Document:

Exhibit 10.1

 

FORM OF REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “Agreement”)
is made as of               ,
2008(1) between SCBT Financial Corporation, a South Carolina corporation
(the “Company”), and
                                
(the “Investor” and, collectively
with other Persons (as defined below) who have executed a Subscription
Agreement (as defined below), the “Investors”).

 

Execution
and delivery of this Agreement by the parties hereto are conditions to the
Investor purchasing Shares (as defined below) from the Company under the
Subscription Agreement (as defined below). 
Accordingly, the parties hereto hereby agree as follows:

 

Section 1.              Definitions. 
Unless the context otherwise requires, the terms defined in this Section 1
have the meanings herein specified for all purposes of this Agreement,
applicable to both the singular and plural forms of such terms:

 

“Affiliate” shall have the meaning under Rule 501(b) of
the Securities Act of 1933, as amended.

 

“Closing Date” has the meaning given in the
Subscription Agreement; provided
that if there is more than one Closing Date pursuant to the Subscription
Agreement, this term shall refer to the latest such Closing Date.

 

“Commission” means the Securities and Exchange Commission.

 

“Common Stock” means the common stock,
$2.50 par value per share, of the Company.

 

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

 

“Holder” means the record owner of
Registrable Securities.

 

“Person” means any natural person,
corporation, trust, association, limited liability company, partnership, joint
venture or other entity and any government, governmental agency,
instrumentality or political subdivision.

 

“Prospectus” shall mean the prospectus included in a
Registration Statement, including any preliminary prospectus, and any such
prospectus as amended or supplemented by any prospectus supplement, including a
prospectus supplement with respect to the terms of the offering of any portion
of the Registrable Securities covered by a Registration Statement, and by all
other amendments and supplements to a prospectus, including post-effective
amendments to the related Registration Statement, and in each case including
all documents incorporated by reference therein.

 

“Register,” “registered” and “registration”
refer to a registration effected by preparing and filing a Registration
Statement in compliance with the Securities Act, and the declaration or
ordering of the effectiveness of such Registration Statement.

 

“Registrable Securities” shall mean the
Shares; provided, however, that
the Shares shall cease to be Registrable Securities upon the earlier of (1) a
Registration Statement with respect to such Shares for the resale thereof
having been declared effective under the Securities Act and such Shares having
been disposed of pursuant to such Registration Statement, (2) such Shares
having become eligible to be sold without restriction as contemplated by Rule 144
under the Securities Act by a person who is not an Affiliate of the Company, or
(3) such Shares having ceased to be outstanding.

 

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

 

(1) Closing Date to
be inserted

 

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“Shares” means the shares of Common Stock
sold and issued to the Investors pursuant to the Subscription Agreement (and
any shares of Common Stock issued in respect thereof as a result of any stock
split, stock dividend, recapitalization or exchange).

 

“Subscription Agreement” means,
collectively, Subscription Agreements between the Company and the Investors
relating to the purchase and sale of the Shares as of the date hereof.

 

Section 2.              Registration.

 

(a)           Subject to the receipt of all
necessary information from the Investors, the Company shall use its reasonable
best efforts to (i) prepare and file a “shelf” registration statement on
such  form as is then available to effect
a registration of the Registrable Securities, under the Securities Act covering
an offering of the Registrable Securities on a continuous basis pursuant to Rule 415
under the Securities Act (the “Registration Statement”),
on or before the date that is ten (10) days after the Closing Date (the “Filing Date”), (ii) cause such Registration Statement
to become effective as soon as practicable after filing, but in no event later
than the date that is one hundred (100) days after the Closing Date (the “Effectiveness Date”) and (iii) cause such Registration
Statement to remain effective (including preparing and filing with the
Commission such amendments and supplements to such Registration Statement and
the Prospectus contained therein as may be necessary to keep such Registration
Statement effective) until all of the Registrable Securities covered by such
Registration Statement have been sold or as otherwise set forth in this Section 2.

 

(b)           The Company shall use its reasonable
best efforts to maintain the effectiveness of the Registration Statement under
the Securities Act until the earlier of: 
(i) the date that is one (1) year after the Closing Date; and (ii) the
date on which all of the Registrable Securities have been sold pursuant to the
Registration Statement or no longer constitute Registrable Securities (the
period ending as of such earlier date, the “Registration Period”).

 

(c)           Notwithstanding the foregoing, the
Company’s obligations under Sections 2(a) and 2(b) to cause the
Registration Statement to become and remain effective shall be suspended, at
the option of the Company, for not more than a total of sixty (60) days (and
not for more than forty five (45) consecutive days) in any 365 day period (an “Allowed Delay”) if the Company determines in good faith that
an event has occurred or a condition exists that results or may result in a
Misstatement (as defined in Section 11 below).

 

Section 3.              Registration Procedures.  If
and whenever the Company is required by the provisions of Section 2 hereof
to effect the registration of Registrable Securities under the Securities Act,
the Company will:

 

(a)           If the offering is to be underwritten
in whole or in part, enter into a customary written underwriting agreement in
form and substance reasonably satisfactory to the managing underwriter of the
public offering, the Company and the Holders of a majority of the Registrable
Securities participating in such offering;

 

(b)           Furnish to the Holders participating
in such registration such reasonable number of copies of the Registration
Statement and each amendment and supplement thereto, preliminary Prospectus,
final Prospectus and such other documents as such Holders may reasonably
request in order to facilitate the public offering of such securities;

 

(c)           At the request of a Holder, use
reasonable best efforts to register or qualify the securities covered by such
Registration Statement under such state securities or blue sky laws of such
jurisdictions in the United States as such participating Holders may reasonably
request prior to the effectiveness of such Registration Statement; provided,
however, that in no event shall the Company be 

 

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obligated
to (i) qualify as a foreign corporation or dealer in securities in any
jurisdiction where it would not otherwise be required to so qualify but for
this Section 3 or (ii) file any general consent to service of process
in any jurisdiction where it is not so subject;

 

(d)           Notify the Holders participating in
such registration, promptly after it receives notice thereof, of the date and
time when such Registration Statement and each post-effective amendment thereto
has become effective or a supplement to any Prospectus forming a part of such
Registration Statement has been filed;

 

(e)           Notify such Holders promptly of any
request by the Commission to amend or supplement such Registration Statement or
Prospectus or for additional information;

 

(f)            Prepare and file with the
Commission, promptly upon the request of the Holders of at least 35% of the
Registrable Securities, any amendments or supplements to such Registration
Statement or Prospectus which, in the written opinion of such counsel as may be
appointed by the Holders of a majority of the Registrable Securities, which
opinion shall be reasonably acceptable to counsel for the Company, is required
under the Securities Act or the rules and regulations of the Commission
thereunder in connection with the distribution of the Registrable Securities by
such Holders;

 

(g)           Prepare and file promptly with the
Commission, and promptly notify such Holders of the filing of, such amendments
or supplements to such Registration Statement or Prospectus as may be necessary
to correct any statements or omissions if, at the time when a Prospectus
relating to such securities is required to be delivered under the Securities
Act, any event has occurred as the result of which any such Prospectus or any
other Prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading;

 

(h)           Advise such Holders, promptly after
it receives notice or obtains knowledge thereof, of the issuance of any stop
order by the Commission suspending the effectiveness of such Registration
Statement or the initiation or threatening of any proceeding for that purpose
and promptly use its reasonable best efforts to prevent the issuance of any
stop order or to obtain its withdrawal, rescission or removal if such stop
order should be issued;

 

(i)            At the request of a managing underwriter
of the public offering, if the offering is to be underwritten in whole or in
part, use its reasonable best efforts to furnish to such managing underwriter,
at the closing provided for in the underwriting agreement: (A) an opinion
of the counsel representing the Company for the purposes of such registration,
dated as of the date of closing, addressed to the underwriters covering such
matters with respect to the Registration Statement, the Prospectus and each
amendment or supplement thereto, proceedings under state and federal securities
laws, other matters relating to the Company, the securities being registered
and the offer and sale of such securities as are customarily the subject of
opinions of issuer’s counsel provided to underwriters in underwritten public
offerings and (B) a letter of the independent certified public accountants
of the Company, in form and substance as is customarily given by independent
certified public accountants to the underwriters in an underwritten public
offering, addressed to the underwriters;

 

(j)            Provide a transfer agent and
registrar, which may be a single entity, for the Registrable Securities not
later than the Effectiveness Date; and

 

(k)           Use reasonable best efforts to cause
all such Registrable Securities to be listed on each securities exchange on
which securities of the same class issued by the Company are then listed.

 

Section 4.              Accuracy of Registration Statement. 
Subject to the Company’s rights under Section 2(c) and Section 11,
any Registration Statement (including any amendments or supplements thereto and
Prospectuses contained therein) filed by the Company covering Registrable
Securities will not, in the case of the Registration Statement, contain any
untrue statement of a material fact or omit to state a 

 

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material
fact required to be stated therein, or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading
and will not, in the case of the Prospectus, include any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.  Subject to the
limitations set forth in Section 11, the Company will prepare and file
with the Commission such amendments (including post-effective amendments) and
supplements to any Registration Statement and the Prospectus used in connection
with the Registration Statement as may be necessary to permit sales pursuant to
the Registration Statement at all times during the Registration Period (subject
to any such post-effective amendment that is not automatically effective upon
filing being declared effective), and, during such period, will comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by any Registration Statement
until the termination of the Registration Period, or if earlier, until such
time as all of such Registrable Securities have been disposed of in accordance
with the intended methods of disposition by the seller or sellers thereof as
set forth in the Registration Statement.

 

Section 5.              Additional Obligations of the Company.

 

5.1           Review.  The Company will permit such counsel as may
be appointed by the Holders of a majority of the Registrable Securities (which
counsel shall be reasonably acceptable to the Company), to review any
Registration Statement covering Registrable Securities and all amendments and
supplements thereto (as well as all requests for acceleration or effectiveness
thereof) a reasonable period of time prior to their filing with the Commission,
and will not file any document in a form to which such counsel reasonably
objects, unless otherwise required by law in the opinion of the Company’s
counsel.  The sections of any such
Registration Statement including information with respect to the Investor, the
Investor’s beneficial ownership of securities of the Company or the Investor’s
intended method of disposition of Registrable Securities must conform to the
information provided to the Company by the Investor (unless otherwise required
by law in the opinion of the Company’s counsel).

 

5.2           Expenses.  With respect to the registration effected
pursuant to Section 2 hereof, the Company will bear all fees, costs and
expenses of and incidental to the Company’s performance of or compliance with
this Agreement with respect to such registration and the public offering in
connection therewith; provided,
however, that the Company shall not be liable for any underwriting,
brokerage or other selling discounts and commissions, which in all cases shall
be borne by the Holders.  Such fees,
costs and expenses of registration to be borne as provided in the preceding
sentence, include, without limitation, all registration, filing and Financial
Industry Regulatory Authority, Inc. fees, printing expenses, fees and
disbursements of counsel and accountants for the Company and all expenses of
complying with state securities or blue sky laws of any jurisdictions in which
the securities to be offered are to be registered or qualified.  The Holders will bear all fees and
disbursements of one firm of counsel for all selling security holders, selected
by the Holders of a majority of the Registrable Securities to be included in
such registration.

 

5.3           Due
Diligence.  The Company will
make available during normal business hours for inspection by any Investor
whose Registrable Securities are being sold pursuant to a Registration
Statement and one firm of attorneys retained by the Investors (collectively,
the “Inspectors”), all pertinent
financial and other records, pertinent corporate documents and properties of
the Company (collectively, the “Records”),
as each Inspector reasonably deems necessary to enable the Inspector to
exercise its due diligence responsibility. 
The Company will cause its officers, directors and employees to supply
all information that any Inspector may reasonably request for purposes of
performing such due diligence.  Each
Inspector will hold in confidence, and will not make any disclosure of, any
Records or other information that the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified,
unless:  (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement; (ii) the release of such Records is ordered
pursuant to a subpoena or other order from a court or government body of
competent jurisdiction, or (iii) the information in such Records has been
made generally available to the public other than by disclosure in violation of
this or any other agreement.

 

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Notwithstanding
any of the foregoing, nothing herein shall obligate the Company to provide to
any Investor, or to any advisors or representatives of any Investor, any
material nonpublic information.  The
Company shall not disclose material nonpublic information to the Investors, or
to advisors to or representatives of the Investors, unless prior to disclosure
of such information the Company identifies such information as being material
nonpublic information and provides the Investors, such advisors and
representatives with the opportunity to accept or refuse to accept such
material nonpublic information for review and any Investor wishing to obtain
such information enters into an appropriate confidentiality agreement with the
Company with respect thereto.

 

Section 6.              Indemnification.

 

(a)           The Company will, and does hereby
undertake to, indemnify and hold harmless each Holder, each of its officers,
directors and partners, and each person controlling such Holder within the
meaning of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Agreement, and
each underwriter, if any, and each person who controls any underwriter within
the meaning of the Securities Act, against all expenses, claims, losses,
damages and liabilities (or actions in respect thereof), including settlement
of any litigation, commenced or threatened (such settlement to be made in
accordance with the terms of Section 6(c) of this Agreement) to which
they may become subject under the Securities Act, the Exchange Act, or other
federal or state law, arising out of or based on compliance with, any untrue
statement (or alleged untrue statement) of a material fact contained in any
Registration Statement, Prospectus (preliminary or final), offering circular or
other document or amendments thereto, or arising out of or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or arising out of or any
violation by the Company of any federal, state or common law rule or
regulation applicable to the Company and relating to action or inaction
required of the Company by such rule or regulation in connection with any
such registration, qualification or compliance, and will reimburse each such
Holder, each of its officers, directors and partners, and each person
controlling such Holder, each such underwriter and each person who controls any
such underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action; provided, that
the Company will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement or omission or alleged untrue statement or omission, made in
reliance upon and in conformity with written information furnished to the
Company by an instrument executed by a Holder or underwriter expressly for use
in connection with such registration.

 

(b)           Each Holder will, if Registrable
Securities held by such Holder are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify and hold
harmless the Company, each of its directors and officers, agents and employees,
each underwriter, if any, of the Company’s securities covered by such a
Registration Statement, each person who controls the Company or such
underwriter within the meaning of the Securities Act, and each other such
Holder, each of its officers, directors and partners and each person
controlling such Holder within the meaning of the Securities Act, against all
claims, losses, damages and liabilities (or actions in respect thereof to which
they may become subject) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any such Registration
Statement, Prospectus, offering circular or other document, or amendments
thereto, or any omission (or alleged omission) to state therein a material fact
required to be stated therein in light of the circumstances in which they were
made, or necessary to make the statements therein, not misleading, and will
reimburse the Company, such Holders, such directors, officers, persons,
underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission
(or alleged omission) is made in such Registration Statement, Prospectus,
offering circular or other document in reliance upon and in conformity with
written information furnished to the Company by an instrument executed by such
Holder expressly for use in connection with such registration; provided,
however, that the obligations of such Holders hereunder shall be limited to an
amount equal to the proceeds to each such Holder of Registrable Securities from
the sale of such Registrable Securities as contemplated herein.

 

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(c)           Each party entitled to
indemnification under this Section (the “Indemnified
Party”) shall give notice to the party required to provide
indemnification (the “Indemnifying Party”)
promptly after such Indemnified Party has actual knowledge of any claim as to
which indemnity may be sought, and shall deliver written notice to the
Indemnifying Party of commencement thereof. 
The Indemnifying Party, at its sole option, may participate in or assume
the defense of any such claim or any litigation resulting therefrom with
counsel reasonably satisfactory to the Indemnified Party, and the Indemnified
Party may participate in such defense at Indemnified Party’s expense.  After notice from the Indemnifying Party to
the Indemnified Party of its election to assume the defense of such claim or
action and engagement of such counsel, the Indemnifying Party shall not be
liable to the Indemnified Party under this Section 6 for any legal or
other expenses subsequently incurred by the Indemnified Party in connection
with the defense thereof.  No
Indemnifying Party shall (i) without the prior written consent of the
Indemnified Parties (which consent shall not be unreasonably withheld), settle
or compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
Indemnified Parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each Indemnified Party from all liability arising out of such claim, action,
suit or proceeding and does not include a statement as to or an admission of
fault, culpability or a failure to act by or on behalf of any Indemnified Party
or (ii) be liable for any settlement of any such action effected without
its written consent (which consent shall not be unreasonably withheld), but if
settled with the consent of the Indemnifying Party or if there be a final
judgment of the plaintiff in any such action, the Indemnifying Party agrees to
indemnify and hold harmless any Indemnified Party from and against any loss or
liability by reason of such settlement or judgment to the extent required by
this Section 6.

 

(d)           The indemnification provided for
under this Agreement will remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Party or any officer,
director or controlling person of such Indemnified Party and will survive the
transfer of Registrable Securities.  The
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section except
to the extent that such failure to give notice shall materially adversely
affect the Indemnifying Party in the defense of any such litigation.  No Indemnifying Party, in the defense of any
such claim or litigation shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term a release from all liability in respect to
such claim or litigation by the claimant or plaintiff to such Indemnified
Party.

 

(e)           If the indemnification provided for
in subsection (a) or (b) of this Section is held by a court of
competent jurisdiction to be unavailable to a party to be indemnified with
respect to any claims, actions, demands, losses, damages, liabilities, costs or
expenses referred to therein, then each Indemnifying Party under any such
subsection, in lieu of indemnifying such Indemnified Party thereunder, agrees
to contribute to the amount paid or payable by such Indemnified Party as a
result of such claims, actions, demands, losses, damages, liabilities, costs or
expenses in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party on the one hand and of the Indemnified Party on the
other in connection with the statements or omissions which resulted in such
claims, actions, demands, losses, damages, liabilities, costs or expenses, as
well as any other relevant equitable considerations. The relative fault of the
Indemnifying Party and of the Indemnified Party will be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.  Notwithstanding the foregoing, the amount any
Holder of Registrable Securities will be obligated to contribute pursuant to
this subsection will be limited to an amount equal to the per share public
offering price (less any underwriting discount and commissions) multiplied by
the number of shares of Registrable Securities sold by such Holder pursuant to
the Registration Statement which gives rise to such obligation to contribute
(less the aggregate amount of any damages which such Holder has otherwise been
required to pay in respect of such claim, action, demand, loss, damage,
liability, cost or expense or any substantially similar claim, action, demand,
loss, damage, liability, cost or expense arising from the sale of such
Registrable Securities). No person guilty of 

 

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fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution hereunder from any person who
was not guilty of such fraudulent misrepresentation.

 

Section 7.              Reporting Requirements Under Exchange Act.  The
Company will maintain the effectiveness of its registration of Common Stock
under Section 12 of the Exchange Act and use its reasonable best efforts
to timely file (whether or not it is then required to do so) such information,
documents and reports as the Commission may require or prescribe under the
Securities Act or the Exchange Act.  The
Company will, forthwith upon written request, furnish to any Holder of
Registrable Securities a written statement by the Company, if true, that it has
complied with such reporting requirements. 
In addition, the Company will use its reasonable best efforts to take
such other measures and file such other information, documents and reports, as
may be required of it hereafter by the Commission as a condition to the
availability of Rule 144 under the Securities Act (or any similar
exemptive provision hereafter in effect). 
This Section 7 shall cease to apply as of the end of the
Registration Period.

 

Section 8.              Participation in an Underwritten Registration.  No
Holder may participate in an underwritten registration relating to a sale of
the Common Stock unless such Holder (a) agrees to sell such Holder’s
Registrable Securities on the basis provided in any underwriting arrangement
approved by the Company in accordance with the provision of Section 3(a) of
this Agreement and (b) completes and executes all reasonable
questionnaires, powers of attorney, indemnities, underwriting agreements,
lock-up letters and other documents reasonably required under the terms of such
underwriting arrangements.

 

Section 9.              Selection of Underwriters.  The
Holders of Registrable Securities covered by the Registration Statement who
desire to do so may sell the Shares covered by such Registration Statement in
an underwritten offering.  In any such
underwritten offering, the underwriter or underwriters and manager or managers
that will administer the offering will be selected by the Holders of a majority
of the Registrable Securities included in such offering; provided, however,
that such underwriters and managers must be reasonably satisfactory to the
Company.

 

Section 10.            Holder Information.

 

(a)           The rights of each Holder of
Registrable Securities to participate in any registration to be effected
pursuant to this Agreement is subject to such Holder furnishing the Company
with such information with respect to such Holder and the distribution of such
Registrable Securities as the Company may from time to time reasonably request
and as may be required by law or by the Commission in connection therewith, and
each Holder of Registrable Securities as to which any registration is to be
effected pursuant to this Agreement shall furnish the Company with such
information by a written instrument executed by such Holder.

 

(b)           Each selling Holder shall promptly
advise the Company in writing if changes in the Registration Statement or the
Prospectus are required in order that disclosures made in the Registration
Statement or Prospectus based upon written information previously provided or
approved by the selling Holder for use in the Registration Statement and
Prospectus, will not, in the case of the Registration Statement, contain an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and will not, in the case of the Prospectus, include an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under which
they were made, not misleading.

 

Section 11.            Suspension of Sales.  Upon
receipt of written notice from the Company that a Registration Statement or
Prospectus contains an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading (a “Misstatement”),
each Holder of Registrable Securities shall forthwith discontinue disposition
of Registrable Securities until such Holder has received copies of the supplemented
or amended Registration Statement or Prospectus that corrects such
Misstatement, or until such Holder is advised in writing by the Company that
the use of the Prospectus may be resumed, and, if so directed by the Company,
such Holder shall deliver to the Company (at the Company’s expense) all copies,
other than permanent file copies then 

 

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in
such Holder’s possession, of the Prospectus covering such Registrable
Securities current at the time of receipt of such notice.  The Investor acknowledges that an event or
condition that results or may result in a Misstatement could include a bona
fide transaction or financing under consideration by the Company or other event
or condition that would require the disclosure of information that has not
been, and is not otherwise required to be, disclosed to the public, the
premature disclosure of which could materially and adversely affect the
Company, and this Agreement shall not be construed to require the Company to
make such premature disclosure.

 

Section 12.            Forms.  All
references in this Agreement to particular forms of Registration Statements are
intended to include, and will be deemed to include, references to all successor
forms which are intended to replace, or to apply to similar transactions as,
the forms herein referenced.

 

Section 13.            Miscellaneous.

 

13.1         Waivers
and Amendments.  With the
written consent of the Holders of a majority of the Registrable Securities then
outstanding, the obligations of the Company and the rights of the Holders under
this Agreement may be waived (either generally or in a particular instance,
either retroactively or prospectively and either for a specified period of time
or indefinitely), and with the same consent the Company may enter into a
supplementary agreement for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Agreement or of any
supplemental agreement or modifying in any manner the rights and obligations
hereunder of the Holders and the Company;
provided, however, that no such waiver or
supplemental agreement may reduce the aforesaid proportion of Registrable
Securities, the Holders of which are required to consent to any waiver or
supplemental agreement, without the consent of the Holders of all the
Registrable Securities; and  provided further, and notwithstanding any
provision herein to the contrary, that any such waiver amendment or
supplement that applies only to a particular registration shall require only the
written consent of the Holders of a majority of the Registrable Securities
included in such registration. 
Notwithstanding the foregoing, if any such amendment, modification or
waiver would adversely affect in any material respect any Holder or group of
Holders who have comparable rights under this Agreement disproportionately to
the other Holders having such comparable rights, such amendment, modification,
or waiver shall also require the written consent of the Holder(s) so
adversely affected.  Upon the
effectuation of each such waiver, consent or agreement of amendment or
modification, the Company will give prompt written notice thereof to the
Holders of the Registrable Securities who have not previously consented thereto
in writing.  Neither this Agreement nor
any provision hereof may be changed, waived, discharged or terminated orally or
by course of dealing, except by a statement in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, except to the extent provided in this Section 13.1.  Specifically, but without limiting the
generality of the foregoing, the failure of any Investor at any time or times
to require performance of any provision hereof by the Company will not affect
the right of any Investor at a later time to enforce the same.  No waiver by any party of the breach of any
term or provision contained in this Agreement, in any one or more instances,
will be deemed to be, or construed as, a further or continuing waiver of any
such breach, or a waiver of the breach of any other term or covenant contained
in this Agreement.

 

13.2         Effect
of Waiver or Amendment.  The
Investor acknowledges that by operation of Section 13.1 the Holders of a
majority of the Registrable Securities will, subject to the limitations
contained in Section 13.1, have the right and power to diminish or
eliminate certain rights of such Investor under this Agreement.

 

13.3         Rights
of Investors Inter Se.  The
Investor has the absolute right to exercise or refrain from exercising any
right or rights which the Investor may have by reason of this Agreement or any
Registrable Security, including, without limitation, the right to consent to
the waiver of any obligation of the Company under this Agreement and to enter
into an agreement with the Company for the purpose of modifying this Agreement
or any agreement effecting any such modification, and the Investor will not
incur any liability to any other Investor or Investors with respect to
exercising or refraining from exercising any such right or rights.

 

8

 

13.4         Notices.  All notices, requests, consents and other
communications required or permitted hereunder will be in writing and will be
delivered, or mailed first class postage prepaid, registered or certified mail,

 

(a)           If to the Investor, addressed to the
Investor at its address shown on the Investor’s Subscription Agreement related
to the Registrable Securities hereto, or at such other address as the Investor
may specify by written notice to the Company; or

 

(b)           If to the Company, at 520 Gervais
Street, Columbia, South Carolina 29201, Attention: Richard C. Mathis, Executive
Vice President and Chief Risk Officer, or at such other address as the Company
may specify by written notice to the Investors;

 

and
each such notice, request, consent and other communication will for all
purposes of this Agreement be treated as being effective or having been given
when delivered, if delivered personally, or, if sent by mail, at the earlier of
its actual receipt or three (3) days after the same has been deposited in
a regularly maintained receptacle for the deposit of United States mail,
addressed and postage prepaid as aforesaid.

 

13.5         Severability.  If any one or more of the provisions of this Agreement
or of any agreement entered into pursuant to this Agreement is determined to be
illegal or unenforceable, it is the intention of the parties hereto that all
other provisions of this Agreement and of each other agreement entered into
pursuant to this Agreement should be given effect separately from the provision
or provisions determined to be illegal or unenforceable and not be affected
thereby.

 

13.6         Parties
in Interest.  All the terms
and provisions of this Agreement will be binding upon and inure to the benefit
of and be enforceable by the respective successors and assigns of the parties
hereto, whether so expressed or not and, in particular, will inure to the
benefit of and be enforceable by the Holder or Holders at the time of any
registration of Registrable Securities. 
Subject to the immediately preceding sentence, this Agreement will not
run to the benefit of or be enforceable by any Person other than a party to
this Agreement and its successors and assigns.

 

13.7         Headings.  The headings of the sections, subsections and
paragraphs of this Agreement have been inserted for convenience of reference
only and do not constitute a part of this Agreement.

 

13.8         Entire
Agreement.  This Agreement
constitutes the entire understanding of the parties with respect to the subject
matter hereto and supersedes all prior understanding among such parties with
respect to the subject matter hereto.

 

Section 14.            Governing Law; Jurisdiction.

 

All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that any suit, action
or proceeding (a “Proceeding”) concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement (whether brought
against a party hereto or its respective Affiliates, employees or agents) shall
be commenced exclusively in the New York Courts. Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the New York Courts for
the adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any Proceeding, any claim that it is not
personally subject to the jurisdiction of any such New York Court, or that such
Proceeding has been commenced in an improper or inconvenient forum. Each party
hereto hereby irrevocably waives personal service of process and consents to
process being served in any such Proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit
in any way any right to 

 

9

 

serve
process in any manner permitted by law. EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

14.2         Counterparts.  This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, with
the same effect as if all parties had signed the same document.  All such counterparts will be deemed an
original, will be construed together and will constitute one and the same
instrument.

 

14.3         Assignment
of Registration Rights.  The
rights of the Investor hereunder, including the right to have the Company
register Registrable Securities pursuant to this Agreement, will be
automatically assigned by the Investor to transferees or assignees of all or
any portion of the Registrable Securities, but only if:  (a) the Investor agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement
is furnished to the Company within a reasonable time after such assignment; (b) the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being transferred or assigned; (c) after such transfer or assignment the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act and applicable state securities laws; (d) at
or before the time the Company received the written notice contemplated by
clause (b) of this sentence, the transferee or assignee agrees in
writing with the Company to be bound by all of the provisions contained herein
and (e) such transfer shall have been made in accordance with the
applicable requirements of the Subscription Agreement.

 

14.4.        No Piggyback on Registrations;
Prohibit on Filing Other Registration Statements.  The Company shall not include securities of
the Company in the Registration Statement other than the Registrable Securities
and the Company shall not, prior to the date on which the initial Registration
Statement is first declared effective by the Commission (the “Effective Date”),
enter into any agreement providing any such right to any of its security
holders. The Company shall not, from the date hereof until the date that is 30
days after the Effective Date, prepare and file with the Commission a
registration statement relating to an offering for its own account under the
Securities Act of any of its Common Shares. 
Notwithstanding anything to the contrary herein, this Section 14.4
shall not apply to and shall not limit the Company with respect to (i) a
registration statement on Form S-8, (ii) in connection with an
acquisition, a registration statement on Form S-4, (iii) a
registration statement filed in connection with U.S. Treasury’s Capital
Purchase Program, or (iv) a registration statement to register for resale
securities issued by the Company pursuant to acquisitions or strategic
transactions (other than a transaction in which the Company is issuing
securities primarily for the purpose of raising capital or to an entity whose
primary business is investing funds in securities for its own account) approved
by the board of directors of the Company.

 

[SIGNATURE PAGE TO FOLLOW]

 

10

 

In
Witness Whereof, each
of the parties hereto has caused this Registration Rights Agreement to be
executed personally or by a duly authorized representative thereof as of the
day and year first above written.

 

	
  SCBT
  FINANCIAL CORPORATION

  	
   

  	
   

  
	
   

  	
   

  	
  Printed Name of Investor

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  	
   

  	
  Title:

  	
   

  

 

11ex10127.htm

    [Free Translation from
Hebrew]

    

    INDENTURE

    

    Entered
into and signed in Tel Aviv on December 13, 2007

    [As
Amended and Restated on October 27, 2008]

    

    

    
      	
              Between:

            	
              Xfone,
      Inc.

            
	 	Registered
      in the State of Nevada, U.S.A. (Co. no. C23688-2000)
	 	
              whose
      address for the purposes of this Indenture will be c/o Xfone 018
      Ltd.

            
	 	
              1
      Haodem St. P.O. Box 7616 Kiryat Matalon, Petach Tikva, Zip Code 49170 (c/o
      Adv. Alon Reisser)

              Tel:
      03-9254452

              Fax:
      03-9238838

              (hereinafter:
      the “Company”)

            

    

    
    

    
    

     

    of
the first part;

    
      

      
        	
                
                  And
      between:

                

              	
                
                  Ziv
      Haft Trusts Company Ltd.

                

              
	 	Registered
      in the State of Nevada, U.S.A. (Co. no. C23688-2000)
	 	
                whose
      address for the purposes of this Indenture will be c/o Xfone 018
      Ltd.

              
	 	
                
                  
                    Co.
      no. 513771337

                    of
      46 Derech Menachem Begin, Tel Aviv

                  

                  
                    Tel:
      03-6386894

                  

                  
                    Fax:
      03-6382511

                  

                  
                    (hereinafter:
      the “Trustee”)

                  

                

              

      

      
      

      
      

       

    

    of
the second part;

    

    
      	
              Whereas:

            	
              the
      Company’s board of directors decided on December 12, 2007 to raise funds
      in consideration for an issue of Series A Bonds according to the terms and
      conditions of this Indenture (the “Issue”);
    and

            
	 	 

    

    
      	
              Whereas:

            	
              in
      the framework of the said Issue, the Company shall issue a series of
      Series A Bonds, as specified in Section 2 of this Indenture;
      and

            
	 	 

    

    
      	
              Whereas:

            	
              the
      Series A Bonds have been rated by Midroog Ltd. (“Midroog”) with a rating
      of A3 and the Company represents that as of the date of this Indenture, it
      meets the rating terms and conditions and that it will make its best
      efforts to fulfill the terms and conditions determined in the rating;
      and

            

    

    
      	 	 
	
              Whereas:

            	
              the
      Trustee is a company registered in Israel, limited by shares, which was
      incorporated in Israel pursuant to the Companies Ordinance, whose main
      object is occupation in trusts; and

            

    

    
      	 	 
	
              Whereas:

            	
              the
      Trustee has represented that there is no impediment pursuant to the
      Securities Law, 5728-1968 or any other law to its engagement with the
      Company pursuant to this Indenture and that it meets the eligibility
      requirements and conditions prescribed by the Securities Law, 5728-1968
      for serving as a trustee for the Issue of the Series A Bonds contemplated
      in this Indenture; and

            
	 	 

    

    
      	
              Whereas:

            	
              the
      Company has requested that the Trustee serve as the trustee for the
      holders of the Series A Bonds, and the Trustee has agreed thereto, all
      subject to and in accordance with the terms and conditions of this
      Indenture; and

            

    

    
      	 	 
	
              Whereas:

            	
              the
      Company represents that there is no impediment, pursuant to any law and/or
      agreement, to performing a private placement of the Series A Bonds and/or
      to engaging with the Trustee pursuant to this
Indenture;

            
	 	 

    

    Therefore,
it has been Agreed, Represented and Stipulated between the Parties as
Follows:

    
      
        
        

      

      
        -1-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	
               
      

            	
              1.
      Preamble, Interpretation and
      Definitions

            

    

     

    
      	 	 	 
	
               
      

            	
              1.1

            	
              The
      preamble to this Indenture and the annexes attached hereto constitute a
      material and integral part hereof, whilst it is hereby clarified, with
      respect to the Third Addendum to the Indenture, that it is attached hereto
      on behalf of the Company only and that the Trustee does not opine on the
      veracity thereof.

            
	 	 	 

    

    
      	
               
      

            	
              1.2

            	
              The
      division of this Indenture into sections and the giving of headings to
      sections have been effected for purposes of convenience and orientation
      only and they are not to be used for the purpose of
      interpretation.

            

    

    
      	 	 	 
	
               
      

            	
              1.3

            	
              Anything
      stated in this Indenture in the plural shall also import the singular and
      vice versa,
      anything stated in the masculine gender shall also import the feminine
      gender and vice
      versa and anything stated as to a person shall also refer to a
      corporation, and all insofar as there is no other express and/or implied
      provision in this Indenture and/or the content or context does not
      prescribe otherwise.

            
	 	 	 

    

    
      	
               
      

            	
              1.4

            	
              In
      this Indenture and in the Series A Bonds, the following terms shall bear
      the meaning set forth alongside them, unless any other intention is
      implied from the content or the
context:

            

    

    
      	 	 	 
	 	
              This
      “Indenture” or the
      “Indenture”

            	
              This
      indenture, including the annexes attached hereto and which constitute an
      integral part hereof;

            
	 	 
      	 
      
	 	
              “Prospectus”

            	
              The
      Company’s prospectus which shall be published, if published, for the
      purpose of, inter
      alia, the listing of the Series A Bonds on TASE, the removal of
      restrictions on resale of the Series A Bonds pursuant to Section 15C of
      the Securities Law, 5728-1968;

            
	 	 
      	 
      
	 	
              “Bonds” or “Series A
      Bonds”

            	
              Registered
      Series A Bonds of the Company, whose terms and conditions are specified in
      this Indenture, which shall be issued from time to time at the Company’s
      sole discretion;

            
	 	 
      	 
      
	 	
              “Trustee”

            	
              Ziv
      Haft Trusts Company Ltd. and/or any entity that shall serve as trustee for
      the holders of the Series A Bonds from time to time according to this
      Indenture;

            
	 	 
      	 
      
	 	
              “Register”

            	
              The
      register of the holders of the Series A Bonds, according to the provisions
      of Section 7 of the First Addendum to this Indenture;

            
	 	 
      	 
      
	 	
              “Holder of the Series A
      Bonds” and/or “Bondholder”

            	
              A
      holder of a Series A Bond by a holding according to the meaning thereof in
      the Securities Law, although on any matter that requires the
      identification of a person as a holder of Series A Bonds, the definition
      shall include only a Registered Holder and a Non-Registered
      Holder;

            

    

    

    
      
        
        

      

      
        -2-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    

    
      	 	 
      	 
      
	 	
               “Non-Registered
      Holder”

            	
              The
      holder of an autonomous power of attorney from a transfer agent in respect
      of a certain number of Bonds or in respect of a certain par value amount
      of Bonds registered in its name in the Register (according to which the
      transfer agent’s proxy is not barred from exercising his discretion in the
      vote).

            
	 	 
      	 
      
	 	
              “Registered
      Holder”

            	
              A
      person whose name is registered in the Register at the time being, and in
      the event that several joint holders are registered in the Register, the
      joint holder registered first in the Register, with the exception of a
      transfer agent;

            
	 	 
      	 
      
	 	
              “Series A Bond
      Certificate”

            	
              A
      Series A Bond Certificate, in the form attached hereto as the First
      Addendum;

            
	 	 
      	 
      
	 	
              “Law” or “Securities
      Law”

            	
              The
      Securities Law, 5728-1968 and the regulations promulgated thereunder, as
      being from time to time;

            
	 	 
      	 
      
	 	
              “Principal”

            	
              The
      par value of the Series A Bonds;

            
	 	 
      	 
      
	 	
              “Trading
    Day”

            	
              A
      day on which transactions are performed on TASE;

            
	 	 
      	 
      
	 	
              “Business
      Day”

            	
              A
      day on which the majority of the banks in Israel are open for the
      performance of transactions;

            
	 	 
      	 
      
	 	
              “TASE”

            	
              The
      Tel Aviv Stock Exchange Ltd. ;

            
	 	 
      	 
      
	 	
              “Consumer Price Index”
      (“Index”)

            	
              The
      price index known as the “consumer price index”, including fruit and
      vegetables, and which is published by the Central Bureau of Statistics and
      Economic Research in Israel, including the said index even if published by
      another official body or institution and also including any other official
      index that shall replace it, regardless of whether or not it shall be
      based on the same data as the existing index. If it shall be replaced by
      another index to be published by such body or institution, and such body
      or institution shall not have determined the ratio between it and the
      replaced index, such ratio shall be determined by the Central Bureau of
      Statistics, and if such ratio shall not be determined as aforesaid, then
      the Trustee, in consultation with such economic experts as shall be chosen
      thereby, shall determine the same;

            
	 	 
      	 
      
	 	
              “Known
    Index”

            	
              The
      last known Consumer Price Index;

            

    

    

    
      
        
        

      

      
        -3-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	 	 
      	 
      
	 	
              “Base
    Index”

            	
              The
      Consumer Price Index for the month of October, 2007, published on November
      15, 2007;

            
	 	 
      	 
      
	 	
              “Payment
      Index”

            	
              The
      index known on the date of the making of any payment on account of the
      Principal or interest, although if the payment index is lower than the
      Base Index, the payment index will be the Base Index;

            
	 	 
      	 
      
	 	
              “Issue”

            	
              As
      defined in the preamble to this agreement;

            
	 	 
      	 
      
	 	
              “Date of the
      Issue”

            	
              December
      13, 2007

            
	 	 	 

    

    
      	
              2.

            	
              The
      Issue of the Series A Bonds and the Applicability of the
      Indenture

            

    

    
      	 	 	 
	
               
      

            	
              2.1

            	
              The
      Company will issue a series of up to NIS 100,382,100 par value registered
      Series A Bonds, bearing annual interest at the rate of 9%. The Principal
      of the Series A Bonds will be paid in eight (8) equal annual installments
      on the 1st
      of December of each of the years 2008 to 2015 (inclusive). The interest in
      respect of the Series A Bonds will be paid in biannual installments on
      June 1st and December 1st of each one of the years 2008 until 2015
      (inclusive). The Series A Bonds are offered at a purchase price equal to
      100% of the par value thereof. The Series A Bonds are linked (Principal
      and interest) to a rise in the Consumer Price Index as specified in
      Section 4 of the terms and conditions overleaf.

            
	 	 	 

    

    
      	
               
      

            	
              2.2

            	
              The
      Company undertakes to pay the holders of the Series A Bonds annual
      interest at the rate of 9% (the “Interest for the Pre-Listing
      Period”). The Interest for the Pre-Listing Period shall be
      calculated and paid as follows:

            

    

    
      	 	 	 
	
               
      

            	
              2.2.1.

            	
              The
      first interest payment, at the rate of 4.192%, for the period from the
      Date of the Issue until May 31, 2008 shall be made on June 1, 2008 (the
      “First Interest
      Period”).

            
	 	 	 

    

    
      	
               
      

            	
              2.2.2.

            	
              Commencing
      from the second interest payment, the biannual interest payments will be
      at the rate of 4.5%.

            

    

    
      	 	 	 
	
               
      

            	
              2.3

            	
              Notwithstanding
      the aforesaid in Section 2.2 above, in the event that the Company shall
      list the Series A Bonds on TASE as specified in Section 2.4 of this
      Indenture, commencing from the date of the listing of the Series A Bonds
      on TASE, and insofar as the Series A Bonds shall indeed be listed on TASE,
      the interest rate that the unpaid balance of the Series A Bonds shall bear
      will be 8% (a deduction in the annual rate of 1% (calculated according to
      365 days in a year) (the “Reduced Interest”) for
      the period that shall commence on the date of the listing of the Series A
      Bonds on TASE and concluding on the date of payment of the Series A Bonds.
      Insofar as the Series A Bonds shall be listed on TASE as aforesaid, the
      Company shall notify TASE regarding the effective date for a change in the
      interest as aforesaid, the payment date and the exact interest rate to be
      paid in respect of the pre-listing interest period. The listing of the
      Series A Bonds shall be performed shortly after the publication of a
      prospectus for the listing of the Series A Bonds, although in any event
      not before five (5) Business Days from the date of publication of such
      prospectus.

            
	 	 	 
	 	 	 
	 	 	
              Only
      a person who shall hold Series A Bonds at the end of the fourth Trading
      Day after the publication of the Prospectus (the “Effective Date for Payment of
      the Interest for the Pre-Listing Period”) will be entitled to
      payment of the Interest for the Pre-Listing Period, which will be paid
      twelve (12) days after the Effective Date for Payment of the Interest for
      the Pre-Listing Period.

               

              It
      is hereby clarified that on the date of the first interest payment which
      shall occur after the listing of the Series A Bonds, the Bondholders will
      be entitled to payment of the Reduced Interest, calculated according to
      the interest period that shall remain commencing from the date of the
      listing of the Series A Bonds until the date of the first interest payment
      which shall occur after the listing as
  aforesaid.

            

    

    
      
        
        

      

      
        -4-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	
               
      

            	
              2.4

            	
              Listing
      of the Series A Bonds on TASE – On the date of issuance of the
      Series A bonds, they will be listed neither on TASE nor on the trading system for
      institutional investors operated by TASE (TACT Institutional).
      Immediately after the Issue, the Company shall apply to TASE to register
      the Series A Bonds as a “non-registered security” (“NRS”) in the TASE
      clearinghouse, at the Company’s discretion and subject to the provisions
      of any law and the TASE articles of association. The Company will notify
      the Trustee of the registration as a NRS, if and insofar as there shall be
      such registration. Any and all costs of the registration shall be borne by
      the Company in full, all subject to receipt of appropriate approvals of
      TASE and/or the TASE clearinghouse and/or another authority. The Company
      will be entitled to perform modifications to the Indenture and/or the
      Bonds, as shall be required by the Securities Authority and/or TASE and/or
      the TASE clearinghouse and/or another authority for the purpose of
      performance of the registration as a NRS, in accordance with the language
      that shall be agreed upon in advance and in writing with the Trustee,
      without the need for receipt of additional approval from the bondholders,
      provided that the Trustee shall be convinced that the required
      modification as aforesaid shall not prejudice the rights of the holders of
      the Series A Bonds and shall approve the modification in advance and in
      writing.

            
	 	 	 
	 	 	
              It
      is hereby clarified that if the Company’s application for registration as
      a NRS shall be denied for any reason, this will not constitute a breach of
      the terms and conditions of this Indenture and the Company will act to
      issue Series A Bond Certificates in the name of the investors. In such a
      case, the Company shall pay directly to the holders of the Series A Bonds
      all of the interest payments in respect of the Series A Bonds by the date
      of the listing of the Series A Bonds on TASE as stated in this section
      below.

            
	 	 	 
	 	 	Immediately
      after the Issue, the Company shall make its best efforts and take all of
      the actions that are reasonably required, subject to the provisions of any
      law and to the TASE rules, for the listing of the Series A Bonds on TASE
      such that resale restrictions pursuant to Section 15C of the Securities
      Law shall not apply to the holders of the Series A Bonds, no later than a
      period of 12 months from the Date of the Issue, namely from December 13,
      2007. In any event of listing of the Series A Bonds on TASE as aforesaid,
      the Company shall be entitled to modify the provisions of the Indenture
      and the provisions of the terms of the Bonds, if an insofar as shall be
      required in accordance with the instructions of TASE and its directives
      and/or the Securities Authority and/or the American securities authority
      and/or another authority, all as shall be agreed with the Trustee, without
      the need for receipt of any approval by the Company from the holders of
      the Series A Bonds, provided that the Trustee shall be convinced that the
      required modification does not materially prejudice the rights of the
      holders of the Series A Bonds. It is clarified that a modification of the
      terms of payment of the Principal and interest, a modification of the
      Principal and interest payment due date (with the exception of a technical
      modification to the dates of payment thereof), elimination of any of the
      grounds for acceleration that are listed in this Indenture or elimination
      of any of the reports that the Company has undertaken to deliver to the
      Trustee in this Indenture – these will all be deemed as modifications
      which materially prejudice the rights of the holders of the Series A
      Bonds, as stated in this section, and therefore may not be modified by the
      Trustee other than with the consent of the holders of the Series A Bonds
      in a Special Resolution. The Company shall deliver to the holders of the
      Series A Bonds written notice of any such modification, if and to the
      extent performed, as early as possible after performance
  thereof

    

    
      
        
        

      

      
        -5-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

     

    
      	 	 	
              It
      is hereby clarified that the holders of the Series A Bonds and the Trustee
      will entertain no claim against the Company or any person on behalf
      thereof if the Series A Bonds shall not be listed on TASE, apart from the
      right of the holders of the Series A Bonds to receive the Interest for the
      Pre-Listing Period, as defined in Section 2.2 of this Indenture, during
      the period in which the Series A Bonds are not listed on TASE, and except
      as specified in Section 2.7 below. In addition, it is hereby clarified
      that from the listing of the Series A Bonds forth, the Reduced Interest
      specified in Section 2.3 above will be the interest that shall be paid in
      respect of the Series A Bonds.

            
	 	 	 
	 	 	
              A
      precondition to the Company’s obligation to act to publish a prospectus
      according to which the Series A Bonds will be listed on TASE is that each
      holder of a series A bond will deliver to the Company information as shall
      be reasonably required for the listing of the Series A Bonds with respect
      to himself and with respect to the Series A Bonds held by him, all as
      shall be required pursuant to any law, including by a securities authority
      in the U.S.A.

            
	 	 	 
	 	 	
              The
      listing of the Series A Bonds is subject to the Company meeting TASE’s
      articles of association and the directives according thereto, as being
      from time to time.

            
	 	 	 
	
               
      

            	
              2.5

            	
              Up
      until the date of listing on TASE, in any event in which due to an action
      initiated by the Company or for any other reason, the rating of the Series
      A Bonds shall have dropped from the rating given to the Series A Bonds on
      the date of the first allotment thereof, A3 of Midroog (or a rating
      parallel thereto by another rating company) to a rating of Baa1 of Midroog
      (or a rating parallel thereto of another rating company), the annual
      interest rate to be borne by the Series A Bonds shall be increased by one
      quarter percent (0.25%).

            

    

    
      	 	 	 
	
               
      

            	
              2.6

            	
              Immediately
      after the Date of the Issue, the Company shall act to register the Series
      A Bonds in the name of a transfer agent of Mizrahi Tefahot Nominees Company Ltd.. It is hereby clarified that so
      long as the Series A Bonds are not listed on TASE, no transfers of the
      Series A Bonds shall be performed other than with the Company’s approval
      and only after the transferee and the transferor shall deliver to the
      Company, in advance and in writing, the details as shall be required for
      the purpose of performance of the transfer of the Series A Bonds as well
      as an IRS W-8BEN form, all subject to Section 2.11 below. In the framework
      of the details that shall be required for a transfer of the Series A
      Bonds, the transferee shall be required to assume the terms and conditions
      of this Indenture, including the terms and conditions
      overleaf.

            
	 	 	 
	 	 	
              A
      transfer of the Series A Bonds without receipt of the Company’s approval
      as aforesaid will be null and void, shall confer upon the transferee no
      right vis-à-vis
      the Company and shall not bind the Company.

            
	 	 	 

    

    
      	
               
      

            	
              2.7

            	
              In
      the event that the Series A Bonds shall not be listed on TASE within 12
      months from the Date of the Issue, the following provisions shall
      apply:

               

            

    

    
      	
               
      

            	
              2.7.1.

            	
              Within
      one Business Day from the conclusion of the period of twelve (12) months
      from the Date of the Issue, the Company shall notify the holders of the
      Series A Bonds (by notice to the bondholders as stated in Section 21 of
      the Indenture), TASE and the Trustee of the fact that the listing of the
      Series A Bonds on TASE has not been completed. In the foregoing notice,
      the Company shall also give notice of the early redemption date which will
      be on the first Business Day after 30 days from the date on which such
      notice shall have been given (the “Early Redemption
      Date”).

            

    

    
      
        
        

      

      
        -6-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	
               
      

            	
              2.7.2.

            	
              Each
      Holder of Series A Bonds will be entitled (although not obligated) to
      redeem the same, in whole or in part. A Holder of Series A Bonds who shall
      wish to redeem the same, in whole or in part, will submit written notice
      thereof on a form as shall be determined by the Company (the “Early Redemption
      Notice”), together with the bond certificate (if issued in his
      name) and confirmation of exemption from withholding tax, if
      any.

            

    

    
      	 	 	 
	
               
      

            	
              2.7.3.

            	
              Commencing
      from the date on which the Company shall deliver notice as aforesaid
      regarding the date for notice of early redemption, it will be possible to
      deliver Early Redemption Notice, subject to the provisions
      below.

            
	 	 	 
	 	 	
              An
      Early Redemption Notice of a Holder of Series A Bonds registered in his
      name in the Register of the Company’s bondholders shall be delivered to
      the Company no less than ten days prior to the early redemption date, to
      the registered office of Xfone 018 Ltd. or any other place of which the
      Company shall give notice.

            
	 	 	 
	 	 	
              An
      Early Redemption Notice of a person holding Series A Bonds through TASE
      members shall be delivered to the TASE member through which he holds the
      Series A Bonds sought to be redeemed no less than ten Trading Days prior
      to the early redemption date.

            

    

    
      	
               
      

            	
              2.7.4.

            	
              Pursuant
      to the bylaws of the TASE clearinghouse, the following provisions shall
      apply to delivery of Early Redemption
Notices:

            

    

     

    
      	 	2.7.4.1.	
              Up
      to six Trading Days prior to the early redemption date, the TASE member
      shall submit to the clearinghouse, separately for each sub-account, a
      written application in which the quantity in respect of which early
      redemption is sought shall be specified.

            
	 	 	 
	 	 	
              An
      early redemption application which relates to a quantity of Series A Bonds
      that exceeds the quantity registered to the credit of the TASE member in
      the sub-account to which the application relates will not be performed at
      all and will be returned to the sending TASE member, stating the reason
      therefor.

            
	 	 	 

    

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	 	2.7.4.2.	
              No
      later than the second Trading Day after the date on which the TASE member
      shall have submitted an application to the clearinghouse as specified in
      Subsection 2.7.4.1 above, the clearinghouse shall deliver to the transfer
      agent notice specifying the total par value of the Series A Bonds in
      respect of which early redemption applications were submitted, together
      with the confirmations of exemption from withholding
  tax.

            
	 	 	 
	 	2.7.4.3.	
              No
      later than the second Trading Day after the date on which the
      clearinghouse shall have delivered notice to the transfer agent as
      specified in Subsection 2.7.4.2 above, the transfer agent shall deliver to
      the Company notice specifying the total par value of the Series A Bonds in
      respect of which early redemption applications were submitted, together
      with the confirmations of exemption from withholding
  tax.

            

    

    
    

    
    

    
      	
               
      

            	
            

    

    
      	
               
      

            	
              2.7.5.

            	
              On
      the date of early redemption of each applicant, the Company shall redeem
      the Series A Bonds in respect of which early redemption notices shall have
      been submitted, such that the holder of the Bonds stated shall be entitled
      to receive from the Company the sum of NIS 1 in respect of each NIS 1 of
      Bonds that shall be redeemed by the Company on the said date, linked to
      the Index in accordance with the provisions of this Indenture. It is
      hereby clarified that in addition to the provisions of Section 2.7.6
      below, the Company will not pay the holders of the Series A Bonds any
      payment and/or any interest.

            

    

    
      	 	 	 
	
               
      

            	
              2.7.6.

            	
              The
      interest that shall accrue in respect of the Series A Bonds from the date
      of the last interest payment that shall have preceded the early redemption
      date until the early redemption date shall be paid to the holders of the
      Series A Bonds who shall have chosen to perform early redemption according
      to this section.

            
	 	 	 

    

    
      	
               
      

            	
              2.7.7.

            	
              Early
      Redemption Notice submitted to the Company or the TASE members may not be
      cancelled or modified.

            

    

    
      	 	 	 
	
               
      

            	
              2.7.8.

            	
              It
      is hereby further clarified that a Holder of Series A Bonds who shall not
      deliver Early Redemption Notice to the Company, the Company shall not
      redeem Bonds held by him and he will continue to hold the same subject to
      the provisions of this Indenture.

            
	 	 	 

    

    
      	
               
      

            	
              2.8

            	
              The
      Company will be entitled to issue, at any time, without the need for the
      consent of the holders of the Series A Bonds and/or the Trustee, including
      a subsidiary of the Company, pursuant to the provisions of any law,
      additional bonds from the series of Series A Bonds, at such price and in
      such manner as the Company shall deem fit, including at a discount rate
      which is different (higher or lower) to the rate determined in the terms
      and conditions of the Bonds offered pursuant to this Indenture. Subject
      thereto, the Indenture for the Bonds will also apply in respect of any
      such additional bonds from the same series that shall be issued by the
      Company and, from the date of the issue thereof, they shall be treated as
      the Bonds from the same series that were initially listed. In the event of
      an increase in the series of Series A Bonds, the Trustee will be entitled
      to demand an increase to its fee, relative to the increase of the series,
      and the Company gives its prior consent in its engagement in this
      Indenture to the increase to the Trustee’s fee as
    aforesaid.

            
	 	 	 
	 	 	
              For
      details regarding the tax implications in the event of an issue of
      additional Series A Bonds at different discount rates, the Holder of the
      Series A Bonds is referred to the Third Addendum to this
      Indenture.

            
	 	 	 

    

    
      	
               
      

            	
              2.9

            	
              The
      Series A Bonds shall rank pari passu among
      themselves in connection with the Company’s undertakings according to the
      Series A Bonds, and without any priority or preference of one over
      another.

            
	 	 	 
	 	 	
              The
      aforesaid does not exempt the Trustee from reviewing the Issue as
      aforesaid, insofar as such duty is imposed on the Trustee pursuant to any
      law and/or constitute its prior consent to the Issue and does not derogate
      from the rights of the Trustee and of the meeting of the holders of the
      Series A Bonds according to this Indenture, including their right to
      accelerate the Series A Bonds as stated in Section 6
  below.

            
	 	 	 

    

    
      
        
        

      

      
        -8-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	
               
      

            	
              2.10

            	
              The
      provisions of this Indenture shall apply to the Series A Bonds that shall
      be issued as aforesaid according to this Indenture and which shall be
      held, from time to time, both by buyers of the Series A Bonds and by the
      public, insofar as they shall be listed, unless stated
      otherwise.

            

    

    
      	 	 	 
	
               
      

            	
              2.11

            	
              The Issue is being performed in
      Israel only and is not being performed in the United States and/or to a
      U.S. Person as defined in Regulation S which was promulgated under the
      United States Securities Act of 1933 (“Securities Act”). Every buyer of
      the securities offered according to the Issue will declare in writing on
      the offer form that shall be delivered to the Company and a copy of which
      shall be delivered to the Trustee that he is not a U.S. Person, that he is
      not buying the securities offered according to the Issue for a U.S. Person
      and/or a person who is located in the United States, that he was not in
      the United States at the time that he submitted the application to buy the
      securities offered according to the Issue and that he is not buying the
      securities offered according to the Issue with the intention of performing
      a “Distribution” in the United States (according to the meaning of this
      term in the American securities laws).

            
	 	 	 
	 	 	
              No
      person is authorized to act to sell the securities offered according to
      the Issue in the United States.

            
	 	 	 
	 	 	
              The Series A Bonds offered
      according to this Indenture are not listed in the United States pursuant
      to the Securities Act and buyers of the Series A Bonds according to this
      Indenture are prohibited from offering and/or selling the same in the
      United States or to a “US Person” unless they shall be listed pursuant to
      the Securities Act or a legal opinion shall be given which shall be
      acceptable to the Company whereby there is an exemption from the listing
      requirements pursuant to the Securities Act. The Company does not
      undertake to list the Series A Bonds pursuant to the Securities
      Act.

            
	 	 	 

    

    
      	
               
      

            	
              2.12

            	
              Pursuant
      to the provisions of the Securities Law and Section 5 of the Securities
      Regulations (Details with
      regard to Sections 15A to 15C of the Law), 5760-2000,
      restrictions apply to resale of the Series A Bonds.

            
	 	 	 

    

    
      	
               
      

            	
              2.13

            	
              Deposit
      of Moneys with the Trustee and Release of the Issue Proceeds

            
	 	 	 
	 	 	
              The
      moneys that the Company shall receive from the holders of the Series A
      Bonds in respect of the Issue of the Series A Bonds, after deduction of
      NIS 20,000 in respect of the Issue expenses (the “Issue Proceeds”) shall
      be remitted through Excellence Nessuah Brokerage Services Ltd. (the “Depositary”) to a trust
      account in the Trustee’s name at Bank Leumi Le-Israel Ltd. (the “Bank”), branch 812
      (Migdalei Aviv), account no.: 15998/55 (the “Trust Account”). Within
      three days after the remittance of the Issue Proceeds, the Depositary
      shall deliver to the Trustee, via e-mail, a written list of the full names
      of the investors / bondholders who shall have paid the said moneys, while
      alongside the name of each investor on the list shall be stated the amount
      paid by him, his I.D/passport/corporation no., full address, telephone and
      fax no., the name of at least one contact person thereof and the e-mail
      address of the contact person as well as full details with respect to the
      bank account of every such investor (the “List of
      Investors”).

            
	 	 	 
	 	 	
              Subject
      to the following provisions, the Issue Proceeds will be invested by the
      Trustee in interest-bearing renewable NIS deposits for a period of up to
      one week (and at the Company’s written request, 8 days in advance, in
      daily deposits) according to the conditions then accepted at the Bank, and
      the Trustee will instruct the Bank to remit the same, along with the yield
      thereon, to the Company or to other beneficiaries, at the Company’s
      written demand of the Trustee, within two Business Days after the Company
      shall have provided the Trustee with such written demand, accompanied by a
      written confirmation signed by the Company’s CEO and the Company’s U.S.
      legal counsel (whose details shall be delivered to the Trustee in advance
      and in writing, duly signed by the Company), stating
  that:

            

    

    
      
        
        

      

      
        -9-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	
               
      

            	
              2.13.1.

            	
              The
      Company has completed the raising of capital in the sum total of U.S. $20
      million.

            

    

    
      	 	 	 
	
               
      

            	
              2.13.2.

            	
              The
      conditions (which are unrelated to the manner of financing of the
      transaction) that are required for the closing of the transaction for the
      acquisition of the shares of NTS Communications Inc. in accordance with
      the provisions of the agreement for the acquisition of the shares of NTS
      Communications Inc. of August 22, 2007 (in this section, the “NTS Acquisition”), have
      been fulfilled.

            
	 	 	 

    

    It is
hereby clarified that the Trustee will not check the veracity of the details and
the information stated in the said confirmation and that the relevant condition
for remittance of the Issue Proceeds and the yield thereon as aforesaid from the
Trustee to the Company / other beneficiaries is the mere receipt of such
confirmation by the Trustee.

     

    Upon
remittance of the Issue Proceeds and the yield thereon as aforesaid, the Company
will be entitled to use the same at its sole discretion for the purpose and/or
in connection with the closing of the NTS Acquisition.

     

    The
aforesaid notwithstanding, in the event that the Trustee shall not receive such
written confirmation, signed by the Company’s CEO and the Company’s U.S. legal
counsel by March 31, 2008, the Issue pursuant to this Indenture shall be
cancelled and the Trustee shall reimburse the Issue Proceeds to each investor
based on the List of Investors (even if such confirmation shall be received by
the Trustee after March 31, 2008 and prior to the release of the Issue moneys
there from to the Investors). In addition, the Company shall pay the investors
the interest and linkage differentials in respect of the pre-listing period for
the period from the Date of the Issue until the reimbursement of the Principal
as aforesaid. The yield on the Issue Proceeds that shall accrue in the Trust
Account shall be remitted to the Company.

     

    
      	
               
      

            	
              2.14

            	
              Provisions
      regarding the Management of the Trust
  Account

            

    

    
      	 	 	 
	
               
      

            	
              2.14.1.

            	
              All
      of the aforesaid notwithstanding, any remittance of the moneys that shall
      be received in the Trust Account or part thereof and/or amounts that shall
      accrue in respect thereof in the account shall be after deduction of any
      expense, fee and/or other amount which shall be debited to the Trust
      Account, including any tax that shall be deducted by the Bank in which the
      Trust Account is maintained.

            
	 	 	 

    

    
      	
               
      

            	
              2.14.2.

            	
              The
      Company shall provide the Trustee with any confirmation that shall be
      required with respect to the inapplicability of a tax liability with
      respect to the holding of the moneys, in whole or in part, or the deposit
      thereof in the Trust Account, interest or profit that shall accrue in
      respect thereof and the remittance thereof from the Trust
      Account.

            

    

    
      	 	 	 
	
               
      

            	
              2.14.3.

            	
              The
      Company hereby confirms and undertakes that any and all moneys that shall
      be remitted to the Trust Account will be remitted as required by law and
      that the holding thereof by the Trustee and its actions in respect thereof
      which shall be performed pursuant to this Indenture are permitted and
      legitimate pursuant to any law, including U.S. laws.

            
	 	 	 

    

    
      
        
        

      

      
        -10-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	
               
      

            	
              2.14.4.

            	
              During
      the trust period, the Trustee may remit amounts from moneys that shall be
      invested in the Trust Account in a deposit or otherwise, to a checking
      account to cover any liability and fee, upon the creation thereof, which
      shall be debited to the Trust
Account.

            

    

    
      	 	 	 
	
               
      

            	
              2.14.5.

            	
              At
      the Company’s request, the Trustee shall transfer to the Company detailed
      bank documents attesting to the transactions in the
    account.

            
	 	 	 

    

    
      	
              3.

            	
              Terms
      and Conditions of the Issue; Self
  Purchase

            

    

    
      	 	 	 
	
               
      

            	
              3.1

            	
              The
      Company shall issue the Series A Bonds under the terms and conditions as
      specified in this Indenture and in the Series A Bonds and shall secure the
      same as specified in this Indenture.

            
	 	 	 

    

    
      	
               
      

            	
              3.2

            	
              The
      Company reserves the right to purchase, at any time, regardless of whether
      on TASE, insofar as the Series A Bonds shall be listed thereon, or
      elsewhere, Series A Bonds at such price as it shall deem fit, without
      prejudice to the obligation to pay the Series A Bonds that shall be held
      by others who are not the Company.

            
	 	 	 
	 	 	
              The
      Series A Bonds that shall be purchased by the Company shall be cancelled
      and delisted from TASE, insofar as they shall be listed thereon, and the
      Company will not be entitled to reissue the same.

            
	 	 	 
	 	 	
              A
      subsidiary of the Company or of controlling shareholders of the Company
      and/or a company controlled by the controlling shareholders of the Company
      and/or of another entity affiliated with the Company and/or with the
      controlling shareholders thereof, apart from the Company itself (an “Affiliated Corporation”)
      may purchase and/or sell Bonds, from time to time, either on TASE or
      elsewhere, including by way of an issue, by the Company, of bonds at such
      price as it shall deem fit, and to sell the same accordingly. In the event
      of such a purchase and/or sale, the Company shall release an immediate
      report thereon and shall deliver notice to the Trustee. The immediate
      report and the notice as aforesaid will include reference to the
      quantities and prices that were purchased and/or sold by the Affiliated
      Corporation, as the case may be. The Bonds that shall be held as aforesaid
      by an Affiliated Corporation shall be deemed as an asset of the Affiliated
      Corporation and will not be delisted from TASE, other than subject to TASE
      rules. However, so long as the Bonds shall be held by the Affiliated
      Corporation, they shall confer no voting rights on their holders at the
      general meeting of the bondholders nor be taken into account for the
      purpose of determination of the presence of a legal
  quorum.

            
	 	 	 
	 	 	
              At
      the time of holding of a meeting of the holders of the Series A Bonds, the
      Trustee will examine the existence of conflicting interests of the holders
      of the Series A Bonds, according to the circumstances of the matter. The
      Company and the Trustee will act to convene class meetings of the holders
      of the Series A Bonds pursuant to the provisions of any law, the binding
      precedent, the provisions of the Securities Law and the regulations and
      directives that shall be promulgated thereunder, as the Trustee shall
      instruct. In the event of the holding of class meetings, approval of a
      resolution requires its approval by each one of the class meetings that
      shall be convened and by the meeting of all of the holders of the Series A
      Bonds, and all by the majority required according to the provisions of
      this Indenture, including the annexes hereto. The Trustee may, at its sole
      discretion, determine that such a meeting not be
  convened.

            
	 	 	 

    

    
      
        
        

      

      
        -11-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	
              4.

            	
              Undertakings
      of the Company and Securing the Series A Bonds

            
	 	 
	 	
              The
      Company hereby undertakes to pay any and all Principal and interest
      amounts (including arrears interest, insofar as applicable) which shall be
      payable according to the terms and conditions of the Series A Bonds and to
      fulfill all of the remaining conditions and undertakings imposed thereon
      according to the terms and conditions of the Series A Bonds and according
      to this Indenture.

            
	 	 
	 	
              The Company’s undertaking to
      pay the Series A Bonds (Principal, interest and linkage differentials) is
      not secured by any pledge or collateral.

            
	 	 
	 	
              For
      the avoidance of doubt it is clarified that the Trustee is under no duty
      to examine, and in practice the Trustee has not examined, the need for the
      provision of securities to secure the payments to the bondholders. In its
      engagement in this Indenture, and in the Trustee’s agreement to serve as
      trustee for the bondholders, the Trustee does not opine, either explicitly
      or implicitly, on the Company’s ability to meet its undertakings to the
      bondholders. The aforesaid does not constitute prior consent on the part
      of the Trustee to such actions nor does it derogate from the Trustee’s
      duties pursuant to law and/or the Indenture, including the Trustee’s duty
      (insofar as the Trustee is subject to such a duty pursuant to any law) to
      examine the effect of changes in the Company from the Date of the Issue
      forth, insofar as they serve to have an adverse effect on the Company’s
      ability to meet its undertakings to the holders of the Series A Bonds. The
      aforesaid does not derogate from the Trustee’s duties pursuant to law
      and/or the Indenture.

            
	 	 

    

    
      	
              5.

            	
              Early
      Redemption

            
	 	 
	 	
              Insofar
      as the Series A Bonds shall be listed on TASE:

            
	 	 
	 	
              Should
      TASE decide to delist the Series A Bonds in circulation due to the fact
      that the value of the public holdings thereof has dropped below the
      minimal amount determined in the TASE directives regarding delisting, the
      Company shall not perform immediate redemption of the Series A Bonds,
      although the Series A Bonds will be delisted from TASE and the holders
      thereof will be subject to the tax implications deriving
      therefrom.

            

    

    
      
        
        

      

      
        -12-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	
              
                6.

              

            	
              Acceleration

            
	 	 

    

    
      	
               
      

            	
              6.1

            	
              Upon
      the occurrence of one or more of the instances listed below, the
      provisions of Section 6.2 below shall
apply:

            

    

    
      	 	 	 
	
               
      

            	
              6.1.1.

            	
              If
      the Company shall not pay any amount that shall be due therefrom in
      connection with the Bonds within 14 days after its payment due
      date.

            
	 	 	 

    

    
      	
               
      

            	
              6.1.2.

            	
              If
      a temporary or permanent liquidator shall be appointed by a court or a
      valid resolution shall be adopted for dissolution of the Company or a stay
      of proceedings ordered (with the exception of dissolution for the purposes
      of a merger with another company and/or a restructuring of the Company)
      and such appointment or resolution shall not be cancelled within 60
      Business Days from the date of the issue
  thereof.

            

    

    
      	 	 	 
	
               
      

            	
              6.1.3.

            	
              If
      an attachment shall be imposed on the Company’s material assets, in whole
      or in material part, and the attachment shall not be removed within 60
      days.

            
	 	 	 

    

    
      	
               
      

            	
              6.1.4.

            	
              An
      act of realization of a pledge and/or execution shall be performed against
      a material asset of the Company, in whole or in material part, which act
      shall not be cancelled within 90
days.

            

    

    
      	 	 	 
	
               
      

            	
              6.1.5.

            	
              If
      a temporary or permanent receiver shall be appointed for the Company
      and/or its assets, in whole or in material part, which appointment shall
      not be cancelled within 60 days.

            
	 	 	 

    

    
      	
               
      

            	
              6.1.6.

            	
              If
      the Company shall discontinue engagement in and/or management of its
      business, as being from time to time and/or shall give notice of its
      intention to discontinue engagement in and/or management of its business,
      as being from time to time.

            

    

    
      	 	 	 
	
               
      

            	
              6.1.7.

            	
              If
      the Company shall discontinue the Series A Bond payments (Principal and/or
      interest) and/or shall give notice of its intention to discontinue the
      Series A Bond payments (Principal and/or interest) and/or there is a
      substantial concern that it shall discontinue the Series A Bond payments
      (Principal and/or interest).

            
	 	 	 

    

    
      	
               
      

            	
              6.1.8.

            	
              In
      the event that the Company shall be liquidated or erased for any
      reason.

            

    

    
      	 	 	 
	
               
      

            	
              6.1.9.

            	
              In
      the event that the Company shall breach or fail to fulfill a material
      undertaking or condition included in the Bonds or the Indenture and the
      Company shall not have fulfilled such undertaking or condition within 15
      Business Days from the date on which the Trustee shall have given it
      written warning thereof.

            
	 	 	 

    

    
      	
               
      

            	
              6.1.10.

            	
              If
      holders of pledges on the Company’s property shall realize the pledges
      that they have on material assets of the
  Company.

            

    

    
      	 	 	 
	
               
      

            	
              6.1.11.

            	
              So
      long as the Series A Bonds shall not have been listed on TASE – if the
      rating of the Series A Bonds shall have dropped to the rating of Baa2 of
      Midroog (or a rating parallel thereto by another rating company) or a
      lower rating.

            
	 	 	 

    

    
      
        
        

      

      
        -13-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	
               
      

            	
              6.1.12.

            	
              So
      long as the Series A Bonds shall not have been listed on TASE – if the
      Company shall issue additional Series A Bonds and/or bonds from other
      series, in a manner that shall cause a drop in the rating of the Series A
      Bonds to a rating lower than A3 of Midroog (or a rating parallel thereto
      by another rating company).

            

    

    
      	 	 	 
	
               
      

            	
              6.1.13.

            	
              So
      long as the Series A Bonds shall not have been listed on TASE – if the
      Series A Bonds shall cease to be rated for a period of over 30 days. For
      the avoidance of doubt, it is clarified that in the event that the Series
      A Bonds shall be rated by several companies, for the purposes of this
      section, cessation of rating means cessation of rating by all of the
      rating companies.

            
	 	 	 

    

    
      	
               
      

            	
              6.1.14.

            	
              From
      the date of the remittance of the Issue Proceeds to the Company according
      to the provisions of Section 2.13 of this Indenture until the listing of
      the Series A Bonds on TASE, in the event that the Company shall not be the
      controlling shareholder of NTS (either directly or indirectly). For this
      purpose, “control” is as defined in the Securities
  Law.

            

    

    
      	 	 	 
	
               
      

            	
              6.1.15.

            	
              In
      the event that the Bank shall have accelerated credit in a material amount
      due to a breach of an undertaking of the Company thereto or in instances
      in which bonds from other series (insofar as such series shall be issued)
      of the Company shall be accelerated in the future.

            
	 	 	 

    

    
      	
               
      

            	
              6.1.16.

            	
              So
      long as the Series A Bonds shall not have been listed on TASE – in the
      event that Mr. Guy Nissenson shall cease to serve as president and CEO of
      the Company.

            

    

    
      	 	 	 
	
               
      

            	
              6.1.17.

            	
              Failure
      to publish financial statements within 45 days from the date determined
      therefor in the U.S. laws (and if the Company shall have received an
      extension from a competent authority – within 45 days from the end of the
      extension period).

            
	 	 	 

    

    
      	
               
      

            	
              6.1.18.

            	
              So
      long as the Series A Bonds shall not have been listed on TASE – if the
      Company shall cease to be a company whose securities are held by the
      public.

            

    

    
      	 	 	 
	
               
      

            	
              6.1.19.

            	
              So
      long as the Series A Bonds shall not have been listed on TASE – if the
      debt to EBITDA ratio shall exceed 4. For this purpose, “EBITDA” means the
      Company’s earnings before financing expenses, taxes, depreciation and
      amortization and other expenses / revenues, all according to the Company’s
      financial statements for such period, audited by the Company’s auditors
      and approved by the Company’s board of directors. The EBITDA shall be
      calculated on the basis of the Company’s two quarterly financial
      statements in which the financial results of NTS shall have been
      consolidated throughout the period of the statement.

            
	 	 	 

    

    
      	
               
      

            	
              6.1.20.

            	
              If
      the Company shall distribute a dividend to its shareholders such that the
      Company's equity to balance sheet ratio shall drop below 25% (for this
      purpose, the “Company’s balance sheet” is the sum total of the Company’s
      assets).

            

    

    
      
        
        

      

      
        -14-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	 	 	 
	
               
      

            	
              6.1.21.

            	
              Upon
      the occurrence of any other event which, in the opinion of the Trustee,
      materially prejudices the rights of the holders of the Series A
      Bonds.

            
	 	 	 

    

     

    
      	 	 	
              For
      the purposes of this section “a material part of the Company’s assets” is
      a part of the Company’s assets, whose book value exceeds 40% of the
      Company’s total assets.

            

    

    
      	 	 	 
	
               
      

            	
              6.2

            	
              Upon
      the occurrence of any of the events specified in Sections 6.1.1 to 6.1.21
      (inclusive) above:

            
	 	 	 

    

    
      	
               
      

            	
              6.2.1.

            	
              The
      Trustee will be obligated to summon a meeting of the holders of the Series
      A Bonds, except upon the occurrence of the events specified in Sections
      6.1.11 and 6.1.16, in which case the Trustee will be entitled (although
      not obligated) to summon such a meeting and holders of the Series A Bonds
      that hold at least ten percent (10%) of the par value of the unpaid
      balance of the Principal of the Series A Bonds in circulation will be
      entitled (although not obligated) to summon a meeting of the bondholders.
      The date of convening of which will be 30 days after the date of the
      summoning thereof (or earlier in accordance with the provisions of Section
      6.2.4 below). The agenda of such meeting shall include a resolution
      regarding the acceleration of the entire unpaid balance of the Series A
      Bonds due to the occurrence of any of the events specified in Sections
      6.1.1 to 6.1.21 (inclusive) above.

            

    

    
      	 	 	 
	
               
      

            	
              6.2.2.

            	
              In
      the event that by the date of convening of the meeting, any of the events
      specified in Sections 6.1.1 to 6.1.21 (inclusive) above shall not have
      been cancelled, removed or ceased, and a resolution at the meeting of the
      bondholders as aforesaid shall have been adopted as a Special Resolution
      (as defined in the Second Addendum hereto), the Trustee will be obligated,
      within a reasonable time, to accelerate the entire unpaid balance of the
      Series A Bonds, provided that it shall have given the Company written
      warning of 7 Business Days before approaching the courts for enforcement
      of the acceleration.

            
	 	 	 

    

    
      	
               
      

            	
              6.2.3.

            	
              A
      copy of the notice summoning the meeting as aforesaid shall be sent to the
      Company by the Trustee immediately upon publication of the notice, and
      will constitute an advance written warning to the Company of its intention
      to act as aforesaid.

            

    

    
      	 	 	 
	
               
      

            	
              6.2.4.

            	
              The
      Trustee may, at its discretion, shorten the timeframe stated above in the
      event that the Trustee shall be of the opinion that any delay in
      acceleration of the Company’s debt shall risk the rights of the holders of
      the Series A Bonds. Prior notice on the matter as aforesaid shall be
      delivered to the Company simultaneously with an immediate acceleration of
      the Series A Bonds.

            
	 	 	 

    

    
      	
               
      

            	
              6.2.5.

            	
              The
      Trustee will be responsible for reporting to the holders of the Series A
      Bonds on the occurrence of any of the events specified in Sections 6.1.1 –
      6.1.21 (inclusive), either by virtue of public announcements released by
      the Company or in accordance with the Company’s notice which shall be sent
      thereto according to the terms and conditions of the Indenture, shortly
      after the event shall have been brought to its attention and/or it is
      informed thereof.

            

    

    
      
        
        

      

      
        -15-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	
              7.

            	
              Claims
      and Proceedings by the
Trustee

            

    

    
      	 	 	 
	
               
      

            	
              7.1

            	
              Without
      derogating from any other provision of the Indenture, the Trustee will be
      entitled, at the discretion thereof, to institute against the Company any
      such proceedings, including legal proceedings, as it shall deem fit and
      subject to the provisions of any law, for the purpose of enforcement of
      the Company’s undertakings pursuant to the Indenture and for the exercise
      of the rights of the holders of the Series A Bonds pursuant to the
      Indenture. The Trustee will notify the Company in writing of its intention
      to institute proceedings as aforesaid 14 days before the institution
      thereof, insofar as possible.

            
	 	 	 

    

    
      	
               
      

            	
              7.2

            	
              Subject
      to the provisions of Section 20 below (“Indemnification of the
      Trustee”), the Trustee will be obligated to act as stated in
      Section 7.1 above if it shall be required to do so by a Special Resolution
      adopted at the general meeting of the holders of the Series A Bonds by a
      majority of 75% of the participants in the vote. Subject to the Trustee’s
      right to move the appropriate court for instructions on the
      matter.

            

    

    
      	 	 	 
	
               
      

            	
              7.3

            	
              The
      Trustee is entitled, prior to instituting proceedings as aforesaid, to
      convene a meeting of the holders of the Series A Bonds in order that the
      bondholders shall decide, by a Special Resolution, which proceedings to
      institute for the exercise of their rights pursuant to the Indenture. In
      addition, the Trustee will be entitled to reconvene meetings as aforesaid
      for the purpose of receiving instructions on any matter relating to the
      management of the proceedings as aforesaid.

            
	 	 	 

    

    
      	
               
      

            	
              7.4

            	
              Subject
      to the provisions of this Indenture, the Trustee is entitled, although not
      obligated, to convene, at any time, a general meeting of the holders of
      the Series A Bonds in order to deliberate and/or receive its instructions
      on any matter relating to the
Indenture.

            

    

    
      	 	 	 
	
               
      

            	
              7.5

            	
              The
      Trustee is entitled, although not obligated, at the sole discretion
      thereof, to delay the performance of any action thereby pursuant to the
      Indenture, for the purpose of approaching the meeting of the holders of
      the Series A Bonds and/or the Court until it shall receive instructions
      from the meeting of the holders of the Series A Bonds and/or instructions
      from the Court on how to act. The general meeting of the holders of the
      Series A Bonds and/or the Court, as the case may be, shall be approached
      without delay and on the first reasonably possible date, provided that the
      delay of the proceedings will not jeopardize the rights of the holders of
      the Series A Bonds.

            
	 	 	 

    

    
      	
               
      

            	
              7.6

            	
              For
      the avoidance of any doubt, it is hereby clarified that none of the
      provisions specified above serve to prejudice and/or derogate from the
      Trustee’s right, hereby conferred thereon, to move the courts, at the sole
      discretion thereof, also before the Series A Bonds shall be accelerated,
      to issue any order with regard to the trust
  affairs.

            

    

    
      	 	 
	
              8.

            	
              Distribution of the
      Revenues

            
	 	 
	 	Any
      and all revenues that shall be received by the Trustee as a consequence of
      proceedings that it shall institute, if any, against the Company, shall be
      held thereby in escrow and shall be used thereby for the following
      purposes and according to the following priority:
	 	 
	 	
              First,
      for payment of the expenses, payments, levies and liabilities incurred by
      the Trustee, imposed thereon or caused incidentally to or as a consequence
      of actions for performance of the trust or otherwise in another connection
      with the terms and conditions of this Indenture, including its fee; second
      – in order to pay the holders of the Series A Bonds the interest arrears
      due to them according to the terms and conditions of the Series A Bonds,
      pari
      passu and relative to the amount of the interest in arrears that is
      due to each one of them, without preference or priority in respect of any
      of them; third – in order to pay the holders of the Series A Bonds the
      Principal amounts due to them according to the Series A Bonds that are
      held by them, pari
      passu, regardless of whether or not the Principal amounts shall
      have been due and payable and proportionately to the amounts due to them,
      without any preference in connection with the precedence of time of issue
      of the Series A Bonds by the Company or otherwise, and the Trustee will
      pay the surplus, if any, to the Company or its
  substitutes.

            
	 	 
	 	
              Payment
      of the amounts by the Trustee to the holders of the Series A Bonds is
      subject to the prior rights of other creditors of the Company, if
      any.

            

    

    
      
        
        

      

      
        -16-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

     

    
      	
              9.

            	
              Authority
      to Delay Distribution of
Moneys

            

    

    
      	 	 	 
	
               
      

            	
              9.1

            	
              The
      provisions of Section 8 above notwithstanding, in the event that the
      monetary amounts that shall be received as a consequence of the
      institution of the foregoing proceedings that shall be distributable at
      any time, as stated in the said section, shall be less than the sum of one
      million (1,000,000) NIS, the Trustee will not be obligated to distribute
      the same and will be entitled to invest the said amount, in whole or in
      part, in the investments permitted pursuant to this Indenture, and to
      substitute these investments from time to time with other permitted
      investments, all as it shall deem fit.

            
	 	 	 

    

    
      	
               
      

            	
              9.2

            	
              When
      the foregoing investments, including the profits thereon, together with
      additional moneys that shall come into the Trustee's hands for the purpose
      of payment thereof to the holders of the Series A Bonds, if any, shall
      reach an amount that shall be sufficient to pay at least ten percent of
      the unpaid balance of the Principal of the Series A Bonds and the
      interest, the Trustee shall pay the same to the holders of the Series A
      Bonds as stated in Section 8 above.

            

    

    
      	 	 	 
	
               
      

            	
              9.3

            	
              The
      Trustee will be entitled to decide, and will be obligated to do so if
      demanded by the holders of the Series A Bonds by a Special Resolution,
      upon the distribution of the moneys in its hands, even if the amount
      thereof shall be less than 10% of the unpaid balance of the Principal of
      the Series A Bonds and the interest.

            
	 	 	 

    

    
      	
              10.

            	
              Notice
      of Distribution and Deposit with the
  Trustee

            

    

    
      	 	 	 
	
               
      

            	
              10.1

            	
              The
      Trustee shall notify the holders of the Series A Bonds of the date and
      place at which any of the payments mentioned in Section 8 and 9 above
      shall be made by prior notice of 14 days which shall be delivered in the
      manner determined in Section 21 below.

            
	 	 	 
	 	 	
              After
      the date determined in the notice, the holders of the Series A Bonds will
      be entitled to interest in respect thereof according to the rate
      determined in the Series A Bonds only on the balance of the Principal
      amount (if any) after deduction of the amount that was paid or for payment
      as aforesaid.

            
	 	 	 

    

    
      	
               
      

            	
              10.2

            	
              Any
      amount that is due to a Holder of the Series A Bonds that is not actually
      paid for a reason that is not dependent upon the Company, while the
      Company was prepared to pay the same, will cease to bear interest and
      linkage differentials from the date scheduled for payment thereof, and the
      Holder of the Series A Bond will only be entitled to those amounts to
      which he was entitled on the date scheduled for payment of the said
      payment on account of the Principal, interest and linkage
      differentials.

            

    

    
      	 	 	 
	
               
      

            	
              10.3

            	
              The
      Company will deposit with the Trustee, within 15 days from the date
      scheduled for the said payment, the amount of the payment that shall not
      have been paid for a reason that is not dependent upon the Company, and
      such deposit shall be deemed as payment of said payment, and in the event
      of payment of everything due in respect of the Series A Bond, also as
      redemption of the Series A Bond.

            
	 	 	 

    

    
      
        
        

      

      
        -17-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	
               
      

            	
              10.4

            	
              The
      Trustee will invest any such amount in the framework of trust accounts in
      its name and to the order thereof to the credit of such bondholders, in
      investments permitted according to the Indenture and pursuant to the laws
      of the State of Israel, all as the Trustee shall deem fit and subject to
      the provisions of the Law. Should the Trustee do so, it shall not be
      liable to the entitled persons in respect of such amounts other than for
      the proceeds that shall be received from realization of investments, after
      deduction of the expenses associated therewith. The Trustee shall hold the
      said amounts and invest the same in the foregoing manner up until the end
      of one year from the final redemption date of the Series A Bonds. After
      this date, the Trustee will return the amounts that shall have accrued in
      its hands, including profits deriving from the investment thereof, to the
      Company which shall hold these amounts in escrow for the holders of the
      Series A Bonds.

            

    

    
      	 	 	 
	
               
      

            	
              10.5

            	
              The
      Trustee will remit moneys to every Holder of a Series A Bond for whom
      amounts and/or moneys due to the holders of the Series A Bonds shall have
      been deposited with the Trustee, out of such moneys that shall have been
      deposited as aforesaid, against presentation of such proof, as shall be
      required by the Trustee to the full satisfaction thereof, of the holder’s
      entitlement to the moneys.

            
	 	 	 

    

    
      	
              11.

            	
              Receipt
      from the Holders of the Series A
Bonds

            

    

    
      	 	 	 
	
               
      

            	
              11.1

            	
              A
      receipt from a Holder of the Series A Bonds in respect of the Principal
      and interest amounts that shall have been paid thereto by the Trustee in
      respect of the Series A Bond shall absolutely release the Trustee with
      respect to payment of the amounts stated therein.

            
	 	 	 

    

    
      	
               
      

            	
              11.2

            	
              The
      moneys distributed according to the provisions of Section 10 above shall
      be deemed as made on account of the payment.

            
	 	 	 

    

    
      	
              12.

            	
              The
      Company’s Undertakings to the Trustee

            
	 	 
	 	
              The
      Company hereby undertakes, vis-à-vis the Trustee,
      so long as the Series A Bonds shall not have been paid, as
      follows:

            

    

    
      	 	 	 
	
               
      

            	
              12.1

            	
              To
      give and instruct its auditors to give the Trustee and/or persons on its
      behalf, any document or information regarding the business and/or assets
      of the Company that shall reasonably be required for the protection of the
      holders of the Series A Bonds.

            
	 	 	 

    

    
      	
               
      

            	
              12.2

            	
              To
      maintain orderly books of account in accordance with GAAP. To keep the
      books and documents serving as authorities therefor (including deeds of
      pledge, mortgage, accounts and receipts) and also to enable the Trustee
      and/or any person who the Trustee shall appoint in writing for this
      purpose, to inspect any book and/or document and/or approval as aforesaid
      at any reasonable time.

            
	 	 	 
	 	 	
              The
      Trustee hereby undertakes to keep any information that is given as
      aforesaid confidential, except for the purpose of transferring information
      to a meeting of the holders of the Series A Bonds for the adoption of a
      resolution relating to their rights pursuant to the Series A Bonds or for
      the provision of a report on the condition of the
  Company.

            

    

    
      	 	 	 
	
               
      

            	
              12.3

            	
              To
      notify the Trustee, immediately upon learning thereof, of any instance in
      which a material attachment shall have been imposed on its assets, and of
      any instance in which a receiver shall have been appointed for its assets,
      in whole or in part, and also to immediately take, at its expense, any and
      all reasonable measures required for the removal of such material
      attachment or cancellation of the receivership.

            
	 	 	 

    

    
      
        
        

      

      
        -18-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	
               
      

            	
              12.4

            	
              To
      invite the Trustee to its general meetings (either annual general meetings
      or special general meetings of the Company’s shareholders) without
      granting the Trustee a voting right at such
  meetings.

            

    

    
      	 	 	 
	
               
      

            	
              12.5

            	
              To
      immediately notify the Trustee, in writing, of the occurrence of any of
      the events specified in Section 6.1 above, insofar as the Company is aware
      of the occurrence of such event.

            
	 	 	 

    

    
      	
               
      

            	
              12.6

            	
              The
      Trustee hereby undertakes to keep any information that shall be given
      thereto as aforesaid confidential, except for the purpose of transferring
      information to a meeting of the holders of the Series A Bonds for the
      adoption of a resolution relating to their rights pursuant to the Series A
      Bonds or for the provision of a report on the condition of the
      Company.

            

    

    
      	 	 	 
	
               
      

            	
              12.7

            	
              To
      arrange that so long as the Series A Bonds shall not have been paid in
      full, they shall continue to be rated by a rating company, to which end
      the Company undertakes to pay all of the payments and to cooperate with
      the rating company as aforesaid.

            
	 	 	 

    

    
      	
               
      

            	
              12.8

            	
              To
      deliver to the Trustee any information that the Company shall deliver to
      the rating company.

            

    

    
      	 	 	 
	
               
      

            	
              12.9

            	
              To
      deliver to the Trustee, no later than 30 days after the date of this
      Indenture, a payment schedule for payment of the Bonds (Principal and
      interest) in an Excel file.

            
	 	 	 

    

    
      	
               
      

            	
              12.10

            	
              To
      deliver to the Trustee any additional information at the Trustee’s
      reasonable demand that is required for the purpose of fulfillment of the
      Trustee’s duties, for the protection of the rights of the holders of the
      Series A bonds.

            

    

    
      	 	 	 
	
               
      

            	
              12.11

            	
              To
      carry out any reasonable instruction of the Trustee that is intended to
      protect, according to the provisions of this Indenture, the rights of the
      holders of the Series A Bonds.

            
	 	 	 

    

    
      	
              13.

            	
              Additional
      Undertakings

            
	 	 
	 	
              If
      and insofar as the Series A Bonds shall be accelerated, as defined in
      Section 6 above, the Company shall perform, from time to time and at any
      time that it shall be demanded to do so by the Trustee, any and all
      reasonable actions in order to enable the exercise of all of the
      authorities vested in the Trustee, and the Company shall perform the
      following actions in particular:

            
	 	 

    

    
      	
               
      

            	
              13.1

            	
              Make
      such declarations and/or sign any such documents and/or perform and/or
      arrange for the performance of any such actions as are necessary and/or
      required by law in order to give effect to the exercise of the
      authorities, powers and authorizations of the Trustee and/or its
      representatives.

            

    

    
      	 	 	 
	
               
      

            	
              13.2

            	
              Give
      any such notices, orders and instructions as the Trustee shall deem to be
      beneficial and shall demand.

            
	 	 	 

    

    
      	
               
      

            	
              13.3

            	
              For
      the purposes of this section, written notice signed by the Trustee
      confirming that an action that is demanded thereby, in the framework of
      its authorities, is a reasonable action, shall constitute prima facie evidence
      thereof.

            

    

    
      
        
        

      

      
        -19-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	
              14.

            	
              Representatives

            
	 	 
	 	
              The
      Company hereby irrevocably appoints the Trustee as its representative, to
      execute and perform, on its behalf and in its stead, all of the actions
      that it shall be obligated to perform according to the terms and
      conditions included in this Indenture, and generally to act on its behalf
      in relation to actions that the Company is obligated to perform according
      to this Indenture and shall not have performed or to perform part of the
      authorities vested therein, and to appoint any other person, as the
      Trustee shall deem fit, to perform the duties thereof pursuant to this
      Indenture, subject to the Company not having performed the actions that it
      is obligated to perform pursuant to the terms and conditions of this
      Indenture within a reasonable period of time, according to the
      determination of the Trustee, from the date of the Trustee’s demand,
      provided that it shall have acted reasonably.

            
	 	 
	 	
              An
      appointment pursuant to this section does not serve to obligate the
      Trustee to take any action and the Company and the holders of the Series A
      Bonds hereby exempt the Trustee in advance in the event that it shall not
      take, by virtue of the said power of attorney, any action and/or shall not
      timely and/or correctly perform the same. In addition, the Company and the
      holders of the Series A Bonds hereby waive in advance any claim against
      the Trustee and/or its agents in respect of any damage that is caused
      and/or may be caused thereto, either directly and/or indirectly, due to
      the actions and/or omissions of the Trustee as stated in this section,
      provided that its actions and/or omissions shall not have been performed
      maliciously and/or negligently and that it shall have acted in good
      faith.

            
	 	 

    

    
      	
              15.

            	
              Other
      Agreements

            
	 	 
	 	
              Subject
      to the provisions of the Law and the restrictions imposed upon the Trustee
      by law, neither the fulfillment of the Trustee’s duties pursuant to this
      Indenture nor its mere status as a trustee shall serve to prevent it from
      engaging with the Company in different contracts or from performing
      transactions therewith in the ordinary course of its
    business.

            
	 	 

    

    
      	
              16.

            	
              Reporting
      by the Trustee

            
	 	 
	 	
              The
      Trustee shall, every 12 months from the date of this Indenture and up
      until payment of the Bonds, draw up an annual report on the trust affairs
      (hereinafter: the “Annual
      Report”).

            
	 	 
	 	
              The
      Annual Report shall include a specification of the following
      matters:

            
	 	 

    

    
      	
               
      

            	
              16.1

            	
              A
      current specification of the trust affairs in the previous
      year.

            

    

    
      	 	 	 
	
               
      

            	
              16.2

            	
              A
      report on irregular events in connection with the trust which shall have
      occurred during the previous year.

            
	 	 	 
	 	 	
              The
      holders of the Series A Bonds will be entitled to inspect the Annual
      Report at the Trustee’s offices during accepted working hours and will be
      entitled to receive a copy of the report upon request.

            
	 	 	 
	 	 	
              The
      Trustee will deliver notice to the holders of the Series A Bonds of the
      date of submission of the report, as stated in Section 21 below or in an
      immediate report which shall be issued by the Company at the Trustee’s
      request. In the event that the Trustee shall learn of a material breach of
      this Indenture on the part of the Company, it shall notify the holders of
      the Series A Bonds of the breach and of the steps that it shall have taken
      to remedy the same or to fulfill the undertakings of the Company, as the
      case may be.

            
	 	 	 

    

    
      	
              17.

            	
              The
      Trustee’s Fee and Coverage of Expenses

            
	 	 
	 	
              The
      Company shall pay the Trustee a fee for its services in accordance with
      this Indenture as specified below:

            
	 	 

    

    
      	
               
      

            	
              17.1

            	
              For
      the first trust year or part thereof, within one Business Day after
      publication of the results of the Issue, NIS
  30,500.

            

    

    
      
        
        

      

      
        -20-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	 	 	 
	
               
      

            	
              17.2

            	
              For
      each of the years commencing from the second year (namely commencing from
      the end of 12 months from the Date of the Issue) in which there shall be
      Series A Bonds that shall still not have been paid, the sum of NIS 22,000,
      positively linked to the Consumer Price Index known on the Date of the
      Issue (hereinafter: the “Annual Fee”). The Annual
      Fee will be paid to the Trustee at the start of each trust year, after
      receipt of prior notice from the Trustee regarding the next payment. The
      Annual Fee shall be paid to the Trustee in respect of the period up until
      the end of the trust period pursuant to the terms and conditions of this
      Indenture, even if a receiver and/or managing receiver shall be appointed
      for the Company and/or if the trust pursuant to this Indenture shall be
      managed under the court’s supervision.

            
	 	 	 

    

    
      	
               
      

            	
              17.3

            	
              In
      the event that the Trustee’s office shall expire, as stated in Section 24
      below, the Trustee will not be entitled to payment of its fee commencing
      from the date of expiration of its office. In the event that the Trustee’s
      office shall expire in the course of the trust year, the fee that shall
      have been paid in respect of the months in which the Trustee shall not
      have served as trustee for the Company shall be returned. The provisions
      of this Subsection 17.3 will not apply in respect of the first trust
      year.

            

    

    
      	 	 	 
	
               
      

            	
              17.4

            	
              In
      addition, the Trustee shall be entitled to reimbursement of the reasonable
      expenses that it shall incur in the framework of fulfillment of its duties
      and/or by virtue of the authorities granted thereto pursuant to this
      Indenture, including in respect of announcements in newspapers, provided
      that in respect of expenses for an expert opinion, as specified in Section
      18 below, and insofar as possible also in respect of expenses for
      announcements in newspapers in an amount that exceeds NIS 5,000, the
      Trustee shall give prior notice of its intention to obtain an expert
      opinion.

            
	 	 	 

    

    
      	
               
      

            	
              17.5

            	
              In
      the event that the Trustee will be required to take part in discussions
      with the Securities Authority in connection with the listing of the Series
      A Bonds according to the Prospectus, the Trustee will be entitled to
      payment according to the working hours that shall be devoted to this
      matter thereby.

            

    

    
      	 	 	 
	
               
      

            	
              17.6

            	
              In
      addition, and without prejudice to the generality of the provisions of
      this Section 17, the Trustee will be entitled to an additional payment on
      the basis of working hours in respect of:

            
	 	 	 

    

    
      	
               
      

            	
              17.6.1.

            	
              Actions
      that derive from a breach of this Indenture by the
  Company;

            

    

    
      	 	 	 
	
               
      

            	
              17.6.2.

            	
              Actions
      in connection with immediate acceleration of the Series A
      Bonds;

            
	 	 	 

    

    
      	
               
      

            	
              17.6.3.

            	
              Special
      actions required or needed to be performed for the purpose of fulfillment
      of its duties pursuant to this Indenture in connection with a potential
      risk to the rights of the holders of the Series A Bonds, including any
      action according to Sections 6 and 7
above;

            

    

    
      	 	 	 
	
               
      

            	
              17.6.4.

            	
              Special
      work (such as, although not only, work that is required due to a
      restructuring of the Company) or work due to the need to perform
      additional actions for the purpose of fulfillment of its duties as a
      reasonable trustee, due to a future modification of the laws and/or
      regulations and/or other binding instructions that shall apply in
      connection with the Trustee's actions and its responsibility according to
      this Indenture.

            
	 	 	 

    

    
      	
               
      

            	
              17.6.5.

            	
              Actions
      in connection with the examination, enforcement, registration and
      cancellation etc. of the undertakings that the Company shall assume or
      that shall be assumed by any person on its behalf or therefor in the
      future, including collateral.

            

    

    
      
        
        

      

      
        -21-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	 	 	 
	
               
      

            	
              17.6.6.

            	
              The
      Trustee will update the Company, insofar as possible 14 days in advance
      and in writing, of any expense as aforesaid in an amount higher than NIS
      5,000 as well as regarding the sum of the annual expenses if the aggregate
      sum thereof is higher than NIS 10,000.

            
	 	 	 

    

    
      	
               
      

            	
              17.7

            	
              It
      is hereby agreed between the parties that the Trustee will be entitled to
      a fee in the sum of U.S. $150 for every working hour in respect of any
      part of its salary that is paid on the basis of working
    hours.

            

    

    
      	 	 	 
	
               
      

            	
              17.8

            	
              In
      addition, the Trustee will be entitled to an additional fee in the sum of
      NIS 1,000 (with the Company’s approval) for any annual shareholders’
      meeting or meeting of the holders of the Series A Bonds in which the
      Trustee shall take part.

            
	 	 	 

    

    
      	
               
      

            	
              17.9

            	
              V.A.T.,
      if applicable, shall be added to the payments due to the Trustee pursuant
      to the provisions of this section and shall be paid by the
      Company.

            

    

    
      	 	 
	
              18.

            	
              Special
      Powers

            
	 	 
	 	
              The
      Trustee shall be entitled to deposit any and all notes and documents
      attesting to, representing and/or establishing its right in connection
      with any asset then in its hands, in a safe and/or elsewhere according to
      its choice, with any banker and/or any banking company and/or with an
      attorney. If the Trustee does so, it shall not be liable for any loss or
      damage caused in connection with such deposit, provided that the Trustee
      shall have acted in good faith and unless the Trustee shall have acted
      negligently or maliciously.

            
	 	 
	 	
              The
      Trustee may, in the context of performance of the Trustee affairs pursuant
      to the Indenture, act according to its opinion and/or upon the advice of
      any attorney, an accountant, appraiser, assessor, surveyor, broker or
      other expert, whether such opinion and/or advice shall have been prepared
      at the Trustee’s request and/or by the Company, and the Trustee shall not
      be liable for any loss or damage caused as a result of any act and/or
      omission performed thereby based on such advice or opinion, provided that
      the Trustee shall have acted in good faith and unless the Trustee shall
      have acted negligently or maliciously.

            
	 	 
	 	
              Any
      such advice and/or opinion may be given, sent or received by letter,
      telegram, facsimile and/or any other electronic means for the transfer of
      information, and the Trustee shall not be liable for acts performed based
      on advice and/or an opinion or information transferred in one of the said
      manners, notwithstanding any errors having befallen the same and/or their
      having been inauthentic, provided that the error could not have been
      discovered by reasonable examination and further provided that the Trustee
      shall have acted in good faith and unless the Trustee shall have acted
      negligently or maliciously.

            
	 	 
	 	
              The
      Trustee shall not be obligated to inform any party of the execution of the
      Indenture, and it may not intervene in any form or manner in the
      management of the Company’s business or affairs, other than pursuant to
      the powers conferred upon the Trustee in the Indenture.

            
	 	 
	 	
              The
      Trustee shall exercise the powers, authorities and authorizations granted
      thereon by the Indenture with loyalty and at its sole discretion, and will
      not be liable for any damage caused by an error in such discretion,
      provided that the Trustee shall have acted in good faith and unless the
      Trustee shall have acted in negligence or malice.

            
	 	 

    

    
      	
              19.

            	
              Authority
      of the Trustee to Employ Agents

            
	 	 
	 	
              The
      Trustee may appoint agent/s to act in its place, whether an attorney or
      otherwise, in order to take or to participate in the taking of special
      actions required in relation to the trust and, without derogating from the
      generality of the aforesaid, instituting legal proceedings. The Trustee
      may also pay on the Company’s account the reasonable fees of any such
      agent and the Company shall reimburse to the Trustee, immediately upon its
      first demand, any such expense. The Trustee hereby undertakes to do all it
      can in order to give to the Company a prior notice of the appointment of
      such agents and to obtain its prior approval for such appointment, to the
      extent possible.

            

    

     

    
      
        
        

      

      
        -22-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	 	 
	 	
              The
      Trustee shall, to the extent possible, consult with the Company and try,
      to the extent possible, to take into consideration the Company’s
      position.

            
	 	 
	 	
              The
      Trustee may at any time delegate any and all of the trusts, powers,
      authorizations and authorities vested therein hereunder to other person or
      persons and any such delegation shall be made according to the terms and
      conditions (including the authority of an agent to appoint agent) that the
      Trustee shall deem fit, provided, however, that such delegation of powers
      may not release the Trustee from any liability to which it would have been
      subject if the delegation of powers had not occurred.

            
	 	 

    

    
      	
              20.

            	
              Indemnification
      of the Trustee

            
	 	 
	 	
              The
      Trustee will be entitled to receive indemnification from the Series A
      Bondholders or from the Company, as the case may be, in respect of any
      damage and/or loss and in respect of reasonable expenses that it has
      incurred in connection with actions that it performed by virtue of its
      duty according to the terms and conditions of the Indenture or upon the
      demand of the Series A Bondholders, provided that:

            
	 	 

    

    
      	
               
      

            	
              [a]

            	
              It
      will not be entitled to demand the indemnification in advance in respect
      of a matter that cannot be
postponed.

            

    

    
      	 	 	 
	
               
      

            	
              [b]

            	
              The
      Trustee shall be entitled to indemnification in respect of liability in
      torts to be charged to the Trustee, according to a final judgment or
      according to a closed settlement vis-à-vis a third party that is not a
      Bondholder, subject to that .

            
	 	 	 

    

    
      	
               
      

            	
              [c]

            	
              The
      Trustee shall have acted in good faith and such action was taken in the
      context of fulfillment of its duties.

            
	 	 	 

    

    
      	 	
              Without
      prejudice to the compensation rights available to the Trustee pursuant to
      the law and/or the Company’s obligations according hereto, the Trustee,
      its attorney, manager, agent or other person appointed by the Trustee in
      accordance herewith will be entitled to receive indemnification out of the
      funds that shall be received by the Trustee from the proceedings that it
      initiated and/or in another manner according hereto, in relation to the
      Trustee’s fees and to undertakings that they assumed in relation to the
      reasonable expenses that they incurred incidentally to performance of the
      trust or in connection with such actions which, in the opinion thereof,
      were required for performance of the aforesaid and/or in connection with
      exercise of powers and authorizations available by virtue hereof as well
      as in association with all types of legal proceedings, opinions of
      attorneys and other experts, negotiations, disputes, expenses, claims and
      demands in relation to any matter and/or thing done and/or not done in any
      manner in relation to the aforesaid, and the Trustee will be entitled to
      withhold the moneys in its possession and to pay the sums necessary for
      the payment of the said indemnification therefrom.

            
	 	 
	 	
              Whenever
      the Trustee shall be obligated, according to the terms and conditions of
      the Indenture and/or pursuant to a statute and/or an instruction of a
      competent authority and/or any law and/or upon the demand of the Series A
      Bondholders and/or upon the demand of the Company, to take any action,
      including, but not only, initiation of proceedings or the filing of claims
      upon the demand of the Series A Bondholders, as stated in the Indenture,
      the Trustee will be entitled to abstain from taking any such action until
      it shall receive, to its satisfaction, a letter of indemnification and/or
      bank guarantee and/or payment in kind from the Series A Bondholders or any
      thereof – from the Company or from any other person that shall be
      acceptable to the Trustee, in respect of any liability for damage and/or
      expenses that may be caused to both or anyone of the Trustee and the
      Company due to the performance of the said action. The aforesaid is with
      the exception of under circumstances in which an urgent action is
      required, that abstention from performance of which before receipt of a
      letter of indemnification as aforesaid will cause damage and/or loss to
      the Series A Bondholders and/or the Company. The aforesaid
      notwithstanding, in the event that it shall be required to initiate or
      take such proceedings or actions, the Company will deposit with the
      Trustee an amount that shall be determined by the Trustee as the projected
      amount of the Trustee’s expenses in association with the same. In the
      event that the Company shall not deposit the said sum on the date on which
      it is requested to do so by the Trustee, and in the opinion of the
      Trustee, the Company’s ability to cover the expenses involved in the
      initiation of proceedings or taking of actions by the Trustee is doubtful,
      the Trustee will immediately convene a meeting of the Series A Bondholders
      in order to confirm their responsibility for covering the expenses
      involved in the proceedings or actions that the Trustee shall initiate or
      take. In the event that the Series A Bondholders shall refuse to bear such
      expenses or abstain from giving a specific approval thereto, the Trustee
      shall be under no duty to initiate such proceedings or take such
      actions.

            

    

     

    
      
        
        

      

      
        -23-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	 	 
	 	
              If
      the Trustee shall be satisfied with an undertaking to indemnify, the
      Company or the Series A Bondholders, as the case may be, hereby undertake
      to indemnify the Trustee, immediately upon its first written demand, in
      respect of any damage and/or loss and/or expense (including fees of
      lawyers and professional experts), which shall be incurred by the Trustee
      due to any action taken or omission thereby according to the provisions of
      this Indenture and/or any other instruction that it shall receive from the
      Company and/or Series A Bondholders, as the case may be, and pursuant to
      the powers vested in the Trustee under the same, including to indemnify it
      in respect of any payment that it shall incur vis-à-vis any other person
      or pursuant to a final judgment or of any payment pursuant to a settlement
      agreed by the Company and/or Bondholders, as the case may be, or in
      respect of any payment pursuant to a judgment subject to appeal, including
      with leave, the due date of which precedes the finality of the
      proceedings, and all due to any action or demand directly or indirectly
      related to its trust.

            
	 	 
	
              21.

            	
              Notices

            
	 	 
	 	
              Any
      notice on behalf of the Company and/or the Trustee to the Series A
      Bondholders, shall be given in an announcement published in two (2) daily
      newspapers of wide circulation, issued in Israel in the Hebrew language or
      by dispatch of a notice by registered mail according to the last address
      of the Series A Bondholders as registered in the Series A Bondholders’
      Register, and any notice that shall be so published or sent shall be
      deemed to have been delivered to the Series A Bondholders on the day of
      its publication as aforesaid or three (3) days after its deposit in the
      post office, as the case may be. Furthermore, should the Bonds be listed
      for trade, then, in addition to the publication of the notice in the
      newspapers as aforesaid, the Company shall announce an immediate report to
      the Securities Authority and the TASE in respect of each such
      notice.

            
	 	 
	 	
              Copies
      of notices and invitations which the Company shall give to the Series A
      Bondholders, shall also delivered by the Company to the
      Trustee.

            
	 	 
	 	
              Copies
      of notices and invitations which the Trustee shall give to the Series A
      Bondholders, shall also delivered by the Trustee to the
      Company.

            
	 	 

    

    
      	
              22.

            	
              Waiver,
      Settlements and/or Modifications of the
  Indenture

            

    

    
      	 	 	 
	
               
      

            	
              22.1

            	
              Subject
      to the provisions of the Securities Law, the Trustee of the Series A Bonds
      shall be entitled, from time to time and at any time, or in any other
      case, if it was convinced that it shall not materially prejudice the
      rights of the Bondholders, to waive any breach or non-fulfillment of any
      of the terms and conditions of the Bonds or the Indenture by the
      Company.

            
	 	 	 

    

    
      	
               
      

            	
              22.2

            	
              Subject
      to the provisions of the Securities Law, and with prior approval that
      shall be granted at a general meeting of the Series A Bondholders, by a
      majority of 75% of those participating in the vote, which was attended by
      the holders of, personally or by proxy, at least fifty percent (50%) of
      the par value of the unpaid balance of the Bond Principal, or at an
      adjourned meeting, which was attended by the holders of, personally or by
      proxy, at least ten percent (10%) of the said balance, the Trustee may,
      without derogating from its power under the previous paragraph, either
      before or after the Bond Principal shall be due and payable, compromise
      with the Company in connection with any right or claim of the Bondholders
      or any one of them and agree with the Company on any settlement of their
      rights, including to waive any right or claim of the Trustee and/or the
      Bondholders or any of them vis-à-vis the
  Company.

            

    

    
      
        
        

      

      
        -24-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	
               
      

            	
              22.3

            	
              Subject
      to the provisions of the Securities Law and any law, the Trustee and the
      Company may, either before or after the Bond Principal shall be due and
      payable, modify the Indenture and/or the terms and conditions of the
      Bonds, without obtaining the consent of the meeting of the Series A
      Bondholder, provided that the Trustee was convinced that the modification
      does not prejudice the rights of Series A the Bondholders. It is clarified
      that a modification of the terms of payment of Principal and interest, a
      modification of the date of payment of the Principal and interest (except
      for technical modification of the payment dates), omitting any of the
      causes for acceleration that are specified in this Indenture or omitting
      any of the reports that the Company undertook to deliver to the Trustee in
      this Indenture shall be deemed to be modifications that materially
      prejudice the rights of the Series A Bondholders, as provided in this
      section, and therefore may only be modified by the Trustee with the
      consent of the Series A Bondholders through a special
      resolution.

            
	 	 	 
	 	 	
              Subject
      to the aforesaid, the modification of the terms and conditions of the
      Series A Bonds and/or the Indenture shall be approved through a special
      resolution adopted at a general meeting of the Series A Bondholders, which
      was attended by Series A Bondholders of, personally or by proxy, at least
      fifty percent (50%) of the par value of the unpaid balance of the Bond
      Principal, or at an adjourned meeting, which was attended by the holders
      of, personally or by proxy, at least ten percent (10%) of the said
      balance

            
	 	 	 

    

    
      	
               
      

            	
              22.4

            	
              The
      Company shall deliver an immediate report on any modification of the
      Indenture and/or the terms and conditions of the Bonds under this
      section.

            

    

    
      	 	 	 
	
               
      

            	
              22.5

            	
              In
      any event of exercising the Trustee’s right under this Section 22, the
      Trustee may demand of the Series A Bondholders to deliver the Bond
      Certificates thereto or to the Company, for the addition of a comment
      thereon regarding any settlement, waiver, modification or amendment as
      aforesaid and at the Trustee’s demand the Company shall add such
      comment.

            
	 	 	 

    

    
      	
              23.

            	
              Release

            
	 	 
	 	
              Once
      it is proven, to the Trustee’s satisfaction, that all of the Series A
      Bonds have been paid or redeemed or once the Company deposits with the
      Trustee, in escrow, amounts of money sufficient for redemption, and once
      it is proven to the Trustee’s satisfaction that all of the liabilities and
      expenses made or incurred by the Trustee in connection with This Indenture
      and pursuant to its instructions have been paid in full, then the Trustee
      shall be obligated, pursuant to the Company’s first demand, to act upon
      moneys deposited for Series A Bonds not sought to be redeemed, pursuant to
      the conditions fixed herein.

            
	 	 

    

    
      	
              24.

            	
              Appointment
      of a New Trustee and Expiration of the Trustee’s
    Office

            

    

    
      	 	 	 
	
               
      

            	
              24.1

            	
              The
      provisions of the Securities Law shall apply to the Trustee’s term of
      office and the expiration thereof and to the appointment of a new
      trustee.

            

    

    
      	 	 	 
	
               
      

            	
              24.2

            	
              The
      Trustee will be entitled to resign from its position at any time it sees
      fit after giving a three (3) months prior written notice to Company, which
      shall specify the reasons for the resignation. As from the listing for
      trade of the Series A Bonds, the Trustee’s resignation shall be of no
      force or effect unless approved by the court and as from the day to be
      determined for this purpose with the court’s approval as
      aforesaid.

            

    

     

    
      
        
        

      

      
        -25-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	 	 	 
	 	 	
              The
      Securities Authority may file with the court a petition to terminate the
      Trustee’s office, pursuant to Section 35N of the Securities
      Law.

            
	 	 	 
	 	 	
              The
      Trustee shall cease from holding its office if it shall transpire that it
      is prevented from further holding its office due to modification in the
      provisions of the Securities Law or the governing law with respect to the
      qualification to act as a trustee, including in the event that such
      prevention shall have been caused in relation to the listing for trade on
      TASE of the Bonds. For this purpose, “prevention” shall also include a
      demand by the Securities Authority to terminate the Trustee’s office. In
      such case, a new trustee to be proposed by the Company shall be appointed
      through a resolution of the meeting of the Series A Bondholders, which
      shall be adopted by the majority required in Section 24.3
      below.

            
	 	 	 
	 	 	
              The
      Company shall file an immediate report on any such event in relation to
      the Trustee’s office.

            
	 	 	 

    

    
      	
               
      

            	
              24.3

            	
              The
      holders of 10% of the par value of the unpaid balance of the Bond
      Principal are entitled to convene a general meeting of Series A
      Bondholders, which is entitled to resolve, by the vote of the holders of
      at least fifty percent (50%) of the said balance or of the representatives
      thereof, to remove the Trustee from its
office.

            

    

    
      	 	 	 
	
               
      

            	
              24.4

            	
              In
      the event of expiration of the Trustee’s term of office, the court is
      entitled to appoint another trustee for a period and under terms and
      conditions that it shall deem fit. The Trustee, whose term of office
      expired, shall continue to exercise its office until the appointment of
      another trustee.

            
	 	 	 

    

    
      	
               
      

            	
              24.5

            	
              Any
      new trustee will have the same powers, authorities and other
      authorizations as the Trustee, whose term of office expired, and the new
      trustee will be able to act, for all intents and purposes, as if it had
      been appointed as the Trustee from the outset.

            
	 	 	 

    

    
      	
              25.

            	
              Series
      A Bondholders Meetings

            
	 	 
	 	
              Meetings
      of Series A Bondholders shall be conducted as set forth in the Second
      Schedule hereto.

            
	 	 

    

    
      	
              26.

            	
              Reporting
      by the Company to the Trustee

            
	 	 
	 	
              The
      Company shall deliver to the Trustee, so long as not all of the Series A
      Bonds have been paid (including linkage differences
    thereon):

            
	 	 

    

    
      	
               
      

            	
              26.1

            	
              Audited
      financial statements of the Company for the financial year that ended on
      December 31 of the previous year and periodical statements, immediately
      after the publication thereof.

            

    

    
      	 	 	 
	
               
      

            	
              26.2

            	
              Any
      interim financial statement and any quarterly statement, immediately after
      the publication thereof.

            
	 	 	 

    

    
      	
               
      

            	
              26.3

            	
              Any
      immediate report shortly after the publication
  thereof.

            

    

    
      	 	 	 
	
               
      

            	
              26.4

            	
              Any
      report that it is required to file with the Securities Authority and/or
      TASE, immediately upon the filing thereof.

            
	 	 	 

    

    
      	
               
      

            	
              26.5

            	
              Certifications
      by the senior financial officer, a director and a manager in the Company,
      no later than April 30 of each year, relating to the 12 months period that
      ended on December 31 of the previous year, that, to the best of their
      knowledge, the Company is in no breach of terms and restrictions under
      this Indenture (including the terms and conditions of the Bonds), unless
      and to the extent so specified in the
  certifications.

            

    

    
      	 	 	 

    

     

    
      
        
        

      

      
        -26-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	
               
      

            	
              26.6

            	
              At
      the Trustee’s written demand, a written certification, which shall be
      signed by the Company’s accountant, that all of the payments to the Series
      A Bondholders were timely made, and the balance of the par value of the
      Series A Bonds in circulation.

            
	 	 	 

    

    
      	
               
      

            	
              26.7

            	
              For
      the purpose of this Section 26, any immediate or periodical report or
      statement that was published by the Company shall be deemed to have been
      delivered to the Trustee in accordance with the terms and conditions of
      this Indenture and the Company shall be exempt from delivering a hard copy
      thereof to the Trustee.

            

    

    
      	 	 
	
              27.

            	
              Governing
      Law

            
	 	 
	 	
              The
      Series A Bonds are subject to the provisions of the Israeli law. With
      respect to any matter not mentioned herein and in any case of
      contradiction between the provisions of the law and the provisions of the
      Indenture, the parties shall act according to the provisions of the
      law.

            
	 	 
	 	
              The
      offering and purchase of the offered Series A Bonds and all matters
      resulting from and/or in connection to the private placement and the
      offering thereunder and purchase of the Series A Bonds, shall be governed
      by the laws of the State of Israel only and no other laws shall apply and
      the exclusive and sole jurisdiction in any matter resulting therefrom
      and/or in connection thereto is granted solely to the competent courts in
      Tel Aviv, Israel and to them only.

            

    

    

    
      	
              28.

            	
              Addresses

            
	 	 
	 	
              The
      addresses of the parties shall be as specified in the preamble to this
      Indenture or any other address of which an appropriate written notice
      shall be given to the other party. The Company may not provide an address
      for receipt of notice outside of the borders of Israel. The address of the
      Company hereunder or any other address in Israel of which the Company
      shall give notice from time to time shall be also used as the address for
      service of legal
      process on the Company.

            
	 	 

    

    
      	
              29.

            	
              Authorization
      for Magna

            
	 	 
	 	
              Pursuant
      to the provisions of the Securities (Electronics Signature and Reporting)
      Regulations, 5763-2003, the Trustee hereby authorizes the competent person
      for this purpose on behalf of the Company to electronically report to the
      Securities Authority on This
Indenture.

            

    

    

    In
witness whereof the parties have hereunto set their hands:

    

    
      	
              __________________

              Xfone,
      Inc.

            	 
      	
              ___________________________

              Ziv
      Haft Trusts Company Ltd.

            

    

    

    I, the
undersigned, Alon Reisser, Adv., confirm that this Indenture was signed by
Xfone, Inc. via Mr. Guy Nissanson and that his signature is binding upon Xfone,
Inc.

    

    _______________________________

    Alon
Reisser, Adv.

    
      
        
        

      

      
        -27-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    Xfone,
Inc.

    First
Addendum

    Series A
Bonds

    A Series
A Bond, payable in eight (8) equal installments in 2008 to 2015 (inclusive) and
bearing annual interest and linkage differences as specified below is hereby
issued.

     

    Registered
Series A Bonds

     

    Number 1
– Mizrahi Tefahot Nominee Company Ltd.

     

    Annual
Interest Rate: 9%

     

    Par Value
NIS 100,382,100

     

    The
Series A Bonds are linked (Principal and interest) to the Consumer Price Index
of October 2007.

     

    
      	
              1.

            	
              This
      certificate attests that Xfone, Inc. (hereinafter: the “Company”) shall pay to
      the Mizrahi Tefahot Nominee Company Ltd. or to any person that shall be
      the registered owner of this Bond (hereinafter: the “Series A Bondholder”) in
      eight (8) equal annual installments on December 1 of each one of the years
      2008 to 2015 (inclusive) the full Principal of the par value of the Series
      A Bonds in circulation, and all subject to the terms specified in the
      terms and conditions overleaf.

            

    

    
      	 	 
	
              2.

            	
              The
      payments on account of the interest for the Bonds shall be made to the
      Bondholders whose names shall be registered in the Company’s Bondholders
      Register as holders at the end of the day of May 19 and of November 18 of
      each year prior to the due date of such payment for the Series A Bonds
      (the “Record
      Date”). Notwithstanding the aforesaid, the last payment of the
      interest and the last payment of the Principal shall be made against the
      delivery of the Bond Certificates to the Company at its registered office
      or in any other place notified by the Company, no later than five (5)
      Business Days prior to the due date of the last
payment.

            
	 	 

    

    
      	
              3.

            	
              Series
      A Bonds are issued according to the indenture (hereinafter: the “Indenture”) of December
      13, 2007, which was signed between the Company and Ziv Haft Trusts Company
      Ltd. (hereinafter: the “Trustee”).

            

    

    
      	 	 
	
              4.

            	
              All
      of the Series A Bonds shall rank equally, pari passu, in
      connection with the Company’s undertakings pursuant to the Series A Bonds,
      with no right of preference or priority of the one over
      another.

            
	 	 

    

    
      	
              5.

            	
              This
      Series A Bond is issued subject to the terms and conditions specified
      overleaf and to the conditions specified in the
  Indenture.

            

    

    

    

    
      
        
        

      

      
        -28-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

     

    
      TRANSFER
OF THIS SECURITY DIRECTLY OR INDIRECTLY, WITHIN THE UNITED STATES OR TO OR FOR
THE ACCOUNT OR BENEFIT OF U.S. PERSONS IS PROHIBITED EXCEPT IN ACCORDANCE WITH
THE PROVISIONS OF REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933 (THE
"SECURITIES ACT") (RULE
901 THROUGH RULE 905, AND PRELIMINARY NOTES), PURSUANT TO REGISTRATION UNDER THE
SECURITIES ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION. HEDGING
TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE SECURITIES ACT.

    

    

    

    

    

    

    Signed
with the Company’s seal that was affixed on December 13, 2007

    

    

    

    
      	 
      
	
              Xfone
      Inc.

            

    

    
      
        
        

      

      
        -29-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    The Terms and Conditions
Overleaf

    
      	
              1.

            	
              General

               

            

    

    
      	
               
      

            	
              1.1

            	
              In
      this Series A Bond, the following terms shall have the meaning set forth
      next thereto, unless the context implies otherwise:

               

            

    

    
      	
              The
      “Company” and/or
      the “Issuer”:

               

            	
              Xfone,
      Inc.

            
	
              The
      “Indenture”:

               

               

            	
              The
      indenture signed between the Company and the Trustee on December 13 2007,
      including the annexes that are attached thereto and constitute an integral
      part thereof;

            
	
              The
      “Prospectus”:

            	
              The
      Company’s prospectus which shall be published, if published, for the
      purpose of, inter
      alia, the listing of the Series A Bonds on TASE, the removal of
      restrictions on resale of the Series A Bonds pursuant to Section 15C of
      the Securities Law, 5728-1968;

               

            
	
              “Bonds” or “Series A
      Bonds”:

            	
              Registered
      Series A Bonds of the Company, whose terms and conditions are specified in
      this Indenture, which shall be issued from time to time at the Company’s
      sole discretion;

               

            
	
              The
      “Trustee”:

            	
              Ziv
      Haft Trusts Company Ltd. and/or any entity that shall serve as trustee for
      the holders of the Series A Bonds from time to time according to this
      Indenture;

               

            
	
              “Register”:

            	
              The
      register of the holders of the Series A Bonds, according to the provisions
      of Section 7 of the First Addendum to this Indenture;

               

            
	
              “Holder of the Series A
      Bonds” and/or “Bondholder”:

            	
              A
      holder of Series A Bonds by a holding according to the meaning thereof in
      the Securities Law, although on any matter that requires the
      identification of a person as a holder of Series A Bonds, the definition
      shall include only a Registered Holder and a Non-Registered
      Holder;

               

            
	
              “Non-Registered
      Holder”:

            	
              The
      holder of an autonomous power of attorney from a transfer agent in respect
      of a certain number of Bonds or in respect of a certain par value amount
      of Bonds registered in its name in the Register (whereby the transfer
      agent’s proxy is not barred from exercising his discretion in the
      vote).

               

            

    

     

    
      
        
        

      

      
        -30-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	
              “Registered
      Holder”:

            	
              A
      person whose name is registered in the Register at the time being, and in
      the event that several joint holders are registered in the Register, the
      joint holder registered first in the Register, with the exception of a
      transfer agent;

               

            
	
              “Series A Bond
      Certificate”:

            	
              A
      Series A Bond Certificate, in the form attached hereto as the First
      Addendum;

               

            
	
              The
      “Law”:

            	
              The
      Securities Law, 5728-1968 and the regulations thereunder, as applicable
      from time to time;

               

            
	
              “Principal”:

            	
              The
      par value of the Series A Bonds;

               

            
	
              “Trading
    Day”

            	
              A
      day on which transactions are performed on TASE;

               

            
	
              “Business
      Day”:

            	
              A
      day on which the most
      banks in Israel are open for the performance of transactions;

               

            
	
              “TASE”:

            	
              The
      Tel Aviv Stock Exchange Ltd.

               

            
	
              “Consumer Price Index”
      (“Index”):

            	
              The
      price index known as the “consumer price index”, including fruit and
      vegetables, and which is published by the Central Bureau of Statistics and
      Economic Research in Israel, including the said index even if published by
      another official body or institution, and also including any other
      official index that shall replace it, regardless of whether or not it
      shall be based on the same data as the existing index. If it shall be
      replaced by another index to be published by such body or institution, and
      such body or institution shall not have determined the ratio between it
      and the replaced index, such ratio shall be determined by the Central
      Bureau of Statistics, and if such ratio shall not be determined as
      aforesaid, then the Trustee, in consultation with such economic experts as
      shall be chosen thereby, shall determine the same;

               

            
	
              The
      “Known
      Index”:

            	
              The
      last Consumer Price Index known;

               

            

    

     

    
      
        
        

      

      
        -31-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	
              The
      “Basic
      Index”:

            	
              The
      Consumer Price Index for the month of October, 2007, published on November
      15, 2007;

               

            
	
              The
      “Payment
      Index”:

            	
              The
      index known on the date of the making of any payment on account of the
      Principal or interest, although if the payment index is lower than the
      Base Index, the payment index will be the Base Index;

               

            
	
              “Issue”:

            	
              As
      defined in the preamble to this agreement;

               

            
	
              “Date of the
      Issue”:

            	
              December
      13, 2007

               

            

    

    
      	
               
      

            	
              1.2

            	
              This
      Bond is one of a series of registered Series A Bonds in a total par value
      of up to NIS 100,382,100. All of the Bonds of this series shall rank
      equally, pari
      passu, in connection with the Company’s undertakings pursuant to
      the Series A Bonds, with no right of preference or priority of the one
      over another.

               

            

    

    
      	
               
      

            	
              1.3

            	
              The
      Company shall take action in order that the Bonds shall be listed for
      trade on TASE, subject to the provisions of any law.

               

            

    

    
      	
              2.

            	
              Series
      A Bond Principal Payment Date

            
	 	 
	 	
              Subject
      to the other terms and conditions of the Bonds, the Series A Bond
      Principal shall be paid in eight (8) equal annual installments, on
      December 1 of each one of the years 2008 to 2015 (inclusive). The Series A
      Bond Principal is linked to the Consumer Price Index as specified below in
      Section 4.

               

            

    

    
      	
              3.

            	
              The
      Interest

               

            

    

    
      	
               
      

            	
              3.1

            	
              The
      Company undertakes to pay to the Series A Bondholders annual interest of
      9% (the “Interest for the
      Pre-Listing Period”). The Interest in respect of the Series A Bonds
      shall be paid in biannual installments on June 1st and December 1st of
      each one of the years 2008 until 1015 (inclusive). The Interest for the
      Pre-Listing Period shall be calculated and paid as follows:

               

            

    

    
      	
               
      

            	
              3.1.1

            	
              The
      first interest payment, at the rate of 4.192%, for the period starting on
      the Date of the Issue until May 31, 2008, shall be made on June 1, 2008
      (the “First Interest
      Period”).

               

            

    

    
      	
               
      

            	
              3.1.2

            	
              Commencing
      from the second interest payment, the biannual interest payments will be
      at the rate of 4.5%.

            
	 	 	 

    

    
       

      
        	
                 
      

              	
                 

              	
                
                  Notwithstanding
      the aforesaid in Sections 3.1.11 and 3.1.2 above, in the event that the
      Company lists the Series A Bonds for trade on TASE, as specified in
      Section 2.4 of the Indenture, then, as from the date of listing of the
      Series A Bonds’ for trade on TASE and insofar as the Series A Bonds are
      actually listed for trade on TASE, the interest rate that the unpaid
      balance of the Series A Bonds shall bear will be 8% (a deduction in the
      annual rate of 1% (based on a 365-day a year calculation) (the “Reduced Interest”), for
      the period commencing on the date of listing of the Series A Bonds for
      trade on TASE and ending on the due date of the Series A Bonds. Insofar as
      the Series A Bonds shall be listed for trade on TASE as aforesaid, the
      Company shall give a notice to TASE concerning the effective date for such
      change in interest, the payment date and the exact interest rate to be
      paid for interest period until listing for trade. The listing for trade of
      the Series A Bonds shall be done shortly after the publication of the
      Prospectus, but in any case no earlier than five (5) Business Days after
      the publication date of the Prospectus as aforesaid.
     

              

      

       

      __________________________________

        1 The original
document stated "2.1.1" due to typographical error.

      
        
          
          

        

        
          -32-

          
            

          

        

        
          [Free
Translation from Hebrew]

        

      

      
        	 	 	  

                Only
      persons holding Series A Bonds at the end of the fourth Trading Day after
      the publication of the Prospectus (the “Effective Date for Payment of
      the Interest for the Pre-Listing Period”) shall be entitled to the
      payment of the Interest for the Pre-Listing Period, which shall be paid
      twelve (12) days after the Effective Date for Payment of the Interest for
      the Pre-Listing Period.
       

                It
      is hereby clarified that on the date of the first interest payment which
      shall occur after the listing of the Series A Bonds, the Bondholders will
      be entitled to payment of the Reduced Interest, calculated according to
      the interest period that shall remain commencing from the date of the
      listing of the Series A Bonds until the date of the first interest payment
      which shall occur after the listing as aforesaid.
       

                Up
      until the date of listing on TASE, in any event in which due to an action
      initiated by the Company or for any other reason, the rating of the Series
      A Bonds shall have dropped from the rating given to the Series A Bonds on
      the date of the first allotment thereof, A3 of Midroog (or a rating
      parallel thereto by another rating company) to a rating of Baa1 of Midroog
      (or a rating parallel thereto of another rating company), the annual
      interest rate to be borne by the Series A Bonds shall be increased by one
      quarter percent (0.25%).
       

                The
      last payment of the interest for the Series A Bonds shall be made on
      December 1, 2015, together with the payment of the Series A Bond Principal
      and against the delivery of the Series A Bond Certificates to the Company
      (the “Final Payment
      Date”).
       

                Payment
      of income tax shall be deducted from any interest payment as required by
      law.

              

      

    

    
             

    

    
      
        
          	
                   
      

                	
                  3.2

                	
                  If
      the Series A Bonds are not listed for trade on TASE within 12 months from
      the Date of the Issue, the following provisions shall
    apply:

                

        

         

      

    

    
      	
               
      

            	
              3.2.1

            	
              Within
      one Business Day from the end of the twelve (12) months period commencing
      on the Date of the Issue, the Company shall notify to the Series A
      Bondholders (with a notice to the Bondholders as set forth in Section 21
      of the Indenture), TASE and the Trustee that the listing of the Series A
      Bonds for trade on TASE was not completed. In this notice, the Company
      shall also notify the early redemption date, which shall be the first
      Business Day after 30 days from the date of such notice (the “Early Redemption
      Date”).

               

            

    

    
      	
               
      

            	
              3.2.2

            	
              Any
      person holding Series A Bonds may (but shall not be required to) redeem
      the same, in whole or in part. Any Series A Bondholder, who shall desire
      to redeem the Bonds, in whole or in part, shall submit a written notice
      thereof on such form as shall be determined by the Company (the “Early Redemption
      Notice”) in addition to the Bond Certificate (if such was issued on
      the Bondholder’s name) as well as a certification on exemption from
      withholding tax at source, if applicable.

               

            

    

    
      
        
        

      

      
        -33-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	
               
      

            	
              3.2.3

            	
              As
      from the date on which the Company shall give such notice of the date of
      the notice of early redemption, an Early Redemption Notice may be given,
      subject to the provisions specified below.

            
	 	 	 
	 	 	
              Any
      Early Redemption Notice of a holder of Series A Bonds, which are
      registered on such holder’s name in the Company’s Bondholder Register,
      shall be given to the Company no less than ten days prior to the early
      redemption date, at the registered office of Xfone 018 Ltd. or in any
      other place notified by the Company.

               

              The
      Early Redemption Notice of a person holding Series A Bondholder via the
      TASE Members shall be given to the TASE Member via whom such person holds
      the Series A Bonds sought to be redeemed no less than ten Trading Days
      prior to the early redemption date.

            

    

     

    
      	
               
      

            	
              3.2.4

            	
              In
      accordance with the By-law of the TASE Clearing House, the following
      provisions shall apply to the giving of Early Redemption
      Notices:

               

            

    

    
      	
               
      

            	
              3.2.4.1

            	
              Until
      six days prior to the date of the early redemption, the TASE Member shall
      submit a written request to the Clearing House, separately for each
      subaccount, specifying the quantity in respect of which early redemption
      is requested.

               

              
                If
      a request for early redemption related to a quantity of Series A Bonds in
      excess of the quantity registered to the TASE Member’s credit in the
      subaccount to which the request refers, then it shall not be carried out
      and it shall be returned to the submitting member with a statement of the
      reason therefor.

                 

              

            

    

    
      	
               
      

            	
              3.2.4.2

            	
              No
      later than the second Trading Day after the day on which the TASE Member
      submitted to the Clearing House a request as specified in Subsection
      3.2.4.1 above, the Clearing House shall give notice to the nominee company
      specifying the total par value of the Series A Bonds for which requests
      for early redemption have been submitted, together with the certifications
      for exemptions from withholding tax at source.

               

            

    

    
      	
               
      

            	
              3.2.4.3

            	
              No
      later than the second Trading Day after the Clearing House gave notice to
      the nominee company as specified in Subsection 3.2.4.2 above, the nominee
      company shall give notice to the Company, specifying the total par value
      of the Series A Bonds for which requests for early redemption have been
      submitted, together with the certifications for exemptions from
      withholding tax at source.

               

            

    

    
      	
               
      

            	
              3.2.5

            	
              On
      the early redemption date of each requesting person, the Company shall
      redeem the Series A Bonds for which Early Redemption Notices were given,
      such that the holder of such Bonds shall be entitled to receive from the
      Company the sum of NIS 1 for each 1 NIS of Bonds to be redeemed by the
      Company on such date, linked to the index in accordance with the
      provisions of the Indenture. It is hereby clarified that, beyond the
      provisions of Section 3.2.6 below, the Company shall pay to the Series A
      Bondholders no payment and/or interest.

               

            

    

    
      	
               
      

            	
              3.2.6

            	
              The
      interest that shall be accumulated for the Bonds as from the date of the
      last interest payment before the early redemption date until the early
      redemption date shall be paid to the Series A Bondholders who elected to
      execute an early redemption pursuant to this section.

               

            

    

    
      
        
        

      

      
        -34-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	
               
      

            	
              3.2.7

            	
              Any
      Early Redemption Notice that was given to the Company or to the TASE
      Members may not be canceled or modified.

               

            

    

    
      	
               
      

            	
              3.2.8

            	
              It
      is hereby further clarified that the Company shall not redeem Bonds held
      by any Series A Bondholder who shall not give an Early Redemption Notice
      to the Company and such Bondholder will continue to hold the same subject
      to the provisions hereof.

               

            

    

    
      	
              4.

            	
              Linkage
      Terms of the Principal and Interest

            
	 	 
	 	
              The
      Bond Principal and the interest thereon shall be linked to the Consumer
      Price Index based on the Basic Index as follows:

               

              Should
      it transpire, on the date of making of any payment on account of the
      Principal and/or interest, that the Payment Index for such date had risen
      compared to the Basic Index, then the Company shall increase the Principal
      and/or interest payment, made thereby proportionately to the rate of
      change of the payment index versus the Basic Index, provided, however,
      that should it transpire that the Payment Index is identical to or lower
      than the Basic Index, then the Payment Index shall be the Basic
      Index.

               

              This
      linking method may not be modified.

            

    

     

    
      	
              5.

            	
              Principal
      and Interest Payments on the
Bonds

            

    

    
      	 	 	 
	
               
      

            	
              5.1

            	
              The
      payments of the interest shall be paid to the Bondholders on the dates and
      in accordance with the terms and conditions that are specified in Section
      3 above, to Bondholders whose names shall be registered as holders in the
      Company’s Register of Bondholders at the close of May 19 and November 18
      of each year prior to the date of making of each payment, except for the
      last payment of the interest and the last payment of the Principal, which
      shall be made against delivery of  Bond Certificates to the
      Company, either at its registered office or at any other place notified by
      the Company, no later than five (5) Business Days prior to the date
      scheduled for the last payment.

            
	 	 	 

    

    
      	
               
      

            	
              5.2

            	
              If
      the scheduled date for the making of any payment of Principal or interest
      occurs on a day that is not a baking Business Day, then the date shall be
      postponed to the next banking Business Day immediately thereafter without
      any additional interest. A banking Business Day is a day on which the
      banks in Israel are open for the transaction of
  business.

            

    

    
      	 	 	 
	
               
      

            	
              5.3

            	
              The
      payment of Principal and interest shall be made subject to the linkage
      terms stated in Section 4 above.

            
	 	 	 

    

    
      	
               
      

            	
              5.4

            	
              Any
      payment under the Bonds to entitled persons shall be made by checks or
      wire transfer to the bank account of the persons whose names shall be
      registered in the Register of Bondholders and which shall be stated among
      the details to be provided to the Company in advance and in writing, in
      accordance with the provisions of Section 5.5 below. If the Company shall,
      for any reason beyond its control, be unable to pay any amount to the
      persons entitled thereto, the provisions of Section 6 below shall
      apply.

            

    

    
      	 	 	 
	
               
      

            	
              5.5

            	
              A
      holder of a Bond who shall be interested in informing the Company of the
      details of the bank account for his crediting with payments pursuant to
      the Bonds as aforesaid, or modifying the details of the said account or
      his instructions with regard to the manner of payment, may do so by a
      notice in a registered letter to the Company. However, the Company shall
      only fulfill the instruction if the Company received it at least ten (10)
      days prior to the effective date for the making of any payment pursuant to
      the Bonds.

               

              
                In
      the event that the notice is tardily received by the Company, the Company
      shall only act in accordance therewith with respect to payments, the
      effective date for the making of which shall occur after the payment date
      close to the date of receipt of the notice.

              

            
	 	 	 

    

    
      
        
        

      

      
        -35-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	
               
      

            	
              5.6

            	
              In
      the event that the entitled person as aforesaid shall not have given the
      Company in advance and in writing details of his bank account, to the
      credit of which payments pursuant to the Bonds should be made, any such
      payment shall be effected by way of a check to be sent by registered mail
      to his last address as recorded in the Register of Bondholders. Dispatch
      of a check to an entitled person by registered mail as aforesaid shall be
      deemed, for all intents and purposes, as payment of the amount stated
      thereon on the date of mailing thereof, provided that it is cleared upon
      proper presentation thereof for collection.

               

            

    

    
      	
               
      

            	
              5.7

            	
              Any
      payment on account of Principal and/or interest, which shall be paid in a
      delay exceeding seven (7) Business Days from the date scheduled for the
      payment thereof pursuant to the Bond Certificate as aforesaid, for reasons
      that depend on the Company, shall bear arrears interest as defined below
      as from the date scheduled for the payment thereof until its actual
      payment date. For this purpose, the arrears interest shall be the maximal
      interest rate that shall be customary at that time at Bank Hapoalim Ltd.
      for debit balances in Israeli currency current accounts or checking
      accounts in which no credit facility is in force, whichever is
      higher.

               

            

    

    
      	
               
      

            	
              5.8

            	
              The
      transaction permit signed by Bank Hapoalim Ltd. shall apply, mutatis mutandis, to
      all of the interest matters directly and/or indirectly in connection with
      and/or in relation to the Series A Bonds.

               

            

    

    
      	
               
      

            	
              6.

            	
              Abstention
      from Payment for a Reason Beyond the Company's
    Control

            
	 	 	 
	 	 	
              Any
      sum that is due to the Holder of the Series A Bonds and was not paid in
      practice for a reason that is beyond the Company's control, while the
      Company was ready to pay this sum, shall cease to bear interest and
      linkage differentials from the date that was determined for its payment,
      whereas the Holder of the Series A Bond shall only be entitled to the sums
      he would have been entitled to on the date that was determined for the
      payment of the said payment on account of the Principal, the interest and
      the linkage differentials.

               

              The
      Company shall deposit in the hands of the Trustee, within 15 days from the
      date which was determined for payment of the said payment, the sum of the
      payment that was not paid for a reason beyond the Company's control, and a
      deposit as aforesaid shall be deemed as a removal of the said payment, and
      in the event of a removal of all that is due with respect to the Series A
      Bond, it shall be deemed as the payment of the Series A Bond as
      well.

               

              The
      Trustee shall invest any sum as aforesaid, in the framework of trust
      accounts in its name and to its order in favor of the said Bondholders, in
      such investments as it is allowed to make in accordance with the Indenture
      and the laws of the State of Israel, all as the Trustee shall deem fit and
      subject to the provisions of the law. Having done so, the Trustee shall
      not be liable to the entitled persons, due to such amounts, other than for
      the consideration received from the realization of investments, after
      deduction of the expenses associated therewith. The Trustee shall hold the
      aforementioned sums and invest them in the aforesaid manner until a year
      has passed from the Bonds’ Final Redemption Date. After the said date, the
      Trustee shall return the sums accrued in its hands, including profits
      deriving from the investment thereof, to the Company which shall hold such
      sums in escrow for the Bondholders.

            
	 	 	 

    

     

    
      	
               
      

            	
              7.

            	
              The
      Register of the Holders of the Series A
  Bonds

            

    

    
      
        
        

      

      
        -36-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

     

    
      	 	 	
              The
      Company shall hold and maintain a Register of Bondholders for each series,
      in which shall be recorded the names and addresses of the Bondholders,
      numbers, and the par value of the Bonds registered in their names. In
      addition, any transfer of title to the Bonds shall be recorded in the
      Register. The Trustee and any Bondholder shall be entitled, at any
      reasonable time, to review the aforesaid Register. The Company is entitled
      to close the Register from time to time for a period or periods that shall
      not exceed a total of thirty (30) days a year.

               

              The
      Company shall not be obligated to record in the Register any notice with
      respect to an explicit, implied or assumed Trust, or with respect to any
      pledge or encumber of any kind whatsoever or any right in equity, claim or
      offset or any other right, with respect to the Bonds. The Company shall
      only acknowledge the title of the person in whose name the Bonds were
      registered, provided that the legal successors, administrators or
      executors of the registered holder and any person who shall be entitled to
      the Bonds due to the bankruptcy of any registered holder (and if it is a
      corporation – due to its dissolution) shall be entitled to be registered
      as their holder, after providing proof that is satisfactory in the
      Company's opinion to prove his right to be registered as the Bonds'
      holder.

            
	 	 	 
	
               
      

            	
              8.

            	
              Split
      of Series A Bond Certificates and the Transfer
    thereof

            
	 	 	 

    

    
      	
               
      

            	
              [a]

            	
              Each
      Bonds Certificate may be split into a number of Series A Bonds
      Certificates in which the total par value of the Bonds is equal to the par
      value sum of the Series A Bonds that were included in the Certificate for
      which the split is being requested. A split of a Certificate as aforesaid
      shall be carried out by a split application signed by the registered
      holder of the same Series A Bonds for which the split is being requested,
      against handing over the Certificate for which the split is being
      requested to the Company. The split shall be carried out within thirty
      (30) days from the end of the month in which the Certificate was handed
      over together with the split application at the Company's office. The new
      Series A Bonds Certificates that shall be issued following the split shall
      each have par value sums in whole New Israeli Shekels. Any and all
      expenses entailed by the split, including levies, if any, shall be borne
      by the split applicant.

            
	 	 	 

    

    
      	
               
      

            	
              [b]

            	
              The
      Bonds may be transferred with respect to any par value sum, provided it is
      in whole New Shekels. Any transfer of the Bonds that is not carried out
      through the TASE trade, shall be carried out by a transfer deed prepared
      in the customary language for share transfers, properly signed by the
      registered holder or his legal representatives, as well as by the
      transferee or his legal representatives, which shall be delivered to the
      Company attached with Bonds Certificates that are transferred according to
      the transfer deed, and any other proof that is required by the Company for
      proving the transferor's right to transfer the Bonds. In the event that
      any mandatory payment applies to the transfer deed of the Bonds, the
      transfer applicant shall deliver proof with respect to its payment to the
      Company, which proof shall be to the Company's
    satisfaction.

            
	 	 	 
	 	 	
              It
      is hereby clarified that any and all expenses associated with the
      transfer, including levies, if any, shall apply solely to the transfer
      applicant.

               

            

    

    
      	
               
      

            	
              (1)

            	
              In
      the event of transfer of only part of the par principal amount of the
      Bonds in such Certificate, the Certificate shall first be split according
      to the provisions of Section [A] above into several Bond Certificates as
      called for thereby, such that the sum total of all principal amounts
      stated therein be equal to the par principal amount of such Bond
      Certificate.

               

            

    

    
      	
               
      

            	
              (2)

            	
              After
      all the aforesaid terms are fulfilled, the transfer shall be recorded in
      the Register.

               

            

    

    
      	
               
      

            	
              (3)

            	
              All
      the expenses and the fees that are entailed by the transfer shall apply to
      the transfer applicant.

               

            

    

    
      	
               
      

            	
              9.

            	
              Receipts
      as Proof

            
	 	 	 
	 	 	
              Without
      derogating from any other term of the Bonds' terms, a signed receipt by
      any Holder of a Series A Bond shall constitute as proof of the full
      removal of any payment that was made by the Company due to that Series A
      Bond.

               

            

    

    
      
        
        

      

      
        -37-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	
               
      

            	
              10.

            	
              Replacement
      of Series A Bond Certificates

            
	 	 	 
	 	 	
              In
      the event that this Series A Bond Certificate shall become worn out, lost
      or destroyed, the Company shall be entitled to issue a new Series A Bond
      Certificate in its stead under the same terms. Taxes and other levies as
      well as other expenses that are entailed in issuing the new Certificate,
      shall apply to the person requesting the aforesaid Certificate (including
      expenses in connection with proving his title to the bond and in
      connection with indemnification and/or insurance coverage that the Company
      shall request, if it shall so request in connection therewith). In the
      event of wear and tear, the worn out certificate shall be returned to the
      Company prior to the new certificate being issued.

               

            

    

    
      	
               
      

            	
              11.

            	
              Taxation

            
	 	 	 
	 	 	
              For
      details about taxation of the Holders of the Series A Bonds, the
      Bondholder is referred to the Third Addendum to the
    Indenture.

            

    

    
      
        
        

      

      
        -38-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	
               
      

            	
              Xfone,
      Inc.

            

    

    
      	
               
      

            	
              Second
      Addendum

            

    

    
      	
               
      

            	
              Meetings of the
      Holders of the Series A Bonds

               

            

    

    
      	
              [a]

            	
              The
      Bonds Trustee or the Company is entitled to convene the Bondholders to a
      Bondholders meeting. In the event that the Company convenes such a
      meeting, it must immediately send a written notice to the Trustee with
      respect to the place, day and time in which the meeting will take place as
      well as with respect to the matters that will be discussed in the meeting.
      Meetings shall take place in Israel. If no notice with respect to another
      place for convening the meeting has been given, the meeting shall take
      place at the offices of the subsidiary Xfone 018 Ltd. or at another place
      agreed upon between the Trustee and the Company.

               

            

    

    
      	
              [b]

            	
              The
      Company shall be obligated to convene a meeting as aforesaid according to
      a written request by the Trustee or by the holders of at least ten percent
      (10%) of the par value of the unpaid balance of the Bonds’ principal who
      addressed the Trustee with a reasoned written request for convening a
      meeting by the Trustee, a reasonable time before the date they request for
      convening the meeting, and they have been refused by the Trustee, or their
      request has been ignored in a way that constitutes a breach of the
      Trustee's undertakings according to this Indenture and according to the
      law. In the event that the persons seeking to convene the meeting are
      Holders of Series A Bonds, the Company and/or the Trustee, as the case may
      be, shall be entitled to require of such persons, including as a
      precondition, indemnification for the reasonable expenses that are
      involved in the matter. It is clarified that the Company's right to
      indemnification from the requesting persons is conditioned on that the par
      value balance of the Series A Bonds in circulation, represented by the
      requesting persons, is lower than 50%.

               

            

    

    
      	
              [c]

            	
              With
      respect to each Bondholders meeting, the Bondholders and the Trustee shall
      be given an advance notice of at least fourteen (14) days, which shall
      describe the place, date and the time of the meeting, as well as a general
      indication of the issues that shall be discussed in the meeting. In the
      event of convening the meeting by the Trustee, a notice as aforesaid shall
      be given to the Company as well.

               

            

    

    
      	
              [d]

            	
              In
      the event that the objective of the meeting is for the purpose of adopting
      a special resolution, the advance notice shall be of at least 21 days and
      shall also include a summary of the proposed resolution.

               

            

    

    
      	
              [e]

            	
              The
      Trustee shall be allowed to shorten the advance notices periods if it
      believes that a postponement in convening the meeting constitutes an
      infringement to the Bondholders' rights.

               

            

    

    
      	
              [f]

            	
              Any
      notice on behalf of the Company or the Trustee to the Bondholders, may be
      given by an announcement published in two (2) Israeli widespread Hebrew
      daily newspapers, or by sending the notice to each Bondholder via
      registered mail according to his last known address registered in the
      Register, and any notice that is published or sent as aforesaid shall be
      deemed as delivered on the day it is published in the newspaper or three
      (3) business days after it was delivered by mail, as the case may
      be.

               

            

    

    
      	
              [g]

            	
              In
      addition, after the listing of the Series A Bonds, in the event of
      convening of a meeting by the Company or the Trustee, the Company shall
      publish an immediate report.

               

            

    

    
      	
              [h]

            	
              Prior
      to listing the Series A Bonds – any resolution lawfully adopted in a
      meeting convened as aforesaid, shall not be disqualified, in the event
      that the meeting was mistakenly not informed of to holders of less than
      ten percent (10%) of the par value of the unpaid balance of the Bonds
      Principal. In the event that the Series A Bonds are listed – any
      resolution lawfully adopted in a meeting convened as aforesaid shall not
      be disqualified, in the event that the meeting was mistakenly not informed
      of to any of the Series A Bondholders.

               

            

    

    
      	
              [i]

            	
              The
      chairman of the meeting shall be a person appointed by the Trustee. In the
      event that the Trustee shall not have appointed a chairman as aforesaid or
      that the person appointed by the Trustee is absent from the meeting, the
      present Bondholders (or their proxies) shall select a chairman from their
      number. The Bondholders meeting shall commence once it is proven that the
      required legal quorum for beginning the discussion is
present.

               

            

    

    
      	
              [j]

            	
              Subject
      to the legal quorum required for terminating a Trustee according to the
      law, in the Bondholders meetings, to the exclusion of what is described in
      Section N below, the legal quorum shall constitute of at least two (2)
      Bondholders who are present in person or by a proxy, who jointly hold or
      represent at least ten percent (10%) of the par value of the unpaid
      balance of the Bonds Principal at that time.

               

            

    

    
      
        
        

      

      
        -39-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	
              [k]

            	
              In
      the event that within half an hour from the time that was set for the
      beginning of the meeting there is no such legal quorum, the meeting shall
      be postponed to the same day in the following week, at the same place and
      at the same time (without the need of an additional notice), and in the
      event that that day is not a business day – the next business day after
      that day (without the need of an additional notice), or to a different
      day, place and time, as the person convening the meeting shall determine,
      under condition that the person convening the meeting has informed at
      least seven (7) days in advance with respect to the holding of an
      adjourned meeting as aforesaid, in the same manner in which the notice
      with respect to the original meeting was given, and shall mention that if
      there is no legal quorum at the adjourned meeting as aforesaid, the legal
      quorum shall be two (2) Bondholders that present in person or by their
      proxies, without consideration of the par value of the Bonds they hold. A
      notice as aforesaid may also be given in the notice convening the meeting
      that was adjourned.

               

            

    

    
      	
              [l]

            	
              In
      the event that there is no legal quorum in the postponed meeting as
      aforesaid, two Bondholders that are present in person or by their proxies,
      who hold any quantity of Bonds, shall be the legal quorum.

               

            

    

    
      	
              [m]

            	
              According
      to the agreement of the holders of the majority of the par value of the
      unpaid Bonds Principal balance that are present at the meeting in person
      or by their proxies, and there is a legal quorum present at the meeting,
      the chairman is entitled to, and according to the demand of the meeting he
      must, postpone the meeting from time to time and from place to place, as
      the meeting decides. In the event that the meeting has been postponed for
      ten (10) days or more, notice with respect to the adjourned meeting shall
      be given in the same manner in which a notice is given with respect to the
      first meeting (including an immediate report). Apart from the aforesaid,
      the Bondholders shall not be entitled to receive any notice with respect
      to an adjourned meeting and/or with respect to the matters that will be
      discussed in the adjourned meeting. No matters shall be discussed in the
      adjourned meeting other than matters that could have been discussed in the
      meeting in which the adjournment was decided upon.

               

            

    

    
      	
              [n]

            	
              At
      a meeting convened for the adoption of any one of the resolutions
      specified below ("Special
      Resolution"), legal quorum shall be formed upon the presence at the
      meeting of the holders of at least fifty percent (50%) of the par value of
      the unpaid balance of the Bond Principal or, at an adjourned meeting, upon
      the presence of the holders, in person or by proxy, of at least ten
      percent (10%) of the aforesaid balance:

               

            

    

    
      	
               
      

            	
              [1]

            	
              A
      change of the Indenture;

               

            

    

    
      	
               
      

            	
              [2]

            	
              Any
      material amendment, change or arrangement of the Bondholders' rights,
      whether these rights derive from the Bonds, the Indenture or otherwise, or
      any material settlement or waiver with respect to these
      rights;

               

            

    

    
      	
               
      

            	
              [3]

            	
              Setting
      up the Bonds for immediate payment;

               

            

    

    
      	
              [o]

            	
              It
      is hereby clarified that in the legal quorum for the purpose of holding
      the general meeting for adopting a Special Resolution and in the number of
      voters for a Special Resolution as aforesaid, there will be no taking into
      consideration of the votes of Bondholders that are holders of control in
      the Company, or corporations that are controlled by the holders of control
      in the Company, as these terms are defined in the Securities Law, to the
      exclusion of whoever of the aforementioned that is an investor who is
      considered one of the investors listed in the First Addendum to the
      Securities Law (for the matter of Section 15A(b)(1) of the Securities
      Law), due to Bonds that he is not holding for himself, and that his vote
      due to these Bonds shall be taken into consideration.

               

            

    

    
      	
              [p]

            	
              The
      voting method in the meetings of the Holders of Series A Bonds of the
      Company, if and as long as no detailed guidelines and/or arrangements are
      issued in the TASE clearinghouse's by-laws with respect to voting in the
      meetings of companies that were incorporated outside of Israel and are
      issued on TASE, shall be as detailed below:

               

            

    

    
      	
               
      

            	
              The
      following procedure shall apply in any case of convening a general meeting
      of the Holders of Series A Bonds with respect to Non-registered
      Holders:

               

            

    

    
      
        
        

      

      
        -40-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	
               
      

            	
              Holders
      of the Series A Bonds for whom a Series A Bond is registered with a TASE
      member, which Series A Bond is included in the Series A Bonds that are
      registered in the name of the transfer agent who shall seek to vote at a
      general meeting, shall approach the TASE member with which their right to
      a Series A Bond is registered as aforesaid and request that the TASE
      member act, through the TASE clearinghouse, to receive a power of attorney
      from the transfer agent in their name or in the name of an authorized
      representative on their behalf.

               

            

    

    
      	
               
      

            	
              A
      Holder of a Series A Bond for whom a Series A Bond is registered with a
      TASE member may participate and vote at a meeting only if he presents a
      power of attorney as aforesaid, and he may not prove his title and
      participate in a vote by way of presenting proof of title (as this term is
      defined in the Companies Law) from the TASE member with respect to his
      holdings of Series A Bonds.

               

            

    

    
      	
               
      

            	
              The
      transfer agent shall approach the TASE clearinghouse and request that the
      clearinghouse approve that the power of attorney requests that were
      transferred to the clearinghouse as aforesaid, according to a list of the
      desired quantity with each clearinghouse member, were indeed held, by the
      clearinghouse members as detailed in the list. Once the approval of the
      clearinghouse is received as aforesaid, the transfer agent shall present
      to the Holders of the Series A Bonds powers of attorney according to the
      power of attorney requests, in which the transfer agent shall authorize
      each of the Non-registered Holders of the Series A Bonds to vote in the
      general meeting according to his discretion due to the sum of the par
      value of a holder as aforesaid, as well as note that each of the
      Bondholders is entitled to deliver to the Company by the date of the
      meeting a power of attorney on his behalf in which he authorizes another
      person to vote in his name.

               

            

    

    
      	
               
      

            	
              If
      and insofar that guidelines and/or detailed arrangement shall be issued in
      the clearinghouse by-laws with respect to voting in meetings of companies
      that were incorporated outside of Israel and are issued on the Tel Aviv
      Stock Exchange Ltd., the provisions and/or arrangements as aforesaid shall
      apply subject to their adjustment to the laws of the State of Nevada, and
      under condition that the Trustee is convinced that the changes and
      adjustments according to this paragraph in this Section P do not harm the
      Bondholders' rights.

               

            

    

    
      	
              [q]

            	
              The
      Bondholders are entitled to participate and vote at each general meeting
      through proxies. At each Bondholder's vote, the
      vote shall be conducted according to a count of votes, such that each
      Bondholder or his proxy shall be entitled to one vote for each par value
      NIS 1 of the total unpaid par Principal of the Bonds by virtue of which he
      is entitled to vote. In the event of joint holders, the only vote accepted
      shall be that of the person requesting to vote that is registered first in
      the Register, whether in person or through a proxy.

               

            

    

    
      	
              [r]

            	
              A
      Bondholder or his proxy may vote part of his votes for a certain proposed
      resolution, and another part against, and due to another part to abstain,
      all as he deems fit.

               

            

    

    
      	
              [s]

            	
              The
      Trustee that participates in the meeting according to the Company's
      invitation, shall participate with no voting rights.

               

            

    

    
      	
              [t]

            	
              The
      required majority for adopting an ordinary resolution of the general
      meeting is an ordinary majority of the number of votes that are
      represented in the meeting and are voting for or against. The required
      majority for adopting a special resolution in a meeting as aforesaid in
      Section [N] above is a majority of no less than 75% of the number of votes
      that are represented in a vote as aforesaid.

               

            

    

    
      	
              [u]

            	
              A
      resolution to change the Indenture shall be adopted by a special
      resolution and subject to the provisions of the Securities
      Law.

               

            

    

    
      	
              [v]

            	
              The
      declaration of the chairman with respect to the adoption or rejection of a
      resolution, and the record on this matter in the minutes of the meeting,
      shall serve as conclusive evidence of such fact.

               

            

    

    
      
        
        

      

      
        -41-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	
              [w]

            	
              A
      letter of appointment that appoints a proxy shall be in writing and shall
      be signed by the principal or by his attorney who is duly authorized in
      writing to do so. In the event that the principal is a corporation, the
      appointment shall be carried out by a written authorization duly signed by
      the corporation, accompanied by an attorney’s certification of the
      validity of the signature. A proxy does not have to be a Bondholder
      himself. A letter of appointment and the power of attorney or the other
      certificate according to which the letter of appointment was signed, shall
      be deposited in the Company's office no less than forty eight (48) hours
      before the date of the meeting with respect to which the power of attorney
      has been given, unless it is determined otherwise in the notice that
      convenes the meeting. A vote cast in accordance with the conditions of the
      document appointing a proxy shall be valid notwithstanding the prior
      passing or declaration of incapacity of the principal or termination of
      the letter of appointment or transfer of the Bond voted, unless written
      notice of such passing, incapacity decision, termination or transfer, as
      the case may be, shall have been received at the Company's registered
      office prior to the date of the meeting. Any corporation that is a
      Bondholder is entitled, according to a written authorization lawfully
      signed, to authorize a person it deems fit to act as its representative in
      each Bondholders meeting, and the authorized person shall be entitled to
      act on behalf of the corporation he represents.

               

            

    

    
      	
              [x]

            	
              The
      chairman of the meeting shall arrange for the taking of minutes of any and
      all deliberations and resolutions at every Bondholders’ general meeting,
      and for the keeping thereof in the book of minutes of the Bondholders’
      meetings. Any minutes that is signed by the chairman of the meeting in
      which the resolutions were adopted and the deliberations were conducted,
      or signed by the chairman of the meeting that took place immediately
      after, shall serve as proof of the matters that are recorded in it, and as
      long as it is not proved otherwise, indeed every decision recorded in the
      minutes of such a meeting shall be deemed as lawfully
adopted.

               

            

    

    
      	
              [y]

            	
              A
      person or people that shall be appointed by the Trustee, the Company
      secretary and any other person or people that are authorized to do so by
      the Company, shall be entitled to be present at the Bondholders
      meetings.

               

            

    

    
      	
              [z]

            	
              The
      Trustee shall examine the need to convene class meetings in events in
      which there are different interests among the Bondholders, according to
      the circumstances. The Company and the Trustee shall act to convene class
      meetings of the Bondholders according to the provisions of any law, the
      case law, the provisions of the Securities Law and the regulations and
      guidelines that are issued by its virtue.

               

            

    

    
      	
              [aa]

            	
              The
      Company represents that the method of voting through a letter of
      appointment and/or a power of attorney as aforementioned, does not
      contradict the provisions of the law that apply in the USA with respect to
      voting in meetings.

            

    

    
      
        
        

      

      
        -42-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    

    

    
      	
               
      

            	
              Xfone,
      Inc.

            

    

    
      	
               
      

            	
              Third
      Addendum

            

    

    
      	
               
      

            	
              Taxation of the
      Securities Offered in the Private Placement

               

            

    

    
      	
              1.

            	
              Taxation in
      Israel

               

            

    

    
      	
               
      

            	
              On
      July 25, 2005, the Knesset adopted a law for the amendment of the Income
      Tax Ordinance (No. 147), 5765-2005 (the "Amendment"). The Amendment was
      published in the Official Gazette on August 10, 2005, and took effect on
      January 1, 2006. The amendment significantly changes the provisions of the
      Income Tax Ordinance [New Version], 5721-1961 (the: "Ordinance") with
      regard to taxation of securities that are traded at TASE. On the date of
      execution of this Indenture, all the regulations that are expected to be
      published following the Amendment, have not yet been published. In
      addition, on the date of executing this Indenture there exists no accepted
      practice with regard to some of the provisions of the Amendment, and there
      is also no case law that interprets all the new tax provisions in the
      Amendment.

               

            

    

    
      	
               
      

            	
              As
      accepted at the time of making decisions with respect to investment of
      monies, the tax implications related to the investment in the offered
      bonds must be considered. The provisions that are included below with
      respect to taxation of the Series A Bonds do not purport to constitute an
      authorized interpretation of the provisions of the law, and do not replace
      professional advice, according to the special characteristics and unique
      circumstances of each investor.

               

            

    

    
      	
               
      

            	
              The
      tax arrangements in Israel described in the summary below shall apply to
      the offered securities, including income from interest:

               

            

    

    
      	
               
      

            	
              1.1

            	
              Capital Gain from the
      Sale of the Offered Securities

            
	 	 	 
	 	 	
              According
      to Section 91 of the Ordinance, real capital gains from the sale of
      securities by an individual, a resident of Israel, are taxed according to
      the individual's marginal tax rate in accordance with Section 121of the
      Ordinance, but no more than 20%, and the capital gains shall be deemed as
      the highest bracket in his taxable income scale. Other than with respect
      to the sale of securities by an individual who is a "material shareholder"
      in the Company – that is, the holder, directly or indirectly, by himself
      or jointly with another2, of at least 10% of one or more of the
      means of control1 in
      the Company – at the time of the sale of the securities, or at any other
      time in the 12 months prior to the sale as aforesaid, which the tax rate
      regarding real capital gains in his possession, will be no more than 25%.
      In addition, with respect to an individual who claimed real interest and
      linkage differentials expenses due to the securities, the real capital
      gains from the sale of the securities shall be charged tax at a rate of
      25%, until determination of directives and conditions for the deduction of
      real interest expenses according to Section 101A(a)(9) of the Ordinance.
      The reduced tax rate as aforesaid shall not apply with respect to an
      individual that the income in his possession from the sale of the
      securities is deemed as income from a "business" according to the
      provisions of Section 2(1) of the Ordinance. With respect to an individual
      as aforesaid, the profit from the sale of securities will be liable for
      tax at the marginal tax rate that applies to him pursuant to the tax rates
      set forth in Section 121 of the Ordinance (up to 47% in
2008).

               

              A body of persons
      shall owe tax on real capital gains from the sale of unlisted securities
      at a rate of 25%. In the event of listing the securities in the Bonds
      stock exchange, the body of persons shall owe tax on real capital gains
      from the sale of Bonds at companies' tax rate, which shall be gradually
      reduced until a rate of 25% in the 2010 tax year and onward (27% in the
      2008 tax year and 26% in the 2009 tax year). However, a body of persons to
      which the provisions of Section 6 of the Income Tax Law (Adjustments due
      to Inflation), 5745-1985, or Section 130A of the Ordinance did not apply,
      prior to  the publishing date of the Amendment, shall be charged
      tax in any event at a rate of 25% due to real capital gains as
      aforesaid.

            

    

     

    
      _____________________________

      2 As this term
is defined in Section 88 of the Ordinance.

    

    
      
        
        

      

      
        -43-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

     

    
      	 	 	
               

              An
      exempt mutual fund as well as provident funds and bodies that are exempt
      from tax according to Section 9(2) of the Ordinance, are exempt from tax
      due to capital gains from the sale of securities as aforesaid. A liable
      mutual fund's income from the sale of securities, shall be subject to the
      tax rate applicable to the income of an individual for whom the income
      does not constitute income from a "business".

               

              Losses
      in the tax year originating from the sale of the securities offered in the
      tax year, shall be offset against capital gains and land betterment,
      including gains from the sale of a security, traded or not, Israeli or
      foreign, and in addition, against interest and dividends that shall have
      been paid due to such security or due to other securities (provided that
      the tax rate that applies to interest or dividends as aforesaid does not
      exceed 25%), in that tax year. Setoff of the losses shall be carried out
      in a manner of offsetting capital losses against capital gains or income
      from interest or from dividends as aforesaid.

               

              In
      the sale of the offered Bonds, withholding tax of 30% will be deducted
      from the consideration in accordance with the Income Tax Regulations
      (Deduction from Payments for Services or Assets), 5737-1977, provided that
      the recipient shall have produced a certificate indicating another
      withholding tax rate, or is not included in the list of exempt bodies that
      is included in the schedule to these Regulations.

               

              Upon
      the Bonds listing on TASE, withholding tax shall be deducted from the real
      capital gains in accordance with the Income Tax Regulations (Deduction
      from Consideration, Payment or Capital Gains in a Sale of a Security, in
      the Sale of a Mutual Fund Unit or in a Future Transaction), 5763-2002.
      According to these Regulations, a taxpayer who pays consideration to a
      seller in the sale of the securities, shall deduct tax at a rate of 20%
      from the real capital gains, when the seller is an individual, and at a
      rate of 25% from the real capital gains, when the seller is a body of
      persons. That, subject certificates of exemption from withholding tax and
      subject to setoff of losses which the person deducting withholding tax is
      authorized to perform. In addition, withholding tax will not be deducted
      for provident funds, mutual funds and additional bodies that are exempt
      from deduction of withholding tax according to the law. It shall be noted
      that in the event that at the time of the sale the full withholding tax
      shall not have been deducted from the real capital gains, the provisions
      of Section 91(d) of the Ordinance and the instructions thereunder with
      respect to reports and payment of an advance due to a sale as aforesaid,
      shall apply.

               

              As
      a rule, taxes that were paid in the United States due to a sale of the
      securities shall be allowed to be credited against tax that is paid in
      Israel in accordance with the provisions of the Ordinance and the Treaty
      (as it is defined in Section 2 below).

               

              See
      Section 2 below with respect to federal taxing in the United States and
      the provisions of the Treaty with respect to the sale of the offered
      securities.

            
	 	 	 

    

    
      
        	
                 
      

              	
                1.2

              	
                
                  The Tax Rate that
      shall Apply to Interest Income from Bonds

                

              
	 	 	
                 

                
                  In
      accordance with Section 125C(b) of the Ordinance, an individual shall be
      liable for tax at a rate no higher than 20% on interest or discount fees
      originating from Bonds that are fully linked to the Index, and such income
      shall be deemed as the highest bracket in his taxable income scale. The
      aforesaid tax rate shall not apply at the existence, inter alia, of one of
      the following conditions:

                   

                  (1)
      The interest is an income from a "business" according to Section 2(1) of
      the Ordinance or it is registered in the individual's books or it is
      subject to registration as aforesaid; (2) the individual claimed a
      deduction of interest and linkage differentials expenses due to the
      security; (3) the individual is a material shareholder in the company that
      is paying the interest. In cases such as the aforesaid, the individual
      shall be liable for tax on interest or discount fees at the individual's
      marginal tax rate in accordance with Section 121 of the
      Ordinance.

                   

                  The
      tax rate which applies to income from interest or discount fees of a body
      of persons that is an Israeli resident, which is not a body of persons
      that the provisions of Section 9(2) of the Ordinance apply in
      determination of its income, other than with respect to Section 3(h) of
      the Ordinance regarding interest that has accrued, is the companies' tax
      rate, that shall be gradually reduced until a rate of 25% in the 2010 tax
      year onward (29% in the 2007 tax year, 27% in the 2008 tax year and 26% in
      the 2009 tax year).

                

              

      

       

      
        
          
          

        

        
          -44-

          
            

          

        

        
          [Free
Translation from Hebrew]

        

      

      
        	 	 	
                An
      exempt mutual fund, as well as provident funds and bodies that are exempt
      from tax according to Section 9(2) of the Ordinance, are exempt from tax
      due to income from interest or discount fees as aforesaid, subject to the
      provisions of Section 3(h) of the Ordinance with respect to interest or
      discount fees which shall have been accrued in the period of the holding
      of another. A liable mutual fund's income from interest or discount fees,
      shall be subject to the tax rate applicable to the income of an individual
      for whom the income does not constitute income from a
      "business".

                 

                In
      the redemption of a bond, the linkage differentials shall be deemed as
      part of the consideration, and the provisions of the Ordinance with
      respect to the calculation of the capital gains shall apply, as described
      above.

                 

                In
      accordance with the Income Tax Regulations (Deduction from Interest,
      Dividends and Specific Profits), 5766-2005, the rate of withholding tax to
      be deducted from interest (as defined in the aforementioned Regulations)
      that is paid on bonds, fully linked to the Consumer Price Index, is 20%
      with respect to an individual (a foreign resident as well) who is not a
      material shareholder of the company paying the interest, in accordance
      with the maximum marginal tax rate according to Section 121 of the
      Ordinance with respect to an individual who is a material shareholder of
      the company paying the interest, and according to the companies' tax with
      respect to a body of persons.

                 

                The
      Company shall deduct withholding tax from the interest payments to be paid
      thereby to the Bondholders, such withholding tax which it is obligated to
      deduct, other than with respect to bodies that are exempt from withholding
      tax as aforesaid in accordance with the law in Israel.

                 

                The
      Company has opened a deductions file in Israel for the purposes of
      deduction and reporting to the Tax Authorities in Israel with respect to
      payments of interest, dividend, redemption or any other payment which is
      liable for tax deduction in respect of the bonds offered pursuant to the
      Indenture.

                 

                The
      Company shall act in accordance with the provisions of the Treaty between
      the U.S. government and the Israeli government with respect to taxes on
      income which was executed on November 20, 1975, as amended in the
      protocols of May 30, 1980 and January 26, 1993 (the “Treaty”).

                 

                In
      the event of a change to the double taxation agreement, the Company shall
      give notice thereof in an immediate report prior to or in proximity to
      performance of payment to the bondholders.

                 

                In
      the absence of a double taxation agreement, and if withholding tax is
      applicable to foreign residents according to the foreign law, the Company
      shall act according to the “residency certificates”
mechanism.

                 

              
	 	
                1.3

              	
                Expansion of the
      Bond’s series in the Future

              
	 	 	 
	 	 	
                In
      the case that the Company will issue additional bonds of the series in the
      future, in the context of an expansion of a series, at a different
      discount rate than the discount rate for such series (including no
      discount), the Company will approach the Tax authority, prior to the
      expansion of the series (that is, until the date of the actual allotment
      of the additional bonds), in order to receive the approval thereof that
      pertaining to the deduction of withholding tax from the discount fees with
      respect to the bonds, a uniform rate of deduction will be determined for
      the bonds of the relevant series, according to a formula which weights the
      different discount rates in such series, if any (the “Weighted Discount
      Rate”). In the case of receipt of an approval as aforesaid, the
      Company will calculate, prior to expansion of the series, the Weighted
      Discount Rate due to all of the bonds of the series, in accordance with
      such approval, and prior to the expansion of the series the Company will
      submit an immediate report in which it will announce the Weighted Discount
      Rate for the whole series, and will deduct tax on the dates of the
      redemption of the bonds of the series, according to the Weighted Discount
      Rate, as aforesaid, and in accordance with the provisions of the law. In
      such case, all the remaining provisions of the law pertaining to the
      taxation of discount fees will apply. If such approval will not be
      received from the Tax Authority, the Company will deduct withholding tax
      from the discount fees with respect to the whole series of the bonds in
      accordance with the higher discount rate that shall have been created due
      to such series.

                 

              

      

       

      
        
          
          

        

        
          -45-

          
            

          

        

        
          [Free
Translation from Hebrew]

        

      

      
        	 	 	
                In
      any case of expansion of the bonds’ series, for any reason whatsoever, if
      the discount rate which will be determined in the context of issuance of
      bonds from the series will be higher than the discount rate of the series
      immediately prior to the expansion of the series (including no discount),
      cases are possible in which the Company will deduct withholding tax due to
      discount fees at a rate that is higher than the discount fees which shall
      have been determined for anyone who held the bonds of the series prior to
      the expansion of the series (the “Excess Discount Fees”),
      whether or not an approval shall have been received from the Tax Authority
      for the determination of a uniform discount rate for the series. A
      taxpayer who held the bonds of the series prior to the expansion of the
      series, and until payment of the bonds held by him, will be entitled to
      file a tax report with the Tax Authority, and receive a tax refund at the
      level of the tax that shall have been deducted from the Excess Discount
      Fees, insofar as he is entitled to a refund as aforesaid according to
      law.

              
	 	 	 

      

    

    
    

    
      	
              2.

            	
              Federal Taxation in
      the United States

            
	 	 
	 	
              This
      Section summarizes various tax implications of the Federal estate tax and
      income tax in the United States on the purchase, holding and sale of the
      Series A Bonds (the "Offered Securities").
      This Section is only relevant to an "Israeli Holder" (as defined below),
      who holds the Offered Securities as a capital asset for U.S. tax purposes.
      This Section does not constitute an exhaustive description of all the
      possible tax implications.

               

              This
      Section is based on the U.S. Federal Income Tax Law of 1986, as amended
      (the "Compilation"), the
      legislative history of the Compilation, existing or proposed directives
      thereof, the Treaty, resolutions of the United States tax authorities and
      courts as were published, all as they are valid as of the date of
      execution of this Indenture. These laws are subject to changes which may
      apply retroactively.

               

              For
      the purposes of this Section, an "Israeli Holder" is any holder (including
      an Israeli corporation and an individual Israeli resident for tax purposes
      in Israel) who is an Israeli resident for purposes of the Treaty, is
      entitled to benefits by virtue of the Treaty, is the beneficiary of the
      Offered Securities, provided he is not one of the following: (a) a citizen
      or resident of the United States; (b) a former citizen or resident of the
      United States who is subject to the special rules in accordance with
      Section 877 of the Compilation; (c) A corporation that was incorporated
      according to the laws of the United States or one of the states of the
      United States; (d) a trust that is subject to the supervision of the
      United States courts and all its material resolutions are controlled by
      one or more Americans or it has elected to be American according to the
      treasury regulations in the United States; or (e) an estate whose income
      is subject to United States Income Tax without consideration of the source
      of the income.

               

              This
      Section does not address all the tax implications which may be relevant to
      Israeli Holders in light of their unique circumstances or because they are
      subject to special laws, including, inter alia, banks,
      insurance companies, individuals who received the Offered Securities
      through the exercise of employee options or as compensation, and Israeli
      corporations which hold (directly or indirectly) at least 10% of the
      Company's voting power. In addition, this part does not discuss local or
      state tax aspects and non-U.S. tax implications.

               

              Israeli
      Holders who are considering to purchase the Offered Securities are advised
      to consult with their tax advisors with respect to the applicability of
      the United States tax laws and Federal estate tax with respect to their
      specific circumstances and with respect to the implications of the state
      and local tax laws, foreign (non-U.S.) tax laws and the applicability of
      the Treaty.

            

    

     

    
      
        
        

      

      
        -46-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	
               
      

            	
              2.1

            	
              Interest that is Paid
      due to the Bonds

            
	 	 	 
	 	 	
              Interest
      that is paid to an Israeli Holder due to the Bonds shall not be subject to
      Federal withholding tax in the U.S., where an "exemption for interest from
      passive income" applies, that is:

            
	 	 	 

    

    
      	
               
      

            	
              [a]

            	
              The
      Israeli Holder does not, directly or indirectly, actually or potentially,
      hold 10% or more of the total voting rights in all classes of
      shares;

               

            

    

    
      	
               
      

            	
              [b]

            	
              The
      Israeli Holder is not:

               

            

    

    
      	
               
      

            	
              [1]

            	
              A
      foreign controlled company associated with the Company by way of share
      holding; or

               

            

    

    
      	
               
      

            	
              [2]

            	
              A
      bank which has received the Bonds by way of granting credit in
      continuation to a loan agreement executed as part of its regular course of
      business; and

               

            

    

    
      	
               
      

            	
              [c]

            	
              The
      beneficiary of the Bonds delivers his name and address and confirms,
      subject to the penalties for perjury prescribed by law, that he is not a
      U.S. resident, in accordance with the documentation requirements as shall
      be described below ("Documentation Requirements For The Purpose Of Reduced
      Tax Deduction Or An Exemption From Tax Deduction").

               

            

    

    
      	
               
      

            	
              [d]

            	
              A
      securities clearing organization, bank or other financial institution
      which holds securities of customers in the ordinary course of its business
      and which holds the bonds in this framework, confirms to the payer or the
      payer’s representative, subject to the penalties for perjury prescribed by
      law, that such declaration was received from the equitable right holder
      thereby or by a financial institution between it and the equitable rights
      holder, and presents to the payer or the payer’s representative a copy of
      such declaration.

               

            

    

    
      	 	 	
              Interest
      paid to an Israeli Holder, to whom the exemption for interest from passive
      income does not apply and who has no business or trade that are
      effectively associated with the United States, shall be liable for U.S.
      Federal withholding tax at the rate of 30%. If the Israeli Holder is
      entitled to enjoy the Treaty’s benefits and meets the documentation
      requirements that shall be described below, then the withholding tax rate
      shall be 17.5% (or 10% in the case of certain Israeli financial
      institutions).

               

              Special
      provisions shall apply in the case that the interest shall be deemed as
      associated with a business or trade of the Israeli Holder in the United
      States. See discussion below with respect to "income that is effectively
      associated with the United States".

               

            
	
               
      

            	
              2.2

            	
              Interest, Dividends
      and Capital Gains that are Associated with a Business or Trade in the
      United States

            
	 	 	 
	 	 	
              If
      interest that was paid due to the Bonds, dividends that were paid due to
      the holding of ordinary shares of the Company or a profit from the sale of
      the Offered Securities, are associated with a business or a trade of the
      Israeli Holder in the Unites States, and such interest, dividends and
      profit are attributed to a Permanent Establishment (as defined in the
      Treaty) of the Israeli Holder in the United States, such payments will be
      subject to U.S. Federal Income Tax at the ordinary rates that apply to
      United States residents, and in addition in the case of an Israeli Holder
      that is a corporation, it shall be subject to branch profit tax of 30% (or
      at the rate of 12.5% in accordance with the Treaty) that applies to income
      after tax (may be amended) that is effectively associated with the
      activity of the business or trade in the United States, and is not
      invested and remains in the Israeli Holder's business in the United
      States.

               

            

    

     

    
      
        
        

      

      
        -47-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	 	 	 
	 	 	
              Interest
      and dividend payments that are associated with the Israeli Holder's
      business or trade in the United States are exempt from withholding tax,
      provided that the Israeli Holder has supplied a U.S. W-8ECI Income Tax
      form.

            

    

     

    
      	
               
      

            	
              2.3

            	
              Documentation
      Requirements for the purpose of Reduced Tax Deduction or an Exemption from
      Tax Deduction

            
	 	 	
               

              
                Even
      if the Israeli Holder is entitled to a reduced tax rate or an exemption
      from tax deduction, whether by virtue of the Treaty or in accordance with
      the internal United States law, as a rule 30% withholding tax shall apply
      to the interest or dividend payments, unless the Israeli Holder has
      presented to the Company or to the body through which he trades the shares
      (broker etc.) with respect to the payments:

                 

              

            

    

    
      	
               
      

            	
              [a]

            	
              A
      valid U.S. W-8BEN form (in the case of payment of income that is
      effectively associated with the United States, a W-8ECI form) or another
      accepted alternative form according to which the Israeli Holder confirms,
      subject to the penalties for perjury prescribed by law, law that he (or in
      the case of an Israeli Holder which is a partnership, an estate or a
      trust, these forms confirm that every partner in a partnership or the
      beneficiary of the estate or the trust) is not American, and confirms his
      entitlement to the reduced tax rate in accordance with the Treaty (or to
      the exemption) due to these payments; or

               

            

    

    
      	
               
      

            	
              [b]

            	
              In
      the event that such payments were made outside of the United States to a
      foreign account (generally, an account held by the Israeli Holder in an
      office or in a bank branch or in another financial institution anywhere
      outside of the United States), the Israeli Holder may present either a
      W-8BEN form or other documented evidence which establishes the Israeli
      Holder's entitlement to a reduced tax rate according to the Treaty in
      accordance with the U.S. Treasury Regulations.

               

            
	 	 	
              In
      the case that the ordinary shares are held through a financial
      institution, the Israeli Holder is to present the aforementioned documents
      (or another document accepted in accordance with the law in the United
      States) to the aforesaid financial institution so he can demand benefits
      in accordance with the Treaty, and the financial institution is to present
      suitable certificates with respect to the payments to the Company or to a
      body through which it trades
shares.

            

    

    
      	 	 	
               

              
                The
      holders of the Series A Bonds who shall purchase Series A Bonds listed
      pursuant to this Prospectus will be required, as a condition to the
      purchase of the Series A Bonds, to fill out, at the TASE member through
      which they purchased the Series A Bonds, a W-8BEN IRS form.

                 

                For
      the avoidance of doubt, it is hereby clarified that a holder of Series A
      Bonds who shall not fill out a W-8BEN IRS form as aforesaid will be deemed
      as a U.S. holder for withholding tax purposes in the United
      States.

                 

              

            
	
               
      

            	
              2.4

            	
              Capital Gains from the
      Sale and/or Other Transfer of the Offered
  Securities

            
	 	 	
               

              
                As
      a rule, an Israeli Holder is not subject to Federal Income Tax in the
      United States due to profits from the sale and/or other transfer of the
      Offered Securities (including an ordinary shares component or a Warrants
      component or both), unless:

                 

              

            

    

    
      	
               
      

            	
              [a]

            	
              The
      aforesaid profit is associated with a business or trade of the Israeli
      Holder in the United States, provided that if the Israeli Holder is an
      Israeli Resident for purposes of the Treaty, the profit is associated with
      a Permanent Establishment (as defined in the Treaty) of the Israeli Holder
      in the United States (in which case special provisions shall apply, as
      specified below).

            

    

    
      
        
        

      

      
        -48-

        
          

        

      

      
        [Free
Translation from Hebrew]

      

    

    
      	
               
      

            	
              [b]

            	
              The
      Israeli Holder is an individual, who holds the Offered Securities as a
      capital asset, situated in the United States for 183 days or more in the
      tax year in which the sale took place and other certain additional
      conditions are fulfilled; or

               

            

    

    
      	
               
      

            	
              [c]

            	
              The
      Company is or was a U.S. real estate holding company for Federal Income
      Tax purposes at any time during a period of five years ending on the sale
      date, unless certain exceptions
apply.

            

    

    
      	 	 	
               

              
                The
      Company is not, was not in the past, and does not foresee that it shall
      become a U.S. real estate holding company in the future for the purposes
      of Federal Income Tax in the United States.

                 

                On
      the taxation of capital gains that are effectively associated with the
      United States, see "Interest, Dividends and Capital Gains that are
      Associated with a Business or Trade in the United States" above. On
      capital gains with respect to an individual who is situated in the United
      States 183 days or more in the tax year, such individual will, as a rule,
      be liable for 30% U.S. Federal Income Tax on his profits from a U.S.
      source which exceed his losses from a U.S. a source for that
      year.

                 

              

            
	
               
      

            	
              2.5

            	
              Backup Withholding and
      Report Duties

               

            

    

    
      	
               
      

            	
              2.5.1

            	
              Certain
      payments of interest, dividends and consideration due to the sale of
      securities are to be reported to the United States tax authorities. In the
      case that the recipient of the aforesaid payments (who does not benefit
      from a special exemption) does not confirm his identification number for
      tax purposes in the required form (for example, a W-8BEN tax form) or
      other conditions apply, the payment maker must perform backup withholding
      (today at a rate of 28%) of these payments. However, backup withholding
      does not apply to payments with respect to the bonds to an Israeli Holder
      if the relevant declarations described above shall have been duly
      delivered by the Israeli Holder, provided that the payer has no actual
      knowledge or reason to know that the Israeli Holder is a United States
      resident.

               

            
	 	 	
              Payments
      of interest on the Bonds and dividends on ordinary shares that are paid to
      an Israeli Holder, as a rule are not subject to backup withholding, as
      well as payments of the consideration due to the sale of the Offered
      Securities that are paid to an Israeli Holder through a broker are not
      subject to report duties and to backup withholding, provided that the
      Israeli Holder confirms his foreign status for tax purposes (non-U.S.)
      (certain means for the proof of a foreign status are described in the
      Section "Documentation Requirements for the purpose of Reduced Tax
      Deduction or an Exemption from Tax Deduction" above). Once a year, the
      Company is required to report to the United States tax authorities on any
      and all interest or dividends that are paid to any non-U.S. holder and on
      the withholding tax deducted in respect thereof. According to the Treaty,
      copies of reports as aforesaid may be placed at the disposal of the
      Israeli tax authorities.

               

              The
      Company undertakes to act in accordance with the TASE clearinghouse's
      by-laws as shall be amended from time to time, provided they shall not
      contradict any other law that applies to the Company.

               

            

    

    The
general description above constitutes no substitute for individual consultation
by experts, in consideration of the unique circumstances of each investor. It is
recommended to any one wishing to buy securities according to this Prospectus,
to seek professional advice in order to clarify the tax consequences which will
apply to him, in consideration of his unique circumstances.

    

    
 

    
      
        
        

      

      
        -49-

        
          

        

      

      
        [Free
Translation from Hebrew]

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