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                                                                    Exhibit 10.1

                          SHAREHOLDERS RIGHTS AGREEMENT

This Shareholders Rights Agreement (this "AGREEMENT") is entered into as of the
2 day of October 2000, by and among SAIFUN SEMICONDUCTORS LTD., an Israeli
company No. 51-239733-2, having its main place of business at the Topper
Building, 65 Hamelacha St., Industrial Zone South, Netanya 42504, Israel (the
"COMPANY"), and the shareholders listed in SCHEDULE A (severally and not jointly
referred to as "SHAREHOLDERS" and each one as "SHAREHOLDER").

WHEREAS following the execution of a Share Purchase Agreement, dated October 2,
     2000, between the Company and certain entities specified therein (the
     "INVESTORS") (the "SHARE PURCHASE AGREEMENT"), the Company and the
     Shareholders desire to make certain provisions as hereinafter set forth
     regarding ownership of the shares of the Company, and relating to the
     rights and obligations of the Shareholders as shareholders of the Company;

NOW THEREFORE, THE PARTIES DECLARE, STIPULATE AND AGREE AS FOLLOWS:

     1.   INTERPRETATION; DEFINITIONS.

          1.1. The recitals and Exhibits hereto consist an integral part hereof.

          1.2. The headings of the sections and subsections of this Agreement
               are for convenience of reference only and are not to be
               considered in construing this Agreement.

          1.3. In this Agreement, unless the context otherwise requires:

               1.3.1. "AS-CONVERTED BASIS" means as if all classes of shares of
                    the Company have been converted into Ordinary Shares.

               1.3.2. "AMENDED ARTICLES" means the amended Articles of
                    Association to be adopted by the shareholders of the Company
                    pursuant to Section 6.1 to the Share Purchase Agreement..

               1.3.3. "FULLY DILUTED BASIS" means as if all outstanding options
                    and warrants and convertible instruments or any other
                    similar rights, agreements or commitments of any Person to
                    receive shares in the Company have been exercised in full;
                    all ungranted options under the ESOP deemed granted and
                    exercised, and after conversion of all shareholders' loans
                    to equity (to the extent there are any such loans).

               1.3.4. "BOARD" means the board of directors of the Company.

               1.3.5. "CORPORATE DOCUMENTS" means the Company's Memorandum of
                    Association and Articles of Association.

               1.3.6. "INTERESTED PARTY" means any "Interested party" as such
                    term is defined in the Israeli Securities Law of 1968 and
                    any officer or director of the Company or any Person owning
                    shares of the

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                    Company (excluding employees solely under stock option or
                    share purchase plans) or any member of the family or
                    affiliate of such officer, director or shareholder, Person
                    controlled by it or Person controlling it or Person under
                    common control with it.

               1.3.7. "MAJORITY INVESTORS" means Investors holding the majority
                    of the voting power of the Preferred B Shares (and any
                    Ordinary Shares into which such Preferred B Shares have been
                    converted), on an as-converted basis.

               1.3.8. "ORDINARY SHARES" means the ordinary shares of the Company
                    NIS 0.01 par value each.

               1.3.9. "ORIGINAL ISSUE PRICE" means the price actually paid by
                    each respective shareholder for each Preferred Share of the
                    Company held by such shareholder.

               1.3.10. "PERSON" means an individual, corporation, partnership,
                    joint venture, trust or unincorporated organization.

               1.3.11. "PREFERRED SHARES" means the Class A Preferred Shares and
                    the Class B Preferred Shares of the Company.

               1.3.12. "PREFERRED A SHARES" means the Class A Preferred Shares
                    of the Company, NIS 0.01 par value each.

               1.3.13. "PREFERRED B SHARES" means the Class B Preferred Shares
                    of the Company, NIS 0.01 par value each.

               1.3.14. "IPO" means an initial public offering of the Company's
                    securities.

               1.3.15. "FOUNDER" means Mr. Boaz Eitan.

               1.3.16. "TOWER" means Tower Semiconductors Ltd.

               1.3.17 "TOWER AGREEMENT" means the Agreement between the Company
                    and Tower dated October 9, 1997.


     2.   RIGHTS OF PREFERRED SHARES.

          The Company covenants that the Preferred Shares shall have, inter
          alia, the following rights and privileges, as more fully set forth in
          the Amended Articles:

          2.1. Liquidation Preference. (A) In the event of (i) any dissolution
               or liquidation of the Company; (ii) any bankruptcy, insolvency or
               creditors' arrangement proceeding, under any companies,
               bankruptcy or insolvency or similar law, whether voluntary or
               involuntary, is commenced by or against the Company; or (iii) a
               receiver, a liquidator or a trustee in a creditors' arrangement
               has been appointed to Company's assets; or (B) unless otherwise
               agreed by the holders of at least two thirds (2/3) of the
               Preferred Shares, upon any event of sale of all or substantially
               all of the assets or shares of the Company or a merger or
               acquisition of the Company pursuant to which the shareholders of
               the Company will not be the majority shareholders of the
               surviving entity (a "DEEMED LIQUIDATION EVENT"), any assets of
               the Company available for distribution (including


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               securities or any other assets received by the Company or its
               shareholders in such Deemed Liquidation Event) ("DISTRIBUTABLE
               ASSETS") shall be distributed pursuant to the following order of
               preference:

               2.1.1. The holders of the Preferred B Shares shall be entitled to
                    receive, prior to and in preference to any payments to any
                    of the holders of Ordinary Shares and Preferred A Shares, an
                    amount in US Dollars per Preferred B Share calculated as
                    follows (the "PREFERRED B LIQUIDATION AMOUNT"): (A) if the
                    value of the Distributable Assets ("COMPANY VALUE") is less
                    than US $500 million, then each holder of the Preferred B
                    Shares shall be entitled to receive at its discretion, for
                    each Preferred B Share, prior to and in preference to
                    payments to the holders of Preferred A Shares and Ordinary
                    Shares, an amount equal to either: (i) the Original Issue
                    Price (adjusted for any event of share combination or
                    subdivision, issuance of bonus shares, stock splits or any
                    other recapitalization of the Company's shares (a
                    "RECAPITALIZATION EVENT") plus 28% (twenty eight percent) or
                    (ii) its pro rata share among all shareholders of the
                    Company (B) if the Company Value is between US$500 million
                    and US$750 million, each holder of the Preferred B Shares
                    shall be entitled to receive for each Preferred B Share,
                    prior to and in preference to payments to the holders of
                    Preferred A Shares and Ordinary Shares, an amount equal to
                    128% (one hundred twenty eight percent) of the amount
                    reflecting its proportionate holding in the Company (for
                    example, assuming the holders of the Preferred B Shares hold
                    10% of the share capital of the Company and the Company
                    Value is US$500 million, they will be entitled to receive
                    US$64 million); (C) if the Company Value exceeds US$750
                    million, each holder of the Preferred B Shares shall be
                    entitled to receive, prior to and in preference to payments
                    to the holders of Preferred A Shares and Ordinary Shares, an
                    amount reflecting its proportionate holding in the Company
                    but in any event not less than the maximum amount to which
                    it is entitled under sub-clause (B) above, i.e not more than
                    US$96 million.

               2.1.2. If after payment of the Preferred B Liquidation Amount is
                    paid in full to the Investors there remain any Distributable
                    Assets, they shall be distributed to the holders of
                    Preferred A Shares as follows (the "PREFERRED A LIQUIDATION
                    AMOUNT"): (A) If by the time of the Deemed Liquidation Event
                    the holders of Preferred A Shares have not exercised the
                    options granted to them under the agreement dated March 24
                    1998 ("Options"), the following will apply: (i) if the value
                    of the Distributable Assets is less than US$ 50 million, the
                    holders of the Preferred A Shares shall be entitled to
                    receive prior to and in preference to payments to the
                    holders of Ordinary Shares a sum which shall be the lower of
                    US$6 million or all of the remaining Distributable Assets.
                    (ii) if the value of the Distributable Assets is between
                    US$50 million and US$100


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                    million, the holders of the Preferred A Shares shall be
                    entitled to receive prior to and in preference to payments
                    to the holders of Preferred A Shares and Ordinary Shares a
                    sum which shall be 12% of the remaining Distributable
                    Assets, or (B) If by the time of the Deemed Liquidation
                    Event, the holders of Preferred A Shares have exercised the
                    Options, the following will apply: (i) if the value of the
                    Distributable Assets is less than US$50 million, the holders
                    of the Preferred A Shares shall be entitled to receive prior
                    to and in preference to payments to the holders of Preferred
                    A Shares and Ordinary Shares a sum which shall be the lower
                    of US$9 million or all of the remaining Distributable
                    Assets; (ii) if the value of the Distributable Assets is
                    between US$50 million and US$100 million, the holders of the
                    Preferred A Shares shall be entitled to receive prior to and
                    in preference to payments to the holders of Preferred A
                    Shares and Ordinary Shares a sum which shall be the
                    combination of US$3 million plus 12% of all the remaining
                    Distributable Assets.

               2.1.3. Any remaining Distributable Assets or securities shall be
                    distributed pro-rata to the holders of Ordinary Shares of
                    the Company to the exclusion of the holders of Preferred A
                    Shares and Preferred B Shares.

               2.1.4. Notwithstanding the provisions of sub-section 2.1.3 above,
                    the Preferred A Shareholders may elect (by decision of
                    majority of the Preferred A Shareholders) to forgo the
                    provisions of sub-section 2.1.2 above, and in such case all
                    of the remaining Distributable Assets of the Company then
                    available for distribution, after full payment of the
                    Preferred B Liquidation Amount, shall be distributed
                    pro-rata among the holders of the Preferred A Shareholders
                    and Ordinary Shares, in proportion to their respective
                    shareholdings in the Company on an as-converted basis to the
                    exclusion of the holders of Preferred B Shares.

          2.2. Voting Rights. The holders of the Preferred Shares shall be
               entitled to vote in all shareholders meetings, and each of them
               shall have votes in the number of Ordinary Shares into which such
               Preferred Shares held by it could then be converted.

          2.3. Dividend Participation. In the event that any dividends or other
               distributions, whether in cash or in securities or other assets,
               have been declared or distributed by the Company, each holder of
               the Preferred B Shares shall be entitled to receive for each
               Preferred B Share, prior to and in preference to distributions to
               the other shareholders, an amount equal to the amount to which
               such shareholder is entitled pursuant to the provisions of
               Section 2.1 above.

          2.4. Conversion of Preferred Shares. Each Preferred Share shall be
               convertible into Ordinary Shares par value NIS0.01 of the
               Company. Initially, the conversion ratio shall be one-to-one, but
               such conversion ratio shall be adjusted: (i) in


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               accordance with any Recapitalization Event, and (ii) pursuant to
               the anti-dilution provisions set forth herein, all as more fully
               set forth in the Amended Articles. Each Preferred Share shall be
               convertible into an Ordinary Share at any time at the election of
               its Holder, and automatically upon (i) the election of the
               Majority Investors;(ii) an IPO, or (iii) a merger or acquisition
               of the Company pursuant to which the shareholders of the Company
               will not be the majority shareholders of such new entity.

          2.5. Anti Dilution. Until the earlier of (i) 24 months after the
               Closing (as defined in the Share Purchase Agreement) or (ii) IPO,
               if the Company issues any securities, including rights, options
               or warrants to purchase equity securities of the Company
               including exercisable into, convertible to or exchangeable for
               Ordinary Shares, at a price per share (the "NEW PRICE") lower
               than the Price Per Share paid by the Investors for each Preferred
               B Share, as adjusted from time to time for any Recapitalization
               Event, then in each such event the conversion price of the
               Preferred B Shares shall be reduced, for no additional
               consideration, in accordance with a standard "Weighted Average"
               formula, all according to the terms and conditions as set forth
               in the Amended Articles. The foregoing anti-dilution protection
               shall not apply upon the following issuances of shares and
               options: (i) to employees, consultants and directors (excluding
               the Founder) in the framework of the ESOP approved by the Board.;
               (ii) issuances of shares constituting up to 10% of the issued and
               outstanding share capital of the Company to a strategic investor
               (which means any business entity, which adds to the prospects of
               the Company a material value beyond the purchase price of its
               shares, which, has entered or simultaneously with the investment
               in the Company enters into a commercial agreement with the
               Company, which agreement is deemed by the Board as materially
               contributing to the Company's research & development, marketing,
               distribution or sales); (iii) in exchange for the acquisition of
               another entity, line of business or technology; or (vi) a
               Recapitalization Event of the Company's shares capital.

          2.6. Registration Rights. The Company hereby grants to the holders of
               the Preferred B Shares, the holders of the Preferred A Shares,
               the Founder and Tower registration rights as more fully set forth
               in EXHIBIT 2.6 attached hereto (the "REGISTRATION RIGHTS
               AGREEMENT").

     3.   MANAGEMENT OF THE COMPANY.

          3.1. From and after the Closing, the Shareholders agree that the
               provisions of this Section 3 shall apply:

          3.2. Board of Directors.

               3.2.1. From and after the date hereof, the Board of Directors
                    shall consist of up to seven (7) directors.

               3.2.2. The holders of the majority of the Preferred B Shares are
                    entitled to appoint and replace from time to time one (1)
                    member of the


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                    Board, by a written notice to the Company (the "PREFERRED B
                    DIRECTOR").

               3.2.3. The holders of the majority of the Preferred A Shares are
                    entitled to appoint and replace from time to time one (1)
                    member of the Board, by a written notice to the Company (the
                    "PREFERRED A DIRECTOR"; the Preferred A Director and the
                    Preferred B Director, shall be referred to as the "PREFERRED
                    DIRECTORS").

               3.2.4. Dr. Yoav Nissan-Cohen shall represent Tower on the Board
                    until such time as the Tower Agreement is terminated or
                    Tower's holdings in the Company are reduced to less than 3%
                    of the issued and outstanding share capital of the Company.
                    In the event that Dr. Yoav Nissan-Cohen resigns or otherwise
                    terminates his membership on the Board, or in the event that
                    he ceases to be employed by Tower, and Tower holds 5% or
                    more of the issued and outstanding share capital of the
                    Company, the Company and Tower will appoint a mutually
                    agreed upon Board member as his replacement. Such director
                    will maintain his or her position as long as Tower holds 5%
                    or more of the issued and outstanding share capital of the
                    Company.

               3.2.5. The remaining members of the Board will be appointed by a
                    general meeting of the holders of the Ordinary Shares
                    excluding Tower, the holders of the Preferred A Shares and
                    preferred B Shares.

               3.2.6. In addition to the appointment of one director, the
                    holders of the Preferred A Shares will be entitled to
                    appoint one observer, and such observer will be invited to
                    attend the meetings of the Board (without the right to vote
                    thereat) and will receive all written information as a
                    regular member of the Board.

               3.2.7. The right of the holders of Preferred A Shares to appoint
                    the Preferred A Director and an observer to the Board will
                    expire if their holdings in the Company are reduced to less
                    than 4% of the issued and outstanding share capital of the
                    Company (on an as-converted basis). The right of the holders
                    of Preferred B Shares to appoint the Preferred B Director
                    will expire if their holdings in the Company are reduced to
                    less than 4% of the issued and outstanding share capital of
                    the Company (on an as-converted basis).

               3.2.8. The Board shall meet as frequently as reasonably necessary
                    but in any event at least once every calendar quarter. The
                    Company undertakes that: (i) within 45 days from Closing, it
                    will obtain a Directors and Officers liability insurance
                    policy covering the Preferred Directors, which insurance
                    policy shall provide adequate insurance coverage for the
                    Preferred Directors; and (ii) it shall maintain such
                    insurance policy in full force and effect for as long


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                    as a Preferred Director serves as a director or may be
                    subject to possible claims with regard to his/her service as
                    a director of the Company. The Investors shall have similar
                    rights to appoint representative to the board of directors
                    of any Subsidiary and to any committee of the Board of
                    Directors or of the board of directors of any Subsidiary.
                    Subject to applicable law, the Company undertakes to insure
                    the Preferred Directors against directors and officers
                    liability to the greatest extent permitted under law, and to
                    indemnify the Preferred Director in respect to personal
                    liability, all as set forth in the Amended Articles.

          3.3. Quorum. The presence of a majority of the directors including a
               Preferred Director shall constitute a quorum for meetings of the
               Board, and the presence of a majority of the shareholders
               including shareholders holding the majority in interest of the
               Preferred B Shares shall constitute a quorum for general
               meetings. Notwithstanding the aforesaid, if within half an hour
               of the time arranged for a Board meeting or for a general
               meeting, respectively, no quorum is present, such meeting shall
               stand adjourned to the same day of the following week, at the
               same hour and in the same place, or in the event that such a day
               is not a business day, then to the first business day thereafter,
               and in such adjourned meeting if no quorum is present within half
               an hour of the time arranged, the present directors or
               shareholders (as applicable) shall be deemed a quorum.

          3.4. Board and Shareholders Decisions.

               3.4.1. Subject to any applicable mandatory law and the following
                    provisions, all resolutions and actions of the Board and of
                    the shareholders of the Company shall be taken by a majority
                    vote.

               3.4.2. Notwithstanding the aforesaid, until the consummation of
                    the IPO any action or resolution of the Company's general
                    meeting, or of the Company's Board of Directors, as
                    applicable, regarding any of the following issues shall
                    require the affirmative consent of the majority holders of
                    the Preferred B Shares or with the affirmative consent of
                    the Preferred B Director: Change the terms and provisions of
                    the Preferred B Shares or any other term or condition of the
                    Articles of Association of the Company so as to affect
                    adversely the rights of the Preferred B Shares.

               3.4.3. Notwithstanding the aforesaid, until the consummation of
                    the IPO any action or resolution of the Company's general
                    meeting, or of the Company's Board of Directors, as
                    applicable, regarding any of the following issues shall
                    require the affirmative consent of the majority holders of
                    the Preferred A Shares or with the affirmative consent of
                    the Preferred A Director: Change the terms and provisions of
                    the Preferred A Shares or any other term or condition of the
                    Articles of Association of the Company so as to affect
                    adversely the rights of the Preferred A Shares.


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               3.4.4. Notwithstanding the aforesaid, until the consummation of
                    the IPO any action or resolution of the Company's general
                    meeting, or of the Company's Board of Directors, as
                    applicable, regarding any of the following issues shall
                    require the affirmative consent of a majority of 70% of the
                    holders of the Preferred A Shares and the Preferred B
                    Shares, as one group:

                    3.4.4.1. Any material transaction with any officer,
                         director, shareholder or any other Interested Party,
                         except with Tower, M Systems - Flash Disk Pioneers Ltd.
                         and Infineon AG),

                    3.4.4.2. Liquidation, dissolution, winding-up, or any other
                         event which means or entails the cessation of the
                         operations of the Company as an on-going independent
                         business entity; and

                    3.4.4.3. Issuance of share capital, or options, or warrants
                         to purchase shares, or other securities ranking senior
                         to the Preferred B Shares, or increase in the number of
                         authorized securities beyond those specified in this
                         Agreement and in the Amended Articles - if such
                         increase adversely affects the rights and privileges of
                         the holders of the Preferred A and/or B Shares.

          3.5. Accounts and Records. The Company will keep true records and
               books of account in which full, true and correct entries will be
               made of all dealings or transactions in relation to its business
               and affairs in accordance with generally accepted accounting
               principles applied on a consistent basis.

          3.6. Access to Information. The representative appointed by the
               Investors shall have, at any reasonable time, only at a
               reasonable frequency and upon reasonable notice, full access to
               all books and records of the Company, and shall be entitled to
               review them at their discretion and to inspect the properties of
               the Company all subject to customary confidentiality agreement.
               Such representative of the Investors shall also be entitled to
               consult with management of the Company regarding the Company, its
               assets, liabilities, business and prospects, upon reasonable
               notice. Such representative shall be allowed to report its
               findings to the Investors, provided the Investors do not have a
               conflict of interest with the Company and provided the Investors
               sign a Non Disclosure Agreement in a form reasonably acceptable
               to the Company.

          3.7. Information Rights. Prior to the IPO, each Preferred Director and
               after the termination of such Preferred Director, the
               representative to be elected by the holders of Preferred Shares
               who were entitled to appoint such Preferred Director, shall be
               entitled to receive from the Company: (i) reviewed quarterly
               financial statements (including a balance sheet, statement of
               income and statement of cash flow), within 45 days from the end
               of each quarter (ii) annual financial statements, audited by a
               firm affiliated with one of the "Big-Five" US accounting firms
               (including a balance sheet, statement of income and statement of
               cash


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               flow), within 90 days after the end of each fiscal year; (iii)
               all reports prepared by the Company for shareholders and (iv) for
               as long as the holders of the Preferred B Shares or the holders
               of the Preferred A Shares, as applicable (in each case, the
               "Appointing Holders") have a right to appoint the Preferred
               Director, any other information that each of the applicable
               Appointing Holders may reasonably request. For avoidance of
               doubt, the Preferred Director may transfer all above materials to
               the applicable Appointing Holders provided that with respect to
               subsections (iii) and (iv) such applicable Appointing Holders do
               not have a conflict of interest with the Company and provided
               that with respect to all subsections (i) - (iv) above they sign a
               Non Disclosure Agreement in a form reasonably acceptable to the
               Company.

          3.8. Reporting Requirements. The Company's management shall submit to
               the Board monthly reports, financial statements and budgets, in
               such format and containing such information as the Board shall
               require. An annual budget and operating plan shall be submitted
               to the Board at least 30 days prior to the first day of the year
               covered by such plan. For avoidance of doubt, each Preferred
               Director may transfer all above materials to the applicable
               Appointing Holders provided they sign a Non Disclosure Agreement
               in a form reasonably acceptable to the Company.

          3.9. Pre-emptive Rights. Until the IPO, each Major Shareholder in the
               Company (as defined in the Amended Articles) shall be entitled to
               participate in all future issuances by the Company of any capital
               stock of the Company, in the manner and subject to such
               exclusions as set forth in the Company's Amended Articles.

          3.10. Right of First Refusal. Until the IPO, the Major Shareholders of
               the Company (as defined in the Amended Articles) shall have a
               mutual right of first refusal in respect of any proposed sale,
               transfer or other disposition of shares of the Company by a
               shareholder, in the manner and subject to such exclusions as set
               forth in the Company's Amended Articles.

          3.10A Co Sale Rights. Holders of Preferred Shares and Tower shall have
               co sale rights as detailed in the Amended Articles.

          3.11. Bring Along. Prior to an IPO, in the event that shareholders of
               the Company holding at least 80% of the Company's issued and
               outstanding share capital on a fully diluted and as converted
               basis shall elect to sell all of their shares to a third party
               (the "PROPOSING SHAREHOLDERS") then all remaining shareholders
               (the "REMAINING SHAREHOLDERS") shall be required, if so demanded
               by the Proposing Shareholders, to sell all of their shares in the
               Company to such third party at the same price and upon the same
               terms and conditions as the Proposing Shareholders, all as more
               fully set forth in the Amended Articles. Proceeds received under
               this Section shall be distributed among the shareholders of the
               Company in accordance with distribution instructions set forth in
               Section 2.1 hereof.

     4.   CONFIDENTIALITY; NON-COMPETE


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          4.1. Without derogating from any other agreement or undertaking to
               which any of the parties hereto is subject, and in addition to
               any such agreement or undertaking, the parties undertake to abide
               by the provisions of this Section 4.

          4.2. Each party hereto undertakes to keep in strict confidence, and
               not to use for any purpose whatsoever except for the benefit of
               the Company, any and all information relating in any way to the
               Company and its business which had been provided to such party by
               the Company, except: (i) information which is or shall be in the
               public domain not due to any act of such party in breach of law
               or agreement; (ii) information which became or shall become known
               to such party prior to disclosure by Company of such information
               to such party; (iii) information which became or shall become
               known to such party from a source other than Company other than
               by the breach of an obligation of confidentiality owed to the
               Company; (iv) information that was or shall be independently
               developed by such party; or (v) information which such party is
               required to disclose under any applicable law. Notwithstanding
               the aforesaid, in connection with periodic reports to their
               shareholders or partners, the holders of Preferred Shares may
               make general statements, not containing technical information,
               regarding the nature and progress of the Company's business, and
               may provide summary financial information of the Company. In
               addition, in the event that any holder of Preferred Shares or its
               partners or parent companies (any such entity, a "PARENT
               COMPANY") is or shall become publicly traded and/or otherwise
               subject to certain disclosure duties under applicable securities
               laws and regulations (including any regulations and rules of
               stock exchanges), or any other laws and regulations, the Company
               shall furnish it with financial statements and/or any other
               information as such holder of Preferred Shares or its Parent
               Company may require in order to comply with any disclosure
               requirements under such laws and regulations.

          4.3. The holders of Preferred Shares confirm that, in the event that
               any of them shall invest in any entity which directly competes
               with the Company's products, then, absent the Board's prior
               written approval, the applicable Preferred Director shall not
               simultaneously serve as a director of such entity which competes
               with the Company. It is agreed that in the event a certain holder
               of Preferred Shares shall make an equity investment in a company
               which is a competitor of the Company, the applicable Preferred
               Director shall be entitled to provide such holder of Preferred
               Shares with any material concerning the Company which is of a
               confidential nature, provided however without derogating from the
               forgoing in this Agreement, that such holder of Preferred Shares
               shall not be entitled to convey the said confidential information
               to the said competitor. For the prevention of doubt and for
               purposes of this Section 4.3 only, financial statements shall not
               be regarded as confidential. Furthermore, for purposes of this
               Section 4.3, a Competitor shall be taken to mean any legal entity
               in which the holder of Preferred Shares holds at least 5% of the
               equity or a legal entity in which the holder of Preferred Shares
               has a representative at the board of directors.

     5.   MISCELLANEOUS.


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          5.1. Subject to EXHIBIT 5.1, this Agreement constitutes the full and
               entire understanding and agreement between the parties with
               regard to the subject matters hereof, and supersedes all prior
               agreements between all or some of the parties hereof with regard
               to such subject matters, and especially the applicable provisions
               of that certain Share Purchase and Shareholders Agreement dated
               March 24, 1998, entered into between the Company and the holders
               of the Preferred A Shares. 5.2. Each party hereto agrees that the
               provisions of this Agreement shall govern in the event of any
               conflict between such provisions and any provision of the Amended
               Articles, and the parties shall take such actions as may be
               necessary to amend the Amended Articles accordingly.

          5.3. Each of the parties shall take such actions, including the
               execution and delivery of further instruments and voting its
               shares in the Company, as may be necessary to give full effect to
               the provisions hereof and to the intent of the parties hereto.

          5.4. Except as otherwise provided herein, this Agreement shall bind
               and inure to the benefit of and be enforceable by the Company and
               its successors and assigns and the Shareholders and any
               subsequent holders of Shares and the respective successors and
               assigns of each of them, so long as they hold Shares.

          5.5. A party may waive any of its rights hereunder provided, however,
               that such waiver shall be in writing and shall apply only to such
               party's rights hereunder.

          5.6. No delay or omission to exercise any right, power, or remedy
               accruing to any party upon any breach or default under this
               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 Agreement, or any
               waiver on the part of any party of any provisions or conditions
               of this Agreement, must be in writing and shall be effective only
               to the extent specifically set forth in such writing.

          5.7. All remedies, either under this Agreement or by law or otherwise
               afforded to any of the parties, shall be cumulative and not
               alternative.

          5.8. This Agreement shall be governed exclusively by and construed
               solely in accordance with, the laws of the State of Israel. The
               competent court in Tel Aviv, Israel, shall have exclusive
               jurisdiction over any dispute relating to this Agreement.

          5.9. If any provision of this Agreement is held by a court of
               competent jurisdiction to be unenforceable under applicable law,
               then such provision shall be excluded from this Agreement and the
               remainder of this Agreement shall be interpreted as if such
               provision were so excluded and shall be enforceable in accordance
               with its terms; provided, however, that in such event this
               Agreement shall be interpreted so as to give effect, to the
               greatest extent consistent with and permitted by applicable law,
               to the meaning and intention of the excluded provision as
               determined by such court of competent jurisdiction.

          5.10. Any notice under this Agreement shall be in writing and shall be
               deemed to have been duly given and received for all purposes (a)
               when received or seven (7) days after it is mailed by prepaid
               registered mail; (b) upon the transmittal thereof by


                                       11

<PAGE>

               facsimile; or (c) upon the manual delivery thereof, to the
               respective addressee or fax numbers set forth above or to such
               other address of which notice as aforesaid is actually received.

          5.11. This Agreement may be executed in any number of counterparts,
               each of which shall be deemed an original and enforceable against
               the parties actually executing such counterpart, and all of which
               together shall constitute one and the same instrument.

          5.12. Certain Investors may from time to time designate, by a written
               notice submitted to the Company, a person or persons who shall be
               authorized to act for such Investors in matters related to or
               arising from this Agreement and the shareholding in the Company.
               Any document/resolution signed/confirmed by such designee/s shall
               be considered as a document/resolution signed/confirmed by the
               designating Investors. Any Investor may cancel such
               authorization, by written notice to the Company, but such
               cancellation shall not have a retroactive power.

          5.13. Any term of this Agreement may be amended only with the written
               consent of the Company, the holders of a majority of the
               Preferred A Shares and the holders of a majority of the Preferred
               B Shares.

          IN WITNESS WHEREOF the parties have signed this Agreement as of the
          date first hereinabove set forth.

          Boaz Eitan
          ------------------------------------
          Saifun Semiconductors Ltd.


          By:  /s/ Boaz Eitan
              --------------------------------
          Title: CEO
                 -----------------------------
          Date:  11/10/2000
                 -----------------------------


                                       12

<PAGE>

IN WITNESS WHEREOF the parties have signed this Agreement as of the date first
hereinabove set forth.

<TABLE>
<CAPTION>
NAME OF SHAREHOLDER                                     SIGNATURE
-------------------                                     ---------
<S>                                     <C>


Boaz Eitan                              By: /s/ Boaz Eitan
                                            ------------------------------------
                                        Date: 2/10/2000


Shaul,Yael and Anat Ltd.                By: /s/ Boaz Eitan
                                            ------------------------------------
                                        Date: 2/10/2000


Roni, Eran and Adi Ltd.                 By: /s/ Boaz Eitan
                                            ------------------------------------
                                        Date: 2/10/2000


Shikmat Eitan Ltd.                      By: /s/ Boaz Eitan
                                            ------------------------------------
                                        Date: 2/10/2000


Notziz Atuf Ltd.                        By: /s/ Boaz Eitan
                                            ------------------------------------
                                        Date: 2/10/2000


Deboranit Ha'horesh Ltd.                By: /s/ Boaz Eitan
                                            ------------------------------------
                                        Date: 2/10/2000


Doron Latzer (in trust for employees
& Ass)                                  By: /s/ Doron Latzer
                                            ------------------------------------
                                        Date: 3/10/00


Tower Semiconductor Ltd.                By: /s/ [illegible]
                                            ------------------------------------
                                        Date: 4/10/00
</TABLE>


                                       13

<PAGE>

<TABLE>
<S>                                     <C>


STI Venture Fund Ltd.                   By: /s/ [illegible]
                                            ------------------------------------
                                        Date:
                                              ----------------------------------


P.L.E 1997 Ltd.                         By: /s/ Doron Latzer
                                            ------------------------------------
                                        Date: 3/10/00


Gemini Israel II Parallel Fund L.P.     By: /s/ [illegible]
                                            ------------------------------------
                                        Date: October 3, 2000


Gemini Israel II L.P.                   By: /s/ [illegible]
                                            ------------------------------------
                                        Date: October 3, 2000


Advant PGGM Gemini L.P.                 By: /s/ [illegible]
                                            ------------------------------------
                                        Date: October 3, 2000


Targa Capital Ltd.                      By: /s/ [illegible]
                                            ------------------------------------
                                        Date: October 3, 2000


Partners Financial Managers Inc.        By: /s/ [illegible]
                                            ------------------------------------
                                        Date: Oct. 3rd 2000


Mallard Investments L.P.                By: /s/ [illegible]
                                            ------------------------------------
                                        Date: Oct. 3rd 2000


Samro B.V.                              By: /s/ [illegible]
                                            ------------------------------------
                                        Date: 10/3/00
</TABLE>


                                       14

<PAGE>

<TABLE>
<S>                                     <C>


Gemini Partners Investors L.P.          By: /s/ Yossi Sela
                                            ------------------------------------
                                        Date: October 3, 2000


K.T. Concord Ventures Fund (Cayman)
L.P.                                    By: /s/ Matty Karp
                                            ------------------------------------
                                        Date: 10/3/00


K.T. Concord Ventures Funds (Israel)
L.P.                                    By: /s/ Matty Karp
                                            ------------------------------------
                                        Date: 10/3/00


Deaneary Investments Ltd.               By: /s/ Haim Rabinovich
                                            ------------------------------------
                                        Date: 3/10/05


Aftis Technology Investments Ltd.       By: /s/ Haim Rabinovich
                                            ------------------------------------
                                        Date: 3/10/05

Lorentech Technologies Ltd.             By: /s/ Haim Rabinovich
                                            ------------------------------------
                                        Date: 3/10/05


York Holdings Group Ltd.                By: /s/ Haim Rabinovich
                                            ------------------------------------
                                        Date: 3/10/05


L.U.D.O. (Holdings) Ltd.                By: /s/ Haim Rabinovich
                                            ------------------------------------
                                        Date: 3/10/05
</TABLE>


                                       15

<PAGE>

<TABLE>
<S>                                     <C>


Moritz Israeli Investments Ltd.         By: /s/ Haim Rabinovich
                                            ------------------------------------
                                        Date: 3/10/05


Novick Israeli Investments Ltd.         By: /s/ Haim Rabinovich
                                            ------------------------------------
                                        Date: 3/10/05


Virtgotech Ltd.                         By: /s/ Haim Rabinovich
                                            ------------------------------------
                                        Date: 3/10/05


Alumot Technology Investments Ltd.      By: /s/ Haim Rabinovich
                                            ------------------------------------
                                        Date: 3/10/05


Kanfei Zahav Investment Company Ltd.    By: /s/ Kolish
                                            ------------------------------------
                                        Date:
                                              ----------------------------------


T.B.S. Group Ltd.                       By: /s/ Haim Rabinovich
                                            ------------------------------------
                                        Date: 3/10/05


Gad Shilo                               By: /s/ Gad Shiloh
                                            ------------------------------------
                                        Date: 4/10/00


Yehosua Givon                           By: /s/ Yehosua Givon
                                            ------------------------------------
                                        Date: 4/10/00
</TABLE>


                                       16

<PAGE>

<TABLE>
<S>                                     <C>


Yesha Primas                            By: Yesha Primas
                                            ------------------------------------
                                        Date: 3 Oct. 2000


Bank Hapoalim                           By: /s/ [illegible]
                                            ------------------------------------
                                        Date: October 5, 2000


Clal Electronics Industries Ltd.        By: /s/ [illegible]
                                            ------------------------------------
                                        Date:
                                              ----------------------------------


M-Systems Flash Disk Pioneers Ltd.      By: /s/ [illegible]
                                            ------------------------------------
                                        Date: Oct. 2, 2000

Gemini Israel III LP                    By: /s/ [illegible]
                                            ------------------------------------
                                        Date: October 3, 2000


Infineon Technologies AG                By: /s/ [illegible]
                                            ------------------------------------
                                        Date: October 5, 2000


BAS Capital Funding Corporation         By: /s/ [illegible]
                                            ------------------------------------
                                        Date: October 2, 2000


Morgan Stanley Dean Witter Equity
Funding Inc.                            By: /s/ James T. Keane
                                            ------------------------------------
                                        Date: 10/2/00


Microdent Ltd.                          By: /s/ [illegible]
                                            ------------------------------------
                                        Date: 3/10/05
</TABLE>


                                       17

<PAGE>

<TABLE>
<S>                                     <C>


Samal Investments Ltd.                  By: /s/ Wiegel
                                            ------------------------------------
                                        Date: 3/10/00


Neon Holdings Ltd.                      By: /s/ Manacor S.A.
                                            ------------------------------------
                                        Date: 4/10/00


Pre-Seed hi-tech Investment             By: /s/ Yochanan Korman
                                            ------------------------------------
                                        Date: 3/10/00


M. Cohen                                By: /s/ Yochanan Korman
                                            ------------------------------------
                                        Date: 3/10/00
</TABLE>


                                       18