10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended: June 30, 2018
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to

Commission File Number 001-33299

MELLANOX TECHNOLOGIES, LTD.

(Exact name of registrant as specified in its charter)

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

Beit Mellanox, Yokneam, Israel 20692

(Address of principal executive offices, including zip code)

+972-4-909-7200

(Registrant's telephone number, including area code)

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

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

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

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

The total number of shares outstanding of the registrant's Ordinary Shares, nominal value NIS 0.0175 per share, as of July 27, 2018, was 52,970,258.

MELLANOX TECHNOLOGIES, LTD.

PART I		Page No.
FINANCIAL INFORMATION
ITEM 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets (Unaudited) — June 30, 2018 and December 31, 2017	3
	Condensed Consolidated Statements of Operations (Unaudited) — Three and Six Months Ended June 30, 2018 and 2017	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) — Three and Six Months Ended June 30, 2018 and 2017	5
	Condensed Consolidated Statements of Cash Flows (Unaudited) — Six Months Ended June 30, 2018 and 2017	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	28
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	39
ITEM 4.	Controls and Procedures	40
	PART II
	OTHER INFORMATION
ITEM 1	Legal Proceedings	41
ITEM 1A.	Risk Factors	41
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59
ITEM 3.	Defaults Upon Senior Securities	59
ITEM 4.	Mine Safety Disclosures	59
ITEM 5.	Other Information	59
ITEM 6.	Exhibits	60

2

PART I. FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS

MELLANOX TECHNOLOGIES, LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	June 30,			December 31,
	2018			2017
	(in thousands, except par value)
ASSETS
Current assets:
Cash and cash equivalents	$	63,422		$	62,473
Short-term investments	219,225			211,281
Accounts receivable, net	155,664			154,213
Inventories	94,484			64,657
Other current assets	12,007			14,295
Total current assets	544,802			506,919
Property and equipment, net	106,746			109,919
Severance assets	17,111			18,302
Intangible assets, net	208,450			228,195
Goodwill	473,916			472,437
Deferred taxes and other long-term assets	98,744			66,162
Total assets	$	1,449,769		$	1,401,934
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	71,137		$	59,090
Accrued liabilities	124,792			114,058
Deferred revenue	20,719			23,485
Total current liabilities	216,648			196,633
Accrued severance	21,464			23,205
Deferred revenue	17,791			17,820
Term debt	—			72,761
Other long-term liabilities	32,117			34,067
Total liabilities	288,020			344,486
Commitments and Contingencies - (see Note 8)
Shareholders’ equity:
Ordinary shares: NIS 0.0175 par value, 200,000 shares authorized, 52,931 and 51,488 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively	229			221
Additional paid-in capital	923,202			873,979
Accumulated other comprehensive income (loss)	(2,182		)	1,618
Retained earnings	240,500			181,630
Total shareholders’ equity	1,161,749			1,057,448
Total liabilities and shareholders' equity	$	1,449,769		$	1,401,934

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

3

MELLANOX TECHNOLOGIES, LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
	(in thousands, except per share data)
Total revenues	$	268,462		$	211,962		$	519,462		$	400,613
Cost of revenues	103,668			73,427			192,666			137,877
Gross profit	164,794			138,535			326,796			262,736
Operating expenses:
Research and development	87,152			92,348			173,578			180,839
Sales and marketing	35,673			38,110			75,167			73,867
General and administrative	23,635			12,476			40,151			24,995
Restructuring charges	1,774			—			9,361			—
Total operating expenses	148,234			142,934			298,257			279,701
Income (loss) from operations	16,560			(4,399		)	28,539			(16,965		)
Interest expense	(871		)	(1,996		)	(2,042		)	(3,989		)
Other income, net	533			827			1,171			1,510
Interest and other, net	(338		)	(1,169		)	(871		)	(2,479		)
Income (loss) before taxes on income	16,222			(5,568		)	27,668			(19,444		)
Provision for (benefit from) taxes on income	(304		)	2,423			(26,701		)	791
Net income (loss)	$	16,526		$	(7,991	)	$	54,369		$	(20,235	)
Net income (loss) per share — basic	$	0.31		$	(0.16	)	$	1.04		$	(0.41	)
Net income (loss) per share — diluted	$	0.30		$	(0.16	)	$	1.00		$	(0.41	)
Shares used in computing net income (loss) per share:
Basic	52,615			50,056			52,219			49,698
Diluted	54,466			50,056			54,149			49,698

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

4

MELLANOX TECHNOLOGIES, LTD.

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
	(in thousands)
Net income (loss)	$	16,526		$	(7,991	)	$	54,369		$	(20,235	)
Other comprehensive income (loss), net of tax:
Change in unrealized gains (losses) on available-for-sale securities, net of tax	213			(47		)	(80		)	22
Change in unrealized gains (losses) on derivative contracts, net of tax	(2,382		)	498			(3,720		)	4,742
Other comprehensive income (loss), net of tax	(2,169		)	451			(3,800		)	4,764
Total comprehensive income (loss), net of tax	$	14,357		$	(7,540	)	$	50,569		$	(15,471	)

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

5

MELLANOX TECHNOLOGIES, LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Six Months Ended June 30,
	2018			2017
	(in thousands)
Cash flows from operating activities:
Net income (loss)	$	54,369		$	(20,235	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	52,674			50,814
Deferred income taxes	(28,085		)	(704		)
Share-based compensation	29,890			32,433
Gain on investments, net	(1,828		)	(1,701		)
Impairment and loss on disposal of property and equipment	1,567			—
Changes in assets and liabilities:
Accounts receivable	(1,451		)	(7,780		)
Inventories	(30,598		)	(7,679		)
Prepaid expenses and other assets	718			(2,667		)
Accounts payable	12,530			48
Accrued liabilities and other liabilities	12,334			(1,141		)
Net cash provided by operating activities	102,120			41,388
Cash flows from investing activities:
Purchase of severance-related insurance policies	(612		)	(651		)
Purchase of short-term investments	(82,486		)	(69,110		)
Proceeds from sales of short-term investments	13,893			74,359
Proceeds from maturities of short-term investments	62,396			13,590
Proceeds from sales of property and equipment	3,239			—
Purchase of property and equipment	(20,078		)	(27,120		)
Purchase of intangible assets	(6,383		)	(1,647		)
Purchase of investments in private companies	(6,000		)	(11,000		)
Acquisition, net of cash acquired	(7,129		)	—
Net cash used in investing activities	(43,160		)	(21,579		)
Cash flows from financing activities:
Principal payments on term debt	(74,000		)	(30,000		)
Payments on capital lease and intangible asset financings	(3,446		)	(3,263		)
Proceeds from issuances of ordinary shares through employee equity incentive plans	19,341			12,396
Net cash used in financing activities	(58,105		)	(20,867		)
Net increase (decrease) in cash, cash equivalents, and restricted cash	855			(1,058		)
Cash, cash equivalents, and restricted cash at beginning of period	70,498			56,780
Cash, cash equivalents, and restricted cash at end of period	$	71,353		$	55,722
Supplemental disclosure of non-cash investing and financing activities
Intangible assets financed with debt	$	800		$	3,877
Unpaid additions to property and equipment	$	609		$	6,003
Transfer from inventory to property and equipment	$	771		$	1,241

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

6

MELLANOX TECHNOLOGIES, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

Company

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

Principles of presentation

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

The unaudited condensed consolidated financial statements included in this quarterly report on Form 10-Q have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The year-end balance sheet data were derived from audited consolidated financial statements, but do not include all disclosures required by accounting principles generally accepted in the United States ("GAAP"). Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures contained in this quarterly report comply with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended, for a quarterly report on Form 10-Q and are adequate to make the information presented not misleading. The unaudited condensed consolidated financial statements included herein reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the financial position, results of operations and cash flows for the interim periods presented. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed with the SEC on February 16, 2018. The results of operations for the six months endedJune 30, 2018 are not necessarily indicative of the results to be anticipated for the entire year ending December 31, 2018 or thereafter.

Risks and uncertainties

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

Use of estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements and the reported amounts of net revenue and expenses in the reporting periods. The Company regularly evaluates estimates and assumptions related to revenue recognition, allowances for doubtful accounts, allowances for price adjustments, investment valuation, warranty reserves, inventory reserves, share-based compensation expense, long-term asset valuations, useful lives of property, equipment, and intangibles, accounting for business combinations, goodwill and purchased intangible asset valuation, investments in privately-held companies, accounting and fair value of financial instruments and derivatives, deferred income tax asset valuation, uncertain tax positions, and litigation and other loss contingencies. These estimates and assumptions are based on current facts, historical experience and various other factors that the Company believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenue, costs and expenses that are not readily apparent from other sources. The actual results that the Company experiences may differ materially and adversely from the Company's original estimates. To the extent there are material differences between the estimates and actual results, the Company's future results of operations will be affected.

7

MELLANOX TECHNOLOGIES, LTD.

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

Significant accounting policies

Other than the changes discussed below, there have been no changes in the Company’s significant accounting policies that were disclosed in its Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed with the SEC on February 16, 2018.

On January 1, 2018, the Company adopted Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers (ASC 606-10), using the modified retrospective method. Prior to the adoption of ASC 606-10, the Company deferred the recognition of revenue and the cost of revenue from sales to distributors until the distributors reported that they had sold the products to their customers (known as “sell though” revenue recognition). Under ASC 606-10, the Company recognizes revenue on sales to all distributors upon shipment and transfer of control (known as “sell-in” revenue recognition), net of estimated allowances for price adjustments. As a result of this adoption, the Company revised its accounting policy for revenue recognition as detailed below.

Revenue Recognition

The Company recognizes revenue when (or as) it satisfies performance obligations by transferring promised products or services to its customers in an amount that reflects the consideration the Company expects to receive. The Company applies the following five steps: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied.

The Company considers customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts with a customer. For each contract, the Company considers the promise to transfer tangible products, extended warranty and post-contract customer support, each of which are distinct, to be the identified performance obligations. In determining the transaction price, the Company evaluates whether the price is subject to rebates and adjustments to determine the net consideration to which the Company expects to receive. As the Company’s standard payment terms are less than one year, the contracts have no significant financing component. The Company allocates the transaction price to each distinct performance obligation based on their relative standalone selling price. Revenue from tangible products is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which typically occurs at shipment. The revenues from fixed-price support or maintenance contracts, including extended warranty contracts and software post-contract customer support agreements, are recognized ratably over the contract period and the costs associated with these contracts are recognized as incurred. The Company's standard arrangements with its customers typically do not allow for rights of return.

The Company maintains inventory, or hub arrangements with certain customers. Pursuant to these arrangements, the Company delivers products to a customer or a designated third party warehouse based upon the customer's projected needs, but does not recognize product revenue unless and until the customer reports it has removed the Company's product from the warehouse to be incorporated into its end products.

A portion of the Company’s sales are made to distributors under agreements which contain price protection provisions. Revenue from sales to distributors is recognized upon shipment and transfer of control, net of estimated allowances for price adjustments. Frequently, distributors submit distribution price adjustment (“DPA”) claims to the Company to adjust the distributor’s cost from the standard price to the pre-approved lower price. After the Company verifies the DPA claim, a credit memo is issued to the distributor. The Company records an allowance for these unprocessed DPA claims and for estimated future DPA claims as a reduction of revenue and a reduction of accounts receivable. The allowance is recorded as a reduction to revenue in the same period that the related revenue is recorded and is calculated based on specific authorized DPA claims and an analysis of historical DPA claims, at the distributor level, over a period of time considered adequate to account for current pricing and business trends.

Most of the Company’s distributors are entitled to a limited right of return related to stock rotation. Distributors have the right to return a limited amount of product not to exceed a percentage of distributor’s prior quarter's net purchases. However, a simultaneous, compensation order of equal or greater value must be placed by distributor within the same quarter of the return. Therefore, no stock rotation reserves are recorded.

8

MELLANOX TECHNOLOGIES, LTD.

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

Restricted cash

The Company maintains certain cash amounts that are restricted as to withdrawal or use over the long-term. The cash is securing bank guarantees primarily issued against long-term tenancy agreements. The long-term restricted cash balance of $7.9 million was reported in other long-term assets on the balance sheet as of June 30, 2018, and was included in the ending balance of cash, cash equivalents and restricted cash in the statement of cash flows for the six months endedJune 30, 2018. There was no restricted cash as of June 30,2017. The following table provides a reconciliation of the cash and cash equivalents balances reported on the balance sheets and the cash, cash equivalents and restricted cash balances reported in the statements of cash flows:

	June 30,
	2018		2017
	(In thousands)
Cash and cash equivalents, as reported on the balance sheets	$	63,422	$	55,722
Restricted cash in other long-term assets, as reported on the balance sheets	7,931		—
Cash, cash equivalents, and restricted cash, as reported in the statements of cash flows	$	71,353	$	55,722

Concentration of credit risk

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Dell Technologies Inc. ("Dell")	14	%	11	%	12	%	12	%
Hewlett Packard Enterprise ("HPE")	13	%	14	%	15	%	13	%
IBM	*		15	%	*		*
____________________

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

	June 30, 2018		December 31, 2017
HPE	16	%	13	%
____________________

9

MELLANOX TECHNOLOGIES, LTD.

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

Product warranty

The following table provides changes in the product warranty accrual for the six months endedJune 30,2018 and 2017:

	Six Months Ended June 30,
	2018			2017
	(in thousands)
Balance, beginning of the period	$	889		$	1,474
New warranties issued during the period	856			756
Reversal of warranty reserves	—			(350		)
Settlements during the period	(784		)	(745		)
Balance, end of the period	961			1,135
Less: long-term portion of product warranty liability	(173		)	(180		)
Current portion, end of the period	$	788		$	955

Net income (loss) per share

The following table sets forth the computation of basic and diluted net income (loss) per share for the three and six months ended June 30,2018 and 2017:

	Three Months Ended June 30,					Six Months Ended June 30,
	2018		2017			2018		2017
	(in thousands, except per share data)
Net income (loss)	$	16,526	$	(7,991	)	$	54,369	$	(20,235	)
Basic and diluted shares:
Weighted average ordinary shares outstanding	52,615		50,056			52,219		49,698
Effect of dilutive shares	1,851		—			1,930		—
Shares used to compute diluted net income (loss) per share	54,466		50,056			54,149		49,698
Net income (loss) per share — basic	$	0.31	$	(0.16	)	$	1.04	$	(0.41	)
Net income (loss) per share — diluted	$	0.30	$	(0.16	)	$	1.00	$	(0.41	)

The Company excluded 0.2 million potentially dilutive share options and restricted share units ("RSUs") from the computation of diluted net income per share for both the three and six months ended June 30,2018, and 5.5 million outstanding share options and RSUs from the computation of diluted net loss per share for both the three and six months ended June 30,2017, because including them would have had an anti-dilutive effect.

Adoption of new accounting principles

In May 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606). The standard replaced the revenue recognition guidance in U.S. GAAP under Topic 605, and was required to be applied retrospectively to each prior period presented, or applied using a modified retrospective method with the cumulative effect recognized in the beginning retained earnings during the period of initial application. Subsequently, the FASB issued several additional ASUs related to ASU No. 2014-09, collectively they are referred to as the “new revenue standards”, which became effective for the Company beginning January 1, 2018. The Company adopted the standard using the modified retrospective method. See Note 2 for details about the impact from adopting the new revenue standard and other required disclosures.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 amended various aspects of the recognition, measurement, presentation, and disclosure of financial instruments, and became effective for the Company beginning January

10

MELLANOX TECHNOLOGIES, LTD.

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

1, 2018. One aspect that may have a material impact on the Company's consolidated financial statements relates to the measurement of its equity investments in privately-held companies whose fair values are not readily determinable. With the election to use the measurement alternative (as opposed to fair value), the Company measures these equity investments at cost, less impairments, adjusted by observable price changes. No gain or loss was recorded in the six months endedJune 30, 2018 as a result of remeasuring the Company's equity investments in privately-held companies.

Recent accounting pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The standard requires lessees to recognize almost all leases on the balance sheet as a right-of-use asset and a lease liability and requires leases to be classified as either an operating or a finance type lease. The standard excludes leases of intangible assets or inventory. Early adoption of the standard is allowed. The standard becomes effective for the Company beginning January 1, 2019. The Company expects that the adoption of the standard will have a material impact on its consolidated balance sheets due to the recognition of the right-of-use assets and lease liabilities related to the Company's operating leases. The standard is not expected to have a material impact on the Company's results of operations or cash flows. The Company is continuing its assessment, which may identify additional impacts this guidance will have on its consolidated financial statements and disclosures.

NOTE 2—REVENUE

On January 1, 2018, the Company adopted ASC Topic 606-10 using the modified retrospective method and applied the standard to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606-10, while prior period amounts are not adjusted and continue to be reported in accordance with the historic accounting under Topic 605.

The Company recognized the cumulative effect of initially adopting Topic 606-10 as an adjustment to the opening balance of retained earnings as of January 1, 2018. Distributor revenue was recognized using the sell-through method under Topic 605, while such revenue is recognized using the sell-in method under Topic 606-10, which primarily contributed to the adjustment to the opening balance of retained earnings as well as the impact of adoption disclosed in the tables below.

The cumulative effect of the changes made to the consolidated balance sheet as of January 1, 2018 for the adoption of Topic 606-10 were as follows:

	December 31, 2017		Adjustments			January 1, 2018
	(in thousands)
Deferred revenue, short term	$	23,485	$	(4,501	)	$	18,984
Retained earnings	$	181,630	$	4,501		$	186,131

In accordance with Topic 606-10, the disclosure of the impact of adoption on the consolidated balance sheet as of June 30, 2018 was as follows:

	As Reported		Impact of Adoption			Amounts under Topic 605
	(in thousands)
Condensed Consolidated Balance Sheet
Deferred revenue, short term	$	20,719	$	10,900		$	31,619
Retained earnings	$	240,500	$	(10,900	)	$	229,600

In accordance with Topic 606-10, the disclosure of the impact of adoption on the consolidated statement of operations and cash flows was as follows:

11

MELLANOX TECHNOLOGIES, LTD.

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

	Three Months Ended June 30, 2018
	As Reported		Impact of Adoption			Amounts under Topic 605
	(in thousands, except per share data)
Condensed Consolidated Statement of Operations
Total revenues	$	268,462	$	(2,280	)	$	266,182
Cost of revenues	103,668		(100		)	103,568
Net income	$	16,526	$	(2,180	)	$	14,346
Earnings per share
Basic	$	0.31	$	(0.04	)	$	0.27
Diluted	$	0.30	$	(0.04	)	$	0.26

	Six Months Ended June 30, 2018
	As Reported		Impact of Adoption			Amounts under Topic 605
	(in thousands, except per share data)
Condensed Consolidated Statement of Operations
Total revenues	$	519,462	$	(9,099	)	$	510,363
Cost of revenues	192,666		(2,700		)	189,966
Net income	$	54,369	$	(6,399	)	$	47,970
Earnings per share
Basic	$	1.04	$	(0.12	)	$	0.92
Diluted	$	1.00	$	(0.12	)	$	0.88
Condensed Consolidated Statement of Cash Flows
Cash flows from operating activities:
Net income	$	54,369	$	(6,399	)	$	47,970
Accrued liabilities and other liabilities	$	12,334	$	6,399		$	18,733

Revenues by geographic region are as follows (prior period amounts have not been adjusted under the modified retrospective method):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
	(in thousands)
United States	$	101,396	$	80,703	$	197,656	$	159,567
China	54,181		31,990		110,395		65,191
Europe	41,454		38,828		77,450		85,233
Other Americas	33,112		31,358		60,852		42,248
Other Asia	38,319		29,083		73,109		48,374
Total revenue	$	268,462	$	211,962	$	519,462	$	400,613

12

MELLANOX TECHNOLOGIES, LTD.

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

The following tables represent our total revenues for the three months ended June 30,2018 and 2017 by product type and interconnect protocol (prior period amounts have not been adjusted under the modified retrospective method):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
	(in thousands)
ICs	$	28,934	$	34,063	$	57,521	$	76,485
Boards	136,708		80,425		254,759		144,717
Switch systems	57,074		56,189		112,721		103,335
Cables, accessories and other	45,746		41,285		94,461		76,076
Total revenue	$	268,462	$	211,962	$	519,462	$	400,613

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
	(in thousands)
InfiniBand:
EDR	$	59,319	$	59,436	$	115,265	$	99,059
FDR	35,649		42,978		77,397		92,807
QDR/DDR/SDR	7,143		5,697		12,587		13,230
Total	102,111		108,111		205,249		205,096
Ethernet	157,470		87,023		294,418		167,500
Other	8,881		16,828		19,795		28,017
Total revenue	$	268,462	$	211,962	$	519,462	$	400,613

The Company recognizes contract liabilities, or deferred revenues, when it receives advance payments from customers before performance obligations primarily related to extended warranty and post-contract customer support have been performed. Advance payments are received at the beginning of the service period and the related deferred revenues are reclassified to revenue ratably over the service period. The balance of deferred revenues approximates the aggregate amount of the transaction price allocated to the unsatisfied performance obligations at the end of reporting period. The Company expects to recognize the long-term portion of deferred revenue over the remaining service period of up to five years.

The following table presents the significant changes in the deferred revenue balance during the six months endedJune 30,2018:

	(in thousands)
Balance, beginning of the period	$	36,804
New performance obligations	14,578
Reclassification to revenue as a result of satisfying performance obligations	(12,872		)
Balance, end of the period	38,510
Less: long-term portion of deferred revenue	17,791
Current portion, end of the period	$	20,719

Because all performance obligations in the Company’s contracts with customers, other than extended warranty and post-contract customer support, relate to contracts with a duration of less than one year, the Company has elected to apply the optional exemption and is not required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period.

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MELLANOX TECHNOLOGIES, LTD.

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

NOTE 3—BALANCE SHEET COMPONENTS:

	June 30, 2018			December 31, 2017
	(in thousands)
Accounts receivable, net:
Accounts receivable, gross	$	156,296		$	154,845
Less: allowance for doubtful accounts	(632		)	(632		)
	$	155,664		$	154,213
Inventories:
Raw materials	$	13,560		$	12,656
Work-in-process	42,253			22,769
Finished goods	38,671			29,232
	$	94,484		$	64,657
Other current assets:
Prepaid expenses	$	5,588		$	7,518
Derivative contracts receivable	—			982
VAT receivable	3,394			2,259
Other	3,025			3,536
	$	12,007		$	14,295
Property and equipment, net:
Computer, equipment, and software	$	173,070		$	164,707
Furniture and fixtures	2,882			3,198
Leasehold improvements	49,605			47,262
	225,557			215,167
Less: Accumulated depreciation and amortization	(118,811		)	(105,248		)
	$	106,746		$	109,919
Deferred taxes and other long-term assets:
Equity investments in private companies	$	35,255		$	29,255
Deferred taxes	52,648			24,563
Long-term restricted cash	7,931			8,025
Other assets	2,910			4,319
	$	98,744		$	66,162
Accrued liabilities:
Payroll and related expenses	$	64,859		$	71,868
Accrued expenses	43,694			31,951
Derivative contracts payable	2,756			17
Product warranty liability	788			706
Other	12,695			9,516
	$	124,792		$	114,058
Other long-term liabilities:
Income tax payable	$	24,971		$	24,425
Deferred rent	2,528			2,220
Other	4,618			7,422
	$	32,117		$	34,067

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

NOTE 4—FAIR VALUE MEASUREMENTS:

Fair value hierarchy:

The Company measures its cash equivalents and marketable securities at fair value. The Company’s cash equivalents are classified within Level 1. Cash equivalents are valued primarily using quoted market prices utilizing market observable inputs. The Company's investments in debt securities and certificates of deposits are classified within Level 2 as the market inputs to value these instruments consist of market yields, reported trades and broker/dealer quotes. In addition, foreign currency contracts are classified within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments. The Level 3 valuation inputs include the Company's best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instrument's valuation. As of June 30, 2018 and December 31, 2017, the Company did not have any assets or liabilities valued based on Level 3 valuations.

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

The following table represents the fair value hierarchy of the Company's financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2018:

	Level 1		Level 2		Total
	(in thousands)
Money market funds	$	1,646	$	—	$	1,646
Certificates of deposit	—		54,444		54,444
U.S. Government and agency securities	—		37,477		37,477
Commercial paper	—		33,227		33,227
Corporate bonds	—		67,014		67,014
Municipal bonds	—		12,045		12,045
Foreign government bonds	—		15,018		15,018
	1,646		219,225		220,871
Long-term restricted cash	—		7,931		7,931
Total financial assets	$	1,646	$	227,156	$	228,802
Derivative contracts	—		2,756		2,756
Total financial liabilities	$	—	$	2,756	$	2,756

15

MELLANOX TECHNOLOGIES, LTD.

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

The following table represents the fair value hierarchy of the Company's financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2017:

	Level 1		Level 2		Total
	(in thousands)
Money market funds	$	1,857	$	—	$	1,857
Certificates of deposit	—		58,003		58,003
U.S. Government and agency securities	—		43,872		43,872
Commercial paper	—		27,029		27,029
Corporate bonds	—		54,447		54,447
Municipal bonds	—		15,169		15,169
Foreign government bonds	—		12,761		12,761
	1,857		211,281		213,138
Long-term restricted cash	—		8,025		8,025
Derivative contracts	—		982		982
Total financial assets	$	1,857	$	220,288	$	222,145
Derivative contracts	—		17		17
Total financial liabilities	$	—	$	17	$	17

There were no transfers between Level 1 and Level 2 securities during the six months ended June 30, 2018 and 2017.

NOTE 5—INVESTMENTS:

Cash, cash equivalents and short-term investments:

The short-term investments are classified as available-for-sale securities. The cash, cash equivalents and short-term investments at June 30, 2018 and December 31, 2017 were as follows:

	June 30, 2018
	Amortized Cost			Unrealized Gains		Unrealized Losses			Estimated Fair Value
	(in thousands)
Cash	$	61,776		$	—	$	—		$	61,776
Money market funds	1,646			—		—			1,646
Certificates of deposit	54,514			—		(70		)	54,444
U.S. Government and agency securities	37,609			—		(132		)	37,477
Commercial paper	33,254			16		(43		)	33,227
Corporate bonds	67,384			—		(370		)	67,014
Municipal bonds	12,090			—		(45		)	12,045
Foreign government bonds	15,064			—		(46		)	15,018
Total	283,337			16		(706		)	282,647
Less amounts classified as cash and cash equivalents	(63,422		)	—		—			(63,422		)
Short-term investments	$	219,915		$	16	$	(706	)	$	219,225

16

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

	December 31, 2017
	Amortized Cost			Unrealized Gains		Unrealized Losses			Estimated Fair Value
	(in thousands)
Cash	$	60,616		$	—	$	—		$	60,616
Money market funds	1,857			—		—			1,857
Certificates of deposit	58,039			—		(36		)	58,003
U.S. Government and agency securities	44,070			—		(198		)	43,872
Commercial paper	27,073			1		(45		)	27,029
Corporate bonds	54,673			—		(226		)	54,447
Municipal bonds	15,227			—		(58		)	15,169
Foreign government bonds	12,809			—		(48		)	12,761
Total	274,364			1		(611		)	273,754
Less amounts classified as cash and cash equivalents	(62,473		)	—		—			(62,473		)
Short-term investments	$	211,891		$	1	$	(611	)	$	211,281

Interest income and gains on short-term investments, net were $1.0 million for both the three months endedJune 30,2018 and 2017. Interest income and gains on short-term investments, net were $1.9 million and $1.8 million for the six months endedJune 30,2018 and 2017, respectively. At June 30, 2018, gross unrealized losses on investments that were in a gross unrealized loss position for greater than 12 months were $0.1 million. These investments were not deemed to be other-than-temporarily impaired and the gross unrealized losses were recorded in other comprehensive income (loss) ("OCI").

The contractual maturities of short-term investments at June 30, 2018 and December 31, 2017 were as follows:

	June 30, 2018				December 31, 2017
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(in thousands)
Due in less than one year	$	199,635	$	199,107	$	148,232	$	147,921
Due in one to three years	20,280		20,118		63,659		63,360
	$	219,915	$	219,225	$	211,891	$	211,281

Equity investments in privately-held companies:

As of June 30, 2018 and December 31, 2017, the Company held a total of $35.3 million and $29.3 million, respectively, in equity investments in privately-held companies. No gain or loss was recorded during the six months endedJune 30, 2018 as a result of remeasuring the Company's equity investments in privately-held companies.

NOTE 6—GOODWILL AND INTANGIBLE ASSETS:

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

17

MELLANOX TECHNOLOGIES, LTD.

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

Balance as of December 31, 2017	$	472,437
Acquisitions	1,479
Balance as of June 30, 2018	$	473,916

The carrying amounts of intangible assets as of June 30, 2018 were as follows:

	Gross Carrying Value		Accumulated Amortization			Net Carrying Value		Useful Life
	(in thousands)							(in years)
Licensed technology	$	47,590	$	(23,039	)	$	24,551	1-8
Developed technology	285,443		(144,417		)	141,026		4-7
Customer relationships	69,776		(28,113		)	41,663		4-9
Trade names	5,600		(4,390		)	1,210		3
Total intangible assets	$	408,409	$	(199,959	)	$	208,450

The carrying amounts of intangible assets as of December 31, 2017 were as follows:

	Gross Carrying Value		Accumulated Amortization			Net Carrying Value		Useful Life
	(in thousands)							(in years)
Licensed technology	$	40,407	$	(16,478	)	$	23,929	1-8
Developed technology	279,543		(122,414		)	157,129		4-7
Customer relationships	69,776		(24,783		)	44,993		4-9
Trade names	5,600		(3,456		)	2,144		3
Total intangible assets	$	395,326	$	(167,131	)	$	228,195

Amortization expense of intangible assets totaled approximately $16.5 million and $15.1 million for the three months ended June 30,2018 and 2017, respectively. Amortization expense of intangible assets totaled approximately $32.8 million and $30.1 million for the six months endedJune 30,2018 and 2017, respectively.

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

	(in thousands)
2018 (remainder of the year)	$	34,378
2019	61,167
2020	52,049
2021	32,514
2022	11,946
Thereafter	16,396
Total	$	208,450

NOTE 7—DERIVATIVES AND HEDGING ACTIVITIES:

The Company enters into foreign currency forward and option contracts with financial institutions to protect against foreign exchange risks, mainly the exposure to changes in the exchange rate of the New Israeli Shekels ("NIS") against the U.S. dollar that are associated with forecasted cash flows and existing assets and liabilities. The Company accounts for its derivative

18

MELLANOX TECHNOLOGIES, LTD.

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

instruments as either assets or liabilities and carries them at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation.

Fair Value of Derivative Contracts

The fair value of derivative contracts in the unaudited condensed consolidated balance sheets at June 30, 2018 and December 31, 2017 were as follows:

		Accrued liabilities		Other current assets		Accrued liabilities
		June 30, 2018		December 31, 2017
		(in thousands)
Derivatives designated as hedging instruments
	Currency forward and option contracts	$	2,741	$	980	$	—
Derivatives not designated as hedging instruments
	Currency forward and option contracts	$	15	$	2	$	17
Total derivatives		$	2,756	$	982	$	17

The gross notional amounts of derivative contracts were NIS denominated. The notional amounts of outstanding derivative contracts in U.S. dollars at June 30, 2018 and December 31, 2017 were as follows:

	June 30, 2018		December 31, 2017
	(in thousands)
Derivatives designated as hedging instruments
Currency forward and option contracts	$	100,384	$	52,380
Derivatives not designated as hedging instruments
Currency forward and option contracts	$	38,356	$	47,015

Effect of Derivatives Designated as Hedging Instruments on Accumulated Other Comprehensive Income

The following table represents the unrealized gains (losses) of derivatives designated as hedging instruments, net of tax effects, that were recorded in accumulated other comprehensive income as of June 30, 2018 and December 31, 2017 and their effect on OCI for the six months endedJune 30, 2018:

	(in thousands)
December 31, 2017	$	925
Amount of loss recognized in OCI (effective portion)	(4,604		)
Amount of loss reclassified from OCI to income (effective portion)	884
June 30, 2018	$	(2,795	)

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

The effect of derivative contracts on the unaudited condensed consolidated statements of operations for the three months endedJune 30,2018 and 2017 was as follows:

	Derivatives designated as hedging instruments					Derivatives not designated as hedging instruments
	Three Months Ended June 30,					Three Months Ended June 30,
	2018			2017		2018			2017
	(in thousands)
Operating income	$	(1,419	)	$	2,379	$	—		$	—
Other income (loss)	$	—		$	—	$	(1,814	)	$	1,239

19

MELLANOX TECHNOLOGIES, LTD.

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

The effect of derivative contracts on the unaudited condensed consolidated statements of operations for the six months endedJune 30,2018 and 2017 was as follows:

	Derivatives designated as hedging instruments					Derivatives not designated as hedging instruments
	Six Months Ended June 30,					Six Months Ended June 30,
	2018			2017		2018			2017
	(in thousands)
Operating income	$	(884	)	$	3,815	$	—		$	—
Other income (loss)	$	—		$	—	$	(2,704	)	$	3,305

NOTE 8—COMMITMENTS AND CONTINGENCIES:

Commitments

Leases

At June 30, 2018, future minimum payments under non-cancelable operating leases are as follows:

	(in thousands)
2018 (remainder of the year)	$	10,926
2019	21,173
2020	17,944
2021	16,026
2022	12,598
Thereafter	75,966
Total minimum lease payments	$	154,633

Purchase commitments

At June 30, 2018, the Company had the following non-cancelable purchase commitments:

	(in thousands)
2018 (remainder of the year)	$	211,373
2019	46,782
2020	2,084
2021	536
2022	261
Thereafter	—
	$	261,036

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

Other Commitments

Operating lease

On May 3, 2016, the Company entered into a lease agreement for additional office space expected to be built in Yokneam, Israel. The lease term expires 10 years after lease inception with no options to extend the lease term. The Company's occupancy of the additional office space and its obligation under the lease agreement was contingent on the lessor's attainment of stated milestones in the lease agreement. The estimated total future lease obligation is approximately $30.3 million. As of June 30,2018, substantially all of the contingencies have been resolved, and the future lease obligation has been included in the future minimum payments under non-cancelable operating leases as reported above.

Royalty-bearing grants

In April 2018, the Company entered into a settlement agreement with the Israeli Innovation Authority (the "IIA"), formerly known as the Office of the Chief Scientist of Israel's Ministry of Economy and Industry (the "OCS"), which eliminated the future contingent royalty payment obligations of the Company (approximately $36.4 million at March 31, 2018) and the associated future interest payments. These obligations were related to the funding the Company received from the IIA prior to the date of the agreement under approved plans in accordance with the Israeli Law for Encouragement of Research, Development and Technological Innovation in Industry, 1984 and the regulations and rules of the IIA (the "R&D Law"). As part of the agreement, the Company paid approximately $9.3 million to the IIA and the expense was included in cost of revenues during the second quarter of 2018.

Unrecognized tax benefits

Due to the inherent uncertainty with respect to the timing of future cash outflows associated with the Company's unrecognized tax benefits, it is unable to reliably estimate the timing of cash settlement with the respective taxing authorities. As of June 30,2018, the Company's unrecognized tax benefits totaled $45.8 million, out of which an amount of $23.7 million would reduce the Company's income tax expense and effective tax rate, if recognized.

Contingencies

Legal proceedings

The Company is involved in a variety of claims, suits, investigations and proceedings that arise from time to time in the ordinary course of its business, including actions with respect to contracts, intellectual property, taxation, employment, benefits, securities, personal injuries and other matters. The results of these proceedings in the ordinary course of business are not expected to have a material adverse effect on the Company’s condensed consolidated financial position or results of operations.

The Company records a liability when it believes that it is both probable that a liability will be incurred, and the amount of loss can be reasonably estimated. The Company evaluates, at least quarterly, developments in its legal matters that could affect the amount of liability that has been previously accrued and makes adjustments as appropriate. Significant judgment is required to determine both the probability and the estimated amount of a loss or potential loss. The Company may be unable to reasonably estimate the reasonably possible loss or range of loss for a particular legal contingency for various reasons, including, among others: (i) if the damages sought are indeterminate; (ii) if proceedings are in the early stages; (iii) if there is uncertainty as to the outcome of pending proceedings (including motions and appeals); (iv) if there is uncertainty as to the likelihood of settlement and the outcome of any negotiations with respect thereto; (v) if there are significant factual issues to be determined or resolved; (vi) if the proceedings involve a large number of parties; (vii) if relevant law is unsettled or novel or untested legal theories are presented; or (viii) if the proceedings are taking place in jurisdictions where the laws are complex or unclear. In such instances, there is considerable uncertainty regarding the ultimate resolution of such matters, including a possible eventual loss, if any.

NOTE 9—SHARE INCENTIVE PLANS

Stock Option Plans

On April 25, 2017, the Company's shareholders approved the Mellanox Technologies, Ltd. Second Amended and Restated Global Share Incentive Plan (2006) (the “Second Restated Plan”), which constitutes a second amendment and restatement of

21

MELLANOX TECHNOLOGIES, LTD.

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

the Mellanox Technologies, Ltd. Global Share Incentive Plan (2006) and its appendices (the “2006 Plan”), as amended and restated by the Mellanox Technologies, Ltd. Amended and Restated Global Share Incentive Plan (2006) as of March 14, 2016 (the “First Restated Plan”). The Second Restated Plan became effective on February 14, 2017. The Second Restated Plan increased the ordinary shares reserved for issuance under the First Restated Plan by 1,640,000 shares to 2,390,000 shares plus any shares subject to issued and outstanding awards under the other equity incentive plans that existed prior to the First Restated Plan that expire, are cancelled or otherwise terminated after the effective date of the First Restated Plan. The Second Restated Plan also extended the term of the First Restated Plan to February 14, 2027. In addition, the Second Restated Plan implements additional amendments to reflect compensation and governance best practices.

On July 25, 2018, the Company's shareholders approved the Mellanox Technologies, Ltd. Third Amended and Restated Global Share Incentive Plan (2006) (the “Third Restated Plan”). See Note 16 for further details.

Share option activity

Share option activity under the Company's equity incentive plans in the six months ended June 30,2018 is set forth below:

	Options Outstanding
	Number of Shares		Weighted Average Exercise Price
Outstanding at December 31, 2017	1,110,061		$	38.35
Options exercised	(345,862	)	$	23.11
Options canceled	(11,062	)	$	99.89
Outstanding at June 30, 2018	753,137		$	44.45

The total pretax intrinsic value of options exercised in the six months ended June 30, 2018 and 2017 was $19.4 million and $5.2 million, respectively. This intrinsic value represents the difference between the fair market value of the Company's ordinary shares on the date of exercise and the exercise price of each option. Based on the closing price of the Company's ordinary shares of $84.30 on June 29, 2018, the last trading day of the quarter ended June 30, 2018, the total pretax intrinsic value of options outstanding at June 30, 2018 was $32.6 million. The total pretax intrinsic value of options outstanding at December 31, 2017 was $35.5 million.

There were 751,471 and 1,107,712 options exercisable at June 30, 2018 and December 31, 2017, respectively. The total pretax intrinsic value of exercisable options at June 30, 2018 was $32.5 million. The total pretax intrinsic value of exercisable options at December 31, 2017 was $35.4 million.

Restricted share unit activity

RSU activity under the Company's equity incentive plans in the six months ended June 30, 2018 is set forth below:

	Restricted Share Units Outstanding
	Number of Shares		Weighted Average Grant Date Fair Value
Non-vested restricted share units at December 31, 2017	3,414,705		$	48.45
Restricted share units granted	125,300		$	70.32
Restricted share units vested	(809,234	)	$	47.71
Restricted share units canceled	(375,848	)	$	48.94
Non-vested restricted share units at June 30, 2018	2,354,923		$	49.78

The weighted average fair value of RSUs granted in the six months ended June 30, 2018 and 2017 was $70.32 and $50.42, respectively.

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MELLANOX TECHNOLOGIES, LTD.

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

The total intrinsic value of all outstanding RSUs as of June 30, 2018 and December 31, 2017 was $198.5 million and $220.9 million, respectively.

Employee Stock Purchase Plan activity

There were 288,017 and 269,698 shares purchased under the ESPP for the six months ended June 30, 2018 and 2017 at an average price per share of $39.40 and $37.63, respectively.

Shares reserved for future issuance

The Company had the following ordinary shares reserved for future issuance under its equity incentive plans as of June 30, 2018:

	Number of Shares
Share options outstanding	753,137
Restricted share units outstanding	2,354,923
Shares authorized for future issuance	1,019,396
ESPP shares available for future issuance	3,137,452
Total shares reserved for future issuance as of June 30, 2018	7,264,908

Share-based compensation

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

The following weighted average assumptions were used to value ESPP shares issued pursuant to the Company's share incentive plans for the six months ended June 30, 2018 and 2017:

	Six Months Ended June 30,
	2018		2017
Dividend yield	—	%	—	%
Expected volatility	37.2	%	25.3	%
Risk free interest rate	1.20	%	0.91	%
Expected life, years	0.5		0.5

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
	(in thousands)
Cost of goods sold	$	415	$	575	$	826	$	1,057
Research and development	8,340		10,297		16,514		18,987
Sales and marketing	3,646		4,010		7,245		7,348
General and administrative	2,515		2,783		5,305		5,041
Total share-based compensation expense	$	14,916	$	17,665	$	29,890	$	32,433

At June 30, 2018, there was $106.1 million of total unrecognized share-based compensation costs related to non-vested share-based compensation arrangements. The costs are expected to be recognized over a weighted average period of approximately 2.44 years.

23

MELLANOX TECHNOLOGIES, LTD.

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

NOTE 10—ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):

The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the six months ended June 30,2018 and 2017:

	Unrealized Gains (Losses) on Available-for-Sale Securities			Unrealized Gains (Losses) on Derivatives Designated as Hedging Instruments			Total
	(in thousands)
Balance at December 31, 2017	$	693		$	925		$	1,618
Other comprehensive income/(loss) before reclassifications, net of taxes	(81		)	(4,604		)	(4,685		)
Realized (gains)/losses reclassified from accumulated other comprehensive income	1			884			885
Net current-period other comprehensive income/(loss), net of taxes	(80		)	(3,720		)	(3,800		)
Balance at June 30, 2018	$	613		$	(2,795	)	$	(2,182	)
Balance at December 31, 2016	$	(236	)	$	(692	)	$	(928	)
Other comprehensive income/(loss) before reclassifications, net of taxes	22			8,557			8,579
Realized (gains)/losses reclassified from accumulated other comprehensive income	—			(3,815		)	(3,815		)
Net current-period other comprehensive income/(loss), net of taxes	22			4,742			4,764
Balance at June 30, 2017	$	(214	)	$	4,050		$	3,836

The following table provides details about reclassifications out of accumulated other comprehensive income (loss) for the six months ended June 30,2018 and 2017:

	Realized (Gains)/Losses Reclassified from Accumulated Other Comprehensive Income (Loss)					Affected Line Item in the Statement of Operations
	Six Months Ended June 30,
	2018		2017
	(in thousands)
Realized (gains)/losses on derivatives designated as hedging instruments	$	884	$	(3,815	)	Cost of revenues and Operating expenses:
	45		(220		)	Cost of revenues
	78		(427		)	General and administrative
	81		(372		)	Sales and marketing
	680		(2,796		)	Research and development
Realized (gains)/losses on available-for-sale securities	1		—			Other income, net
Total reclassifications for the period	$	885	$	(3,815	)	Total

NOTE 11—INCOME TAXES:

As of June 30,2018 and December 31, 2017, the Company had gross unrecognized tax benefits of $45.8 million and $45.2 million, respectively. It is the Company’s policy to classify accrued interest and penalties as part of the unrecognized tax benefits and record the expense in the provision for income taxes. The amount of accrued interest and penalties related to unrecognized tax benefits totaled $2.3 million at June 30,2018 and $1.6 million at December 31, 2017.

24

MELLANOX TECHNOLOGIES, LTD.

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

During the six months endedJune 30,2018, the Company released $26.3 million of valuation allowance against the deferred tax assets primarily related to net operating loss carryforwards ("NOLs") and tax credit carryforwards related to its U.S. subsidiaries. After the discontinuation of the Company’s 1550nm silicon photonics development activities in the first quarter of fiscal 2018, the U.S. subsidiaries will have sufficient taxable income in the future to utilize the deferred tax assets before they expire.

As of June 30,2018, the Company's U.S. subsidiaries had federal and state NOLs of approximately $86.1 million and $74.4 million, respectively. The Company also had federal and state research and development tax credit carryforwards of approximately $12.9 million and $4.5 million, respectively. The U.S. NOLs for federal tax purposes will expire from 2024 to 2027, and the U.S. NOLs for state tax purposes will expire from 2018 to 2037. The research and development tax credit carryforwards will expire from 2025 to 2039.

On December 22, 2017, the Tax Cuts and Jobs Acts was enacted into law. The new legislation contains several key tax provisions that will impact the Company. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, a one-time repatriation tax on accumulated foreign earnings, an elimination of U.S. federal income taxes on dividends from foreign subsidiaries, a limitation on the tax deductibility of interest expense, and a change in rules related to uses and limitations of NOLs created in tax years beginning after December 31, 2017.

The lower corporate income tax rate required the Company to remeasure its U.S. deferred tax assets and liabilities as of December 31, 2017 as well as reassess the realizability of its deferred tax assets and liabilities. ASC 740 requires the Company to recognize the effect of the tax law changes in the period of enactment. However, the SEC staff has issued SAB 118 which allowed the Company to record provisional amounts during a measurement period.

The Company has concluded that a reasonable estimate could be developed for the effects of the tax reform, and recorded a provisional decrease to deferred tax assets of $3.2 million and corresponding decrease to the valuation allowance as of December 31, 2017. However, due to the fundamental changes of the tax law, the accounting complexity, and the expected ongoing guidance and accounting interpretations during the measurement period, the Company considers the accounting for the deferred tax remeasurement and other items to be incomplete. These effects have been included in the consolidated financial statements for the year ended December 31, 2017 as provisional amounts.

During the measurement period, the Company might need to reflect adjustments to the provisional amounts upon obtaining, preparing, or analyzing additional information about facts and circumstances that existed as of the enactment date that, if known, would have affected the income tax effects initially reported as provisional amounts. No adjustments to the provisional amounts were recorded during the six months endedJune 30,2018.

The measurement period will end when the Company obtains, prepares, and analyzes the information needed in order to complete the accounting requirements under ASC Topic 740 or on December 22, 2018, whichever is earlier. The Company expects to complete its analysis within the measurement period in accordance with SAB 118.

As of June 30,2018, the 2014 through 2017 tax years are open and may be subject to potential examinations in the United States. The Company has NOLs in the United States from prior tax periods beginning in 2003 which may be subject to examination upon utilization in future tax periods. As of June 30,2018, the 2013 through 2017 tax years are open and may be subject to potential examinations in Denmark and Israel. As of June 30,2018, the income tax returns of the Company and one of its subsidiaries in Israel are under examination by the Israeli Income Tax Authorities for certain years from 2013 to 2015.

The Company's operations in Israel were granted "Approved Enterprise" status by the Investment Center in the Israeli Ministry of Economy and Industry and "Beneficiary Enterprise" status from the Israeli Income Tax Authority, which makes the Company eligible for tax benefits under the Israeli Law for Encouragement of Capital Investments, 1959 (the "Encouragement Law"). Under the terms of the Beneficiary Enterprise program, income that is attributable to the Company's operations in Yokneam, Israel, is exempt from income tax commencing fiscal year 2011 through 2021. Income that is attributable to the Company's operations in Tel Aviv, Israel is subject to a reduced income tax rate (generally between 10.0% and the current corporate tax rate, depending on the percentage of foreign investment in the Company) commencing fiscal year 2013 through 2021. The tax holiday has resulted in a cash tax savings of $8.3 million for the six months ended June 30,2018, increasing diluted earnings per share by approximately $0.15 in the six months ended June 30,2018.

On June 14, 2017, the Israeli government legislated new regulations regarding the "Preferred Technological Enterprise" regime, under which a company that complies with the terms may be entitled to certain tax benefits. The Company expects that its operation in Israel will comply with the terms of the Preferred Technological Enterprise regime. Therefore, the Company may utilize the tax benefits under this regime after the end of the benefit period of its Approved and Beneficiary Enterprise

25

MELLANOX TECHNOLOGIES, LTD.

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

statuses (i.e. from fiscal year 2022 onwards). Under the new legislation, the majority of the Company’s income from its operations in Yokneam, Israel, will be subject to a corporate rate of 7.5%, while the majority of the income from its operations in Tel-Aviv, Israel, will be subject to a corporate rate of 12.0%.

The Company’s effective tax rate is highly dependent upon the geographic distribution of its worldwide earnings or losses, tax regulations and tax holiday benefits in Israel, and the effectiveness of the Company’s tax planning strategies. The Company’s effective tax rates were (96.5)% and (4.1)% for the six months endedJune 30,2018 and 2017, respectively. The difference between the Company’s effective tax rate and the 21.0% federal statutory rate for the six months ended June 30, 2018 resulted primarily from the release of valuation allowance of $26.3 million against the deferred tax assets related to U.S. subsidiaries, the excess benefits of share-based compensation, the tax holiday in Israel and foreign earnings taxed at rates lower than the federal statutory rates, partially offset by the accrual of unrecognized tax benefits, interest and penalties associated with unrecognized tax positions, non-tax-deductible expenses such as share-based compensation and losses generated from subsidiaries without tax benefit.

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

At June 30,2018, the Company maintained a valuation allowance against deferred tax assets of certain subsidiaries. The Company assesses its ability to recover its deferred tax assets on an ongoing basis. Significant management judgment is required in determining any valuation allowance recorded against deferred tax assets. In evaluating the ability to recover deferred tax assets, the Company considers available positive and negative evidence including its recent cumulative losses, its ability to carry-back losses against prior taxable income and its projected financial results. The Company also considers, commensurate with its objective verifiability, the forecast of future taxable income including the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies. A valuation allowance may be recorded in the event it is deemed to be more-likely-than-not that the deferred tax asset cannot be realized. Previously established valuation allowances may also be released in the event it is deemed to be more-likely-than-not that the deferred tax asset can be realized. Any release of valuation allowance will be recorded as a tax benefit which will positively impact the Company’s operating results. Management has determined on the basis of the quarterly assessment performed at June 30, 2018, that these deferred tax assets are not more-likely-than-not to be realized. 

NOTE 12—OTHER INCOME, NET:

Other income, net is summarized in the following table:

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
	(in thousands)
Interest income and gains on short-term investments, net	$	972		$	951		$	1,939		$	1,828
Foreign exchange loss, net	(396		)	(161		)	(578		)	(322		)
Other	(43		)	37			(190		)	4
Other income, net	$	533		$	827		$	1,171		$	1,510

NOTE 13—TERM DEBT:

In connection with the Company’s acquisition of EZchip, on February 22, 2016, the Company and its wholly owned subsidiary, Mellanox Technologies, Inc., entered into a $280.0 million variable interest rate Term Debt note maturing February 21, 2019. Debt issuance costs of $5.5 million on the Term Debt were being amortized to interest expense at the effective interest rate over the contractual term of the Term Debt. The Term Debt allowed for voluntary prepayments at any time and additional term loan borrowings under certain conditions.

26

MELLANOX TECHNOLOGIES, LTD.

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

On April 30, 2018, the Company paid off all outstanding principal and interest related to the Term Debt. As a result, the unamortized debt issuance costs were fully amortized when the outstanding principal and interest were fully paid.

NOTE 14—RESTRUCTURING CHARGES:

In connection with the discontinuation of its 1550nm silicon photonics development activities, the Company initiated a restructuring plan to wind down the business operations related to these activities, which primarily included terminating employees, exiting contracts with vendors, selling assets, and exiting facilities.

The Company recorded employee separation and severance costs of $0.1 million and $3.5 million during the three and six months ended June 30,2018, respectively. The Company has completed the employee termination activities, and does not expect additional costs related to employee terminations in future periods.

The Company recorded contract exit costs with vendors of $0.2 million and $3.4 million during the three and six months ended June 30,2018, respectively. The Company does not expect additional exit costs in future periods.

The Company recorded impairment charges and a net loss on disposal of assets of $1.4 million and $2.4 million during the three and six months ended June 30,2018, respectively. The Company does not expect additional losses on the disposal of assets in future periods.

As of June 30,2018, the Company is still using the facilities related to the discontinued activities and therefore has not recorded any related restructuring charges. The Company expects to record up to $0.5 million of facility related charges in the third quarter of 2018.

NOTE 15—RELATED PARTY TRANSACTIONS:

On June 19, 2018, the Company entered into a settlement agreement (the “Settlement Agreement”) by and among the Company and Starboard Value LP and certain of its affiliates (“Starboard”), together holding, on such date, approximately 10.3% of the Company’s outstanding ordinary shares. The Settlement Agreement provided for, among other things, the concurrent resignations of three members of the Company’s Board of Directors (the “Board”) and the concurrent appointment of two independent directors nominated by Starboard and one mutually agreed upon independent nominee to the Board. Starboard also agreed to terminate its proxy contest against the Company and withdraw its notice of shareholder nomination of individuals for election as directors at the Company's 2018 annual general meeting of shareholders. Furthermore, the Company agreed to reimburse Starboard for its reasonable, documented out-of-pocket fees and expenses (including legal expenses) incurred through the date of the Settlement Agreement in connection with Starboard’s interactions with the Company up to a maximum of $2.0 million. As of June 30, 2018, the Company accrued the $2.0 million related to the reimbursement to Starboard, and this liability was paid on July 11, 2018.

NOTE 16—SUBSEQUENT EVENTS:

On July 25, 2018, the Company's shareholders approved the Third Restated Plan, which constitutes an amendment and restatement of the Second Restated Plan. The Third Restated Plan increases the ordinary shares reserved for issuance under the Second Restated Plan by 2,077,000 shares to 4,467,000 shares plus any shares subject to issued and outstanding awards under certain of the Company’s prior equity plans that expire, are cancelled or otherwise terminate after March 14, 2016, the effective date of the first amendment and restatement of the Global Share Incentive Plan (2006). The Third Restated Plan also implements certain additional amendments, including specifically providing for the grant of performance share units.

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

The following discussion and analysis of our financial condition as of June 30,2018 and results of operations for the three and six months ending June 30,2018 and 2017 should be read together with our financial statements and related notes included elsewhere in this report. This discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve risks, uncertainties and assumptions. Words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “predict,” “potential” and similar expressions, as they relate to us, our business and our management, are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this report. The identification of certain statements as “forward-looking” is not intended to mean that other statements not specifically identified are not forward-looking. All statements other than statements about historical facts are statements that could be deemed forward-looking statements, including, but not limited to, statements that relate to our future revenues, product development and introductions, customer demand, our dependence on key customers for a substantial portion of our revenue, performance of our subcontractors, growth rates, market adoption of our products, competitive factors, gross margins, levels of research, development and other related costs, expenditures, protection of our proprietary rights and patents, tax expenses and benefits, cash flows, management’s plans and objectives for current and future operations, and worldwide economic conditions.

Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those set forth under the section entitled “Risk Factors” in Part II, Item 1A of this report and in the section entitled “Risk Factors” in Part 1, Item 1A of our Annual Report on Form 10-K for fiscal year ended December 31, 2017. We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. All forward-looking statements included in this report are based on information available to us on the date of this report, and we assume no obligation to update any forward-looking statements contained in this report. Quarterly financial results may not be indicative of the financial results of future periods.

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

Overview

General

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

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

We are a leader in high performance Ethernet interconnects, including adapters, switches, and optical and copper cables and transceivers. We have gained significant market share in the 25Gb/s and greater market segment and are the leading provider of adapters at these speeds. We work closely with key cloud, web 2.0, server, storage, machine learning and telco customers to develop hardware and software that accelerate workloads and make data centers more efficient. This deep engagement with our customers enables us to deliver unique acceleration capabilities and thereby differentiate our products from our competitors. This provides us with the opportunity to gain share in the Ethernet market as users upgrade from 1Gb/s or 10Gb/s directly to 25/40/50 or 100Gb/s.

We are one of the pioneers of InfiniBand, an industry-standard architecture for high-performance interconnects. We believe InfiniBand interconnect solutions deliver industry-leading performance, efficiency and scalability for clustered computing and storage systems that incorporate our products. We are the leader in the HPC and machine learning markets and

28

provide the most efficient, highest bandwidth, and lowest latency end to end interconnect solutions for scientific, data intensive, big data, and analytics applications.

Our Business

Revenues. We derive revenues from sales of our ICs, boards, switch systems, cables, modules, software, accessories and other product groups. Revenues for the three months endedJune 30,2018 were $268.5 million compared to $212.0 million for the three months endedJune 30,2017, representing an increase of $56.5 million, or approximately 26.7%. Revenues for the six months endedJune 30,2018 were $519.5 million compared to $400.6 million for the six months endedJune 30,2017, representing an increase of $118.9 million, or approximately 29.7%. Our revenues for the six months endedJune 30,2018 are not necessarily indicative of our future results. In order to increase our annual revenues, we must continue to achieve design wins over other Ethernet providers and providers of competing interconnect technologies. We consider a design win to occur when an original equipment manufacturer ("OEM"), or contract manufacturer notifies us that it has selected our products to be incorporated into a product or system under development. Because the life cycles for our customers' products can last for several years if these products have successful commercial introductions, we expect to continue to generate revenues over an extended period of time for each successful design win.

Our products have broad adoption with multiple end customers across cloud, Web 2.0, HPC, Big Data, artificial intelligence, machine learning, storage, telecommunications, enterprise data center, financial services, and media and entertainment markets. These markets are mainly served by leading server, storage and communications infrastructure OEMs. Therefore, we have derived a substantial portion of our revenues from a relatively small number of OEM customers. Sales to our top ten customers represented 56% and 57% of our total revenues for the six months endedJune 30,2018 and 2017, respectively. Sales to customers representing 10% or more of revenues accounted for 27% and 25% of our total revenues for the six months endedJune 30,2018 and 2017, respectively. The loss of one or more of our principal customers, the reduction or deferral of purchases, or changes in the mix of our products ordered by any one of these customers could cause our revenues to decline materially if we are unable to increase our revenues from other customers. Our customers, including our most significant customers, are not obligated by long-term contracts to purchase our products and may cancel orders with limited potential penalties. If any of our large customers reduces or cancels its purchases from us for any reason, it could have an adverse effect on our revenues and results of operations.

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

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

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

Operational expenses

Research and development expenses. Our research and development expenses consist primarily of salaries, share-based compensation and associated costs for employees engaged in research and development, depreciation, amortization of intangibles, allocable facilities related and administrative expenses and tape-out costs. Tape-out costs are expenses related to the manufacture of new ICs, including charges for mask sets, prototype wafers, mask set revisions and testing incurred before releasing new ICs into production.

29

Sales and Marketing Expenses. Sales and marketing expenses consist primarily of salaries, incentive compensation, share-based compensation and associated costs for employees engaged in sales, marketing and customer support, advertising, trade shows and promotions, travel, amortization of intangibles, and allocable facilities related and administrative expenses.

General and Administrative Expenses. General and administrative expenses consist primarily of salaries, share-based compensation and associated costs for employees engaged in finance, legal, human resources and administrative activities, professional service expenses for accounting, corporate legal fees and allocable facilities related and administrative expenses.

Taxes on Income

Our operations in Israel have been granted "Approved Enterprise" status by the Investment Center of the Israeli Ministry of Economy and Industry and "Beneficiary Enterprise" status by the Israeli Income Tax Authority, which makes us eligible for tax benefits under the Encouragement Law. Under the terms of the Beneficiary Enterprise program, income that is attributable to our operations in Yokneam, Israel is exempt from income tax commencing fiscal year 2011 through 2021. Income that is attributable to our operations in Tel Aviv, Israel is subject to a reduced income tax rate (generally between 10.0% and the current corporate tax rate, depending on the percentage of foreign investment in the Company) commencing fiscal year 2013 through 2021.

On June 14, 2017, the Israeli government legislated new regulations regarding the "Preferred Technological Enterprise" regime, under which a company that complies with the terms may be entitled to certain tax benefits. The Company expects that its operation in Israel will comply with the terms of the Preferred Technological Enterprise regime. Therefore, the Company may utilize the tax benefits under this regime after the end of the benefit period of its Approved and Beneficiary Enterprise statuses (i.e. from fiscal year 2022 onwards). Under the new legislation, the majority of the Company’s income from its operations in Yokneam, Israel, will be subject to a corporate rate of 7.5%, while the majority of the income from its operations in Tel-Aviv, Israel, will be subject to a corporate rate of 12.0%.

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

Critical Accounting Policies and Estimates

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

We believe that the assumptions and estimates associated with revenue recognition, allowances for doubtful accounts, investment valuation, warranty reserves, inventory reserves, long-term asset valuations, useful lives of property, equipment, and intangibles, accounting for business combinations, goodwill and purchased intangible asset valuation, investments in privately-held companies, accounting and fair value of financial instruments and derivatives, deferred income tax asset valuation, uncertain tax positions, and litigation and other loss contingencies have the greatest potential impact on our unaudited condensed consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates.

See our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on February 16, 2018, for a discussion of critical accounting policies and estimates. Other than the adoption of the new revenue standards as discussed in Notes 1 “The Company and Summary of Significant Accounting Policies” and 2 “Revenue” in the notes to the unaudited condensed consolidated financial statements, there have been no changes in our critical accounting policies as compared to what was disclosed in the Form 10-K for the year ended December 31, 2017.

30

Results of Operations

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

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2018		2017			2018			2017
Total revenues	100	%	100		%	100		%	100		%
Cost of revenues	39		35			37			34
Gross profit	61		65			63			66
Operating expenses:
Research and development	32		44			34			45
Sales and marketing	13		18			14			18
General and administrative	9		5			8			7
Restructuring charges	1		—			2			—
Total operating expenses	55		67			58			70
Income (loss) from operations	6		(2	)		5			(4	)
Interest expense	—		(1	)		—			(1	)
Other income, net	—		—			—			—
Interest and other, net	—		(1	)		—			(1	)
Income (loss) before taxes on income	6		(3	)		5			(5	)
Provision for (benefit from) taxes on income	—		1			(5	)		—
Net income (loss)	6	%	(4	)	%	10		%	(5	)	%

Comparison of the Three Months Ended June 30,2018 to the Three Months Ended June 30,2017

The following tables represent our total revenues for the three months ended June 30,2018 and 2017 by product type and interconnect protocol:

	Three Months Ended June 30,
	2018		% of Revenues		2017		% of Revenues
	(dollars in thousands)
ICs	$	28,934	10.8	%	$	34,063	16.1	%
Boards	136,708		50.9	%	80,425		37.9	%
Switch systems	57,074		21.3	%	56,189		26.5	%
Cables, accessories and other	45,746		17.0	%	41,285		19.5	%
Total Revenue	$	268,462	100.0	%	$	211,962	100.0	%

	Three Months Ended June 30,
	2018		% of Revenues		2017		% of Revenues
	(dollars in thousands)
InfiniBand:
EDR	$	59,319	22.1	%	$	59,436	28.0	%
FDR	35,649		13.3	%	42,978		20.3	%
QDR/DDR/SDR	7,143		2.6	%	5,697		2.7	%
Total	102,111		38.0	%	108,111		51.0	%
Ethernet	157,470		58.7	%	87,023		41.1	%
Other	8,881		3.3	%	16,828		7.9	%
Total revenue	$	268,462	100.0	%	$	211,962	100.0	%

Revenues. Revenues were $268.5 million for the three months endedJune 30,2018, compared to $212.0 million for the three months endedJune 30,2017, representing an increase of $56.5 million, or approximately 26.7%. Ethernet product sales

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increased by $70.4 million due to the increased adoption of our 25 gigabit per second and above solutions. The revenues for the three months endedJune 30,2018 are not necessarily indicative of future results.

Gross Profit and Margin. Gross profit was $164.8 million for the three months endedJune 30,2018, compared to $138.5 million for the three months endedJune 30,2017, representing an increase of $26.3 million, or approximately 19.0%. Gross margin decreased to 61.4% in the three months endedJune 30,2018 from approximately 65.4% in the three months endedJune 30,2017. The decrease in gross margin was primarily due to a $9.3 million settlement of a contingent royalty obligation recorded during the second quarter of 2018. Gross margin for the three months endedJune 30,2018 is not necessarily indicative of future results.

Research and Development.

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

	Three Months Ended June 30,
	2018		% of Revenues		2017		% of Revenues
	(dollars in thousands)
Salaries and benefits	$	51,649	19.2	%	$	50,220	23.7	%
Share-based compensation	8,340		3.1	%	10,297		4.9	%
Development and tape-out costs	7,303		2.8	%	9,880		4.7	%
Other	19,860		7.3	%	21,951		10.3	%
Total Research and development	$	87,152	32.4	%	$	92,348	43.6	%

Research and development expenses were $87.2 million for the three months endedJune 30,2018, compared to $92.3 million for the three months endedJune 30,2017, representing a decrease of $5.1 million, or approximately 5.6%. The increase in salaries and benefits expenses was primarily attributable to higher bonus expense, partially offset by headcount decreases primarily related to the discontinuation of our 1550nm silicon photonics development activities. The decrease in development and tape-out costs was primarily due to lower tape-out costs during the three months endedJune 30,2018 and the discontinuation of our 1550nm silicon photonics development activities. The decrease in other expenses was mainly due to lower outsourcing of research and development activities during the three months endedJune 30,2018.

Please refer to "Share-based Compensation Expense" below for a discussion of its impact on research and development expenses.

Sales and Marketing.

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

	Three Months Ended June 30,
	2018		% of Revenues		2017		% of Revenues
	(dollars in thousands)
Salaries and benefits	$	22,448	8.4	%	$	23,300	11.0	%
Share-based compensation	3,646		1.4	%	4,010		1.9	%
Trade shows and promotions	3,894		1.5	%	4,692		2.2	%
Other	5,685		2.0	%	6,108		2.9	%
Total Sales and marketing	$	35,673	13.3	%	$	38,110	18.0	%

Sales and marketing expenses were $35.7 million for the three months endedJune 30,2018, compared to $38.1 million for the three months endedJune 30,2017, representing a decrease of $2.4 million, or approximately 6.4%. The decrease in salaries and benefits expenses was primarily related to headcount decreases.

Please refer to "Share-based Compensation Expense" below for a discussion of its impact on sales and marketing expenses.

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General and Administrative.

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

	Three Months Ended June 30,
	2018		% of Revenues		2017		% of Revenues
	(dollars in thousands)
Salaries and benefits	$	5,763	2.1	%	$	5,432	2.6	%
Share-based compensation	2,515		0.9	%	2,783		1.3	%
Professional services	13,613		5.1	%	2,603		1.2	%
Other	1,744		0.8	%	1,658		0.8	%
Total General and administrative	$	23,635	8.9	%	$	12,476	5.9	%

General and administrative expenses were $23.6 million for the three months endedJune 30,2018, compared to $12.5 million for the three months endedJune 30,2017, representing an increase of $11.1 million, or approximately 89.4%. The increase in professional services was primarily due to the $10.1 million of expenses related to the proxy contest during the three months endedJune 30,2018.

Please refer to "Share-based Compensation Expense" below for a discussion of its impact on general and administrative expenses.

Share-based Compensation Expense.

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

	Three Months Ended June 30,
	2018		2017
	(in thousands)
Cost of goods sold	$	415	$	575
Research and development	8,340		10,297
Sales and marketing	3,646		4,010
General and administrative	2,515		2,783
	$	14,916	$	17,665

Share-based compensation expense was $14.9 million for the three months ended June 30,2018, compared to $17.7 million for the three months ended June 30,2017, representing a decrease of $2.8 million, or approximately 15.9%. The decrease was mainly due to headcount decreases.

Restructuring charges for the three months endedJune 30,2018 primarily consisted of impairment charges and a net loss on disposal of assets of $1.4 million and contract exit costs with vendors of $0.2 million primarily related to the discontinuation of our 1550nm silicon photonics development activities.

Interest and other, net in the three months endedJune 30,2018 was an expense of $0.3 million as compared to an expense of $1.2 million for the three months endedJune 30,2017. The change was primarily attributable to a decrease in interest expense of $1.1 million related to the pay-down of the Term Debt.

Provision for (benefit from) taxes on income. Our benefit from taxes on income was $0.3 million for the three months endedJune 30,2018 as compared to a provision for taxes on income of $2.4 million for the three months endedJune 30,2017.

Our effective tax rate was (1.9)% and (43.5)% for three months endedJune 30,2018 and 2017, respectively. For the three months endedJune 30,2018, the difference between the (1.9)% effective tax rate and the 21.0% federal statutory rate resulted primarily from the excess benefits of share-based compensation, the tax holiday in Israel and foreign earnings taxed at rates lower than the federal statutory rates, partially offset by the accrual of unrecognized tax positions, interest and penalties associated with unrecognized tax positions, non-tax-deductible expenses such as share-based compensation expense, and losses generated from subsidiaries without tax benefits.

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

Comparison of the Six Months EndedJune 30,2018 to the Six Months EndedJune 30,2017

The following tables represent our total revenues for the three months ended June 30,2018 and 2017 by product type and interconnect protocol:

	Six Months Ended June 30,
	2018		% of Revenues		2017		% of Revenues
	(dollars in thousands)
ICs	$	57,521	11.1	%	$	76,485	19.1	%
Boards	254,759		49.0	%	144,717		36.1	%
Switch systems	112,721		21.7	%	103,335		25.8	%
Cables, accessories and other	94,461		18.2	%	76,076		19.0	%
Total Revenue	$	519,462	100.0	%	$	400,613	100.0	%

	Six Months Ended June 30,
	2018		% of Revenues		2017		% of Revenues
	(dollars in thousands)
InfiniBand:
EDR	$	115,265	22.2	%	$	99,059	24.7	%
FDR	77,397		14.9	%	92,807		23.2	%
QDR/DDR/SDR	12,587		2.4	%	13,230		3.3	%
Total	205,249		39.5	%	205,096		51.2	%
Ethernet	294,418		56.7	%	167,500		41.8	%
Other	19,795		3.8	%	28,017		7.0	%
Total revenue	$	519,462	100.0	%	$	400,613	100.0	%

Revenues. Revenues were $519.5 million for the six months endedJune 30,2018, compared to $400.6 million for the six months endedJune 30,2017, representing an increase of $118.9 million, or approximately 29.7%. Ethernet product sales increased by $126.9 million due to the increased adoption of our 25 gigabit per second and above solutions. The revenues for the six months endedJune 30,2018 are not necessarily indicative of future results.

Gross Profit and Margin. Gross profit was $326.8 million for the six months endedJune 30,2018, compared to $262.7 million for the six months endedJune 30,2017, representing an increase of $64.1 million, or approximately 24.4%. Gross margin decreased to 62.9% in the six months endedJune 30,2018 from approximately 65.6% in the six months endedJune 30,2017. The decrease in gross margin was primarily due to a $9.3 million settlement of a contingent royalty obligation recorded during the second quarter of 2018 and changes in product mix. Gross margin for the six months endedJune 30,2018 is not necessarily indicative of future results.

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Research and Development.

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

	Six Months Ended June 30,
	2018		% of Revenues		2017		% of Revenues
	(dollars in thousands)
Salaries and benefits	$	104,186	20.2	%	$	96,201	24.0	%
Share-based compensation	16,514		3.2	%	18,987		4.7	%
Development and tape-out costs	11,983		2.3	%	22,943		5.7	%
Other	40,895		7.8	%	42,708		10.6	%
Total Research and development	$	173,578	33.5	%	$	180,839	45.0	%

Research and development expenses were $173.6 million for the six months endedJune 30,2018, compared to $180.8 million for the six months endedJune 30,2017, representing a decrease of $7.2 million, or approximately 4.0%. The increase in salaries and benefits expenses was primarily attributable to merit-based salary increases and higher bonus expenses, partially offset by headcount decreases primarily related to the discontinuation of our 1550nm silicon photonics development activities. The decrease in development and tape-out costs was primarily due to lower tape-out costs during the six months endedJune 30,2018 and the discontinuation of our 1550nm silicon photonics development activities. The decrease in other expenses was mainly due to lower outsourcing of research and development activities during the six months endedJune 30,2018.

Please refer to "Share-based Compensation Expense" below for a discussion of its impact on research and development expenses.

Sales and Marketing.

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

	Six Months Ended June 30,
	2018		% of Revenues		2017		% of Revenues
	(dollars in thousands)
Salaries and benefits	$	47,460	9.0	%	$	44,314	11.0	%
Share-based compensation	7,245		1.4	%	7,348		1.8	%
Trade shows and promotions	8,519		1.6	%	10,203		2.5	%
Other	11,943		2.4	%	12,002		3.0	%
Total Sales and marketing	$	75,167	14.4	%	$	73,867	18.3	%

Sales and marketing expenses were $75.2 million for the six months endedJune 30,2018, compared to $73.9 million for the six months endedJune 30,2017, representing an increase of $1.3 million, or approximately 1.8%. The increase in salaries and benefits expenses was primarily related to merit-based salary increases, higher bonuses and sales commissions, partially offset by headcount decreases.

Please refer to "Share-based Compensation Expense" below for a discussion of its impact on sales and marketing expenses.

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General and Administrative.

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

	Six Months Ended June 30,
	2018		% of Revenues		2017		% of Revenues
	(dollars in thousands)
Salaries and benefits	$	11,643	2.2	%	$	10,728	2.7	%
Share-based compensation	5,305		1.0	%	5,041		1.2	%
Professional services	19,453		3.7	%	5,914		1.5	%
Other	3,750		0.8	%	3,312		0.8	%
Total General and administrative	$	40,151	7.7	%	$	24,995	6.2	%

General and administrative expenses were $40.2 million for the six months endedJune 30,2018, compared to $25.0 million for the six months endedJune 30,2017, representing an increase of $15.2 million, or approximately 60.6%. The increase in professional services was primarily due to $13.5 million of expenses related to the proxy contest during the six months endedJune 30,2018.

Please refer to "Share-based Compensation Expense" below for a discussion of its impact on general and administrative expenses.

Share-based Compensation Expense.

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

	Six Months Ended June 30,
	2018		2017
	(in thousands)
Cost of goods sold	$	826	$	1,057
Research and development	16,514		18,987
Sales and marketing	7,245		7,348
General and administrative	5,305		5,041
	$	29,890	$	32,433

Share-based compensation expense was $29.9 million for the six months endedJune 30,2018, compared to $32.4 million for the six months endedJune 30,2017, representing a decrease of $2.5 million, or approximately 7.8%. The decrease was mainly due to the headcount decreases.

Restructuring charges for the six months endedJune 30,2018 primarily consisted of employee termination and severance costs of $3.5 million, contract exit costs with vendors of $3.4 million, and impairment charges and a net loss on disposal of assets of $2.4 million primarily related to the discontinuation of our 1550nm silicon photonics development activities.

Interest and other, net in the six months endedJune 30,2018 was an expense of $0.9 million as compared to an expense of $2.5 million for the six months endedJune 30,2017. The change was primarily attributable to a decrease in interest expense of $1.9 million related to the pay down of the Term Debt.

Provision for (benefit from) taxes on income. Our benefit from taxes on income was $26.7 million for the six months endedJune 30,2018 as compared to a provision for taxes on income of $0.8 million for the six months endedJune 30,2017.

Our effective tax rate was (96.5)% and (4.1)% for six months endedJune 30,2018 and 2017, respectively. For the six months endedJune 30,2018, the difference between the (96.5)% effective tax rate and the 21.0% federal statutory rate resulted primarily from the release of a valuation allowance of $26.3 million against the deferred tax assets related to our U.S. subsidiaries, the excess benefits of share-based compensation, the tax holiday in Israel and foreign earnings taxed at rates lower than the federal statutory rates, partially offset by the accrual of unrecognized tax positions, interest and penalties associated with unrecognized tax positions, non-tax-deductible expenses such as share-based compensation expense, and losses generated from subsidiaries without tax benefits.

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Liquidity and Capital Resources

Historically, we have financed our operations through a combination of sales of equity securities and cash generated by operating activities. As of June 30,2018, our principal sources of liquidity consisted of cash and cash equivalents of $63.4 million and short-term investments of $219.2 million. In our first quarter ended March 31, 2016, we completed the acquisition of EZchip and financed it with cash on hand and with $280.0 million from a variable-interest rate three-year Term Debt. On April 30, 2018, we paid off all outstanding principal and interest related to the Term Debt.

We are an Israeli company and as of June 30,2018, our subsidiaries outside of Israel held approximately $17.6 million in cash, cash equivalents and short-term investments.

Our cash, cash equivalents, short-term investments and working capital balances at June 30,2018 and December 31, 2017 were as follows:

	June 30, 2018		December 31, 2017
	(in thousands)
Cash and cash equivalents	$	63,422	$	62,473
Short-term investments	219,225		211,281
Total	$	282,647	$	273,754
Working capital	$	328,154	$	310,286

Our ratio of current assets to current liabilities was 2.5:1 and 2.6:1 at June 30,2018 and December 31, 2017, respectively.

Operating Activities

Net cash provided by our operating activities amounted to $102.1 million in the six months endedJune 30,2018. The adjustments from net income of $54.4 million to net cash provided by operating activities mainly included net non-cash items of $56.0 million, partially offset by changes in assets and liabilities of $6.5 million and a gain on investments of $1.8 million. Non-cash items consisted primarily of $52.7 million of depreciation and amortization, and $29.9 million of share-based compensation, partially offset by the increase in deferred tax assets of $28.1 million primarily due to the release of a valuation allowance. The $6.5 million cash outflow from changes in assets and liabilities was attributed to an increase in inventory of $30.6 million primarily due to higher demand and an increase in accounts receivable of $1.5 million primarily due to timing of invoicing and collections, partially offset by an increase in accounts payable of $12.5 million primarily due to an increase in inventory related purchases and timing of payments and an increase of $12.3 million in accrued liabilities and other liabilities primarily due to accruals related to the proxy contest.

Net cash provided by our operating activities amounted to $41.4 million in the six months ended June 30, 2017. The adjustments from net loss of $20.2 million to net cash provided by operating activities mainly included net non-cash items of $82.5 million, partially offset by changes in assets and liabilities of $19.2 million and a gain on investments of $1.7 million. Non-cash expenses consisted primarily of $50.8 million of depreciation and amortization, $32.4 million of share-based compensation, partially offset by an increase in deferred tax assets of $0.7 million. The $19.2 million cash outflow from changes in assets and liabilities is attributed to an increase in accounts receivable of $7.8 million, primarily due to timing of collections, an increase in inventory of $7.7 million, an increase in prepaid expense and other assets of $2.7 million, and a decrease of $1.1 million in accrued liabilities and other liabilities.

Investing Activities

Net cash used in investing activities was $43.2 million in the six months endedJune 30,2018. Cash used in investing activities was primarily attributable to $20.1 million for purchases of property and equipment, $7.1 million for acquisitions, $6.4 million for purchases of intangible assets, net purchases of short-term investments of $6.2 million, and $6.0 million for purchases of investments in private companies, partially offset by the proceeds from sales of property and equipment of $3.2 million.

Net cash used in investing activities was $21.6 million in the six months ended June 30, 2017. Cash used in investing activities was primarily attributable to $27.1 million for purchases of property and equipment, $11.0 million for purchases of investments in private companies, and $1.6 million for purchases of intangible assets. These uses were partially offset by net proceeds from sales, maturities and purchases of short-term investments of $18.8 million.

Financing Activities

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Net cash used in financing activities was $58.1 million in the six months endedJune 30,2018. Cash used in financing activities was primarily due to $74.0 million of principal payments on the Term Debt and $3.4 million of payments on intangible asset financings. These were partially offset by $19.3 million of proceeds from issuances of ordinary shares through our employee equity incentive plans.

Net cash used in financing activities was $20.9 million in the six months ended June 30, 2017. Cash used in financing activities was primarily due to $30.0 million of principal payments on the Term Debt, and $3.3 million of payments on intangible asset financings. These were partially offset by $12.4 million of proceeds from issuances of ordinary shares through our employee equity incentive plans.

Contractual Obligations

The following table summarizes our contractual obligations at June 30,2018 and the effect those obligations are expected to have on our liquidity and cash flows in future periods:

	Contractual Obligations:
	Total		Non-cancelable operating lease commitments		Purchase commitments
	(in thousands)
2018 (remainder of the year)	$	222,299	$	10,926	$	211,373
2019	67,955		21,173		46,782
2020	20,028		17,944		2,084
2021	16,562		16,026		536
2022	12,859		12,598		261
Thereafter	75,966		75,966		—
Total	$	415,669	$	154,633	$	261,036

Purchase commitments. Purchase commitments are defined as agreements that are enforceable and legally binding and that specify all significant terms including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Purchase orders for inventory are based on our current manufacturing needs and are generally fulfilled by our subcontractors within a period of eight to twelve weeks. 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.

Other Commitments

For additional information about other commitments, see Note 8 "Commitments and Contingencies" in the notes to the unaudited condensed consolidated financial statements.

Recent Accounting Pronouncements

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

Off-Balance Sheet Arrangements

As of June 30,2018, we did not have any off-balance sheet arrangements.

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ITEM 3—QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate fluctuation risk

Investments. Our investments consist of cash, money market funds, time deposits and interest bearing investments in government debt securities, commercial paper, corporate bonds and municipal bonds with an average maturity of 6.3 months. The primary objective of our investment activities is to preserve principal and ensure liquidity while maximizing income without significantly increasing risk. By policy, we limit the amount of our credit exposure through diversification and restricting our investments to highly rated securities. At the time of purchase, we do not invest more than 4% of the total investment portfolio in individual securities, except U.S. Treasury or agency securities. Highly rated long-term securities are defined as having a minimum Moody's, Standard & Poor's or Fitch rating of A2 or A, respectively. Highly rated short-term securities are defined as having a minimum Moody's, Standard & Poor's or Fitch rating of P-1, A-1 or F-1, respectively. We have not experienced any significant losses on our cash equivalents or short-term investments. We do not enter into investments for trading or speculative purposes. Our investments are exposed to market risk due to a fluctuation in interest rates, which may affect our interest income and the fair market value of our investments. An immediate 100 basis point change in interest rates would have a $1.0 million effect on the fair market value of our portfolio.

Foreign currency exchange risk

We derive all of our revenues in U.S. dollars. The U.S. dollar is our functional and reporting currency in all of our foreign locations. However, a significant portion of our liabilities, as well as our operating expenses, consisting principally of salaries and related personnel costs and facilities 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 net income.

To protect against foreign exchange risks associated with forecasted future cash flows and existing assets and liabilities, we have established a balance sheet and anticipated transaction risk management program. Currency derivative instruments and natural hedges are generally utilized in this hedging program. We do not enter into derivative instruments for trading or speculative purposes. We account for our derivative instruments as either assets or liabilities and carry them at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation.

Our hedging program reduces, but does not eliminate the impact of currency exchange rate movements (see Part II, Item 1A, "Risk Factors"). If we were to experience an immediate strengthening of NIS against USD of 10%, the impact on assets and liabilities denominated in NIS, after taking into account hedges and offsetting positions, would result in a loss before taxes of approximately $0.1 million at June 30, 2018. There would also be an impact on future operating expenses denominated in currencies other than the U.S. dollar. For the month ending June 30, 2018, approximately $19.1 million of our monthly expenses were denominated in NIS. As of June 30, 2018, we had derivative contracts designated as cash flow hedges in the notional amount of approximately 366.4 million NIS, or approximately $100.4 million based upon the exchange rate on that day. In addition, as of June 30, 2018, we had derivative contracts hedging against NIS denominated assets and liabilities in the notional amount of approximately 140.0 million NIS, or approximately $38.4 million based upon the exchange rate on that day.

Our derivatives expose us to credit risk to the extent that the counterparties may be unable to meet the terms of the agreement. We seek to mitigate such risk by limiting our counterparties to major financial institutions and by spreading the risk across a number of major financial institutions. However, failure of one or more of these financial institutions is possible and could result in incurred losses.

Inflation related risk

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

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ITEM 4—CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

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

As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our CEO and V.P., Corporate Controller, of the effectiveness of our disclosure controls and procedures as of June 30, 2018. Based on this evaluation, our CEO and V.P., Corporate Controller concluded that our disclosure controls and procedures were effective as of June 30, 2018 to provide the reasonable assurance described above.

Changes in Internal Control Over Financial Reporting

There were no changes during the three months ended June 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1—LEGAL PROCEEDINGS

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

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

ITEM 1A—RISK FACTORS

Investing in our ordinary shares involves a high degree of risk. You should carefully consider the following risk factors, in addition to the other information set forth in this report, before purchasing our ordinary shares. Each of these risk factors could harm our business, financial condition and results of operations, as well as decrease the value of an investment in our ordinary shares.

Risks Related to Our Business

The semiconductor industry may be adversely impacted by worldwide economic uncertainties which may cause our revenues and profitability to decline.

We operate primarily in the semiconductor industry, which is cyclical and subject to rapid change and evolving industry standards. From time to time, the semiconductor industry has experienced significant downturns characterized by decreases in product demand and excess customer inventories. Economic volatility can cause extreme difficulties for our customers and vendors to accurately forecast and plan future business activities. This unpredictability could cause our customers to reduce spending on our products and services, which would delay and lengthen sales cycles. Furthermore, during challenging economic times our customers and vendors may face issues gaining timely access to sufficient credit, which could affect their ability to make timely payments to us. As a result, we may experience growth patterns that are different than the end demand for products, particularly during periods of high volatility.

We cannot predict the timing, strength or duration of any economic slowdown or recovery or the impact of such events on our customers, our vendors or us. The combination of our lengthy sales cycle coupled with challenging macroeconomic conditions could have a compound impact on our business. The impact of market volatility is not limited to revenue but may also affect our product gross margins and other financial metrics. Any downturn in the semiconductor industry may be severe and prolonged, and any failure of the industry to fully recover from downturns could seriously impact our revenue and harm our business, financial condition and results of operations.

We may pursue acquisitions of other companies or new or complementary products, technologies and businesses, which could harm our operating results, may disrupt our business and could result in unanticipated accounting charges.

Our growth depends upon market growth, our ability to enhance our existing products, and our ability to introduce new products on a timely basis. We intend to continue to address the need to develop new products and enhance existing products through acquisitions of other companies, product lines, technologies, and personnel.

Acquisitions create additional material risk factors for our business that could cause our results to differ materially and adversely from our expected or projected results. Such risk factors include:

• difficulties in integrating the operations, systems, technologies, products, and personnel of the acquired companies, particularly companies with large and widespread operations and/or complex products;

• the diversion of management's attention from normal daily operations of the business and the challenges of managing larger and more widespread operations resulting from acquisitions;

• possible disruption to the continued expansion of our product lines;

• potential changes in our customer base and changes to the total available market for our products;

• reduced demand for our products;

41

• potential difficulties in completing projects associated with in-process research and development intangibles;

• the use of a substantial portion of our cash resources and incurrence of significant amounts of debt;

• significantly increase our interest expense, leverage and debt service requirements as a result of incurring debt;

• the impact of any such acquisition on our financial results;

• internal controls may become more complex and may require significantly more resources to ensure they remain effective;

• negative customer reaction to any such acquisition; and

• assuming the liabilities of the acquired company.

Acquisitions present a number of other potential risks and challenges that could disrupt our business operations. For example, we may not be able to successfully negotiate or finance the acquisition on favorable terms. If an acquired company also has inventory that we assume, we will be required to write up the carrying value of that inventory to its fair value. When that inventory is sold, the gross margins for those products are reduced and our gross margins for that period are negatively affected. Furthermore, the purchase price of any acquired businesses may exceed the current fair values of the net tangible assets of such acquired businesses. As a result, we would be required to record material amounts of goodwill, acquired in-process research and development and other intangible assets, which could result in significant impairment and acquired in-process research and development charges and amortization expense in future periods. These charges, in addition to the results of operations of such acquired businesses and potential restructuring costs associated with an acquisition, could have a material adverse effect on our business, financial condition and results of operations. We cannot forecast the number, timing or size of future acquisitions, or the effect that any such acquisitions might have on our operating or financial results. Furthermore, potential acquisitions, whether or not consummated, will divert our management's attention and may require considerable cash outlays at the expense of our existing operations. In addition, to complete future acquisitions, we may issue equity securities, incur debt, assume contingent liabilities or have amortization expenses and write-downs of acquired assets, which could adversely affect our profitability.

We have made and may in the future pursue investments in other companies, which could harm our operating results.

We have made, and could make in the future, investments in technology companies, including privately-held companies in the development stage. Many of these private equity investments are inherently risky because these businesses may never develop, and we may incur losses related to these investments. In addition, we have written down the carrying value of these investments in the past and may be required to write down the carrying value of these investments in the future to reflect other-than-temporary declines in their value, which could have a material adverse effect on our business, financial position and results of operations.

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

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 affected 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 customer and end-user demand for our products and generally have short inventory cycles, which introduce uncertainty into our revenue and 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

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directly to end users. In addition, the majority of our adapter card, switch system and cable businesses are conducted on a short order fulfillment basis, introducing more uncertainty into our forecasts. Because of the lead 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 demand. 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-burden our 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.

In addition, the majority of our revenues are derived from customer orders received and fulfilled in the same quarterly period. If we overestimate customer demand, we could miss our quarterly revenue targets, which could have a material adverse effect on our financial results.

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

A small number of customers account for a significant portion of our revenues. For the three months ended June 30, 2018, sales to Dell accounted for 13.6% and sales to HPE accounted for 12.7% of our total revenues. Sales to our top ten customers represented 56.4% and 63.5% of our total revenues for the three months ended June 30, 2018 and 2017, respectively. Because the majority of servers, storage, communications infrastructure equipment and embedded systems are sold by a relatively small number of vendors, we expect that we will continue to depend on a small number of customers to account for a significant percentage of our revenues for the foreseeable future. Our customers, including our most significant customers, are not obligated by long-term contracts to purchase our products and may cancel orders with limited potential penalties. If any of our large customers reduces or cancels its purchases from us for any reason, it could have an adverse effect on our revenues and results of operations.

We 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 fluctuating average selling prices. We may not be able to compete successfully against current or potential competitors.

Some of our customers are also IC and switch suppliers and already have in-house expertise and internal development capabilities similar to ours. Licensing our technology and supporting such customers entails the transfer of intellectual property rights that may enable such customers to develop their own products and solutions to replace those we are currently providing to them. Consequently, these customers may become competitors to us. Further, each new design by a customer presents a competitive situation. In the past, we have lost design wins to divisions within our customers and this may occur again in the future. We cannot predict whether these customers will continue to compete with us, whether they will continue to be our customers or whether they will continue to buy products from us at the same volumes. Competition could increase pressure on us to lower our prices and could negatively affect our profit margins.

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 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.

There has been a trend toward industry consolidation in our markets for several years, as companies attempt to improve the leverage of growing research and development costs, strengthen or hold their market positions in an evolving industry or are unable to continue operations. Companies that are strategic alliance partners in some areas of our business may acquire or form alliances with our competitors, thereby reducing their business with us. We believe that industry consolidation may result in stronger competitors that are better able to compete as sole-source vendors for customers. This could lead to more variability in our operating results and could have a material adverse effect on our business, financial condition and results of operations.

Winning business is subject to lengthy, competitive selection processes that often require us to incur significant expense, from which we may ultimately generate no revenues.

Our business is dependent on us winning competitive bid selection processes, known as "design wins," to develop semiconductors for use in our customers' products. These selection processes are typically lengthy and can require us to incur significant design and development expenditures and to dedicate scarce engineering resources in pursuit of a single customer

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opportunity. We may not win the competitive selection process and may never generate any revenue despite incurring such expenditures.

Furthermore, winning a product design does not guarantee sales to a customer. We may experience delays in generating revenue as a result of the lengthy development cycle typically required, or we may not realize as much revenue as anticipated. In addition, a delay or cancellation of a customer's plans could materially and adversely affect our financial results, as we may have incurred significant expense in the design process and generated little or no revenue. Customers could choose at any time to stop using our products or may fail to successfully market and sell their products, which could reduce the demand for our products and cause us to hold excess inventory, thereby materially adversely affecting our business, financial condition and results of operations.

The timing of design wins is unpredictable and implementing production for a major design win, or multiple design wins occurring at or around the same time, may strain our resources and those of our contract manufacturers. In such instances, we may be forced to dedicate significant additional resources and incur additional, unanticipated costs and expenses, which may have a material adverse effect on our results of operations.

Finally, some customers will not purchase any products from us, other than limited numbers of evaluation units, until they qualify the products and/or the manufacturing line for the products. The qualification process can take significant time and resources and we may not always be able to satisfy the qualification requirements of these customers. Delays in qualification or failure to qualify our products may cause a customer to discontinue use of our products and result in a significant loss of revenue.

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 our next generation of products in order to meet the demands of our customers who continually require higher performance and functionality at lower costs. The development process for these advancements is lengthy and will require us to accurately anticipate 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.

We may be unable to successfully develop additional next generation products, new products or product enhancements. There is a risk that these developments or enhancements will be late, have technical problems, fail to meet customer or market specifications or otherwise be uncompetitive with other products using alternative technologies that offer comparable performance and functionality. Our next generation products or any new products or product enhancements may not be accepted in new or existing markets. Our business, financial condition and results of operations may be adversely affected 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 the vast majority of our products, and we must rely on third-party subcontractors to perform these services. 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.

In addition, the consolidation of foundry subcontractors, as well as the increasing capital intensity and complexity associated with fabrication in smaller process geometries has limited the diversity of our suppliers and increased our risk of a "single point of failure." Specifically, as we move to smaller geometries, we have become increasingly reliant on IC manufacturers. The lack of diversity of suppliers could also drive increased prices and adversely affect our results of operations, including our product gross margins.

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

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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, thereby 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.

If we fail to carefully manage the use of "open source" software in our products, we may be required to license key portions of our products on a royalty-free basis or expose key parts of source code.

Some portion of our software may be derived from "open source" software that is generally made available to the public by its authors and/or other third parties. Such open source software is often made available to us under licenses, such as the GNU General Public License, which impose certain obligations on us in the event we were to create and distribute derivative works of the open source software. These obligations may require us to make source code for the derivative works available to the public and/or license such derivative works under a particular type of license, rather than the forms of licenses customarily used to protect our intellectual property. In the event that we inadvertently use open source software without the correct license form or a copyright holder of any open source software were to successfully establish in court that we had not complied with the terms of a license for a particular work, we could be required to release the source code of that work to the public and/or stop distribution of that work.

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 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. If we are unable to reduce our associated manufacturing costs this reduction in average selling prices 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 margins.

We expect gross margin to vary over time, and our recent level of product gross margin may not be sustainable.

Our product gross margins vary from quarter to quarter, and our recent level of gross margins may not be sustainable and may be adversely affected in the future by numerous factors, including product mix shifts, product transitions, increased price competition in one or more of the markets in which we compete, increases in material or labor costs, excess product component or obsolescence charges from our contract manufacturers, warranty related issues, or the introduction of new products or entry into new markets with different pricing and cost structures.

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:

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• 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;

• changes in the relative sales mix of our products;

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

• changes in the cost of our 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 may be 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 may not be able to proportionately reduce our operating expenses.

We rely on our ecosystem partners to enhance and drive demand for our product offerings. Our inability to continue to develop or maintain such relationships in the future or our partners' inability to timely deliver technology or product offerings to the market may harm our revenues and ability to remain competitive.

We have developed relationships with third parties, which we refer to as ecosystem partners. Such partners provide their technology products, operating systems, tool support, reference designs and other elements necessary for the sale of our products into our markets. In addition, introduction of new products into the market by these partners may increase demand for our products. If we are unable to continue to develop or maintain these relationships, or if our ecosystem partners delay or fail to timely deliver their technology or products or other elements to the market, our revenues may be adversely impacted and we might not be able to enhance our customers' ability to commercialize their products in a timely manner and our ability to remain competitive may be harmed.

We rely primarily upon trade secret, patent, trademark and copyright 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, trademark 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.

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We may not obtain sufficient patent protection on the technology embodied in 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. Patents that we currently own do not cover all of the products that we presently sell as we have patent applications pending with respect to certain products, while we have not been able to obtain, or choose not to seek, patent protection for other products. 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. Furthermore, any issued patents may be challenged, invalidated or declared unenforceable. Whether or not these patents are issued, the applications may become publicly available and the proprietary information disclosed in the applications will become available to others. The lives of acquired patents may also be of a shorter term depending upon their acquisition dates and the issue dates. The term of any issued patent in the United States and Israel is typically 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 be issued. 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, financial condition and results of operations. In addition, given the costs of obtaining patent protection, we may choose not to protect certain innovations that later on turn out to be important. In such cases, our lack of intellectual property rights may have a material adverse impact on our business, financial condition and results of operations.

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. From time to time, we receive notices from competitors and other third parties that claim we have infringed upon, misappropriated or misused other parties' proprietary rights. We may also be required to indemnify some customers and strategic partners under our agreements if a third party alleges or if a court finds that our products or activities have infringed upon, misappropriated or misused another party's proprietary rights. We have received requests from certain customers and strategic partners to include increasingly broad indemnification provisions in our agreements with them. Additionally, our products may contain technology provided to us by other parties such as contractors, suppliers or customers. We may have little or no ability to determine in advance whether such technology infringes upon the intellectual property rights of a third party. Our contractors, suppliers and licensors may not be required to indemnify us in the event that a claim of infringement is asserted against us, or they may be required to indemnify us only up to a maximum amount, above which we would be responsible for any further costs or damages.

Questions of infringement in the markets we serve involve highly technical and subjective analysis. We are involved in intellectual property litigation today and 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 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, and 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.

In the normal course of business, we enter into agreements with terms and conditions that require us to indemnify the other party against third-party claims alleging that one of our products infringes or misappropriates intellectual property rights, as well as against certain claims relating to property damage, personal injury or acts or omissions relating to supplied products or technologies, or acts or omissions made by us or our agents or representatives. In addition, we are obligated pursuant to indemnification undertakings with our officers and directors to indemnify them to the fullest extent permitted by law and to indemnify venture capital funds that were affiliated with or represented by such officers or directors. If we receive demands for indemnification under these agreements and terms and conditions, they will likely be very expensive to settle or defend, and we may incur substantial legal fees in connection with any indemnity demands. Our indemnification obligations under these agreements and terms and conditions may be unlimited in duration and amount, and could have an adverse effect on our business, financial condition and results of operations.

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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 is intense and accordingly, we may not be able to retain or hire all of the engineers required 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 our president and CEO and other senior executives. We do not have long-term employment contracts with our president and CEO or any other key personnel, and their knowledge of our business and industry would be extremely difficult to replace. On May 4, 2018, Jacob Shulman, stepped down as our CFO, following the announcement of his resignation on February 21, 2018. We are actively searching for a new CFO. If there is a significant delay in the hiring or the transition of a new CFO, there could be an adverse impact on our business, financial condition and results of operations.

In an effort to retain key employees, we may modify our compensation policies by, for example, increasing cash compensation to certain employees and/or modifying existing share options. These modifications of our compensation policies and the requirement to expense the fair value of share options and RSUs awarded to employees and officers may increase our operating expenses and result in the dilution of the holders of our ordinary shares. We cannot be certain that these and any other changes in our compensation policies will or would improve our ability to attract, retain and motivate employees. Our inability to attract and retain additional key employees and the increase in share-based compensation expense could each have an adverse effect on our business, financial condition and results of operations.

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 company 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 and strengthen our sales and marketing and general and administrative efforts. To successfully manage our growth, we believe we must effectively:

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

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

• address capacity shortages;

• expand and upgrade our technological capabilities;

• manage the challenges of having U.S., Israeli and other foreign operations; and

• hire, train, integrate and manage additional qualified engineers for research and development activities as well as additional personnel to strengthen our sales and marketing, financial and IT functions.

Managing our growth 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, in which case our business, financial conditions and results of operations may be adversely affected.

We are subject to risks associated with our distributors' product inventories.

We sell many of our products to customers through distributors who maintain their own inventory of our products for sale to dealers and end customers. We allow limited price adjustments on sales to distributors. Prior to January 1, 2018, we recognized revenues for sales to distributors upon sell through by the distributors, net of estimated allowances for price adjustments. Upon the adoption of the new revenue standards effective January 1, 2018, we began recognizing revenue on sales to distributors upon shipment and transfer of control (known as "sell-in" revenue recognition), net of the estimated allowances for price adjustments. We have extended these programs to certain distributors in the United States, Asia and Europe and may extend them on a selective basis to some of our other distributors in these geographies. The allowances for distributor price adjustments are based on judgments and estimates, using historical experience rates, inventory levels in distribution, current trends and other factors, and there could be material differences between actual amounts and our estimates.

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If our distributors are unable to sell an adequate amount of their inventory of our products in a given quarter to dealers and end customers or if they decide to decrease their inventories for any reason, such as adverse global economic conditions or a downturn in technology spending, our sales to these distributors and our revenues may decline. We also face the risk that our distributors may purchase, or for other reasons accumulate, inventory levels of our products in any particular quarter in excess of future anticipated sales to end customers. If such sales do not occur in the time frame anticipated by these distributors for any reason, these distributors may substantially decrease the amount of product they order from us in subsequent periods until their inventory levels realign with end-customer demand, which would harm our business and could adversely affect our revenues in such subsequent periods.

We do not always have a direct relationship with the end customers of our products sold through distributors. As a result, our products may be used in applications for which they were not necessarily designed or tested, and they may not perform as anticipated in such applications. In such event, failure of even a small number of parts could result in significant liabilities to us, damage our reputation and harm our business and results of operations.

Certain of our customers and suppliers require us to comply with their codes of conduct, which may include certain restrictions that may substantially increase our cost of doing business as well as have an adverse effect on our operating efficiencies, operating results and financial condition.

Certain of our customers and suppliers require us to agree to comply with the Electronic Industry Code of Conduct ("EICC") or their own codes of conduct, which may include detailed provisions on labor, human rights, health and safety, environment, corporate ethics and management systems. Certain of these provisions are not requirements under the laws of the countries in which we operate and may be burdensome to comply with on a regular basis. Moreover, new provisions may be added or material changes may be made to any these codes of conduct, and we may have to promptly implement such new provisions or changes, which may substantially further increase the cost of our business, be burdensome to implement and adversely affect our operational efficiencies and operating results. If we violate any such codes of conduct, we may lose further business with the customer or supplier and, in addition, we may be subject to fines from the customer or supplier. While we believe that we are currently in compliance with our customers and suppliers' codes of conduct, there can be no assurance that, from time to time, if any one of our customers and suppliers audits our compliance with such code of conduct, we would be found to be in full compliance. A loss of business from these customers or suppliers could have a material adverse effect on our business, financial condition and results of operations.

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, delays of our product shipments and prevent us from recognizing the benefits of new technologies we develop.

Our products may contain defects and errors. Product defects and errors could result in additional development costs, diversion of technical resources, delayed product shipments, increased warranty-related returns, including wide-scale product recalls, warranty expenses and product liability claims against us which may not be fully covered by insurance. Our products are complex and our quality control tests and procedures may fail to detect any such defects or errors. Delivery of products with defects or reliability, quality or compatibility problems may damage our reputation and our ability to retain existing customers and attract new customers. As a result, defects in our products could have an adverse effect on our business, financial condition and results of operations.

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 a limited number of third parties to manufacture our products. Our ability to offer new products depends on our manufacturers' ability to implement our revised product specifications, which is costly, time-consuming and complex.

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

Our intangible assets and goodwill are significant. As of June 30, 2018, we had recorded $682.4 million of intangible assets, net and goodwill primarily related to our past acquisitions. Intangible assets and goodwill are subject to an impairment analysis whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. Additionally, goodwill and indefinite-lived assets are subject to an impairment test at least annually. The impairment of any goodwill and other intangible assets may have a negative impact on our consolidated results of operations.

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Unanticipated changes in our tax provisions or adverse outcomes resulting from examination of our income tax returns could adversely affect our results of operations.

We are subject to income taxes in Israel, the United States and various foreign jurisdictions. Our effective income tax rate could be adversely affected by changes in tax laws or interpretations of those tax laws, by changes in the mix of earnings in countries with differing statutory tax rates, or by changes in the valuation of our deferred tax assets and liabilities. The U.S. recently enacted significant tax reform, and certain provisions of the new law may adversely affect us. See Note 11, “Income Taxes” in the notes to the unaudited condensed consolidated financial statements for more details about the U.S. tax reform and its effects.

Our effective income tax rates are also affected by intercompany transactions for sales, services, funding and other items. Given the increased global scope of our operations, and the complexity of global tax and transfer pricing rules and regulations, it has become increasingly difficult to estimate earnings within each tax jurisdiction. If actual earnings within a tax jurisdiction differ materially from our estimates or new information is discovered in the course of our tax return preparation process, we may not achieve our expected effective tax rate. Additionally, our effective tax rate may be affected by the tax effects of acquisitions, restructuring activities, newly enacted tax legislation, share-based compensation and uncertain tax positions. Finally, we are subject to the examination of our income tax returns by the Internal Revenue Service and other tax authorities which may result in the assessment of additional income taxes. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. However, unanticipated outcomes from these examinations could have a material adverse effect on our business, financial condition and results of operations.

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 to GAAP in the United States. These accounting principles are subject to interpretation by the FASB, the American Institute of Certified Public Accountants, 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.

We may be subject to disruptions or failures in information technology systems and network infrastructures, including theft, misuse of our electronic data or cyber-attacks that could have a material adverse effect on us.

We rely on the efficient and uninterrupted operation of complex information technology systems and network infrastructures to operate our business. We also hold large amounts of data in various data center facilities upon which our business depends. A disruption, infiltration or failure of our information technology systems or any of our data centers as a result of software or hardware malfunctions, system implementations or upgrades, computer viruses, third-party security breaches, attempts by others that try to gain unauthorized access through the Internet to our information technology systems, employee error, theft or misuse, malfeasance, power disruptions, natural disasters or accidents could cause breaches of data security, loss of intellectual property and critical data and the release and misappropriation of sensitive competitive information and partner, customer and employee personal data. These attempts may be the result of industrial or other espionage, or actions by hackers seeking to harm us, our products, or our end users. Any of these events could harm our competitive position, result in a loss of customer confidence, cause us to incur significant costs to remedy any damages and ultimately materially adversely affect our business, financial condition and results of operations.

While we have implemented a number of protective measures, including firewalls, antivirus, patches, log monitors, routine back-ups, system audits, routine password modifications and disaster recovery procedures, such measures may not be adequate or implemented properly to prevent or fully address the adverse effect of such events, and in some cases we may be unaware of an incident or its magnitude and effects.

In addition, our third-party subcontractors, including our foundries, test and assembly houses and distributors, have access to certain portions of our sensitive data. In the event that these subcontractors do not properly safeguard our data that they hold, security breaches and loss of our data could result. Any such loss of data by our third-party service providers, or theft, unauthorized use or publication of our trade secrets and other confidential business information as a result of such cyber threats, could adversely affect our competitive position and reduce marketplace acceptance of our products; the value of our investment in research and development and marketing could be reduced; and third parties may assert against us or our customers claims related to resulting losses of confidential or proprietary information or end-user data, or system reliability. Any such event could have a material adverse effect on our business, financial condition and results of operations.

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Our business is subject to the risks of earthquakes, fires, floods and other natural catastrophic events.

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 or tsunami, could have a material adverse impact on our business, financial condition and results of operations. To the extent that such disruptions result in delays or cancellations of customer orders, or the deployment of our products, our business, financial condition and results of operations would be adversely affected.

We must comply with a variety of existing and future laws and regulations that could impose substantial costs on us and may adversely affect our business.

We are subject to various state, federal and international laws and regulations governing the environment, including restricting the presence of certain substances in electronic products and making producers of those products financially responsible for the collection, treatment, recycling and disposal of those products. In addition, we are also subject to various industry requirements restricting the presence of certain substances in electronic products. Although our management systems are designed to maintain compliance, we cannot assure you that we have been or will be at all times in complete compliance with such laws and regulations. If we violate or fail to comply with any of them, a range of consequences could result, including fines, import/export restrictions, sales limitations, criminal and civil liabilities or other sanctions.

We and our customers are also subject to various import and export laws and regulations. Government export regulations apply to the encryption or other features contained in some of our products. If we fail to continue to receive licenses or otherwise comply with these regulations, we may be unable to manufacture the affected products or ship these products to certain customers, or we may incur penalties or fines.

We are also subject to regulations concerning the supply of certain minerals coming from the conflict zones in and around the Democratic Republic of Congo ("DRC"). The Dodd-Frank Wall Street Reform and Consumer Protection Act includes disclosure requirements regarding the use of certain minerals mined from the DRC and adjoining countries and procedures regarding a manufacturer's efforts to identify sourcing of such conflict minerals. The implementation of these requirements could affect the sourcing and availability of minerals used in the manufacture of semiconductor devices.

As a result, this could limit the pool of suppliers who can provide us confirmation that the components and parts we source are considered DRC "conflict free," and we may not be able to confirm that we have obtained products or supplies that can be confirmed as DRC "conflict free" in sufficient quantities for our operations. Also, because our supply chain is complex, we may face reputational challenges with our customers, shareholders and other stakeholders if we are unable to sufficiently verify the origins for the minerals used in our products.

The costs of complying with these laws could adversely affect our current or future business. In addition, future regulations may become more stringent or costly and our compliance costs and potential liabilities could increase, which may harm our current or future business.

If we fail to maintain an effective system of internal controls, we may not be able to report accurately our financial results or prevent material 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 material fraud. We have in the past discovered, and may in the future discover, areas of our internal controls that need improvement. Section 404 of the Sarbanes-Oxley Act of 2002 requires our management to report on, and our independent registered public accounting firm to attest to, the effectiveness of our internal control structure and procedures for financial reporting. We have an ongoing program to perform the system and process evaluation and testing necessary to comply with these requirements. We have incurred, and expect to continue to incur significant expenses and to devote significant management resources to Section 404 compliance. Furthermore, as we grow our business or acquire businesses, our internal controls may become more complex and we may require significantly more resources to ensure they remain effective. Failure to implement required new or improved controls, or difficulties encountered in their implementation, either in our existing business or in businesses that we may acquire could harm our operating results or cause us to fail to meet our reporting obligations. In the event that our CEO, V.P., Corporate Controller or independent registered public accounting firm determine that our internal controls over financial reporting are not effective as defined under Section 404, investor perceptions of our company may be adversely affected and may cause a decline in the market price of our ordinary shares.

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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, corporate and sales support operations located in Israel. A significant number of our employees and a material amount of assets are 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. These conflicts negatively affected business conditions in Israel. In addition, Israel and companies doing business with Israel have, in the past, been the subject of an economic boycott. In addition, there has been recent civil unrest in certain areas in the Middle East, including Egypt, Jordan, Iraq, Syria and Libya. 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.

The security and political conditions may have an 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. Our Israeli operations are within range of Hezbollah or Hamas 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 as a result of such events could have a material adverse effect on our business, financial condition and results of operations.

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 employees, are obligated to perform military reserve duty for Israel 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 some of our employees, including those in key positions, have been called upon 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 labor unrest in Israel.

In the past, there have been several general strikes and work stoppages in Israel affecting all banks, airports and ports. These strikes 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 61.9% and 60.2% of our revenues in the six months ended June 30, 2018 and 2017, respectively, from sales outside of the United States. As a result, we face additional risks from doing business internationally, including:

• reduced protection of intellectual property rights in some countries;

• difficulties in staffing and managing foreign operations;

• longer sales and payment cycles;

• greater difficulties in collecting accounts receivable;

• adverse economic conditions;

• seasonal reductions in business activity;

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• potentially adverse tax consequences;

• laws and business practices favoring local competition;

• costs and difficulties of customizing products for foreign countries;

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

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

• compliance with export control and regulations;

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

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

• foreign currency exchange risks;

• fluctuations in freight rates and transportation disruptions;

• political and economic instability;

• variance and unexpected changes in local laws and regulations;

• natural disasters and public health emergencies; and

• trade and travel restrictions.

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

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

It may be difficult to enforce a U.S. judgment against us, our officers and directors or to assert U.S. securities law claims in Israel.

We are incorporated in Israel. Two of our executive officers and two of our directors, one of whom is also an executive officer, are non-residents of the United States and are located in Israel, and a significant amount 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 the above persons in Israel.

In addition, it may be difficult for a shareholder to enforce civil liabilities under 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. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved in an Israeli court as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed by Israeli law.

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

The Israeli Companies Law, 1999 (the "Companies Law") generally requires that a merger be approved by the board of directors and by the general meeting of the shareholders. Upon the request of any creditor of a merging company, a court may delay or prevent the merger if it concludes that there is a reasonable concern that, as a result of the merger, the surviving company will be unable to satisfy its obligations. In addition, a merger may generally not be completed unless at least (i) 50 days have passed since the filing of the merger proposal with the Israeli Registrar of Companies and (ii) 30 days have passed since the merger was approved by the shareholders of each of the merging companies.

Also, in certain circumstances, an acquisition of shares in a public company must be made by means of a tender offer if, as a result of the acquisition, the purchaser would hold 25% or more of the voting rights in the company (unless there is already a 25% or greater shareholder of the company) or more than 45% of the voting rights in the company (unless there is already a shareholder that holds more than 45% of the voting rights in the company). If, as a result of an acquisition, the acquirer would hold more than 90% of a company's shares or voting rights, the acquisition must be made by means of a tender offer for all of the shares.

In addition, the Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including rights that 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 would require an amendment to our articles of association, which requires the prior approval of the holders of a majority of our shares at a general meeting.

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.

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

We derive all of our revenues in U.S. dollars. The U.S. dollar is our functional and reporting currency in all of our foreign locations. However, a significant portion of our liabilities, as well as our operating expenses, consisting principally of salaries and related personnel costs and facilities 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. To the extent that the value of the NIS increases against the U.S. dollar, our expenses on a U.S. dollar cost basis will increase. We cannot predict any future trends in the rate of appreciation of the NIS against the U.S. dollar. If the U.S. dollar cost of our salaries and related personnel costs and facilities expenses 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 hedge against currency fluctuations in the future. Further, because all 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 the collection of our receivables more difficult. To help manage this risk we have been engaged in foreign currency hedging activities, comprised of currency derivative instruments and natural hedges.

Our cost in Israel in U.S. dollar terms will also 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.

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

The United Kingdom ("U.K.") held a referendum in June 2016 in which a majority of voters approved an exit from the European Union ("Brexit"). In March 2017, the U.K. began the process to exit the European Union. Negotiations are in progress to determine the future terms of the U.K.'s relationship with the European Union, including, among other things, the terms of trade between the U.K. and the European Union. The effects of Brexit will depend on any agreements the U.K. reaches to retain access to European Union markets either during a transitional period or more permanently. In addition, the exit of the U.K from the European Union could lead to legal and regulatory uncertainty and potentially divergent treaties, laws and regulations as the U.K. determines which European Union treaties, laws and regulations to replace or replicate, including those governing manufacturing, labor, environmental, data protection/privacy, competition and other matters applicable to the semiconductor industry. The referendum has also given rise to calls for the governments of other European Union member states to consider withdrawal. These developments, or the perception that any of them could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets. Any of these factors could depress economic activity and restrict our access to capital, which could have a material adverse effect on our business, financial condition and results of operations and reduce the price of our ordinary shares.

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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.

According to the Encouragement Law, the Company's operations in Israel were granted "Approved Enterprise" status by the Investment Center in the Israeli Ministry of Economy and Industry and "Beneficiary Enterprise" status by the Israeli Income Tax Authority. The Company is eligible for tax benefits under the Encouragement Law with respect to its income derived from its Approved and Beneficiary Enterprises. The availability of these tax benefits is subject to certain requirements, including, among other things, making specified investments in fixed assets and equipment, financing a percentage of those investments with our capital contributions, complying with our marketing program which was submitted to the Investment Center, filing of certain reports with the Investment Center, limiting manufacturing outside of Israel and complying with Israeli intellectual property laws. If we do not meet these requirements in the future, these tax benefits may be cancelled and we could be required to refund any tax benefits that we have already received plus interest and penalties thereon. The tax benefits that our current "Approved Enterprise" and "Beneficiary Enterprise" program receives may not be continued in the future at their current levels or at all. If these tax benefits were reduced or eliminated, the amount of taxes that we pay would likely increase, which could adversely affect our results of operations. Additionally, if we increase our activities outside of Israel, for example, by acquisitions, our increased activities may not be eligible for inclusion in Israeli tax benefit programs.

If we elect to distribute dividends out of exempt income derived from "Approved/Beneficiary Enterprise" income, we will be subject to tax on the gross amount distributed. The tax rate will be the rate which would have been applicable had we not been granted the beneficial status. This rate is generally between 10% and the corporate tax rate in Israel, depending on the percentage of our shares held by foreign shareholders. The dividend recipient is subject to withholding tax at the source at the reduced rate applicable to dividends from Approved Enterprises, which is 15% if the dividend is distributed during the tax exemption period (subject to the applicable double tax treaty) or within 12 years after the period. This 12-year limitation does not apply to foreign investment companies. The Encouragement Law has defined certain actions that are deemed as dividend distributions and would trigger the recapture of tax benefits.

The Israeli government grants that we received require us to meet various conditions and 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 grants from the IIA, formerly known as the OCS, for the financing of a portion of our research and development expenditures in Israel. When know-how is developed using or in connection with IIA grants, we are subject to restrictions on transfer of the know-how, including outside of Israel. Transfer of know-how outside of Israel requires pre-approval by the IIA which may at its sole discretion grant such approval and impose certain conditions, and is subject to the payment to IIA of a transfer fee or license fees, calculated according to the formulas provided in the R&D Law which takes into account, inter alia, the consideration for such know-how paid to us in the transaction in which the technology is transferred. In general, transfer fees are no less than the funding received plus interest less the royalties already paid for the transferred know-how and are not higher than six times the amount of the grants received by the company. In addition, any decrease of the percentage of manufacturing performed in Israel, as originally declared in the application to the IIA, requires us to obtain the approval of the IIA and may result in increased amounts to be paid to the IIA as well as in increased royalty rate. Transfer of know-how to another Israeli entity requires the approval of IIA as well as full or partial assumption of the liabilities to IIA by the other entity. These restrictions may impair our ability to enter into agreements for those products or technologies without the approval of the IIA. We cannot be certain that any approval of the IIA 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 IIA 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 IIA. Any approval, if given, will generally be subject to additional financial obligations. If we fail to comply with the conditions imposed by the IIA, we may be required to refund any payments previously received, together with interest and penalties as well as tax benefits. Also, failure to meet the restrictions concerning transfer of know-how outside of Israel may trigger criminal liability. The restrictions regarding the use and transfer of know-how (including for the purpose of manufacturing) apply also to any IIA programs that are under a royalty payments agreement and to non-royalty-bearing programs.

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.

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Risks Related to Our Ordinary Shares

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

Factors that could cause volatility in the market price of our ordinary shares include, but are not limited to:

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

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

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

• disruption to our operations;

• geopolitical instability;

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

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

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

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

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

• anticompetitive practices of our competitors;

• commencement of, or our involvement in, litigation;

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

• continuing international conflicts and acts of terrorism; and

• changes in accounting rules.

We may need to raise additional capital, which might not be available or which, if available, may be on terms that are not favorable to us.

We may need to raise additional funds, and we cannot be certain that we will be able to obtain additional financing on favorable terms, if at all. If we issue equity securities to raise additional funds, the ownership percentage of our shareholders would be diluted, and the new equity securities may have rights, preferences or privileges senior to those of existing holders of our ordinary shares. If we borrow money, we may incur significant interest charges, which could harm our profitability. Holders of debt may also have certain rights, preferences or privileges senior to those of existing holders of our ordinary shares. If we cannot raise needed funds on acceptable terms, we may not be able to develop or enhance our products, take advantage of future opportunities or respond to competitive pressures or unanticipated requirements, which could harm our business, financial condition and results of operations.

If we sell our ordinary shares in future financings, ordinary shareholders could experience immediate dilution and, as a result, the market price of our ordinary shares may decline.

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 or debt financings or similar arrangements in the future, including the issuance of convertible debt securities, preferred shares or ordinary shares. If we issue ordinary shares or securities convertible into ordinary shares, holders of our ordinary shares could experience dilution.

The ownership of our ordinary shares may continue to be concentrated, and certain shareholders may have significant influence over the outcome of corporate actions requiring shareholder approval.

As of June 30, 2018, based on information filed with the SEC or reported to us, Starboard Value LP and certain of its affiliates beneficially owned an aggregate of approximately 10.3% of our outstanding ordinary shares and Capital Research Global Investors beneficially owned an aggregate of approximately 8.1% of our outstanding ordinary shares. These shareholders and any other shareholders acquiring beneficial ownership of a significant amount of our outstanding ordinary shares may have significant influence over the outcome of corporate actions requiring shareholder approval, including the

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election of directors, any merger, consolidation or sale of all or substantially all of our assets or any other significant corporate transaction.

If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding our ordinary shares or if our operating results do not meet their expectations, the market price of our ordinary shares could decline.

The trading market for our ordinary shares could be influenced by the research and reports that industry or securities analysts publish about us or our business. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause the price of our ordinary shares or trading volume in our ordinary shares to decline. Moreover, if one or more of the analysts who cover our company downgrades our ordinary shares or if our operating results do not meet their expectations, the market price of our ordinary shares could decline.

Provisions of our articles of association 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:

• no cumulative voting;

• a requirement for any merger involving the Company shall require the approval of the shareholders of at least a majority of the voting power of the Company;

• a requirement for the approval of at least 75% of the voting power represented at the general meeting of the shareholders for the removal of any director from office, and election of any director instead of the director so removed; and

• an advance notice requirement for shareholder proposals and nominations.

Furthermore, Israeli tax law treats some acquisitions, particularly share-for-share swaps between an Israeli company and a foreign company, less favorably than U.S. tax law. Under certain circumstances and subject to receiving a ruling from the Israeli Tax Authority, Israeli tax law generally provides that a shareholder who exchanges our shares for shares that are listed for trading on an Exchange in a foreign corporation is treated as if the shareholder 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. For a further discussion of Israeli laws relating to mergers and acquisitions, please see "Risk Factors - Risks Related to Operations in Israel and Other Foreign Countries - Provisions of Israeli law may delay, prevent or make difficult an acquisition of our company, which could prevent a change of control and therefore depress the price of our shares." 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, while the Board regularly reviews our cash position and uses for cash, we do not anticipate paying any cash dividends 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 incur increased costs as a result of changes in laws and regulations relating to corporate governance matters.

Changes in the laws and regulations affecting public companies, including Israeli laws, rules adopted by the SEC, the NASDAQ Stock Market, the FASB and the Public Company Accounting Oversight Board, may 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

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committees or as executive officers. We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements.

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

Not applicable.

ITEM 3 — DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4 — MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5 — OTHER INFORMATION

Not applicable.

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ITEM 6 — EXHIBITS

3.1	†			Amended and Restated Articles of Association of Mellanox Technologies, Ltd. (as amended on May 24, 2018)
10.1			(1)	Settlement Agreement, dated as of June 19, 2018, among Mellanox Technologies, Ltd. and Starboard Value LP and certain of its affiliates
10.2	†	*		Form of Mellanox Technologies, Ltd. Executive Severance Benefits Agreement for U.S. Executives
10.3	†	*		Form of Mellanox Technologies, Ltd. Executive Severance Benefits Agreement for Israel Executives
10.4	†	*		Form of Restricted Share Unit Award Grant Notice and Restricted Share Unit Award Agreement For All Participants (Other than Participants in Israel) under the Third Amended and Restated Global Share Incentive Plan (2006)
10.5	†	*		Form of Restricted Share Unit Award Grant Notice and Restricted Share Unit Award Agreement For Participants in Israel under the Third Amended and Restated Global Share Incentive Plan (2006)
10.6	†	*		Form of Performance Share Unit Award Grant Notice and Performance Share Unit Award Agreement for Participants in the United States under the Third Amended and Restated Global Share Incentive Plan (2006)
10.7	†	*		Form of Performance Share Unit Award Grant Notice and Performance Share Unit Award Agreement for Participants in Israel under the Third Amended and Restated Global Share Incentive Plan (2006)
10.8		*	(2)	Third Amended and Restated Global Share Incentive Plan (2006)
31.1				Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2				Certification of Interim Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1				Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2				Certification of Interim Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS				XBRL Instance Document
101.SCH				XBRL Taxonomy Extension Schema Document
101.CAL				XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB				XBRL Taxonomy Extension Label Linkbase Document
101.PRE				XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF				XBRL Taxonomy Extension Definition Linkbase Document

_______________________________________________________________________________

(1) Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (SEC File No. 001-33299) filed on June 19, 2018.

(2) Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (SEC File No. 001-33299) filed on July 25, 2018.

†    Filed herewith.

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

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

Date:	August 3, 2018	Mellanox Technologies, Ltd.
		/s/ Eric Johnson
		Eric Johnson
		V.P., Corporate Controller
		(Interim Principal Financial and Accounting Officer)

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EX-3.1

EXHIBIT 3.1

Amended and Restated Articles of Association
AMENDED AND RESTATED
ARTICLES OF ASSOCIATION
OF
MELLANOX TECHNOLOGIES, LTD.
A COMPANY LIMITED BY SHARES
PRELIMINARY

1.     COMPANY NAME

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

2.     INTERPRETATION

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

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

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

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

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

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

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

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

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

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

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

3.     PUBLIC COMPANY; LIMITED LIABILITY AND COMPANY OBJECTIVES

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

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

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

SHARE CAPITAL

4.     SHARE CAPITAL

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

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

5.     INCREASE OF AUTHORIZED SHARE CAPITAL

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

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

6.     SPECIAL RIGHTS; MODIFICATION OF RIGHTS

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

(b)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

SHARES

8.     ISSUANCE OF SHARE CERTIFICATES; REPLACEMENT OF LOST CERTIFICATES

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

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

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

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

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9.     REGISTERED HOLDER

Except as otherwise provided in these Articles, the Company shall be entitled to treat the registered holder of each share as the absolute owner thereof, and accordingly, shall not, except as ordered by a court of competent jurisdiction, or as required by statute, be obligated to recognize any equitable or other claim to, or interest in, such share on the part of any other person.

10.   ALLOTMENT OF SHARES

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

11.   PAYMENT IN INSTALLMENTS

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

12.   CALLS ON SHARES

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

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

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

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

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

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

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13.   PREPAYMENT

With the approval of the Board of Directors, any shareholder may pay to the Company any amount not yet payable in respect of his shares, and the Board of Directors may approve the payment by the Company of interest on any such amount until the same would be payable if it had not been paid in advance, at such rate and time(s) as may be approved by the Board of Directors. The Board of Directors may at any time cause the Company to repay all or any part of the money so advanced, without premium or penalty. Nothing in this Article 13 shall derogate from the right of the Board of Directors to make any call for payment before or after receipt by the Company of any such advance.

14.   FORFEITURE AND SURRENDER

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

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

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

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

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

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

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

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15.   LIEN

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

(b)The Board of Directors may cause the Company to sell a share subject to such a lien when the debt, liability or engagement giving rise to such lien has matured, in such manner as the Board of Directors deems fit, but no such sale shall be made unless such debt, liability or engagement has not been satisfied within fourteen (14) days after written notice of the intention to sell shall have been served on such shareholder, his executors or administrators.

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

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

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

17.   REDEEMABLE SHARES

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

TRANSFER OF SHARES

18.   REGISTRATION OF TRANSFER

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

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

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

(a)Notwithstanding any provision of these Articles to the contrary, and to allow the Company to determine the shareholders entitled to notice of, or to vote at, any Annual or Extraordinary General Meeting or any adjournment thereof, or to express consent to or dissent from any corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of, or to take or be the subject to, any other action, the Board of Directors may fix, a record date, which shall not be more than forty (40), or any longer period required under the Companies Law, nor less than four

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(4) days, or any longer period required under the Companies Law, before the date of such meeting or other action. A determination of shareholders of record entitled to notice of or to vote at a meeting shall apply to any adjournment of the meeting: provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

(b)Any shareholder or shareholders of the Company holding, at least one percent (1%) of the voting rights in the issued share capital of the Company may, pursuant to the Companies Law, request that the Board of Directors include a subject in the agenda of a General Meeting to be held in the future. Any such request must be in writing, must include all information related to subject matter and the reason that such subject is proposed to be brought before the General Meeting and must be signed by the shareholder or shareholders making such request. In addition, subject to the Companies Law and the provisions of Article 39, the Board of Directors may include such subject in the agenda of a General Meeting only if the request has been delivered to the Secretary of the Company not later than sixty (60) days and not more than one hundred and twenty (120) days prior to the General Meeting in which the subject is to be considered by the shareholders of the Company. Each such request shall also set forth: (a) the name and address of the shareholder making the request; (b) a representation that the shareholder is a holder of record of shares of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting; (c) a description of all arrangements or understandings between the shareholder and any other person or persons (naming such person or persons) in connection with the subject which isrequested to be included in the agenda; and (d) a declaration that all the information that is required under the Companies Law and any other applicable law to be provided to the Company in connection with such subject, if any, has been provided. Furthermore, the Board of Directors, may, in its discretion to the extent it deems necessary, request that the shareholders making the request provide additional information necessary so as to include a subject in the agenda of a General Meeting, as the Board of Directors may reasonably require.

TRANSMISSION OF SHARES

20.   DECEDENTS' SHARES

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

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

21.   RECEIVERS AND LIQUIDATORS

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

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

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GENERAL MEETINGS

22.   ANNUAL GENERAL MEETING

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

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

23.   EXTRAORDINARY GENERAL MEETINGS

All General Meetings other than Annual General Meetings shall be called "Extraordinary General Meetings". The Board of Directors may, whenever it thinks fit, convene an Extraordinary General Meeting, at such time and place, within or out of the State of Israel, as may be determined by the Board of Directors, and shall be obliged to do so upon a requisition in writing in accordance with Section 63 of the Companies Law.

24.   NOTICE OF GENERAL MEETINGS; OMISSION TO GIVE NOTICE

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

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

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

25.   MANNER OF MEETING

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

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

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

(c)be heard by all other persons so present in the same way.

PROCEEDINGS AT GENERAL MEETINGS

26.   QUORUM

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

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

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

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

27.   CHAIRMAN

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

28.   ADOPTION OF RESOLUTIONS AT GENERAL MEETINGS

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

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

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

(d)Notwithstanding any of the other provisions of these Articles, any resolution to consummate a Merger, as defined in Section 1 of the Law, shall require the approval of the holders of at least a majority of the voting power

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of the Company. For the avoidance of doubt, any amendment to this Article 28(d) shall require the approval of the holders of at least a majority of the voting power of the Company.

29.   RESOLUTIONS IN WRITING

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

30.   POWER TO ADJOURN

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

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

31.   VOTING POWER

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

32.   VOTING RIGHTS

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

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

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

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

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PROXIES

33.   INSTRUMENT OF APPOINTMENTS

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

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

Signed this    day of                , 20    .

(Signature of Appointor)"

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

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

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

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

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

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deemed revoked in accordance with the foregoing provisions of this Article 34(b) at or prior to the time such vote was cast.

BOARD OF DIRECTORS

35.   POWERS OF BOARD OF DIRECTORS

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

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

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

36.   EXERCISE OF POWERS OF BOARD OF DIRECTORS

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

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

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

37.   DELEGATION OF POWERS

(a)The Board of Directors may, subject to the provisions of the Companies Law, delegate any or all of its powers to committees, each consisting of one or more persons (who are Directors), and it may from time to time revoke

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such delegation or alter the composition of any such committee. Any Committee so formed (in these Articles referred to as a "Committee of the Board of Directors"), shall, in the exercise of the powers so delegated, conform to any regulations imposed on it by the Board of Directors. The meetings and proceedings of any such Committee of the Board of Directors shall, mutatis mutandis, be governed by the provisions herein contained for regulating the meetings of the Board of Directors, so far as not superseded by any regulations adopted by the Board of Directors under this Article. Unless otherwise expressly provided by the Board of Directors in delegating powers to a Committee of the Board of Directors, such Committee shall not be empowered to further delegate such powers.

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

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

38.   NUMBER OF DIRECTORS

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

39.   ELECTION AND REMOVAL OF DIRECTORS

(a) Subject to the provisions of these Articles and the Companies Law, Directors shall be elected at the Annual General Meeting or an Extraordinary General Meeting of the Company by the vote of the holders of a majority of the voting power represented at such meeting in person or by proxy, intermediary instruction form or written ballot (each, a “proxy card”) and voting on the election of directors, provided that, notwithstanding Articles 28(a) and 28(c), in the event of a contested election, Directors shall be elected by a plurality of the votes cast with respect to the election of Directors by the shares represented in person or by proxy card at such meeting (which shall mean that the Directors receiving the largest number of “for” votes will be elected in such contested election). For the purposes of these Articles, an Annual General Meeting or an Extraordinary General Meeting shall be considered a “contested election” if the total number of nominees for election to the Board of Directors at such meeting (including all persons (i) with respect to whom a shareholder has delivered, in due time pursuant to the Companies Law and these Articles, a notice of its intent to nominate at such meeting and (ii) with respect to whom such notice of intent to nominate has not been withdrawn by such shareholder prior to the date of the definitive proxy statement filed by the Company with the Securities and Exchange Commission with respect to such meeting, as such date is set forth in the definitive proxy statement) made in compliance with these Articles and the Companies Law exceeds the total number of Directors to be elected at such meeting. At any Annual General Meeting or Extraordinary General Meeting at which Directors are to be elected, each shareholder shall be entitled to cast a number of votes with respect to nominees for election to the Board of Directors up to the total number of Directors to be elected at such meeting.

(b) Nominations for the election of Directors may be made by the Board of Directors or a committee appointed by the Board of Directors or by any shareholder holding at least 1% of the outstanding voting power in the Company. However, and without limitation of Sections 63 or 64 of the Companies Law, any such shareholder may nominate one or more persons for election as Directors at a General Meeting only if a written notice of such shareholder’s intent to make such nomination or nominations has been given to the Secretary of the Company not later than (i) with respect to an election to be held at an Annual General Meeting of shareholders, ninety (90) days prior to the anniversary date of the immediately preceding annual meeting or if the Annual General Meeting is not held within thirty (30) days of the anniversary date of the immediately preceding Annual General Meeting, then notice must be provided by the later of sixty (60) days prior to the date of the Annual General Meeting or ten (10) days following and including the date of public announcement of the Notice of Election of Directors (as defined below) by the Company with respect to such meeting, and (ii) with respect to an election to be held at an Extraordinary General Meeting of shareholders for the election of Directors, by the later of ninety (90) days prior to the date of

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such meeting or ten (10) days following and including the date of public announcement of the Notice of Election of Directors by the Company with respect to such meeting. Each such notice shall set forth: (a) the name and address of the shareholder who intends to make the nomination and of the person or persons to be nominated; (b) a representation that the shareholder is a holder of record of at least 1% of the outstanding voting power in the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder; (d) the consent of each nominee to serve as a Director of the Company if so elected and a declaration signed by each of the nominees declaring that there is no limitation under the Companies Law for the appointment of such a nominee and that all the information that is required under the Companies Law to be provided to the Company in connection with such an appointment has been provided; (e) the information specified in Items 4(b) and 5(b) of Schedule 14A (or any successor) (“Schedule 14A”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) with respect to each nominee as a participant in the solicitation of proxies by the Company and the information specified in Items 7(a), (b) and (c) of Schedule 14A, with respect to each nominee as a director nominee; and (f) the consent of each nominee to be named as a nominee for election as a Director of the Company in any proxy statement or proxy, intermediary instruction form or written ballot (each a “proxy card”) relating to the Company’s next Annual General Meeting or Extraordinary General Meeting at which Directors are to be elected and the consent of each such nominee to the disclosure and use by the Company and by each other shareholder who has given notice of its intent to nominate one or more persons for election as Directors at such General Meeting in accordance with this Article 39(b) of any information provided with respect to such nominee pursuant to clauses (a), (b), (c), (d) or (e) or that is publicly filed with the Securities and Exchange Commission (“SEC”) with respect to such nominee in a proxy statement, proxy card or other proxy materials, in each case used in connection with or relating to such Annual General Meeting or Extraordinary General Meeting. Notwithstanding Article 24(a), the Company shall at least fifty (50) days prior to the date of such Annual General Meeting or Extraordinary General Meeting publicly announce its intent to hold (x) any Annual General Meeting if the Annual General Meeting is held more than thirty (30) days of the anniversary date of the immediately preceding Annual General Meeting, and (b) any Extraordinary General Meeting at which directors will be elected (any such public announcement with respect to clause (x) or (y), a “Notice of Election of Directors”).

Any shareholder who delivers a written notice to the Company of such shareholder’s intent to nominate one or more persons for election as Directors at an Annual General Meeting or Extraordinary General Meeting pursuant to the first paragraph of this Article 39(b) and any related information required pursuant to the first paragraph of this Article 39(b), shall deliver to the Secretary of the Company notice in writing, as promptly as practicable, of (i) any change that occurs with respect to such shareholder’s intent to nominate persons for election as Directors following delivery of the notice contemplated by the immediately preceding paragraph to the Company and (ii) any update necessary to correct any statement contained in the information provided to the Company pursuant to the immediately preceding paragraph or in any information publicly filed with the SEC with respect to any such nominee in a proxy statement, proxy card or other proxy materials, in each case used in connection with or relating to such Annual General Meeting or Extraordinary General Meeting in order to make such statement not false or misleading with respect to any material fact, or omission of any material fact. To the extent that more than one shareholder has delivered a written notice to the Company of such shareholder’s intent to nominate one or more persons for election as Directors at an Annual General Meeting or Extraordinary General Meeting pursuant to the first paragraph of this Article 39(b), and the Company receives any updated information pursuant to the foregoing clause (i) or (ii) from any such nominating shareholder, the Company shall promptly as practicable provide such updated information to each other nominating shareholder.

In the event that the Secretary of the Company has duly received written notice of a shareholder’s intent to make nominations in accordance with this Article 39(b), the Company shall provide a written notice to such shareholder at the address for such shareholder in the nomination notice provided by such shareholder to the Company, not later than (i) with respect to an election of Directors to be held at an Annual General Meeting, sixty (60) days prior to the date of such Annual General Meeting, or if the Annual General Meeting is not held within thirty (30) days of the anniversary date of the immediately preceding Annual General Meeting, five (5) days after the last day that shareholders may submit notice of their intent to make a nomination or nominations for the election of directors at such Annual General Meeting under clause (i) of the first paragraph of this Article 39(b), and (ii) with respect to an election of directors to be held at an Extraordinary General Meeting, five (5) days after the last day that shareholders may submit notice of their intent to make a nomination or nominations for the election of Directors at such Extraordinary General Meeting under clause (ii) of the first paragraph of this Article 39(b). Such notice shall include, with respect to each nominee designated by the Board of Directors or a committee appointed by the Board

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of Directors: (a) the information specified in Items 4(b) and 5(b) of Schedule 14A with respect to each nominee as a participant in the solicitation of proxies by the nominating shareholder and the information specified in Items 7(a), (b) and (c) of Schedule 14A, with respect to each nominee as a director nominee; (b) the information that would be required under the Companies Law with respect to each person to be so nominated if such person was nominated by a shareholder; (c) the consent of each nominee to serve as a Director of the Company if so elected and a declaration signed by each of the nominees declaring that there is no limitation under the Companies Law for the appointment of such a nominee and that all the information that is required under the Companies Law to be provided by such nominee to the Company in connection with such an appointment has been provided and (d) the consent of each nominee to be named as a nominee for election as a Director of the Company in any proxy statement or proxy card relating to such Annual General Meeting or Extraordinary General Meeting and to serve as a Director of the Company if elected, and the consent of each such nominee to the disclosure and use by each shareholder who has given notice of its intent to nominate one or more persons for election as Directors at the applicable Annual General Meeting or Extraordinary General Meeting in accordance with this Article 39(b) of any information provided with respect to such nominee pursuant to clauses (a) or (b) or that is publicly filed with the SEC with respect to such nominee in any proxy statement, proxy card or other proxy materials, in each case used in connection with or relating to such Annual General Meeting or Extraordinary General Meeting. In the event that the Secretary of the Company has duly received written notice of a shareholder’s intent to make nominations in accordance with this Article 39(b) from more than one shareholder, the Company shall within five (5) days following the last date for shareholders to provide notice of their intent to make nominations in connection with the applicable Annual General Meeting or Extraordinary General Meeting pursuant to clause (i) or clause (ii), as applicable, of the first paragraph of this Article 39(b), provide to each nominating shareholder (i) a copy of the written notice received by the Company from any other shareholder for nominations in accordance with this Article 39(b) and the Companies Law and (ii) a copy of the information set forth in the first paragraph of this Article 39(b) that is received by the Company from any other nominating shareholder.

The Company shall deliver to each nominating shareholder notice in writing, as promptly as practicable, any update necessary to correct any statement contained in the information provided by the Company pursuant to the immediately preceding paragraph (including any information publicly filed with the SEC with respect to any Company nominee in a proxy statement, proxy card or other proxy materials, in each case used in connection with or relating to such Annual General Meeting or Extraordinary General Meeting) in order to make such statement not false or misleading with respect to any material fact, or omission of any material fact.

Notwithstanding the applicable notification deadlines set forth in the first paragraph and third paragraph of this Article 39(b) with respect to the delivery of information and consents by any nominating shareholders and the Company, respectively, with respect to the 2018 Annual General Meeting of the Company only (i) any nominating shareholder whose notice of intent to make nominations of one or more persons for election as Directors at the 2018 Annual General Meeting was made with respect to the 2018 Annual General Meeting prior to the date on which this Article 39(b) is approved by the shareholders of the Company shall deliver to the Company the information and consents required by clauses (a), (b), (c) and (d) of the first paragraph of this Article 39(b), to the extent such information and consents have not been previously provided with respect to any applicable nominee or has materially changed, and the information required by clause (e) of the first paragraph and the consents required by clause (f) in the first paragraph of this Article 39(b), and (ii) the Company shall deliver the information required by clauses (a) and (b) of the third paragraph of this Article 39(b) and the consents required by clauses (c) and (d) of the third paragraph of this Article 39(b) to each shareholder from whom the Secretary of the Company has duly received prior to the date on which this Article 39(b) was approved by the shareholders of the Company written notice of such shareholder’s intent to make nominations with respect to the 2018 Annual General Meeting, in each case, by the later of sixty (60) days prior to the date of the 2018 Annual General Meeting and ten (10) days following and including the date of the Extraordinary General Meeting at which this fifth paragraph of Article 39(b) is approved by the shareholders of the Company, provided that the nomination of any nominee with respect to whom a nominating shareholder or the Company, as applicable, fails to provide such applicable information or consents within such period, shall not be recognized by the Company or the Chairman of the 2018 Annual General Meeting as a valid nominee. Any nominating shareholder shall deliver the information required by this paragraph to the Company using the same method of delivery as the initial nomination notice delivered to the Company. The Company shall deliver the information required by this paragraph to each nominating shareholder using the contact information provided for such shareholder in such shareholder’s nomination notice.

In the event of a contested election, each proxy card used in connection with the election of Directors of the Company, or the solicitation of votes with respect to the election of Directors of the Company, at the applicable Annual General Meeting or Extraordinary General Meeting, shall (A) set forth the names of (I) all persons

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nominated for election by the Board of Directors and (II) all persons with respect to whom a written notice of a shareholder’s intent to make a nomination for election as a Director at such meeting has been given in accordance with this Article 39(b) and applicable law (and whose nomination has not been withdrawn by such shareholder); (B) provide a means for a shareholder to grant authority to vote for each of the nominees set forth on such proxy card; (C) if a plurality voting standard is applicable under Article 39(a), provide a means for a shareholder to grant authority to withhold its vote with respect to each nominee on such proxy card (and not provide means for a shareholder to grant authority to vote against or abstain from voting with respect to any nominee set forth on such proxy card); (D) if a majority voting standard is applicable under Article 39(a), provide a means for a shareholder to grant authority to vote against or abstain from voting with respect with to each of the nominees set forth on such proxy card (and not provide means for a shareholder to grant authority to withhold its vote with respect to each nominee on such proxy card); (E) clearly distinguish between the nominees of the Board of Directors and the nominees of any shareholder; (F) within each group of nominees referenced in (E) above, list the nominees in alphabetical order; and (G) use the same font type, style and size for all nominees.

For the purposes of these Articles, an Annual General Meeting or an Extraordinary General Meeting shall be considered a “contested election” if the total number of nominees for election to the Board of Directors at such meeting (including all persons (i) with respect to whom a shareholder has delivered, in due time pursuant to the Companies Law and these articles a notice of its intent to nominate at such meeting and (ii) with respect to whom such notice of intent to nominate has not been withdrawn by such shareholder prior to the date of the definitive proxy statement filed by the Company with the Securities and Exchange Commission with respect to such meeting, as such date is set forth in the definitive proxy statement) made in compliance with these Articles and the Companies Law exceeds the total number of Directors to be elected at such meeting.

The Chairman of the meeting may refuse to acknowledge (x) the nomination of any person or (y) any vote purported to be solicited or cast using any proxy statement or proxy card, in each case, not made in compliance with the foregoing procedures.

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

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

40.   QUALIFICATION OF DIRECTORS

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

41.   CONTINUING DIRECTORS IN THE EVENT OF VACANCIES

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

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

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42.   VACATION OF OFFICE

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

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

43.   REMUNERATION OF DIRECTORS

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

44.   CONFLICT OF INTEREST

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

45.   [RESERVED]

PROCEEDINGS OF THE BOARD OF DIRECTORS

46.   MEETINGS

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

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

47.   RESOLUTIONS IN WRITING

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

48.   QUORUM

Until otherwise unanimously decided by the Board of Directors, a quorum at a meeting of the Board of Directors shall be constituted by the presence in person or by telephone conference of half (50%) of the Directors then in office who are lawfully entitled to participate in the meeting. No business shall be transacted at a meeting of the

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Board of Directors unless the requisite quorum is present (in person or by telephone conference or by other means by which all directors may hear and be heard) when the meeting proceeds to business.

49.   CHAIRMAN OF THE BOARD OF DIRECTORS

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

50.   VALIDITY OF ACTS DESPITE DEFECTS

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

CHIEF EXECUTIVE OFFICER AND PRESIDENT

51.   CHIEF EXECUTIVE OFFICER AND PRESIDENT

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

MINUTES

52.   MINUTES

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

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

DIVIDENDS

53.   DECLARATION OF DIVIDENDS

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

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54.   FUNDS AVAILABLE FOR PAYMENT OF DIVIDEND

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

55.   AMOUNT PAYABLE BY WAY OF DIVIDENDS

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

56.   INTEREST

No dividend shall carry interest as against the Company.

57.   PAYMENT IN SPECIE

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

58.   IMPLEMENTATION OF POWERS UNDER ARTICLE 57

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

59.   DIVIDEND ON UNPAID SHARES

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

60.   RETENTION OF DIVIDENDS

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

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

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61.   UNCLAIMED DIVIDENDS

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

62.   MECHANICS OF PAYMENT

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

63.   RECEIPT FROM A JOINT HOLDER

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

ACCOUNTS

64.   BOOKS OF ACCOUNT

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

65.   AUDIT

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

66.   AUDITORS

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

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BRANCH REGISTERS

67.   BRANCH REGISTERS

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

INSURANCE, INDEMNITY AND EXEMPTION

68.   INDEMNITY, INSURANCE AND EXEMPTION

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

(b)Indemnification.

(i)Subject to the provisions of the Companies Law and the Securities Law, the Company may indemnify an Office Holder to the fullest extent permitted by the Companies Law and the Securities Law, with respect to the following liabilities, expenses and payments, provided that such liabilities, expenses and payments were incurred by such Office Holder in such Office Holder's capacity as an Office Holder of the Company:

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

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

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

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

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

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

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

(c)Insurance.

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

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

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

(C)a financial obligation imposed on him in favor of another person; and

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

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

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

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

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

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(C)an act or omission committed with intent to derive illegal personal benefit; or

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

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

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

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

WINDING UP

69.   WINDING UP

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

RIGHTS OF SIGNATURE, STAMP, AND SEAL

70.   RIGHTS OF SIGNATURE, STAMP, AND SEAL

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

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

NOTICES

71.   NOTICES

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

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of this Article 71(a).

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

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

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EX-10.2

EXHIBIT 10.2

AMENDED AND RESTATED EXECUTIVE SEVERANCE BENEFITS AGREEMENT

This AMENDED AND RESTATEDEXECUTIVE SEVERANCE BENEFITS AGREEMENT (the “Agreement”) is entered into effective as of this [ ˜ ] day of [ ˜ ] (the “Effective Date”), between [ ˜ ] (“Executive”) and MELLANOX TECHNOLOGIES, LTD. (the “Company”). This Agreement is intended to provide Executive with the compensation and benefits described herein upon the occurrence of specific events and supersedes in its entirety any prior Executive Severance Benefits Agreement entered into by and between Executive and the Company (the “Prior Agreement”). Certain capitalized terms used in this Agreement are defined in Article 5.

The Company and Executive hereby agree as follows:

ARTICLE 1.

SCOPE OF AND CONSIDERATION FOR THIS AGREEMENT

1.1Position and Duties. Executive is currently employed by the Mellanox Technologies, Inc., a wholly-owned subsidiary of the Company (“Mellanox”), as [ ˜ ]. Executive reports directly to the [ ˜ ] of the Company.

1.2Restrictions. During Executive’s employment by Mellanox, Executive agrees to the best of Executive’s ability and experience that Executive will at all times loyally and conscientiously perform all of the duties and obligations required of and from Executive as [ ˜ ] or any other position Executive is assigned. During the term of Executive’s employment, Executive further agrees that Executive will devote all of Executive’s business time and attention to the business of Mellanox, Mellanox shall be entitled to all of the benefits and profits arising from or incident to all such work, services and advice, Executive shall not render commercial or professional services of any nature to any person or organization, whether or not for compensation, without the prior written consent of the Board, and Executive shall not directly or indirectly engage or participate in any business that is competitive in any manner with the business of Mellanox or the Company. Nothing in this Agreement shall prevent Executive from accepting speaking or presentation engagements in exchange for honoraria or from service on boards of charitable organizations or otherwise participating in civic, charitable or fraternal organizations, or from owning no more than one percent (1%) of the outstanding equity securities of a corporation whose stock is listed on a national stock exchange.

1.3Employee Proprietary Information and Inventions Agreement. Executive acknowledges that Executive has previously executed and delivered to an officer of Mellanox, Mellanox’s Employee Proprietary Information and Inventions Agreement (the “Confidentiality Agreement”) and that the Confidentiality Agreement remains in full force and effect.

1.4Benefits Upon Covered Termination. The Company and Executive wish to set forth the benefits which Executive shall be entitled to receive in the event of a Covered Termination.

1.5Consideration. The duties and obligations of the Company to Executive under this Agreement shall be in consideration for Executive’s past services to Mellanox, Executive’s continued employment with Mellanox and full compliance with the provisions of this Agreement, and Executive’s execution of a release in accordance with Section 4.1 hereof.

1.6Prior Agreement. This Agreement shall supersede any other agreement relating to severance benefits in the event of Executive’s severance from employment, including without limitation, any Prior Agreement.

ARTICLE 2.

SEVERANCE BENEFITS

2.1Covered Termination Severance Benefits. A Covered Termination of Executive’s employment entitles Executive to receive the benefits set forth in this Section 2.1, subject to Sections 4.1 and 6.14.

(a)Base Salary. Mellanox shall pay to Executive an amount equal to the sum of Executive’s Base Salary and Target Bonus. The severance contemplated by this Section 2.1(a) (the “Cash Severance”), which shall be subject to all required tax and other applicable withholdings, shall be payable in equal monthly installments during the period commencing on the date of termination and ending twelve (12) months thereafter (the “Severance Period”), subject to Executive’s good faith compliance with the terms of this Agreement, including, specifically with Executive’s obligations and undertakings pursuant to Sections 1.3 and 3 hereof. Notwithstanding the foregoing, but subject to Section 6.14(b), all or a portion of the Cash Severance shall be paid in a lump sum on the sixtieth (60^th) day following the date of Executive’s Separation from Service (as defined below) solely to the extent (and in such amounts) that such lump sum payment would not result in any additional excise tax or tax penalties under Section 409A of the Code.

(b)COBRA Coverage. Provided that Executive elects continued coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA,” and the elected continuation of COBRA, “COBRA Coverage”) under Mellanox’s group health plan, Mellanox shall pay for the cost to continue COBRA Coverage for Executive and Executive’s eligible dependents, until the end of the Severance Period; provided, however,that Mellanox shall pay premiums for Executive’s eligible dependents only for coverage for which those eligible dependents were enrolled immediately prior to the Covered Termination, and it being understood that it shall be Executive’s sole responsibility to elect continuation of COBRA Coverage in the first instance. Anything to the contrary in the foregoing notwithstanding, COBRA Coverage continuation shall cease on the date that Executive becomes covered by a health insurance plan of a subsequent employer. Notwithstanding the foregoing, (i) if any plan pursuant to which such benefits are provided is not, or ceases prior to the expiration of the period of COBRA Coverage continuation to be, exempt from the application of Section 409A of the Code under Treasury Regulation Section 1.409A-1(a)(5), or (ii) Mellanox is otherwise unable to continue to cover Executive under its group health plans without penalty under applicable law (including without limitation, Section 2716 of the Public Health Service Act), then, in either case, an amount equal to each remaining subsidy shall thereafter be paid to Executive in substantially equal monthly installments.

(c)Equity Award Acceleration. The vesting and/or exercisability of one-hundred percent (100%) of the unvested shares subject to Executive’s Equity Awards shall be automatically accelerated immediately effective as of the date of the Covered Termination.

2.2Other Terminations. If Executive’s employment is terminated by Mellanox for Cause, by Executive other than pursuant to a Constructive Termination or as a result of Executive’s death or disability, neither the Company nor Mellanox shall not have any other or further obligations to Executive under this Agreement (including any financial obligations) except that Executive shall be entitled to receive (a) Executive’s fully earned but unpaid base salary, through the date of termination at the rate then in effect, and (b) all other amounts or benefits to which Executive is entitled under any compensation, retirement or benefit plan or practice of Mellanox at the time of termination in accordance with the terms of such plans or practices, including, without limitation, any continuation of benefits required by COBRA or applicable law. In addition, subject to the provisions of the Company’s equity compensation plans and the terms of Executive’s Equity Awards, if Executive’s employment is

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terminated by the Company for Cause, by Executive other than pursuant to a Constructive Termination or as a result of Executive’s death or disability, all vesting of Executive’s unvested Equity Awards previously granted to Executive by the Company shall cease and none of such unvested Equity Awards shall be exercisable following the date of such termination. The foregoing shall be in addition to, and not in lieu of, any and all other rights and remedies that may be available to Mellanox or the Company under the circumstances, whether at law or in equity.

2.3Mitigation. Except as otherwise specifically provided herein, Executive shall not be required to mitigate damages or the amount of any payment provided under this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided for under this Agreement be reduced by any compensation earned by Executive as a result of employment by another employer or by any retirement benefits received by Executive after the date of a Covered Termination.

2.4Exclusive Remedy. Except as otherwise expressly required by law (e.g., COBRA) or as specifically provided herein, all of Executive’s rights to salary, severance, benefits, bonuses and other amounts hereunder (if any) accruing after the termination of Executive’s employment shall cease upon such termination. In the event of a termination of Executive’s employment with Mellanox, Executive’s sole remedy shall be to receive the payments and benefits described in this Agreement.

ARTICLE 3.

RESTRICTIVE COVENANTS

3.1Non-Solicitation. In further consideration of the duties and obligations of the Company to Executive hereunder, Executive acknowledges that during the course of Executive’s employment with Mellanox, Executive has or will become familiar with the Company’s trade secrets and with other confidential information concerning the Company and that Executive’s services shall be of special, unique and extraordinary value to the Company; and, therefore, Executive agrees that, during the one-year period commencing on the date of termination of Executive’s employment for any reason (the “Restricted Period”), Executive shall not, directly or indirectly, through another person or entity, induce, solicit, encourage or attempt to induce, solicit or encourage any employee of the Company or Mellanox to leave the employ of the Company or Mellanox, or in any way interfere with the relationship between the Company or Mellanox and any employee thereof.

3.2Modification of Covenants. If, at the time of enforcement of any of the covenants contained in Section 3.1 hereof, a court of competent jurisdiction shall hold that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances shall be substituted for the stated duration, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum period, scope and area permitted by law.

ARTICLE 4.LIMITATIONS AND CONDITIONS ON BENEFITS

4.1Release Prior to Payment of Benefits. Upon a Covered Termination, and prior to the payment of any benefits under this Agreement on account of such Covered Termination, Executive shall execute and deliver to the Company an effective general release (the “Release”) in the form attached hereto and incorporated herein as Exhibit A or Exhibit B, as applicable, subject to any changes the Company deems necessary or appropriate to reflect applicable law. Such Release shall specifically relate to all of Executive’s rights and claims in existence at the time of such execution and shall confirm Executive’s obligations under the Confidentiality Agreement. It is understood that, as specified in the applicable Release, Executive has a specified number of calendar days to consider whether

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to execute such Release, and Executive may revoke such Release within seven (7) calendar days after execution. In the event Executive does not execute and deliver such Release within the applicable period, or if Executive revokes such Release within the subsequent seven (7) day period, no benefits shall be payable under this Agreement.

4.2Termination of Benefits. Benefits under this Agreement shall terminate immediately if Executive, at any time, violates any proprietary information or confidentiality obligation to the Company or Mellanox or any other restrictive covenant, including, without limitation, the Confidentiality Agreement and any non-solicitation obligation to the Company pursuant to Section 3.1 above or otherwise.

ARTICLE 5.
DEFINITIONS

For purposes of the Agreement, the following terms are defined as follows:

5.1    “Base Salary” means Executive’s annual base salary as in effect during the last regularly scheduled payroll period immediately preceding a Covered Termination but excluding any reduction of base salary giving rise to Constructive Termination hereunder.

5.2    “Board” means the Board of Directors of the Company.

5.3    “Cause” means that, in the reasonable determination of the Chief Executive Officer of the Company, Executive:

(a)    has committed an act of fraud or embezzlement or has intentionally committed some other illegal act that has a material adverse impact on the Company or any successor or parent or subsidiary thereof;

(b)    has been convicted of, or entered a plea of “guilty” or “no contest” to, a felony which causes or may reasonably be expected to cause substantial economic injury to or substantial injury to the reputation of the Company or any subsidiary or affiliate of the Company;

(c)    has made any unauthorized use or disclosure of confidential information or trade secrets of the Company or any successor or parent or subsidiary thereof that has a material adverse impact on any such entity;

(d)    has committed any other intentional misconduct that has a material adverse impact on the Company or any successor or parent or subsidiary thereof; or

(e)    has intentionally refused or intentionally failed to act in accordance with any lawful and proper direction or order of the Board or the appropriate individual to whom Executive reports, provided such direction is not materially inconsistent with Executive’s customary duties and responsibilities.

5.4    “Change of Control” means and includes each of the following:

(a)    A transaction or series of transactions (other than an offering of Shares to the general public through a registration statement filed under the laws of any applicable jurisdiction) whereby any person or related group of persons (other than the Company, any of its subsidiaries, an employee benefit plan maintained by the Company or any of its subsidiaries or a person that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership of securities of the Company possessing more than 50% of the total combined voting power of the Company’s securities outstanding immediately after such acquisition; or

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

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

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

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

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

The Board shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change of Control has occurred pursuant to the above definition, and the date of the occurrence of such Change of Control and any incidental matters relating thereto.

5.5    “Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time and the Treasury Regulations thereunder.

5.6    “Company” means Mellanox Technologies, Ltd., company organized under the laws of the State of Israel, or, following a Change of Control, the surviving entity resulting from such transaction.

5.7    “Constructive Termination” means that Executive voluntarily terminates Executive’s employment with Mellanox after any of the following are undertaken without Executive’s express written consent:

(a)    the removal of or a material reduction in the nature or scope of Executive’s responsibilities, or the assignment to Executive of duties that are materially inconsistent with Executive’s position other than a change in reporting relationship;

(b)    a change in Executive’s direct reporting relationship so that Executive no longer reports directly to the person indicated in Section 1.1 or an individual at a substantially similar or higher level;

(c)    a material reduction in Executive’s base salary or target annual bonus, unless the base salaries or target annual bonus, as applicable, of all other executives are similarly reduced; or

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(d)    a relocation of Executive’s place of employment that increases Executive’s one-way commute by more than thirty (30) miles from such Executive’s place of employment as of immediately prior to such relocation. The termination of Executive’s employment as a result of Executive’s death or disability shall not be deemed to be a Constructive Termination.

Notwithstanding the foregoing, a resignation shall not constitute a “Constructive Termination” unless the event or condition giving rise to such resignation continues more than thirty (30) days following Executive’s written notice of such condition provided to Mellanox within ninety (90) days of the first occurrence of such event or condition and such resignation is effective within thirty (30) days following the end of such notice period.

5.8    “Covered Termination” means an Involuntary Termination Without Cause or a Constructive Termination, in each case, which occurs within 12 months following a Change of Control.

5.9    “Equity Awards” means all options to purchase ordinary shares, awards of restricted shares and such other awards granted pursuant to the Company’s option and equity incentive award plans or agreements.

5.10    “Involuntary Termination Without Cause” means Executive’s dismissal or discharge by Mellanox other than for Cause. The termination of Executive’s employment as a result of Executive’s death or disability shall not be deemed to be an Involuntary Termination Without Cause.

5.11    “Target Bonus” means Executive’s target annual bonus for the year in which a Covered Termination occurs or, in the event a target annual bonus has not been established for Executive for such year, the average of the three most recent annual bonuses paid to Executive as of the date of the Covered Termination.

ARTICLE 6.

GENERAL PROVISIONS

6.1Employment Status. This Agreement does not constitute a contract of employment or impose upon Executive any obligation to remain as an employee, or impose on the Company or Mellanox any obligation (a) to retain Executive as an employee, (b) to change the status of Executive as an at-will employee, or (c) to change the Company’s or Mellanox’s policies regarding termination of employment.

6.2Notices. Any notices provided hereunder must be in writing, and such notices or any other written communication shall be deemed effective upon the earlier of personal delivery (including personal delivery by facsimile) or the third day after mailing by first class mail to Mellanox at its primary office location and to Executive at Executive’s address as listed in Mellanox’s payroll records. Any payments made by Mellanox to Executive under the terms of this Agreement shall be delivered to Executive either in person or at the address as listed in Mellanox’s payroll records.

6.3Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provisions had never been contained herein.

6.4Waiver. If either party should waive any breach of any provisions of this Agreement, such party shall not thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this Agreement.

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6.5Arbitration. Any dispute, claim or controversy based on, arising out of or relating to Executive’s employment or this Agreement shall be settled by final and binding arbitration in Santa Clara County, California, before a single neutral arbitrator in accordance with the National Rules for the Resolution of Employment Disputes (the “Rules”) of the American Arbitration Association, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction. Arbitration may be compelled pursuant to the California Arbitration Act (Code of Civil Procedure §§ 1280 etseq.). If the parties are unable to agree upon an arbitrator, one shall be appointed by the AAA in accordance with its Rules. Each party shall pay the fees of its own attorneys, the expenses of its witnesses and all other expenses connected with presenting its case; however, Executive and the Company agree that, to the extent permitted by law, the arbitrator may, in his or her discretion, award reasonable attorneys’ fees to the prevailing party. Other costs of the arbitration, including the cost of any record or transcripts of the arbitration, AAA’s administrative fees, the fee of the arbitrator, and all other fees and costs, shall be borne by the Company. This Section 6.5 is intended to be the exclusive method for resolving any and all claims by the parties against each other for payment of damages under this Agreement or relating to Executive’s employment; provided, however, that neither this Agreement nor the submission to arbitration shall limit the parties’ right to seek provisional relief, including, without limitation, injunctive relief, in any court of competent jurisdiction pursuant to California Code of Civil Procedure § 1281.8 or any similar statute of an applicable jurisdiction. Seeking any such relief shall not be deemed to be a waiver of such party’s right to compel arbitration. Both Executive and the Company expressly waive their right to a jury trial. Pursuant to California Civil Code Section 1717, each party warrants that it was represented by counsel in the negotiation and execution of this Agreement, including the attorneys’ fees provision herein.

6.6Complete Agreement. This Agreement, including Exhibit A and Exhibit B, constitutes the entire agreement between Executive and the Company or Mellanox and is the complete, final, and exclusive embodiment of their agreement with regard to this subject matter, wholly superseding all written and oral agreements with respect to severance benefits to Executive in the event of employment termination, including without limitation, any Prior Agreement. It is entered into without reliance on any promise or representation other than those expressly contained herein. Notwithstanding anything herein to the contrary, this Agreement shall not supersede any indemnification agreement between Executive and the Company or Mellanox.

6.7Amendment or Termination of Agreement. This Agreement may be changed or terminated only upon the mutual written consent of the Company and Executive. The written consent of the Company to a change or termination of this Agreement must be signed by an executive officer of the Company after such change or termination has been approved by the Board.

6.8Counterparts. This Agreement may be executed in separate counterparts, any one of which need not contain signatures of more than one party, but all of which taken together will constitute one and the same Agreement.

6.9Headings. The headings of the Articles and Sections hereof are inserted for convenience only and shall not be deemed to constitute a part hereof nor to affect the meaning thereof.

6.10Successors and Assigns. This Agreement is intended to bind and inure to the benefit of and be enforceable by Executive, and the Company, and any surviving entity resulting from a Change of Control and upon any other person who is a successor by merger, acquisition, consolidation or otherwise to the business formerly carried on by the Company, and their respective successors, assigns, heirs, executors and administrators, without regard to whether or not such person actively assumes any rights or duties hereunder; provided, however, that Executive may not assign any duties hereunder and may not assign any rights hereunder without the written consent of the Company, which consent shall not be withheld unreasonably.

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6.11Choice of Law. All questions concerning the construction, validity and interpretation of this Agreement will be governed by the law of the State of California, without regard to such state’s conflict of laws rules.

6.12Non-Publication. The parties mutually agree not to disclose publicly the terms of this Agreement except to the extent that disclosure is mandated by applicable law or regulation or to their respective advisors (e.g., attorneys, accountants).

6.13Construction of Agreement. In the event of a conflict between the text of the Agreement and any summary, description or other information regarding the Agreement, the text of the Agreement shall control.

6.14Code Section 409A.

(a)    Notwithstanding any provision to the contrary in this Agreement, no amount that is deemed deferred compensation subject to Section 409A of the Code shall be payable pursuant to Section 2 unless Executive’s termination of employment constitutes a separation from service within the meaning of Treasury Regulation Section 1.409A-1h (a “Separation from Service”) and, except as provided under Section 6.14(b) below, any such amount shall not be paid, or in the case of installments, commence to be paid, until the sixtieth (60^th) day following Executive’s Separation from Service. Any installment payments that would have been made to Executive during the sixty (60) day period immediately following Executive’s Separation from Service but for the preceding sentence shall be paid to Executive on the sixtieth (60^th) day following Executive’s Separation from Service and the remaining payments shall be made as provided in this Agreement, subject to the last sentence of Section 2.1(a).

(b)    Notwithstanding any provision to the contrary in this Agreement, if Executive is deemed at the time of Executive’s separation from service to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code, to the extent delayed commencement of any portion of the benefits to which Executive is entitled under this Agreement is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, such portion of Executive’s benefits shall not be provided to Executive prior to the earlier of (x) the expiration of the six (6)-month period measured from the date of Executive’s Separation from Service or (y) the date of Executive’s death. Upon the first business day following the expiration of the applicable Code Section 409A(a)(2)(B)(i) period, all payments deferred pursuant to this Section 6.14(b) shall be paid in a lump sum to Executive, and any remaining payments due under this Agreement shall be paid as otherwise provided herein.

(c)    To the extent that any reimbursements payable pursuant to this Agreement are subject to the provisions of Section 409A of the Code, any such reimbursements payable to Executive pursuant to this Agreement shall be paid to Executive no later than December 31 of the year following the year in which the expense was incurred, the amount of expenses reimbursed in one year shall not affect the amount eligible for reimbursement in any subsequent year, and Executive’s right to reimbursement under this Agreement will not be subject to liquidation or exchange for another benefit.

(d)    Executive’s right to receive any installment payments under this Agreement shall be treated as a right to receive a series of separate payments and, accordingly, each such installment payment shall at all times be considered a separate and distinct payment as permitted under Treasury Regulation Section 1.409A-2(b)(2)(iii).

(e)    The parties acknowledge and agree that, to the extent applicable, this Agreement shall be interpreted in accordance with, and the parties agree to use their best efforts to achieve timely compliance with, Section 409A of the Code, including, without limitation, any such regulations or other guidance that may be issued after the Effective Date. Notwithstanding any provision of this Agreement to the contrary, in the event that the Company determines that any amounts payable hereunder would otherwise be taxable to Executive under Section 409A, the Company may adopt such limited amendments to this Agreement and appropriate policies and procedures,

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including amendments and policies with retroactive effect, that the Company reasonably determines are necessary or appropriate to comply with the requirements of Section 409A of the Code and thereby avoid the application of penalty taxes under such Section.

(SIGNATURE PAGE FOLLOWS)

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IN WITNESS WHEREOF, the parties have executed this Agreement on the Effective Date written above.

Mellanox Technologies, Ltd.	[NAME OF EXECUTIVE]
By:
Name:
Title:

Exhibit A: Release (Individual Termination) Exhibit B: Release (Group Termination)

[Signature Page To Executive Severance Benefits Agreement]

EXHIBIT A

RELEASE(INDIVIDUAL TERMINATION)

Certain capitalized terms used in this Release are defined in the Amended and Restated Executive Severance Benefits Agreement (the “Agreement”), which I have executed and of which this Release is a part.

I hereby confirm my obligations under the Company’s Employee Proprietary Information and Inventions Agreement.

I acknowledge that I have read and understand Section 1542 of the California Civil Code which reads as follows: “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.” I hereby expressly waive and relinquish all rights and benefits under that section and any law of any jurisdiction of similar effect with respect to my release of any claims I may have against the Company.

Except as otherwise set forth in this Release, I hereby release, acquit and forever discharge the Company, its parents and subsidiaries, and their officers, directors, agents, servants, employees, shareholders, successors, assigns and affiliates, of and from any and all claims, liabilities, demands, causes of action, costs, expenses, attorneys’ fees, damages, indemnities and obligations of every kind and nature, in law, equity, or otherwise, known and unknown, suspected and unsuspected, disclosed and undisclosed (other than any claim for indemnification I may have as a result of any third party action against me based on my employment with the Company or its subsidiaries), arising out of or in any way related to agreements, events, acts or conduct at any time prior to the date I execute this Release, including, but not limited to: all such claims and demands directly or indirectly arising out of or in any way connected with my employment with the Company or its subsidiaries or the termination of that employment, including but not limited to, claims of intentional and negligent infliction of emotional distress, any and all tort claims for personal injury, claims or demands related to salary, bonuses, commissions, stock, stock options, or any other ownership interests in the Company, vacation pay, fringe benefits, expense reimbursements, severance pay, or any other form of disputed compensation; claims pursuant to any federal, state or local law or cause of action including, but not limited to, the federal Civil Rights Act of 1866; Title VII of the federal Civil Rights Act of 1964, as amended; the federal Civil Rights of 1991; Sections 1981 through 1988 of Title 42 of the United States Code, as amended; the federal Occupational Safety and Health Act of 1970; the Consolidated Omnibus Budget Reconciliation Act of 1985; the federal Family and Medical Leave Act of 1993, except as prohibited by law; the federal Worker Adjustment and Retraining Notification Act of 1988; the federal Vocational Rehabilitation Act of 1973; the federal Equal Pay Act of 1963; the federal Fair Labor Standards Act, except as prohibited by law; the National Labor Relations Act, as amended; the federal Employee Retirement Income Security Act of 1974, as amended; the federal Americans with Disabilities Act of 1990; the Age Discrimination in Employment Act of 1967, as amended (the “ADEA”); the Sarbanes-Oxley Act of 2002; the California Fair Employment and Housing Act, as amended; the California civil rights laws; the California Equal Pay Law; tort law; contract law; statutory law; common law; wrongful discharge; discrimination; fraud; defamation; emotional distress; and breach of the implied covenant of good faith and fair dealing; provided, however, that nothing in this paragraph shall be construed in any way to release the Company from (i) the payments and benefits under Section 2 of my Agreement, (ii) to accrued or vested benefits I may have, if any, as of the date hereof under any applicable plan, policy, practice, program, contract or agreement with the Company, (iii) its obligation to indemnify me pursuant to the Company’s indemnification obligation pursuant to agreement or applicable law, (iv) to any rights or benefits that may not be waived pursuant to applicable law, including, without limitation, any right to unemployment insurance

Exhibit A-1

benefits, or (v) to my right to communicate directly with, cooperate with, or provide information to, any federal, state or local government regulator.

For the avoidance of doubt, nothing in this Agreement will be construed to prohibit me from filing a charge with, reporting possible violations to, or participating or cooperating with any governmental agency or entity, including but not limited to the Equal Employment Opportunity Commission, the National Labor Relations Board, the California Department of Fair Employment and Housing, the Department of Justice, the Securities and Exchange Commission, Congress, or any agency Inspector General, or making other disclosures that are protected under the whistleblower, anti-discrimination, or anti-retaliation provisions of federal, state or local law or regulation; provided, however, that I may not disclose information of the Company or any of their affiliates that is protected by the attorney-client privilege, except as otherwise required by law. I do not need the prior authorization of the Company to make any such reports or disclosures, and I am not required to notify the Company that I have made such reports or disclosures.

Furthermore, in accordance with 18 U.S.C. § 1833, notwithstanding anything to the contrary in this Agreement: (i) I shall not be in breach of this Agreement, and shall not be held criminally or civilly liable under any federal or state trade secret law (x) for the disclosure of a trade secret that is made in confidence to a federal, state, or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law, or (y) for the disclosure of a trade secret that is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal; and (ii) if I file a lawsuit for retaliation by the Company for reporting a suspected violation of law, I may disclose the trade secret to my attorney, and may use the trade secret information in the court proceeding, if I file any document containing the trade secret under seal, and does not disclose the trade secret, except pursuant to court order.

I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under the ADEA. I also acknowledge that the consideration given under the Agreement for the waiver and release in the preceding paragraph hereof is in addition to anything of value to which I was already entitled. I further acknowledge that I have been advised by this writing, as required by the ADEA, that: (A) my waiver and release do not apply to any rights or claims that may arise on or after the date I execute this Release; (B) I should consult with an attorney of my choice prior to executing this Release; (C) I have twenty-one (21) days to consider this Release (although I may choose to voluntarily execute this Release earlier); (D) I have seven (7) days following the execution of this Release by the parties to revoke the Release; and (E) this Release shall not be effective until the date upon which the revocation period has expired, which shall be the eighth day after this Release is executed by me. I hereby understand that the revocation contemplated in this paragraph shall not be effective unless it is in writing and signed by me and received by the Company prior to the expiration of the revocation period. I further acknowledge that I have read this Release carefully and completely understand each of the terms of this Release.

[NAME OF EXECUTIVE]

Date:    

Exhibit A-2

EXHIBIT B

RELEASE
(GROUP TERMINATION)

Certain capitalized terms used in this Release are defined in the Amended and Restated Executive Severance Benefits Agreement (the “Agreement”), which I have executed and of which this Release is a part.

I hereby confirm my obligations under the Company’s Employee Proprietary Information and Inventions Agreement.

I acknowledge that I have read and understand Section 1542 of the California Civil Code which reads as follows: “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.” I hereby expressly waive and relinquish all rights and benefits under that section and any law of any jurisdiction of similar effect with respect to my release of any claims I may have against the Company.

Except as otherwise set forth in this Release, I hereby release, acquit and forever discharge the Company, its parents and subsidiaries, and their officers, directors, agents, servants, employees, shareholders, successors, assigns and affiliates, of and from any and all claims, liabilities, demands, causes of action, costs, expenses, attorneys’ fees, damages, indemnities and obligations of every kind and nature, in law, equity, or otherwise, known and unknown, suspected and unsuspected, disclosed and undisclosed (other than any claim for indemnification I may have as a result of any third party action against me based on my employment with the Company or its subsidiaries), arising out of or in any way related to agreements, events, acts or conduct at any time prior to the date I execute this Release, including, but not limited to: all such claims and demands directly or indirectly arising out of or in any way connected with my employment with the Company or its subsidiaries or the termination of that employment, including but not limited to, claims of intentional and negligent infliction of emotional distress, any and all tort claims for personal injury, claims or demands related to salary, bonuses, commissions, stock, stock options, or any other ownership interests in the Company, vacation pay, fringe benefits, expense reimbursements, severance pay, or any other form of disputed compensation; claims pursuant to any federal, state or local law or cause of action including, but not limited to, the federal Civil Rights Act of 1866; Title VII of the federal Civil Rights Act of 1964, as amended; the federal Civil Rights Act of 1991; Sections 1981 through 1988 of Title 42 of the United States Code, as amended; the federal Occupational Safety and Health Act of 1970; the Consolidated Omnibus Budget Reconciliation Act of 1985; the federal Family and Medical Leave Act of 1993, except as prohibited by law; the federal Worker Adjustment and Retraining Notification Act of 1988; the federal Vocational Rehabilitation Act of 1973; the federal Equal Pay Act of 1963; the federal Fair Labor Standards Act, except as prohibited by law; the National Labor Relations Act, as amended; the federal Employee Retirement Income Security Act of 1974, as amended; the federal Americans with Disabilities Act of 1990; the Age Discrimination in Employment Act of 1967, as amended (the “ADEA”); the Sarbanes-Oxley Act of 2002; the California Fair Employment and Housing Act, as amended; the California civil rights laws; the California Equal Pay Law; tort law; contract law; statutory law; common law; wrongful discharge; discrimination; fraud; defamation; emotional distress; and breach of the implied covenant of good faith and fair dealing; provided, however, that nothing in this paragraph shall be construed in any way to release the Company from (i) the payments and benefits under Section 2 of my Agreement, (ii) to accrued or vested benefits I may have, if any, as of the date hereof under any applicable plan, policy, practice, program, contract or agreement with the Company, (iii) its obligation to indemnify me pursuant to the Company’s indemnification obligation pursuant to agreement or applicable law, (iv) to any rights or benefits that may not be waived pursuant to applicable law, including, without limitation, any right to unemployment insurance

Exhibit B-1

benefits, or (v) to my right to communicate directly with, cooperate with, or provide information to, any federal, state or local government regulator.

For the avoidance of doubt, nothing in this Agreement will be construed to prohibit me from filing a charge with, reporting possible violations to, or participating or cooperating with any governmental agency or entity, including but not limited to the Equal Employment Opportunity Commission, the National Labor Relations Board, the California Department of Fair Employment and Housing, the Department of Justice, the Securities and Exchange Commission, Congress, or any agency Inspector General, or making other disclosures that are protected under the whistleblower, anti-discrimination, or anti-retaliation provisions of federal, state or local law or regulation; provided, however, that I may not disclose information of the Company or any of their affiliates that is protected by the attorney-client privilege, except as otherwise required by law. I do not need the prior authorization of the Company to make any such reports or disclosures, and I am not required to notify the Company that I have made such reports or disclosures.

Furthermore, in accordance with 18 U.S.C. § 1833, notwithstanding anything to the contrary in this Agreement: (i) I shall not be in breach of this Agreement, and shall not be held criminally or civilly liable under any federal or state trade secret law (x) for the disclosure of a trade secret that is made in confidence to a federal, state, or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law, or (y) for the disclosure of a trade secret that is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal; and (ii) if I file a lawsuit for retaliation by the Company for reporting a suspected violation of law, I may disclose the trade secret to my attorney, and may use the trade secret information in the court proceeding, if I file any document containing the trade secret under seal, and does not disclose the trade secret, except pursuant to court order.

I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under the ADEA. I also acknowledge that the consideration given under the Agreement for the waiver and release in the preceding paragraph hereof is in addition to anything of value to which I was already entitled. I further acknowledge that I have been advised by this writing, as required by the ADEA, that: (A) my waiver and release do not apply to any rights or claims that may arise on or after the date I execute this Release; (B) I should consult with an attorney of my choice prior to executing this Release; (C) I have forty-five (45) days to consider this Release (although I may choose to voluntarily execute this Release earlier); (D) I have seven (7) days following the execution of this Release by the parties to revoke the Release; (E) this Release shall not be effective until the date upon which the revocation period has expired, which shall be the eighth day after this Release is executed by me. I hereby understand that the revocation contemplated in this paragraph shall not be effective unless it is in writing and signed by me and received by the Company prior to the expiration of the revocation period. I further acknowledge that I have read this Release carefully and completely understand each of the terms of this Release; and, as required by ADEA, that I have received with this Release a detailed list of the job titles and ages of all employees who were terminated in this group termination and the ages of all employees of the Company in the same job classification or organizational unit who were not terminated.

[NAME OF EXECUTIVE]

Date:    

Exhibit B-2

EX-10.3

EXHIBIT 10.3

AMENDED AND RESTATED EXECUTIVE SEVERANCE BENEFITS AGREEMENT

This AMENDED AND RESTATEDEXECUTIVE SEVERANCE BENEFITS AGREEMENT (the “Agreement”) is entered into effective as of this [ ˜ ] day of [ ˜ ], 2018 (the “Effective Date”), between [ ˜ ] (“Executive”) and MELLANOX TECHNOLOGIES, LTD. (the “Company”). This Agreement is intended to provide Executive with the compensation and benefits described herein upon the occurrence of specific events and supersedes in its entirety any prior Executive Severance Benefits Agreement entered into by and between Executive and the Company (the “Prior Agreement”). Certain capitalized terms used in this Agreement are defined in Article 5.

The Company and Executive hereby agree as follows:

ARTICLE 1.

SCOPE OF AND CONSIDERATION FOR THIS AGREEMENT

1.1Position and Duties. Executive is currently employed by the Company as [ ˜ ]. Executive reports directly to the [ ˜ ] of the Company.

1.2Restrictions. Without limiting Executive's obligations pursuant to the Employment Agreement between Executive and the Company, during Executive’s employment by the Company, Executive agrees to the best of Executive’s ability and experience that Executive will at all times loyally and conscientiously perform all of the duties and obligations required of and from Executive as [ ˜ ] or any other position Executive is assigned. During the term of Executive’s employment, Executive further agrees that Executive will devote all of Executive’s business time and attention to the business of the Company, the Company shall be entitled to all of the benefits and profits arising from or incident to all such work, services and advice, Executive shall not render commercial or professional services of any nature to any person or organization, whether or not for compensation, without the prior written consent of the Board, and Executive shall not directly or indirectly engage or participate in any business that is competitive in any manner with the business of the Company. Nothing in this Agreement shall prevent Executive from accepting speaking or presentation engagements in exchange for honoraria or from service on boards of charitable organizations or otherwise participating in civic, charitable or fraternal organizations, or from owning no more than one percent (1%) of the outstanding equity securities of a corporation whose stock is listed on a national stock exchange.

1.3Employee Proprietary Information and Inventions Agreement. Executive acknowledges that Executive has previously executed and delivered to an officer of the Company the Company’s Employee Proprietary Information and Inventions Agreement (the “Confidentiality Agreement”) and that the Confidentiality Agreement remains in full force and effect.

1.4Benefits Upon Covered Termination. The Company and Executive wish to set forth the benefits which Executive shall be entitled to receive in the event of a Covered Termination.

1.5Consideration. The duties and obligations of the Company to Executive under this Agreement shall be in consideration for Executive’s past services to the Company, Executive’s continued employment with the Company and full compliance with the provisions of the Employment Agreement and this Agreement, and Executive’s execution of a release in accordance with Section 4.1 hereof.

1.6Prior Agreement. This Agreement shall supersede any other agreement relating to severance benefits in the event of Executive’s severance from employment, including without limitation, any Prior Agreement.

29829-3982361v1

ARTICLE 2.

SEVERANCE BENEFITS

2.1Covered Termination Severance Benefits. A Covered Termination of Executive’s employment entitles Executive to receive the benefits set forth in this Section 2.1, subject to Section 4.1.

(a)Additional Severance Payment. Subject to Executive’s continued compliance with this Agreement including without limitation, Executive’s obligations and undertakings pursuant to Section 1.3 and 3 hereof, and the Employment Agreement, the Company shall pay to Executive, in addition to any rights and entitlements under law and the Executive’s Employment Agreement, an amount equal to the sum of Executive’s Base Salary and Target Bonus, less applicable withholdings, in a cash lump sum as soon as administratively practicable following the date that the Release (as defined below) was executed by Executive.

(b)Equity Award Acceleration. The vesting and/or exercisability of one-hundred percent (100%) of the unvested shares subject to Executive’s Equity Awards shall be automatically accelerated immediately effective as of the date of the Covered Termination.

2.2Other Terminations. If Executive’s employment is terminated by the Company for Cause, by Executive other than pursuant to a Constructive Termination or as a result of Executive’s death or disability, the Company shall not have any other or further obligations to Executive under this Agreement (including any financial obligations) except that Executive shall be entitled to receive (a) Executive’s fully earned but unpaid base salary, through the date of termination at the rate then in effect, and (b) all other amounts or benefits to which Executive is entitled under the Employment Agreement (if any) and all other amounts or benefits to which Executive is entitled under any compensation, retirement or benefit plan or practice of the Company at the time of termination in accordance with the terms of such plans or practices or applicable law. In addition, subject to the provisions of the Company’s equity compensation plans and the terms of Executive’s Equity Awards, if Executive’s employment is terminated by the Company for Cause, by Executive other than pursuant to a Constructive Termination or as a result of Executive’s death or disability, all vesting of Executive’s unvested Equity Awards previously granted to Executive by the Company shall cease and none of such unvested Equity Awards shall be exercisable following the date of such termination. The foregoing shall be in addition to, and not in lieu of, any and all other rights and remedies that may be available to the Company under the circumstances, whether at law or in equity.

2.3Mitigation. Except as otherwise specifically provided herein, Executive shall not be required to mitigate damages or the amount of any payment provided under this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided for under this Agreement be reduced by any compensation earned by Executive as a result of employment by another employer or by any retirement benefits received by Executive after the date of a Covered Termination.

2.4    Exclusive Remedy. Except as otherwise expressly required by law or as specifically provided herein or in the Executive’s Employment Agreement, all of Executive’s rights to salary, severance, benefits, bonuses and other amounts hereunder (if any) accruing after the termination of Executive’s employment shall cease upon such termination.

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ARTICLE 3.

RESTRICTIVE COVENANTS

3.1Non-Solicitation. In further consideration of the duties and obligations of the Company to Executive hereunder, Executive acknowledges that during the course of Executive’s employment with the Company, Executive has or will become familiar with the Company’s trade secrets and with other confidential information concerning the Company and that Executive’s services shall be of special, unique and extraordinary value to the Company; and, therefore, Executive agrees that, during the one-year period commencing on the date of termination of Executive’s employment for any reason (the “Restricted Period”), Executive shall not, directly or indirectly, through another person or entity, (i) induce, solicit, encourage or attempt to induce, solicit or encourage any employee of the Company to leave the employ of the Company, or in any way interfere with the relationship between the Company and any employee thereof; (ii) induce, solicit or encourage or attempt to induce, solicit or encourage any customer, supplier, licensee, licensor, franchisee or other business relation of the Company and any of its Affiliates to cease doing business with the Company and any of its Affiliates, or in any way interfere with the relationship between any such customer, supplier, licensee or business relation of the Company and any of its Affiliates.

3.2Modification of Covenants. If, at the time of enforcement of any of the covenants contained in Section 3.1 hereof, a court of competent jurisdiction shall hold that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances shall be substituted for the stated duration, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum period, scope and area permitted by law.

ARTICLE 4.LIMITATIONS AND CONDITIONS ON BENEFITS

4.1Release Prior to Payment of Benefits. Upon a Covered Termination, and prior to the payment of any benefits under this Agreement on account of such Covered Termination, Executive shall execute and deliver to the Company an effective general release (the “Release”) in the form attached hereto and incorporated herein as Exhibit A, subject to any changes the Company deems necessary or appropriate to reflect applicable law. Such Release shall specifically relate to all of Executive’s rights and claims in existence at the time of such execution and shall confirm Executive’s obligations under the Confidentiality Agreement. In the event Executive does not execute and deliver such Release within thirty (30) days following the Covered Termination, no benefits shall be payable under this Agreement.

4.2Termination of Benefits. Benefits under this Agreement shall terminate immediately if Executive, at any time, violates any proprietary information or confidentiality obligation to the Company or any other restrictive covenant, including, without limitation, the Confidentiality Agreement and any non-solicitation obligation to the Company pursuant to Section 3.1 above or otherwise.

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ARTICLE 5.DEFINITIONS

For purposes of the Agreement, the following terms are defined as follows:

5.1    “Base Salary” means Executive’s annual salary (that is the base salary and where applicable together with the Overtime Payment, with no fringe benefits whatsoever) as in effect during the last regularly scheduled payroll period immediately preceding a Covered Termination but excluding any reduction of base salary giving rise to Constructive Termination hereunder.

5.2     “Board” means the Board of Directors of the Company.

5.3    “Cause” means that, in the reasonable determination of the Chief Executive Officer of the Company, Executive:

(a)    has committed an act of fraud or embezzlement or has intentionally committed some other illegal act that has a material adverse impact on the Company or any successor or parent or subsidiary thereof;

(b)    has been convicted of, or entered a plea of “guilty” or “no contest” to, a felony which causes or may reasonably be expected to cause substantial economic injury to or substantial injury to the reputation of the Company or any subsidiary or affiliate of the Company;

(c)    has made any unauthorized use or disclosure of confidential information or trade secrets of the Company or any successor or parent or subsidiary thereof that has a material adverse impact on any such entity;

(d)    has committed any other intentional misconduct that has a material adverse impact on the Company or any successor or parent or subsidiary thereof; or

(e)    has intentionally refused or intentionally failed to act in accordance with any lawful and proper direction or order of the Board or the appropriate individual to whom Executive reports, provided such direction is not materially inconsistent with Executive’s customary duties and responsibilities.

5.4    “Change of Control” means and includes each of the following:

(a)    A transaction or series of transactions (other than an offering of Shares to the general public through a registration statement filed under the laws of any applicable jurisdiction) whereby any person or related group of persons (other than the Company, any of its subsidiaries, an employee benefit plan maintained by the Company or any of its subsidiaries or a person that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership of securities of the Company possessing more than 50% of the total combined voting power of the Company’s securities outstanding immediately after such acquisition; or

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

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

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

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

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

The Board shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change of Control has occurred pursuant to the above definition, and the date of the occurrence of such Change of Control and any incidental matters relating thereto.

5.5    “Company” means Mellanox Technologies, Ltd., company organized under the laws of the State of Israel, or, following a Change of Control, the surviving entity resulting from such transaction.

5.6    “Constructive Termination” means that Executive voluntarily terminates Executive’s employment with the Company after any of the following are undertaken without Executive’s express written consent:

(a)    the removal of or a material reduction in the nature or scope of Executive’s responsibilities, or the assignment to Executive of duties that are materially inconsistent with Executive’s position other than a change in reporting relationship;

(b)    a change in Executive’s direct reporting relationship so that Executive no longer reports directly to the person indicated in Section 1.1 or an individual at a substantially similar or higher level;

(c)    a material reduction in Executive’s base salary or target annual bonus, unless the base salaries or target annual bonus, as applicable, of all other executives are similarly reduced; or

(d)    a relocation of Executive’s place of employment that increases Executive’s one-way commute by more than thirty (30) miles from such Executive’s place of employment as of immediately prior to such relocation. The termination of Executive’s employment as a result of Executive’s death or disability shall not be deemed to be a Constructive Termination.

Notwithstanding the foregoing, a resignation shall not constitute a “Constructive Termination” unless the event or condition giving rise to such resignation continues more than thirty (30) days following Executive’s written notice of such condition provided to the Company within ninety (90) days of the first occurrence of such event or condition and such resignation is effective within thirty (30) days following the end of such notice period.

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5.7    “Covered Termination” means an Involuntary Termination Without Cause or a Constructive Termination, in each case, which occurs within 12 months following a Change of Control.

5.8    “Employment Agreement” means that employment agreement dated [ ] by and between the Company and Executive.

5.9    “Equity Awards” means all options to purchase ordinary shares, awards of restricted ordinary shares and such other awards granted pursuant to the Company’s option and other equity incentive award plans or agreements.

5.10     “Involuntary Termination Without Cause” means Executive’s dismissal or discharge by the Company other than for Cause. The termination of Executive’s employment as a result of Executive’s death or disability shall not be deemed to be an Involuntary Termination Without Cause.

5.11    “Target Bonus” means Executive’s target annual bonus for the year in which a Covered Termination occurs or, in the event a target annual bonus has not been established for Executive for such year, the average of the three most recent annual bonuses paid to Executive as of the date of the Covered Termination.

ARTICLE 6.

GENERAL PROVISIONS

6.1Employment Status. This Agreement does not constitute a contract of employment or impose upon Executive any obligation to remain as an employee, or impose on the Company any obligation (a) to retain Executive as an employee, (b) to change the status of Executive as an at-will employee (subject to applicable law), or (c) to change the Company’s policies regarding termination of employment.

6.2Notices. Any notices provided hereunder must be in writing, and such notices or any other written communication shall be deemed effective upon the earlier of personal delivery (including personal delivery by facsimile) or the third day after mailing by first class mail to the Company at its primary office location and to Executive at Executive’s address as listed in the Company’s payroll records. Any payments made by the Company to Executive under the terms of this Agreement shall be delivered to Executive either in person or at the address as listed in the Company’s payroll records.

6.3Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provisions had never been contained herein.

6.4Waiver. If either party should waive any breach of any provisions of this Agreement, such party shall not thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this Agreement.

6.5Complete Agreement. This Agreement, including Exhibit A, constitutes the entire agreement between Executive and the Company and is the complete, final, and exclusive embodiment of their agreement with regard to this subject matter, wholly superseding all written and oral agreements with respect to severance benefits to Executive in the event of employment termination, including without limitation, any Prior Agreement. It is

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entered into without reliance on any promise or representation other than those expressly contained herein. Notwithstanding anything herein to the contrary, this Agreement shall not supersede the Employment Agreement or any indemnification agreement between Executive and the Company.

6.6Amendment or Termination of Agreement. This Agreement may be changed or terminated only upon the mutual written consent of the Company and Executive. The written consent of the Company to a change or termination of this Agreement must be signed by an executive officer of the Company after such change or termination has been approved by the Board.

6.7Counterparts. This Agreement may be executed in separate counterparts, any one of which need not contain signatures of more than one party, but all of which taken together will constitute one and the same Agreement.

6.8Headings. The headings of the Articles and Sections hereof are inserted for convenience only and shall not be deemed to constitute a part hereof nor to affect the meaning thereof.

6.9Successors and Assigns. This Agreement is intended to bind and inure to the benefit of and be enforceable by Executive, and the Company, and any surviving entity resulting from a Change of Control and upon any other person who is a successor by merger, acquisition, consolidation or otherwise to the business formerly carried on by the Company, and their respective successors, assigns, heirs, executors and administrators, without regard to whether or not such person actively assumes any rights or duties hereunder; provided, however, that Executive may not assign any duties hereunder and may not assign any rights hereunder without the written consent of the Company, which consent shall not be withheld unreasonably.

6.10    Choice of Law. All questions concerning the construction, validity and interpretation of this Agreement will be governed by the law of the State of Israel, without regard to its conflict of laws rules. Any legal proceeding arising out of, or relating to this Agreement will be instituted in a court in Israel, and the Executive and the Company hereby consent to the personal and exclusive jurisdiction of such court(s) and hereby waive any objection(s) that they may have to personal jurisdiction, the laying of venue of any such proceeding and any claim or defense of inconvenient forum.

6.11Non-Publication. The parties mutually agree not to disclose publicly the terms of this Agreement except to the extent that disclosure is mandated by applicable law or regulation or to their respective advisors (e.g., attorneys, accountants).

6.12Construction of Agreement. In the event of a conflict between the text of the Agreement and any summary, description or other information regarding the Agreement, the text of the Agreement shall control.

(SIGNATURE PAGE FOLLOWS)

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IN WITNESS WHEREOF, the parties have executed this Agreement on the Effective Date written above.

Mellanox Technologies, Ltd.	[NAME OF EXECUTIVE]
By:
Name:
Title:

Exhibit A: Release

[Signature Page To Executive Severance Benefits Agreement]

EXHIBIT A

RELEASE

Certain capitalized terms used in this Release are defined in the Amended and Restated Executive Severance Benefits Agreement (the “Agreement”), which I have executed and of which this Release is a part.

I hereby confirm my obligations under the Company’s Employee Proprietary Information and Inventions Agreement.

I also hereby confirm that of the date hereof, I have received all amounts and/or entitlements to which I am due as a result of or in connection with my employment with the Company and its termination including, without limitation, with respect to salary, wages, back wages, contributions of all kind (including to Managers' Insurance Policy or Pension Fund, (*) and Education Fund (**)), severance pay,Additional Severance Payment, annual vacation, redemption of annual vacation, overtime pay, travel allowance, car, recreation pay (***), sick pay, commissions, incentives, bonuses, options, stock, warranties, benefit plans or programs ,notice period or payment in lieu of notice, deferred compensation payments, expenses, benefits, and reimbursement of any kind and any other payment or benefits or rights whatsoever in connection or arising out of my employment with the Company or termination of my employment or that otherwise might be owed to me by the Company.

In accordance with the termination of my employment at the Company I am entitled to all sums as described in the List of Final Payments, attached to this letter, and the release letters. I accept the payments and the rights described in the List of Final Payments as full, complete and unconditional payment, settlement and satisfaction of any and all obligations of the Company arising out of my employment or the termination of my employment, or that otherwise might be owed to me by the Company.

Upon completion by the Company of the payments and provision of the release letters, all as listed in the attached “List of Final Payments” in connection with my employment with the Company and/or the termination of such employment, neither myself, nor anyone on my behalf, has or will have any claim, demand and/or cause of action, including with respect to my dismissal and/or entitlement to severance pay, whether or not now known, suspected or claimed, which I have ever had, now have, or may claim to have against the Company and/or its affiliates (whether directly or indirectly) pursuant to the Employment Agreement and/or any applicable law or otherwise against Company and/or its parent company, and/or its affiliates and/or anyone on its behalf, including directors, officers, employees, agents, partners, investors, predecessors, successors, heirs, assigns, directors, employees or shareholders or any of their representatives of successors or affiliated corporations or organizations, whether previously or hereinafter affiliated in any manner. Without derogating in any way from the above, I acknowledge that this Release is a “Settlement and Acknowledgement of Discharge” as defined in Section 29 of the Severance Pay Law, 5723 — 1963.

I acknowledge that all of the payments referred to hereunder (including in the Agreement and in the List of Final Payments) are gross amounts and shall be subject to the withholding of all applicable taxes and deductions required by any applicable law.

I acknowledge and agree that the payments and entitlements specified in and the attached “List of Final Payments" are the sole consideration to which I am entitled from the Company (subject to the contingencies set forth in such documents) and that there is no further obligation, financial or otherwise, owing to me by the Company.

* [  ]

** [  ]

*** [  ]

Exhibit A-1

I hereby confirm that I shall continue to comply with the obligations under the Confidentiality Agreement executed by me and the Company and appended to my employment agreement and other undertakings that by their nature survive my employment with the Company. Without limiting the generality of the foregoing, I undertake to maintain the terms of this Release in strict confidence.

I expressly waive any right or claim of right to assert hereafter that any claim, demand, obligation and/or cause of action has, through ignorance, oversight or error, been omitted from the terms of this Release. I make this waiver with full knowledge of my and with specific intent to release both my known and unknown claims. I understand and acknowledge the significance and consequence of this Release and expressly agrees that this Release shall be given full force and effect according to each and all of its express terms and provisions, including those relating to unknown and unsuspected claims, demands, obligations and causes of action specified herein.

Except as otherwise set forth in this Release, I hereby release, acquit and forever discharge the Company, its parents and subsidiaries, and their officers, directors, agents, servants, employees, shareholders, successors, assigns and affiliates, of and from any and all claims, liabilities, demands, causes of action, costs, expenses, attorneys’ fees, damages, indemnities and obligations of every kind and nature, in law, equity, or otherwise, known and unknown, suspected and unsuspected, disclosed and undisclosed (other than any claim for indemnification I may have as a result of any third party action against me based on my employment with the Company), arising out of or in any way related to agreements, events, acts or conduct at any time prior to the date I execute this Release, including, but not limited to: all such claims and demands directly or indirectly arising out of or in any way connected with my employment with the Company or the termination of that employment, including but not limited to, with respect to salary, wages, back wages, contributions to managers insurance (*) and education fund (**), severance pay, annual vacation, overtime pay, travel allowance, recreation pay (***), sick pay, commissions, incentives, bonuses, options, notice period or payment in lieu of notice, deferred compensation payments, expenses, benefits, and reimbursement of any kind and any other payment or benefits or rights whatsoever in connection with my employment with the Company or termination of my employment or that otherwise might be owed to me by the Company; claims of intentional and negligent infliction of emotional distress, any and all tort claims for personal injury; claims pursuant to any federal, state or local law or cause of action including tort law; contract law; statutory law; common law; wrongful discharge; discrimination; fraud; defamation; emotional distress; and breach of the implied covenant of good faith and fair dealing; provided, however, that nothing in this paragraph shall be construed in any way to release the Company from (i) the payments and benefits under Section 2 of my Agreement, (ii) to benefits described in the List of Final Payments, (iii) its obligation to indemnify me pursuant to the Company’s indemnification obligation pursuant to agreement or applicable law, (iv) to any rights or benefits that may not be waived pursuant to applicable law, including, without limitation, any right to unemployment insurance benefits, or (v) to my right to communicate directly with, cooperate with, or provide information to, any federal, state or local government regulator.

Exhibit A-2

I acknowledge that I have read this Release carefully and completely understand each of the terms of this Release. I acknowledge that the undertakings contained in this Release are irrevocable and the Company and its representatives and successors are relying upon my undertakings. I declare that I am fully aware of my rights under law and that this waiver is signed by me upon my own free will after I was given the opportunity to receive any and all explanations regarding my rights to my full satisfaction, and to check all my accounts with the Company and after I have examined all my rights against the Company. I further acknowledge that I have been afforded sufficient time to understand the terms and effects of this Release, and that the agreements and obligations herein are made voluntarily, knowingly and without duress, and that neither the Company nor its agents or representatives have made any representations inconsistent with the provisions of this Release.

[NAME OF EXECUTIVE]

Date:    

Exhibit A-3

LIST OF FINAL PAYMENTS

On or subsequent to the date of termination of your employment with the Company (the “Termination Date”), the Company shall pay and/or release to you the following:

1.    Last Monthly Salary:

A gross sum for Salary through Termination Date.

2.    Severance Pay: (gross)

Release of all amount accumulated in your managers insurance policy and/or pension fund shall be on account of your statutory severance pay entitlement, and the Company will complete payment of the statutory severance entitlement. [Only in the event that such completion of the statutory severance payment is required]

3.    Vacation Days:

A gross payment for _________accrued and unused vacation days - NIS____________

4.    Recuperation Pay (d’mei havra’ah):

A gross payment for _____ unpaid d’mei havra’ah due as of the Termination Date - NIS __________

5.    Prior Notice of Termination

A gross payment in lieu of prior notice for_______    days, including a payment for social benefits payable thereupon. [If applicable]

6.    Additional Severance Payment

Subject to the terms and conditions of the Agreement - NIS ___________

7.    In addition, the Company shall release the Managers Insurance Policy Pension Fund (severance payment and benefits) and Education Fund (Keren Hishtalmuti) maintained on your behalf by the Company.

Exhibit A-4

EX-10.4

EXHIBIT 10.4

MELLANOX TECHNOLOGIES, LTD.

THIRD AMENDED AND RESTATED GLOBAL SHARE INCENTIVE PLAN (2006)

RESTRICTED SHARE UNIT AWARD GRANT NOTICE AND
RESTRICTED SHARE UNIT AWARD AGREEMENT

FOR ALL PARTICIPANTS (OTHER THAN PARTICIPANTS IN ISRAEL)

Mellanox Technologies, Ltd., a corporation organized under the laws of the State of Israel (the “Company”), pursuant to its Third Amended and Restated Global Share Incentive Plan (2006), including any applicable appendix thereto (the “Plan”), hereby grants to the individual listed below (the “Participant”), an award (the “Award”) of restricted share units (“Restricted Share Units”or“RSUs”). Each Restricted Share Unit represents the right to receive one unrestricted, fully transferable ordinary share of the Company (each a “Share,” collectively “Shares”) upon vesting. This Award is subject to all of the terms and conditions as set forth herein, in the Restricted Share Unit Award Agreement attached hereto as Exhibit A (the “RSU Agreement”), the special provisions for the Participant’s country of residence, if any, attached hereto as Exhibit B, (the “Foreign Appendix” and, together with the RSU Agreement, the “Agreement”) and the Plan, each of which are incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Agreement.

Participant’s Name:	[ ˜ ]
RSU Number:	[ ˜ ]
Grant Date:	[ ˜ ]
Total Number of RSUs:	[ ˜ ]
Vesting Commencement Date:	[ ˜ ]
Vesting Schedule:	[ ˜ ]

By his or her acceptance of the Award through the Company's online acceptance procedure (or by his or her signature and the signature of the Company’s representative below), the Participant agrees to be bound by the terms and conditions of the Plan, the Agreement and this Grant Notice. The Participant has reviewed the Agreement, the Plan and this Grant Notice in their entirety and fully understands all provisions of this Grant Notice, the Agreement, and the Plan. The Participant also agrees that the Company, in its sole discretion, may satisfy any applicable tax withholding obligations in accordance with Section 2.6 of the RSU Agreement by (i) withholding Shares otherwise issuable to the Participant upon vesting of the RSUs, (ii) instructing a broker on the Participant’s behalf to sell Shares otherwise issuable or issued to the Participant upon vesting of the RSUs and submit the proceeds of such sale to the Company, or (iii) using any other method permitted by Section 2.6 of the RSU Agreement or under the Plan. The Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or relating to the RSUs.

If the Participant does not accept or decline the Award before the first vesting period of the grant date stated above or by such other date that may be communicated to the Participant by the Company, the Company will accept the Award on the Participant's behalf and the Participant will be deemed to have accepted the terms and conditions of the Award set forth in the Plan, the Agreement and this Grant Notice. If the

Participant declines the Award, the Award will be cancelled and no benefits from the Award nor any compensation or benefits in lieu of the Award will be provided to the Participant.

MELLANOX TECHNOLOGIES, LTD.:	PARTICIPANT:
By:	By:
Print Name:	Print Name:
Title:
Address:	Address:

EXHIBIT A

TO RESTRICTED SHARE UNIT AWARD GRANT NOTICE

RESTRICTED SHARE UNIT AWARD AGREEMENT

FOR ALL PARTICIPANTS (OTHER THAN PARTICIPANTS IN ISRAEL)

Pursuant to the Restricted Share Unit Award Grant Notice (the “Grant Notice”) and this Restricted Share Unit Award Agreement (the “RSU Agreement”), including any special provisions for the Participant’s country set forth in Exhibit B (the “Foreign Appendix” and, together with the RSU Agreement, the “Agreement”), Mellanox Technologies, Ltd., a corporation organized under the laws of the State of Israel (the “Company”), has granted to the Participant an award (the “Award”) of restricted share units (“Restricted Share Units”or“RSUs”) under the Company’s Third Amended and Restated Global Share Incentive Plan (2006), including any applicable appendix or supplement thereto (the “Plan”).

ARTICLE I

GENERAL

1.1Defined Terms. Wherever the following terms are used in this Agreement they shall have the meanings specified below, unless the context clearly indicates otherwise. Capitalized terms not specifically defined herein shall have the meanings specified in the Plan or the Grant Notice, as applicable.

(a)“Termination of Consultancy” shall mean the time when the engagement of the Participant as a Consultant to the Company or any affiliate thereof is terminated for any reason, with or without cause, including, but not by way of limitation, by resignation, discharge, death or retirement, butexcluding: (i) terminations where there is a simultaneous employment or continuing employment of the Participant by the Company or any affiliate thereof, and (ii) terminations where there is a simultaneous re-establishment of a consulting relationship or continuing consulting relationship between the Participant and the Company or any affiliate thereof. The Administrator, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Consultancy, including, but not by way of limitation, the question of whether a particular leave of absence constitutes a Termination of Consultancy. Notwithstanding any other provision of the Plan, the Company or any affiliate thereof has an absolute and unrestricted right to terminate a Consultant’s service at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in writing.

(b)“Termination of Directorship” shall mean the time when the Participant, if he or she is or becomes a Non-Employee Director, ceases to be a member of the Board of Directors for any reason, including, but not by way of limitation, a termination by resignation, failure of shareholders to approve appointment, failure to be elected, death or retirement. The Board of Directors, in its sole and absolute discretion, shall determine the effect of all matters and questions relating to Termination of Directorship with respect to Non-Employee Directors.

(c)“Termination of Employment” shall mean the time when the employee-employer relationship between the Participant and the Company or any affiliate thereof is terminated for any reason, with or without cause, including, but not by way of limitation, a termination by resignation, discharge, death, disability or retirement; but excluding: (i) terminations where there is a simultaneous reemployment or continuing employment of the Participant by the Company or any affiliate thereof, (ii) terminations where there is a simultaneous establishment of a consulting relationship or continuing consulting relationship

between the Participant and the Company or any affiliate thereof, and (iii) terminations where the Participant simultaneously becomes a Non-Employee Director, whether by appointment or election; for avoidance of doubt, the Participant will participate in the Plan as an employee until the Participant’s appointment to the Board of Directors is approved by the Company’s shareholders. The Administrator, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Employment, including, but not by way of limitation, the question of whether a particular leave of absence constitutes a Termination of Employment.

(d)“Termination of Services” shall mean the Participant’s Termination of Consultancy, Termination of Directorship or Termination of Employment, as applicable.

1.2General. Each Restricted Share Unit shall constitute a non-voting unit of measurement which is deemed for bookkeeping purposes to be equivalent to one Share (subject to adjustment as provided in Section 11.1 of the Plan) solely for purposes of the Plan and this Agreement. The Restricted Share Units shall be used solely as a device for the determination of the payment to eventually be made to the Participant if such Restricted Share Units vest pursuant to Section 2.3 hereof. The Restricted Share Units shall not be treated as property or as a trust fund of any kind.

1.3Incorporation of Terms of Plan. The RSUs are subject to the terms and conditions of the Plan, which is incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control.

ARTICLE II

GRANT OF RESTRICTED SHARE UNITS

2.1    Grant of RSUs. Effective as of the grant date set forth in the Grant Notice (the “Grant Date”), the Company grants to the Participant the Award as set forth in the Grant Notice.

2.2    Company’s Obligation to Pay. Each RSU has a value equal to the fair market value of a Share on the date it becomes vested. Unless and until the RSUs will have vested in the manner set forth in Article II hereof, the Participant will have no right to payment of any such RSUs. Prior to actual payment of any vested RSUs, such RSUs will represent an unsecured obligation of the Company, payable (if at all) only from the general assets of the Company.

2.3    Vesting Schedule. Subject to Section 2.4 hereof and any accelerated vesting provisions in any Executive Severance Benefit Agreement, employment agreement or other agreement between the Participant and the Company, the RSUs awarded by the Grant Notice will vest and become non-forfeitable with respect to the applicable portion thereof according to the vesting schedule set forth on the Grant Notice to which this Agreement is attached (the “Vesting Schedule”), subject to the Participant’s continued employment or service through such dates, as a condition to the vesting of the applicable installment of the RSUs and the rights and benefits under this Agreement. Unless otherwise determined by the Administrator, partial employment or service, even if substantial, during any vesting period will not entitle the Participant to any proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following a Termination of Services as provided in Section 2.4 below or under the Plan.

2.4    Forfeiture, Termination and Cancellation upon Termination of Services. Notwithstanding any contrary provision of this Agreement, upon the Participant’s Termination of Services for any or no reason, the then-unvested RSUs subject to this Agreement will be automatically forfeited, terminated and cancelled as of such date without payment of any consideration by the Company, and the Participant, or the Participant’s

beneficiary or personal representative, as the case may be, shall have no further rights hereunder. For the avoidance of doubt, except as otherwise provided by the Administrator, no RSUs shall vest following the Participant’s Termination of Services.

2.5    Payment after Vesting. As soon as administratively practicable, and, in any event, within sixty (60) days, following the vesting of any Restricted Share Units pursuant to Section 2.3 or Section 3.2, the Company shall deliver to the Participant a number of Shares (either by delivering one or more certificates for such shares or by entering such shares in book entry form, as determined by the Company in its sole discretion) equal to the number of Restricted Share Units subject to this Award that vest on the applicable vesting date, unless such Restricted Share Units terminate prior to the given vesting date pursuant to Section 2.4. Notwithstanding the foregoing, in the event Shares cannot be issued pursuant to Section 2.9(a), (b) or (c) hereof, then the Shares shall be issued pursuant to the preceding sentence as soon as administratively practicable after the Administrator determines that Shares can again be issued in accordance with Sections 2.9(a), (b) and (c) hereof; provided, however, that if the Participant is a U.S. federal taxpayer, any such delay shall apply only to the extent permissible under Section 409A (as defined below).

2.6    Responsibility for Taxes.

(a)The Participant acknowledges that, regardless of any action taken by the Company or, if different, the Participant’s employer (the “Employer”), the ultimate liability for any or all income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items related to the Participant’s participation in the Plan and legally applicable to the Participant (“Tax-Related Items”) is and remains the Participant’s responsibility and may exceed the amount actually withheld by the Company or the Employer. The Participant further acknowledges that the Company and/or the Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Award, including, but not limited to, the grant, vesting or payment of the RSUs, the issuance of Shares, the subsequent sale of Shares and the receipt of any dividends; and (ii) do not commit to and are under no obligation to structure the terms of the RSUs or any aspect of the Award to reduce or eliminate the Participant’s liability for Tax-Related Items or achieve any particular tax result. Further, if the Participant has become subject to Tax-Related Items in more than one jurisdiction, the Participant acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

(b)Prior to any relevant taxable or tax withholding event, as applicable, the Participant will pay or make arrangements satisfactory to the Company and/or the Employer to fulfill all Tax-Related Items. In this regard, the Participant authorizes the Company and/or the Employer, or their respective agents, at their discretion, to satisfy any applicable withholding obligations for Tax-Related Items by one or a combination of the following:

(i)withholding from the Participant’s wages or other cash compensation paid to the Participant by the Company and/or the Employer;

(ii)requiring the Participant to tender a payment in cash, check or wire transfer of the Tax-Related Items to the Company or the Employer;

(iii)withholding from proceeds of the sale of Shares acquired upon payment of the RSUs either through a voluntary sale or through a mandatory sale arranged by the Company (on the Participant’s behalf pursuant to this authorization without further consent);

(iv)withholding Shares to be issued upon payment of the RSUs (“net-share settlement”); provided, however, that if the Participant is a Section 16 officer of the Company under the Exchange Act, then applicable withholding obligations for Tax-Related Items will be settled by withholding Shares in accordance with this subsection (iv) or, alternatively, the Committee (as constituted in accordance with Rule 16b-3 under the Exchange Act)shall establish the method of withholding from alternatives (i)-(iii) herein; and/or

(v)any other method of withholding determined by the Company and permitted by applicable law.

(c)Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or, to the extent permitted under the Plan, other applicable withholding rates, including maximum applicable rates in the Participant’s jurisdiction(s) in which case the Participant will receive a refund of any over-withheld amount in cash and will have no entitlement to the equivalent amount in Shares. If the obligation for Tax-Related Items is satisfied by withholding Shares, for purposes of calculating the Tax-Related Items and determining the number of Shares that have been delivered in accordance with Section 2.5 above, the Participant will be deemed to have been issued the full number of Shares subject to the vested RSUs, notwithstanding that a number of the Shares are held back solely for the purpose of paying the Tax-Related Items.

(d)The Company may refuse to deliver the Shares or the proceeds of the sale of Shares, if the Participant fails to comply with the Participant’s obligations in connection with the Tax-Related Items.

2.7    Section 409A. The RSUs are not intended to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code (together with any Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the date hereof, “Section 409A”). However, notwithstanding any other provision of the Plan, the Grant Notice or this Agreement, if at any time the Participant is a U.S. federal taxpayer and the Administrator determines that the RSUs (or any portion thereof) may be subject to Section 409A, the Administrator shall have the right in its sole discretion (without any obligation to do so or to indemnify the Participant or any other person for failure to do so) to adopt such amendments to the Plan, this Agreement or the Grant Notice or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Administrator determines are necessary or appropriate either for the RSUs to be exempt from the application of Section 409A or to comply with the requirements of Section 409A. Notwithstanding the foregoing, the Company makes no representation that the grant, vesting, or payment of the RSUs provided for under this Agreement will be exempt from or compliant with Section 409A and the Company will have no liability to the Participant or any other party if such grant, vesting or payment of RSUs is not so exempt or compliant or for any action taken by the Company with respect thereto.

2.8    Rights as Shareholder. The holder of the RSUs shall not be, nor have any of the rights or privileges of, a shareholder of the Company, including, without limitation, any dividend rights and voting rights, in respect of the RSUs and any Shares underlying the RSUs and deliverable hereunder unless and until such Shares shall have been actually issued by the Company and held of record by such holder (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 11.1 of the Plan.

2.9    Conditions to Delivery of Shares. Subject to Section 19 of the Plan, the Shares deliverable hereunder, or any portion thereof, may be either previously authorized but unissued Shares or issued Shares which have then been reacquired by the Company. Such Shares shall be fully paid and non-assessable. The Company shall not be required to issue or deliver any Shares deliverable hereunder or portion thereof prior to fulfillment of all of the following conditions:

(a)The admission of such Shares to listing on all stock exchanges on which such Shares are then listed;

(b)The completion of any registration or other qualification of such Shares under any applicable law, rule or regulation, which the Administrator shall, in its absolute discretion, deem necessary or advisable;

(c)The obtaining of any approval or other clearance from any local, state, federal or foreign governmental agency which the Administrator shall, in its absolute discretion, determine to be necessary or advisable;

(d)The receipt by the Company or the Employer of any Tax-Related Items required to be withheld by the Company or any affiliate thereof, as further described in Section 2.6 hereof; and

(e)The lapse of such reasonable period of time following the vesting of any Restricted Share Units as the Administrator may from time to time establish for reasons of administrative convenience.

ARTICLE III

OTHER PROVISIONS

3.1    Administration. The Administrator shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken and all interpretations and determinations made by the Administrator in good faith shall be final and binding upon Participant, the Company and all other interested persons. No member of the Administrator shall not be personally liable for any action, determination or interpretation made in good faith with respect to the Plan, this Agreement or the RSUs.

3.2    Adjustments Upon Specified Events. Provided that the RSUs are not “nonqualified deferred compensation” within the meaning of Section 409A, the Administrator may accelerate payment and vesting of the Restricted Share Units in such circumstances as it, in its sole discretion, may determine. In addition, upon the occurrence of certain events relating to the Shares contemplated by Section 11.1 of the Plan (including, without limitation, an extraordinary cash dividend on such Shares), the Administrator shall make such adjustments the Administrator deems appropriate in the number of Restricted Share Units then outstanding and the number and kind of securities that may be issued in respect of the Restricted Share Units. The Participant acknowledges that the RSUs are subject to modification and termination in certain events as provided in this Agreement and Article 11 and 13 of the Plan.

3.3    Grant is Not Transferable. During the lifetime of the Participant, this grant and the rights and privileges conferred hereby will not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and will not be subject to sale under execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of the RSUs, or any right or privilege conferred hereby, or upon any attempted sale under any execution, attachment or

similar process, the RSUs and the rights and privileges conferred hereby immediately will become null and void. Notwithstanding anything herein to the contrary, this Section 3.3 shall not prevent transfers by will or applicable laws of descent and distribution.

3.4    Binding Agreement. Subject to the limitation on the transferability of the RSUs contained herein, this Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.

3.5    Notices. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company at Corporate_Secretary@mellanox.com or the address given beneath the signature of Company’s authorized officer on the Grant Notice, and any notice to be given to the Participant shall be addressed to the Participant at the address given beneath the Participant’s signature on the Grant Notice. By a notice given pursuant to this Section 3.5, either party may hereafter designate a different address for notices to be given to that party. Any notice which is required to be given to the Participant shall, if the Participant is then deceased, be given to the person entitled to the RSUs by written notice under this Section 3.5. Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service or, in the event of Participants outside of the United States, when deposited with an internationally-recognized courier service with proof of such deposit.

3.6    Titles. Titles provided herein are for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

3.7    Governing Law; Severability. The laws of the State of Israel shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflict of laws. The Participant may only exercise his or her rights in respect of the Plan, this Agreement and these RSUs to the extent that it would be lawful to do so, and the Company would not, in connection with this Agreement, be in breach of the laws of any jurisdiction to which the Participant may be subject. The Participant shall be solely responsible to seek advice as to the laws of any jurisdiction to which he or she may be subject, and participation in the Plan by the Participant shall be on the basis of a warranty by the Participant that the Participant may lawfully so participate without the Participant being in breach of the laws of any such jurisdiction. In addition, the provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

3.8    Conformity to Securities Laws. Participant acknowledges that the Plan and this Agreement are intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the U.S. Securities and Exchange Commission thereunder, any jurisdiction in which the Participant may be subject and state securities laws and regulations, provided, however, that the Company is under no obligation to register or qualify the Shares with any state, federal or foreign securities commission or to seek approval or clearance from any governmental authority for the issuance or sale of the Shares. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the RSUs are granted, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.

3.9    Amendments, Suspension and Termination. To the extent permitted by the Plan, this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time

or from time to time by the Administrator, provided, however, that, except as may otherwise be provided by the Plan and this Agreement, no amendment, modification, suspension or termination of this Agreement shall adversely effect the RSUs in any material way without the prior written consent of the Participant.

3.10    Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth in Sections 3.2 and 3.3 hereof, this Agreement shall be binding upon the Participant and his or her heirs, executors, administrators, successors and assigns.

3.11    Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan or this Agreement, if the Participant is subject to Section 16 of the Exchange Act, the Plan, the RSUs and this Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

3.12    Not a Contract of Employment. Nothing in the Plan or this Agreement shall confer upon the Participant any right to continue in the employ or service of the Company or any affiliate thereof or be interpreted as forming or amending an employment or service contract with the Company or any affiliate thereof and shall not interfere with or restrict in any way the rights of the Company and its affiliates, which rights are hereby expressly reserved, to discharge or terminate the services of the Participant at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in a written agreement between the Company or an affiliate thereof and the Participant.

3.13    Entire Agreement. The Plan, the Grant Notice and this Agreement (including all Exhibits thereto) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and the Participant with respect to the subject matter hereof.

3.14    Limitation on Participant’s Rights. Participation in the Plan confers no rights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Company as to amounts payable and shall not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets. The Participant shall have only the rights of a general unsecured creditor of the Company with respect to amounts credited and benefits payable, if any, with respect to the RSUs, and rights no greater than the right to receive the Shares as a general unsecured creditor with respect to RSUs, as and when payable hereunder.

3.15    Data Privacy.

(a)Data Collection and Usage. The Company and the Employer may collect, process and use certain personal information about the Participant, including, but not limited to, the Participant’s name, home address and telephone number, email address, date of birth, social insurance number, passport or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all Restricted Share Units or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in the Participant’s favor (“Data”), for the purposes of implementing, administering and managing the Plan. The legal basis, where required, for the processing of Data is the Participant’s consent.

(b)Stock Plan Administration Service Providers. The Company transfers Data to E*Trade Corporate Financial Services, Inc. and its affiliated companies (“E*Trade”), an independent

service provider based in the United States, which is assisting the Company with the implementation, administration and management of the Plan. In the future, the Company may select a different service provider and share Data with such other provider serving in a similar manner. The Participant may be asked to agree on separate terms and data processing practices with the service provider, with such agreement being a condition to the ability to participate in the Plan.

(c)International Data Transfers. The Company and its service providers are based in Israel and the United States. The Participant’s country or jurisdiction may have different data privacy laws and protections than Israel and the United States. For example, the European Commission has issued a limited adequacy finding with respect to the United States that applies only to the extent companies register for the EU-U.S. Privacy Shield program. The Company's legal basis, where required, for the transfer of Data is Participant’s consent.

(d)Data Retention. The Company will hold and use the Data only as long as is necessary to implement, administer and manage the Participant’s participation in the Plan, or as required to comply with legal or regulatory obligations, including under tax and security laws.

(e)Voluntariness and Consequences of Consent Denial or Withdrawal. Participation in the Plan is voluntary and the Participant is providing the consents herein on a purely voluntary basis. If the Participant does not consent, or if the Participant later seeks to revoke the Participant’s consent, the Participant’s salary from or employment and career with the Employer will not be affected; the only consequence of refusing or withdrawing the Participant’s consent is that the Company would not be able to grant this Award or other awards to the Participant or administer or maintain such awards.

By accepting the Award and indicating consent via the Company’s online acceptance procedure, the Participant is declaring that he or she agrees with the data processing practices described herein and consents to the collection, processing and use of Data by the Company and the transfer of Data to the recipients mentioned above, including recipients located in countries which do not adduce an adequate level of protection from a European (or other non-U.S.) data protection law perspective, for the purposes described above.

Finally, the Participant understands that the Company may rely on a different legal basis for the processing or transfer of Data in the future and/or request that the Participant provide another data privacy consent form. If applicable and upon request of the Company, the Participant agrees to provide an executed acknowledgement or data privacy consent form to the Employer or the Company (or any other acknowledgements, agreements or consents that may be required by the Employer or the Company) that the Company and/or the Employer may deem necessary to obtain under the data privacy laws in the Participant’s country, either now or in the future. The Participant understands that he or she will not be able to participate in the Plan if he or she fails to execute any such acknowledgement, agreement or consent requested by the Company and/or the Employer.

3.16    Insider Trading Restrictions / Market Abuse Laws. The Participant may be subject to insider trading restrictions and/or market abuse laws in applicable jurisdictions, including, but not limited to, the United States and the Participant’s country, which may affect the Participant’s ability to accept, acquire, sell or otherwise dispose of Shares, rights to Shares (e.g., RSUs) or rights linked to the value of Shares under the Plan during such times as the Participant is considered to have “inside information” regarding the Company (as defined by the laws in the applicable jurisdictions). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. Neither the Company nor any affiliate thereof will be responsible for such

restrictions or liable for the failure on the Participant’s part to know and abide by such restrictions. The Participant should consult with his or her own personal legal advisers to ensure compliance with applicable laws.

3.17    Foreign Asset / Account and Exchange Control Requirements. Depending on the Participant’s country, the Participant may be subject to foreign asset/account and/or exchange control reporting or other requirements which may affect the Participant’s ability to acquire or hold RSUs or Shares under the Plan or cash received from participating in the Plan in a brokerage or bank account outside the Participant’s country. The Participant may be required to report such RSUs, Shares, accounts, assets or transactions to the tax or other authorities in his or her country and/or repatriate funds received in connection with the Plan to the Participant's country within a certain time period or according to certain procedures. The Participant acknowledges that it is his or her responsibility to comply with any applicable requirements, and that the Participant should consult his or her own personal tax and legal advisors to ensure compliance with applicable laws.

3.18    Electronic Delivery, Acceptance and Participation. The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means and the Participant hereby consents to receive such documents by electronic delivery. The Participant agrees that his or her electronic acceptance of the Award through the Company's online acceptance procedure constitutes his or her acceptance of the Award and further agrees to participate in the Plan through an online or electronic system established and maintained by the Company or a third party designated by the Company.

3.19    Imposition of Other Requirements. The Company reserves the right to impose other requirements on the Participant’s participation in the Plan, on the RSUs and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require the Participantto sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.

3.20    Waiver. The Participant acknowledges that a waiver by the Company of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by the Participant or any other Participant.

ARTICLE IV

SPECIAL PROVISIONS FOR RESTRICTED SHARE UNITS GRANTED TO PARTICIPANTS OUTSIDE THE UNITED STATES

4.1    Nature of Grant. In accepting the grant of RSUs, the Participant acknowledges, understands and agrees that:

(a)the Plan is established voluntarily by the Company, it is discretionary in nature, and may be amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan;

(b)the grant of the RSUs is exceptional, voluntary and occasional and does not create any contractual or other right to receive future grants of restricted share units, or benefits in lieu of restricted share units, even if RSUs have been granted in the past;

(c)all decisions with respect to future restricted share units or other grants, if any, will be at the sole discretion of the Company;

(d)the Participant is voluntarily participating in the Plan;

(e)the RSUs and any Shares subject to the RSUs, and the income from and value of same, are not intended to replace any pension rights or compensation;

(f)unless otherwise agreed with the Company, the RSUs and the Shares subject to the RSUs, and the income from and value of same, are not granted as consideration for, or in connection with, the service the Participant may provide as a director of an affiliate;

(g)the RSUs and any Shares subject to the RSUs, and the income from and value of same, are not part of normal or expected compensation for any purpose, including, without limitation, calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, holiday pay, pension or retirement or welfare benefits or similar payments;

(h)the future value of the Shares underlying the RSUs is unknown, indeterminable, and cannot be predicted with certainty;

(i)no claim or entitlement to compensation or damages shall arise from forfeiture of the RSUs resulting from the termination of the Participant’s employment or service relationship (for any reason whatsoever, whether or not later found to be invalid or in breach of employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any);

(j)for purposes of the RSUs, the date of the Participant’s Termination of Services shall be the date the Participant is no longer actively providing services to the Company or any affiliate thereof (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where the Participant is employed or providing services or the terms of Participant’s employment or service agreement, if any), and the Participant’s right to vest in the RSUs under the Plan, if any, will terminate as of such date and will not be extended by any notice period (e.g., the Participant’s period of service would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where Participant is employed or providing services or the terms of Participant’s employment or service agreement, if any). The Administrator shall have the exclusive discretion to determine when the Participant is no longer actively providing services for purposes of the RSUs (including whether the Participant may still be considered to be providing services while on a leave of absence); and

(k)neither the Company, the Employer nor any affiliateshall be liable for any foreign exchange rate fluctuation between the Participant’s local currency and the United States Dollar that may affect the value of the RSUs or of any amounts due to the Participant pursuant to the payment of the RSUs or the subsequent sale of any Shares acquired upon settlement.

4.2Country-Specific Provisions. Notwithstanding any provisions in this Agreement, the grant of Restricted Share Units shall be subject to any special terms and conditions set forth in the Foreign Appendix. Moreover, if the Participant relocates to one of the countries included in the Foreign Appendix, the special terms and conditions for such country will apply to the Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Foreign Appendix constitutes part of this Agreement.

4.3    Language. The Participant acknowledges that he or she is proficient in the English language, or has consulted with an advisor who is sufficiently proficient in English, so as to allow the Participant to understand the terms and conditions of this Agreement. If the Participant has received this Agreement, or any ot

her documents related to the RSUs and/or the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.

*        *        *

EXHIBIT B
TO RESTRICTED SHARE UNIT AWARD GRANT NOTICEFOREIGN APPENDIX - COUNTRY SPECIFIC PROVISIONS

Terms and Conditions

This Exhibit B includes additional terms and conditions that govern the RSUs granted to the Participant under the Plan if the Participant resides and/or works in one of the countries listed below (in alphabetical order according to the English language). Capitalized terms not specifically defined herein shall have the meanings specified in the Plan, the Grant Notice or the RSU Agreement, as applicable.

If the Participant is a citizen or resident of a country other than the one in which he or she is currently working and/or residing, is considered a resident of another country for local law purposes, transfers to another country after the Grant Date or changes employment status during the life of the Award, the Company shall, in its discretion, determine the extent to which the special terms and conditions contained herein shall be applicable to the Participant.

Notifications

This Exhibit B also includes information regarding exchange controls and certain other issues of which the Participant should be aware with respect to the Participant’s participation in the Plan. The information is based on the securities, exchange control and other laws in effect in the respective countries as of April 2018. Such laws are often complex and change frequently. As a result, the Participant should not rely on the information noted herein as the only source of information relating to the consequences of participation in the Plan because the information may be out of date by the time the RSUs vests or the Participant receives Shares or sells Shares acquired under the Plan.

In addition, the information contained in this Exhibit B is general in nature and may not apply to the Participant’s particular situation, and the Company is not in a position to assure the Participant of any particular result. Accordingly, the Participant should seek appropriate professional advice as to how the applicable laws in his or her country may apply to his or her situation.

Finally, if the Participant is a citizen or resident of a country other than the one in which he or she is currently working and/or residing, is considered a resident of another country for local law purposes, transfers to another country after the Grant Date or changes employment status during the life of the Award, the notifications contained herein may not be applicable to the Participant in the same manner.

ARGENTINA

Notifications

Securities Law Information. Neither the RSUs nor the Shares are publicly offered or listed on any stock exchange in Argentina and, as a result, they have not been and will not be registered with the Argentine Securities Commission (Comisión Nacional de Valores or “CNV”). The offer is private and not subject to the supervision of any Argentine governmental authority. Neither this nor any other offering material related to the RSUs nor the underlying Shares may be utilized in connection with any general offering to the public

in Argentina. Argentine residents who acquire RSUs under the Plan do so according to the terms of a private offering made from outside Argentina.

Exchange Control Information. The Participant is responsible for complying with any and all Argentine currency exchange restrictions, approvals and reporting requirements in connection with the RSUs. The Participant should consult with the Participant’s personal legal advisor to ensure compliance with the applicable requirements.

Foreign Asset / Account Reporting Information. Argentine tax residents must report any Shares acquired under the Plan and held on December 31st of each year on their annual tax returns for that year.

AUSTRALIA

Terms and Conditions

Australian Offer Document. Additional details regarding the offer of the RSUs are set forth in the Offer Document for the Offer of Restricted Share Units to Australian Resident Employees.

Tax Information. The Plan is a plan to which Subdivision 83A-C of the Income Tax Assessment Act 1997 (Cth) applies (subject to conditions in the Act).

Notifications

Exchange Control Information. Exchange control reporting is required for cash transactions exceeding A$10,000 and international fund transfers. The Australian bank assisting with the transaction will file the report. If there is no Australian bank involved in the transfer, the Participant will be required to file the report.

CANADA

Terms and Conditions

Nature of Grant. This provision replaces Section 4.1(j) of the RSU Agreement:

For purposes of the RSUs, the date of the Participant’s Termination of Service shall be the date that is the earliest of (i) the date the Participant’s employment or service relationship with the Company or any affiliate thereof is terminated, (ii) the date the Participant receives notice of termination of the Participant’s employment or service relationship, or (iii) the date the Participant is no longer actively providing service to the Company or an affiliate thereof, regardless of any notice period or period of pay in lieu of such notice required under applicable employment laws in the jurisdiction where the Participant is employed or providing services (including, but not limited to statutory law, regulatory law and/or common law) or the terms of the Participant’s employment agreement, if any. The Administrator shall have the exclusive discretion to determine when the Participant is no longer actively providing services for purposes of the RSUs (including whether the Participant may still be considered to be providing services while on a leave of absence).

The following provisions will apply if the Participant is a resident of Quebec:

Data Privacy. The following provision supplements Section 3.15 of the RSU Agreement:

The Participant hereby authorizes the Company and the Company’s representatives to discuss with and obtain all relevant information from all personnel, professional or non-professional, involved in the administration and operation of the Plan. The Participant further authorizes the Company, any affiliate of the Company and E*Trade (or such other stock plan service provider as may be selected by the Company in the future) to disclose and discuss the Plan with their advisors. The Participant further authorizes the Company and any affiliate thereof to record such information and to keep such information in the Participant’s employee file.

Language Consent. The parties acknowledge that it is their express wish that this Agreement, as well as all documents, notices and legal proceedings entered into, given or instituted pursuant hereto or relating directly or indirectly hereto, be drawn up in English.

Consentement Relatif à la Langue. Les parties reconnaissent avoir expressement souhaité que la convention « Agreement » ainsi que tous les documents, avis et procédures judiciaries, éxecutés, donnés ou intentés en vertu de, ou lié, directement ou indirectement à la présente convention, soient rédigés en langue anglaise.

Notifications

Securities Law Information. The Participant is permitted to sell Shares acquired through the Plan through the designated broker appointed under the Plan, if any, provided the resale of Shares acquired under the Plan takes place outside of Canada through the facilities of a stock exchange on which the Shares are listed. The Shares are currently listed on the Nasdaq Global Select Market.

Foreign Asset / Account Reporting Information. Foreign property, including Shares and rights to receive Shares (e.g., RSUs), must be reported annually by Participant on a Form T1135 (Foreign Income Verification Statement) if the total cost of the Participant’s foreign specified property exceeds C$100,000 at any time during the year. Thus, RSUs must be reported - generally at a nil cost - if the C$100,000 cost threshold is exceeded because of other foreign specified property the Participant holds. When Shares are acquired, their cost generally is the adjusted cost base (“ACB”) of the Shares. The ACB would ordinarily equal the fair market value of the Shares at the time of acquisition, but if other Shares are also owned, this ACB may have to be averaged with the ACB of the other Shares. The Participant is solely responsible for complying with any applicable reporting obligations and should consult his or her personal tax advisor to ensure compliance with such obligations.

CHINA

Terms and Conditions

Payment After Vesting. The following provision supplements Section 2.5 of the RSU Agreement:

The Participant acknowledges and agrees that, to facilitate compliance with applicable laws and regulations in China, the Company shall require that all Shares issued to the Participant upon vesting of the RSUs be sold (either immediately after vesting and payment, or upon Participant’s Termination of Services, or within any other time frame as the Company determines to be necessary or advisable to comply or facilitate compliance with local regulatory requirements). Alternatively, if the Company decides, in its sole discretion, to allow the Participant to hold Shares issuable to the Participant upon vesting of the RSUs, the Participant acknowledges and agrees that the Company may require that Participant hold any such Shares in an account with the Company’s designated broker until such Shares sold. The Participant further agrees that the Company

is authorized to instruct its designated broker to assist with the mandatory sale of such Shares (on the Participant’s behalf pursuant to this authorization) and the Participant expressly authorizes the Company’s designated broker to complete the sale of such Shares. The Participant agrees to sign any other consent as may be required by the Company or its designated broker to facilitate the sale of the Shares. The Participant acknowledges that the Company’s designated broker is under no obligation to arrange for the sale of the Shares at any particular price. Upon the sale of the Shares, the cash proceeds from the sale of the Shares, less any brokerage fees or commissions and Tax-Related Items, shall be paid to the Participant in accordance with exchange control requirements. The Participant acknowledges that the Participant is not aware of any material nonpublic information with respect to the Company or any securities of the Company as of the date of this Agreement.

Exchange Control Requirements. The Participant understands and agrees that, pursuant to local exchange control requirements, the cash proceeds from the sale of the Shares issued upon the settlement of the RSUs (and any other funds related to participation in the Plan) must be repatriated to China. The Participant further understands that, under applicable laws, such repatriation of the Participant’s cash proceeds and other funds may need to be effectuated through a special exchange control account established by the Company or an affiliate thereof, and the Participant hereby consents and agrees that any proceeds from the sale of any Shares or other funds the Participant acquires may be transferred to such special account prior to being delivered to the Participant.

The Participant also understands that the Company will deliver the funds to the Participant as soon as possible, but there may be delays in distributing the funds to the Participant due to exchange control requirements in China. Proceeds may be paid to the Participant in U.S. dollars or local currency at the Company’s discretion. If the proceeds are paid to the Participant in U.S. dollars, the Participant will be required to set up a U.S. dollar bank account in China so that the proceeds may be deposited into this account. If the proceeds are paid to the Participant in local currency, the Company is under no obligation to secure any particular exchange conversion rate and the Company may face delays in converting the proceeds to local currency due to exchange control restrictions. The Participant also understands and agrees that the Company is not responsible for any currency fluctuation that may occur between the date the Shares are sold and the date the cash proceeds are distributed to the Participant.

The Participant further agrees to comply with any other requirements that may be imposed by the Company in the future in order to facilitate compliance with exchange control requirements in China.

CZECH REPUBLIC

Notifications

Exchange Control Information. The Participant may be required to fulfill certain notification duties in relation to the RSUs and the opening and maintenance of a foreign account, including reporting foreign financial assets with a value of CZK 200,000,000 or more. The Participant should consult his or her personal legal advisor to ensure compliance with the applicable requirements.

DENMARK

Terms and Conditions

Stock Option Act. The Participant acknowledges that he or she has received an Employer Statement in Danish which sets forth additional terms that will apply to the RSUs, to the extent that the Danish Stock Option Act applies to the RSUs.

Notifications

Foreign Asset / Account Reporting Information.  The Participant must complete a “Declaration V” form in connection with the deposit of any securities (including Shares acquired under the Plan) into a bank or brokerage account outside Denmark.  The form is available at the website of the Danish Tax Authorities.  In connection with filing Declaration V to the Danish Tax Authorities, the bank or broker with which the securities are deposited (the “depositary”) may sign a statement according to which the depositary undertakes an obligation, without further request, to forward certain information concerning the Shares on an annual basis to the Danish Tax Authorities. However, if the depositary will not agree to sign such a statement, the Participant will be personally responsible for submitting the required information as an attachment to his or her annual tax return. 

It is only necessary to submit a Declaration V form the first time securities are deposited with a depositary outside Denmark.  However, if the securities are transferred to a different depositary or if the Participant begins using a new depositary, a new Declaration V is required. 

Generally, the Declaration V must be submitted by the depositary no later than on February 1 of the year following the calendar year to which the information relates. However, if the Participant is responsible for submitting the information, the Participant must submit the required information as an attachment to his or her annual tax return. 

In addition, if the Participant holds Shares or cash in an account outside Denmark, he or she is required to report the existence of such an account to the Danish Tax Authorities by completing a “Declaration K” form and submitting it to the Danish Tax Authorities following opening of the account.  The form is available at the website of the Danish Tax Authorities.  A separate form must be submitted for each account held outside Denmark that holds Shares or cash which are taxable in Denmark. The Declaration K requirement is in addition to the Declaration V requirement discussed above. The Participant should consult with his or her personal legal advisor to ensure compliance with the applicable requirements.

FRANCE

Terms and Conditions

Type of RSUs. The RSUs are not intended to qualify for specific tax or social security treatment in France.

Language Consent. By accepting the grant of the RSUs, the Participant confirms having read and understood the documents related to the grant (the Grant Notice, the Agreement and the Plan), which were provided in the English language.  The Participant accepts the terms of those documents accordingly.

Consentement Relatif à la Langue.  En acceptant l'attribution du droit sur des actions assujetti à des restrictions (“RSUs”), le Participant confirme avoir lu et compris les documents relatifs à l'attribution (l'Avis de l'Attribution, le Contrat et le Plan) qui ont été fournis en langue anglaise. Le Participant‎ accepte les dispositions de ces documents en connaissance de cause.‎

Notifications

Foreign Asset / Account Reporting Information. French residents may hold Shares acquired under the Plan outside France, provided they declare all foreign accounts, whether open, current, or closed, in the their income tax return.

GERMANY

Notifications

Exchange Control Information.  Cross-border payments in excess of €12,500 (including transactions made in connection with the sale of securities) must be reported monthly to the German Federal Bank (Bundesbank). If the Participant is a German resident and he or she makes or receives a payment in excess of this amount in connection with the Participant’s participation in the Plan, the Participant must report the payment to Bundesbank electronically using the “General Statistics Reporting Portal” (“Allgemeines Meldeportal Statistik”) available via Bundesbank’s website (www.bundesbank.de).

INDIA

Notifications

Exchange Control Information. The Participant must repatriate the proceeds from the sale of Shares to India within 90 days of receipt and any dividends received in relation to the Shares within 180 days of receipt, or within such time as prescribed under applicable Indian exchange control laws as may be amended from time to time. The Participant must obtain a foreign inward remittance certificate (“FIRC”) from the bank where the Participant deposits the foreign currency and maintain the FIRC as evidence of the repatriation of funds in the event the Reserve Bank of India or the Company or an affiliate thereof requests proof of repatriation. The Participant should consult with his or her personal legal advisor to ensure compliance with the applicable requirements.

Foreign Asset / Account Reporting Information. The Participant is required to declare foreign bank accounts and any foreign financial assets (including Shares) in his or her annual tax return. It is the Participant’s responsibility to comply with this reporting obligation and the Participant should consult with his or her personal tax advisor in this regard.

INDONESIA

Terms and Conditions

Language Consent and Information.A translation of the documents relating to this grant (i.e., the Plan and the Agreement) into Bahasa Indonesia can be provided to the Participant upon request to the Company at shareholderservices@mellanox.com.  By accepting the grant of RSUs, the Participant (i) confirms having read and understood the documents relating to this grant (i.e., the Grant Notice, the Agreement and the Plan) which were provided in the English language, (ii) accepts the terms of those documents accordingly, and (iii) agrees not to challenge the validity of this document based on Law No. 24 of 2009 on National Flag, Language, Coat of Arms and National Anthem or the implementing Presidential Regulation (when issued).

Notifications

Exchange Control Information. Indonesian residents must provide Bank Indonesia with information on foreign exchange activities (e.g., remittance of proceeds from the sale of Shares into Indonesia) via a monthly report submitted online through Bank Indonesia’s website. The report is due no later than the 15th day of the month following the month in which the activity occurred.

In addition, when proceeds from the sale of Shares are remitted into Indonesia, a statistical reporting requirement will apply and the Indonesian bank executing the transaction may request information from the Participant and the Participant will be obliged to provide such information so that the bank can fulfill this reporting requirement to Bank Indonesia. 

ITALY

Terms and Conditions

Data Privacy. This provision replaces Section 3.15 of the RSU Agreement:

Pursuant to Section 13 of the Legislative Decree no. 196/2003, the Participant understands that the Employer, the Company or any affiliate thereof may hold and process certain personal information about the Participant, including the Participant’s name, home address and telephone number, email address, date of birth, social insurance number, passport or other identification number (e.g., resident registration number), salary, nationality, job title, any shares of stock or directorships that the Participant holds in the Company, details of all RSUs or any other entitlement to shares of stock awarded, awarded, canceled, exercised, vested, unvested or outstanding in the Participant’s favor (“Data”), for the exclusive purpose of implementing, administering and managing the Participant’s participation in the Plan.

The Participant also understands that providing the Company with Data is necessary for the performance of the Plan and that the Participant’s refusal to provide Data would make it impossible for the Company to perform its contractual obligations and may affect the Participant’s ability to participate in the Plan. The Controller of personal data processing is Mellanox Technologies, Ltd., with its principal operating offices at Beit Mellanox, Yokneam, Israel 20692, and its representative in Italy is Mellanox Technologies UK Limited, with its office at 37 Broadhurst Gardens, London, NW6 3QT..

The Participant understands that Data will not be publicized, but it may be transferred to banks, other financial institutions or brokers involved in the management and administration of the Plan, including, but not limited to, E*Trade Corporate Financial Services, Inc. and its affiliated companies (“E*Trade”). The Participant further understands that the Company and any affiliate thereof will transfer Data amongst themselves as necessary for the purpose of implementation, administration and management of the Participant’s participation in the Plan, and that the Company and/or any affiliate may each further transfer Data to third parties assisting the Company in the implementation, administration and management of the Plan, including any requisite transfer to E*Trade or another third party with whom the Participant may elect to deposit any Shares acquired under the Plan. Such recipients may receive, possess, use, retain and transfer the Data in electronic or other form, for the purposes of implementing, administering and managing the Participant’s participation in the Plan. The Participant understands that these recipients may be located in the European Economic Area, or elsewhere, such as the United States. Should the Company exercise its discretion in suspending all necessary legal obligations connected with the management and administration of the Plan, the Participant understands that the Company will delete

the Participant’s Data as soon as it has accomplished all the necessary legal obligations connected with the management and administration of the Plan. In any event, Data will be stored only for the time needed to fulfill the purposes mentioned above.

The Participant understands that Data processing related to the purposes specified above shall take place under automated or non-automated conditions, anonymously when possible, that comply with the purposes for which Data are collected and with confidentiality and security provisions as set forth by applicable laws and regulations, with specific reference to Legislative Decree no. 196/2003.

The processing activity, including communication, the transfer of the Participant’s Data abroad, including outside the European Economic Area, as herein specified and pursuant to applicable laws and regulations, does not require the Participant’s consent thereto as the processing is necessary to performance of contractual obligations related to implementation, administration and management of the Plan, which represents the legal basis for the processing. The Participant understands that, pursuant to Section 7 of the Legislative Decree no. 196/2003, the Participant has the right to, including but not limited to, access, delete, update, erase, ask for rectification of the Data and cease, for legitimate reason, any processing of the Data. The Participant also understand that he or she has the right to data portability and to lodge a complaint with the Italian supervisory authority. Furthermore, the Participant is aware that the Data will not be used for direct marketing purposes. In addition, the Data provided may be reviewed and questions or complaints can be addressed by contacting shareholderservices@mellanox.com.

Finally, the Participant understands that the Company may rely on a different legal basis for the processing or transfer of Data in the future and/or request that the Participant provide another data privacy consent form. If applicable and upon request of the Company, the Participant agrees to provide an executed acknowledgement or data privacy consent form to the Employer or the Company (or any other acknowledgements, agreements or consents that may be required by the Employer or the Company) that the Company and/or the Employer may deem necessary to obtain under the data privacy laws in the Participant’s country, either now or in the future. The Participant understands that he or she will not be able to participate in the Plan if he or she fails to execute any such acknowledgement, agreement or consent requested by the Company and/or the Employer.

Plan Document Acknowledgment.  By accepting the RSUs, the Participant acknowledges that he or she has received a copy of the Plan, the RSU Agreement and the Grant Notice and has reviewed the Plan, the RSU Agreement, including this Foreign Appendix, and the Grant Notice in their entirety and fully understands and accepts all provisions of the Plan, the RSU Agreement, including this Foreign Appendix, and the Grant Notice.

The Participant further acknowledges that he or she has read and specifically and expressly approves the following provisions of the RSU Agreement: Section 2.1 (Grant or RSUs); Section 2.2 (Company’s Obligation to Pay); Section 2.3 (Vesting Schedule); Section 2.4 (Forfeiture, Termination and Cancellation upon Termination of Services); Section 2.5 (Payment after Vesting); Section 2.6 (Responsibility for Taxes); Section 2.9 (Conditions to Delivery of Shares); Section 3.7 (Governing Law; Severability); Section 3.9(Amendments, Suspension and Termination); Section 3.12 (Not a Contract of Employment); Section 3.18 (Electronic Delivery, Acceptance and Participation); Section 4.1 (Nature of Grant); Section 4.2 (Country-Specific Provisions); Section 4.3 (Language); and the Data Privacy provision above in this Foreign Appendix for Italy.

Notifications

Foreign Asset / Account Reporting Notification. Italian residents who, at any time during the fiscal year, hold foreign financial assets (including cash and Shares) which may generate income taxable in Italy are required to report these assets on their annual tax returns (UNICO Form, RW Schedule) for the year during which the assets are held, or on a special form if no tax return is due. These reporting obligations will also apply to Italian residents who are the beneficial owners of foreign financial assets under Italian money laundering provisions. The Participant should consult his or her personal tax advisor to ensure compliance with applicable reporting obligations.

JAPAN

Notifications

Foreign Asset / Account Reporting Information. Details of any assets held outside Japan (including Shares acquired under the Plan) as of December 31 of each year must be reported to the tax authorities on an annual basis, to the extent such assets have a total net fair market value exceeding ¥50 million. Such report is due by March 15 each year. The Participant should consult with his or her personal tax advisor to determine if the reporting obligation applies to the Participant and whether the Participant will be required to include details of the Participant’s outstanding RSUs, as well as Shares, in the report.

MALAYSIA

Terms and Conditions

Data Privacy. The following provision replaces Section 3.15 of the RSU Agreement in its entirety:

The Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of the Participant’s personal information as described in this Agreement by and among, as applicable, the Employer, and the Company and its affiliates for the exclusive purpose of implementing, administering and managing the Participant’s participation in the Plan. The Participant understands that the Company and the Employer may hold certain personal information about the Participant, including, but not limited to, the Participant’s name, home address and telephone number, e-mail address, date of birth, social insurance number, passport or other identification number (e.g., resident registration number), salary, nationality, job title, residency status, any Shares or directorships held in the Company, details of all RSUs or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding (the “Data”) for the purpose of implementing, administering and managing the Participant’s participation in the Plan. The Data is supplied by the Employer and also by the Participant through information collected in connection with the Agreement and the Plan. The Participant understands that the Data may be transferred to the Company or any of its affiliates, or to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in the Participant’s country or elsewhere, and that the recipient’s country (e.g., the United States) may have different data privacy laws and protections than the Participant’s country. The Participant understands that the Participant may request a list with the names and addresses of any potential recipients of the Data by contacting a human resources representative at shareholderservices@mellanox.com. Peserta dengan ini secara eksplisit dan tanpa sebarang keraguan mengizinkan pengumpulan, penggunaan dan pemindahan, dalam bentuk elektronik atau lain-lain, data peribadi Peserta seperti yang diterangkan dalam Perjanjian oleh dan di antara, seperti mana yang terpakai, Majikan, Syarikat dan syarikat-syarikat sekutunya untuk tujuan ekslusif bagi melaksanakan, mentadbir dan menguruskan penyertaan Peserta dalam Pelan. Peserta memahami bahawa Syarikat dan Majikan mungkin memegang maklumat peribadi tertentu tentang Peserta, termasuk, tetapi tidak terhad kepada, nama Peserta, alamat rumah dan nombor telefon, alamat e-mel, tarikh lahir, nombor insurans sosial, pasport atau nomber pegenalan lain (contohnya nombor pendaftaran residen), gaji, kewarganegaraan, jawatan, status kependudukan, apa-apa Syer atau jawatan pengarah yang dipegang dalam Syarikat, butir-butir semua RSU atau apa-apa hak lain atas Syer yang dianugerahkan, dibatalkan, dilaksanakan, terletak hak, tidak diletak hak ataupun yang belum dijelaskan (“Data”), untuk tujuan melaksanakan, mentadbir dan menguruskan penyertaan Peserta dalam Pelan. Data tersebut dibekalkan oleh pihak yang berkontrak dan juga oleh Peserta melalui maklumat yang dikumpul berkenaan dengan Perjanjian dan Pelan. Peserta memahami bahawa Data mungkin dipindahkan kepada Syarikat atau syarikat-syarikat sekutunya, atau mana-mana pihak ketiga yang membantu dengan pelaksanaan, pentadbiran dan pengurusan Pelan, dimana penerima-penerima ini mungkin berada di negara Peserta atau mana-mana tempat lain, dan bahawa negara penerima (contohnya, Amerika Syarikat) mungkin mempunyai undang-undang privasi data dan perlindungan yang berbeza daripada negara Peserta. Peserta memahami bahawa Peserta boleh meminta satu senarai yang mengandungi nama dan alamat penerima-penerima Data yang berpotensi dengan menghubungi wakil sumber manusia di shareholderservices@mellanox.com.

The Participant authorizes the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purposes of implementing, administering and managing the Participant’s participation in the Plan, including any requisite transfer of such Data to a broker or other third party assisting with the administration of the RSUs under the Plan or with whom Shares acquired pursuant to the RSUs or cash from the sale of such Shares may be deposited. Furthermore, the Participant acknowledges and understands that the transfer of the Data to the Company or any of its affiliates, or to any third parties is necessary for the Participant’s participation in the Plan. The Participant understands that the Data will be held only as long as is necessary to implement, administer and manage the Participant’s participation in the Plan. The Participant understands that the Participant may, at any time, view the Data, request additional information about the storage and processing of the Data, require any necessary amendments to the Data or refuse or withdraw the consents herein by contacting a local human resources representative in writing. Further, the Participant understands that the Participant is providing the consents herein on a purely voluntary basis. If the Participant does not consent, or if the Participant later seeks to revoke the Participant’s consent, the Participant’s employment status or service with the Employer will not be affected; the only consequence of refusing or withdrawing the Participant’s consent is that the Company would not be able to grant the Participant an RSU or other equity awards, or administer or maintain such awards.  Therefore, the Participant understands that refusing or withdrawing the Participant’s consent may affect the Participant’s ability to vest in or realize benefits from this RSU and the Participant’s ability to participate in the Plan. For more information on the consequences of the Participant’s refusal to consent or withdrawal of consent, the Participant understands that the Participant may contact a local human resources representative.  Peserta memberi kuasa kepada penerima-penerima untuk menerima, memiliki, menggunakan, mengekalkan dan memindahkan Data, dalam bentuk elektronik atau lain-lain, semata-mata dengan tujuan untuk melaksanakan, mentadbir dan menguruskan penyertaan Peserta dalam Pelan, termasuklah apa-apa pemindahan Data yang diperlukan kepada broker atau mana-mana pihak ketiga yang membantu dalam pentadbiran RSU di bawah Pelan atau dengan sesiapa Syer yang diperolehi menurut RSU atau wang tunai daripada penjualan Syer tersebut boleh didepositkan. Selanjutnya, Peserta mengakui dan memahami bahawa pemindahan Data kepada Syarikat atau mana-mana syarikat-syarikat sekutunya, atau kepada mana-mana pihak ketiga adalah perlu untuk penyertaan Peserta dalam Pelan.  Peserta memahami bahawa Data hanya akan disimpan untuk tempoh yang perlu bagi melaksanakan, mentadbir, dan menguruskan penyertaan Peserta dalam Pelan. Peserta memahami bahawa Peserta boleh, pada bila-bila masa, melihat Data, meminta maklumat tambahan mengenai penyimpanan dan pemprosesan Data, meminta bahawa pindaan-pindaan dilaksanakan ke atas Data atau menolak atau menarik balik persetujuan dalam ini dengan menghubungi secara bertulis wakil sumber manusia tempatan. Selanjutnya, Peserta memahami bahawa Peserta memberikan persetujuan di sini secara sukarela. Jika Peserta tidak bersetuju, atau jika Peserta kemudian membatalkan persetujuan Peserta, status pekerjaan atau perkhidmatan Peserta dengan Majikan tidak akan terjejas; satu-satunya akibat buruk jika Peserta tidak bersetuju atau menarik balik persetujuannya adalah bahawa Syarikat tidak akan dapat memberikan kepada Peserta RSU atau anugerah-anugerah ekuiti yang lain atau mentadbir atau mengekalkan anugerah tersebut. Oleh itu, Peserta memahami bahawa keengganan atau penarikan balik persetujuan Peserta mungkin akan menjejaskan keupayaan Peserta untuk terletak hak atau merealisasikan manfaat dari RSU dan keupayaan Peserta untuk mengambil bahagian dalam Pelan. Untuk maklumat lanjut mengenai akibat keengganan Peserta untuk memberikan keizinan atau penarikan balik keizinan, Peserta memahami bahawa Peserta boleh menghubungi wakil sumber manusia tempatan yang dinyatakan di atas.

Notifications

Director Notification Information. If the Participant is a director of an affiliate of the Company in Malaysia, the Participant is subject to certain notification requirements under the Malaysian Companies Act. Among these requirements is an obligation to notify the Malaysian affiliate in writing when the Participant receives or disposes of an interest in the Company (e.g., RSUs, Shares). These notifications must be made within 14 days of acquiring or disposing of any interest in the Company.

NETHERLANDS

There are no country-specific provisions.

NORWAY

There are no country-specific provisions.

PALESTINIAN AUTHORITY

There are no country-specific provisions.

RUSSIA

Notifications

Securities Law Information.  Any RSUs granted under the Agreement, the Plan and all other materials the Participant may receive regarding the Participant’s participation in the Plan or any RSUs granted hereunder do not constitute advertising or an offering of securities in Russia. The issuance of Shares under the Plan has not and will not be registered in Russia; therefore, Shares may not be offered or placed in public circulation in Russia. In no event will Shares acquired under the Plan be delivered to the Participant in Russia. The Participant is not permitted to sell any Shares acquired under the Plan directly to a Russian legal entity or resident.

Exchange Control Information.  Under current exchange control regulations in Russia, certain funds must be repatriated to Russia as soon as the Participant intends to use those cash amounts for any purpose, including reinvestment.  Such funds must be initially credited to the Participant through a foreign currency account opened in the Participant’s name at an authorized bank in Russia.  After the funds are initially received in Russia, they may be further remitted to a foreign bank subject to the following limitations: (i) the foreign account may be opened only for individuals; (ii) the foreign account may not be used for business activities; and (iii) the Russian tax authorities must be given notice about the opening/closing of each foreign account within one month of the account opening/closing. 

As an express statutory exception to this requirement, cash dividends paid on Shares can be paid directly into a foreign bank or brokerage account opened with a foreign bank located in Organisation for Economic Cooperation Development (“OECD”) or Financial Action Task Force (“FATF”) countries without first remitting them to a bank account in Russia. Additionally, cash proceeds from the sale of securities can be paid directly into a foreign bank or brokerage account opened with a bank located in an OECD or FATF country, provided that such securities are listed on one of the foreign exchange on the list provided for by

Russian Federal law (e.g., the Nasdaq). Other statutory exceptions may also apply. The Participant should consult his or her personal legal advisor to ensure compliance with applicable requirements.

Foreign Asset / Account Reporting Information. As described above, Russian residents will be required to notify the Russian tax authorities within one month of opening or closing a foreign bank account or of changing any account details. Russian residents are also required to file reports of the transactions in their foreign bank accounts with the Russian tax authorities on an annual basis. In addition, Russian residents are required to report any cash transactions with respect to foreign bank accounts to the Russian tax authorities. The tax authorities can require any supporting documents related to the transactions in a Russian resident’s foreign bank account. The Participant should consult his or her personal tax advisor to ensure compliance with applicable requirements.

SINGAPORE

Notifications

Securities Law Information.  The grant of the RSUs is being made in reliance on the “Qualifying Person” exemption under section 273(1)(f) of the Securities and Futures Act (Cap. 289) (“SFA”). The Plan has not been and will not be lodged or registered as a prospectus with the Monetary Authority of Singapore. The Participant should note that the RSUs are subject to section 257 of the SFA and the RSUs may not be offered or sold, or made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore, unless such offer, sale or invitation is made (i) more than six (6) months from the Grant Date, (ii) pursuant to the exemptions under Part XIII Division 1 Subdivision (4) (other than section 280) of the SFA, or (iii) pursuant to, and in accordance with the conditions of, any other applicable provisions of the SFA.

Chief Executive Officer / Director Notification Information.  If the Participant is the Chief Executive Officer (“CEO”) or a director, associate director or shadow director of a Singapore affiliate of the Company, the Participant is subject to certain notification requirements under the Singapore Companies Act.  Among these requirements is an obligation to notify the Singapore affiliate in writing within two (2) business days of (i) becoming the registered shareholder of or acquiring an interest in the Company or an affiliate (e.g., the RSUs, the Shares or any other Award), (ii) any change in a previously disclosed interest, or (iii) becoming the CEO or a director, associate director or shadow director if such an interest exists at that time.

SOUTH KOREA

Notifications

Foreign Asset / Account Reporting Information. Korean residents must declare all foreign financial accounts (e.g., non-Korean bank accounts, brokerage accounts) to the Korean tax authority and file a report with respect to such accounts in June of the immediately following year if the monthly balance of such accounts exceeds KRW 1 billion (or an equivalent amount in foreign currency) on any month-end date during a calendar year.

SPAIN

Terms & Conditions

Nature of Grant.  The following provision supplements Section 4.1 of the RSU Agreement:

In accepting the grant of RSUs, the Participant consents to participation in the Plan and acknowledges having received a copy of the Plan.

The Participant understands that the Company has unilaterally, gratuitously and in its sole discretion decided to grant RSUs under the Plan to individuals who may be eligible to receive an Award under the Plan. This decision is a limited decision that is entered into upon the express assumption and condition that any grant will not bind the Company or any affiliate other than as expressly set forth in this Agreement. Consequently, the Participant understands that the RSUs are granted on the assumption and condition that the RSUs and any Shares issued upon settlement of the RSUs are not a part of any employment or service contract with the Employer and shall not be considered a mandatory benefit, salary for any purpose (including severance compensation) or any other right whatsoever.

Further, the Participant understands and agrees that the unvested RSUs will be cancelled immediately without entitlement to any Shares underlying the RSUs if the Participant’s service is terminated for any reason, including, but not limited to: resignation, retirement, disciplinary dismissal adjudged to be with cause, disciplinary dismissal adjudged or recognized to be without cause (i.e., subject to a “despido improcedente”), material modification of the terms of employment under Article 41 of the Workers’ Statute, relocation under Article 40 of the Workers’ Statute, Article 50 of the Workers’ Statute, or under Article 10.3 of Royal Decree 1382/1985.

In addition, the Participant understands that this grant would not be made to the Participant but for the assumptions and conditions referred to above; thus, the Participant acknowledges and freely accepts that, should any or all of the assumptions be mistaken or should any of the conditions not be met for any reason, then any grant of, or right to, the RSUs shall be null and void.

Notifications

Securities Law Information. No “offer of securities to the public,” as defined under Spanish law, has taken place or will take place in the Spanish territory in connection with the grant of RSUs under the Plan. Neither the Plan nor the Agreement have been nor will they be registered with the Comisión Nacional del Mercado de Valores (Spanish Securities Exchange Commission), and they do not constitute a public offering prospectus.

Exchange Control Information. The Participant must declare the acquisition, ownership and disposition of Shares to the Spanish Dirección General de Comercio Inversiones (the “DGCI”) of the Ministry of Economy and Competitiveness on a Form D-6.  Generally, the declaration must be made in January for Shares owned as of December 31 of the prior year and/or Shares acquired or disposed of during the prior year; however, if the value of Shares acquired or disposed of or the amount of the sale proceeds exceeds €1,502,530 (or if the Participant holds 10% or more of the share capital of the company), the declaration must be filed within one month of the acquisition or disposition, as applicable.    

In addition, the Participant may be required to electronically declare to the Bank of Spain any foreign accounts (including brokerage accounts held abroad), any foreign instruments (including Shares acquired under the Plan), and any transactions with non-Spanish residents (including any payments of shares made pursuant to the Plan), depending on the balances in such accounts together with the value of such instruments as of December 31 of the relevant year, or the volume of transactions with non-Spanish residents during the relevant year.

Foreign Asset / Account Reporting Information. To the extent the Participant holds rights or assets (e.g., cash or Shares held in a bank or brokerage account) outside Spain with a value in excess of €50,000 per type of right or asset as of December 31 each year (or at any time during the year in which the Participant sells or disposes of such right or asset), the Participant is required to report information on such rights and assets on his or her tax return for such year. After such rights or assets are initially reported, the reporting obligation will only apply for subsequent years if the value of any previously-reported rights or assets increases by more than €20,000. The Participant should consult with his or her personal tax advisor to ensure compliance with applicable reporting requirements.

SWEDEN

There are no country-specific provisions.

SWITZERLAND

Notifications

Securities Law Information. The grant of the RSUs and the issuance of any Shares is not intended to be a public offering in Switzerland. Neither this document nor any other materials relating to the RSUs constitute a prospectus as such term is understood pursuant to article 652a of the Swiss Code of Obligations, and neither this document nor any other materials relating to the RSUs may be publicly distributed nor otherwise made publicly available in Switzerland. Neither this document nor any other offering or marketing material relating to the RSUs have been or will be filed with, or approved or supervised by, any Swiss regulatory authority (in particular, the Swiss Financial Market Supervisory Authority (FINMA)).

TAIWAN

Notifications

Exchange Control Information.  Taiwan residents may acquire and remit foreign currency (including proceeds from the sale of Shares) into and out of Taiwan up to US$5,000,000 per year.  If the transaction amount is TWD$500,000 or more in a single transaction, the Participant must submit a foreign exchange transaction form and also provide supporting documentation to the satisfaction of the remitting bank. 

If the transaction amount is US$500,000 or more, the Participant may be required to provide additional supporting documentation (including the contracts for such transaction, approval letter, etc.) to the satisfaction of the remitting bank.  The Participant should consult with his or her personal advisor to ensure compliance with applicable exchange control laws in Taiwan.

THAILAND

Notifications

Exchange Control Information. If the Participant realizes US$50,000 or more in a single transaction from the sale of Shares acquired under the Plan, the Participant must immediately repatriate the cash proceeds to Thailand and either convert such proceeds into Thai Baht or deposit the proceeds into a foreign currency account opened with any commercial bank in Thailand within 360 days of repatriation.  Further, for repatriated proceeds of US$50,000 or more, the Participant must provide details of the transaction (i.e., identification information and purpose of the transaction) to the receiving bank.  If the Participant fails to comply with these obligations, the Participant may be subject to penalties assessed by the Bank of Thailand.  The Participant should consult with his or her person advisor before taking action with respect to remittance of proceeds from the sale of Shares into Thailand.  The Participant is responsible for ensuring compliance with all exchange control laws in Thailand.

TURKEY

Notifications

Securities Law Information. The sale of Shares acquired under the Plan is not permitted within Turkey. Shares are currently traded on the Nasdaq Global Select Market in the United States and Shares may be sold on this market, which is located outside of Turkey.

UKRAINE

Notifications

Exchange Control Information. The Participant is responsible for complying with all applicable exchange control regulations in Ukraine, including any placement and investment license requirement that may apply to participation in the Plan. The Participant should consult with his or her personal legal advisor to ensure compliance with the applicable requirements.

UNITED KINGDOM

Terms and Conditions

Responsibility for Taxes. The following provision supplements Section 2.6 of the RSU Agreement:

Without limitation to Section 2.6 of the Agreement, the Participant agrees that the Participant is liable for all Tax-Related Items and hereby covenants to pay all such Tax-Related Items as and when requested by the Company or any affiliate or by Her Majesty's Revenue and Customs (“HMRC”) (or any other tax authority or any other relevant authority). The Participant also agrees to indemnify and keep indemnified the Company and any affiliate against any Tax-Related Items that they are required to pay or withhold on the Participant’s behalf or have paid or will pay to HMRC (or any other tax authority or any other relevant authority).

Notwithstanding the foregoing, if the Participant is a director or executive officer of the Company (within the meaning of Section 13(k) of the Exchange Act), the terms of the immediately foregoing provision will not apply. In such case, if the amount of any income tax due is not collected from or paid by the Participant within 90 days of the end of the U.K. tax year in which an event giving rise to the indemnification described above occurs, the amount of any uncollected income taxes may constitute a benefit to the Participant on which additional income tax and national insurance contributions (“NICs”) may be payable. The Participant will be responsible for reporting and paying any income tax due on this additional benefit directly to HMRC under the self-assessment regime and for paying to the Company or the Employer, as applicable, any employee NICs due on this additional benefit.

EX-10.5

EXHIBIT 10.5

MELLANOX TECHNOLOGIES, LTD.

THIRD AMENDED AND RESTATED GLOBAL SHARE INCENTIVE PLAN (2006)

RESTRICTED SHARE UNIT AWARD GRANT NOTICE AND
RESTRICTED SHARE UNIT AWARD AGREEMENTFOR PARTICIPANTS IN ISRAEL

Mellanox Technologies, Ltd., a corporation organized under the laws of the State of Israel (the “Company”), pursuant to its Third Amended and Restated Global Share Incentive Plan (2006) and the appendix thereto setting forth the additional terms applicable to Participants who are Israeli Taxpayers (collectively referred to as the “Plan,” except where the context otherwise requires), hereby grants to the individual listed below (the “Participant”), an award (the “Award”) of restricted share units (“Restricted Share Units”or“RSUs”). Each RSU represents the right to receive one unrestricted, fully transferable ordinary share of the Company (each a “Share,” collectively “Shares”) upon vesting. This Award is subject to all of the terms and conditions as set forth herein, in the Restricted Share Unit Award Agreement attached hereto as Exhibit A (the “Agreement”) and the Plan, each of which are incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Agreement.

Participant’s Name:	[ ˜ ]
RSU Number:	[ ˜ ]
Grant Date:	[ ˜ ]
Total Number of RSUs:	[ ˜ ]
Vesting Commencement Date:	[ ˜ ]
Type of RSUs:	102 Capital Gains Track
Vesting Schedule:	[ ˜ ]

By his or her acceptance of the Award through the Company's online acceptance procedure (or by his or her signature and the signature of the Company’s representative below), the Participant agrees to be bound by the terms and conditions of the Plan, the Agreement and this Grant Notice. The Participant has reviewed the Agreement, the Plan and this Grant Notice in their entirety and fully understands all provisions of this Grant Notice, the Agreement and the Plan. The Participant also agrees that the Company, in its sole discretion, may satisfy any applicable tax withholding obligations in accordance with Section 2.6 of the Agreement by (i) withholding Shares otherwise issuable to the Participant upon vesting of the RSUs, (ii) instructing a broker on the Participant’s behalf to sell Shares otherwise issuable or issued to the Participant upon vesting of the RSUs and submit the proceeds of such sale to the Company, or (iii) using any other method permitted by Section 2.6 of the Agreement or the Plan. The Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or relating to the RSUs.

The Participant and the Company further agree that, provided the Participant is an Eligible 102 Participant, the RSUs are intended to be granted under and governed by Section 102(b)(2) and 102(b)(3) of the Income Tax Ordinance (New Version) – 1961 and the Rules promulgated in connection therewith (the “ITO”), and the Trust Agreement between the Company and the Trustee, a copy of which has been provided

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to the Participant or made available for his/her review. Furthermore, the Participant agrees that the RSUs and underlying Shares will be issued to the Trustee to hold on the Participant’s behalf, pursuant to the terms of the ITO, the Rules and the Trust Agreement. The Participant confirms that he or she is familiar with the terms and provisions of Section 102 of the ITO, particularly the Capital Gains Track described in subsection (b)(2) and (b)(3) thereof, and agrees that he or she will not require the Trustee to release the RSUs or Shares to the Participant, or to sell the Shares to a third party, during the Required Holding Period, unless permitted to do so by applicable law.

If the Participant does not accept or decline the Award within 90 days of the grant date stated above or by such other date that may be communicated to the Participant by the Company. If the Participant declines the Award, the Award will be cancelled and no benefits from the Award nor any compensation or benefits in lieu of the Award will be provided to the Participant.

MELLANOX TECHNOLOGIES, LTD.:	PARTICIPANT:
By:	By:
Print Name:	Print Name:
Title:
Address:	Address:

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EXHIBIT A

TO RESTRICTED SHARE UNIT AWARD GRANT NOTICE

RESTRICTED SHARE UNIT AWARD AGREEMENT

FOR PARTICIPANTS IN ISRAEL

Pursuant to the Restricted Share Unit Award Grant Notice (the “Grant Notice”) to which this Restricted Share Unit Award Agreement (the “Agreement”) is attached, Mellanox Technologies, Ltd., a corporation organized under the laws of the State of Israel (the “Company”), has granted to Participant an award (the “Award”) of restricted share units (“Restricted Share Units”or“RSUs”) under the Company’s Third Amended and Restated Global Share Incentive Plan (2006) and the appendix thereto setting forth the additional terms applicable to Participants who are Israeli Taxpayers (collectively referred to herein as the “Plan,” unless context otherwise requires).

ARTICLE I

GENERAL

1.1Defined Terms. Wherever the following terms are used in this Agreement they shall have the meanings specified below, unless the context clearly indicates otherwise. Capitalized terms not specifically defined herein shall have the meanings specified in the Plan or the Grant Notice, as applicable.

(a)     “Termination of Consultancy” shall mean the time when the engagement of the Participant as a Consultant to the Company or any affiliate thereof is terminated for any reason, with or without cause, including, but not by way of limitation, by resignation, discharge, death or retirement, but excluding: (i) terminations where there is a simultaneous employment or continuing employment of the Participant by the Company or any affiliate thereof, and (ii) terminations where there is a simultaneous re-establishment of a consulting relationship or continuing consulting relationship between the Participant and the Company or any affiliate thereof. The Administrator, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Consultancy, including, but not by way of limitation, the question of whether a particular leave of absence constitutes a Termination of Consultancy. Notwithstanding any other provision of the Plan, the Company or any affiliate thereof has an absolute and unrestricted right to terminate a Consultant’s service at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in writing.

(b)    “Termination of Directorship” shall mean the time when the Participant, if he or she is or becomes a Non-Employee Director, ceases to be a member of the Board of Directors for any reason, including, but not by way of limitation, a termination by resignation, failure of shareholders to approve appointment, failure to be elected, death or retirement. The Board of Directors, in its sole and absolute discretion, shall determine the effect of all matters and questions relating to Termination of Directorship with respect to Non-Employee Directors.

(c)    “Termination of Employment” shall mean the time when the employee-employer relationship between the Participant and the Company or any affiliate thereof is terminated for any reason, with or without cause, including, but not by way of limitation, a termination by resignation, discharge, death, disability or retirement; but excluding: (i) terminations where there is a simultaneous reemployment or continuing employment of the Participant by the Company or any affiliate thereof, (ii) terminations where there is a simultaneous establishment of a consulting relationship or continuing consulting relationship

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between the Participant and the Company or any affiliate thereof, and (iii) terminations where the Participant simultaneously becomes or previously is appointed or elected as a Non-Employee Director. The Administrator, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Employment, including, but not by way of limitation, the question of whether a particular leave of absence constitutes a Termination of Employment.

(d)    “Termination of Services” shall mean the Participant’s Termination of Consultancy, Termination of Directorship or Termination of Employment, as applicable.

1.2General. Each Restricted Share Unit shall constitute a non-voting unit of measurement which is deemed for bookkeeping purposes to be equivalent to one Share (subject to adjustment as provided in Section 11.1 of the Plan) solely for purposes of the Plan and this Agreement. The Restricted Share Units shall be used solely as a device for the determination of the payment to eventually be made to the Participant if such Restricted Share Units vest pursuant to Section 2.3 hereof. The Restricted Share Units shall not be treated as property or as a trust fund of any kind.

1.3Incorporation of Terms of Plan. The RSUs are subject to the terms and conditions of the Plan and the Trust Agreement, entered into between the Company and the Trustee, which are incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control.

ARTICLE II

GRANT OF RESTRICTED SHARE UNITS

2.1    Grant of RSUs; Compliance with Section 102.

(a)    Effective as of the grant date set forth in the Grant Notice (the “Grant Date”), the Company grants to the Participant the Award as set forth in the Grant Notice.

(b)    If the Award is a 102 Trustee Grant granted to an Eligible 102 Participant, the RSUs will be registered in the name of the Trustee as required by law to qualify under Section 102, for the benefit of the Participant. The Participant shall comply with the ITO, the Rules, and the terms and conditions of the Trust Agreement entered into between the Company and the Trustee. The Trustee will hold the RSUs or the Shares to be issued upon vesting of the RSUs for at least the Required Holding Period, as set forth in the Plan. The Participant hereby undertakes to release the Trustee from any liability in respect of any action or decision duly taken andbona fideexecuted in relation to the Plan, or any RSU granted to him thereunder. The Participant hereby confirms that he shall execute any and all documents which the Company or the Trustee may reasonably determine to be necessary in order to comply with the ITO and particularly the Rules.

2.2    Company’s Obligation to Pay. Each RSU has a value equal to the fair market value of a Share on the date it becomes vested. Unless and until the RSUs will have vested in the manner set forth in Article II hereof, the Participant will have no right to payment of any such RSUs. Prior to actual payment of any vested RSUs, such RSUs will represent an unsecured obligation of the Company, payable (if at all) only from the general assets of the Company.

2.3    Vesting Schedule; Notice to Trustee.

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(a)    Subject to Section 2.4 hereof and any accelerated vesting provisions in any Executive Severance Benefit Agreement, employment agreement or other agreement between the Participant and the Company, the RSUs awarded by the Grant Notice will vest and become non-forfeitable with respect to the applicable portion thereof according to the vesting schedule set forth on the Grant Notice to which this Agreement is attached (the “Vesting Schedule”), subject to the Participant’s continued employment or service through such dates, as a condition to the vesting of the applicable installment of the RSUs and the rights and benefits under this Agreement. Unless otherwise determined by the Administrator, partial employment or service, even if substantial, during any vesting period will not entitle the Participant to any proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following a Termination of Services as provided in Section 2.4 below or under the Plan.

(b)    If the Award is a 102 Trustee Grant granted to an Eligible 201 Participant, the Company will notify the Trustee upon vesting of RSUs. The Shares issued upon the vesting of the RSUs shall be issued in the name of the Trustee, and held in trust on the Participant’s behalf by the Trustee, until they are sold or transferred by the Trustee, provided that the Participant first complies with the tax withholding provisions set forth in this Agreement. In the event that the Participant elects to have the Shares transferred to the Participant without selling such Shares, the Participant shall become liable to pay taxes immediately in accordance with the provisions of the ITO

2.4    Forfeiture, Termination and Cancellation upon Termination of Services. Notwithstanding any contrary provision of this Agreement, upon the Participant’s Termination of Services for any or no reason, the then-unvested RSUs subject to this Agreement will be automatically forfeited, terminated and cancelled as of such date without payment of any consideration by the Company, and the Participant, or the Participant’s beneficiary or personal representative, as the case may be, shall have no further rights hereunder. For the avoidance of doubt, except as otherwise provided by the Administrator, no RSUs shall vest following the Participant’s Termination of Services.

2.5    Payment after Vesting. As soon as administratively practicable, and, in any event, within sixty (60) days, following the vesting of any Restricted Share Units pursuant to Section 2.3 or Section 3.2, the Company shall deliver to the Participant a number of Shares (either by delivering one or more certificates for such shares or by entering such shares in book entry form, as determined by the Company in its sole discretion and in accordance with Section 2.3(b)) equal to the number of Restricted Share Units subject to this Award that vest on the applicable vesting date, unless such Restricted Share Units terminate prior to the given vesting date pursuant to Section 2.4. Notwithstanding the foregoing, in the event Shares cannot be issued pursuant to Section 2.9(a), (b) or (c) hereof, then the Shares shall be issued pursuant to the preceding sentence as soon as administratively practicable after the Administrator determines that Shares can again be issued in accordance with Sections 2.9(a), (b) and (c) hereof; provided, however, that if the Participant is a U.S. federal taxpayer, any such delay shall apply only to the extent permissible under Section 409A (as defined below).

2.6    Responsibility for Taxes.

(a)The Participant acknowledges that, regardless of any action taken by the Company or, if different, the Participant’s employer (the “Employer”) or the Trustee, the ultimate liability for all income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items related to the Participant’s participation in the Plan and legally applicable to the Participant (“Tax-Related Items”) is and remains the Participant’s responsibility. The Participant further acknowledges that the Company and/or the Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Award, including, but not limited to, the grant, vesting or payment

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of the RSUs, the issuance of Shares, the subsequent sale of Shares and the receipt of any dividends; and (ii) do not commit to and are under no obligation to structure the terms of the RSUs or any aspect of the RSUs to reduce or eliminate the Participant’s liability for Tax-Related Items or achieve any particular tax result. Further, if the Participant has become subject to tax in more than one jurisdiction, the Participant acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

(b)Prior to any relevant taxable or tax withholding event, as applicable, the Participant will pay or make arrangements satisfactory to the Company and/or the Employer to fulfill all Tax-Related Items. In this regard, the Participant authorizes the Company and/or the Employer, or their respective agents, at their discretion, to satisfy any applicable withholding obligations with regard to all Tax-Related Items by one or a combination of the following:

(i)withholding from the Participant’s wages or other cash compensation paid to the Participant by the Company and/or the Employer;

(ii)requiring the Participant to tender payment in cash, check or wire transfer of the Tax-Related Items to the Company, the Employer or the Trustee;

(iii)withholding from proceeds of the sale of Shares acquired upon payment of the RSUs either through a voluntary sale or through a mandatory sale arranged by the Company (on the Participant’s behalf pursuant to this authorization without further consent);

(iv)withholding Shares to be issued upon payment of the RSUs (“net-share withholding”), provided, however, that if the Participant is a Section 16 officer of the Company under the Exchange Act, then applicable withholding obligations for Tax-Related Items will be settled by withholding Shares in accordance with this subsection (iv) or, alternatively, the Committee (as constituted in accordance with Rule 16b-3 under the Exchange Act)shall establish the method of withholding from alternatives (i)-(iii) herein; and/or

(v)any other method of withholding determined by the Company and permitted by applicable law.

(c)Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or, to the extent permitted under the Plan, other applicable withholding rates, including maximum applicable rates in the Participant’s jurisdiction(s) in which case the Participant will receive a refund of any over-withheld amount in cash and will have no entitlement to the equivalent amount in Shares. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for purposes of calculating the Tax-Related Items and determining the number of Shares that have been delivered in accordance with Section 2.5 above, the Participant will be deemed to have been issued the full number of Shares subject to the vested RSUs, notwithstanding that a number of the Shares are held back solely for the purpose of paying the Tax-Related Items.

(d)The Participant 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-Related Item or interest or penalty thereon, including without limitation, liabilities relating to the necessity to withhold, or to have withheld, any such Tax-Related Items from any payment made to the Participant for which the Participant is responsible. The Company shall not be obligated to deliver any new certificate representing Shares to the Trustee, the Participant or the Participant’s legal representative or to enter such Shares in book

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entry form unless and until the Participant or the Participant’s legal representative shall have paid or otherwise satisfied in full the amount of all Tax-Related Items.

2.7    Section 409A. The RSUs are not intended to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code (together with any Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the date hereof, “Section 409A”). However, notwithstanding any other provision of the Plan, the Grant Notice or this Agreement, if at any time the Participant is a U.S. federal taxpayer and the Administrator determines that the RSUs (or any portion thereof) may be subject to Section 409A, the Administrator shall have the right in its sole discretion (without any obligation to do so or to indemnify the Participant or any other person for failure to do so) to adopt such amendments to the Plan, this Agreement or the Grant Notice or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Administrator determines are necessary or appropriate either for the RSUs to be exempt from the application of Section 409A or to comply with the requirements of Section 409A. Notwithstanding the foregoing, the Company makes no representation that the grant, vesting, or payment of the RSUs provided for under this Agreement will be exempt from or compliant with Section 409A and the Company will have no liability to the Participant or any other party if such grant, vesting or payment of RSUs is not so exempt or compliant or for any action taken by the Company with respect thereto.

2.8    Rights as Shareholder. The holder of the RSUs shall not be, nor have any of the rights or privileges of, a shareholder of the Company, including, without limitation, any dividend rights and voting rights, in respect of the RSUs and any Shares underlying the RSUs and deliverable hereunder unless and until such Shares shall have been actually issued by the Company and held of record by such holder (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 11.1 of the Plan.

2.9    Conditions to Delivery of Shares. Subject to Section 19 of the Plan, the Shares deliverable hereunder, or any portion thereof, may be either previously authorized but unissued Shares or issued Shares which have then been reacquired by the Company. Such Shares shall be fully paid and non-assessable. The Company shall not be required to issue or deliver any Shares deliverable hereunder or portion thereof prior to fulfillment of all of the following conditions:

(a)    The admission of such Shares to listing on all stock exchanges on which such Shares are then listed;

(b)    The completion of any registration or other qualification of such Shares under any applicable law, rule or regulation, which the Administrator shall, in its absolute discretion, deem necessary or advisable;

(c)    The obtaining of any approval or other clearance from any local, state, federal or foreign governmental agency which the Administrator shall, in its absolute discretion, determine to be necessary or advisable;

(d)    The receipt by the Company, the Employer or the Trustee of any Tax-Related Items required to be withheld, as further described in Section 2.6 hereof; and

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(e)    The lapse of such reasonable period of time following the vesting of any Restricted Share Units as the Administrator may from time to time establish for reasons of administrative convenience.

ARTICLE III

OTHER PROVISIONS

3.1    Administration. The Administrator shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken and all interpretations and determinations made by the Administrator in good faith shall be final and binding upon the Participant, the Company and all other interested persons. No member of the Administrator shall not be personally liable for any action, determination or interpretation made in good faith with respect to the Plan, this Agreement or the RSUs.

3.2     Adjustments Upon Specified Events. Provided that the RSUs are not “nonqualified deferred compensation” within the meaning of Section 409A, the Administrator may accelerate payment and vesting of the Restricted Share Units in such circumstances as it, in its sole discretion, may determine. In addition, upon the occurrence of certain events relating to the Shares contemplated by Section 11.1 of the Plan (including, without limitation, an extraordinary cash dividend on such Shares), the Administrator shall make such adjustments the Administrator deems appropriate in the number of Restricted Share Units then outstanding and the number and kind of securities that may be issued in respect of the Restricted Share Units. The Participant acknowledges that the RSUs are subject to modification and termination in certain events as provided in this Agreement and Article 11 and 13 of the Plan.

3.3    Grant is Not Transferable. During the lifetime of the Participant, this grant and the rights and privileges conferred hereby will not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and will not be subject to sale under execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of the RSUs, or any right or privilege conferred hereby, or upon any attempted sale under any execution, attachment or similar process, the RSUs and the rights and privileges conferred hereby immediately will become null and void. Notwithstanding anything herein to the contrary, this Section 3.3 shall not prevent transfers by will or applicable laws of descent and distribution.

3.4    Binding Agreement. Subject to the limitation on the transferability of the RSUs contained herein, this Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.

3.5    Notices. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company at Corporate_Secretary@mellanox.com or the address given beneath the signature of Company’s authorized officer on the Grant Notice, and any notice to be given to the Participant shall be addressed to the Participant at the address given beneath the Participant’s signature on the Grant Notice. By a notice given pursuant to this Section 3.5, either party may hereafter designate a different address for notices to be given to that party. Any notice which is required to be given to the Participant shall, if the Participant is then deceased, be given to the person entitled to the RSUs by written notice under this Section 3.5. Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.

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3.6    Titles. Titles provided herein are for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

3.7    Governing Law; Severability. The laws of the State of Israel shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflict of laws. The Participant may only exercise his or her rights in respect of the Plan, this Agreement and these RSUs to the extent that it would be lawful to do so, and the Company would not, in connection with this Agreement, be in breach of the laws of any jurisdiction to which the Participant may be subject. The Participant shall be solely responsible to seek advice as to the laws of any jurisdiction to which he or she may be subject, and participation in the Plan by the Participant shall be on the basis of a warranty by the Participant that the Participant may lawfully so participate without the Participant being in breach of the laws of any such jurisdiction. In addition, the provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

3.8    Conformity to Securities Laws. Participant acknowledges that the Plan and this Agreement are intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the U.S. Securities and Exchange Commission thereunder and state securities laws and regulations. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the RSUs are granted, only in such a manner as to conform to such laws, rules and regulations, and the Company is under no obligation to register or qualify the Shares with any state, federal or foreign securities commission or to seek approval or clearance from any governmental authority for the issuance or sale of the Shares. Further, the Participant understands that, to the extent permitted by applicable law, the Company shall have the unilateral authority to amend the Plan and this Agreement without the Participant’s consent to the extent necessary to comply with securities or other laws applicable to the issuance of Shares.

3.9    Amendments, Suspension and Termination. To the extent permitted by the Plan, this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Administrator, provided, however, that, except as may otherwise be provided by the Plan and this Agreement, no amendment, modification, suspension or termination of this Agreement shall adversely effect the RSUs in any material way without the prior written consent of the Participant.

3.10    Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth in Sections 3.2 and 3.3 hereof, this Agreement shall be binding upon the Participant and his or her heirs, executors, administrators, successors and assigns.

3.11    Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan or this Agreement, if the Participant is subject to Section 16 of the Exchange Act, the Plan, the RSUs and this Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, the Company shall have unilateral authority to amend this Agreement without the Participant’s consent to the extent necessary to comply with such applicable exemptive rule.

3.12    Not a Contract of Employment. Nothing in this Agreement or in the Plan shall confer upon the Participant any right to continue to serve as an employee or other service provider of the Company or

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any affiliate thereof, or be interpreted as forming or amending an employment or service contract with the Company or any affiliate thereof and shall not interfere with or restrict in any way the rights of the Company and its affiliates, which rights are hereby expressly reserved, to discharge or terminate the services of the Participant at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in a written agreement between the Company or an affiliate thereof and the Participant.

3.13    Entire Agreement. The Plan, the Grant Notice and this Agreement (including all Exhibits thereto) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and the Participant with respect to the subject matter hereof.

3.14    Limitation on Participant’s Rights. Participation in the Plan confers no rights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Company as to amounts payable and shall not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets. The Participant shall have only the rights of a general unsecured creditor of the Company with respect to amounts credited and benefits payable, if any, with respect to the RSUs, and rights no greater than the right to receive the Shares as a general unsecured creditor with respect to RSUs, as and when payable hereunder.

3.15    Nature of Grant. In accepting the grant of RSUs, the Participant acknowledges, understands and agrees that:

(a)the Plan is established voluntarily by the Company, it is discretionary in nature, and may be amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan;

(b)the grant of the RSUs is exceptional, voluntary and occasional and does not create any contractual or other right to receive future grants of restricted share units, or benefits in lieu of restricted share units, even if RSUs have been granted in the past;

(c)all decisions with respect to future restricted share units or other grants, if any, will be at the sole discretion of the Company;

(d)the Participant is voluntarily participating in the Plan;

(e)the RSUs and any Shares subject to the RSUs, and the income from and value of same, are not intended to replace any pension rights or compensation;

(f)unless otherwise agreed with the Company, the RSUs and the Shares subject to the RSUs, and the income from and value of same, are not granted as consideration for, or in connection with, the service the Participant may provide as a director of an affiliate;

(g)the RSUs and any Shares subject to the RSUs, and the income from and value of same, are not part of normal or expected compensation for any purpose, including, without limitation, calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, holiday pay, pension or retirement or welfare benefits or similar payments;

(h)the future value of the Shares underlying the RSUs is unknown, indeterminable, and cannot be predicted with certainty;

(i)no claim or entitlement to compensation or damages shall arise from forfeiture of the RSUs resulting from the termination of the Participant’s employment or service relationship (for any

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reason whatsoever, whether or not later found to be invalid or in breach of employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any);

(j)for purposes of the RSUs, the date of the Participant’s Termination of Services shall be the date the Participant is no longer actively providing services to the Company or any affiliate thereof (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where the Participant is employed or providing services or the terms of Participant’s employment or service agreement, if any), and the Participant’s right to vest in the RSUs under the Plan, if any, will terminate as of such date and will not be extended by any notice period (e.g., the Participant’s period of service would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where Participant is employed or providing services or the terms of Participant’s employment or service agreement, if any). The Administrator shall have the exclusive discretion to determine when the Participant is no longer actively providing services for purposes of the RSUs (including whether the Participant may still be considered to be providing services while on a leave of absence); and

(k)neither the Company, the Employer nor any affiliate thereof shall be liable for any foreign exchange rate fluctuation between the Participant’s local currency and the United States Dollar that may affect the value of the RSUs or of any amounts due to the Participant pursuant to the payment of the RSUs or the subsequent sale of any Shares acquired upon settlement.

3.16    Data Privacy.

(a)    Data Collection and Usage. The Company and the Employer may collect, process and use certain personal information about the Participant, including, but not limited to, the Participant’s name, home address and telephone number, email address, date of birth, social insurance number, passport or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all Restricted Share Units or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in the Participant’s favor (“Data”), for the purposes of implementing, administering and managing the Plan. The legal basis, where required, for the processing of Data is the Participant’s consent.

(b)    Stock Plan Administration Service Providers. The Company transfers Data to E*Trade Corporate Financial Services, Inc. and its affiliated companies (“E*Trade”), an independent service provider based in the United States, which is assisting the Company with the implementation, administration and management of the Plan. In the future, the Company may select a different service provider and share Data with such other provider serving in a similar manner. The Participant may be asked to agree on separate terms and data processing practices with the service provider, with such agreement being a condition to the ability to participate in the Plan.

(c)International Data Transfers. The Company and its service providers are based in Israel and the United States. The Participant’s country or jurisdiction may have different data privacy laws and protections than Israel and the United States. The Company's legal basis, where required, for the transfer of Data is Participant’s consent.

(d)    Data Retention. The Company will hold and use the Data only as long as is necessary to implement, administer and manage the Participant’s participation in the Plan, or as required to comply with legal or regulatory obligations, including under tax and security laws.

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(e)    Voluntariness and Consequences of Consent Denial or Withdrawal. Participation in the Plan is voluntary and the Participant is providing the consents herein on a purely voluntary basis. If the Participant does not consent, or if the Participant later seeks to revoke the Participant’s consent, the Participant’s salary from or employment and career with the Employer will not be affected; the only consequence of refusing or withdrawing the Participant’s consent is that the Company would not be able to grant this Award or other awards to the Participant or administer or maintain such awards.

By accepting the Award and indicating consent via the Company’s online acceptance procedure, the Participant is declaring that he or she agrees with the data processing practices described herein and consents to the collection, processing and use of Data by the Company and the transfer of Data to the recipients mentioned above, including recipients located in countries which may not have the same level of protection as the Participant’s country, for the purposes described above.

Finally, the Participant understands that the Company may rely on a different legal basis for the processing or transfer of Data in the future and/or request that the Participant provide another data privacy consent form. If applicable and upon request of the Company, the Participant agrees to provide an executed acknowledgement or data privacy consent form to the Employer or the Company (or any other acknowledgements, agreements or consents that may be required by the Employer or the Company) that the Company and/or the Employer may deem necessary to obtain under the data privacy laws in the Participant’s country, either now or in the future. The Participant understands that he or she will not be able to participate in the Plan if he or she fails to execute any such acknowledgement, agreement or consent requested by the Company and/or the Employer.

3.17    Language. The Participant acknowledges that he or she is proficient in the English language, or has consulted with an advisor who is sufficiently proficient in English, so as to allow the Participant to understand the terms and conditions of this Agreement. If the Participant has received this Agreement, or any other documents related to the RSUs and/or the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.

3.18    Insider Trading Restrictions / Market Abuse Laws. The Participant may be subject to insider trading restrictions and/or market abuse laws in applicable jurisdictions, including, but not limited to, the United States and the Participant’s country, which may affect the Participant’s ability to accept, acquire, sell or otherwise dispose of Shares, rights to Shares (e.g., RSUs) or rights linked to the value of Shares under the Plan during such times as the Participant is considered to have “inside information” regarding the Company (as defined by the laws in the applicable jurisdictions). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. Neither the Company nor any affiliate thereof will be responsible for such restrictions or liable for the failure on the Participant’s part to know and abide by such restrictions. The Participant should consult with his or her own personal legal advisers to ensure compliance with applicable laws.

3.19    Foreign Asset / Account and Exchange Control Requirements. Depending on the Participant’s country, the Participant may be subject to foreign asset/account and/or exchange control reporting or other requirements which may affect the Participant’s ability to acquire or hold RSUs or Shares under the Plan or cash received from participating in the Plan in a brokerage or bank account outside the Participant’s country. The Participant may be required to report such RSUs, Shares, accounts, assets or transactions to the tax or other authorities in his or her country and/or repatriate funds received in connection with the Plan to the Participant's country within a certain time period or according to certain procedures. The Participant acknowledges that it is his or her responsibility to comply with any applicable requirements,

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and that the Participant should consult his or her own personal tax and legal advisors to ensure compliance with applicable laws.

3.20    Electronic Delivery, Acceptance and Participation. The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means and the Participant hereby consents to receive such documents by electronic delivery. The Participant agrees that his or her electronic acceptance of the Award through the Company’s online acceptance procedure constitutes his or her acceptance of the Award and further agrees to participate in the Plan through an online or electronic system established and maintained by the Company or a third party designated by the Company.

3.21    Imposition of Other Requirements. The Company reserves the right to impose other requirements on the Participant’s participation in the Plan, on the RSUs and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require the Participantto sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.

3.22    Waiver. The Participant acknowledges that a waiver by the Company of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by the Participant or any other Participant.

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EX-10.6

EXHIBIT 10.6

MELLANOX TECHNOLOGIES, LTD.

THIRD AMENDED AND RESTATED GLOBAL SHARE INCENTIVE PLAN (2006)

PERFORMANCE SHARE UNIT AWARD GRANT NOTICE ANDPERFORMANCE SHARE UNIT AWARD AGREEMENTFOR PARTICIPANTS IN THE UNITED STATES

Mellanox Technologies, Ltd., a corporation organized under the laws of the State of Israel (the “Company”), pursuant to its Third Amended and Restated Global Share Incentive Plan (2006) and the appendix thereto setting forth the additional terms applicable to Participants who are U.S. Taxpayers (collectively referred to as the “Plan,” except where the context otherwise requires), hereby grants to the individual listed below (the “Participant”), an award (the “Award”) of performance share units (“Performance Share Units”or“PSUs”). Each PSU represents the right to receive [ ˜ ] unrestricted, fully transferable ordinary shares of the Company (each a “Share,” collectively “Shares”) upon vesting. This Award is subject to all of the terms and conditions as set forth herein, in the Performance Share Unit Award Agreement attached hereto as Exhibit A (the “Agreement”) and the Plan, each of which are incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Agreement.

Participant’s Name:	[ ˜ ]
PSU Number:	[ ˜ ]
Grant Date:	[ ˜ ]
Target Number of PSUs:	[ ˜ ]
Vesting Commencement Date:	[ ˜ ]
Performance Period:	[ ˜ ]
Performance Goals:	[ ˜ ]
Termination of Employment:	Except as otherwise set forth in the Agreement, the Participant shall forfeit all Performance Shares upon the Participant’s Termination of Employment prior to the Measurement Date (as defined in the Agreement).

By his or her acceptance of the Award through the Company’s online acceptance procedure (or by his or her signature and the signature of the Company’s representative below), the Participant agrees to be bound by the terms and conditions of the Plan, the Agreement and this Grant Notice. The Participant has reviewed the Agreement, the Plan and this Grant Notice in their entirety and fully understands all provisions of this Grant Notice, the Agreement and the Plan. The Participant also agrees that the Company, in its sole discretion, may satisfy any applicable tax withholding obligations in accordance with Section 2.6 of the Agreement by (i) withholding Shares otherwise issuable to the Participant upon vesting of the PSUs, (ii) instructing a broker on the Participant’s behalf to sell Shares otherwise issuable or issued to the Participant upon vesting of the PSUs and submit the proceeds of such sale to the Company, or (iii) using any other method permitted by Section 2.6 of the Agreement or the Plan. The Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or relating to the PSUs.

If the Participant does not accept or decline the Award before the vesting date of the grant stated above or by such other date that may be communicated to the Participant by the Company, the Company will accept the Award on the Participant’s behalf and the Participant will be deemed to have accepted the terms and conditions of the Award set forth in the Plan, the Agreement and this Grant Notice. If the Participant declines the Award, the Award will be cancelled and no benefits from the Award nor any compensation or benefits in lieu of the Award will be provided to the Participant.

MELLANOX TECHNOLOGIES, LTD.:		PARTICIPANT:
By:		By:
Print Name:		Print Name:
Title:	__________________________
Address:		Address:

EXHIBIT A

TO PERFORMANCE SHARE UNIT AWARD GRANT NOTICE

PERFORMANCE SHARE UNIT AWARD AGREEMENT

FOR PARTICIPANTS IN THE UNITED STATES

Pursuant to the Performance Share Unit Award Grant Notice (the “Grant Notice”) and this Performance Share Unit Award Agreement (the “Agreement”), Mellanox Technologies, Ltd., a corporation organized under the laws of the State of Israel (the “Company”), has granted to the Participant an award (the “Award”) of performance share units (“Performance Share Units”or“PSUs”) under the Company’s Third Amended and Restated Global Share Incentive Plan (2006) and the appendix thereto setting forth the additional terms applicable to Participants who are U.S. Taxpayers (collectively referred to herein as the “Plan,” unless context otherwise requires).

ARTICLE I

GENERAL

1.1Defined Terms. Wherever the following terms are used in this Agreement they shall have the meanings specified below, unless the context clearly indicates otherwise. Capitalized terms not specifically defined herein shall have the meanings specified in the Plan or the Grant Notice, as applicable.

(a)     “Cause” means that, in the reasonable determination of the [Board, IN THE CASE OF THE CHIEF EXECUTIVE OFFICER][Chief Executive Officer, IN THE CASE OF OTHER EMPLOYEES], the Participant:

(i)     has committed an act of fraud or embezzlement or has intentionally committed some other illegal act that has a material adverse impact on the Company or any successor or parent or subsidiary thereof;

(ii)     has been convicted of, or entered a plea of “guilty” or “no contest” to, a felony which causes or may reasonably be expected to cause substantial economic injury to or substantial injury to the reputation of the Company or any subsidiary or affiliate of the Company;

(iii)     has made any unauthorized use or disclosure of confidential information or trade secrets of the Company or any successor or parent or subsidiary thereof that has a material adverse impact on any such entity;

(iv)     has committed any other intentional misconduct that has a material adverse impact on the Company or any successor or parent or subsidiary thereof, or

(v)     has intentionally refused or intentionally failed to act in accordance with any lawful and proper direction or order of the Board or the appropriate individual to whom Participant reports, provided such direction is not materially inconsistent with Participant’s customary duties and responsibilities.

(b)     “Constructive Termination” means that Participant voluntarily terminates Participant’s employment with the Company after any of the following are undertaken without Participant’s express written consent:

(i)     the removal of or a material reduction in the nature or scope of Participant’s responsibilities, or the assignment to Participant of duties that are materially inconsistent with Participant’s position other than a change in reporting relationship;

(ii)     a change in Participant’s direct reporting relationship so that Participant no longer reports directly to the [ ˜ ];

(iii)     a material reduction in Participant’s base salary or target annual bonus opportunity, unless the base salaries and target bonus opportunities of all other Participants are similarly reduced; or

(iv)    a relocation of Participant’s place of employment that increases Participant’s one-way commute by more than thirty (30) miles from such Participant’s place of employment as of immediately prior to such relocation. The termination of Participant’s employment as a result of Participant’s death or disability shall not be deemed to be a Constructive Termination.

Notwithstanding the foregoing, a resignation shall not constitute a “Constructive Termination” unless the event or condition giving rise to such resignation continues more than thirty (30) days following Executive’s written notice of such condition provided to the Company within ninety (90) days of the first occurrence of such event or condition and such resignation is effective within thirty (30) days following the end of such notice period.

(c)     “Covered Termination” means an Involuntary Termination Without Cause or a Constructive Termination, in each case, which occurs within 12 months following a Change in Control.

(d)     “Involuntary Termination Without Cause” means Participant’s dismissal or discharge by the Company other than for Cause. The termination of Participant’s employment as a result of Participant’s death or disability shall not be deemed to be an Involuntary Termination Without Cause.

(e)     “Termination of Consultancy” shall mean the time when the engagement of the Participant as a Consultant to the Company or any affiliate thereof is terminated for any reason, with or without cause, including, but not by way of limitation, by resignation, discharge, death or retirement, but excluding: (i) terminations where there is a simultaneous employment or continuing employment of the Participant by the Company or any affiliate thereof, and (ii) terminations where there is a simultaneous re-establishment of a consulting relationship or continuing consulting relationship between the Participant and the Company or any affiliate thereof. The Administrator, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Consultancy, including, but not by way of limitation, the question of whether a particular leave of absence constitutes a Termination of Consultancy. Notwithstanding any other provision of the Plan, the Company or any affiliate thereof has an absolute and unrestricted right to terminate a Consultant’s service at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in writing.

(f)    “Termination of Directorship” shall mean the time when the Participant, if he or she is or becomes a Non-Employee Director, ceases to be a member of the Board of Directors for any reason, including, but not by way of limitation, a termination by resignation, failure of shareholders to approve appointment, failure to be elected, death or retirement. The Board of Directors, in its sole and absolute

discretion, shall determine the effect of all matters and questions relating to Termination of Directorship with respect to Non-Employee Directors.

(g)    “Termination of Employment” shall mean the time when the employee-employer relationship between the Participant and the Company or any affiliate thereof is terminated for any reason, with or without cause, including, but not by way of limitation, a termination by resignation, discharge, death, disability or retirement; but excluding: (i) terminations where there is a simultaneous reemployment or continuing employment of the Participant by the Company or any affiliate thereof, (ii) terminations where there is a simultaneous establishment of a consulting relationship or continuing consulting relationship between the Participant and the Company or any affiliate thereof, and (iii) terminations where the Participant simultaneously becomes a Non-Employee Director, whether by appointment or election; for avoidance of doubt, the Participant will participate in the Plan as an employee until the Participant’s appointment to the Board of Directors is approved by the Company’s shareholders. The Administrator, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Employment, including, but not by way of limitation, the question of whether a particular leave of absence constitutes a Termination of Employment.

(h)    “Termination of Services” shall mean the Participant’s Termination of Consultancy, Termination of Directorship or Termination of Employment, as applicable.

1.2General. Each Performance Share Unit shall constitute a non-voting unit of measurement which is deemed for bookkeeping purposes to be equivalent to up to [ ˜ ] Shares (subject to adjustment as provided in Section 11.1 of the Plan) solely for purposes of the Plan and this Agreement. The Performance Share Units shall be used solely as a device for the determination of the payment to eventually be made to the Participant if such Performance Share Units vest pursuant to Section 2.3 hereof. The Performance Share Units shall not be treated as property or as a trust fund of any kind.

1.3Incorporation of Terms of Plan. The PSUs are subject to the terms and conditions of the Plan, which is incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control.

ARTICLE II

GRANT OF PERFORMANCE SHARE UNITS

2.1    Grant of PSUs. Effective as of the grant date set forth in the Grant Notice (the “Grant Date”), the Company grants to the Participant the Award as set forth in the Grant Notice.

2.2    Company’s Obligation to Pay. Each PSU constitutes the right to receive up to [ ˜ ] Shares upon vesting, as determined in accordance with Section 2.3 below. Unless and until the PSUs will have vested in accordance with Article II hereof, Participant will have no right to receive Shares under any such PSUs. Prior to actual payment of any vested PSUs, such PSUs will represent an unsecured obligation of the Company, payable (if at all) only from the general assets of the Company.

2.3    Vesting Schedule; Change in Control.

(a)    Subject to Section 2.3(b) hereof and any accelerated vesting provisions in any Executive Severance Benefit Agreement, employment agreement or other agreement between the Participant and the Company, the PSUs awarded by the Grant Notice will vest and become non-forfeitable, and the number of Shares issuable in respect of the PSUs, if any, will be determined, on the date (the “Measurement

Date”) on which the Administrator certifies the Company’s achievement of the Performance Goals, which shall occur no later than ninety (90) days after the end of the Performance Period, in accordance with the terms set forth on Exhibit B attached hereto.

(b)    Notwithstanding Section 2.3(a), in the event of a Change in Control that occurs following the beginning of the Performance Period and prior to [ ˜ ], the number of Shares that shall become issuable upon the applicable vesting date (as set forth below) in respect of such PSUs shall equal the greater of (i) the Target Number of PSUs set forth in the Grant Notice and (ii) such number of Shares determined based on the Company’s actual achievement of the Performance Goals as of the Change in Control, with Relative TSR (as defined in Exhibit B) determined using an Ending Average Market Value (as defined in Exhibit B) equal to the price per Share paid to the holder thereof in accordance with the definitive agreement governing the transaction constituting the Change in Control (or in absence of such agreement, the closing price per Share on the last trading day prior to the Change in Control):

(i) If the successor or surviving entity assumes the PSUs, such PSUs shall remain outstanding and eligible to vest as of [ ˜ ] subject to the Participant’s continued service with the Company or any affiliate through such date; provided that in the event of an earlier Covered Termination of Participant’s employment, the PSUs shall vest in full upon such termination; and

(ii) If the successor or surviving entity does not assume the PSUs, the PSUs shall vest in full upon such Change in Control.

2.4    Forfeiture, Termination and Cancellation upon Termination of Services. Subject to Section 2.3(b), upon the Participant’s Termination of Services for any or no reason, the then-unvested PSUs subject to this Agreement will be automatically forfeited, terminated and cancelled as of such date without payment of any consideration by the Company, and the Participant, or the Participant’s beneficiary or personal representative, as the case may be, shall have no further rights hereunder. For the avoidance of doubt, except as otherwise provided by the Administrator, no PSUs shall vest following the Participant’s Termination of Services.

2.5    Payment after Vesting. As soon as administratively practicable, and, in any event, within sixty (60) days, following the vesting of any Performance Share Units pursuant to Section 2.3 or Section 3.2, the Company shall deliver to the Participant a number of Shares (either by delivering one or more certificates for such shares or by entering such shares in book entry form, as determined by the Company in its sole discretion and in accordance with Section 2.3, unless such Performance Share Units terminate prior to the given vesting date pursuant to Section 2.4. Notwithstanding the foregoing, in the event Shares cannot be issued pursuant to Section 2.9(a), (b) or (c) hereof, then the Shares shall be issued pursuant to the preceding sentence as soon as administratively practicable after the Administrator determines that Shares can again be issued in accordance with Sections 2.9(a), (b) and (c) hereof; provided, however, that if the Participant is a U.S. federal taxpayer, any such delay shall apply only to the extent permissible under Section 409A (as defined below).

2.6    Responsibility for Taxes.

(a)The Participant acknowledges that, regardless of any action taken by the Company or, if different, the Participant’s employer (the “Employer”), the ultimate liability for any or all income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items related to

the Participant’s participation in the Plan and legally applicable to the Participant (“Tax-Related Items”) is and remains the Participant’s responsibility and may exceed the amount actually withheld by the Company or the Employer. The Participant further acknowledges that the Company and/or the Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Award, including, but not limited to, the grant, vesting or payment of the PSUs, the issuance of Shares, the subsequent sale of Shares and the receipt of any dividends; and (ii) do not commit to and are under no obligation to structure the terms of the PSUs or any aspect of the PSUs to reduce or eliminate the Participant’s liability for Tax-Related Items or achieve any particular tax result. Further, if the Participant has become subject to Tax-Related Items in more than one jurisdiction, the Participant acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

(b)Prior to any relevant taxable or tax withholding event, as applicable, the Participant will pay or make arrangements satisfactory to the Company and/or the Employer to fulfill all Tax-Related Items. In this regard, the Participant authorizes the Company and/or the Employer, or their respective agents, at their discretion, to satisfy any applicable withholding obligations for all Tax-Related Items by one or a combination of the following:

(i)withholding from the Participant’s wages or other cash compensation paid to the Participant by the Company and/or the Employer;

(ii)requiring the Participant to tender a payment in cash, check or wire transfer of the Tax-Related Items to the Company or the Employer;

(iii)withholding from proceeds of the sale of Shares acquired upon payment of the PSUs either through a voluntary sale or through a mandatory sale arranged by the Company (on the Participant’s behalf pursuant to this authorization without further consent);

(iv)withholding Shares to be issued upon payment of the PSUs (“net-share settlement”); provided, however, that if the Participant is a Section 16 officer of the Company under the Exchange Act, then applicable withholding obligations for Tax-Related Items will be settled by withholding Shares in accordance with this subsection (iv) or, alternatively, the Committee (as constituted in accordance with Rule 16b-3 under the Exchange Act)shall establish the method of withholding from alternatives (i)-(iii) herein; and/or

(v)any other method of withholding determined by the Company and permitted by applicable law.

(c)Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or, to the extent permitted under the Plan, other applicable withholding rates, including maximum applicable rates in the Participant’s jurisdiction(s) in which case the Participant will receive a refund of any over-withheld amount in cash and will have no entitlement to the equivalent amount in Shares. If the obligation for Tax-Related Items is satisfied by withholding Shares, for purposes of calculating the Tax-Related Items and determining the number of Shares that have been delivered in accordance with Section 2.5 above, the Participant will be deemed to have been issued the full number of Shares subject to the vested PSUs, notwithstanding that a number of the Shares are held back solely for the purpose of paying the Tax-Related Items.

(d)The Company may refuse to deliver the Shares or the proceeds of the sale of Shares, if the Participant fails to comply with the Participant’s obligations in connection with the Tax-Related Items.

2.7    Section 409A. The PSUs are not intended to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code (together with any Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the date hereof, “Section 409A”). However, notwithstanding any other provision of the Plan, the Grant Notice or this Agreement, if at any time the Participant is a U.S. federal taxpayer and the Administrator determines that the PSUs (or any portion thereof) may be subject to Section 409A, the Administrator shall have the right in its sole discretion (without any obligation to do so or to indemnify the Participant or any other person for failure to do so) to adopt such amendments to the Plan, this Agreement or the Grant Notice or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Administrator determines are necessary or appropriate either for the PSUs to be exempt from the application of Section 409A or to comply with the requirements of Section 409A. Notwithstanding the foregoing, the Company makes no representation that the grant, vesting, or payment of the PSUs provided for under this Agreement will be exempt from or compliant with Section 409A and the Company will have no liability to the Participant or any other party if such grant, vesting or payment of PSUs is not so exempt or compliant or for any action taken by the Company with respect thereto.

2.8    Rights as Shareholder. The holder of the PSUs shall not be, nor have any of the rights or privileges of, a shareholder of the Company, including, without limitation, any dividend rights and voting rights, in respect of the PSUs and any Shares underlying the PSUs and deliverable hereunder unless and until such Shares shall have been actually issued by the Company and held of record by such holder (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 11.1 of the Plan.

2.9    Conditions to Delivery of Shares. Subject to Section 19 of the Plan, the Shares deliverable hereunder, or any portion thereof, may be either previously authorized but unissued Shares or issued Shares which have then been reacquired by the Company. Such Shares shall be fully paid and non-assessable. The Company shall not be required to issue or deliver any Shares deliverable hereunder or portion thereof prior to fulfillment of all of the following conditions:

(a)    The admission of such Shares to listing on all stock exchanges on which such Shares are then listed;

(b)    The completion of any registration or other qualification of such Shares under any applicable law, rule or regulation, which the Administrator shall, in its absolute discretion, deem necessary or advisable;

(c)    The obtaining of any approval or other clearance from any local, state, federal or foreign governmental agency which the Administrator shall, in its absolute discretion, determine to be necessary or advisable;

(d)    The receipt by the Company or the Employer of any Tax-Related Items required to be withheld by the Company or any affiliate thereof, as further described in Section 2.6 hereof; and

(e)    The lapse of such reasonable period of time following the vesting of any Performance Share Units as the Administrator may from time to time establish for reasons of administrative convenience.

ARTICLE III

OTHER PROVISIONS

3.1    Administration. The Administrator shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken and all interpretations and determinations made by the Administrator in good faith shall be final and binding upon the Participant, the Company and all other interested persons. No member of the Administrator shall not be personally liable for any action, determination or interpretation made in good faith with respect to the Plan, this Agreement or the PSUs.

3.2     Adjustments Upon Specified Events. Provided that the PSUs are not “nonqualified deferred compensation” within the meaning of Section 409A, the Administrator may accelerate payment and vesting of the Performance Share Units in such circumstances as it, in its sole discretion, may determine. In addition, upon the occurrence of certain events relating to the Shares contemplated by Section 11.1 of the Plan (including, without limitation, an extraordinary cash dividend on such Shares), the Administrator shall make such adjustments the Administrator deems appropriate in the number of Performance Share Units then outstanding and the number and kind of securities that may be issued in respect of the Performance Share Units. The Participant acknowledges that the PSUs are subject to modification and termination in certain events as provided in this Agreement and Articles 11 and 13 of the Plan.

3.3    Grant is Not Transferable. During the lifetime of the Participant, this grant and the rights and privileges conferred hereby will not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and will not be subject to sale under execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of the PSUs, or any right or privilege conferred hereby, or upon any attempted sale under any execution, attachment or similar process, the PSUs and the rights and privileges conferred hereby immediately will become null and void. Notwithstanding anything herein to the contrary, this Section 3.3 shall not prevent transfers by will or applicable laws of descent and distribution.

3.4    Binding Agreement. Subject to the limitation on the transferability of the PSUs contained herein, this Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.

3.5    Notices. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company at Corporate_Secretary@mellanox.com or the address given beneath the signature of Company’s authorized officer on the Grant Notice, and any notice to be given to the Participant shall be addressed to the Participant at the address given beneath the Participant’s signature on the Grant Notice. By a notice given pursuant to this Section 3.5, either party may hereafter designate a different address for notices to be given to that party. Any notice which is required to be given to the Participant shall, if the Participant is then deceased, be given to the person entitled to the PSUs by written notice under this Section 3.5. Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service or, in the event of Participants outside of the United States, when deposited with an internationally recognized courier service with proof of such deposit.

3.6    Titles. Titles provided herein are for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

3.7    Governing Law; Severability. The laws of the State of Israel shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflict of laws. The Participant may only exercise his or her rights in respect of the Plan, this Agreement and these PSUs to the extent that it would be lawful to do so, and the Company would not, in connection with this Agreement, be in breach of the laws of any jurisdiction to which the Participant may be subject. The Participant shall be solely responsible to seek advice as to the laws of any jurisdiction to which he or she may be subject, and participation in the Plan by the Participant shall be on the basis of a warranty by the Participant that the Participant may lawfully so participate without the Participant being in breach of the laws of any such jurisdiction. In addition, the provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

3.8    Conformity to Securities Laws. Participant acknowledges that the Plan and this Agreement are intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the U.S. Securities and Exchange Commission thereunder, any jurisdiction in which the Participant may be subject and state securities laws and regulations, provided, however, that the Company is under no obligation to register or qualify the Shares with any state, federal or foreign securities commission or to seek approval or clearance from any governmental authority for the issuance or sale of the Shares. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the PSUs are granted, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.

3.9    Amendments, Suspension and Termination. To the extent permitted by the Plan, this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Administrator, provided, however, that, except as may otherwise be provided by the Plan and this Agreement, no amendment, modification, suspension or termination of this Agreement shall adversely affect the PSUs in any material way without the prior written consent of the Participant.

3.10    Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth in Sections 3.2 and 3.3 hereof, this Agreement shall be binding upon the Participant and his or her heirs, executors, administrators, successors and assigns.

3.11    Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan or this Agreement, if the Participant is subject to Section 16 of the Exchange Act, the Plan, the PSUs and this Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

3.12    Not a Contract of Employment. Nothing in the Plan or this Agreement shall confer upon the Participant any right to continue in the employ or service of the Company or any affiliate thereof or be interpreted as forming or amending an employment or service contract with the Company or any affiliate thereof and shall not interfere with or restrict in any way the rights of the Company and its affiliates, which

rights are hereby expressly reserved, to discharge or terminate the services of the Participant at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in a written agreement between the Company or an affiliate thereof and the Participant.

3.13    Entire Agreement. The Plan, the Grant Notice and this Agreement (including all Exhibits thereto) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and the Participant with respect to the subject matter hereof.

3.14    Limitation on Participant’s Rights. Participation in the Plan confers no rights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Company as to amounts payable and shall not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets. The Participant shall have only the rights of a general unsecured creditor of the Company with respect to amounts credited and benefits payable, if any, with respect to the PSUs, and rights no greater than the right to receive the Shares as a general unsecured creditor with respect to PSUs, as and when payable hereunder.

3.15    Data Privacy.

(a)Data Collection and Usage. The Company and the Employer may collect, process and use certain personal information about the Participant, including, but not limited to, the Participant’s name, home address and telephone number, email address, date of birth, social insurance number, passport or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all Restricted Share Units or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in the Participant’s favor (“Data”), for the purposes of implementing, administering and managing the Plan. The legal basis, where required, for the processing of Data is the Participant’s consent.

(b)Stock Plan Administration Service Providers. The Company transfers Data to E*Trade Corporate Financial Services, Inc. and its affiliated companies (“E*Trade”), an independent service provider based in the United States, which is assisting the Company with the implementation, administration and management of the Plan. In the future, the Company may select a different service provider and share Data with such other provider serving in a similar manner. The Participant may be asked to agree on separate terms and data processing practices with the service provider, with such agreement being a condition to the ability to participate in the Plan.

(c)International Data Transfers. The Company and its service providers are based in Israel and the United States. The Participant’s country or jurisdiction may have different data privacy laws and protections than Israel and the United States. For example, the European Commission has issued a limited adequacy finding with respect to the United States that applies only to the extent companies register for the EU-U.S. Privacy Shield program. The Company's legal basis, where required, for the transfer of Data is Participant’s consent.

(d)Data Retention. The Company will hold and use the Data only as long as is necessary to implement, administer and manage the Participant’s participation in the Plan, or as required to comply with legal or regulatory obligations, including under tax and security laws.

(e)Voluntariness and Consequences of Consent Denial or Withdrawal. Participation in the Plan is voluntary and the Participant is providing the consents herein on a purely voluntary basis. If the Participant does not consent, or if the Participant later seeks to revoke the Participant’s consent, the Participant’s salary from or employment and career with the Employer will not be affected; the only

consequence of refusing or withdrawing the Participant’s consent is that the Company would not be able to grant this Award or other awards to the Participant or administer or maintain such awards.

By accepting the Award and indicating consent via the Company’s online acceptance procedure, the Participant is declaring that he or she agrees with the data processing practices described herein and consents to the collection, processing and use of Data by the Company and the transfer of Data to the recipients mentioned above, including recipients located in countries which do not adduce an adequate level of protection from a European (or other non-U.S.) data protection law perspective, for the purposes described above.

Finally, the Participant understands that the Company may rely on a different legal basis for the processing or transfer of Data in the future and/or request that the Participant provide another data privacy consent form. If applicable and upon request of the Company, the Participant agrees to provide an executed acknowledgement or data privacy consent form to the Employer or the Company (or any other acknowledgements, agreements or consents that may be required by the Employer or the Company) that the Company and/or the Employer may deem necessary to obtain under the data privacy laws in the Participant’s country, either now or in the future. The Participant understands that he or she will not be able to participate in the Plan if he or she fails to execute any such acknowledgement, agreement or consent requested by the Company and/or the Employer.

3.16    Insider Trading Restrictions / Market Abuse Laws. The Participant may be subject to insider trading restrictions and/or market abuse laws in applicable jurisdictions, including, but not limited to, the United States and the Participant’s country, which may affect the Participant’s ability to accept, acquire, sell or otherwise dispose of Shares, rights to Shares (e.g., PSUs) or rights linked to the value of Shares under the Plan during such times as the Participant is considered to have “inside information” regarding the Company (as defined by the laws in the applicable jurisdictions). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. Neither the Company nor any affiliate thereof will be responsible for such restrictions or liable for the failure on the Participant’s part to know and abide by such restrictions. The Participant should consult with his or her own personal legal advisers to ensure compliance with applicable laws.

3.17    Foreign Asset / Account and Exchange Control Requirements. Depending on the Participant’s country, the Participant may be subject to foreign asset/account and/or exchange control reporting or other requirements which may affect the Participant’s ability to acquire or hold PSUs or Shares under the Plan or cash received from participating in the Plan in a brokerage or bank account outside the Participant’s country. The Participant may be required to report such PSUs, Shares, accounts, assets or transactions to the tax or other authorities in his or her country and/or repatriate funds received in connection with the Plan to the Participant's country within a certain time period or according to certain procedures. The Participant acknowledges that it is his or her responsibility to comply with any applicable requirements, and that the Participant should consult his or her own personal tax and legal advisors to ensure compliance with applicable laws.

3.18    Electronic Delivery, Acceptance and Participation. The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means and the Participant hereby consents to receive such documents by electronic delivery. The Participant agrees that his or her electronic acceptance of the Award through the Company's online acceptance procedure constitutes his or her acceptance of the Award and further agrees to participate in the Plan through an online or electronic system established and maintained by the Company or a third party designated by the Company.

3.19    Imposition of Other Requirements. The Company reserves the right to impose other requirements on the Participant’s participation in the Plan, on the PSUs and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require the Participantto sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.

3.20    Waiver. The Participant acknowledges that a waiver by the Company of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by the Participant or any other Participant.

EX-10.7

EXHIBIT 10.7

MELLANOX TECHNOLOGIES, LTD.

THIRD AMENDED AND RESTATED GLOBAL SHARE INCENTIVE PLAN (2006)

PERFORMANCE SHARE UNIT AWARD GRANT NOTICE ANDPERFORMANCE SHARE UNIT AWARD AGREEMENTFOR PARTICIPANTS IN ISRAEL

Mellanox Technologies, Ltd., a corporation organized under the laws of the State of Israel (the “Company”), pursuant to its Third Amended and Restated Global Share Incentive Plan (2006) and the appendix thereto setting forth the additional terms applicable to Participants who are Israeli Taxpayers (collectively referred to as the “Plan,” except where the context otherwise requires), hereby grants to the individual listed below (the “Participant”), an award (the “Award”) of performance share units (“Performance Share Units”or“PSUs”). Each PSU represents the right to receive [ ˜ ] unrestricted, fully transferable ordinary shares of the Company (each a “Share,” collectively “Shares”) upon vesting. This Award is subject to all of the terms and conditions as set forth herein, in the Performance Share Unit Award Agreement attached hereto as Exhibit A (the “Agreement”) and the Plan, each of which are incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Agreement.

Participant’s Name:	[ ˜ ]
PSU Number:	[ ˜ ]
Grant Date:	[ ˜ ]
Target Number of PSUs:	[ ˜ ]
Maximum Number of Shares Issuable:	[ ˜ ]
Vesting Commencement Date:	[ ˜ ]
Type of PSUs:	102 Capital Gains Track
Performance Period:	[ ˜ ]
Performance Goals:	[ ˜ ]
Termination of Employment:	Except as otherwise set forth in the Agreement, the Participant shall forfeit all Performance Shares upon the Participant’s Termination of Employment prior to the Measurement Date (as defined in the Agreement).

By his or her acceptance of the Award through the Company's online acceptance procedure (or by his or her signature and the signature of the Company’s representative below), the Participant agrees to be bound by the terms and conditions of the Plan, the Agreement and this Grant Notice. The Participant has reviewed the Agreement, the Plan and this Grant Notice in their entirety and fully understands all provisions of this Grant Notice, the Agreement and the Plan. The Participant also agrees that the Company, in its sole discretion, may satisfy any applicable tax withholding obligations in accordance with Section 2.6 of the Agreement by (i) withholding Shares otherwise issuable to the Participant upon vesting of the PSUs, (ii) instructing a broker on the Participant’s behalf to sell Shares otherwise issuable or issued to the Participant upon vesting of the PSUs and submit the proceeds of such sale to the Company, or (iii) using any other

method permitted by Section 2.6 of the Agreement or the Plan. The Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or relating to the PSUs.

The Participant and the Company further agree that, provided the Participant is an Eligible 102 Participant, the PSUs are intended to be granted under and governed by Section 102(b)(2) and 102(b)(3) of the Income Tax Ordinance (New Version) – 1961 and the Rules promulgated in connection therewith (the “ITO”), and the Trust Agreement between the Company and the Trustee, a copy of which has been provided to the Participant or made available for his/her review. Furthermore, the Participant agrees that the PSUs and underlying Shares will be issued to the Trustee to hold on the Participant’s behalf, pursuant to the terms of the ITO, the Rules and the Trust Agreement. The Participant confirms that he or she is familiar with the terms and provisions of Section 102 of the ITO, particularly the Capital Gains Track described in subsection (b)(2) and (b)(3) thereof, and agrees that he or she will not require the Trustee to release the PSUs or Shares to the Participant, or to sell the Shares to a third party, during the Required Holding Period, unless permitted to do so by applicable law.

If the Participant does not accept or decline the Award within 90 days of the grant date stated above or by such other date that may be communicated to the Participant by the Company. If the Participant declines the Award, the Award will be cancelled and no benefits from the Award nor any compensation or benefits in lieu of the Award will be provided to the Participant.

MELLANOX TECHNOLOGIES, LTD.:	PARTICIPANT:
By:	By:
Print Name:	Print Name:
Title:
Address:	Address:

EXHIBIT A

TO PERFORMANCE SHARE UNIT AWARD GRANT NOTICE

PERFORMANCE SHARE UNIT AWARD AGREEMENT

FOR PARTICIPANTS IN ISRAEL

Pursuant to the Performance Share Unit Award Grant Notice (the “Grant Notice”) to which this Performance Share Unit Award Agreement (the “Agreement”) is attached, Mellanox Technologies, Ltd., a corporation organized under the laws of the State of Israel (the “Company”), has granted to Participant an award (the “Award”) of performance share units (“Performance Share Units”or“PSUs”) under the Company’s Third Amended and Restated Global Share Incentive Plan (2006) and the appendix thereto setting forth the additional terms applicable to Participants who are Israeli Taxpayers (collectively referred to herein as the “Plan,” unless context otherwise requires).

ARTICLE I

GENERAL

1.1Defined Terms. Wherever the following terms are used in this Agreement they shall have the meanings specified below, unless the context clearly indicates otherwise. Capitalized terms not specifically defined herein shall have the meanings specified in the Plan or the Grant Notice, as applicable.

(a)     “Cause” means that, in the reasonable determination of the [Board, IN THE CASE OF THE CHIEF EXECUTIVE OFFICER][Chief Executive Officer, IN THE CASE OF OTHER EMPLOYEES], the Participant:

(i)     has committed an act of fraud or embezzlement or has intentionally committed some other illegal act that has a material adverse impact on the Company or any successor or parent or subsidiary thereof;

(ii)     has been convicted of, or entered a plea of “guilty” or “no contest” to, a felony which causes or may reasonably be expected to cause substantial economic injury to or substantial injury to the reputation of the Company or any subsidiary or affiliate of the Company;

(iii)     has made any unauthorized use or disclosure of confidential information or trade secrets of the Company or any successor or parent or subsidiary thereof that has a material adverse impact on any such entity;

(iv)     has committed any other intentional misconduct that has a material adverse impact on the Company or any successor or parent or subsidiary thereof, or

(v)     has intentionally refused or intentionally failed to act in accordance with any lawful and proper direction or order of the Board or the appropriate individual to whom Participant reports, provided such direction is not materially inconsistent with Participant’s customary duties and responsibilities.

(b)     “Constructive Termination” means that Participant voluntarily terminates Participant’s employment with the Company after any of the following are undertaken without Participant’s express written consent:

(i)     the removal of or a material reduction in the nature or scope of Participant’s responsibilities, or the assignment to Participant of duties that are materially inconsistent with Participant’s position other than a change in reporting relationship;

(ii)     a change in Participant’s direct reporting relationship so that Participant no longer reports directly to the [ ˜ ];

(iii)     a material reduction in Participant’s base salary or target annual bonus opportunity, unless the base salaries and target bonus opportunities of all other Participants are similarly reduced; or

(iv)    a relocation of Participant’s place of employment that increases Participant’s one-way commute by more than thirty (30) miles from such Participant’s place of employment as of immediately prior to such relocation. The termination of Participant’s employment as a result of Participant’s death or disability shall not be deemed to be a Constructive Termination.

Notwithstanding the foregoing, a resignation shall not constitute a “Constructive Termination” unless the event or condition giving rise to such resignation continues more than thirty (30) days following Executive’s written notice of such condition provided to the Company within ninety (90) days of the first occurrence of such event or condition and such resignation is effective within thirty (30) days following the end of such notice period.

(c)     “Covered Termination” means an Involuntary Termination Without Cause or a Constructive Termination, in each case, which occurs within 12 months following a Change in Control.

(d)     “Involuntary Termination Without Cause” means Participant’s dismissal or discharge by the Company other than for Cause. The termination of Participant’s employment as a result of Participant’s death or disability shall not be deemed to be an Involuntary Termination Without Cause.

(e)     “Termination of Consultancy” shall mean the time when the engagement of the Participant as a Consultant to the Company or any affiliate thereof is terminated for any reason, with or without cause, including, but not by way of limitation, by resignation, discharge, death or retirement, but excluding: (i) terminations where there is a simultaneous employment or continuing employment of the Participant by the Company or any affiliate thereof, and (ii) terminations where there is a simultaneous re-establishment of a consulting relationship or continuing consulting relationship between the Participant and the Company or any affiliate thereof. The Administrator, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Consultancy, including, but not by way of limitation, the question of whether a particular leave of absence constitutes a Termination of Consultancy. Notwithstanding any other provision of the Plan, the Company or any affiliate thereof has an absolute and unrestricted right to terminate a Consultant’s service at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in writing.

(f)    “Termination of Directorship” shall mean the time when the Participant, if he or she is or becomes a Non-Employee Director, ceases to be a member of the Board of Directors for any reason, including, but not by way of limitation, a termination by resignation, failure of shareholders to approve appointment, failure to be elected, death or retirement. The Board of Directors, in its sole and absolute

discretion, shall determine the effect of all matters and questions relating to Termination of Directorship with respect to Non-Employee Directors.

(g)    “Termination of Employment” shall mean the time when the employee-employer relationship between the Participant and the Company or any affiliate thereof is terminated for any reason, with or without cause, including, but not by way of limitation, a termination by resignation, discharge, death, disability or retirement; but excluding: (i) terminations where there is a simultaneous reemployment or continuing employment of the Participant by the Company or any affiliate thereof, (ii) terminations where there is a simultaneous establishment of a consulting relationship or continuing consulting relationship between the Participant and the Company or any affiliate thereof, and (iii) terminations where the Participant simultaneously becomes or previously is appointed or elected as a Non-Employee Director. The Administrator, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Employment, including, but not by way of limitation, the question of whether a particular leave of absence constitutes a Termination of Employment.

(h)    “Termination of Services” shall mean the Participant’s Termination of Consultancy, Termination of Directorship or Termination of Employment, as applicable.

1.2General. Each Performance Share Unit shall constitute a non-voting unit of measurement which is deemed for bookkeeping purposes to be equivalent to up to [ ˜ ] Shares (subject to adjustment as provided in Section 11.1 of the Plan) solely for purposes of the Plan and this Agreement. The Performance Share Units shall be used solely as a device for the determination of the payment to eventually be made to the Participant if such Performance Share Units vest pursuant to Section 2.3 hereof. The Performance Share Units shall not be treated as property or as a trust fund of any kind.

1.3Incorporation of Terms of Plan. The PSUs are subject to the terms and conditions of the Plan and the Trust Agreement, entered into between the Company and the Trustee, which are incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control.

ARTICLE II

GRANT OF PERFORMANCE SHARE UNITS

2.1    Grant of PSUs; Compliance with Section 102.

(a)    Effective as of the grant date set forth in the Grant Notice (the “Grant Date”), the Company grants to the Participant the Award as set forth in the Grant Notice.

(b)    If the Award is a 102 Trustee Grant granted to an Eligible 102 Participant, the PSUs will be registered in the name of the Trustee as required by law to qualify under Section 102, for the benefit of the Participant. The Participant shall comply with the ITO, the Rules, and the terms and conditions of the Trust Agreement entered into between the Company and the Trustee. The Trustee will hold the PSUs or the Shares to be issued upon vesting of the PSUs for at least the Required Holding Period, as set forth in the Plan. The Participant hereby undertakes to release the Trustee from any liability in respect of any action or decision duly taken andbona fideexecuted in relation to the Plan, or any PSU granted to him thereunder. The Participant hereby confirms that Participant shall execute any and all documents which the Company or the Trustee may reasonably determine to be necessary in order to comply with the ITO and particularly the Rules.

2.2    Company’s Obligation to Pay. Each PSU constitutes the right to receive up to [ ˜ ] Shares upon vesting, as determined in accordance with Section 2.3 below. Unless and until the PSUs will have vested in accordance with Article II hereof, Participant will have no right to receive Shares under any such PSUs. Prior to actual payment of any vested PSUs, such PSUs will represent an unsecured obligation of the Company, payable (if at all) only from the general assets of the Company.

2.3    Vesting Schedule; Change in Control; Notice to Trustee.

(a)    Subject to Section 2.3(b) hereof and any accelerated vesting provisions in any Executive Severance Benefit Agreement, employment agreement or other agreement between the Participant and the Company, the PSUs awarded by the Grant Notice will vest and become non-forfeitable, and the number of Shares issuable in respect of the PSUs, if any, will be determined, on the date (the “Measurement Date”) on which the Administrator certifies the Company’s achievement of the Performance Goals, which shall occur no later than ninety (90) days after the end of the Performance Period, in accordance with the terms set forth on Exhibit B attached hereto.

(b)    Notwithstanding Section 2.3(a), in the event of a Change in Control that occurs following the beginning of the Performance Period and prior to [ ˜ ], the number of Shares that shall become issuable upon the applicable vesting date (as set forth below) in respect of such PSUs shall equal the greater of (i) the Target Number of PSUs set forth in the Grant Notice and (ii) such number of Shares determined based on the Company’s actual achievement of the Performance Goals as of the Change in Control, with Relative TSR (as defined in Exhibit B) determined using an Ending Average Market Value (as defined in Exhibit B) equal to the price per Share paid to the holder thereof in accordance with the definitive agreement governing the transaction constituting the Change in Control (or in absence of such agreement, the closing price per Share on the last trading day prior to the Change in Control):

(i) If the successor or surviving entity assumes the PSUs, such PSUs shall remain outstanding and eligible to vest as of [ ˜ ] subject to the Participant’s continued service with the Company or any affiliate through such date; provided that in the event of an earlier Covered Termination of Participant’s employment, the PSUs shall vest in full upon such termination; and

(ii) If the successor or surviving entity does not assume the PSUs, the PSUs shall vest in full upon such Change in Control.

(c)    If the Award is a 102 Trustee Grant granted to an Eligible 201 Participant, the Company will notify the Trustee upon vesting of PSUs. The Shares issued upon the vesting of the PSUs shall be controlled by the Trustee for the benefit of Participant, until they are sold or transferred, provided that the Participant first complies with the tax withholding provisions set forth in this Agreement. In the event that the Participant elects to have the Shares transferred to the Participant without selling such Shares, the Participant shall become liable to pay taxes immediately in accordance with the provisions of the ITO.

2.4    Forfeiture, Termination and Cancellation upon Termination of Services. Subject to Section 2.3(b), upon the Participant’s Termination of Services for any or no reason, the then-unvested PSUs subject to this Agreement will be automatically forfeited, terminated and cancelled as of such date without payment of any consideration by the Company, and the Participant, or the Participant’s beneficiary or personal representative, as the case may be, shall have no further rights hereunder. For the avoidance of doubt, except as otherwise provided by the Administrator, no PSUs shall vest following the Participant’s Termination of Services.

2.5    Payment after Vesting. As soon as administratively practicable, and, in any event, within sixty (60) days, following the vesting of any Performance Share Units pursuant to Section 2.3 or Section 3.2, the Company shall deliver to the Participant a number of Shares (either by delivering one or more certificates for such shares or by entering such shares in book entry form, as determined by the Company in its sole discretion and in accordance with Section 2.3, unless such Performance Share Units terminate prior to the given vesting date pursuant to Section 2.4. Notwithstanding the foregoing, in the event Shares cannot be issued pursuant to Section 2.9(a), (b) or (c) hereof, then the Shares shall be issued pursuant to the preceding sentence as soon as administratively practicable after the Administrator determines that Shares can again be issued in accordance with Sections 2.9(a), (b) and (c) hereof; provided, however, that if the Participant is a U.S. federal taxpayer, any such delay shall apply only to the extent permissible under Section 409A (as defined below).

2.6    Responsibility for Taxes.

(a)The Participant acknowledges that, regardless of any action taken by the Company or, if different, the Participant’s employer (the “Employer”) or the Trustee, the ultimate liability for all income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items related to the Participant’s participation in the Plan and legally applicable to the Participant (“Tax-Related Items”) is and remains the Participant’s responsibility. The Participant further acknowledges that the Company and/or the Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Award, including, but not limited to, the grant, vesting or payment of the PSUs, the issuance of Shares, the subsequent sale of Shares and the receipt of any dividends; and (ii) do not commit to and are under no obligation to structure the terms of the PSUs or any aspect of the PSUs to reduce or eliminate the Participant’s liability for Tax-Related Items or achieve any particular tax result. Further, if the Participant has become subject to tax in more than one jurisdiction, the Participant acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

(b)Prior to any relevant taxable or tax withholding event, as applicable, the Participant will pay or make arrangements satisfactory to the Company and/or the Employer to fulfill all Tax-Related Items. In this regard, the Participant authorizes the Company and/or the Employer, or their respective agents, at their discretion, to satisfy any applicable withholding obligations with regard to all Tax-Related Items by one or a combination of the following:

(i)withholding from the Participant’s wages or other cash compensation paid to the Participant by the Company and/or the Employer;

(ii)requiring the Participant to tender payment in cash, check or wire transfer of the Tax-Related Items to the Company, the Employer or the Trustee;

(iii)withholding from proceeds of the sale of Shares acquired upon payment of the PSUs either through a voluntary sale or through a mandatory sale arranged by the Company (on the Participant’s behalf pursuant to this authorization without further consent);

(iv)withholding Shares to be issued upon payment of the PSUs (“net-share withholding”), provided, however, that if the Participant is a Section 16 officer of the Company under the Exchange Act, then applicable withholding obligations for Tax-Related Items will be settled by withholding Shares in accordance with this subsection (iv) or, alternatively, the Committee (as constituted in accordance

with Rule 16b-3 under the Exchange Act)shall establish the method of withholding from alternatives (i)-(iii) herein; and/or

(v)any other method of withholding determined by the Company and permitted by applicable law.

(c)Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or, to the extent permitted under the Plan, other applicable withholding rates, including maximum applicable rates in the Participant’s jurisdiction(s) in which case the Participant will receive a refund of any over-withheld amount in cash and will have no entitlement to the equivalent amount in Shares. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for purposes of calculating the Tax-Related Items and determining the number of Shares that have been delivered in accordance with Section 2.5 above, the Participant will be deemed to have been issued the full number of Shares subject to the vested PSUs, notwithstanding that a number of the Shares are held back solely for the purpose of paying the Tax-Related Items.

(d)The Participant 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-Related Item or interest or penalty thereon, including without limitation, liabilities relating to the necessity to withhold, or to have withheld, any such Tax-Related Items from any payment made to the Participant for which the Participant is responsible. The Company shall not be obligated to deliver any new certificate representing Shares to the Trustee, the Participant or the Participant’s legal representative or to enter such Shares in book entry form unless and until the Participant or the Participant’s legal representative shall have paid or otherwise satisfied in full the amount of all Tax-Related Items.

2.7    Section 409A. The PSUs are not intended to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code (together with any Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the date hereof, “Section 409A”). However, notwithstanding any other provision of the Plan, the Grant Notice or this Agreement, if at any time the Participant is a U.S. federal taxpayer and the Administrator determines that the PSUs (or any portion thereof) may be subject to Section 409A, the Administrator shall have the right in its sole discretion (without any obligation to do so or to indemnify the Participant or any other person for failure to do so) to adopt such amendments to the Plan, this Agreement or the Grant Notice or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Administrator determines are necessary or appropriate either for the PSUs to be exempt from the application of Section 409A or to comply with the requirements of Section 409A. Notwithstanding the foregoing, the Company makes no representation that the grant, vesting, or payment of the PSUs provided for under this Agreement will be exempt from or compliant with Section 409A and the Company will have no liability to the Participant or any other party if such grant, vesting or payment of PSUs is not so exempt or compliant or for any action taken by the Company with respect thereto.

2.8    Rights as Shareholder. The holder of the PSUs shall not be, nor have any of the rights or privileges of, a shareholder of the Company, including, without limitation, any dividend rights and voting rights, in respect of the PSUs and any Shares underlying the PSUs and deliverable hereunder unless and until such Shares shall have been actually issued by the Company and held of record by such holder (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 11.1 of the Plan.

2.9    Conditions to Delivery of Shares. Subject to Section 19 of the Plan, the Shares deliverable hereunder, or any portion thereof, may be either previously authorized but unissued Shares or issued Shares which have then been reacquired by the Company. Such Shares shall be fully paid and non-assessable. The Company shall not be required to issue or deliver any Shares deliverable hereunder or portion thereof prior to fulfillment of all of the following conditions:

(a)    The admission of such Shares to listing on all stock exchanges on which such Shares are then listed;

(b)    The completion of any registration or other qualification of such Shares under any applicable law, rule or regulation, which the Administrator shall, in its absolute discretion, deem necessary or advisable;

(c)    The obtaining of any approval or other clearance from any local, state, federal or foreign governmental agency which the Administrator shall, in its absolute discretion, determine to be necessary or advisable;

(d)    The receipt by the Company, the Employer or the Trustee of any Tax-Related Items required to be withheld, as further described in Section 2.6 hereof; and

(e)    The lapse of such reasonable period of time following the vesting of any Performance Share Units as the Administrator may from time to time establish for reasons of administrative convenience.

ARTICLE III

OTHER PROVISIONS

3.1    Administration. The Administrator shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken and all interpretations and determinations made by the Administrator in good faith shall be final and binding upon the Participant, the Company and all other interested persons. No member of the Administrator shall not be personally liable for any action, determination or interpretation made in good faith with respect to the Plan, this Agreement or the PSUs.

3.2     Adjustments Upon Specified Events. Provided that the PSUs are not “nonqualified deferred compensation” within the meaning of Section 409A, the Administrator may accelerate payment and vesting of the Performance Share Units in such circumstances as it, in its sole discretion, may determine. In addition, upon the occurrence of certain events relating to the Shares contemplated by Section 11.1 of the Plan (including, without limitation, an extraordinary cash dividend on such Shares), the Administrator shall make such adjustments the Administrator deems appropriate in the number of Performance Share Units then outstanding and the number and kind of securities that may be issued in respect of the Performance Share Units. The Participant acknowledges that the PSUs are subject to modification and termination in certain events as provided in this Agreement and Articles 11 and 13 of the Plan.

3.3    Grant is Not Transferable. During the lifetime of the Participant, this grant and the rights and privileges conferred hereby will not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and will not be subject to sale under execution, attachment or

similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of the PSUs, or any right or privilege conferred hereby, or upon any attempted sale under any execution, attachment or similar process, the PSUs and the rights and privileges conferred hereby immediately will become null and void. Notwithstanding anything herein to the contrary, this Section 3.3 shall not prevent transfers by will or applicable laws of descent and distribution.

3.4    Binding Agreement. Subject to the limitation on the transferability of the PSUs contained herein, this Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.

3.5    Notices. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company at Corporate_Secretary@mellanox.com or the address given beneath the signature of Company’s authorized officer on the Grant Notice, and any notice to be given to the Participant shall be addressed to the Participant at the address given beneath the Participant’s signature on the Grant Notice. By a notice given pursuant to this Section 3.5, either party may hereafter designate a different address for notices to be given to that party. Any notice which is required to be given to the Participant shall, if the Participant is then deceased, be given to the person entitled to the PSUs by written notice under this Section 3.5. Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.

3.6    Titles. Titles provided herein are for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

3.7    Governing Law; Severability. The laws of the State of Israel shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflict of laws. The Participant may only exercise his or her rights in respect of the Plan, this Agreement and these PSUs to the extent that it would be lawful to do so, and the Company would not, in connection with this Agreement, be in breach of the laws of any jurisdiction to which the Participant may be subject. The Participant shall be solely responsible to seek advice as to the laws of any jurisdiction to which he or she may be subject, and participation in the Plan by the Participant shall be on the basis of a warranty by the Participant that the Participant may lawfully so participate without the Participant being in breach of the laws of any such jurisdiction. In addition, the provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

3.8    Conformity to Securities Laws. Participant acknowledges that the Plan and this Agreement are intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the U.S. Securities and Exchange Commission thereunder, and state securities laws and regulations. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the PSUs are granted, only in such a manner as to conform to such laws, rules and regulations, and the Company is under no obligation to register or qualify the Shares with any state, federal or foreign securities commission or to seek approval or clearance from any governmental authority for the issuance or sale of the Shares. Further, the Participant understands that, to the extent permitted by applicable law, the Company shall have the unilateral authority to amend the Plan and this Agreement without the Participant’s consent to the extent necessary to comply with securities or other laws applicable to the issuance of Shares.

3.9    Amendments, Suspension and Termination. To the extent permitted by the Plan, this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Administrator, provided, however, that, except as may otherwise be provided by the Plan and this Agreement, no amendment, modification, suspension or termination of this Agreement shall adversely affect the PSUs in any material way without the prior written consent of the Participant.

3.10    Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth in Sections 3.2 and 3.3 hereof, this Agreement shall be binding upon the Participant and his or her heirs, executors, administrators, successors and assigns.

3.11    Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan or this Agreement, if the Participant is subject to Section 16 of the Exchange Act, the Plan, the PSUs and this Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, the Company shall have unilateral authority to amend this Agreement without the Participant’s consent to the extent necessary to comply with such applicable exemptive rule.

3.12    Not a Contract of Employment. Nothing in this Agreement or in the Plan shall confer upon the Participant any right to continue to serve as an employee or other service provider of the Company or any affiliate thereof, or be interpreted as forming or amending an employment or service contract with the Company or any affiliate thereof and shall not interfere with or restrict in any way the rights of the Company and its affiliates, which rights are hereby expressly reserved, to discharge or terminate the services of the Participant at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in a written agreement between the Company or an affiliate thereof and the Participant.

3.13    Entire Agreement. The Plan, the Grant Notice and this Agreement (including all Exhibits thereto) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and the Participant with respect to the subject matter hereof.

3.14    Limitation on Participant’s Rights. Participation in the Plan confers no rights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Company as to amounts payable and shall not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets. The Participant shall have only the rights of a general unsecured creditor of the Company with respect to amounts credited and benefits payable, if any, with respect to the PSUs, and rights no greater than the right to receive the Shares as a general unsecured creditor with respect to PSUs, as and when payable hereunder.

3.15    Nature of Grant. In accepting the grant of PSUs, the Participant acknowledges, understands and agrees that:

(a)the Plan is established voluntarily by the Company, it is discretionary in nature, and may be amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan;

(b)the grant of the PSUs is exceptional, voluntary and occasional and does not create any contractual or other right to receive future grants of performance share units, or benefits in lieu of performance share units, even if PSUs have been granted in the past;

(c)all decisions with respect to future performance share units or other grants, if any, will be at the sole discretion of the Company;

(d)the Participant is voluntarily participating in the Plan;

(e)the PSUs and any Shares subject to the PSUs, and the income from and value of same, are not intended to replace any pension rights or compensation;

(f)unless otherwise agreed with the Company, the PSUs and the Shares subject to the PSUs, and the income from and value of same, are not granted as consideration for, or in connection with, the service the Participant may provide as a director of an affiliate;

(g)the PSUs and any Shares subject to the PSUs, and the income from and value of same, are not part of normal or expected compensation for any purpose, including, without limitation, calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, holiday pay, pension or retirement or welfare benefits or similar payments;

(h)the future value of the Shares underlying the PSUs is unknown, indeterminable, and cannot be predicted with certainty;

(i)no claim or entitlement to compensation or damages shall arise from forfeiture of the PSUs resulting from the termination of the Participant’s employment or service relationship (for any reason whatsoever, whether or not later found to be invalid or in breach of employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any);

(j)for purposes of the PSUs, the date of the Participant’s Termination of Services shall be the date the Participant is no longer actively providing services to the Company or any affiliate thereof (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where the Participant is employed or providing services or the terms of Participant’s employment or service agreement, if any), and the Participant’s right to vest in the PSUs under the Plan, if any, will terminate as of such date and will not be extended by any notice period (e.g., the Participant’s period of service would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where Participant is employed or providing services or the terms of Participant’s employment or service agreement, if any). The Administrator shall have the exclusive discretion to determine when the Participant is no longer actively providing services for purposes of the PSUs (including whether the Participant may still be considered to be providing services while on a leave of absence); and

(k)neither the Company, the Employer nor any affiliate thereof shall be liable for any foreign exchange rate fluctuation between the Participant’s local currency and the United States Dollar that may affect the value of the PSUs or of any amounts due to the Participant pursuant to the payment of the PSUs or the subsequent sale of any Shares acquired upon settlement.

3.16    Data Privacy.

(a)    Data Collection and Usage. The Company and the Employer may collect, process and use certain personal information about the Participant, including, but not limited to, the Participant’s name, home address and telephone number, email address, date of birth, social insurance number, passport or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all Performance Share Units or any other entitlement to shares of stock awarded,

canceled, exercised, vested, unvested or outstanding in the Participant’s favor (“Data”), for the purposes of implementing, administering and managing the Plan. The legal basis, where required, for the processing of Data is the Participant’s consent.

(b)    Stock Plan Administration Service Providers. The Company transfers Data to E*Trade Corporate Financial Services, Inc. and its affiliated companies (“E*Trade”), an independent service provider based in the United States, which is assisting the Company with the implementation, administration and management of the Plan. In the future, the Company may select a different service provider and share Data with such other provider serving in a similar manner. The Participant may be asked to agree on separate terms and data processing practices with the service provider, with such agreement being a condition to the ability to participate in the Plan.

(c)International Data Transfers. The Company and its service providers are based in Israel and the United States. The Participant’s country or jurisdiction may have different data privacy laws and protections than Israel and the United States. The Company's legal basis, where required, for the transfer of Data is Participant’s consent.

(d)    Data Retention. The Company will hold and use the Data only as long as is necessary to implement, administer and manage the Participant’s participation in the Plan, or as required to comply with legal or regulatory obligations, including under tax and security laws.

(e)    Voluntariness and Consequences of Consent Denial or Withdrawal. Participation in the Plan is voluntary and the Participant is providing the consents herein on a purely voluntary basis. If the Participant does not consent, or if the Participant later seeks to revoke the Participant’s consent, the Participant’s salary from or employment and career with the Employer will not be affected; the only consequence of refusing or withdrawing the Participant’s consent is that the Company would not be able to grant this Award or other awards to the Participant or administer or maintain such awards.

By accepting the Award and indicating consent via the Company’s online acceptance procedure, the Participant is declaring that he or she agrees with the data processing practices described herein and consents to the collection, processing and use of Data by the Company and the transfer of Data to the recipients mentioned above, including recipients located in countries which may not have the same level of protection as the Participant’s country, for the purposes described above.

Finally, the Participant understands that the Company may rely on a different legal basis for the processing or transfer of Data in the future and/or request that the Participant provide another data privacy consent form. If applicable and upon request of the Company, the Participant agrees to provide an executed acknowledgement or data privacy consent form to the Employer or the Company (or any other acknowledgements, agreements or consents that may be required by the Employer or the Company) that the Company and/or the Employer may deem necessary to obtain under the data privacy laws in the Participant’s country, either now or in the future. The Participant understands that he or she will not be able to participate in the Plan if he or she fails to execute any such acknowledgement, agreement or consent requested by the Company and/or the Employer.

3.17    Language. The Participant acknowledges that he or she is proficient in the English language, or has consulted with an advisor who is sufficiently proficient in English, so as to allow the Participant to understand the terms and conditions of this Agreement. If the Participant has received this Agreement, or any other documents related to the PSUs and/or the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.

3.18    Insider Trading Restrictions / Market Abuse Laws. The Participant may be subject to insider trading restrictions and/or market abuse laws in applicable jurisdictions, including, but not limited to, the United States and the Participant’s country, which may affect the Participant’s ability to accept, acquire, sell or otherwise dispose of Shares, rights to Shares (e.g., PSUs) or rights linked to the value of Shares under the Plan during such times as the Participant is considered to have “inside information” regarding the Company (as defined by the laws in the applicable jurisdictions). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. Neither the Company nor any affiliate thereof will be responsible for such restrictions or liable for the failure on the Participant’s part to know and abide by such restrictions. The Participant should consult with his or her own personal legal advisers to ensure compliance with applicable laws.

3.19    Foreign Asset / Account and Exchange Control Requirements. Depending on the Participant’s country, the Participant may be subject to foreign asset/account and/or exchange control reporting or other requirements which may affect the Participant’s ability to acquire or hold PSUs or Shares under the Plan or cash received from participating in the Plan in a brokerage or bank account outside the Participant’s country. The Participant may be required to report such PSUs, Shares, accounts, assets or transactions to the tax or other authorities in his or her country and/or repatriate funds received in connection with the Plan to the Participant's country within a certain time period or according to certain procedures. The Participant acknowledges that it is his or her responsibility to comply with any applicable requirements, and that the Participant should consult his or her own personal tax and legal advisors to ensure compliance with applicable laws.

3.20    Electronic Delivery, Acceptance and Participation. The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means and the Participant hereby consents to receive such documents by electronic delivery. The Participant agrees that his or her electronic acceptance of the Award through the Company’s online acceptance procedure constitutes his or her acceptance of the Award and further agrees to participate in the Plan through an online or electronic system established and maintained by the Company or a third party designated by the Company.

3.21    Imposition of Other Requirements. The Company reserves the right to impose other requirements on the Participant’s participation in the Plan, on the PSUs and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require the Participantto sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.

3.22    Waiver. The Participant acknowledges that a waiver by the Company of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by the Participant or any other Participant.

EX-31.1

EXHIBIT 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Eyal Waldman, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Mellanox Technologies, Ltd.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 3, 2018

By:	/s/ EYAL WALDMAN
	Name:	Eyal Waldman
	Title:	President and Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

Certification of Interim Principal Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Eric Johnson, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Mellanox Technologies, Ltd.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 3, 2018

By:	/s/ Eric Johnson
	Name:	Eric Johnson
	Title:	V.P., Corporate Controller
		(Interim Principal Financial and Accounting Officer)

EX-32.1

EXHIBIT 32.1

Certification of Chief Executive Officer

Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

I, Eyal Waldman, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(i) the Quarterly Report of Mellanox Technologies, Ltd. (the “Company”) on Form 10-Q for the quarter ended June 30,2018 (the “Form 10-Q”), fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

In Witness Whereof, the undersigned has set his hand hereto as of August 3, 2018.

By:		/s/ EYAL WALDMAN
	Name:	Eyal Waldman
	Title:	President and Chief Executive Officer
		(Principal Executive Officer)

Dated: August 3, 2018

This certification accompanies the Form 10-Q to which it relates to, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by references into any filings of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

EX-32.2

EXHIBIT 32.2

Certification of Interim Principal Financial Officer

Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

I, Eric Johnson, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(i) the Quarterly Report of Mellanox Technologies, Ltd. (the “Company”) on Form 10-Q for the quarter ended June 30,2018 (the “Form 10-Q”), fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

In Witness Whereof, the undersigned has set his hand hereto as of August 3, 2018.

By:		/s/ Eric Johnson
	Name:	Eric Johnson
	Title:	V.P., Corporate Controller
		(Interim Principal Financial and Accounting Officer)

Dated: August 3, 2018

This certification accompanies the Form 10-Q to which it relates to, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by references into any filings of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2018	Jul. 27, 2018
Document and Entity Information
Entity Registrant Name	Mellanox Technologies, Ltd.
Trading Symbol	MLNX
Entity Central Index Key	0001356104
Document Type	10-Q
Document Period End Date	Jun. 30, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		52,970,258
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q2

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 63,422	$ 62,473
Short-term investments	219,225	211,281
Accounts receivable, net	155,664	154,213
Inventories	94,484	64,657
Other current assets	12,007	14,295
Total current assets	544,802	506,919
Property and equipment, net	106,746	109,919
Severance assets	17,111	18,302
Intangible assets, net	208,450	228,195
Goodwill	473,916	472,437
Deferred taxes and other long-term assets	98,744	66,162
Total assets	1,449,769	1,401,934
Current liabilities:
Accounts payable	71,137	59,090
Accrued liabilities	124,792	114,058
Deferred revenue	20,719	23,485
Total current liabilities	216,648	196,633
Accrued severance	21,464	23,205
Deferred revenue	17,791	17,820
Term debt	0	72,761
Other long-term liabilities	32,117	34,067
Total liabilities	288,020	344,486
Commitments and Contingencies - (see Note 8)
Shareholders’ equity:
Ordinary shares: NIS 0.0175 par value, 200,000 shares authorized, 52,931 and 51,488 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively	229	221
Additional paid-in capital	923,202	873,979
Accumulated other comprehensive income (loss)	(2,182)	1,618
Retained earnings	240,500	181,630
Total shareholders’ equity	1,161,749	1,057,448
Total liabilities and shareholders' equity	$ 1,449,769	$ 1,401,934

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - ₪ / shares	Jun. 30, 2018	Dec. 31, 2017
Statement of Financial Position [Abstract]
Ordinary shares, par value (in NIS per share)	₪ 0.0175	₪ 0.0175
Ordinary shares, shares authorized (in shares)	200,000,000	200,000,000
Ordinary shares, shares issued (in shares)	52,931,000	51,488,000
Ordinary shares, shares outstanding (in shares)	52,931,000	51,488,000

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Income Statement [Abstract]
Total revenues	$ 268,462	$ 211,962	$ 519,462	$ 400,613
Cost of revenues	103,668	73,427	192,666	137,877
Gross profit	164,794	138,535	326,796	262,736
Operating expenses:
Research and development	87,152	92,348	173,578	180,839
Sales and marketing	35,673	38,110	75,167	73,867
General and administrative	23,635	12,476	40,151	24,995
Restructuring charges	1,774	0	9,361	0
Total operating expenses	148,234	142,934	298,257	279,701
Income (loss) from operations	16,560	(4,399)	28,539	(16,965)
Interest expense	(871)	(1,996)	(2,042)	(3,989)
Other income, net	533	827	1,171	1,510
Interest and other, net	(338)	(1,169)	(871)	(2,479)
Income (loss) before taxes on income	16,222	(5,568)	27,668	(19,444)
Provision for (benefit from) taxes on income	(304)	2,423	(26,701)	791
Net income (loss)	$ 16,526	$ (7,991)	$ 54,369	$ (20,235)
Net income (loss) per share - basic (in USD per share)	$ 0.31	$ (0.16)	$ 1.04	$ (0.41)
Net income (loss) per share - diluted (in USD per share)	$ 0.30	$ (0.16)	$ 1.00	$ (0.41)
Shares used in computing net income (loss) per share:
Basic (in shares)	52,615	50,056	52,219	49,698
Diluted (in shares)	54,466	50,056	54,149	49,698

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ 16,526	$ (7,991)	$ 54,369	$ (20,235)
Other comprehensive income (loss), net of tax:
Change in unrealized gains (losses) on available-for-sale securities, net of tax	213	(47)	(80)	22
Change in unrealized gains (losses) on derivative contracts, net of tax	(2,382)	498	(3,720)	4,742
Other comprehensive income (loss), net of tax	(2,169)	451	(3,800)	4,764
Total comprehensive income (loss), net of tax	$ 14,357	$ (7,540)	$ 50,569	$ (15,471)

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Cash flows from operating activities:
Net income (loss)	$ 54,369	$ (20,235)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	52,674	50,814
Deferred income taxes	(28,085)	(704)
Share-based compensation	29,890	32,433
Gain on investments, net	(1,828)	(1,701)
Impairment and loss on disposal of property and equipment	1,567	0
Changes in assets and liabilities:
Accounts receivable	(1,451)	(7,780)
Inventories	(30,598)	(7,679)
Prepaid expenses and other assets	718	(2,667)
Accounts payable	12,530	48
Accrued liabilities and other liabilities	12,334	(1,141)
Net cash provided by operating activities	102,120	41,388
Cash flows from investing activities:
Purchase of severance-related insurance policies	(612)	(651)
Purchase of short-term investments	(82,486)	(69,110)
Proceeds from sales of short-term investments	13,893	74,359
Proceeds from maturities of short-term investments	62,396	13,590
Proceeds from sales of property and equipment	3,239	0
Purchase of property and equipment	(20,078)	(27,120)
Purchase of intangible assets	(6,383)	(1,647)
Purchase of investments in private companies	(6,000)	(11,000)
Acquisition, net of cash acquired	(7,129)	0
Net cash used in investing activities	(43,160)	(21,579)
Cash flows from financing activities:
Principal payments on term debt	(74,000)	(30,000)
Payments on capital lease and intangible asset financings	(3,446)	(3,263)
Proceeds from issuances of ordinary shares through employee equity incentive plans	19,341	12,396
Net cash used in financing activities	(58,105)	(20,867)
Net increase (decrease) in cash, cash equivalents, and restricted cash	855	(1,058)
Cash, cash equivalents, and restricted cash at beginning of period	70,498	56,780
Cash, cash equivalents, and restricted cash at end of period	71,353	55,722
Supplemental disclosure of non-cash investing and financing activities
Intangible assets financed with debt	800	3,877
Unpaid additions to property and equipment	609	6,003
Transfer from inventory to property and equipment	$ 771	$ 1,241

XML

THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Company

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

Principles of presentation

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

The unaudited condensed consolidated financial statements included in this quarterly report on Form 10-Q have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The year-end balance sheet data were derived from audited consolidated financial statements, but do not include all disclosures required by accounting principles generally accepted in the United States ("GAAP"). Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures contained in this quarterly report comply with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended, for a quarterly report on Form 10-Q and are adequate to make the information presented not misleading. The unaudited condensed consolidated financial statements included herein reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the financial position, results of operations and cash flows for the interim periods presented. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed with the SEC on February 16, 2018. The results of operations for the six months endedJune 30, 2018 are not necessarily indicative of the results to be anticipated for the entire year ending December 31, 2018 or thereafter.

Risks and uncertainties

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

Use of estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements and the reported amounts of net revenue and expenses in the reporting periods. The Company regularly evaluates estimates and assumptions related to revenue recognition, allowances for doubtful accounts, allowances for price adjustments, investment valuation, warranty reserves, inventory reserves, share-based compensation expense, long-term asset valuations, useful lives of property, equipment, and intangibles, accounting for business combinations, goodwill and purchased intangible asset valuation, investments in privately-held companies, accounting and fair value of financial instruments and derivatives, deferred income tax asset valuation, uncertain tax positions, and litigation and other loss contingencies. These estimates and assumptions are based on current facts, historical experience and various other factors that the Company believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenue, costs and expenses that are not readily apparent from other sources. The actual results that the Company experiences may differ materially and adversely from the Company's original estimates. To the extent there are material differences between the estimates and actual results, the Company's future results of operations will be affected.

Significant accounting policies

Other than the changes discussed below, there have been no changes in the Company’s significant accounting policies that were disclosed in its Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed with the SEC on February 16, 2018.

On January 1, 2018, the Company adopted Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers (ASC 606-10), using the modified retrospective method. Prior to the adoption of ASC 606-10, the Company deferred the recognition of revenue and the cost of revenue from sales to distributors until the distributors reported that they had sold the products to their customers (known as “sell though” revenue recognition). Under ASC 606-10, the Company recognizes revenue on sales to all distributors upon shipment and transfer of control (known as “sell-in” revenue recognition), net of estimated allowances for price adjustments. As a result of this adoption, the Company revised its accounting policy for revenue recognition as detailed below.

Revenue Recognition

The Company recognizes revenue when (or as) it satisfies performance obligations by transferring promised products or services to its customers in an amount that reflects the consideration the Company expects to receive. The Company applies the following five steps: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied.

The Company considers customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts with a customer. For each contract, the Company considers the promise to transfer tangible products, extended warranty and post-contract customer support, each of which are distinct, to be the identified performance obligations. In determining the transaction price, the Company evaluates whether the price is subject to rebates and adjustments to determine the net consideration to which the Company expects to receive. As the Company’s standard payment terms are less than one year, the contracts have no significant financing component. The Company allocates the transaction price to each distinct performance obligation based on their relative standalone selling price. Revenue from tangible products is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which typically occurs at shipment. The revenues from fixed-price support or maintenance contracts, including extended warranty contracts and software post-contract customer support agreements, are recognized ratably over the contract period and the costs associated with these contracts are recognized as incurred. The Company's standard arrangements with its customers typically do not allow for rights of return.

The Company maintains inventory, or hub arrangements with certain customers. Pursuant to these arrangements, the Company delivers products to a customer or a designated third party warehouse based upon the customer's projected needs, but does not recognize product revenue unless and until the customer reports it has removed the Company's product from the warehouse to be incorporated into its end products.

A portion of the Company’s sales are made to distributors under agreements which contain price protection provisions. Revenue from sales to distributors is recognized upon shipment and transfer of control, net of estimated allowances for price adjustments. Frequently, distributors submit distribution price adjustment (“DPA”) claims to the Company to adjust the distributor’s cost from the standard price to the pre-approved lower price. After the Company verifies the DPA claim, a credit memo is issued to the distributor. The Company records an allowance for these unprocessed DPA claims and for estimated future DPA claims as a reduction of revenue and a reduction of accounts receivable. The allowance is recorded as a reduction to revenue in the same period that the related revenue is recorded and is calculated based on specific authorized DPA claims and an analysis of historical DPA claims, at the distributor level, over a period of time considered adequate to account for current pricing and business trends.

Most of the Company’s distributors are entitled to a limited right of return related to stock rotation. Distributors have the right to return a limited amount of product not to exceed a percentage of distributor’s prior quarter's net purchases. However, a simultaneous, compensation order of equal or greater value must be placed by distributor within the same quarter of the return. Therefore, no stock rotation reserves are recorded.

Restricted cash

The Company maintains certain cash amounts that are restricted as to withdrawal or use over the long-term. The cash is securing bank guarantees primarily issued against long-term tenancy agreements. The long-term restricted cash balance of $7.9 million was reported in other long-term assets on the balance sheet as of June 30, 2018, and was included in the ending balance of cash, cash equivalents and restricted cash in the statement of cash flows for the six months endedJune 30, 2018. There was no restricted cash as of June 30,2017. The following table provides a reconciliation of the cash and cash equivalents balances reported on the balance sheets and the cash, cash equivalents and restricted cash balances reported in the statements of cash flows:

	June 30,
	2018		2017
	(In thousands)
Cash and cash equivalents, as reported on the balance sheets	$	63,422	$	55,722
Restricted cash in other long-term assets, as reported on the balance sheets	7,931		—
Cash, cash equivalents, and restricted cash, as reported in the statements of cash flows	$	71,353	$	55,722

Concentration of credit risk

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Dell Technologies Inc. ("Dell")	14	%	11	%	12	%	12	%
Hewlett Packard Enterprise ("HPE")	13	%	14	%	15	%	13	%
IBM	*		15	%	*		*
____________________

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

	June 30, 2018		December 31, 2017
HPE	16	%	13	%
____________________

Product warranty

The following table provides changes in the product warranty accrual for the six months endedJune 30,2018 and 2017:

	Six Months Ended June 30,
	2018			2017
	(in thousands)
Balance, beginning of the period	$	889		$	1,474
New warranties issued during the period	856			756
Reversal of warranty reserves	—			(350		)
Settlements during the period	(784		)	(745		)
Balance, end of the period	961			1,135
Less: long-term portion of product warranty liability	(173		)	(180		)
Current portion, end of the period	$	788		$	955

Net income (loss) per share

The following table sets forth the computation of basic and diluted net income (loss) per share for the three and six months ended June 30,2018 and 2017:

	Three Months Ended June 30,					Six Months Ended June 30,
	2018		2017			2018		2017
	(in thousands, except per share data)
Net income (loss)	$	16,526	$	(7,991	)	$	54,369	$	(20,235	)
Basic and diluted shares:
Weighted average ordinary shares outstanding	52,615		50,056			52,219		49,698
Effect of dilutive shares	1,851		—			1,930		—
Shares used to compute diluted net income (loss) per share	54,466		50,056			54,149		49,698
Net income (loss) per share — basic	$	0.31	$	(0.16	)	$	1.04	$	(0.41	)
Net income (loss) per share — diluted	$	0.30	$	(0.16	)	$	1.00	$	(0.41	)

The Company excluded 0.2 million potentially dilutive share options and restricted share units ("RSUs") from the computation of diluted net income per share for both the three and six months ended June 30,2018, and 5.5 million outstanding share options and RSUs from the computation of diluted net loss per share for both the three and six months ended June 30,2017, because including them would have had an anti-dilutive effect.

Adoption of new accounting principles

In May 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606). The standard replaced the revenue recognition guidance in U.S. GAAP under Topic 605, and was required to be applied retrospectively to each prior period presented, or applied using a modified retrospective method with the cumulative effect recognized in the beginning retained earnings during the period of initial application. Subsequently, the FASB issued several additional ASUs related to ASU No. 2014-09, collectively they are referred to as the “new revenue standards”, which became effective for the Company beginning January 1, 2018. The Company adopted the standard using the modified retrospective method. See Note 2 for details about the impact from adopting the new revenue standard and other required disclosures.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 amended various aspects of the recognition, measurement, presentation, and disclosure of financial instruments, and became effective for the Company beginning January 1, 2018. One aspect that may have a material impact on the Company's consolidated financial statements relates to the measurement of its equity investments in privately-held companies whose fair values are not readily determinable. With the election to use the measurement alternative (as opposed to fair value), the Company measures these equity investments at cost, less impairments, adjusted by observable price changes. No gain or loss was recorded in the six months endedJune 30, 2018 as a result of remeasuring the Company's equity investments in privately-held companies.

Recent accounting pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The standard requires lessees to recognize almost all leases on the balance sheet as a right-of-use asset and a lease liability and requires leases to be classified as either an operating or a finance type lease. The standard excludes leases of intangible assets or inventory. Early adoption of the standard is allowed. The standard becomes effective for the Company beginning January 1, 2019. The Company expects that the adoption of the standard will have a material impact on its consolidated balance sheets due to the recognition of the right-of-use assets and lease liabilities related to the Company's operating leases. The standard is not expected to have a material impact on the Company's results of operations or cash flows. The Company is continuing its assessment, which may identify additional impacts this guidance will have on its consolidated financial statements and disclosures.

XML

REVENUE

6 Months Ended

Jun. 30, 2018

Revenue from Contract with Customer [Abstract]

REVENUE

REVENUE

On January 1, 2018, the Company adopted ASC Topic 606-10 using the modified retrospective method and applied the standard to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606-10, while prior period amounts are not adjusted and continue to be reported in accordance with the historic accounting under Topic 605.

The Company recognized the cumulative effect of initially adopting Topic 606-10 as an adjustment to the opening balance of retained earnings as of January 1, 2018. Distributor revenue was recognized using the sell-through method under Topic 605, while such revenue is recognized using the sell-in method under Topic 606-10, which primarily contributed to the adjustment to the opening balance of retained earnings as well as the impact of adoption disclosed in the tables below.

The cumulative effect of the changes made to the consolidated balance sheet as of January 1, 2018 for the adoption of Topic 606-10 were as follows:

	December 31, 2017		Adjustments			January 1, 2018
	(in thousands)
Deferred revenue, short term	$	23,485	$	(4,501	)	$	18,984
Retained earnings	$	181,630	$	4,501		$	186,131

In accordance with Topic 606-10, the disclosure of the impact of adoption on the consolidated balance sheet as of June 30, 2018 was as follows:

	As Reported		Impact of Adoption			Amounts under Topic 605
	(in thousands)
Condensed Consolidated Balance Sheet
Deferred revenue, short term	$	20,719	$	10,900		$	31,619
Retained earnings	$	240,500	$	(10,900	)	$	229,600

In accordance with Topic 606-10, the disclosure of the impact of adoption on the consolidated statement of operations and cash flows was as follows:

	Three Months Ended June 30, 2018
	As Reported		Impact of Adoption			Amounts under Topic 605
	(in thousands, except per share data)
Condensed Consolidated Statement of Operations
Total revenues	$	268,462	$	(2,280	)	$	266,182
Cost of revenues	103,668		(100		)	103,568
Net income	$	16,526	$	(2,180	)	$	14,346
Earnings per share
Basic	$	0.31	$	(0.04	)	$	0.27
Diluted	$	0.30	$	(0.04	)	$	0.26

	Six Months Ended June 30, 2018
	As Reported		Impact of Adoption			Amounts under Topic 605
	(in thousands, except per share data)
Condensed Consolidated Statement of Operations
Total revenues	$	519,462	$	(9,099	)	$	510,363
Cost of revenues	192,666		(2,700		)	189,966
Net income	$	54,369	$	(6,399	)	$	47,970
Earnings per share
Basic	$	1.04	$	(0.12	)	$	0.92
Diluted	$	1.00	$	(0.12	)	$	0.88
Condensed Consolidated Statement of Cash Flows
Cash flows from operating activities:
Net income	$	54,369	$	(6,399	)	$	47,970
Accrued liabilities and other liabilities	$	12,334	$	6,399		$	18,733

Revenues by geographic region are as follows (prior period amounts have not been adjusted under the modified retrospective method):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
	(in thousands)
United States	$	101,396	$	80,703	$	197,656	$	159,567
China	54,181		31,990		110,395		65,191
Europe	41,454		38,828		77,450		85,233
Other Americas	33,112		31,358		60,852		42,248
Other Asia	38,319		29,083		73,109		48,374
Total revenue	$	268,462	$	211,962	$	519,462	$	400,613

The following tables represent our total revenues for the three months ended June 30,2018 and 2017 by product type and interconnect protocol (prior period amounts have not been adjusted under the modified retrospective method):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
	(in thousands)
ICs	$	28,934	$	34,063	$	57,521	$	76,485
Boards	136,708		80,425		254,759		144,717
Switch systems	57,074		56,189		112,721		103,335
Cables, accessories and other	45,746		41,285		94,461		76,076
Total revenue	$	268,462	$	211,962	$	519,462	$	400,613

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
	(in thousands)
InfiniBand:
EDR	$	59,319	$	59,436	$	115,265	$	99,059
FDR	35,649		42,978		77,397		92,807
QDR/DDR/SDR	7,143		5,697		12,587		13,230
Total	102,111		108,111		205,249		205,096
Ethernet	157,470		87,023		294,418		167,500
Other	8,881		16,828		19,795		28,017
Total revenue	$	268,462	$	211,962	$	519,462	$	400,613

The Company recognizes contract liabilities, or deferred revenues, when it receives advance payments from customers before performance obligations primarily related to extended warranty and post-contract customer support have been performed. Advance payments are received at the beginning of the service period and the related deferred revenues are reclassified to revenue ratably over the service period. The balance of deferred revenues approximates the aggregate amount of the transaction price allocated to the unsatisfied performance obligations at the end of reporting period. The Company expects to recognize the long-term portion of deferred revenue over the remaining service period of up to five years.

The following table presents the significant changes in the deferred revenue balance during the six months endedJune 30,2018:

	(in thousands)
Balance, beginning of the period	$	36,804
New performance obligations	14,578
Reclassification to revenue as a result of satisfying performance obligations	(12,872		)
Balance, end of the period	38,510
Less: long-term portion of deferred revenue	17,791
Current portion, end of the period	$	20,719

Because all performance obligations in the Company’s contracts with customers, other than extended warranty and post-contract customer support, relate to contracts with a duration of less than one year, the Company has elected to apply the optional exemption and is not required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period.

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BALANCE SHEET COMPONENTS

6 Months Ended

Jun. 30, 2018

Balance Sheet Related Disclosures [Abstract]

BALANCE SHEET COMPONENTS

BALANCE SHEET COMPONENTS:

	June 30, 2018			December 31, 2017
	(in thousands)
Accounts receivable, net:
Accounts receivable, gross	$	156,296		$	154,845
Less: allowance for doubtful accounts	(632		)	(632		)
	$	155,664		$	154,213
Inventories:
Raw materials	$	13,560		$	12,656
Work-in-process	42,253			22,769
Finished goods	38,671			29,232
	$	94,484		$	64,657
Other current assets:
Prepaid expenses	$	5,588		$	7,518
Derivative contracts receivable	—			982
VAT receivable	3,394			2,259
Other	3,025			3,536
	$	12,007		$	14,295
Property and equipment, net:
Computer, equipment, and software	$	173,070		$	164,707
Furniture and fixtures	2,882			3,198
Leasehold improvements	49,605			47,262
	225,557			215,167
Less: Accumulated depreciation and amortization	(118,811		)	(105,248		)
	$	106,746		$	109,919
Deferred taxes and other long-term assets:
Equity investments in private companies	$	35,255		$	29,255
Deferred taxes	52,648			24,563
Long-term restricted cash	7,931			8,025
Other assets	2,910			4,319
	$	98,744		$	66,162
Accrued liabilities:
Payroll and related expenses	$	64,859		$	71,868
Accrued expenses	43,694			31,951
Derivative contracts payable	2,756			17
Product warranty liability	788			706
Other	12,695			9,516
	$	124,792		$	114,058
Other long-term liabilities:
Income tax payable	$	24,971		$	24,425
Deferred rent	2,528			2,220
Other	4,618			7,422
	$	32,117		$	34,067

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FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2018

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS:

Fair value hierarchy:

The Company measures its cash equivalents and marketable securities at fair value. The Company’s cash equivalents are classified within Level 1. Cash equivalents are valued primarily using quoted market prices utilizing market observable inputs. The Company's investments in debt securities and certificates of deposits are classified within Level 2 as the market inputs to value these instruments consist of market yields, reported trades and broker/dealer quotes. In addition, foreign currency contracts are classified within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments. The Level 3 valuation inputs include the Company's best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instrument's valuation. As of June 30, 2018 and December 31, 2017, the Company did not have any assets or liabilities valued based on Level 3 valuations.

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

The following table represents the fair value hierarchy of the Company's financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2018:

	Level 1		Level 2		Total
	(in thousands)
Money market funds	$	1,646	$	—	$	1,646
Certificates of deposit	—		54,444		54,444
U.S. Government and agency securities	—		37,477		37,477
Commercial paper	—		33,227		33,227
Corporate bonds	—		67,014		67,014
Municipal bonds	—		12,045		12,045
Foreign government bonds	—		15,018		15,018
	1,646		219,225		220,871
Long-term restricted cash	—		7,931		7,931
Total financial assets	$	1,646	$	227,156	$	228,802
Derivative contracts	—		2,756		2,756
Total financial liabilities	$	—	$	2,756	$	2,756

The following table represents the fair value hierarchy of the Company's financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2017:

	Level 1		Level 2		Total
	(in thousands)
Money market funds	$	1,857	$	—	$	1,857
Certificates of deposit	—		58,003		58,003
U.S. Government and agency securities	—		43,872		43,872
Commercial paper	—		27,029		27,029
Corporate bonds	—		54,447		54,447
Municipal bonds	—		15,169		15,169
Foreign government bonds	—		12,761		12,761
	1,857		211,281		213,138
Long-term restricted cash	—		8,025		8,025
Derivative contracts	—		982		982
Total financial assets	$	1,857	$	220,288	$	222,145
Derivative contracts	—		17		17
Total financial liabilities	$	—	$	17	$	17

There were no transfers between Level 1 and Level 2 securities during the six months ended June 30, 2018 and 2017.

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INVESTMENTS

6 Months Ended

Jun. 30, 2018

Investments, Debt and Equity Securities [Abstract]

INVESTMENTS

INVESTMENTS:

Cash, cash equivalents and short-term investments:

The short-term investments are classified as available-for-sale securities. The cash, cash equivalents and short-term investments at June 30, 2018 and December 31, 2017 were as follows:

	June 30, 2018
	Amortized Cost			Unrealized Gains		Unrealized Losses			Estimated Fair Value
	(in thousands)
Cash	$	61,776		$	—	$	—		$	61,776
Money market funds	1,646			—		—			1,646
Certificates of deposit	54,514			—		(70		)	54,444
U.S. Government and agency securities	37,609			—		(132		)	37,477
Commercial paper	33,254			16		(43		)	33,227
Corporate bonds	67,384			—		(370		)	67,014
Municipal bonds	12,090			—		(45		)	12,045
Foreign government bonds	15,064			—		(46		)	15,018
Total	283,337			16		(706		)	282,647
Less amounts classified as cash and cash equivalents	(63,422		)	—		—			(63,422		)
Short-term investments	$	219,915		$	16	$	(706	)	$	219,225

	December 31, 2017
	Amortized Cost			Unrealized Gains		Unrealized Losses			Estimated Fair Value
	(in thousands)
Cash	$	60,616		$	—	$	—		$	60,616
Money market funds	1,857			—		—			1,857
Certificates of deposit	58,039			—		(36		)	58,003
U.S. Government and agency securities	44,070			—		(198		)	43,872
Commercial paper	27,073			1		(45		)	27,029
Corporate bonds	54,673			—		(226		)	54,447
Municipal bonds	15,227			—		(58		)	15,169
Foreign government bonds	12,809			—		(48		)	12,761
Total	274,364			1		(611		)	273,754
Less amounts classified as cash and cash equivalents	(62,473		)	—		—			(62,473		)
Short-term investments	$	211,891		$	1	$	(611	)	$	211,281

Interest income and gains on short-term investments, net were $1.0 million for both the three months endedJune 30,2018 and 2017. Interest income and gains on short-term investments, net were $1.9 million and $1.8 million for the six months endedJune 30,2018 and 2017, respectively. At June 30, 2018, gross unrealized losses on investments that were in a gross unrealized loss position for greater than 12 months were $0.1 million. These investments were not deemed to be other-than-temporarily impaired and the gross unrealized losses were recorded in other comprehensive income (loss) ("OCI").

The contractual maturities of short-term investments at June 30, 2018 and December 31, 2017 were as follows:

	June 30, 2018				December 31, 2017
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(in thousands)
Due in less than one year	$	199,635	$	199,107	$	148,232	$	147,921
Due in one to three years	20,280		20,118		63,659		63,360
	$	219,915	$	219,225	$	211,891	$	211,281

Equity investments in privately-held companies:

As of June 30, 2018 and December 31, 2017, the Company held a total of $35.3 million and $29.3 million, respectively, in equity investments in privately-held companies. No gain or loss was recorded during the six months endedJune 30, 2018 as a result of remeasuring the Company's equity investments in privately-held companies.

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GOODWILL AND INTANGIBLE ASSETS

6 Months Ended

Jun. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND INTANGIBLE ASSETS

GOODWILL AND INTANGIBLE ASSETS:

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

Balance as of December 31, 2017	$	472,437
Acquisitions	1,479
Balance as of June 30, 2018	$	473,916

The carrying amounts of intangible assets as of June 30, 2018 were as follows:

	Gross Carrying Value		Accumulated Amortization			Net Carrying Value		Useful Life
	(in thousands)							(in years)
Licensed technology	$	47,590	$	(23,039	)	$	24,551	1-8
Developed technology	285,443		(144,417		)	141,026		4-7
Customer relationships	69,776		(28,113		)	41,663		4-9
Trade names	5,600		(4,390		)	1,210		3
Total intangible assets	$	408,409	$	(199,959	)	$	208,450

The carrying amounts of intangible assets as of December 31, 2017 were as follows:

	Gross Carrying Value		Accumulated Amortization			Net Carrying Value		Useful Life
	(in thousands)							(in years)
Licensed technology	$	40,407	$	(16,478	)	$	23,929	1-8
Developed technology	279,543		(122,414		)	157,129		4-7
Customer relationships	69,776		(24,783		)	44,993		4-9
Trade names	5,600		(3,456		)	2,144		3
Total intangible assets	$	395,326	$	(167,131	)	$	228,195

Amortization expense of intangible assets totaled approximately $16.5 million and $15.1 million for the three months ended June 30,2018 and 2017, respectively. Amortization expense of intangible assets totaled approximately $32.8 million and $30.1 million for the six months endedJune 30,2018 and 2017, respectively.

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

	(in thousands)
2018 (remainder of the year)	$	34,378
2019	61,167
2020	52,049
2021	32,514
2022	11,946
Thereafter	16,396
Total	$	208,450

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DERIVATIVES AND HEDGING ACTIVITIES

6 Months Ended

Jun. 30, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVES AND HEDGING ACTIVITIES

DERIVATIVES AND HEDGING ACTIVITIES:

The Company enters into foreign currency forward and option contracts with financial institutions to protect against foreign exchange risks, mainly the exposure to changes in the exchange rate of the New Israeli Shekels ("NIS") against the U.S. dollar that are associated with forecasted cash flows and existing assets and liabilities. The Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation.

Fair Value of Derivative Contracts

The fair value of derivative contracts in the unaudited condensed consolidated balance sheets at June 30, 2018 and December 31, 2017 were as follows:

		Accrued liabilities		Other current assets		Accrued liabilities
		June 30, 2018		December 31, 2017
		(in thousands)
Derivatives designated as hedging instruments
	Currency forward and option contracts	$	2,741	$	980	$	—
Derivatives not designated as hedging instruments
	Currency forward and option contracts	$	15	$	2	$	17
Total derivatives		$	2,756	$	982	$	17

The gross notional amounts of derivative contracts were NIS denominated. The notional amounts of outstanding derivative contracts in U.S. dollars at June 30, 2018 and December 31, 2017 were as follows:

	June 30, 2018		December 31, 2017
	(in thousands)
Derivatives designated as hedging instruments
Currency forward and option contracts	$	100,384	$	52,380
Derivatives not designated as hedging instruments
Currency forward and option contracts	$	38,356	$	47,015

Effect of Derivatives Designated as Hedging Instruments on Accumulated Other Comprehensive Income

The following table represents the unrealized gains (losses) of derivatives designated as hedging instruments, net of tax effects, that were recorded in accumulated other comprehensive income as of June 30, 2018 and December 31, 2017 and their effect on OCI for the six months endedJune 30, 2018:

	(in thousands)
December 31, 2017	$	925
Amount of loss recognized in OCI (effective portion)	(4,604		)
Amount of loss reclassified from OCI to income (effective portion)	884
June 30, 2018	$	(2,795	)

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

The effect of derivative contracts on the unaudited condensed consolidated statements of operations for the three months endedJune 30,2018 and 2017 was as follows:

	Derivatives designated as hedging instruments					Derivatives not designated as hedging instruments
	Three Months Ended June 30,					Three Months Ended June 30,
	2018			2017		2018			2017
	(in thousands)
Operating income	$	(1,419	)	$	2,379	$	—		$	—
Other income (loss)	$	—		$	—	$	(1,814	)	$	1,239

The effect of derivative contracts on the unaudited condensed consolidated statements of operations for the six months endedJune 30,2018 and 2017 was as follows:

	Derivatives designated as hedging instruments					Derivatives not designated as hedging instruments
	Six Months Ended June 30,					Six Months Ended June 30,
	2018			2017		2018			2017
	(in thousands)
Operating income	$	(884	)	$	3,815	$	—		$	—
Other income (loss)	$	—		$	—	$	(2,704	)	$	3,305

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES:

Commitments

Leases

At June 30, 2018, future minimum payments under non-cancelable operating leases are as follows:

	(in thousands)
2018 (remainder of the year)	$	10,926
2019	21,173
2020	17,944
2021	16,026
2022	12,598
Thereafter	75,966
Total minimum lease payments	$	154,633

Purchase commitments

At June 30, 2018, the Company had the following non-cancelable purchase commitments:

	(in thousands)
2018 (remainder of the year)	$	211,373
2019	46,782
2020	2,084
2021	536
2022	261
Thereafter	—
	$	261,036

Other Commitments

Operating lease

On May 3, 2016, the Company entered into a lease agreement for additional office space expected to be built in Yokneam, Israel. The lease term expires 10 years after lease inception with no options to extend the lease term. The Company's occupancy of the additional office space and its obligation under the lease agreement was contingent on the lessor's attainment of stated milestones in the lease agreement. The estimated total future lease obligation is approximately $30.3 million. As of June 30,2018, substantially all of the contingencies have been resolved, and the future lease obligation has been included in the future minimum payments under non-cancelable operating leases as reported above.

Royalty-bearing grants

In April 2018, the Company entered into a settlement agreement with the Israeli Innovation Authority (the "IIA"), formerly known as the Office of the Chief Scientist of Israel's Ministry of Economy and Industry (the "OCS"), which eliminated the future contingent royalty payment obligations of the Company (approximately $36.4 million at March 31, 2018) and the associated future interest payments. These obligations were related to the funding the Company received from the IIA prior to the date of the agreement under approved plans in accordance with the Israeli Law for Encouragement of Research, Development and Technological Innovation in Industry, 1984 and the regulations and rules of the IIA (the "R&D Law"). As part of the agreement, the Company paid approximately $9.3 million to the IIA and the expense was included in cost of revenues during the second quarter of 2018.

Unrecognized tax benefits

Due to the inherent uncertainty with respect to the timing of future cash outflows associated with the Company's unrecognized tax benefits, it is unable to reliably estimate the timing of cash settlement with the respective taxing authorities. As of June 30,2018, the Company's unrecognized tax benefits totaled $45.8 million, out of which an amount of $23.7 million would reduce the Company's income tax expense and effective tax rate, if recognized.

Contingencies

Legal proceedings

The Company is involved in a variety of claims, suits, investigations and proceedings that arise from time to time in the ordinary course of its business, including actions with respect to contracts, intellectual property, taxation, employment, benefits, securities, personal injuries and other matters. The results of these proceedings in the ordinary course of business are not expected to have a material adverse effect on the Company’s condensed consolidated financial position or results of operations.

The Company records a liability when it believes that it is both probable that a liability will be incurred, and the amount of loss can be reasonably estimated. The Company evaluates, at least quarterly, developments in its legal matters that could affect the amount of liability that has been previously accrued and makes adjustments as appropriate. Significant judgment is required to determine both the probability and the estimated amount of a loss or potential loss. The Company may be unable to reasonably estimate the reasonably possible loss or range of loss for a particular legal contingency for various reasons, including, among others: (i) if the damages sought are indeterminate; (ii) if proceedings are in the early stages; (iii) if there is uncertainty as to the outcome of pending proceedings (including motions and appeals); (iv) if there is uncertainty as to the likelihood of settlement and the outcome of any negotiations with respect thereto; (v) if there are significant factual issues to be determined or resolved; (vi) if the proceedings involve a large number of parties; (vii) if relevant law is unsettled or novel or untested legal theories are presented; or (viii) if the proceedings are taking place in jurisdictions where the laws are complex or unclear. In such instances, there is considerable uncertainty regarding the ultimate resolution of such matters, including a possible eventual loss, if any.

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SHARE INCENTIVE PLANS

6 Months Ended

Jun. 30, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

SHARE INCENTIVE PLANS

SHARE INCENTIVE PLANS

Stock Option Plans

On April 25, 2017, the Company's shareholders approved the Mellanox Technologies, Ltd. Second Amended and Restated Global Share Incentive Plan (2006) (the “Second Restated Plan”), which constitutes a second amendment and restatement of the Mellanox Technologies, Ltd. Global Share Incentive Plan (2006) and its appendices (the “2006 Plan”), as amended and restated by the Mellanox Technologies, Ltd. Amended and Restated Global Share Incentive Plan (2006) as of March 14, 2016 (the “First Restated Plan”). The Second Restated Plan became effective on February 14, 2017. The Second Restated Plan increased the ordinary shares reserved for issuance under the First Restated Plan by 1,640,000 shares to 2,390,000 shares plus any shares subject to issued and outstanding awards under the other equity incentive plans that existed prior to the First Restated Plan that expire, are cancelled or otherwise terminated after the effective date of the First Restated Plan. The Second Restated Plan also extended the term of the First Restated Plan to February 14, 2027. In addition, the Second Restated Plan implements additional amendments to reflect compensation and governance best practices.

On July 25, 2018, the Company's shareholders approved the Mellanox Technologies, Ltd. Third Amended and Restated Global Share Incentive Plan (2006) (the “Third Restated Plan”). See Note 16 for further details.

Share option activity

Share option activity under the Company's equity incentive plans in the six months ended June 30,2018 is set forth below:

	Options Outstanding
	Number of Shares		Weighted Average Exercise Price
Outstanding at December 31, 2017	1,110,061		$	38.35
Options exercised	(345,862	)	$	23.11
Options canceled	(11,062	)	$	99.89
Outstanding at June 30, 2018	753,137		$	44.45

The total pretax intrinsic value of options exercised in the six months ended June 30, 2018 and 2017 was $19.4 million and $5.2 million, respectively. This intrinsic value represents the difference between the fair market value of the Company's ordinary shares on the date of exercise and the exercise price of each option. Based on the closing price of the Company's ordinary shares of $84.30 on June 29, 2018, the last trading day of the quarter ended June 30, 2018, the total pretax intrinsic value of options outstanding at June 30, 2018 was $32.6 million. The total pretax intrinsic value of options outstanding at December 31, 2017 was $35.5 million.

There were 751,471 and 1,107,712 options exercisable at June 30, 2018 and December 31, 2017, respectively. The total pretax intrinsic value of exercisable options at June 30, 2018 was $32.5 million. The total pretax intrinsic value of exercisable options at December 31, 2017 was $35.4 million.

Restricted share unit activity

RSU activity under the Company's equity incentive plans in the six months ended June 30, 2018 is set forth below:

	Restricted Share Units Outstanding
	Number of Shares		Weighted Average Grant Date Fair Value
Non-vested restricted share units at December 31, 2017	3,414,705		$	48.45
Restricted share units granted	125,300		$	70.32
Restricted share units vested	(809,234	)	$	47.71
Restricted share units canceled	(375,848	)	$	48.94
Non-vested restricted share units at June 30, 2018	2,354,923		$	49.78

The weighted average fair value of RSUs granted in the six months ended June 30, 2018 and 2017 was $70.32 and $50.42, respectively.

The total intrinsic value of all outstanding RSUs as of June 30, 2018 and December 31, 2017 was $198.5 million and $220.9 million, respectively.

Employee Stock Purchase Plan activity

There were 288,017 and 269,698 shares purchased under the ESPP for the six months ended June 30, 2018 and 2017 at an average price per share of $39.40 and $37.63, respectively.

Shares reserved for future issuance

The Company had the following ordinary shares reserved for future issuance under its equity incentive plans as of June 30, 2018:

	Number of Shares
Share options outstanding	753,137
Restricted share units outstanding	2,354,923
Shares authorized for future issuance	1,019,396
ESPP shares available for future issuance	3,137,452
Total shares reserved for future issuance as of June 30, 2018	7,264,908

Share-based compensation

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

The following weighted average assumptions were used to value ESPP shares issued pursuant to the Company's share incentive plans for the six months ended June 30, 2018 and 2017:

	Six Months Ended June 30,
	2018		2017
Dividend yield	—	%	—	%
Expected volatility	37.2	%	25.3	%
Risk free interest rate	1.20	%	0.91	%
Expected life, years	0.5		0.5

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
	(in thousands)
Cost of goods sold	$	415	$	575	$	826	$	1,057
Research and development	8,340		10,297		16,514		18,987
Sales and marketing	3,646		4,010		7,245		7,348
General and administrative	2,515		2,783		5,305		5,041
Total share-based compensation expense	$	14,916	$	17,665	$	29,890	$	32,433

At June 30, 2018, there was $106.1 million of total unrecognized share-based compensation costs related to non-vested share-based compensation arrangements. The costs are expected to be recognized over a weighted average period of approximately 2.44 years.

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

6 Months Ended

Jun. 30, 2018

Equity [Abstract]

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):

The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the six months ended June 30,2018 and 2017:

	Unrealized Gains (Losses) on Available-for-Sale Securities			Unrealized Gains (Losses) on Derivatives Designated as Hedging Instruments			Total
	(in thousands)
Balance at December 31, 2017	$	693		$	925		$	1,618
Other comprehensive income/(loss) before reclassifications, net of taxes	(81		)	(4,604		)	(4,685		)
Realized (gains)/losses reclassified from accumulated other comprehensive income	1			884			885
Net current-period other comprehensive income/(loss), net of taxes	(80		)	(3,720		)	(3,800		)
Balance at June 30, 2018	$	613		$	(2,795	)	$	(2,182	)
Balance at December 31, 2016	$	(236	)	$	(692	)	$	(928	)
Other comprehensive income/(loss) before reclassifications, net of taxes	22			8,557			8,579
Realized (gains)/losses reclassified from accumulated other comprehensive income	—			(3,815		)	(3,815		)
Net current-period other comprehensive income/(loss), net of taxes	22			4,742			4,764
Balance at June 30, 2017	$	(214	)	$	4,050		$	3,836

The following table provides details about reclassifications out of accumulated other comprehensive income (loss) for the six months ended June 30,2018 and 2017:

	Realized (Gains)/Losses Reclassified from Accumulated Other Comprehensive Income (Loss)					Affected Line Item in the Statement of Operations
	Six Months Ended June 30,
	2018		2017
	(in thousands)
Realized (gains)/losses on derivatives designated as hedging instruments	$	884	$	(3,815	)	Cost of revenues and Operating expenses:
	45		(220		)	Cost of revenues
	78		(427		)	General and administrative
	81		(372		)	Sales and marketing
	680		(2,796		)	Research and development
Realized (gains)/losses on available-for-sale securities	1		—			Other income, net
Total reclassifications for the period	$	885	$	(3,815	)	Total

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INCOME TAXES

6 Months Ended

Jun. 30, 2018

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES:

As of June 30,2018 and December 31, 2017, the Company had gross unrecognized tax benefits of $45.8 million and $45.2 million, respectively. It is the Company’s policy to classify accrued interest and penalties as part of the unrecognized tax benefits and record the expense in the provision for income taxes. The amount of accrued interest and penalties related to unrecognized tax benefits totaled $2.3 million at June 30,2018 and $1.6 million at December 31, 2017.

During the six months endedJune 30,2018, the Company released $26.3 million of valuation allowance against the deferred tax assets primarily related to net operating loss carryforwards ("NOLs") and tax credit carryforwards related to its U.S. subsidiaries. After the discontinuation of the Company’s 1550nm silicon photonics development activities in the first quarter of fiscal 2018, the U.S. subsidiaries will have sufficient taxable income in the future to utilize the deferred tax assets before they expire.

As of June 30,2018, the Company's U.S. subsidiaries had federal and state NOLs of approximately $86.1 million and $74.4 million, respectively. The Company also had federal and state research and development tax credit carryforwards of approximately $12.9 million and $4.5 million, respectively. The U.S. NOLs for federal tax purposes will expire from 2024 to 2027, and the U.S. NOLs for state tax purposes will expire from 2018 to 2037. The research and development tax credit carryforwards will expire from 2025 to 2039.

On December 22, 2017, the Tax Cuts and Jobs Acts was enacted into law. The new legislation contains several key tax provisions that will impact the Company. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, a one-time repatriation tax on accumulated foreign earnings, an elimination of U.S. federal income taxes on dividends from foreign subsidiaries, a limitation on the tax deductibility of interest expense, and a change in rules related to uses and limitations of NOLs created in tax years beginning after December 31, 2017.

The lower corporate income tax rate required the Company to remeasure its U.S. deferred tax assets and liabilities as of December 31, 2017 as well as reassess the realizability of its deferred tax assets and liabilities. ASC 740 requires the Company to recognize the effect of the tax law changes in the period of enactment. However, the SEC staff has issued SAB 118 which allowed the Company to record provisional amounts during a measurement period.

The Company has concluded that a reasonable estimate could be developed for the effects of the tax reform, and recorded a provisional decrease to deferred tax assets of $3.2 million and corresponding decrease to the valuation allowance as of December 31, 2017. However, due to the fundamental changes of the tax law, the accounting complexity, and the expected ongoing guidance and accounting interpretations during the measurement period, the Company considers the accounting for the deferred tax remeasurement and other items to be incomplete. These effects have been included in the consolidated financial statements for the year ended December 31, 2017 as provisional amounts.

During the measurement period, the Company might need to reflect adjustments to the provisional amounts upon obtaining, preparing, or analyzing additional information about facts and circumstances that existed as of the enactment date that, if known, would have affected the income tax effects initially reported as provisional amounts. No adjustments to the provisional amounts were recorded during the six months endedJune 30,2018.

The measurement period will end when the Company obtains, prepares, and analyzes the information needed in order to complete the accounting requirements under ASC Topic 740 or on December 22, 2018, whichever is earlier. The Company expects to complete its analysis within the measurement period in accordance with SAB 118.

As of June 30,2018, the 2014 through 2017 tax years are open and may be subject to potential examinations in the United States. The Company has NOLs in the United States from prior tax periods beginning in 2003 which may be subject to examination upon utilization in future tax periods. As of June 30,2018, the 2013 through 2017 tax years are open and may be subject to potential examinations in Denmark and Israel. As of June 30,2018, the income tax returns of the Company and one of its subsidiaries in Israel are under examination by the Israeli Income Tax Authorities for certain years from 2013 to 2015.

The Company's operations in Israel were granted "Approved Enterprise" status by the Investment Center in the Israeli Ministry of Economy and Industry and "Beneficiary Enterprise" status from the Israeli Income Tax Authority, which makes the Company eligible for tax benefits under the Israeli Law for Encouragement of Capital Investments, 1959 (the "Encouragement Law"). Under the terms of the Beneficiary Enterprise program, income that is attributable to the Company's operations in Yokneam, Israel, is exempt from income tax commencing fiscal year 2011 through 2021. Income that is attributable to the Company's operations in Tel Aviv, Israel is subject to a reduced income tax rate (generally between 10.0% and the current corporate tax rate, depending on the percentage of foreign investment in the Company) commencing fiscal year 2013 through 2021. The tax holiday has resulted in a cash tax savings of $8.3 million for the six months ended June 30,2018, increasing diluted earnings per share by approximately $0.15 in the six months ended June 30,2018.

On June 14, 2017, the Israeli government legislated new regulations regarding the "Preferred Technological Enterprise" regime, under which a company that complies with the terms may be entitled to certain tax benefits. The Company expects that its operation in Israel will comply with the terms of the Preferred Technological Enterprise regime. Therefore, the Company may utilize the tax benefits under this regime after the end of the benefit period of its Approved and Beneficiary Enterprise statuses (i.e. from fiscal year 2022 onwards). Under the new legislation, the majority of the Company’s income from its operations in Yokneam, Israel, will be subject to a corporate rate of 7.5%, while the majority of the income from its operations in Tel-Aviv, Israel, will be subject to a corporate rate of 12.0%.

The Company’s effective tax rate is highly dependent upon the geographic distribution of its worldwide earnings or losses, tax regulations and tax holiday benefits in Israel, and the effectiveness of the Company’s tax planning strategies. The Company’s effective tax rates were (96.5)% and (4.1)% for the six months endedJune 30,2018 and 2017, respectively. The difference between the Company’s effective tax rate and the 21.0% federal statutory rate for the six months ended June 30, 2018 resulted primarily from the release of valuation allowance of $26.3 million against the deferred tax assets related to U.S. subsidiaries, the excess benefits of share-based compensation, the tax holiday in Israel and foreign earnings taxed at rates lower than the federal statutory rates, partially offset by the accrual of unrecognized tax benefits, interest and penalties associated with unrecognized tax positions, non-tax-deductible expenses such as share-based compensation and losses generated from subsidiaries without tax benefit.

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

At June 30,2018, the Company maintained a valuation allowance against deferred tax assets of certain subsidiaries. The Company assesses its ability to recover its deferred tax assets on an ongoing basis. Significant management judgment is required in determining any valuation allowance recorded against deferred tax assets. In evaluating the ability to recover deferred tax assets, the Company considers available positive and negative evidence including its recent cumulative losses, its ability to carry-back losses against prior taxable income and its projected financial results. The Company also considers, commensurate with its objective verifiability, the forecast of future taxable income including the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies. A valuation allowance may be recorded in the event it is deemed to be more-likely-than-not that the deferred tax asset cannot be realized. Previously established valuation allowances may also be released in the event it is deemed to be more-likely-than-not that the deferred tax asset can be realized. Any release of valuation allowance will be recorded as a tax benefit which will positively impact the Company’s operating results. Management has determined on the basis of the quarterly assessment performed at June 30, 2018, that these deferred tax assets are not more-likely-than-not to be realized.

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OTHER INCOME, NET

6 Months Ended

Jun. 30, 2018

Other Income and Expenses [Abstract]

OTHER INCOME, NET

OTHER INCOME, NET:

Other income, net is summarized in the following table:

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
	(in thousands)
Interest income and gains on short-term investments, net	$	972		$	951		$	1,939		$	1,828
Foreign exchange loss, net	(396		)	(161		)	(578		)	(322		)
Other	(43		)	37			(190		)	4
Other income, net	$	533		$	827		$	1,171		$	1,510

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TERM DEBT

6 Months Ended

Jun. 30, 2018

Debt Disclosure [Abstract]

TERM DEBT

TERM DEBT:

In connection with the Company’s acquisition of EZchip, on February 22, 2016, the Company and its wholly owned subsidiary, Mellanox Technologies, Inc., entered into a $280.0 million variable interest rate Term Debt note maturing February 21, 2019. Debt issuance costs of $5.5 million on the Term Debt were being amortized to interest expense at the effective interest rate over the contractual term of the Term Debt. The Term Debt allowed for voluntary prepayments at any time and additional term loan borrowings under certain conditions.

On April 30, 2018, the Company paid off all outstanding principal and interest related to the Term Debt. As a result, the unamortized debt issuance costs were fully amortized when the outstanding principal and interest were fully paid.

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RESTRUCTURING CHARGES

6 Months Ended

Jun. 30, 2018

Restructuring and Related Activities [Abstract]

RESTRUCTURING CHARGES

RESTRUCTURING CHARGES:

In connection with the discontinuation of its 1550nm silicon photonics development activities, the Company initiated a restructuring plan to wind down the business operations related to these activities, which primarily included terminating employees, exiting contracts with vendors, selling assets, and exiting facilities.

The Company recorded employee separation and severance costs of $0.1 million and $3.5 million during the three and six months ended June 30,2018, respectively. The Company has completed the employee termination activities, and does not expect additional costs related to employee terminations in future periods.

The Company recorded contract exit costs with vendors of $0.2 million and $3.4 million during the three and six months ended June 30,2018, respectively. The Company does not expect additional exit costs in future periods.

The Company recorded impairment charges and a net loss on disposal of assets of $1.4 million and $2.4 million during the three and six months ended June 30,2018, respectively. The Company does not expect additional losses on the disposal of assets in future periods.

As of June 30,2018, the Company is still using the facilities related to the discontinued activities and therefore has not recorded any related restructuring charges. The Company expects to record up to $0.5 million of facility related charges in the third quarter of 2018.

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RELATED PARTY TRANSACTIONS

6 Months Ended

Jun. 30, 2018

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS:

On June 19, 2018, the Company entered into a settlement agreement (the “Settlement Agreement”) by and among the Company and Starboard Value LP and certain of its affiliates (“Starboard”), together holding, on such date, approximately 10.3% of the Company’s outstanding ordinary shares. The Settlement Agreement provided for, among other things, the concurrent resignations of three members of the Company’s Board of Directors (the “Board”) and the concurrent appointment of two independent directors nominated by Starboard and one mutually agreed upon independent nominee to the Board. Starboard also agreed to terminate its proxy contest against the Company and withdraw its notice of shareholder nomination of individuals for election as directors at the Company's 2018 annual general meeting of shareholders. Furthermore, the Company agreed to reimburse Starboard for its reasonable, documented out-of-pocket fees and expenses (including legal expenses) incurred through the date of the Settlement Agreement in connection with Starboard’s interactions with the Company up to a maximum of $2.0 million. As of June 30, 2018, the Company accrued the $2.0 million related to the reimbursement to Starboard, and this liability was paid on July 11, 2018.

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SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2018

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS:

On July 25, 2018, the Company's shareholders approved the Third Restated Plan, which constitutes an amendment and restatement of the Second Restated Plan. The Third Restated Plan increases the ordinary shares reserved for issuance under the Second Restated Plan by 2,077,000 shares to 4,467,000 shares plus any shares subject to issued and outstanding awards under certain of the Company’s prior equity plans that expire, are cancelled or otherwise terminate after March 14, 2016, the effective date of the first amendment and restatement of the Global Share Incentive Plan (2006). The Third Restated Plan also implements certain additional amendments, including specifically providing for the grant of performance share units.

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THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Principles of presentation

Principles of presentation

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

The unaudited condensed consolidated financial statements included in this quarterly report on Form 10-Q have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The year-end balance sheet data were derived from audited consolidated financial statements, but do not include all disclosures required by accounting principles generally accepted in the United States ("GAAP"). Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures contained in this quarterly report comply with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended, for a quarterly report on Form 10-Q and are adequate to make the information presented not misleading. The unaudited condensed consolidated financial statements included herein reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the financial position, results of operations and cash flows for the interim periods presented. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed with the SEC on February 16, 2018. The results of operations for the six months endedJune 30, 2018 are not necessarily indicative of the results to be anticipated for the entire year ending December 31, 2018 or thereafter.

Risks and uncertainties

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 material adverse impact on the Company's financial position and results of operations: unpredictable volume or timing of customer orders; ordered product mix; the sales outlook and purchasing patterns of the Company's customers based on consumer demands and general economic conditions; loss of one or more of the Company's customers; decreases in the average selling prices of products or increases in the average cost of finished goods; the availability, pricing and timeliness of delivery of components used in the Company's products; reliance on a limited number of subcontractors to manufacture, assemble, package and production test the Company's products; the Company's ability to successfully develop, introduce and sell new or enhanced products in a timely manner; product obsolescence and the Company's ability to manage product transitions; the timing of announcements or introductions of new products by the Company's competitors; and the Company's ability to successfully integrate acquired businesses.

Use of estimates

Use of estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements and the reported amounts of net revenue and expenses in the reporting periods. The Company regularly evaluates estimates and assumptions related to revenue recognition, allowances for doubtful accounts, allowances for price adjustments, investment valuation, warranty reserves, inventory reserves, share-based compensation expense, long-term asset valuations, useful lives of property, equipment, and intangibles, accounting for business combinations, goodwill and purchased intangible asset valuation, investments in privately-held companies, accounting and fair value of financial instruments and derivatives, deferred income tax asset valuation, uncertain tax positions, and litigation and other loss contingencies. These estimates and assumptions are based on current facts, historical experience and various other factors that the Company believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenue, costs and expenses that are not readily apparent from other sources. The actual results that the Company experiences may differ materially and adversely from the Company's original estimates. To the extent there are material differences between the estimates and actual results, the Company's future results of operations will be affected.

Revenue Recognition

Revenue Recognition

The Company recognizes revenue when (or as) it satisfies performance obligations by transferring promised products or services to its customers in an amount that reflects the consideration the Company expects to receive. The Company applies the following five steps: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied.

The Company considers customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts with a customer. For each contract, the Company considers the promise to transfer tangible products, extended warranty and post-contract customer support, each of which are distinct, to be the identified performance obligations. In determining the transaction price, the Company evaluates whether the price is subject to rebates and adjustments to determine the net consideration to which the Company expects to receive. As the Company’s standard payment terms are less than one year, the contracts have no significant financing component. The Company allocates the transaction price to each distinct performance obligation based on their relative standalone selling price. Revenue from tangible products is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which typically occurs at shipment. The revenues from fixed-price support or maintenance contracts, including extended warranty contracts and software post-contract customer support agreements, are recognized ratably over the contract period and the costs associated with these contracts are recognized as incurred. The Company's standard arrangements with its customers typically do not allow for rights of return.

The Company maintains inventory, or hub arrangements with certain customers. Pursuant to these arrangements, the Company delivers products to a customer or a designated third party warehouse based upon the customer's projected needs, but does not recognize product revenue unless and until the customer reports it has removed the Company's product from the warehouse to be incorporated into its end products.

A portion of the Company’s sales are made to distributors under agreements which contain price protection provisions. Revenue from sales to distributors is recognized upon shipment and transfer of control, net of estimated allowances for price adjustments. Frequently, distributors submit distribution price adjustment (“DPA”) claims to the Company to adjust the distributor’s cost from the standard price to the pre-approved lower price. After the Company verifies the DPA claim, a credit memo is issued to the distributor. The Company records an allowance for these unprocessed DPA claims and for estimated future DPA claims as a reduction of revenue and a reduction of accounts receivable. The allowance is recorded as a reduction to revenue in the same period that the related revenue is recorded and is calculated based on specific authorized DPA claims and an analysis of historical DPA claims, at the distributor level, over a period of time considered adequate to account for current pricing and business trends.

Most of the Company’s distributors are entitled to a limited right of return related to stock rotation. Distributors have the right to return a limited amount of product not to exceed a percentage of distributor’s prior quarter's net purchases. However, a simultaneous, compensation order of equal or greater value must be placed by distributor within the same quarter of the return. Therefore, no stock rotation reserves are recorded.

Restricted cash

Restricted cash

The Company maintains certain cash amounts that are restricted as to withdrawal or use over the long-term. The cash is securing bank guarantees primarily issued against long-term tenancy agreements.

Adoption of new accounting principles and recent accounting pronouncements

Adoption of new accounting principles

In May 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606). The standard replaced the revenue recognition guidance in U.S. GAAP under Topic 605, and was required to be applied retrospectively to each prior period presented, or applied using a modified retrospective method with the cumulative effect recognized in the beginning retained earnings during the period of initial application. Subsequently, the FASB issued several additional ASUs related to ASU No. 2014-09, collectively they are referred to as the “new revenue standards”, which became effective for the Company beginning January 1, 2018. The Company adopted the standard using the modified retrospective method. See Note 2 for details about the impact from adopting the new revenue standard and other required disclosures.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 amended various aspects of the recognition, measurement, presentation, and disclosure of financial instruments, and became effective for the Company beginning January 1, 2018. One aspect that may have a material impact on the Company's consolidated financial statements relates to the measurement of its equity investments in privately-held companies whose fair values are not readily determinable. With the election to use the measurement alternative (as opposed to fair value), the Company measures these equity investments at cost, less impairments, adjusted by observable price changes. No gain or loss was recorded in the six months endedJune 30, 2018 as a result of remeasuring the Company's equity investments in privately-held companies.

Recent accounting pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The standard requires lessees to recognize almost all leases on the balance sheet as a right-of-use asset and a lease liability and requires leases to be classified as either an operating or a finance type lease. The standard excludes leases of intangible assets or inventory. Early adoption of the standard is allowed. The standard becomes effective for the Company beginning January 1, 2019. The Company expects that the adoption of the standard will have a material impact on its consolidated balance sheets due to the recognition of the right-of-use assets and lease liabilities related to the Company's operating leases. The standard is not expected to have a material impact on the Company's results of operations or cash flows. The Company is continuing its assessment, which may identify additional impacts this guidance will have on its consolidated financial statements and disclosures.

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THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

6 Months Ended

Jun. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of cash and cash equivalents

The following table provides a reconciliation of the cash and cash equivalents balances reported on the balance sheets and the cash, cash equivalents and restricted cash balances reported in the statements of cash flows:

	June 30,
	2018		2017
	(In thousands)
Cash and cash equivalents, as reported on the balance sheets	$	63,422	$	55,722
Restricted cash in other long-term assets, as reported on the balance sheets	7,931		—
Cash, cash equivalents, and restricted cash, as reported in the statements of cash flows	$	71,353	$	55,722

Reconciliation of cash and cash equivalents to cash, cash equivalents and restricted cash

The following table provides a reconciliation of the cash and cash equivalents balances reported on the balance sheets and the cash, cash equivalents and restricted cash balances reported in the statements of cash flows:

	June 30,
	2018		2017
	(In thousands)
Cash and cash equivalents, as reported on the balance sheets	$	63,422	$	55,722
Restricted cash in other long-term assets, as reported on the balance sheets	7,931		—
Cash, cash equivalents, and restricted cash, as reported in the statements of cash flows	$	71,353	$	55,722

Schedule of revenues and accounts receivable from customers

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Dell Technologies Inc. ("Dell")	14	%	11	%	12	%	12	%
Hewlett Packard Enterprise ("HPE")	13	%	14	%	15	%	13	%
IBM	*		15	%	*		*
____________________

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

	June 30, 2018		December 31, 2017
HPE	16	%	13	%
____________________

Schedule of changes in the entity's liability for product warranty

The following table provides changes in the product warranty accrual for the six months endedJune 30,2018 and 2017:

	Six Months Ended June 30,
	2018			2017
	(in thousands)
Balance, beginning of the period	$	889		$	1,474
New warranties issued during the period	856			756
Reversal of warranty reserves	—			(350		)
Settlements during the period	(784		)	(745		)
Balance, end of the period	961			1,135
Less: long-term portion of product warranty liability	(173		)	(180		)
Current portion, end of the period	$	788		$	955

Schedule of computation of basic and diluted net income per share

The following table sets forth the computation of basic and diluted net income (loss) per share for the three and six months ended June 30,2018 and 2017:

	Three Months Ended June 30,					Six Months Ended June 30,
	2018		2017			2018		2017
	(in thousands, except per share data)
Net income (loss)	$	16,526	$	(7,991	)	$	54,369	$	(20,235	)
Basic and diluted shares:
Weighted average ordinary shares outstanding	52,615		50,056			52,219		49,698
Effect of dilutive shares	1,851		—			1,930		—
Shares used to compute diluted net income (loss) per share	54,466		50,056			54,149		49,698
Net income (loss) per share — basic	$	0.31	$	(0.16	)	$	1.04	$	(0.41	)
Net income (loss) per share — diluted	$	0.30	$	(0.16	)	$	1.00	$	(0.41	)

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REVENUE REVENUE (Tables)

6 Months Ended

Jun. 30, 2018

Revenue from Contract with Customer [Abstract]

Schedule of new accounting pronouncements and changes in accounting principles

The cumulative effect of the changes made to the consolidated balance sheet as of January 1, 2018 for the adoption of Topic 606-10 were as follows:

	December 31, 2017		Adjustments			January 1, 2018
	(in thousands)
Deferred revenue, short term	$	23,485	$	(4,501	)	$	18,984
Retained earnings	$	181,630	$	4,501		$	186,131

In accordance with Topic 606-10, the disclosure of the impact of adoption on the consolidated balance sheet as of June 30, 2018 was as follows:

	As Reported		Impact of Adoption			Amounts under Topic 605
	(in thousands)
Condensed Consolidated Balance Sheet
Deferred revenue, short term	$	20,719	$	10,900		$	31,619
Retained earnings	$	240,500	$	(10,900	)	$	229,600

In accordance with Topic 606-10, the disclosure of the impact of adoption on the consolidated statement of operations and cash flows was as follows:

	Three Months Ended June 30, 2018
	As Reported		Impact of Adoption			Amounts under Topic 605
	(in thousands, except per share data)
Condensed Consolidated Statement of Operations
Total revenues	$	268,462	$	(2,280	)	$	266,182
Cost of revenues	103,668		(100		)	103,568
Net income	$	16,526	$	(2,180	)	$	14,346
Earnings per share
Basic	$	0.31	$	(0.04	)	$	0.27
Diluted	$	0.30	$	(0.04	)	$	0.26

	Six Months Ended June 30, 2018
	As Reported		Impact of Adoption			Amounts under Topic 605
	(in thousands, except per share data)
Condensed Consolidated Statement of Operations
Total revenues	$	519,462	$	(9,099	)	$	510,363
Cost of revenues	192,666		(2,700		)	189,966
Net income	$	54,369	$	(6,399	)	$	47,970
Earnings per share
Basic	$	1.04	$	(0.12	)	$	0.92
Diluted	$	1.00	$	(0.12	)	$	0.88
Condensed Consolidated Statement of Cash Flows
Cash flows from operating activities:
Net income	$	54,369	$	(6,399	)	$	47,970
Accrued liabilities and other liabilities	$	12,334	$	6,399		$	18,733

Disaggregation of revenue

Revenues by geographic region are as follows (prior period amounts have not been adjusted under the modified retrospective method):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
	(in thousands)
United States	$	101,396	$	80,703	$	197,656	$	159,567
China	54,181		31,990		110,395		65,191
Europe	41,454		38,828		77,450		85,233
Other Americas	33,112		31,358		60,852		42,248
Other Asia	38,319		29,083		73,109		48,374
Total revenue	$	268,462	$	211,962	$	519,462	$	400,613

The following tables represent our total revenues for the three months ended June 30,2018 and 2017 by product type and interconnect protocol (prior period amounts have not been adjusted under the modified retrospective method):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
	(in thousands)
ICs	$	28,934	$	34,063	$	57,521	$	76,485
Boards	136,708		80,425		254,759		144,717
Switch systems	57,074		56,189		112,721		103,335
Cables, accessories and other	45,746		41,285		94,461		76,076
Total revenue	$	268,462	$	211,962	$	519,462	$	400,613

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
	(in thousands)
InfiniBand:
EDR	$	59,319	$	59,436	$	115,265	$	99,059
FDR	35,649		42,978		77,397		92,807
QDR/DDR/SDR	7,143		5,697		12,587		13,230
Total	102,111		108,111		205,249		205,096
Ethernet	157,470		87,023		294,418		167,500
Other	8,881		16,828		19,795		28,017
Total revenue	$	268,462	$	211,962	$	519,462	$	400,613

Changes in deferred revenue balances

The following table presents the significant changes in the deferred revenue balance during the six months endedJune 30,2018:

	(in thousands)
Balance, beginning of the period	$	36,804
New performance obligations	14,578
Reclassification to revenue as a result of satisfying performance obligations	(12,872		)
Balance, end of the period	38,510
Less: long-term portion of deferred revenue	17,791
Current portion, end of the period	$	20,719

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BALANCE SHEET COMPONENTS (Tables)

6 Months Ended

Jun. 30, 2018

Balance Sheet Related Disclosures [Abstract]

Schedule of balance sheet components

	June 30, 2018			December 31, 2017
	(in thousands)
Accounts receivable, net:
Accounts receivable, gross	$	156,296		$	154,845
Less: allowance for doubtful accounts	(632		)	(632		)
	$	155,664		$	154,213
Inventories:
Raw materials	$	13,560		$	12,656
Work-in-process	42,253			22,769
Finished goods	38,671			29,232
	$	94,484		$	64,657
Other current assets:
Prepaid expenses	$	5,588		$	7,518
Derivative contracts receivable	—			982
VAT receivable	3,394			2,259
Other	3,025			3,536
	$	12,007		$	14,295
Property and equipment, net:
Computer, equipment, and software	$	173,070		$	164,707
Furniture and fixtures	2,882			3,198
Leasehold improvements	49,605			47,262
	225,557			215,167
Less: Accumulated depreciation and amortization	(118,811		)	(105,248		)
	$	106,746		$	109,919
Deferred taxes and other long-term assets:
Equity investments in private companies	$	35,255		$	29,255
Deferred taxes	52,648			24,563
Long-term restricted cash	7,931			8,025
Other assets	2,910			4,319
	$	98,744		$	66,162
Accrued liabilities:
Payroll and related expenses	$	64,859		$	71,868
Accrued expenses	43,694			31,951
Derivative contracts payable	2,756			17
Product warranty liability	788			706
Other	12,695			9,516
	$	124,792		$	114,058
Other long-term liabilities:
Income tax payable	$	24,971		$	24,425
Deferred rent	2,528			2,220
Other	4,618			7,422
	$	32,117		$	34,067

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FAIR VALUE MEASUREMENTS (Tables)

6 Months Ended

Jun. 30, 2018

Fair Value Disclosures [Abstract]

Schedule of the fair value hierarchy of the Company's financial assets and liabilities measured at fair value

The following table represents the fair value hierarchy of the Company's financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2018:

	Level 1		Level 2		Total
	(in thousands)
Money market funds	$	1,646	$	—	$	1,646
Certificates of deposit	—		54,444		54,444
U.S. Government and agency securities	—		37,477		37,477
Commercial paper	—		33,227		33,227
Corporate bonds	—		67,014		67,014
Municipal bonds	—		12,045		12,045
Foreign government bonds	—		15,018		15,018
	1,646		219,225		220,871
Long-term restricted cash	—		7,931		7,931
Total financial assets	$	1,646	$	227,156	$	228,802
Derivative contracts	—		2,756		2,756
Total financial liabilities	$	—	$	2,756	$	2,756

The following table represents the fair value hierarchy of the Company's financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2017:

	Level 1		Level 2		Total
	(in thousands)
Money market funds	$	1,857	$	—	$	1,857
Certificates of deposit	—		58,003		58,003
U.S. Government and agency securities	—		43,872		43,872
Commercial paper	—		27,029		27,029
Corporate bonds	—		54,447		54,447
Municipal bonds	—		15,169		15,169
Foreign government bonds	—		12,761		12,761
	1,857		211,281		213,138
Long-term restricted cash	—		8,025		8,025
Derivative contracts	—		982		982
Total financial assets	$	1,857	$	220,288	$	222,145
Derivative contracts	—		17		17
Total financial liabilities	$	—	$	17	$	17

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INVESTMENTS (Tables)

6 Months Ended

Jun. 30, 2018

Investments, Debt and Equity Securities [Abstract]

Schedule of cash, cash equivalents and short-term investments

The short-term investments are classified as available-for-sale securities. The cash, cash equivalents and short-term investments at June 30, 2018 and December 31, 2017 were as follows:

	June 30, 2018
	Amortized Cost			Unrealized Gains		Unrealized Losses			Estimated Fair Value
	(in thousands)
Cash	$	61,776		$	—	$	—		$	61,776
Money market funds	1,646			—		—			1,646
Certificates of deposit	54,514			—		(70		)	54,444
U.S. Government and agency securities	37,609			—		(132		)	37,477
Commercial paper	33,254			16		(43		)	33,227
Corporate bonds	67,384			—		(370		)	67,014
Municipal bonds	12,090			—		(45		)	12,045
Foreign government bonds	15,064			—		(46		)	15,018
Total	283,337			16		(706		)	282,647
Less amounts classified as cash and cash equivalents	(63,422		)	—		—			(63,422		)
Short-term investments	$	219,915		$	16	$	(706	)	$	219,225

	December 31, 2017
	Amortized Cost			Unrealized Gains		Unrealized Losses			Estimated Fair Value
	(in thousands)
Cash	$	60,616		$	—	$	—		$	60,616
Money market funds	1,857			—		—			1,857
Certificates of deposit	58,039			—		(36		)	58,003
U.S. Government and agency securities	44,070			—		(198		)	43,872
Commercial paper	27,073			1		(45		)	27,029
Corporate bonds	54,673			—		(226		)	54,447
Municipal bonds	15,227			—		(58		)	15,169
Foreign government bonds	12,809			—		(48		)	12,761
Total	274,364			1		(611		)	273,754
Less amounts classified as cash and cash equivalents	(62,473		)	—		—			(62,473		)
Short-term investments	$	211,891		$	1	$	(611	)	$	211,281

Schedule of contractual maturities of short-term investments

The contractual maturities of short-term investments at June 30, 2018 and December 31, 2017 were as follows:

	June 30, 2018				December 31, 2017
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(in thousands)
Due in less than one year	$	199,635	$	199,107	$	148,232	$	147,921
Due in one to three years	20,280		20,118		63,659		63,360
	$	219,915	$	219,225	$	211,891	$	211,281

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GOODWILL AND INTANGIBLE ASSETS (Tables)

6 Months Ended

Jun. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of goodwill

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

Balance as of December 31, 2017	$	472,437
Acquisitions	1,479
Balance as of June 30, 2018	$	473,916

Schedule of carrying amounts of intangible assets

The carrying amounts of intangible assets as of June 30, 2018 were as follows:

	Gross Carrying Value		Accumulated Amortization			Net Carrying Value		Useful Life
	(in thousands)							(in years)
Licensed technology	$	47,590	$	(23,039	)	$	24,551	1-8
Developed technology	285,443		(144,417		)	141,026		4-7
Customer relationships	69,776		(28,113		)	41,663		4-9
Trade names	5,600		(4,390		)	1,210		3
Total intangible assets	$	408,409	$	(199,959	)	$	208,450

The carrying amounts of intangible assets as of December 31, 2017 were as follows:

	Gross Carrying Value		Accumulated Amortization			Net Carrying Value		Useful Life
	(in thousands)							(in years)
Licensed technology	$	40,407	$	(16,478	)	$	23,929	1-8
Developed technology	279,543		(122,414		)	157,129		4-7
Customer relationships	69,776		(24,783		)	44,993		4-9
Trade names	5,600		(3,456		)	2,144		3
Total intangible assets	$	395,326	$	(167,131	)	$	228,195

Schedule of estimated future amortization expense from amortizable intangible assets

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

	(in thousands)
2018 (remainder of the year)	$	34,378
2019	61,167
2020	52,049
2021	32,514
2022	11,946
Thereafter	16,396
Total	$	208,450

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DERIVATIVES AND HEDGING ACTIVITIES (Tables)

6 Months Ended

Jun. 30, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of fair value of derivative contracts

The fair value of derivative contracts in the unaudited condensed consolidated balance sheets at June 30, 2018 and December 31, 2017 were as follows:

		Accrued liabilities		Other current assets		Accrued liabilities
		June 30, 2018		December 31, 2017
		(in thousands)
Derivatives designated as hedging instruments
	Currency forward and option contracts	$	2,741	$	980	$	—
Derivatives not designated as hedging instruments
	Currency forward and option contracts	$	15	$	2	$	17
Total derivatives		$	2,756	$	982	$	17

Schedule of notional amounts of outstanding derivative positions

The notional amounts of outstanding derivative contracts in U.S. dollars at June 30, 2018 and December 31, 2017 were as follows:

	June 30, 2018		December 31, 2017
	(in thousands)
Derivatives designated as hedging instruments
Currency forward and option contracts	$	100,384	$	52,380
Derivatives not designated as hedging instruments
Currency forward and option contracts	$	38,356	$	47,015

Schedule of designated derivative contracts as cash flow hedges and their impact on OCI

The following table represents the unrealized gains (losses) of derivatives designated as hedging instruments, net of tax effects, that were recorded in accumulated other comprehensive income as of June 30, 2018 and December 31, 2017 and their effect on OCI for the six months endedJune 30, 2018:

	(in thousands)
December 31, 2017	$	925
Amount of loss recognized in OCI (effective portion)	(4,604		)
Amount of loss reclassified from OCI to income (effective portion)	884
June 30, 2018	$	(2,795	)

Effect of derivative contracts on the condensed consolidated statement of operations

The effect of derivative contracts on the unaudited condensed consolidated statements of operations for the three months endedJune 30,2018 and 2017 was as follows:

	Derivatives designated as hedging instruments					Derivatives not designated as hedging instruments
	Three Months Ended June 30,					Three Months Ended June 30,
	2018			2017		2018			2017
	(in thousands)
Operating income	$	(1,419	)	$	2,379	$	—		$	—
Other income (loss)	$	—		$	—	$	(1,814	)	$	1,239

The effect of derivative contracts on the unaudited condensed consolidated statements of operations for the six months endedJune 30,2018 and 2017 was as follows:

	Derivatives designated as hedging instruments					Derivatives not designated as hedging instruments
	Six Months Ended June 30,					Six Months Ended June 30,
	2018			2017		2018			2017
	(in thousands)
Operating income	$	(884	)	$	3,815	$	—		$	—
Other income (loss)	$	—		$	—	$	(2,704	)	$	3,305

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COMMITMENTS AND CONTINGENCIES (Tables)

6 Months Ended

Jun. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

Schedule of future minimum payments under non-cancelable operating and capital leases

At June 30, 2018, future minimum payments under non-cancelable operating leases are as follows:

	(in thousands)
2018 (remainder of the year)	$	10,926
2019	21,173
2020	17,944
2021	16,026
2022	12,598
Thereafter	75,966
Total minimum lease payments	$	154,633

Purchase commitment, excluding long-term commitment

At June 30, 2018, the Company had the following non-cancelable purchase commitments:

	(in thousands)
2018 (remainder of the year)	$	211,373
2019	46,782
2020	2,084
2021	536
2022	261
Thereafter	—
	$	261,036

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SHARE INCENTIVE PLANS (Tables)

6 Months Ended

Jun. 30, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of share option awards activity under equity incentive plans

Share option activity under the Company's equity incentive plans in the six months ended June 30,2018 is set forth below:

	Options Outstanding
	Number of Shares		Weighted Average Exercise Price
Outstanding at December 31, 2017	1,110,061		$	38.35
Options exercised	(345,862	)	$	23.11
Options canceled	(11,062	)	$	99.89
Outstanding at June 30, 2018	753,137		$	44.45

Summary of restricted share units activity

RSU activity under the Company's equity incentive plans in the six months ended June 30, 2018 is set forth below:

	Restricted Share Units Outstanding
	Number of Shares		Weighted Average Grant Date Fair Value
Non-vested restricted share units at December 31, 2017	3,414,705		$	48.45
Restricted share units granted	125,300		$	70.32
Restricted share units vested	(809,234	)	$	47.71
Restricted share units canceled	(375,848	)	$	48.94
Non-vested restricted share units at June 30, 2018	2,354,923		$	49.78

Summary of ordinary shares reserved for future issuance under equity incentive plans

The Company had the following ordinary shares reserved for future issuance under its equity incentive plans as of June 30, 2018:

	Number of Shares
Share options outstanding	753,137
Restricted share units outstanding	2,354,923
Shares authorized for future issuance	1,019,396
ESPP shares available for future issuance	3,137,452
Total shares reserved for future issuance as of June 30, 2018	7,264,908

Schedule of weighted average assumptions used to value share options granted

The following weighted average assumptions were used to value ESPP shares issued pursuant to the Company's share incentive plans for the six months ended June 30, 2018 and 2017:

	Six Months Ended June 30,
	2018		2017
Dividend yield	—	%	—	%
Expected volatility	37.2	%	25.3	%
Risk free interest rate	1.20	%	0.91	%
Expected life, years	0.5		0.5

Summary of the distribution of total share-based compensation expense

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
	(in thousands)
Cost of goods sold	$	415	$	575	$	826	$	1,057
Research and development	8,340		10,297		16,514		18,987
Sales and marketing	3,646		4,010		7,245		7,348
General and administrative	2,515		2,783		5,305		5,041
Total share-based compensation expense	$	14,916	$	17,665	$	29,890	$	32,433

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables)

6 Months Ended

Jun. 30, 2018

Equity [Abstract]

Summary of the changes in accumulated balances of other comprehensive income (loss)

The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the six months ended June 30,2018 and 2017:

	Unrealized Gains (Losses) on Available-for-Sale Securities			Unrealized Gains (Losses) on Derivatives Designated as Hedging Instruments			Total
	(in thousands)
Balance at December 31, 2017	$	693		$	925		$	1,618
Other comprehensive income/(loss) before reclassifications, net of taxes	(81		)	(4,604		)	(4,685		)
Realized (gains)/losses reclassified from accumulated other comprehensive income	1			884			885
Net current-period other comprehensive income/(loss), net of taxes	(80		)	(3,720		)	(3,800		)
Balance at June 30, 2018	$	613		$	(2,795	)	$	(2,182	)
Balance at December 31, 2016	$	(236	)	$	(692	)	$	(928	)
Other comprehensive income/(loss) before reclassifications, net of taxes	22			8,557			8,579
Realized (gains)/losses reclassified from accumulated other comprehensive income	—			(3,815		)	(3,815		)
Net current-period other comprehensive income/(loss), net of taxes	22			4,742			4,764
Balance at June 30, 2017	$	(214	)	$	4,050		$	3,836

Reclassification out of accumulated other comprehensive income

The following table provides details about reclassifications out of accumulated other comprehensive income (loss) for the six months ended June 30,2018 and 2017:

	Realized (Gains)/Losses Reclassified from Accumulated Other Comprehensive Income (Loss)					Affected Line Item in the Statement of Operations
	Six Months Ended June 30,
	2018		2017
	(in thousands)
Realized (gains)/losses on derivatives designated as hedging instruments	$	884	$	(3,815	)	Cost of revenues and Operating expenses:
	45		(220		)	Cost of revenues
	78		(427		)	General and administrative
	81		(372		)	Sales and marketing
	680		(2,796		)	Research and development
Realized (gains)/losses on available-for-sale securities	1		—			Other income, net
Total reclassifications for the period	$	885	$	(3,815	)	Total

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OTHER INCOME, NET (Tables)

6 Months Ended

Jun. 30, 2018

Other Income and Expenses [Abstract]

Schedule of other income, net

Other income, net is summarized in the following table:

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
	(in thousands)
Interest income and gains on short-term investments, net	$	972		$	951		$	1,939		$	1,828
Foreign exchange loss, net	(396		)	(161		)	(578		)	(322		)
Other	(43		)	37			(190		)	4
Other income, net	$	533		$	827		$	1,171		$	1,510

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THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Restricted cash narrative) (Details) - USD ($)	Jun. 30, 2018	Dec. 31, 2017	Jun. 30, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Long-term restricted cash	$ 7,931,000	$ 8,025,000	$ 0

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THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Restricted cash) (Details) - USD ($)	Jun. 30, 2018	Dec. 31, 2017	Jun. 30, 2017	Dec. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Cash and cash equivalents, as reported on the balance sheets	$ 63,422,000	$ 62,473,000	$ 55,722,000
Restricted cash in other long-term assets, as reported on the balance sheets	7,931,000	8,025,000	0
Cash, cash equivalents, and restricted cash, as reported in the statements of cash flows	$ 71,353,000	$ 70,498,000	$ 55,722,000	$ 56,780,000

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THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Concentration of credit risk) (Details) - Customer Concentration Risk	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Dell Technologies Inc. (Dell) | Net sales revenue
Concentration Risk [Line Items]
Percentage of consolidated revenue by major customer	14.00%	11.00%	12.00%	12.00%
Hewlett Packard Enterprise (HPE) | Net sales revenue
Concentration Risk [Line Items]
Percentage of consolidated revenue by major customer	13.00%	14.00%	15.00%	13.00%
Hewlett Packard Enterprise (HPE) | Accounts receivable
Concentration Risk [Line Items]
Percentage of consolidated revenue by major customer			16.00%		13.00%
IBM | Net sales revenue
Concentration Risk [Line Items]
Percentage of consolidated revenue by major customer		15.00%

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THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Product warranty) (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Changes in the entity's liability for product warranty
Balance, beginning of the period	$ 889	$ 1,474
New warranties issued during the period	856	756
Reversal of warranty reserves	0	(350)
Settlements during the period	(784)	(745)
Balance, end of the period	961	1,135
Less: long-term portion of product warranty liability	(173)	(180)
Current portion, end of the period	$ 788	$ 955	$ 706

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THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Net income (loss) per share) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Net income (loss)	$ 16,526	$ (7,991)	$ 54,369	$ (20,235)
Basic and diluted shares:
Weighted average ordinary shares outstanding (in shares)	52,615	50,056	52,219	49,698
Effect of dilutive shares (in shares)	$ 1,851	$ 0	$ 1,930	$ 0
Shares used to compute diluted net income (loss) per share (in shares)	54,466	50,056	54,149	49,698
Net income (loss) per share - basic (in USD per share)	$ 0.31	$ (0.16)	$ 1.04	$ (0.41)
Net income (loss) per share - diluted (in USD per share)	$ 0.30	$ (0.16)	$ 1.00	$ (0.41)
Share options and restricted stock units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)	200	5,500	200	5,500

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REVENUE REVENUE (Cumulative effect of changes for Topic 606 made to balance sheet) (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Jan. 01, 2018	Dec. 31, 2017
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Deferred revenue, short term	$ 20,719	$ 18,984	$ 23,485
Retained earnings	240,500	186,131	181,630
Calculated under Revenue Guidance in Effect before Topic 606
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Deferred revenue, short term	31,619		23,485
Retained earnings	229,600		$ 181,630
Difference between Revenue Guidance in Effect before and after Topic 606 | Accounting Standards Update 2014-09
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Deferred revenue, short term	10,900	(4,501)
Retained earnings	$ (10,900)	$ 4,501

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REVENUE REVENUE (Impact to Balance Sheet) (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Jan. 01, 2018	Dec. 31, 2017
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Deferred revenue, short term	$ 20,719	$ 18,984	$ 23,485
Retained earnings	240,500	186,131	181,630
Calculated under Revenue Guidance in Effect before Topic 606
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Deferred revenue, short term	31,619		23,485
Retained earnings	229,600		$ 181,630
Accounting Standards Update 2014-09 | Difference between Revenue Guidance in Effect before and after Topic 606
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Deferred revenue, short term	10,900	(4,501)
Retained earnings	$ (10,900)	$ 4,501

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REVENUE REVENUE (Impact to Statement of Operations and Cash Flow) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Condensed Consolidated Statement of Operations
Total revenues	$ 268,462	$ 211,962	$ 519,462	$ 400,613
Cost of revenues	103,668	73,427	192,666	137,877
Net income	$ 16,526	$ (7,991)	$ 54,369	$ (20,235)
Earnings per share
Basic (in USD per share)	$ 0.31	$ (0.16)	$ 1.04	$ (0.41)
Diluted (in USD per share)	$ 0.30	$ (0.16)	$ 1.00	$ (0.41)
Cash flows from operating activities:
Accrued liabilities and other liabilities			$ 12,334	$ (1,141)
Calculated under Revenue Guidance in Effect before Topic 606
Condensed Consolidated Statement of Operations
Total revenues	$ 266,182		510,363
Cost of revenues	103,568		189,966
Net income	$ 14,346		$ 47,970
Earnings per share
Basic (in USD per share)	$ 0.27		$ 0.92
Diluted (in USD per share)	$ 0.26		$ 0.88
Cash flows from operating activities:
Accrued liabilities and other liabilities			$ 18,733
Accounting Standards Update 2014-09 | Difference between Revenue Guidance in Effect before and after Topic 606
Condensed Consolidated Statement of Operations
Total revenues	$ (2,280)		(9,099)
Cost of revenues	(100)		(2,700)
Net income	$ (2,180)		$ (6,399)
Earnings per share
Basic (in USD per share)	$ (0.04)		$ (0.12)
Diluted (in USD per share)	$ (0.04)		$ (0.12)
Cash flows from operating activities:
Accrued liabilities and other liabilities			$ 6,399

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REVENUE REVENUE (Revenue by Geographic Location) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Disaggregation of Revenue [Line Items]
Total revenues	$ 268,462	$ 211,962	$ 519,462	$ 400,613
United States
Disaggregation of Revenue [Line Items]
Total revenues	101,396	80,703	197,656	159,567
China
Disaggregation of Revenue [Line Items]
Total revenues	54,181	31,990	110,395	65,191
Europe
Disaggregation of Revenue [Line Items]
Total revenues	41,454	38,828	77,450	85,233
Other Americas
Disaggregation of Revenue [Line Items]
Total revenues	33,112	31,358	60,852	42,248
Other Asia
Disaggregation of Revenue [Line Items]
Total revenues	$ 38,319	$ 29,083	$ 73,109	$ 48,374

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REVENUE REVENUE (Revenue by Product Type) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Disaggregation of Revenue [Line Items]
Total revenues	$ 268,462	$ 211,962	$ 519,462	$ 400,613
ICs
Disaggregation of Revenue [Line Items]
Total revenues	28,934	34,063	57,521	76,485
Boards
Disaggregation of Revenue [Line Items]
Total revenues	136,708	80,425	254,759	144,717
Switch systems
Disaggregation of Revenue [Line Items]
Total revenues	57,074	56,189	112,721	103,335
Cables, accessories and other
Disaggregation of Revenue [Line Items]
Total revenues	$ 45,746	$ 41,285	$ 94,461	$ 76,076

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REVENUE REVENUE (Revenue by Interconnect Protocol) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Disaggregation of Revenue [Line Items]
Total revenues	$ 268,462	$ 211,962	$ 519,462	$ 400,613
Remaining service period	5 years		5 years
InfiniBand:
Disaggregation of Revenue [Line Items]
Total revenues	$ 102,111	108,111	$ 205,249	205,096
EDR
Disaggregation of Revenue [Line Items]
Total revenues	59,319	59,436	115,265	99,059
FDR
Disaggregation of Revenue [Line Items]
Total revenues	35,649	42,978	77,397	92,807
QDR/DDR/SDR
Disaggregation of Revenue [Line Items]
Total revenues	7,143	5,697	12,587	13,230
Ethernet
Disaggregation of Revenue [Line Items]
Total revenues	157,470	87,023	294,418	167,500
Other
Disaggregation of Revenue [Line Items]
Total revenues	$ 8,881	$ 16,828	$ 19,795	$ 28,017

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REVENUE REVENUE (Contract Liabilities) (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jan. 01, 2018	Dec. 31, 2017
Change in Contract with Customer, Asset and Liability [Roll Forward]
Balance, beginning of the period	$ 36,804
New performance obligations	14,578
Reclassification to revenue as a result of satisfying performance obligations	(12,872)
Balance, end of period	38,510
Less: long-term portion of deferred revenue	17,791		$ 17,820
Current portion, end of the period	$ 20,719	$ 18,984	$ 23,485

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BALANCE SHEET COMPONENTS (Details) - USD ($)	Jun. 30, 2018	Dec. 31, 2017	Jun. 30, 2017
Accounts receivable, net:
Accounts receivable, gross	$ 156,296,000	$ 154,845,000
Less: allowance for doubtful accounts	(632,000)	(632,000)
Accounts receivable, net	155,664,000	154,213,000
Inventories:
Raw materials	13,560,000	12,656,000
Work-in-process	42,253,000	22,769,000
Finished goods	38,671,000	29,232,000
Inventories	94,484,000	64,657,000
Other current assets:
Prepaid expenses	5,588,000	7,518,000
Derivative contracts receivable	0	982,000
VAT receivable	3,394,000	2,259,000
Other	3,025,000	3,536,000
Other current assets	12,007,000	14,295,000
Property and equipment, net:
Property and equipment, gross	225,557,000	215,167,000
Less: Accumulated depreciation and amortization	(118,811,000)	(105,248,000)
Property and equipment, net	106,746,000	109,919,000
Deferred taxes and other long-term assets:
Equity investments in private companies	35,255,000	29,255,000
Deferred taxes	52,648,000	24,563,000
Long-term restricted cash	7,931,000	8,025,000	$ 0
Other assets	2,910,000	4,319,000
Deferred taxes and other long-term assets	98,744,000	66,162,000
Accrued liabilities:
Payroll and related expenses	64,859,000	71,868,000
Accrued expenses	43,694,000	31,951,000
Derivative contracts payable	2,756,000	17,000
Product warranty liability	788,000	706,000	$ 955,000
Other	12,695,000	9,516,000
Accrued liabilities	124,792,000	114,058,000
Other long-term liabilities:
Income tax payable	24,971,000	24,425,000
Deferred rent	2,528,000	2,220,000
Other	4,618,000	7,422,000
Other long-term liabilities	32,117,000	34,067,000
Computer, equipment, and software
Property and equipment, net:
Property and equipment, gross	173,070,000	164,707,000
Furniture and fixtures
Property and equipment, net:
Property and equipment, gross	2,882,000	3,198,000
Leasehold improvements
Property and equipment, net:
Property and equipment, gross	$ 49,605,000	$ 47,262,000

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FAIR VALUE MEASUREMENTS (Details) - Fair value, measurements, recurring basis - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Financial assets measured at fair value
Investments, fair value	$ 220,871	$ 213,138
Long-term restricted cash	7,931	8,025
Derivative contracts		982
Total financial assets	228,802	222,145
Derivative contracts	2,756	17
Total financial liabilities	2,756	17
Money market funds
Financial assets measured at fair value
Investments, fair value	1,646	1,857
Certificates of deposit
Financial assets measured at fair value
Investments, fair value	54,444	58,003
U.S. Government and agency securities
Financial assets measured at fair value
Investments, fair value	37,477	43,872
Commercial paper
Financial assets measured at fair value
Investments, fair value	33,227	27,029
Corporate bonds
Financial assets measured at fair value
Investments, fair value	67,014	54,447
Municipal bonds
Financial assets measured at fair value
Investments, fair value	12,045	15,169
Foreign government bonds
Financial assets measured at fair value
Investments, fair value	15,018	12,761
Level 1
Financial assets measured at fair value
Investments, fair value	1,646	1,857
Long-term restricted cash	0	0
Derivative contracts		0
Total financial assets	1,646	1,857
Derivative contracts	0	0
Total financial liabilities	0	0
Level 1 | Money market funds
Financial assets measured at fair value
Investments, fair value	1,646	1,857
Level 1 | Certificates of deposit
Financial assets measured at fair value
Investments, fair value	0	0
Level 1 | U.S. Government and agency securities
Financial assets measured at fair value
Investments, fair value	0	0
Level 1 | Commercial paper
Financial assets measured at fair value
Investments, fair value	0	0
Level 1 | Corporate bonds
Financial assets measured at fair value
Investments, fair value	0	0
Level 1 | Municipal bonds
Financial assets measured at fair value
Investments, fair value	0	0
Level 1 | Foreign government bonds
Financial assets measured at fair value
Investments, fair value	0	0
Level 2
Financial assets measured at fair value
Investments, fair value	219,225	211,281
Long-term restricted cash	7,931	8,025
Derivative contracts		982
Total financial assets	227,156	220,288
Derivative contracts	2,756	17
Total financial liabilities	2,756	17
Level 2 | Money market funds
Financial assets measured at fair value
Investments, fair value	0	0
Level 2 | Certificates of deposit
Financial assets measured at fair value
Investments, fair value	54,444	58,003
Level 2 | U.S. Government and agency securities
Financial assets measured at fair value
Investments, fair value	37,477	43,872
Level 2 | Commercial paper
Financial assets measured at fair value
Investments, fair value	33,227	27,029
Level 2 | Corporate bonds
Financial assets measured at fair value
Investments, fair value	67,014	54,447
Level 2 | Municipal bonds
Financial assets measured at fair value
Investments, fair value	12,045	15,169
Level 2 | Foreign government bonds
Financial assets measured at fair value
Investments, fair value	$ 15,018	$ 12,761

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INVESTMENTS (Schedule of cash, cash equivalents and short-term investments) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Amortized Cost
Amortized Cost	$ 283,337		$ 283,337		$ 274,364
Short-term investments	219,915		219,915		211,891
Unrealized Gains	16		16		1
Unrealized Losses	(706)		(706)		(611)
Estimated Fair Value
Short term investments, Estimated fair value	282,647		282,647		273,754
Short-term investments	219,225		219,225		211,281
Interest income and gains on short-term investments, net	972	$ 951	1,939	$ 1,828
Unrealized losses, greater than 12 months	100		100
Cash
Amortized Cost
Amortized Cost	61,776		61,776		60,616
Unrealized Gains	0		0		0
Unrealized Losses	0		0		0
Estimated Fair Value
Short term investments, Estimated fair value	61,776		61,776		60,616
Money market funds
Amortized Cost
Amortized Cost	1,646		1,646		1,857
Unrealized Gains	0		0		0
Unrealized Losses	0		0		0
Estimated Fair Value
Short term investments, Estimated fair value	1,646		1,646		1,857
Certificates of deposit
Amortized Cost
Amortized Cost	54,514		54,514		58,039
Unrealized Gains	0		0		0
Unrealized Losses	(70)		(70)		(36)
Estimated Fair Value
Short term investments, Estimated fair value	54,444		54,444		58,003
U.S. Government and agency securities
Amortized Cost
Amortized Cost	37,609		37,609		44,070
Unrealized Gains	0		0		0
Unrealized Losses	(132)		(132)		(198)
Estimated Fair Value
Short term investments, Estimated fair value	37,477		37,477		43,872
Commercial paper
Amortized Cost
Amortized Cost	33,254		33,254		27,073
Unrealized Gains	16		16		1
Unrealized Losses	(43)		(43)		(45)
Estimated Fair Value
Short term investments, Estimated fair value	33,227		33,227		27,029
Corporate bonds
Amortized Cost
Amortized Cost	67,384		67,384		54,673
Unrealized Gains	0		0		0
Unrealized Losses	(370)		(370)		(226)
Estimated Fair Value
Short term investments, Estimated fair value	67,014		67,014		54,447
Municipal bonds
Amortized Cost
Amortized Cost	12,090		12,090		15,227
Unrealized Gains	0		0		0
Unrealized Losses	(45)		(45)		(58)
Estimated Fair Value
Short term investments, Estimated fair value	12,045		12,045		15,169
Foreign government bonds
Amortized Cost
Amortized Cost	15,064		15,064		12,809
Unrealized Gains	0		0		0
Unrealized Losses	(46)		(46)		(48)
Estimated Fair Value
Short term investments, Estimated fair value	15,018		15,018		12,761
Cash and cash equivalents
Amortized Cost
Amortized Cost	63,422		63,422		62,473
Estimated Fair Value
Short term investments, Estimated fair value	$ 63,422		$ 63,422		$ 62,473

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INVESTMENTS (Fair value due by period) (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Amortized Cost
Due in less than one year	$ 199,635	$ 148,232
Due in one to three years	20,280	63,659
Amortized Cost	219,915	211,891
Estimated Fair Value
Due in less than one year	199,107	147,921
Due in one to three years	20,118	63,360
Estimated Fair Value	219,225	211,281
Equity investments in private companies	$ 35,255	$ 29,255

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GOODWILL AND INTANGIBLE ASSETS (Schedule of Goodwill) (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2018 USD ($)
Goodwill [Roll Forward]
Goodwill, beginning balance	$ 472,437
Acquisitions	1,479
Goodwill, ending balance	$ 473,916

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GOODWILL AND INTANGIBLE ASSETS (Schedule of Carrying Amounts of Intangible Assets) (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Value	$ 408,409	$ 395,326
Accumulated Amortization	(199,959)	(167,131)
Net Carrying Value	208,450	228,195
Licensed technology
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Value	47,590	40,407
Accumulated Amortization	(23,039)	(16,478)
Net Carrying Value	24,551	23,929
Developed technology
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Value	285,443	279,543
Accumulated Amortization	(144,417)	(122,414)
Net Carrying Value	141,026	157,129
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Value	69,776	69,776
Accumulated Amortization	(28,113)	(24,783)
Net Carrying Value	41,663	44,993
Trade names
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Value	5,600	5,600
Accumulated Amortization	(4,390)	(3,456)
Net Carrying Value	$ 1,210	$ 2,144
Useful life	3 years	3 years
Minimum | Licensed technology
Finite-Lived Intangible Assets [Line Items]
Useful life	1 year	1 year
Minimum | Developed technology
Finite-Lived Intangible Assets [Line Items]
Useful life	4 years	4 years
Minimum | Customer relationships
Finite-Lived Intangible Assets [Line Items]
Useful life	4 years	4 years
Maximum | Licensed technology
Finite-Lived Intangible Assets [Line Items]
Useful life	8 years	8 years
Maximum | Developed technology
Finite-Lived Intangible Assets [Line Items]
Useful life	7 years	7 years
Maximum | Customer relationships
Finite-Lived Intangible Assets [Line Items]
Useful life	9 years	9 years

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GOODWILL AND INTANGIBLE ASSETS (Narrative) (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization of intangible assets	$ 16.5	$ 15.1	$ 32.8	$ 30.1

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GOODWILL AND INTANGIBLE ASSETS (Schedule of Estimated Future Amortization Expense) (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Goodwill and Intangible Assets Disclosure [Abstract]
2018 (remainder of the year)	$ 34,378
2019	61,167
2020	52,049
2021	32,514
2022	11,946
Thereafter	16,396
Net Carrying Value	$ 208,450	$ 228,195

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DERIVATIVES AND HEDGING ACTIVITIES (Fair Value of Derivative Contracts and Notional Amounts) (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Derivatives designated as hedging instruments
Notional Disclosures [Abstract]
Currency forward and option contracts	$ 100,384	$ 52,380
Derivatives not designated as hedging instruments
Notional Disclosures [Abstract]
Currency forward and option contracts	38,356	47,015
Currency forward and option contracts | Accrued liabilities
Derivative, Fair Value, Net [Abstract]
Currency forward contracts, liabilities	2,756	17
Currency forward and option contracts | Accrued liabilities | Derivatives designated as hedging instruments
Derivative, Fair Value, Net [Abstract]
Currency forward contracts, liabilities	2,741	0
Currency forward and option contracts | Accrued liabilities | Derivatives not designated as hedging instruments
Derivative, Fair Value, Net [Abstract]
Currency forward contracts, liabilities	$ 15	17
Currency forward and option contracts | Other current assets
Derivative, Fair Value, Net [Abstract]
Currency forward contracts, assets		982
Currency forward and option contracts | Other current assets | Derivatives designated as hedging instruments
Derivative, Fair Value, Net [Abstract]
Currency forward contracts, assets		980
Currency forward and option contracts | Other current assets | Derivatives not designated as hedging instruments
Derivative, Fair Value, Net [Abstract]
Currency forward contracts, assets		$ 2

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DERIVATIVES AND HEDGING ACTIVITIES (Effect of Derivatives Designated as Hedging Instruments on AOCI) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Balance of designated derivative contracts as cash flow hedges and their impact on OCI
Balance at the beginning of the period			$ 1,618
Amount of loss recognized in OCI (effective portion)	$ (2,382)	$ 498	(3,720)	$ 4,742
Balance at the end of the period	(2,182)		(2,182)
Derivatives designated as hedging instruments
Balance of designated derivative contracts as cash flow hedges and their impact on OCI
Balance at the beginning of the period			925
Amount of loss recognized in OCI (effective portion)			(4,604)
Amount of loss reclassified from OCI to income (effective portion)			884
Balance at the end of the period	$ (2,795)		$ (2,795)

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DERIVATIVES AND HEDGING ACTIVITIES (Effective of Contracts on Statement of Operations) (Details) - Realized (Gains)/Losses Reclassified from Accumulated Other Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Derivatives designated as hedging instruments | Operating income
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Gain (loss) on derivatives	$ (1,419)	$ 2,379	$ (884)	$ 3,815
Derivatives designated as hedging instruments | Other income (loss)
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Gain (loss) on derivatives	0	0	0	0
Derivatives not designated as hedging instruments | Operating income
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Gain (loss) on derivatives	0	0	0	0
Derivatives not designated as hedging instruments | Other income (loss)
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Gain (loss) on derivatives	$ (1,814)	$ 1,239	$ (2,704)	$ 3,305

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COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	May 03, 2016
Future minimum payments under non-cancelable operating leases
2018 (remainder of the year)	$ 10,926
2019	21,173
2020	17,944
2021	16,026
2022	12,598
Thereafter	75,966
Total minimum lease payments	154,633
Purchase commitments
2018 (remainder of the year)	211,373
2019	46,782
2020	2,084
2021	536
2022	261
Thereafter	0
Amount of non-cancelable purchase commitments	261,036
Loss Contingencies [Line Items]
Length of operating lease term (in years)				10 years
Accrued royalties		$ 36,400
Unrecognized tax benefits	45,800		$ 45,200
Unrecognized tax benefits that would impact effective tax rate	23,700
Yokneam
Loss Contingencies [Line Items]
Present value of capital lease obligations	30,300
Settlement Agreement With Israeli Innovative Authority
Loss Contingencies [Line Items]
Settlement agreement expense	$ 9,300

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SHARE INCENTIVE PLANS (Stock Option Plans) (Details) - shares	Feb. 14, 2017	Jun. 30, 2018
Share incentive plans
Common stock, capital shares reserved for future issuance (in shares)		7,264,908
Second Restated Plan
Share incentive plans
Number of additional shares authorized	1,640,000
Common stock, capital shares reserved for future issuance (in shares)	2,390,000

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SHARE INCENTIVE PLANS (Summary of Share Option Awards Activity Under Equity Incentive Plans) (Details) - Employee Stock Option - USD ($) $ / shares in Units, $ in Millions	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 29, 2018	Dec. 31, 2017
Number of Shares
Options outstanding at the beginning of the period (in shares)	1,110,061
Options exercised (in shares)	(345,862)
Options canceled (in shares)	(11,062)
Options outstanding at the end of the period (in shares)	753,137
Weighted Average Exercise Price
Options outstanding at the beginning of the period (in USD per share)	$ 38.35
Options exercised (in USD per share)	23.11
Options canceled (in USD per share)	99.89
Options outstanding at the end of the period (in USD per share)	$ 44.45
Pretax intrinsic value of options exercised	$ 19.4	$ 5.2
Share price (in USD per share)			$ 84.3
Pretax intrinsic value of options outstanding	$ 32.6			$ 35.5
Options, exercisable, number (in shares)	751,471			1,107,712
Pretax intrinsic value of exercisable options	$ 32.5			$ 35.4

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SHARE INCENTIVE PLANS (Summary of Restricted Share Units Activity) (Details) - Restricted Share Units Outstanding - USD ($) $ / shares in Units, $ in Millions	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Number of Shares
Non vested restricted share units at the beginning of the period (in shares)	3,414,705
Restricted share units granted (in shares)	125,300
Restricted share units vested (in shares)	(809,234)
Restricted share units canceled (in shares)	(375,848)
Non vested restricted share units at the end of the period (in shares)	2,354,923
Weighted Average Grant Date Fair Value
Non vested restricted share units at the beginning of the period (in USD per share)	$ 48.45
Restricted share units granted (in USD per share)	70.32	$ 50.42
Restricted share units vested (in USD per share)	47.71
Restricted share units cancelled (in USD per share)	48.94
Non vested restricted share units at the end of the period (in USD per share)	$ 49.78
Total intrinsic value of all outstanding restricted share units	$ 198.5		$ 220.9

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SHARE INCENTIVE PLANS (Employee Stock Purchase Plan activity) (Details) - $ / shares	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock issued during period, shares, employee stock ownership plan	288,017	269,698
Average price per share (in USD per share)	$ 39.40	$ 37.63

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SHARE INCENTIVE PLANS (Shares Reserved, ESPP Assumptions) (Details) - shares	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Number of Shares
Share options outstanding (in shares)	753,137
Shares authorized for future issuance (in shares)	1,019,396
Common stock, capital shares reserved for future issuance (in shares)	7,264,908
Restricted Share Units Outstanding
Number of Shares
Restricted share units outstanding (in shares)	2,354,923		3,414,705
Employee stock
Number of Shares
Shares authorized for future issuance (in shares)	3,137,452
Weighted average assumptions
Dividend yield	0.00%	0.00%
Expected volatility	37.20%	25.30%
Risk free interest rate	1.20%	0.91%
Expected life, years	6 months	6 months

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SHARE INCENTIVE PLANS (Share-Based Compensation Expense) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Share-based compensation expense
Allocated share-based compensation expense	$ 14,916	$ 17,665	$ 29,890	$ 32,433
Total unrecognized share-based compensation costs related to non-vested awards	106,100		$ 106,100
Weighted average period for recognition of unrecognized share-based compensation costs (in years)			2 years 5 months 9 days
Cost of goods sold
Share-based compensation expense
Allocated share-based compensation expense	415	575	$ 826	1,057
Research and development
Share-based compensation expense
Allocated share-based compensation expense	8,340	10,297	16,514	18,987
Sales and marketing
Share-based compensation expense
Allocated share-based compensation expense	3,646	4,010	7,245	7,348
General and administrative
Share-based compensation expense
Allocated share-based compensation expense	$ 2,515	$ 2,783	$ 5,305	$ 5,041

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Summary of the changes in accumulated balances of other comprehensive income (loss)) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance			$ 1,057,448
Other comprehensive income/(loss) before reclassifications, net of taxes			(4,685)	$ 8,579
Realized (gains)/losses reclassified from accumulated other comprehensive income			885	(3,815)
Other comprehensive income (loss), net of tax	$ (2,169)	$ 451	(3,800)	4,764
Ending balance	1,161,749		1,161,749
Unrealized Gains (Losses) on Available-for-Sale Securities
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance			693	(236)
Other comprehensive income/(loss) before reclassifications, net of taxes			(81)	22
Realized (gains)/losses reclassified from accumulated other comprehensive income			1	0
Other comprehensive income (loss), net of tax			(80)	22
Ending balance	613	(214)	613	(214)
Unrealized Gains (Losses) on Derivatives Designated as Hedging Instruments
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance			925	(692)
Other comprehensive income/(loss) before reclassifications, net of taxes			(4,604)	8,557
Realized (gains)/losses reclassified from accumulated other comprehensive income			884	(3,815)
Other comprehensive income (loss), net of tax			(3,720)	4,742
Ending balance	(2,795)	4,050	(2,795)	4,050
Total
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance			1,618	(928)
Ending balance	$ (2,182)	$ 3,836	$ (2,182)	$ 3,836

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Reclassification out of accumulated other comprehensive income) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Reclassifications out of accumulated other comprehensive income
Cost of revenues	$ (103,668)	$ (73,427)	$ (192,666)	$ (137,877)
General and administrative	(23,635)	(12,476)	(40,151)	(24,995)
Sales and marketing	(35,673)	(38,110)	(75,167)	(73,867)
Research and development	(87,152)	(92,348)	(173,578)	(180,839)
Other income, net	$ 533	$ 827	1,171	1,510
Total reclassifications for the period			885	(3,815)
Realized (Gains)/Losses Reclassified from Accumulated Other Comprehensive Income (Loss) | Realized (gains)/losses on derivatives designated as hedging instruments
Reclassifications out of accumulated other comprehensive income
Cost of revenues and Operating expenses			884	(3,815)
Cost of revenues			45	(220)
General and administrative			78	(427)
Sales and marketing			81	(372)
Research and development			680	(2,796)
Realized (Gains)/Losses Reclassified from Accumulated Other Comprehensive Income (Loss) | Realized (gains)/losses on available-for-sale securities
Reclassifications out of accumulated other comprehensive income
Other income, net			$ 1	$ 0

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INCOME TAXES (Details)		6 Months Ended		12 Months Ended
	Jun. 14, 2017	Jun. 30, 2018 USD ($) subsidiary $ / shares	Jun. 30, 2017	Dec. 31, 2017 USD ($)
Income Tax Disclosure [Line Items]
Unrecognized tax benefits		$ 45,800,000		$ 45,200,000
Unrecognized tax benefits, income tax penalties and interest accrued		2,300,000		1,600,000
Valuation allowance against deferred tax assets		26,300,000
Provisional decrease to deferred tax assets		$ 0		$ 3,200,000
Effective income tax rate, percent		(96.50%)	(4.10%)
Domestic Tax Authority
Income Tax Disclosure [Line Items]
Operating loss carryforwards		$ 86,100,000
State and Local Jurisdiction
Income Tax Disclosure [Line Items]
Operating loss carryforwards		$ 74,400,000
Israel Tax Authority
Income Tax Disclosure [Line Items]
Income tax holiday, income tax benefits (in usd per share) | $ / shares		$ 0.15
Yokneam | Israel Tax Authority
Income Tax Disclosure [Line Items]
Effective income tax rate, percent	7.50%
Tel Aviv | Israel Tax Authority
Income Tax Disclosure [Line Items]
Effective income tax rate, percent	12.00%
Research Tax Credit Carryforward | Domestic Tax Authority
Income Tax Disclosure [Line Items]
Tax credit carryforward, amount		$ 12,900,000
Research Tax Credit Carryforward | State and Local Jurisdiction
Income Tax Disclosure [Line Items]
Tax credit carryforward, amount		4,500,000
Israel Tax Authority
Income Tax Disclosure [Line Items]
Income tax holiday, aggregate dollar amount		$ 8,300,000
Israel Tax Authority | Israel Tax Authority
Income Tax Disclosure [Line Items]
Number of subsidiaries | subsidiary		1
Israel Tax Authority | Tel Aviv
Income Tax Disclosure [Line Items]
Income tax holiday reduced income tax rate after second year of tax holiday		10.00%

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OTHER INCOME, NET (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Other Income and Expenses [Abstract]
Interest income and gains on short-term investments, net	$ 972	$ 951	$ 1,939	$ 1,828
Foreign exchange loss, net	(396)	(161)	(578)	(322)
Other	(43)	37	(190)	4
Other income, net	$ 533	$ 827	$ 1,171	$ 1,510

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TERM DEBT (Details) - USD ($)	Jun. 30, 2018	Feb. 22, 2016
Debt Disclosure [Abstract]
Debt instrument, face amount	$ 280,000,000
Debt issuance costs		$ 5,500,000

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RESTRUCTURING CHARGES (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Restructuring Cost and Reserve [Line Items]
Restructuring charges	$ 1,774	$ 0	$ 9,361	$ 0
Employee separation and severance costs
Restructuring Cost and Reserve [Line Items]
Restructuring charges	100		3,500
Contract termination
Restructuring Cost and Reserve [Line Items]
Restructuring charges	200		3,400
Disposal of assets
Restructuring Cost and Reserve [Line Items]
Restructuring charges	1,400		2,400
Facility closing costs
Restructuring Cost and Reserve [Line Items]
Restructuring cost, expected remaining cost	$ 500		$ 500

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RELATED PARTY TRANSACTIONS (Details)	Jun. 19, 2018 USD ($) board_member	Jun. 30, 2018 USD ($)
Related Party Transaction [Line Items]
Ownership percentage by noncontrolling interest	10.30%
Investee | Starboard Value, LP | Settlement Agreement
Related Party Transaction [Line Items]
Number of resignations from the board	3
Number of appointed directors to the board	2
Number of independent nominees to the board	1
Maximum reimbursement | $	$ 2,000,000.0
Due to related parties | $		$ 2,000,000

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SUBSEQUENT EVENTS (Details) - shares	Jul. 25, 2018	Feb. 14, 2017	Jun. 30, 2018
Subsequent Event [Line Items]
Common stock, capital shares reserved for future issuance (in shares)			7,264,908
Second Restated Plan
Subsequent Event [Line Items]
Number of additional shares authorized		1,640,000
Common stock, capital shares reserved for future issuance (in shares)		2,390,000
Second Restated Plan | Subsequent Event
Subsequent Event [Line Items]
Number of additional shares authorized	2,077,000
Common stock, capital shares reserved for future issuance (in shares)	4,467,000