<PAGE>
                                                                    Exhibit 10.7

                                TABLE OF CONTENTS

                              TECHNOLOGY AGREEMENT

                                     BETWEEN

                           SAIFUN SEMICONDUCTORS LTD.

                                       AND

                        MACRONIX INTERNATIONAL CO., LTD.
<TABLE>
<S>                                                                                       <C>
1.    DEFINITIONS......................................................................    2
2.    GRANT OF LICENSE FOR IMMEDIATE PRODUCTS..........................................    8
3.    GRANT OF OPTIONS.................................................................   10
4.    GENERAL LICENSING PROVISIONS.....................................................   12
5.    LICENSES AND IMMUNITIES TO SAIFUN PRODUCTS.......................................   15
6.    LICENSES AND IMMUNITIES TO FOUNDRIES IN WHICH SAIFUN PRODUCTS ARE MANUFACTURED...   17
7.    MUTUAL PROTECTION SAIFUN LICENSEES...............................................   17
8.    DEVELOPMENT OF MACRONIX NROM BASED PROCESS.......................................   17
9.    CAPACITY.........................................................................   18
10.   WAFER PRICING....................................................................   22
11.   MISCELLANEOUS FOUNDRY PROVISIONS.................................................   23
12.   AUDIT AND RECORD KEEPING.........................................................   25
13.   CONFIDENTIALITY..................................................................   26
14.   INTELLECTUAL PROPERTY INFRINGEMENT...............................................   27
15.   WARRANTIES.......................................................................   27
16.   ADOPTION AND PROMOTION...........................................................   28
17.   TERM AND TERMINATION.............................................................   29
18.   MISCELLANEOUS....................................................................   31
</TABLE>

<PAGE>

     TECHNOLOGY AGREEMENT

     This technology agreement ("Agreement") is entered this 4th day of May 2000
     ("Effective Date") among Saifun Semiconductor Ltd., a company incorporated
     in Israel, with offices at Topper Bldg. 65 Hamelacha St. Industrial Zone
     South, Netanya 42504, Israel ("Saifun"), Macronix International Co., Ltd.,
     a company incorporated in Taiwan with offices at No. 3 Creation Road III,
     Science-Based Industrial Park, Hsin-Chu, Taiwan ("Macronix"). Saifun and
     Macronix shall be collectively referred to herein as the "Parties."

                                    RECITALS

     Saifun has developed know-how and proprietary information relating to Non
     Volatile Memory (NVM) technology hereinafter defined as "Saifun NROM
     Technology".

     Macronix owns patents, know-how and other proprietary information relating
     to NVM technology and Macronix desires to incorporate the Saifun NROM
     Technology into the Licensed Products (defined below); and

     Saifun is willing to license the Saifun NROM Technology to Macronix, and to
     assist Macronix in implementing and manufacturing Licensed Products based
     on the Saifun NROM Technology; and

     Saifun is interested in expediting the time it will take to bring to the
     market place Licensed Products and Saifun Products and is interested in
     Macronix' endorsement of the Saifun NROM Technology, and in making the
     Saifun NROM Technology the leading NVM technology in the market place; and

     Saifun desires to obtain capacity for the manufacture of Saifun Products
     (defined below), and Macronix is willing to provide such capacity to Saifun
     at a competitive price utilizing Macronix' most advanced technology; and

     The Parties desire to form a close working relationship by which they shall
     (amongst other things) jointly develop applications to be agreed upon.

     Therefore, for good and valuable consideration, the receipt and sufficiency
     of which is hereby acknowledged, the Parties agree as follows:

1.   DEFINITIONS

     1.1. "Basic Capacity" shall mean the capacity as defined in Section 9.1 of
          this Agreement.

     1.2. "Blocking Patent" shall mean a Patent invented on behalf of and/or
          owned by a Party or a Subsidiary at any time which covers an invention


                                                                               2

<PAGE>

          to which a license would be necessary in order to utilize the Saifun
          NROM Technology.

     1.3. "Confidential Information" shall mean confidential and proprietary
          information, except as provided in Section13.2, whenever made and
          whenever disclosed of a Party which is (i) designated with the legend
          "Confidential" or comparable legend in case of disclosure thereof in
          written, graphic, machine readable or other tangible form or (ii)
          designated "Confidential" at the disclosure thereof in other form
          (including oral) and within thirty (30) days after such disclosure set
          forth in writing designated "Confidential" and forwarded to the
          receiving party, Confidential Information also includes without
          limitation the terms of this Agreement and the identity of licensee or
          potential licensees of Saifun disclosed to Macronix pursuant to this
          Agreement.

     1.4. "E(2) Block" shall mean a byte or word or page electrically writeable
          non-volatile Memory Block incorporating Saifun NROM Technology.

     1.5. "Element" shall mean a digital memory, arranged in array of memory
          cells in which binary data is stored and electronically retrieved that
          does not include and is not based on Saifun NROM Technology.

     1.6. "Embedded Customized Product" shall mean a Macronix Product where
          either (or both) kind(s) of Product(s) in accordance with the
          following description:

          (a)  A Product comprising of:

               (i)  FLASH Block; and

               (ii) A non standard I/O Protocol and non-standard Flash Pin-out;
                    and

               (iii) Logic Block with *** or less equivalents Gate counts;
                    and/or

               (iv) Test/Use Logic Block; and/or

               (v)  Memory Block and/or Limited E(2) Block and/or an Element.

          (b)  A Product comprising of:

               (i)  Flash Block whose size is equal or smaller than 1Mbit; and

               (ii) Test/Use Logic Block; and

               (iii) at least one of the following blocks :

                    (1) a Memory Block and/or Limited E(2) Block; and/or an
                    Element; and/or

                    (2) a Logic Block

      1.7. "Embedded Flash Product" shall mean a Macronix Product comprising of:

-----------

*** Omitted pursuant to a confidential treatment request. the confidential
    information has been filed separately with the SEC.

<PAGE>

          (a)  Flash Block that is larger than *** Flash Block; and

          (b)  a Test/Use Logic Block; and/or an Element; and

          (c)  at least one of the following blocks:

               (i)  Logic Block; and/or

               (ii) a Memory Block and/or Limited E(2) Block

     1.8. "Embedded Non-Flash Product" shall mean a Macronix Product comprising
          of:

          (a)  OTP Memory Block or ROM Memory Block; and

          (b)  a Test/Use Logic Block; and/or an Element; and

          (c)  at least one of the following blocks:

               (i)  Logic Block; and/or

               (ii) Memory Block and/or a Limited E(2).

     1.9. "Embedded Products" shall mean a collective reference to Embedded
          Flash Products, Embedded Non-Flash Products and Embedded Customized
          Products.

     1.10. "Extended Capacity" shall mean the capacity as defined in Section 9.2
          of this Agreement.

     1.11. Final Foundry Agreement" shall mean a detailed written agreement
          dealing with the manufacturing procedures and supply arrangements to
          be agreed upon by the Parties.

     1.12. "Flash Block" shall mean a (i) byte programmable and block erasable;
          or (ii) word programmable and block erasable; or (iii) byte
          programmable and bulk erasable; or (iv) word programmable and bulk
          erasable; or (v) block programmable and block erasable; or (vii) block
          programmable and bulk erasable non-volatile Memory Block

     1.13. "Foundry Service" shall mean the service of manufacturing
          semiconductor wafers on behalf of third parties.

     1.14. "Immediate Product" shall mean a collective reference to MTP
          Products, Non-Flash Products, Mass Storage Products and Embedded
          Products.

     1.15. "Improvements" shall mean Patents covering changes, modifications and
          developments relating to the cell and array and circuits of the Saifun
          NROM Technology which constitute the best or otherwise optimal method
          of carrying out and implementing the Saifun NROM Technology for the
          designing, developing or manufacturing of NVM products based on the
          Saifun NROM Technology (but not application specific such as, with no
          limitation, Smart cards, Smartmedia, and other product related
          intellectual property).

     1.16. "Large E(2) Block" shall mean an E(2) Block that is not a Limited
          E(2) Block.

-----------------
*** Omitted pursuant to a confidential treatment request. The confidential
    information has been filed separately with the SEC.

                                                                               4

<PAGE>

     1.17. "Licensed Products" shall mean a collective reference to Stand-alone
          Flash Products and Immediate Products.

     1.18. "Limited E(2) Block" shall mean an E(2) Block smaller than the
          maximum size listed below:

          (a)  Maximum size during 2000 - ***

          (b)  Maximum size, from 1/1/2001-the end of 2004 - ***

          (c)  Maximum size, thereafter - ***

     1.19. "Logic Block" shall mean a group of electronic circuits capable of
          performing logical operations as a function of electronic digital
          signals that is not necessary for the testing or use of the Flash
          Block or a Memory Block within the Product in which the logic block is
          incorporated. Such logic blocks may include, by way of example but
          without limitation, a microprocessor (MPU), a microcontroller (MCU),
          or a digital signal processor (DSP).

     1.20. "M&A" shall mean merger, consolidation, transfer or sale of all or
          substantially all of the assets or shares of a Party.

     1.21. "Macronix Product" shall mean a Product, designed and made and sold
          by Macronix and/or its Subsidiaries.

     1.22. "Macronix NROM Patents" shall mean Macronix NVM Patents which are
          required for or otherwise are based on or utilize the Saifun NROM
          Technology together with all incidental intellectual property rights,
          know how and trade secrets required for effectively exploiting such
          patents.

     1.23. "Macronix NROM Process Patents" shall mean Macronix NROM Patents that
          are process related.

     1.24. "Macronix NVM Patents" shall mean all Macronix NVM Patents (including
          Macronix NROM Patents) covering Macronix Non-Volatile Memory
          technology together with all incidental intellectual property rights,
          know how and trade secrets required for effectively exploiting such
          patents.

     1.25. "Mass Storage Product" shall mean a Product comprising of a Test/Use
          Logic Block and Flash Block which is (a) Sector (at least ***)
          programmable and Sector erasable; or (b) Sector programmable and block
          erasable; or (c) Sector programmable and bulk erasable that meets the
          following specifications:

          (a)  a serial interface (e.g. of the type conventionally used in
               magnetic hard disk drives, for digital recording, or for digital
               camera); and

          (b)  the access time of 1st bit is twice slower than the serial access
               time.

     1.26. "Memory Block" shall mean a digital memory, arranged in array of
          memory cells in which binary data is stored and electronically
          retrieved, incorporating Saifun NROM Technology. For the purpose of
          this definition


*** Omitted pursuant to a confidential treatment request. The confidential
information has been filed separately with the SEC.

                                                                               5

<PAGE>

          the term Memory Block, excludes Limited E(2) Block, Large E(2) Block
          or any other E(2) Block.

     1.27. "MTP Product" shall mean a Macronix Product comprising of:

          (a)  Flash Block with endurance that equals or is less than 1,000
               cycles; and

          (b)  Test/Use Logic Block

     1.28. Net Sales shall mean:

          (a)  for transactions at arms length terms between Macronix and a 3rd
               party - the amount invoiced by Macronix for the sale of Licensed
               Products under this Agreement;

          (b)  for transactions not made at arms length terms including but not
               limited to transactions between Macronix and an entity in which
               Macronix directly or indirectly has a beneficial interest
               including but not limited to sales classified as internal - the
               higher amount of either the amount invoiced or the market price
               of the Licensed Products (and if not known, calculated on the
               basis of the average of the last 5 transactions with different
               entities, which were made at arms length terms).

          In each case the amount invoiced shall be calculated according to the
          following principles: excluding amounts attributable to sales tax,
          value-added taxes, and use taxes (as may be applicable), reasonable
          discounts actually allowed (including quantity or promotional
          discounts given to customers), deductions for returns, import duties,
          costs of shipping insurance, freight, packing, and other
          transportation and related charges, but including fees and commissions
          paid to agents and others.

          For sales not made in U.S. dollars, such sales will be converted to
          U.S. dollars for purposes of this Agreement at the average daily
          exchange rate during each reporting period as reported in the Reuters
          Financial Reporting Service.

          For the purposes of determining the date upon which a sale was made
          under this definition an "invoice" shall be deemed as having been
          rendered at the first to occur of the following events: an invoice is
          sent, the Licensed Products are shipped or delivered or are first set
          aside for future use.

     1.29. "Non-Flash Products" shall mean a collective reference to OTP Memory
          Product and ROM Memory Product.

     1.30. "OTP Memory Product" shall mean a Macronix Product comprising of:


                                                                               6

<PAGE>

          (a)  One time programmable non-volatile Memory Block, incorporating
               Saifun NROM Technology, that cannot be erased (other than for
               testing during manufacture); and

          (b)  Test/Use Logic Block.

     1.31. "Patents" shall mean all classes or types of patents, utility models
          and design patents (including, without limitation, originals,
          divisions, continuations, continuations-in-part, extensions or
          reissues), and applications for these classes or types of patent
          rights in all countries of the world owned or controlled by a Party
          during the term of this Agreement, to the extent that the applicable
          Party has the right to grant licenses within and of the scope set
          forth herein and without the requirement to pay consideration to any
          unaffiliated party (other than employees of the applicable Party) for
          the grant of such a license under this Agreement.

     1.32. "Product" shall mean a product in wafer, die, packaged or other form
          which contain a non-volatile memory circuit.

     1.33. "Qual Date 1" shall mean the earlier of the:

          (a)  actual product qualification date of the first Immediate Product;
               or

          (b)  end of the *** period after a third party had qualified any
               of third party's Products of the same nature as Licensed Product;
               or

          (c)  ***

     1.34. "Qual Date Stand-Alone" shall mean the earlier of the:

          (a)  actual product qualification date of the first Stand-alone Flash
               Product; or

          (b)  the end of the *** following the Effective Date.

     1.35. "ROM Memory Product" shall mean a Macronix Product comprising of:

          (a)  read only Memory Block, incorporating Saifun NROM Technology
               which is programmed as part of the manufacturing process using a
               mask step; and

          (b)  Test/Use Logic Block.

     1.36. "Saifun NROM Technology" shall mean the whole or any part of Saifun's
          proprietary (i) electrically erasable and electrically programmable
          non-volatile memory cell and array; (ii) process and circuit
          technology for implementation and in corporation thereof into
          non-volatile memory; and (iii) know-how that is reasonably necessary
          for the utilization of the foregoing. Saifun NROM Technology is
          identified by (but not limited to):

          (a)  any *** and/or *** or *** or ***; and/or


*** Omitted pursuant to a confidential treatment request. The confidential
information has been filed separately with the SEC.


                                                                               7

<PAGE>

          (b)  The Saifun trade secrets, know-how and any other intellectual
               property ***; and/or

          (c)  ***; and/or

          (d)  ***.

     1.37. "Saifun Patents" shall mean all Patents of Saifun covering or
          relating to the Saifun NROM Technology and all other NVM Patent of
          Saifun applied for or granted prior to the Effective Date and all
          future Blocking Patents owned by Saifun.

     1.38. "Saifun Products" shall mean a Product of Saifun and/or its
          Subsidiaries handled in Saifun's ordinary way of doing business
          utilizing or otherwise incorporating or based on the Saifun NROM
          Technology.

     1.39. "Stand-alone Flash Product" shall mean a Macronix Product (excluding
          Licensed Mass Storage Flash Products) comprising of (i) Flash Block;
          and (ii) Test/Use Logic Block.

     1.40. "Subsidiary" shall mean a corporation, company or other entity that
          is controlled by either Party. Control means that 50 or more percent
          of the Subsidiary's shares or ownership interest representing the
          right to make decisions for such Subsidiary are owned or controlled
          directly or indirectly by either Party. Any Subsidiary is considered
          to be a Subsidiary only so long as such ownership or control exists by
          either Party. The term Subsidiary may expand to third parties in which
          a Party controls less than 50 percent, upon written consent of the
          other Party.

     1.41. "Substitute Foundry" shall mean the foundry in accordance with
          Section 9.4.

     1.42. "Test/Use Logic Block" shall mean a group of electronic circuits
          capable of performing logical operations as a function of electronic
          digital signals that is used for the testing or operating of the Flash
          Block or a Memory Block within the Product in which it is
          incorporated.

     1.43. "Wafer - Actual Price" shall mean the wafer price set in accordance
          with the principles of Section 10.3.

     1.44. "Wafer Base Price" shall mean the wafer price determined in
          accordance with the principles set out in Section 10.1.

     1.45. "W/M" shall mean wafer starts per month.

2.   GRANT OF LICENSE FOR IMMEDIATE PRODUCTS

     2.1. The License. Saifun hereby grants to Macronix a non-exclusive,
          non-transferable, worldwide license without the right to sub-license
          under the Saifun Patents and Improvements to use, make (without
          sub-contracting or have made), design, co-design (with a Subsidiary
          only) and have designed by a subsidiary, develop, sell and offer to
          sell, and otherwise


*** Omitted pursuant to a confidential treatment request. The confidential
information has been filed separately with the SEC.

                                                                               8

<PAGE>

          dispose of Immediate Products. In case when Macronix shall need the
          have-made and have-design rights for conducting Macronix' business in
          its normal way of doing business, the Parties shall discuss in good
          faith the specific terms and conditions and such request shall not be
          unreasonably denied.

     2.2. Sublicense Rights. Macronix shall have the right to sublicense to its
          Subsidiaries all or part of the rights granted to Macronix in Section
          2.1 and as necessary to allow Macronix to fully exercise the rights
          granted therein in accordance with Macronix' normal way of doing
          business. The sublicense rights granted herein are only intended to
          allow Macronix to utilize the rights granted in a manner that is
          consistent with their internal divisions of functions, corporate
          structures and business organizations. Sub-licensees under this
          sub-section shall not have the right to sub-license the rights granted
          to them by Macronix hereunder. The Parties agree that the sub-licenses
          under this sub-section shall be limited in nature and only to the
          extent necessary for Macronix to fully exercise the rights granted to
          it.

     2.3. Few Licensees. Saifun declares that it is Saifun's business intention
          to limit the number of licensees with rights to Stand-alone Flash
          Product to few licensees only.

     2.4. Compensation. Macronix shall pay Saifun the following license fee and
          royalties for the foregoing license for the Immediate Products:

          (a)  License Fee:

<TABLE>
<CAPTION>
                    PAYMENT
DATE OR EVENT      U.S $       TERMS
----------------   ---------   -----
<S>                <C>         <C>
                    ***         Payable in two installment:

Execution of the               (1) $***
Agreement
                               (2) $***

Qual Date 1         ***        Payable immediately upon occurrence of the Event/Date

***                 ***        Payable in two installment:

                               (1) $***

                               (2) $***
</TABLE>

-----------------
*** Omitted pursuant to a confidential treatment request. The confidential
    information has been filed separately with the SEC.


                                                                               9

<PAGE>

          (b)  Royalties:

<TABLE>
<CAPTION>
                                     NET SALES OF THE RELEVANT PRODUCTS
    THE IMMEDIATE PRODUCT                  AND ROYALTY RATE
----------------------------   ----------------------------------------------
                               The Net Sales in U.S. Dollars   The Percentage
                               -----------------------------   --------------
<S>                            <C>                             <C>
Embedded Non-Flash  Products   ***                                   ***%
                               ***                                   ***%
                               ***                                   ***%

Embedded Customized Products   ***                                   ***%
                               ***                                   ***%
                               ***                                   ***%

Non-Flash Products             ***                                   ***%

Embedded Flash Products        ***                                   ***%
                               ***                                   ***%
                               ***                                   ***%

MTP Product &  Mass Storage    ***                                   ***%
Product                        ***                                   ***%
                               ***                                   ***%
</TABLE>

Minimum Royalties. At the applicable due date below, Macronix will pay the
higher of the amount of royalties due in respect of the Net Sales of Immediate
Products as set in Section 2.4(b) above or the following minimum royalties:

<TABLE>
<CAPTION>
   Due Date      Payment in US $
--------------   ---------------
<S>              <C>
July 10th 2001        $***
July 10th 2002        $***
July 10th 2003        $***
July 10th 2004        $***
July 10th 2005        $***
</TABLE>

3.   GRANT OF RIGHTS IN FLASH

     3.1. Grant of Rights in Stand- alone Flash Product.

-----------------
*** Omitted pursuant to a confidential treatment request. The confidential
    information has been filed separately with the SEC.


                                                                              10

<PAGE>

          (a)  Saifun hereby grants Macronix a non-exclusive, non-transferable,
               worldwide license without the right to sub-license (subject to
               Section 3.1(b)) under the Saifun Patents to use, make (without
               sub-contracting or have made), design, co-design (with a
               subsidiary only) and have-designed by a subsidiary, develop, sell
               and offer to sell and otherwise dispose of Stand-alone Flash
               Products. In case when Macronix shall need the have-made and
               have-design rights for conducting Macronix' business in its
               normal way of doing business, the Parties shall discuss in good
               faith the specific terms and conditions and such request shall
               not be unreasonably denied.

          (b)  Sublicense Rights. Macronix shall have the right to sublicense to
               its Subsidiaries all or part of the rights granted to Macronix in
               Section 3.1 as necessary to allow Macronix to fully exercise the
               rights granted therein in accordance with Macronix' normal way of
               doing business. The sublicense rights granted herein are only
               intended to allow Macronix to utilize the rights granted in a
               manner that is consistent with their internal divisions of
               functions, corporate structures and business organizations.
               Sub-licensees under this sub-section shall not have the right to
               sub-license the rights granted to them by Macronix hereunder. The
               Parties agree that the sub-licenses under this sub-section shall
               be limited in nature and only to the extent necessary for
               Macronix to fully exercise the rights granted to it.

          (c)  Payment.

               (i)  For the rights granted hereunder, Macronix will pay Saifun
                    upon execution of this Agreement the sum of *** US dollars.

               (ii) Macronix shall pay Saifun an additional sum of *** U.S.
                    dollars, within *** after the Effective Date.

               (iii) Macronix will pay Saifun additional $*** on Qual Date
                    Stand-Alone.

     3.2. Additional Compensation. Macronix shall pay Saifun the following
          royalties for the Stand-alone Flash Products in accordance with the
          following schedules:

          Royalties (subject to the minimums set below)(1):

<TABLE>
<CAPTION>
Net Sales in U.S. Dollars of
Stand-alone Flash Products     The Percentage
----------------------------   --------------
<S>                            <C>
***                                 ***%
***                                 ***%
***                                 ***%
***                                 ***%
***                                 ***%
</TABLE>

-----------------
*** Omitted pursuant to a confidential treatment request. The confidential
    information has been filed separately with the SEC.

                                                                              11

<PAGE>

(1)  Minimum Royalties. At the applicable due date below, Macronix will pay the
     higher of the amount of royalties due in respect of the Net Sales of
     Stand-alone Flash Products or the following minimum royalties:

<TABLE>
<CAPTION>
DUE DATE                                           PAYMENT IN US DOLLARS
--------                                           ---------------------
<S>                                                <C>
Within 24 months following the Qual Date Stand-
Alone Date                                                 $***

Within  36 months following the Qual Date Stand-
Alone Date                                                 $***
</TABLE>

4.   GENERAL LICENSING PROVISIONS

     4.1. Non-Suit Protection.

          (a)  Saifun hereby covenants to Macronix and its Subsidiaries not to
               assert any Saifun Patent and Saifun Improvements against
               Macronix, its Subsidiaries, and their respective customers in
               relation with the Licensed Products, so long as Macronix did not
               violate its material obligations of this Agreement.

          (b)  Saifun further covenants not to assert any claims regarding the
               use, design, development, making, selling, offering to sell, and
               otherwise disposing of Limited E(2) Block by Macronix, its
               Subsidiaries , and their respective customers, provided the
               Limited E(2) Block is a part of an Immediate Product in
               accordance with the provisions of this Agreement. This provision
               will be in full force and effect so long that Macronix did not
               violate its material obligations of this Agreement.

          (c)  Saifun further covenants not to assert any claims regarding the
               use, design, development or making of any Saifun Product, on
               behalf of and only on behalf of Saifun, in connection with the
               manufacture of the Saifun Products.

     4.2. *** Should Saifun extend a license for Foundry Services to a third
          party other than ***, Saifun will offer such a license to Macronix
          under the same terms and conditions the license is extended to the
          other third party.

          Macronix will be permitted to manufacture Licensed Products other than
          *** under the logo of third parties, as soon as *** confirms in
          writing that

-----------------
*** Omitted pursuant to a confidential treatment request. The confidential
    information has been filed separately with the SEC.

                                                                              12

<PAGE>


          it does not object to Macronix's manufacture of such products or when
          *** loses exclusive rights granted to it by Saifun. Such product
          will be automatically covered under this license and will be subject
          to all provisions of this agreement.

     4.3. Special Rights. Subject to Section 9.5 ("Substitute Foundry"), Saifun
          will not grant a new license to manufacture the Licensed Products to a
          semiconductor company located in Taiwan and/or whose primary place of
          business is in Taiwan. Macronix acknowledges that such right will not
          prevent licensees of Saifun from seeking production of products
          licensed to them in Taiwan under such licensee's "have made" rights.

          FURTHER RESTRICTIONS. Should Saifun utilize as Substitute Foundry an
          entity located in Taiwan and/or whose primary place of business is in
          Taiwan, in accordance with the provisions of said 9.5 then Saifun will
          be precluded from granting such entity a license that will allow such
          Substitute Foundry to manufacture ***. Saifun also agrees not to
          grant a new license to a Taiwan company to manufacture the Mass
          Storage Products unless Macronix has failed to support Saifun foundry
          as per Section 9.5 for such Mass storage Products.

     4.4. Matching Offer. Should Saifun grant a license for a product with
          specifications similar to the specifications of a Licensed Product, to
          a semiconductor manufacturer for royalties lower than those paid by
          Macronix for any substantially similar Licensed Product, Saifun shall
          inform Macronix immediately and Macronix will be entitled to match the
          reduced price so that the future royalties paid by Macronix are no
          more than the royalties paid by any such third party licensee for the
          relevant similar products. This provision will not apply to a license
          to a Subsidiary or an affiliated company of Saifun and will not apply
          to royalties by Advanced Micro Devices Inc, and Fujitsu Limited or to
          royalties paid by 3rd party licensee with whom Saifun signed a
          contract prior to the Effective Date.

     4.5. Waiver. Nothing in this Agreement does or shall give Macronix rights
          in Large E(2) Block or in any other product not specifically and
          expressly licensed to it in this Agreement.

     4.6. Termination of Licenses.

          (a)  TERMINATION OF IMMEDIATE PRODUCTS LICENSE.

          The licenses granted under Section 2 of this Agreement for Immediate
          Products and the covenants set under Section 4.1 as applicable to
          Immediate Products, shall expire or otherwise be terminated without
          further notice (unless otherwise agreed upon by the Parties) should
          Macronix fail to reach one of the following targets:

-----------------
*** Omitted pursuant to a confidential treatment request. The confidential
    information has been filed separately with the SEC.


                                                                              13

<PAGE>

               (i)  Qualification of 1st Macronix Immediate Product by ***
                    or an extended period agreed upon by the Parties; or

               (ii) Net Sales of Licensed Products of: *** dollars
                    ($***) during 2002; or *** dollars ($***) during 2003

          (b)  TERMINATION OF STAND-ALONE FLASH PRODUCTS LICENSE.

          The licenses granted under Section 3 of this Agreement for Stand-alone
          Flash Products and the covenants set under Section 4.1 as applicable
          to Stand-alone Flash Products shall expire or otherwise be terminated
          (unless otherwise agreed upon by the Parties) should Macronix fail to
          reach one of the following targets:

               (i)  Qualification of the first Macronix' Stand-alone Flash
                    Product by the end of the *** following Release Date
                    or an extended period agreed upon by the Parties; or

               (ii) Net Sales of Stand-alone Products of:
                    *** dollars ($***) during the year 2003; or *** dollars
                    ($***) during the year 2004.

          (c)  TERMINATION OF ALL LICENSES FOR FAILURE TO PROVIDE CAPACITY.

          The licenses granted under Sections 2 and 3 and the covenants not to
          sue set in Section 4.1 of this Agreement shall expire or otherwise
          terminate, (unless otherwise agreed upon by the Parties) should
          Macronix fail to provide the capacity in accordance with the
          provisions of Section 9.1, 9.2 and 9.3 and does not cure the
          deficiency within *** from the date of shortfall ( as described
          in Section 9.7) arose or was discovered or was notified by Saifun
          (whichever is earlier), Failure to provide ***% of the capacity
          committed to (in accordance with the ordering procedures to be set in
          the Final Foundry Agreement) during a quarter will constitute a
          failure in accordance with this Section.

          (d)  TERMINATION OF LICENSES FOR FAILURE TO MAKE TIMELY PAYMENTS.

          The licenses granted under Sections 2 and 3 and the covenants not to
          sue set in Section 4.1 of this Agreement shall expire or otherwise
          terminate (unless otherwise agreed upon by the Parties) should
          Macronix fail to make any payments due in accordance with this
          Agreement (license fees and/or royalty payments) within *** after
          a payment is due.

     4.7. Consequences of Termination of a License.

          MATERIAL BREACH. Should any of the licenses be terminated in
          accordance with the provisions of Section 4.6 the Agreement will be
          deemed

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

*** Omitted pursuant to a confidential treatment request. The confidential
    information has been filed separately with the SEC.


                                                                              14

<PAGE>

          materially breached and the provisions of Section 17 will apply.

5.   LICENSES AND IMMUNITIES TO SAIFUN PRODUCTS

     5.1. Macronix NROM License for Saifun Products.

          (a)  THE LICENSE. Macronix hereby grants to Saifun and its
               Subsidiaries a fully paid up, royalty free, non-exclusive
               worldwide, non-transferable license, without the right to
               sub-license, under the Macronix NROM Patents to use, design, have
               designed, develop, have developed, make, have made, import, have
               imported, sell, have sold, offer to sell, and otherwise dispose
               of Saifun Products.

          (b)  MACRONIX NROM PROCESS PATENTS RESTRICTION. The license in Section
               5.1(a) does not include the right to utilize Macronix NROM
               Process Patents for fabrication of Saifun Products outside of
               Macronix fabs. Nonetheless, this restriction (subject to Section
               5.1(c) will not apply for manufacture in Substitute Foundry.

          (c)  REASONABLE ROYALTIES FOR SAIFUN PRODUCTS. For any Macronix NROM
               Process Patent utilized for Saifun Products that is not licensed
               under Section 5.1(a), the Parties and Saifun Subsidiaries (if
               applicable) will discuss reasonable royalties. Should Saifun
               and/or its Subsidiaries not be interested in a license or an
               understanding cannot be reached, Saifun will be allowed
               reasonable time to phase out of the Saifun Product or Element for
               which a license is required in accordance with this Section. The
               reasonable time will allow Saifun to ship any existing inventory
               of the relevant Saifun Product or design around the relevant
               Macronix NROM Process Patent. Rights of third parties granted in
               reliance of the licenses of this Agreement will not be affected
               provided that third parties complete the phase out within
               reasonable time period upon receipt of Macronix written notice.
               During the time period when Saifun is phasing out of the Macronix
               NROM Process Patents; there will be no royalty payment from
               Saifun to Macronix for the first 12 months following the notice.
               However, if the phase out period is longer, than 12 months, a
               ***% default royalty (if the Parties in good faith negotiations
               have not reached a different royalty rate) will be paid to
               Macronix until the completion of such phase out.

     5.2. Macronix NVM Covenants.

          (a)  THE COVENANT. Macronix covenants on behalf of itself and its
               Subsidiaries that it shall not assert Macronix NVM Patents
               (including, but not limited to Macronix NROM Patents) and
               Confidential Information disclosed to Saifun or to Saifun's
               Subsidiary, against Saifun or its Subsidiary for the use, design,
               development, manufacture, importation, sale, offering to sell, or

***  Omitted pursuant to a confidential treatment request. The confidential
     information has been filed separately with the SEC.

                                                                              15

<PAGE>

               other disposition or activity regarding the Saifun Products. Such
               non-suit covenant will equally apply to other third party
               companies for the use, importation, sale, disposition or other
               utilization permissible under this Agreement with regards with
               the Saifun Products.

               The covenant in accordance with this provision will be
               automatically revoked if and when Macronix and such a third party
               is involved in mutual litigation initiated by such a third party.
               In other cases where Macronix believes that the covenant presents
               a significant commercial threat to Macronix against a harmful
               competitor the Parties will discuss potential courses of action
               and conduct good faith negotiations.

          (B)  NVM (BUT NOT NROM) PATENTS RESTRICTIONS. The covenant in Section
               5.2(a) will not extend to Macronix NVM Patents which are not
               Macronix NROM Patents, where such Patents are utilized for
               fabrication of Saifun Products outside of Macronix fabs.
               Nonetheless, this restriction will (subject to Section 5.2(c))
               not apply for manufacture in Substitute Foundry

          (c)  Reasonable Royalties for Saifun Products. For any Macronix NVM
               Patents utilized for the Saifun Products, which are not protected
               under the covenant in Section 5.2(a) of this Agreement, the
               Parties will discuss reasonable royalties. Should Saifun and/or
               its subsidiaries not be interested in a license or an
               understanding cannot be reached, Saifun will be allowed
               reasonable time to phase out of the Saifun Product or Element for
               which a license is required in accordance with this Section. The
               reasonable time will allow Saifun to ship any existing inventory
               of the relevant Saifun Product and design around the relevant
               Macronix Patent. Rights of third parties granted in reliance of
               the licenses of this Agreement will not be affected provided that
               third parties complete the phase out within reasonable time
               period upon receipt of Macronix written notice. During the time
               period when Saifun is phasing out of the Macronix NVM Patents,
               there will be no royalty payment from Saifun to Macronix for the
               first 12 months following the notice. However, if the phase out
               period is longer than 12 months, a 4% default royalty (if the
               Parties in good faith negotiations have not reached a different
               royalty rate) will be paid to Macronix until the completion of
               such phase out.

     5.3. General Provision - Intention Statement. The license in Section 5.1
          and covenant of and 5.2 will not extend to allow Saifun to utilize
          such licenses for manufacture of products under the logo of a third
          party if such product is neither developed, nor designed or is not
          created in the normal way of


                                                                              16

<PAGE>

          doing business by Saifun. Parties will discuss special cases and
          circumstances.

6.   MUTUAL PROTECTION AMONG SAIFUN LICENSEES.

     6.1. For the duration of this Agreement ***. Notwithstanding the above
          ***:

          (a)  ***; or

          (b)  ***.

     6.2. Mutual Protection.***

7.   LICENSES AND IMMUNITIES TO FOUNDRIES IN WHICH SAIFUN PRODUCTS ARE
     MANUFACTURED

     7.1. Protection as a Licensee. Foundries in which Saifun Products are
          manufactured, will not be enjoined (such non-enjoinment applies to
          only the production of Saifun Products) by Macronix or Macronix'
          Subsidiaries. This Section 7 will not prevent Macronix from asserting
          rights or seeking remedy against such foundry with regards to activity
          of a third party that is not protected in accordance with this
          Agreement.

     7.2. Protection to Substitute Foundry. Subject to Section 5 Macronix on
          behalf of itself and its Subsidiaries, covenants that it shall not
          assert any claims against the Substitute Foundry for the use,
          development, design, manufacture, importation, sale, offering to sell,
          or other disposition of Saifun Products incorporating the Saifun NROM
          Technology, provided that Saifun was entitled to select a Substitute
          Foundry and the Substitute Foundry was selected in accordance with the
          preferences of Section 9.5(a)(iv) of this Agreement.

8.   DEVELOPMENT OF MACRONIX NROM BASED PROCESS

***  Omitted pursuant to a confidential treatment request. The confidential
     information has been filed separately with the SEC.

                                                                              17

<PAGE>

     8.1. Process Qualification. The Parties shall cooperate in developing the
          first Macronix Product as a vehicle for qualifying Macronix process
          based on Saifun NROM Technology (the "Macronix NROM Based Process").
          Macronix will work diligently on qualifying the Macronix NROM Based
          Process and the first Macronix Product and will make its best effort
          to conclude the Macronix NROM Based Process qualification as soon as
          possible.

     8.2. Qualification of Saifun Products.

          The Parties will cooperate, work diligently and put best effort on the
          qualification of the Macronix NROM Based Process for production of
          Saifun Products to commence commercial production of Saifun Products
          at Macronix, at the earliest possible date. At Saifun's request the
          qualification of Saifun first E(2) Product may start immediately upon
          the above commercial production. Towards this end Macronix will
          provide to Saifun, no later than the Effective Date the balance of the
          information and documentation necessary to design the Saifun Products
          which are Confidential Information of Macronix as described in Section
          14, such as topographical design rules (DRC), cell library, Hspice
          data, electrical specifications (E test), process parameters of
          Macronix' manufacturing process and assistance for the product
          qualification.

     8.3. Assistance by Saifun. Within the period ending eighteen (18) months
          following the Effective Date Saifun will:

          (a)  Supply Macronix with all information owned by Saifun necessary to
               practice the Saifun NROM Technology and know-how including, but
               not limited to, design rules, test chip, samples, wafers, test
               techniques and other know-how as needed to facilitate the
               implementation of the Saifun NROM Technology into production at
               Macronix; and

          (b)  Provide support in order to facilitate the transfer, and the
               debug of, the Saifun NROM Technology for the purpose of
               production at Macronix manufacturing facility, and will make its
               people available for general consultation as needed.

     8.4. Reporting and Cooperation. It is agreed that both Parties will work
          towards developing an ongoing technical and business partnership and
          alliance that will benefit both companies. With this spirit, an
          operation and business review meeting will take place once a quarter
          between Macronix and Saifun, in which the parties will discuss and
          review technical, business and operation topics. Meetings shall be
          held alternately at Saifun's site in Israel and Macronix site in
          Taiwan.

9.   CAPACITY

     9.1. Basic Capacity. Macronix will complete the qualification of the
          process based on the Saifun NROM Technology no later than September
          2000.


                                                                              18

<PAGE>

          Ramp up, and capacity allocation increases and the format of the
          rolling wafer requirement forecast to be transferred monthly, will be
          agreed upon in the Final Foundry Agreement. At the end of an initial
          ramp up period to be defined in the Final Foundry Agreement, but no
          later than 2002 Macronix will allocate, total of three thousand (3000)
          W/M on the basis of 8" wafers (or an equivalent quantity of W/M of a
          different size) at Macronix' fab (the 3000 W/M will be referred to
          hereunder as "Basic Capacity").

     9.2. Extended Capacity. Macronix will allocate more capacity totaling up to
          10% of Macronix overall manufacturing capacity manufactured on
          processes utilizing Saifun NROM Technology, but no more than
          additional 3000 W/M (in addition to the capacity committed in Section
          9.1 ). The Basic Capacity together with the capacity guaranteed in
          accordance with this Section 9.2 will be referred to hereunder as
          "Extended Capacity".

     9.3. Additional Capacity. Should Saifun need capacity beyond the Basic
          Capacity, such capacity will be allocated according to the following
          principles:

          (a)  Submission of Request. Saifun will provide an 18-month forecast
               for all wafers Saifun needs beyond the Basic Capacity. Should
               Macronix have such capacity available and the capacity is not
               committed at the time the request is made, Macronix will commit
               the requested capacity or portion thereof to Saifun, depending on
               availability. Subject to Section 9.3(b)(iii) ("Temporary Loss of
               Capacity") once approved, the Additional Capacity will be
               committed and Saifun will not be obliged to finance such approved
               Additional Capacity.

          (b)  Financing of Additional Capacity. Should Macronix lack the
               capacity for the Additional Capacity, Saifun may, at its
               discretion, participate in the financing of the building capacity
               for Additional Capacity by Macronix as follows:

               (i)  For every 1,000 W/M of Additional Capacity (to be
                    established by ordering date), Saifun will pay the lower of
                    the actual depreciation cost of equipment necessary for such
                    Additional Capacity and $6M annually for 5 years (prorated
                    payments will be made to lesser quantities of W/M). The
                    annual payments will be adjusted for embedded process.
                    Precise mechanism and cost for embedded process will be
                    established in the Final Foundry Agreement.

               (ii) Fees and payments in accordance with this provision will be
                    assessed only for portions of Additional Capacity requested
                    (over the initial 3000 W/M) and the allocated capacity to
                    satisfy the Additional Capacity was not utilized (either by
                    Saifun or by third parties).


                                                                              19

<PAGE>

               (iii) Temporary Loss of Capacity. Should Saifun's rolling
                    forecast wafer demand is below the committed capacity for an
                    extended period of time (to be agreed upon by the Parties in
                    the Final Foundry Agreement), Saifun will temporarily lose
                    some of such non used capacity in accordance with the
                    principles set in the Final Foundry Agreement.

     9.4. Limitation for Saifun Products. The capacity allocated in accordance
          with this provision will be limited to Saifun Products developed,
          designed and created in the normal way of doing business by Saifun.

     9.5. Substitute Foundry.

          (a)  Saifun will be free to manufacture at a Foundry of a third Party
               should Macronix:

               (i)  Insufficient Capacity. Lack the capacity in accordance with
                    Sections 9.1or 9.2 or 9.3 which is not attributable to
                    Saifun, and Macronix fails to cure in accordance with the
                    provisions of Section 9.7; or

               (ii) Failure to Meet Technology Needs. Not be able to support or
                    cannot qualify specific process technology, provided such
                    process technology was included in Saifun technology road
                    map made available to Macronix at least one and a half year
                    in advance and/or rolling forecasts are duly provided by
                    Saifun and nonetheless Macronix was not able to recover the
                    defaults within *** after receipt of Saifun's written
                    notification regarding such failure to meet the technology
                    needs of Saifun.

               (iii) Wafer Price. Not meet a matching offer, which is at least
                    ***% of the Wafer Based price in accordance with Section
                    10.2(c).

               (iv) Material Breach. Take (by Macronix or any of its
                    Subsidiaries) an action or in action in violation of
                    Sections 2.4, 3.1(c)(i) or 3.2 (payment), Section 4.5(re non
                    licensed E(2) and other non licensed Products), or Section 5
                    (non sue).

               (v)  A Substitute Foundry should be selected based on the
                    following order and preference (assuming all have available
                    capacity in comparable prices):

                    (1)  ***

                    (2)  ***


*** Omitted pursuant to a confidential treatment request. The confidential
    information has been filed separately with the SEC.


                                                                              20

<PAGE>

                    (3)  ***

                    (4)  A single foundry in Taiwan. In case Saifun seeks
                         production from a semiconductor company whose primary
                         place of business is in Taiwan, it will not utilize
                         within Taiwan, more than one such Substitute Foundry

                    (5)  If Saifun is unable to secure capacity in any of the
                         above-mentioned fabs, or the conditions are not
                         competitive, no restrictions will apply as to the
                         identity of the Substitute Foundry, but, under no
                         circumstances will Saifun chose more than one
                         Substitute Foundry in Taiwan.

     9.6. Phase Out of Capacity. Where according to this Agreement Macronix will
          cease providing capacity to Saifun (e.g. should Macronix lose the
          licenses granted under Section 2 and 3, upon termination of this
          Agreement, or upon the revocation of the licenses in accordance with
          Section 4.6), Saifun will be able to provide Macronix with and
          Macronix shall fulfill purchase orders from Saifun and its customers
          during the *** period, or other period agreed upon by the
          parties, following the termination or revocation, or other
          circumstance that triggered Macronix' stop of manufacture for Saifun
          as the case may be, for quantities up to *** the total monthly
          allocation for all the period as fixed at the date the licenses are
          lost or the Agreement is terminated or Macronix stop the manufacture
          on other grounds. At the end of the *** period, or other period
          agreed upon by the parties Macronix will be released of its capacity
          obligations set out in this Agreement.

     9.7. Shortfall. Parties will agree as part of the Final Foundry Agreement
          on shortfall terms along the following principles:

          (a)  Saifun will be a most favored customer, and will suffer the least
               (compared to other customers of Macronix) of a shortfall from
               Macronix.

          (b)  Shortfall of ***% or less which does not persist for lengthy
               periods will be ignored. Similarly, shortfall of less then ***%
               during *** only will not require recovery.

          (c)  Continuous shortfall of less then ***% *** in a row, then
               Macronix will be obliged to meet forecast of the next Quarter
               provided that orders are placed accordingly.

          (d)  For quantities exceeding the first ***% shortfall, the parties
               will agree on an expedited recovery program, which will give
               Saifun

____________________________

*** Omitted pursuant to a confidential treatment request. The confidential
    information has been filed separately with the SEC.


                                                                              21

<PAGE>

               preference over other customers of Macronix.

10.  WAFER PRICING

     10.1. Wafer Base Price (F.O.B ex works)

          (a)  THE INDUSTRY WAFER PRICE. Subject to subsection (b) and (c), The
               Industry Wafer Price will be ***

               (i)  ***

               (ii) ***

          (b)  CALCULATING THE WAFER BASE PRICE. The Wafer Base Price for Saifun
               will be calculated based on the Industry Wafer Price and will
               take into consideration the actual number of masks and process
               steps using specific equation to be determined in the Final
               Foundry Agreement.

          (c)  WAFER SORT PRICE. ***

     10.2. Adjustments of Wafer Base Price.

          (a)  FREQUENCY OF UPDATES. The Wafer Base Price may be updated ***
               to reflect the business, products, technology, yield, and
               manufacture conditions or the industry or market conditions or
               special needs of the Parties.

          (b)  PRINCIPLES OF UPDATE.

               (i)  When the Industry Wafer Price in 10.1(a) increases by ***%
                    or more, the Base Wafer Price will be discounted by ***% or
                    more.

               (ii) When said Industry Wafer Price decreases or it increases by
                    less than ***%, Wafer Base Price will not be adjusted.
                    However, should Saifun needs special discount due to
                    specific business condition, the Parties will discuss in
                    good faith such discounts.

          (c)  Matching Offer. If a third party has offered in writing to sell
               Saifun wafers in an arms length transaction and for a reasonable
               commercial price which is lower than the Wafer Base Price, Saifun
               may advise Macronix in writing of the business opportunity and


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

***  Omitted pursuant to a confidential treatment request. The confidential
     information has been filed separately with the SEC.


                                                                              22

<PAGE>

               allow Macronix to match such offer. Should Macronix fail to
               exercise its right to sell at a price of ***% or less of the
               offer made by a third party, or does not send a written
               confirmation to Saifun of its intention to do so, within 30 days
               from the date it received Saifun's notice, Saifun will be free to
               purchase its wafers from the third party at the notified price,
               and the provisions of Section 9.4 and other sections in this
               Agreement regarding Substitute Foundry will apply to such foundry
               provided that the price of products provided to Saifun shall not
               exceed the notified price and such price must be higher than ***%
               of the Industry Wafer Price.


     10.3. Wafer- Actual Price.

          The Wafer - Actual Price Saifun will pay the lower between:

          (a)  Base Wafer Price less the following quantity discount:

               (i)  ***% for the 1st *** W/M;

               (ii) ***% for the 2nd *** W/M ***;

               (iii) ***% for the 3rd *** W/M ***;

               (iv) ***% for the 4th *** W/M ***;

               (v)  above *** W/M there will be no discounts;

                    AND

          (b)  ***.

11.  MISCELLANEOUS FOUNDRY PROVISIONS

     11.1. Macronix commits to enter a separate understanding with ***
          according to which Macronix will engage *** as a foundry for
          Licensed Products. The quantity of wafers, the duration for such an
          obligation (along the understandings described in Appendix 11.1) and
          all other terms and conditions regarding the fabrication will be
          agreed upon between *** and Macronix.

     11.2. Advanced Technology. Macronix will permit Saifun to move its capacity
          allocation to the most advanced Macronix NROM technologies at the
          earliest practical date after the full qualification of such
          technology (with a reasonable ramp up rate).

     11.3. Wafer Sort. Wafer supplied will be sorted. The Final Foundry
          Agreement will be negotiated by the Parties in good faith to cover all
          aspects of Sort program development and sort capacity based on
          following principles:

          (a)  Macronix will support the development of the needed outsourcing
               sort capacity of Saifun. Such support will include: recommending
               wafer sort subcontractor vendor (up to two) to support all Saifun

-------------------------
***  Omitted pursuant to a confidential treatment request. The confidential
     information has been filed separately with the SEC.


                                                                              23

<PAGE>

               sort capacity requirements, or test program development (E(2)
               only), support tester selection and advice the reasonableness of
               the subcontractor's prices.

          (b)  Macronix will use commercially reasonable effort to assist Saifun
               in getting a competitive wafer sort pricing at test fabs
               introduced by Macronix.

     11.4. Final Foundry Agreement

          (a)  The Parties will execute within four (4) months after the
               Effective Date or other agreed upon period a Final Foundry
               Agreement which will include provisions customary in
               semiconductor supply agreements and will include among other
               things the agreed upon product qualification for Saifun Products,
               and related NRE charges, wafer sort program, foundry yield, cycle
               time and lead time, rolling forecast mechanism process change
               (modification) and termination of a process, engineering and
               reliability, information access and facility audit, inventory,
               quick turnaround lots, engineering lots, termination of process
               provisions, sort options and other terms and conditions for the
               supply of Saifun Products.

          (b)  Failure to reach such an understanding will be resolved by
               utilizing the assistance of an agreed upon objective party or,
               expert in the industry in reliance on the standard customary in
               the industry, such as the standard terms.

     11.5. Management Program

          (a)  Immediately after the Effective Date, the Parties shall appoint a
               program management committee. Each Party shall designate one
               representative to this committee as program manager, whose
               primary responsibility shall be to act as a focal point for
               technical and commercial discussions between the Parties relating
               to the performance defined in this Agreement.

          (b)  The program management committee shall meet as often as required,
               but not less than once every two months for the initial six
               months following the Effective Date of this Agreement, and not
               less than quarterly thereafter. The program managers of each
               Party shall cooperate with each other in establishing the agenda
               in advance of each meeting.

     11.6. Production for Harmful Competitor of Macronix. Saifun will use its
          best effort to seek production elsewhere for products with logo of a
          third party who is a harmful competitor of Macronix. A third party
          will become such a harmful competitor as soon as Macronix advises
          Saifun that such a third party is considered by Macronix to be a
          harmful competitor. Such notification can be granted only before
          manufacture for such third party's product has commenced, or within 7
          days from the date in which time Saifun advises Macronix of such a new
          party. As soon as Macronix


                                                                              24

<PAGE>

          notifies Saifun that a third party is a harmful competitor in
          accordance with this Section 11.6, the Parties will maintain an open
          dialog to determine the courses of action to be taken. Saifun at her
          end will endeavor to have the above products manufactured in third
          party's fabs, and Macronix will assist Saifun in securing the required
          capacity in Macronix fabs, provided that there is no adverse impact to
          Macronix and that the assistance period shall not exceed six months
          upon the written notice of Saifun. Should Saifun require longer
          support period, the Parties shall negotiate in good faith the
          applicable terms and conditions. Macronix will use the rights granted
          herein under only in extreme cases of competition, such as in the case
          where Macronix and such a third party are in litigation, or such third
          party had already caused actual damage to Macronix in the past or any
          other harmful condition agreed upon by the parties.

12.  AUDIT AND RECORD KEEPING

     12.1. Payment Terms. During the term of this Agreement, Macronix will
          provide Saifun with quarterly written royalty reports for sales of
          Licensed Products within *** after the end of each calendar quarter.
          Such royalty reports shall set forth Macronix' Net Sales, and royalty
          amounts due to Saifun in accordance with this Agreement with respect
          to the quarter just ended and Macronix' calculations (in reasonable
          detail) of such royalties. Macronix shall pay Saifun the amount
          specified in the reports, within *** of the end of the calendar
          quarter. All payments under this Agreement shall be paid in U.S.
          dollars no withholding taxes will be withheld. In the event that
          Macronix payment due hereunder is not paid by the end of the
          applicable *** period, Macronix will be assessed a late charge equal
          to the higher of one and one-half percent (1.5%) per month or the
          statutorily maximum rate of interest in accordance with the laws of
          the State of California.

          Macronix will pay Saifun all other payments due in accordance within
          this no later than *** past the date provided for in this Agreement.

     12.2. Records. For a period of five (5) years after each royalty or other
          payment due or made to Saifun under this Agreement, Macronix agrees to
          make and maintain such books, records and accounts as are reasonably
          necessary to verify such royalty payments.

     12.3. Audit. Upon at least thirty (30) days prior written notice to
          Macronix, no more than once a year, Saifun shall have the right, at
          its own cost and expense, to authorize an internationally recognized
          certified public accounting firm selected by Saifun and approved by
          Macronix, which approval will not be unreasonably withheld, to audit
          Macronix' books, records, and accounts for the sole purpose of
          verifying royalties paid to Saifun under this Agreement. Macronix will
          promptly make up any underpayment revealed by such an audit. Any
          overpayments made shall be credited against future royalty obligations
          or refunded to Macronix if

_________________

*** Omitted pursuant to a confidential treatment request. The confidential
    information has been filed separately with the SEC.


                                                                              25

<PAGE>

          there are no future royalty obligations. Macronix shall bear the costs
          of any audit, which discloses an underpayment of 5% or more between
          its records and the audited payments.

13.  CONFIDENTIALITY

     13.1. Acknowledgement. Saifun and Macronix acknowledge that, in the course
          of performing their respective obligations hereunder, each may obtain
          Confidential Information relating to the other and the others'
          products that is of a confidential and proprietary nature to such
          other party.

     13.2. Exclusions. Confidential Information does not include information
          which:

          (a)  is or becomes public knowledge or is rightfully received by a
               party without fault or misconduct of the receiving party or any
               breach of any confidentiality obligation; or

          (b)  the receiving party can prove by documents that it was
               independently developed by it without use of the Confidential
               Information; or

          (c)  the receiving party can prove by documents that it was previously
               known to it prior to receipt of the Confidential Information.

     13.3. Obligation. Each of the Parties agrees that, for a period of seven
          (7) years following termination of this Agreement or 31st December
          2020 (whichever occurs later) it will (i) use the Confidential
          Information of the other Party only in connection with fulfilling its
          rights and obligations under this Agreement; (ii) hold the
          Confidential Information of the other Party in strict confidence and
          exercise due care with respect to its handling and protection,
          consistent with its own policies concerning protection of its own
          Confidential Information of like importance, but in no instance less
          than reasonable care, (iii) not disclose, divulge or publish the
          Confidential Information of another Party except to such of its
          responsible employees and subcontractors who have a bona fide need to
          know to the extent necessary to fulfill such Party's obligations under
          this Agreement or except as such Confidential Information is required
          to be disclosed pursuant to law, provided the Party uses reasonable
          efforts to give the disclosing Party sufficient notice of such
          required disclosure to allow the disclosing Party reasonable
          opportunity to object to and to take legal action to prevent such
          disclosure; (iv) instruct and enter into a confidentiality agreement
          with all such employees and subcontractors to prevent the other
          Party's Confidential Information being disclosed to third parties,
          including consultants, without the prior written permission of the
          other Party. Each Party and its respective Subsidiaries, may exchange
          Confidential Information as may be reasonably required in furtherance
          of this Agreement.


                                                                              26

<PAGE>

     13.4. Confidentiality of Terms. The Parties hereto shall keep the terms of
          this Agreement confidential and shall not now or hereafter divulge
          these terms to any third party except:

          (i)  with the prior written consent of the other party; or

          (ii) to any governmental body having jurisdiction to call therefor; or

          (iii) as otherwise may be required by law or legal process, including
               to legal and financial advisors in their capacity of advising a
               party in such matters; or

          (iv) during the course of litigation so long as the disclosure of such
               terms and conditions are, to the extent permissible by applicable
               laws, restricted in the same manner as is the confidential
               information of other litigating parties and so long as (a) the
               restrictions are embodied in a court-entered Protective Order, if
               applicable and (b) the disclosing party informs the other parties
               in writing at least ten (10) days in advance of the disclosure;
               or

          (v)  in confidence to legal counsel, accountants, banks and financing
               sources and their advisors solely in connection with complying
               with financial transactions

     13.5. The Confidentiality provisions in the Agreement are intended to add
          to any other confidentiality restrictions set between the parties, and
          should not be construed differently. Nothing in this provision will
          prevent the utilization of the Confidential Information as a party to
          this Agreement in accordance with the licenses granted in this
          Agreement.

14.  INTELLECTUAL PROPERTY INFRINGEMENT

     14.1. Cooperation. The Parties will cooperate in protecting the technology
          obtained under this Agreement and will share information regarding
          third party infringements.

     14.2. No Indemnification. Claims, liabilities and costs of defending any
          claim or suit arising from alleged infringement or misappropriation,
          violation of unfair competition rights of a third party or suits with
          similar causes of action resulting or based on the utilization of the
          technology obtained under this Agreement by any Party, will be the
          responsibility of the Party to whom such claims are directed with no
          right of indemnification from the other Party.

15.  WARRANTIES


                                                                              27

<PAGE>

     15.1. Saifun Warranties.

     Saifun represents and warrants to Macronix that, as of the Effective Date:
     (i) it has full power and authority to enter into this Agreement; (ii) it
     has sufficient right and authority to carry out its obligations hereunder
     and to grant to Macronix all licenses and rights in the Saifun Patents that
     Saifun grants to Macronix hereunder; (iii) it has not granted, any licenses
     to any third party which are inconsistent with the licenses and rights
     granted under this Agreement; (iv) it owns all right, title and interest in
     and to the Saifun Patents; (v) all corporate actions necessary for entering
     into this Agreement have been taken; (vi) the signatories on behalf of it
     have been duly authorized; (vii) any and all government consents required
     for this Agreement to be entered into and for the rights granted herein
     have been obtained; and (viii) Saifun does not know of any claim made by
     any third party that the Saifun NROM Technology and Saifun Patents, in
     whole or in part, infringes upon any patent or other intellectual property
     of a 3rd party. (ix) there is no restriction for Macronix regarding
     Confidential Information

     15.2. Macronix Warranties.

     Macronix represents and warrants to Saifun that: (i) it has full power and
     authority to enter into this Agreement; (ii) it has sufficient right and
     authority to carry out its obligations hereunder; (iii) it has not granted
     any licenses to any third party which are inconsistent with the licenses
     and rights granted under this Agreement; (iv) it owns all right, title and
     interest in and to the Patents licensed by it hereunder; (v) it has the
     right and authority to grant the licenses granted in this Agreement on its
     own behalf and on behalf of its Subsidiaries; (vi) all corporate actions
     necessary for entering into this Agreement have been taken; (vii) the
     signatories on its behalf have been duly authorized; and (viii) any and all
     government consents required for this Agreement to be entered into and for
     the rights granted herein have been or will be obtained.; and (ix) there is
     no restriction for Saifun regarding Confidential Information

     15.3. Exclusion of Warranties.

     THE WARRANTIES IN THIS SECTION ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS
     AND IMPLIED, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTIES OF
     MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. NOTHING IN THIS
     AGREEMENT SHALL BE CONSTRUED AS A WARRANTY OR REPRESENTATION AS TO THE
     VALIDITY OR SCOPE OF ANY PATENT OR CONFIDENTIAL INFORMATION OWNED OR
     CONTROLLED ANY OF THE PARTIES TO THIS AGREEMENT.

16.  ADOPTION AND PROMOTION

     16.1. Announcement of Saifun NROM Technology. Immediately upon execution of
          this Agreement, the Parties will publish a joint press


                                                                              28

<PAGE>

          announcement, advising of the choice of the Saifun NROM Technology as
          the core for future flash technology.

     16.2. Adoption of Saifun NROM Technology. Macronix agrees to make a
          commercially reasonable effort to replace, a part or the whole of,
          Macronix' previous flash memory technology with the Saifun NROM
          Technology.

     16.3. Promotion. Subject adoption of the Saifun NROM Technology, Macronix
          will promote the Saifun NROM Technology in a manner that clarifies
          that the Saifun NROM Technology is the foundation of Macronix' flash
          technology and Licensed Products of Macronix, in a form mutually
          agreeable to the Parties. Such promotion will include a visible
          reference in marketing materials (in all media) that Licensed Products
          incorporate the Saifun NROM Technology. Such attribution will be made
          in accordance with commercially practical guidelines published by
          Saifun and approved by Macronix, which approval will not be
          unreasonably withheld.

17.  TERM AND TERMINATION

     17.1. Term. Unless otherwise terminated as herein provided, this Agreement
          shall continue in full force and effect for the duration of the Saifun
          Patents, and thereafter shall continue on a year-to-year basis unless
          the Party wishing to terminate provides the other Party with no less
          than twelve (12) months written notice of its intent not to renew this
          Agreement.

     17.2. Termination at will by Macronix. Macronix can terminate this
          agreement (at any point of time), as long as : 1) Pays all license and
          prepaid royalties payment due until the date of termination 2) pays
          actual royalties dueand meets all other conditions prior to
          termination. The obligation of Macronix as per section 9 and 10 will
          be maintained for a limited period of 12 months from the notice date,
          or othe term agreed upon by the Parties accordance with the provisions
          of section 9.6 and the reasonable royalty condition.

     17.3. Termination Upon Material Breach.

          (a)  This Agreement may be terminated by either Party for material
               breach of this Agreement if such breach is not cured within sixty
               (60) days after written notification of such breach: provided
               however, that this Agreement may not be terminated if the
               breaching Party has provided within such sixty (60) day period
               evidence of good-faith effort and progress toward curing the
               breach, in which case this Agreement may not be terminated unless
               the breach has not been cured within ninety (90) days of written
               notification of the breach.

          (b)  Consequences of Termination Upon Material Breach. In the event of
               termination under this Section17.3 , the licenses and rights to


                                                                              29

<PAGE>

               royalties granted under this Agreement shall continue except as
               follows:

               (i)  If the Agreement is terminated by Macronix for Saifun
                    unduly, deliberately disclosing substantive process secrets
                    of Macronix, the licenses and immunities granted by Macronix
                    to Saifun shall terminate and the licenses granted to
                    Macronix in Sections 2 and 3 will be deemed fully paid. The
                    obligations of Macronix in Section9, and 10 will be
                    maintained for a limited period of 18 months in accordance
                    with the provisions of Section 9.6.

               (ii) If the Agreement is terminated by Saifun for Macronix'
                    violation of the Foundry Restriction set in Section 4.2,
                    action or in action in violation of Section 4.5(re non
                    licensed E(2) and other non licensed Products), 5 (non sue)
                    9 (capacity), 2.4 (payment) 3.2 and 3.3 (payment) or in
                    accordance with Section 0, the licenses granted by Saifun to
                    Macronix in Sections 2 and 3 shall terminate and the
                    licenses and all immunities in Sections 5 and 7 granted by
                    Macronix to Saifun will be maintained provided that
                    reasonable royalties shall be paid by Saifun when such
                    royalties are due in accordance with Section 5.1(c) and
                    5.2(c).

     17.4. Consequences of Termination (under any circumstances). The
          termination or expiration of this Agreement shall not affect any of
          the Parties' rights or obligations incurred prior to such termination.

          (a)  Maintenance of Rights and Existing Inventory after Termination.

               (i)  Except as otherwise provided, upon termination or expiration
                    of this Agreement, the Parties shall have the right to ship
                    any existing inventory of products licensed in accordance
                    with this Agreement, subject to the royalty provisions
                    (where applicable) of this Agreement. It is agreed that in
                    all instances of termination Macronix should have the right
                    to continue its existing business for at least 12 months, or
                    other period agreed upon by the Parties, to deliver the
                    existing orders and to smoothly terminate such business
                    case.

               (ii) Rights of Blocking Patents granted in reliance and in
                    accordance with this Agreement, will not be affected by the
                    termination or expiration of this Agreement and third
                    parties such as customers, distributors and others in lawful
                    possession of the Saifun Products will be continuing
                    permitted to do and engage in activities permissible under
                    this Agreement after the termination with regards to
                    existing inventory.


                                                                              30

<PAGE>

               (iii) In all circumstances in which termination results in
                    termination of manufacture, than the Parties and their
                    Subsidiaries will be entitled to ramp down period of ***, or
                    other period agreed upon by the Parties, in accordance with
                    the provisions of Section 9.6.

          (b)  Return Of Material. Upon any termination each Party shall
               promptly return to the other Party documents, and all materials
               and samples (in any medium) given to the other Party under this
               Agreement, and which have been in such Party's control or
               possession at any time, and shall immediately cease to make any
               further use of such material and know how acquired in connection
               therewith.

          (c)  Release from Minimum Royalties. Should the Agreement be
               terminated before the obligations regarding Minimum Royalties
               (set in Sections 2.4(b) and 3.2) Macronix will be obligated in
               the payment of the actual royalties and will be released from
               early payment of the Minimum Royalties as set in the relevant
               sections.

          (d)  Survival. Termination of this Agreement will not release each
               Party from any confidentiality obligations entered into or
               payment of funds which have become due and have not yet been paid
               prior to the termination of this Agreement. In addition to the
               other survival clauses in this Agreement, the following
               provisions shall survive any termination or expiration of this
               Agreement for any reason, except as otherwise expressly stated
               herein: Section 11.6, 13, 17 and 18.

18.  DISPUTE RESOLUTION.

     18.1. Informal.

          In the event of a dispute regarding the performance of a Party's
          obligations under this Agreement, the Parties agree to attempt to
          resolve such dispute according to the following procedures prior to
          taking any formal legal action against another Party.

          (a)  Within 20 days of the other Parties receiving a request from the
               another Party, the Parties will negotiate in good faith to
               resolve any dispute between them regarding this Agreement.

          (b)  If the negotiations do not resolve the dispute to the reasonable
               satisfaction of both Parties, then, within thirty (30) days of a
               written request by any Party to call such a meeting, senior-level
               management representatives of the Parties shall meet in person
               and alone (except for one assistant for each Party) and shall
               attempt in good faith to resolve the dispute.

          (c)  If the dispute cannot be resolved as set forth in Sections
               18.1(a) to 18.1(b) above, the Parties agree that they shall
               arbitrate the dispute in accordance with Section 18.2. Under this
               Agreement, either Party may

_________________

*** Omitted pursuant to a confidential treatment request. The confidential
    information has been filed separately with the SEC.

                                                                              31

<PAGE>

               bring an action in any court of competent jurisdiction to compel
               arbitration in accordance with Section 18.2.

     18.2. Arbitration

     In accordance with the following provisions, the Parties shall resolve
     disputes arising under or affecting this Agreement by confidential
     arbitration. Except as provided in this Section 18.2, the Federal
     Arbitration Act shall govern the interpretation, enforcement and all
     proceedings pursuant to this Agreement. To the extent that the Federal
     Arbitration Act is inapplicable, California law pertaining to agreements to
     arbitrate shall apply. The procedure described in this Section 18.2 shall
     be the exclusive means of resolving disputes arising under or affecting
     this Agreement.

          (a)  Scope of Claims. The only claims that are arbitrable are those
               that, in the absence of this Section 13.2, would have been
               justiciable under applicable state or federal law. Claims for
               injunctive and/or other equitable relief are not arbitrable under
               this Agreement. In the event that the claim consists of a claim
               for injunctive relief and/or equitable relief and/or other forms
               of relief then the whole matter will be referred to a Court of
               law, rather than split the jurisdiction of the competent
               tribunal.

          (b)  Notice. The Parties agree that the aggrieved Party shall give
               written notice of a demand to arbitrate any claim arising from
               this Agreement ("Noticei") to the other Party. The Notice shall
               identify and describe the nature of all claims asserted and the
               facts upon which such claims are based. The Notice shall be sent
               to the other Party in accordance with the provisions in this
               Agreement for sending notices.

          (c)  Selection of Arbitrators. The arbitration proceedings shall be
               conducted by a panel of three qualified in the subject matter of
               semiconductor licensing agreements ("Arbitratorsi"). Each Party
               shall designate one Arbitrator and the two Arbitrators so
               designated shall select together the third Arbitrator.

          (d)  Discovery. The Parties shall allow and participate in discovery
               in accordance with the Federal Rules of Civil Procedure for a
               period of ninety (90) days after the receipt of the Notice by the
               accused Party. Additional discovery may be had only where the
               Arbitrators selected pursuant to this Agreement so order upon a
               showing of substantial need.

          (e)  Designation of Witnesses. At least thirty (30) days before the
               arbitration, the Parties must exchange lists of witnesses,
               including any expert(s), and copies of all exhibits intended to
               be used at the arbitration.

          (f)  Subpoenas. Each Party shall have the right to subpoena witnesses
               and documents for the arbitration.

          (g)  Arbitration Procedures. Arbitration proceeding shall be conducted
               pursuant to the rules of , California, U.S.A., or such other
               location as may be agreed between the Parties. The arbitration
               proceedings shall be held in English. The Arbitrators shall apply
               the substantive law (and the law of remedies, if applicable) of
               the State of California, or federal law, or both, as applicable
               to the claim(s) asserted. The Arbitrators are without


                                                                              32

<PAGE>

               jurisdiction to apply any different substantive law, or law of
               remedies. The Arbitrators shall have jurisdiction to hear and
               rule on pre-hearing disputes and are authorized to hold
               pre-hearing conferences by telephone or in person, as the
               Arbitrators deem necessary. The Arbitrators shall have the
               authority to entertain a motion to dismiss and/or a motion for
               summary judgment by any Party and shall apply the standards
               governing such motions under the Federal Rules of Civil
               Procedure. The Arbitrators, and not any federal, state, or local
               court or agency, shall have exclusive authority to resolve any
               dispute relating to the interpretation, applicability,
               enforceability or formation of this Agreement, including but not
               limited to any claim that all or any part of this Agreement is
               void or voidable. The arbitration shall be final and binding upon
               the Parties.

          (h)  Enforcement of Judgment and Judicial Review. The judgment upon
               award of the Arbitrators shall be final and binding and may be
               enforced in any court of competent jurisdiction, and each Party
               unconditionally submits to the jurisdiction of such court for the
               purpose of any proceeding seeking such enforcement.

          (i)  Confidentiality. All papers, documents, or evidence, whether
               written or oral, filed with or presented to the Arbitrators shall
               be deemed by the Parties and by the Arbitrators to be
               Confidential Information.

19.  MISCELLANEOUS

     19.1. Headings. The headings of the sections of this Agreement are for
          convenience only and will not be of any effect in construing the
          meanings of this Agreement.

     19.2. Appendices. The recitals and appendices to this Agreement form an
          integral part thereof and shall be used for the purposes of
          interpreting this Agreement.

     19.3. Reservation of Rights. Except as expressly granted herein, each Party
          reserves unto itself, its successors and assigns all right, title and
          interest it has in its property, including but not limited to its
          intellectual property, confidential information, know how and trade
          secrets.

     19.4. Subsidiaries. Any rights, which apply, to each Party under this
          Agreement shall apply equally to its subsidiaries.

     19.5. Governing Law. This Agreement and matters connected with the
          performance thereof shall be construed, interpreted, applied and
          governed in all respects in accordance with the laws of the United
          States of America and the State of California, without reference to
          its conflict of laws principles.

     19.6. Jurisdiction. The Parties agree that all disputes and litigation
          regarding this Agreement and matters connected with its performance
          shall be subject to the exclusive jurisdiction of the United States
          District Court for the Southern District of California. The Parties
          hereby waive any and all


                                                                              33

<PAGE>

          right to have a jury hear any case arising under or related to this
          Agreement.

     19.7. Assignment.

          (a)  The Agreement and the rights and obligations arising hereunder
               shall be binding upon and inure to the benefit of the Parties and
               to their respective successors and assigns of all rights and
               interests, provided that one Party shall not assign any of its
               rights or privileges hereunder without the prior written consent
               of the other Party.

          (b)  M&A. Notwithstanding the above, this Agreement may be assigned,
               without the written consent of the other Party, by either Party,
               pursuant to an M&A, provided that the successor agrees to be
               bound by the terms of this Agreement. In the event of an M&A of
               Saifun, Saifun will notify Macronix immediately after execution
               of the relevant agreement. The rights of Macronix and Saifun's
               successor in interest shall not be affected due to such
               acquisition.

               Notwithstanding the above in the event that Saifun's successor in
               interest is a semiconductor manufacturer, Macronix will have the
               right to stop performing its obligations under this Agreement for
               providing Saifun's successor with wafers (under Sections 9 and
               10), provided Macronix had given Saifun ***, or other period
               agreed upon by the Parties, phase out period in accordance with
               the procedures and rights set in Section 9.6 All other rights and
               obligations of the Parties under this Agreement will be
               maintained following the M&A.

               For clarification it is hereby stated that under no circumstances
               shall the licenses granted to Macronix be divisible. Transfer of
               rights in an M&A will retain the entire rights in the hands of
               the assignee or successor in interest.

     19.8. Joint Projects. The Parties are to agree on a joint development
          program as part of their contemplated strategic alliance and will
          together explore avenues for future cooperation.

     19.9. Entire Agreement. This Agreement and the appendices attached hereto
          constitute the entire and exclusive agreement between the Parties
          hereto with respect to the subject matter hereof and supersede any
          prior agreements between the parties with respect to such subject
          matter.

     19.10. Severability. If any provision of this Agreement, or the application
          thereof, shall for any reason and to any extent be held invalid or
          unenforceable, the remainder of this Agreement shall remain in full
          force and effect and be interpreted so as best to reasonably effect
          the intention of the Parties.

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

*** Omitted pursuant to a confidential treatment request. The confidential
    information has been filed separately with the SEC.

                                                                              34
<PAGE>

     19.11. Force Majeure. No Party shall be responsible for delay or failure in
          performance caused by any government act, law, regulation, order or
          decree, by communication line or power failures beyond its control, or
          by fire, flood or other natural disasters or by other causes beyond
          its reasonable control, nor shall any such delay or failure be
          considered to be a breach of this Agreement. In any such event,
          performance shall take place as soon thereafter as is reasonably
          feasible. The remedies to be taken in case the force majeure prevent
          full compliance with the obligations set in Section 8.4, will be set
          in the Final Foundry Agreement.

     19.12. Compliance with Law, including U.S. Export Laws. Each Party agrees
          to comply with all applicable international, national, state, regional
          and local laws and regulations in performing its duties hereunder and
          in any of its dealings with respect to the technical information
          disclosed hereunder or direct products thereof. No Party shall export
          or re-export, directly or indirectly, any technical information
          disclosed hereunder or direct products thereof to any destination
          prohibited or restricted by the export control laws and regulations of
          the United States and Taiwan, including the U.S. Export Administration
          Regulations, without the prior authorization form the appropriate
          governmental authorities.

     19.13. No Third Party Beneficiaries; No Agency. Except as expressly
          provided herein to the contrary, no provisions of this Agreement,
          express or implied, are intended or will be construed to confer
          rights, remedies or other benefits to any third party under or by
          reason of this Agreement. This Agreement will not be construed as
          creating an agency, partnership or any other form of legal association
          (other than as expressly set forth herein) among the Parties.

     19.14. Modification and Waiver. No modification to this Agreement, nor any
          waiver of any rights, will be effective unless assented to in writing
          by the Party to be charged, and the waiver of any breach or default
          shall not constitute a waiver of any other right hereunder or any
          subsequent breach or default.

     19.15. Notices. Any required or permitted notices hereunder must be given
          in writing at the address of each Party set forth below, or to such
          other address as any Party may substitute by written notice to the
          others in the manner contemplated herein, by one of the following
          methods: hand delivery; registered, express, or certified mail, return
          receipt requested, postage prepaid; nationally-recognized private
          express courier; or facsimile. Notices will be deemed given on the
          date when hand delivered or transmitted by facsimile, five (5) days
          after being sent by express mail or nationally-recognized private
          express courier, and ten (10) days after being sent by registered or
          certified mail.


                                                                              35

<PAGE>

To Saifun:                              To Macronix:

_____________________________________   ________________________________________

_____________________________________   ________________________________________

_____________________________________   ________________________________________

Attention: Kobi Rozengarten             Attention: Simon Wang

     19.16. Counterparts. This Agreement may be executed in multiple
          counterparts, each of which will be deemed an original, but all of
          which together will constitute one and the same instrument.


                                                                              36

<PAGE>

     IN WITNESS WHEREOF, Saifun and MACRONIX have caused this Agreement to be
executed by their duly authorized representatives as of the Effective Date.

Saifun Semiconductors Ltd.              Macronix


By: /s/ Boaz Eitan                      By: /s/ [illegible]
    ---------------------------------       ------------------------------------
Title: President and CEO                Title: President
Date: May 5, 2000                       Date: May 5, 2000


                                                                              37

<PAGE>

                                  APPENDIX 11.1

                             MANUFACTURING AT ***

Macronix undertakes to have the detailed below manufacturing portion
manufactured at *** at the prices agreed, in a signed document between
Macronix and *** in July 1999.
All manufacturing terms and conditions will be agreed upon by Macronix and ***
through negotiations in good faith.

     1.   For the period commencing upon signing this agreement and until
          September 30, 2002:

          1.1  From the first *** wafers manufactured during a given month - a
               minimum of *** out of every *** wafers shall be manufactured at
               ***, but no less than *** wafer per month; and

          1.2  From the *** wafer up to *** wafers manufactured during a
               given month - a minimum of *** out of every *** wafers shall be
               manufactured at ***; and

          1.3  From the *** wafer up to *** wafers manufactured during a
               given month - a minimum of *** out of every *** wafers shall be
               manufactured at ***; and

          1.4  From the *** wafer up to the *** wafers manufactured during
               a given month - a minimum of *** out of every *** wafers shall be
               manufactured at ***; and

          1.5  From the *** wafer manufactured during a given month -
               MACRONIX shall not be required to have any additional wafers
               manufactured at *** in such given month.

     2.   For the period commencing on October 1, 2002 and until the end of the
          term of this agreement - MACRONIX shall have a monthly minimum of
          *** wafers manufactured at ***, provided that *** shall at such
          period have contemporary foundry services and competitive technology
          offering

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

*** Omitted pursuant to a confidential treatment request. The confidential
    information has been filed separately with the SEC.

                                                                              38