** **

SENIOR INDENTUREM-SYSTEMS FINANCE INC.as IssuerM-SYSTEMS FLASH DISK PIONEERS LTD.as GuarantorTHE BANK OF NEW YORK TRUST COMPANY, N.A.as TrusteeDated as of March 23, 2005$75,000,0001.0% CONVERTIBLE SENIOR NOTES DUE 2035

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CROSS-REFERENCE TABLE
| **TIA   Section**     | **Indenture   Section** |
|-----------------------|-------------------------|
| 310(a)(1)             | 5.11                    |
| (a)(2)                | 5.11                    |
| (a)(3)                | n/a                     |
| (a)(4)                | n/a                     |
| (a)(5)                | 5.11                    |
| (b)                   | 5.3;5.11                |
| (c)                   | n/a                     |
| 311(a)                | 5.12                    |
| (b)                   | 5.12                    |
| (c)                   | n/a                     |
| 312(a)                | 2.10                    |
| (b)                   | 14.3                    |
| (c)                   | 14.3                    |
| 313(a)                | 5.7                     |
| (b)(1)                | n/a                     |
| (b)(2)                | 5.7                     |
| (c)                   | 5.7; 14.2               |
| (d)                   | 5.7                     |
| 314(a)(1),(2),(3)     | 9.6; 14.6               |
| (a)(4)                | 9.6; 9.7; 14.6          |
| (b)                   | n/a                     |
| (c)(1)                | 14.5                    |
| (c)(2)                | 14.5                    |
| (c)(3)                | n/a                     |
| (d)                   | n/a                     |
| (e)                   | 14.6                    |
| (f)                   | n/a                     |
| 315(a)                | 5.1(a)                  |
| (b)                   | 5.6; 14.2               |
| (c)                   | 5.1(b)                  |
| (d)                   | 5.1(c)                  |
| (e)                   | 4.14                    |
| 316(a)(last sentence) | 2.13                    |
| (a)(l)(A)             | 4.5                     |
| (a)(1)(B)             | 4.4                     |
| (a)(2)                | n/a                     |
| (b)                   | 4.7                     |
| (c)                   | 7.4                     |
| 317(a)(1)             | 4.8                     |
| (a)(2)                | 4.9                     |
| (b)                   | 2.5                     |

**____ 2 ____** 

 
| **TIA   Section** | **Indenture   Section** |
|-------------------|-------------------------|
| 318(a)            | 14.1                    |
| (b)               | n/a                     |
| (c)               | 14.1                    |

"n/a" means not applicable.

This Cross-Reference Table shall not, for any purpose, bedeemed to be a part of the Indenture.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**____ 3 ____** 

ARTICLE 1                 DEFINITIONS AND INCORPORATION BYREFERENCE.................... 1

Section 1.01.            Definitions..................................................................................................... 1

Section 1.02.            Incorporation by Reference of TrustIndenture Act....................................... 13

Section 1.03.            Rules of Construction................................................................................... 13

ARTICLE 2                 THE SECURITIES..................................................................................... 13

Section 2.01.            Title and Terms............................................................................................ 13

Section 2.02.            Form of Securities....................................................................................... 15

Section 2.03.            Legends...................................................................................................... 16

Section 2.04.            Execution, Authentication, Deliveryand Dating............................................. 20

Section 2.05.            Registrar and Paying Agent.......................................................................... 20

Section 2.06.            Paying Agent to Hold Assets in Trust........................................................... 21

Section 2.07.            General Provisions Relating toTransfer and Exchange.................................. 21

Section 2.08.            Book-Entry Provisions for the GlobalSecurities........................................... 23

Section 2.09.            Special Transfer Provisions.......................................................................... 24

Section 2.10.            Holder Lists................................................................................................. 26

Section 2.11.            Persons Deemed Owners............................................................................ 26

Section 2.12.            Mutilated, Destroyed, Lost or StolenSecurities............................................ 26

Section 2.13.            Treasury Securities...................................................................................... 27

Section 2.14.            Temporary Securities................................................................................... 27

Section 2.15.            Cancellation................................................................................................. 28

Section 2.16.            CUSIP Numbers......................................................................................... 28

Section 2.17.            Defaulted Interest........................................................................................ 28

Section 2.18.            Rule 144A and Regulation S........................................................................ 28

Section 2.19.            Form of Guarantee...................................................................................... 29

Section 2.20.            Guarantee of Securities................................................................................ 30

Section 2.21.            Execution of Guarantee................................................................................ 31

Section 2.22.            Add On Securities....................................................................................... 32

ARTICLE 3                 SATISFACTION AND DISCHARGE....................................................... 33

Section 3.01.            Satisfaction and Discharge ofIndenture........................................................ 33

Section 3.02.            Deposited Monies to Be Held in Trust.......................................................... 34

Section 3.03.            Return of Unclaimed Monies........................................................................ 34

ARTICLE 4                 DEFAULTS AND REMEDIES.................................................................. 35

Section 4.01.            Events of Default......................................................................................... 35

Section 4.02.            Acceleration of Maturity; Rescissionand Annulment..................................... 36

Section 4.03.            Other Remedies........................................................................................... 37

Section 4.04.            Waiver of Past Defaults............................................................................... 37

Section 4.05.            Control by Majority..................................................................................... 38

Section 4.06.            Limitation on Suit......................................................................................... 38

Section 4.07.            Unconditional Rights of Holders toReceive Payment and to Convert............ 39

**____ 4 ____** 

 

Section 4.08.            Collection of Indebtedness and Suitsfor Enforcement by the Trustee............ 39

Section 4.09.            Trustee May File Proofs of Claim................................................................. 40

Section 4.10.            Restoration of Rights and Remedies............................................................. 40

Section 4.11.            Rights and Remedies.................................................................................... 41

Section 4.12.            Delay or Omission Not Waiver.................................................................... 41

Section 4.13.            Application of Money Collected................................................................... 41

Section 4.14.            Undertaking for Costs.................................................................................. 41

Section 4.15.            Waiver of Stay or Extension Laws............................................................... 42

ARTICLE 5                 THE TRUSTEE.......................................................................................... 42

Section 5.01.            Certain Duties and Responsibilities............................................................... 42

Section 5.02.            Certain Rights of Trustee.............................................................................. 44

Section 5.03.            Individual Rights of Trustee.......................................................................... 44

Section 5.04.            Money Held in Trust.................................................................................... 45

Section 5.05.            Trustee`s Disclaimer.................................................................................... 45

Section 5.06.            Notice of Defaults........................................................................................ 45

Section 5.07.            Reports by Trustee to Holders..................................................................... 45

Section 5.08.            Compensation and Indemnification............................................................... 45

Section 5.09.            Replacement of Trustee............................................................................... 46

Section 5.10.            Successor Trustee by Merger, Etc............................................................... 47

Section 5.11.            Corporate Trustee Required;Eligibility......................................................... 47

Section 5.12.            Collection of Claims Against theCompany................................................... 47

ARTICLE 6                 CONSOLIDATION, MERGER, CONVEYANCE,TRANSFER OR LEASE            48

Section 6.01.            Guarantor May Consolidate, Etc., Onlyon Certain Terms............................ 48

Section 6.02.            Successor Substituted.................................................................................. 49

Section 6.03.            Guarantor to be the Sole Equityholderof the Company................................. 49

ARTICLE 7                 AMENDMENTS, SUPPLEMENTS AND WAIVERS.............................. 49

Section 7.01.            Without Consent of Holders ofSecurities..................................................... 49

Section 7.02.            With Consent of Holders of Securities.......................................................... 50

Section 7.03.            Compliance with Trust Indenture Act........................................................... 51

Section 7.04.            Revocation of Consents and Effect ofConsents or Votes.............................. 51

Section 7.05.            Notation on or Exchange of Securities.......................................................... 52

Section 7.06.            Trustee to Sign Amendment, Etc.................................................................. 52

ARTICLE 8                 MEETING OF HOLDERS OF SECURITI ES........................................... 52

Section 8.01.            Purposes for Which Meetings May BeCalled.............................................. 52

Section 8.02.            Call Notice and Place of Meetings............................................................... 53

Section 8.03.            Persons Entitled to Vote at Meetings............................................................ 53

Section 8.04.            Quorum; Action........................................................................................... 53

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Section 8.05.            Determination of Voting Rights;Conduct and Adjournment of Meetings........ 54

Section 8.06.            Counting Votes and Recording Actionof Meetings....................................... 54

ARTICLE 9                 COVENANTS........................................................................................... 55

Section 9.01.            Payment of Principal and Interest................................................................. 55

Section 9.02.            Maintenance of Offices or Agencies............................................................. 55

Section 9.03.            Corporate Existence.................................................................................... 56

Section 9.04.            Reports....................................................................................................... 56

Section 9.05.            Compliance Certificate................................................................................. 56

Section 9.06.            Liquidated Damages.................................................................................... 57

Section 9.07.            Additional Tax Amounts.............................................................................. 57

Section 9.08.            Resale of Certain Securities.......................................................................... 58

Section 9.09.            Restrictions on Indebtedness........................................................................ 58

Section 9.10.            Tax Status................................................................................................... 59

Section 9.11.            PFIC Status................................................................................................ 59

ARTICLE 10               REDEMPTION OF SECURITIES............................................................. 59

Section 10.01.          Redemption................................................................................................. 59

Section 10.02.          Notice to Trustee......................................................................................... 59

Section 10.03.          Selection of Securities to be Redeemed........................................................ 60

Section 10.04.          Notice of Redemption.................................................................................. 60

Section 10.05.          Effect of Notice of Redemption.................................................................... 61

Section 10.06.          Deposit of Redemption Price....................................................................... 61

Section 10.07.          Securities Redeemed in Part......................................................................... 62

ARTICLE 11               PURCHASE OF SECURITIES.................................................................. 62

Section 11.01.          Purchase Right Upon Fundamental Change.................................................. 62

Section 11.02.          Purchase of Securities by the Companyat Option of the Holder.................... 62

Section 11.03.          Fundamental Change Notices; Method ofExercising Purchase Right, Etc...... 65

ARTICLE 12               CONVERSION OF SECURITIES............................................................ 67

Section 12.01.          Conversion Right and Conversion Rate........................................................ 67

Section 12.02.          Exercise of Conversion Right....................................................................... 67

Section 12.03.          Fractions of Shares...................................................................................... 69

Section 12.04.          Adjustment of Conversion Rate.................................................................... 69

Section 12.05.          Notice of Adjustments of ConversionRate................................................... 79

Section 12.06.          Notice Prior to Certain Actions.................................................................... 79

Section 12.07.          Guarantor to Reserve Ordinary Shares......................................................... 80

Section 12.08.          Taxes on Conversions.................................................................................. 80

Section 12.09.          Covenant as to Ordinary Shares................................................................... 81

Section 12.10.          Cancellation of Converted Securities............................................................ 81

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Section 12.11.          Effect of Recapitalization,Reclassification, Consolidation, Merger or Sale..... 81

Section 12.12.          Responsibility of Trustee forConversion Provisions...................................... 82

ARTICLE 13               [RESERVED]............................................................................................. 83

ARTICLE 14               OTHER PROVISIONS OF GENERALAPPLICATION.......................... 83

Section 14.01.          Trust Indenture Act Controls........................................................................ 83

Section 14.02.          Notices....................................................................................................... 83

Section 14.03.          Communication by Holders with OtherHolders............................................ 84

Section 14.04.          Acts of Holders of Securities........................................................................ 84

Section 14.05.          Certificate and Opinion as to ConditionsPrecedent...................................... 85

Section 14.06.          Statements Required in Certificate orOpinion............................................... 85

Section 14.07.          Effect of Headings and Table ofContents..................................................... 86

Section 14.08.          Successors and Assigns............................................................................... 86

Section 14.09.          Separability Clause...................................................................................... 86

Section 14.10.          Benefits of Indenture.................................................................................... 86

Section 14.11.          Governing Law............................................................................................ 86

Section 14.12.          Submission to Jurisdiction; Consent toService; Waivers............................... 86

Section 14.13.          Counterparts............................................................................................... 87

Section 14.14.          Legal Holidays............................................................................................. 87

Section 14.15.          Recourse Against Others............................................................................. 88

Section 14.16.          Force Majeure............................................................................................ 88

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**____ 7 ____** 

THIS SENIOR INDENTURE, dated as of March 23,2005, among M‐Systems Finance Inc., an exempted company incorporated underthe laws of the Cayman Islands, having its registered office at c/o M & CCorporate Services Limited, P O Box 309 GT, Ugland House, South Church Street,George Town, Grand Cayman, Cayman Islands (the "**Issuer**" or the "**Company**"),M‐Systems Flash Disk Pioneers Ltd., a company duly organized under thelaws of Israel, having its principal offices at 7 Atir Yeda St., Kfar-Saba44425 Israel ("**Guarantor**"), The Bank of New York Trust Company, N.A., anational banking association, having its principal corporate trust office at 700South Flower Street, Suite 500, Los Angeles, California 90017, as Trustee (the "**Trustee**"),and solely with respect to Section 14.12 of this Indenture, M‐Systems,Inc., a New York corporation.

RECITALS OF THE COMPANY AND THE GUARANTOR

The Company has duly authorized the creation ofan issue of its 1.0% Convertible Senior Notes due 2035 (herein called the "**Securities**")of substantially the tenor and amount hereinafter set forth, and to providetherefor the Company has duly authorized the execution and delivery of this Indenture.

The Guarantor desires to irrevocably andunconditionally guarantee the punctual payment when due, whether at maturity,upon redemption or by acceleration or otherwise, of the principal of andinterest, Liquidated Damages and Additional Tax Amounts, if any, on theSecurities as set forth herein (the "**Guarantee**").

All things necessary to make the Securities,when the Securities are executed by the Company and authenticated and deliveredhereunder and duly issued by the Company, the valid obligations of the Company,and to make this Indenture a valid agreement of the Company, in accordance withtheir and its terms, have been done.

All things necessary to make the Guarantee,when the Guarantee is executed by the Guarantor and delivered hereunder and dulyissued by the Guarantor and endorsed on the Securities, the valid and bindingobligations of the Guarantor, and to make this Indenture a valid agreement ofthe Guarantor, in accordance with their and its terms, have been done.

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

For and in consideration of the premises andthe purchase of the Securities by the Holders thereof, it is mutuallycovenanted and agreed, for the equal and proportionate benefit of all Holdersof the Securities, as follows:

# ARTICLE1DEFINITIONS AND INCORPORATION BY REFERENCE  

## Section 1.01.*       **Definitions.*  For all purposes ofthis Indenture and the Securities, the following terms are defined as follows:

"**Act**", when used with respect to anyHolder of a Security, has the meaning specified in Section 14.04(a) hereof.

**____ 8 ____** 

 

"**Acquisition Value**"  of theOrdinary Shares means, for each Trading Day in the Valuation Period withrespect to a Public Acquirer Change of Control, the value of the considerationpaid per Ordinary Share in connection with such Public Acquirer Change of Control,as follows: (i) for any cash, 100% of the face amount of such cash;(ii) for any Public Acquirer Common Stock, 100% of the Last Reported SalePrice of such Public Acquirer Common Stock on each such Trading Day; and(iii) for any other securities, assets or property, 102% of the fairmarket value of such security, asset or property on each such Trading Day, asdetermined by two independent nationally recognized investment banks selectedby the Guarantor for this purpose and approved by the Trustee.

"**ADRs**", or American Depositary Receipts,means any certificates issued by a U.S. bank representing shares of a foreignstock.

"**Additional Stock**" has the meaningspecified in Section 12.04(h) hereof.

"**Additional Tax Amounts**" has the meaningspecified in Section 9.07 hereof.

"**Add On Securities**" means any Securitiesoriginally issued after the date hereof pursuant to Section 2.22, including anyreplacement Securities as specified in the relevant Add On Security BoardResolutions or Add On Security Supplemental Indenture issued therefor inaccordance with this Indenture.

"**Add On Security Board Resolution**" meansBoard Resolutions providing for the issuance of Add On Securities.

"**Add On Security Supplemental Indenture**"means a supplement to this Indenture duly executed and delivered by theCompany, the Guarantor and the Trustee pursuant to Section 2.22 providingfor the issuance of Add On Securities.

"**Affiliate**" of any specified Personmeans any other Person directly or indirectly controlling or controlled by orunder direct or indirect common control with such specified Person.  Forthe purposes of this definition, "control," when used with respect to anyspecified Person, means the power to direct the management and policies of suchPerson, directly or indirectly, whether through the ownership of votingsecurities, by contract or otherwise; and the terms "controlling" and "controlled"have meanings correlative to the foregoing.

"**Bankruptcy Law**" means title 11 of theU.S. Code or any similar federal, state or foreign law, as applicable, for therelief of debtors.

"**Board of Directors**" means either theboard of directors of the Company or the board of directors of the Guarantor orany committee thereof empowered to act for it with respect to this Indenture.

**____ 9 ____** 

 

"**Board Resolution**" means a resolutionduly adopted by a Board of Directors, a copy of which, certified by a director,the secretary or an assistant secretary or other Officer of the Company or theGuarantor, as the case may be, to be in full force and effect on the date ofsuch certification, shall have been delivered to the Trustee.

"**Business Day**", when used with respectto any Place of Payment or Place of Conversion, means each Monday, Tuesday,Wednesday, Thursday and Friday which is not a day on which banking institutionsin that Place of Payment or Place of Conversion, as the case may be, areauthorized or obligated by law to close.

"**Chief Executive Officer**" means thechief executive officer of the Guarantor.

"**Company**" means the company named as the"Company" in the first paragraph of this Indenture until a successor entity shallhave become such pursuant to the applicable provisions of this Indenture, andthereafter "Company" shall mean such successor entity.

"**Company Notice**" has the meaningspecified in Section 11.03 hereof.

"**Company Order**" means a written ordersigned in the name of the Company by a director or other Officer of theCompany, and delivered to the Trustee.

"**Conversion Agent**" means any Personauthorized by the Company and the Guarantor to convert Securities in accordancewith Article 12 hereof.

"**Conversion Price**" as of any day willequal $1,000 divided by the Conversion Rate as of such date.

"**Conversion Rate**" has the meaningspecified in Section 12.01(c) hereof.

"**Corporate Trust Office**" means for purposesof presentation or surrender of Securities for payment, registration, transfer,exchange or conversion or for service of notices or demands upon the Company orfor any other purpose of this Indenture, the office of The Bank of New York TrustCompany, N.A. (which at the Issue Date is located at 700 South Flower Street,Suite 500, Los Angeles, California 90017).

"**Current Market Price**" has the meaning specifiedin Section l2.04(g)(1).

"**Custodian**" means any receiver, trustee,assignee, liquidator, sequestrator or similar official under any BankruptcyLaw.

"**Default**" means an event which is, orafter notice or lapse of time or both would be, an Event of Default.

"**Defaulted Interest**" has the meaningspecified in Section 2.17 hereof.

**____ 10 ____** 

"**Depositary**" means The Depository TrustCompany, its nominees and their respective successors.

"**Dollar**", "**U.S. Dollar**" or "**U.S.$**" means a dollar or other equivalent unit in such coin or currency of theUnited States as at the time shall be legal tender for the payment of publicand private debts.

"**DTC Participants**" has the meaningspecified in Section 2.08 hereof.

"**Effective Date**" has the meaningspecified in Section 12.04(h) hereof.

"**Event of Default**" has the meaningspecified in Section 4.01 hereof.

"**Exchange Act**" means the SecuritiesExchange Act of 1934, as amended.

"**Expiration Time**" has the meaningspecified in Section 12.04(f) hereof.

"**fair market value**" has the meaning specifiedin Section 12.04(g) hereof.

"**FundamentalChange**" means the occurrence of any of the following after the Issue Date:

●*      *the acquisition by any person, including any syndicate or group deemedto be a "person" under Section 13(d)(3) of the Exchange Act, of beneficialownership, directly or indirectly, through a purchase, share exchange, combination,merger or other acquisition transaction or series of transactions of shares ofthe Guarantor`s share capital entitling that person to exercise 50% or more ofthe total voting power of all of the Guarantor`s share capital entitled to votegenerally in elections of directors, other than any acquisition by the Guarantor,any of the Guarantor`s subsidiaries or any of the Guarantor`s or itssubsidiaries` employee benefit plans;

●*      *(a) consummation of any share exchange, consolidation,combination, or merger by the Guarantor  with any person pursuant towhich the Guarantor`s Ordinary Shares are converted into cash, securities orother property, or any sale, lease or direct or indirect transfer in onetransaction or a series of related transactions of all or substantially all ofthe consolidated assets of the Guarantor and its subsidiaries taken as a wholeto any person (other than a subsidiary of the Guarantor); *provided*,*however*, that, in each case under this clause (a), any transaction wherethe holders of the Guarantor`s Ordinary Shares immediately prior to suchtransaction have entitlement to exercise, directly or indirectly, 50% or moreof the voting power of all shares of capital stock entitled to vote generallyin the election of directors of the continuing, surviving or transfereecorporation immediately after such transaction shall not constitute a FundamentalChange; or (b) a change in the composition of the Board of Directors ofthe Guarantor, as a result of which fewer than 50% of the incumbent directorsare directors who either (i) had been members of the Guarantor`s Board of Directorson the corresponding calendar day of the second preceding year (the "**OriginalDirectors**")

**____ 11 ____** 

 or (ii) were nominatedfor election or appointed to the Board of Directors of the Guarantor by amajority of the aggregate of the Original Directors and other directorsnominated or appointed in the manner described in this clause (ii)(i.e.,nominated or appointed by not less than a majority of the incumbent orcontinuing directors at the time of such nomination or appointment);

●*      *the Guarantor`s Ordinary Shares (or other share capital into which the Securitiesare then convertible) is neither listed for trading on a U.S. nationalsecurities exchange nor approved for trading on the NASDAQ National Market; or

●*      *the Guarantor or its shareholders pass a resolution approving a plan ofliquidation, dissolution or winding-up of the Guarantor;

However, a FundamentalChange will not be deemed to have occurred if:

●*      *the Last Reported Sale Price per Ordinary Share for any five Trading Dayswithin the period of 10 consecutive Trading Days beginning immediately afterthe later of the Fundamental Change or the public announcement of the FundamentalChange (in the case of a Fundamental Change described under the first bulletpoint above or under (b) of the second bullet point above) or the periodof 10 consecutive Trading Days ending immediately before the Fundamental Change(in the case of a Fundamental Change described under (a) of the second bulletpoint above) shall equal or exceed 110% of the Conversion Price of the Securitiesin effect on the date of the Fundamental Change or the public announcement ofthe Fundamental Change, as applicable (the "**110% trading price exception**");or

●*      *in the case of a Fundamental Change described under (a) of the secondbullet point above, at least 90% of the consideration (excluding cash paymentsfor fractional shares and cash payment made in respect of dissenters` appraisalrights) in the transaction or transactions constituting the Fundamental Changeconsists of securities that are or will be traded on a U.S. national securitiesexchange or quoted on the NASDAQ National Market.

The beneficial owner shall be determined inaccordance with Rule 13d‐3 under the Exchange Act.  The term"person" includes any syndicate or group which would be deemed to be a "person"under Section 13(d)(3) of the Exchange Act.

"**Fundamental Change Purchase Notice**" hasthe meaning specified in Section 11.03(b)(i).

"**Global Security**" has the meaningspecified in Section 2.02 hereof.

"**Group**" means the Guarantor and all its directand indirect wholly owned subsidiaries (disregarding a nominal percentage of directors`qualifying and similar shares required to be held by a Person other than theGuarantor or its subsidiaries under applicable law).

"**Guarantee**" means the guarantee of theGuarantor to be endorsed on the Securities authenticated and deliveredhereunder.

**____ 12 ____** 

"**guarantee**" means any obligation,contingent or otherwise, of any Person, directly or indirectly guaranteeing anyIndebtedness of any other Person and any obligation, direct or indirect,contingent or otherwise, of such Person:

#####  (1)*              *to purchase or pay (or advance or supply funds forthe purchase or payment of) such Indebtedness of such other Person (whetherarising by virtue of partnership arrangements, or by agreement to keep-well, topurchase assets, goods, securities or services, to take-or-pay, or maintainfinancial statement conditions or otherwise); or

#####  (2)*              *entered into for purposes of assuring in any othermanner the obligee of such Indebtedness of the payment thereof or to protectsuch obligee against loss in respect thereof (in whole or in part);

*provided*,*however*, that the term "guarantee"will not include endorsements for collection or deposit in the ordinary courseof business.  The term "guarantee" used as a verb has a correspondingmeaning.

"**Guarantor**" means the Person named asthe "Guarantor" in the first paragraph of this Indenture until a successorPerson shall have become such Guarantor pursuant to the applicable provisionsof this Indenture, and thereafter "Guarantor" shall mean such successor Person.

"**Holder**", when used with respect to anySecurity, including the Global Security, means the Person in whose name theSecurity is registered in the Register.

"**Indebtedness**", when used with respectto any Person, and without duplication means:

#####  (1)*              *all indebtedness, obligations and other liabilities(contingent or otherwise) of such Person for borrowed money (includingobligations of such Person, in respect of overdrafts, foreign exchangecontracts, currency exchange agreements, Interest Rate Protection Agreements,and any loans or advances from banks, whether or not evidenced by notes orsimilar instruments) or evidenced by bonds, debentures, notes or other instrumentsfor the payment of money, or incurred in connection with the acquisition of anyproperty, services or assets (whether or not the recourse of the lender is tothe whole of the assets of such Person or to only a portion thereof), otherthan any account payable or other accrued current liability or obligation totrade creditors incurred in the ordinary course of business in connection withthe obtaining of materials or services;

#####  (2)*              *all reimbursement obligations and other liabilities(contingent or otherwise) of such Person with respect to letters of credit,bank guarantees, bankers` acceptances, surety bonds, performance bonds or otherguaranty of contractual performance;

#####  (3)*              *all obligations and liabilities (contingent orotherwise) in respect of (a) leases of such Person required, in conformitywith generally accepted accounting principles, to be accounted for ascapitalized lease obligations on the balance sheet of such Person and (b) anylease or related documents (including a purchase agreement) in connection withthe lease of real property which provides that such 

**____ 13 ____** 

##### Person is contractually obligated to purchase orcause a third party to purchase the leased property and thereby guarantee aminimum residual value of the leased property to the landlord and the obligationsof such Person under such lease or related document to purchase or to cause athird party to purchase the leased property;

#####  (4)*              *all obligations of such Person (contingent orotherwise) with respect to an interest rate or other swap, cap or collaragreement or other similar instrument or agreement or foreign currency hedge,exchange, purchase or similar instrument or agreement;

#####  (5)*              *all direct or indirect guarantees or similaragreements by such Person in respect of, and obligations or liabilities(contingent or otherwise) of such Person to purchase or otherwise acquire orotherwise assure a creditor against loss in respect of, indebtedness,obligations or liabilities of another Person of the kind described in clauses(1) through (4);

#####  (6)*              *any indebtedness or other obligations described inclauses (1) through (4) secured by any mortgage, pledge, lien or otherencumbrance existing on property which is owned or held by such Person,regardless of whether the indebtedness or other obligation secured therebyshall have been assumed by such Person; and

#####  (7)*              *any and all deferrals, renewals, extensions,refinancings, replacements, restatements and refundings of, or amendments,modifications or supplements to, any indebtedness, obligation or liability ofthe kind described in clauses (1) through (6).

"**Indenture**" means this senior instrumentas originally executed or as it may from time to time be supplemented oramended by one or more indentures supplemental hereto entered into pursuant tothe applicable provisions hereof.

"**Initial Purchasers**" means CitigroupGlobal Markets Inc., CIBC World Markets Corp, C.E. Unterberg, Towbin, ThomasWeisel Partners LLC and WR Hambrecht + Co, LLC.

"**Interest Payment Date**" means each of March15 and September 15.

"**Interest Rate**" means 1.0% per annum.

"**Interest Rate Protection Agreement**"means, with respect to any Person, any interest rate swap agreement, interestrate cap or collar agreement or other financial agreement or arrangementdesigned to protect such Person against fluctuations in interest rates, as ineffect from time to time.

**"IRS"** has the meaning specified inSection 9.11 hereof.

"**Issue Date**" means March 23, 2005.

**____ 14 ____** 

"**Last Reported Sale Price**" of anysecurity on any date means the closing sale price per such security (or if noclosing sale price is reported, the average of the bid and asked prices or, ifmore than one in either case, the average of the average bid and the averageasked prices) on that date as reported in composite transactions for theprincipal U.S. securities exchange on which such security is traded or, if suchsecurity is not listed on a U.S. national or regional securities exchange, asreported by the Nasdaq National Market or Small Cap Market.  If suchsecurity is not listed for trading on a U.S. national or regional securitiesexchange and not reported by the Nasdaq National Market or Small Cap Market onthe relevant date, the "Last Reported Sale Price" will be the last quoted bidprice for such security in the over-the-counter market on the relevant date asreported by the National Quotation Bureau Incorporated, Pink Sheets LLC orsimilar organization.  If such security is not so quoted, the "LastReported Sale Price" will be the average of the midpoint of the last bid andasked prices for such security on the relevant date quoted by each of at leastthree nationally recognized independent investment banking firms selected bythe Guarantor for this purpose and approved by the Trustee.

"**Liquidated Damages**" means all RegistrationDefault Damages, if any, payable pursuant to, and as defined in, Section 7 ofthe Registration Rights Agreement.

"**Majority Owned**" means having"beneficial ownership" (as defined in Rule 13(d)(3) under the ExchangeAct) of more than 50% of the total voting power of all shares of the respectiveentity`s capital stock that are entitled to vote generally in the election ofdirectors.  "Majority Owner" has the correlative meaning.

"**Maturity**" means the date on which theprincipal of such Security becomes due and payable as therein or hereinprovided, whether at the Stated Maturity or by acceleration, conversion, callfor redemption, exercise of a Purchase Right or a Put Purchase Right orotherwise.

"**Nasdaq National Market**" means theNational Association of Securities Dealers Automated Quotation National Market orany successor national securities exchange or automated over-the-countertrading market in the United States.

"**NIS**" means New Israeli Shekel.

"**Non Stock Change of Control**" has themeaning specified in Section 12.04(h) hereof.

"**Non-Electing Share**" has the meaningspecified in Section 12.11 hereof.

"**Officer**" of the Company or theGuarantor means the Chief Executive Officer, the President, the Chief FinancialOfficer, the Treasurer, any Vice President, the Secretary or any AssistantSecretary of such Person and, with respect to the Company, a director.

"**Officer`s Certificate**" means in thecase of the Company or the Guarantor, a certificate signed by an Officer of theCompany or the Guarantor, as applicable, and delivered to the Trustee.

**____ 15 ____** 

"**Opinion of Counsel**" means a writtenopinion of counsel, who may be counsel to the Company and/or the Guarantor (andmay include directors or employees of the Company and/or the Guarantor) andwhich opinion is acceptable to the Trustee, which acceptance shall not beunreasonably withheld or delayed.

"**Optional Redemption**" has the meaningspecified in Section 10.01(b) hereof.

"**Optional Redemption Date**" means thedate on which the Securities are to be redeemed pursuant to an OptionalRedemption.

"**Optional Redemption Price**" has themeaning specified in Section 10.01(b) hereof.

"**Ordinary Shares**" means the ordinary sharesof the Guarantor, par value NIS 0.001 per share.

"**Outstanding**", when used with respect toSecurities, means, as of the date of determination, all Securities theretoforeauthenticated and delivered under this Indenture, except Securities:

#####  (1)*              *previously canceled by the Trustee or delivered tothe Trustee for cancellation, or converted pursuant to this Indenture;

#####  (2)*              *for the payment or redemption of which money in thenecessary amount has been previously deposited with the Trustee or any PayingAgent (other than the Company) in trust or set aside and segregated in trust bythe Company (if the Company shall act as its own Paying Agent) for the Holdersof such Securities, *provided*,*however*, that if such Securitiesare to be redeemed, notice of such redemption has been duly given pursuant tothis Indenture; and

#####  (3)*              *which have been paid, in exchange for or in lieu ofwhich other Securities have been authenticated and delivered pursuant to thisIndenture, other than any such Securities in respect of which there shall havebeen presented to the Trustee proof satisfactory to it that such Securities areheld by a bona fide purchaser in whose hands such Securities are validobligations of the Company.

"**Paying Agent**" has the meaning specifiedin Section 2.05 hereof.

"**Person**" means any individual,corporation, limited liability company, partnership, association, joint-stockcompany, trust, estate, unincorporated organization or government or any agencyor political subdivision thereof.

"**PFIC**" has the meaning specified inSection 9.11 hereof.

"**Physical Securities**" has the meaningspecified in Section 2.02 hereof.

"**Place of Conversion**" means any city inwhich any Conversion Agent is located.

"**Place of Payment**" means any city inwhich any Paying Agent is located.

**____ 16 ____** 

"**Predecessor Security**" of any particularSecurity means every previous Security evidencing all or a portion of the samedebt as that evidenced by such particular Security; and, for the purposes ofthis definition, any Security authenticated and delivered under Section 2.12hereof in exchange for or in lieu of a mutilated, destroyed, lost or stolenSecurity shall be deemed to evidence the same debt as the mutilated, destroyed,lost or stolen Security.

"**Provisional Redemption Date**" means thedate on which the Securities are to be redeemed pursuant to a ProvisionalRedemption.

"**Provisional Redemption Price**" has themeaning specified in Section 10.01 hereof.

"**Public Acquirer Change of Control**" meansany event constituting a Non Stock Change of Control in which the acquirer hasa class of common stock, ordinary shares or other common equity, or ADRs,traded on any U.S. national securities exchange or quoted on the NasdaqNational Market or which will be so traded or quoted when issued or exchangedin connection with such Non Stock Change of Control (the "**Public AcquirerCommon Stock**").  If an acquirer does not itself have a class ofcommon stock, ordinary shares or other common equity, or ADRs, satisfying theforegoing requirement, it will be deemed to have Public Acquirer Common Stockif a Person that directly or indirectly is the Majority Owner of the acquirerhas a class of common stock, ordinary shares or other common equity, or ADRs,satisfying the foregoing requirement; in such case, all references to PublicAcquirer Common Stock shall refer to such class of common stock, ordinaryshares or other common equity, or ADRs.

"**Purchase Agreement**" means the PurchaseAgreement, dated March 17, 2005, among the Company, the Guarantor and theInitial Purchasers.

"**Purchase Date**" has the meaningspecified in Section 11.01 hereof.

"**Purchase Notice**" has the meaningspecified in Section 11.02 hereof.

"**Purchase Price**" has the meaningspecified in Section 11.01 hereof.

"**Purchase Right**" has the meaningspecified in Section 11.01 hereof.

"**Purchased Shares**" has the meaningspecified in Section 12.04(f) hereof

"**Put Purchase Date**" has the meaningspecified in Section 11.02 hereof.

"**Put Purchase Price**" has the meaning specifiedin Section 11.02 hereof.

"**Put Purchase Right**" has the meaningspecified in Section 11.02 hereof.

"**QEF**" has the meaning specified inSection 9.11 hereof.

"**QIB**" means a "qualified institutionalbuyer" as defined in Rule 144A.

**____ 17 ____** 

"**Record Date**" means either a RegularRecord Date or a Special Record Date, as the case may be, *provided*that,for purposes of Section 12.04 hereof, Record Date has the meaning specified inSection 12.04(g) hereof.

"**Redemption Date**", when used withrespect to any Security to be redeemed, means the Optional Redemption Date, inthe event of an Optional Redemption, or the Provisional Redemption Date, in theevent of a Provisional Redemption.

"**Redemption Price**", when used withrespect to any Security to be redeemed, means the Optional Redemption Price, inthe event of an Optional Redemption, or the Provisional Redemption Price, inthe event of a Provisional Redemption.

"**Reference Period**" has the meaning specifiedin Section 12.04(d) hereof.

"**Register**" has the meaning specified inSection 2.05 hereof.

"**Registrar**" has the meaning specified inSection 2.05 hereof.

"**Registration Rights Agreement**" meansthe Registration Rights Agreement, dated as of March 23, 2005, among theCompany and the Initial Purchasers.

"**Regular Record Date**" for the intereston the Securities (including Liquidated Damages and Additional Tax Amounts, ifany) payable means the March 1 (whether or not a Business Day) next preceding aMarch 15 Interest Payment Date and the September 1 (whether or not a BusinessDay) next preceding a September 15 Interest Payment Date.

"**Regulation S**" means Regulation Spromulgated under the Securities Act.

"**Regulation S Global Security**" means aGlobal Security representing Securities offered and sold to non-U.S. personsoutside the United States of America in reliance on Regulation S.

"**Responsible Officer**", when used withrespect to the Trustee, means any officer in the Corporate Trust Office of theTrustee and also means, with respect to a particular corporate trust matter,any other officer to whom such matter is referred because of such officer`sknowledge of and familiarity with the particular subject.

"**Restricted Period**" means the applicabledistribution compliance period under Regulation S.

"**Restricted Securities**" means theSecurities defined as such in Section 2.03 hereof.

"**Restricted Securities Legend**" has themeaning specified in Section 2.03(a) hereof.

"**Rule 144**" means Rule 144 under theSecurities Act (including any successor rule thereof), as the same may beamended from time to time.

"**Rule 144A**" means Rule 144A aspromulgated under the Securities Act (including any successor rule thereof), asthe same may be amended from time to time.

**____ 18 ____** 

"**SEC**" means the Securities and ExchangeCommission.

"**Securities**" has the meaning ascribed toit in the first paragraph under the caption "Recitals of the Company."

"**Securities Act**" means the SecuritiesAct of 1933, as amended.

"**Special Record Date**" for the payment ofany Defaulted Interest means a date fixed by the Company pursuant to Section 2.17hereof.

"**Stated Maturity**" means the datespecified in any Security as the fixed date for the payment of principal onsuch Security or on which an installment of interest (including LiquidatedDamages and Additional Tax Amounts, if any) on such Security is due andpayable.

"**Stock Price**" has the meaning specifiedin Section 12.04(h) hereof.

"**Subsidiary**" means a corporation morethan 50% of the outstanding voting stock of which is owned, directly orindirectly, by such Person.  For the purposes of this definition only,"voting stock" means stock which ordinarily has voting power for the electionof directors, whether at all times or only so long as no senior class of stockhas such voting power by reason of any contingency.

"**TIA**" means the Trust Indenture Act of1939 (15 U.S. Code Sections 77aaa-77bbbb), as in effect on the Issue Date; *provided*,*however*, that in the event the TIA is amended after such date, "TIA" means,to the extent required by such amendment, the Trust Indenture Act of 1939, asso amended, or any successor statute.

"**Trading Day**" means a day during whichtrading in securities generally occurs on The New York Stock Exchange or, ifthe security is not then listed on The New York Stock Exchange, on theprincipal other national or regional securities exchange on which the securityis then listed or, if the security is not then listed on a national or regionalsecurities exchange, on the Nasdaq National Market or, if the security is notthen quoted on the Nasdaq National Market, on the principal other market on whichthe security is traded.

"**Transfer**" has the meaning specified inSection 2.03 hereof

"**Transfer Agent**" means any Person, whichmay be the Company, authorized by the Company or the Guarantor to exchange orregister the transfer of Securities.

"**Trigger Event**" has the meaningspecified in Section 12.04(d) hereof.

"**Trustee**" means the Person named as the "Trustee"in the first paragraph of this instrument until a successor Trustee shall havebecome such pursuant to the applicable provisions of this Indenture, andthereafter "Trustee" shall mean such successor Trustee.

"**U.S. Person**" has the meaning specifiedin Regulation S.

"**Valuation Period**" has the meaningspecified in Section 12.04(i)(2) hereof.

**____ 19 ____** 

"**Vice President**", when used with respectto the Company or the Guarantor, means any vice president, whether or notdesignated by a number or a word or words added before or after the title "vicepresident."

## Section 1.02.*       **Incorporation by Reference of Trust IndentureAct.  *Whenever this Indenture refers to a provision of the TIA, theprovision is incorporated by reference in and made a part of this Indenture.

The following TIA terms used in this Indenturehave the following meanings:

####  (i)*                 *"indenture securities" means the Securities;

####  (ii)*               *"indenture security holder" means a Holder;

####  (iii)*              *"indenture to be qualified" means this Indenture;

####  (iv)*             *"indenture trustee" or "institutional trustee"means the Trustee; and

####  (v)*               *"obligor" on the Securities means the Company andany other obligor on the indenture securities.

All other TIA terms used in this Indenture thatare defined by the TIA, defined by TIA reference to another statute or definedby SEC rule have the meanings assigned to them by such definitions.

## Section 1.03.*       **Rules of Construction.  *For allpurposes of this Indenture, except as otherwise expressly provided or unless thecontext otherwise requires:

####  (i)*                 *the terms defined in this Article have the meaningsassigned to them in this Article and include the plural as well as thesingular;

####  (ii)*               *all accounting terms not otherwise defined hereinhave the meanings assigned to them in accordance with accounting principlesgenerally accepted in the United States prevailing at the time of any relevantcomputation hereunder; and

####  (iii)*              *the words "herein," "hereof" and "hereunder" andother words of similar import refer to this Indenture as a whole and not to anyparticular Article, Section or other subdivision.

# ARTICLE2THE SECURITIES

## Section 2.01.*       **Title and Terms.  *The Securitiesshall be known and designated as the "1.0% Convertible Senior Notes due 2035"of the Company.  The aggregate principal amount of Securities whichmay be authenticated and delivered under this Indenture is limited to $75,000,000(or $100,000,000 if the option set forth in Section 2(b) of the PurchaseAgreement is exercised in full), 

**____ 20 ____** 

## except for Add On Securities issued in accordancewith Section 2.22 and securities authenticated and delivered upon registrationof, transfer of, or in exchange for, or in lieu of other Securities pursuant toSection 2.03, 2.07, 2.08, 2.09, 2.12, 2.14, 7.05, 10.07, 11.01 or 12.02 hereof.  TheSecurities shall be issuable in denominations of $1,000 or integral multiplesthereof.

The Securities shall mature on March 15, 2035.

Interest shall accrue from March 23, 2005 atthe Interest Rate until the principal thereof is paid or made available forpayment.  Interest (including Liquidated Damages and Additional TaxAmounts, if any) shall be payable semiannually in arrears on March 15 and September15 of each year, commencing September 15, 2005.

Interest on the Securities shall be computed onthe basis of a 360-day year of twelve 30-day months, and for any period shorterthan a full semiannual period for which interest is calculated, on the basis ofa 30-day month, and for such periods of less than a month, the actual number ofdays elapsed over a 30-day month.

Subject to Section 2.17, a Holder of anySecurity at the close of business on a Regular Record Date shall be entitled toreceive interest (including Liquidated Damages and Additional Tax Amounts, ifany) on such Security on the corresponding Interest Payment Date.

A Holder of any Security which is convertedafter the close of business on a Regular Record Date and prior to thecorresponding Interest Payment Date (other than any Security whose Maturity isprior to such Interest Payment Date) shall be entitled to receive interest(including Liquidated Damages and Additional Tax Amounts, if any) on theprincipal amount of such Security on such Interest Payment Date,notwithstanding the conversion of such Security prior to such Interest PaymentDate.  However, any such Holder which surrenders any such Securityfor conversion during the period between the close of business on such RegularRecord Date and ending with the opening of business on the correspondingInterest Payment Date shall be required to pay the Company an amount equal tothe interest (excluding Liquidated Damages and Additional Tax Amounts, if any)on the principal amount of such Security so converted (but excluding anyDefaulted Interest on the principal amount of such Security so converted thatexists at the time such Holder surrenders such Security for conversion), whichis payable by the Company to such Holder on such Interest Payment Date, at thetime such Holder surrenders such Security for conversion.  Notwithstandingthe foregoing, any such Holder which surrenders for conversion any Security (a)which has been called for redemption by the Company in a notice of redemptiongiven by the Company pursuant to Section 10.04 hereof on a Redemption Dateafter such Regular Record Date and on or prior to the next succeeding InterestPayment Date (or on or between March 15, 2008 and March 20, 2008 or on orbetween March 15, 2010 and March 20, 2010), or (b) with respect to whichthe Company has specified a Purchase Date that is after such Regular RecordDate and on or prior to the next succeeding Interest Payment Date in eithercase, shall be entitled to receive (and retain) such interest and need not paythe Company an amount equal to the interest on the principal amount of suchSecurity so converted at the time such Holder surrenders such Security forconversion.

Principal of and interest on, Global Securitiesshall be payable to the Depositary in immediately available funds.

**____ 21 ____** 

Principal on Physical Securities shall bepayable at the office or agency of the Company maintained for such purpose,initially the Corporate Trust Office of the Trustee.  Interest onPhysical Securities will be payable by (i) U.S. Dollar check drawn on a banklocated in the city where the Corporate Trust Office of the Trustee is locatedmailed to the address of the Person entitled thereto as such address shallappear in the Register, or (ii) upon application to the Registrar not laterthan the relevant Record Date by a Holder of an aggregate principal amount ofSecurities in excess of $5,000,000, wire transfer in immediately availablefunds.

The Securities shall be redeemable at theoption of the Company as provided in Article 10 hereof.

The Securities shall have the Purchase Rightsexercisable at the option of Holders as provided in Article 11 hereof.

The Securities shall be convertible as providedin Article 12 hereof.

## Section 2.02.*       **Form of Securities.  *TheSecurities and the Trustee`s certificate of authentication to be borne by suchSecurities shall be substantially in the form annexed hereto as Exhibit A,which is incorporated in and made a part of this Indenture.  Theterms and provisions contained in the form of Security shall constitute, andare hereby expressly made, a part of this Indenture and to the extentapplicable, the Company, the Guarantor and the Trustee, by their execution anddelivery of this Indenture, expressly agree to such terms and provisions and tobe bound thereby.

Any of the Securities may have such letters,numbers or other marks of identification and such notations, legends andendorsements as the Officers executing the same may approve (execution thereofto be conclusive evidence of such approval) and as are not inconsistent withthe provisions of this Indenture, or as may be required to comply with any lawor with any rule or regulation made pursuant thereto or with any rule orregulation of any securities exchange or automated quotation system on whichthe Securities may be listed or designated for issuance, or to conform tousage.

The Securities will be offered and sold only toQIBs in reliance on Rule 144A and outside the United States in accordance withRegulation S and shall be issued initially only in the form of one or morepermanent Global Securities (each, a "**Global Security**") in registeredform without interest coupons.  The Global Securities shall be:

#####  (1)*              *duly executed by the Company and authenticated bythe Trustee as hereinafter provided;

#####  (2)*              *shall have endorsed thereon the Guarantees executedby the Guarantor;

#####  (3)*              *registered in the name of the Depositary (or itsnominee) for credit to the respective accounts of the Holders at theDepositary; and

#####  (4)*              *deposited with the Trustee, as custodian for theDepositary.

**____ 22 ____** 

The Global Securities shall besubstantially in the form of Security set forth in Exhibit A annexed hereto(including the text and schedule called for by footnotes 1 and 2 thereto).  Theaggregate principal amount of the Global Securities may from time to time beincreased or decreased by adjustments made on the records of the Trustee asrequired by Section 2.09, as custodian for the Depositary (or its nominee), inaccordance with the instructions given by the Holder thereof, as hereinafterprovided.

Securities issued in exchange for interests inthe Global Securities pursuant to Section 2.08(d) hereof shall be issued in theform of permanent definitive Securities (the "**Physical Securities**") inregistered form without interest coupons.  The Physical Securitiesshall be substantially in the form set forth in Exhibit A annexed hereto andshall be duly executed by the Company, authenticated and delivered by theTrustee and shall have endorsed thereon the Guarantees executed by theGuarantor.

The Securities shall be typed, printed,lithographed or engraved or produced by any combination of these methods or maybe produced in any other manner permitted by the rules of any securitiesexchange on which the Securities may be listed, all as determined by theOfficers executing such Securities, as evidenced by their execution of suchSecurities.

## Section 2.03.*       **Legends.  (a) Restricted SecuritiesLegends.  *Each Security issued hereunder shall, upon issuance,bear the legend set forth in Section 2.03(a)(i) or Section 2.03(a)(ii) (each, a"**Restricted Securities Legend**"), as the case may be, and such legendshall not be removed except as provided in Section 2.03(a)(iii).  EachSecurity that bears or is required to bear the Restricted Securities Legend setforth in Section 2.03(a)(i) (together with any Ordinary Shares issued uponconversion of the Securities and required to bear the Restricted SecuritiesLegend set forth in Section 2.03(a)(ii), collectively, the "**RestrictedSecurities**") shall be subject to the restrictions on transfer set forth inthis Section 2.03(a) (including the Restricted Securities Legend set forthbelow), and the Holder of each such Restricted Security, by such Holder`sacceptance thereof, shall be deemed to have agreed to be bound by all suchrestrictions on transfer.

As used in Section 2.03(a), the term "transfer"encompasses any sale, pledge, transfer or other disposition whatsoever of anyRestricted Security.

####  (i)*                 **Restricted Securities Legend for Securities.  *Exceptas provided in Section 2.03(a)(iii), until the expiration of the holding periodapplicable to sales thereof under Rule 144(k) under the Securities Act (or anysuccessor provision), any certificate evidencing such Security (and allsecurities issued in exchange therefor or substitution thereof, other than OrdinaryShares, if any, issued upon conversion thereof, which shall bear the legend setforth in Section 2.03(a)(ii), if applicable) shall bear a Restricted SecuritiesLegend in substantially the following form:

THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN ATRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF1933 (THE "SECURITIES ACT"), AND THIS NOTE AND THE ORDINARY SHARES ISSUABLEUPON CONVERSION THEREOF MAY NOT BE OFFERED, 

**____ 23 ____** 

SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCHREGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.  EACH PURCHASER OFTHIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THEEXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BYRULE 144A OR REGULATION S THEREUNDER.

THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF M‐SYSTEMSFINANCE INC. AND M-SYSTEMS FLASH DISK PIONEERS LTD. THAT (A) THIS NOTE AND THE ORDINARYSHARES ISSUABLE UPON CONVERSION THEREOF MAY BE OFFERED, RESOLD, PLEDGED OROTHERWISE TRANSFERRED ONLY (I) IN THE UNITED STATES TO A PERSON WHOM THE SELLERREASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE l44AUNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULEl44A, (II) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCEWITH REGULATION S UNDER THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROMREGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IFAVAILABLE), OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THESECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANYAPPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, (B) THE HOLDERWILL NOT, DIRECTLY OR INDIRECTLY, ENGAGE IN ANY HEDGING TRANSACTION WITH REGARDTO THIS SECURITY OR ANY ORDINARY SHARES ISSUABLE UPON CONVERSION OF THISSECURITY EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT, AND (C) THE HOLDER WILL,AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTEFROM IT OF THE RESTRICTIONS REFERRED TO IN (A) AND (B) ABOVE.

####  (ii)*               **Restricted Securities Legend for Ordinary SharesIssuable upon Conversion of the Securities.  *Except as providedin Section 2.03(a)(iii), until the expiration of the holding period applicableto sales thereof under Rule 144(k) under the Securities Act (or any successorprovision), any stock certificate representing Ordinary Shares issuable uponconversion of a Security shall bear a Restricted Securities Legend insubstantially the following form:

THE ORDINARY SHARES EVIDENCED HEREBY (OR THEIR PREDECESSOR) HAVENOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIESACT").  THE HOLDER OF THIS CERTIFICATE AGREES FOR THE BENEFIT OF M‐SYSTEMSFINANCE INC. AND M-SYSTEMS FLASH DISK PIONEERS LTD. 

**____ 24 ____** 

THAT (A) THE ORDINARY SHARES EVIDENCED HEREBY MAY BE OFFERED,RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) IN THE UNITED STATES TO APERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THEREQUIREMENTS OF RULE 144A, IF AVAILABLE, (II) OUTSIDE THE UNITED STATES IN ANOFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT,(III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACTPROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), OR (IV) PURSUANT TO ANEFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I)THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OFTHE UNITED STATES, (B) THE HOLDER WILL NOT, DIRECTLY OR INDIRECTLY, ENGAGE INANY HEDGING TRANSACTION WITH REGARD TO THESE ORDINARY SHARES EXCEPT INCOMPLIANCE WITH THE SECURITIES ACT, AND (C) THE HOLDER WILL, AND EACHSUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE ORDINARY SHARESEVIDENCED HEREBY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) AND (B) ABOVE.

####  (iii)*              **Removal of the Restricted Securities Legends.  *EachSecurity or Ordinary Shares issued upon conversion of such Security shall bearthe Restricted Securities Legend set forth in Section 2.03(a)(i) or2.03(a)(ii), as the case may be, until the earlier of:

######  (A)*             *the expiration of the holding period applicable tosales thereof under Rule 144(k) under the Securities Act (or any successorprovision);

######  (B)*             *such Security or Ordinary Shares have been soldpursuant to a registration statement that has been declared effective under theSecurities Act (and which continues to be effective at the time of such sale);or

######  (C)*             *such Ordinary Shares have been issued uponconversion of Securities that have been sold pursuant to a registrationstatement that has been declared effective under the Securities Act (and whichcontinues to be effective at the time of such sale).

The Holder must give notice thereof to theTrustee and any transfer agent for the Ordinary Shares, as applicable.

**____ 25 ____** 

Notwithstanding the foregoing, the RestrictedSecurities Legend may be removed if there is delivered to the Company and theGuarantor, such satisfactory evidence, which may include an opinion ofindependent counsel, as may be reasonably required by the Company or theGuarantor, that neither such legend nor the restrictions on transfer set forththerein are required to ensure that transfers of such Security will not violatethe registration requirements of the Securities Act.  Upon provisionof such satisfactory evidence, the Trustee, at the written direction of theCompany and the Guarantor, shall authenticate and deliver in exchange for suchSecurities another Security or Securities having an equal aggregate principalamount that does not bear such legend.  If the Restricted SecuritiesLegend has been removed from a Security as provided above, no other Securityissued in exchange for all or any part of such Security shall bear such legend,unless the Company or the Guarantor has reasonable cause to believe that suchother Security is a "restricted security" within the meaning of Rule 144 andinstructs the Trustee in writing to cause a Restricted Securities Legend toappear thereon.

Any Security (or security issued in exchange orsubstitution thereof) as to which such restrictions on transfer shall haveexpired in accordance with their terms or as to which the conditions forremoval of the Restricted Securities Legend set forth in Section 2.03(a)(i) asset forth therein have been satisfied may, upon surrender of such Security forexchange to the Registrar in accordance with the provisions of Section 2.07hereof, be exchanged for a new Security or Securities, of like tenor andaggregate principal amount, which shall not bear the Restricted SecuritiesLegend required by Section 2.03(a)(i).

Any such Ordinary Shares as to which suchrestrictions on transfer shall have expired in accordance with their terms oras to which the conditions for removal of the Restricted Securities Legend setforth in Section 2.03(a)(ii) as set forth therein have been satisfied may, uponsurrender of the certificates representing such Ordinary Shares for exchange inaccordance with the procedures of the transfer agent for the Ordinary Shares,be exchanged for a new certificate or certificates for a like aggregate numberof Ordinary Shares, which shall not bear the Restricted Securities Legendrequired by Section 2.03(a)(ii).

### (b)*              **Global Security Legend.  *EachGlobal Security shall also bear the following legend on the face thereof:

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZEDREPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC") TO M‐SYSTEMSFINANCE INC. (OR ITS SUCCESSOR) OR ITS AGENT FOR REGISTRATION OF TRANSFER,EXCHANGE, CONVERSION OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED INTHE NAME OF CEDE & CO. OR IN SUCH OTHER ENTITY AS IS REQUESTED BY ANAUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE &CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OFDTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TOANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HASAN INTEREST HEREIN.

**____ 26 ____** 

 

## Section 2.04.*       **Execution, Authentication, Delivery and Dating.  *AnOfficer of the Company shall execute the Securities on behalf of the Company bymanual or facsimile signature.  

At any time and from time to time after theexecution and delivery of this Indenture, the Company may deliver Securitiesexecuted by the Company to the Trustee for authentication, together with aCompany Order for the authentication and delivery of such Securities (includingany Officer`s Certificate required to be provided under Section 14.05 hereof),and the Trustee in accordance with such Company Order shall authenticate anddeliver such Securities as in this Indenture provided and not otherwise.

Each Security shall be dated the date of itsauthentication.

No Security shall be entitled to any benefitunder this Indenture, or be valid or obligatory for any purpose, unless thereappears on such Security a certificate of authentication substantially in theform provided for herein executed by or on behalf of the Trustee by manualsignature, and such certificate upon any Security shall be conclusive evidence,and the only evidence, that such Security has been duly authenticated anddelivered hereunder.

The Trustee may appoint an authenticating agentor agents reasonably acceptable to the Company with respect to the Securities.  Unlesslimited by the terms of such appointment, an authenticating agent mayauthenticate Securities whenever the Trustee may do so.  Eachreference in this Indenture to authentication by the Trustee includesauthentication by such agent.

## Section 2.05.*       **Registrar and Paying Agent.  *TheCompany shall maintain an office or agency where Securities may be presentedfor registration of transfer or for exchange (the "**Registrar**") and anoffice or agency where Securities may be presented for payment (the "**PayingAgent**").  The Registrar shall keep a register of the Securities(the "**Register**") and of their transfer and exchange.  TheCompany may appoint one or more co-Registrars and one or more additional PayingAgents for the Securities.  The term "**Paying Agent**" includesany additional paying agent and the term "**Registrar**" includes anyadditional registrar.  The Company may change any Paying Agent orRegistrar without prior notice to any Holder.

The Company will cause each Paying Agent (otherthan the Trustee) to execute and deliver to the Trustee an instrument in whichsuch Paying Agent shall agree with the Trustee, subject to the provisions ofthis Section, that such Paying Agent will:

####  (i)*                 *hold all sums held by it for the payment of theprincipal of or interest (including Liquidated Damages and Additional TaxAmounts, if any) on Securities in trust for the benefit of the Persons entitledthereto until such sums shall be paid to such Persons or otherwise disposed ofas provided in this Indenture;

####  (ii)*               *give the Trustee notice of any Default by theCompany in the making of any payment of principal or interest (includingLiquidated Damages and Additional Tax Amounts, if any); and

**____ 27 ____** 

####  (iii)*              *at any time during the continuance of any suchDefault, upon the written request of the Trustee, forthwith pay to the Trusteeall sums so held in trust by such Paying Agent.

The Company shall give prompt written notice tothe Trustee of the name and address of any Paying Agent who is not a party tothis Indenture.  If the Company fails to appoint or maintain anotherentity as Registrar or Paying Agent, the Trustee shall act as such.  TheCompany or any Affiliate of the Company may act as Paying Agent or Registrar; *provided*,*however*, that none of the Company, its Subsidiaries or the Affiliates ofthe foregoing shall act:

####  (i)*                 *as Paying Agent in connection with redemptions,offers to purchase and discharges, as otherwise specified in this Indenture,and

####  (ii)*               *as Paying Agent or Registrar if a Default or Eventof Default has occurred and is continuing.

The Company hereby initially appoints theTrustee as Registrar and Paying Agent for the Securities.

## Section 2.06.*       **Paying Agent to Hold Assets in Trust.  *Notlater than 12:00 Noon (New York City time) on each due date of the principaland interest (including Liquidated Damages and Additional Tax Amounts, if any)on any Securities, the Company shall deposit with one or more Paying Agentsmoney in immediately available funds sufficient to pay such principal andinterest (including Liquidated Damages and Additional Tax Amounts, if any) sobecoming due.  The Company at any time may require a Paying Agent topay all money held by it to the Trustee.  Upon payment over to theTrustee, the Paying Agent (if other than the Company) shall have no furtherliability for the money so paid over to the Trustee.

If the Company shall act as a Paying Agent, itshall, prior to or on each due date of the principal of or interest (includingLiquidated Damages and Additional Tax Amounts, if any) on any of theSecurities, segregate and hold in trust for the benefit of the Holders a sumsufficient with monies held by all other Paying Agents, to pay the principal orinterest (including Liquidated Damages and Additional Tax Amounts, if any) sobecoming due until such sums shall be paid to such Persons or otherwisedisposed of as provided in this Indenture, and shall promptly notify theTrustee of its action or failure to act.

## Section 2.07.*       **General Provisions Relating to Transfer andExchange.  *The Securities are issuable only in registered form.  AHolder may transfer a Security only by written application to the Registrarstating the name of the proposed transferee and otherwise complying with theterms of this Indenture.  No such transfer shall be effected until,and such transferee shall succeed to the rights of a Holder only upon, finalacceptance and registration of the transfer by the Registrar in the Register.  Furthermore,any Holder of a Global Security shall, by acceptance of such Global Security,agree that transfers of beneficial interests in such Global Security may beeffected only through a book-entry system maintained by the Holder of suchGlobal Security (or its agent) and that ownership of a beneficial interest inthe Security shall be required to be reflected in a book-entry.  

**____ 28 ____** 

## Notwithstanding the foregoing, in the case of aRestricted Security, a beneficial interest in a Global Security beingtransferred in reliance on an exemption from the registration requirements ofthe Securities Act other than in accordance with Rule 144A and Regulation S mayonly be transferred for a Physical Security.

When Securities are presented to the Registrarwith a request to register the transfer or to exchange them for an equalaggregate principal amount of Securities of other authorized denominations, theRegistrar shall register the transfer or make the exchange as requested if itsrequirements for such transactions are met (including that such Securities areduly endorsed or accompanied by a written instrument of transfer duly executedby the Holder thereof or by an attorney who is authorized in writing to act onbehalf of the Holder).  Subject to Section 2.04 hereof, to permitregistrations of transfers and exchanges, the Company shall execute and theTrustee shall authenticate Securities at the Registrar`s request.  Noservice charge shall be made for any registration of transfer or exchange orredemption of the Securities, but the Company may require payment of a sumsufficient to cover any transfer tax or similar governmental charge payable inconnection therewith (other than any such transfer taxes or other similargovernmental charge payable upon exchanges pursuant to Section 2.14, 7.05 or10.07 hereof).

Neither the Company nor the Registrar shall berequired to exchange or register a transfer of any Securities:

####  (i)*                 *for a period of 15 Business Days prior to the dayof mailing of a notice of redemption of Securities under Article 10 hereof;

####  (ii)*               *selected for redemption or, if a portion of anySecurity is selected for redemption, such portion thereof selected forredemption; or

####  (iii)*              *surrendered for conversion or, if a portion of anySecurity is surrendered for conversion, such portion thereof surrendered forconversion, or for which a Purchase Notice or Fundamental Change Purchase Noticehas been given and not withdrawn.

Each Holder of a Security agrees to indemnifythe Company, the Guarantor, and the Trustee against any liability that mayresult from the transfer, exchange or assignment of such Holder's Security inviolation of any provision of this Indenture and/or applicable United Statesfederal or state securities law.

The Trustee shall have no obligation or duty tomonitor, determine or inquire as to compliance with any restrictions ontransfer imposed under this Indenture or under applicable law with respect toany transfer of any interest in any Security (including any transfers betweenor among DTC Participants or beneficial owners of interests in any GlobalSecurity) other than to require delivery of such certificates and otherdocumentation or evidence as are expressly required by, and to do so if andwhen expressly required by the terms of, this Indenture, and to examine thesame to determine substantial compliance as to form with the expressrequirements hereof.

**____ 29 ____** 

 

## Section 2.08.*       **Book-entry Provisions for the Global Securities*.  (a)The Global Securities initially shall:

####  (i)*                 *be registered in the name of the Depositary (or anominee thereof);

####  (ii)*               *be delivered to the Trustee as custodian for suchDepositary; and

####  (iii)*              *bear the Restricted Securities Legend as set forthin Section 2.03(a)(i) hereof.

Members of, or participants in, the Depositary("**DTC Participants**") shall have no rights under this Indenture withrespect to any Global Security held on their behalf by the Depositary, or theTrustee as its custodian, or under such Global Security, and the Depositary maybe treated by the Company, the Trustee and any agent of the Company or theTrustee as the absolute owner of such Global Security for all purposeswhatsoever.  Notwithstanding the foregoing, nothing contained herein shallprevent the Company, the Trustee or any agent of the Company or Trustee fromgiving effect to any written certification, proxy or other authorizationfurnished by the Depositary or impair, as between the Depositary and the DTCParticipants, the operation of customary practices governing the exercise ofthe rights of a Holder of any Security.

The Trustee shall have no responsibility forany actions taken or not taken by the Depositary.

### (b)*              *The registered Holder of a Global Security maygrant proxies and otherwise authorize any Person, including DTC Participantsand Persons that may hold interests through DTC Participants, to take anyaction which a Holder is entitled to take under this Indenture or theSecurities.

### (c)*               *A Global Security may not be transferred, in wholeor in part, to any Person other than the Depositary (or a nominee thereof), andno such transfer to any such other Person may be registered.  Beneficialinterests in a Global Security may be transferred in accordance with the rulesand procedures of the Depositary and the provisions of Section 2.09 hereof.

### (d)*              *If at any time:

####  (i)*                 *the Depositary notifies the Company in writing thatit is no longer willing or able to continue to act as Depositary for the GlobalSecurities, or the Depositary ceases to be a "clearing agency" registered underthe Exchange Act, and a successor Depositary for the Global Securities is notappointed by the Company within 90 days of such notice or cessation;

####  (ii)*               *the Company, at its option, notifies the Trustee inwriting that it elects to cause the issuance of the Securities in definitiveregistered form under this Indenture in exchange for all or any part of theSecurities represented by a Global Security or Global Securities; or

**____ 30 ____** 

####  (iii)*              *an Event of Default has occurred and is continuingand the Registrar has received a request from the Depositary for the issuanceof Physical Securities in exchange for such Global Security or GlobalSecurities,

the Depositary shall surrender such Global Security orGlobal Securities to the Trustee for cancellation and the Company shallexecute, and the Trustee, upon receipt of an Officer`s Certificate and CompanyOrder for the authentication and delivery of Securities, shall authenticate anddeliver in exchange for such Global Security or Global Securities, PhysicalSecurities of like tenor as that of the Global Securities in an aggregateprincipal amount equal to the aggregate principal amount of such GlobalSecurity or Global Securities.  Such Physical Securities shall beregistered in such names as the Depositary shall identify in writing as thebeneficial owners of the Securities represented by such Global Security orGlobal Securities (or any nominees thereof).

Notwithstanding the foregoing, in connectionwith any such surrender and subsequent exchange pursuant to Sections 2.07 and 2.08hereof, the Registrar shall reflect on its books and records the date and adecrease in the principal amount of such Global Security in an amount equal tothe principal amount of the beneficial interest in such Global Security to betransferred.

## Section 2.09.*       **Special Transfer Provisions.  *Unlessa Security is transferred after the time period referred to in Rule 144(k)under the Securities Act or otherwise sold pursuant to a registration statementthat has been declared effective under the Securities Act (and which continuesto be effective at the time of such sale), the following provisions shallapply.

With respect to the registration of anyproposed transfer of Securities to a QIB in accordance with Rule 144A:

####  (i)*                 *if the Securities to be transferred consist of aninterest in the Global Securities, the transfer of such interest may beeffected only through the book-entry system maintained by the Depositary; and

####  (ii)*               *if the Securities to be transferred consist ofPhysical Securities, the Registrar shall register the transfer if such transferis being made by a proposed transferor who has checked the box provided on theform of Security stating, or has otherwise advised the Company and theRegistrar in writing, that the sale has been made in compliance with theprovisions of Rule 144A to a transferee who has signed the certificationprovided on the form of Security stating or has otherwise advised the Companyand the Registrar in writing that:

######  (A)*             *it is purchasing the Securities for its own accountor an account with respect to which it exercises sole investment discretion, ineach case for investment and not with a view to distribution;

######  (B)*             *it and any such account is a QIB within the meaningof Rule l44A;

###### (C)*             *it is aware that the sale to it is being made inreliance on Rule 144A;

**____ 31 ____** 

 

######  (D)*             *it acknowledges that it has received suchinformation regarding the Company and the Guarantor as it has requestedpursuant to Rule 144A or has determined not to request such information; and

######  (E)*              *it is aware that the transferor is relying upon itsforegoing representations in order to claim the exemption from registrationprovided by Rule 144A.

With respect to the registration of anyproposed transfer of Securities to a person who is not a U.S. Person in anoffshore transaction in accordance with Regulation S:

####  (i)*                 *if the Securities to be transferred consist of aninterest in the Global Securities, the transfer of such interest may beeffected only through the book-entry system maintained by the Depositary; and

####  (ii)*               *if the Securities to be transferred consist ofPhysical Securities, the Registrar shall register the transfer if such transferis being made by a proposed transferor who has checked the box provided for onthe form of Security stating, or has otherwise advised the Company and theRegistrar in writing, that the sale has been made in compliance with theprovisions of Regulation S to a transferee who has signed the certificationprovided for on the form of Security stating or has otherwise advised theCompany and the Registrar in writing that:

######  (A)*             *the transfer is not being made to a person in theUnited States and (1) at the time the buy order was originated, the transfereewas outside the United States or such transferor and any Person acting on itsbehalf reasonably believed and believes that the transferee was outside theUnited States or (2) the transaction was executed in, on or through thefacilities of a designated offshore securities market and neither suchtransferor nor any Person acting on its behalf knows that the transaction wasprearranged with a buyer in the United States;

######  (B)*             *no directed selling efforts have been made incontravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation Sunder the Securities Act;

######  (C)*             *the transaction is not part of a plan or scheme toevade the registration requirements of the Securities Act; and

######  (D)*             *if the proposed transfer is being made prior to theexpiration of the Restricted Period, the transfer is not being made to a U.S.Person.

By its acceptance of any Security bearing theRestricted Securities Legend, each Holder of such a Security acknowledges therestrictions on transfer of such Security set forth in this Indenture andagrees that it will transfer such Security only as provided in this Indenture.  TheRegistrar shall not register a transfer of any Security unless such transfercomplies with the restrictions on transfer of such Security set forth in thisIndenture.  

**____ 32 ____** 

The Registrar shall beentitled to receive and rely on written instructions from the Company verifyingthat such transfer complies with such restrictions on transfer.  Inconnection with any transfer of Securities, each Holder agrees by itsacceptance of the Securities to furnish the Registrar or the Company and theGuarantor such certifications, legal opinions or other information as either ofthem may reasonably require to confirm that such transfer is being madepursuant to an exemption from, or a transaction not subject to, theregistration requirements of the Securities Act; *provided*,*however*,that the Registrar shall not be required to determine (but may rely on adetermination made by the Company and the Guarantor with respect to) thesufficiency of any such certifications, legal opinions or other information.

The Registrar shall retain copies of allletters, notices and other written communications received pursuant to Section 2.08hereof or this Section 2.09.  The Company and the Guarantor shallhave the right to inspect and make copies of all such letters, notices or otherwritten communications at any reasonable time upon the giving of reasonablewritten notice to the Registrar.

## Section 2.10.*       **Holder Lists.  *The Trustee shallpreserve in as current a form as is reasonably practicable the most recent listavailable to it of the names and addresses of Holders and shall otherwisecomply with Section 312(a) of the TIA.  If the Trustee is not theRegistrar, the Company shall furnish to the Trustee prior to or on eachInterest Payment Date and at such other times as the Trustee may request inwriting a list in such form and as of such date as the Trustee may reasonablyrequire of the names and addresses of Holders relating to such Interest PaymentDate or request, as the case may be.

## Section 2.11.*       **Persons Deemed Owners.  *TheCompany, the Trustee and any agent of the Company or the Trustee may treat theregistered Holder of a Global Security as the absolute owner of such GlobalSecurity for the purpose of receiving payment thereof or on account thereof andfor all other purposes whatsoever, whether or not such Security be overdue, andnotwithstanding any notice of ownership or writing thereon, or any notice ofprevious loss or theft or other interest therein.  The Company, theTrustee and any agent of the Company or the Trustee may treat the Person inwhose name any Security is registered as the owner of such Security for thepurpose of receiving payment of principal of and interest (including LiquidatedDamages and Additional Tax Amounts, if any) on such Security and for all otherpurposes whatsoever, whether or not such Security be overdue, and notwithstandingany notice of ownership or writing thereon, or any notice of previous loss ortheft or other interest therein.

## Section 2.12.*       **Mutilated, Destroyed, Lost or Stolen Securities.  *Ifany mutilated Security is surrendered to the Trustee, the Company shall executeand the Trustee shall authenticate and deliver in exchange therefor a newSecurity of like tenor and principal amount and bearing a number notcontemporaneously outstanding.

If there is delivered to the Company and theTrustee

####  (i)*                 *evidence to their satisfaction of the destruction,loss or theft of any Security, and

**____ 33 ____** 

####  (ii)*               *such security or indemnity as may be required bythem to save each of them and any agent of either of them harmless,

then, in the absence of notice to the Company or theTrustee that such Security has been acquired by a bona fide purchaser, theCompany shall execute and, upon request, the Trustee shall authenticate anddeliver, in lieu of any such destroyed, lost or stolen Security, a new Securityof like tenor and principal amount and bearing a number not contemporaneouslyoutstanding.

In case any such mutilated, destroyed, lost orstolen Security has become or is about to become due and payable, the Companyin its discretion, but subject to any conversion rights, may, instead ofissuing a new Security, pay such Security, upon satisfaction of the conditionset forth in the preceding paragraph.

Upon the issuance of any new Security underthis Section, the Company may require the payment of a sum sufficient to coverany tax or other governmental charge that may be imposed in relation theretoand any other expenses (including the fees and expenses of the Trustee)connected therewith.

Every new Security issued pursuant to thisSection in lieu of any destroyed, lost or stolen Security shall constitute anoriginal additional contractual obligation of the Company, whether or not thedestroyed, lost or stolen Security shall be at any time enforceable by anyone,and such new Security shall be entitled to all the benefits of this Indentureequally and proportionately with any and all other Securities duly issuedhereunder.

The provisions of this Section are exclusiveand shall preclude (to the extent lawful) all other rights and remedies withrespect to the replacement or payment of mutilated, destroyed, lost or stolenSecurities.

## Section 2.13.*       **Treasury Securities.  *Indetermining whether the Holders of the requisite principal amount ofOutstanding Securities are present at a meeting of Holders for quorum purposesor have given any request, demand, authorization, direction, notice, consent orwaiver hereunder, Securities owned by the Company or any Affiliate of theCompany shall be disregarded and deemed not to be Outstanding, except that, indetermining whether the Trustee shall be protected in relying upon any suchdetermination as to the presence of a quorum or upon any such request, demand,authorization, direction, notice, consent or waiver, only such Securities ofwhich the Trustee has received written notice and are so owned shall be sodisregarded.

## Section 2.14.*       **Temporary Securities.  *Pending thepreparation of Securities in definitive form, the Company may execute and theTrustee shall, upon written request of the Company, authenticate and delivertemporary Securities (printed or lithographed).  Temporary Securitiesshall be issuable in any authorized denomination, and substantially in the formof the Securities in definitive form but with such omissions, insertions andvariations as may be appropriate for temporary Securities, all as may bedetermined by the Company.  Every such temporary Security shall beexecuted by the Company and authenticated by the Trustee upon the sameconditions and in substantially the same manner, and with the same effect, asthe Securities in definitive form.  

**____ 34 ____** 

## Without unreasonable delay, the Company will executeand deliver to the Trustee Securities in definitive form (other than in thecase of Securities in global form) and thereupon any or all temporarySecurities (other than any such Securities in global form) may be surrenderedin exchange therefor, at each office or agency maintained by the Companypursuant to Section 9.02 and the Trustee shall authenticate and deliver inexchange for such temporary Securities an equal aggregate principal amount ofSecurities in definitive form.  Such exchange shall be made by theCompany at its own expense and without any charge therefor.  Until soexchanged, the temporary Securities shall in all respects be entitled to thesame benefits and subject to the same limitations under this Indenture asSecurities in definitive form authenticated and delivered hereunder.

## Section 2.15.*       **Cancellation.  *All securitiessurrendered for payment, redemption, purchase, conversion, registration oftransfer or exchange shall, if surrendered to any Person other than theTrustee, be delivered to the Trustee.  All Securities so deliveredshall be canceled promptly by the Trustee, and no Securities shall be issued inlieu thereof except as expressly permitted by any of the provisions of thisIndenture.  The Trustee shall dispose of such cancelled securities inaccordance with its customary procedures.  If the Company shallacquire any of the Securities, such acquisition shall not operate as aredemption or satisfaction of the indebtedness represented by such Securitiesunless the same are delivered to the Trustee for cancellation.

## Section 2.16.*       **CUSIP Numbers.  *The Company inissuing the Securities may use "CUSIP" numbers (if then generally in use), andthe Trustee shall use CUSIP numbers in notices of redemption or exchange as aconvenience to Holders; *provided*,*however*, that any such noticeshall state that no representation is made as to the correctness of suchnumbers either as printed on the Securities or as contained in any such noticeand that reliance may be placed only on the other identification numbersprinted on the Securities, and any such redemption shall not be affected by anydefect in or omission of such numbers.  The Company shall promptlynotify the Trustee in writing of any change in the CUSIP numbers.

## Section 2.17.*       **Defaulted Interest.  *If theCompany fails to make a payment of interest (including Liquidated Damages andAdditional Tax Amounts, if any) on any Security when due and payable ("**DefaultedInterest**"), it shall pay such Defaulted Interest plus (to the extentlawful) any interest payable on the Defaulted Interest, in any lawful manner.  Itmay elect to pay such Defaulted Interest, plus any such interest payable on it,to the Persons who are Holders of such Securities on which the interest is dueon a subsequent Special Record Date.  The Company shall notify the Trusteein writing of the amount of Defaulted Interest proposed to be paid on each suchSecurity.  The Company shall fix any such Special Record Date andpayment date for such payment.  At least 15 days before any suchSpecial Record Date, the Company shall mail to Holders affected thereby anotice that states the Special Record Date, the Interest Payment Date, andamount of such interest (and such Liquidated Damages and Additional Tax Amounts,if any) to be paid.

## Section 2.18.*       **Rule 144A and Regulation S.  *TheCompany and the Guarantor agree that each will refuse to register any transferof Securities or Ordinary Shares that is not made in accordance with theprovisions of Rule 144A or Regulation S under the Securities Act, pursuant to aregistration statement which has been declared effective under the SecuritiesAct or pursuant to an available exemption from the registration requirements ofthe Securities Act; 

**____ 35 ____** 

## *provided*that this Section 2.18 shall not beapplicable to any Securities or Ordinary Shares which do not bear the legendset forth in Section 2.03(a)(i) or (ii) hereof.

## Section 2.19.*       **Form of Guarantee*.  AGuarantee substantially in the following form shall be endorsed on the reverse ofthis Security.  Capitalized terms used herein but not defined shallhave the meanings assigned to them in the Indenture unless otherwise indicated.

M-Systems Flash DiskPioneers Ltd. (the "Guarantor") hereby unconditionally and irrevocablyguarantees to the Holder of this Security (i) the due and punctual payment ofthe principal of and interest (including Liquidated Damages and Additional TaxAmounts, if any) on this Security, when and as the same shall become due andpayable, whether at maturity or upon redemption or upon declaration ofacceleration or otherwise, according to the terms of this Security and of theIndenture and (ii) any other obligations the Company may have under theIndenture or the Registration Rights Agreement.  This Guarantee is aguarantee of payment not of collection.  The Guarantor agrees that inthe case of default by the Company in the payment of any such principal orinterest (including Liquidated Damages and Additional Tax Amounts, if any), theGuarantor shall duly and punctually pay the same.  The Guarantorhereby agrees that its obligations hereunder shall be absolute andunconditional irrespective of any extension of the time for payment of thisSecurity, any modification of this Security, the Indenture or the RegistrationRights Agreement, any invalidity, irregularity or unenforceability of thisSecurity (or the Indenture or the Registration Rights Agreement), any failureto enforce the same or any waiver, modification, consent or indulgence grantedto the Company with respect thereto by the Holder of this Security or theTrustee, or any other circumstances which may otherwise constitute a legal orequitable discharge of a surety or guarantor.  The Guarantor herebywaives diligence, presentment, demand for payment, filing of claims with acourt in the event of merger or bankruptcy of the Company, any right to requirea demand or proceeding first against the Company, protest or notice withrespect to this Security or the Indebtedness evidenced hereby and all demandswhatsoever, and covenants that this Guarantee will not be discharged as to thisSecurity except by payment in full of the principal of and interest (includingLiquidated Damages and Additional Tax Amounts, if any) on this Security.  AnEvent of Default under the Indenture or this Security shall constitute an eventof default under this Guarantee, and shall entitle the Holder of this Securityto accelerate the obligations of the Guarantor hereunder in the same manner andto the same extent as the obligations of the Company.

The Guarantor shall besubrogated to all rights of the Holders of this Security against the Company inrespect of any amounts paid by the Guarantor pursuant to the provisions of thisGuarantee or the Indenture; *provided*,*however*, that the Guarantorhereby waives any and all rights to which it may be entitled, by operation oflaw or otherwise, upon making any payment hereunder (i) to be subrogatedto the rights of a Holder against the Company with respect to such payment orotherwise to be reimbursed, 

**____ 36 ____** 

indemnifiedor exonerated by the Company in respect thereof or (ii) to receive anypayment in the nature of contribution or for any other reason, from any otherobligor with respect to such payment, in each case, until the principal of andinterest (including Liquidated Damages and Additional Tax Amounts, if any) onthis Security shall have been paid in full.

The Guarantee shall notbe valid or become obligatory for any purpose with respect to this Securityuntil the certificate of authentication on this Security shall have been signedby the Trustee.

The Guarantee shall begoverned by and construed in accordance with the laws of the State of New York.

INWITNESS WHEREOF, M-Systems Flash Disk Pioneers Ltd. has caused the Guarantee tobe signed manually or by facsimile by its duly authorized officer.

                                    M-SYSTEMSFLASH DISK PIONEERS LTD.

By

Name:Title:

## Section 2.20.*       **Guarantee of Securities.  *TheGuarantor hereby unconditionally and irrevocably guarantees to each Holder andto the Trustee (i) the due and punctual payment of the principal of andinterest (including Liquidated Damages and Additional Tax Amounts, if any) on theSecurities, and all other payment obligations of the Company owed under thisIndenture when and as the same shall become due and payable, whether atmaturity or upon redemption or upon declaration of acceleration or otherwise,according to the terms of such Securities and of this Indenture and (ii) anyother obligations the Company may have under this Indenture or the RegistrationRights Agreement.  The Guarantor agrees that in case of default bythe Company in the payment of any such principal or interest (including LiquidatedDamages and Additional Tax Amounts, if any), the Guarantor shall duly andpunctually pay the same.  The Guarantee set forth in this Section 2.20is a guarantee of payment and not of collection.  The Guarantorhereby agrees that its obligations hereunder shall be absolute andunconditional irrespective of any extension of the time for payment of any suchSecurities, any modification of any such Security, this Indenture, or theRegistration Rights Agreement, any invalidity, irregularity or unenforceabilityof any such Securities, this Indenture or the Registration Rights Agreement,any failure to enforce the same or any waiver, modification, consent orindulgence granted to the Company with respect thereto by the Holder of any suchSecurities or the Trustee or any other circumstances which may otherwiseconstitute a legal or equitable discharge or defense of a surety or guarantor.  

**____ 37 ____** 

## The Guarantor hereby waives diligence,presentment, demand for payment, filing of claims with a court in the event ofmerger or bankruptcy of the Company, any right to require a demand orproceeding first against the Company, protest or notice with respect to anysuch Security or the Indebtedness evidenced thereby and all demands whatsoever,and covenants that the Guarantee will not be discharged as to any such Securityexcept by payment in full of the principal of and interest (including LiquidatedDamages and Additional Tax Amounts, if any) on such Security.

The Guarantor shall be subrogated to all rightsof the Holders against the Company in respect of any amounts paid by theGuarantor pursuant to the provisions of the Guarantee or this Indenture; *provided*,*however*, that the Guarantor hereby waives any and all rights to which itmay be entitled, by operation of law or otherwise, upon making any paymenthereunder  (i) to be subrogated to the rights of a Holderagainst the Company with respect to such payment or otherwise to be reimbursed,indemnified or exonerated by the Company in respect thereof or (ii) toreceive any payment in the nature of contribution or for any other reason, fromany other obligor with respect to such payment, in each case, until theprincipal of and interest (including Liquidated Damages and Additional TaxAmounts, if any) on all Securities issued hereunder shall have been paid infull.

The Guarantor hereby agrees that the Guaranteeshall remain in full force and effect notwithstanding any failure to endorse onany Security a notation of such Guarantee.

The Guarantor, and by its acceptance hereofeach Holder, hereby confirms that it is the intention of all such parties thatthe Guarantee shall not constitute a fraudulent transfer or conveyance for thepurposes of title 11 of the United States Code, the Uniform Fraudulent ConveyanceAct, the Uniform Fraudulent Transfer Act or any other applicable federal, stateor foreign law similar to any of the foregoing.  To effectuate theforegoing intention, the Holders and the Guarantor hereby irrevocably agreethat the obligations of the Guarantor under this Section 2.20 shall be limitedto such maximum amount as will, after giving effect to all other contingent andfixed liabilities of the Guarantor, result in the obligations of the Guarantorunder the Guarantee not constituting a fraudulent transfer or conveyance underapplicable federal, state or foreign law.

An Event of Default under this Indenture shallconstitute an event of default under the Guarantee, and shall entitle theHolder of the Security to accelerate the obligations of the Guarantor thereunderin the same manner and to the same extent as the obligations of the Company.

The Guarantee set forth in this Section shallnot be valid or become obligatory for any purpose with respect to a Securityuntil the certificate of authentication on such Security shall have been signedby the Trustee.

## Section 2.21.*       **Execution of Guarantee*.  To evidenceits Guarantee specified in Sections 2.19 and 2.20 to the Holders of Securities,the Guarantor hereby agrees to execute the Guarantee in substantially the formrecited in Section 2.19 above to be endorsed on each Security.  

**____ 38 ____** 

## If the Company shall execute Physical Securities inaccordance with Section 2.08, the Guarantor shall execute the Guarantees insubstantially the form recited in Section 2.19 above to be endorsed on eachsuch Security.  Such Guarantees shall be executed on behalf of theGuarantor by its Officer.  The signature of any Officer of theGuarantor on the Guarantee may be manual or facsimile.

If an Officer of the Guarantor whose signatureis on this Indenture or the Guarantee endorsed on a Security no longer holdsthat office at the time the Trustee authenticates such Security or at any timethereafter, the Guarantor`s Guarantee and such Security shall be validnevertheless.

## Section 2.22.*       **Add On Securities*.  The Companymay, from time to time, subject to compliance with any other applicableprovisions of this Indenture, without the consent of the Holders, create andissue pursuant to this Indenture additional notes ("**Add On Securities**")having terms identical to those of the Outstanding Securities, except that AddOn Securities:

####  (i)*                 *may have a different issue date from otherOutstanding Securities;

####  (ii)*               *may have a different amount of interest payable onthe first Interest Payment Date after issuance than is payable on other OutstandingSecurities; and

####  (iii)*              *may have terms specified in the Add On SecurityBoard Resolutions or Add On Security Supplemental Indenture for such Add OnSecurities making appropriate adjustments to this Article 2 and Exhibit A (andrelated definitions) applicable to such Add On Securities in order to conformto and ensure compliance with the Securities Act (or other applicablesecurities laws) and any registration rights or similar agreement applicable tosuch Add On Securities, which are not adverse in any material respect to theHolder of any Outstanding Securities (other than such Add On Securities) andwhich shall not affect the rights or duties of the Trustee.

In authenticating any Add On Securities, andaccepting the additional responsibilities under this Indenture in relation tosuch Add On Securities, the Trustee shall be entitled to receive, and shall befully protected in relying upon:

####  (iv)*             *the Add On Security Board Resolutions or Add OnSecurity Supplemental Indenture relating thereto;

####  (v)*               *an Officer`s Certificate complying with Section 14.05;and

#### (vi)*             *Opinions of Counsel complying with Section 14.05stating,

#####  (1)*              *that the forms of such Securities have beenestablished by or pursuant to Add On Security Board Resolutions or by an Add OnSecurity Supplemental Indenture, as permitted by this Section 2.22 and inconformity with the provisions of this Indenture;

#####  (2)*              *that the terms of such Securities have beenestablished by or pursuant to Add On Security Board Resolutions or by an Add OnSecurity Supplemental Indenture, as permitted by this Section 2.22 and inconformity with the provisions of this Indenture;

**____ 39 ____** 

#####  (3)*              *that such Securities, when authenticated anddelivered by the Trustee and issued by the Company in the manner and subject toany customary conditions specified in such Opinion of Counsel, will constitutevalid and legally binding obligations of the Company entitled to the benefitsprovided in the Indenture, enforceable in accordance with their respectiveterms, except to the extent that the enforcement of such obligations may besubject to bankruptcy laws or insolvency laws or other similar laws, generalprinciples of equity and such other qualifications as such counsel shallconclude are customary or do not materially affect the rights of the Holders ofsuch Securities;

#####  (4)*              *that all laws and requirements in respect of theexecution and delivery of the Securities have been complied with; and

#####  (5)*              *such other matters as the Trustee may reasonablyrequest.

If such forms or terms have been so established by orpursuant to Add On Security Board Resolutions or an Add On SecuritySupplemental Indenture, the Trustee shall have the right to decline toauthenticate and deliver any Securities:

(1)        if the Trustee, being advised by counsel,determines that such action may not lawfully be taken;

(2)        if the Trustee by its board of directors,executive committee or a committee of directors or trust officers in good faithdetermines that such action would expose the Trustee to personal liability toHolders of any Outstanding Securities; or

(3)        if the issue of such Add On Securities pursuantto this Indenture will affect the Trustee`s own rights, duties and immunitiesunder the Securities and this Indenture or otherwise in a manner which is notreasonably acceptable to the Trustee.

Notwithstanding anything in this Section 2.22, the Companymay not issue Add On Securities if an Event of Default shall have occurred andbe continuing.

# ARTICLE3SATISFACTION AND DISCHARGE

## Section 3.01.*       **Satisfaction and Discharge of Indenture*.  When:

### (a)*               *The Company shall deliver to the trustee forcancellation all Securities previously authenticated (other than any Securitieswhich have been destroyed, lost or stolen and in lieu of or in substitution forwhich other Securities shall have been authenticated and delivered) and notpreviously canceled, or

### (b)*              *(i) All the Securities not previously canceled ordelivered to the Trustee for cancellation shall have become due and payable, orare by their terms to become due and payable within one year or are to becalled for redemption within one year under arrangements satisfactory to theTrustee for the giving of notice of redemption, and

**____ 40 ____** 

 

####  (i)*                 *The Company shall deposit with the Trustee, intrust, cash in U.S. dollars which through the payment of interest and principalin respect thereof, in accordance with their terms, will provide (and withoutreinvestment and assuming no tax liability will be imposed on the Trustee), notlater than one day before the due date of any payment of money, an amount incash, sufficient to pay principal of and interest (including Liquidated Damagesand Additional Tax Amounts, if any) on all of the Securities (other than anySecurities which shall have been mutilated, destroyed, lost or stolen and inlieu of or in substitution for which other Securities shall have beenauthenticated and delivered) not previously canceled or delivered to theTrustee for cancellation, on the dates such payments of principal and interest(including Liquidated Damages and Additional Tax Amounts, if any) are due tosuch date of maturity or redemption, as the case may be,

and if, in the case of either clause (a) or (b), theCompany shall also pay or cause to be paid all other sums payable hereunder bythe Company, then this Indenture shall cease to be of further effect (except asto:  (A) remaining rights of registration of transfer, substitutionand exchange and conversion of Securities, (B) rights hereunder of Holders toreceive payments of principal of and interest (including Liquidated Damages andAdditional Tax Amounts, if any) on the Securities and the other rights, dutiesand obligations of Holders, as beneficiaries hereof with respect to theamounts, if any, so deposited with the Trustee, and (C) the rights, obligationsand immunities of the Trustee hereunder), and the Trustee, on demand of theCompany accompanied by an Officer`s Certificate and an Opinion of Counsel asprovided in Section 14.05 hereof and at the cost and expense of the Company,shall execute proper instruments acknowledging satisfaction of and dischargingthis Indenture; *provided*,*however*, that the Company shallreimburse the Trustee for all amounts due the Trustee under Section 5.08 hereofand for any costs or expenses thereafter reasonably and properly incurred bythe Trustee and to compensate the Trustee for any services thereafter reasonablyand properly rendered by the Trustee in connection with this Indenture or theSecurities.

## Section 3.02.*       **Deposited Monies to Be Held in Trust.  *Subjectto Section 3.03 hereof, all monies deposited with the Trustee pursuant toSection 3.01 hereof shall be held in trust and applied by it to the payment,either directly or through any Paying Agent (including the Company if acting asits own Paying Agent), to the Holders of the particular Securities for thepayment or redemption of which such monies have been deposited with theTrustee, of all sums due and to become due thereon for principal and interest(including Liquidated Damages and Additional Tax Amounts, if any).  Allmonies deposited with the Trustee pursuant to Section 3.01 hereof (and held byit or any Paying Agent) for the payment of Securities subsequently convertedshall be returned to the Company upon request of the Company.

## Section 3.03.*       **Return of Unclaimed Monies.  *TheTrustee and the Paying Agent shall pay to the Company any money held by themfor the payment of principal or interest (including Liquidated Damages andAdditional Tax Amounts, if any) that remains unclaimed for two years after thedate upon which such payment shall have become due.  After payment tothe Company, Holders entitled to the money must look to the Company for paymentas general creditors unless an applicable abandoned property law designatesanother Person, and all liability of the Trustee and the Paying Agent withrespect to such money shall cease.

**____ 41 ____** 

 

# ARTICLE4DEFAULTS AND REMEDIES

## Section 4.01.*       **Events of Default.  *An "Event ofDefault" with respect to the Securities occurs when any of the following occurs(whatever the reason for such Event of Default and whether it shall bevoluntary or involuntary or be effected by operation of law or pursuant to anyjudgment, decree or order of any court or any order, rule or regulation of anyadministrative or governmental body):

### (a)*               *the Company fails to pay when due the principal onany of the Securities when it becomes due and payable, at Maturity, uponredemption or exercise of a Purchase Right or Put Purchase Right or otherwise;or

### (b)*              *the Company fails to pay an installment of interest(including Liquidated Damages and Additional Tax Amounts, if any) on any of theSecurities when it becomes due and payable and such default continues for aperiod of 30 days; or

### (c)*               *the Guarantor fails to perform its obligations underthe Guarantee; or

### (d)*              *the Guarantor fails to deliver Ordinary Shares whenthose Ordinary Shares are required to be delivered following conversion of aSecurity in accordance with Article 12, and that failure continues for 10 days;or

### (e)*               *either the Company or the Guarantor fails toperform or observe any other term, covenant or agreement contained in theSecurities or this Indenture and the failure continues for a period of 60 daysafter written notice of such failure, requiring the Company or the Guarantor,respectively, to remedy the same, shall have been given to the Company and theGuarantor by the Trustee or to the Company and the Guarantor and the Trustee bythe Holders of at least 25% in aggregate principal amount of the OutstandingSecurities; or

### (f)*                *(i) the Company or the Guarantor fails to make anypayment by the end of the applicable grace period, if any, after the maturityof any Indebtedness of the Company or the Guarantor for borrowed money in anamount in excess of $10,000,000 or (ii) there is an acceleration of anyIndebtedness of the Company or the Guarantor for borrowed money in an amount inexcess of $10,000,000 because of a default with respect to such Indebtednesswithout such Indebtedness having been discharged or such acceleration havingbeen cured, waived, rescinded or annulled, in the case of either (i) or (ii) above,for a period of 30 days after written notice to the Company and the Guarantor bythe Trustee or to the Company and the Guarantor and the Trustee by Holders ofat least 25% in aggregate principal amount of the Outstanding Securities; or

### (g)*               *either the Guarantor or the Company fails, within30 days after the occurrence of a Fundamental Change, to give to each Holder ofSecurities notice pursuant to Section 11.03 hereof; or

**____ 42 ____** 

### (h)*               *the entry by a court having jurisdiction in thepremises of (i) a decree or order for relief in respect of the Company or theGuarantor in an involuntary case or proceeding under any applicable U.S.federal, state or foreign bankruptcy, insolvency, reorganization or othersimilar law or (ii) a decree or order adjudging the Company or the Guarantor abankrupt or insolvent, or approving as properly filed a petition seekingreorganization, arrangement, adjustment or composition of or in respect of theCompany or the Guarantor under any applicable U.S. federal, state or foreign law,or appointing a custodian, receiver, liquidator, assignee, trustee,sequestrator or other similar official of the Company or the Guarantor or ofany substantial part of its property, or ordering the winding up or liquidationof its affairs, and the continuance of any such decree or order for relief orany such other decree or order unstayed and in effect for a period of 60 consecutivedays; or

### (i)*                 *the commencement by the Company or the Guarantor ofa voluntary case or proceeding under any applicable U.S. federal, state orforeign bankruptcy, insolvency, reorganization or other similar law or of anyother case or proceeding to be adjudicated a bankrupt or insolvent, or theconsent by the Company or the Guarantor to the entry of a decree or order forrelief in respect of the Company or the Guarantor in an involuntary case orproceeding under any applicable U.S. federal, state or foreign bankruptcy,insolvency, reorganization or other similar law or to the commencement of anybankruptcy or insolvency case or proceeding against the Company or theGuarantor, or the filing by the Company or the Guarantor of a petition oranswer or consent seeking reorganization or relief under any applicable U.S.federal, state or foreign law, or the consent by the Company or the Guarantorto the filing of such petition or to the appointment of or the takingpossession by a custodian, receiver, liquidator, assignee, trustee,sequestrator or other similar official of the Company or the Guarantor or ofany substantial part of its property, or the making by the Company or theGuarantor of an assignment for the benefit of creditors, or the admission by theCompany or the Guarantor in writing of its inability to pay its debts generallyas they become due, or the taking of corporate action by the Company or theGuarantor expressly in furtherance of any such action.

## Section 4.02.*       **Acceleration of Maturity; Rescission and Annulment.  *Ifan Event of Default with respect to Outstanding Securities (other than an Eventof Default specified in Section 4.01(h) or 4.01(i) hereof) occurs and iscontinuing, the Trustee or the Holders of at least 25% in aggregate principalamount of the Outstanding Securities, by written notice to the Company and theTrustee, may declare due and payable 100% of the principal amount of allOutstanding Securities plus any accrued and unpaid interest (includingLiquidated Damages and Additional Tax Amounts, if any) to the date of payment.  Upona declaration of acceleration, such principal and accrued and unpaid interest(including Liquidated Damages and Additional Tax Amounts, if any) to the dateof payment shall be immediately due and payable.

If an Event of Default specified in Section 4.01(h)or 4.01(i) hereof occurs, all unpaid principal of and accrued and unpaidinterest (including Liquidated Damages and Additional Tax Amounts, if any) onthe Outstanding Securities shall become and be immediately due and payable,without any declaration or other act on the part of the Trustee or any Holder.

**____ 43 ____** 

The Holders of a majority in aggregateprincipal amount of the Outstanding Securities by written notice to the Trusteemay rescind and annul an acceleration and its consequences if:

####  (i)*                 *all existing Events of Default, other than thenonpayment of principal of or interest (including Liquidated Damages andAdditional Tax Amounts, if any) on the Securities which has become due solelybecause of the acceleration, have been remedied, cured or waived, and

####  (ii)*               *the rescission would not conflict with any judgmentor decree of a court of competent jurisdiction;

*provided*,*however*, that in the event such declaration of acceleration has been madebased on the existence of an Event of Default under Section 4.01(e) hereof andsuch Event of Default has been remedied, cured or waived in accordance withSection 4.01(e) hereof, then, without any further action by the Holders, suchdeclaration of acceleration shall be rescinded automatically and the consequencesof such declaration shall be annulled.  No such rescission orannulment shall affect any subsequent Default or impair any right consequentthereon.

## Section 4.03.*       **Other Remedies.  *If an Event ofDefault with respect to Outstanding Securities occurs and is continuing, theTrustee may pursue any available remedy by proceeding at law or in equity tocollect the payment of principal of or interest on the Securities or to enforcethe performance of any provision of the Securities.

The Trustee may maintain a proceeding in whichit may prosecute and enforce all rights of action and claims under thisIndenture or the Securities, even if it does not possess any of the Securitiesor does not produce any of them in the proceeding.

## Section 4.04.*       **Waiver of Past Defaults.  *TheHolders, either (a) through the written consent of not less than a majority inaggregate principal amount of the Outstanding Securities or (b) by the adoptionof a resolution, at a meeting of Holders of the Outstanding Securities at whicha quorum is present, by the Holders of at least a majority in aggregateprincipal amount of the Outstanding Securities represented at such meeting,may, on behalf of the Holders of all of the Securities, waive an existingDefault or Event of Default, except a Default or Event of Default:

####  (i)*                 *in the payment of the principal of or interest(including Liquidated Damages and Additional Tax Amounts, if any) on anySecurity (*provided*,*however*, that subject to Section 4.07 hereof,the Holders of a majority in aggregate principal amount of the OutstandingSecurities may rescind an acceleration and its consequences, including anyrelated payment default that resulted from such acceleration);

####  (ii)*               *in respect of the failure to convert any Securityin accordance with Article 12; or

####  (iii)*              *in respect of a covenant or provision hereof which,under Section 7.02 hereof, cannot be modified or amended without the consent ofthe Holder of each Outstanding Security affected.

**____ 44 ____** 

#### Upon any such waiver, such Default shall cease toexist, and any Event of Default arising therefrom shall be deemed to have beencured, for every purpose of this Indenture; *provided*,*however*, thatno such waiver shall extend to any subsequent or other Default or impair anyright consequent thereon.

## Section 4.05.*       **Control by Majority.  *The Holders,either (a) through the written consent of not less than a majority in aggregateprincipal amount of the Outstanding Securities, or (b) by the adoption of aresolution, at a meeting of Holders of the Outstanding Securities at which aquorum is present, by the Holders of at least a majority in aggregate principalamount of the Outstanding Securities represented at such meeting, shall havethe right to direct the time, method and place of conducting any proceeding forany remedy available to the Trustee or exercising any trust or power conferredon the Trustee.  However, the Trustee may refuse to follow anydirection that:

####  (i)*                 *conflicts with any law or with this Indenture,

####  (ii)*               *the Trustee determines may be unduly prejudicial tothe rights of the Holders not joining therein, or

####  (iii)*              *may expose the Trustee to personal liability.

The Trustee may take any other action deemedproper by the Trustee which is not inconsistent with such direction.

## Section 4.06.*       **Limitation on Suit.  *No Holder ofany Security shall have any right to pursue any remedy with respect to thisIndenture or the Securities (including instituting any proceeding, judicial orotherwise, with respect to this Indenture or for the appointment of a receiveror trustee) unless:

####  (i)*                 *such Holder has previously given written notice tothe Trustee of an Event of Default that is continuing;

####  (ii)*               *the Holders of at least 25% in aggregate principalamount of the Outstanding Securities shall have made written request to theTrustee to pursue the remedy;

####  (iii)*              *such Holder or Holders have offered to the Trusteeindemnity satisfactory to it against any costs, expenses and liabilitiesincurred in complying with such request;

####  (iv)*             *the Trustee has failed to comply with the requestfor 60 days after its receipt of such notice, request and offer of indemnity;and

####  (v)*               *during such 60-day period, no directioninconsistent with such written request has been given to the Trustee by theHolders of a majority in aggregate principal amount of the OutstandingSecurities (or such amount as shall have acted at a meeting pursuant to theprovisions of this Indenture);

**____ 45 ____** 

#### *provided*,*however*, that no one ormore of such Holders may use this Indenture to prejudice the rights of anotherHolder or to obtain preference or priority over another Holder (it beingunderstood that the Trustee does not have an affirmative duty to ascertainwhether or not such actions or forbearances are unduly prejudicial to suchHolders).

## Section 4.07.*       **Unconditional Rights of Holders to ReceivePayment and to Convert.  *Notwithstanding any other provision inthis Indenture, the Holder of any Security shall have the right, which isabsolute and unconditional, to receive payment of the principal of and interest(including Liquidated Damages and Additional Tax Amounts, if any) on suchSecurity on the Stated Maturity expressed in such Security (or, in the case ofredemption, on the Redemption Date, or in the case of the exercise of aPurchase Right or Put Purchase Right, on the Purchase Date or Put PurchaseDate, as applicable) and to convert such Security in accordance with Article 12,and to bring suit for the enforcement of any such payment on or after suchrespective dates and right to convert, and such rights shall not be impaired oraffected without the consent of such Holder.

## Section 4.08.*       **Collection of Indebtedness and Suits forEnforcement by the Trustee*.  The Company covenants that if:

####  (i)*                 *a Default or Event of Default occurs in the paymentof any interest (including Liquidated Damages and Additional Tax Amounts, ifany) on any Security when such interest (including Liquidated Damages andAdditional Tax Amounts, if any) becomes due and payable and such Default orEvent of Default continues for a period of 30 days, or

####  (ii)*               *a Default or Event of Default occurs in the paymentof the principal of any Security at the Maturity thereof,

the Company shall, upon demand of the Trustee, pay to it,for the benefit of the Holders of such Securities, the whole amount then dueand payable (as expressed therein or as a result of any acceleration effectedpursuant to Section 4.02 hereof) on such Securities for principal and interest(including Liquidated Damages and Additional Tax Amounts, if any) and, to theextent that payment of such interest shall be legally enforceable, interest onany overdue principal and on any overdue interest (including Liquidated Damagesand Additional Tax Amounts, if any), in each case at the Interest Rate, and, inaddition thereto, such further amount as shall be sufficient to cover the costsand expenses of collection, including the reasonable compensation, expenses,disbursements and advances of the Trustee, its agents and counsel.

If the Company fails to pay such amountsforthwith upon such demand, the Trustee, in its own name and as trustee of anexpress trust, may institute a judicial proceeding for the collection of thesums so due and unpaid, may prosecute such proceeding to judgment or finaldecree and may enforce the same against the Company and collect the moneysadjudged or decreed to be payable in the manner provided by law out of theproperty of the Company, wherever situated.

**____ 46 ____** 

If an Event of Default occurs and iscontinuing, the Trustee may in its discretion proceed to protect and enforceits rights and the rights of the Holders of Securities by such appropriatejudicial proceedings as the Trustee shall deem most effectual to protect andenforce any such rights, whether for the specific enforcement of any covenantor agreement in this Indenture or in aid of the exercise of any power grantedherein, or to enforce any other proper remedy.

## Section 4.09.*       **Trustee May File Proofs of Claim.  *Incase of the pendency of any receivership, insolvency, liquidation, bankruptcy,reorganization, arrangement, adjustment, composition or other judicialproceeding relative to the Company or the Guarantor or the property of theCompany or the Guarantor or their respective creditors, the Trustee(irrespective of whether the principal of the Securities shall then be due andpayable as therein expressed or by declaration or otherwise and irrespective ofwhether the Trustee shall have made any demand on the Company or the Guarantor forthe payment of overdue principal or interest (including Liquidated Damages andAdditional Tax Amounts, if any)) shall be entitled and empowered, byintervention in such proceeding or otherwise, (1) to file and prove a claim forthe whole amount of principal and interest (including Liquidated Damages andAdditional Tax Amounts, if any) owing and unpaid in respect of the Securitiesand to file such other papers or documents as may be necessary or advisable inorder to have the claims of the Trustee (including any claim for the reasonablecompensation, expenses, disbursements and advances of the Trustee, its agentsand counsel) and of the Holders of Securities allowed in such judicialproceeding, and (2) to collect and receive any moneys or other property payableor deliverable on any such claim and to distribute the same; and any custodian,receiver, assignee, trustee, liquidator, sequestrator or other similar officialin any such judicial proceedings is hereby authorized by each Holder ofSecurities to make such payments to the Trustee and, in the event that theTrustee shall consent to the making of such payments directly to the Holders ofSecurities, to pay to the Trustee any amount due to it for the reasonablecompensation, expenses, disbursements and advances of the Trustee, its agentsand counsel and any other amounts due the Trustee under Section 5.08.

Nothing contained herein shall be deemed toauthorize the Trustee to authorize or consent to or accept, or adopt on behalfof any Holder of a Security, any plan of reorganization, arrangement,adjustment or composition affecting the Securities or the rights of any Holderthereof or to authorize the Trustee to vote in respect of the claim of anyHolder of a Security in any such proceeding.

## Section 4.10.*       **Restoration of Rights and Remedies.  *Ifthe Trustee or any Holder of a Security has instituted any proceeding toenforce any right or remedy under this Indenture and such proceeding has beendiscontinued or abandoned for any reason, or has been determined adversely tothe Trustee or to such Holder, then and in every such case, subject to anydetermination in such proceeding, the Company, the Guarantor, the Trustee andthe Holders of Securities shall be restored severally and respectively to theirformer positions hereunder and thereafter all rights and remedies of theTrustee and the Holders shall continue as though no such proceeding had beeninstituted.

**____ 47 ____** 

## Section 4.11.*       **Rights and Remedies.  *Except asotherwise provided with respect to the replacement or payment of mutilated,destroyed, lost or stolen Securities in the last paragraph of Section 2.12, noright or remedy conferred in this Indenture upon or reserved to the Trustee orto the Holders of Securities is intended to be exclusive of any other right orremedy, and every right and remedy shall, to the extent permitted by law, becumulative and in addition to every other right and remedy given hereunder orhereafter existing at law or in equity or otherwise.  The assertionor employment of any right or remedy hereunder, or otherwise, shall not preventthe concurrent assertion or employment of any other appropriate right orremedy.

## Section 4.12.*       **Delay or Omission Not Waiver.  *Nodelay or omission of the Trustee or of any Holder of any Security to exerciseany right or remedy accruing upon any Event of Default shall impair any suchright or remedy or constitute a waiver of any such Event of Default or anyacquiescence therein.  Every right and remedy given by this Article orby law to the Trustee or to the Holders of Securities may be exercised fromtime to time, and as often as may be deemed expedient, by the Trustee or by theHolders of Securities, as the case may be.

## Section 4.13.*       **Application of Money Collected.  *Anymoney and property collected by the Trustee pursuant to this Article shall beapplied in the following order, at the date or dates fixed by the Trustee and,in case of the distribution of such money and property on account of principalor interest (including Liquidated Damages and Additional Tax Amounts, if any),upon presentation of the Securities and the notation thereon of the payment ifonly partially paid and upon surrender thereof if fully paid:

FIRST:  To the payment of all amountsdue the Trustee;

SECOND:  To the payment of theamounts then due and unpaid for principal of and interest (including LiquidatedDamages and Additional Tax Amounts, if any) on the Securities in respect ofwhich or for the benefit of which such money has been collected, ratably,without preference or priority of any kind, according to the amounts due andpayable on such Securities for principal and interest (including LiquidatedDamages and Additional Tax Amounts, if any), respectively; and

THIRD:  Any remaining amounts shallbe repaid to the Company.

## Section 4.14.*       **Undertaking for Costs.  *Allparties to this Indenture agree, and each Holder of any Security by suchHolder`s acceptance thereof shall be deemed to have agreed, that any court mayin its discretion require, in any suit for the enforcement of any right orremedy under this Indenture, or in any suit against the Trustee for any actiontaken, suffered or omitted by it as Trustee, the filing by any party litigantin such suit of an undertaking to pay the costs of such suit, and that suchcourt may in its discretion assess reasonable costs, including reasonableattorneys` fees and expenses, against any party litigant in such suit, havingdue regard to the merits and good faith of the claims or defenses made by suchparty litigant; but the provisions of this Section shall not apply to any suitinstituted by the Company or the Guarantor, to any suit instituted by theTrustee, to any suit instituted by any Holder, or group of Holders, holding inthe aggregate more than 10% in aggregate principal amount of the OutstandingSecurities, or to any suit instituted by any Holder of any Security for the enforcementof the payment of the

**____ 48 ____** 

## principal of or interest (including LiquidatedDamages and Additional Tax Amounts, if any) on any Security on or after theStated Maturity expressed in such Security (or, in the case of redemption orexercise of a Purchase Right, on or after the Redemption Date) or for theenforcement of the right to convert any Security in accordance with Article 12.

## Section 4.15.*       **Waiver of Stay or Extension Laws.  *Eachof the Company and the Guarantor covenants (to the extent that it may lawfullydo so) that it will not at any time insist upon, or plead, or in any mannerwhatsoever claim to take the benefit or advantage of, any stay or extension lawwherever enacted, now or at any time hereafter in force, which may affect thecovenants or the performance of this Indenture; and each of the Company and theGuarantor (to the extent that it may lawfully do so) hereby expressly waivesall benefit or advantage of any such law and covenants that it will not hinder,delay or impede the execution of any power herein granted to the Trustee, butwill suffer and permit the execution of every such power as though no such lawhad been enacted.

# ARTICLE5THE TRUSTEE

## Section 5.01.*       **Certain Duties and Responsibilities.  *(a)Except during the continuance of an Event of Default,

####  (i)*                 *The Trustee undertakes to perform such duties andonly such duties as are specifically set forth in this Indenture or the TIA,and no implied covenants or obligations shall be read into this Indentureagainst the Trustee; and

####  (ii)*               *In the absence of bad faith on its part, theTrustee may conclusively rely, as to the truth of the statements and thecorrectness of the opinions expressed therein, upon certificates or opinionsfurnished to the Trustee and conforming to the requirements of this Indenture; *provided*,*however*, that in the case of any such certificates or opinions which by anyprovision hereof are specifically required to be furnished to the Trustee, theTrustee shall examine the certificates or opinions to determine whether or not,on their face, they conform to the requirements of this Indenture (but need notinvestigate or confirm the accuracy of any facts stated therein).

### (b)*              *In case an Event of Default actually known to aResponsible Officer of the Trustee has occurred and is continuing, the Trusteeshall exercise such of the rights and powers vested in it by this Indenture,and use the same degree of care and skill in their exercise, as a prudentperson would exercise or use under the circumstances in the conduct of suchperson`s own affairs.

### (c)*               *No provision of this Indenture shall be construedto relieve the Trustee from liability for its own negligent action, its ownnegligent failure to act, or its own willful misconduct, except that:

####  (i)*                 *This paragraph (c) shall not be construed to limitthe effect of paragraph (a) of this Section 5.01;

**____ 49 ____** 

####  (ii)*               *The Trustee shall not be liable for any error ofjudgment made in good faith by a Responsible Officer, unless it shall be provedthat the Trustee was negligent in ascertaining the pertinent facts; and

####  (iii)*              *The Trustee shall not be liable with respect to anyaction taken or omitted to be taken by it in good faith in accordance with adirection received by it of the Holders of a majority in principal amount ofthe Outstanding Securities (or such lesser amount as shall have acted at ameeting pursuant to the provisions of this Indenture) relating to the time,method and place of conducting any proceeding for any remedy available to theTrustee, or exercising any trust or power conferred upon the Trustee, underthis Indenture.

### (d)*              *Whether or not herein expressly so provided, everyprovision of this Indenture relating to the conduct or affecting the liabilityof or affording protection to the Trustee shall be subject to the provisions ofthis Section 5.01.

### (e)*               *No provision of this Indenture shall require the Trusteeto expend or risk its own funds or otherwise incur any liability in theperformance of any of its duties hereunder, or in the exercise of any of itsrights or powers.  The Trustee may refuse to perform any duty orexercise any right or power unless it receives indemnity satisfactory to itagainst any loss, liability, cost or expense (including, without limitation,reasonable fees and expenses of counsel).

### (f)*                *The Trustee shall not be obligated to pay intereston any money or other assets received by it unless otherwise agreed in writingwith the Company.  Assets held in trust by the Trustee need not besegregated from other funds except to the extent required by law.

### (g)*               *The Trustee shall not be bound to make anyinvestigation into the facts or matters stated in any resolution, certificate,statement, instrument, opinion, report, notice, request, direction, consent,order, bond, debenture, note, coupon, other evidence of indebtedness or otherpaper or document, but the Trustee, in its discretion, may make such furtherinquiry or investigation into such facts or matters as it may see fit, and, ifthe Trustee shall determine to make such further inquiry or investigation, itshall be entitled to examine the books, records and premises of the Company,personally or by agent or attorney at the sole cost of the Company, and shallincur no liability or additional liability of any kind by reason of suchinquiry or investigation.

### (h)*               *The Trustee shall not be deemed to have notice oractual knowledge of any Event of Default or an event requiring the payment of LiquidatedDamages unless a Responsible Officer of the Trustee has actual knowledgethereof or unless written notice of any event which is in fact a Default isreceived by the Trustee pursuant to Section 14.02 hereof, and such noticereferences the Securities and this Indenture.

### (i)*                 *The rights, privileges, protections, immunities andbenefits given to the Trustee hereunder, including, without limitation, itsright to be indemnified, are extended to, and shall be enforceable by, theTrustee in each of its capacities hereunder, and each Paying Agent,authenticating agent, Conversion Agent or Registrar acting hereunder.

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###  

## Section 5.02.*       **Certain Rights of Trustee.  *Subjectto the provisions of Section 5.01 hereof and subject to Sections 315(a) through(d) of the TIA:

####  (i)*                 *The Trustee may conclusively rely on any documentbelieved by it to be genuine and to have been signed or presented by the properperson.  The Trustee need not investigate any fact or matter statedin the document.

####  (ii)*               *Before the Trustee acts or refrains from acting, itmay require an Officer`s Certificate.  The Trustee shall not beliable for any action it takes or omits to take in good faith in reliance onthe Officer`s Certificate.

####  (iii)*              *The Trustee may act through attorneys and agentsand shall not be responsible for the misconduct or negligence of any attorneyor agent appointed with due care.

####  (iv)*             *The Trustee shall not be liable for any actiontaken or omitted to be taken by it in good faith which it reasonably believedto be authorized or within the discretion or rights or powers conferred upon itby this Indenture, unless the Trustee`s conduct constitutes negligence.

####  (v)*               *The Trustee may consult with counsel of itsselection and the advice of such counsel as to matters of law shall be full andcomplete authorization and protection in respect of any action taken, omittedor suffered by it hereunder in good faith and in accordance with the advice oropinion of such counsel.

####  (vi)*             *Unless otherwise specifically provided in thisIndenture, any demand, request, direction or notice from the Company shall besufficient if signed by an Officer of the Company.

####  (vii)*            *The permissive rights of the Trustee to do thingsenumerated in this Indenture shall not be construed as a duty unless sospecified herein.

####  (viii)*          *In no event shall the Trustee be responsible orliable for special, indirect, or consequential loss or damage of any kindwhatsoever (including, but not limited to, loss of profit) irrespective ofwhether the Trustee has been advised of the likelihood of such loss or damage andregardless of the form of action.

####  (ix)*             *The Trustee may request that the Company deliver acertificate setting forth the names of individuals and/or titles of officersauthorized at such time to take specified actions pursuant to this Indenture.

## Section 5.03.*       **Individual Rights of Trustee.  *TheTrustee in its individual or any other capacity may become the owner or pledgeeof Securities and may otherwise deal with the Company or the Guarantor or anyAffiliate of the Company or the Guarantor with the same rights it would have ifit were not Trustee.  

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## However, in the event that the Trustee acquires anyconflicting interest (as such term is defined in Section 310(b) of the TIA), itmust eliminate such conflict within 90 days, apply to the SEC for permission tocontinue as trustee (to the extent permitted under Section 310(b) of the TIA)or resign.  Any agent may do the same with like rights and duties.  TheTrustee is also subject to Sections 5.11 and 5.12 hereof.

## Section 5.04.*       **Money Held in Trust.  *Money heldby the Trustee in trust hereunder need not be segregated from other fundsexcept to the extent required by law.  The Trustee shall be under noliability for interest on any money received by it hereunder except asotherwise expressly agreed in writing with the Company or the Guarantor.

## Section 5.05.*       **Trustee`s Disclaimer.  *Therecitals contained herein and in the Securities (except for those in thecertificate of authentication) shall be taken as the statements of the Companyor the Guarantor, as applicable, and the Trustee assumes no responsibility fortheir correctness.  The Trustee makes no representations as to thevalidity, sufficiency or priority of this Indenture or of the Securities.  TheTrustee shall not be accountable for the use or application by the Company orthe Guarantor of Securities or the proceeds thereof.

## Section 5.06.*       **Notice of Defaults.  *Within 90 daysafter the occurrence of any Default or Event of Default hereunder of which theTrustee has received written notice, the Trustee shall give notice to Holderspursuant to Section 14.02 hereof, unless such Default or Event of Default shallhave been cured or waived; *provided*,*however*, that, except in thecase of a Default or Event of Default in the payment of the principal of orinterest (including Liquidated Damages and Additional Tax Amounts, if any), orin the payment of any redemption or purchase obligation, on any Security, theTrustee shall be protected in withholding such notice if and so long asResponsible Officers of the Trustee in good faith determine that thewithholding of such notice is in the interest of the Holders.

## Section 5.07.*       **Reports by Trustee to Holders.  *Within60 days after each March 15th, commencing with the first March 15th followingthe issuance of the Securities, the Trustee shall transmit to Holders suchreports concerning the Trustee and its actions under this Indenture as may berequired by Section 313 of the TIA at the times and in the manner provided bythe TIA.

A copy of each report at the time of itsmailing to Holders shall be filed with the SEC, if required, and each stockexchange, if any, on which the Securities are listed.  The Companyshall promptly notify the Trustee in writing if the Securities become listed onany stock exchange and of any delisting thereof.

## Section 5.08.*       **Compensation and Indemnification.  *TheCompany and the Guarantor, jointly and severally, covenant and agree to pay tothe Trustee from time to time, and the Trustee shall be entitled to, such compensation(which shall not be limited by any provision of law in regard to thecompensation of a trustee of an express trust) as the Company, the Guarantor,as applicable, and the Trustee shall from time to time agree in writing and theCompany and the Guarantor, jointly and severally, covenant and agree to pay orreimburse the Trustee upon its request for all reasonable expenses, disbursementsand advances incurred or made by it or on its behalf in accordance with any ofthe provisions of this Indenture and the Guarantee (including the reasonablecompensation and the expenses and disbursements of its counsel and 

**____ 52 ____** 

## of all agents and other persons not regularly inits employ), except to the extent that any such expense, disbursement oradvance is due to its negligence or bad faith.  When the Trusteeincurs expenses or renders services in connection with an Event of Defaultspecified in Section 4.01 hereof, the expenses (including the reasonablecharges and expenses of its counsel) and the compensation for the services areintended to constitute expenses of administration under any Bankruptcy Law.  TheCompany and the Guarantor, jointly and severally, also covenant to indemnifythe Trustee and its officers, directors, employees and agents for, and to holdsuch Persons harmless against, any and all loss, liability, damage, claim orexpense including taxes (other than taxes based on the income of the Trustee) incurredby them, arising out of or in connection with the acceptance or administrationof this Indenture or the trusts hereunder or the performance of their dutieshereunder, including the reasonable costs and expenses of defending themselvesagainst or investigating any claim (whether asserted by the Company, theGuarantor, a Holder or any other Person) of liability in the premises, exceptto the extent that any such loss, liability or expense was due to thenegligence or willful misconduct of such Persons.  The obligations ofthe Company and the Guarantor under this Section 5.08 to compensate andindemnify the Trustee and its officers, directors, employees and agents and topay or reimburse such Persons for expenses, disbursements and advances shallconstitute additional indebtedness hereunder and shall survive the satisfactionand discharge of this Indenture and the Guarantee or the earlier resignation orremoval of the Trustee.  Such additional indebtedness shall be asenior claim to that of the Securities upon all property and funds held orcollected by the Trustee as such, except funds held in trust for the benefit ofthe Holders of particular Securities, and the Securities are herebysubordinated to such senior claim.  "Trustee" for purposes of thisSection 5.08 shall include any predecessor Trustee, but the negligence orwillful misconduct of any Trustee shall not affect the indemnification of anyother Trustee.

When the Trustee incurs expenses or rendersservices in connection with an Event of Default specified in Section 4.01(h) orSection 4.01(i), the expenses (including the reasonable charges and expenses ofits counsel) and the compensation for the services are intended to constituteexpenses of administration under any applicable federal or state bankruptcy,insolvency or other similar law.

## Section 5.09.*       **Replacement of Trustee.  *Aresignation or removal of the Trustee and appointment of a successor Trusteeshall become effective only upon the successor Trustee`s acceptance ofappointment as provided in this Section 5.09.

The Trustee may resign and be discharged fromthe trust hereby created by so notifying the Company in writing.  TheHolders of at least a majority in aggregate principal amount of OutstandingSecurities may remove the Trustee by so notifying the Trustee and the Companyin writing.  The Company must remove the Trustee if:

####  (i)*                 *the Trustee fails to comply with Section 5.11hereof or Section 310 of the TIA;

####  (ii)*               *the Trustee becomes incapable of acting;

####  (iii)*              *the Trustee is adjudged a bankrupt or an insolventor an order for relief is entered with respect to the Trustee under anyBankruptcy Law; or

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####  (iv)*             *a Custodian or public officer takes charge of theTrustee or its property.

If the Trustee resigns or is removed or if avacancy exists in the office of the Trustee for any reason, the Company shallpromptly appoint a successor Trustee.  The Trustee shall be entitledto payment of its fees and reimbursement of its expenses while acting asTrustee.

Any Holder may petition any court of competentjurisdiction for the removal of the Trustee and the appointment of a successorTrustee if the Trustee fails to comply with Section 5.11 hereof.

If an instrument of acceptance by a successorTrustee shall not have been delivered to the Trustee within 30 days after thegiving of such notice of resignation or removal, the resigning or removedTrustee, as the case may be, may petition, at the expense of the Company, anycourt of competent jurisdiction for the appointment of a successor Trustee.

A successor Trustee shall deliver a writtenacceptance of its appointment to the retiring Trustee and to the Company andthe Guarantor.  Thereupon the resignation or removal of the retiringTrustee shall become effective, and the successor Trustee shall have all therights, powers and duties of the Trustee under this Indenture.  TheCompany shall mail a notice of the successor Trustee`s succession to theHolders.  The retiring Trustee shall promptly transfer all propertyheld by it as Trustee to the successor Trustee.  Notwithstandingreplacement of the Trustee pursuant to this Section 5.09, the Company`sobligations under Section 5.08 hereof shall continue for the benefit of theretiring Trustee with respect to expenses, losses and liabilities incurred byit prior to such replacement.

## Section 5.10.*       **Successor Trustee by Merger, Etc.  *Subjectto Section 5.11 hereof, if the Trustee consolidates with, merges or convertsinto, or transfers or sells all or substantially all of its corporate trustbusiness (including the administration of the trust created by this Indenture)to, another corporation or national banking association, the successor entitywithout any further act shall be the successor Trustee as to the Securities.

## Section 5.11.*       **Corporate Trustee Required; Eligibility.  *TheTrustee shall at all times satisfy the requirements of Sections 310(a)(1), (2) and(5) of the TIA.  The Trustee shall at all times have (or, in the caseof a corporation included in a bank holding company system, the related bankholding company shall at all times have) a combined capital and surplus of atleast $100 million as set forth in its (or its related bank holding company`s)most recent published annual report of condition.  The Trustee issubject to Section 310(b) of the TIA.

## Section 5.12.*       **Collection of Claims Against the Company.  *TheTrustee is subject to Section 311(a) of the TIA, excluding any creditorrelationship listed in Section 311(b) of the TIA.  A Trustee who hasresigned or been removed shall be subject to Section 311(a) of the TIA to theextent indicated therein.

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# ARTICLE6CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE

## Section 6.01.*       **Guarantor May Consolidate, Etc., Only on CertainTerms.  *The Guarantor shall not consolidate or combine with ormerge into, or engage in a share exchange with, any other Person or sell, convey,transfer or lease all or substantially all its assets to any Person unless:

####  (i)*                 *in the event that the Guarantor shall consolidate orcombine with or merge into, or engage in a share exchange with, another Personor convey, sell, transfer or lease all or substantially all its assets to anyPerson, the Person formed by such consolidation, combination or share exchange orinto which the Guarantor is merged or the Person which acquires by conveyance,sale, transfer, or lease all or substantially all of its assets shall be acorporation, limited liability company, partnership or trust organized andvalidly existing under (i) the laws of the United States of America, anyState thereof or the District of Columbia or (ii) under a jurisdictionoutside of the United States if the entity (or the entity holding all of theshares of capital stock of such entity) has common stock, ordinary shares orcommon equity, or ADRs representing common stock, ordinary shares or commonequity, traded on a U.S. national securities exchange or the Nasdaq National Market,and if the entity surviving such transaction or transferee entity is not the Guarantor,then such surviving or transferee entity shall expressly assume, by anindenture supplemental hereto, executed and delivered to the Trustee, in formreasonably satisfactory to the Trustee, all the Guarantor`s obligations underthis Indenture and the Guarantee and shall have provided for conversion rightsin accordance with Section 12.11 hereof, and (subject to Section 6.03 below)either the Company remains an obligor in respect of the Securities or asuccessor entity shall expressly assume, by an Indenture supplement hereto,executed and delivered to the Trustee, in form reasonably satisfactory to theTrustee, all the obligations of the Company under this Indenture and theSecurities;

####  (ii)*               *at the time of consummation of such transaction, noEvent of Default, and no event which, after notice or lapse of time or both,would become an Event of Default, shall have happened and be continuing;

####  (iii)*              *the Company or the Guarantor, as the case may be, shallhave delivered to the Trustee an Officer`s Certificate and Opinions of Counsel,each stating that such consolidation, combination, merger, share exchange, conveyance,sale, transfer or lease and, if a supplemental indenture is required inconnection with such transaction, such supplemental indenture complies withthis Indenture and that all conditions precedent herein provided for relatingto such transaction have been complied with in all material respects; and 

####  (iv)*             *the Company shall have delivered to the TrusteeOpinion(s) of Counsel of a nationally recognized law firm or firms to theeffect that the Holders of the Securities will not recognize income, gain orloss for U.S. federal income or Israeli tax purposes as a result of such consolidation,combination, merger, conveyance, share exchange, transfer, sale, or lease ofassets and will be subject to U.S. federal income and 

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#### Israeli tax on the same amount and in the samemanner and at the same times as would have been the case if such consolidation,merger, combination, conveyance, share exchange, transfer, sale, or lease ofassets had not occurred.

## Section 6.02.*       **Successor Substituted.  *Upon anyconsolidation, combination, or merger by the Company or the Guarantor with orinto any other Person or any conveyance, transfer, sale, or lease of all orsubstantially all the assets of the Guarantor to any Person, in accordance withSection 6.01 hereof, the successor Person formed by such consolidation orcombination into which the Company or the Guarantor is merged or to which suchconveyance, sale, transfer or lease is made shall succeed to, and besubstituted for, and may exercise every right and power of, the Company or theGuarantor under this Indenture with the same effect as if such successor Personhad been named as the Company or the Guarantor herein, and thereafter, exceptin the case of a lease to another Person, the predecessor Person shall berelieved of all obligations and covenants under this Indenture and theSecurities.

## Section 6.03.*       **Guarantor to be the Sole Equityholder of theCompany*.  In addition to the provisions of Section 6.01 hereof, solong as any Securities are outstanding, the Guarantor or its successor willdirectly or indirectly own all of the outstanding share capital of the Company.

# ARTICLE7AMENDMENTS, SUPPLEMENTS AND WAIVERS

## Section 7.01.*       **Without Consent of Holders of Securities.  *Withoutthe consent of any Holders of Securities, the Company, when authorized by aBoard Resolution, the Guarantor, when authorized by a Board Resolution, and theTrustee, at any time and from time to time, may amend this Indenture and theSecurities to:

### (a)*               *add to the covenants of the Company or theGuarantor for the benefit of the Holders of Securities;

### (b)*              *surrender any right or power herein conferred uponthe Company or the Guarantor;

### (c)*               *make provision with respect to the conversionrights of Holders of Securities pursuant to Section 12.11 hereof;

### (d)*              *provide for the assumption of the Guarantor`sobligations to the Holders of Securities in the case of a merger,consolidation, combination, conveyance, sale, transfer or lease pursuant toArticle 6 hereof;

### (e)*               *reduce the Conversion Price; *provided*,*however*, that such reduction in the Conversion Price shall not adverselyaffect the interest of the Holders of Securities (after taking into account taxand other consequences of such reduction) in any material respect;

### (f)*                *comply with the requirements of the SEC in order toeffect or maintain the qualification of this Indenture under the TIA;

**____ 56 ____** 

### (g)*               *make any changes or modifications to this Indenturenecessary in connection with the registration of any Securities under theSecurities Act as contemplated in the Registration Rights Agreement; *provided*,*however*, that such action pursuant to this clause (g) does not adverselyaffect the interests of the Holders of Securities in any material respect;

### (h)*               *cure any ambiguity, correct or supplement anyprovision herein which may be inconsistent with any other provision herein orwhich is otherwise defective, or make any other provisions with respect tomatters or questions arising under this Indenture which the Company and theTrustee may deem necessary or desirable and which shall not be inconsistentwith the provisions of this Indenture;

### (i)*                 *add or modify any other provisions with respect tomatters or questions arising under this Indenture which the Company, theGuarantor and the Trustee may deem necessary or desirable and which shall notbe inconsistent with the provisions of this Indenture, *provided*,*however*, that such action pursuant to this clause does not adversely affectthe interests of the Holders of Securities in any material respect;

### (j)*                *make provision for the establishment of abook-entry system in which Holders would have the option to participate for theclearance and settlement of transactions in Securities originally issued indefinitive form; or

### (k)*              *provide for the issuance of Add On Securities aspermitted by Section 2.22, which will have terms substantially identical to theother Outstanding Securities except as specified in Section 2.22, and whichwill be treated, together with any other Outstanding Securities, as a singleissuance of securities.

## Section 7.02.*       **With Consent of Holders of Securities.  *Exceptas provided above in Section 7.01 or below in this Section 7.02, this Indentureor the Securities may be amended or supplemented, and noncompliance by theCompany in any particular instance with any provision of this indenture or theSecurities may be waived, in each case (i) with the written consent of theHolders of at least a majority in aggregate principal amount of the OutstandingSecurities or (ii) by the adoption of a resolution, at a meeting ofHolders of the Outstanding Securities at which a quorum is present, by theHolders of a majority in aggregate principal amount of the OutstandingSecurities represented at such meeting.

Without the written consent or the affirmativevote of each Holder of Securities affected, an amendment or waiver under thisSection 7.02 may not:

### (a)*               *change the Stated Maturity of the principal of, orany installment of interest (including Liquidated Damages and Additional TaxAmounts, if any) on, any Security;

### (b)*              *reduce the principal amount of or premium, if any,on any Security;

### (c)*               *reduce the Interest Rate or interest (includingLiquidated Damages and Additional Tax Amounts, if any) on any Security;

### (d)*              *change the currency of payment of principal of,premium, if any, or interest (including Liquidated Damages and Additional TaxAmounts, if any) on any Security;

**____ 57 ____** 

### (e)*               *impair the right of any Holder to institute suitfor the enforcement of any payment on or with respect to, or the conversion of,any Security;

### (f)*                *except as permitted or contemplated by thisIndenture, adversely modify the right to convert any Security as provided inArticle 12 hereof;

### (g)*               *adversely modify the Purchase Right or Put PurchaseRight pursuant to this Indenture;

### (h)*               *modify the Company`s obligations to maintain anoffice or agency in the City of New York;

### (i)*                 *modify any of the provisions of this Section,Section 4.04 or Section 4.11, except to increase any percentage containedherein or therein or to provide that certain other provisions of this Indenturecannot be modified or waived without the consent of the Holder of eachOutstanding Security affected thereby;

### (j)*                *reduce the requirements of Section 8.04 hereof forquorum or voting, or reduce the percentage in aggregate principal amount of theOutstanding Securities the consent of whose Holders is required for any suchsupplemental indenture or the consent of whose Holders is required for anywaiver provided for in this Indenture;

### (k)*              *modify the Guarantor`s obligation to own, directlyor indirectly, all of the outstanding capital stock of the Company; or

### (l)*                 *modify the Guarantor`s obligation under theGuarantees in a manner adverse to the Holders of Outstanding Securities.

It shall not be necessary for any Act ofHolders of Securities under this Section to approve the particular form of anyproposed supplemental indenture, but it shall be sufficient if such Act shallapprove the substance thereof.

## Section 7.03.*       **Compliance with Trust Indenture Act.  *Everyamendment to this Indenture or the Securities shall be set forth in asupplemental indenture that complies with the TIA as then in effect.

## Section 7.04.*       **Revocation of Consents and Effect of Consents orVotes.  *Until an amendment, supplement or waiver becomeseffective, a written consent to it by a Holder is a continuing consent by theHolder and every subsequent Holder of a Security or portion of a Security thatevidences the same debt as the consenting Holder`s Security, even if notationof the consent is not made on any Security; *provided*,*however*, thatunless a record date shall have been established, any such Holder or subsequentHolder may revoke the consent as to its Security or portion of a Security ifthe Trustee receives written notice of revocation before the date theamendment, supplement or waiver becomes effective.

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##  An amendment, supplement or waiver becomes effective on receipt by theTrustee of written consents from or affirmative votes by, as the case may be,the Holders of the requisite percentage of aggregate principal amount of theOutstanding Securities, and thereafter shall bind every Holder of Securities; *provided*,*however*, if the amendment, supplement or waiver makes a change described inany of clauses (a) through (l) of Section 7.02 hereof, the amendment,supplement or waiver shall bind only each Holder of a Security which hasconsented to it or voted for it, as the case may be, and every subsequentHolder of a Security or portion of a Security that evidences the sameindebtedness as the Security of the consenting or affirmatively voting, as thecase may be, Holder.

## Section 7.05.*       **Notation on or Exchange of Securities.  *Ifan amendment, supplement or waiver changes the terms of a Security:

### (a)*               *the Trustee may require the Holder of a Security todeliver such Security to the Trustee, the Trustee may place an appropriate notationon the Security about the changed terms and return it to the Holder and theTrustee may place an appropriate notation on any Security thereafterauthenticated; or

### (b)*              *if the Company or the Trustee so determines, theCompany in exchange for the Security shall issue and the Trustee shallauthenticate a new Security that reflects the changed terms.

Failure to make the appropriate notation orissue a new Security shall not affect the validity and effect of suchamendment, supplement or waiver.

## Section 7.06.*       **Trustee to Sign Amendment, Etc.  *TheTrustee shall sign any supplement or amendment authorized pursuant to thisArticle 7 if the amendment does not adversely affect the rights, duties,liabilities or immunities of the Trustee.  If the supplement oramendment does adversely affect the rights, duties, liabilities or immunitiesof the Trustee, the Trustee may but need not sign it.  In signing orrefusing to sign such supplement or amendment, the Trustee shall be entitled toreceive and shall be fully protected in relying upon an Officer`s Certificateand an Opinion of Counsel as conclusive evidence that such amendment isauthorized or permitted by this Indenture.

# ARTICLE8MEETING OF HOLDERS OF SECURITI ES

## Section 8.01.*       **Purposes for Which Meetings May Be Called.  *Ameeting of Holders of Securities may be called at any time and from time totime pursuant to this Article to make, give or take any request, demand,authorization, direction, notice, consent, waiver or other action provided bythis Indenture to be made, given or taken by Holders of Securities.

Notwithstanding anything contained in thisArticle 8, the Trustee may, during the pendency of a Default or an Event ofDefault, call a meeting of Holders of Securities in accordance with itsstandard practices

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## Section 8.02.*       **Call Notice and Place of Meetings.  *(a)The Trustee may at any time call a meeting of Holders of Securities for anypurpose specified in Section 8.01 hereof, to be held at such time and at suchplace in The City of New York.  Notice of every meeting of Holders ofSecurities, setting forth the time and the place of such meeting, in generalterms the action proposed to be taken at such meeting and the percentage of theprincipal amount of the Outstanding Securities which shall constitute a quorumat such meeting, shall be given, in the manner provided in Section 14.02hereof, not less than 21 nor more than 180 days prior to the date fixed for themeeting.

### (a)*               *In case at any time the Company, pursuant to aBoard Resolution, or the Holders of at least 10% in principal amount of theOutstanding Securities shall have requested the Trustee to call a meeting ofthe Holders of Securities for any purpose specified in Section 8.01 hereof, bywritten request setting forth in reasonable detail the action proposed to betaken at the meeting, and the Trustee shall not have made the first publicationof the notice of such meeting within 21 days after receipt of such request orshall not thereafter proceed to cause the meeting to be held as providedherein, then the Company or the Holders of Securities in the amount specified,as the case may be, may determine the time and the place in The City of NewYork for such meeting and may call such meeting for such purposes by givingnotice thereof as provided in paragraph (a) of this Section.

## Section 8.03.*       **Persons Entitled to Vote at Meetings.  *Tobe entitled to vote at any meeting of Holders of Securities, a Person shall be(a) a Holder of one or more Outstanding Securities on the Record Datepertaining to such meeting or (b) a Person appointed by an instrument inwriting as proxy for a Holder or Holders of one or more Outstanding Securitiesby such Holder or Holders on the Record Date pertaining to such meeting.  Theonly Persons who shall be entitled to be present or to speak at any meeting ofHolders shall be the Persons entitled to vote at such meeting and theircounsel, any representatives of the Trustee and its counsel and anyrepresentatives of the Company and its counsel.

## Section 8.04.*       **Quorum; Action.  *The Personsentitled to vote a majority in principal amount of the Outstanding Securitiesshall constitute a quorum.  In the absence of a quorum within 30minutes of the time appointed for any such meeting, the meeting shall, ifconvened at the request of Holders of Securities, be dissolved.  Inany other case, the meeting may be adjourned for a period of not less than 10 daysas determined by the chairman of the meeting prior to the adjournment of suchmeeting.  In the absence of a quorum at any such adjourned meeting,such adjourned meeting may be further adjourned for a period of not less than10 days as determined by the chairman of the meeting prior to the adjournmentof such adjourned meeting.  Notice of the reconvening of anyadjourned meeting shall be given as provided in Section 8.02(a) hereof, exceptthat such notice need be given only once and not less than five days prior tothe date on which the meeting is scheduled to be reconvened.

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##  At a meeting or an adjourned meeting duly reconvened and at which a quorumis present as aforesaid, any resolution and all matters (except as limited bythe second paragraph of Section 7.02 hereof) shall be effectively passed anddecided if passed or decided by the Persons entitled to vote not less than amajority in principal amount of Outstanding Securities represented and votingat such meeting.

Any resolution passed or decisions taken at anymeeting of Holders of Securities duly held in accordance with this Section shallbe binding on all the Holders of Securities, whether or not present orrepresented at the meeting.

## Section 8.05.*       **Determination of Voting Rights; Conduct andAdjournment of Meetings.  *(a)  Notwithstanding anyother provisions of this Indenture, the Trustee may make such reasonableregulations as it may deem advisable for any meeting of Holders of Securitiesin regard to proof of the holding of Securities and of the appointment ofproxies and in regard to the appointment and duties of inspectors of votes, thesubmission and examination of proxies, certificates and other evidence of theright to vote, and such other matters concerning the conduct of the meeting asit shall deem appropriate.

### (a)*               *The Trustee shall, by an instrument in writing,appoint a temporary chairman (which may be the Trustee) of the meeting, unlessthe meeting shall have been called by the Company or by Holders of Securitiesas provided in Section 8.02(b) hereof, in which case the Company or the Holdersof Securities calling the meeting, as the case may be, shall in like mannerappoint a temporary chairman.  A permanent chairman and a permanentsecretary of the meeting shall be elected by vote of the Persons entitled tovote a majority in principal amount of the Outstanding Securities representedat the meeting.

### (b)*              *At any meeting, each Holder of a Security or proxyshall be entitled to one vote for each $1,000 principal amount of Securitiesheld or represented by it; *provided*,*however*, that no vote shallbe cast or counted at any meeting in respect of any Security challenged as notOutstanding and ruled by the chairman of the meeting to be not Outstanding.  Thechairman of the meeting shall have no right to vote, except as a Holder of aSecurity or proxy.

### (c)*               *Any meeting of Holders of Securities duly calledpursuant to Section 8.02 hereof at which a quorum is present may be adjournedfrom time to time by Persons entitled to vote a majority in principal amount ofthe Outstanding Securities represented at the meeting, and the meeting may beheld as so adjourned without further notice.

## Section 8.06.*       **Counting Votes and Recording Action of Meetings.  *Thevote upon any resolution submitted to any meeting of Holders of Securitiesshall be by written ballots on which shall be subscribed the signatures of theHolders of Securities or of their representatives by proxy and the principalamounts and serial numbers of the Outstanding Securities held or represented bythem.  The permanent chairman of the meeting shall appoint twoinspectors of votes who shall count all votes cast at the meeting for oragainst any resolution and who shall make and file with the secretary of themeeting their verified written reports in duplicate of all votes cast at themeeting.  

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## A record, at least in duplicate, of the proceedingsof each meeting of Holders of Securities shall be prepared by the secretary ofthe meeting and there shall be attached to said record the original reports ofthe inspectors of votes on any vote by ballot taken thereat and affidavits byone or more Persons having knowledge of the facts setting forth a copy of thenotice of the meeting and showing that said notice was given as provided inSection 8.02 hereof and, if applicable, Section 8.04 hereof.  Eachcopy shall be signed and verified by the affidavits of the permanent chairmanand secretary of the meeting and one such copy shall be delivered to theCompany and another to the Trustee to be preserved by the Trustee, the latterto have attached thereto the ballots voted at the meeting.  Anyrecord so signed and verified shall be conclusive evidence of the matterstherein stated.

# ARTICLE9COVENANTS

## Section 9.01.*       **Payment of Principal and Interest.  *TheCompany will duly and punctually pay the principal of and interest (includingLiquidated Damages and Additional Tax Amounts, if any) on the Securities inaccordance with the terms of the Securities and this Indenture.  TheCompany will deposit or cause to be deposited with the Trustee as directed bythe Trustee, no later than the day of the Stated Maturity of any Security orinstallment of interest (including Liquidated Damages and Additional TaxAmounts, if any), all payments so due.

## Section 9.02.*       **Maintenance of Offices or Agencies.  *TheCompany hereby appoints the Trustee`s designated office as its office in TheCity of New York where Securities may be:

####  (i)*                 *presented or surrendered for payment;

####  (ii)*               *surrendered for registration of transfer orexchange;

####  (iii)*              *surrendered for conversion;

and where notices and demands to or upon the Company orthe Guarantor in respect of the Securities or the Guarantees and this Indenturemay be served.

The Company may at any time and from time totime vary or terminate the appointment of any such office or appoint anyadditional offices for any or all of such purposes; *provided*,*however*,that until all of the Securities have been delivered to the Trustee forcancellation, or moneys sufficient to pay the principal of and interest(including Liquidated Damages and Additional Tax Amounts, if any) on theSecurities have been made available for payment and either paid or returned tothe Company pursuant to the provisions of Section 9.03 hereof, the Company willmaintain in The City of New York, an office or agency where Securities may bepresented or surrendered for payment, where Securities may be surrendered forregistration of transfer or exchange, where Securities may be surrendered forconversion and where notices and demands to or upon the Company and theGuarantor in respect of the Securities or the Guarantees and this Indenture maybe served.  The Company will give prompt written notice to theTrustee, and notice to the Holders in accordance with Section 14.02 hereof, ofthe appointment or termination of any such agents and of the location and anychange in the location of any such office or agency.

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If at any time the Company shall fail tomaintain any such required office or agency in The City of New York, or shallfail to furnish the Trustee with the address thereof, presentations and surrendersmay be made at, and notices and demands may be served on, the designatedcorporate trust office of the Trustee.

## Section 9.03.*       **Corporate Existence.  *Subject toArticle 6 hereof and applicable law, each of the Guarantor and the Company willdo or cause to be done all things necessary to preserve and keep in full forceand effect its corporate existence, rights (charter and statutory) andfranchises; *provided*,*however*, that the Company and the Guarantorshall not be required to preserve any such right or franchise if the Company andthe Guarantor determine that the preservation thereof is no longer desirable inthe conduct of the business of the Company or the Guarantor and that the lossthereof is not disadvantageous in any material respect to the Holders.

## Section 9.04.*       **Reports.  *(a) The Company or theGuarantor shall make available to the Trustee within 15 days after it filesthem with the SEC copies of the annual and quarterly reports and otherinformation, documents and other reports deemed "filed" for the purposes of Section18 of the Exchange Act or incorporated by reference in any filing under theSecurities Act or the Exchange Act (or copies of such portions of any of theforegoing as the SEC may by rules and regulations prescribe) which the Company orthe Guarantor is required to file with the SEC pursuant to Section 13 or 15(d)of the Exchange Act; *provided*,*however*, that the Company and theGuarantor shall not be required to deliver to the Trustee any materials forwhich the Company or the Guarantor has sought and received confidentialtreatment by the SEC.  The Company and the Guarantor also shallcomply with the other provisions of Section 314(a) of the TIA.

### (a)*               *If at any time, the Guarantor is not subject toSection 13 or 15(d) of the Exchange Act, upon the request of a Holder of aSecurity, the Company or the Guarantor will promptly furnish or cause to befurnished to such Holder or to a prospective purchaser of such Securitydesignated by such Holder, as the case may be, the information, if any,required to be delivered by it pursuant to Rule 144A(d)(4) under the SecuritiesAct to permit compliance with Rule 144A in connection with the resale of suchSecurity; *provided*,*however*, that the Company and the Guarantor shallnot be required to furnish such information in connection with any request madeon or after the date which is two years from the later of the date suchSecurity was last acquired from the Company or an Affiliate of the Company.

### (b)*              *Delivery of such reports, information and documentsto the Trustee is for informational purposes only and the Trustee's receipt ofsuch shall not constitute constructive notice of any information containedtherein or determinable from information contained therein, including theCompany's compliance with any of its covenants hereunder (as to which theTrustee is entitled to rely exclusively on Officer`s Certificates).

## Section 9.05.*       **Compliance Certificate.  *Each ofthe Company and the Guarantor shall deliver to the Trustee, within 120 daysafter the end of each fiscal year of the Company, an Officer`s Certificatewhich complies with Section 314(a) of the TIA, one of the signers of whichshall be the principal executive officer, director, principal financial officeror principal accounting officer of the Company or the Guarantor stating whetheror not the signer thereof has knowledge of any 

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## failure (without regard to notice requirements orperiods of grace) by the Company and the Guarantor to comply with allconditions and covenants then required to be performed under this Indentureand, if so, specifying each such failure and the nature thereof.  Withinfive Business Days of an Officer of the Company or the Guarantor coming to haveactual knowledge of a Default, regardless of the date, the Company or theGuarantor shall deliver an Officer`s Certificate to the Trustee specifying suchDefault and the nature and status thereof.

## Section 9.06.*       **Liquidated Damages.  *If LiquidatedDamages are payable by the Company pursuant to the Registration RightsAgreement and Section 2.01 hereof, the Company shall deliver to the Trustee an Officer`sCertificate to that effect stating (i) the amount of such Liquidated Damagesthat are payable, (ii) the reason why such Liquidated Damages are payable and(iii) the date on which such damages are payable.  Unless and until aResponsible Officer of the Trustee receives such an Officer`s Certificate, theTrustee may assume without inquiry that no Liquidated Damages are payable.  Ifthe Company has paid Liquidated Damages directly to the persons entitled tosuch amounts, the Company shall deliver to the Trustee a certificate settingforth the particulars of such payment.

## Section 9.07.*       **Additional Tax Amounts*.  Neitherthe Company nor the Guarantor will withhold or deduct from payments made withrespect to the Securities on account of any present or future taxes, duties,assessments or governmental charges imposed by or on behalf of any CaymanIslands, United States or Israeli taxing authority unless such withholding ordeduction is required by law.  In the event that the Company or theGuarantor is required to withhold or deduct on account of any such taxes fromany payment made under or with respect to the Securities, the Company or theGuarantor, as the case may be, will pay such additional tax amounts (the "**AdditionalTax Amounts**") so that the net amount received by each Holder of Securities,including those Additional Tax Amounts, will equal the amount that such Holderwould have received if such taxes had not been required to be withheld ordeducted.

Additional Tax Amounts willnot be payable with respect to a payment made to a Holder of Securities to theextent of:

#####  (1)*              *Any tax imposed by the United States or by anypolitical subdivision or having authority thereof or therein;

#####  (2)*              *any taxes that would not have been so imposed,deducted or withheld but for the existence of any connection between the Holderor beneficial owner of a Security (or between fiduciary, settler, beneficiary,member or shareholder of, or possessor of power over, the Holder or beneficialowner of such Security, if the Holder or beneficial owner is an estate,nominee, trust, partnership or corporation) and the relevant taxingjurisdiction (other than the mere receipt of such payment, or the ownership orholding of, or the execution, delivery, registration or enforcement of, suchSecurity);

#####  (3)*              *any estate, inheritance, gift, sales/excise,transfer or personal property tax or similar tax, assessment or governmentalcharge, except as provided in this Indenture;

#####  (4)*              *any taxes payable otherwise than by deduction orwithholding from payments under or with respect to a Security or the Guaranteeof a Security;

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#####  (5)*              *any taxes that would not have been so imposed,deducted or withheld if the Holder or beneficial owner of the Security orbeneficial owner of any payment on the Security or the Guarantee of suchSecurity had (i) made a declaration of such non-residence, or any otherclaim or filing for exemption, to which it is entitled or (ii) compliedwith any certification, indemnification, information, documentation or otherreporting requirement concerning the nationality, residence, identity orconnection with the relevant taxing jurisdiction of such Holder or beneficialowner of such Security or any payment on such Security (*provided* that(x) such declaration of non-residence or other claim or filing forexemption or such compliance is required by the applicable law of the taxingjurisdiction as a precondition to exemption from, or reduction in the rate ofthe imposition, deduction or withholding of, such taxes, (y) at least 30days prior to the first payment date with respect to which such declaration ofnon-residence or other claim or filing for exemption or such compliance isrequired under the applicable law of the taxing jurisdiction, Holders at thattime have been notified by the Company or the Guarantor or any other Person throughwhom payment may be made that a declaration of nonresidence or other claim orfiling for exemption or such compliance is required to be made and (z) Holdersshall not be required to deliver any certification, declaration or otherdocumentation that they are not legally able to deliver);

#####  (6)*              *any taxes that would not have been so imposed,deducted or withheld if the beneficiary of the payment had presented theSecurity for payment within 30 days after the date on which such payment orsuch Security became due and payable or the date on which payment thereof isduly provided for whichever is later (except to the extent that the Holderwould have been entitled to Additional Tax Amounts had the Security beenpresented on the last day of such 30-day period); or

#####  (7)*              *any payment under or with respect to a Security toany Holder that is a fiduciary or partnership or any person other than the solebeneficial owner of such payment or Security to the extent that a beneficiaryor settlor with respect to such fiduciary, a member of such partnership or thebeneficial owner of such payment or Security would not have been entitled tothe Additional Tax Amounts had such beneficiary, settlor, member or beneficialowner been the actual Holder of such Security.

## Section 9.08.*       **Resale of Certain Securities*.  Duringthe period of two years after the last date of original issuance of anySecurities, neither the Guarantor nor the Company shall, nor shall eitherpermit any of its Affiliates to, resell any Securities, or Ordinary Sharesissuable upon conversion of the Securities, that are acquired by any of themexcept pursuant to an effective registration statement under the SecuritiesAct.  The Trustee shall have no responsibility or liability inrespect of the Company`s or the Guarantor`s performance of its agreement in thepreceding sentence.

## Section 9.09.*       **Restrictions on Indebtedness*.  TheCompany shall not incur Indebtedness for borrowed money (other than Securitiesand any Add On Securities as permitted under this Indenture).  Notwithstandingthe forgoing the Company shall be permitted to incur Indebtedness payable to anymember of the Guarantor`s Group.

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## Section 9.10.*       **Tax Status*.  At all times that allor a portion of the Securities remain outstanding, the Company will maintainits status for United States federal income tax purposes as a disregardedentity and as a branch of the Guarantor.

## Section 9.11.*       **PFIC Status*.  The Guarantor shalluse reasonable efforts to monitor and determine whether it is a passive foreigninvestment company ("PFIC"), as defined in Section 1297 of the Internal RevenueCode of 1986, as amended, and the Treasury regulations thereunder.  TheGuarantor shall promptly notify the Trustee or U.S. Holders of the Securitiesif the Guarantor determines that it has become or reasonably expects to become oris notified by the Internal Revenue Service ("IRS") that it has become a PFICfor any taxable year.  If the Guarantor makes such a determination oris notified by the IRS that it has become a PFIC, then the Guarantor shallsupply the Trustee or the U.S. Holders of the Securities who make a qualifiedelecting fund ("QEF") election with sufficient information to enable such U.S.Holders to properly report income and gain pursuant to the QEF election. 

# ARTICLE10REDEMPTION OF SECURITIES

## Section 10.01.*   **Redemption*.  (a)  *ProvisionalRedemption*. The Securities may be redeemed in cash at the election of theCompany, in whole or in part from time to time, at any time beginning on March15, 2008 and prior to March 15, 2010 (a "**Provisional Redemption**"), uponnotice as set forth in Section 10.04, at a Redemption Price equal to 100% ofthe principal amount of the Securities redeemed (the "**Provisional RedemptionPrice**") plus accrued but unpaid interest (including Liquidated Damages andAdditional Tax Amounts, if any) thereon, if any, to but excluding theProvisional Redemption Date if: (1) the Last Reported Sales Price of theOrdinary Shares has exceeded 130% of the then applicable Conversion Price, forat least 20 Trading Days in any period of 30 consecutive Trading Days ending onthe Trading Day prior to the date of mailing of the notice of redemptionpursuant to Section 10.04 (the "**Notice Date**"), and (2) if theredemption occurs prior to March 23, 2007, a registration statement coveringresales of the Securities and the Ordinary Shares issuable upon conversionthereof is effective and available for use and is expected to remain effectivefor the 30 days following the Provisional Redemption Date unless registrationis no longer required.

### (a)*               **Optional Redemption.*  On and afterMarch 15, 2010, the Company may, at its option, redeem the Securities in wholeor in part from time to time (an "**Optional Redemption**"), upon notice asset forth in Section 10.04, at a Redemption Price equal to 100% of theprincipal amount of the Securities redeemed (the "**Optional Redemption Price**"),plus any accrued and unpaid interest (including Liquidated Damages andAdditional Tax Amounts, if any) thereon, if any, to, but excluding, theOptional Redemption Date .

## Section 10.02.*   **Notice to Trustee.  *If the Companyelects to redeem Securities pursuant to the redemption provisions of Section 10.01hereof, it shall notify the Trustee at least 45 days prior to the RedemptionDate of such intended Redemption Date, the principal amount of Securities to beredeemed and the CUSIP numbers of the Securities to be redeemed.  

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## The Company will notify all of the Holders of recordif it redeems any of the Securities.

In any instance, the Company maynot redeem the Securities pursuant to Section 10.01 if the Company has failedto pay interest (including Liquidated Damages and Additional Tax Amounts, ifany), on the Securities when due and such failure to pay is continuing.

## Section 10.03.*   **Selection of Securities to be Redeemed.  *Iffewer than all the Securities are to be redeemed, the Trustee shall select theparticular Securities to be redeemed (in principal amounts of $1,000 orintegral multiples thereof) from the Outstanding Securities by lot, on a prorata basis or in accordance with any other method the Trustee considers fairand appropriate and in such manner as complies with any applicable requirementsof any exchange on which the Securities are listed.  Securities andportions thereof that the Trustee selects shall be in amounts equal to theminimum authorized denominations for Securities to be redeemed or any multiple thereof.

If any Security selected for partial redemptionis converted in part before termination of the conversion right with respect tothe portion of the Security so selected, the converted portion of such Securityshall be deemed to be the portion selected for redemption (*provided*,*however*, that the Holder of such Security so converted and deemed redeemedshall not be entitled to any additional interest payment as a result of suchdeemed redemption other than interest payments to which such Holder would havebeen entitled to receive upon conversion of such Security.  Securitieswhich have been converted during a selection of Securities to be redeemed maybe treated by the Trustee as Outstanding for the purpose of such selection.

The Trustee shall promptly notify the Companyand the Registrar in writing of the Securities selected for redemption and, inthe case of any Securities selected for partial redemption, the principalamount thereof to be redeemed.

For all purposes of this Indenture, unless thecontext otherwise requires, all provisions relating to the redemption ofSecurities shall relate, in the case of any Securities redeemed or to beredeemed only in part, to the portion of the principal amount of suchSecurities which has been or is to be redeemed.

## Section 10.04.*   **Notice of Redemption.  *Notice ofredemption shall be given in the manner provided in Section 14.02 hereof to theHolders of Securities to be redeemed.  Such notice shall be given notless than 30 or more than 60 days prior to the Redemption Date.

All notices of redemption shall state:

#####  (1)*              *the Redemption Date;

#####  (2)*              *the Redemption Price and accrued and unpaid interest(including Liquidated Damages and Additional Tax Amounts, if any), to, butexcluding, the Redemption Date, if any;

#####  (3)*              *if fewer than all the Outstanding Securities are tobe redeemed, the aggregate principal amount of Securities to be redeemed andthe aggregate principal amount of Securities which will be Outstanding aftersuch partial redemption;

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#####  (4)*              *that on the Redemption Date the Redemption Priceand accrued and unpaid interest (including Liquidated Damages and AdditionalTax Amounts, if any), to, but excluding, the Redemption Date, if any, willbecome due and payable upon each such Security to be redeemed, and thatinterest thereon shall cease to accrue on and after such date;

#####  (5)*              *the Conversion Price, the date on which the rightto convert the principal of the Securities to be redeemed will terminate andthe places where such Securities may be surrendered for conversion;

#####  (6)*              *the place or places where such Securities are to besurrendered for payment of the Redemption Price and accrued and unpaid interest(including Liquidated Damages and Additional Tax Amounts, if any), if any; and

#####  (7)*              *the CUSIP number of the Securities.

The notice given shall specify the last date onwhich exchanges or transfers of Securities may be made pursuant to Section 2.07hereof, and shall specify the serial numbers of Securities and the portionsthereof called for redemption.

Notice of redemption of Securities to beredeemed at the election of the Company shall be given by the Company or, atthe Company`s written request, by the Trustee in the name of and at the expenseof the Company.

## Section 10.05.*   **Effect of Notice of Redemption.  *Noticeof redemption having been given as provided in Section 10.04 hereof, theSecurities so to be redeemed shall, on the Redemption Date, become due andpayable at the Redemption Price therein specified, and from and after such date(unless the Company shall default in the payment of the Redemption Price andaccrued and unpaid interest, including Liquidated Damages and Additional TaxAmounts, if any) such Securities shall cease to bear interest.  Uponsurrender of any such Security for redemption in accordance with such notice,such Security shall be paid by the Company at the Redemption Price plus accruedand unpaid interest, if any; *provided*,*however*, that theinstallments of interest on Securities whose Stated Maturity is prior to or onthe Redemption Date shall be payable to the Holders of such Securities, or oneor more Predecessor Securities, registered as such on the relevant Record Dateaccording to their terms and the provisions of Section 2.01 hereof.

If any Security called for redemption shall notbe so paid upon surrender thereof for redemption, the principal shall, untilpaid, bear interest from the Redemption Date at the Interest Rate.

## Section 10.06.*   **Deposit of Redemption Price.  *Priorto or on any Redemption Date, the Company shall deposit with the Trustee orwith a Paying Agent an amount of money sufficient to pay the Redemption Priceof all the Securities to be redeemed on that Redemption Date, other than anySecurities called for redemption on that date which have been converted priorto the date of such deposit, and accrued and unpaid interest (includingLiquidated Damages and Additional Tax Amounts, if any), if any, on suchSecurities.

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##  If any Security called for redemption is converted, any money depositedwith the Trustee or with a Paying Agent or so segregated and held in trust forthe redemption of such Security shall (subject to any right of the Holder ofsuch Security or any Predecessor Security to receive interest as provided in Section2.01 hereof) be paid to the Company on the Company`s request or, if then heldby the Company, shall be discharged from such trust.

## Section 10.07.*   **Securities Redeemed in Part.  *AnySecurity which is to be redeemed only in part shall be surrendered at an officeor agency of the Company designated for that purpose pursuant to Section 9.02hereof (with, if the Company or the Trustee so requires, due endorsement by, ora written instrument of transfer in form satisfactory to the Company and theTrustee duly executed by, the Holder thereof or the Holder`s attorney dulyauthorized in writing), and the Company shall execute, and the Trustee shallauthenticate and deliver to the Holder of such Security without service charge,a new Security or Securities of any authorized denomination as requested bysuch Holder in aggregate principal amount equal to and in exchange for theunredeemed portion of the principal of the Security so surrendered.

# ARTICLE11PURCHASE OF SECURITIES

## Section 11.01.*   **Purchase Right Upon Fundamental Change.*  (a)In the event that a Fundamental Change shall occur, each Holder shall have theright (the "**Purchase Right**"), at the Holder`s option, to require theCompany to purchase, and upon the exercise of such right in accordance withSection 11.03 hereof the Company shall purchase, all of such Holder`sSecurities not theretofore called for redemption, or any portion of theprincipal amount thereof that is equal to $1,000 or any multiple thereof (*provided*,*however*, that no single Security may be purchased in part unless theportion of the principal amount of such Security to be Outstanding after suchpurchase is equal to $1,000 or multiples thereof), on the date (the "**PurchaseDate**") that is 45 days after the date of the Company Notice at a purchaseprice equal to 100% of the principal amount of the Securities to be purchased (the"**Purchase Price**"), plus any accrued and unpaid interest (includingLiquidated Damages and Additional Tax Amounts, if any) thereon, to, butexcluding, the Purchase Date; *provided*,*however*, thatinstallments of interest on Securities whose Stated Maturity is prior to or onthe Purchase Date shall be payable to the Holders of such Securities, or one ormore Predecessor Securities, registered as such on the relevant Record Dateaccording to their terms and the provisions of Section 2.01 hereof.

### (a)*               *Whenever in this Indenture (including Sections2.02, 4.01(a) and 4.07 hereof) or Exhibit A annexed hereto there is areference, in any context, to the principal of any Security as of any time,such reference shall be deemed to include reference to the Purchase Price orthe Put Purchase Price, as the case may be, payable in respect to such Securityto the extent that such Purchase Price or the Put Purchase Price, as the casemay be, is, was or would be so payable at such time, and express mention of thePurchase Price or the Put Purchase Price, as the case may be, in any provisionof this Indenture shall not be construed as excluding the Purchase Price or thePut Purchase Price, as the case may be, in those provisions of this Indenturewhen such express mention is not made.

## Section 11.02.*   **Purchase of Securities by the Company at Optionof the Holder.***

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##  

### (a)*               **General.  *Each Holder shall havethe right to require the Company to purchase all or a portion (in principalamounts of $1,000 or integral multiples thereof) of its Securities on March 15,2010, March 15, 2015, March 15, 2020, March 15, 2025 and March 15, 2030 (or, ifany such date is not a Business Day, on the immediately succeeding BusinessDay) (each, a "**Put Purchase Date**"), at 100% of the principal amount ofthe Securities to be so purchased (the "**Put Purchase Price**"), plus any accruedand unpaid interest (including Liquidated Damages and Additional Tax Amounts,if any) thereon, to, but excluding, the Put Purchase Date, *provided however*,that installments of interest on Securities whose stated Maturity is prior tothe Put Purchase Date shall be payable to the Holders of such Securities, orany one or more Predecessor Securities, registered as such on the relevantRecord Date according to their terms and the provisions of Section 2.01 hereof.  

### (b)*              **Company Notice.  *On or before thetwentieth (20th) Business Day prior to each Put Purchase Date, the Companyshall provide to the Trustee, the Paying Agent and to all Holders at theirrespective addresses as shown on the Register, and to beneficial owners of theSecurities where required by applicable law, a notice stating, among otherthings:

####  (i)*                 *the name and address of the Trustee, the PayingAgent and the Conversion Agent; and

####  (ii)*               *the procedures the Holders must follow to requirethe Company to purchase their Securities.

Simultaneously with providing such notice, theCompany shall publish a notice containing this information in a newspaper ofgeneral circulation in The City of New York or publish the information on theCompany`s or the Guarantor`s website or through such other public medium as theCompany may use at that time.

### (c)*               **Conditions to the Company`s Obligation toPurchase.  *The Company will be required to purchase onlySecurities with respect to which each of the following conditions has beensatisfied:

####  (i)*                 *delivery to the Paying Agent by the Holder of awritten notice of purchase (a "**Purchase Notice**") during the periodbeginning at any time from the opening of business on the date that is twenty(20) Business Days prior to the relevant Put Purchase Date until the close ofbusiness on the third (3rd) Business Day prior to such Put Purchase Date stating:

######  (A)*             *in the case of Physical Securities, the certificatenumber(s) of the Holder`s Securities to be delivered for purchase;

######  (B)*             *the portion of the principal amount of Securitiesto be purchased, in multiples of $l,000; and

######  (C)*             *that the Securities are to be purchased by theCompany pursuant to paragraph 6(b) of the Securities and this Section 11.02;

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######  

####  (ii)*               *delivery of such Securities to the Trustee orPaying Agent prior to, on or after the Put Purchase Date (together with allnecessary endorsements); and

####  (iii)*              *there shall not have occurred and be continuing anEvent of Default, other than an Event of Default that is cured with respect toall Securities by the payment of the Put Purchase Price.

If the Securities are not in the form of PhysicalSecurities, the Purchase Notice must comply with the appropriate Depositoryprocedures.

The Paying Agent shall promptly notify the Company of thereceipt by it of any Purchase Notice.

### (d)*              **Withdrawal of Purchase Notice.  *AHolder may withdraw any Purchase Notice in whole or in part by a written noticeof withdrawal delivered to the Trustee or the Paying Agent prior to the closeof business on the third (3rd) Business Day prior to the applicable PutPurchase Date.  The notice of withdrawal must state:

####  (i)*                 *the principal amount of the withdrawn Securities;

####  (ii)*               *with respect to Physical Securities, thecertificate number(s) of the withdrawn Securities; and

####  (iii)*              *the principal amount of Securities, if any, whichremains subject to the Purchase Notice.

If the Securities are not in the form ofPhysical Securities, the notice of withdrawal must comply with the appropriateDepository procedures.

The Paying Agent shall promptly notify theCompany of the receipt by it of any written notice of withdrawal of a PurchaseNotice.

The Put Purchase Price shall be so paidpursuant to this Section 11.02 only if the Securities so delivered by theHolder conform in all respects to the description thereof in the relatedPurchase Notice, as determined by the Company in its sole discretion.

### (e)*               **Payment of Put Purchase Price by the Company;Effect on Holders of Purchased Securities.  *The Company shall paythe Put Purchase Price to the Paying Agent promptly following the later of therelevant Put Purchase Date or the time of book-entry transfer or delivery ofthe purchased Securities.  If either the Trustee or the Paying Agentholds money or securities sufficient to pay the Put Purchase Price on theBusiness Day immediately following the relevant Put Purchase Date, then:

####  (i)*                 *the purchased Securities will cease to beOutstanding and interest will cease to accrue (whether or not book-entrytransfer of the purchased Securities is made or whether or not the purchasedSecurities are delivered to the Paying Agent); and

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####  (ii)*               *all other rights of the Holders of such purchasedSecurities will terminate (other than the right to receive the Put PurchasePrice upon delivery or transfer of such purchased Securities).

## Section 11.03.*   **Fundamental Change Notices; Method of ExercisingPurchase Right, Etc.  *(a) Unless the Company shall havetheretofore called for redemption all of the Outstanding Securities, prior toor on the 30th day after the occurrence of a Fundamental Change, the Company,or, at the written request and expense of the Company prior to or on the 30thday after such occurrence, the Trustee, shall give to all Holders of Securitiesnotice, in the manner provided in Section 14.02 hereof, of the occurrence ofthe Fundamental Change and of the Purchase Right set forth herein arising as aresult thereof (the "**Company Notice**").  The Company shall alsodeliver a copy of the Company Notice to the Trustee.  Each CompanyNotice shall state:

####  (i)*                 *the Purchase Date;

####  (ii)*               *the date by which the Purchase Right must beexercised;

####  (iii)*              *the Purchase Price and accrued and unpaid interest (includingLiquidated Damages and Additional Tax Amounts, if any), if any;

####  (iv)*             *a description of the procedure which a Holder mustfollow to exercise a Purchase Right, and the place or places where suchSecurities are to be surrendered for payment of the Purchase Price and accruedand unpaid interest (including Liquidated Damages and Additional Tax Amounts,if any), if any;

####  (v)*               *that on the Purchase Date the Purchase Price andaccrued and unpaid interest (including Liquidated Damages and Additional TaxAmounts, if any), if any, will become due and payable upon each such Securitydesignated by the Holder to be purchased, and that interest thereon shall ceaseto accrue on and after said date;

####  (vi)*             *the conversion rate then in effect, the date onwhich the right to convert the principal amount of the Securities to bepurchased will terminate and the place where such Securities may be surrenderedfor conversion; and

####  (vii)*            *the place or places where such Securities, togetherwith the Notice of Exercise of Purchase Right certificate included in Exhibit Aannexed hereto are to be delivered for payment of the Purchase Price andaccrued and unpaid interest (including Liquidated Damages and Additional TaxAmounts, if any), if any.

No failure of the Company to give the foregoingnotices or defect therein shall limit any Holder`s right to exercise a PurchaseRight or affect the validity of the proceedings for the purchase of Securities.

If any of the foregoing provisions or otherprovisions of this Article 11 are inconsistent with applicable law, such lawshall govern.

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### (b)*              *To exercise a Purchase Right, a Holder shalldeliver to the Trustee prior to or on the 30th day after the date of theCompany Notice:

####  (i)*                 *written notice ("**Fundamental Change PurchaseNotice**") of the Holder`s exercise of such right in the form of the Noticeof Exercise of Purchase Right certificate included in Exhibit A annexed hereto,which notice shall set forth the name of the Holder, the principal amount ofthe Securities to be purchased (and, if any Security is to be purchased inpart, the serial number thereof, the portion of the principal amount thereof tobe purchased) and a statement that an election to exercise the Purchase Rightis being made thereby, and

####  (ii)*               *applicable Depository procedures or, in the case ofPhysical Securities, the certificate number(s) of the Holder`s Securities withrespect to which the Purchase Right is being exercised.

Such written notice shall be irrevocable,except that the right of the Holder to convert the Securities with respect towhich the Purchase Right is being exercised shall continue until the close ofbusiness on the Business Day immediately preceding the Purchase Date.

### (c)*               *In the event a Purchase Right shall be exercised inaccordance with the terms hereof, the Company shall pay or cause to be paid tothe Trustee the Purchase Price in cash for payment to the Holder on thePurchase Date, together with accrued and unpaid interest (including LiquidatedDamages and Additional Tax Amounts, if any) to the Purchase Date payable incash with respect to the Securities as to which the Purchase Right has beenexercised; *provided*,*however*, that installments of interest thatmature prior to or on the Purchase Date shall be payable in cash to the Holdersof such Securities, or one or more Predecessor Securities, registered as suchat the close of business on the relevant Regular Record Date.

### (d)*              *If any Security (or portion thereof) surrenderedfor purchase shall not be so paid on the Purchase Date, the principal amount ofsuch Security (or portion thereof, as the case may be) shall, until paid, bearinterest to the extent permitted by applicable law from the Purchase Date atthe Interest Rate, and each Security shall remain convertible into OrdinaryShares until the principal of such Security (or portion thereof, as the casemay be) shall have been paid or duly provided for.

### (e)*               *Any Security which is to be purchased only in partshall be surrendered to the Trustee (with, if the Company or the Trustee sorequires, due endorsement by, or a written instrument of transfer in formsatisfactory to the Company and the Trustee duly executed by the Holder thereofor his attorney duly authorized in writing), and the Company shall execute, andthe Trustee shall authenticate and make available for delivery to the Holder ofsuch Security without service charge, a new Security or Securities, containing identicalterms and conditions, each in an authorized denomination in aggregate principalamount equal to and in exchange for the unpurchased portion of the principal ofthe Security so surrendered.

**____ 73 ____** 

### (f)*                *All Securities delivered for purchase shall bedelivered to the Trustee to be canceled at the direction of the Trustee, whichshall dispose of the same as provided in Section 2.15 hereof.

# ARTICLE12CONVERSION OF SECURITIES

## Section 12.01.*   **Conversion Right and Conversion Rate.  *(a)Subject to and upon:  compliance with the provisions of this Article,at the option of the Holder thereof, any Security or any portion of theprincipal amount thereof which is $1,000 or a multiple of $1,000 may beconverted at the principal amount thereof, or of such portion thereof, into thenumber of duly authorized, fully paid and nonassessable Ordinary Shares at theConversion Rate in effect at the time of conversion.

### (a)*               *In case a Security or portion thereof is called forredemption, such conversion right in respect of the Security or the portion socalled, shall expire at the close of business on the Business Day immediatelypreceding the Redemption Date, unless the Company defaults in making thepayment due upon redemption.  If a Holder exercises its PurchaseRight or Put Purchase Right with respect to a Security or portion thereof, suchconversion right in respect of the Security or portion thereof shall expire atthe close of business on the Business Day preceding the Purchase Date or PutPurchase Date, as applicable *provided*,*however*, in any event, theconversion rights may not be exercised unless and until a Purchase Right or PutRight that has otherwise been provided is validly withdrawn in accordance withthis Indenture.

### (b)*              *Each $1,000 principal amount of the Securitiesshall be convertible into 35.1328 Ordinary Shares (herein called the "**ConversionRate**"), subject to adjustment in certain instances as provided in Section 12.04hereof.

## Section 12.02.*   **Exercise of Conversion Right.  *Toexercise the conversion right, the Holder of any Security to be converted shallsurrender such Security duly endorsed or assigned to the Company or in blank,at the office of any Conversion Agent, accompanied by a duly signed conversionnotice substantially in the form attached to the Security to the Companystating that the Holder elects to convert such Security or, if less than theentire principal amount thereof is to be converted, the portion thereof to beconverted.

Any Security surrendered for conversion duringthe period between the close of business on any Regular Record Date and endingwith the opening of business on the corresponding Interest Payment Date (exceptin the case of any Security whose Maturity is prior to such Interest PaymentDate) shall be accompanied by payment in New York Clearing House funds or otherfunds acceptable to the Company of an amount equal to the interest (excludingLiquidated Damages and Additional Tax Amounts, if any) to be received on such InterestPayment Date on the principal amount of the Security being surrendered forconversion.  

**____ 74 ____** 

Notwithstanding theforegoing, any such Holder which surrenders for conversion any Security (a) whichhas been called for redemption by the Company in a notice of redemption givenby the Company pursuant to Section 10.04 hereof on a Redemption Date after suchRegular Record Date and on or prior to the next succeeding Interest PaymentDate (or on or between March 15, 2008 and March 20, 2008 or on or between March15, 2010 and March 20, 2010) or (b) with respect to which the Company hasspecified a Purchase Date that is after such Regular Record Date and on orprior to the next succeeding Interest Payment Date, in either case, need notpay the Company an amount equal to the interest on the principal amount of suchSecurity so converted at the time such Holder surrenders such Security forconversion.

Securities shall be deemed to have beenconverted immediately prior to the close of business on the day of surrender ofsuch Securities for conversion in accordance with the foregoing provisions, andat such time the rights of the Holders of such Securities as Holders shallcease, and the Person or Persons entitled to receive the Ordinary Sharesissuable upon conversion shall be treated for all purposes as the record holderor holders of such Ordinary Shares at such time.  Except as providedabove in this Section 12.02, the Holder of the Security shall not receive anycash payment of interest, and no adjustment shall be made for interest andLiquidated Damages and Additional Tax Amounts, if any, accrued on any Securityconverted.  Delivery to the Holder of the full number of OrdinaryShares into which the Security surrendered for conversion is convertible,together with any cash payment for such Holder`s fractional shares as providedin Section 12.03 hereof, shall be deemed to satisfy the Company`s obligation topay the principal amount of the Security surrendered for conversion and anyaccrued and unpaid interest on such Security.  As promptly aspracticable on or after the conversion date, but in no event later than thefifth Business Day thereafter, the Company shall cause to be issued anddelivered to the Conversion Agent a certificate or certificates (or, at theGuarantor`s election, a book‐entry confirmation) for the number of full OrdinaryShares issuable upon conversion, together with payment in lieu of any fractionof a share as provided in Section 12.03 hereof.

In the case of any Security which is convertedin part only, upon such conversion the Company shall execute and the Trusteeshall authenticate and deliver to the Holder thereof, at the expense of theCompany, a new Security or Securities of authorized denominations in aggregateprincipal amount equal to the unconverted portion of the principal amount ofsuch Securities.

If Ordinary Shares to be issued upon conversionof a Restricted Security, or Securities to be issued upon conversion of aRestricted Security in part only, are to be registered in a name other thanthat of the Holder of such Restricted Security, such Holder must deliver to theConversion Agent a certificate in substantially the form set forth in the formof Security set forth in *Exhibit A*annexed hereto, dated the date ofsurrender of such Restricted Security and signed by such Holder, as tocompliance with the restrictions on transfer applicable to such RestrictedSecurity.  Neither the Trustee nor any Conversion Agent, Registrar orTransfer Agent shall be required to register in a name other than that of theHolder of Ordinary Shares or Securities issued upon conversion of any suchRestricted Security not so accompanied by a properly completed certificate.

The Company hereby initially appoints theTrustee as the Conversion Agent.

**____ 75 ____** 

 

## Section 12.03.*   **Fractions of Shares.  *Nofractional Ordinary Shares shall be issued upon conversion of any Security orSecurities.  If more than one Security shall be surrendered forconversion at one time by the same Holder, the number of full shares whichshall be issued upon conversion thereof shall be computed on the basis of theaggregate principal amount of the Securities (or specified portions thereof) sosurrendered.  Instead of any fractional Ordinary Shares which wouldotherwise be issued upon conversion of any Security or Securities (or specifiedportions thereof), the Company shall pay a cash adjustment in respect of suchfraction (calculated to the nearest one-100th of a share) in an amount equal tothe same fraction of the Last Reported Sale Price of the Ordinary Shares as ofthe Trading Day preceding the date of conversion.

## Section 12.04.*   **Adjustment of Conversion Rate.  *TheConversion Rate shall be subject to adjustments, calculated by the Guarantor,from time to time as follows:

### (a)*               *In case the Guarantor shall hereafter pay adividend or make a distribution in Ordinary Shares to all holders of OrdinaryShares, the Conversion Rate in effect at the opening of business on the datefollowing the date fixed for the determination of shareholders entitled toreceive such dividend or other distribution shall be increased by multiplyingsuch Conversion Rate by a fraction:

####  (i)*                 *the numerator of which shall be the sum of thenumber of Ordinary Shares outstanding at the close of business on the RecordDate (as defined in Section 12.04(g)) fixed for such determination plus thetotal number of shares constituting such dividend or other distribution, and

####  (ii)*               *the denominator of which shall be the number of OrdinaryShares outstanding at the close of business on such Record Date fixed for suchdetermination.

Such increase shall become effective immediately afterthe opening of business on the day following the Record Date.  If anydividend or distribution of the type described in this Section 12.04(a) isdeclared but not so paid or made, the Conversion Rate shall again be adjustedto the Conversion Rate which would then be in effect if such dividend ordistribution had not been declared.

### (b)*              *In case the outstanding Ordinary Shares shall besubdivided or split into a greater number of Ordinary Shares, the ConversionRate in effect at the opening of business on the day following the day uponwhich such subdivision becomes effective shall be proportionately increased,and conversely, in case outstanding Ordinary Shares shall be combined into asmaller number of Ordinary Shares, the Conversion Rate in effect at the openingof business on the day following the day upon which such combination becomeseffective shall be proportionately reduced, such increase or reduction, as thecase may be, to become effective immediately after the opening of business onthe day following the day upon which such subdivision, split or combinationbecomes effective.

**____ 76 ____** 

### (c)*               *In case the Guarantor shall issue rights orwarrants (other than any rights or warrants referred to in Section 12.04(d) orpursuant to a shareholder rights plan) to all holders of its outstanding OrdinaryShares entitling them (for a period of 60 days or less) to subscribe for orpurchase Ordinary Shares (or securities convertible into Ordinary Shares) at aprice per share (or having a conversion price per share) less than the CurrentMarket Price (as defined in Section 12.04(g)) on the Record Date fixed for thedetermination of shareholders entitled to receive such rights or warrants, theConversion Rate shall be increased so that the same shall equal the ratedetermined by multiplying the Conversion Rate in effect at the opening ofbusiness on the date after such Record Date by a fraction:

####  (i)*                 *the numerator of which shall be the number of OrdinaryShares outstanding at the close of business on the Record Date plus the totalnumber of additional Ordinary Shares so offered for subscription or purchase(or into which the convertible securities so offered are convertible), and

####  (ii)*               *the denominator of which shall be the number of OrdinaryShares outstanding on the close of business on the Record Date plus the numberof shares which the aggregate offering price of the total number of shares sooffered for subscription or purchase (or the aggregate conversion price of theconvertible securities so offered) would purchase at the Current Market Price.

Such adjustment shall become effective immediately afterthe opening of business on the day following the Record Date fixed fordetermination of shareholders entitled to receive such rights or warrants.  Tothe extent that Ordinary Shares (or securities convertible into Ordinary Shares)are not delivered pursuant to such rights or warrants, upon the expiration ortermination of such rights or warrants the Conversion Rate shall be readjustedto the Conversion Rate which would then be in effect had the adjustments madeupon the issuance of such rights or warrants been made on the basis of thedelivery of only the number of Ordinary Shares (or securities convertible into OrdinaryShares) actually delivered.  In the event that such rights orwarrants are not so issued, the Conversion Rate shall again be adjusted to bethe Conversion Rate which would then be in effect if such date fixed for thedetermination of shareholders entitled to receive such rights or warrants hadnot been fixed.  Notwithstanding the foregoing, after a period of 60 daysfrom the date of issuance of such rights or warrants, the Conversion Rate shallbe readjusted to the Conversion Rate which would then be in effect had theadjustments made upon the issuance of such rights or warrants been made on thebasis of the delivery of only the number of Ordinary Shares (or securitiesconvertible into Ordinary Shares) actually delivered during such period.  Indetermining whether any rights or warrants entitle the holders to subscribe foror purchase Ordinary Shares at less than such Current Market Price, and indetermining the aggregate offering price of such Ordinary Shares, there shallbe taken into account any consideration received for such rights or warrants,the value of such consideration if other than cash, to be determined by theBoard of Directors of the Guarantor.

### (d)*              *In case the Guarantor shall, by dividend orotherwise, distribute to all holders of its Ordinary Shares (other than anydividends or distributions to which Section 12.04(a) applies) shares of itscapital stock (other than Ordinary Shares) or evidences of its indebtedness, orother assets, including securities, but excluding (1) Ordinary Shares, or anyrights or warrants referred to in Section 12.04(c), 

**____ 77 ____** 

### (2) any stock, securities or other property orassets (including cash) distributed in connection with a recapitalization, reclassification,change, merger, consolidation, share exchange, combination, sale, transfer, conveyanceor lease to which Section 12.11 hereof applies and (3) dividends anddistributions paid exclusively in cash (the securities described in foregoingclauses (1), (2) and (3) hereinafter in this Section 12.04(d) called the "securities"),then, in each such case, subject to the second succeeding paragraph of thisSection 12.04(d), the Conversion Rate shall be increased so that the same shallbe equal to the rate determined by multiplying the Conversion Rate in effectimmediately prior to the close of business on the Record Date (as defined inSection 12.04(g)) with respect to such distribution by a fraction:

####  (i)*                 *the numerator of which shall be the Current MarketPrice (determined as provided in Section 12.04(g)) on such date, and

####  (ii)*               *the denominator of which shall be such CurrentMarket Price on such date less the fair market value (as determined by theBoard of Directors of the Guarantor, whose determination shall be conclusiveand set forth in a Board Resolution) on such date of the portion of the sharecapital, evidences of indebtedness, cash or other assets, including securities,so distributed applicable to one Ordinary Shares (determined on the basis ofthe number of shares of the Ordinary Shares outstanding on the Record Date).

Such increase shall become effective immediately prior tothe opening of business on the day following the Record Date.  However,in the event that the then fair market value (as so determined) of the portionof the securities so distributed applicable to one Ordinary Share is equal toor greater than the Current Market Price on the Record Date, in lieu of theforegoing adjustment, adequate provision shall be made so that each Holdershall have the right to receive upon conversion of a Security (or any portionthereof) the amount of shares of capital stock, evidences of indebtedness, cashor other assets, including securities, such Holder would have received had suchHolder converted such Security (or portion thereof) immediately prior to suchRecord Date.  In the event that such dividend or distribution is notso paid or made, the Conversion Rate shall again be adjusted to be theConversion Rate which would then be in effect if such dividend or distributionhad not been declared.

If the Guarantor`s Board of Directors determines the fairmarket value of any distribution for purposes of this Section 12.04(d) byreference to the actual or when issued trading market for any securitiescomprising all or part of such distribution, it must in doing so consider theprices in such market over the same period (the "**Reference Period**") usedin computing the Current Market Price pursuant to Section 12.04(g) to theextent possible, unless the Guarantor`s Board of Directors in a BoardResolution determines in good faith that determining the fair market valueduring the Reference Period would not be in the best interest of the Holder.

Rights or warrants distributed by the Guarantor to all holdersof Ordinary Shares entitling the holders thereof to subscribe for or purchasethe Guarantor`s share capital (either initially or under certaincircumstances), which rights or warrants, until the occurrence of a specifiedevent or events ("**Trigger Event**"):

####  (i)*                 *are deemed to be transferred with such OrdinaryShares,

**____ 78 ____** 

####  (ii)*               *are not exercisable, and

####  (iii)*              *are also issued in respect of future issuances of OrdinaryShares

shall be deemed not to have been distributed for purposesof this Section 12.04(d) (and no adjustment to the Conversion Rate under thisSection 12.04(d) will be required) until the occurrence of the earliest TriggerEvent.  If such right or warrant is subject to subsequent events,upon the occurrence of which such right or warrant shall become exercisable topurchase different securities, evidences of indebtedness or other assets orentitle the holder to purchase a different number or amount of the foregoing orto purchase any of the foregoing at a different purchase price, then theoccurrence of each such event shall be deemed to be the date of issuance and RecordDate (as defined in Section 12.04(g)) with respect to the new right or warrant(and the termination or expiration of the existing right or warrant withoutexercise by the holder thereof).  In addition, in the event of anydistribution (or deemed distribution) of rights or warrants, or any TriggerEvent or other event (of the type described in the preceding sentence) withrespect thereto, that resulted in an adjustment to the Conversion Rate under thisSection 12.04(d):

#####  (1)*              *in the case of any such rights or warrants whichshall all have been redeemed or repurchased without exercise by any holdersthereof, the Conversion Rate shall be readjusted upon such final redemption orrepurchase to give effect to such distribution or Trigger Event, as the casemay be, as though it were a cash distribution, equal to the per shareredemption or repurchase price received by a holder of Ordinary Shares withrespect to such rights or warrant (assuming such holder had retained suchrights or warrants), made to all holders of Ordinary Shares as of the date ofsuch redemption or repurchase; and

#####  (2)*              *in the case of such rights or warrants all of whichshall have expired or been terminated without exercise, the Conversion Rate shallbe readjusted as if such rights and warrants had never been issued.

For purposes of this Section 12.04(d) andSection 12.04(a), 12.04(b) and 12.04(c), any dividend or distribution to whichthis Section 12.04(d) is applicable that also includes Ordinary Shares, asubdivision, split or combination of Ordinary Shares to which Section 12.04(b)applies, or rights or warrants to subscribe for or purchase Ordinary Shares towhich Section 12.04(c) applies (or any combination thereof), shall be deemedinstead to be:

#####  (1)*              *a dividend or distribution of the evidences ofindebtedness, assets, shares of capital stock, rights or warrants other thansuch Ordinary Shares, such subdivision, split or combination or such rights orwarrants to which Section 12.04(a), 12.04(b) and 12.04(c) apply, respectively(and any Conversion Rate increase required by this Section 12.04(d) withrespect to such dividend or distribution shall then be made), immediatelyfollowed by

**____ 79 ____** 

#####  (2)*              *a dividend or distribution of such Ordinary Shares,such subdivision, split or combination or such rights or warrants (and anyfurther Conversion Rate increase required by Section 12.04(a), 12.04(b) and12.04(c) with respect to such dividend or distribution shall then be made),except:

######  (A)*             *the Record Date of such dividend or distributionshall be substituted as (x) "the date fixed for the determination of shareholdersentitled to receive such dividend or other distribution," "Record Date fixedfor such determination" and "Record Date" within the meaning of Section 12.04(a),(y) "the day upon which such subdivision or split becomes effective" and "theday upon which such combination becomes effective" (as applicable) within themeaning of Section 12.04(b), and (z) "the Record Date fixed for thedetermination of shareholders entitled to receive such rights or warrants,"such "Record Date," "the Record Date fixed for the determination of shareholdersentitled to receive such rights or warrants" and "such dated fixed for thedetermination of shareholders entitled to receive such rights or warrants"within the meaning of Section 12.04(c), and

######  (B)*             *any Ordinary Shares included in such dividend ordistribution shall not be deemed "outstanding at the close of business on theRecord Date fixed for such determination" within the meaning of Section 12.04(a)and any reduction or increase in the number of Ordinary Shares resulting fromsuch subdivision, split or combination (as applicable) shall be disregarded inconnection with such dividend or distribution.

### (e)*               *In case the Guarantor shall, by dividend orotherwise, distribute to all holders of its Ordinary Shares exclusively in cash(excluding any cash that is distributed upon a reclassification, change,merger, consolidation, share exchange, combination, transfer, sale, lease orconveyance to which Section 12.11 hereof applies or as part of a distributionreferred to in Section 12.04(d) hereof), then, and in each such case,immediately after the close of business on the Record Date with respect to suchdistribution, the Conversion Rate shall be increased so that the same shallequal the rate determined by multiplying the Conversion Rate in effectimmediately prior to the close of business on such Record Date by a fraction:

####  (i)*                 *the numerator of which shall be equal to theCurrent Market Price on the Record Date, and

####  (ii)*               *the denominator of which shall be equal to theCurrent Market Price on such Record Date less an amount equal to the quotientof (x) the aggregate amount of the cash distribution and (y) the number of OrdinaryShares outstanding on the Record Date.

In the event that such dividend or distribution is not sopaid or made, the Conversion Rate shall again be adjusted to be the ConversionRate which would then be in effect if such dividend or distribution had notbeen declared.

**____ 80 ____** 

 

### (f)*                *In case a tender or exchange offer made by the Guarantoror any of its subsidiaries for all or any portion of the Ordinary Shares shallexpire and such tender or exchange offer (as amended upon the expirationthereof) shall require the payment to shareholders (based on the acceptance (upto any maximum specified in the terms of the tender or exchange offer) ofPurchased Shares (as defined below)) of an aggregate consideration per sharehaving a fair market value (as determined by the Guarantor`s Board ofDirectors, whose determination shall be conclusive and set forth in a BoardResolution), that exceeds the Last Reported Sale Price of an Ordinary Share onthe Trading Day next succeeding the last time (the "**Expiration Time**")tenders could have been made pursuant to such tender or exchange offer, then,and in each such case, immediately prior to the opening of business on the dayafter the date of the Expiration Time, the Conversion Rate shall be adjusted sothat the same shall equal the rate determined by multiplying the Conversion Ratein effect immediately prior to close of business on the date of the ExpirationTime by a fraction:

####  (i)*                 *the numerator of which shall be the sum of (x) thefair market value (determined as aforesaid) of the aggregate considerationpayable to shareholders based on the acceptance (up to any maximum specified inthe terms of the tender or exchange offer) of all shares validly tendered orexchanged and not withdrawn as of the Expiration Time (the shares deemed soaccepted, up to any such maximum, being referred to as the "**Purchased Shares**")and (y) the product of (1) the number of Ordinary Shares outstanding (lessany Purchased Shares) at the Expiration Time multiplied by (2) the LastReported Sale Price of the Ordinary Shares on the Trading Day next succeeding theExpiration Time, and

####  (ii)*               *the denominator shall be the product of the numberof Ordinary Shares outstanding (including any tendered or exchanged shares) atthe Expiration Time and the Last Reported Sale Price of the Ordinary Shares onthe Trading Day next succeeding the Expiration Time.

Such increase (if any) shall become effectiveimmediately prior to the opening of business on the day following theExpiration Time.  In the event that the Guarantor is obligated topurchase shares pursuant to any such tender offer, but the Guarantor ispermanently prevented by applicable law from effecting any such purchases orall such purchases are rescinded, the Conversion Rate shall again be adjustedto be the Conversion Rate which would then be in effect if such tender orexchange offer had not been made.  If the application of this Section12.04(f) to any tender or exchange offer would result in a decrease in theConversion Rate, no adjustment shall be made for such tender or exchange offerunder this Section 12.04(f).

### (g)*               *For purposes of this Section 12.04, the followingterms shall have the meanings indicated:

**____ 81 ____** 

###  

#####  (1)*              *"**Current Market Price**" shall mean theaverage of the daily Last Reported Sale Prices per Ordinary Share for the tenconsecutive Trading Days immediately prior to the date in question; *provided*,*however*, that if the "ex" date (as hereinafter defined) for any event(other than the issuance or distribution requiring such computation) thatrequires an adjustment to the Conversion Rate pursuant to Section 12.04(a),(b), (c), (d), (e) or (f) occurs during such ten consecutive Trading Days, "CurrentMarket Price" shall be calculated for such period in a manner determined ingood faith by the Guarantor`s Board of Directors to reflect the impact of suchevent on the Last Reported Sale Price of the Ordinary Shares during suchperiod.

For purposes ofthis paragraph, the term "ex" date, when used:

######  (A)*             *with respect to any issuance or distribution, meansthe first date on which the Ordinary Shares trades regular way on the relevantexchange or in the relevant market from which the Last Reported Sale Price wasobtained without the right to receive such issuance or distribution;

######  (B)*             *with respect to any subdivision, split orcombination of Ordinary Shares, means the first date on which the OrdinaryShares trade regular way on such exchange or in such market after the time atwhich such subdivision, split or combination becomes effective, and

######  (C)*             *with respect to any tender or exchange offer, meansthe first date on which the Ordinary Shares trades regular way on such exchangeor in such market after the Expiration Time of such offer.

Notwithstanding the foregoing, wheneversuccessive adjustments to the Conversion Rate are called for pursuant to thisSection 12.04, such adjustments shall be made to the Current Market Price asmay be necessary or appropriate to effectuate the intent of this Section 12.04and to avoid unjust or inequitable results as determined in good faith by the Guarantor`sBoard of Directors.

#####  (2)*              *"**fair market value**" shall mean the amount whicha willing buyer would pay a willing seller in an arm`s length transaction (asdetermined in good faith by the Guarantor`s Board of Directors).

#####  (3)*              *"**Record Date**" shall mean, with respect toany dividend, distribution or other transaction or event in which the holdersof Ordinary Shares have the right to receive any cash, securities or otherproperty or in which the Ordinary Shares (or other applicable security) isexchanged for or converted into any combination of cash, securities or otherproperty, the date fixed for determination of shareholders entitled to receivesuch cash, securities or other property (whether such date is fixed by the Guarantor`sBoard of Directors or by statute, contract or otherwise).

**____ 82 ____** 

#####  

### (h)*               *Subject to Section 12.04(i), if (and only tothe extent that) a Holder elects to convert a Security in connection with atransaction that both (A) occurs on or prior to March 15, 2010 and (B) thatis a Fundamental Change described under first bullet point or clause (a) of thesecond bullet point of the definition thereof (or that would have been aFundamental Change under the first bullet point or clause (a) of the secondbullet point but for the existence of the  110% trading priceexception) and pursuant to which 10% or more of the consideration for OrdinaryShares (other than cash payments for fractional shares and cash payments madein respect of dissenters` appraisal rights) in such transaction consists ofcash or securities (or other property) that are not traded or scheduled to betraded immediately following such transaction on a U.S. national securitiesexchange or the NASDAQ National Market (a "**Non Stock Change of Control**")and as a result of such transaction, the Securities become convertible intosuch consideration, the Company shall increase the Conversion Rate as describedbelow.  For purposes of this section, "in connection" with aFundamental Change shall mean transactions where the Guarantor is a party to aconsolidation, combination, merger or share exchange pursuant to which theGuarantor Ordinary Shares would be converted into cash, property or othersecurities, if a conversion notice completed in accordance with this Indentureis received by the Conversion Agent from the Holder surrendering such Holder`s Securitiesfor conversion at any time from and after the date that is 15 days prior to theanticipated effective date of the transaction until 15 days after the actualeffective date of such transaction.

The increase in the Conversion Rate will beexpressed as a number of additional Ordinary Shares issuable upon conversionper $1,000 principal amount of Securities (the "**Additional Stock**") thatwill be determined by reference to the table below, based on the date on whichthe Non Stock Change of Control becomes effective (the "**Effective Date**")and the price (the "**Stock Price**") paid per Ordinary Share in such NonStock Change of Control.  If holders of Ordinary Shares receive onlycash in the Non Stock Change of Control, the Stock Price shall be the cashamount paid per share.  Otherwise, the Stock Price shall be theaverage of the Last Reported Sale Prices of the Ordinary Shares on the fiveTrading Days prior to but not including the Effective Date of such Non StockChange of Control.

The Stock Prices set forth in the table and inclauses (ii) and (iii) below will be adjusted as of any date on which theConversion Rate is adjusted pursuant to the other paragraphs of this Section12.04.  On such date, the Stock Prices shall be adjusted bymultiplying the Stock Prices applicable immediately prior to such adjustment bya fraction, the numerator of which shall be the Conversion Rate immediatelyprior to the adjustment giving rise to the Stock Price adjustment, and thedenominator of which shall be the Conversion Rate as so adjusted.

The number of shares of Additional Stock shallbe correspondingly adjusted in the same manner as the Conversion Rate as setforth in Section 12.04 (other than on account of the Additional Stock).

The following table sets forth hypothetical StockPrices and number of shares of Additional Stock issuable per $1,000 principalamount of Securities:

**____ 83 ____** 

 
| **Effective Date of  Non StockChange of Control** | **Stock Price** |
|---------------------------------------------------|-----------------|
| * *                                          |
| $22.59                                            | $25.00          | $28.00 | $31.00 | $34.00 | $37.00 | $40.00 | $55.00 | $70.00 | $85.00 | $100.00 |
| March 15, 2005                                    | 9.135           | 7.383 | 5.762 | 4.571 | 3.675 | 2.990 | 2.458 | 1.036 | 0.498 | 0.257 | 0.136 |
| March 15, 2006                                    | 9.135           | 7.363 | 5.590 | 4.307 | 3.360 | 2.651 | 2.112 | 0.763 | 0.317 | 0.143 | 0.066 |
| March 15, 2007                                    | 9.135           | 7.123 | 5.133 | 3.726 | 2.721 | 1.998 | 1.475 | 0.350 | 0.096 | 0.030 | 0.008 |
| March 15, 2008                                    | 9.135           | 7.002 | 4.434 | 2.585 | 1.219 | 0.354 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 |
| March 15, 2009                                    | 9.135           | 6.915 | 4.395 | 2.529 | 1.192 | 0.347 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 |
| March 15, 2010                                    | 9.135           | 4.867 | 0.581 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 |
| March  16, 2010                                   | 0.000           | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 |

 

If the Stock Price and Effective Date are notset forth in the table above and the Stock Price is:

####  (i)*                 *between two Stock Prices on the table or theEffective Date is between two dates on the table, the number of shares ofAdditional Stock will be determined by straight-line interpolation between thenumber of shares of Additional Stock set forth for the higher and lower StockPrice and the two dates, as applicable, based on a 360-day year;

####  (ii)*               *in excess of $100.00 per share (subject to adjustmentas provided above), no shares of Additional Stock will be issued uponconversion; or

####  (iii)*              *less than $22.59 per share (subject to adjustmentas provided above), no shares of Additional Stock will be issued uponconversion.

Notwithstanding the foregoing, in no eventshall (A) this paragraph (h) of Section 12.04 have any effect in respect of anytransaction occurring after March 15, 2010, and (B) the total number ofOrdinary Shares issuable upon conversion exceed 44.2674 per $1,000 principalamount of Securities, subject to adjustment in the same manner as theConversion Rate as set forth in Section 12.04.

### (i)*                 *Notwithstanding the foregoing, and in lieu ofadjusting the Conversion Rate as set forth in Section 12.04(h), in the case ofa Non Stock Change of Control which constitutes a Public Acquirer Change ofControl, the Company or the Guarantor may elect that, from and after theEffective Date of such Public Acquirer Change of Control, the right to converta Security will be changed into a right to convert a Security into a number ofshares of Public Acquirer Common Stock specified below. The Conversion Rate onand following the Effective Date of such Public Acquirer Change of Controlshall be a number of shares of Public Acquirer Common Stock equal to the productof: 

#####  (1)*              *the Conversion Rate in effect immediately prior tothe Effective Date of such Public Acquirer Change of Control, times 

#####  (2)*              *the average of the quotients obtained, for eachTrading Day in the five consecutive Trading Day period ending on the TradingDay immediately preceding the Effective Date of such Public Acquirer Change ofControl (the "**Valuation Period**"), of: 

**____ 84 ____** 

#####  

######  (A)*             *the Acquisition Value of the Guarantor`s OrdinaryShares on each such Trading Day in the Valuation Period, divided by

######  (B)*             *the Last Reported Sale Price of the Public AcquirerCommon Stock on each such Trading Day in the Valuation Period.

### (j)*                *The Company or the Guarantor may make suchincreases in the Conversion Rate, in addition to those required by Section 12.04(a),(b), (c), (d), (e), (f) or (h), as the Board of Directors considers to beadvisable to avoid or diminish any income tax to holders of Ordinary Shares orrights to purchase Ordinary Shares resulting from any dividend or distributionof shares (or rights to acquire shares) or from any event treated as such forincome tax purposes.

To the extent permitted by applicable law, theCompany or the Guarantor from time to time may increase the Conversion Rate byany amount for any period of time if the period is at least 20 days and theincrease is irrevocable during the period and the Board of Directors determinesin good faith that such increase would be in the best interests of the Companyor the Guarantor, which determination shall be conclusive and set forth in aBoard Resolution.  Whenever the Conversion Rate is increased pursuantto the preceding sentence, the Company shall mail to the Trustee and eachHolder at the address of such Holder as it appears in the Register a notice ofthe reduction at least 15 days prior to the date the increased Conversion Ratetakes effect, and such notice shall state the increased Conversion Rate and theperiod during which it will be in effect.

### (k)*              *No adjustment in the Conversion Rate shall berequired unless such adjustment would require an increase or decrease of at least1% in the Conversion Rate; *provided*,*however*, that anyadjustments which by reason of this Section 12.04(k) are not required to bemade shall be carried forward and taken into account in any subsequentadjustment and, in any case, such adjustment will become effective at the timethe Company delivers a notice of redemption.  Adjustments that arerequired to be made to the applicable Conversion Rate will be calculated to thenearest 1/10,000th of a share.  Except as otherwise provided in thisArticle 12, no adjustment need be made for the issuance of Ordinary Shares orany securities convertible into or exchangeable for Ordinary Shares or thatcarry the right to purchase any of the foregoing, or otherwise.  Allcalculations under this Article 12 shall be made by the Company and shall bemade to the nearest cent or to the nearest 1/10,000th of a share, as the casemay be.  No adjustment need be made for a change in the par value orno par value of the Ordinary Shares.

### (l)*                 *To the extent the Holders of Securities mayparticipate on an as or when‐converted basis equally with the holders of OrdinaryShares in any event or occurrence, then this Section 12.04 shall not apply tosuch event or occurrence.

### (m)*             *In any case in which this Section 12.04 providesthat an adjustment shall become effective immediately after a Record Date foran event, the Guarantor may defer until the occurrence of such event (i) issuingto the Holder of any Security converted after such Record Date and before theoccurrence of such event the additional Ordinary Shares issuable upon suchconversion by reason of the adjustment required by such event over and abovethe 

**____ 85 ____** 

### Ordinary Shares issuable upon such conversionbefore giving effect to such adjustment and (ii) paying to such holder anyamount in cash in lieu of any fraction pursuant to Section 12.03 hereof.

### (n)*               *For purposes of this Section 12.04, the number of OrdinaryShares at any time outstanding shall not include shares held in the treasury ofthe Guarantor but shall include shares issuable in respect of scripcertificates issued in lieu of fractions of Ordinary Shares.  TheCompany will not pay any dividend or make any distribution on Ordinary Sharesheld in the treasury of the Company.

### (o)*              *If the distribution date for the rights provided inthe Guarantor`s rights agreement, if any, occurs prior to the date a Securityis converted, the Holder of the Security who converts such Security after thedistribution date is not entitled to receive the rights that would otherwise beattached (but for the date of conversion) to the Ordinary Shares received uponsuch conversion; *provided*,*however*, that an adjustment shall bemade to the Conversion Rate pursuant to clause 12.04(b) as if the rights werebeing distributed to the shareholders of the Guarantor immediately prior tosuch conversion.  If such an adjustment is made and the rights arelater redeemed, invalidated or terminated, then a corresponding reversingadjustment shall be made to the Conversion Rate, on an equitable basis, to takeaccount of such event.

## Section 12.05.*   **Notice of Adjustments of Conversion Rate.  *Wheneverthe Conversion Rate is adjusted as herein provided (other than in the case ofan adjustment pursuant to the second paragraph of Section 12.04(j) for whichthe notice required by such paragraph has been provided), the Guarantor shallpromptly file with the Trustee and any Conversion Agent other than the Trusteean Officer`s Certificate setting forth the adjusted Conversion Rate and showingin reasonable detail the facts upon which such adjustment is based.  Unlessand until a Responsible Officer of the Trustee receives an Officer`sCertificate describing an adjustment of the Conversion Rate, the Trustee mayassume without inquiry that no such adjustment has been made.  Promptlyafter delivery of such Officer`s Certificate, the Company shall prepare anotice stating that the Conversion Rate has been adjusted and setting forth theadjusted Conversion Rate and the date on which each adjustment becomeseffective, and shall mail such notice to each Holder at the address of suchHolder as it appears in the Register within 20 days of the effective date ofsuch adjustment.  Failure to deliver such notice shall not affect thelegality or validity of any such adjustment.

## Section 12.06.*   **Notice Prior to Certain Actions.  *Incase at any time after the date hereof:

#####  (1)*              *the Guarantor shall declare a dividend (or anyother distribution) on its Ordinary Shares;

#####  (2)*              *the Guarantor shall authorize the granting to theholders of its Ordinary Shares of rights or warrants to subscribe for orpurchase any shares of any class (or of securities convertible into shares ofcapital stock of any class) or of any other rights;

#####  (3)*              *there shall occur any recapitalization, reclassificationof the Ordinary Shares of the Guarantor (other than a subdivision, split orcombination of its outstanding Ordinary Shares, a change in par value, a changefrom par value to no par 

**____ 86 ____** 

##### value or a change from no par value to par value),or any merger, consolidation, share exchange or combination to which the Guarantoris a party and for which approval of any shareholders of the Guarantor isrequired, or the sale, transfer, lease or conveyance of all or substantiallyall of the assets of the Guarantor; or

#####  (4)*              *there shall occur the voluntary or involuntarydissolution, liquidation or winding up of the Company or the Guarantor;

the Company or the Guarantor shall cause to be filed ateach office or agency maintained for the purpose of conversion of securitiespursuant to Section 9.02 hereof, and shall cause to be provided to the Trusteeand all Holders in accordance with Section 14.02 hereof, at least 20 days (or10 days in any case specified in clause (1) or (2) or (3) above) prior tothe applicable record or effective date hereinafter specified, a noticestating:

######  (A)*             *the date on which a record is to be taken for thepurpose of such dividend, distribution, rights or grants of warrants, or, if arecord is not to be taken, the date as of which the holders of Ordinary Sharesof record to be entitled to such dividend, distribution, rights or warrants areto be determined; or

######  (B)*             *the date on which such recapitalization, reclassification,merger, consolidation,  share exchange, combination, sale, transfer,conveyance, lease, dissolution, liquidation or winding up is expected to becomeeffective, and the date as of which it is expected that holders of OrdinaryShares of record shall be entitled to exchange their Ordinary Shares forsecurities, cash or other property deliverable upon such recapitalization, reclassification,merger, consolidation, share exchange, sale, transfer, lease, dissolution,liquidation or winding up.

Neither the failure to give such notice nor anydefect therein shall affect the legality or validity of the proceedings oractions described in clauses (1) through (4) of this Section 12.06.

## Section 12.07.*   **Guarantor to Reserve Ordinary Shares.  *TheGuarantor shall at all times use its best efforts to reserve and keepavailable, free from preemptive rights, out of its authorized but unissued OrdinaryShares, for the purpose of effecting the conversion of Securities, the fullnumber of shares of fully paid and non-assessable Ordinary Shares then issuableupon the conversion of all Outstanding Securities.

## Section 12.08.*   **Taxes on Conversions.  *Except asprovided in the next sentence, the Company will pay any and all taxes (otherthan taxes on income) and duties that may be payable in respect of the issue ordelivery of Ordinary Shares on conversion of Securities pursuant hereto.  AHolder delivering a Security for conversion shall be liable for and will berequired to pay any tax or duty which may be payable in respect of any transferinvolved in the issue and delivery of Ordinary Shares in a name other than thatof the Holder of the Security or Securities to be converted, and no such issueor delivery shall be made unless the Person requesting such issue has paid tothe Company the amount of any such tax or duty, or has established to thesatisfaction of the Company that such tax or duty has been paid.

**____ 87 ____** 

## Section 12.09.*   **Covenant as to Ordinary Shares.  *TheGuarantor covenants that all Ordinary Shares which may be issued uponconversion of Securities will upon issue be fully paid and nonassessable and,except as provided in Section 12.08, the Company will pay all taxes, liens andcharges with respect to the issue thereof.

## Section 12.10.*   **Cancellation of Converted Securities.  *AllSecurities delivered for conversion shall be delivered to the Trustee to becanceled by or at the direction of the Trustee, which shall dispose of the sameas provided in Section 2.09.

## Section 12.11.*   **Effect of Recapitalization, Reclassification,Consolidation, Merger or Sale*.  If any of following events occur,namely:

####  (i)*                 *any recapitalization, reclassification or change ofthe outstanding Ordinary Shares (other than a change in par value, or from parvalue to no par value, or from no par value to par value, or as a result of asubdivision, split or combination);

####  (ii)*               *any merger, consolidation, share exchange orcombination of the Guarantor with another corporation as a result of whichholders of Ordinary Shares shall be entitled to receive stock, other securitiesor other property or assets (including cash) with respect to or in exchange forsuch Ordinary Shares; or

####  (iii)*              *any sale, conveyance or lease of all or substantiallyall the assets of the Guarantor to any other corporation in each case as aresult of which holders of Ordinary Shares shall be entitled to receive stock, othersecurities or other property or assets (including cash or any combinationthereof) with respect to or in exchange for such Ordinary Shares,

#### the Guarantor or the successor or purchasingcorporation, as the case may be, shall execute with the Trustee a supplementalindenture (which shall comply with the TIA as in force at the date of executionof such supplemental indenture if such supplemental indenture is then requiredto so comply) providing that each Outstanding Security shall thereafter beconvertible into the kind and amount of shares of stock, other securities orother property or assets (including cash) which such Holder would have beenentitled to receive upon such recapitalization, reclassification, change,merger, consolidation, share exchange, combination, sale, conveyance or lease hadsuch Securities been converted into Ordinary Shares immediately prior to suchrecapitalization, reclassification, change, merger, consolidation, shareexchange, combination, sale, conveyance or lease assuming such holder of OrdinaryShares did not exercise its rights of election, if any, as to the kind oramount of stock, other securities, cash or other property or assets receivableupon such recapitalization, reclassification, change, merger, consolidation,share exchange, combination, sale, conveyance or lease (*provided*that,if the kind or amount of stock, other securities, cash or other property orassets receivable upon such recapitalization, reclassification, change, merger,consolidation, share exchange, combination, sale, conveyance or lease is notthe same for each Ordinary Share in respect of which such rights of electionshall not have been exercised ("**Non‐Electing Share**"), then for thepurposes of this Section 12.11 the kind and amount of stock, other securities,cash or other property or assets receivable upon such recapitalization, 

**____ 88 ____** 

#### reclassification, change, merger, consolidation,share exchange, combination, sale, conveyance or lease for each Non-ElectingShare shall be deemed to be the kind and amount so receivable per share by aplurality of the Non-Electing Shares).  Such supplemental indentureshall provide for adjustments which shall be as nearly equivalent as may bepracticable to the adjustments provided for in this Article 12.  If,in the case of any such recapitalization, reclassification, change, merger,consolidation, share exchange, combination, sale, conveyance or lease, thestock or other securities and assets receivable thereupon by a holder of OrdinaryShares includes shares of stock or other securities and assets of a corporationother than the successor or purchasing corporation, as the case may be, in suchrecapitalization, reclassification, change, merger, consolidation, shareexchange, combination, sale, conveyance or lease, then such supplementalindenture shall also be executed by such other corporation and shall containsuch additional provisions to protect the interests of the Holders of theSecurities as the Board of Directors of the Guarantor shall reasonably considernecessary by reason of the foregoing, including to the extent practicable theprovisions providing for the Purchase Rights set forth in Article 11 hereof.

The Company shall cause notice of the executionof such supplemental indenture to be mailed to each Holder, at the address ofsuch Holder as it appears on the Register, within 20 days after executionthereof.  Failure to deliver such notice shall not affect thelegality or validity of such supplemental indenture.

The above provisions of this Section 12.11shall similarly apply to successive recapitalizations, reclassifications,mergers, leases, transfers, consolidations, share exchanges, combinations,sales and conveyances.

If this Section 12.11 applies to any event oroccurrence, Section 12.04 (other than paragraph (h) or (i) thereof) hereofshall not apply, except that if the event or occurrence is described inSection 12.04 (h) then both Section 12.04 (h) and Section 12.04(i) shall apply, except that if the event or occurrence is covered inSection 12.04 (i) then Section 12.04 (i) shall apply and not thisSection 12.11.

## Section 12.12.*   **Responsibility of Trustee for ConversionProvisions.  *The Trustee, subject to the provisions of Section 5.01hereof, and any Conversion Agent shall not at any time be under any duty orresponsibility to any Holder of Securities to determine whether any facts existwhich may require any adjustment of the Conversion Rate or Price, or withrespect to the nature or intent of any such adjustments when made, or withrespect to the method employed, or herein or in any supplemental indentureprovided to be employed, in making the same.  Neither the Trustee,subject to the provisions of Section 5.01 hereof, nor any Conversion Agentshall be accountable with respect to the validity or value (of the kind oramount) of any Ordinary Share, or of any other securities or property, whichmay at any time be issued or delivered upon the conversion of any Security; andit or they do not make any representation with respect thereto.  Neitherthe Trustee, subject to the provisions of Section 5.01 hereof, nor anyConversion Agent shall be responsible for any failure of the Company to makeany cash payment or to issue, transfer or deliver any shares of stock or sharecertificates or other securities or property upon the surrender of any Securityfor the purpose of conversion; and the Trustee, subject to the provisions ofSection 5.01 hereof, and any Conversion Agent shall not be 

**____ 89 ____** 

## responsible or liable for any failure of the Companyto comply with any of the covenants of the Company or the Guarantor containedin this Article.

# ARTICLE13[RESERVED]

 

# ARTICLE14OTHER PROVISIONS OF GENERAL APPLICATION

## Section 14.01.*   **Trust Indenture Act Controls.  *ThisIndenture is subject to the provisions of the TIA which are required to be partof this Indenture, and shall, to the extent applicable, be governed by suchprovisions.

## Section 14.02.*   **Notices.  *Any notice orcommunication to the Company, the Guarantor or the Trustee is duly given if inwriting and delivered in person, by facsimile, or mailed by first-class mail tothe address set forth below:

### (a)*               *if to the Company:

c/o M-Systems Flash Disk Pioneers Ltd.

7 AtirYeda St.Kfar-Saba 44425 Israel Attn:  General Counsel

Fax No.:  +972-3-548-8666

 

### (b)*              *if to the Guarantor:

7 AtirYeda St.Kfar-Saba 44425 Israel Attn:  General CounselFax No.:  + 972-3-548-8666

 

### (c)*               *if to the Trustee:

The Bank of New York Trust Company, N.A.700 South Flower Street, Suite 500Los Angeles, California 90017Attn:  Corporate Trust AdministrationFax No.:  (213) 630-6298

The Company, the Guarantor or the Trustee bynotice to the other may designate additional or different addresses forsubsequent notices or communications.

**____ 90 ____** 

Any notice or communication to a Holder shallbe mailed by first-class mail to his address shown on the Register kept by theRegistrar.  Failure to mail a notice or communication to a Holder orany defect in such notice or communication shall not affect its sufficiencywith respect to other Holders.

If a notice or communication is mailed or sentin the manner provided above within the time prescribed, it is duly given as ofthe date it is mailed, whether or not the addressee receives it, except thatnotice to the Trustee shall only be effective upon receipt thereof by theTrustee.

If the Company or the Guarantor mails a noticeor communication to Holders, it shall mail a copy to the Trustee at the sametime.

## Section 14.03.*   **Communication by Holders with Other Holders.  *Holdersmay communicate pursuant to Section 312(b) of the TIA with other Holders withrespect to their rights under the Securities or this Indenture.  TheCompany, the Guarantor, the Trustee, the Registrar and anyone else shall havethe protection of Section 312(c) of the TIA.

## Section 14.04.*   **Acts of Holders of Securities.*  (a)Any request, demand, authorization, direction, notice, consent, waiver or otheraction provided by this Indenture to be given or taken by Holders of Securitiesmay be embodied in and evidenced by:

#####  (1)*              *one or more instruments of substantially similartenor signed by such Holders in person or by agent or proxy duly appointed inwriting;

#####  (2)*              *the record of Holders of Securities voting in favorthereof, either in person or by proxies duly appointed in writing, at anymeeting of Holders of Securities duly called and held in accordance with theprovisions of Article 8; or

#####  (3)*              *a combination of such instruments and any suchrecord.

Except as herein otherwise expressly provided,such action shall become effective when such instrument or instruments orrecord or both are delivered to the Trustee and, where it is hereby expresslyrequired, to the Company or the Guarantor.  Such instrument orinstruments and record (and the action embodied therein and evidenced thereby)are herein sometimes referred to as the "Act" of the Holders of Securitiessigning such instrument or instruments and so voting at such meeting.  Proofof execution of any such instrument or of a writing appointing any such agentor proxy, or of the holding by any Person of a Security, shall be sufficientfor any purpose of this Indenture and (subject to Section 5.01 hereof)conclusive in favor of the Trustee, the Guarantor and the Company if made inthe manner provided in this Section.  The record of any meeting ofHolders of Securities shall be proved in the manner provided in Section 8.06hereof.

### (b)*              *The fact and date of the execution by any Person ofany such instrument or writing may be provided in any manner which the Trusteereasonably deems sufficient.

### (c)*               *The principal amount and serial numbers ofSecurities held by any Person, and the date of such Person holding the same,shall be proved by the Register.

**____ 91 ____** 

### (d)*              *Any request, demand, authorization, direction,notice, consent, election, waiver or other Act of the Holders of any Securityshall bind every future Holder of the same Security and the Holder of everySecurity issued upon the registration of transfer thereof or in exchangetherefor or in lieu thereof in respect of anything done, omitted or suffered tobe done by the Trustee or the Company in reliance thereon, whether or notnotation of such action is made upon such Security.

## Section 14.05.*   **Certificate and Opinion as to ConditionsPrecedent.  *In any case where several matters are required to becertified by, or covered by an opinion of, any specified Person, it is notnecessary that all such matters be certified by, or covered by the opinion of,only one such Person, or that they be so certified or covered by only onedocument, but one such Person may certify or give an opinion with respect tosome matters and one or more other such Persons as to other matters, and anysuch Person may certify or give an opinion as to such matters in one or severaldocuments.

Any certificate or opinion of an officer of theCompany or the Guarantor may be based, insofar as it relates to legal matters,upon an Opinion of Counsel, unless such officer knows, or in the exercise ofreasonable care should know, that the Opinion of Counsel with respect to thematters upon which such certificate or opinion is based is erroneous.  Anysuch Opinion of Counsel may be based, insofar as it relates to factual matters,upon a certificate or representations by, an officer or officers of the Companyor the Guarantor stating that the information with respect to such factualmatters is in the possession of the Company or the Guarantor, unless suchcounsel knows, or in the exercise of reasonable care should know, that thecertificate or representations with respect to such matters are erroneous.

Where any Person is required to make, give orexecute two or more applications, requests, consents, certificates, statements,opinions or other instruments under this Indenture, they may, but need not, beconsolidated and form one instrument.

Upon any application or request by the Company orthe Guarantor to the Trustee to take any action under any provision of thisIndenture, the Company or the Guarantor shall furnish to the Trustee an Officer`sCertificate stating that all conditions precedent, if any, provided for in thisIndenture relating to the proposed action have been complied with, except thatin the case of any such application or request as to which the furnishing ofsuch document is specifically required by any provision of this Indenturerelating to such particular application or request, no additional certificateneed be furnished.

## Section 14.06.*   **Statements Required in Certificate or Opinion.  *Eachcertificate or opinion with respect to compliance with a condition or covenantprovided for in this Indenture shall include:

#####  (1)*              *a statement that each individual signing suchcertificate or opinion on behalf of the Company or the Guarantor has read suchcovenant or condition and the definitions herein relating thereto;

**____ 92 ____** 

#####  (2)*              *a brief statement as to the nature and scope of theexamination or investigation upon which the statements or opinions contained insuch certificate or opinion are based;

#####  (3)*              *a statement that, in the opinion of each suchindividual, he has made such examination or investigation as is necessary toenable him to express an informed opinion as to whether or not such covenant orcondition has been complied with; and

#####  (4)*              *a statement as to whether, in the opinion of eachsuch individual, such condition or covenant has been complied with.

## Section 14.07.*   **Effect of Headings and Table of Contents.  *TheArticle and Section headings herein and the Table of Contents are forconvenience only and shall not affect the construction hereof.

## Section 14.08.*   **Successors and Assigns.  *Allcovenants and agreements in this Indenture by the Company and the Guarantor shallbind its successors and assigns, whether so expressed or not.

## Section 14.09.*   **Severability Clause.  *In case anyprovision in this Indenture, the Guarantee or the Securities shall be invalid,illegal or unenforceable, the validity, legality and enforceability of theremaining provisions shall not in any way be affected or impaired thereby.

## Section 14.10.*   **Benefits of Indenture.  *Nothingcontained in this Indenture, the Guarantee or in the Securities, express orimplied, shall give to any Person, other than the parties hereto and theirsuccessors hereunder, and the Holders of Securities, any benefit or legal orequitable right, remedy or claim under this Indenture.

## Section 14.11.*   **Governing Law.  *THIS INDENTURE,THE GUARANTEE AND THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED INACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

## Section 14.12.*   **Submission to Jurisdiction; Consent to Service;Waivers*.  The parties hereby submit to the non-exclusivejurisdiction of any federal or state court sitting in New York City solely forthe purpose of any legal action or proceeding brought to enforce theirobligations hereunder or, in the case of the Guarantor, with respect to anySecurities and/or the Guarantee. Each of the Guarantor and the Company hereby:

####  (i)*                 *agrees that, as long as any of the Securitiesremain Outstanding or the parties hereto have any obligation under thisIndenture, it shall have an authorized agent in the United States upon whom processmay be served in any such legal action or proceeding. Service of process uponsuch agent and written notice of such service mailed or delivered to it shallto the extent permitted by law be deemed in every respect effective service ofprocess upon it in any such legal action or proceeding and, if it fails tomaintain such an agent, any such process or summons may be served by mailing acopy thereof by registered mail, or a form of mail substantially equivalentthereto, addressed to it at its address as provided for notices hereunder. Eachof the Guarantor and the Company hereby appoints M-Systems, Inc. 

**____ 93 ____** 

#### as its agent for such purposes, and covenants andagrees that service of process in any legal action or proceeding may be madeupon it at such office of such agent;

####  (ii)*               *irrevocably waives, to the fullest extent permittedby law, any objection that it may now or hereafter have to the laying of venueof any such action or proceeding in any federal or state court sitting in NewYork City and any claim that any such action or proceeding brought in any suchcourt has been brought in an inconvenient forum;

####  (iii)*              *irrevocably agrees that the final judgment in anysuch suit, action or proceeding brought in such a court shall be conclusive andbinding and may be enforced in the courts of the jurisdiction of which it issubject by a suit upon judgment;

####  (iv)*             *irrevocably agrees that, should any such action orproceeding be brought against it arising out of or in connection with thisIndenture or the Guarantee, no immunity (to the extent that it may now orhereafter exist, whether on the grounds of sovereignty or otherwise) from suchaction or proceeding, from attachment (whether in aid of execution, beforejudgment or otherwise) of its property, assets or revenues, or from execution orjudgment wherever brought or made, shall be claimed by it or on its behalf orwith respect to its property, assets or revenues, any such immunity beinghereby irrevocably waived by each of the Company and the Guarantor to thefullest extent permitted by law; and 

####  (v)*               *irrevocably waives any right to trial by jury inany action, proceeding or counterclaim arising out of or relating to thisIndenture, the Guarantee or the Securities or any transaction related hereto orthereto.

## Section 14.13.*   **Counterparts.  *This instrument maybeexecuted in any number of counterparts, each of which when so executed shall bedeemed to be an original but all such counterparts shall together constitutebut one and the same instrument.

## Section 14.14.*   **Legal Holidays.  *In any case whereany Interest Payment Date, Redemption Date, Purchase Date, Put Purchase Date,or Stated Maturity of any Security or the last day on which a Holder of aSecurity has a right to convert such Security shall not be a Business Day atany Place of Payment or Place of Conversion, then (notwithstanding any otherprovision of this Indenture or of the Securities) payment of interest(including Liquidated Damages and Additional Tax Amounts, if any) or principalor conversion of the Securities, need not be made at such Place of Payment orPlace of Conversion on such day, but may be made on the next succeedingBusiness Day at such Place of Payment or Place of Conversion with the sameforce and effect as if made on the Interest Payment Date or Redemption Date orat the Stated Maturity or on such last day for conversion; *provided*,*however*, that in the case that payment is made on such succeeding BusinessDay, no interest shall accrue on the amount so payable for the period from andafter such Interest Payment Date, Purchase Date, Put Purchase Date, RedemptionDate or Stated Maturity, as the case may be.

**____ 94 ____** 

## Section 14.15.*   **Recourse Against Others.  *Norecourse for the payment of the principal of or interest (including LiquidatedDamages and Additional Tax Amounts, if any) on any Security, or for any claimbased thereon or otherwise in respect thereof, shall be had against anyincorporator, shareholder, officer or director, as such, past, present orfuture, of the Company or the Guarantor or of any successor entity, whether byvirtue of any constitution, statute or rule of law or by the enforcement of anyassessment or penalty or otherwise, all such liability being, by the acceptancethereof and as part of the consideration for the issue thereof, expresslywaived and released.

## Section 14.16.*   *Force Majeure.  In no event shall theTrustee be responsible or liable for any failure or delay in the performance ofits obligations hereunder arising out of or caused by, directly or indirectly,forces beyond its control, including, without limitation, strikes, workstoppages, accidents, acts of war or terrorism, civil or military disturbances,nuclear or natural catastrophes or acts of God, and interruptions, loss ormalfunctions of utilities, communications or computer (software and hardware)services; it being understood that the Trustee shall use reasonable effortswhich are consistent with accepted practices in the banking industry to resumeperformance as soon as practicable under the circumstances.

[Remainder of PageIntentionally Left Blank]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**____ 95 ____** 

SIGNATURES

IN WITNESS WHEREOF, the parties hereto havecaused this Indenture to be duly executed all as of the day and year firstabove written.

**M-SYSTEMS FINANCE INC.**,as the Issuer

 

 

Name:

Title:

 

 

**M-SYSTEMS FLASH DISK PIONEERS****LTD.**, as Guarantor

 

 

Name:

Title:

 

 

**M-SYSTEMS, INC.**, (solelyin respect of Section 14.12)

 

 

Name:

Title:

 

 

**THE BANK OF NEW YORK TRUSTCOMPANY, N.A.**, as the Trustee

 

 

Name:

Title:

 

 

 

 

 

 

**____ 96 ____** 

EXHIBIT A

FORM OF SECURITY

[FACE OF SECURITY]

UNLESS THIS CERTIFICATE IS PRESENTED BY ANAUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC") TO  M-SYSTEMSFINANCE INC. (OR ITS SUCCESSOR) OR ITS AGENT FOR REGISTRATION OF TRANSFER,EXCHANGE, CONVERSION OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED INTHE NAME OF CEDE & CO. OR OF SUCH OTHER ENTITY AS IS REQUESTED BY ANAUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE &CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OFDTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TOANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HASAN INTEREST HEREIN.(1)

(1)           This legendshould be included only if the Security is issued in global form.

 

THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLYISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATESSECURITIES ACT OF 1933 (THE "SECURITIES****ACT"), AND THIS NOTE AND THE ORDINARYSHARES ISSUABLE UPON CONVERSION THEREOF MAY NOT BE OFFERED, SOLD OR OTHERWISETRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTIONTHEREFROM.  EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THESELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OFSECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A OR REGULATION STHEREUNDER.

THE HOLDER OF THIS NOTE AGREES FOR THE BENEFITOF M-SYSTEMS FINANCE INC. AND M-SYSTEMS FLASH DISK PIONEERS LTD. THAT (A) THIS NOTEAND THE ORDINARY SHARES ISSUABLE UPON CONVERSION THEREOF MAY BE OFFERED,RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) IN THE UNITED STATES TO APERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THEREQUIREMENTS OF RULE 144A, (II) OUTSIDE THE UNITED STATES IN AN OFFSHORETRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT, (III) PURSUANTTO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144THEREUNDER (IF AVAILABLE), OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATIONSTATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) INACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITEDSTATES, (B) THE HOLDER WILL NOT, DIRECTLY OR INDIRECTLY, ENGAGE IN ANY HEDGINGTRANSACTION WITH REGARD TO THIS SECURITY OR ANY ORDINARY SHARES 

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ISSUABLE UPONCONVERSION OF THIS SECURITY EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT, AND(C) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANYPURCHASER OF THIS NOTE FROM IT OF THE RESTRICTIONS REFERRED TO IN (A) AND (B) ABOVE.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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M-SYSTEMS FINANCE INC.

1.0% Convertible Senior Notes due 2035

                                                                                                              CUSIPNo. M 7061C100

                                                                                                              $75,000,000

M-SYSTEMS FINANCE INC., a Cayman Islands exemptedcompany (the "Company," which term includes any successor entity under theIndenture hereinafter referred to), for value received, hereby promises to payto Cede & Co., or its registered assigns, the principal sum of U.S. DollarsSeventy Five Million Dollars ($75,000,000) on March 15, 2035, or such greateror lesser amount as is indicated on the Schedule of Exchanges of the Notes.

Interest Payment Dates:  September 15 andMarch 15, commencing September 15, 2005.

Regular Record Dates:  September 1 and March1.

Reference is hereby made to the furtherprovisions of this Security set forth on the reverse hereof, which furtherprovisions shall for all purposes have the same effect as if set forth at thisplace.

SIGNATUREPAGE FOLLOWS

 

 

 

 

 

 

 

 

 

 

 

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IN WITNESS WHEREOF, the Company has caused thisSecurity to be duly executed manually or by facsimile by its duly authorizedofficer.

M‐SYSTEMS FINANCE INC.

 

 

 

By:

      Name:    

      Title:

Trustee`s Certificate of Authentication

This is one of the 1.0% Convertible Senior Notesdue 2035 described in the within-named Indenture.

**The Bank of New York TrustCompany, N.A.,** as Trustee

 

 

By:

                    Authorized Signatory

Dated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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REVERSE OF SECURITY

M-SYSTEMS FINANCE INC.

1.0% Convertible Senior Notes due 2035

Capitalized terms used herein but not definedshall have the meanings assigned to them in the Indenture referred to belowunless otherwise indicated.

1.         *Principal and Interest.  *M-SystemsFinance Inc., a Cayman Islands exempted company (the "Company"), promises topay interest on the principal amount of this Security at the Interest Rate fromthe date of issuance until repayment at Maturity, redemption or purchase.  TheCompany shall pay interest on this Security semiannually in arrears on March 15and September 15 of each year (each an "Interest Payment Date"),commencing September 15, 2005.

Interest on this Security shall be computed onthe basis of a 360-day year of twelve 30-day months and for any period shorterthan a full semiannual period for which interest is calculated, on the basis ofa 30-day month and, for such periods of less than a month, the actual number ofdays elapsed over a 30-day month.

Subject to Section 2.17 of the Indenture, aHolder of any Security at the close of business on a Regular Record Date shallbe entitled to receive interest on such Security on the corresponding InterestPayment Date.  A Holder of any Security which is converted after theclose of business on a Regular Record Date and prior to the correspondingInterest Payment Date (other than any Security whose Maturity is prior to suchInterest Payment Date) shall be entitled to receive interest (includingLiquidated Damages and Additional Tax Amounts, if any) on the principal amountof such Security, notwithstanding the conversion of such Security prior to suchInterest Payment Date.  However, any such Holder which surrenders anysuch Security for conversion during the period between the close of business onsuch Regular Record Date and ending with the opening of business on thecorresponding Interest Payment Date shall be required to pay the Company anamount equal to the interest (excluding Liquidated Damages and Additional TaxAmounts, if any) on the principal amount of such Security so converted (butexcluding any Defaulted Interest on the principal amount of such Security soconverted that exists at the time such Holder surrenders such Security forconversion), which is payable by the Company to such Holder on such InterestPayment Date, at the time such Holder surrenders such Security for conversion.  Notwithstandingthe foregoing, any such Holder which surrenders for conversion any Security (a)which has been called for redemption by the Company in a notice of redemptiongiven by the Company pursuant to Section 10.04 of the Indenture on a RedemptionDate after such Regular Record Date and on or prior to the next succeeding InterestPayment Date (or on or between March 15, 2008 and March 20, 2008 or on orbetween March 15, 2010 and March 20, 2010) or (b) with respect to which theCompany has specified a Purchase Date that is after such Regular Record Dateand on or prior to the next succeeding Interest Payment Date, in either case,shall be entitled to receive such interest and need not pay the Company anamount equal to the interest on the principal amount of such Security soconverted at the time such Holder surrenders such Security for conversion.

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In accordance with the terms of theRegistration Rights Agreement, during the first 90 days following an eventrequiring the payment of Registration Default Damages (as defined in theRegistration Rights Agreement), the Interest Rate borne by this Security shallbe increased by 0.25%.  From and after the 91st day following suchRegistration Default, the Interest Rate borne by this Security shall beincreased by 0.50%.  In no event shall the Interest Rate borne bythis Security be increased by more than 0.50%.

Any amount of additional interest shall bepayable in cash semiannually, in arrears, on each Interest Payment Date andshall cease to accrue on the date the Registration Default is cured.  TheHolder of this Security is entitled to the benefits of the Registration RightsAgreement.

2.         *Method of Payment.  *Intereston any Security which is payable, and is punctually paid or duly provided for,on any Interest Payment Date shall be paid to the person in whose name thatSecurity (or one or more Predecessor Securities) is registered at the close ofbusiness on the Regular Record Date for such interest.

Principal of and interest on, Global Securitiesshall be payable to the Depositary in immediately available funds.

Principal of Physical Securities shall bepayable at the office or agency of the Company maintained for such purpose,initially the Corporate Trust Office of the Trustee.  Interest onPhysical Securities shall be payable by (i) U.S. Dollar check drawn on a banklocated in the city where the Corporate Trust Office of the Trustee is locatedmailed to the address of the Person entitled thereto as such address shallappear in the Register, or (ii) upon written application to the Registrar notlater than the relevant Record Date by a Holder of an aggregate principalamount of Securities in excess of $5,000,000, wire transfer in immediatelyavailable funds.

3.         *Paying Agent and Registrar.  *Initially,The Bank of New York Trust Company, N.A., the Trustee under the Indenture, willact as Paying Agent and Registrar.  The Company may change the PayingAgent or Registrar without notice to any Holder.

4.         *Indenture.  *TheCompany issued this Security under an Indenture, dated as of March 23, 2005(the "Indenture"), between the Company, the Guarantor, M‐Systems, Inc. andThe Bank of New York Trust Company, N.A., as trustee (the "Trustee").  Theterms of this Security include those stated in the Indenture and those madepart of the Indenture by reference to the Trust Indenture Act of 1939, asamended ("TIA").  This Security is subject to all such terms, andHolders are referred to the Indenture and the TIA for a statement of all suchterms.  To the extent permitted by applicable law, in the event ofany inconsistency between the terms of this Security and the terms of theIndenture, the terms of the Indenture shall control.

5.         *Redemption.*  (a)  *ProvisionalRedemption*.  The Securities may be redeemed in cash at theelection of the Company, in whole or in part from time to time, at any timebeginning on March 15, 2008 and prior to March 15, 2010, upon notice as setforth in the Indenture at a Provisional Redemption Price equal to 100% of theprincipal amount of the Securities redeemed plus accrued but unpaid interest(including Liquidated Damages and Additional Tax Amounts, if any) thereon, ifany, to, but excluding the Provisional Redemption Date if:  (1) theLast 

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Reported Sale Price ofthe Ordinary Shares has exceeded 130% of the then applicable Conversion Price,for at least 20 Trading Days in any period of 30 consecutive Trading Daysending on the Trading Day prior to the date of mailing of the notice ofredemption pursuant to the Indenture, and (2) if the redemption occursprior to March 23, 2007, a registration statement covering resales of the Securitiesand the Ordinary Shares issuable upon conversion thereof is effective and  availablefor use and is expected to remain effective for the 30 days following theProvisional Redemption Date unless registration is no longer required.  

(b)        On andafter March 15, 2010, the Company may, at its option, redeem the Securities inwhole or in part from time to time, upon notice as set forth in the Indentureat the Optional Redemption Price of 100% of the principal amount of theSecurities redeemed, plus any accrued but unpaid interest (including LiquidatedDamages and Additional Tax Amounts, if any) thereon, if any, to, but excluding,the Optional Redemption Date.

If fewer than all the Securities are to beredeemed, the Trustee shall select the particular Securities to be redeemedfrom the Outstanding Securities by the methods as provided in the Indenture.  Ifany Security selected for partial redemption is converted in part beforetermination of the conversion right with respect to the portion of the Securityso selected, the converted portion of such Security shall be deemed to be theportion selected for redemption (*provided*,*however*, that theHolder of such Security so converted and deemed redeemed shall not be entitledto any additional interest payment as a result of such deemed redemption thansuch Holder would have otherwise been entitled to receive upon conversion ofsuch Security).  Securities which have been converted during aselection of Securities to be redeemed may be treated by the Trustee as Outstandingfor the purpose of such selection.

On and after the applicable Redemption Date,interest shall cease to accrue on Securities or portions of Securities calledfor redemption, unless the Company defaults in the payment of the applicableRedemption Price and accrued and unpaid interest.

Notice of redemption shall be given by theCompany to the Holders as provided in the Indenture.

6.         *PurchaseRights.*

### (a)*               **Purchase Right Upon a Fundamental Change.  *Inthe event that a Fundamental Change shall occur, each Holder shall have the PurchaseRight, at the Holder`s option, to require the Company to purchase, and upon theexercise of such right in accordance with Section 11.03 of the Indenture theCompany shall purchase, all of such Holder`s Securities not theretofore calledfor redemption, or any portion of the principal amount thereof that is equal to$1,000 or a multiple thereof (*provided*,*however*, that no single Securitymay be purchased in part unless the portion of the principal amount of suchSecurity to be Outstanding after such purchase is equal to $1,000 or multiplethereof), on the Purchase Date that is 45 days after the date of the CompanyNotice at a Purchase Price of 100% of the principal amount of the Securities tobe purchased, plus accrued and unpaid interest (including Liquidated Damagesand Additional Tax Amounts, if any) thereon, to, but excluding, 

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### the Purchase Date, *provided*,*however*, that installments of interest on Securities whose Stated Maturityis prior to or on the Purchase Date shall be payable to the Holders of suchSecurities, or one or more Predecessor Securities, registered as such on therelevant Record Date according to their terms and the provisions of Section2.01 of the Indenture.  

A Company Notice shall be given by the Companyto the Holders as provided in the Indenture.  To exercise a PurchaseRight, a Holder must deliver to the Trustee a written notice as provided in theIndenture.

### (b)*              **Purchase by the Company at the Option of theHolder.  *Subject to the terms and conditions of the Indenture,each Holder shall have the right to require the Company to purchase all or aportion (in principal amounts of $1,000 or integral multiples thereof) of itsSecurities on a Put Purchase Date, at 100% of the principal amount of theSecurities to be so purchased, plus any accrued and unpaid interest thereon (includingLiquidated Damages and Additional Tax Amounts, if any) thereon, to, butexcluding the Put Purchase Date, *provided however*, that installments ofinterest on Securities whose stated Maturity is prior to the Put Purchase Dateshall be payable to the Holders of such Securities, or any one or morePredecessor Securities, registered as such on the relevant Record Dateaccording to their terms and the provisions of Section 2.01 of the Indenture.  

### (c)*               **Company Notice.*  On or before thetwentieth (20th) Business Day prior to each Put Purchase Date, the Companyshall provide to the Trustee, the Paying Agent and to all Holders at theirrespective addresses as shown on the Register, and to beneficial owners of theSecurities where required by applicable law, a notice as provided in theIndenture.  The Company will be required to purchase only Securitieswith respect to which a Holder has delivered a Purchase Notice in accordancewith the terms and conditions of the Indenture and subject to the satisfactionof the other conditions set forth in the Indenture.

7.         *Conversion Rights.  *(a)Subject to and upon compliance with the provisions of the Indenture, the Holderof Securities shall be entitled, at such Holder`s option, at any time beforethe close of business on March 15, 2035, to convert the Holder`s Securities (orany portion of the principal amount hereof which is $1,000 or a multiplethereof), at the principal amount thereof or of such portion thereof into dulyauthorized, fully paid Ordinary Shares of the Guarantor at the Conversion Ratein effect at the time of conversion.

(b)        In the case of a Security (or a portionthereof) called for redemption, such conversion right in respect of theSecurity (or such portion thereof) so called shall expire at the close ofbusiness on the Business Day immediately preceding the Redemption Date, unlessthe Company defaults in making the payment due upon redemption.  If aHolder exercises its Purchase Right or Put Purchase Right with respect to aSecurity (or a portion thereof), such conversion right in respect of theSecurity (or portion thereof) shall expire at the close of business on theBusiness Day preceding the Purchase Date or Put Purchase Date, as applicable.

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(c)        Each $1,000 principal amount of the Securitiesshall initially be convertible into 35.1328 Ordinary Shares (referred to as the"Conversion Rate").  The Conversion Rate shall be adjusted undercertain circumstances as provided in the Indenture.

(d)        Toexercise the conversion right, the Holder must surrender the Security (orportion thereof) duly endorsed or assigned to the Company or in blank, at theoffice of the Conversion Agent, accompanied by a duly signed conversion noticeto the Company.  Any Security surrendered for conversion during theperiod between the close of business on any Regular Record Date and the openingof business on the corresponding Interest Payment Date (other than any Securitywhose Maturity is prior to such Interest Payment Date) shall be accompanied bypayment in New York Clearing House funds or other funds acceptable to theCompany of an amount equal to the interest (excluding Liquidated Damages andAdditional Tax Amounts, if any) payable on such Interest Payment Date by theCompany on the principal amount of the Security being surrendered forconversion (but excluding any overdue interest on the principal amount of suchSecurity so converted that exists at the time such Holder surrenders suchSecurity for conversion).  Notwithstanding the foregoing, any suchHolder which surrenders for conversion any Security (a) which has been calledfor redemption by the Company in a notice of redemption given by the Companypursuant to Section 10.04 of the Indenture on a Redemption Date after such RegularRecord Date and on or prior to the next succeeding Interest Payment Date (or onor between March 15, 2008 and March 20, 2008 or on or between March 15, 2010and March 20, 2010) or (b) with respect to which the Company has specified aPurchase Date that is after such Regular Record Date and on or prior to thenext succeeding Interest Payment Date, in either case, need not pay the Companyan amount equal to the interest on the principal amount of such Security soconverted at the time such Holder surrenders such Security for conversion.

(e)        No fractional Ordinary Shares shallbe issued upon conversion of any Securities.  Instead of any fractionalOrdinary Shares which would otherwise be issued upon conversion of suchSecurities, the Company shall pay a cash adjustment as provided in theIndenture.

8.         *Denominations; Transfer;Exchange.  *The Securities are issuable in registered form,without coupons, in denominations of $1,000 and multiples of $1,000 in excessthereof.  A Holder may register the transfer or exchange ofSecurities in accordance with the Indenture.  The Registrar mayrequire a Holder, among other things, to furnish appropriate endorsements andtransfer documents and the Company may require a Holder to pay any taxes andfees required by law or permitted by the Indenture.

In the event of a redemption in part, theCompany shall not be required (a) to register the transfer of, or exchange,Securities for a period of 15 days immediately preceding the date notice isgiven identifying the serial numbers of the Securities called for suchredemption, or (b) to register the transfer of, or exchange, any suchSecurities, or portion thereof, called for redemption.

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In the event of redemption, conversion orpurchase of the Securities in part only, a new Security or Securities for theunredeemed, unconverted or unpurchased portion thereof shall be issued in thename of the Holder hereof.

9.         *Persons Deemed Owners.  *Theregistered Holder of this Security shall be treated as its owner for allpurposes.

10.       *Unclaimed Money.  *TheTrustee and the Paying Agent shall pay to the Company any money held by themfor the payment of principal or interest that remains unclaimed for two yearsafter the date upon which such payment shall have become due.  Afterpayment to the Company, Holders entitled to the money must look to the Companyfor payment as general creditors unless an applicable abandoned property lawdesignates another Person, and all liability of the Trustee and the PayingAgent with respect to such money shall cease.

11.       *Discharge Prior to Redemption orMaturity.  *Subject to certain conditions contained in theIndenture, the Company and the Guarantor may discharge their obligations underthe Securities and the Indenture if (1) (a) all of the Outstanding Securitieshave become due and payable or shall become due and payable at their scheduledMaturity within one year or (b) all of the Outstanding Securities are scheduledfor redemption within one year, and (2) the Company shall have deposited withthe Trustee an amount in cash sufficient to pay the principal of and intereston, all of the Outstanding Securities on the date of Maturity or redemption, asthe case may be.

12.       *Amendment;Supplement; Waiver.  *The Indenture permits, with certainexceptions as therein provided, the amendment thereof and the modification ofthe rights and obligations of the Company and the Guarantor and the rights ofthe Holders of the Securities under the Indenture at any time by the Company andthe Guarantor and the Trustee with the consent of the Holders of a majority inaggregate principal amount of the Outstanding Securities (or such lesser amountas shall have acted at a meeting pursuant to the provisions of the Indenture).  TheIndenture also contains provisions permitting the Holders of specifiedpercentages in principal amount of the Securities at the time Outstanding, onbehalf of the Holders of all the Securities, to waive compliance by the Companyand the Guarantor with certain provisions of the Indenture and certain pastdefaults under the Indenture and their consequences.  Any suchconsent or waiver by the Holder of this Security shall be conclusive andbinding upon such Holder and upon all future Holders of this Security and ofany Security issued upon registration of transfer hereof or in exchange thereforor in lieu hereof, whether or not notation of such consent or waiver is madeupon this Security or such other Security.

No reference herein to the Indenture and noprovision of this Security or of the Indenture shall alter or impair theobligation of the Company and the Guarantor, which is absolute andunconditional, to pay the principal of and interest (including LiquidatedDamages and Additional Tax Amounts, if any) on this Security at the times,places and rate, and in the coin or currency, herein prescribed or to convertthis Security as provided in the Indenture.

13.       *Defaultsand Remedies.  *The Indenture provides that an Event of Defaultwith respect to the Securities occurs when any of the following occurs:

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(a)        the Company fails to pay when due theprincipal on any of the Securities when it becomes due and payable, atMaturity, upon redemption or exercise of a Purchase Right or Put Purchase Rightor otherwise; or

(b)        the Company fails to pay on installment ofinterest (including Liquidated Damages and Additional Tax Amounts, if any) onany of the Securities when it becomes due and payable and such defaultcontinues for a period of 30 days; or

(c)        the Guarantor fails to perform its obligationsunder the Guarantee; or

(d)        the Guarantor fails to deliver Ordinary Shareswhen those Ordinary Shares are required to be delivered following conversion ofa Security in accordance with the provisions of Article 12 of the Indenture andthat failure continues for 10 days; or

(e)        either the Company or the Guarantor fails toperform or observe any other term, covenant or agreement contained in theSecurities or the Indenture and the failure continues for a period of 60 daysafter written notice of such failure requiring the Company and the Guarantor,respectively, to remedy the same, shall have been given to the Company and theGuarantor by the Trustee or to the Company and to the Guarantor and the Trusteeby the Holders of at least 25% in aggregate principal amount of the OutstandingSecurities; or

(f)         (i) the Company or the Guarantor failsto make any payment by the end of the applicable grace period, if any, afterthe maturity of any Indebtedness of the Company or the Guarantor for borrowedmoney in an amount in excess of $10,000,000, or (ii) there is an accelerationof any Indebtedness of the Company or the Guarantor for borrowed money in anamount in excess of $10,000,000 because of a default with respect to suchIndebtedness without such Indebtedness having been discharged or such accelerationhaving been cured, waived, rescinded or annulled, in the case of either (i) or(ii) above, for a period of 30 days after written notice is given to theCompany and the Guarantor by the Trustee or to the Company and the Guarantorand the Trustee by Holders of at least 25% in aggregate principal amount of theOutstanding Securities; or

(g)        either the Guarantor or the Company fails,within 30 days after the occurrence of a Fundamental Change, to give to eachHolder of Securities notice pursuant to Section 11.03 of the Indenture; or

(h)        there are certain events of bankruptcy,insolvency or reorganization of the Company or the Guarantor as specified inthe Indenture.

If an Event of Default shall occur and becontinuing, the principal of all the Securities may be declared due and payablein the manner and with the effect provided in the Indenture.

14.       *Authentication.  *ThisSecurity shall not be valid until the Trustee (or authenticating agent)executes the certificate of authentication on the other side of this Security.

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15.       *Abbreviations.  *Customaryabbreviations may be used in the name of a Holder or an assignee, such as:  TENCOM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN(=joint tenants with right of survivorship and not as tenants in common), CUST(= Custodian) and U/G/M/A (=Uniform Gifts to Minors Act).

16.       *AdditionalRights of Holders of Registrable Securities.  *In addition to therights provided to Holders under the Indenture, Holders of RegistrableSecurities shall have all the rights set forth in the Registration RightsAgreement.

17.       *CUSIPNumbers.  *Pursuant to a recommendation promulgated by theCommittee on Uniform Security Identification Procedures, the Company has causedCUSIP numbers to be printed on this Security and the Trustee may use CUSIPnumbers in notices of redemption as a convenience to Holders.  Norepresentation is made as to the accuracy of such numbers either as printed onthis Security or as contained in any notice of redemption and reliance may beplaced only on the other identification numbers placed thereon.

18.       *GoverningLaw.  *The Indenture and this Security shall be governed by, andconstrued in accordance with, the laws of the State of New York.

19.       *SuccessorEntity.  *In the event a successor entity assumes all theobligations of the Company under this Security (and the Guarantor`s obligationsunder the Guarantor as otherwise permitted under the Indenture), pursuant tothe terms hereof and of the Indenture, the Company shall be released from allsuch obligations.

 

 

 

 

 

 

 

 

 

 

 

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[REVERSE OF SECURITY - ENDORSEMENT]

M-Systems Flash DiskPioneers Ltd. (the "Guarantor") hereby unconditionally and irrevocablyguarantees to the Holder of this Security (i) the due and punctual payment ofthe principal of and interest (including Liquidated Damages and AdditionalTaxes, if any) on this Security, when and as the same shall become due andpayable, whether at maturity or upon redemption or upon declaration ofacceleration or otherwise, according to the terms of this Security and of theIndenture and (ii) any other obligations the Company may have under theIndenture or the Registration Rights Agreement.  This Guarantee is aguarantee of payment not of collection.  The Guarantor agrees that inthe case of default by the Company in the payment of any such principal orinterest (including Liquidated Damages and Additional Tax Amounts, if any), theGuarantor shall duly and punctually pay the same.  The Guarantorhereby agrees that its obligations hereunder shall be absolute andunconditional irrespective of any extension of the time for payment of thisSecurity, any modification of this Security, the Indenture or the RegistrationRights Agreement, any invalidity, irregularity or unenforceability of thisSecurity (or the Indenture or the Registration Rights Agreement), any failureto enforce the same or any waiver, modification, consent or indulgence grantedto the Company with respect thereto by the Holder of this Security or theTrustee, or any other circumstances which may otherwise constitute a legal orequitable discharge of a surety or guarantor.  The Guarantor herebywaives diligence, presentment, demand for payment, filing of claims with acourt in the event of merger or bankruptcy of the Company, any right to requirea demand or proceeding first against the Company, protest or notice with respectto this Security or the Indebtedness evidenced hereby and all demandswhatsoever, and covenants that this Guarantee will not be discharged as to thisSecurity except by payment in full of the principal of and interest (includingLiquidated Damages and Additional Tax Amounts, if any) on this Security.  AnEvent of Default under the Indenture or this Security shall constitute an eventof default under this Guarantee, and shall entitle the Holder of this Securityto accelerate the obligations of the Guarantor hereunder in the same manner andto the same extent as the obligations of the Company.

The Guarantor shall besubrogated to all rights of the Holders of this Security against the Company inrespect of any amounts paid by the Guarantor pursuant to the provisions of thisGuarantee or the Indenture; *provided*,*however*, that the Guarantorhereby waives any and all rights to which it may be entitled, by operation oflaw or otherwise, upon making any payment hereunder (i) to be subrogatedto the rights of a Holder against the Company with respect to such payment orotherwise to be reimbursed, indemnified or exonerated by the Company in respectthereof or (ii) to receive any payment in the nature of contribution orfor any other reason, from any other obligor with respect to such payment, ineach case, until the principal of and interest (including Liquidated Damagesand Additional Tax Amounts, if any) on this Security shall have been paid infull.

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The Guarantee shall notbe valid or become obligatory for any purpose with respect to this Securityuntil the certificate of authentication on this Security shall have been signedby the Trustee.

The Guarantee shall begoverned by and construed in accordance with the laws of the State of New York.

IN WITNESS WHEREOF,M-Systems Flash Disk Pioneers Ltd. has caused the Guarantee to be signedmanually or by facsimile by its duly authorized officer.

                                    M-SYSTEMSFLASH DISK PIONEERS LTD.

By

Name:Title:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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**ASSIGNMENT FORM**

To assign this Security, fill in the form belowand have your signature guaranteed:  (I) or (we) assign and transferthis Security to:

(Insert assignee`ssoc. sec. or tax ID. no.)

 

 

(Print or typeassignee`s name, address and zip code)

 

 

and irrevocably appoint                         totransfer this Security on the books of the Company.  The agent maysubstitute another to act for him.

Dated

Your Name:

 

(Print your name exactly as itappears on the face of this Security) 

 

Your Signature:

 

(Sign exactly as your nameappears on the face of this Security) 

 

**SignatureGuarantee*:**

 

****

*******Participantin a recognized Signature Guarantee Medallion Program (or other signatureguarantor acceptable to the Trustee).**

In connection with any transfer of this Securityoccurring prior to the end of the period referred to in Rule 144(k) under theSecurities Act, the undersigned confirms that without utilizing any generalsolicitation or general advertising:

[Check One]

        (a) this Security is being transferred in compliance with the exemption fromregistration under the Securities Act of 1933, as amended, provided by Rule 144Athereunder.

or

        (b) this Security is being transferred in compliance with the exemption from registrationunder the Securities Act of 1933, as amended, provided by Regulation Sthereunder.

Or

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        (c) this Security is being transferred other than in accordance with (a) or(b) above and documents are being furnished which comply with the conditions oftransfer set forth in this Security and the Indenture.

If none of the foregoing boxes is checked, theTrustee or other Registrar shall not be obligated to register this Security inthe name of any Person other than the Holder hereof unless the conditions toany such transfer of registration set forth herein and in Sections 2.07, 2.08and 2.09 of the Indenture shall have been satisfied.

Dated:

NOTICE:  The signature to this assignmentmust correspond with the name as written upon the face of the within-mentionedinstrument in every particular, without alteration or any change whatsoever.

Signature Guarantee:

Signature must be guaranteed bya participant in a recognized signature guaranty medallion program or othersignature guarantor acceptable to the Trustee.

** **

TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.

The undersigned represents and warrants that it ispurchasing this Security for its own account or an account with respect towhich it exercises sole investment discretion, in each case for investment andnot with a view to distribution, and that it and any such account is a "QualifiedInstitutional Buyer" within the meaning of Rule 144A under the Securities Actof 1933 and is aware that the sale to it is being made in reliance on Rule 144Aand acknowledges that it has received such information regarding the Company asthe undersigned has requested pursuant to Rule 144A or has determined not torequest such information and that it is aware that the transferor is relyingupon the undersigned`s foregoing representations in order to claim theexemption from registration provided by Rule 144A.

Dated:

NOTICE:  To be executed by an executiveofficer

TO BE COMPLETED BY PURCHASER IF (b) ABOVE IS CHECKED.

The undersigned represents and warrants that thetransfer is being effected pursuant to and in accordance with Rule 903 or Rule 904under the Securities Act and, accordingly, the undersigned further certifiesthat (A) the transfer is not being made to a person in the United States and(1) at the time the buy order was originated, the transferee was outside theUnited States or such transferor and any Person acting on its behalf reasonablybelieved and believes that the transferee was outside the United States or (2) thetransaction was executed in, on or through the facilities of a designatedoffshore securities market and neither 

**____ 112 ____** 

such transferor nor any Person acting on its behalfknows that the transaction was prearranged with a buyer in the United States;(B) no directed selling efforts have been made in contravention of therequirements of Rule 903(b) or Rule 904(b) of Regulation S under the SecuritiesAct; (C) the transaction is not part of a plan or scheme to evade theregistration requirements of the Securities Act; and (D) if the proposedtransfer is not being made prior to the expiration of the Restricted Period,the transfer is not being made to a U.S. Person.

Dated:

NOTICE:         To be executed by an executiveofficer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**____ 113 ____** 

**CONVERSION NOTICE**

**TO:     M‐SYSTEMSFINANCE INC.**

            c/o M‐SystemsFlash Disk Pioneers Ltd.

            7 Atir Yeda St.

            Kfar-Saba 44425 

            Israel 

            Attention:  ChiefFinancial Officer            Fax:  + 972-3-548-8666

The undersigned registered owner of thisSecurity hereby irrevocably exercises the option to convert this Security, orthe portion hereof (which is $1,000 principal amount or a multiple thereof)below designated, into the Guarantor`s Ordinary Shares in accordance with theterms of the Indenture referred to in this Security, and directs that theshares issuable and deliverable upon such conversion, together with any checkin payment for fractional shares and any Securities representing anyunconverted principal amount hereof, be issued and delivered to the registeredholder hereof unless a different name has been indicated below.  Ifshares or any portion of this Security not converted is to be issued in thename of a person other than the undersigned, the undersigned will pay alltransfer taxes payable with respect thereto.  Any amount required tobe paid to the undersigned on account of interest accompanies this Security.

Dated:

Your Name:

(Print your name exactly as itappears on the face of this Security)

 

Your Signature:

(Sign exactly as your nameappears on the face of this Security) 

 

Signature Guarantee*:         

 

Social Security or other Taxpayer Identification Number:                             

 

 

Principal amount to be converted (if less than all):  $

*          *  *Participantin a recognized Signature Guarantee Medallion Program (or other signatureguarantor acceptable to the Trustee).

**____ 114 ____** 

 

Fill in forregistration of shares (if to be issued) and Securities (if to be delivered)other than to and in the name of the registered holder:

(Name)

 

(StreetAddress)

 

(City, State and ZipCode)

 

In connection with any conversion of this Securityoccurring prior to the end of the period referred to in Rule 144(k) under theSecurities Act, if any Ordinary Shares of the Guarantor are to be issued uponconversion of this Security are to be registered in a name other than that ofthe undersigned registered owner, the undersigned confirms that withoututilizing any general solicitation or general advertising:

[Check One]

        (a) this Security and the Ordinary Shares to be issued upon conversion of this Security are being transferred in compliance with the exemption from registration under the Securities Actof 1933, as amended, provided by Rule 144A thereunder.

        (b) this Security and the Ordinary Shares to be issued upon conversion of thisSecurity are being transferred in compliance with the exemption fromregistration under the Securities Act of 1933, as amended, provided byRegulation S thereunder.

        (c) this Security and the Ordinary Shares to be issued upon conversion of thisSecurity are being transferred other than in accordance with (a) or (b) aboveand documents are being furnished which comply with the conditions of transferset forth in this Security and the Indenture.

If none of the foregoing boxes is checked, theTrustee or other Registrar shall not be obligated to register this Security orthe Ordinary Shares to be issued upon conversion of this Security in the nameof any Person other than the Holder hereof unless the conditions to any suchtransfer of registration set forth herein and in Sections 2.07, 2.08 and 2.09of the Indenture shall have been satisfied.

TO BE COMPLETED BY TRANSFEREE IF (a) ABOVE IS CHECKED.

The undersigned represents and warrants that it ispurchasing this Security for its own account or an account with respect towhich it exercises sole investment discretion, in each case for investment andnot with a view to distribution, and that it and any such account is a "QualifiedInstitutional Buyer" within the meaning of Rule 144A under the Securities Actof 1933 and is aware that the sale to it is being made in reliance on Rule 144Aand acknowledges that it has received such information regarding the Company andthe Guarantor as the undersigned has requested pursuant to Rule 144A or hasdetermined not to request such information and that it is

**____ 115 ____** 

aware that the transferor is relying upon theundersigned`s foregoing representations in order to claim the exemption fromregistration provided by Rule 144A.

Dated:

NOTICE:         To be executed by an executiveofficer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**____ 116 ____** 

TO BE COMPLETED BY TRANSFEREE IF (b) ABOVE IS CHECKED.

The undersigned represents and warrants that thetransfer is being effected pursuant to and in accordance with Rule 903 or Rule 904under the Securities Act and, accordingly, the undersigned further certifiesthat (A) the transfer is not being made to a person in the United States and(1) at the time the buy order was originated, the transferee was outside theUnited States or such transferor and any Person acting on its behalf reasonablybelieved and believes that the transferee was outside the United States or (2) thetransaction was executed in, on or through the facilities of a designatedoffshore securities market and neither such transferor nor any Person acting onits behalf knows that the transaction was prearranged with a buyer in theUnited States; (B) no directed selling efforts have been made in contraventionof the requirements of Rule 903(b) or Rule 904(b) of Regulation S under theSecurities Act; (C) the transaction is not part of a plan or scheme to evadethe registration requirements of the Securities Act; and (D) if the proposedtransfer is not being made prior to the expiration of the Restricted Period,the transfer is not being made to a U.S. Person.

Dated:

NOTICE:          Tobe executed by an executive officer

 

 

 

 

 

 

 

 

 

 

 

**____ 117 ____** 

NOTICE OF EXERCISE OF PURCHASE RIGHT

**TO:     M‐SYSTEMSFINANCE INC.**

            c/o M‐SystemsFlash Disk Pioneers Ltd.

            7 Atir Yeda St.

            Kfar-Saba 44425 

            Israel 

            Attention:  ChiefFinancial Officer            Fax:  + 972-3-548-8666

The undersigned registered owner of this Securityhereby irrevocably acknowledges receipt of a notice from M‐SystemsFinance Inc. (the "Company") as to the occurrence of a Fundamental Change withrespect to the Company and/or the Guarantor and requests and instructs theCompany to repay the entire principal amount of this Security, or the portionthereof (which is $1,000 principal amount or a multiple thereof) belowdesignated, in accordance with the terms of the Indenture referred to in thisSecurity, together with interest (including Liquidated Damages and AdditionalTax Amounts, if any) accrued and unpaid to, but excluding, such date, to theregistered holder hereof, in cash.

Dated:

Your Name:

(Print your name exactly as itappears on the face of this Security)

 

Your Signature:

(Sign exactly as your nameappears on the face of this Security) 

 

Signature Guarantee*:         

 

Social Security or other Taxpayer Identification Number:                             

 

Principal amount to be converted (if less than all):  $

*          *  *Participantin a recognized Signature Guarantee Medallion Program (or other signatureguarantor acceptable to the Trustee).

Serial Number:

Certificate Number (if Physical Security):

**____ 118 ____** 

SCHEDULE OF EXCHANGES OF NOTES (1)

The following exchanges, redemptions,repurchases or conversions of a part of this Global Security have been made:
| **Date of Exchange** | **Amount of decrease in Principal  Amount of this Global Security** | **Amount of increase in Principal  Amount of this Global Security** | **Principal Amount of this Global  Security following such decrease (or increase)** | **Signature of authorized signatory  of Trustee** |
|----------------------|---------------------------------------------------------------------|---------------------------------------------------------------------|-------------------------------------------------------------------------------------|---------------------------------------------------|
| * *             | * *                                                            | * *                                                            | * *                                                                            | * *                                          |
| * *             | * *                                                            | * *                                                            | * *                                                                            | * *                                          |
| * *             | * *                                                            | * *                                                            | * *                                                                            | * *                                          |
| * *             | * *                                                            | * *                                                            | * *                                                                            | * *                                          |
| * *             | * *                                                            | * *                                                            | * *                                                                            | * *                                          |

(1)           This schedule shouldbe included only if the Security is issued in global form.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**____ 119 ____** 

SCHEDULE OF EXCHANGES OF NOTES (2)

The following exchanges, redemptions, repurchasesor conversions of a part of this Global Security for Physical Securities havebeen made:
| **Date of Exchange** | **Amount of decrease in Principal  Amount of this Global Security** | **Amount of increase in Principal  Amount of this Global Security** | **Principal Amount of this Global  Security following such decrease (or increase)** | **Signature of authorized signatory  of Trustee** |
|----------------------|---------------------------------------------------------------------|---------------------------------------------------------------------|-------------------------------------------------------------------------------------|---------------------------------------------------|
| * *             | * *                                                            | * *                                                            | * *                                                                            | * *                                          |
| * *             | * *                                                            | * *                                                            | * *                                                                            | * *                                          |
| * *             | * *                                                            | * *                                                            | * *                                                                            | * *                                          |
| * *             | * *                                                            | * *                                                            | * *                                                                            | * *                                          |
| * *             | * *                                                            | * *                                                            | * *                                                                            | * *                                          |

(2)           This schedule shouldbe included only if the Security is issued in global form.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**____ 120 ____**