In consideration for the Bank’s agreement to amend the Loan Agreement, between July 1, 2004 and June 30, 2007, the Bank will be entitled to instruct the Company to issue to the Bank or to a third party a warrant or warrants for the purchase of ordinary shares of the Company, par value NIS 0.20 per share (the “Warrant”). The maximum exercise amount that may be paid under the Warrant shall be equal to the then outstanding balance on the loan due by the Company to the Bank under the Loan Agreement, which as of March 15, 2004 was approximately $71.4 million.

The exercise price of the ordinary shares underlying the Warrant shall equal the average closing sale price of the Company’s shares, as published by the NASDAQ over the thirty (30) consecutive trading days immediately preceding the day of the notice of exercise by the Warrant holder plus 1%, however, in no event shall the per share price be less than $7.50 or in excess of $21.00 if exercised between July 1, 2004 and June 30, 2005, $30.00 if exercised between July 1, 2005 and June 30, 2006 and $40.00 if exercised between July 1, 2006 and June 30, 2007. Moreover, in the event that the Company completes a private placement investment by a third party for an amount that exceeds $20 million, at the Bank’s option, the exercise price shall be based on the same price offered in the private placement.

Once issued, the Warrant is exercisable for a thirty-day period.

The proceeds paid to the Company from the exercise of the Warrant shall be applied to reduce all future installments of the principal due to the Bank, on a pro-rata basis.

The Bank shall be entitled to require the Company to prepare a Registration Statement on Form F-3 covering a resale offering of all of the Bank’s shares in the Company including the shares underlying the Warrant. The Company shall be required to keep such registration statement effective for 36 months from the date that the Registration Statement is declared effective, other than between March 15 to June 30 of each year. In addition, until June 30, 2007, the Bank shall be entitled to require the Company to grant one “Demand Registration” with respect to shares underlying one Warrant.

Item 4.     Purpose of Transaction.

Consideration for an amendment to the Loan Agreement and conversion of debt to equity.

Item 5.     Interest in Securities of the Issuer.

(a) As of the date of this Amendment No. 2, the Bank beneficially owns 12,979,712 ordinary shares of the Company, which represents approximately 40.9% of the outstanding ordinary shares. For the purposes of this calculation, an assumed exercise price per share of $7.50 was used with respect to the shares issuable upon the Bank’s exercise of the Warrant.

Of the 12,979,712 ordinary shares of the Company beneficially owned by the Bank, 157,284 are owned by mutual funds managed by fund managers and other managing entities, all subsidiaries of the Bank. While these subsidiaries hold investment power over the securities owned by the mutual funds, the members of each mutual fund’s independent and external investment committee hold voting power over such securities. Pursuant to Israeli Law, any economic interest or beneficial ownership in any of such securities is held for the benefit of the unit holders of the mutual funds.