ACQUISITION AGREEMENT

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THIS ACQUISITION AGREEMENT (this “ Agreement ”), dated as of October 12, 2009, is entered into by and among CopperGate Communications Ltd., a limited liability company under the laws of Israel (the “Company”), Sigma Designs, Inc., a California corporation (“ Purchaser ”), Carmel V.C. 2 Ltd. and Tamir Fishman Ventures Management II Ltd., as the Holder Representatives, and each of the Persons identified on Exhibit A (the “ Executing Shareholders ”).

WHEREAS, the parties intend, subject to the terms and conditions herein, to effect an acquisition by Purchaser, directly, or indirectly through a wholly owned Israeli subsidiary of Purchaser (the “ Acquisition Subsidiary ”), of all of the issued and outstanding share capital of the Company, whether by way of a share purchase of all of the issued and outstanding share capital of the Company or by way of a merger of Acquisition Subsidiary with the Company, as more fully described hereinbelow;

WHEREAS, the parties intend that, subject to the terms and conditions herein, Purchaser or the Acquisition Subsidiary shall purchase from the Selling Shareholders, and the Selling Shareholders shall sell, transfer assign or convey to Purchaser or the Acquisition Subsidiary, all of the issued and outstanding share capital of the Company;

WHEREAS, the Executing Shareholders collectively hold and own at least 95% of the issued and outstanding Company Shares;

WHEREAS, the Company will take reasonable commercial efforts to cause this Agreement to be executed prior to the Closing by the holders of Company Shares who did not execute this Agreement at the date hereof and who are listed in Exhibit B of this Agreement (the “ Non-Executing Shareholders ”) (collectively with the Executing Shareholders the “ Selling Shareholders ”) and in such case the Company will amend Exhibit A or Exhibit B ;

WHEREAS, the Company will take reasonable commercial efforts to cause the Company Warrantholders to exercise their Warrants and execute this Agreement (and in such case the Company will amend Exhibit A or Exhibit B ) or will terminate their rights pursuant to such securities (unless such securities by their terms are terminated at the Closing), as further contemplated herein;

WHEREAS, Purchaser shall have certain indemnification rights against the Equityholders, as further set forth in this Agreement, and will deposit with the Escrow Agent the Escrow Fund otherwise payable by Purchaser to the Participating Rights Holders to be held in accordance with the provisions of an escrow agreement in the form attached hereto as Exhibit D (the “ Escrow Agreement ”);

WHEREAS, concurrently with the execution and delivery of this Agreement, certain Executing Shareholders listed in Exhibit E (the “ Principal Shareholders ”) and holding at least ninety percent (90%) of the issued and outstanding Company Shares are executing and delivering to Purchaser a lockup agreement in the form attached hereto as Exhibit F (the “ Lockup Agreement ”);

WHEREAS, concurrently with the execution and delivery of this Agreement, the Key Employees listed in Schedule 1 are executing and delivering a Letter of Acknowledgment in the form attached hereto as Exhibit G and a non-competition agreement in the form attached hereto as Exhibit H (each, a “ Non-competition Agreement ”);

WHEREAS, Purchaser has agreed to establish a Retention Pool for certain Designated Employees listed in Exhibit I as further described in this Agreement;

WHEREAS, the board of directors of the Company (the “ Company Board of Directors ”) has carefully considered the terms of this Agreement and has determined that the terms and conditions of the transactions contemplated hereby, including the Transactions, are fair and in the best interests of, and are advisable to, the Company and the Equityholders, and the Company Board of Directors unanimously recommended that the Selling Shareholders vote for the approval of this Agreement and the transactions contemplated hereby and will be submitting the execution and delivery of this Agreement and the performance of the transaction contemplated hereby to the Selling Shareholders for their approval and adoption in accordance with the Company’s Charter Documents and the Israeli Companies Law (the “ Shareholders Meeting ”).

WHEREAS, following such recommendation of the Company Board of Directors certain Executing Shareholders holding an aggregate of more than ninety percent (90%) of the issued and outstanding Company Shares signed a Shareholder’s Voting and Support Agreement in the form attached hereto as Exhibit C .

WHEREAS, the board of directors of Purchaser has carefully considered the terms of this Agreement and has determined that the terms and conditions of the transactions contemplated hereby, including the Transactions, are fair and in the best interests of, and are advisable to, the Purchaser and Purchaser’s shareholders.

NOW, THEREFORE, intending to be legally bound, the parties to this Agreement hereby agree as follows:

“ Acquired Companies ” means, collectively, the Company and each of its Subsidiaries.

“ Acquisition Proposal ” means, other than the Transactions or any alternative transaction proposed by Purchaser, any offer, proposal or inquiry relating to, or any Person’s indication of interest in, (i) the sale, license, disposition or acquisition of all or a material portion of the business or assets of the Acquired Companies, taken as a whole, (ii) the issuance, disposition or acquisition of (a) any shares or other equity security of any Acquired Company (other than in connection with the exercise or conversion of any Company Preferred Shares, Company Option or Company Warrant), (b) any subscription, option, call, warrant, preemptive right, right of first refusal or any other right (whether or not exercisable) to acquire any shares or other equity security of any Acquired Company (other than the grant of Company Options to newly hired employees of the Company in the ordinary course of business consistent with past practices), or (c) any security, instrument or obligation that is or may become convertible into or exchangeable for any shares or other equity security of any Acquired Company or (iii) any merger, consolidation, business combination, reorganization or similar transaction involving any Acquired Company.

(i)           the sale, license or disposition of all or a material portion of any Acquired Company’s business or assets;

(ii)           the issuance, disposition or acquisition of: (i) any capital stock or other equity security of an Acquired Company; (ii) any option, call, warrant or right (whether or not immediately exercisable) to acquire any capital stock, unit or other equity security of an Acquired Company; or (iii) any security, instrument or obligation that is or may become convertible into or exchangeable for any capital stock, unit or other equity security of an Acquired Company; or

(iii)           any merger, consolidation, business combination, reorganization or similar transaction involving an Acquired Company.

“ Affiliate ” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person. For purposes of this definition, “control,” when used with respect to any specified Person, means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through ownership of voting securities or by contract or otherwise, and the terms “controlling” and “controlled by” have correlative meanings to the foregoing.

“ Aggregate Consideration Shares ” or "Consideration Shares" the lesser of (a) the Base Line Number of Consideration Shares and (b) the Maximum Consideration Shares (as of the date of the execution of this Agreement 5,085,736).

“ Aggregate Consideration Value ” means (i) the Aggregate Consideration Shares multiplied by the Closing SD Share Price, plus (ii) the Closing Cash Consideration, minus the Vested Option Adjustment Amount.

“ Applicable Law ” means, with respect to any Person, any Israeli, U.S. federal, state, local, municipal, foreign or other law (including common law), statutes, regulations, written regulatory guidance, directives, constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling, request or other similar requirement enacted, adopted, promulgated or applied by a Governmental Authority that is binding upon or applicable to such Person, as amended unless expressly specified otherwise.

“ Average SD Share Price ” means $14.986 per each Consideration Share.

“ Balance Sheet ” means the reviewed balance sheet of the Company as of June 30, 2009.

“ Balance Sheet Date ” means June 30, 2009.

“ Base Line Number of Consideration Shares ” means 5,338,316 shares of Purchaser’s Shares.

“ Business Day ” means a day, other than Saturday, Sunday or other day on which commercial banks in San Francisco, California, USA or Tel Aviv, Israel are authorized or required by Applicable Law to close.

“ Cash ” means cash (including short or long term bank deposits) and Cash Equivalents determined in accordance with GAAP and calculated net of issued but uncleared checks and drafts and shall include checks, wire transfers and drafts deposited or available for deposit.

“ Cash Equivalents ” means investment securities with original maturities (calculated as of the Closing Date) of 12 months or less, including all funds held in money market or similar accounts, including interest accrued thereon as of the Closing.

“ Closing Cash Consideration ” means (i) $80,000,000 plus (ii) the Vested Options Adjustment Amount, plus (iii) the Share Adjustment Amount (as of the date of execution an amount equal to $3,785,164)   plus (iv) an amount equal to the Company Cash minus an amount equal to the Company Debt minus the Company Transaction Expenses set forth in the Company Transaction Certificate.

“ Closing Consideration Shares ” means the Aggregate Consideration Shares minus the number of Phantom Shares minus the number of Purchaser's Equity Awards (i.e. the total number of Consideration Shares issued at the Closing to the Selling Shareholders in connection with the Transaction contemplated hereby).

“ Closing SD Share Price ” means the average closing price of a Purchaser’s Share on the Nasdaq Global Select Market for the 30-day trading period in which the last day will be the third Business Date prior to the Closing Date.

“ Code ” means the United States Internal Revenue Code of 1986, as amended.

“ Company Cash ” means the aggregate amount of all Cash of the Acquired Companies as of the close of business on the day immediately preceding the Closing Date.

“ Company Debt ” means both the current and long-term portions of any amount owed by any of the Acquired Companies (including all outstanding principal, prepayment premiums, penalties and similar amounts, if any, and accrued but unpaid interest, fees and expenses related thereto) in respect of borrowed money from third parties (e.g. excluding any inter-company financing arrangements) from third parties.

“ Company Disclosure Schedule ” means the disclosure schedule dated the date of this Agreement regarding this Agreement that has been delivered by the Company to Purchaser.

“ Company IP ” means any and all Intellectual Property Rights owned by any Acquired Company.

“ Company IP Contract ” means any Contract to which any Acquired Company   is party or by which any Acquired Company   is bound, that contains any sale, assignment or license of, or covenant not to assert or enforce, or release of, any Intellectual Property Right, including any Company IP.

“ Company Material Adverse Effect ” Any event, change, development or state of facts having a material adverse effect on the business, assets, Company IP, liabilities, operations, results of operations or financial condition of the Acquired Companies, taken as a whole; provided , however , that no (i) event, change, development or state of facts relating to the economy or financing or capital markets in general or resulting from industry-wide developments in the semiconductor or IPTV industries or generally affecting geographical areas in which any of the Acquired Companies conducts its business (but only to the extent such events, changes, developments or states of facts do not, individually or in the aggregate, have a disproportionate impact on the Acquired Companies, taken as a whole,   relative to other Persons in the semiconductor industry or in such applicable geographical areas in which any of the Acquired Companies conducts its business), (ii) event, change, development or state of facts directly related to the announcement, execution, performance or pendency of this Agreement and the Transactions, including the impact thereof on relationships, contractual or otherwise, with customers, suppliers, distributors or partners, or resulting shortfalls or declines in revenue, margins or profitability (iii) change in accounting requirements in accordance with GAAP, (iv) any natural disaster or any acts of military action or war (whether or not declared), sabotage, terrorism or any escalation or worsening thereof, occurring or commenced after the date of this Agreement (but only to the extent such disaster or acts do not, individually or in the aggregate, have a disproportionate impact on the Acquired Companies, taken as a whole,   relative to other Persons similarly affected by such disaster or acts), (v) changes in Applicable Law; or (vi) actions by Purchaser, Company or any of the Equityholders required to be taken pursuant to this Agreement (including the consummation of the Transactions), shall be deemed, each individually, to constitute a Company Material Adverse Effect.

“ Company Option ” shall have the meaning ascribed to it in Section 2.12(a) hereof.

“ Company Optionholder ” means a holder of a Company Option.

“ Company Option Plan ” means the Company’s 2000 Israel Share Incentive Plan, the Company’s 2003 Share Option Plan and the 2007 U.S. Appendix thereto, each as amended from time to time.

“ Company Ordinary Shares ” means the ordinary shares of the Company, nominal value NIS 0.10 each.

“ Company Ordinary A Shares ” means the ordinary A shares of the Company, nominal value NIS 0.10 each.

“ Company Preferred Shares ” means the preferred shares of the Company, including the Preferred A-1 Shares, the Preferred A-3 Shares, the Preferred B Shares, the Preferred C Shares and the Preferred D Shares.

“ Company Product ” means each product developed, manufactured, marketed, licensed by, sold, performed, offered, distributed or otherwise made available, currently or previously, by or on behalf of any Acquired Company, including any product currently or previously under development by any Acquired Company, and any and all services currently or previously provided by or for any Acquired Company with respect to such Company Products or provided as a separate service

“ Company Shares ” means collectively, the Company Ordinary Shares, the Company Ordinary A Shares and the Company Preferred Shares.

“ Company Trade Secrets ” means all Trade Secrets owned by any Acquired Company.

“ Company Transaction Expenses ” means the total amount of fees, costs and expenses of any nature that is payable by any Acquired Company to outside legal counsel and any financial advisor, accountant or other Person who performed services for or on behalf of any Acquired Company, or who is otherwise entitled to any compensation from any Acquired Company, in connection with this Agreement or any of the transactions contemplated by this Agreement and not paid prior to the Closing.

“ Company Warrantholder ” means a holder of a Company Warrant.

“ Company Warrants ” means each warrant or other contractual right to purchase or acquire Company Shares other than Company Options.

“ Consent ” means any approval, consent, ratification or permission.

“ Consideration Allocation Certificate ” means a spreadsheet that shall be delivered to the Purchaser 3 days prior to the Closing Date and shall set forth, as of the Closing Date and immediately prior to the Closing, the following factual information relating to each Equityholder: (i) the names of all of the holders of Company Shares and holders of Vested Company Options, their street addresses, e-mail address, telephone number, Israeli identification numbers (if available), bank information (the respective bank name and number, the branch name, number and address, swift number and account number); (ii) the number (and class) of Company Shares held by each holder of Company Shares; (iii) the number of Vested Company Options and Unvested Company Options held by each Company Optionholder and the number of underlying Company Shares into which the Vested Company Options are exercisable assuming a cashless exercise of such Vested Company Options; (iv) a calculation of the Closing Cash Consideration and the portion payable to each Selling Shareholder and each holder of Vested Company Options; (v) a calculation of the number of Closing Consideration Shares, Phantom Shares and Purchaser's Equity Awards each Equityholder is entitled to receive pursuant to the terms of this Agreement; (vi) the Cash Component of the Escrow Fund and the Share Component of the Escrow Fund to be delivered to the Escrow Agent and a calculation of each Participating Rights Holder’s Interest; and (vii) the Rep Reimbursement Amount, and (viii) the calculation of each Participating Rights Holder’s Interest in the Rep Reimbursement Amount and in the Escrow Fund.

 “ Contract ” means any oral or written contract, agreement, understanding, undertaking, indenture, note, or bond pursuant to which an Acquired Company is a party.

“ Damages ” include any direct liability, loss, damage, injury, claim, demand, settlement, judgment, award, fine, penalty, fee (including reasonable attorneys’ fees), charge, cost (including reasonable costs of investigation) or expense of any nature.

“ Designated Employees ” means the Persons identified on Exhibit I .

“ Environmental Laws ” means any Applicable Law or any agreement with any Governmental Authority or other Person, relating to human health and safety, the environment or to Hazardous Substances.

“ Environmental Permits ” means all permits, licenses, franchises, certificates, approvals and other similar authorizations of Governmental Authorities relating to or required by Environmental Laws and affecting, or relating in any way to, the business of the Acquired Companies as currently conducted.

“ Equityholders ” means the Selling Shareholders, the Company Warrantholders and the Company Optionholders.

“ ERISA ” means the Employee Retirement Income Security Act of 1974.

“ ERISA Affiliate ” of any entity means any other entity which, together with such entity, would be treated as a single employer under Section 414 of the Code.

“ Escrow Agent ” means UBank Trust Company Ltd.

“ Escrow Fund ” means (i) with respect to holders of issued and outstanding Company Shares immediately prior to the Closing, an amount in US$ equal to 10% of the Closing Cash Consideration and that number of Purchaser’s Shares equal to 10% of the Closing Share Consideration payable to all such holders pursuant to this Agreement, and (ii) with respect to holders of issued and outstanding Vested Company Options immediately prior to the Closing, an amount in US$ equal to 10% of the Closing Cash Consideration payable to all such holders pursuant to this Agreement.

“ Estimated Consideration Allocation Chart ” means a spreadsheet that shall be dated as of the date of this Agreement and shall set forth the following factual information relating to each Equityholder: (i) the names of the Equityholder; (ii) the number (and class) of Company Shares held by each holder of Company Shares; (iii) the number of Vested Options and Unvested Options held by each Company Optionholder, the exercise price of such options, the number of underlying Company Shares into which the Vested Options are exercisable assuming a cashless exercise of the Vested Options (iv) the number of Company Warrants held by each Company Warrantholder and the number (and class) of Company Shares the Company Warrants may be exercised into (based both on a cash and a cashless exercise, such cashless exercise calculation to be based on the Per Share Ordinary Amount; (v) an estimation of the Company Cash and the Closing Cash Consideration and the portion payable to each Selling Shareholder and each holder of Vested Company Options; (vi) a calculation of the number of Closing Consideration Shares, Phantom Shares and Purchaser's Equity Awards each Equityholder is entitled to receive pursuant to the terms of this Agreement; (vii) the Cash Component of the Escrow Fund and the Share Component of the Escrow Fund to be delivered to the Escrow Agent and a calculation of each Participating Rights Holder’s Interest; (viii) the Rep Reimbursement Amount; and (ix) the  calculation of each Participating Rights Holder’s Interest in the Rep Reimbursement Amount and in the Escrow Fund.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

“ GAAP ” means generally accepted accounting principles in the United States, consistently applied throughout the respective periods covered.

“ Governmental Authority ” means any: (i) nation, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (ii) Israeli, U.S. federal, state, local, municipal, foreign or other government; (including any governmental division, department, agency, commission, instrumentality, official, organization, unit, body or Person and any court or other tribunal).

“Governmental Authorization” means any permit, license, certificate, franchise, permission, clearance, registration, qualification or authorization issued, granted, given or otherwise made available by or under the authority of any Governmental Authority.

“Governmental Grant ” means any grant, incentive, subsidy, award, participation, exemption, status, cost sharing arrangement, reimbursement arrangement or other benefit, relief or privilege provided or made available by or on behalf of or under the authority of the Chief Scientist, the Investment Center, the State of Israel, the BIRD Foundation and other bi- or multi-national grant programs for research and development, the European Union, the Fund for Encouragement of Marketing Activities of the Israeli Government or any other Governmental Authority.

“ Hazardous Substances ” means any pollutant, contaminant, waste or chemical or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous substance, waste or material, or any substance, waste or material having any constituent elements displaying any of the foregoing characteristics, including petroleum, its derivatives, by-products and other hydrocarbons, and any substance, waste or material regulated under any Environmental Law.

“ Intellectual Property Rights ” means all of the following forms of intellectual property rights arising under the laws of Israeli, United States or any other jurisdiction with respect thereto: (i) any and all classes and types of patents, utility models and design patents and  applications for these classes and types of patent rights and all disclosures relating thereto (and any patents that issue as a result of those patent applications), and any renewals, reissues, reexaminations, extensions, continuations, continuations-in-part, divisions and substitutions relating to any of the patents and patent applications, as well as all related foreign patent and patent applications that are counterparts to such patents and patent applications, (ii) trademarks, service marks, trade dress, logos, trade names and corporate names, whether registered or unregistered, and the goodwill associated therewith, together with any registrations, applications for registration, renewals and extensions thereof, (iii) copyrights and rights under copyrights (including software), whether registered or unregistered, including moral rights and any other rights in works of authorship, and any registrations and applications for registration thereof, (iv) mask work rights and registrations and applications for registration thereof, (v) rights in databases and data collections (including knowledge databases, customer lists and customer databases), whether registered or unregistered, and any applications for registration therefor, (vi) Trade Secrets, (vii) URL and domain name registrations and (viii) all claims, causes of action and rights to sue or recover and claim damages arising out of or related to the past, present or future infringement or misappropriation of any of the foregoing.

“ IRS ” means the United States Internal Revenue Service.

“ ISA ” means the Israeli Securities Authority.

“ Israeli Code ” means the Income Tax Ordinance of Israel New Version, 1961, as amended, and the rules and regulations promulgated thereunder.

“ Israeli Companies Law ” means the Israeli Companies Law, 1999, as amended and the rules and regulations promulgated thereunder.

“ Israel Securities Law ” means the Israel Securities Law, 1968, as amended, and the rules and regulations promulgated thereunder.

“ ITA ” means the Israel Tax Authority established pursuant to the Israeli Code.

“ Key Employees ” means the Persons identified on Schedule 1 .

“ Knowledge ” means, (i) with respect to the Company, the actual knowledge of each of the Key Employees and any knowledge that each of such individuals should have obtained after reasonable inquiry in the course of the performance of their respective duties on behalf of any Acquired Companies; provided, however, that for purposes of Section 3.16 below, reasonable inquiry shall not include a “freedom to operate” study, and, (ii) with respect to the Purchaser, the actual knowledge of each of the Chief Executive Officer and Chief Financial Officer of Purchaser and any knowledge that each of such individuals should have obtained after reasonable inquiry in the course of the performance of their respective duties on behalf of the Purchaser, and (iii) with respect to each Selling Shareholder that is not an individual, the Chief Executive Officer (in case of a company), or General Partner (in case of a partnership), of such Selling Shareholders and any knowledge that each of such individuals should have obtained after reasonable inquiry in the course of the performance of their respective duties on behalf of the relevant Selling Shareholder.

“ Lien ” means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest, encumbrance or other adverse claim of any kind in respect of such property or asset. For purposes of this Agreement, a Person shall be deemed to own subject to a Lien any property or asset that it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such property or asset.

“ Maximum Consideration Shares ” means the lesser of (i) 5,085,736 shares of Purchaser’s Shares, or (ii) such number of Purchaser's Shares representing 19.0% of the issued and outstanding capital stock of the Purchaser immediately prior to the Closing (as provided by Purchaser to the Company by a certificate signed by the Chief Executive Officer or Chief Financial Officer of Purchaser at least three (3) Business Days prior to the Closing).

“ OCS ” means the Office of the Chief Scientist of the Israeli Ministry of Industry, Trade and Labor.

“ Open Source Software ” means any software code that is either (a) distributed under a license approved by the Open Source Initiative,  (b) described as “free software” or “open source software,” or (c) otherwise distributed in source code form under terms requiring as a condition of use, modification and/or distribution of such software that other software incorporated into, derived from or distributed with such software (1) be disclosed or distributed in source code form, (2) be licensed for the purpose of making derivative works, (3) be redistributable at no charge, (4) licensed under terms that allow such software or portions thereof or interfaces therefor to be reverse engineered, reverse assembled or disassembled (other than as provided under Applicable Law), or (5) grants to any third party any rights to or immunities under any Intellectual Property Rights (other than as provided under Applicable Law). Open Source Software includes software code licensed under the GNU General Public License, GNU Lesser General Public License, Mozilla Public License, Apache License, BSD License, MIT License, Artistic License, Common Development and Distribution License, Common Public License, Eclipse Public License, and similar licenses.

“ Phantom Shares ” means Purchaser's Shares that would have been issued to the holders of Vested Company Options as further described in Section 2.03(b) below.

“ Paying Agent ” means UBank Trust Company Ltd.

“ Participating Rights Holder ” means holder of Company Shares and holder of Vested Company Options.

“ Participating Rights Holder’s Interest ” means the percentage interest of each Participating Rights Holder in the Escrow Fund (calculated pursuant to the formula set forth in Section 2.05(c) below) and in the Rep Reimbursement Amount.

“ Person ” means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a Governmental Authority.

“ Pre-Closing Tax Period ” means (i) any Tax period ending before the Closing Date and (ii) with respect to any Straddle Period, the portion of such period ending at the close of business on the day prior to the Closing Date.

“ Preferred A-1 Shares ” means the Preferred A-1 Shares of the Company, nominal value NIS 0.01 each.

“ Preferred A-3 Shares ” means the Preferred A-3 Shares of the Company, nominal value NIS 0.01 each.

“ Preferred B Shares ” means the Preferred B Shares of the Company, nominal value NIS 0.01  each.

“ Preferred C Shares ” means the Preferred C Shares of the Company, nominal value NIS 0.01  each.

“ Preferred D Shares ” means the Preferred D Shares of the Company, nominal value NIS 0.01 each.

“ Proceeding ” means any action, suit, litigation, arbitration, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), hearing, inquiry, audit, examination or investigation commenced, brought, conducted or heard by or before, or otherwise involving, any court or other Governmental Authority or any arbitrator or arbitration panel.

"Purchaser's Equity Awards" shall have the meaning as set forth in Section 2.03(c).

“ Purchaser Indemnitees ” means the following Persons: (i) Purchaser; (ii) the Acquired Companies; (iii) the respective Representatives of the Persons referred to in clauses “(i)” and “(ii)” above; and (iv) the respective successors and assigns of the Persons referred to in clauses “(i),” “(ii)” and “(iii)” above.

“ Purchaser Material Adverse Effect ” means any event, change, development or state of facts having a material adverse effect on the business, assets, liabilities, operations or financial condition of Purchaser, taken as a whole; provided , however , that no (i) event, change, development or state of facts relating to the economy or financing or capital markets in general, or resulting from industry-wide developments in the semiconductor or IPTV industries or generally affecting geographical areas in which Purchaser or any of its Subsidiaries conducts its business (but only to the extent such events, changes, developments or states of facts do not, individually or in the aggregate, have a disproportionate impact on Purchaser or any of its Subsidiaries, taken as a whole,   relative to other Persons in the semiconductor industry or in such applicable geographical areas in which Purchaser conducts its business), (ii) event, change, development or state of facts directly related to the announcement, execution, performance or pendency of this Agreement and the Transactions, including the impact thereof on relationships, contractual or otherwise, with customers, suppliers, distributors or partners, or resulting shortfalls or declines in revenue, margins or profitability (iii) change in accounting requirements in accordance with GAAP, (iv) a any natural disaster or any acts of military action or war (whether or not declared), sabotage, terrorism or any escalation or worsening thereof, occurring or commenced after the date of this Agreement (but only to the extent such disaster or acts do not, individually or in the aggregate, have a disproportionate impact on Purchaser or any of its Subsidiaries, taken as a whole,   relative to other Persons similarly affected by such disaster or acts), (v) changes in Applicable Law; or (vi) actions by Purchaser, Company or any of the Equityholders required to be taken pursuant to this Agreement (including the consummation of the Transactions), shall be deemed, each individually, to constitute a Purchaser Material Adverse Effect.

 “ Purchaser’s Share(s) ” means shares of Purchaser’s common stock, no par value.

“ Registered IP ” means all Company IP with respect to which any registration, application, certificate, filing or other document has been issued by, filed with, or recorded by, any private, state, government or other public or quasi-public legal authority in connection with the protection of Intellectual Property Rights, including patents, domain names, registered copyrights (including registered mask works), and registered trademarks and all applications for any of the foregoing.

“ Representatives ” means a Person’s officers, directors, employees, agents, attorneys, accountants, advisors, investment bankers and other representatives (and in case of a partnership, its general partner).

“ SEC ” means the United States Securities and Exchange Commission.

“ Securities Act ” means the Securities Act of 1933, as amended.

“ Share Adjustment Amount ” means, if the Maximum Consideration Shares is lower than the B ase Line Number of Consideration Shares, an amount equal to the product of (i) the Average SD Share Price multiplied by (ii) the difference of Base Line Number of Consideration Shares minus the Maximum Consideration Shares (as of the date of execution of this Agreement $3,785,164 calculated by multiplying 252,580 shares of Purchaser's Shares multiplied by the Average SD Share Price). If the Maximum Consideration Shares is not lower than the Base Line Number of Consideration Shares, then the Share Adjustment Amount shall be zero.

 “ Specified Representations ” means the representations and warranties set forth in Section 3.01, Section 3.02, Section 3.05, Section 4.01 and Section 4.02, and the information and calculations set forth on the Consideration Allocation Certificate.

“ Straddle Period ” means any Tax period beginning before the Closing Date and ending on or after the Closing Date.

“ Subsidiary ” means, with respect to any Person, any entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at any time directly or indirectly owned by such Person.

“ Tax ” means any and all taxes, including (i) any net income, gross income, gross receipts, branch profits, sales, use, value added, transfer, franchise, profits, license, registration, documentary, conveyancing, gains, withholding, national insurance ( ‘bituach leumi ’), national health insurance ( ‘bituach briyut’ ) and other payroll taxes, employment, excise, severance, stamp, occupation, premium, property, environmental or windfall profit, custom duty, escheat or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest, inflation linkage ( ‘hefreshei hatzmada ’), penalty, addition to tax or additional amount imposed by any governmental authority responsible for the imposition of any such tax (Israeli, United States (federal, state or local) or foreign).

“ Tax Contest ” means any audit (by any Governmental Authority), other administrative proceeding or inquiry or judicial proceeding involving Taxes.

“ Tax Return ” means any return, report, declaration, claim for refund, information return (including schedules thereto, other attachments thereto, amendments thereof) filed or required to be filed with any Tax authority in connection with the determination, assessment or collection of any Tax, or the administration of any laws, regulations or administrative requirements relating to any Tax.

“ Technology ” means all tangible or intangible embodiments of the Company IP owned by any Acquired Company which are incorporated in any Company Products.

“ Trade Secrets ” means all inventions (whether or not patentable) and improvements thereto, know-how, research and development information, business plans, specifications, designs, processes, process libraries, technical data, customer data, financial information, pricing and cost information, bills of material, or other confidential information exclusively owned by a Person, including any formula, pattern, compilation, program, device, method, technique, or process, that (i) provides an actual or potential independent economic value from not being generally known to and not being readily ascertainable by, other Persons, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy and for which those efforts resulted in a reasonable belief that sufficient secrecy was maintained.

“ Transactional Agreements ” means this Agreement, the Company Closing Certificate, the Consideration Allocation Certificate, the Transaction Expenses Certificate, the Closing Cash Certificate, the Selling Shareholder Certificate, the Escrow Agreement, the Lockup Agreements, the Option Acknowledgment Agreement, the Paying Agent Agreement, the Non-competition Agreements and the Letter of Acknowledgment.

“ Transactions ” means the purchase of the Company Shares by Purchaser, the payment for the termination or waiver of Company Warrants, the exchange of Vested Company Options for cash, the assumption of Unvested Company Options, and the other transactions contemplated by this Agreement.

“ Trustee ” means Tamir Fishman Trusts 2004 Ltd. appointed by the Company for the purpose of the Company’s “Section 102 Plan”.

“ Vested Options Adjustment Amount ” means an amount equal to total number of Phantom Shares multiplied by the Closing SD Share Price.

(a)           The words “hereof,” “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.

(b)           The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Articles, Sections, Exhibits and Schedules are to Articles, Sections, Exhibits and Schedules of this Agreement unless otherwise specified.

(c)           All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in any Exhibit or Schedule but not otherwise defined therein, shall have the meaning as defined in this Agreement.

(d)           Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular.

(e)           Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation,” whether or not they are in fact followed by those words or words of like import.

(f)           All references to time shall refer to New York City time. The word “extent” in the phrase “to the extent” means the degree to which a subject or other thing extends, and such phrase shall not mean simply “if”.

(g)           The use of the word “or” shall not, necessarily, be exclusive.

(h)           Any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be applied in the construction or interpretation of this Agreement.

(i)           Any agreement or instrument defined or referred to herein, or in any agreement or instrument that is referred to herein, means such agreement or instrument as from time to time amended, modified or supplemented. Other terms may be defined elsewhere in the text of this Agreement and shall have the meaning indicated throughout this Agreement.

(j)           The term “foreign” when used with respect to Applicable Law or a Governmental Authority shall refer to all jurisdictions other than Israel or the United States.

(k)           The term “Dollar”, “$”, or USD shall refer to the currency of the United States of America. When such reference is made and the actual liability or payment is set in Israeli New Shekels, for purpose of this Agreement, the representative rate of exchange published by the Bank of Israel on the day prior to the day on which the calculation is made, unless otherwise specified herein.

(a)            Sale and Purchase of Shares . Subject to the terms and conditions of this Agreement, at the Closing: (i) the Selling Shareholders, severally and not jointly, shall sell, assign, transfer and deliver the Company Shares to Purchaser, and Purchaser shall purchase the Company Shares from the Selling Shareholders; (ii) Company Warrants outstanding as of the Closing Date will be waived or terminated; (iii) the Purchaser shall exchange all Vested Company Options for cash and (iv) the Purchaser shall assume the Unvested Company Options in exchange for the Purchaser's Equity Awards in accordance with the terms of this Agreement, and subject to adjustments and withholdings as set forth in this Agreement.

(b)            Shareholder’s Voting and Support Agreement . At or prior to the date hereof, Executing Shareholders holding at least ninety percent (90%) of the issued and outstanding Company Shares executed a Shareholder’s Voting and Support Agreement in the form attached hereto as Exhibit C (the “ Shareholder’s Voting and Support Agreement ”).  The Company shall use reasonable commercial efforts to cause each other Executing Shareholder to execute a Shareholder’s Voting and Support Agreement.

(a)            Execution of Agreement by Additional Parties . Promptly after the date of execution of this Agreement and for as long as this Agreement is not duly terminated, the Company shall take reasonable commercial efforts to obtain from all Non-Executing Shareholders, a counter signature on this Agreement under which each such Non-Executing Shareholder becomes bound by and subject to the provisions of this Agreement as an Executing Shareholder. The Company agrees to communicate promptly to the Purchaser any update to the Company’s efforts to obtain a counter signature on this Agreement from a Non-Executing Shareholder or any material communication with any Non-Executing Shareholder regarding the execution of this Agreement by such Non-Executing Shareholder.  At any time on or before the Closing, Purchaser, the Company and the Holder Representatives may amend Exhibit A , without the consent of the Executing Shareholders, to include as parties any Equityholders of the Company not listed on Exhibit A on the date of this Agreement, including all Non-Executing Shareholders as well as Company Warrantholders and holders of Vested Company Options who exercised their respective Company Warrants or Company Options. Such additional Equityholders shall be deemed to be “Selling Shareholders” for all purposes of this Agreement, and any Company Ordinary Shares, Company Ordinary A Shares or Company Preferred Shares owned by such shareholders shall be deemed to be “Company Shares”.

(b)            Section 341 of the Israeli Companies Law; Bring Along .

(1)           By executing this Agreement, the Executing Shareholders, who collectively hold at least 95% of the issued and outstanding share capital of the Company, have, and are deemed to have, accepted an offer by Purchaser to purchase their shares in accordance with the terms set forth in this Agreement, in accordance with Section 341 of the Israeli Companies Law and Article 50 of the Company’s Articles of Association.

(2)           This Agreement shall be deemed, for the purpose of Section 341(a) of the Israeli Companies Law and Article 50 of the Company’s Articles of Association to constitute (i) an offer by Purchaser for the purchase of all issued and outstanding share capital of the Company which is conditioned upon the sale of all of the outstanding share capital of the Company and (ii) an acceptance of such offer by all Executing Shareholders who have duly executed this Agreement initially or pursuant to Section 2.2(a)(i) above.

(3)           Promptly (but in any event within two (2) Business Days) following the date of this Agreement, Purchaser will, in accordance with Section 341(a) of the Israeli Companies Law and Article 50.1 of the Company’s Articles of Association, provide a written notice in the form to be agreed upon by Purchaser and the Company, (the “ Bring-Along Notice ”) to each Non-Executing Shareholder that has not duly executed and delivered this Agreement or countersigned this Agreement in accordance with Section 2.2(a)(i) setting forth the information required by Section 341(a) of the Israeli Companies Law and Article 50.1 of the Company’s Articles of Association and stating that Purchaser’s requirement to purchase such Non-Executing Shareholder’s Company Shares under the terms and conditions of this Agreement. The Company shall assist Purchaser to dispatch the Bring-Along Notice to each Non-Executing Shareholder. Purchaser and Company shall fully coordinate any correspondence to which each may be a party which concerns the Bring-Along Notice. Purchaser and the Company shall take such other actions as may be commercially reasonably appropriate in order to complete the transfer of all of the outstanding Company Shares pursuant to Section 341 of the Israeli Companies Law and Article 50 of the Company’s Articles of Association and under the terms and conditions of this Agreement, including in making all reasonable filings and taking such other reasonable action which is necessary or desirable to effect the Transactions with respect to all the securities of the Company outstanding as of the Closing in compliance with Section 341 of the Israeli Companies Law and Article 50 of the Company’s Articles of Association. After satisfactory completion of the necessary procedures under Section 341 of the Israeli Companies Law and Article 50.1 of the Company’s Articles of Association, and provided that no injunction against the Transactions was issued by a court of competent jurisdiction that was not subsequently removed, at the Closing the Company shall register Purchaser as owner of all the shares of the Company held by all Non-Executing Shareholders as of the Closing against delivery by Purchaser to the Company of the portion of the Closing Cash Consideration and the number of the Closing Consideration Shares payable or issuable, as the case may be, with respect to the Company Shares held by the Non-Executing Shareholders, less such Non-Executing Shareholder’s portion of the Escrow Fund to be held in escrow by the Escrow Agent, and paid to the Non-Executing Shareholders following the Closing.

(4)           Subject to the terms of this Agreement, following the execution of this Agreement and prior to the Closing Date, if the Company shall issue any shares pursuant to the exercise of any Company Options, Company Warrants or any other convertible securities, then the Company shall promptly: (i) inform Purchaser of such an issuance, and (ii) amend Exhibit B so that such Person will be deemed, for purposes of this Agreement a Non-Executing Shareholder; and (iii) use commercially reasonable efforts to obtain from such holder of Company Shares, a counter signature on this Agreement under which he, she or it becomes bound by and subject to the provisions of this Agreement as an Executing Shareholder (and amend Exhibit A accordingly); and (iv) if such a Person does not execute this Agreement, assist Purchaser, to the extent necessary, in the dispatch of a Bring-Along Notice to such new Non-Executing Shareholders such that said notice will cover all issued and outstanding share capital of the Company.

(5)           For purposes of this Agreement, the term “Selling Shareholder” shall include all Non-Executing Shareholders and each such Non-Executing Shareholder shall be deemed to be subject to the terms and conditions of this Agreement, except to the extent that doing so would be inconsistent with the provisions of Section 341 of the Israeli Companies Law.

(6)           For the sake of clarity, Purchaser may elect, in its sole discretion, no later than five (5) Business Days after the alternative transaction deadline date as set forth in Section 6.11 below, the alternative transaction form under Section 6.11 hereof, in lieu of the bring-along contemplated under this Section 2.02(b), and is not deemed for any purposes whatsoever to be bound to consummate the acquisition of the Company by way of said bring-along provisions.

(c)            Company Warrants . At the Closing, the outstanding Company Warrants will either be terminated or exercised into Company Shares. The number of and class of Company Shares each Warrantholder will be entitled to receive upon exercise or termination of such Warrants (calculated on a cashless basis) shall be set forth in the Estimated Consideration Allocation Chart and the Consideration Allocation Certificate. For purposes of this Agreement, the term “Selling Shareholder” shall include all holders of Company Warrants.

Out of the Aggregate Consideration, each Equityholder shall be entitled to receive the following:

(a)            Selling Shareholders . Each Selling Shareholder shall be entitled to receive:

(1)           At the Closing - the product of the Per Share Series C Amount multiplied by the total number of Series C Preferred Shares held by such Selling Shareholder on the Closing Date, plus the product of the Per Share Series B Amount multiplied by the number of Series B Preferred Shares held by such Selling Shareholder on the Closing Date, plus the product of the Per Share Series A-3 Amount multiplied by the total number of Series A-3 Preferred Shares held by such Selling Shareholder on the Closing Date, plus the product of the Per Share Series A-1 Amount multiplied by the total number of Series A-1 Preferred Shares held by such Selling Shareholder on the Closing Date, plus the product of the Per Share Series Ordinary A Amount multiplied by the total number of Series Ordinary A Shares held by such Selling Shareholder on the Closing Date (the sum of this subsection 2.03(a)(1) – for each Selling Shareholder shall be referred to herein as the “ Selling Shareholder’s Preferred Amount ” and for the aggregate amount of all Selling Shareholder's Preferred Amount, the “ Preference Amount ”);

For purpose of this Agreement; the “ Per Share Series C Amount ” means an amount equal to $ 1.5299 per share of Series C Preferred Shares; the “ Per Share Series B Amount ” means an amount equal to $ 1.08946 per share of Series B Preferred Shares; the “ Per Share Series A-3 Amount ” means an amount equal to $ 1.08946 per share of Series A-3 Preferred Shares; the “ Per Share Series A-1 Amount ” means an amount equal to $ 13.6542 per share of Series A-1 Preferred Shares; and the “ Per Share Series Ordinary A Amount ” means an amount equal to $ 3.6316095 per share of Series Ordinary A Shares;; plus in each such per share amount above (other than the Ordinary A Shares) the amount of interest accrued and applicable to each such Company Shares calculated as of November 30, 2009, as set forth in the Consideration Allocation Spreadsheet. The Preference Amount shall be $35,344,209.

(2)           At the Closing - the product of the Per Share Ordinary Amount multiplied by the sum of (i) the total number of Ordinary Shares held by such Selling Shareholder on the Closing Date, plus (ii) the total number of Ordinary Shares issuable upon conversion of all Series Ordinary A Shares, Series A-1 Preferred Shares, Series A-3 Preferred Shares, Series B Preferred Shares and Series C Preferred Shares held by such Shareholder on the Closing Date, as set forth opposite the name of such Shareholder on the Consideration Allocation Certificate.

(i)           The Aggregate Consideration Value minus the Preference Amount shall be referred to herein as the “ Aggregate Participating Amount ”.

(ii)           The quotient obtained by dividing the Aggregate Participating Amount by the " Fully Diluted Equity Securities " (which is equal to the total number of Participating Shares plus the total number of Vested Company Options which are outstanding as of the Closing Date plus the total number of Company Ordinary Shares that are subject to the Unvested Company Option assumed by Purchaser pursuant to the terms of this Agreement), shall be defined as the " Per Share FD Amount ".

(iii)           The “ Participating Rights Holders Participating Amount” shall be equal to the Aggregate Participating Amount minus the product obtained by multiplying the Unvested Company Options by the Per Share FD Amount (i.e., the Value of Unvested Company Options”).

(iv)           The quotient obtained by dividing (A) the Participating Rights Holders Participating Amount plus the Aggregate Exercise Amount, by (B) the Participating Shares plus the total number of Vested Company Options, shall be defined as the “ Per Share Ordinary Amount ”. In this Agreement, the “ Aggregate Exercise Amount ” shall mean the amount which would have been obtained if the total number of Vested Company Options had been exercised in full into Company Shares. For clarification purposes, the Aggregate Exercise Amount will not be actually paid by the holders of Vested Company Options, nor will it be added to the Closing Cash Consideration, but rather used for calculation purposes only in order to determine the Per Share Ordinary Amount.

The total number of shares held by each Selling Shareholder and which are referred to in subsection 2.03(a)(2)(i) and 2.03(a)(2)(ii) above shall be referred to as the “ Selling Shareholder’s Participating Shares ” and for all Selling Shareholders the “ Participating Shares ”; The amount or value each Selling Shareholder shall be entitled to receive pursuant to this subsection 2.03(a)(2) shall be referred to as the “ Selling Shareholder’s Participating Amount ” and for all Selling Shareholders the “Shareholders Participating Amount ”.

The total amount each Selling Shareholder will be entitled to receive shall be equal to such Selling Shareholder’s Participating Amount plus such Selling Shareholder’s Preferred Amount, if any (the “ Selling Shareholder’s Closing Payment Amount ”), subject to the provisions of Section 2.5 and Article XI below.

(3)           In this Agreement:

The “ Closing Payment Value ” means an amount equal to the Aggregate Consideration Value minus the Value of Unvested Company Options.

The quotient obtained by dividing (i) (A) the Value of the Closing Consideration Shares plus (B) the Value of the Phantom Shares, by (ii) the Closing Payment Value will be referred to herein as the “ Equity Portion ”; and the quotient obtained by dividing (i) Closing Cash Consideration minus the Vested Options Adjustment Amount, by (ii) the Closing Payment Value shall be referred to herein as the “ Cash Portion ”. In this Agreement the “ Value of the Closing Consideration Shares ” means an amount equal to the Closing SD Share Price multiplied by the total number of Closing Consideration Shares; and the " Value of the Phantom Shares " means an amount equal to the Closing SD Share Price multiplied by the total number of Phantom Shares.

The proportion between the Closing Consideration Shares and the Closing Cash Consideration each Selling Shareholder will be entitled to receive at the Closing, will be based on the ratio between the Cash Portion and the Equity Portion (the “ Distribution Ratio ”).

The number of Closing Consideration Shares each Selling Shareholder will be entitled to receive shall be equal to such Selling Shareholder’s Closing Payment Amount multiplied by a fraction the numerator of which is equal to the Equity Portion and the denominator is equal to the Closing SD Share Price.

The number of Closing Consideration Shares and the portion of the Cash Consideration each Selling Shareholders will be entitled to receive at the Closing shall be set forth in the Consideration Allocation Certificate.

(b)            Holder’s of Vested Company Options :

(1)           At the Closing, each holder of a Vested Company Option, by virtue of the Transactions without any action on the part of the holder, shall be entitled to receive in exchange for such Vested Company Option an amount in cash equal to the product of Per Share Ordinary Amount multiplied by the total number of Ordinary Shares issuable upon a cashless exercise (i.e. using the Per Share Ordinary Amount) of such Optionholder’s Vested Company Option (“ Optionholder’s Closing Payment Amount ”).    

The Purchaser's Shares that all holders of Vested Company Options would have been entitled to receive, if such Optionholders had exercised their Vested Company Options into Company Shares (on a cashless basis) is defined as the " Phantom Shares ". The number of Phantom Shares each holder of Vested Company Options would have been entitled to receive if such Optionholder would have exercised his, her or its Vested Company Options, shall be equal to such Optionholder’s Closing Payment Amount multiplied by a fraction the numerator of which is equal to the Equity Portion and the denominator is equal to the Closing SD Share Price.

For clarification purposes (i) the Phantom Shares are not issuable and will not be issued to the holders of Vested Company Options and in lieu of such Phantom Shares such holders of Vested Company Options will be entitled to receive an amount in cash equal to such Optionholder's respective number of Phantom Shares multiplied by the Closing SD Share Price; and (ii) the total amount payable to all holders of Vested Company Options pursuant to this sub-section shall be equal to the Vested Options Adjustment Amount.

(2)           Payments made to each holder of Vested Company Options will be made to the Trustee through the Paying Agent in accordance with Section 2.10 below;

(3)           The amount of Cash Consideration each holder of Vested Company Options will be entitled to receive pursuant to the terms of this Agreement shall be set forth in the Consideration Allocation Certificate.

(c)            Holder’s of Unvested Company Option

(1)           At the Closing, Purchaser shall assume the unvested portion of each Company Option outstanding as of the Closing Date (the “ Unvested Company Options ”). Each Unvested Company Option will be exercisable (or will become exercisable in accordance with its terms) for that number of whole Consideration Shares equal to the number of Company Ordinary Shares that were subject to the Unvested portion of such Company Option immediately prior to the Closing Date multiplied by the ratio of the Per Share FD Amount to the Closing SD Share Price (such ratio, the “ Option Ratio ”), rounded down to the nearest whole number of Consideration Shares (and the per share exercise price for the Consideration Shares issuable upon exercise of such assumed Unvested Company Option will be equal to the quotient obtained by dividing the exercise price per Company Ordinary Share at which such Unvested Company Option was exercisable immediately prior to the Closing Date by the Option Ratio, rounded up to the nearest whole cent). The “ Value of Unvested Company Options ” shall mean the product obtained by multiplying the Unvested Company Options by the Per Share FD Amount.

(2)            The number of Consideration Shares issuable pursuant to this Section 2.03(c) shall be referred to as the “ Purchaser’s Equity Awards ”.  The number of Purchaser's Equity Awards each holder of Unvested Company Options will be entitled to receive pursuant to the terms of this Agreement, shall be set forth in the Consideration Allocation Certificate.

(d)            Company Warrantholders .

(1)           The Company Warrants outstanding at the Closing will either be terminated or exercised into Company Shares immediately prior to the Closing.

(2)           The number of and class of Company Shares each Warrantholder will be entitled to receive upon exercise or termination of such Warrants as well as the number Closing Consideration Shares and the portion of the Cash Consideration each holder Warrantholder will be entitled to receive at the Closing upon the cashless exercise of such Warrants, shall be set forth in the Consideration Allocation Certificate.

(3)           For clarification purposes the parties acknowledge that for purposes of this Section 2.03 and the calculation of the amount distributed to each Equityholder, the Warrantholders will deemed to be, and are treated as, Selling Shareholders (and the formulas set forth above should include the number of Company Shares issuable upon a cashless exercise of such Warrants).

(e)            Clarifications; Mechanics . Anything to the contrary notwithstanding:

(1)           Out of the total number of Closing Consideration Shares, ninety percent (90%) shall be issued to the Selling Shareholders and the balance of ten percent (10%) will be issued for the benefit of the Selling Shareholders yet set aside in the Escrow Fund (the " Share Component of the Escrow Fund ") as further described in this Section 2 and subject to forfeiture in accordance with Article XI. Notwithstanding anything to the contrary contained herein, in no event will the total number of Consideration Shares issued or issuable by Purchaser pursuant to this Agreement, including all Closing Consideration Shares and all Purchaser's Equity Awards, equal more than the Maximum Consideration Shares.

(2)           Out of the Closing Cash Consideration payable at Closing, Purchaser shall extend to the Escrow Agent: (i) an amount in cash equal to ten percent (10%) of the Closing Cash Consideration (the " Cash Component of the Escrow Fund "); and (ii) an amount in cash equal to $200,000 as the Rep Reimbursement Amount - as further described in this Section 2, and the balance of Closing Cash Consideration will be paid to the Participating Rights Holders in accordance with the terms hereof. In addition, and with respect to each Participating Rights Holder, severally and not jointly, Purchaser may deduct any withholding amounts as further described in this Section 2.

(3)           The Purchaser or any of its Representatives shall not be responsible for the determination of the Aggregate Consideration allocation. The Aggregate Consideration allocation will be presented in the Consideration Allocation Certificate, which will be deemed a Specified Representation of the Company. The Company also represents that the information and calculations set forth in the Consideration Allocation Certificate shall be made in accordance with the terms and conditions of this Agreement, the Company’s Articles of Association, and other relevant existing contractual arrangements among the Company, the holders of Company Shares, Company Optionholders and Company Warrantholders. Anything to the contrary notwithstanding, Purchaser shall be entitled to rely entirely upon the Consideration Allocation Certificate in connection with making the payments pursuant to this Agreement and neither the Holder Representatives nor any Equityholder shall be entitled to make any claim in respect of the allocation of the payments made by Purchaser to or for the benefit of any Equityholders to the extent that the payments are made in a manner consistent with the Consideration Allocation Certificate.

(4)           The Purchaser will make the payments pursuant this Agreement with the assistance of a Payment Agent. Purchaser shall cause, and be responsible for, the Payment Agent, to make the payment of the Closing Cash Consideration to the holders of Company Shares and Vested Company Options in accordance with the provisions set forth in this Agreement and the Consideration Allocation Certificate.

(5)           Anything in this Agreement to the contrary notwithstanding, no fractions of a cent will be payable hereunder and any amounts payable hereunder shall be rounded down to the nearest whole cent and no fractional shares shall be issued hereunder and any fractional shares shall be rounded down to the nearest whole share.

(6)           Notwithstanding anything to the contrary in this Agreement, and subject to the potential additional payment pursuant to the terms of Section 7.05 hereof, the aggregate maximum consideration that Purchaser shall be required to pay to all of the Equityholders pursuant to this Agreement shall in no event exceed an aggregate value of $160,000,000 plus the amount of Company Cash held by the Company on the Closing Date, with all shares of Purchaser’s Shares issued or to be issued pursuant to the terms of this Agreement deemed to have, for the purpose of this sub-section 2.03(e)(6) only, a stipulated value of the Average SD Share Price, minus the amount of Company Debt on the Closing Date minus the Company Transaction Expenses set forth in the Transaction Expenses Certificate.

(f)            WAIVER AND RELEASE OF CLAIMS .

(1)           Effective for all purposes as of the date hereof, each Executing Shareholder acknowledges and agrees on behalf of itself and each of its agents, trustees, beneficiaries, directors, officers, affiliates, subsidiaries, estate, successors and assigns (each, a “ Releasing Party ”) that each hereby releases and forever discharges the Company, each Equityholder and the Purchaser (each a “ Beneficiary ”) and each of such Beneficiary’s respective subsidiaries, affiliates, directors, officers, employees, representatives, agents, members, stockholders, successors, predecessors and assigns (each, a “ Released Party ” and collectively, the “ Released Parties ”) from any and all Equityholder Claims such Releasing Party may have or assert it has against any of the Released Parties, from the beginning of time through the time of the Closing and following the Closing, in each case whether known or unknown, or whether or not the facts that could give rise to or support a Claim are known or should have been known. In this Agreement an “ Equityholder Claim ” shall mean: (i) any claim or right to receive any Company Shares other than the Company Shares set forth opposite his, her or its name in the Estimated Consideration Allocation Chart (other than as a result of an exercise of any Company Warrant outstanding as of immediately prior to the Closing by any Executing Shareholder who is a Company Warrantholder); (ii) any claim or right to receive any portion of the Cash Consideration,  Consideration Shares or any other form, amount or value of consideration payable or issuable to any Equityholder pursuant to the terms of this Agreement, other than as specifically set forth in the Consideration Allocation Certificate (subject to any changes contemplated in this Agreement – e.g. as a result of changes in the Company Cash, Company Debt, the vesting of any Unvested Company Option or the exercise of any Company Warrant outstanding as of immediately prior to the Closing by any Company Warrantholder) and applicable to such Executing Shareholder; or (iii) any claim with respect to the authority to enter into the Transactions and the enforceability of the Transactions.

(2)           Each Executing Shareholder hereby confirms, acknowledges,  represents and warrants that he, she or it: (A) (i) is the holder of the number of Company Shares set forth opposite his, her or its name in the Estimated Consideration Allocation Chart; (ii) other than the number and class of Company Shares set forth opposite his, her or its name in the Estimated Consideration Allocation Chart, is not entitled to any additional Company Shares (other than as a result of an exercise of any Company Warrant outstanding as of immediately prior to the Closing by any Executing Shareholder who is a Company Warrantholder) or any other form of equity securities including, shares, options, warrants or any other convertible security, or right to acquire shares, options or warrants of or any other convertible security into share capital of the Company; (iii) waives any right to receive any additional Company Shares (as a result of any anti-dilution rights, preemptive rights, conversion rights (of any of the Company Shares which are outstanding as of the date hereof or any Company Shares he, she or it may have been entitled to receive as a result of the conversion of any convertible loan agreement or any other convertible instrument that was issued by the Company), rights of first offer, co-sale and no-sale rights, any other participation, first refusal or similar rights, any adjustment of the conversion price of any preferred share whatsoever) or otherwise), except for any additional Company Shares issued as a result of an exercise of any Company Warrant outstanding as of immediately prior to the Closing by any Company Warrantholder; (iv) fully, finally, irrevocably and forever waives any right to convert any of its Company Shares into any other class or series of Company Shares presently and through the Closing; and (B) (i) examined the Estimated Consideration Allocation Chart and is entitled only to the distribution set forth in such a chart (subject to any changes contemplated in this Agreement – e.g. as a result of changes in the Company Cash, Company Debt, the vesting of any Unvested Company Option or the exercise of any Company Warrant outstanding as of immediately prior to the Closing by any Company Warrantholder); (ii) waives any right to receive consideration other than as set forth in the Consideration Allocation Certificate (including, without limitation, for any interest payments, the method of determination of the Preference Amount and the Aggregate Participating Amount, the method of calculation of any of the values set forth in this Agreement or the method of determination of the Participating Rights Holder's Interest,, any preferential amount, any amount resulting from the conversion of shares any other rights of any nature under the Articles of Association, or any Shareholders Agreement, which the Executing Shareholders and/or its successors and assignees ever had, now have or hereafter can, shall or may have, at any time, due to actions or events that occurred prior to Closing which do not conform or are not consistent with the terms of this Agreement and the consideration attributed to such Executing Shareholders in the Consideration Allocation Certificate); (C) hereby terminates and waives any rights, powers and privileges such Executing Shareholder has or may have pursuant to any Shareholders Agreement (which for purposes of this Agreement will be defined as any investors rights agreement, registration rights agreement or shareholders agreement entered into by such Executing Shareholders with respect to the Company) or any right to make a claim or demand for any discrepancy between any Shareholders Agreement, share purchase agreement or convertible loan agreement such Executing Shareholder and the provisions of this Agreement and his, her or its entitlement pursuant to such agreements; (D) for as long as this Agreement is in force agrees not to sell, transfer, assign or convert any of its Company Shares, or subject such Company Shares to any Liens, except pursuant to a transfer request of Company Shares provided to the Company and Purchaser prior to the date hereof; and (E) has not heretofore assigned or transferred, or purported to have assigned or transferred, to any corporation (or any other legal entity) or person whatsoever, any claim, debt, liability, demand, obligation, cost, expense, action or cause of action herein released.

(3)           Each Executing Shareholder hereby acknowledges that such Executing Shareholder is familiar with Section 1542 of the Civil Code of the State of California (“ Section 1542 ”), which provides 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.

Effective for all purposes as of the date hereof, each Executing Shareholder waives and relinquishes on behalf of each Releasing Party any rights and benefits which such Releasing Party may have under Section 1542 or any similar statute or common law principle of any jurisdiction.  Each Executing Shareholder acknowledges that such Executing Shareholder may hereafter discover facts in addition to or different from those which such Executing Shareholder now knows or believes to be true with respect to the subject matter of this Agreement, but it is such Executing Shareholder’s intention to fully and finally and forever settle and release any and all matters, disputes and differences, known or unknown, suspected and unsuspected, which do now exist or may exist or heretofore have existed between any Releasing Party and any Released Party with respect to the subject matter of this Agreement.  In furtherance of this intention, the releases herein shall be and remain in effect as full and complete general releases notwithstanding the discovery or existence of any such additional or different facts.

(4)           Each Executing Shareholder, on behalf of each Releasing Party, further covenants and agrees that such Releasing Party has not heretofore sold, transferred, hypothecated, conveyed or assigned, and shall not hereafter sue any Released Party upon, any Equityholder Claim released under this Section 2.03(f), and that each Releasing Party shall indemnify and hold harmless the Released Parties against any loss or liability on account of any actions brought by such Releasing Party or such Releasing Party’s assigns or prosecuted on behalf of such Releasing Party and relating to any Equityholder Claim released under this Section 2.03(f).

(5)           Notwithstanding anything in this Section 2.03(f), the foregoing releases and covenants shall not apply to any claims (a) relating to Purchaser’s failure to pay the Closing Cash Consideration, to issue the Consideration Shares or any other payments in accordance with this Agreement; (b) relating to Purchaser’s failure to perform any of its obligations, undertakings or covenants set forth in this Agreement (including, without limitation the filing of the Registration Statement on Form S-8 and indemnification obligations) or any of the Transactional Agreements; (c) relating to any employment payment, including salary, bonuses, accrued vacation, any other employee compensation and/or benefits, and unreimbursed expenses or any of the amounts set forth in Section 7.05 ( Bonus/ Retention Pool ), (d) relating to or arising from any commercial relationship such Executing Shareholder may have with any of the Released Parties; and (e) for indemnity by officers, employees and directors of the Company in their capacity as such in accordance with Section 7.07 below.

(6)           Anything to the contrary notwithstanding: (i) the foregoing release is conditioned upon the consummation of the Closing and shall become null and void, and shall have no effect whatsoever, without any action on the part of any person or entity, upon termination of this Agreement in accordance with its terms; and (ii) should any provision of this release be found, held, declared, determined, or deemed by any court of competent jurisdiction to be void, illegal, invalid or unenforceable under any applicable statute or controlling law, the legality, validity, and enforceability of the remaining provisions will not be affected and the illegal, invalid, or unenforceable provision will be deemed not to be a part of this Release.

(a)            Escrow Deposit . At the Closing, Purchaser shall issue and deliver to the Escrow Agent, as the escrow agent under the Escrow Agreement, the Cash Component of the Escrow Fund in US dollars in immediately available funds and shall deliver the Share Component of the Escrow Fund constituting the Escrow Fund to be held by the Escrow Agent in accordance with the terms of the Escrow Agreement and released from the Escrow Fund pursuant to the terms of this Agreement and the Escrow Agreement. For all purposes of the Escrow Fund, including the calculation of any payment to Purchasers for Damages in accordance with Article XI below, the value of each Consideration Share held in the Escrow Fund shall be calculated using the Average SD Share Price. The “ Value of the Escrow Fund ” shall be equal to the product of the aggregate Share Component of the Escrow Fund multiplied by the Average SD Share Price, plus the aggregate Cash Component of the Escrow Fund.

(b)           Any amount paid from the Escrow Fund to Purchaser in accordance with Article XI shall be paid to Purchaser in (i) cash and (ii) a number of Consideration Shares, in proportion to the ratio between the Cash Component of the Escrow Fund and the Share Component of the Escrow Fund, assuming a value for each such Consideration Share equal to the Average SD Share Price.

(c)            Participating Rights Holder’s Interest . Each Participating Rights Holder portion in the Escrow Fund shall be calculated as the quotient obtained by dividing each Participating Rights Holder's Cash Component of the Escrow Fund, plus such Participating Rights Holder's Share Component of the Escrow Fund, if any (calculated based on the Average SD Share Price), by the Value of the Escrow Fund  Each Participating Rights Holder’s Interest in the Escrow Fund and the number of Consideration Shares and the portion of the Cash Consideration set aside in Escrow Fund, shall be set forth in the Consideration Allocation Certificate.

(d)           Any amount distributed out of the Escrow Fund shall be allocated to each Participating Rights Holder according to such Participating Rights Holder's Interest in the Escrow Fund (it being understood that the Share Component of the Escrow Fund shall be distributed only to the Selling Shareholders, and in accordance with the aforementioned such Participating Rights Holder's Interest.

Section 2.06                                  Non Executing Shareholders' Deposit .

(a)           Anything in this Agreement to the contrary notwithstanding, if the Purchaser elects to exercise its rights to provide the Bring-Along Notice under Section 2.02(b)(3) of this Agreement, Purchaser shall transfer to the Paying Agent the appropriate portion out of the Closing Consideration Shares and the Closing Cash Consideration payable under this Agreement to all Non Executing Shareholders, subject to any applicable amount to remain in the Escrow Fund in accordance with Section 2.05 (the “ Non-Executing Shareholder’s Deposit ”). Such amounts will be held by the Paying Agent in trust for and to the benefit of each such Non Executing Shareholders, until such Non Executing Shareholder shall have become an Execution Shareholder hereunder by executing and delivering to Purchaser this Agreement and the other Transaction Documents to be executed by it and otherwise delivering to Purchaser all other deliveries called for herein. As soon as practicable thereafter, the Paying Agent shall transfer to such Non Executing Shareholder who has become an Executing Shareholder his, her or its appropriate portion held in such assets and funds. The foregoing shall also apply, mutatis mutandis , to the appropriate portion of any sums released from the Escrow Agent in accordance with the Escrow Agreement.  Should a Non-Executing Shareholder not execute the aforementioned within three months of the Bring-Along Notice, then the Purchaser may direct the Paying Agent to transfer such Non-Executing Shareholder’s Deposit to the Company.  Thereafter, such Non-Executing Shareholder shall look only to the Company for the Non-Executing Shareholder’s Deposit.

A portion of the Closing Cash Consideration otherwise payable to the Participating Rights Holders equal to $200,000 (the “ Rep Reimbursement Amount ”), shall not be paid at the Closing to the Participating Rights Holders, but shall instead be deposited with the Escrow Agent, to be used by the Holder Representatives for the payment of expenses incurred by each of the Holder Representatives in performing his duties pursuant to this Agreement. The portion of the Closing Cash Consideration to be contributed on behalf of each Participating Rights Holder hereunder to the Rep Reimbursement Amount shall be based on the Participating Rights Holder’s Interest. The Rep Reimbursement Amount shall in no manner affect or impact the amount of the Escrow Fund. In the event that the Holder Representatives have not used the entire Rep Reimbursement Amount at such time as the termination of the Escrow Period, any remaining amount shall be distributed by the Escrow Agent to the Participation Rights Holders pro rata to their respective Participating Rights Holder’s Interests. The Rep Reimbursement Amount, or any portion thereof, will be distributed to the Participating Rights Holders in accordance with the terms of the Escrow Agreement and such distribution shall be based on the Participating Rights Holder's Interest.  If the Rep Reimbursement Amount shall be insufficient to reimburse each of the Holder Representatives’ expenses in accordance with this Agreement, then upon written request of the Holder Representatives, each Participating Rights Holder shall make a payment of its respective share of such additional expenses to the Holder Representatives, based on such Participating Rights Holder’s Interest; provided, however, that any additional payment by each Participating Rights Holder shall not impact any of the obligations of each Participating Rights Holder pursuant to Article XI below.

(a)            Estimated Consideration Allocation Chart . Prior to the date hereof, the Company provided the Purchaser and the Holder Representatives with the Estimated Consideration Allocation Chart (attached hereto as Exhibit K ) illustrating the respective distribution of the consideration at Closing Date based on certain hypothetical assumptions and conditions. The Estimated Consideration Allocation Chart is not intended in any way to set forth the amounts that will actually be payable to the Equityholders pursuant to this Agreement, and is merely an illustration of how to calculate the amount due to each Equityholder based on the methodology set forth above.

(b)            Consideration Allocation Certificate . Not later than three (3) Business Days before the Closing, the Company shall deliver to Purchaser and the Holder Representatives a certificate of the Company (the “ Estimated Company Pre-Closing Certificate ”) executed on its behalf by the Chief Financial Officer of the Company that sets forth in reasonable detail the Company’s estimate of the Closing Cash, together with copies of the Company bank statements supporting such estimation (“ Estimated Closing Cash ”). The Estimated Company Pre-Closing Certificate will be amended and delivered to Purchaser one (1) Business Day before the Closing, to reflect any changes in the Closing Cash. The adjusted certificate will be referred to herein as the “ Closing Cash Certificate ”. The amounts set forth in the Closing Cash Certificate shall be incorporated in the Consideration Allocation Certificate. The Closing Cash Certificate shall be executed by the Chief Executive Officer and Chief Financial Officer of the Company and shall be deemed to be a representation and warranty of the Company with respect to the amount of Cash held by the Company at Closing. The Consideration Allocation Certificate, as adjusted to reflect the Closing Cash Certificate (the “ Consideration Allocation Certificate ”) shall be delivered together with the Closing Cash Certificate and shall be executed by the Chief Executive Officer and Chief Financial Officer of the Company, and by the Holder Representatives, and shall be deemed to be a representation and warranty of the Company and each of the Selling Shareholders with respect to his, her or its entitlement to distribution hereunder. In no event shall Purchaser be required to make any payments pursuant to this Agreement unless and until the Consideration Allocation Certificate has been duly executed and delivered by the Company and the Holder Representatives. Purchaser shall be entitled to rely entirely upon the Consideration Allocation Certificate in connection with making the payments pursuant to this Agreement and neither the Holder Representatives nor any Equityholder shall be entitled to make any claim in respect of the allocation of the payments made by Purchaser to or for the benefit of any Equityholders to the extent that the payments are made in a manner consistent with the Consideration Allocation Certificate.

(c)            Recapitalization . If between the date of this Agreement and the Closing, the number of outstanding Ordinary Shares or Preferred Shares is changed into a different number of shares or into a different class, by reason of any share dividend, subdivision, reclassification, recapitalization, split-up, combination, exchange of shares, or the like, the per Company Share, and per Company Option amounts set out in this Agreement will be correspondingly adjusted to reflect such change, such that the Aggregate Consideration shall not be increased or reduced as a result of any such action.

(a)            Securities Act . Each certificate representing the Closing Consideration Shares shall (unless otherwise permitted by the provisions of this Agreement) be imprinted with a legend substantially similar to the following (in addition to any legend required under applicable securities laws or as provided elsewhere in this Agreement):

“THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED PURSUANT TO REGULATION D OF THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE SOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE THEREWITH, PURSUANT TO A REGISTRATION UNDER THE ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. IN ADDITION, NO HEDGING TRANSACTION MAY BE CONDUCTED WITH RESPECT TO THESE SECURITIES UNLESS SUCH TRANSACTIONS ARE IN COMPLIANCE WITH THE ACT.”

For Regulation S Investors:

“THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED PURSUANT TO REGULATION D OF THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE SOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE THEREWITH, PURSUANT TO A REGISTRATION UNDER THE ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. IN ADDITION, NO HEDGING TRANSACTION MAY BE CONDUCTED WITH RESPECT TO THESE SECURITIES UNLESS SUCH TRANSACTIONS ARE IN COMPLIANCE WITH THE ACT.”

For all Principal Shareholders:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED PURSUANT TO THE ACQUISITION AGREEMENT DATED OCTOBER 12, 2009 BY AND AMONG SIGMA DESIGNS, INC., COPPERGATE COMMUNICATIONS LTD., AND CARMEL V.C. 2 LTD. AND TAMIR FISHMAN VENTURES MANAGEMENT II LTD., AS THE HOLDER REPRESENTATIVES, AND EACH PERSON IDENTIFIED ON EXHIBIT A-1 THERETO (THE “ACQUISITION AGREEMENT”) AND ARE SUBJECT TO CERTAIN RESTRICTIONS (THE “LOCK-UP RESTRICTIONS”) ON TRANSFER SET FORTH IN A LOCK-UP AGREEMENT DATED OCTOBER 12, 2009, IN FAVOR OF SIGMA DESIGNS, INC.  THE LOCK-UP RESTRICTIONS SHALL EXPIRE AS TO TWENTY-FIVE PERCENT (25%) OF THE TOTAL SECURITIES ISSUED TO THE HOLDER OF THIS CERTIFICATE PURSUANT TO THE ACQUISITION AGREEMENT ON THE LATER OF (I) THE SECOND BUSINESS DAY FOLLOWING THE FIRST PUBLIC ANNOUNCEMENT, RELEASE OR FILING OF EARNINGS OF SIGMA DESIGNS, INC. FOLLOWING THE CLOSING DATE OF SIGMA DESIGNS, INC.’S ACQUISITION OF COPPERGATE COMMUNICATIONS LTD., OR (II) THE DATE ON WHICH THE REGISTRATION STATEMENT PURSUANT TO WHICH THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE REGISTERED FOR RESALE IN ACCORDANCE WITH THE ACQUISITION AGREEMENT IS DECLARED EFFECTIVE (SUCH LATER DATE, THE “INITIAL RELEASE DATE”).  THEREAFTER, AN ADDITIONAL TWENTY-FIVE PERCENT (25%) OF THE TOTAL SECURITIES ISSUED TO THE HOLDER OF THIS CERTIFICATE PURSUANT TO THE ACQUISITION AGREEMENT WILL BE RELEASED FROM THE LOCK-UP RESTRICTIONS ON EACH OF THE 60TH, 120TH AND 180TH DAY FOLLOWING THE INITIAL RELEASE DATE.”

(b)            Blue Sky Laws . In addition, certificates representing the Closing Consideration Shares may contain any legend required by the blue sky laws of any jurisdiction to the extent such laws are applicable to the sale of the Closing Consideration Shares hereunder.

At the Closing Date, holders of certificates representing Company Shares that were outstanding immediately prior to the Closing Date shall cease to have any rights as shareholders of the Company, and the share registry of the Company shall be closed with respect to all shares outstanding immediately prior to the Closing Date. No further transfer of any such Company Shares shall be made on such share registry after the Closing Date.

(a)            Right to Withhold . Each of Purchaser, the Paying Agent, the Escrow Agent and the Company shall be entitled to deduct and withhold from any consideration payable or otherwise deliverable to any Equityholder, former Equityholder or other Person pursuant to this Agreement such amounts as Purchaser, the Paying Agent, the Escrow Agent or the Company, as the case may be, are required to deduct or withhold therefrom under the Code, the Israeli Code, or any Tax law, with respect to the making of such payment. To the extent that such amounts are so withheld by Purchaser, the Paying Agent, the Escrow Agent or the Company, as the case may be, (i) such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person to whom or to which such amounts would otherwise have been paid in respect of whom such deduction and withholding was made by Purchaser, the Escrow Agent or the Company, (ii) such withheld amounts shall be remitted by Purchaser, the Escrow Agent or the Company, to the applicable Governmental Authority, and (iii) Purchaser, the Escrow Agent or the Company, as applicable, shall promptly provide to the Equityholder from which such amounts were withheld written confirmation of the amount so withheld. To the extent that such amounts are required to be deducted or withheld by Purchaser, the Paying Agent, Escrow Agent or Company, such Person shall withhold such amounts from the Closing Cash Consideration rather than the Closing Consideration Shares. In the event such amounts required to be deducted or withheld by Purchaser, the Paying Agent, Escrow Agent or Company exceed the Closing Cash Consideration, such Person is authorized to sell or otherwise dispose of, on behalf of such Equityholder, the portion of the Closing Consideration Shares otherwise deliverable to such Equityholder, to enable Purchaser, the Paying Agent, Escrow Agent or Company to comply with such deduction or withholding requirement. Purchaser, Escrow Agent or Company shall notify the relevant Equityholder that such sale and withholding or deduction was made and remit to such Equityholder any balance of the proceeds of such sale not applied to the payment of taxes less any costs or expenses incurred by Purchaser, the Paying Agent, Escrow Agent or Company in connection with such sale.

(b)            Tax Rulings; Withholding Certificates . Without derogating from the foregoing, Purchaser agrees that:

(1)           if a valid Israeli tax ruling with respect to withholding required in connection with the Transactions is obtained from the ITA, any withholding under the Israeli Code with respect to the transactions covered in such tax ruling will be made in accordance with such tax ruling;

(2)           no withholding or reduced withholding under the Israeli Code will be made from any consideration payable hereunder to an Equityholder to the extent that such holder has provided Purchaser, the Paying Agent, the Escrow Agent or the Company with an appropriate and applicable exemption or confirmation of no withholding or a reduced withholding rate (as applicable) issued by the ITA with respect to such Equityholder (a “ Qualified Withholding Certificate ”), prior to the time such payment of consideration is made;

(3)           no withholding under United States Tax law will be made from any consideration payable hereunder to a Selling Shareholder that delivers to Purchaser or the Paying Agent a duly completed Form W-9 or Form W-8, as applicable, unless required under applicable law for service providers to the Company prior to the Closing or Purchaser following the Closing.

(4)           in the absence of receipt of a Qualified Withholding Certificate, to the extent any Tax is withheld by Purchaser or the Company, as the case may be, in accordance with the provisions hereof and subject to the prior compliance by the relevant Equityholder with the conditions of the following sentence, then the party withholding such amount shall not remit same to the applicable Tax authorities earlier than one Business Day prior to the last date for such remittance is required under applicable Tax law with respect to a certain Equityholder, provided, unless it is provided by said Equityholder, prior to such date, with a Qualified Withholding Certificate in respect of such payment, in which case Purchaser shall withhold in accordance with the provisions of the Qualified Withholding Certificate and any remaining amount shall be promptly released to Paying Agent for distribution to the relevant Equityholder. The party withholding such amount shall not defer payment to the applicable Tax authorities, unless provided with a cashier’s check on or prior to the date of the original payment in such amount as the Purchaser deems adequate to cover for any deficiencies due to exchange rate fluctuations

(a)            General . Each outstanding option to purchase Company Ordinary Shares under any Company Option Plan (a “ Company Option ”) shall entitle its holder to receive the benefits set forth in this Agreement.

(b)            Unvested Company Options . At the Closing Date, Unvested Company Options shall be assumed by Purchaser as set forth in this Section 2. Each Unvested Company Option so assumed by Purchaser under this Agreement will continue to have, and be subject to, the same terms and conditions set forth in the applicable Company Option documents (including any applicable Company Option Plan and share option agreement or other document evidencing such Company Option) immediately prior to the Closing Date (including any repurchase rights or vesting provisions), except that (i) each such Company Option will be exercisable (or will become exercisable in accordance with its terms) for that number of Purchaser's Equity Awards and (ii) the per share exercise price under the assumed Unvested Company Option for the Purchaser’s Equity Award will be based on the Option Ratio as set forth above. Each assumed Unvested Company Option shall continue to vest following the Closing Date based on the vesting schedule applicable to such Unvested Company Option as in effect immediately prior to the Closing Date. The assumption of any Unvested Company Option is intended to be effected in a manner which is consistent with Section 424(a) of the Code, and each assumed Unvested Company Option that qualified as an incentive stock option pursuant to Section 422 of the Code immediately prior to the Closing Date is intended to qualify as an incentive stock option immediately after the Closing Date. The assumption of any Unvested Company Options granted under the Israeli Code is intended to be effected in a manner which is consistent with the provisions of the Israeli Option Tax Pre-Ruling, if obtained. Following the Closing Date, Purchaser Board of Directors, a committee thereof or such other committee to which Purchaser Board duly delegates authority shall succeed to the authority and responsibility of the Company Board of Directors or any committee thereof with respect to each assumed Unvested Company Option. The exercise of the assumed Unvested Company Option and/or sale of underlying shares shall be subject to the terms of the Israeli Option Tax Pre-Ruling, if obtained and to such terms and restrictions, including blackout periods, as are generally applicable to such exercise and sale of options to purchase Purchaser's Shares. In the event that any Unvested Company Option assumed in accordance with this Section 2.12(b) terminates or otherwise expires following the Closing in accordance with its terms, the Purchaser's Equity Awards which would have been issued upon the exercise of such Unvested Company Option shall be, as soon as practicable following such termination or expiration, granted as additional options to individuals who were employed by the Company as of the Closing Date and continue to be employed by the Purchaser, the Company or any of their respective Affiliates at the time of grant, on such terms and to such specific individuals as will be determined in the discretion of the Purchaser Board of Directors or any committee thereof to which the Purchaser Board of Directors delegates its authority, in consultation with management of the Company.

(c)            Vested Company Options . At the Closing, each holder of a Vested Company Option, by virtue of the Transactions without any action on the part of the holder, shall be entitled to receive in exchange for such Vested Company Option and the cancellation thereof at the Closing an amount in cash as set forth in Section 2.03 above.  Notwithstanding the foregoing, to the extent that any Company Shares or Vested Company Options are held in trust pursuant to Section 102 of the Israeli Code, the Paying Agent will make payment of the consideration that such holder of Company Shares or Vested Company Options is entitled to receive directly to the “Section 102 Plan” trustee (the “ Trustee ”), and in accordance with the provisions of the Israeli Option Tax Pre-Ruling, if obtained. The vesting and exercisability of each outstanding Company Option held by a non-employee director (or consultant) of the Company or its Subsidiaries, shall accelerate in accordance with the terms of the Company Option Plan and/or agreement evidencing the Company Option, and such Company Option shall be canceled at the Closing Date and shall thereafter constitute Vested Company Options. Prior to the Closing Date, the Company shall use reasonable commercial efforts to obtain at the earliest practicable date an Options Acknowledgement Agreement from holders of Vested Company Options.  Notwithstanding anything herein to the contrary, as a condition to receipt of the Optionholder’s Closing Payment Amount, each such Optionholder shall be required to execute and deliver to Purchaser an Options Acknowledgement Agreement.

(a)            Time and Place . The consummation of the Transactions (the “ Closing ”) shall take place at the offices of Herzog, Fox, Neeman Law Offices, Assia House, 4 Weizman St.,Tel Aviv, Israel at a time and on a date to be specified by the parties, which shall be no later than the third Business Day after the satisfaction or waiver of all the conditions set forth in Article IX to be satisfied or waived (other than those conditions that by their nature are to be satisfied at the Closing), or at such other time, date and location as the parties hereto agree in writing. The date on which the Closing actually takes place is referred to in this Agreement as the “ Closing Date ”.

(b)            Transactions at Closing . At the Closing, the following transactions shall occur, which transactions shall be deemed to take place simultaneously, and no transaction shall be deemed to have been completed or any document delivered until all such transactions have been completed and all required documents delivered:

(1)           Each Executing Shareholder shall deliver to Purchaser one or more share certificates (or a written declaration of loss or destruction in lieu thereof in the form to be agreed upon by Purchaser and the Company (and attached hereto as Exhibit M ) accompanied by duly executed deeds of transfer, in the form to be agreed upon by Purchaser and the Company (and attached as Exhibit N ).

(2)           Each person who at the time of the Closing is a Company Warrantholder shall deliver at the Closing to Purchaser a duly executed termination and waiver agreement in the form reasonably acceptable to Purchaser.

(3)           Purchaser, each of the Holder Representatives on behalf of himself and each Participating Rights Holder, and the Escrow Agent shall enter into the Escrow Agreement.

(4)           Purchaser shall deliver to the Paying Agent for further distribution by the Paying Agent, upon receipt of a duly executed and completed letter of transmittal set forth as an exhibit to the Paying Agent Agreement, to each Participating Rights Holder or the Trustee in accordance with the Option Tax Ruling, the portion of the Closing Cash Consideration, if any, payable thereto in accordance with this Agreement and the information contained in such letter of transmittal, and shall issue to each Participating Rights Holders his, her or its portion of Closing Consideration Shares.

(5)           Purchaser shall deliver to the Escrow Agent the Escrow Fund.

(6)           If the Purchaser elects to exercise its rights to provide the Bring-Along Notice under Section 2.02(b)(3) of this Agreement, Purchaser shall acquire good and valid title, free and clear of any Liens, to all Company Shares owned by the Non Executing Shareholders in accordance with Section 341 of the Companies Law-1999 or any other procedures available under the Company's articles of association and applicable law, and as of the Closing Date, Purchaser will own 100% of the issued and outstanding share capital of the Company (on a fully diluted basis) and, indirectly through the Company, 100% of the issued and outstanding of the share capital of the Subsidiary free and clear of any Lien.

(7)           If Purchaser elects to exercise its rights to provide the Bring-Along Notice under Section 2.02(b)(3) of this Agreement, the Company shall register the transfer of all the Company Shares to Purchaser in the register of shareholders of the Company, and shall provide Purchaser with a true and correct copy of such updated register of shareholders reflecting such entry, certified by two directors of the Company.  If Purchaser elects not to exercise its rights to provide the Bring-Along Notice under Section 2.02(b)(3) of this Agreement, the Company shall register the transfer of the Company Shares held by the Executing Shareholders to Purchaser in the register of shareholders of the Company, and shall provide Purchaser with a true and correct copy of such updated register of shareholders reflecting such entry, certified by two directors of the Company.

(8)           If Purchaser elects to exercise its rights to provide the Bring-Along Notice under Section 2.02(b)(3) of this Agreement, the Company shall issue and deliver to Purchaser validly executed share certificate(s) covering all the Company Shares, issued in the name of Purchaser.  If Purchaser elects not to exercise its rights to provide the Bring-Along Notice under Section 2.02(b)(3) of this Agreement, the Company shall issue and deliver to Purchaser validly executed share certificate(s) covering the Company Shares previously held by the Executing Shareholders, issued in the name of Purchaser.

(9)           The Purchaser shall have received an irrevocable Letter of Appointment of Directors in the form set forth in Exhibit CC , executed by holders of a majority of the Company Preferred Shares, including Tamir Fishman Ventures Capital II Ltd., Tamir Fishman Ventures II L.P., Tamir Fishman Ventures II CEO Fund (U.S.) L.P., Tamir Fishman Ventures II (Cayman Islands) L.P., Tamir Fishman II (Israel) L.P., Tamir Fishman Ventures II CEO Fund L.P. (collectively, “ Tamir Fishman ”), The Challenge Fund II – Etgar L.P. (the “ Challenge Fund ”) and Carmel Ventures II L.P. (“ Carmel Ventures ”), appointing Purchaser’s designees to the Board of Directors of the Company, effective as of the Closing.

Subject to Section 13.05, except as set forth in the Company Disclosure Schedule, the Company represents and warrants to Purchaser:

(a)           The Company: (i) is a limited liability company duly incorporated and validly existing under the laws of Israel; (ii) is duly licensed or qualified to do business and where applicable is in good standing as a foreign corporation in all jurisdictions in which the conduct of its business or the activities it is engaged makes such licensing or qualification necessary; and (iii) has all necessary corporate power and authority: (A) to conduct is business in the manner in which its business is currently being conducted; (B) to own, use and distribute its assets in the manner in which its assets are currently owned, used and distributed; and (C) to perform its obligations under all Contracts.

(b)           Section 3.01(b) of the Company Disclosure Schedule sets forth a true, correct and complete list of the Company’s Subsidiaries as of the date of this Agreement. Each of the Subsidiaries of the Company (i) has been duly organized, and is validly existing and where applicable in good standing under the Laws of the jurisdiction of its organization; (ii) is duly licensed or qualified to do business and is where applicable in good standing as a foreign entity in all jurisdictions in which the conduct of its business or the activities it is engaged makes such licensing or qualification necessary; and (iii) has all necessary corporate power and authority: (A) to conduct is business in the manner in which its business is currently being conducted; (B) to own, use and distribute its assets in the manner in which its assets are currently owned, used and distributed; and (C) to perform its obligations under all Material Contracts. ¬

(c)           The Company has delivered to Purchaser accurate and complete copies of: (i) the articles of association, certificate of incorporation, bylaws or equivalent governing documents, including all amendments thereto, of each Acquired Company (the “ Charter Documents ”), including all amendments thereto, of each Acquired Company; (ii) the equity records of each Acquired Company; and (iii) the minutes of the meetings and other proceedings (including any actions taken by written consent or otherwise without a meeting) of the Selling Shareholders of each Acquired Company, the Company Board of Directors, all committees thereof and the boards of directors of the Subsidiary, in each case since January 1, 2006. There has not been any violation of any of the provisions of the articles of association or bylaws (or equivalent constituent documents), including all amendments thereto, of each Acquired Company, as applicable, and no Acquired Company has taken any action that is inconsistent in any material respect with any resolution adopted by the Selling Shareholders, the Company Board of Directors or any committee thereof. The books of accounts, stock records, minute books and other records of each Acquired Company are accurate, up-to-date and complete in all material respects, and have been maintained in accordance with prudent business practices and all Applicable Law.

(d)           Section 3.01(d) of the Company Disclosure Schedule accurately sets forth: (i) the names of the members of the board of directors (or similar body) of each Acquired Company; (ii) the names of the members of each committee of the board of directors (or similar body) of each Acquired Company; and (iii) the names and titles of the officers of each Acquired Company.

(e)           None of the Acquired Companies has conducted any business under or otherwise used, for any purpose or in any jurisdiction, any fictitious name, assumed name, business name or other name, other than its respective corporate name as set forth in this Agreement.

(a)           The Company has all necessary corporate power and authority to enter into and to perform its obligations under the Transactional Agreements to which it is a party in accordance with the respective terms thereof; and the execution, delivery and performance by the Company of the Transactional Agreements to which it is a party in accordance with the respective terms thereof have been duly authorized by all necessary corporate action on the part of the Company and the Company Board of Directors. This Agreement constitutes the legal, valid and binding obligation of the Company, and, assuming the due authorization, execution and delivery by all other parties thereto, enforceable against the Company in accordance with its terms, subject to (i) laws of general application relating to bankruptcy, insolvency, reorganization, moratorium and the relief of debtors, and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies. Upon the execution of each of the other Transactional Agreements at the Closing, each of such other agreements to which the Company is a party will constitute the legal, valid and binding obligation of the Company, and will be, assuming the due authorization, execution and delivery by all other parties thereto, enforceable against the Company in accordance with its respective terms, subject to (i) laws of general application relating to bankruptcy, insolvency, reorganization, moratorium and the relief of debtors, and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies.

(b)           At a meeting duly called and held, the Company Board of Directors has (i) unanimously determined that this Agreement and the Transactions are fair to, advisable and in the best interests of the Company’s shareholders and (ii) unanimously approved and adopted this Agreement and the Transactions.

(a)           Section 3.03(a) of the Company Disclosure Schedule identifies each material Governmental Authorization held by any Acquired Company, and the Company has delivered to Purchaser accurate and complete copies of all Governmental Authorizations identified in Section 3.03(a) of the Company Disclosure Schedule. The Governmental Authorizations identified in Schedule 3.03(a) of the Company Disclosure Schedule are valid and in full force and effect, and collectively constitute all material Governmental Authorizations necessary to enable the Acquired Companies to conduct their respective businesses in the manner in which such businesses are currently being conducted. Each of the Acquired Companies is, and has at all times been, in compliance with the terms and requirements of the respective Governmental Authorizations identified in Schedule 3.03(a) of the Company Disclosure Schedule, except for any noncompliance with any such Governmental Authorization that would not cause the Company to lose a material benefit or incur any material liability. Except as set forth in Section 3.03(a) of the Company Disclosure Schedule, none of the Acquired Companies has received any notice or other communication from any Governmental Authority regarding: (i) any actual or possible violation of or failure to comply with any term or requirement of any Governmental Authorization; or (ii) any actual or possible revocation, withdrawal, suspension, cancellation, termination or modification of any Governmental Authorization.

(b)           Section 3.03(b)(i) of the Company Disclosure Schedule identifies each Governmental Grant (including with respect to “approved enterprise” status) that has been or is provided or available or applicable to any Acquired Company. Except as set forth on Section 3.03(b)(i) of the Company Disclosure Schedule, no Acquired Company has ever received any Governmental Grant. The Company has delivered to Purchaser accurate and complete copies of: (i) all applications and related documents and correspondence submitted by the Company to the Investment Center, the Office of the Chief Scientist and any other Governmental Authority; and (ii) all certificates of approval and letters of approval (and supplements thereto) granted to the Company by the Investment Center, the Office of the Chief Scientist and any other Governmental Authority. In each such application submitted by or on behalf of any Acquired Company, all information required by such application has been disclosed accurately and completely in all material respects and any non-material disclosures that are not accurate or complete would not cause the loss of the Governmental Grant obtained by such application. Except for undertakings set forth in such letters of approval and under Applicable Law, there are no undertakings of any Acquired Company given in connection with any Governmental Grant. Each Acquired Company is in compliance with the terms, conditions, requirements and criteria of all Governmental Grants, except for any noncompliance with such Governmental Grants that would not cause the Company to lose a material benefit or incur any material liability and, except as set forth in Section 3.03(b)(iii) of the Company Disclosure Schedule, has duly fulfilled all conditions, undertakings and other obligations relating thereto. Except as set forth in Section 3.03(b)(iv) of the Company Disclosure Schedule, no Governmental Authority: (i) has awarded any participation or provided any support to any Acquired Company; or (ii) is or may become entitled to receive any royalties or other payments from any Acquired Company.

(c)           Section 3.03(c) of the Company Disclosure Schedule sets forth, with respect to each Governmental Grant referred to in Section   3.03 (b)(i) of the Company Disclosure Schedule: (i) the total amount of the benefits received by each Acquired Company under such Governmental Grant and the total amount of the benefits available for future use by each Acquired Company under such Governmental Grant; (ii) the time period in which each Acquired Company received, or will be entitled to receive, benefits under such Governmental Grant; and (iii) any Governmental Grant consisting of a Tax incentive (other than incentives generally available by operation of law without application or action by any Governmental Authority). No event has occurred, and no circumstance or condition exists, that would or that could reasonably be expected to give rise to: (A) the annulment, revocation, withdrawal, suspension, cancellation, recapture or modification of any Governmental Grant; (B) the imposition of any limitation on any Governmental Grant or any benefit available in connection with any Governmental Grant; or (C) a requirement that any Acquired Company return or refund any benefits provided under any Governmental Grant. The consummation of the Acquisition Transaction pursuant to the terms of this Agreement: (1) will not adversely affect the ability of any Acquired Company to obtain the benefit of any Governmental Grant for the remaining duration thereof or require any recapture of any previously claimed incentive; and (2) will not result in (x) the failure of any Acquired Company to comply with any of the terms, conditions, requirements and criteria of any Governmental Grant or (y) any claim by any Governmental Authority or other Person that any Acquired Company is required to return or refund, or that any Governmental Authority is entitled to recapture, any benefit provided under any Governmental Grant. Except as set forth in Section 3.03(c) of the Company Disclosure Schedule, no Consent of any Governmental Authority or other Person is required to be obtained prior to the consummation of the Acquisition Transaction pursuant to the terms of this Agreement in order to preserve the entitlement of any Acquired Company to any Governmental Grant or to avoid any increase in royalty rates incurred by any Acquired Company under any such Governmental Grant or other change in the terms and conditions applicable to any Acquired Company under any such Governmental Grant. There is no intention to change the terms of any Governmental Grant, except as may result from generally applicable changes to the relevant laws and regulations thereunder.

Except as set forth in Section 3.04 of the Company Disclosure Schedule, neither: (1) the execution, delivery or performance of this Agreement or any of the other agreements, documents or instruments referred to in this Agreement; nor (2) the consummation of the transactions contemplated by this Agreement or any such other agreement, document or instrument, will (with or without notice or lapse of time):

(a)           contravene, conflict with or result in a violation of: (i) any of the provisions of any Charter Documents of any of the Acquired Companies;

(b)           contravene, conflict with or result in a violation of, or give any Governmental Authority or other Person, subject to the Purchaser’s representation and warranties set forth in Section 5.04 below being true and correct, the right to challenge any of the transactions contemplated by this Agreement or to exercise any remedy or obtain any relief under, any Applicable Law or any order, writ, injunction, judgment or decree to which any of the Acquired Companies or any of the assets owned or used by any of the Acquired Companies, is subject;

(c)           contravene, conflict with or result in a violation of any of the terms or requirements of, or give any Governmental Authority the right to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental Authorization that is held by any of the Acquired Companies or that otherwise relates to any Acquired Company’s business or to any of the assets owned or used by any Acquired Company;

(d)           contravene, conflict with or result in a violation or breach of, or result in a default under, any material provision of any Material Contract, or give any Person the right to: (i) declare a default or exercise any remedy under any such Material Contract; (ii) accelerate the maturity or performance of any such Material Contract; or (iii) cancel, terminate or modify any such Material Contract; or

(e)           result in the imposition or creation of any Lien upon or with respect to any asset owned or used by any of the Acquired Companies (except for minor liens that will not, in any case or in the aggregate, materially detract from the value of the assets subject thereto or materially impair the operations of any of the Acquired Companies).

Except as set forth in Section 3.04 of the Company Disclosure Schedule, none of the Acquired Companies is and none of the Acquired Companies will be required to make any filing with or give any notice to, or to obtain any consent from, any Person in connection with: (x) the execution, delivery or performance of this Agreement or any of the other agreements referred to in this Agreement; or (y) the consummation of the transactions contemplated by this Agreement.

(a)           The authorized capital of the Company consists of 30,000,000 Company Ordinary Shares, 8,040,000 Company Ordinary A Shares, 8,000,000 Preferred A-1 Shares, 4,650,000 Preferred A-3 Shares, 3,158,000 Preferred B Shares, 15,200,000 Preferred C Shares, 1,500,000 Preferred D Shares and 4,500,000 Deferred Shares. As of the date of this Agreement, there were issued and outstanding 506,540 Company Ordinary Shares, 229,460 Company Ordinary A Shares, 21,960 Preferred A-1 Shares, 4,645,470 Preferred A-3 Shares, 3,157,800 Preferred B Shares, 9,608,510 Preferred C Shares, zero Preferred D Shares and 167,620 Deferred Shares, Company Options to purchase an aggregate of 5,328,425 Company Ordinary Shares (of which options to purchase an aggregate of 3,729,925 Company Ordinary Shares were exercisable) and Company Warrants to purchase an aggregate of 281,880 Preferred C Shares. Each Company Ordinary A Share is convertible at the option of the holder of such Share into the right to receive one Company Ordinary Share. Each Preferred A-1 Share is convertible into such number of Company Ordinary Shares received by dividing 136.542 by 15.853. Each Preferred B Share and each Preferred A-3 Share is convertible at the option of the holder of such Share into the right to receive one Preferred A-1 Share or one Company Ordinary A Share. As of the date of this Agreement, the Company has reserved 184,575 Company Ordinary Shares for future issuance of Company Options.  All of the issued and outstanding Company Shares have been, and all Company Shares that may be issued pursuant to any Company Option granted under any Option Plan or pursuant to Company Warrants will be, when issued in accordance with the respective terms thereof, duly authorized and validly issued, fully paid and nonassessable.

(b)           Section 3.05(b) of the Company Disclosure Schedule contains a complete and correct list of each outstanding Company Option to purchase Company Shares, including the name of the holder, the number of Company Shares subject to such Company Option, the vested status applicable thereto as of the date of this Agreement, exercise price per share, vesting schedule (including the number of vested and unvested shares as of a date not earlier than five (5) Business Days prior to date of this Agreement assuming continued employment by such Optionholders), whether such Company Option is an “incentive stock option” within the meaning of Section 422 of the Code, the date on which such Company Option expires, and whether the vesting of such Company Option shall be subject to any acceleration in connection with the Transactions, and with respect to the Company Options granted to Israeli taxpayers, whether each such Company Option was granted pursuant to Section 3(i) of the Israeli Code, Section 102 of the Israeli Code (prior to June 30, 2003) or Section 102 of the Israeli Code (on or after June 30, 2003) and the subsection of Section 102 pursuant to which the Company Option was granted. With respect to any Company Option granted under a Company Option Plan, there has been (y) no amendment to such option, including any amendment to reduce its exercise price per share, and (z) no cancellation of such option in exchange for cash or another equity-based award.

(c)           Section 3.05(c) of the Company Disclosure Schedule contains a complete and correct list of each outstanding Company Warrant to purchase Company Shares, including the name of the holder, the number of Company Shares subject to such Company Warrant, the vested status applicable thereto as of the date of this Agreement, exercise price per share, vesting schedule (including the number of vested and unvested shares as of a date not earlier than five (5) Business Days prior to date of this Agreement assuming continued employment by such Optionholders), the date on which such Company Warrant expires, and whether the vesting of such Company Warrant shall be subject to any acceleration in connection with the Transactions.

(d)           Except as set forth in Section 3.05(d) of the Company Disclosure Schedule, there are no outstanding (i) shares of capital stock of the Company, (ii) securities, instruments or obligations of the Company that are or may become convertible into or exchangeable for Company Shares (iii) subscription, option, call, convertible note, warrant or rights (whether or not currently exercisable) to acquire any Company Shares or other securities of the Company; (iv) Contract under which the Company is or may become obligate to sell or otherwise issue any Company Shares or any other securities; or (v) condition or circumstance that may give rise to or provide a basis for the assertion of a claim by any Person to the effect that such Person is entitled to acquire or receive any Company Shares or other securities of the Company.

(e)           Section 3.05(e) of the Company Disclosure Schedule sets forth a complete and accurate list, by name, of the Company’s Shareholders, the addresses of the Company Shareholders, the number of Company Shares owned by such shareholder identified by class and series. All outstanding Company Shares have been issued and granted in compliance with (i) all applicable securities laws and other Applicable Law and (ii) all material requirements set forth in applicable Contracts. None of the outstanding Company Shares were issued in violation of any preemptive rights or other rights to subscribe for or purchase securities of the Company. Section 3.05(e) of the Company Disclosure Schedule accurately identified each Acquired Company Contract relating to any securities of the Company that contained any information rights, management rights, registration rights, financial statement requirements or other terms that would survive the Closing unless terminated (other than in accordance with its terms) or amended prior to the Closing.

(f)           At the Closing, Purchaser will receive good and valid title, free and clear of any Liens, adverse claims, to all outstanding Company Shares owned by the Selling Shareholders.

(g)           Other than as set forth in Section 3.05(g) of the Company Disclosure Schedule, the Company has never repurchased, redeemed or otherwise reacquired any of its shares or other securities and there are no outstanding rights or obligations of the Company to repurchase or redeem any of its securities. All shares of capital stock of the Company ever repurchased or redeemed by the Company were repurchased or redeemed in compliance with: (i) all applicable securities laws and other Applicable Law; and (ii) all requirements set forth in all applicable Charter Documents and Contracts.

(h)           Section 3.05(h) of the Company Disclosure Schedule lists each Subsidiary of the Company. The Company is the sole owner of all of the securities of each of its Subsidiaries. Except as set forth in Section 3.05(h) of the Company Disclosure Schedule, no Subsidiary of the Company has or is bound by any outstanding subscriptions, options, warrants, calls, commitments, rights agreements or agreements of any character calling for it to issue, deliver or sell, or cause to be issued, delivered or sold any of its equity securities or any securities convertible into, exchangeable for or representing the right to subscribe for, purchase or otherwise receive any such equity security or obligating such Subsidiary to grant, extend or enter into any such subscriptions, options, warrants, calls, commitments, rights agreements or other similar agreements. There are no outstanding contractual obligations of any Subsidiary of the Company to repurchase, redeem or otherwise acquire any of its securities or other equity interests. All of the securities of each of the Subsidiaries of the Company are validly issued, fully paid (to the extent required under the applicable governing documents) and nonassessable and, with respect to such shares held directly or indirectly by the Company, are owned by the Company free and clear of any Liens other than Permitted Liens. All of the securities of each of the Subsidiaries (i) have been issued in compliance with all applicable securities laws and other Applicable Law and all requirements set forth in applicable Charter Documents and Contracts; and (ii) were not issued in violation of or subject to any preemptive rights or other rights to subscribe for or purchase securities of such Subsidiaries. The Company has not agreed and is not obligated under any Contract to, directly or indirectly, make any future investment in or capital contribution or advance to any Person. Except for preemptive rights held by the Company, there are no preemptive rights applicable to any shares of any of the Subsidiaries of the Company. None of the Subsidiaries of the Company have the right to vote on or approve any of the transactions contemplated by this Agreement.

(a)           The Company has delivered to Purchaser the Company’s audited consolidated balance sheets as of December 31, 2006, 2007 and 2008 and the related audited consolidated statements of income and cash flows for each of the years ended December 31, 2006, 2007 and 2008, and the reviewed but unaudited consolidated interim balance sheet as of June 30, 2009 and the related reviewed but unaudited consolidated interim statement of income and cash flows for the six months ended June 30, 2009 (collectively, the “ Financial Statements ”).

(b)           The Financial Statements (i) have been prepared from the books and records of the Acquired Companies, (ii) complied as to form in all respects with applicable accounting requirements with respect thereto as of their respective dates, (iii) have been prepared in accordance with GAAP (except, in the case of unaudited statements, for the absence of footnotes) applied on a consistent basis throughout the periods indicated (except as may be indicated therein or in the notes thereto) and consistent with each other, and (iv) fairly present, in all material respects, the financial condition of the Acquired Companies at the dates therein indicated and the consolidated results of operations and cash flows of the Company and its Subsidiaries for the periods therein specified (subject, in the case of unaudited interim period financial statements, to normal recurring year-end audit adjustments and to any other adjustments described therein including the notes thereto).

(c)           To the Knowledge of the Company, the books of account and other financial records of the Company have been kept accurately in the ordinary course of business consistent in all material respects with Applicable Law, the transactions entered therein represent bona fide transactions, and the revenues, expenses, assets and liabilities of the Acquired Companies have been properly recorded therein in all material respects.

(d)           To the Knowledge of the Company, the Company has not received any written complaint, allegation, assertion or claim regarding any material deficiency in the accounting or auditing practices, procedures, methodologies or methods of the Company or their respective internal accounting controls, including any complaint, allegation, assertion or claim that the Company has engaged in questionable accounting or auditing practices.

(e)           To the Knowledge of the Company: (i) transactions of the Acquired Companies are executed in accordance with management’s general or specific authorization; (ii) transactions of the Acquired Companies are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

(f)           Section 3.06(f) of the Company Disclosure Schedule provides an accurate reconciliation of all accounts receivable, notes receivable and other receivables of the Acquired Companies as of the Unaudited Interim Balance Sheet Date.  Except as set forth in Section 3.06(f) of the Company Disclosure Schedule, all existing accounts receivable of the Acquired Companies (including those accounts receivable reflected on the Company Financial Statements that have not yet been collected and those accounts receivable that have arisen since the Balance Sheet Date and have not yet been collected) represent current and valid obligations arising from bona fide transactions entered into in the ordinary course of business and not in violation of Applicable Law.

(g)           There are no amounts (including loans, advances or other indebtedness) owed to any Acquired Company by a director, officer, employee or shareholder of an Acquired Company (other than travel advances made in the ordinary course of business.

Since the Balance Sheet Date, the business of the Company has been conducted in the ordinary course consistent with past practices (except for actions taken in connection with the negotiation of this Agreement and the Transactions) and, except as set forth in Section 3.07 of the Company Disclosure Schedule, there has not been:

(a)           any event, occurrence, development or state of circumstances or facts that has had or would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect;

(b)           any damage, destruction or other casualty loss (whether or not covered by insurance) affecting the business or assets of any Acquired Company in any material manner;

(c)           except as set forth in Section 3.07(c) of the Company Disclosure Schedule, any amendment of the Charter Documents of any Acquired Company and none of the Acquired Companies has effected or been a party to any Acquisition Transaction;

(d)           any splitting, combination or reclassification of any Company Shares or any equity securities of any Subsidiary of the Company or declaration, setting aside or payment of any dividend or other distribution (whether in cash, shares or property or any combination thereof) in respect of any Company Securities or any equity securities of any Subsidiary of the Company, or redemption, repurchase or other acquisition or offer to redeem, repurchase, or otherwise acquire any Company Securities or any equity securities of any Subsidiary of the Company;

(e)           (i) any issuance, delivery or sale, or authorization of the issuance, delivery or sale of, any shares of any Company Securities or any equity securities of any Subsidiary of the Company, other than the issuance of any Company Shares upon the exercise of Company Options or Company Warrants that are outstanding on the date of this Agreement in accordance with the terms of those options or warrants on the date of this Agreement (except for the issuance of Company Options set forth on Schedule 3.07(e) of the Company Disclosure Schedule), or (ii) any amendment or waiver of (in each case, whether by merger, consolidation or otherwise) any term of any Company Security or Company Option Plan (including permitting the accelerated vesting thereunder) (other than an amendment to effect the provisions of Section 2.11 above and the acceleration of vesting of Company Options set forth and as described in Section 3.07(e) of the Company Disclosure Schedule);

(f)           any incurrence of any capital expenditures or any obligations or liabilities in respect thereof by any Acquired Company, except for capital expenditures that do not exceed $50,000 individually or $100,000 in the aggregate;

(g)           any acquisition (by merger, consolidation, acquisition of shares or assets or otherwise), directly or indirectly, by any Acquired Company of any all of substantially all assets, properties or securities of any Person;

(h)           any sale, lease or other transfer, or creation or incurrence of any Lien on, any assets, securities, properties, interests or businesses of any Acquired Company, other than (i) sales of Company Products in the ordinary course of business consistent with past practices or (ii) sales of assets, securities, properties, interests or businesses with a sale price (including any related assumed indebtedness) that does not exceed $50,000 individually or $100,000 in the aggregate;

(i)           the making by any Acquired Company of any loans (other than in the ordinary course of business), guarantee or capital contributions to, or investments in, any other Person;

(j)           the creation of any Company Debt or the guarantee by any of the Acquired Companies of any indebtedness formerly borrowed;

(k)           (i) the entering into of any Contract that limits or otherwise restricts in any respect any Acquired Company or any of its Affiliates or any successor thereto from engaging or competing in any line of business, in any location or with any Person or (ii) the entering into, amendment or modification in any material respect or termination of any Material Contract (as defined in Section 3.09) or waiver, release or assignment of any material rights, claims or benefits of any Acquired Company thereunder;

(l)           the sale, disposition of, transfer or license to any Person of any rights, including any rights to any Company IP or other assets by any Acquired Company other than on a non-exclusive basis in the ordinary course of business consistent with past practice, or the acquisition, lease or license from any Person of any rights including any Intellectual Property Right or other assets other than in the ordinary course of business, or the sale, disposition of, transfer or provision of a copy of the Company’s source code;

(m)           (i) the grant or increase of any severance or termination pay to (or amendment of any existing arrangement with) any director, officer, advisor, consultant or employee of any Acquired Company, (ii) any increase in benefits payable under any existing severance or termination pay policies or employment agreements, (iii) the entering into of any employment, deferred compensation or other similar agreement (or amendment of any such existing agreement) with any director, officer, advisor, consultant or employee of any Acquired Company, (iv) the establishment, adoption or amendment (except as required by Applicable Law) of any collective bargaining, bonus, commission, profit-sharing, thrift, pension, retirement, deferred compensation, compensation, share option, restricted share or other benefit plan or arrangement covering any director, officer, advisor, consultant or employee of any Acquired Company, (v) any increase in compensation, bonus, commission or other benefits payable to any director, officer, advisor, consultant or employee of any Acquired Company, except that in the case of  each of the clauses (iii) and (v), when reference is made to an advisor, consultant or employee who is not an officer or director of the Company or a Key Employee, the foregoing representation will be read with the following qualification: other than in the ordinary course of business or as required by any Applicable Law;

(n)           any change in the methods of accounting or accounting practices of any Acquired Company, except as required by concurrent changes in GAAP, as agreed to by its independent public accountants;

(o)           any settlement, or offer or proposal by any Acquired Company to settle: (i) any Proceeding or claim involving or against any Acquired Company, (ii) any Selling Shareholder litigation or dispute against any Acquired Company or any of its Representatives or (iii) any Proceeding that relates to the Transactions;

(p)           any Tax election made or materially changed; any claim, notice, audit report or assessment in respect of Taxes settled or compromised (or agreement with respect thereto); any Tax Return filed (except as required by Applicable Law or in the ordinary course of business consistent with past practice); any Tax allocation agreement, Tax sharing agreement, advance pricing agreement, cost sharing agreement, pre-filing agreement, Tax indemnity agreement or closing agreement relating to any Tax entered into; any annual Tax accounting period or method of Tax accounting changed or adopted; any Tax petition, Tax complaint or administrative Tax appeal filed; any right to claim a Tax refund surrendered or foregone (which is reasonably be expected to be material to the Company); or any extension or waiver of the statute of limitations period applicable to any Tax claim or assessment consented to, nor has any application or negotiation for or receipt of a Tax ruling or arrangement been made by the Company or, to the Company’s Knowledge, any Selling Shareholder or on their behalf, whether or not in connection with the Transactions, except as explicitly contemplated in this Agreement;

(q)           any application for or receipt of a Governmental Grant;

(r)           any of the Acquired Companies has written off as uncollectible, or established any extraordinary reserve with respect to, any account receivable or other indebtedness in excess of $10,000 with respect to a single matter, or in excess of $50,000 in the aggregate;

(s)           any of the Acquired Companies has made any pledge of any of its assets or otherwise permitted any of its assets to become subject to any Lien, except for pledges of immaterial assets made in the ordinary course of business and consistent with such Acquired Company’s past practices;

(t)           any of the Acquired Companies has entered into any material transaction outside the ordinary course of business; and

(u)           any of the Acquired Companies has commenced any Proceeding; or

(v)           any agreement or commitment to take any of the actions referred to in clauses “(c)” through “(u).”

(a)           No Acquired Company has any liabilities or obligations of any kind, whether accrued, contingent, absolute, determined, determinable or otherwise, whether or not required to be reflected or reserved in financial statements in accordance with GAAP and greater than $50,000 in each individual case, and whether due or to become due, other than:

(1)           liabilities or obligations reflected in the “liabilities” column of the Company’s Balance Sheet or in the notes thereto;

(2)           accounts payable and accrued salaries that have been incurred by the Acquired Companies since the Balance Sheet Date in the ordinary course of business and consistent with past practice;

(3)           the liabilities identified in Section 3.08 of the Company Disclosure Schedule; and

(4)           liabilities arising under this Agreement.

(b)           Section 3.08 of the Company Disclosure Schedule provides an accurate and complete breakdown and aging of: (i) all accounts payable of each of the Acquired Companies as of the date of this Agreement; and (ii) all notes payable of each of the Acquired Companies and all other indebtedness of each of the Acquired Companies as of the date of this Agreement.

(c)           None of the Acquired Companies has ever effected or otherwise been involved in any “off-balance sheet arrangements” (as defined in Item 303(a)(4)(ii) of Regulation S-K under the Securities Exchange Act of 1934, as amended).  Without limiting the generality of the foregoing, none of the Acquired Companies has ever guaranteed any debt or other obligation of any other Person.

(a)           Except as set forth in Section 3.09 of the Company Disclosure Schedule, no Acquired Company is a party to or bound by any of the following (a Contract responsive to any of the following categories being hereinafter referred to as a “ Material Contract ”):

(1)           any lease of tangible personal property providing for annual payments in excess of $10,000 individually, or $50,000 in the aggregate when taken together with all other such leases, except for car leases, phone leases and similar leases that would not individually exceed annual payments of $25,000;

(2)           any Contract relating to the acquisition, transfer, use, development, sharing or license of any Intellectual Property Rights (including any joint development agreement, technical collaboration agreement or similar agreement), to or from any of the Acquired Companies other than any end user license agreements for non-exclusive “off the shelf”, and “click through” agreements or similar form of agreements or non-disclosure agreements entered in the ordinary course of business;

(3)           any Contract imposing any restriction on any Acquired Company’s right, (A) to compete with any other Person (including granting exclusive rights or rights of first refusal to license, market, sell or deliver any of the products or services offered by any Acquired Company), (B) to acquire any product or other asset or any services from any other Person, to sell any product or other asset to or perform any services for any other Person or to transact business or deal in any other manner with any other Person (including granting any rights of first refusal), or (C) to develop, distribute or license Intellectual Property Rights;

(4)           any Contract for the purchase of materials, supplies, goods, services, equipment or other assets from a “single source” provider, providing for annual payments by any Acquired Company or annual payments of $50,000 or more;

(5)           any Contract (including purchaser orders or a series of purchase orders) for the provision of any Acquired Companies’ products or services that (i) account for at least 10% of the Acquired Companies’ aggregate revenues from January 1, 2009 and until June 30, 2009 as per the Financial Statements or (ii) offers “most favored nation” pricing guarantees;

(6)           any partnership, joint venture or any sharing of revenues, profits, losses, costs or liabilities Contract;

(7)           any Contract relating to the consolidation, reorganization, acquisition or disposition of any business (whether by merger, sale of shares, sale of assets or otherwise) or any similar transaction to which any of the Acquired Companies is party;

(8)           any Contract relating to borrowed money;

(9)           any Contract effective as of the Closing Date relating to the acquisition, issuance or transfer of any securities and the voting and any other rights or obligations of a shareholder of any of the Acquired Companies;

(10)           any Contract under which (A) any third party has directly or indirectly guaranteed any liabilities or obligations of any Acquired Company, (B) any Acquired Company has directly or indirectly guaranteed liabilities or obligations of any other third party (in each case other than endorsements for the purposes of collection in the ordinary course of business);

(11)           any Contract relating to the creation of any Lien with respect to any asset of any Acquired Company (other than Permitted Liens);

(12)           any Contract which contains any provisions requiring any Acquired Company to indemnify any other party, except in respect of indemnity in connection with the sale of Company Products in the ordinary course of business;

(13)           any Contract of any Acquired Company with any Related Person;

(14)           any employment, severance, retention, guaranteed bonus or other agreement with any current employee, officer, director, advisor or consultant of any Acquired Company pursuant to which any Acquired Company which will result  (by its terms) in annual cash payments by any Acquired Company of more than $50,000 to any such individual (other than for base salary payments and/or as a result of the receipt of Closing Cash Consideration and/or Purchaser’s Equity Awards pursuant to the terms of this Agreement and/or as a result of the receipt of any cash payments pursuant to Section 7.05 hereof);

(15)           each Contract relating to any liquidation or dissolution of any of the Acquired Companies;

(16)           any Contract that contemplates or involves: (A) the payment or delivery of cash or other consideration by any of the Acquired Companies in an amount or having a value in excess of $50,000 individually, or $100,000 in the aggregate when taken together with all other Contracts involving such Person or such Person’s affiliates; or (B) the performance of services having a value in excess of $50,000 individually, or $100,000 in the aggregate when taken together with all other Acquired Company Contracts involving such Person or such Person’s affiliates, in each case other than Contracts entered in the ordinary course of business or otherwise disclosed under Section 3.09(a) of the Company Disclosure Schedule;

(17)           each Contract with a Governmental Authority; and

(18)           any other Contract that was entered into outside the ordinary course of business or was inconsistent with the past practices of any of the Acquired Companies.

(b)           The Company has delivered to Purchaser accurate and complete copies of all written Material Contracts identified in Section 3.09(a) of the Company Disclosure Schedule, including all amendments thereto. Section 3.09(a) of the Company Disclosure Schedule provides an accurate description of the material terms of each Material Contract identified in Section 3.09(a) of the Company Disclosure Schedule that is not in written form.

(c)           Except as set forth in Section 3.09(c) of the Company Disclosure Schedule, each Material Contract is a valid and binding agreement of the Acquired Company   party thereto, and is in full force and effect, is enforceable by the applicable Acquired Company in accordance with its terms, subject to: (i) laws of general application relating to bankruptcy, insolvency and the relief of debtors; and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies and no Acquired Company is and, to the Knowledge of the Company, no other party thereto is in default or breach in any material respect under the terms of any such Material Contract, and, to the Knowledge of the Company, no event has occurred, and no circumstance or condition exists, that (with or without notice or lapse of time) will, or would reasonably be expected to, (i) result in a violation or breach of any of the material provisions of any Material Contract, (ii) give any Person the right to declare a default or exercise any remedy under any Material Contract, (iii) give any Person the right to accelerate the maturity or performance of any Material Contract, or (iv) give any Person the right to cancel, terminate or modify any Material Contract.  No Acquired Company has waived any of its material rights under any Contract.

(d)           Except as set forth in Section 3.09(d) of the Company Disclosure Schedule, no Acquired Company has received any written notice or, to the Knowledge of the Company, any other communication regarding any material violation or breach of, or default under, any Material Contract.

(e)           No Person is renegotiating any amount paid or payable to any Acquired Company under any Material Contract or any other material term or provision of any Material Contract.

(f)           The Company has delivered to Purchaser a complete and accurate copy of each standard form of customer Contract used by any Acquired Company, including each standard form of purchase order.  Schedule 3.09(f) of the Company Disclosure Schedule accurately identifies each material customer Contract that deviates in any material respect from the corresponding standard form agreement delivered to Purchaser.

(a)           Each Acquired Company is, and has at all times been, in compliance in all material respects with and has operated its respective business and maintained its respective Assets in compliance with all Applicable Law, excep