<PAGE>

                                                                    Exhibit 10.4

                              ANNEX LOAN AGREEMENT

This ANNEX LOAN AGREEMENT is part of the Employment Agreement which is dated,
June 3, 2001, as amended May 3, 2003, by and between SAIFUN SEMICONDUCTORS LTD.
a corporation incorporated under the laws of the State of Israel. (the
"EMPLOYER") AND KOBI ROZENGARTEN ("THE EMPLOYEE").

WHEREAS: the Employee desires to borrow an amount of up to $300,000 from the
Employer subject to the terms and conditions of this ANNEX LOAN AGREEMENT; and

WHEREAS: the Employee intends to continue his employment with the Employer for
the next five years

WHEREAS the Employer is willing to lend such sum to the Employee, subject to the
terms and conditions of this Loan Agreement;

NOW THEREFORE IT IS AGREED BETWEEN THE PARTIES AS FOLLOWS:

      1 . LOAN. On the basis of the representations and covenants made by the
      Employee herein, the Employer shall lend to the Employee $300,000 (the
      "Loan Amount").

      2 . INTEREST. The Loan Amount shall bear interest at the rate of 4% plus
      VAT (ma-am) as defined by law, until the Loan Amount is fully repaid.

      3 . DISBURSEMENT. The Loan Amount shall be disbursed by the Employer to
      the Employee on     , 2001 (the "EFFECTIVE DATE") in one installment, by
      check or wire transfer to the Employee's bank account.

      4 . IRREVOCABLE LETTER OF INSTRUCTIONS. Concurrently with execution of
      this ANNEX LOAN AGREEMENT, the Employee shall execute an Irrevocable
      Letter of Instructions ("LETTER OF INSTRUCTIONS") to the Trustee (as such
      term is defined in the Employer's Option Plans and as shall be determined
      by the Employer) in the form attached hereto as EXHIBIT A, which
      constitute an integral part of this ANNEX LOAN AGREEMENT.

      5 . REPAYMENT. The Loan Amount, together with accrued interest
      differentials and VAT will immediately become due and payable upon the
      occurrence of any of the following:

5.1.        Termination of the Employment Agreement executed between the
      parties, by either of the parties for any reason.

5.2.        Five years after the Effective Date.

5.3.        Upon the sale or release from the trust of the options and/or
      shares, as applicable ("OPTIONS", "SHARES", respectively) granted to the
      Employee by the Employer according to an Option Agreement signed between
      the parties, the Employer's Option Plans and the provisions of section 102
      of the Israeli Tax Ordinance.
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      6. MISCELLANEOUS

6.1.        This ANNEX LOAN AGREEMENT may not be amended, supplemented,
      discharged, terminated or altered, except in writing signed by the parties
      hereto.

6.2.        This ANNEX LOAN AGREEMENT does not constitute an expressed or
      implied promise of continued Employer -Employee relations.

6.3.        This ANNEX LOAN AGREEMENT, together with its Exhibits, constitute
      the full and entire understandings and agreements between the parties with
      regard to the subject-matter hereof and supersedes all prior agreements
      between the parties hereof with regard to such subject-matter.

6.4.        The Employee shall have sole responsibility to pay any tax which may
      be or become due as a result of this agreement.

6.5.        The Employer shall be entitled to transfer and assign all of its
      rights and obligations under this ANNEX LOAN AGREEMENT to any party. The
      Employee may not assign any of its rights or obligations to any party
      absent prior written consent of the Employer.

6.6.        No delay or omission to exercise any right, power, or remedy
      accruing to any party upon any breach or default under this ANNEX LOAN
      AGREEMENT, shall be deemed a waiver of any other breach or default
      therefore or thereafter occurring. Any waiver, permit, consent, or
      approval of any kind or character on the part of any party of any breach
      or default under this ANNEX LOAN AGREEMENT, or any waiver on the part of
      any party of any provisions or conditions of this ANNEX LOAN AGREEMENT,
      must be in writing and shall be effective only to the extent specifically
      set forth in such writing.

6.7.        All remedies, either under this ANNEX LOAN AGREEMENT or by law or
      otherwise afforded to any of the parties, shall be cumulative and not
      alternative.

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6.8.        Any notice required or permitted hereunder shall be in writing and
      shall be sent by registered mail or confirmed facsimile to the parties
      hereto at the respective addresses set forth above, as may be changed by
      each of the parties in a written notice from time to time.

      IN WITNESS WHEREOF, THE PARTIES HAVE SIGNED THIS AGREEMENT AS OF THE DATE
      FIRST HEREIN ABOVE SET FORTH.

      EMPLOYER:
      SAIFUN SEMICONDUCTORS LTD.                 EMPLOYEE:


      BY:   /S/ IGAL SHANY                           BY: /S/ KOBI ROZENGARTEN
            --------------------                         --------------------
      TITLE:
            --------------------
      DATE:        5/6/01                            DATE:        3/6/01
            --------------------                           --------------------



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<PAGE>
EXHIBIT A

                      AN IRREVOCABLE LETTER OF INSTRUCTIONS

TO:   Eitan, Pearl, Latzer & Cohen-Zedek Trustee for Employees Benefit Programs/
      Doron Latzer, Adv. (the "TRUSTEE")

I, the undersigned, Kobi Rozengarten (employee's name), I.D. No. 54375589, (the
"EMPLOYEE"), hereby confirm that I was granted options (the "OPTIONS")
convertible into ordinary shares nominal value NIS 0.01 per share (the "SHARES")
of Saifun Semiconductors Ltd. (the "COMPANY"), according to share option
agreement signed between me and the Company (the "OPTION AGREEMENT") and subject
to the 1997 Employee Share Option Plan and the 2001 Share Option Plan
(collectively, the "PLANS") and the applicable laws. The Options and/or Shares
are held in trust by you according to a trust agreement (the "TRUST AGREEMENT")
signed between you and the Company, the Plans and the applicable laws, including
without limitation the provisions of section 102 of the Israeli Tax Ordinance
and the rules promulgated thereunder ("SECTION 102").

On the Effective Date, as such term is defined in the loan agreement signed
between me and the Company (the "LOAN AGREEMENT") I received a loan from the
Company (the "LOAN"), all under the terms and conditions of the Loan Agreement.

By executing this irrevocable letter of instructions ("LETTER OF INSTRUCTIONS"),
I irrevocably instruct you as follows:

      1. REPAYMENT OF THE LOAN

1.1 Sale of the Shares

(one)       Upon my instruction to you to sell the Shares subject to the
provisions of Section 102, any applicable law and the provisions of the Option
Agreement and the Plans, you shall apply to the Company in order to receive its
written acknowledgement for such sale of Shares (the "COMPANY'S ACKNOWLEDGEMENT
OF SALE FORM") in the form attached hereto as Exhibit 1. The Company shall, by
its signature on the Company's Acknowledgement of Sale Form, confirm to you to
execute the sale and it shall state on such form the Loan Amount (as such term
is defined under section 1 of the Loan Agreement) together with accrued interest
that is due to it by me (the "DEBT"). You shall have no obligation to verify the
amount stated by the Company as the Debt and you shall act only according to the
Company's acknowledgement given on such form.

(two)       Upon receiving the sale consideration you shall deduct from the sale
consideration the amount due by me for the payment of my tax liability,
according to the provisions of Section 102 and any applicable laws or you shall
act according to the Company's instructions with respect to the payment of my
tax liability.

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(three)     From the remaining balance (after deduction of the tax in accordance
with the above paragraph) you shall deduct the Debt stated on the Company's
Acknowledgement of Sale Form or you shall deduct the maximum available amount
for deduction out of the balance and you shall deliver it to the Company
according to the details it will provide on such form. The balance (if any)
shall be delivered to me according to my instructions.

(four)      For avoidance of any doubt, it is hereby expressly stated that you
shall not be required to execute any sale instruction given by me until you
shall receive the Company's Acknowledgement of Sale Form duly completed and
signed by the Company.

(five)      In the event that the Company shall refuse to sign the Company's
Acknowledgement of Sale Form you shall notify me of the refusal thereof.

      1.2 Release of Shares

(one)       In the event I would like to release the Shares from the trust, in
whole or in part, without selling such Shares, and to have the Shares
transferred into my own name, subject to the provisions of Section 102, any
applicable law and the provisions of the Option Agreement and the Plans, I shall
transfer to you together with my release instruction: (i) an amount sufficient
for the payment of the tax due by me in connection with the release of the
Shares thereof according to the provisions of Section 102 or any applicable laws
or the assessing officer approval regarding the payment of such tax; and (ii) an
amount sufficient for the payment of my Debt to the Company.

(two)       Upon receipt of my instruction together with the required amounts
and/or confirmation, you shall apply to the Company in order to receive its
written acknowledgement for such release of Shares (the "COMPANY'S
ACKNOWLEDGEMENT OF RELEASE FORM") in the form attached hereto as Exhibit 2. The
Company shall, by its signature on the Company's Acknowledgement of Release
Form, confirm to you the following: (i) the release of the Shares from the
trust; and (ii) that the amount delivered by me is sufficient for the repayment
of my Debt to the Company. You shall have no obligation to verify the amount
stated by the Company as the Debt and you shall act only according to the
Company's acknowledgement given on such form.

(three)     Upon receipt of a duly completed and signed Company's
Acknowledgement of Release Form you shall release the Shares from the trust and
transfer it directly to me, according to the details provided by me.

(four)      For avoidance of any doubt, it is hereby expressly stated that you
shall not be required to execute any release instruction given by me until you
shall receive the Company's Acknowledgement of Release Form duly completed and
signed by the Company.

(five)      In the event that the Company shall refuse to sign the Company's
Acknowledgement of Release Form you shall notify me of the refusal thereof.


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      1.3 Completion of Five years from the Grant Date of the Loan

(One)       Upon the completion of five (5) years from the Effective Date (as
such term is defined in the Loan Agreement), the Company shall be entitled to
instruct you from time to time to sell the Shares held in trust on my behalf, in
part or in whole, and repay my Debt out of the sale consideration, subject to
the lock-up period provisions of Section 102 ("LOCK-UP PERIOD") and payment of
the tax due by me in connection with such sale.

(Two)       In the event that the Shares are still subject to the Lock-Up Period
upon the completion of five (5) years from the Effective Date, you shall act
according to the Company's instructions as shall be delivered to you from time
to time thereafter.

(Three)     I hereby expressly acknowledge and confirm that you may sale the
Shares according to the Company's instructions, without having to obtain my
prior consent.

(Four)      I further acknowledge and confirm that you shall be under no
obligation to examine the completion of 5 years from the Effective Date and that
you shall act in this matter only according to the Company's instructions.

(Five)      For avoidance of any doubt, I hereby expressly acknowledge and
confirm that you shall not be liable for any action taken in full compliance
with the Company's instructions, as specified in paragraph 1.3(a) hereunder.

      1.4 Termination of Employment

(One)       In the event the employment agreement signed between the Company and
myself shall terminate for any reason, the Company shall be entitled to instruct
you from time to time to sell the Shares held in trust on my behalf, in whole or
in part, and repay my Debt out of the sale consideration, subject to the lock-up
period provisions of Section 102 and payment of the tax due by me in connection
with such sale.

(Two)       In the event that the Shares are still subject to the Lock-Up Period
upon the termination of my employment, you shall act according to the Company's
instructions as shall be delivered to you from time to time thereafter.

(Three)     I hereby expressly acknowledge and confirm that you may sale the
Shares according to the Company's instructions, without having to obtain my
prior consent.

(Four)      I further acknowledge and confirm that you shall be under no
obligation to examine my rights as a result of termination of my employment and
that you shall act in this matter only according to the Company's instructions.

(Five)      For avoidance of any doubt, I hereby expressly acknowledge and
confirm that you shall not be liable for any action taken in full compliance
with the Company's instructions, as specified in paragraph 1.4(a) hereunder
including without limitation, you shall.

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<PAGE>
      2. CHANGES IN CAPITALIZATION, MERGER AND ADDITIONAL GRANT OF OPTIONS
AND/OR SHARES

2.1         In the event of a share split, reverse share split, share dividend,
recapitalization, combination or reclassification of the Shares, rights issues
or any other increase or decrease in the number of shares held by the Trustee on
my behalf, the provisions of this Letter of Instructions shall apply, mutatis
mutandis, on such shares and you shall be required to act accordingly.

2.2         In the event of consolidation, reorganization, merger of the Company
with or into another corporation whereby the Company is not the surviving
entity, or the sale of all or substantially all of the assets or shares of the
Company, whereby my Options and/or Shares shall be assumed or substituted with
appropriate number of Options and/or Shares of the surviving entity, the
provisions of this Letter of Instructions shall apply, mutatis mutandis, on such
assumed or substituted Options and/or Shares and you shall be required to act
accordingly.

2.3         In the event the Company shall grant me additional Options and/or
Shares, then the provisions of this Letter of Instructions shall apply, mutatis
mutandis, on such additional Options and/or Shares and you shall be required to
act accordingly.

3.    EMPLOYEE'S REPRESENTATIONS

      The Employee hereby represents, confirms and undertakes as follows:

3.1         The Trustee shall not be obligated to take any action of whatever
kind with the Options and/or the Shares and/or in connection thereto unless the
Trustee is expressly required to do so and subject to the provisions of this
Letter of Instructions.

3.2         The Trustee shall not be obligated to take any action which is not
within the services to be performed by the Trustee under this Letter of
Instructions and which imposes financial liability on the Trustee, unless the
Trustee is guaranteed to its full satisfaction a cover in respect of such
financial liability.

3.3         The Trustee shall not be responsible for any act and/or omission
arising from information, guidance or instruction which it was given by the
Company and/or at the Company's express approvals in the event that it acted or
omitted to act in reliance on such information, guidance or instruction.

3.4         The Employee shall indemnify the Trustee in respect of any damage,
expense or loss of any kind that the Trustee may incur as a result of or in
consequence of performance of its duties as a reasonable trustee under this
Letter of Instructions (including reasonable lawyers' fees and other experts'
fees).

4.    INTERPRETATION

Any interpretation of this Letter of Instructions shall be made in accordance
with the Loan Agreement and the Option Agreement, but in the event there is any
conflict between this Letter of Instructions and the Option Agreement, the
provisions of this Letter of Instructions shall prevail. However, in the event
of a conflict between the provisions of this Letter of Instructions and the
applicable laws including Section 102, then the latter shall prevail.

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5.    SUCCESSOR AND ASSIGNS

The Trustee may assign any of its rights under this Letter of Instructions to
another trustee to be determined by the company and in accordance with the
Company's instructions at such time, and this Letter of Instructions shall inure
to the benefit of the successors and assigns of the Trustee.

EMPLOYEE

/s/ Kobi Rozengarten
------------------------
Signature

Kobi Rozengarten
------------------------
Print Name

June 3, 2001
------------------------
Date

79 Ester Rabin St. Haifa
------------------------
Address

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<PAGE>
EXHIBIT 1

                   SAIFUN SEMICONDUCTORS LTD. (the "COMPANY")

                        COMPANY'S ACKNOWLEDGEMENT OF SALE

TO:    Saifun Semiconductors Ltd.
ATTN:  Igal Shany
BY FAX : ____________________

                   MR./MRS. _______________ (the "EMPLOYEE")

      We were instructed by the Employee to sell an amount of __________
      Ordinary Shares of the Company, each having a nominal value of NIS 0.01
      (the "SHARES"), which are held in trust by us, in accordance with the
      provisions of Section 102 of the Israeli Tax Ordinance, the Trust
      Agreement signed between the Company and us and the Irrevocable Letter of
      Instructions given to us by the Employee (the "LETTER OF INSTRUCTIONS").

      Please confirm the Employee's entitlement to sell the above mentioned
      amount of Shares and please provide us with details regarding the
      Employee's debt to the Company (the "DEBT") with respect to the loan given
      to the Employee by the Company.

                                                   -----------------------------
                                                          [SIGNATURE]

--------------------------------------------------------------------------------
                            COMPANY'S ACKNOWLEDGEMENT

TO:    Eitan, Pearl, Latzer & Cohen-Zedek Trustee for Employees Benefit
       Programs/ Doron Latzer, Adv. (the "TRUSTEE")
ATTN:  Hila Laufer, Adv.
BY FAX: 09-9709001

We hereby confirm to you as follows:

1)    The Employee is entitled to sell the above mentioned amount of Shares.

2)    The Employee's Debt to the Company (the loan amount/remaining loan amount
      together with VAT and accrued interest) is in the sum of NIS__________ .

We hereby request you to deduct from the remaining sale consideration (after
deduction of the tax due by the Employee in connection with the above sale) the
Debt or the maximum available amount for repayment of the Loan (as defined in
the Letter of Instructions).

Please deliver such amount to us, according to the following details:

----------------------------------------------


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----------------------------------------------

--------------------------           --------------------                ------
SAIFUN SEMICONDUCTORS LTD.           PRINT NAME AND TITLE                DATE



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<PAGE>
To:

Saifun Semiconductors Ltd.
Sapir Industrial Area
Netanya 42505
Israel

                        Re:   Loan Agreement

Reference is hereby made to the Loan Agreement entered between the undersigned
and Saifun Semiconductors Ltd. (the "Company") on ____________ (the "Agreement")

I hereby give my irrevocable consent that immediately prior to any of the events
detailed below, the Company shall have the right to terminate the Agreement and
to demand the immediate repayment of the loan granted to me under the Agreement
and any interest accrued thereon: (i) the Company's IPO; (ii) merger &
acquisition of the Company or a sale of substantially all of the Company's
assets; or (iii) any similar transaction.

/s/ Kobi Rozengarten
--------------------
Kobi Rozengarten

Date: 3/5/2003
--------------------


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