20-F

As filed with the Securities and Exchange Commission on March 14, 2003

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 20-F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

COMMISSION FILE NUMBER 1-14968

PARTNER COMMUNICATIONS COMPANY LTD.
(Exact name of Registrant as specified in its charter)

ISRAEL

(Jurisdiction of incorporation or organization)

8 AMAL STREET
AFEQ INDUSTRIAL PARK
ROSH-HA’AYIN 48103
ISRAEL

(Address of principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

NONE

Securities registered pursuant to Section 12(g) of the Act:

Title of class

American Depositary Shares
Ordinary Shares*

*     Not for trading, but only in connection with the registration of American Depositary Shares representing such ordinary shares, pursuant to the requirements of the Securities and Exchange Commission.

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

NONE

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

ORDINARY SHARES OF NIS 0.01 EACH 181,595,222

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:

YES      x      NO      o     

Indicate by check mark which financial statement item the Registrant has
elected to follow:

ITEM 17      o      ITEM 18      x     

TABLE OF CONTENTS

INTRODUCTION
FORWARD-LOOKING STATEMENTS
	ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
	ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
	ITEM 3. KEY INFORMATION
	ITEM 4. INFORMATION ON THE COMPANY
	ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
	ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
	ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
	ITEM 8. FINANCIAL INFORMATION
	ITEM 9. THE OFFER AND LISTING
	ITEM 10. ADDITIONAL INFORMATION
	ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 12. ` DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
	ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
	ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
	ITEM 15. CONTROLS AND PROCEDURES
	ITEM 16. [RESERVED]
	ITEM 17. FINANCIAL STATEMENTS
	ITEM 18. FINANCIAL STATEMENTS
	ITEM 19. EXHIBITS
SIGNATURES
CERTIFICATIONS
EXHIBIT INDEX
Articles of Association
Agreement with LM Ericsson (Nov 25, 2002)
Supplemental Agreement (April 18, 2002)
General License for Partner Amendment # 12
General License for Partner Amendment # 13
General License for Partner Amendment # 14
General License for Partner Amendment # 15
General License for Partner Amendment # 16
General License for Partner - Amendment # 17
Amending Agreement to the Facility Agreement
List of Subsidiaries
Consent of Kesselman & Kesselman
Section 906 Certifications

TABLE OF CONTENTS

	Page
PART I
INTRODUCTION		2
FORWARD-LOOKING STATEMENTS		3
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS		5
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE		5
ITEM 3. KEY INFORMATION		6
ITEM 4. INFORMATION ON THE COMPANY		33
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS		82
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES		99
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS		122
ITEM 8. FINANCIAL INFORMATION		136
ITEM 9. THE OFFER AND LISTING		140
ITEM 10. ADDITIONAL INFORMATION		143
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		159
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES		162
PART II		162
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES		162
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS		162
ITEM 15. CONTROLS AND PROCEDURES		162
ITEM 16. [RESERVED]		162
PART III		162
ITEM 17. FINANCIAL STATEMENTS		162
ITEM 18. FINANCIAL STATEMENTS		163
ITEM 19. EXHIBITS		164
GLOSSARY OF SELECTED TELECOMMUNICATIONS TERMS		166

Page 1

INTRODUCTION

     As used herein, references to “we,” “our,” “us,” “Partner” or the “Company” are references to Partner Communications Company Ltd. and to its wholly owned subsidiary, Partner Future Communications 2000 Ltd., except as the context otherwise requires. In addition, references to our “financial statements” are to our consolidated financial statements except as the context otherwise requires.

     In this document, references to “$,” “US$,” “US dollars” and “dollars” are to United States dollars and references to “NIS” and “shekels” are to New Israeli Shekels. This annual report contains translations of NIS amounts into US dollars at specified rates solely for the convenience of the reader. No representation is made that the amounts referred to in this annual report as convenience translations could have been or could be converted from NIS into US dollars at these rates, at any particular rate or at all. The translations of NIS amounts into US dollars appearing throughout this annual report have been made at the representative exchange rate on December 31, 2002 of NIS 4.737 = US$1.00 as published by the Bank of Israel, unless otherwise specified. See “Item 3A. Key Information—Selected Financial Data—Exchange Rate Data.”

     We maintain our financial books and records in shekels. Our financial statements included in this annual report are prepared in accordance with accounting principles generally accepted in the United States, or US GAAP, and the accompanying discussion of the results of our operations is based on our results under US GAAP. See “Item 18. Financial Statements” and “Item 5A. Operating and Financial Review and Prospects—Operating Results”.

Page 2

FORWARD-LOOKING STATEMENTS

     This annual report includes forward-looking statements within the meaning of Section 27A of the US Securities Act of 1933, as amended, Section 21E of the US Securities Exchange Act of 1934, as amended, and the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to risks, uncertainties and assumptions about Partner.

     Words such as “believe,” “anticipate,” “expect,” “intend,” “seek,” “will,” “plan,” “could,” “may,” “project,” “goal,” “target” and similar expressions often identify forward-looking statements but are not the only way we identify these statements. All statements other than statements of historical fact included in this annual report, including the statements in the sections of this annual report entitled “Item 3D. Key Information—Risk Factors,” “Item 4. Information on the Company” and “Item 5. Operating and Financial Review and Prospects” and located elsewhere in this annual report regarding our future performance, plans to increase revenues or margins or preserve or expand market share in existing or new markets, reduce expenses and any statements regarding other future events or our future prospects, are forward-looking statements.

     Because such statements involve risks and uncertainties, actual results may differ materially from the results currently expected. Factors that could cause such differences include, but are not limited to:

• uncertainties about the degree of growth in the number of consumers in Israel using wireless personal communications services and the growth in the Israeli population;

• the risks associated with the implementation of a third-generation network and business strategy, including risks relating to the operations of new systems and technologies, substantial expenditures required and potential unanticipated costs, uncertainties regarding the adequacy of suppliers on whom we must rely to provide both network and consumer equipment and consumer acceptance of the products and services to be offered;

• the impact of existing and new competitors in the market in which we compete, including competitors that may offer less expensive products and services, desirable or innovative products, technological substitutes, or have extensive resources or better financing;

• the effects of vigorous competition in the market in which we operate, which may decrease prices charged, increase churn and change our customer mix, profitability and average revenue per

Page 3

	user;
•	the availability and cost of capital and the consequences of increased leverage;
•	the effects of the high degree of regulation in the telecommunications market in which we operate;
•	fluctuations in foreign exchange rates;
•	the results of litigation filed or that may be filed against us; and
•	the possibility of the market in which we compete being impacted by changes in political, economic or other factors, such as monetary policy, legal and regulatory changes or other external factors over which we have no control;

as well as the risks discussed in “Item 3D. Key Information—Risk Factors,” “Item 4. Information on the Company” and “Item 5. Operating and Financial Review and Prospects”. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this annual report might not occur.

     We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Page 4

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

Page 5

ITEM 3. KEY INFORMATION

3A. Selected Financial Data

     The following table sets forth our selected financial data as at and for each of the years in the five-year period ended December 31, 2002 prepared in accordance with US GAAP. The selected financial data for each of the years in the three-year period ended December 31, 2002 and at December 31, 2002 and 2001 are derived from our consolidated financial statements set forth elsewhere in this annual report. The selected financial data for each of the years in the two-year period ended December 31, 1999 and at December 31, 2000, 1999 and 1998 are derived from other financial statements not appearing in this annual report. We were incorporated in September 1997 and began full commercial operations on January 1, 1999. The selected financial data set forth below should be read in conjunction with “Item 5. Operating and Financial Review and Prospects” and the financial statements and notes thereto included elsewhere in this annual report.

	Year ended December 31,
	1998			1999			2000			2001			2002		2002
															Convenience
															translation into
	New Israeli Shekels														US dollars
	In thousands (except per share data)
Statement of Operations Data
Revenues, net		—			899,217			2,103,859			3,249,349			4,054,563		855,935
Cost of revenues (1998—operating expenses, net(1))		27,289			1,483,061			2,161,507			2,719,163			3,069,458		647,975
Gross profit (loss)		(27,289	)		(583,844	)		(57,648	)		530,186			985,105		207,960
Selling and marketing expenses		46,157			265,124			327,881			292,960			308,079		65,037
General and administrative expenses		20,737			158,588			154,637			134,282			143,594		30,313
Operating profit (loss)		(94,183	)		(1,007,556	)		(540,166	)		102,944			533,432		112,610
Financial expenses, net		5,010			290,397			228,609			400,927			445,180		93,979
Loss on impairment of investments in non-marketable securities		—			—			—			8,862			4,054		856
Net income (loss) before cumulative effect of a change in accounting principles		(99,193	)		(1,297,953	)		(768,775	)		(306,845	)		84,198		17,775
Cumulative effect, at beginning of year, of a change in accounting principles		—			—			—			3,483			—		—
Net income (loss) for the year		(99,193	)		(1,297,953	)		(768,775	)		(303,362	)		84,198		17,775

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			Year ended December 31,
			1998			1999			2000			2001			2002			2002
																		Convenience
																		translation into
			New Israeli Shekels															US dollars
			In thousands (except per share data)
Earnings (loss) per ordinary share and per ADS
	Basic:
		Before cumulative effect		(0.71	)		(8.86	)		(4.30	)		(1.72	)		0.47			0.10
		Cumulative effect		—			—			—			0.02			—			—
				(0.71	)		(8.86	)		(4.30	)		(1.70	)		0.47			0.10
	Diluted:
		Before cumulative effect		(0.71	)		(8.86	)		(4.30	)		(1.72	)		0.46			0.10
		Cumulative effect		—			—			—			0.02			—			—
				(0.71	)		(8.86	)		(4.30	)		(1.70	)		0.46			0.10
Weighted average number of shares outstanding
		Basic:		140,000,000			146,481,482			178,888,888			178,909,274			179,984,090			179,984,090
		Diluted:		140,000,000			146,481,482			178,888,888			178,909,274			183,069,394			183,069,394
Other Financial Data
Capital expenditures, net				548,476			823,995			544,927			599,493			556,376			117,453
EBITDA(2)				(95,336	)		(581,959	)		(58,741	)		656,369			1,052,240			222,132
Statement of Cash Flows Data
Net cash provided by (used in) operating activities				(71,198	)		(835,949	)		(353,272	)		422,548			682,191			144,013
Net cash used in investing activities				(1,901,833	)		(690,396	)		(809,731	)		(629,061	)		(815,968	)		(172,254	)
Net cash provided by financing activities				1,989,543			1,924,930			748,775			210,916			129,865			27,415
Balance Sheet Data (at year end)
Current assets				109,824			774,242			588,545			631,148			816,416			172,348
Investments and long-term receivables				—			8,112			119,524			140,969			45,991			9,709
Fixed assets, net				546,295			1,216,765			1,507,045			1,749,052			1,864,511			393,606
License and deferred charges, net				1,613,914			1,436,949			1,289,933			1,112,959			1,269,348			267,965
Total assets				2,270,033			3,436,068			3,505,047			3,634,128			3,996,266			843,628
Current liabilities(3)				931,380			571,261			583,243			1,194,704			735,153			155,194
Long-term liabilities(3)				1,435,526			2,063,815			2,832,964			2,633,200			3,357,497			708,781
Total liabilities				2,366,906			2,635,076			3,416,207			3,827,904			4,092,650			863,975
Shareholders’ equity (capital deficiency)				(96,873	)		800,992			88,840			(193,776	)		(96,384	)		(20,347	)
Total liabilities and shareholders’ equity (net of capital deficiency)				2,270,033			3,436,068			3,505,047			3,634,128			3,996,266			843,628

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		Year ended December 31,
		1998			1999			2000			2001			2002			2002
																	Convenience
																	translation into
		New Israeli Shekels															US dollars
		In thousands
Reconciliation Between Operating Cashflows and EBITDA
Net cash provided by (used in) operating activities			(71,198	)		(835,949	)		(353,272	)		422,548			682,191			144,013
Liability for employee rights upon retirement			(447	)		(9,583	)		(11,581	)		(18,736	)		(18,632	)		(3,933	)
Accrued interest, exchange and linkage differences on long-term liabilities			—			(141,663	)		13,214			(54,522	)		(91,027	)		(19,216	)
Amount carried to deferred charges			—			—			7,489			22			3,805			803
Accrued interest, exchange and linkage differences on security deposit			—			—			2,574			6,590			6,925			1,462
Sundry			(5,000	)		(2,560	)		181			—			—			—
Increase (Decrease) in accounts receivable:
	Trade		4,146			204,732			197,308			55,944			56,638			11,957
	Other		22,060			17,180			(23,970	)		14,235			8,056			1,701
Decrease (Increase) in accounts payable and accruals:
	Trade		(76,044	)		(133,238	)		(93,499	)		(57,271	)		(31,909	)		(6,736	)
	Shareholder—current account		(629	)		16			(20	)		2,230			—			—
	Other		(26,915	)		(8,063	)		(84,685	)		(68,068	)		(14,796	)		(3,124	)
Increase (Decrease) in inventories			53,681			43,921			65,614			(36,859	)		12,996			2,744
Financial Expenses(4)			5,010			283,248			221,906			393,739			437,993			92,461
Cumulative effect, at beginning of year and change in accounting principles			—			—			—			(3,483	)		—			—
EBITDA			(95,336	)		(581,959	)		(58,741	)		656,369			1,052,240			222,132

(1)

After deduction of incidental revenues amounting to NIS 4.7 million.

(2)

EBITDA represents earnings (loss) before interest, taxes, depreciation, amortization, exceptional items and capitalization of intangible assets. EBITDA is presented because it is a measure commonly used in the telecommunications industry and is presented solely to enhance the understanding of our operating results. EBITDA, however, should not be considered as an alternative to operating income or income for the year as an indicator of our operating performance. Similarly, EBITDA should not be considered as an alternative to cash flows from operating activities as a measure of liquidity. EBITDA is not a measure of financial performance under generally accepted accounting principles and may not be comparable to other similarly titled measures for other companies. EBITDA may not be indicative of our historic operating results; nor is it meant to be predictive of potential future results. The EBITDA figures presented above are substantially the same as those resulting from the calculation of Consolidated Adjusted EBITDA pursuant to US GAAP as required under the indenture governing our 13% senior subordinated notes due 2010.

Page 8

(3)	See Notes 5, 6 and 7 to our consolidated financial statements for information regarding long-term liabilities and current maturities of long-term bank loans. With respect to our loans from Bank Hapoalim, see “Item 5B. Operating and Financial Review and Prospects—Liquidity and Capital Resources.”
(4)	Financial expenses excluding any charge for the amortization of pre-launch financial costs.

Selected Operating Data

	At December 31,
	2000		2001		2002
Industry Data
Estimated population of Israel (in thousands)(1)		6,347		6,500		6,650
Estimated Israeli mobile telephone subscribers (in thousands)(2)		4,003		5,470		6,333
Estimated Israeli mobile telephone penetration(3)		63%		84%		95%

		Year ended December 31,*								Three months ended
										March 31,		June 30,		Sept. 30,		Dec. 31,
		1999		2000		2001		2002		2002		2002		2002		2002
Partner Data
Subscribers (000’s) (at period end)(4)			355		834		1,458		1,837		1,596		1,703		1,758		1,837
	Prepaid						389		540		453		502		514		540
	Postpaid (private)						829		1,004		888		933		966		1,004
	Postpaid (business)						240		293		255		268		278		293
Share of total Israeli subscribers (at period end)(5)			13%		21%		27%		29%		27%		28%		28%		29%
Average monthly usage per subscriber (mins.)(6)			456		392		318		280		284		284		279		272
Average monthly revenue per subscriber including inroaming (NIS)(7)			393		306		214		183		184		185		187		178
	Prepaid						151		127		127		129		131		120
	Postpaid (private)						192		167		167		169		172		161
	Postpaid (business)						354		343		337		344		347		343
Churn rate(8)			6.8%		5.5%		5.8%		10.9%		1.3%		1.6%		4.7%		2.9%
Subscriber acquisition costs per subscriber (NIS)(9)			1,464		819		458		470		443		463		495		482
Estimated coverage of Israeli population (at period end)(10)			96%		97%		97%		97%		97%		97%		97%		97%
Number of operational base stations (at period end)			846		1,355		1,882		2,035		1,901		1,950		1,986		2,035

Page 9

	Year ended December 31,*								Three months ended
									March 31,		June 30,		Sept. 30,		Dec. 31,
	1999		2000		2001		2002		2002		2002		2002		2002
Partner Data
Number of microsites out of total number of operational base stations (at period end)(11)		46		347		703		726		690		703		710		726
Number of employees (full time equivalent) (at period end)(12)		1,453		2,131		2,523		2,685		2,469		2,564		2,648		2,685

*	Until the end of 1998 we were mainly engaged in planning and establishing our cellular network. We launched our commercial services in January 1999.
(1)	The estimated population of Israel at December 31, 2000 and 2001 is published by the Central Bureau of Statistics in Israel. The figures for 2002 are the Company’s estimates.
(2)	We have estimated the total number of Israeli mobile telephone subscribers from information contained in published reports issued by, and public statements made by, Pelephone and Cellcom or by their shareholders and from Partner subscriber data at December 31, 2000, 2001 and 2002. The figure for MIRS 2001 is the Company’s estimate. As MIRS received a general license on February 5, 2001 their subscribers have not been included in the Israeli subscriber count in prior years. MIRS’s entire subscriber base has been included in the Israeli subscriber count from the date on which MIRS received its license.
(3)	Total number of estimated Israeli mobile telephone subscribers expressed as a percentage of the estimated population of Israel. This includes dormant subscribers as well as other subscribers who are not included in the Israeli population figures, such as Palestinians, new immigrants, and foreign workers.
(4)	In accordance with general practice in the mobile telephone industry, we use the term “subscriber”, unless the context otherwise requires, to indicate a telephone, rather than either a bill-paying network customer, who may have a number of telephones connected to the network, or a mobile telephone user who may share a single telephone with a number of other users. “Subscriber” includes our prepaid customers. Our prepaid service was launched on June 29, 2000. References to the number of subscribers are stated net of subscribers who leave or are disconnected from the network, or who have not generated revenue for the Company for a period of over six consecutive months ending at a reporting date.
(5)	Total number of Partner subscribers expressed as a percentage of the estimated total number of Israeli subscribers.
(6)	We have calculated Partner average monthly usage per subscriber by (i) dividing, for each month in such period, the total number of minutes of usage, excluding in-roaming usage, during such month by the average of the number of Partner subscribers, and (ii) dividing the sum of such results by the number of months in the relevant period.
(7)	We have calculated Partner average monthly revenue per subscriber by (i) dividing, for each month in such period, the Partner revenue during such month, excluding revenue from equipment sales and including revenue from foreign Global System for Mobile Communications, or GSM, network operators for

Page 10

	calls made by their roaming customers while in Israel using our network, by the average of the number of Partner subscribers, and (ii) dividing the sum of such results by the number of months in the relevant period. We have presented the amounts in NIS.
(8)	We define the “churn rate” as the total number of subscribers who disconnect from our network, either involuntarily or voluntarily, in a given period expressed as a percentage of the average of the number of our subscribers at the beginning and end of such period. From June 2001, our churn rate has also included subscribers who have not generated revenue for the Company for a period of the last six consecutive months ending at a reporting date. Involuntary churn includes disconnections due to non-payment of bills or suspected fraudulent use, and voluntary churn includes disconnections due to subscribers switching to a competing mobile telephone network or terminating their use of our services. In the quarter ended September 30, 2002, we refined our reporting procedures for active subscribers. This change caused a reduction in the reported number of active subscribers for the third quarter of 2002 of 41,000 subscribers. Some of the additional churn provided for, related to periods prior to the third quarter of 2002.
(9)	Subscriber acquisition costs (SAC) include mainly handset and car kit costs, net of revenues received from sales of handsets, referred to as “handset subsidies”, and commissions paid to dealers, distributors and sales personnel. Subscriber acquisition costs per subscriber are calculated by dividing the subscriber acquisition costs incurred during the reporting period by the number of subscribers acquired in the reporting period.
	The aforementioned components of SAC are included in our consolidated financial statements as follows: handset and car kit costs—in “cost of revenues”; commissions paid to dealers, distributors and sales personnel—in “selling and marketing expenses”; and revenues received from sales of handsets—in “revenues, net”.
(10)	We measure coverage using computerized models of our network, radio propagation characteristics and topographic information to predict signal levels at two meters above ground level in areas where we operate a cell site. According to these coverage results, we estimate the population serviced by our network and divide this by the estimated total population of Israel. Estimates are published by the Central Bureau of Statistics in Israel.
(11)	We did not begin to record data on the number of microsites until the second quarter of 1999.
(12)	A full-time employee is contracted to work a standard 186 hours per month. Part-time employees are converted to full-time equivalents by dividing their contracted hours per month by the full-time standard. The result is added to the number of full-time employees to determine the number of employees on a full-time equivalent basis.

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Exchange Rate Data

     The following table sets forth, for the years indicated, exchange rates between the shekel and the US dollar, expressed as shekels per US dollar and based upon the daily representative rate of exchange on the last day of each year as published by the Bank of Israel.

	1998		1999		2000		2001		2002
Average(1)		3.800		4.140		4.077		4.220		4.736
High		4.367		4.288		4.198		4.416		4.994
Low		3.536		4.013		3.967		4.067		4.437
End of period		4.160		4.153		4.041		4.416		4.737

(1) Calculated based on the average of the exchange rates on the last day of each month during the relevant period.

	September		October		November		December		January		February
	2002		2002		2002		2002		2003		2003
High		4.890		4.862		4.756		4.791		4.898		4.924
Low		4.679		4.738		4.634		4.632		4.769		4.810

On March 12 2003, the exchange rate was NIS 4.832 per US dollar as published by the Bank of Israel.

Changes in the exchange rate between the shekel and the US dollar could materially affect our financial results.

3B. Capitalization and Indebtedness

Not applicable.

3C. Reasons for the Offer and Use of Proceeds

Not applicable.

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3D. Risk Factors

We expect our growth to slow, because Israel’s mobile telephone market is highly penetrated, making it difficult to obtain new subscribers.

     Although we have experienced substantial subscriber growth since our commercial launch in 1999, we expect the growth of the Israeli market for mobile telephones to slow because the market is highly penetrated. The population of Israel at December 31, 2002 was approximately 6.7 million. At December 31, 1998, prior to our full commercial launch, approximately 35% of the Israeli population had mobile telephones. At December 31, 2002, that percentage is estimated to be 95%, although this includes dormant subscribers as well as other subscribers who are not included in the Israeli population figures, such as Palestinians, new immigrants, and foreign workers. Because the Israeli market for mobile telephones is highly penetrated, future demand for our services may not develop at the same rate as it has in the past, and depends largely on our ability to retain existing subscribers in our network and to attract subscribers from the other mobile telephone network operators. While our market share, based on internal estimates, has increased from approximately 13% of Israeli mobile subscribers at December 31, 1999 to approximately 29% at December 31, 2002, we expect our market share growth to slow down in 2003.

A continuing deterioration in the economic conditions in Israel may adversely affect our financial condition and results of operations.

     We are incorporated and based in, and currently derive almost all our revenues from markets within, the State of Israel. Primarily due to the global economic downturn and Israel’s security and political situation, the Israeli economy has slipped into recession. The rate of unemployment is rising, consumer spending has decreased and many businesses are experiencing financial difficulties. A continuing deterioration in the economic conditions in Israel may adversely affect usage patterns of our services and the ability of our customers to pay for our services, which would adversely affect our financial condition and results of operations. Such continuing deterioration may also cause us to delay our future investments and our launch of Universal Mobile Telecommunications System, or UMTS third generation, technology, also known as Wideband Code Division Multiple Access, or W-CDMA technology. In addition, if the economic deterioration in Israel continues, it may also affect the ability of Israeli banks to provide us with financing under our current credit facility and additional financing on reasonable terms and conditions, should we need it in the future.

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The political and military conditions in Israel may adversely affect our financial condition and results of operations.

     The political and military conditions in Israel directly influence us. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its Arab neighbors. Hostilities involving Israel, the interruption or curtailment of trade between Israel and its trading partners, political instability within Israel or its neighboring countries and changes in Israeli laws and regulations, including taxation, are likely to cause our revenues to fall and harm our business.

     Since October 2000, there has been a substantial deterioration in the relationship between Israel and the Palestinians, which has resulted in increased violence, and the situation has recently worsened due to the possibility of an Iraqi attack against Israel in response to an attack by the United States and its allies against Iraq. The future effect of this deterioration and violence on the Israeli economy and our operations is unclear. Ongoing violence between Israel and its Arab neighbors and Palestinians may have a material adverse effect on our business, financial condition or results of operations. Due to the substantial deterioration in the political situation in Israel, we have already experienced and may continue to suffer from a decrease in incoming roaming services.

     Some of our directors, officers and employees are currently obligated to perform annual reserve duty. Additionally, all such reservists are subject to being called to active duty at any time under emergency circumstances. We cannot assess the full impact of these requirements on our workforce and business if conditions should change, and we cannot predict the effect on us of any expansion or reduction of these obligations. Under emergency circumstances, the government also has the right to revoke temporarily some of the spectrum granted to us, to protect the security of the State of Israel or to ensure the provision of necessary services to the public. This may materially harm our ability to provide services to our subscribers in such emergency circumstances.

     We cannot assure you that we are fully prepared for every disaster or emergency situation, or that we could recover fully from such an occurrence, and we cannot predict the effect on us of any such circumstances.

Increased competition from existing competitors may affect our market share and require us to reduce our tariffs in the future, may increase our subscriber acquisition costs and customer retention costs and may continue to increase our churn rate.

     We compete primarily with Cellcom, which launched its services in 1994, and Pelephone, which launched its services in 1986, two of the other mobile telephone network operators in Israel. Although we were once the only GSM network operator in Israel, Cellcom began providing GSM 1800 services during the second half of 2002, and we expect competition to intensify as it will be much

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easier than before for Cellcom to attract new subscribers, including those who are currently our subscribers. As a result, we may face an increase in our churn rate and may be forced to increase our customer retention costs, including subsidies towards upgrades of subscribers’ handsets, in order to retain our subscribers. Moreover, we have lost and do not expect to regain a material part of our revenues from roaming services offered to GSM subscribers visiting from abroad. These developments may adversely affect our market share and financial condition and results of operations.

     According to public reports, Cellcom also intends to launch a technology called Enhanced Data Rates for GSM Evolution, or EDGE, enabling the transfers of data at rates of up to approximately 380 Kbps. Additionally, Pelephone is adding an overlay to its existing CDMA network, which is called CDMA-1x, a technology that enables the transfer of data at speeds of up to approximately 300 Kbps. If Cellcom or Pelephone successfully launch these new advanced technologies before we launch UMTS third generation technology, or if any of our competitors successfully launches third generation services, before we do, we will be at a competitive disadvantage.

     Pelephone also recently launched a new brand called “ESCAPE”, or “ESC”, which is primarily aimed at young subscribers, which we believe are a very important target market of ours. Pelephone is investing heavily in promoting its new brand. However, we cannot predict at this stage the impact of the launch of this new brand on our ability to retain our subscribers and attract new subscribers from the other mobile telephone network operators.

     We also compete with an Enhanced Specialized Mobile Radio, or “trunking”, network known as MIRS. MIRS was granted a general license to operate as a mobile telephone operator on February 5, 2001. As a result of the general license, the use of MIRS’s network has grown and may continue to grow significantly, and this growth could adversely affect our market share.

     To the extent that fixed-line telephones are used instead of mobile telephones, we also compete with Bezeq, which owns 50% of Pelephone and is the only incumbent public fixed-line operator in Israel. We also may face competition from new fixed-line operators. Additional fixed-line telephone service licenses may be granted in the future. If any of our competitors is granted such a license, we may be at a competitive disadvantage relative to those existing mobile telephone operators who are able to offer combined packages of fixed-line and mobile telephone services.

     In addition, the Palestine Telecommunication Co. Ltd., or Paltel, operates a GSM mobile telephone network under the name “Jawwal” in the Palestinian Authority administered areas of the

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West Bank and Gaza Strip, as well as a fixed-line network. Paltel’s GSM network competes with our network in some border coverage overlap areas.

     Competition may require us to increase our subscriber acquisition costs and customer retention costs. Competition may also limit our ability in the future to increase tariffs, or cause us to reduce tariffs. We experienced a material increase in churn in 2002 and expect a further material increase in churn in 2003. For more information, see “Item 5A. Operating Results—Churn”. Competition may further increase our expected level of churn. The impact of increased competition could have a material adverse effect on our business, financial condition or results of operations.

Risks and uncertainties in connection with UMTS third generation technology mean that we may not make an economic return on our investment in acquiring UMTS third generation spectrum, establishing a UMTS third generation network, or developing UMTS third generation services.

     The technology for new UMTS third generation services has not yet been fully developed by the limited number of suppliers of the handsets, network equipment and software to be used by us and our competitors in providing UMTS third generation services. If these suppliers do not provide reasonably priced devices, technologically proven network equipment and software with sufficient functionality or speed or if they experience delays in the delivery or functional deployment of such devices and related network equipment or software, our ability to develop our UMTS third generation network, and our customers’ ability to access it, will be impaired. We also rely on applications developers to develop services that will stimulate demand for our UMTS third generation network, although we cannot predict whether customer demand will develop as expected. If applications developers fail to develop such services, or experience delays in their development of such services, our ability to generate revenues from our UMTS third generation networks will be adversely affected.

     UMTS third generation technology is newer and has less mature standards than second generation technology. We may not be able to roll-out or operate new technologies to perform as expected or favorably when compared to existing or emerging competing communications technologies, such as second generation technology, as well as technologies in connection with UMTS third generation mobile communications services that are being or will be developed around the world. Competing communications technologies also include those discussed below, in “—The telecommunications industry is subject to rapid and significant changes in technology which could reduce the appeal of our services.” See also “—Increased competition from existing competitors may affect our market share and require us to reduce our tariffs in the future, may increase our subscriber acquisition costs and customer retention costs and may continue to increase our churn rate.”

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Consequently, the UMTS third generation network and services that we intend to establish and develop through investing substantial capital resources may not gain market acceptance. As well, testing UMTS third generation networks in live environments has been limited, and it is not yet clear how large-scale usage will affect the capacity and functionality of UMTS third generation networks and therefore what the optimal network density, which determines the cost of our network roll-out, will be. Furthermore, it is not yet clear if customers will adopt UMTS third generation services, how widespread the usage of these new services will be, how many customers will be willing to pay for such services and devices and whether the revenue generated from these services will justify the costs involved in establishing and operating our UMTS third generation network. For these reasons, we cannot be certain that our UMTS third generation-related investments will provide an economic return.

The telecommunications industry is subject to rapid and significant changes in technology which could reduce the appeal of our services.

     We may face competition from technologies currently in development or that will be developed in the future, including fixed-line and cordless technologies, satellite-based personal communications services, private and shared radio networks, and other communications services that have the technical capability to handle mobile telephone calls including interconnection to the fixed-line telephone network. The effect of emerging and future technological changes on the viability or competitiveness of our network cannot be accurately predicted. We cannot assure you that the technologies we employ or intend to employ, including UMTS third generation technology, will not become obsolete or subject to competition from new technologies in the future.

We operate in a highly regulated telecommunications market which limits our flexibility to manage our business. In particular, the regulator’s decisions, including those relating to tariffs, may materially adversely affect our results of operations.

     Our business is subject to government regulation regarding licensing, competition, frequency allocation and costs and arrangements pertaining to interconnection and leased lines. Our business and operations could be adversely affected by changes in laws, regulations or government policy affecting our business activities, such as decisions by the regulator increasing the rate of royalties to be paid to the State of Israel, enlarging the types of revenues which the royalties apply to, setting policies and imposing new regulations governing electronic trade and M-Commerce, or further reducing call or SMS termination tariffs, as well as the amendment or revocation of our license. For example, as of January 1, 2003, the Ministry of Communications reduced the call termination tariffs to mobile telephone

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networks from NIS 0.50 per minute to NIS 0.45 per minute. For more information, see “Item 4B. Business Overview-Interconnection”. According to our estimation, this reduction in call termination tariffs will have a major adverse impact on our revenues and results of operations.

     Had the call termination tariffs been reduced to NIS 0.45 per minute for all of 2002, the proforma negative impact on our revenues and net income would have amounted to approximately NIS 110 million and NIS 62 million, respectively, as a result of the reduction in the call termination tariffs that we would have collected and paid, together with the related royalties. The Ministry of Communications has also recently indicated that it may further reduce call and SMS termination tariffs.

     As well, the Ministry of Communications has started an inquiry into SMS termination tariffs. The Antitrust Authority has also been reviewing SMS interconnection agreements and has informed us preliminarily that the SMS interconnection arrangements are in restraint of trade. The Antitrust Authority has indicated that it will refrain from action for the time being to allow the Ministry of Communications to resolve the matter. The result of either of these two inquiries could be the reduction or elimination of SMS termination tariffs, which would adversely affect our results of operations.

     During an emergency, including a major communications crisis in Israel’s national communications network, a natural disaster, or a special security situation in Israel, control of our network may be assumed by a lawfully authorized person in order to protect the security of the State of Israel or to ensure the provision of necessary services to the public. During such extreme circumstances, the government also has the right to withdraw temporarily some of the spectrum granted to us.

We may be unable to obtain necessary financing to support our network expansion and enhancement plans.

     Operating a mobile telephone network like ours requires high levels of capital investment and marketing expenditures. From January 1, 1998 to December 31, 2002 we made cumulative net capital expenditures of approximately NIS 3,073 million ($649 million), and paid license fees and associated costs totaling approximately NIS 1,793 million ($378 million).

     In an auction process completed on December 18, 2001, the Ministry of Communications awarded us the two bands of spectrum for which we had submitted bids: one band of 1800 MHz spectrum, which is GSM compatible, or GSM 1800 spectrum, and one band of UMTS third generation spectrum. The cost of the license fees is NIS 180 million (approximately $38 million) for the GSM 1800 spectrum, payable in two installments, and NIS 220 million (approximately $46 million) for the

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UMTS third generation spectrum, payable in six installments. To date, we have paid NIS 108 million and NIS 100 million for the GSM 1800 spectrum and the UMTS third generation spectrum, respectively. For more information, see “Item 5B. Operating and Financial Review and Prospects—Liquidity and Capital Resources.”

     We will incur additional substantial capital expenditures in building out our UMTS third generation network and increasing the capacity of our existing network. We estimate that capital expenditures in connection with building out our UMTS third generation network will be approximately $300 million over the three to five years from the beginning of the network build-out, with approximately $150 million in capital expenditures required in the first twelve months of the build-out. The network build-out is expected to begin towards the end of 2003 or the beginning of 2004. Although at present we believe we have a fully funded business plan, including the support necessary for our UMTS third generation operations, we may require additional funding for capital expenditures in connection with building out our UMTS third generation network.

     We may also be forced to incur additional debt or raise additional equity to meet such costs and any unanticipated requirements. This may include entering into additional credit arrangements or issuing debt or other securities, which may require consents under our credit agreement and indenture and under the terms of our license. As well, any offering of more than 10% of our currently outstanding ordinary shares would require the approval of the Ministry of Communications, pursuant to the terms of our license. See “—Our telecommunications license imposes certain restrictions on who can own our shares. If these restrictions are breached, we could lose our license.” If for any reason adequate financing is not available as needed, our business, financial condition or results of operations could be materially adversely affected.

     In addition, there is a risk that we have underestimated our future capital requirements or overestimated our future revenues and operating profits in the build-out and operation of a third generation network. If so, our future business, financial condition and results of operations could be materially adversely affected.

Our credit facility and our indenture each contain a number of restrictions and obligations that limit our operating and financial flexibility.

     Our credit facility and the indenture governing our 13% senior subordinated notes due 2010 each contain a number of financial, operating and other obligations that limit our operating and financial flexibility. These covenants, among other things, restrict our ability to pledge our assets, enter into certain types of lease financing, dispose of assets, make loans or give guarantees, make

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certain acquisitions or engage in mergers or consolidations, incur borrowing (other than permitted borrowings), make any substantial change to the nature of our business or engage in any other business. Permitted borrowings include shareholders loans and subordinated debt (including notes) and an aggregate amount in loans and credits, performance guarantees and letters of credit of up to a maximum of $50 million, provided that the aggregate amount of loans and credits alone do not exceed $25 million. Our subsidiaries may incur borrowings provided they maintain a defined debt to equity ratio, and we may make acquisitions with the proceeds of certain debt and equity offerings.

     In addition, we may not pay dividends or similar payments on our ordinary shares or repay principal or interest on shareholders’ loans or principal on subordinated debt, or make payments to shareholders generally by way of return or repurchase of capital, other than by way of a permitted distribution. A permitted distribution means an amount not exceeding, in the aggregate, 50% of the excess cash flow arising in the previous financial year, and is subject to our compliance with additional conditions, including that an actual or potential event of default does not exist, that we are able to meet outstanding operating expenditure requirements, that we have repaid (and cannot re-borrow) at least 50% of the total bank commitments under the credit facility, that such distribution is made no earlier than December 31, 2005, and that we comply with certain minimum coverage ratios. Payments of interest on our notes are restricted in the event amounts due under the credit facility are unpaid or an event of default has occurred.

     Our credit facility contains covenants regarding achieving certain levels of financial ratios during each of the ratio periods (semi-annual or annual periods) during the term of the credit facility. These ratios include:

• Fixed Charge Coverage Ratio (EBITDA divided by the sum of debt service, capital expenditures and tax payments), which has to be not less than 83% by the end of 2002, and not less than 105% by the end of June 2008.

• Facility Debt Coverage Ratio (EBITDA divided by the aggregate advances made under the credit facility), which has to be not less than 33% by the end of 2002 and not less than 65% by the end of June 2008.

• Total Debt Coverage Ratio (EBITDA divided by Total Debt (as defined in the credit facility)), which has to be not less than 25% by the end of 2002, and not less than 45% by the end of 2008.

• ADSCR (EBITDA divided by Debt Service (as defined in the credit facility)), which has to be not less than 200% by the end of 2002, and not less than 165% by the end of 2008.

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     Deviation of up to 5% is permitted in ADSCR and in any one of the other three covenants in each ratio period, provided such deviation is not repeated in any of the three immediately following ratio periods.

     Our ability to continue to comply with these and other obligations depends in part on the future performance of our business. There can be no assurance that such obligations will not materially adversely affect our ability to finance our future operations, or the manner in which we operate our business. In particular, any non-compliance with performance-related covenants and other undertakings of our credit facility or indenture could result in an acceleration of our outstanding debt under the credit facility and the indenture and restrict our ability to draw additional funds, which could have a material adverse effect on our business, financial condition or results of operations.

Our substantial leverage could adversely affect our financial health.

     We are highly leveraged. At December 31, 2002, our total long-term indebtedness was approximately NIS 3,297 million ($696 million).

     This debt represents approximately 103% of our total capitalization (bank loans plus notes payable net of capital deficiency) at December 31, 2002. Our credit facility and the indenture governing our notes permit us to incur additional indebtedness subject to some limitations. The indenture does not place a limit on the amount of indebtedness that we may incur in financing the acquisition of network assets, including licenses, equipment and inventory, or for capital expenditures and working capital for our business.

     Our substantial debt could adversely affect our financial health by, among other things:

• increasing our vulnerability to adverse economic conditions or increases in prevailing interest rates, particularly if any of our borrowings are at variable interest rates;

• limiting our ability to obtain the additional finance we need to operate, develop and expand our business;

• requiring us to dedicate a substantial portion of our cash flow from operations to service our debt, which reduces the funds available for operations and future business development; and

• exposing us to the effects of foreign exchange fluctuations on our obligations under our notes, which are denominated in US dollars.

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We may not be able to make our debt payments in the future.

     Our ability to meet our debt obligations will depend on whether we can successfully implement our strategy, as well as on financial, competitive, legal and technical factors, including some factors that are beyond our control. If we are unable to generate sufficient cash flow from operations to meet principal and interest payments on our debt, we may have to refinance all or part of our indebtedness.

     We cannot ensure that any such refinancing would be possible on terms that we could accept or that we could obtain additional financing. If refinancing were not possible or if additional financing were not available, we may have to sell our assets under circumstances that might not yield the highest prices, or default on our debt obligations, including the notes, which would permit our noteholders and holders of other outstanding indebtedness to accelerate their maturity dates.

Our business may be impacted by the shekel exchange rate fluctuations and inflation.

     Substantially all of our revenues and a majority of our operating expenses are denominated in shekels. However, through December 31, 2002, a substantial amount of our operating expenses were linked to non-shekel currencies. These expenses related mainly to the acquisition of handsets where the price paid by us is based on various foreign currencies. In addition, a substantial majority of our capital expenditures are incurred in, or linked to, non-shekel currencies, and our notes are denominated in US dollars and require US dollar interest payments. Thus, any devaluation of the shekel against the dollar (or other foreign currencies), will increase the shekel cost of our non-shekel denominated or linked expenses and capital expenditures. Such an increase may have an adverse impact on our results, which may be material. In addition, we expect that we will make investments in our UMTS third generation network predominately in foreign currency. Material changes in exchange rates may cause the amounts that we must invest to increase materially in shekel terms. We hedge some of our foreign currency commitments, but we do not currently hedge the principal payable on our notes. As of December 31, 2002, the notional amounts of our foreign currency derivatives were approximately $249 million. Our derivative transactions are mainly designed to hedge the cash flows related to the payments of dollar interest on our notes and those related to anticipated payments in respect of purchases of handsets and fixed assets in foreign currency. The transactions are primarily foreign currency transactions and purchases and sales of currency options. See Note 12(b) to our consolidated financial statements.

     Our bank credit facility borrowings are primarily in shekels, and some of our shekel bank borrowings are linked to the Israeli consumer price index, or CPI. We may not be permitted to raise our tariffs pursuant to our license in a manner that would fully compensate for any increase in the

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Israeli CPI. Therefore, an increase in the rate of inflation may also have a material adverse impact upon us by increasing our financial expenses without an offsetting increase in revenue.

Historically, we have experienced substantial operating and net losses. Although, for the first time, in 2002 we experienced net income, we cannot assure you that we will continue to do so, or that future net income will offset our cumulative losses.

     To date, the launch and development of our business have required substantial capital, operating and marketing expenditures. These expenditures have historically resulted in net cash outflows, negative EBITDA and substantial operating and net losses. For the years ended December 31, 1999 and 2000, we had negative EBITDA of approximately NIS 582 million and NIS 59 million, respectively. Although we generated positive EBITDA of approximately NIS 656 million and NIS 1,052 million ($222 million) for the years ended December 31, 2001 and 2002, respectively, and net income of approximately NIS 84 million ($18 million) in 2002, we may experience net losses and continue to have net cash outflows in the next few years while we continue to expand our network and build and maintain our subscriber base.

Operating a mobile telecommunications network involves the inherent risk of fraudulent activities and potential abuse of our services, which may cause loss of revenues and non-recoverable expenses.

     There is an inherent risk in operating a mobile telecommunications network with regard to potential abuse by individuals, groups, businesses or other organizations who use our mobile telecommunications services and avoid paying for them. The effects of such fraudulent activities may be, among others, the loss of revenue due to us and out of pocket expenses which we will have to pay to third parties in connection with those services, such as interconnect fees, payments to international operators or to operators overseas and payments to content providers. Such payments may be non-recoverable. Although we are taking measures in order to prevent fraudulent activities, we have suffered in the past, and may suffer in the future, from these activities. The financial impact of fraudulent activities that have occurred in the past has not been material. However, we cannot assure you that future fraudulent activities, if they occur, will not materially affect our financial condition and results of operations.

We have had difficulties obtaining some of the permits for which we have applied, and have not yet applied for other permits that are required for the erection of our antenna sites. These difficulties could continue and therefore affect our ability to erect or maintain antenna sites. This could have an adverse effect on the extent, quality and capacity of our network coverage

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which could prevent us from achieving or maintaining the network coverage and quality requirements contained in our license and adversely affect our business.

     In order to establish our mobile telephone network and achieve the coverage required by our license, we have undertaken the rapid deployment of antenna sites throughout Israel. In addition, in order to adapt our network for GSM 1800 and UMTS third generation technology, we will be required to erect additional antennas and make modifications to our existing antennas. The erection and operation of these antenna sites require building permits from local or regional zoning authorities, as well as a number of additional permits from governmental and regulatory authorities, including:

• erection and operating permits from the Ministry of the Environment;

• permits from the Civil Aviation Authority, in certain cases; and

• permits from the Israeli Defense Forces.

     Like our competitors, we have experienced difficulties in obtaining some of these consents and permits, especially from local building authorities. Our ability to maintain and improve the extent and quality of our network coverage depends in part on our ability to obtain appropriate sites and approvals to install our network infrastructure, including antenna sites. In addition, as part of our UMTS third generation network build out, we are erecting additional antenna sites and making modifications to our existing antenna sites, for which we require new consents and approvals. If we continue to experience difficulty in obtaining approvals for the erection of antenna sites, this could adversely affect our existing network and delay the erection of additional antenna sites to our network. This difficulty could have an adverse effect on the extent, quality and capacity of our network coverage and on our ability to continue to market our products and services effectively. Our inability to resolve these issues in a timely manner could also prevent us from achieving or maintaining the network coverage and quality requirements contained in our license.

     It has been our policy not to operate an antenna site until we have received the required permits from the Ministry of the Environment, the Civil Aviation Authority and the Israeli Defense Forces, or at least until all third party environmental testing necessary for those permits has been successfully completed. We believe that all of our antenna sites meet the International Radiation Protection Agency’s standards.

     The Ministry of the Environment will issue permanent permits for antenna sites only after required local or regional building permits are obtained. As a result, approximately 36% of our antenna sites are operating without permits from the Ministry of the Environment, although all

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environmental testing necessary for those permits has been successfully completed by third parties authorized to conduct such testing by the Ministry of the Environment. Many of these antenna sites are commonly referred to as microsites, which are small antenna devices that emit low levels of radiation comparable to those emitted by our handsets. Additionally, as required by the Ministry of the Environment, an authorized third party annually verifies that each of our antenna sites complies with the International Radiation Protection Agency standards adopted by the Ministry of the Environment.

     In addition, a small percentage of antenna sites are operating without permits from the Civil Aviation Authority and the Israeli Defense Forces. Also, some local and regional building authorities have caused a number of administrative delays to the granting of building permits for the erection of antenna sites, which has resulted in delays in obtaining local building permits. As a result, we, like other mobile telephone operators in Israel, have erected antenna sites without the issuance of a building permit from the relevant local or regional authority. As of December 31, 2002, 50% of our antenna sites are operating without local building permits. A substantial portion of these are microsites. Applications have been submitted to the relevant local or regional authority and are at various stages of the approval process for approximately 20% of our antenna sites, and the application process has not been commenced for approximately 30% of our sites. We believe that a portion of the sites for which the application process has not been commenced do not require local building permits under the Planning and Building Law.

     The erection of an antenna site without a required local building permit is a violation of the Planning and Building Law, 1965 and, in some cases, has resulted in a demolition order being imposed on us and in the filing of criminal charges and civil proceedings against us and our officers and directors. To date, we have been largely successful in avoiding or delaying the execution of demolition orders. So far, settlements have resulted in the imposition of demolition orders for the relevant sites, execution of which has been stayed for a period of time to allow us to obtain the necessary permits or to relocate the relevant antenna site. These settlements have not involved any admission of guilt by our officers and directors. We are facing greater difficulty in reaching these settlements. Therefore, we cannot assure you that we will continue to be successful in this regard or that we will not be faced with demolition orders and criminal charges, including against our officers and directors. In addition, we, like the other mobile telephone operators in Israel, may be required to dismantle antenna sites for which we have not yet obtained the required consents and permits.

     In addition, we, like the other mobile telephone operators in Israel, provide repeaters, also known as bi-directional amplifiers, to subscribers seeking an interim solution to weak signal reception within specific indoor locations. These repeaters, which we install at the subscribers’ premises upon their request, consist of an indoor box attached to a small outdoor antenna of between 40 and 70 cm

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(approximately one to two feet), receive signals from a network antenna site and amplify them within a specific room or rooms. The radiation emission from these outdoor antennas is comparable to that of the handset whose signal it is transmitting. In light of the lack of a clear policy of the local planning and building authorities, and in light of the practice of the other mobile telephone operators, we have not requested permits under the Planning and Building Law for the repeaters. However, we have received from the Ministry of Communications a type approval for the repeaters. A type approval is an approval given by the Israeli Minister of Communications, pursuant to the relevant provisions of the Communications Law (Telecommunications and Broadcasting), 1982, for a specific type of user equipment in order to enable the owner of a general license to connect this equipment to the owner’s communications network. We have also approached the Ministry of the Environment, asserting that no permits are necessary for the repeaters, based on the Ministry’s previous advice that permits are not necessary for devices with comparable levels of emission called “Fixed Cellular Terminals”. If the local planning and building authorities determine that permits are necessary for the installation of these devices, it could have a negative impact on our ability to obtain permits for our antenna sites.

     National Building Plan No. 36 was recently approved by the Israeli government, after the National Committee removed from the draft a provision which would have required notification to owners of adjoining assets of an intention to erect an antenna site in a residential area. The plan has been published in the “Reshumot” (the official gazette of the State of Israel), and has been in effect since June 2002.

     To date, we have been subject to minimal monetary penalties. There is no certainty that future penalties will be in the same amounts, but we believe that the total amount of these penalties would not have a material effect on our business and/or financial condition.

We are dependent upon our ability to interconnect with other telecommunications carriers. We also depend on Bezeq for transmission services. The failure of these carriers to provide these services on a consistent basis could have a material adverse effect on us.

     Our ability to provide commercially viable mobile telephone services depends upon our ability to interconnect with the telecommunications networks of existing and future fixed-line, mobile telephone and international operators in Israel in order to complete calls between our customers and parties on the fixed-line or other mobile telephone networks. All fixed-line, mobile telephone and international operators in Israel are legally required to provide interconnection to, and not to discriminate against, any other licensed telecommunications operator in Israel. We have signed interconnection agreements with Pelephone, Cellcom and MIRS, the other mobile telephone network operators in Israel, and with Bezeq International and Barak, two of the three international operators in

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Israel, and we have an operating arrangement with the third Israeli international operator, Golden Lines. We have no control over the quality and timing of the investment and maintenance activities that are necessary for these entities to provide us with interconnection to their respective telecommunications networks. The failure of these or other telecommunications providers to provide reliable interconnections to us on a consistent basis could have a material adverse effect on our business, financial condition or results of operations.

     We currently lease most of our transmission capacity from Bezeq, and we lease additional capacity from other suppliers, primarily Cellcom. We have no control over the quality and timing of the investment and maintenance activities that are necessary for these suppliers to provide us with transmission services. Disruptions, stoppages, strikes and slowdowns experienced by them may significantly affect our ability to provide mobile telephone services. In particular, Bezeq has experienced labor disputes with its employees, including stoppages, notably in recent years as the privatization of Bezeq and liberalization of the telecommunications market in Israel have developed. The failure by our suppliers to provide reliable transmission services to us on a consistent basis could have a material adverse effect on our business, financial condition or results of operations.

We may be required in the future to offer access to our network infrastructure to other operators. This may lower the entry barriers for potential new competitors and adversely affect our financial condition and our ability to provide services to our subscribers.

     Under the Communications Law (Telecommunications and Broadcasting), 1982, the Ministry of Communications has the power to require us, like the other telephone operators in Israel, to offer access to our network infrastructure to other operators, although the Ministry of Communications has not required us to do so yet. Our amended license also requires us, upon demand by the Minister of Communications, to permit other operators to provide telecom services using our network. This will lower the entry barriers for potential new competitors and increase the likelihood of additional new competitors entering the mobile telephone market in Israel. Our capacity is limited, and if we are required to allocate capacity to other operators, the services to our subscribers may be harmed. If we fail to agree with new operators that are given access to our network regarding the tariffs for the usage of our infrastructure, the Ministry of Communications may determine those tariffs. If the Ministry of Communications sets those tariffs too low, this may adversely affect our financial condition.

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We can only operate our business for as long as we have a license from the Ministry of Communications.

     We conduct our operations pursuant to a general license granted to us by the Ministry of Communications on April 7, 1998. Our original license was valid until 2008. As a result of our obtaining additional spectrum in the December 2001 spectrum auction in Israel, our license has been extended until February 2022. Our license may be extended for an additional six-year period upon our request to the Ministry of Communications and a confirmation from the Ministry that we have met certain performance requirements, and we may request renewal of our license for successive six-year periods thereafter, subject to regulatory approval. We cannot be certain that our license will not be revoked, will be extended when necessary, or, if extended, on what terms an extension may be granted.

     Additionally, although we believe that we are currently in compliance with all material requirements of our license, the interpretation and application of the technical standards used to measure these requirements, including the requirements regarding population coverage and minimum quality standards, and other license provisions may not be certain, and disagreements have arisen and may arise in the future between us and the Ministry of Communications. We have provided a bank guarantee to the Ministry of Communications in the amount of $20 million to guarantee our performance under our license. For more information, see “Item 5B. Operating and Financial Review and Prospects—Liquidity and Capital Resources.” If we are found to be in material breach of our license, the guarantee may be forfeited and our license may be revoked.

Our marketing strategy is based upon the international Orange Brand. If our license agreement terminates or is revoked, we will lose one of our main competitive strengths.

     Our marketing strategy is based upon the international Orange Brand. We can operate our business under the Orange Brand only if we have the right to use it under the brand license agreement with Orange International Developments Limited, a subsidiary of Orange plc, described in “Item 4B. Business Overview—Intellectual Property.” Under this license agreement, we are required to comply with the Orange Brand guidelines established by Orange International. We have the right to use the Orange Brand as long as we are able and legally eligible under the laws of Israel to offer telecommunications services to the public in Israel. However, the brand license agreement may be terminated by mutual agreement, or at our discretion, or by Orange International if a court determines that we have materially misused the brand and we continue to materially misuse the brand after such determination of material misuse. If we lose the right to use the Orange Brand, our financial condition and results of operations may be materially adversely affected.

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Our telecommunications license imposes certain restrictions on who can own our shares. If these restrictions are breached, we could lose our license.

     As with other companies engaged in the telecommunications business in Israel, our license requires that, at a minimum, 20% of the economic and voting interest, and certain other defined means of control, of our company be owned by Israeli citizens and residents. In addition, no transfer or acquisition of 10% or more of any of such means of control, or the acquisition of control of our company, may be made without the consent of the Ministry of Communications. Our license also restricts cross-ownership and cross-control among competing mobile telephone operators, including the ownership of 5% or more of the means of control of both our company and of a competing operator, without the consent of the Ministry of Communications, which may limit certain persons from acquiring our shares. Shareholdings in breach of these limits could have two consequences. First, the shares that are in excess of the limits will be converted into “dormant” shares, with no rights other than the right to receive dividends or other distributions to shareholders, and to participate in rights offerings. Second, the breach of the limits could be the basis for revoking our license unless our principal shareholders, who currently hold an aggregate of approximately 75% of our ordinary shares, continue to hold an aggregate of at least 51% of our ordinary shares.

We depend on a limited number of suppliers for our network equipment. Our results of operations could be adversely affected if our suppliers fail to provide us with adequate supplies of network equipment or maintenance support on a timely basis.

     We purchase our network equipment, such as switching equipment, base station controllers and base transceiver stations and network software, from Ericsson and from Nokia. Although our network utilizes standard equipment that is produced by several suppliers, we cannot be certain that we will be able to obtain equipment from one or more alternative suppliers on a timely basis in the event that either Ericsson or Nokia is unable to satisfy our equipment requirements in a timely manner, especially if the growth in demand for mobile telephone network equipment exceeds the ability of suppliers of this equipment as a whole to meet such demands. Our results of operations could be adversely affected if Ericsson, Nokia or an alternative supplier fails to provide us with adequate supplies of equipment, as well as ongoing maintenance support, in a timely manner. In addition, our results of operations could be adversely affected if the price of network equipment rises significantly. In our experience, suppliers from time to time extend delivery times, limit supplies and increase the prices of supplies due to their supply limitations and other factors.

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There are alleged health risks related to antenna sites and the use of mobile telecommunications devices, including handsets, which could expose us to liability and lead to reduced usage of mobile phones or increased difficulties in obtaining sites or permits to erect sites for base stations.

     We are aware of recent allegations that there may be health risks associated with the effects of electromagnetic signals from antenna sites and from mobile telephone handsets and from other mobile telecommunications devices. In the construction and operation of our base stations we observe the standards established by the International Radiation Protection Agency, which sets guidelines for the safe exposure level for all uses of radio spectrum. These standards have been adopted by the Ministry of the Environment.

     We have received type approval from the Ministry of Communication for all of the handsets and other terminal equipment we sell. The Ministry of the Environment also has authority to regulate the sale of handsets in Israel. However, in accordance with the current practice among mobile telephone operators in Israel, we have not obtained approvals or exemptions from the Ministry of the Environment for the handsets we provide because, to date, neither the Ministry of the Environment nor the Ministry of Health has issued standards for the permitted level of radiation emissions from handsets. However, as of June 15, 2002, we have been required to provide information to purchasers of handsets on the Specific Absorption Rate, or SAR, of the handset, as well as its compliance with certain standards pursuant to a regulation promulgated by the Ministry of Industry and Trade under the Consumer Protection Law. In the event that new standards for permitted radiation emission levels from handsets are issued, we will be obliged to comply with them.

     While there is currently no substantiated link between exposure to electromagnetic signals at the level transmitted by our base transceiver stations and our mobile telephone handsets and long-term damage to health, the actual or perceived health risks of mobile telephone communications devices could adversely affect us through a reduction in subscribers, reduced usage per subscriber, increased difficulty in obtaining sites for base stations, and exposure to potential liability. Furthermore, we are unable to obtain insurance with respect to such liability.

Our company is controlled by a small number of shareholders.

     At December 31, 2002, our principal shareholders, comprising our founding shareholders Hutchison Whampoa Limited, Matav-Cable Systems Media Ltd., and Elbit Limited, together with the former limited partners of our founding shareholder Tapuz Cellular Systems Limited Partnership, collectively held approximately 75% of our shares. At December 31, 2002, Hutchison Whampoa Limited indirectly owned approximately 42.6% of our shares, Elbit Limited owned approximately 12.2%, Matav-Cable Systems Media Ltd. indirectly owned approximately 7.4%, and the former limited partners in Tapuz Cellular Systems Limited Partnership, Eurocom Communications Ltd. (and its wholly owned subsidiary, Tapuz Cellular Systems Ltd.) and Polar Communications Ltd., owned approximately 9.9% and 2.4%, respectively.

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     Each of the principal shareholders directly holding Partner shares and Elbit.COM Limited, Elbit’s wholly owned subsidiary, is a party to a relationship agreement relating to its investment in our company which governs their collective relationship as shareholders of Partner. This relationship agreement sets forth, among other things, each of these parties’ rights and obligations among themselves with respect to the composition of our Board of Directors, the transfer of shares and other material issues pertaining to their investment in our company.

     These principal shareholders together have the ability to influence our business through their ability as a group to control all actions that require shareholder approval and through their representatives on our Board of Directors. They are not obligated, however, to provide us with financial support or to exercise their rights as shareholders in our best interests or the best interests of our minority shareholders and noteholders, and they may engage in activities that conflict with such interests. If the interests of these principal shareholders conflict with the interests of our other shareholders, those shareholders could be disadvantaged by the actions that these principal shareholders choose to pursue. In addition, our principal shareholders may cause our business to pursue strategic objectives that may conflict with the interests of our other shareholders.

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Our share price has been and may continue to be volatile in response to conditions in the global securities markets generally and in the communications and technology sectors in particular.

     Our share price has been subject to significant volatility, in part due to highly volatile securities markets generally, particularly for communications and technology companies’ shares. Factors other than our results of operations that may affect our share price include, among other things, low trading volume, market expectations of our performance and projected growth in the mobile communications market. In addition, our share price may be affected by factors such as the Israeli economy and the political situation and the level of business activity or perceived growth (or the lack thereof) in the market in general, the performance of other mobile telecommunications companies, announcements by or the results of operations of our competitors, customers and suppliers, potential litigation and regulation involving ourselves or our industry, and announcements concerning the success of UMTS third generation mobile networks, products and services, as well as general market volatility.

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ITEM 4. INFORMATION ON THE COMPANY

4A. History and Development of the Company

     We were incorporated in Israel under the laws of the State of Israel on September 29, 1997 as Partner Communications Company Ltd. Our products and services are marketed under the Orange Brand. Our principal executive offices are located at 8 Amal Street, Afeq Industrial Park, Rosh Ha’ayin 48103, Israel (telephone: 972-67-814-888). Our website address is www.orange.co.il. Information contained on our website does not constitute a part of this annual report. Our agent for service in the United States is CT Corporation, 111 Eighth Avenue, New York, New York 10011.

     In our short history, we have achieved a number of important milestones:

• In April 1998, we received our license to establish and operate a mobile telephone network in Israel.

• In August 1998, we finalized our long-term credit facility to support our network and business roll out.

• By October 1998, we completed our initial network roll out with approximately 77% coverage of the Israeli population, enabling us to commence the soft launch of our services to a test market of targeted customers.

• By January 1999, we had launched full commercial operations with approximately 88% population coverage, established a nationwide distribution network and were offering full services with an extensive media campaign.

• In October 1999, we completed our initial public offering of ordinary shares in the form of American Depositary Shares, and received net proceeds of approximately NIS 2,092 million, with the listing of our American Depositary Shares on NASDAQ and the London Stock Exchange. We used part of these net proceeds to repay approximately NIS 1,494 million in indebtedness to our principal shareholders, and the remainder to finance the continued development of our business.

• In February 2000, we introduced post-paid tariff plans, which we branded “orange to go,” and which allowed subscribers to pay only for airtime usage without a minimum subscription period and without any minimum usage commitment. At December 31, 2002, we had approximately 890,000 subscribers to our “orange to go” plans, or approximately 48% of our total subscriber base.

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• In April 2000, we formed a wholly owned subsidiary, Partner Future Communications 2000 Ltd. to cooperate with and invest in start-up and high technology companies developing new GSM wireless applications.

• In June 2000, we introduced our prepaid subscriber plan, known as “Big Talk.” At December 31, 2002, we had 540,000 subscribers, or approximately 29% of our total subscriber base, in this plan.

• in July 2000, we amended our long-term credit facility, increasing the amount available to up to $750 million.

• In August 2000, we completed an offering, registered under the US Securities Act of 1933, as amended, of $175 million (approximately $170.5 million after deducting commissions and offering expenses) 13% unsecured senior subordinated notes due 2010.

• In January 2001, we received accreditation for the ISO 9002 standard from the Israeli Institute of Quality and Control.

• In March 2001, we received a special license issued by the Ministry of Communications, allowing us to provide internet services.

• On March 31, 2001, we had over 1,000,000 subscribers.

• In July 2001, we registered our ordinary shares for trading on the Tel Aviv Stock Exchange.

• In an auction process completed on December 18, 2001, the Ministry of Communications awarded us the two bands of spectrum for which we had submitted bids: one band of GSM 1800 spectrum and one band of UMTS third generation spectrum.

• On December 26, 2001, we filed a shelf registration statement under the US Securities Act of 1933, as amended, registering $400 million of debt securities and ordinary shares for possible offer and sale during the next two years.

• On January 28, 2002, we had over 1,500,000 subscribers.

• In June 2002, our license was extended until February 2022.

• In June 2002, we launched “orange obox” services, which enable the downloading of rich applications and content. These services are based on the virtual machine platforms, Java to microeditions (J2ME) and proprietary General Virtual Machine (GVM).

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• In October 2002, we launched “orange oklik” services, which enable the transfer of photos, multimedia and animation, based on Multimedia Message Service, or MMS.

• On December 31, 2002, we entered into an amending agreement to our senior credit facility in order to tailor it to our future business plan.

• On December 31, 2002, we had 1,837,000 subscribers.

     For information on our capital expenditures, see “Item 5B Liquidity and Capital Resources—Commitments and Contractual Obligations”.

4B. Business Overview

     We were the first GSM mobile telephone network operator in Israel. We received our mobile telephone license in April 1998 and commenced full commercial operations of our digital GSM 900 mobile telephone network in January 1999. Since then we have expanded rapidly and at December 31, 2002 we had 1,837,000 subscribers, representing an estimated 29% of total Israeli mobile telephone subscribers at that date. During 2002, we increased our customer base by approximately 26%, an increase of approximately 379,000 subscribers. At December 31, 2002 our network covered approximately 97% of the Israeli population. We had constructed and installed 2,035 base transceiver stations (including microsites) by December 31, 2002, with 153 of those stations installed in 2002. At December 31, 2002, most of our subscribers had post-paid tariff plan contracts with us, approximately 29% of our subscribers were in prepaid subscriber plans, and approximately 16% of our subscribers were business subscribers.

     We market our services by capitalizing on the strong international Orange Brand and the experience of our principal shareholders and their affiliates, primarily Hutchison Whampoa Limited. The Orange Brand, which is licensed to us, has been used successfully in other markets to promote mobile telephone services. Market surveys show that we have achieved strong brand awareness in Israel.

     We currently operate in the 900 MHz and the 1800 MHz band. Our services include standard and enhanced GSM services, as well as value added services and products such as voice mail, voice messaging, Color Picture Messaging, icon, ringtone and game downloads, information services, High Speed Circuit Switched Data, General Packet Radio Services, or GPRS, which enables the packet transfer of data in an “always on” mode at a speed of up to 20-30 Kbps, personal numbering and data and fax transmission services. We also offer our subscribers the ability to roam using their mobile

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phones outside Israel. At December 31, 2002, we offered international roaming through 250 operators covering 104 countries.

     We have set forth in the following table an estimate of each operator’s share of total subscribers in the Israeli cellular market at December 31, 1999, 2000, 2001 and 2002:

Market share*	1999			2000			2001			2002
Partner		13	%		21	%		27	%		29	%
Cellcom		48	%		46	%		41	%		39	%
Pelephone		39	%		33	%		28	%		28	%
MIRS**		—			—			4	%		4	%

*	Based on information contained in published reports issued by, and public statements made by, Pelephone and Cellcom or by their shareholders and from Partner subscriber data at December 31, 1999, 2000, 2001 and 2002. The figures for MIRS in 2001 and 2002 are the Company’s estimates.
**	As MIRS received a general license at February 5, 2001 their subscribers have not been included in the Israeli subscriber count in prior years. MIRS’s entire subscriber base has been included in the Israeli subscriber count from the date on which MIRS received its license.

     We operate in one business segment, GSM mobile telephony and related services, and one geographic segment, Israel.

Overview of mobile telecommunications industry in Israel

     There are currently four mobile telephone network operators in Israel: Partner, Pelephone, Cellcom and MIRS. Pelephone is an Israeli corporation owned by Bezeq, the public fixed-line operator in Israel (50%) and by Pelephone Holdings, LLC (50%), a Delaware corporation owned by Shamrock Holdings. Bezeq has a four-year call option to purchase the shares owned by Shamrock Holdings. Pelephone currently operates nationwide mobile telephone networks in Israel using both the N-AMPS analog and the CDMA digital system and is in the process of upgrading its network to CDMA1x. The major beneficial shareholders of Cellcom are BellSouth, the Safra Group and Discount Investment Corporation Ltd. Cellcom operates a nationwide mobile telephone network based on D-AMPS digital technology, and it began providing GSM services in the DCS 1800 band in the second half of 2002. Recent published reports state that Cellcom is considering launching EDGE technology. MIRS is an Enhanced Specialized Mobile Radio, or “trunking,” iDEN network. MIRS’s major shareholders are Motorola Communications (Israel) Ltd. (66.7%) and Ampal Israel Ltd. (25%).

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     In addition, the Palestine Telecommunication Co. Ltd., or Paltel, operates a GSM mobile telephone network under the name “Jawwal” in the Palestinian Authority administered areas of the West Bank and Gaza Strip, as well as a fixed-line network. Paltel’s GSM network competes with our network in some border coverage overlap areas.

     Mobile telephones were first introduced in Israel in 1986. For the first eight years of operation the growth of mobile telephone services in Israel was slow. There was a single operator, Pelephone, offering analog service, and prices were relatively high. It was not until the end of 1994, and the launch of the second mobile telephone operator Cellcom, that growth in mobile phone usage in Israel increased significantly. Within two years, subscriber numbers had increased by more than seven times.

     Since the end of 1996, there has been continued strong growth in the Israeli mobile telephone market. Market data from industry sources indicates that the total market size was approximately 6.3 million subscribers at December 31, 2002, representing nearly 95% of the Israeli population.

     In an auction process completed on December 18, 2001, the Ministry of Communications awarded us the two bands of spectrum for which we had submitted bids: one band of GSM 1800 spectrum and one band of UMTS third generation spectrum. Cellcom was also awarded a band of GSM 1800 spectrum in the auction and began providing GSM 1800 services in the second half of 2002. For more information, see “Item 3D. Risk Factors—Increased competition from existing competitors may affect our market share and require us to reduce our tariffs in the future, may increase our subscriber acquisition costs and customer retention costs and may increase our churn rate.” Cellcom and Pelephone were also each awarded one band of UMTS third generation spectrum in the auction.

     The following are some of the special characteristics that we believe differentiate the Israeli market from other developed mobile telecommunications markets:

• HIGH MOBILE PHONE USAGE. Israeli usage of mobile phones is relatively high compared to Western Europe.

• CALLING PARTY PAYS. In Israel, only the party originating a telephone call pays for the airtime (except for 1-800 numbers). Mobile telephone network operators do not charge subscribers to receive calls on their handsets, except while roaming. This encourages higher rates of mobile telephone usage.

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• HIGH MOBILE TELEPHONE PENETRATION. Since Cellcom’s launch in 1994, the market has sustained a rapid annual rate of growth from a 2.6% penetration rate at year-end 1994 to an estimated penetration rate in Israel at December 31, 2002 of 95%, representing approximately 6.3 million subscribers, although this may include subscribers, dormant subscribers and subscribers to multiple networks as well as other subscribers who are not included in the Israeli population figures, such as Palestinians, new immigrants, and foreign workers.

• FIVE DIFFERENT MOBILE TELEPHONE TECHNOLOGIES. The four mobile telephone licensees in Israel have systems based on five technologies. Pelephone uses both the N-AMPS analog and the CDMA digital systems and Cellcom uses D-AMPS and GSM systems. MIRS uses an iDEN system. We are currently one of two network operators using a GSM digital system. GSM is an advanced, internationally accepted technology used by over 790 million people worldwide as of December 31, 2002.

• FAVORABLE GEOGRAPHY. Israel covers an area of approximately 8,000 square miles (20,700 square kilometers) and its population tends to be centered in a small number of densely populated areas. In addition, the terrain of Israel is relatively flat. These factors facilitate the roll out of a cellular network in a cost effective manner.

• STRONG POTENTIAL FOR VALUE ADDED SERVICES. Published market data shows that the relatively young Israeli population has a propensity to accept and use high technology products. We believe that this characteristic of the Israeli population will facilitate further growth in the Israeli mobile telecommunications market as well as the acceptance of new value added services as they become available on our network.

Strategy

     Our mission is to continue and maintain our position as a leading provider of quality and innovative mobile communications solutions in Israel and to promote the Orange Brand into a leading consumer brand in Israel. In order to achieve our mission, we are implementing strategies designed to:

• Provide high quality customer service to subscribers.

• Ensure that our subscribers enjoy high quality network with nationwide coverage.

• Promote the Orange Brand through a broad-based marketing campaign.

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• Offer packages of innovative voice and data services and unique tariff structures that are responsive to the needs of the various target customer segments in Israel.

• Develop applications tailored to the needs of various subscriber segments.

• Deliver content and information services to subscribers through our network, taking into consideration the different segments in the market.

• Further develop dedicated, wide-reaching sales and distribution channels for all targeted market segments.

Competitive Strengths

     We believe that the following competitive strengths differentiate us from our competitors and will assist us in achieving our mission and implementing our strategies:

• HIGH QUALITY NETWORK. We believe that we set high standards for network quality. We also believe that our EFR voice coding technology produces high sound quality. In addition, we believe that our use of sophisticated network planning and optimization tools and techniques and our investment in dense base station coverage have produced a high quality network. Moreover, the additional spectrum granted to us as a result of our success in the December 2001 spectrum auction in Israel will further improve the capacity and quality of our network.

• DATA SERVICES AND APPLICATIONS LEADERSHIP. We believe that we are a leader in the development and provision of mobile data and content services in Israel. Our content services may be viewed in three ways. First, we provide our subscribers with a wide range of information services under the brand “SIM center” that can be accessed from their handsets. The combination of services available to a subscriber depends upon the subscriber’s handset type and tariff plan. Second, our present and planned content services may be divided along applications lines: entertainment; location-based; information services and community services. Third, we presently provide our services using the following interfaces: interactive voice response, or IVR; short messages service, or SMS; and Wireless Application Protocal, or WAP. We have rolled out WAP-enabled services and GPRS services, orange obox services and orange oklik services. In addition, we have signed agreements with several content providers to expand the variety of content services available to our subscribers.

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• INTERNATIONAL ROAMING. We believe that we provide the most convenient and comprehensive roaming services available to Israelis traveling abroad and to visitors to Israel using their own GSM phones.

• STRONG AND EXPERIENCED SHAREHOLDER. One of our principal shareholders, Hutchison Whampoa Limited, is a global leader in the mobile telecommunications market. It has a substantial interest in 3G operating companies in Austria, Australia, Denmark, Hong Kong, Ireland, Italy, Sweden and the United Kingdom. We benefit from the knowledge and experience of Hutchison Whampoa Limited. In addition, we have signed a cost sharing agreement with Hutchison Telecommunications Limited and certain of its subsidiaries, for the joint acquisition and development of information technology platforms and software solutions, hardware, content and other services in connection with the 3G business. For more information see “Item 7B. Related Party Transactions — Transactions with Affiliates”.

• STRONG BRAND IDENTITY. Since the launch of full commercial operations, we have made a substantial investment in promoting the Orange Brand in Israel to represent quality, innovation and customer service. Our broad-based domestic marketing campaign has resulted in a rapid wide-scale recognition of the Orange Brand in Israel. The Orange Brand is currently used in countries that include the UK, Hong Kong, Australia, France, India, Switzerland and Denmark.

• STRONG AND MOTIVATED MANAGEMENT TEAM. We have been able to attract a number of Israeli senior managers from the telecommunications, high-tech and consumer products industries. All senior managers are highly incentivized through our stock and performance based incentive packages. We believe that the performance-based incentive package aligns the interests of senior management with those of our investors.

Marketing and brand

     We believe that a focused marketing strategy is critical to support our goal of sustaining our position as a leading provider of quality and innovative mobile communications solutions in Israel. Our marketing strategy is based upon the strong international Orange Brand and emphasizes network quality, feature rich services, innovation and customer service. In carrying out this strategy we have made a substantial effort in promoting the Orange Brand in Israel as a vehicle for differentiating our services from those of our competitors. We believe the brand, which is licensed to us, has been a significant factor in our success. Independent research shows that unaided awareness of the cellular operators in Israel including the Orange Brand is very high, although we are a much more recent entrant into the Israeli market.

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     Our marketing strategy is based on the concept of high value for money, introducing advanced services for subscribers. In order to carry out our new strategy, we offer our subscribers tariffs which are generally at the level of those charged by our competitors, and technologies and services that we believe are more advanced, such as our advanced information and content services. In July 2000 we began offering our WAP mobile services. These services enable our subscribers to access our mobile portal, all through WAP-enabled handsets. In December 2000, we launched High Speed Circuit Switched Data, or HSCSD, which enables the transmission of data at a speed of up to 43 Kbps. In September 2002, we launched GPRS services on our network.

     In addition, during 2002 we launched orange obox services and orange oklik services. We consider both orange obox services and orange oklik services as our major platforms for future growth in usage.

     In order to promote our advanced new services and to increase awareness of these services, we are taking many promotional steps, using a broad range of advertising media. We also intend to maintain our advertising presence in the media in order to maintain high exposure for our brand and advanced technologies.

     Our marketing also focuses on promoting our services to the various segments of the Israeli population. We advertise our services in several languages. We also target campaigns to the large Orthodox Jewish community. In addition to traditional media, we promote our services by sponsoring cultural and community programs, including the International Film Festival which takes place every year in Jerusalem, and which is a major cultural event in Israel, attracting interest both in Israel and abroad. We use the distinctive Orange Brand logo in all our promotional activities and advertising and all mobile phones sold to our subscribers bear the logo.

     At December 31, 2002, approximately 16% of our subscribers were business subscribers. We are continually developing tailored value added services to meet the special needs of business subscribers.

     We have a license to use the Orange Brand. Under the brand license agreement, we have the right to use the Orange Brand in connection with promoting our network services in Israel for as long as we hold a license to operate a mobile telephone system in Israel. See “Item 4B. Information on the Company—Business Overview—Intellectual Property.” The Orange Brand is currently used by mobile telecommunications operators in countries that include the UK, Hong Kong, Australia, France, Switzerland, Denmark and India.

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Services and products

     Our principal business is the provision of mobile telephone services in Israel. Our goal is to offer our subscribers a wide range of sophisticated and easy to use services based upon the latest proven technology. In addition to our standard and enhanced GSM services, including international dialing and roaming, we offer our customers value added services, including voice mail, short message services, intelligent network services, content based on our mobile portal, data and fax transmission and other services. Our use of High Speed Circuit Switched Data and GPRS Technologies enable high speed data transmission. Our orange obox service enables the downloading of rich applications and content, and our orange oklik services enable subscribers to send photos, multimedia and animation from handset to handset and from handset to web, using our MMS platform. We also offer 24-hour, seven days a week customer service, as well as handset repair and replacement services, to subscribers who acquire these services.

     Additionally, in January 2001, we received the accreditation of the ISO 9002 Standard from the Israeli Institute of Quality and Control. ISO 9002 is a quality management system specification whose requirements are aimed primarily at achieving customer satisfaction by preserving standardization at all stages, and throughout company processes.

Tariff plans

     Since the beginning of our full commercial operations, we introduced tariff plans aimed at bringing innovation to the Israeli mobile communications market. Our original tariff plans were based on one or more of the following basic elements:

• Rewarding high usage with decreasing marginal airtime charges as more airtime is used each month. The per minute tariff rates paid by a subscriber under these tariff plans decline as the number of minutes used in a month by that customer increases.

• Charging fees based on airtime usage. These tariff plans do not include an additional fixed monthly fee or interconnect charges imposed by other mobile and fixed-line providers for calls made by our subscribers that terminate on third party networks.

• Charging for value added services on a usage basis with no fixed monthly fee.

• Providing discounts for calls to designated numbers within a subscriber’s calling circle.

• Some of our rates are related to the time of day that a call is placed.

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     In February 2000, we introduced the first post paid tariff plans without a minimum monthly fee, which we branded “orange to go.” Our orange to go plans are based on the following basic elements:

• No monthly payment charge.

• No commitment for minimum usage.

• No contractual obligations for a minimum subscription period.

• Limited handset subsidies.

     The elements of the orange to go tariff plans are applied, packaged and marketed in various ways to create tariff packages designed to appeal primarily to the private sector and target markets, including families, soldiers, Orthodox Jewish, Arab and Russian communities, young adults (b.u.) and students.

     Since May 2000, on most of our orange to go tariff plans, the customer pays a fixed rate per minute in addition to call termination tariffs depending on the network on which the call terminates.

     Many of our subscribers sign up to the orange family plan. Under this plan, two to four individuals, and from 2003 two to five individuals, who subscribe as a group are given large discounts on calls made to each of the other family members’ orange phones. For our orange family subscribers under the orange to go tariff plan, we offer a fixed rate for calls made to other family members’ orange phones.

     We offer our orange b.u. subscribers who are under the orange to go tariff plan a monthly refund, which is given against voice and SMS usage.

     As of December 31, 2002, our new orange soldiers and orange students tariff plans, as well as our main tariff plan for the Jewish Orthodox community, include a uniform airtime tariff for all calls made in Israel, both for calls within our network and for calls originating on our network and terminating on a Bezeq fixed-line network or other cellular networks.

     Under our original tariff plans for business customers, which are still available, we offer lower airtime tariffs, which vary according to the size of the business, and extra discounts for calls between employees of the business.

     To date, we have a wide range of tariff plans for our business customers, based on one or more of the following elements:

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• Monthly minimum payment including a bundle of minutes.

• Discounts on airtime tariffs between users who are registered under one business customer.

• Monthly minimum payment for unlimited calls between users who are registered under one business customer.

• Uniform tariff for all calls in Israel, both for calls within our network and for calls originating on our network and terminating on Bezeq fixed-line network or other cellular networks.

• Rewarding high usage with a decreasing marginal airtime charge as more airtime is used each month. The per minute tariff rates decline as the number of minutes used in a month by a customer increases.

     Our prepaid plan, known as “Big Talk,” was launched on June 29, 2000. Under the plan, our subscribers purchase a handset and a nationally distributed phone charge card, available in fixed denominations. Upon purchase of the phone card or prepaying by credit card, customers can use our network, including some of our value added services, without the need to register with us or enter into any contract. Under this plan, there are some reduced tariffs for certain hours with no obligation to use our network for a minimum period of time and no monthly subscription fee or monthly bill. Since December 2002, we offer our prepaid customers a limited roaming service, which includes incoming calls and SMS only, provided that the customer is registered for this service. Our prepaid plan enables us to compete in the growing prepaid mobile services market. Certain prepaid customers receive handset subsidies. These subsidies are lower than those received by other subscribers.

     In addition, we have a few GPRS, WAP and orange obox services packages, which include a monthly payment for these services.

     We developed several retention and churn prevention plans to retain our subscribers. Some of these plans are based on a subscriber’s ranking according to financial and economic parameters. In addition, we have developed tools to predict a subscriber’s potential to churn from our network, thus enabling us to proactively approach the subscriber with an attractive offering.

     We believe that the combination of our tariff plans and our advanced technology and content services provides attractive value in the Israeli mobile telephone market and that our pricing strategy has facilitated subscriber growth.

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International roaming

     Israelis are frequent travelers. According to the Israel Central Bureau of Statistics, in 2002, more than 3.27 million overseas departures of Israelis were recorded, and more than 862,000 people visited Israel during 2002. Roaming allows a mobile phone subscriber to place and to receive calls while in the coverage area of a network to which he does not subscribe and to be billed for such service by his home network. Unique among mobile telephone technologies, facilitating international roaming was a primary design goal of the GSM system from its inception. A GSM roamer can therefore expect to enjoy substantially the same services, features and security while traveling as he does at home. We consider international roaming to be a significant source of revenue.

     Our roaming service was created within the framework of the GSM technical standard and the policies and procedures set forth by the GSM Association. A bilateral relationship is created between two GSM operators by signing a roaming agreement based upon the GSM Association’s general template, modified as appropriate for the particular circumstances. After technical and billing tests are successfully concluded, the connection is opened commercially and each party’s subscribers may use the other party’s network. At December 31, 2002, we had open commercial roaming relationships with 250 operators in 104 countries or jurisdictions. Creating roaming relationships with multiple operators in each country increases potential incoming roaming revenue for us and gives our subscribers more choice in coverage, services and prices in that country.

     Since we operate on the 900 MHz band, which is the most widely-used among GSM operators worldwide in terms of handsets, all of our subscribers may roam to all but three of the 90 countries where we have roaming capability using their own handsets without modification. GSM networks in those three countries, the United States, Canada and Chile, use the 1900 MHz band. Our subscribers who own dual- or tri-band handsets that work on GSM 1900 as well as GSM 900 may also use their own handsets in those three countries. Other subscribers who advise us of their intention to visit those countries are lent free-of-charge a compatible handset into which they insert their SIM, thus retaining their own phone number, phone book and all other regular features.

     Since 900 MHz is the most widely-used GSM band, most GSM handsets in the world are already compatible with our network. GSM networks operating on 1800 or 1900 MHz who offer international roaming to their subscribers generally make some arrangement for their subscribers to receive or rent a 900 MHz-compatible handset. Most GSM subscribers worldwide who roam are therefore capable of using our network immediately upon their arrival in Israel. Since we launched our GSM 1800 network, subscribers with GSM 1800 handsets are able to use our network even without having to obtain a 900 MHz-compatible handset.

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     If Paltel’s GSM network is successful in attracting customers and the Palestinian economy remains closely linked to that of Israel, we have the potential to increase the roaming income derived from Palestinians who commute daily to or through Israel or visit frequently.

     Cellcom was awarded a band of GSM 1800 spectrum in the December 2001 auction for additional spectrum in Israel. It began providing GSM 1800 services in the second half of 2002. Cellcom offers international roaming services through its commercial roaming agreements to some destinations and to others through an agreement with a third party. At present Pelephone subscribers cannot use their Israeli handsets for roaming on any GSM network, and there are no networks in Western Europe using technologies or frequencies compatible with Pelephone’s CDMA network and Cellcom’s TDMA network. Pelephone and Cellcom rent, lend or give their subscribers GSM handsets that contain a SIM from a GSM network that provides service in its own country and roaming to GSM networks elsewhere.

     In addition, Pelephone and Cellcom’s TDMA subscribers traveling to North America may have a US cellular identification and number added to their existing Israeli phone or may rent or be lent a different phone. Cellcom also offers its subscribers automatic roaming with limited coverage in the US and Canada through a major D-AMPS carrier operating in the US. Pelephone and Cellcom subscribers who find themselves using analog (AMPS) networks are subject to the same call interception and phone duplication risks as subscribers of those networks. Also, since in order to prevent fraud, many AMPS networks in the United States do not permit international direct dialing, some Pelephone and Cellcom subscribers using those networks are required to use a calling or credit card to call back to Israel or elsewhere overseas. MIRS offers its subscribers an automatic roaming service on Nextel’s network in the United States and in South America.

     Charges to Pelephone or Cellcom’s TDMA customers appear on the customer’s bill, and arrangements can be made to forward or transfer calls received at their Israel mobile number onward to the local cellular number overseas. Handsets and services relating to roaming are provided to the customers either directly by Pelephone and Cellcom or through agents.

Value added services

     In addition to standard GSM value added services, including call waiting, call forwarding, caller identification and conference calling, we currently offer and are developing a variety of additional value added services. Value added network services are important to our business as they create differentiating factors and increase customer usage and satisfaction. We follow all major market developments regarding value added network services, and we intend to implement and offer those

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services that are likely to be popular with customers and which would add value to our business. Some of the value added services that we offer are available only to subscribers who have certain handset models. The value added services we currently offer include the following:

• VOICE MAIL. Our voice mail offers what we believe are among the most advanced features available today, such as SMS notification of messages received, including time of day and caller identification, and call return.

• SHORT MESSAGE SERVICE (SMS). Subscribers can type, send, receive, reply to and forward text messages using any handset we sell.

• VOICE MESSAGING. Our voice messaging service allows subscribers to send voice messages to lists of more than 400 people, with prioritization and receipts requested.

• FAX MAIL. Subscribers can receive, store, and forward fax messages through their handsets, freeing them from the need to own their own fax machine or to be near a particular fax machine.

• CALLING SERVICES. These services include conference calls, caller identification, call waiting, conditional call forwarding, and calls to one of our numbers that rings two phones—one handheld and the other a car phone.

• WORLD WIDE WEB-SMS GATEWAY. This service enables subscribers to receive messages on their handset from people who visit our web site.

• ACCOUNT BALANCE. All subscribers can request and receive current information on their Partner account balance and air time usage directly on their handset display.

• DATA SERVICES. We currently provide our subscribers data transfer capability at a rate of 14.4 Kbps. This capability enables our subscribers to browse the internet, access their intranet data, send and receive e-mails and other data transfer applications. This functionality is mainly accessed through WAP enabled handsets and Personal Digital Assistants, such as hand held computers and laptop computers, linked to standard handsets.

• HIGH SPEED CIRCUIT SWITCHED DATA (HSCSD). This infrastructure development enables the transmission of data at a speed of up to 43.2 Kbps, which is higher than the 14.4 Kbps speed previously available on GSM networks.

• ELECTRONIC BILL PRESENTATION. This service enables our subscribers to view, analyze and compare their private Partner accounts.

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• INFORMATION AND CONTENT SERVICES. We provide voice and text-based information and content services. The voice-based information services are provided through Interactive Voice Response platforms, which include interactive information services and radio programs. Text based information services are provided through our current SMS and WAP technologies. We have expanded our information services to SIM-tool kit applications. Interactive information services include services such as: stock quotes, personal stock portfolio management, stock indices, currency exchange rates, news headlines, sport news and results, lottery results, weather reports in Israel and abroad (for our roaming subscribers), daily horoscopes, travel and leisure deals, entertainment tickets information, TV listings and airlines information. For purposes of these services we have relationships with content providers.

• GENERAL PACKET RADIO SERVICE (GPRS). This technology enables the packet transfer of data in an “always on” mode, at speeds of up to 20-30 KBps.

• WAP SERVICES. We have WAP technology that enables WAP-related services. WAP services create a significant incremental demand for content services and increase usage of our network.

• RADIO BU 99 FM INTERACTIVE ACTIVITIES. We provide our subscribers with the ability to participate in Radio bu 99 FM programs, games, quizzes, to vote, to chat and to participate in other interactive activities, using SMS, such as sending advance notification of a certain band upon subscriber request. This FM radio station is well positioned among 12-24-year olds, and is associated with our “orange b.u.” plan.

• ORANGE OKLIK. These services enable subscribers to send photos, multimedia and animation from handset to handset and from handset to web, based on Multimedia Message Services (MMS) platform.

• ORANGE OBOX. This service enables the downloading of rich applications and content, including games, interactive screensavers, karaoke and 16 poly ringtones, combined with a unique range of handsets. This service is based on the virtual machine platforms, Java to Micro Editions (J2ME) and proprietary General Virtual Machine (GVM).

• DOUBLE RING. Double Ring enables our subscribers to receive calls made to their mobile telephone on either their mobile or their fixed-line telephone.

• VIRTUAL PRIVATE NETWORK. User groups are able to be formed in multiple layers, and the members can then reach each other through short dialing codes, like extension numbers.

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• SHORT CODE DIALING FOR ROAMERS. This service allows foreign GSM users roaming in Israel to use their home services dialing codes during their stay in Israel and allows our subscribers while roaming abroad to use the short dialing codes available on our network.

• FIELD PERSONNEL MANAGEMENT. This service provides a comprehensive system for businesses to manage their field personnel via our network, including dispatching, scheduling, task assignment by real time location and confirmation back to the customer.

• PERSONAL VOICE MAIL GREETINGS. This service enables subscribers to personalize their voice mailbox greetings by easily applying professional, customizable pre-recorded messages.

• INTERNATIONAL SAVING. This service enables our subscribers to reduce their costs of international calls while roaming.

• ORANGE PAGES. This service enables subscribers to receive information about a nearby business or service (such as a taxi service) through IVR and to connect to that business or service immediately.

Entertainment accessories

• ICONS. This service enables subscribers to download icons from our website and save them on their handsets. Subscribers can also design their own icons and send them to friends.

• RING TONES. This service enables subscribers to personalize the ring tones heard upon receiving an incoming call. Subscribers can also compose their own ringtones and send them to friends. We also offer our subscribers an innovative extension to this service, which enables them to receive a whole song as a ring tone.

• 4 U. This service enables subscribers to “send” a recorded greeting, accompanied by a song or a joke selected by the subscriber, to another subscriber (on any Israeli network) at a predetermined time.

• PICTURE MESSAGING. This service enables subscribers to send and receive pictures.

• ORANGE GAMEZ. This service is a games platform which enables subscribers to play various interactive games via WAP, the internet, SMS and IVR.

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Handsets

     We provide handsets to our contract subscribers at discounts of up to 100% when they first become subscribers. The price at which the handset is provided depends upon the tariff package and special promotions. When subscribers under our “orange to go” and “Big Talk” plans receive handset subsidies, such subsidies are significantly lower than those received by our subscribers who sign 36-month contracts. Since October 2001, subscribers who return the handset of a competing network are entitled to discounts, depending on their actual monthly bill and the type of handset purchased.

     We currently offer a range of different handset models supplied by a number of manufacturers, all of which are branded with the Orange logo. We offer handsets to satisfy our subscribers’ roaming needs in the 900 MHz, 1800 MHz and 1900 MHz bands. We evaluate the technical features of every new mobile handset and, if we decide to make it available to subscribers, we obtain a type approval from the Ministry of Communications for such handset. We advise our sales representatives and dealers on compatibility and technical issues. All our handsets are EFR compatible to provide high voice quality. Most of our handset models have Hebrew language displays. Because of the wide international acceptance of GSM technology, handset manufacturers generally make their latest model handsets available for use on GSM networks before networks based on other technology. Recently, we have begun selling some innovative handsets with enhanced applications, including multicolor screens, 16 poly ringtones and MMS capabilities.

Customer service

     We aim to provide the best quality customer service in Israel through quick, simple and reliable handling of all customer needs and interactions. We invest in both state of the art technology and training of customer service skills in order to achieve this goal. At December 31, 2002, approximately 1,421 employees, on a full-time equivalent basis, worked in our customer service division. Our customer service division consists of both call center services and face-to-face service centers. Call center services are divided into different centers—general, finance, network, international roaming, business, data and prepaid—in order to provide focused and professional responses to our customer inquiries in four languages 24 hours a day, seven days a week.

     Our face-to-face customer service consists of 32 service points serving the customer as a one-stop-shop in both sales and service areas.

     In addition, we give our customers various self-service channels: IVR, Web-Based service and service via SMS.

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     On January 1, 2003, we merged our customer service division and our sales division into an integrated Customer Division.

Customer contracts, credit policy, billing bad debt and disconnection

     Part of our subscriber contracts for customers on our original tariff plans provide for a 36-month term. Under the terms of these contracts, customers who terminate their contracts prior to the expiration of the 36-month term and have purchased their handset from us or our dealers can be charged by us for payment of the residual price of their handset. This charge reflects the difference between the price they paid for the handset, if any, and the list price, adjusted for the number of months that the customer has been a subscriber. Subscribers are billed monthly in arrears for airtime charges and charges per services. We outsource the printing and sending of bills to third parties. Most of our business customers have signed 36-month contracts.

     Most of our individual subscribers subscribe and pay for their services by credit card. All credit card accounts are subject to an initial maximum credit limit each month, which varies depending upon the type of credit card and for which we obtain prior approval from the card issuer. When a subscriber account reaches this limit, we may seek approval from the card issuer. If the approval is not granted by the card issuer, we may require the customer to provide other means of payment or arrange an increase in the approved limit from his credit card issuer. If this does not occur, the customer’s usage may be limited or suspended until we receive a cash deposit or guarantee from the customer.

     All business subscribers and some of our individual subscribers can subscribe and pay for their services by credit card or direct debit. Customers acquiring more than fifteen handsets (or eight through our dealers) are subject to a credit scoring review performed by outside credit agencies. All customers are subject to a monthly maximum credit limit. When the monthly limit is exceeded, usage may be limited. Roaming access for direct debit subscribers is subject to credit scoring by outside credit agencies and may require additional guarantees or credit checks.

     Subscribers are subject to periodic credit risk reviews, taking into consideration payment history, disconnection history and new circumstances. If payment for a subscriber’s monthly bill is not received within 27 days of the issue of the bill, roaming and international call service is suspended. After 31 to 36 days, all outgoing call service is suspended. After 45 days, all services are suspended, after 60 days, we begin legal proceeding regarding the debt collection and ultimately, after 150 days, all services are disconnected. If the subscriber does not reinstate service after being disconnected, we may require him to pay the residual value of his handset.

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Distribution

     As the third entrant into a competitive market, we recognize that effective distribution channels are a key success factor for our business. We have developed and are executing a multi-channel approach to target the various segments of the market and to coordinate our sales strategy. We distribute our services primarily through:

• direct sales through Partner-owned sales centers and business sales representatives; and

• indirect sales through traditional networks of specialist dealers and non-traditional networks of retail chains and stores, which account for a majority of our sales.

Direct sales

Orange sales and service centers

     We currently operate six Orange Brand stores which focus on sales to individual customers. These stores are sales and service centers with a uniform design, typically 1,100 square feet (100 square meters) in size, and offer high service standards. The Orange Brand stores are conveniently located in highly visible locations, such as shopping malls, in the Tel Aviv area, Jerusalem, Haifa and Be’er Sheva. These stores serve as flagship stores to help introduce the Orange Brand and our services to the Israeli market and to generate a high level of repeat business and referrals. In the future, we also expect these stores to become involved in the sale of advanced data services and other technologically sophisticated applications. We have built three new Orange sales and service centers, each approximately 5,500-9,000 square feet (500-800 square meters) in size, located in the outskirts of Tel Aviv, Jerusalem and Haifa. Our new centers serve as “one-stop shops” for direct customer service, in which our representatives will demonstrate the use of new products and services. In addition, we have opened 23 service centers, each approximately 2,152 square feet (200 square meters) in size. These centers offer our customers various services, including handset maintenance services.

Direct sales force

     At December 31, 2002, we had a sales force comprised of sales representatives, account managers and area managers, targeting business clients. We primarily focus on small- and medium-sized enterprises which tend to use more airtime and yield higher margins. Small to medium-sized businesses are serviced by a team of regional representatives and customer account managers located in five regional offices. Large corporate customers are serviced by a team of national representatives and customer account managers. Prominent individuals are served by national VIP

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representatives. We provide our sales force with regular training to ensure that they are capable of selling advanced solutions such as mobile data, intranet extension and connectivity, virtual private networks and other value added services that appeal to corporate customers. Our direct sales force is supported by an outsourced telemarketing department which makes initial contact with prospective customers and makes appointments for the sales representatives. The telemarketing department is another channel for direct sales by phone.

Indirect sales

Traditional dealer networks

     At December 31, 2002, we had agreements with 46 traditional dealers providing 94 points of sale, consisting of specialists selling a range of our products. The private dealer network is an important distribution channel because of its ability to attract existing cellular users to our network. Our dealer network focuses primarily on sales to individual customers and, to a lesser extent, small business customers. Our dealers are highly professional and some of them have previous experience selling cellular services in Israel. One of our dealers has a workforce of approximately 100 salesmen for “door-to-door” sales. In addition, we have specific dealers that target the Jewish Orthodox, Arab, Russian communities, as well as other segments of the Israeli population with the appropriate style, language and locations. We provide regular training to employees of our dealers to update them on our products and services. We believe that the ongoing sales success of our existing distribution channels will continue to attract dealers to our network. Our dealer managers visit dealers on a regular basis to provide information and training, answer questions and solve any problems that may arise in the activation process. We pay our dealers competitive commissions and provide handset subsidies to them. However, dealers are not entitled to commissions for any customers that terminate their service within 60 days of activation.

Non-traditional dealer networks

     Non-traditional dealers consist of generalist retailers or specialist stores that sell related products. This distribution channel is not common in the Israeli cellular market today, and we believe that it provides us with a competitive advantage over and differentiates us from our competitors.

     We have a contract with Super-Pharm, the largest drug store chain in Israel, to sell our network services in their stores. At December 31, 2002, our services were sold in 107 Super-Pharm stores nationwide in a variety of formats, including Partner shop-in-shops, kiosks, wall-unit displays and at front counters. In 2002, approximately 17.5% of our new subscribers were recruited through

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sales by Super-Pharm. Under our agreement with Super-Pharm, in addition to Super-Pharm continuing to sell our network services in their stores, we are cooperating with them in a new chain of stores that Super-Pharm has established, called Super-Link, and that is dedicated to selling communications services and equipment. Six such stores have been opened to date, and the intention is to open 10 more. This agreement replaces our previous agreement with Super-Pharm, which expired in December 2000. The initial term of our current agreement was until December 31, 2001, and the term of the agreement is renewable each year for an additional one year unless one of the parties chooses to notify the other party 180 days before its termination of its willingness to terminate the agreement. Currently the term of the agreement is until December 31, 2003.

     In addition, we are developing our distribution network with other non-traditional dealers, such as the Ituran chain, which sells, installs and maintains car security and tracking systems in approximately 46 locations throughout Israel. They also sell and install our car kits in these sites. Another non-traditional dealer is Eurocom Communications Ltd. See “Item 7. Major Shareholders and Related Party Transactions.” We provide regular training to the employees of our non-traditional dealers to update them on our products and services.

Our network

     We believe that we have built an extensive, resilient and advanced mobile network system in Israel, allowing us to offer our services with extensive coverage and consistent high quality. Through December 31, 2002, we have made net capital expenditures of NIS 2,399 million ($506 million) in our network infrastructure and other related fixed assets.

Overview

     The “first generation” of wireless communications, based on analog technology, provides simple voice telephony. The “second generation” of wireless communications, such as the digital GSM standard, provides additional data facilities ranging from short messaging services to narrow band data, which is sufficient for the basic data services offered by network operators, but cannot support high resolution video or multimedia applications.

     New types of services are made possible by the roll out of technological developments that will increase the speed and efficiency of existing GSM networks such as GPRS, which is a 2.5G technology. 2.5G technology network operators are able to deliver multimedia and high speed services before third generation services are introduced.

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     Third generation wireless communications, which are expected to offer full interactive multimedia capabilities at data rates of up to 2 Mbits per second, are expected to bring wirefree networks significantly closer to the capabilities of fixed line networks. Improvements in coding and data compression technology will provide better voice quality and more reliable data transmission. UMTS is the global standard adopted for the implementation of third generation wirefree telecommunications.

Infrastructure

     At December 31, 2002, our GSM network consisted of 1,309 macrobase transceiver stations and 726 microbase transceiver stations, all linked to 29 base station controllers. The base station subsystem is controlled by 11 mobile switching centers. Base transceiver stations, mobile switching centers and base station controllers are interconnected by approximately 3,900 transmission links. In addition, our network is interconnected with the public switched telephone network operated by Bezeq in several locations across Israel. Our network is also directly connected to the mobile networks of Pelephone, Cellcom and the three Israeli international operators, Bezeq International, Barak and Golden Lines, and indirectly to MIRS and the fixed and mobile telephone networks of Paltel. During 2002, our network was directly connected to the mobile networks of Pelephone and Cellcom for the purpose of bilateral transfer of SMS’s. In February 2003, we added an SMS direct connection to MIRS. See “Item 4B. Information on the Company—Business Overview—Interconnection.” Ericsson and Nokia supply our base station controller and base transceiver station sites for our network in Israel.

     Our transmission network is made up of leased lines from Bezeq, Cellcom and Pelephone and our own microwave links. Currently most of our transmission network consists of leased lines. As our network currently covers approximately 97% of the Israeli population, we are now selectively expanding the capacity and quality of our network primarily in urban areas by adding infrastructure to improve outdoor and indoor coverage. We plan to continue increasing the capacity and quality of our network in order to accommodate the anticipated growth in the number of our customers.

Network Design

     Our primary design objective is to build a mobile telephone network engineered to provide excellent voice quality, call reliability, high capacity and high coverage quality and to maintain technical advantages over our competitors. In formulating our network design objectives, we have been guided by our business strategy to build the highest quality network. We work to quality standards which exceed those set forth in our license. The quality parameters that we seek to satisfy

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are those that we believe are important to mobile phone users: voice quality, low “blocked call” rate, low “dropped call” rate and deep indoor penetration, especially in densely populated areas or areas of special commercial interest. Blocked calls are calls that fail because access to the network is not possible due to insufficient network resources. Dropped calls are calls that are involuntarily terminated.

     With these quality parameters in mind, we have rolled out an advanced radio network, using macrocellular and microcellular base transceiver stations and advanced frequency planning software in very high density metropolitan areas in order to provide “deep” indoor coverage and sufficient capacity for latent demand. This technology is designed to maximize spectrum utilization and enhance service quality. Our transmission network design confers the following benefits: (i) necessary bandwidth for GSM services; (ii) resilience; (iii) use of high transmission rate back-bone routes based on Synchronous Digital Hierarchy; and (iv) the ability to utilize a new generation of sophisticated technology to optimize the system and increase capacity where necessary. Our switching architecture is based on two transit switches connected to all of our systems and platforms, which improves reliability and facilitates expansion. We are optimizing our network with an advanced radio method called Synthesized Frequency Hopping. This method is increasing the capacity of our network and improving the quality of the performance we supply our subscribers. Because our network was planned with our key quality parameters in mind, we believe that we will be able to continually upgrade the quality of our network as our business develops.

Spectrum allocation and capacity

     Spectrum availability is limited and is allocated by the Ministry of Communications through a licensing process. Pursuant to the terms of our license and subsequent allocations, we were allocated 2x10.4 MHz in the 900 MHz frequency band, of which 2x2.4 MHz are shared with Paltel in the West Bank and the Gaza Strip. We also have an agreement to use an additional 2x2.4 MHz of spectrum in the 900 MHz frequency band on a shared basis with Paltel. Under this agreement, which has been endorsed by the Ministry of Communications, we are permitted to use this additional spectrum in Israel so long as we do not cause interference in areas where Paltel operates.

     In the December 2001 spectrum auction in Israel, the Ministry of Communications awarded us the two bands of spectrum for which we had submitted bids: 2 x 10 MHz of GSM 1800 spectrum and 2 x 10 MHz and 1 x 5 MHz of UMTS third generation spectrum. During 2002, we started deploying GSM 1800 MHz band base transceiver stations to enhance the capacity of our GSM 900 MHz network, and to further improve our GSM 900 MHz network’s quality.

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     We seek to optimize the use of our current spectrum allocation by adding more base transceiver stations in combination with advanced design and operation techniques. We have experienced in the past, and may experience in the future, interference in the GSM 900 spectrum allocated to us. We intend to continually enhance the quality of our coverage and capacity in response to changing consumer demands.

Dropped Calls

     Dropped calls are calls that fail to complete when dialed or are terminated involuntarily. Since the launch of full commercial operations, our dropped call rate has steadily improved. Our monthly dropped call rate has declined from 3.50% for January 1999 to 1.71% for December 1999, to 1.44% for December 2000, to 1.3% for December 2001 and to 1.15% for December 2002.

Other systems

     Our Home Location Register, or HLR, stores details of our subscribers and their location. We have installed a special purpose HLR which prevents a single point of failure in our network from affecting the service to all our subscribers. Our Authentication Center automatically verifies each SIM’s authenticity by performing an encrypted transaction when the mobile telephone is switched on. Our Short Message Service Center handles short messages sent by our subscribers to other mobile telephones. The Voice Mail System takes messages for subscribers and allows them to retrieve and forward messages and faxes after being notified by short message of the receipt and source of the voice message. The Partner Information Hub that we launched in January 2000 enables all our subscribers to receive data information services on their handsets using SMS technology. During 2000, we increased our SMS Center capacity four-fold. The system is used for mobile originated, SMS information services and other monitor and control systems based on SMS. We also extended our information services with an IVR system by CTware Ltd., which allows voice access to many information services. Dozens of such services are currently available including news, games, entertainment, jokes, radio and others. We have purchased Ericsson’s Mobile Positioning System (MPS) platform. This is a technology platform which enables us to provide location-based services to a large number of subscribers. A system which enables location-based services has been launched in 2001. During 2002, we launched orange oklik services, which are based on Multimedia Messaging Service Center (MMSC), an Ericsson platform. In addition, we have developed with Samsung (Korea) a system which enables the downloading of rich applications and content. These services, which are branded “orange obox”, are based on GVM, a technology which was originally developed in Korea on CDMA-1x technology and has been implemented on our GSM network. We intend to offer our subscribers in 2003 downloads of video clips through our MMSC platform and will enable subscribers

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to prepare their own personal photo album on the web with a direct connection to a paper development photo laboratory. Our “test bed” laboratory enables start-up companies to develop and evaluate new GSM services without interfering with the operation of our network. Since September 2000, we have also offered foreign GSM users roaming in Israel, and our subscribers while roaming abroad, the ability to use some of their home services’ dialing codes during their stay in Israel with a system developed by star*home.

     We have also enhanced the authentication ability in our network, in order to strengthen the protection of our network against fraud and interception.

     On June 29, 2000, we installed and launched an Ericsson prepaid system. In May 2002, we upgraded the Ericsson platform in order to support our larger prepaid subscriber base and to allow us to offer a wider range of services. Also in June 2000, we launched WAP services based on a platform designed by Exalink (now Comverse), an Israeli provider of internet-based services over wireless devices. We have chosen Ericsson to provide us with a GPRS system that will enable the high speed packet transfer of data in an “always on” mode. The WAP over GPRS system will allow our subscribers to have mobile internet services on line in the future.

     We have completed the national deployment of our GPRS network and have launched a variety of supported services in 2002. As part of our GPRS service, we are using mainly Cisco’s IP Core System. The IP Core System is the first step towards new advanced services, and can be used on third-generation UMTS networks as well.

     In 2001, we upgraded our basic data transmission capability to allow a 14.4 Kbps rate over the entire network, an improvement over the previous rate of 9.6 Kbps.

Site procurement

     Once a new coverage area has been identified, our technical staff determine the optimal base station location and the required coverage characteristics. The area is then surveyed to identify antenna sites. In urban areas, typical sites are building rooftops. In rural areas, masts are usually constructed. Technical staff also identify the best means of connecting the base station to the network, for example, via leased or owned and operated microwave links or wired links leased from Bezeq. Once a preferred site has been identified and the exact equipment configuration for that site decided, we begin the process of obtaining necessary approvals.

     The erection of these antennas require building permits from local or regional authorities, as well as a number of additional permits from governmental and regulatory authorities, including:

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• erection and operating permits from the Ministry of the Environment;

• permits from the Civil Aviation Authority, in certain cases; and

• permits from the Israeli Defense Forces.

     See “Item 4B. Information on the Company—Business Overview—Regulation” for a description of the approvals that are required for the erection and operation of antenna sites.

Suppliers

     Our network utilizes standard equipment, which is available from a limited number of suppliers. One of our major GSM equipment suppliers is Ericsson and its affiliates, which supply us with mobile switching centers, base station controllers, base transceiver stations, transit transmission centers, operation support systems and transmission systems equipment. Ericsson is also our major supplier of GPRS network equipment, including GPRS support nodes and gateway GPRS support nodes. Nokia also supplies us base station controllers, base transceiver stations and network management system equipment. See “Item 3D. Key Information—Risk Factors—We depend on a limited number of suppliers for our network equipment. Our results of operations could be adversely affected if our suppliers fail to provide us with adequate supplies of network equipment or maintenance support on a timely basis.” We have agreements with Baran Raviv, Bintech and H. Mer, all Israeli engineering companies, for the construction of our sites. We continue to purchase certain network components from various other key suppliers. We believe that our network suppliers price structure is competitive with industry standards.

Interconnection

     All telecommunications providers with general licenses in Israel have provisions in their licenses requiring them to allow interconnection of their networks with all other telecommunications networks in Israel. Currently, our network is connected to all other telecommunications networks operating with general licenses in Israel. Our network is directly interconnected to the networks of Bezeq, Cellcom, Pelephone, MIRS, Bezeq International, Barak and Golden Lines. Our network is indirectly interconnected to the networks of Paltel through the Bezeq network for the purpose of bilateral transfer of calls. During 2002, our network was connected to the networks of Cellcom and Pelephone for the purpose of bilateral transfer of SMSs, and in February 2003, we connected our network to the network of MIRS.

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     In December 2002, we entered into an agreement with Matav-Cable Systems Media Ltd., one of our principal shareholders. The agreement enables our subscribers to send an SMS to the TV screen of Matav’s digital subscribers and vice versa. See “Item 7B. Related Party Transactions—Transactions with Affiliates”.

     We are currently operating without any formal interconnection agreements with Bezeq. We are not aware of any interconnect agreement that Cellcom, Pelephone or MIRS has signed with Bezeq. Our day-to-day arrangements with Bezeq substantially conform to a draft interconnect agreement negotiated with Bezeq. The interconnect rates charged by Bezeq are set by Israeli legislation and Bezeq is required by law not to discriminate against any licensed telecommunications operator in Israel with respect to the provision of interconnect services. As of March 1, 2000, Bezeq began calculating interconnect (call termination) fees due to us based on fees actually collected by Bezeq from its subscribers and imposing an additional collection fee on us. Until that time, interconnect fees were calculated on the basis of actual usage. We were not successful in challenging Bezeq’s position in court (a ruling which we are appealing). In October 2000, a new Interconnect Regulation became effective, stating that interconnect fees among cellular and fixed line operators should be based upon actual usage. Nevertheless, Bezeq continued calculating interconnect fees due to us based on fees actually collected from its subscribers and imposing an additional collection fee on us. At the end of 2001, following a complaint by us and another mobile operator, the Ministry of Communications rejected Bezeq’s fee calculation method, stating that the appropriate basis for calculating interconnect fees due to us is actual usage. The Ministry of Communications declared that for the period from October 2, 2000 until December 31, 2002, Bezeq may withhold a certain percentage from the interconnect fees due to us. As an interim settlement and until we reach an agreement, if any, with Bezeq, the Minister of Communications has decided to permit Bezeq to withhold 2.5% of the amounts due us. The Minister of Communications also indicated that with no agreement between the parties he may set a different rate at his discretion. In addition, the Minister of Communications indicated that he would consider applying new rules from January 1, 2003.

     Recently, since the operators were unable to reach an agreement, the Ministry of Communications considered a settlement, according to which Bezeq would deduct 1.1% of the amounts due to us for the period commencing October 2, 2000 until December 31, 2002. For the period commencing January 1, 2003, Bezeq would pay amounts due to us according to actual usage without any deduction. In addition, the Ministry of Communications suggested, subject to court approval, that a deduction of 1.1% of amounts due us would be in effect also for the period of March 2000 to September 2000.

     As of February 2003, following comments it received from the operators, and since the official committee nominated by the Ministry of Communications to examine Bezeq’s tariffs had not

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concluded its work, the Ministry of Communications decided upon an additional interim settlement, pursuant to which Bezeq would withhold 1.1% of the amounts due us for the period commencing January 1, 2003 until April 30, 2003.

     We currently pay Bezeq an interconnection fee based on a tariff structure that came into force on May 1, 2000. The table below illustrates these interconnection tariffs.

Bezeq interconnection tariffs (not including VAT)

	Local call	Tariff for calls
Time of day	tariff	between area codes
Sunday through Thursday 08:00 a.m.-6:00 p.m. and Friday 08:00 a.m.-1:00 p.m.	NIS 0.055	NIS 0.115
Sunday through Thursday 6:00 p.m.-10:00 p.m.	NIS 0.035	NIS 0.035
Sunday through Thursday 10:00 p.m.-08:00 a.m. and Friday 1:00 p.m.-Sunday 08:00 a.m.	NIS 0.024	NIS 0.024

     We have formal interconnection agreements with Cellcom, Pelephone and MIRS. The agreements have one-year terms and are renewable for an unlimited number of additional one-year terms. The agreements can be terminated on 90 days’ written notice by either party. The interconnection agreements with Cellcom, Pelephone and MIRS do not contain any pricing terms. The interconnection tariffs charged by Cellcom, Pelephone and MIRS are set by a Ministry of Communications regulation that, coupled with a change to the mobile telephone operators’ licenses, imposes a uniform call termination tariff for all mobile telephone operators. The uniform tariff, originally set at NIS 0.54 per minute fell to NIS 0.50 on January 1, 2001. The uniform tariff was to fall further to NIS 0.46 on January 1, 2002 and finally to NIS 0.42 per minute on January 1, 2003. In addition, these regulations impose a uniform call termination tariff for incoming international calls to cellular networks of NIS 0.25 per minute. In response to legal proceedings brought by Pelephone against the Ministry of Communications, the Ministry of Communications agreed that the uniform tariff should remain at NIS 0.50 per minute until January 1, 2003, at which point it has been reduced to NIS 0.45 per minute, rather than at the levels contemplated by the regulations. The tariffs accepted by the Ministry of Communications have since been formally adopted by an amendment to the call termination tariff regulations, which were published by the Ministry of Communications. Because we transfer and receive all traffic to and from the MIRS (until February 2003) and Paltel networks through the Bezeq network, we pay Bezeq a transit fee for each call.

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     We have a written interconnection agreements with Bezeq International and Barak. We currently have an operating arrangement with the other international operator, Golden Lines. As noted already, the Ministry of Communications regulation and the change to the mobile telephone operators’ licenses discussed above also impose a uniform call termination tariff for incoming international calls of NIS 0.25 per minute. We have notified the Ministry of Communications of our objection to this rate.

Competition

     There are currently four mobile telephone network operators in Israel: Partner, Cellcom, Pelephone and MIRS. The major beneficial shareholders of Cellcom are BellSouth, the Safra Group and Discount Investment Corporation Ltd. Cellcom operates a nationwide mobile telephone network based on D-AMPS digital technology. Cellcom was awarded spectrum in the DCS 1800 band in the December 2001 spectrum auction in Israel and began providing GSM services in the second half of 2002. For more information, see “Item 3D. Risk Factors—Increased competition from existing competitors may affect our market share and require us to reduce our tariffs in the future, may increase our subscriber acquisition costs and customer retention costs and may continue to increase our churn rate”. Our second competitor is Pelephone. Pelephone is an Israeli corporation owned by Bezeq, the public fixed-line operator in Israel (50%) and by Pelephone Holdings, LLC (50%), a Delaware corporation owned by Shamrock Holdings. Bezeq has a four-year call option to purchase the shares owned by Shamrock Holdings. Pelephone currently operates nationwide mobile telephone networks in Israel using both the N-AMPS analog and the CDMA digital system. Our third competitor is MIRS, an Enhanced Specialized Mobile Radio, or “trunking,” network, which was granted a general license to operate as a mobile telephone operator on February 5, 2001. MIRS’s major shareholders are Motorola Communications (Israel) Ltd. (66.7%) and Ampal Israel Ltd. (25%).

     According to the Company’s estimate, at December 31, 2002 Cellcom had an estimated 2,470,000 customers, representing approximately 39% of the Israeli mobile telecommunications market. Pelephone had approximately 1,761,000 paying customers at December 31, 2002, representing approximately 28% of the Israeli mobile telecommunications market. MIRS is estimated to have had over 265,000 users at December 31, 2002, representing approximately 4% of the Israeli mobile telecommunications market. We compete with Cellcom, Pelephone and MIRS principally on the basis of telecommunications service quality, brand identity, variety of handsets, tariffing, value added services and the quality of customer services.

     To the extent that mobile telephones are used in lieu of fixed telephones, we also compete with Bezeq.

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     In addition, the Palestine Telecommunication Co. Ltd., or Paltel, operates a GSM mobile telephone network under the name “Jawwal” in the Palestinian Authority administered areas of the West Bank and Gaza Strip, as well as a fixed-line network. Paltel’s GSM network competes with our network in some border coverage overlap areas.

Information technology

     We depend upon a wide range of information technology systems to support network management, subscriber registration and billing, customer service and marketing and management functions. These systems execute critical tasks for our business, from rating and billing of calls, to monitoring our points of sale and antenna sites, to managing highly segmented marketing campaigns. As our subscriber base has grown, we have devoted significant resources to expanding and enhancing our information technology systems and adopting and implementing new systems, including updating our financial management and accounting system. We believe these systems have been an important factor in our achievements since our commercial launch.

     While many of our systems have been developed by third-party vendors, all of them have been modified and refined to suit our particular needs. In certain instances, we have developed critical information technology systems internally to meet our specific requirements. For example, significant segments of our customer service system and business information infrastructure were developed internally and were designed to integrate our customer service outreach with our overall sales and marketing effort. In other cases, conversely, we have outsourced responsibility for certain systems to third parties. SchlumbergerSema—Sema S.p.a (formerly LHS Verwaltungs GmbH & Co.), for example, provides and maintains our billing system. We have completed upgrading our billing system to increase our flexibility to offer new tariff packages and to support data packet switching services for 2.5 generation and for third generation in the future. In addition, during 2002 we upgraded our enterprise resources planning and our customer relations management systems.

Intellectual property

     We are the registered owners of the trademark “Partner” in Israel with respect to telecommunications-related devices and services as well as additional trademarks. We have also registered several internet Web domain names, including, among others: www.partner.co.il, www.orange.co.il and www.partnergsm.co.il.

     We have entered into a brand license agreement with Orange International Developments Limited, a subsidiary of Orange plc. Under this agreement, Orange International appointed us as a

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permitted user of its trademarks in Israel. Under this license agreement, we have the exclusive right to use the Orange Brand in advertising and promotional materials in Israel. The term of the brand license began on July 1, 1998. The trademark license is royalty-free for the first 15 years of its term. In 2012, the parties are to discuss the royalties to be paid for a five-year term beginning July 1, 2013. In 2017, the parties are to again consider the royalties to be paid for an additional five-year term beginning July 1, 2018. Under this license agreement, we are required to comply with the Orange Brand guidelines established by Orange International. We have the right to use the Orange Brand as long as we are able and legally eligible under the laws of Israel to offer telecommunications services to the public in Israel. However, the license agreement may be terminated by mutual agreement, or at our discretion, or by Orange International if a court determines that we have materially misused the brand and we continue to materially misuse the brand after such determination of material misuse.

     We have also entered into a brand support/technology transfer agreement with Orange Personal Communications Services Limited. Under this agreement, Orange Personal will provide us with information and expertise to support the Orange Brand in Israel at an agreed cost for a minimum of five years beginning December 1, 1998. We may also request additional, optional support from Orange Personal at a daily rate. From May, 2003, either party may terminate the agreement effective as of November 30 of a particular year by giving written notice in May of that year. See “Item 3D. Risk Factors—Our marketing strategy is based upon the international Orange Brand. If our license agreement terminates or is revoked, we will lose one of our main competitive strengths.”

     In addition, we are a full member of the GSM Association. In conjunction with the promotion and operation of our GSM network, we have the right to use their relevant intellectual property, such as the GSM trademark and logo, security algorithms, roaming agreement templates, and billing transfer information file formats. We are eligible to remain a member of the GSM Association for as long as we are licensed to provide GSM service.

Regulation

Overview

     We operate within Israel primarily under the Communications Law (Telecommunications and Broadcasting), 1982 (the “Telecommunications Law”), the Wireless Telegraphy Ordinance (New Version), 1972 (the “Wireless Telegraphy Ordinance”), the regulations promulgated by the Ministry of Communications and our license. The Ministry of Communications issues the licenses which grant the right to establish and operate mobile telephone service in Israel, and sets the terms by which such mobile telephone service is provided. The Israeli telecommunications market is in a state of transition,

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moving to a more liberalized environment in which various markets, such as the mobile, international services, and domestic markets and infrastructure, are gradually being opened to competition and in which government-owned monopolies are being privatized. As a result, there is a possibility that changes may take place in the regulatory framework described below.

The Israeli regulatory framework

     The regulatory framework under which we operate consists primarily of the Telecommunications Law and related laws and the general license awarded to us by the Ministry of Communications. The Wireless Telegraphy Ordinance governs wireless telegraphy transmissions and equipment. At times, the Ministry of Communications issues policy papers and correspondence regarding issues not addressed in the law or the general license or details concerning issues addressed only generally in the law or the general license. These policy papers and correspondence also influence the regulatory environment. The regulatory framework under which we operate consists also of the Planning and Building Law, 1965 and the Consumer Protection Law, 1981. Additional areas of Israeli law may be relevant to our operations, including antitrust law, specifically the Restrictive Trade Practices Law, 1988, and administrative law.

Telecommunications Law

     The principal law governing telecommunications in Israel is the Telecommunications Law and related regulations. The Telecommunications Law prohibits any person, other than the State of Israel, from providing public telecommunications services without a license issued by the Ministry of Communications. “Telecommunications” is defined broadly to include broadcasting, transmission or reception of symbols, signals, signs, text, visual forms, voice or data by means of wire, wireless systems, optical systems or other electro-magnetic systems. For telecommunications, the Telecommunications Law provides for the granting of two types of licenses:

• special licenses, which are limited to a particular type of activity or service, and

• general licenses, which relate to telecommunications activities over a public network or for the granting of nationwide services or international telecommunications services.

     General licenses have been awarded to Bezeq, to the four mobile telephone operators, Pelephone, Cellcom, Partner and MIRS, and to the three international operators, Barak, Bezeq International and Golden Lines. Special licenses have been awarded for a variety of services and activities including internet service provision, telefax (store and forward) services, satellite transmission services and other value-added services. In addition, the Ministry of Communications

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may issue additional mobile telephone operator licenses in the future. The Telecommunications Law also provides for the granting of licenses for broadcasting in the area of cable and satellite television.

     The Ministry of Communications has the authority to amend the terms of any license. The grounds to be considered in connection with such an amendment are government telecommunications policy, public interest, the suitability of the licensee to perform the relevant services, the promotion of competition in the telecommunications market, the level of service and changes in technology. The Ministry of Communications may also make the award of certain benefits, such as new spectrum, conditional upon the licensee’s consent to a license amendment. The Ministry of Communications also has the authority to revoke, limit or suspend a license at the request of the licensee or when the licensee is in breach of a fundamental condition of the license, when the licensee is not granting services under the license or is not granting services at the appropriate grade of service or when the licensee has been declared bankrupt or an order of liquidation has been issued with respect to the licensee. Public interest may also be grounds for the rescission or suspension of a license.

     The Ministry of Communications, with the consent of the Minister of Finance, may also promulgate regulations to determine interconnect tariffs, or formulae for calculating such tariffs. Moreover, the Ministry of Communications may, if interconnecting parties fail to agree on tariffs, or if regulations have not been promulgated, set the interconnect tariff based on cost plus a reasonable profit, or based on each of the interconnecting networks bearing its own costs.

     The Ministry of Communications has promulgated regulations that, coupled with a change effected in the mobile telephone operators’ licenses, impose a uniform call termination tariff. For more information, see “—Interconnection”.

     The Telecommunications Law also includes certain provisions which may be applied by the Ministry of Communications to general licensees, including rights of way which may be accorded to general licensees to facilitate the building of telecommunications networks or systems and a partial immunity against civil liability which may be granted to a general licensee, exempting the licensee, inter alia, from tort liability with the exception of direct damage caused by the suspension of a telecommunications service and damage stemming from intentional or grossly negligent acts or omissions of the licensee. The Ministry of Communications has applied the partial immunity provisions to us, including immunity in the event that we cause a mistake or change in a telecommunication message, unless resulting from our intentional act or gross negligence.

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     Royalties. Pursuant to the Telecommunication (Royalties) Regulations, 2001, we must pay royalties to the State of Israel every quarter based on our chargeable revenues, as defined in the regulation, from mobile telephone services (including airtime, monthly subscription fees, roaming services and non-recurring), on a cumulative basis, excluding value added tax. Revenues for purposes of royalty calculation also exclude revenues transferred to other telecommunications license holders, bad debts, payments for roaming services to foreign mobile telephone operators and certain other revenues. The regulation currently provides a rate of 5% of our chargeable revenues in 2001, 4.5% in 2002, 4% in 2003 and 3.5% from 2004.

Fair Competition and Antitrust Law

     Provisions protecting Partner from anti-competitive practices can be found in our license and in the licenses of the other telecommunications operators, in the various telecommunications regulations and in the Restrictive Trade Practices Law. Our license emphasizes the principle of granting users equal access to the systems of each of the operators upon equitable terms. The Telecommunications Law also provides certain protection against disruption of service by Bezeq, whose interconnection and transmission services are necessary in order for us to be able to provide certain services.

     The Restrictive Trade Practices Law is the principal statute concerning restrictive practices, mergers and monopolies. This law prohibits a monopoly from abusing its market position in a manner that might reduce competition in the market or negatively affect the public. The law empowers the Commissioner of Restrictive Trade Practices to instruct a monopoly abusing its market power to perform certain acts or to refrain from certain acts in order to prevent the abuse. Bezeq has been declared a monopoly in certain markets, a ruling it is challenging. For more information see “Item 3D. Risk Factors—We operate in a highly regulated telecommunications market which limits our flexibility to manage our business.”

Judicial review of administrative actions

     Decisions made by the Ministry of Communications as well as by any other governmental authority may be reviewed by a court upon petition of an affected party. Traditionally, this review has been granted mainly to the Supreme Court of Israel sitting as the High Court of Justice. In recent years, the jurisdiction of the district courts to review administrative action has been broadened, and many petitions regarding administrative actions are brought before the district courts, particularly those involving complex questions of fact. The grounds for court intervention in administrative decisions include, among others, gross unreasonableness.

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Our license

     On April 7, 1998, the Ministry of Communications granted to us a general license to establish and operate a mobile telephone network in Israel for which we paid a license fee and associated costs totaling approximately NIS 1,571 million, including an amount of approximately NIS 12 million as a license fee adjustment to reflect changes in the Israeli CPI from the time we submitted a bid for our license until the time our license was granted by the Ministry of Communications. We paid this additional fee under protest and requested a refund of the fee from the Ministry of Communications. As a result of the rejection of our request by the Ministry of Communications, we filed a suit in the Jerusalem District court.

     In the December 2001 spectrum auction in Israel, we were awarded additional spectrum (GSM (1800 MHz) spectrum and UMTS third generation (1900 MHz and 2100 MHz) spectrum). Following the award of this spectrum, our license was amended and extended through 2017. During June 2002, the Minister of Communications amended and extended the license through 2022.

     The cost of the license fees is NIS 180 million (approximately $38 million) for the GSM 1800 spectrum, payable in two installments and NIS 220 million (approximately $46 million) for the UMTS third generation spectrum, payable in six installments. To date, we have paid NIS 108 million and NIS 100 million for the GSM 1800 spectrum and the UMTS third generation spectrum, respectively. For more information, see “Item 5B. Operating and Financial Review and Prospects—Liquidity and Capital Resources.”

     Under the terms of the amended license, we have provided a $20 million guarantee to the State of Israel to secure the Company’s adherence to the terms of the license. For more information, see “Item 5B. Operating and Financial Review and Prospects—Liquidity and Capital Resources.”

     Term. Our license authorizes us on a non-exclusive basis to establish and operate a mobile telephone network in Israel. A mobile telephone network is a wireless telephone network through which mobile telephone service is provided to the public. Our license allocates to us specified frequencies and telephone numbers. Our license was originally valid for a period of ten years (until April 2008). As described above, we were granted an amended license as a result of our success in the December 2001 auction for additional spectrum in Israel. Among other changes, the amendment extended our license for 20 years from February 1, 2002.

     The license may be extended for an additional six-year period upon our request to the Ministry of Communications, and a confirmation from the Ministry of Communications that we have met the following performance requirements:

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• observing the provisions of the Telecommunications Law, the Wireless Telegraphy Ordinance, the regulations and the provisions of our license;

• acting to continuously improve our mobile telephone services, their scope, availability, quality and technology, and that there has been no act or omission by us harming or limiting competition in the mobile telephone sector;

• having the ability to continue to provide mobile telephone services of a high standard and to implement the required investments in the technological updating of our system in order to improve the scope of such services, as well as their availability and quality; and

• efficient use of the spectrum allocated to us, compared to alternative applications.

     At the end of this additional six-year period, we may request renewal of our license for successive six-year periods thereafter, subject to regulatory approval.

     Contracting with customers. Pursuant to our license, our standard agreement with customers must receive Ministry of Communications approval. We have submitted our standard agreement to the Ministry of Communications for approval pursuant to our license. The agreement is still under review by the Ministry of Communications.

     Tariffs. Our license requires us to submit to the Ministry of Communications our tariffs (and any changes in our tariffs) before they enter into effect. Our license allows us to set and change our tariffs for outgoing calls without approval of the Ministry of Communications. However, the Ministry of Communications may intervene in our tariffs if it finds that our tariffs unreasonably harm consumers or competition.

     Payments. Our license specifies the payments we may charge our subscribers. These include one-time installation fees, fixed monthly payments, airtime fees, payments for the use of other telecommunication systems, payments for handset maintenance and payments for additional services. In most of our tariff plans we have chosen to charge only for airtime and use of services. See “Item 4B. Information on the Company—Business Overview—Services and Products—Tariff Plans.”

     Interconnection. Like the licenses of Pelephone, Cellcom and MIRS, our license requires that we interconnect our mobile telephone network to other telecommunications networks operating in Israel, including that of Bezeq, the other mobile telephone operators and the international operators.

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Conversely, Partner must allow other network operators to interconnect to its network. See “Item 4B. Information on the Company—Business Overview—Interconnection.”

     Service approval. The Ministry of Communications has the authority to require us to submit for approval details of any of our services (including details concerning tariffs). In addition, we are required to inform the Ministry of Communications 30 days prior to the activation of any service on a specified list of services.

     Access to infrastructure. The Ministry of Communications has the power to require us, like the other telephone operators in Israel, to offer access to our network infrastructure to other operators. We may also be required to permit other operators to provide value-added services using our network.

     Universal service. We are required to provide any third generation service with the same coverage as our existing network within 24 months from the commercial launch of each such service.

     Territory of license. Our license authorizes us to provide mobile telephone services within the State of Israel. In May 2000, we were also granted a license from the Israeli Civil Administration, which is responsible for administering the territories of the West Bank and Gaza that are not under the administration of the Palestine Authority.

     License conditions. Our license imposes many conditions on our conduct. We must at all times be a company registered in Israel. Our license may not be transferred, mortgaged or attached without the prior approval of the Ministry of Communications. We may not sell, lease or mortgage any of the assets which serve for the implementation of our license without the prior approval of the Ministry of Communications, other than in favor of a banking corporation which is legally active in Israel, and in accordance with the conditions of our license.

     Our license provides that no direct or indirect control of Partner may be acquired, at one time or through a series of transactions, and no means of control may be transferred in a manner which results in a transfer of control, without the consent of the Ministry of Communications. Furthermore, no direct or indirect holding of 10% or more of any means of control may be transferred or acquired at one time or through a series of transactions, without the consent of the Ministry of Communications. In addition, no shareholder of Partner may permit a lien to be placed on shares of Partner if the foreclosure on such lien would cause a change in the ownership of 10% or more of any of Partner’s means of control unless such foreclosure is made subject to the consent of the Ministry of Communications. For purposes of our license, “means of control” means any of:

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• voting rights in Partner;

• the right to appoint a director or managing director of Partner;

• the right to participate in Partner’s profits; or

• the right to share in Partner’s remaining assets after payment of debts when Partner is wound up.

     Each of our ordinary shares and ADSs grants its holder means of control in Partner.

     In addition, Partner, any entity in which Partner is an Interested Party, as defined below, an Office Holder, as defined below, in Partner or an Interested Party in Partner or an Office Holder in an Interested Party in Partner may not be a party to any agreement, arrangement or understanding which may reduce or harm competition in the area of mobile telephone services or any other telecommunications services.

     Our license also provides that a foreign mobile radio telephone operator, as defined below, or its controlling corporation, must hold during the five year period commencing on the date our license was granted by the Ministry of Communications, 25% of the voting rights and of the rights to appoint directors or the general manager of Partner. The foreign mobile radio telephone operator must also provide us all with the information in its possession required for the establishment of a mobile telecommunications system and for the provision, marketing and sale of mobile telecommunications services. Accordingly, no transfer may occur if as a result the foreign mobile radio telephone operator, or a controlling corporation, will hold less than 25% of the voting rights or the right to appoint directors or the general manager in Partner. After such five-year period, this holding may be reduced with the approval of the Ministry of Communications.

     In connection with our initial public offering, our license was amended to provide that our entering into an underwriting agreement for the offering and sale of shares to the public, listing the shares for trading, and depositing shares with the depositary or custodian will not be considered a transfer of any means of control, as defined below. Pursuant to the amendment, if the ADSs (or other “traded means of control,” that is, means of control which have been listed for trade or offered through a prospectus and are held by the public) are transferred or acquired in breach of the restrictions imposed by the license with respect to transfer or acquisition of 10% or more of any means of control, we must notify the Ministry of Communications and request the Minister’s consent within 21 days of learning of the breach. In addition, should a shareholder, other than a founding shareholder, breach these ownership restrictions, or provisions regarding acquisition of control or cross-ownership or cross-control with other mobile telephone operators or shareholdings or agreements which may

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reduce or harm competition, its shareholdings will be converted into dormant shares, as long as the Minister’s consent is required but not obtained, with no rights other than the right to receive dividends and other distributions to shareholders, and to participate in rights offerings.

     The dormant shares must be registered as dormant shares in our share registry. Any shareholder seeking to vote at a general meeting of our shareholders must notify us prior to the vote, or, if the vote is by deed of vote, must so indicate on the deed of vote, whether or not the shareholder’s holdings in Partner or the shareholder’s vote requires the consent of the Ministry of Communications due to the restrictions on transfer or acquisition of means of control, or provisions regarding cross-ownership or cross-control with other mobile telephone operators or shareholders. If the shareholder does not provide such certification, his instructions shall be invalid and his vote not counted.

     The existence of shareholdings which breach the restrictions of our license in a manner which could cause them to be converted into dormant shares and may otherwise provide grounds for the revocation of our license will not serve in and of themselves as the basis for the revocation of our license so long as:

• the principal shareholders of Partner continue to hold in the aggregate at least 51% of the means of control of Partner;

• our Articles of Association include the provisions described in this paragraph;

• we act in accordance with such provisions;

• our Articles of Association provide that an ordinary majority of the voting power at the general meeting of Partner is entitled to appoint all the directors of Partner.

     The amendment of our license providing for the dormant share mechanism does not apply to our principal shareholders.

     The provisions contained in the amendment to our license are also contained in our Articles of Association. In addition, our Articles of Association contain similar provisions in the event the holdings of shares by a shareholder breaches the Israeli and foreign mobile radio telephone operator ownership limits contained in our license. The principal shareholders have informed us that they intend to seek a change to the 51% ownership threshold.

     Revoking, limiting or altering our license. Our license contains several qualifications that we are required to meet. These conditions are designed primarily to ensure that we maintain at least a

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specified minimum connection to Israel and that we benefit from the experience of a foreign mobile radio telephone operator. Other eligibility requirements address potential conflicts of interest and cross-ownership with other Israeli telecommunications operators. The major eligibility requirements are set forth below. A failure to meet these eligibility requirements may lead the Ministry of Communications to revoke, limit or alter our license, after we have been given an opportunity and have failed to remedy it.

• Citizens and residents of Israel, as determined by Israeli law, must hold at least 20% of each of Partner’s means of control.

• The majority of our directors, and our general manager, must be citizens and residents of Israel.

• Neither the general manager of Partner nor a director of Partner may continue to serve in office if he has been convicted of certain legal offenses.

• The foreign mobile radio telephone operator, or a controlling corporation, must hold at least 25% of the voting rights and of the right to appoint directors or the General Manager of Partner, during at least the five year period commencing on the date our license was granted by the Ministry of Communications.

• No trust fund, insurance company, investment company or pension fund that is an Interested Party in Partner may: (a) hold, either directly or indirectly, more than 5% of any means of control in a competing mobile radio telephone operator without having obtained a permit to do so from the Ministry of Communications, or (b) hold, either directly or indirectly, more than 5% of any means of control in a competing mobile radio telephone operator in accordance with a permit from the Minister, and in addition have a representative or appointee who is an Office Holder in a competing mobile radio telephone operator, unless it has been legally required to do so, or (c) hold, either directly or indirectly, more than 10% of any means of control in a competing mobile radio telephone operator, even if it received a permit to hold up to 10% of such means of control.

• No trust fund, insurance company, investment company or a pension fund that is an Interested Party in a competing mobile radio telephone operator may: (a) hold, either directly or indirectly, more than 5% of any means of control in Partner, without having obtained a permit to do so from the Ministry of Communications; or (b) hold, directly or indirectly, more than 5% of any means of control in Partner in accordance with a permit from the Ministry of Communications, and in addition have a representative or appointee who is an Office Holder in Partner, unless it has been legally required to do so; or (c) hold, either directly or indirectly, more than 10% of any means of control in Partner, even if it received a permit to hold up to 10% of such means of control.

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• Partner, an Office Holder or Interested Party in Partner, or an Office Holder in an Interested Party in Partner does not control a competing mobile radio telephone operator, is not controlled by a competing mobile radio telephone operator, by an Office Holder or an Interested Party in a competing mobile radio telephone operator, by an Office Holder in an Interested Party in a competing mobile radio telephone operator, or by a person or corporation that controls a competing mobile radio telephone operator.

     Our license may also be revoked, limited or altered by the Ministry of Communications if we have failed to uphold our obligations under the Telecommunications Law, the Wireless Telegraphy Ordinance or the regulations, or have committed a substantial breach of the license conditions. Examples of the principal undertakings identified in our license in this connection are:

• We have illegally ceased, limited or delayed any one of our services;

• Any means of control in Partner or control of Partner has been transferred in contravention of our license;

• We fail to invest the required amounts in the establishment and operation of the mobile radio telephone system in accordance with our undertakings to the Ministry of Communications;

• We have harmed or limited competition in the area of mobile radio telephone services;

• A receiver or temporary liquidator is appointed for us, an order is issued for our winding up or we have decided to voluntarily wind up; or

• Partner, an Office Holder in Partner or an Interested Party in Partner or an Office Holder in an Interested Party of Partner is an Interested Party in a competing mobile radio telephone operator or is an Office Holder in a competing mobile radio telephone operator or in an interested party in a competing mobile radio telephone operator without first obtaining a permit from the Ministry of Communications to do so or has not fulfilled one of the conditions included in such permit. See “Item 4B. Information on the Company—Business Overview—Regulation—Our Permit Regarding Cross Ownership.”

     In addition, our amended license, like the licenses of our competitors, provides that if we participate in a future tender for a mobile telecommunications license, we may be required by the terms of a new tender, if we win such tender, to transfer our network to another operator according to terms which the Minister of Communications may decide upon and to cease providing mobile telephony services.

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     Change in license conditions. Under our license, the Ministry of Communications may change, add to, or remove conditions of our license if certain conditions exist, including:

• A change has occurred in the suitability of Partner to implement the actions and services that are the subject of our license.

• A change in our license is required in order to ensure effective and fair competition in the telecommunications sector.

• A change in our license is required in order to ensure the standards of availability and grade of service required of Partner.

• A change in telecommunications technology justifies a modification of our license.

• A change in the electromagnetic spectrum needs justifies, in the opinion of the Ministry of Communications, changes in our license.

• Considerations of public interest justify modifying our license.

• A change in government policy in the telecommunications sector justifies a modification of our license.

• A change in our license is required due to its breach by Partner.

     During a period of an emergency, control of Partner’s mobile radio telephone system may be assumed by any lawfully authorized person for the security of the State of Israel to ensure the provisions of necessary service to the public, and some of the spectrum granted to us may be withdrawn. In addition, our license requires us to supply certain services to the Israeli defense and security forces. Furthermore, certain of our senior officers are required to obtain security clearance from Israeli authorities.

     For the purposes of this discussion, the following definitions apply:

• “OFFICE HOLDER” means a director, manager, company secretary or any other senior officer that is directly subordinate to the general manager.

• “CONTROL” means the ability to, directly or indirectly, direct the activity of a corporation, either alone or jointly with others, whether derived from the governing documents of the corporation, from an agreement, oral or written, from holding any of the means of control in the corporation or in another corporation, or which derives from any other source, and excluding the ability derived

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	solely from holding the office of director or any other office in the corporation. Any person controlling a subsidiary or a corporation held directly by him will be deemed to control any corporation controlled by such subsidiary or by such controlled corporation. It is presumed that a person or corporation controls a corporation if one of the following conditions exist: (1) such person holds, either directly or indirectly, fifty percent (50%) or more of any means of control in the corporation; (2) such person holds, either directly or indirectly, a percentage of any means of control in the corporation which is the largest part in relation to the holdings of the other Interested Parties in the corporation; or (3) such person has the ability to prevent the taking of business decisions in the corporation, with the exception of decisions in the matters of sale or liquidation of most businesses of the corporation, or fundamental changes of these businesses.
•	“CONTROLLING CORPORATION” means a company that has control, as defined above, of a foreign mobile radio telephone operator.
•	“FOREIGN MOBILE RADIO TELEPHONE OPERATOR” means an operator of a mobile telephone system abroad, through which mobile telephone services are provided to at least 500,000 subscribers.
•	“INTERESTED PARTY” means a person who either directly or indirectly holds 5% or more of any type of means of control, including holding as an agent.

Our permit regarding cross ownership

     Our license generally prohibits cross-control or cross-ownership among competing mobile telephone operators without a permit from the Ministry of Communications. In particular, Partner, an Office Holder or an Interested Party in Partner, as well as an Office Holder in an Interested Party in Partner may not control or hold, directly or indirectly, 5% or more of any means of control of a competing mobile radio telephone operator. Our license also prohibits any competing mobile radio telephone operator or an Office Holder or an Interested Party in a competing mobile radio telephone operator, or an Office Holder in an Interested party in a competing mobile radio telephone operator or a person or corporation that controls a competing mobile radio telephone operator from either controlling, or being an Interested Party in us.

     However, our license, as amended on April 14, 2002 also provides that the Ministry of Communications may permit an Interested Party in Partner to hold, either directly or indirectly, 5% or more in any of the means of control of a competing mobile radio telephone operator if the Ministry of Communications is satisfied that competition will not be harmed, and on the condition that the Interested Party is an Interested Party in Partner only by virtue of a special calculation described in

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the license and relating to attributed holdings of shareholders deemed to be in control of a corporation.

     An indirect shareholder of Elbit, Discount Investment Company Ltd., is deemed to be an Interested Party in both Partner and Cellcom by virtue of the special calculation described above. Accordingly, we applied for and received a permit from the Ministry of Communications which authorized Discount’s indirect ownership of equity in both Partner and Cellcom. Our permit was also amended on April 14, 2002 and on June 2, 2002. Our permit contains certain guidelines which apply to Discount and the related companies PEC Israel Economic Corporation, Elron Electronic Industries Ltd., the parent of Elbit, Elbit and IDB Development Company Ltd., the parent of Discount, and persons who control any one of them (collectively, the “IDB Group”). Our permit establishes limits on the holdings of the IDB Group in the equity of Cellcom and Partner. Changes in these holdings require a permit from the Ministry of Communications, and may require Elbit to significantly reduce its holdings in Partner. In addition, our permit limits the number of directors of Partner that may be appointed by the IDB Group. Our permit also limits the exchange of information regarding Partner within the IDB Group and its subsidiaries, limits the involvement of the two directors and office holders of Discount Investment Company Ltd. who are also directors of Cellcom in matters relating to Partner, and prohibits these directors from certain activities within the IDB Group which would provide them with access to information about Partner.

ISP license

     On March 7, 2001, we received a special license issued by the Ministry of Communications, allowing us through our own facilities to provide internet access to both mobile and fixed network customers. The license is valid until March 2003. We applied to the Ministry of Communications for an extension.

Antenna site permits

Permits of the Ministry of Environment

     Pursuant to the Pharmacists (Radioactive Elements and Products) Regulations, 1980 (the “Pharmacists Regulations”) issued under the Pharmaceutics Ordinance, the Ministry of the Environment is empowered to grant erection permits and operation permits for our antennae. The granting of such permits is subject to the satisfaction of conditions to which we are subject under the Pharmacists Regulations. The application to the Ministry of Environment must include a discussion of the type of device, its impact on the environment both during ordinary operation and in times of fault,

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and details of the possible dangers posed by the device and the manner in which these dangers may be prevented or neutralized. In addition, the application includes an engineer’s sketch of the device and its related equipment. The Pharmacists Regulations further provide that the permits granted by the Ministry of Environment are for a one-year period.

     The Ministry of the Environment has adopted the International Radiation Protection Agency’s standard as a basis for the consents it gives for the erection and operation of our antennae. This standard is an international standard based upon a number of years of scientific study.

Local building permits

     The Planning and Building Law requires that we receive a building permit for the construction of our antennae. The local committee or local licensing authority in each local authority is authorized to grant building permits, provided such permits are in accordance with the local, regional, and National Building Plan No. 36 which came into effect on June 15, 2002. The local committee is made up of members of the local municipal council. The local committee is authorized to delegate certain of its powers to subcommittees on which senior members of the local authority may sit.

     The local committee examines the manner in which an application for a building permit conforms to the plans applying to the parcel of land that is the subject of the application, and the extent to which the applicant meets the requirements set forth in the Planning and Building Law. The local committee is authorized to employ technical, vista, and aesthetic considerations in its decision-making process. The local committee may grant building permits that are conditioned upon the quality of the construction of the structure, the safety of flight over the structure, and the external appearance of the structure. Every structure located on a certain parcel of land must satisfy the requirements and definitions set forth in the building plan applicable to such parcel.

     A decision by a local committee not to grant a building permit may be appealed to the District Appeals Committee. A person harmed by the ruling of the District Appeals Committee may have such ruling examined judicially by means of an administrative petition to the District Court sitting as an Administrative Affairs Tribunal.

National Building Plan No. 36

     National Building Plan No. 36 which came into effect on June 15, 2002 regulates the growth of telecommunications infrastructure in Israel. Chapter A of National Building Plan No. 36 sets forth the licensing, view, flight safety and electromagnetic radiation requirements for the construction of mobile radio telephone infrastructure. National Building Plan No. 36 was recently approved by the Israeli

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government, after the National Committee removed from the draft a provision which would have required notification to owners of adjoining assets of an intention to erect an antenna site in a residential area. National Building Plan No. 36 also adopts the radiation emission standards set by the International Radiation Protection Agency which were also previously adopted by the Ministry of the Environment. We believe that we currently comply with these standards.

     Other Approvals. The construction of our antennae may be subject to the approval of the Civil Aviation Administration which is authorized to ensure that the construction of our antennae does not interfere with air traffic, depending on the height and location of such antennae. The approval of the Israeli Defense Forces is required in order to coordinate site frequencies so that our transmissions do not interfere with the communications of the Israel Defense Forces.

     We have received type approval from the Ministry of Communications for all of the handsets and other terminal equipment we sell. The Ministry of the Environment also has authority to regulate the sale of handsets in Israel. However, in accordance with the current practice among mobile telephone operators in Israel, we have not obtained approvals or exemptions from the Ministry of the Environment for the handsets we provide because, to date, neither the Ministry of the Environment nor the Ministry of Health has issued standards for the permitted level of radiation emissions from handsets. However, as of June 15, 2002, we have been required to provide information to purchasers of handsets on the Specific Absorption Rate, or SAR, of the handsets as well as its compliance with certain standards pursuant to a regulation promulgated by the Ministry of Industry and Trade under the Consumer Protection Law.

     We, like other mobile telephone operators in Israel, provide repeaters, also known as bi-directional amplifiers, to subscribers seeking an interim solution to weak signal reception within specific indoor locations. These repeaters, which we install at the subscribers’ premises upon their request, consist of an indoor box attached to a small outdoor antenna of between 40 and 70 cm (approximately one to two feet), receive signals from a network antenna site and amplify them within a specific room or rooms. The radiation emission from these outdoor antennae is comparable to that of the handset whose signal it is transmitting. In light of the lack of a clear policy of the local planning and building authorities, and in light of the practice of the other mobile telephone operators, we have not requested permits under the Planning and Building Law for the repeaters. However, we have received from the Ministry of Communications a type approval for the repeaters. We have also approached the Ministry of the Environment, asserting that no permits are necessary for the repeaters, based on the Ministry’s previous advice that permits are not necessary for devices with comparable levels of emission called “Fixed Cellular Terminals.”

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4C. Organizational Structure

     We have one wholly owned subsidiary, Partner Future Communications 2000 Ltd., an Israeli corporation.

4D. Property, Plants and Equipment

Headquarters

     We lease our headquarter facilities in Rosh Ha-ayin, Israel, as follows:

(1)	Main office at 8 Amal St.—a building of 10,532 square meters plus 6,345 square meters mainly for parking. The lease agreement is for a 20 year period commencing on June 1998. We have an option to shorten the lease period by five to fifteen years.
(2)	Call center at 14 Amal St.—a building of 7,874 square meters plus 5,474 square meters of parking. During 2002, we decided to terminate the lease agreement in favor of a new building (see 3. below). The move will be completed in the first half of 2003.
(3)	Main office at 6 Amal St.—a building of 9,172 square meters plus 14,877 square meters of parking and service areas. In 2003, we will increase our lease to 18,151 square meters and 14,877 square meters for parking and service areas. The lease agreement is for a 16 year period commencing in November 2002. We have an option to shorten the lease period by five to ten years.

     We lease another call center at 5 Kornas St. in Haifa—a building of 2,525 square meters. The lease agreement is for a 5 year period commencing in November 2001. We have the option to extend the lease period for 6 years.

Network sites

     We lease most of the sites where our mobile telecommunications network equipment is installed throughout Israel. At December 31, 2002, we had 2,035 antenna sites (including micro-sites). The lease agreements relating to our cell sites are generally for periods of two to three years. We have the option to extend the lease periods to ten years (including the original lease period).

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Service centers and points of sale

     Lease agreements for our retail stores and service centers are for periods of two to five years. We have the option to extend the lease periods to twenty additional years (including the original lease period). The average size of our retail stores and service center is approximately 230 square meters. See also Note 8a(2)(b) to our consolidated financial statements.

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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

     The following operating and financial review and prospects are based upon and should be read in conjunction with our financial statements and selected financial data, which appear elsewhere in this annual report. You should also read the risk factors appearing elsewhere in this annual report for a discussion of a number of factors that affect and could affect our financial condition and results of operations.

5A. Operating results

     We were formed in September 1997. We submitted our bid to the Ministry of Communications for our license on October 28, 1997. The Ministry of Communications awarded us our license on April 7, 1998, and we began full commercial operations to the general public in January 1999.

     See “Item 4A. Information on the Company—History and Development of the Company” for significant events since we commenced commercial operations and “Item 5B. Liquidity and Capital Resources” for information on the costs required to build and expand our network and services.

Revenues

     Our principal source of revenues is from the sale of network services, primarily network airtime usage fees, and is denominated primarily in shekels. In each of 2002, 2001 and 2000, approximately 54% of network airtime usage fees were derived from outgoing calls, with the remainder generated from incoming calls, roaming and value-added services. We also derive revenues from sales of handsets, car kits, accessories and handset maintenance services to subscribers as well as other services. Network airtime usage fees comprise payments from subscribers originating calls on our network, payments received from other telecommunications network operators for delivering calls originating on their networks and terminating on our network and from foreign GSM network operators for calls made by their roaming customers while in Israel using our network, also called “in-roaming.” In addition, we receive payments from our subscribers for calls they originate on networks located outside of Israel, or “out-roaming.” We recognize revenues from airtime usage at the time we provide the service to the subscriber. We recognize revenues from handset sales only upon delivery and the transfer of ownership to the subscriber.

     The Ministry of Communications has promulgated regulations that, coupled with a change effected in the mobile telephone operators’ licenses, impose a uniform call termination tariff. The

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uniform tariff, originally NIS 0.54 per minute, fell to NIS 0.50 on January 1, 2001 until January 1, 2003, at which point it was reduced to NIS 0.45 per minute. For more information, see “Item 4B. Business Overview—Interconnection”. These changes will substantially decrease our revenues from incoming calls, and will also to a lesser extent decrease our cost of revenues. Had the call termination tariffs been reduced to NIS 0.45 per minute for all of 2002, the proforma negative impact on our revenues and net income would have amounted to approximately NIS 110 million and NIS 62 million, respectively, as a result of the reduction in the call termination tariffs that we would have collected and paid, together with the related royalties.

Cost of revenues and other operating expenses

Our principal operating expenditures are:

• subscriber acquisition costs, including primarily handset and car-kit costs and commissions to dealers;

• upgrade and retention costs;

• network operations costs;

• interconnect fees paid to the fixed-line and other telecommunication network operators in Israel for calls made by our subscribers carried by or terminating on the other networks;

• charges paid to foreign GSM network operators for services provided to our subscribers while outside Israel using their networks;

• charges for leases and maintenance;

• costs of replacing or repairing damaged handsets;

• advertising and promotion;

• customer services costs;

• employee salaries and related expenses;

• depreciation relating to our network-related assets and amortization of our license; and

• royalties paid to the Israeli government under our license.

     Our average subscriber acquisition costs, per subscriber, for 2002 were NIS 470 ($99), compared to NIS 458 in 2001 and NIS 819 in 2000. The slight increase in average subscriber acquisition costs is attributed primarily to the increasing percentage of business subscribers amongst our new subscribers, for whom we have traditionally incurred higher subscriber acquisition costs compared to other new subscribers, and higher prices of more sophisticated handsets, resulting in

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higher handset subsidies. Average subscriber acquisition costs may increase slightly during 2003, if handset prices on newer sophisticated models remain high, which may lead to an increase in the handset subsidies that we provide.

     We anticipate that interconnect fees, royalties to the Israeli government and costs related to the replacement and upgrading of handsets will continue to grow in line with the growth of our subscriber base. In addition, because of the importance of the Orange Brand to our strategy, we expect to continue to incur significant advertising and marketing costs for the foreseeable future in order to maintain and enhance the strength of the brand.

     Pursuant to the Telecommunication (Royalties) Regulations, 2001, we must pay royalties to the State of Israel every quarter based on our chargeable revenues (as defined in the regulation, including airtime, monthly subscription fees, roaming services and non-recurring) from mobile telephone services, on a cumulative basis, excluding value added tax. Revenues for purposes of royalty calculation also exclude revenues transferred to other telecommunications license holders, bad debts, payments for roaming services to foreign mobile telephone operators and certain other revenues. The regulation provided a rate of 5% of our chargeable revenues in 2001 and 4.5% in 2002, and provides a rate of 4% in 2003 and 3.5% from 2004. Before the regulation became effective on January 1, 2001, the rate had been 8%, and the basis on which the royalties were calculated had been narrower than it is now.

Churn

     Churn refers to subscriber disconnections from network services, either involuntary or voluntary, and from June 2001, subscribers who have not generated revenue for the Company for a period of over the last six consecutive months ending at a reporting date. Involuntary churn includes disconnections due to non-payment of bills or suspected fraudulent use, and voluntary churn includes disconnections due to subscribers switching to a competing mobile telephone network or terminating their use of our services. Since we only launched full commercial operations in January 1999, and since until mid 2002 each Israeli operator used different technologies our current churn rates are not necessarily indicative of our future churn rates. Our annual churn rate was 10.9% for 2002, compared to 5.8% for 2001 and 5.5% for 2000.

     We believe that the increase in the churn rate in 2002 is attributed predominately to increased churn in the prepaid sector and churn from those subscribers who joined the network in 1999 with three year commitment periods, as well as increasing competition.

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     We anticipate churn for 2003 to increase to a level of between 15% to 18% driven by increasing churn in the pre-paid sector caused primarily by higher turnover in the base of foreign workers in Israel, and increasing competition affecting all sectors.

     We recognize that managing subscriber churn is an important factor in maximizing revenue and cash flows. In order to control churn caused by subscribers voluntarily terminating our service, we attempt to ensure that our service is high quality and competitive. We use our advanced information technology systems as a tool to understand, monitor and control voluntary churn. We have a retention team within our customer services group that makes follow-up phone-calls to subscribers who call us with complaints or problems in order to resolve any problems and to retain the subscribers on the network. We have developed several retention and churn prevention plans to retain our subscribers. Some of these plans are based on a subscriber’s ranking according to financial and economic parameters. In addition, we have developed tools to predict a subscriber’s potential to churn from our network, thus enabling us to proactively approach the subscriber with an attractive offering. We also host exclusive subscriber events, such as shows and parties for subscribers, in order to encourage subscriber loyalty.

Critical accounting policies and estimates

     Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with US GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses during the reportitng period. On an ongoing basis, we evaluate our estimates, including those related to long-lived assets, bad debts, inventories, income taxes, and contingencies and litigation. We base our estimates on historical experience and on various other assumptions and information that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

     Please refer to Note 1 to our consolidated financial statements included in this Annual Report on Form 20-F for the year ended December 31, 2002 for a summary of all of Partner’s significant accounting policies.

     We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:

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Long-lived assets

     We have substantial investments in tangible and intangible long-lived assets, primarily our communications network and our license. Changes in technology or changes in our intended use of these assets may cause the estimated period of use or the value of these assets to change. We amortize our communications network by the straight-line method over 6.7 years (15% per year). We amortize our license by the straight-line method over the utilization period of the license, which is based upon the license period. Following the extension of the license period the amortized balance of this license is amortized as of 2002 over the period ending in 2022, subject to the changes in utilization period. We review our communications network and license for impairment annually, according to the economic environment and technological developments in the cellular industry, and whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. On January 1, 2002, we adopted FAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” FAS 144 requires that long-lived assets, to be held and used by an entity, be reviewed for impairment and, if necessary, written down to the estimated fair values, whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through undiscounted future cash flows.

Allowance for doubtful accounts

     We maintain allowance for doubtful accounts for estimated losses resulting from the inability of our subscribers to make required payments. We base our allowance on the likelihood of recoverability of accounts receivable based on the aging of the balances, our historical write-off experience, net of recoveries, changes in the credit worthiness of our customers, and taking into account current collection trends that are expected to continue. These estimated allowance are periodically reviewed, analyzing the subscribers’ payment history. The allowance charged to expenses is determined in respect of specific debts doubtful of collection, calculated as a specified percentage of the outstanding balance in each debt age group, with the percentage of the allowance increasing as the age of the debt increases. For example, a debt that is between 1-1.5 years overdue is reserved for at the rate of 94%. The debt becomes fully reserved once it is 1.5 years overdue. Actual customer collections could differ from our estimates. For example, if the financial condition or our customers were to deteriorate, additional allowances may be required. Our bad debt expenses as a percentage of revenues were 1.6%, 0.5% and 0.3% for the years ended December 31, 2000, 2001 and 2002, respectively.

Deferred income taxes

     Deferred taxes are determined utilizing the asset and liability method, based on the differences between the amounts presented in our financial statements and those taken into account for tax

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purposes, in accordance with the related tax laws. Valuation allowances are included in respect of deferred tax assets when it is more likely than not that no such assets will be realized. We have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance. Due to the uncertainty as to utilization of the tax losses carryforward, full valuation allowance was provided to reduce our deferred tax assets, because in the foreseeable future it is less likely than not to be realized. Management evaluates the realizability of the deferred tax assets on a current basis and assesses the need for valuation allowances. If it were determined that we would be able to realize a deferred tax asset in excess of its net recorded amount, an adjustment to deferred tax assets would increase income.

Contingencies and litigation

     As described in Note 8b to our consolidated financial statements, we are party to various claims arising in the ordinary course of our operations. In determining whether liabilities should be recorded for pending litigation claims, we assess, based on the advice of our outside legal counsel, the allegations made and the likelihood of our success.

     When we believe that it is probable that we will not prevail in a particular matter, we then estimate the amount of the liability. The evaluation of the probability of success of such claims and the determination of whether there is a necessity to include a provision in respect thereof requires judgment by our outside legal counsel and management. Should the outcome of such litigation be adversely determined, and if the amount of the claim is substantial, it is possible that our results of operations or liquidity in a particular period could be materially affected by these contingencies.

Revenue recognition

     As described in Note 1j to our consolidated financial statements, we recognize revenues as services are rendered. We recognize service revenues based upon minutes of use processed, net of credits and adjustments for services discounts. As a result of our billing cycle cut-off times, we are required to make estimates for services revenue earned but not yet billed at the end of each quarter. These estimates are based primarily upon historical minutes of use processed.

     Actual billing cycle results and related revenue may vary, depending on subscriber usage and rate plan mix, from the results estimated at the end of each period. Material differences may result between our estimates and the actual amount and timing of our revenue for any period.

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Inventories

     We write down our inventory for estimated obsolescence or unmarketable inventory based on an analysis of inventory agings, assumptions about future demand and market conditions. Changes in technology may require us to provide additional reserves. If actual demand and/or market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

Handset warranty obligation

     Until 2002, a provision for warranties was not made, as our liability was covered by the handset suppliers’ warranties. As of 2002, we have entered into several agreements under which the suppliers do not provide any warranty but rather provide additional handsets to satisfy their warranty obligation. In these cases we provide for warranty costs at the same time as the revenues are recognized. The costs associated with product warranties that we provide to our customers require us to make estimates and assumptions regarding the extent of future warranty issues and related costs. Should actual handset failure rates, material usage or service costs differ from management’s estimates, revisions to the estimated warranty liability would be required.

Information on Israel

     We are incorporated under the laws of, and our offices and network facilities are located in, the State of Israel. Accordingly, we are directly affected by political, economic and military conditions in Israel. Our operations would be materially adversely affected if major hostilities involving Israel should occur or if trade between Israel and its present trading partners should be curtailed.

Political and economic conditions

     Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its Arab neighbors and a state of hostility, varying from time to time in intensity and degree, has led to security and economic problems for Israel. However, a peace agreement between Israel and Egypt was signed in 1979, a peace agreement between Israel and Jordan was signed in 1994 and, since 1993, several agreements between Israel and Palestinian representatives have been signed. In addition, Israel and several other Arab States have announced their intention to establish trade and other relations and are discussing certain projects. To date, Israel has not entered into any peace agreement with Syria or Lebanon. There is substantial uncertainty about how the “peace process” will develop or what effect it may have upon us. Since October 2000, there has been a substantial deterioration in the relationship between Israel and the Palestinians which has resulted in increased violence, and the situation has recently worsened due to the

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possibility of an Iraqi attack against Israel in response to an attack by the United States and its allies against Iraq. The future effect of this deterioration and violence on the Israeli economy and our operations is unclear. Ongoing violence between Israel and its Arab neighbors and Palestinians may have a material adverse effect on our business, financial condition or results of operations.

     Generally, male adult citizens and permanent residents of Israel under the age of 45, unless exempt, may be required to perform between 36-45 days of military reserve duty annually. Certain reserve soldiers may be required to serve more.

     Some of our directors, officers and employees are currently obligated to perform annual reserve duty. Additionally, all such reservists are subject to being called to active duty at any time under emergency circumstances. We cannot assess the full impact of these requirements on our workforce and business if conditions should change, and we cannot predict the effect on us of any expansion or reduction of these obligations. Under emergency circumstances, the government also has the right to revoke temporarily some of the spectrum granted to us, to protect the security of the State of Israel or to ensure the provision of necessary services to the public. This may materially harm our ability to provide services to our subscribers in such emergency circumstances.

Results of operations for the year ended December 31, 2002 compared to the year ended December 31, 2001

     We had 1,837,000 subscribers as of December 31, 2002 compared to 1,458,000 subscribers as of December 31, 2001, an increase of 26%. For the year ended December 31, 2002 we had revenues of NIS 4,055 million ($856 million) compared to NIS 3,249 million for 2001. The increase was attributable mainly to the increase in our subscriber base. We expect the rate of increase in our revenues to go down, as the Israeli cellular market approaches saturation and interconnect tariffs are reduced as mandated by the regulator.

     Average monthly revenue per subscriber, or ARPU, for the year ended December 31, 2002 was NIS 183 ($39), compared to NIS 214 in 2001. The primary cause of this reduction was the increasing percentage of prepaid subscribers in our subscriber base, which have historically provided below-average ARPU. We expect ARPU to decline moderately during 2003 mainly due to the reduction in the interconnect tariffs, with a reduction to levels of approximately NIS 165-170 ($35-36), or NIS 8-13 ($1.7-2.7) lower than ARPU in the fourth quarter of 2002.

     Our cost of revenues for the year ended December 31, 2002 was NIS 3,069 million ($648 million), compared to NIS 2,719 million in 2001. This amounted to 76% of our revenues for the year ended December 31, 2002, compared to 84% in 2001. The increase in our cost of revenues in 2002 over 2001 was driven

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primarily by interconnect and other network expenses related to higher subscriber numbers and usage, offset by a decrease of NIS 113 million ($24 million) in our license amortization expenses as a result of the extension of our license until 2022. Our cost of revenues as a percentage of our revenues was lower in 2002 than in 2001, primarily due to the increasing economies of scale that result from the fact that a portion of our costs are not directly correlated to our revenues.

     Our selling and marketing expenses, which consist primarily of expenses related to advertising and public relations, commissions paid to dealers, distributors and salaries of personnel involved in these activities, were NIS 308 million ($65 million) for the year ended December 31, 2002, compared to NIS 293 million in 2001. This amounted to 8% of our revenues in 2002, compared to 9% in 2001. The stability in these expenses was driven primarily by efficient cost management. The slight increase in selling and marketing expenses was due to increased marketing efforts in response to increased competition. We expect selling and marketing expenses to increase in 2003 as we continue to support the Orange Brand in anticipation of increased competition.

     General and administrative expenses for the year ended December 31, 2002 were NIS 144 million ($30 million) compared to NIS 134 million in 2001. This amounted to 4% of our revenues in 2002 compared to 4% in 2001. The increase in these expenses was driven primarily by insurance costs and also resulted from the fact that in 2001, we received a refund in the amount of approximately NIS 24 million from Bezeq following the Ministry of Communications’ interim settlement regarding our dispute on bad debt collection. We expect that general and administrative expenses will remain relatively stable in 2003.

     We had an operating profit for the year ended December 31, 2002 of NIS 533 million ($113 million) compared to NIS 103 million in 2001. The increase in operating profit was achieved by our subscriber growth, accompanied by increasing economies of scale.

     We had net financial expenses for the year ended December 31, 2002 of NIS 445 million ($94 million) compared to NIS 401 million in 2001, an increase of NIS 44 million. The increase in net financial expenses is attributed mainly to an increase of NIS 222 million in our average total debt outstanding, higher interest rates set by the Central Bank of Israel and the effect of the shekel devaluation on our US $175 million senior subordinated notes.

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     Our net income in 2002 was NIS 84 million ($18 million) compared to a net loss of NIS 303 million in 2001.

Results of operations for the year ended December 31, 2001 compared to the year ended December 31, 2000

     We had 1,458,000 subscribers as of December 31, 2001 compared to 834,000 subscribers as of December 31, 2000. For the year ended December 31, 2001 we had revenues of NIS 3,249 million compared to NIS 2,104 million for 2000. The increase was attributable mainly to a 75% increase in our subscriber base.

     Average monthly revenue per subscriber, or ARPU, for the year ended December 31, 2001 was NIS 214, compared to NIS 306 in 2000. The primary cause of this reduction was the increasing percentage of prepaid subscribes in our subscriber base, which have historically provided below-average ARPU.

     Our cost of revenues for the year ended December 31, 2001 was NIS 2,719 million compared to NIS 2,162 million in 2000. This amounted to 84% of our revenues for the year ended December 31, 2001 compared to 103% in 2000. Our cost of revenues as a percentage of our revenues was lower in 2001 than in 2000, primarily due to the increasing economies of scale that result from the fact that a substantial portion of our costs are not directly correlated to our revenues, combined with the decrease in the handset subsidies we provided to the customers who joined the network during 2001. Consequently, we experienced a gross profit during 2001, compared to a gross loss during 2000.

     Our selling and marketing expenses, which consist primarily of expenses related to advertising and public relations, commissions paid to dealers, distributors and salaries of personnel involved in these activities, were NIS 293 million for the year ended December 31, 2001 compared to NIS 328 million in 2000. This amounted to 9% of our revenues in 2001, compared to 16% in 2000. The decrease in these expenses as a percentage of revenue was driven primarily by more efficient cost management.

     General and administrative expenses for the year ended December 31, 2001 were NIS 134 million compared to NIS 155 million in 2000. This amounted to 4% of our revenues in 2001 compared to 7% in 2000. The decrease in these expenses was primarily due to a refund received from Bezeq following the Ministry of Communications’ interim settlement regarding our dispute with Bezeq on bad debts’ collection.

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     We had an operating profit for the year ended December 31, 2001 of NIS 103 million compared to an operating loss of NIS 540 million in 2000. The increase in operating profit was achieved by our subscriber growth, accompanied by increasing economies of scale and lower total subscriber acquisition costs. During 2001 total subscriber acquisition costs were NIS 316 million compared to NIS 424 million in 2000.

     We had net financial expenses for the year ended December 31, 2001 of NIS 401 million compared to NIS 229 million in 2000. Our net financial expenses increased from 2000 to 2001 by NIS 172 million, and our total debt increased by NIS 265 million. The increase in net financial expenses was attributed mainly to an increase in our average total debt outstanding and the effects of currency fluctuations on the outstanding principal of our senior subordinated notes, which are denominated in US dollars.

     Our net loss in 2001 was NIS 303 million compared to NIS 769 million in 2000.

Impact of inflation and exchange rate fluctuations

     Substantially all of our revenues and a majority of our operating expenses are denominated in shekels. However, through December 31, 2002, a substantial amount of our operating expenses were linked to non-shekel currencies. These expenses related mainly to the acquisition of handsets where the price paid by us is based on various foreign currencies. In addition, a substantial majority of our capital expenditures are incurred in, or linked to, non-shekel currencies, and our notes are denominated in US dollars and require US dollar interest payments. Thus, any devaluation of the shekel against the non shekel currencies will increase the shekel cost of our non-shekel denominated or linked expenses. Such an increase may have an adverse impact on our results, which may be material. We hedge some of our foreign currency commitments, but we do not currently hedge the principal payable on our notes due 2010.

     Although we have the ability to borrow under our bank credit facility in US dollars and Euros, our borrowings are primarily in shekels, and part of our shekel bank borrowings are linked to the Israeli CPI. We may not be permitted to raise our tariffs pursuant to our license in a manner that would fully compensate for any increase in the Israeli CPI. Therefore, an increase in the rate of inflation may also have a material adverse impact upon us by increasing our financial expenses without an offsetting increase in revenue.

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Compensation charge related to grant of employee stock options

     At December 31, 2002, there were options to purchase 6,611,110 ordinary shares outstanding at an average exercise price of NIS 18.001 per share. See note 9 to the Financial Statements. We have recognized a non-cash charge equal to the difference between the exercise price of the options and the market value of the underlying shares at the time they were granted. The compensation cost determined under APB 25 and charged against income in the years ended December 31, 2000, 2001 and 2002, was NIS 56,618,000, NIS 20,699,000 and 8,957,000 ($1,891,000), respectively.

5B. Liquidity and Capital Resources

Liquidity

     The mobile telephone business is highly capital intensive, requiring significant capital to acquire a license, construct mobile telecommunications networks and fund operating losses. The capital requirements of our network are determined by the coverage desired, the expected call traffic and the desired quality and variety of services. Network construction costs are mainly related to the number of cells in the service area, the number of radio channels in the cell and the switching equipment required.

     Until August 1998, our principal sources of funds were loans and other borrowings from principal shareholders and a bridge loan facility, all of which have been repaid out of the proceeds from our initial public offering. In August 1998, we entered into a credit facility to finance the development of our network and business. In October 1999, we completed our initial public offering of ordinary shares in the form of American Depositary Shares, and received net proceeds of approximately NIS 2,092 million. We used part of these net proceeds to repay approximately NIS 1,494 million in indebtedness to our principal shareholders, and the remainder to finance the continued development of our business. In July 2000, we entered into an Amending and Rescheduling Agreement, which amended our credit facility, increasing the amount available to $750 million, subject to the meeting of defined milestones. In August 2000, we completed an offering of $175 million aggregate principal amount of unsecured senior subordinated notes due 2010. The net proceeds from this offering (approximately $170.5 million after deducting commissions and offering expenses) were used mainly to repay a portion of the outstanding indebtedness under our credit facility.

     Currently, the main sources of our liquidity are:

• our operating cashflows;

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• our credit facility; and

• factoring long-term trade receivables.

     We generated positive cashflow from operations amounting to NIS 682 million ($144 million) in 2002, compared to NIS 423 million in 2001. The difference was primarily due to increased operating profits in 2002 as compared to 2001. Cashflow used in investing activities was NIS 816 million ($172 million) in 2002, compared to NIS 629 million in 2001. The increase was mainly due to our paying for additional spectrum that we had acquired in 2001. Cash provided by financing activities was NIS 130 million ($27 million) in 2002, compared to NIS 211 million for 2001. The decrease is primarily due to the decrease of net borrowings under our long-term loans.

     On December 31, 2002, we entered into an Amending Agreement to the Facility Agreement, which amended our credit facility, decreasing the amount available to $710 million. Our credit facility is divided into three tranches: a $410 million multicurrency term loan facility (facility A), a $150 million revolving multicurrency loan facility (facility B), and a $150 million shekel term loan facility (facility C). All facilities are provided by Israeli banks and Citibank N.A., with Bank Leumi Le-Israel B.M. as facility agent.

     Facilities A and B of our credit facility may be drawn in shekels, US dollars or euros, provided that not less than 60% of the outstanding advances under facilities A and B, at any time, must be in shekels and that not more than 40% of the outstanding advances under facilities A and B may be drawn in US dollars or euros. Facility C may be drawn only in shekels. It is our intention to draw amounts under the credit facility primarily in shekels. Under the amended credit facility, facility A is available for drawing until March 31, 2003, facility B is available for drawing until June 30, 2008 and facility C is available for drawing until December 31, 2004. At December 31, 2002, the balances available for drawing were approximately $29 million under facility A, $12 million under facility B, and $150 million under facility C, and at February 28, 2003 the balances available for drawing were approximately $30 million under facility A, $6 million under facility B, and $150 million under facility C.

     Repayment under facility A will begin on March 31, 2003 and will continue until June 30, 2008, repayment under facility B will begin on June 30, 2008, and repayment under facility C will begin on March 31, 2005 and will continue until June 30, 2009.

     Another source of our liquidity results from our factoring on a non-recourse basis most of our long-term trade receivables resulting from sales of handsets. We record the transfer of accounts receivable as a sales transaction under the provisions of Statement of Financial Accounting Standards No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments

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of Liabilities. During the years ended December 31, 2001 and 2002, we factored approximately NIS 180 million and NIS 210 million ($44 million), respectively, from long-term trade receivables. The resulting costs amounted to approximately NIS 9 million and NIS 10 million for the years ended December 31, 2001 and 2002, respectively, and are charged to “Financial expenses-net”, as incurred.

Commitments and contractual obligations

     As a result of obtaining GSM 1800 and UMTS third generation spectrum bands in the December 2001 spectrum auction in Israel, we have payment obligations with respect to each of those spectrum bands. We are committed to pay NIS 180 million (approximately $38 million) for the GSM 1800 spectrum, in two installments. The first installment, in the amount of NIS 108 million (approximately $23 million) was paid in February 2002, and the second installment in the amount of NIS 72 million (plus interest at the rate set by the Accountant General of the Israeli Ministry of Finance) is payable no later than December 31, 2003.

     We are also committed to pay NIS 220 million (approximately $46 million) for the UMTS third generation spectrum, in six installments. The first two installments, totaling NIS 100 million (approximately $21 million), were paid in February and June 2002, and the remaining four installments (plus interest at the rate set by the Accountant General of the Israeli Ministry of Finance) are payable no later than June 1, 2003, 2004, 2005 and 2006 in amounts equal to NIS 31 million, NIS 35 million, NIS 33 million and NIS 22 million, respectively.

     Since the additional spectrum has only been received in part, the assets recorded on our balance sheet reflect only the cost of spectrum actually received and advances paid on account of spectrum still to be received, including interest costs (relating to loans and credit which served to finance the license fee) which were incurred until the commencement of utilization of the license and which were capitalized along with the cost of the license.

     From January 1, 2000 to December 31, 2002, we made cumulative net capital expenditures of approximately NIS 1,701 million, of which NIS 556 million ($117 million) was incurred in 2002. We expect that capital expenditures for our network will continue to represent the largest portion of our total capital expenditures over the next few years. We expect to incur approximately NIS 700 million ($148 million) of capital expenditures in 2003, primarily in order to increase the capacity of our GSM network through the installation of GSM 1800 antennas. We estimate that building out our UMTS network will cost approximately $300 million over the three to five years from the beginning of the network build-out, with approximately $150 million in capital expenditures required in the first 12

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months of the build-out. The UMTS third generation network build-out is expected to begin towards the second half of 2003.

     Set forth below are our contractual obligations and other commercial commitments over the medium term.

		Payments due by period (NIS in thousands)
				Less than						After 5
Contractual Obligations		Total		1 year		1-3 years		4-5 years		years
Long-Term Debt			2,642,031		0		997,463		815,593		828,975
Capital Lease Obligations			—		—		—		—		—
Operating Leases			247,086		101,192		113,425		21,917		10,552
Unconditional Purchase Obligations:
	GSM 1800 spectrum		70,000		70,000		—		—		—
	UMTS third generation spectrum		132,000		34,000		98,000		—		—
	Handsets		203,000		203,000		—		—		—
	Fixed Assets		41,000		41,000		—		—		—
Other Long-Term Obligations			—		—		—		—		—
Total Contractual Cash Obligations			3,335,117		449,192		1,208,888		837,510		839,527

	Amount of commitment expiration per period
	(NIS in thousands)
	Total
	amounts		Less than						Over 5
Other Commercial Commitments	committed		1 year		1-3 years		4-5 years		years
Lines of Credit		654,500		—		—		654,500		—
Standby Letters of Credit		—		—		—		—		—
Guarantees		122,159		24,922		26		103		97,108
Standby Repurchase Obligations		—		—		—		—		—
Other Commercial Commitments		—		—		—		—		—
Total Commercial Commitments		776,659		24,922		26		654,603		97,108

     We believe that funds from our operations, together with funds available under the credit facility, will provide us with enough liquidity and resources to fund our expected capital expenditure needs, including our plans to increase the capacity of our existing network and capital expenditures associated with our UMTS third generation network build-out, as well as our obligations under our financing agreements, our license payments and our other material commitments. However, the

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actual amount and timing of our future requirements may differ materially from our estimate. In addition, we may be required to seek additional financing if:

• Our assumptions regarding the costs associated with the offering of our new products prove be inaccurate;

• We experience lower growth in our business or subscriber base than we currently anticipate; or

• We experience unanticipated costs or competitive pressures.

5C. Research and Development, Patents and Licenses

     In order to compete in Israel’s highly penetrated mobile telephone market by attracting new subscribers and retaining existing subscribers, we must introduce new services based on the latest available technology in the mobile telephone industry and particularly in the GSM sector. We currently offer our subscribers a range of value added services, some of which were developed by outside companies. We have a strong relationship and are working with Hutchison Whampoa Limited, one of our principal shareholders, in connection with the development of products and services for UMTS third generation cellular communications. Hutchison is a global leader in UMTS third technology and, in particular, the deployment and development of UMTS third generation mobile networks and products and services worldwide. In August 2002, we signed a cost-sharing agreement with Hutchison Telecommunications Limited and its subsidiaries for the joint acquisition and development of information technology platforms and software solutions, hardware, content and other services, as well as joint marketing, promotion and communications activities in connection with UMTS third generation business. For more information, see “Item 7B. Related Party Transactions—Transactions with Affiliates.”

     We and our wholly-owned subsidiary, Partner Future Communications 2000 Ltd., or PFC, offer companies the opportunity to test their technologies on engineering test laboratories and on our network systems and in return enjoy the advantage of launching innovative services to our subscribers with a faster time to market. PFC has also invested in some small, high technology companies. PFC’s carrying value of the investments in these companies decreased in 2002 to NIS 3.5 million ($0.7 million).

5D. Trend Information

     Our business and results of operations have been affected by a number of trends, such as the significant growth in the Israeli mobile telephone market and the rapid growth in the demand for

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mobile telephones and mobile services. Growth in the use of the SMS has also contributed to the increase in demand for mobile data applications.

     There are several potential effects of these trends on our business. The rapid growth in the demand for mobile services increases penetration levels in the market. Historically, we have experienced rapid growth in the number of our subscribers and in our market share since we launched our network. As the Israeli market approaches saturation, we expect subscriber growth to decrease. We further expect that this decrease in our subscriber growth, together with Cellcom’s launch of its GSM services, will lead to increased competition among mobile operators and therefore increased churn. The increasing penetration has also affected the average monthly number of minutes our subscribers used in our network, which has been reduced over time, and which is expected to moderately decline in 2003. We are also affected by the market trends in the growing demand for value added services, and we are currently introducing to our subscribers advanced value added services, accessible through various interfaces and platforms including WAP, High Speed Circuit Switched Data, or HSCSD, services, SMS services and General Packet Radio Services, or GPRS. We forecast that the majority of any revenue growth in 2003 will be voice related, although we expect that data revenues will grow at a faster rate in 2003 than voice revenues.

     In order to provide UMTS third generation broadband cellular services, we will have to establish a UMTS third generation network and develop UMTS third generation services. Building and rolling-out a UMTS third generation network will require additional capital and operational expenditures. In addition, we believe that the commercial introduction of a UMTS third generation network and services is likely to significantly affect our business in further ways that we cannot fully foresee at present.

     For more information about other factors that may affect our results of operations, see “Item 3D. Key Information—Risk Factors.”

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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

6A. Directors and Senior Management

Directors

Name of Director	Age		Position
Fok Kin-ning, Canning		51	Chairman of the Board of Directors
Khoo Chek Ngee(1)(4)		60	Director
Tal Raz(1)(4)		41	Director
Avraham Bigger(1)(2)(3)(4)		56	Director
Ting Yu Chan(1)(4)		52	Director
Chow Woo Mo Fong, Susan		49	Director
Dori Dankner(1)		42	Director
Shmuel Dankner		72	Director
Robert Donald Fullerton(2)(3)		71	Director
Uzia Galil		77	Director
Erez Gissin(1)		44	Director
Amir Kess		41	Director
Pesach Shachar(1)		69	Director
Frank John Sixt		51	Director
Hans Roger Snook		54	Director
Carol Tsang		51	Director
Ben-Zion Zilberfarb(1)(2)(3)		53	Director

(1)	Member of the Executive Committee of the Board of Directors
(2)	Independent Director
(3)	Member of the Audit Committee
(4)	Member of the Compensation Committee

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     FOK KIN-NING, CANNING has been a director of Partner since May 1998 and the Chairman of its Board of Directors since that time. Mr. Fok has been an Executive Director of Hutchison Whampoa Limited since 1984 and its Group Managing Director since 1993. He also serves as Chairman of Hutchison Telecommunications (Australia) Limited, Hutchison Harbour Ring Limited and Hutchison Telecommunications Limited (the holding company of the telecommunications interests of Hutchison Whampoa Limited). In addition, Mr. Fok is the Co-Chairman of Husky Energy Inc., the Deputy Chairman of Cheung Kong Infrastructure Holdings Limited and Hongkong Electric Holdings Limited. He is also a Director of Cheung Kong (Holdings) Limited. Mr. Fok holds a Bachelor of Arts degree from St. John’s University in Minnesota, United States and a diploma in financial administration from the University of New England in Australia. He is a member of the Australian Institute of Chartered Accountants. Mr. Fok was nominated as a director, and as the Chairman of the Board of Directors, by Advent pursuant to the relationship agreement described in “Item 7B. Major shareholders and Related Party Transactions—Related Party Transactions—Relationship Agreement.”

     KHOO CHEK NGEE has been a director of Partner since October 1997 and is the Chairman of the Executive Committee and the Chairman of the Compensation Committee. Since 1993, Mr. Khoo has been Group Managing Director of Hutchison Telecommunications Limited. From 1966 to 1993, he was with Singapore Telecommunications Pte. Ltd., rising to the position of Vice President of Mobile Communications in 1991. Mr Khoo holds a Bachelor of Science degree in Engineering from the London University Imperial College of Science and Technology, and he participated in the Advanced Telecommunications Management Program at the Center of Telecommunication Management, University of Southern California. Mr. Khoo was nominated as a director, and as a member of the Executive Committee, by Advent, pursuant to the relationship agreement described in “Item 7B. Major shareholders and Related Party Transactions—Related Party Transactions—Relationship Agreement.”

     TAL RAZ has been a director of Partner since November 2001 and is a member of the Executive Committee and the Compensation Committee. Mr. Raz is serving as Vice President Finance and Chief Financial Officer of Elron Electronic Industries since May 2002. Mr. Raz is Acting President and Chief Executive Officer since October 2001 as well as Chief Financial Officer of Elbit Ltd. The latter position he has held since he joined Elbit Ltd. in April 1997. Mr. Raz is a certified public accountant, and holds Bachelor of Arts and Master of Arts degrees in accounting and business administration from Baruch Collage, New York. Mr. Raz was nominated as a director, and as a member of the Executive committee, by Elbit.COM, pursuant to the relationship agreement described in “Item 7B. Major shareholders and Related Party Transactions—Related Party Transactions—Relationship Agreement.”

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     AVRAHAM BIGGER has been a director of Partner since February 2000. Mr. Bigger is a member of the Executive Committee, the Audit Committee and the Compensation Committee of Partner. From 1998 to the present, he has been director and owner of Bigger Investments Ltd. and chairman and owner of Caniel Beverage Packaging Ltd. and Caniel Packaging Industries Ltd. Since February 2002, he has been the Chairman of Y.D. Vehicles and Transportation Ltd. He also serves on the boards of directors of several companies. He was the Chief Executive Officer of Menorah Insurance Company Ltd. and a member of the Board of Directors of Menorah during 1997. He served on the Board of Directors of Bank Leumi Le Israel B.M. and as a member of the Finance Committee and Credit Committee of this Bank during 1995. From 1993 to 1996, he was the Chief Executive Officer of Paz Oil Company Ltd. From 1986 to 1993, he was the Chief Executive Officer of the Israel General Bank Ltd., and prior to that, held various management positions in Clal Industries Ltd. He also served in various positions in the Israeli Ministry of Finance, including Special Assistant to the General Director of the Ministry of Finance. He received his Bachelor’s degree in Economics and Master of Arts degree in Business Management from the Hebrew University of Jerusalem.

     TING YU CHAN was a director of Partner from October 1997 to March 2000 and became a director again in May 2001. He is a member of the Executive Committee and the Compensation Committee. Mr. Chan is a director of Hutchison Telecommunications (Australia) Ltd. and Deputy Group Managing Director of Hutchison Telecommunications International Limited. Since joining the Hutchison Whampoa group, he has been closely involved in the management and development of Hutchison’s telecommunications business internationally. Mr. Chan holds a degree in Law and Arts (Maths), as well as a Postgraduate Certificate in Laws. Mr. Chan was nominated as a director, and as a member of the Executive Committee, by Advent, pursuant to the relationship agreement described in “Item 7B. Major shareholders and Related Party Transactions—Related Party Transactions—Relationship Agreement.”

     CHOW WOO MO FONG, SUSAN has been a director of Partner since August 1998. Mrs. Chow has been an Executive Director of Hutchison Whampoa Limited since 1993 and its Deputy Group Managing Director since 1998. She is a solicitor and holds a Bachelor’s degree in Business Administration. Mrs. Chow is also an Executive Director of Cheung Kong Infrastructure Holdings Limited and a Director of Hongkong Electric Holdings Limited, TOM.COM LIMITED, Hutchison Harbour Ring Limited and Hutchison Telecommunications Limited. Mrs. Chow was nominated as a director by Advent, pursuant to the relationship agreement described in “Item 7B. Major shareholders and Related Party Transactions—Related Party Transactions—Relationship Agreement.”

     DORI DANKNER has been a director of Partner since October 1997 and is a member of the Executive Committee. He is the chairman of Elleren (D.D.) Investments, a company whose shares are

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traded on the Tel Aviv Stock Exchange, and the Chief Executive Officer of D.S.D. Investments Ltd. Mr. Dankner is also a director of Matav, Dankner Investments Ltd., Israel Salt Industries Ltd., Dankner Infrastructure (D.D.) Ltd., Omega D.S. Investments Ltd. and Bareket D.S. Investments Ltd. He holds a Bachelor of Science degree in Industrial Engineering from Tel Aviv University and a Master of Business Administration degree in Finance and International Business from New York University. Dori Dankner is the son of Shmuel Dankner. Mr. Dankner was nominated as a director, and as a member of the Executive Committee, by Matav, pursuant to the relationship agreement described in “Item 7B. Major shareholders and Related Party Transactions—Related Party Transactions—Relationship Agreement.”

     SHMUEL DANKNER has been a director of Partner since October 1997. Mr. Dankner has been Chairman of the Board of Directors of Matav since 1988. He is the Chairman of the Board of Dankner Investments Ltd. The Dankner Group, which he co-founded in 1957, includes enterprises involved in banking; telecommunications; cable television; salt production and export; petrochemical and plastic production; and real estate development. Mr. Dankner holds a Bachelor of Science degree with highest honors in Chemical Engineering from the University of California—Berkeley and a Master of Science in Chemical Engineering from Columbia University, New York. In 1977, he received the Industry Prize from the Israel Association of Manufacturers for managerial achievements and initiative in developing the private industry. Shmuel Dankner is the father of Dori Dankner. Mr. Dankner was nominated as a director by Matav, pursuant to the relationship agreement described in “Item 7B. Major shareholders and Related Party Transactions—Related Party Transactions—Relationship Agreement.”

     ROBERT DONALD FULLERTON has been a director of Partner since February 2003. He became director of Canadian Imperial Bank of Commerce (CIBC) (formerly The Canadian Bank Of Commerce) in 1974. He joined the Bank in 1953 and served in a variety of positions in the branch system and the International Division including New York. He served in the following senior executive positions prior to becoming Chairman, President and Chief Executive Officer in 1985, Regional General Manager International, Regional General Manager Saskatchewan, Chief General Manager and President. During this period, he chaired many of the board committees including the Executive Committee and the Audit Committee. Mr. Fullerton retired as an Executive Officer in 1992 but remained on the board and continued to chair the Executive Committee until 1999. He continues to serve as a director. Mr. Fullerton Chairs the Audit Committee of George Weston Limited and is a member of the Audit Committees of CIBC, Hollinger Inc. and Asia Satellite Telecommunications Holdings Ltd. During his career he has served on the board of directors of a large number of both Canadian and international companies including I.B.M. Canada, Honeywell Inc., Amoco Petroleum

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Canada, Orange plc, Ontario Hydro, Westcoast Energy, as well as many cultural and educational entities. He received a Bachelor’s degree in Arts from the University of Toronto in 1953.

     UZIA GALIL has been a director of Partner since August 1999. Mr. Galil currently serves as President and Chief Executive Officer of Uzia Initiatives and Management Ltd., a company specializing in the promotion and nurturing of new businesses associated with mobile communication, electronic commerce and medical information media, which he founded in November 1999. From 1962 until November 1999, Mr. Galil served as President and Chief Executive Officer of Elron Electronics Industries Ltd., an Israeli high technology holding company, which he founded and of which he also served as Chairman of the Board. From January 1981 until leaving Elron, Mr. Galil also served as Chairman of the Board of Directors of Elbit Ltd., an electronic communication affiliate of Elron, and as a member of the Boards of Directors of Elbit Systems Ltd., a defense electronics affiliate of Elron, and all other private companies held in the Elron portfolio. Mr. Galil currently serves as a member of the Boards of Directors of Orbotech Ltd., NetManage Inc., and as Chairman of Zoran Corporation. From 1980 to 1990, Mr. Galil served as Chairman of the International Board of Governors of the Technion. Mr. Galil holds a M.S. in Electrical Engineering from Purdue University and a B.S. from the Technion. Mr. Galil has also been awarded an honorary doctorate in technical sciences by the Technion in recognition of his contribution to the development of science-based industries in Israel, an honorary doctorate in philosophy by the Weizman Institute of Science, an honorary doctorate in engineering by Polytechnic University, New York, and an honorary doctorate from the Ben-Gurion University of the Negev in Israel. Mr. Galil is also a recipient of the Israel Prize. Mr. Galil was nominated as a director by Elbit.COM, pursuant to the relationship agreement described in “Item 7B. Major shareholders and Related Party Transactions—Related Party Transactions—Relationship Agreement.”

     EREZ GISSIN has been a director of Partner since August 1998 and is a member of the Executive Committee. For the last two years, Mr. Gissin has been the CEO of IP Planet Network Ltd., an Israeli telecommunication company providing satellite broadband services. Previously, he was the Vice President of Business Development of the Eurocom Group, an Israeli leader in telecom and internet products and services. Mr. Gissin holds a Bachelor of Science in Industrial Engineering from Tel Aviv University and an MBA degree from Stanford University, California. Mr. Gissin was nominated as a director, and as a member of the Executive Committee, by Eurocom, pursuant to the relationship agreement described in “Item 7B. Major shareholders and Related Party Transactions—Related Party Transactions—Relationship Agreement.”

     AMIR KESS has been a director of Partner since August 1998, and has been an Executive Vice President of Arison Investments since 1996. He also serves as a director of other companies in which

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Arison or its affiliates is a shareholder, including Eurocom Communications, Internet Gold, a large Israeli internet service provider, DBS Satellite Services, a direct broadcast satellite licensee in Israel, and Shikun V’Binui Holdings, a company which is active in the building and construction market. From 1990 to 1995, Mr. Kess was an attorney in the Israeli law office of S. Horowitz and Co. Mr. Kess was nominated as a director by Eurocom, pursuant to the relationship agreement described in “Item 7B. Major shareholders and Related Party Transactions—Related Party Transactions—Relationship Agreement.”

     PESACH SHACHAR has been a director of Partner since May 1998 and is a member of the Executive Committee. For 21 years he was the General Manager, founder, and a shareholder in Nogay Ltd., a telecommunications consulting firm active in numerous high-tech projects in Israel and overseas. In that capacity, he advised Hutchison on the prospects in the cellular market in Israel, established the Partner shareholder consortium and advised Hutchinson on the bidding for the license and launch of operations. Mr. Shachar served 28 years in the Israel Defense Forces Signal Corps and Air Force/Telecommunications, reaching the rank of Colonel. Mr. Shachar was nominated as a director, and as a member of the Executive Committee, by Advent, pursuant to the relationship agreement described in “Item 7B. Major shareholders and Related Party Transactions—Related Party Transactions—Relationship Agreement.”

     FRANK JOHN SIXT has been a director of Partner since May 1998. Mr. Sixt has been an Executive Director of Hutchison Whampoa Limited since 1991 and its Group Finance Director since 1998. He is the Chairman of TOM.COM LIMITED. He is also an Executive Director of Cheung Kong Infrastructure Holdings Limited and Hongkong Electric Holdings Limited and a Director of Cheung Kong (Holdings) Limited, Hutchison Telecommunications (Australia) Limited, Husky Energy Inc., and Hutchison Telecommunications Limited. He holds a Bachelor of Arts degree and a Master of Arts degree from McGill University and a Bachelor’s degree in Civil Law from the University of Montreal, and is a member of the Bar and of the Law Society of the Provinces of Quebec and Ontario, Canada. Mr. Sixt was nominated as director by Advent, pursuant to the relationship agreement described in “Item 7B. Major shareholders and Related Party Transactions—Related Party Transactions—Relationship Agreement.”

     HANS ROGER SNOOK has been a director of Partner since August 1998. Mr. Snook was the founder and CEO of Orange plc., which was acquired by France Telecom and merged with France Telecom’s mobile assets in 2000. After leading the company to a second successful flotation in 2001, Mr. Snook stepped down as CEO to pursue other interests in health and integrated medicine. He previously served as a Director of Hutchison Telecommunications Limited and as a member of the Board of Directors of a number of telecommunications companies within the Hutchison Whampoa

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Limited group. Mr. Snook was nominated as a director by Advent, pursuant to the relationship agreement described in “Item 7B. Major shareholders and Related Party Transactions—Related Party Transactions—Relationship Agreement.”

     CAROL TSANG has been a director of Partner since April 2002. Ms. Tsang joined Hutchison Telecommunications International Limited in September 1997 as Director of Business Development-Finance and was closely involved in the financial aspects of Hutchison’s new telecommunication projects internationally. She has been Group Finance Director of Hutchison Telecommunications International Limited since January 1999. Ms. Tsang holds a Masters Degree in Business Administration from the Chinese University of Hong Kong. Ms. Tsang was nominated as director by Hutchison Telecommunications (Amsterdam) BV, pursuant to the relationship agreement described in “Item 7B. Major Shareholders and Related Party Transactions—Related Party Transactions— Relationship Agreement.”

     BEN-ZION ZILBERFARB has been a director of Partner since February 2000. Professor Zilberfarb is currently a professor of economics and chairman of the A. Meir Center for Banking at Bar-Ilan University. He is a member of the board of directors of Fundtech Ltd. He was the chairman of the board of directors of Euro-Trade Bank during 2000-2001 and of Karnit Insurance Company during 1998-2002. He also served as the Director General of the Israeli Ministry of Finance from 1998 to 1999. For many years, he served as a member of several governmental committees. He also served as the Chairman of the Investment Committee, of Bank Leumi Provident Funds and consultant to several financial institutions and several governmental and regulatory authorities including the Israel Securities Authority and the Bank of Israel. He received a Ph.D. in Economics from the University of Pennsylvania and a Bachelor’s degree and Master of Arts degree, both in Economics, from Bar-Ilan University.

Senior Management

Name of officer	Age		Position
Amikam Cohen		54	Chief Executive Officer
Iris Beck		36	Vice President, Marketing
Adi Biran		59	Vice President, Regulation and New Business Development
Dan Eldar		49	Vice President, Carrier, International and Investor Relations
Alan Gelman		47	Chief Financial Officer
Amnon Gideon		50	Vice President, Human Resources and Operations
Neomi Goldgevicht*		44	Vice President, Finance

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Name of officer	Age		Position
Yacov Kedmi		51	Vice President, Content and Multimedia
Roly Klinger		43	General Counsel and Joint Company Secretary
Haim Romano		48	Vice President, Customers
Effie Rosenhause**		51	Vice President, Marketing and Sales
Edith Shih		50	Joint Company Secretary
Menahem Tirosh		51	Vice President, Network Engineering and Operation

*	Ms. Goldgevicht resigned from the Company, effective January 31, 2003.
**	Mr. Rosenhause resigned from the Company, effective December 31, 2002.

     AMIKAM COHEN joined Partner in April 1998 as Chief Executive Officer. From 1996 to 1998, he was Chief Executive Officer of Elite Industries Ltd., one of Israel’s largest confectionery and coffee producers and marketers. From 1991 to 1996, Mr. Cohen was Managing Director of Strauss Dairies Ltd. From 1987 to 1990, he was General Manager of the Refrigerator and Air Conditioner Division of Tadiran Home Appliances Ltd. From 1978 to 1986, Mr. Cohen served in numerous capacities at the Tadiran Telecommunications Group, including General Manager of the Public Switching Division, General Manager of the Microelectronics Section, and Director of the entire group’s purchasing department. He holds a Bachelor of Science degree in Industrial Management Engineering from Ben Gurion University, Beersheva, Israel.

     IRIS BECK was appointed Vice President, Marketing in December, 2002. Prior to joining the Company, she served as General Manager of Lever Israel (local subsidiary of Unilever). Ms. Beck worked at Lever Israel since 1996 and held senior positions such as Marketing Manager and Technical Director before her appointment as General Manager. Ms. Beck worked as Brand Manager at Strauss Ice Cream from 1993 to 1996, and as Project Controller at Kulick & Soffa from 1991 to 1993. Ms. Beck holds a Bachelor’s degree in Economic Science (with distinction) from Haifa University, and Master of Arts Degree in Marketing (with distinction) from Bar-Ilan University.

     ADI BIRAN joined Partner in October 1997 and in April 1998 became Vice President, Regulation and New Business Development. Mr. Biran came to Partner from Elbit Ltd., where, since 1992, he headed their effort to enter the telecommunications market and in that capacity, guided their participation and managed the bid preparation process that resulted in Partner’s mobile radio telephone license. Prior to joining Elbit, he was Managing Director of Efrat Future Technology Ltd., a subsidiary of Comverse Technology Inc. Mr. Biran continues to be an employee of Elbit in connection with matters unrelated to Partner on which he worked prior to joining Partner. He completed his 20-year career in the Israel Air Force as a colonel and as chief of research and development. Mr. Biran

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holds a Bachelor’s degree in Aeronautical Engineering with distinction from the Israel Institute of Technology (Technion), Haifa, Israel.

     DAN ELDAR serves as Vice President, Carrier, International and Investor Relations for Partner. Dr. Eldar joined Partner in April 1998 and was responsible for strategic planning and relations with carriers in Israel and abroad. Since 1989, Dr. Eldar has served as the managing director of an Israeli consulting firm specializing in strategic planning, negotiation and project management. Dr. Eldar has managed many large-scale projects in the telecommunications and semiconductor industries, as well as in other areas. He holds Ph.D and Master of Arts degrees from Harvard University and Master of Arts and Bachelor of Arts degrees from Hebrew University, Jerusalem.

     ALAN GELMAN was appointed Chief Financial Officer of Partner in January 2001. For the three years prior to joining Partner, Mr. Gelman served as Chief Financial Officer and Vice President of Barak ITC, one of Israel’s providers of international voice, data and internet services. From 1994 to 1997, Mr. Gelman served as the Controller for Cellcom Israel Ltd. Mr Gelman holds a Bachelor’s degree in Accounting from Queens College in New York and an MBA from Hofstra University in New York. Mr. Gelman is licensed as a Certified Public Accountant in the USA (New York) and in Israel. Mr. Gelman was nominated as Chief Financial officer by Advent, with the approval of our Board, pursuant to the relationship agreement described in “Item 7B. Major shareholders and Related Party Transactions—Related Party Transactions—Relationship Agreement.”

     AMNON GIDEON was appointed Vice President, Human Resources in January 2001. Prior to joining the Company, Mr. Gideon served as Manager of Human Resources at Motorola Israel Ltd. From 1991 until 1994, Mr. Gideon served as the Executive Director of the Association for Civil Rights in Israel. Mr. Gideon holds a Bachelor’s degree in Political Science and Psychology from Bar-Ilan University and a Master’s degree in Human Resource Management from the University of Derby.

     NEOMI GOLDGEVICHT joined Partner in August 1998 as Vice President, Finance and resigned from the company on January 31, 2003. Prior to then, she was Chief Financial Officer at Mul-T-Lock Ltd., an international manufacturer of high security locks, doors, and related components and devices. In that capacity, she was responsible for financial matters at that company which is listed on the Tel Aviv Stock Exchange, and for establishing eight subsidiaries in Europe and the United States and implementation of their enterprise resource processing system. She holds a Bachelor of Arts degree in Economics and Accounting from Tel Aviv University, and an MBA degree from the University of Bradford. Mrs. Goldgevicht has held her Certified Public Account credentials in Israel since 1982, and serves as a member of the Bank of Israel’s Advisory Council and Committee.

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     YACOV KEDMI joined Partner in May 1998 and served as Vice President, Marketing and in October 2001 was appointed as Vice President, Content and Multimedia. From 1992 to 1994, he had been Deputy Managing Director and Marketing Director of the Ma’ariv daily newspaper, and before that, Managing Director of Mei Eden, a bottled water producer. He also served for eleven years as Marketing Director of Tabori Corporation, a producer of soft drinks, disposable diapers, and paper products. In the four years immediately prior to joining us, Mr. Kedmi was the principal in MPV Communications, providing marketing consulting services to numerous Israeli companies, and was a partner in the launch of two businesses, one with a direct marketing catalogue in which customers bid for the products, and another producing premium gifts and promotional products. He studied management at Bar Ilan University, Israel.

     ROLY KLINGER joined Partner in August 1998 as General Counsel and Joint Company Secretary. From 1993, she served as Legal Advisor and Corporate General Secretary of Keshet Broadcasting Ltd., which holds an operating franchise for Israel’s first commercial television channel. Previously, while practicing in the private sector, she lectured on communications law at the College of Management—Academic Studies, Tel-Aviv. Ms. Klinger received an LL.B degree from Tel Aviv University and is admitted to the Israel Bar.

     HAIM ROMANO joined Partner in June 1998 as Vice President, Human Resources and Administration, in December 2000 was appointed Vice President, Customer Services and in January 2003 was appointed Vice President, Customers’ Division. In that capacity he is responsible for personnel policy and management, physical facilities, and site acquisition. From 1996 to 1998, Mr. Romano headed the Human Resources Division in the Israel General Security Service. Immediately prior, he had served in the Israel Defense Forces for 24 years, the last two as head of their Civil Personnel Department. Mr. Romano holds Masters degrees from Haifa University and Tel Aviv University.

     EFFIE ROSENHAUSE joined Partner in June 1998 as Vice President, Sales and in October 2001 was appointed as Vice President, Marketing and Sales, although he resigned from the company on December 31, 2002. For the seven previous years, Mr. Rosenhause was Vice President Marketing and Sales for Super-Pharm, the leading drugstore chain in Israel. Eleven years earlier he had been Marketing Manager and was one of the founders of that chain. In the interim, he served in New York as Executive Vice President of the largest Benetton licensee in New York, and as a partner in a patented products firm in the United States and Switzerland. He holds a Bachelor degree in Business Administration from the Polytechnic of Central London.

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     EDITH SHIH has been the Joint Company Secretary of Partner since July 1998. Ms. Shih has been a senior manager of Hutchison Whampoa Limited since 1991, its Head Group General Counsel since 1993 and its Company Secretary since 1998. She is currently an executive director of Hutchison International Limited and director of various Hutchison group companies. She is also the Company Secretary of Hutchison Telecommunications Limited and the Joint Company Secretary of Hutchison Telecommunications (Australia) Limited. She holds a Bachelor of Science and a Master of Arts degree from the University of the Philippines, a Master of Arts and a Master of Education degree from Columbia University, New York. She is qualified to practice law in Hong Kong, England and Wales and Victoria, Australia.

     MENAHEM TIROSH has served Partner since May 1998 as a consultant and as Vice President, Network Engineering and Operation. From 1996 to 1998, Mr. Tirosh was Deputy Director of the Cellular Infrastructure Division of Motorola (Israel) Ltd. From 1969 to 1996, Mr. Tirosh served in the Israeli Defense Forces, rising to the position of Department Head, Communication Systems. He holds a Bachelor of Science degree in Electrical Engineering from the Israel Institute of Technology (Technion), Haifa, Israel and a Master of Science in Advanced Communication Engineering degree from Ben Gurian University. Mr. Tirosh served as a full colonel in the Israeli Defense Forces Signal Corps.

     Except as disclosed above, none of the above directors or members of senior management has any family relationship with any other director or senior manager of the Company. Senior managers, except for the Chief Financial Officer, as disclosed above, are selected by the CEO with the approval of the Board for an indefinite term of office and may be removed by the Board at any time.

6B. Compensation

     The aggregate compensation paid, and benefits in kind granted to or accrued on behalf of all our directors and senior managers for their services in all capacities during the year ended December 31, 2002 was approximately NIS 32 million ($7 million). In 2002 options were granted to our senior management under the 2000 Employee Stock Option Plan to purchase up to 175,000 of our ordinary shares at an exercise price of NIS 22.45 per share. These options will expire in December 2011, subject to earlier expiration upon the termination of employment under certain circumstances. For more information, see “Item 6E. Directors, Senior Management and Employees—Share Ownership—2000 Employee Stock Option Plan”. Included in the above, the total amount set aside or accrued to provide pension, retirement or similar benefits on behalf of all our directors and

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senior managers during the year ended December 31, 2002 was approximately NIS 10 million ($2 million).

6C. Board Practices

Terms of directors

     Directors are elected at the annual shareholders meeting to serve for three years, in the case of independent directors, or until the next annual meeting of the shareholders, in the case of other directors; or until their respective successors are elected and qualified, whichever occurs first. An extraordinary meeting of the Company may elect any person as a director to fill an office which became vacant, or to serve as an external director or an independent director, or if the number of the members of the Board of Directors is less than the minimum set in the Articles of Association. Any director elected in such manner (excluding an external director) shall serve in office until the coming annual meeting. The Articles of Association also provide that the Board, with the approval of 75% of the directors, may appoint an additional director to fill a vacancy. The Company’s Articles of Association provide that the Board may delegate all of its powers to committees of the Board as it deems appropriate, subject to the provisions of the Companies Law. No director has a service contract with the company or its wholly owned subsidiary providing for benefits upon termination of employment. Officers of Partner serve at the discretion of the Board or until their successors are appointed.

Alternate directors

     Our Articles of Association provide that a director may appoint any individual to serve as an alternate director. An alternate director may not serve as such unless such person is qualified to serve as a director. In addition, no person who already serves as a director or alternate director of Partner may serve as the alternate director of another director of Partner. Under the Companies Law, an alternate director shall have all of the rights and obligations of the director appointing him or her, except the power to appoint an alternate. The alternate director may not act at any meeting at which the director appointing him or her is present. Unless the time period or scope of any such appointment is limited by the appointing director, such appointment is effective for all purposes and for an indefinite time, but will expire upon the expiration of the appointing director’s term.

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Independent directors

     The Companies Law requires that Partner have at least two external directors on its Board of Directors. In the interests of good corporate governance, our Board of Directors decided that our Audit Committee should consist of three members, each qualified as an independent director, pursuant to applicable U.S. and other requirements, including, inter alia, the requirements of Nasdaq. These independent directors are also qualified as external directors, according to the Companies Law. The election of an external director under the Companies Law must be approved by a general meeting of shareholders provided that either: (a) the majority of shares voted at the meeting, including at least one third of the shares of non-controlling shareholders voted at the meeting, vote in favor of such arrangement or (b) the total number of shares voted against such arrangement does not exceed one percent of the aggregate voting rights in the company.

     Mr. Avraham Bigger, Mr. Ben-Zion Zilberfarb and Mr. Robert Donald Fullerton are currently the external, independent directors who satisfy the requirements for independent directors under the Nasdaq National Market and for external directors under the Companies Law.

Executive committee

     Our Executive Committee was nominated by the Board of Directors on July 15, 1998. Our principal shareholders have agreed that the Executive Committee initially will consist of three nominees of Advent and one nominee of each of Elbit.COM, Matav Investments and Eurocom, the other principal shareholders of Partner. Two of our independent directors currently serve on our Executive Committee.

     Subject to the provisions of the Companies Law, the Executive Committee is authorized to make all major decisions relating to the business affairs of Partner. The Executive Committee is authorized by the Board of Directors to approve contracts, commitments and other transactions up to a value determined by the Board of Directors from time to time.

Audit committee

     The Companies Law requires public companies, including Partner, to appoint an audit committee. The responsibilities of the audit committee that we have appointed include reviewing our financial statements, identifying irregularities in the management of the company’s business and approving related party transactions as required by law. According to the Companies Law, an audit committee must consist of at least three board members, and include all the company’s external directors. However, the chairman of the board, any director employed by the company or granting

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services to the company on a permanent basis, any controlling shareholder or any relative of a controlling shareholder may not be a member of the audit committee. Our audit committee consists of three board members, all of which meet both Nasdaq’s definition of independent directors, and the Companies Law’s definition of external directors. None of them is an affiliated person of Partner or has received any consulting, advisory or other compensatory fee from Partner, other than in their capacity as directors of Partner.

Compensation committee

     The compensation committee was nominated by the Board of Directors on November 14, 2002. Our compensation committee consists of four Board members, of which one is an external, independent director. The compensation committee is responsible for evaluating and recommending to the Board (and to the Audit Committee, if so required under any applicable law) the total compensation package for the Company’s Chief Executive Officer and all other officers; reviewing the results and procedures for the evaluation of the performance of other officers by the Company’s Chief Executive Officer; making recommendations to the Board regarding any long-term incentive compensation or equity plans; and supervising the administration of the plans and periodically reviewing a comprehensive statement of executive compensation policy.

Internal auditor

     The Companies Law requires the board of a public company to appoint an internal auditor nominated by the audit committee. A person who does not satisfy certain independence requirements may not be appointed as an internal auditor. The role of the internal auditor is to examine, among other things, the compliance of the company’s conduct with applicable law and orderly business procedures. Mr. Yehuda Motro has been appointed as our first internal auditor. Mr. Motro was formerly the internal auditor of the Tel Aviv Stock Exchange.

Fiduciary duties of an office holder

     The Companies Law governs the duty of care and duty of loyalty which an Office Holder has to the company. An “Office Holder” is defined in the Companies Law as a director, general manager, chief executive officer, executive vice president, vice president, any other person assuming the responsibilities of any of the foregoing positions without regard to such person’s title and other managers directly subordinate to the general manager.

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     The duty of loyalty requires the office holder to avoid any conflict of interest between the office holder’s position in the company and personal affairs, and proscribes any competition with the company or the exploitation of any business opportunity of the company in order to receive personal advantages for him or herself or others. This duty also requires him or her to reveal to the company any information or documents relating to the company’s affairs that the office holder has received due to his or her position as an office holder. The duty of care requires an office holder to act in a way that a reasonable office holder would act in the same position and under the same circumstances. This includes the duty to utilize reasonable means to obtain information regarding the advisability of a given action submitted for his or her approval or performed by virtue of his or her position and all other relevant information.

Approval of related party transactions

     Generally, under the Companies Law the compensation of an Office Holder who is a director, or the compensation of an Office Holder who holds a controlling interest in the company, requires the approval of the audit committee, the Board of Directors and the general meeting of the shareholders of the company. The Companies Law also requires that an arrangement between the company and its Office Holder and also a transaction between the company and another person in which an Office Holder has a personal interest, requires the approval of the Board of Directors. If such transactions are extraordinary transactions, in addition to the Board approval and any approval required by the Articles of Association, the transaction also must be approved by the company’s audit committee, and, in certain circumstances, the shareholders of the company at a general meeting. Under the Companies Law, an extraordinary transaction between a public company and a person having control of the company or an extraordinary transaction between a public company and another person, in which a controlling member has a personal interest, must be approved by the audit committee, the Board of Directors and a meeting of the shareholders, provided that either: (a) the majority of shares voted in favor of the arrangement at the meeting, including at least one third of the shares voted by shareholders who do not have a personal interest in the matter and who are present at the meeting are voted in favour of such arrangement (abstentions shall not be included in the total of the votes) or (b) the total number of shares of the shareholders referred to in clause (a) voting against such arrangement does not exceed one percent of the aggregate voting rights of the company.

     The Companies Law requires that an Office Holder promptly disclose any direct or indirect personal interest that he or his affiliates may have, and all related material information known to him, in connection with any existing or proposed transaction by the company. If the Office Holder complies with such disclosure requirements, the company may approve the transaction in accordance with the provisions of its articles of association and the Companies Law. Under the Companies Law, if the

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Office Holder has a personal interest in the transaction, the approval must confirm that the transaction is not adverse to the company’s interest.

     In most circumstances, the Companies Law restricts Office Holders who have a personal interest in a matter which is considered at a meeting of the board or the audit committee from being present at such meeting, participating in the discussions or voting on any such matter.

     For information concerning the direct and indirect personal interests of certain of our Office Holders and principal shareholders in certain transactions, see “Item 7. Major Shareholders and Related Party Transactions.”

Duty of a shareholder

     Under the Companies Law, a shareholder has a general duty to act in good faith towards the company and other shareholders and refrain from improperly exploiting his power in the company, particularly when voting in the general meeting of shareholders on (a) any amendment to the articles of association, (b) an increase of the company’s authorized share capital, (c) a merger or (d) approval of transactions with affiliates which require shareholder approval. In addition, any controlling shareholder, any shareholder who knows that it possesses power to determine the outcome of a shareholder vote and any shareholder that, pursuant to the provisions of the articles of association, has the power to appoint an office holder in the company, is under a duty to act in fairness towards the company.

Indemnification

     Our Articles of Association provide that Partner shall be entitled to undertake in advance to indemnify an officer or director of Partner, provided that the undertaking is restricted to the events of a kind which the Board of Directors may anticipate at the time it makes such undertaking at an amount which the Board of Directors determines is reasonable under the circumstances. In addition, Partner can indemnify an officer or director for specific occurrences retroactively.

     The Articles of Association also provide that Partner may indemnify an officer or director of Partner for liability or expense he incurs as a result of an action taken by him in his capacity as an officer or director of Partner as follows:

(1) any financial liability imposed on the officer or director in favor of a third party in accordance with a judgment, including a judgment given in a settlement or a judgment of an arbitrator, approved by the court; or

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(2) reasonable litigation expenses, including legal fees, incurred by the officer or director or which he was ordered to pay by the court:

(a)	within the framework of proceedings filed against him by Partner or on Partner’s behalf or by a third party,
(b)	in a criminal proceeding in which he was acquitted, or
(c)	in a criminal proceeding in which he was convicted of a felony which does not require a finding of criminal intent.

In no event may Partner indemnify an officer or director for:

(1)	a breach of the duty of loyalty toward Partner, unless the officer or director acted in good faith and had reasonable grounds to assume that the action would not harm Partner;
(2)	a breach of the duty of care if it was made intentionally or recklessly;
(3)	an intentional act which was done to unlawfully yield a personal profit; or
(4)	fine or penalty imposed on him.

     We have undertaken to indemnify our directors and officers, subject to certain conditions for (a) any financial obligation that is imposed on such person for the benefit of a third person by a judgment, including a settlement or arbitration decision certified by the court for an action done in the scope of such person’s duties as our director or officer, and (b) reasonable litigation expenses, including legal fees, that were incurred by such person or which the court obligates such person to pay in a proceeding against such person that has been filed by us, on our behalf or by a third party, or in a criminal proceeding in which such person is acquitted or convicted, provided that the crime for which such person was convicted does not require a finding of criminal intent, and in each case for an act committed in the capacity as our director or officer.

     We have effected a directors’ and officers’ liability insurance policy insuring our directors’ and officers’ liability and our undertaking to indemnify them, in respect of certain matters permitted by the Companies Law. The policy includes coverage in respect of our and our directors’ and officers’ liability in respect of our initial public offering and our offering of 13% senior subordinated notes due 2010.

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6D. Employees

     At December 31, 2002, we had 2,688 employees on a full-time or full-time equivalent basis (2,523 at December 31, 2001 and 2,131 at December 31, 2000), of whom 1,421 (including face-to-face customer service employees who were transferred to customer service in 2001) (1,382 at December 31, 2001 and 834 at December 31, 2000) were in customer service, 325 (274 at December 31, 2001 and 286 at December 31, 2000) were in engineering, 281 (232 at December 31, 2001 and 349 at December 31, 2000) were in sales and sales support, 160 (129 at December 31, 2001 and 154 at December 31, 2000) were in information technology, 75 (55 at December 31, 2001 and 57 at December 31, 2000) were in marketing, 72 (70 at December 31, 2001 and 69 at December 31, 2000) were in finance, 68 (43 at December 31, 2001 and 37 at December 31, 2000) were in human resources and security and fraud management and administration and 286 (467 at December 31, 2001 and 345 at December 31, 2000) were in our remaining operations. Substantially all of our employees have entered into employment contracts with us, terminable at will by either party.

     Our employees are not covered by any company-specific collective bargaining agreement. However, we are subject to various Israeli labor laws and practices, as well as orders extending certain provisions of collective bargaining agreements between the Histadrut, currently the largest labor organization in Israel, and the Coordinating Bureau of Economic Organizations, the federation of employers’ organizations. Such laws, agreements and orders cover a wide range of areas and impose minimum employment standards including, working hours, minimum wages, vacation and severance pay, and special issues, such as equal pay for equal work, equal opportunity in employment, and employment of women, youth, disabled persons and army veterans.

     We generally contribute funds on behalf of our employees to a fund known as “Managers’ Insurance”. This fund provides a combination of provident fund, insurance and severance pay benefits to the employees, giving the employees a lump sum payment upon retirement and securing most of the severance pay, if legally entitled, upon termination of employment. Most employees are entitled to participate in the plan upon the start of employment or after an initial period. Each of the participating employees contributes an amount equal to 5% of his salary and we contribute between 13.3% and 15.8% of such employee’s salary.

     We also offer to most of our employees the opportunity to participate in a “Continuing Education Fund,” which functions also as a savings plan. Each of the participating employees contributes an amount equal to 2.5% of his salary and we contribute between 5% and 7.5% of such employee’s salary.

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     According to the National Insurance Law, Israeli employers and employees are required to pay predetermined sums to the National Insurance Institute. These contributions entitle the employees to health insurance and benefits in periods of unemployment, work injury, maternity leave, disability, reserve military service, and bankruptcy or winding-up of the employer. We have never experienced a strike or work stoppage and no material labor-related claims are pending. We believe that our relations with our employees are good.

     Since October 2001, most of our employees participate in a Health Insurance Program which provides additional benefits and coverage which the public health system does not provide. Eligibility to participate in the policy depends on seniority and position. Non eligible employees can participate by their own means and receive the same prices and coverage as eligible employees.

6E. Share Ownership

     As of December 31, 2002, our directors and senior managers beneficially owned an aggregate of 2,326,991 or 1.28%, of our outstanding ordinary shares. No individual director or senior manager beneficially owns 1% or more of our outstanding ordinary shares.

     As of December 31, 2002, our senior managers, in the aggregate, held options under the 1998 and 2000 Employee Stock Option Plans to purchase up to 1,533,578 of our ordinary shares. No individual senior manager holds options to purchase 1% or more of our outstanding ordinary shares. 957,870 of these options have an exercise price of $0.343 and will expire after the eighth anniversary date of the commencement of the vesting schedule with respect to the options, subject to earlier expiration upon the termination of the option-holder’s employment under certain circumstances. The remaining 575,708 of these options have an exercise price of the fair market value of our ordinary shares on the date preceding the date on which the option was granted and will expire nine years from the date of the option grant, subject to an earlier expiration upon the termination of the option-holder’s employment under certain circumstances. The exercise price for the remaining options ranges between NIS 20.45 and NIS 22.23. The fair market value, with respect to such remaining options, was determined on the basis of the average of the closing sale price of ordinary shares during the 30 trading days preceding the granting date.

1998 Employee Stock Option Plan

     Our board of directors adopted the 1998 Employee Stock Option Plan, or the Plan, to promote the interests of Partner and its shareholders by providing our senior management and other

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employees with appropriate incentives and rewards to encourage them to enter into and continue in the employ of Partner and to acquire a proprietary interest in our long-term success.

     The Plan currently authorizes the issuance of options to purchase up to 5,104,168 ordinary shares. As of December 31, 2002, we had granted (excluding options granted but subsequently cancelled) options to purchase 2,225,388 ordinary shares at an exercise price of $0.343 per share or at fair market value, as described above. In addition, options to purchase 2,706,334 ordinary shares had been exercised under the Plan. In April 2002, the Board of Directors resolved that options to be allocated under the Plan may be issued under the same terms and conditions of the 2000 Plan, including their exercise price, vesting schedule and expiration period, as shall be determined by the Board of Directors from time to time.

     Upon the occurrence of any merger, consolidation, reorganization, recapitalization or similar event, or other substantially similar corporate transaction or event, we are required to make such equitable changes or adjustments necessary to the number of shares subject to each outstanding option in order to prevent dilution or enlargement of the option holders’ rights.

     The Plan is administered by an Employee Stock Option Committee of the Board of Directors. Subject to the restrictions of the Companies Law, the Employee Stock Option Committee is authorized, among other things, to exercise all the powers and authorities either specifically granted to it under the Plan or necessary or advisable in the administration of the Plan including the authority in its discretion to determine the persons to whom options are granted, the number of shares covered by each option, the time or times at which options are granted, the exercise price for options, and any other terms to be included as part of the option grant. The Employee Stock Option Committee also has the power and authority to determine whether, to what extent, and under what circumstances an option may be settled, canceled, forfeited, exchanged, or surrendered; to construe and interpret the Plan and any agreement granting an option; and to make all other determinations deemed necessary or advisable for the administration of the Plan.

     In accordance with Section 102 of the Israeli Income Tax Ordinance (New Version), 1961 and regulations promulgated thereunder, the options and the shares to be issued upon the exercise of options, which were granted prior to December 31, 2002, will be held for the benefit of the option holders by a trustee who will hold the outstanding options and any shares issued upon exercise of the options in trust on behalf of each participant for a period of not less than two years from the date an option is issued to the Trustee on behalf of such employee.

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     In December 2002, we entered into an agreement with the Israeli tax authorities concerning the tax liabilities of our employees resulting from the benefit arising from the options granted to them under the Plan. According to the agreement, the individual tax rate on the taxable income received by the employees in connection with the benefit arising from the options will be reduced. In exchange, the Company will defer the deduction of such taxable income as an expense, for a period of four years from the date it commences paying income taxes.

     The agreement applies only to employees who have joined the agreement and relates to (1) options that are exercised by December 31, 2002 and/or (2) options that vest by December 31, 2003 and are exercised by March 31, 2004. In each case, the trustee must have held the options for a period of 24 months from the date on which they were granted. See Note 9(d) to our consolidated financial statements.

     An option shall be exercised upon the instruction of an option holder to the Trustee. Twenty percent of each option shall become vested on each of the first, second, third, fourth and fifth anniversaries of the date the holder of that option has commenced his or her employment with Partner, unless another date for the commencement of the vesting schedule with respect to such option has been set by the Employee Stock Option Committee. The option holder may exercise all or part of his options at any time after the date of vesting but not later than the eighth anniversary date of commencement of the vesting schedule with respect to the option.

     If an option holder’s employment with Partner is terminated because of his willful and continued failure to perform his duties and obligations to Partner or his willful engaging in misconduct injurious to Partner such that, in each case, the actions or omissions of the participant are sufficient to deny the participant severance payment under the Israeli Severance Payment Law, 1963, his options will expire upon termination of employment. If an option holder’s employment with Partner is terminated by Partner for any other reason, he may exercise his vested options during the remainder of their exercise period. If an option holder’s employment is voluntarily terminated by the option holder, he may exercise his vested options during the 90 day period following the later of the date of termination and the date upon which the resulting shares may be freely sold. If an option holder’s employment with Partner is terminated as a result of the retirement, death or disability of the option holder, he may exercise his vested options and the pro rata portion of options scheduled to vest in the year of termination during the remainder of their exercise period.

     The Board of Directors may, at any time and from time to time, terminate or amend the Plan in any respect, subject to any applicable approvals or consents that may be otherwise required by law, regulation or agreement, and provided that no termination or amendment of the Plan shall adversely affect the terms of any option which has already been granted.

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2000 Employee Stock Option Plan

     Our board of directors adopted a second employee stock option plan, the 2000 Employee Stock Option Plan, or the 2000 Plan, to promote our interests and those of our shareholders by providing our employees with appropriate incentives and rewards to encourage them to enter into and continue in our employ and to acquire a proprietary interest in our long-term success.

     The 2000 Plan authorizes the issuance of options to purchase up to 4,472,222 ordinary shares. As of December 31, 2002, we had granted (excluding options granted but subsequently cancelled) options to purchase 4,385,722 ordinary shares at an exercise price of the fair market value of our ordinary shares on the date preceding the date on which the option is granted. The fair market value is determined on the basis of the average of the closing sale price of ordinary shares during the 30 trading days preceding the granting date. As of December 31, 2002, no options to purchase ordinary shares had been exercised under the 2000 Plan.

     Upon the occurrence of any merger, consolidation, reorganization or similar event, or other substantially similar corporate transaction or event, we are required to make such equitable changes or adjustments necessary to the number of shares subject to each outstanding option in order to prevent dilution or enlargement of the option holders’ rights.

     The 2000 Plan is administered by an Employee Stock Option Committee of the Board of Directors. Subject to the restrictions of the Companies Law, the Employee Stock Option Committee is authorized, among other things, to exercise all the powers and authorities either specifically granted to it under the 2000 Plan or necessary or advisable in the administration of the 2000 Plan including the authority in its discretion to determine the persons to whom options are granted, the number of shares covered by each option, the time or times at which options are granted, the options exercise price and any other terms to be included as part of the option grant. The Employee Stock Option Committee also has the power and authority to determine whether, to what extent, and under what circumstances an option may be settled, canceled, forfeited, exchanged, or surrendered; to construe and interpret the 2000 Plan and any agreement granting an option; and to make all other determinations deemed necessary or advisable for the administration of the 2000 Plan.

     In accordance with Section 102 of the Israeli Income Tax Ordinance (New Version), 1961 and the regulations promulgated thereunder, the options and the shares to be issued upon the exercise of options, which were granted prior to December 31, 2002, will be held for the benefit of the option holders by a trustee who will hold the outstanding options and any shares issued upon exercise of the options in trust on behalf of each participant for a period of not less than two years from the date an option is issued to the Trustee on behalf of such employee.

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     An option shall be exercised upon the instruction of an option holder to the Trustee. Twenty five percent of each option shall become vested on each of the first, second, third and fourth anniversaries of the date the holder of that option commenced his or her employment with us, unless another date for the commencement of the vesting schedule with respect to such option has been set by the Employee Stock Option Committee. The option holder may exercise all or part of his options at any time after the date of vesting but no later than the expiration of the exercise period, which will be fixed by the Employee Stock Option Committee and will not exceed ten years from the date of option grant.

     If an option holder’s employment with us is terminated because of his willful and continued failure to perform his duties and obligations to us or his willful engaging in misconduct injurious to us such that, in each case, the actions or omissions of the participant are sufficient to deny the participant a severance payment under the Israeli Severance Payment Law, 1963, his options will expire upon termination of employment. If an option holder’s employment with us is terminated by us for any other reason, he may exercise his vested options during the remainder of their exercise period. If an option holder’s employment is voluntarily terminated by the option holder, he may exercise his vested options during the 90 day period following the later of the date of termination and the date upon which the resulting shares may be freely sold. If an option holder’s employment with us is terminated as a result of the retirement, death or disability of the option holder, he may exercise his vested options and the pro rata portion of options scheduled to vest in the year of termination during the remainder of their exercise period.

     The Board of Directors may, at any time and from time to time, terminate or amend the 2000 Plan in any respect, subject to any applicable approvals or consents that may be otherwise required by law, regulation or agreement, and provided that no termination or amendment of the 2000 Plan shall adversely affect the terms of any option which has already been granted.

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ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

7A. Major Shareholders

     The following table sets forth certain information with respect to the beneficial ownership of our ordinary shares as of December 31, 2002 with respect to each person who we believe to be the beneficial owner of 5% or more of our ordinary shares. Except where otherwise indicated, we believe, based on information furnished to us by the principal shareholders, that the beneficial owners of the ordinary shares listed below have sole investment and voting power with respect to such ordinary shares. None of our major shareholders has any different voting rights than any other shareholder.

	Number of		Percent of
	ordinary shares		outstanding
	beneficially		ordinary shares
Name and address	owned		owned
Hutchison Whampoa Limited(1) 22/F Hutchison House 10 Harcourt Road Central, Hong Kong		77,377,051		42.61	%
Elbit Ltd.(2) 3 Azrieli Center 42nd floor, Tel Aviv 67023		22,134,777		12.19	%
Eurocom Communications Ltd.(3) 2 Dov Friedman Street Ramat Gan 52141 Israel		17,793,548		9.80	%
Matav-Cable Systems Media Ltd.(4) 42 Pinkas Street Netanya 42134 Israel		13,494,539		7.43	%

(1) Hutchison Whampoa Limited, a company listed on the Hong Kong Stock Exchange and traded on the London Stock Exchange, owns Partner shares through two indirect subsidiaries, Advent Investments Pte Ltd (“Advent”) and Hutchison Telecommunications (Amsterdam) B.V. (“HTA”) which own 34.48% and 8.13%, respectively, of the ordinary shares of Partner. Advent, incorporated in Singapore, is an indirect wholly owned subsidiary of Hutchison Whampoa Limited, through a chain of wholly owned subsidiaries as

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	follows: Advent is owned by Amber International Holdings Inc., which is owned by Hutchison Telecommunications Limited, which is owned by Hutchison International Limited, which is owned by Hutchison Whampoa Limited. HTA, incorporated in the Netherlands, is a wholly-owned subsidiary of Hutchison Whampoa Limited through a chain of wholly-owned subsidiaries (unless specified otherwise) as follows: HTA is owned by Hutchison 3G Europe Investments S.a.r.l., which is owned by Hutchison Whampoa Europe Investments S.a.r.l., which is 98.98%, 0.51% and 0.51% owned by Auditorium Investments 1 S.a.r.l., Auditorium Investments 2 S.a.r.l. and Auditorium Investments 3 S.a.r.l. respectively, all of which are owned by New Millennium Corp., which is owned by Ommaney Limited, which is owned by Hutchison Whampoa International (00/03) Limited, which is owned by Hutchison Telecommunications Limited, which is owned by Hutchison International Limited, which is owned by Hutchison Whampoa Limited. By virtue of interests in relation to Hutchison Whampoa Limited, Cheung Kong (Holdings) Limited, Li Ka-Shing Unity Holdings Limited, Li Ka-Shing Unity Trustee Company Limited as trustee of The Li Ka-Shing Unity Trust, Li Ka-Shing Unity Trustee Corporation Limited as trustee of The Li Ka-Shing Unity Discretionary Trust and Li Ka-Shing as owner of more than one third of the issued share capital of Li Ka-Shing Unity Holdings Limited are each taken as interested in the Partner shares held by Hutchison Whampoa Limited by virtue of the provisions of the Securities (Disclosure of Interests) Ordinance, Cap. 396 of the laws of Hong Kong.
(2)	Elbit Limited owns Partner shares through its wholly owned subsidiary, Elbit.COM Limited. Elbit Limited is wholly owned by Elron Electronic Industries Ltd. The principal shareholders of Elron are Discount Investment Corporation Ltd. (“DIC”), mutual and/or provident funds managed by Bank Leumi (“Bank Leumi Group”) and the Clal Insurance Group. DIC held approximately 38.52% of the voting power of Elron. Bank Leumi Group and the Clal Insurance Group, held approximately 8.39% and 2.69%, respectively, of the voting power of Elron.
	IDB Holding Corporation Ltd. (“IDBH”) is the parent of IDB Development Corporation Ltd. (“IDBD”), which in turn is the parent of DIC, which in turn is the parent of PEC Israel Economic Corporation (“PEC”). The Recanati family holds, through three private companies (the “Private Companies”) approximately 51.7% of the outstanding share capital and voting rights of IDBH. The Private Companies may be deemed to be controlled by Oudi Recanati, Leon Y. Recanati, Judith Yovel Recanati and Elaine Recanati. Elaine Recanati is the aunt of each of Oudi Recanati, Leon Y. Recanati, and Judith Yovel Recanati. Leon Y. Recanati and Judith Yovel Recanati are siblings and Oudi Recanati is their cousin. Leon Y. Recanati is Chairperson of IDBH, IDBD and DIC. These persons may be deemed to share the power to vote and dispose of Elron’s shares owned by DIC. On or about May 23, 2002, the Private Companies signed an agreement to sell their approximately 51.7% of the share capital of IDBH Ltd. to a group comprising Ganden Holdings Ltd., Ganden Investments IDB Ltd., Maskit-Man Ltd. (a company owned by the Yitzhak and Ruth Manor family) and Avraham Livnat Investments (2002) Ltd. The agreement is subject to the fulfillment of conditions precedent and to the receipt of various approvals, including approvals at the

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	general meetings of the shareholders of the Private Companies, and to approvals required by law. The agreement also contains various provisions that make it possible for the Private Companies and the purchasers to cancel the agreement.
(3)	Eurocom Communications Ltd. owns 9.92% of the ordinary shares of Partner. Of these, it owns 9.80% directly, and an additional 0.12% indirectly through its wholly owned subsidiary Tapuz Cellular Systems Ltd. Eurocom Communications Ltd. is owned by Eurocom Holdings (1979) Ltd. (50.33%), Shaul Elovitch (0.66%) and Arison Investments Ltd. (49%). Eurocom Holdings (1979) Ltd. is owned by Shaul Elovitch (80% of the ordinary shares and 75% of the management shares) and Joseph Elovitch (20% of the ordinary shares and 25% of the management shares). Arison Investments Ltd. is a wholly owned subsidiary of Arison Holdings (1998) Ltd. Arison Holding (1998) Ltd. is owned by the late Ted Arison Trust for Shari Arison (33.74%), the late Ted Arison Trust for Mickey Arison (25.3%), the late Ted Arison Trust for Lin Arison (25.3%), Shlomo Nehama (14.88%), and by Arison Investments Ltd. (0.77%).
(4)	Matav-Cable Systems Media Ltd. (“Matav”), a company quoted on Nasdaq and listed in the Tel Aviv Stock Exchange, owns Partner’s shares through its wholly owned subsidiary, Matav Investments Ltd. Matav is owned by Dankner Investments Ltd. (47.74% equity, 49.96% voting), Ma’ariv Electronic Communications (15.09% equity, 15.79% voting) and by its directors and officers (as a group, 12.65% equity, 13.67% voting). The remaining 20.07% of the shares in Matav are held by the public. Dankner Investments is a publicly held company, whose securities are traded on the Tel Aviv Stock Exchange, controlled by members of the Dankner and Gineo families (who collectively hold approximately 88.08% of Dankner Investments’ issued share capital). Members of the Dankner and Gineo families are parties to the shareholders agreement in Dankner Investments, concerning the voting of their respective shares in coordination with the parties to the agreements. Each member of the Dankner and Gineo families who is a party to the Dankner Investments shareholders’ agreement could be deemed to be beneficial owners of all of the shares of Matav owned by Dankner Investments, but they disclaim beneficial ownership of such shares. On July 30, 1998, Dankner Investments reached an agreement with Mr. Hanania Gibstein, Mr. Shimon Cheifetz and Mr. Eli Cheifetz all shareholders of Matav, according to which Mr. Gibstein and Messrs. Cheifetz agreed not to sell their shares in Matav without the consent of Dankner Investments. Dankner Investments agreed not to sell its shares in Matav without allowing Mr. Gibstein and Messrs. Cheifetz to take part in the sale and Mr. Gibstein and Messrs. Cheifetz agreed to join the sale of all or most of Dankner Investment’s shares of Matav. This agreement is subject to the Matav Shareholders’ Agreement. In July 2002, the parties to the Matav Shareholders Agreement entered into an agreement amending the Matav Shareholders Agreement (the “Amendment”). Under the Amendment, Ma’ariv ceased to be a party to the Matav Shareholders Agreement and has no right or obligation in connection with the Matav Shareholders Agreement or the Amendment. In Addition, pursuant to the Amendment, if Messrs. Cheifetz shall not have a right to nominate a director to the Board of Directors of Matav, on account of the number of original shares held by him, the parties shall act to nominate a director to the Board of Directors

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of Matav designated by Messrs. Cheifetz, provided that the number of original shares held by Messrs. Cheifetz shall be at least 60% of the number of original shares required in order to have a right to nominate one director of Matav. Dankner Investments shall not be obligated to act according to the above, if as a result the number of directors of Matav nominated by Dankner Investments shall not constitute the majority of directors of Matav (the director designated by Messrs. Cheifetz shall not be considered a director nominated by Dankner Investments).

     Before our October 1999 initial public offering, the ownership of our outstanding ordinary shares by our founding shareholders, on a percentage basis, was as follows: Matbit Telecommunication Systems Ltd. owned 33.066%; Matav Investments Ltd. owned 3.76%; Advent Investments Pte Ltd. owned 46.674%; and Tapuz Cellular Systems Limited Partnership owned 16.5%. In January 2002, Tapuz Cellular Systems Limited Partnership was dissolved and its holdings in Partner were transferred to its limited partners, Eurocom Communications Ltd., Polar Communications Ltd. and Tapuz Cellular Systems Ltd., a wholly owned subsidiary of Eurocom, pro rata their previous interests in the partnership. On April 24, 2002 Matav Investments Ltd. sold to Hutchison Telecommunications (Amsterdam) BV, an indirect wholly owned subsidiary of Hutchison Whampoa Limited, 5,044,667 ordinary shares of Partner and Matbit Telecommunication Systems Ltd. sold to Hutchison Telecommunications (Amsterdam) BV 8,734,001 ordinary shares of Partner, which aggregate number of 13,778,668 ordinary shares comprise approximately 7.7% of Partner’s issued share capital. On December 2, 2002, the holdings of Matbit Telecommunication Systems Ltd. in Partner were transferred to its shareholders, Elbit.COM Ltd. and Matav Investments Ltd., pro rata to their previous interest in Matbit Telecommunication Systems Ltd. During 2002, two of our shareholders, MFS Investments Management and T. Rowe Price Associates, Inc., who had previously held 7.22% and 5.70% of our ordinary shares, reduced their holdings to less than 5% each. There have been no other significant changes in the ownership of our outstanding ordinary shares, on a percentage basis, by our major shareholders since our inception.

     On December 31, 2002, 16,782,299 ADSs (equivalent to 16,782,299 ordinary shares or approximately 9.24% of the total outstanding ordinary shares) were outstanding and held of record by 21 registered holders in the United States. Additionally, at December 31, 2002, there were approximately nine holders of record of our ordinary shares. Of these holders, none had a registered address in the United States, although certain accounts of record with registered addresses other than in the United States may hold our ordinary shares, in whole or in part, beneficially for United States persons. We are aware that many ADSs and ordinary shares are held of record by brokers and other nominees and accordingly the above numbers are not necessarily representative of the actual

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number of persons who are beneficial holders of ADSs and ordinary shares, or the number of ADSs and ordinary shares beneficially held by such persons.

     As far as we know, we are not directly or indirectly owned or controlled by another corporation or by any government, and there are no arrangements that might result in a change in our control.

7B. Related Party Transactions

Relationship Agreement

     Our founding shareholders and Elbit.COM Limited entered into a Relationship Agreement in relation to their direct and indirect holdings of our shares and the rights associated with such holdings. The Relationship Agreement replaced all existing agreements between our founding shareholders and Elbit.COM Limited. When one of our founding shareholders, Tapuz, was dissolved in January 2002 and its holdings in Partner were distributed to its limited partners, who are Eurocom Communications Ltd., Polar Communications Ltd. and Tapuz Cellular Systems Ltd., these limited partners became parties to, and assumed Tapuz’s rights and obligations under, the Relationship Agreement. The Relationship Agreement was amended on April 23, 2002, concurrently with the sale of shares in Partner indirectly owned by Matav-Cable Systems Media Ltd. to Hutchison Telecommunications (Amsterdam) BV.

Foreign mobile radio telephone operator

     The parties to the Relationship Agreement have agreed that a parent of Advent will continue to be a controlling corporation of a foreign mobile radio telephone operator as required by our license, for so long as this is required by our license. See also “Item 4B. Information on the Company—Business Overview—Regulation—Our License.”

Board composition

     Pursuant to the Relationship Agreement, our Board shall comprise a minimum of seven and a maximum of sixteen directors, including at least two independent directors. If more independent directors are required by law or by any of the stock exchanges on which our shares are to become listed, the number of independent directors and size of the board will be increased accordingly. Currently our board consists of 17 directors of whom seven were nominated by Advent, one by Hutchison Telecommunications (Amsterdam) BV, two by each of Matav Investments Limited, Elbit.COM Limited and Eurocom Communications, plus three independent directors.

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     The Relationship Agreement contains detailed provisions whereby the number of directors that each of the “nominating parties,” who are Advent, Hutchinson Telecommunications (Amsterdam) BV, Matav Investments Ltd., Elbit.COM Limited, Eurocom Communications Ltd. and Polar Communications Ltd., may nominate, may be reduced if a nominating party disposes of some or all of its shares, depending on the remaining percentage of shares held by the nominating party. In addition the nominating parties may transfer some or all of their rights to nominate directors to a “strategic investor,” i.e. a person, including a nominating party, who already has, or will have as a result of a simultaneous transfer of our shares, at least 4.99% of our shares acquired from one of the nominating parties in a single transaction.

     Two of our founding shareholders, Matav Investments Ltd. and Eurocom Communications Ltd., are not currently required by the Relationship Agreement to vote for the board nominations of the nominating parties under the Relationship Agreement. Matav Investments Ltd. and Eurocom Communications Ltd. will be required to vote for these nominations if and when an undertaking to do so will not, under Bank of Israel rules, limit our ability to borrow from any bank participating in our credit facility. In addition, if Matav Investments Ltd. or Eurocom Communications Ltd. sells Partner shares together with the right to nominate a director, the acquirer will be required under the Relationship Agreement to undertake to vote for the board nominations provided this undertaking would not subject Partner to the borrowing limitations described above. See also “—Term and Termination.”

     To the extent the operation of the above provisions results in our Board size decreasing below 16 but not below seven, no additional directors will be appointed. If the Board falls below seven directors then additional directors are to be appointed to make it up to seven and none of our principal shareholders will have any special rights to nominate such extra directors. In addition, to the extent the right to nominate directors is assigned from one person to another, the assignment may only take place if the assignor can produce evidence that the assignment will not breach our license or the terms of our credit facility and that all necessary approvals have been obtained, and if the assignee agrees to be bound by the Relationship Agreement and other applicable agreements between the shareholders and, where appropriate, produces a guarantee from a suitable parent company.

     There are special provisions which enable Hutchison Telecommunications (Amsterdam) BV to assign its right to nominate one director to a person who purchases all of the Partner shares it acquired directly from Matav Investments Ltd. In addition, if Advent disposes of shares such that its holding differs from the aggregate holding of the Israeli nominating parties by less than 4.99% then Advent, if required by the Relationship Agreement, will reduce its nominees to the board so that the

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number of Advent nominees is the same as the number of nominees of the Israeli nominating parties taken together.

     The agreement also provides that if a party or certain affiliates of a party become involved in a tender for, or for an interest in, a mobile cellular telecommunications license in Israel other than the licenses held by Cellcom or Pelephone, the rights of any directors nominated by such party to attend and vote at Board meetings may be suspended and, if necessary, they may be removed from our Board. These provisions do not restrict the activities of Polar Investment Limited or Polar Communications Limited so long as these entities do not have nominees on our Board, and the existing interests of the IDB Group in Cellcom, as these may change in the future with Ministry of Communications’ approval, are also exempted.

     All of the above provisions are subject to compliance by our principal shareholders with the provision of our license which conditions the agreement of the Ministry of Communications not to cancel our license for certain breaches upon the principal shareholders retaining at least 51% of each means of control for so long as this condition of the Ministry of Communications remains in effect.

Chairman

     For so long as Advent holds at least 25% of our shares and no other party to the Relationship Agreement holds more of our shares, Advent is entitled to nominate the chairman of the Board, who will be one of Advent’s nominated directors.

Executive Committee

     In view of the size of our Board, day-to-day management is delegated to an Executive Committee of the Directors initially comprising three representatives of Advent and one representative of each of Matav Investments Limited, Elbit.COM Limited and Eurocom, plus two independent directors. However, a shareholder is not entitled to a greater number of representatives on the Executive Committee than it has on the Board. The first chairman of the Executive Committee is Khoo Chek Ngee.

Chief Financial Officer

     For so long as Advent holds at least 25% of our shares, it is entitled to nominate the Chief Financial Officer who will be appointed, subject only to the approval of a majority of the directors, other than those appointed by Advent, including at least one director representing each of the other nominating parties. This approval will not be unreasonably withheld or delayed by the directors

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nominated by nominating parties. While Advent holds at least 25% of our shares it is also entitled to remove the CFO from office, as may the directors, other than Advent’s nominees, so long as they act unanimously, on reasonable grounds and in consultation with Advent and the Chief Executive Officer.

Restrictions on Directors

     The Relationship Agreement contains restrictions on any shareholder that is an “interested party,” as defined in our license, which has holdings in Cellcom (Israel) Limited, nominating or acting as one of our directors. These restrictions are intended to ensure compliance with our license and our permit regarding cross ownership issued to us by the Ministry of Communications.

     Those principal shareholders which are Israeli entities may only nominate citizens and residents of Israel to act as their representative directors. The representatives nominated by Advent or other non-Israeli shareholders must include a sufficient number of citizens and residents of Israel so as to ensure that the majority of members of the Board are citizens and residents of Israel, for so long as this is required by our license.

Transfer of shares

     Other than a requirement to comply with our license and permit and the terms of our credit facility and to obtain all necessary consents, our principal shareholders’ freedom to transfer their shares is not restricted by the Relationship Agreement. This is subject to (a) our principal shareholders’ minimum 51% holding (or such other percentage as is specified in our License); (b) special provisions in relation to transfers by Tapuz to its partners, as occurred in January 2002; and (c) “tag-along” provisions described below in relation to transfers by Advent. For the requirements of our license and permit, see “Item 4B. Information on the Company—Business Overview—Regulation—Our License—License Conditions” and “Item 4B. Information on the Company—Business Overview—Regulation—Our Permit Regarding Cross Ownership.” For the terms of our credit facility, see “Item 5B. Operating and Financial Review and Prospects—Liquidity and Capital Resources.”

Minimum 51% threshold

     The Ministry of Communications has notified us that it will not terminate our license as a result of certain breaches which might otherwise be caused when our ADSs are publicly traded, as long as our principal shareholders retain an aggregate of 51% of the means of control of Partner. See “Item 3D. Key Information—Risk Factors—Our telecommunications license imposes certain restrictions on

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who can own our shares. If these restrictions are breached, we could lose our license” and “Item 4B. Information on the Company—Business Overview—Regulation—Our License”. In addition to the requirement noted above in relation to Board composition, the Relationship Agreement requires that our principal shareholders retain 51% of our shares (or such other percentage as is specified in our License).

Tag-along with transfers by Advent

     If Advent disposes of 4.99% or more of our shares in one transaction or a series of transactions within any six month period, the other principal shareholders have the right to “tag-along” by requiring that some of their own shares be bought instead of an equivalent number of Advent’s shares. The number of shares which the other principal shareholders may sell shall in aggregate be at most one half of the number of shares Advent proposes to transfer. The tag-along rights do not apply to:

• the first transfer by Advent of at least 4.99% of our shares where it also assigns the right to nominate a director,

• transfers within the Hutchison Whampoa Limited group provided the transferee adheres to the Relationship Agreement,

• transfers pursuant to the Registration Rights Agreement, or

• transactions effected on an investment exchange on which our securities are or may become listed.

     The tag-along rights expire five years after the date of the Relationship Agreement or if Advent’s shareholding falls below 15% of our shares.

Compulsory transfer in the event of default

     If a party to the Relationship Agreement commits certain events of default described in the agreement, then our Board, minus the representatives of the defaulting party, may require the defaulting party to offer its shares to the other parties on a pre-emptive basis. Events of default for this purpose include a breach of the Relationship Agreement which has a material adverse effect on Partner, any voluntary or involuntary liquidation, various insolvency-related events, a party ceasing to carry on business or a breach of the terms of our credit facility which has a material adverse effect. In the case of breaches of the Relationship Agreement, the offending shareholder is penalized in that

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the price at which the shares are to be offered will be market value less a 17.5% discount. Disputes in relation to events of default are to be resolved by arbitration.

Compliance with our license

     The parties to the Relationship Agreement have agreed that they and we shall at all times comply with the terms of our license. In addition, Elbit.COM Limited has undertaken to use its best efforts to ensure that its parent, Elbit, and its associates and any person mentioned in the cross-holdings permit issued by the Ministry of Communications shall undertake to comply with any applicable conditions of that permit and the relevant terms of our license. Each Israeli party to the Relationship Agreement has undertaken to maintain such portion of the shares as is necessary to ensure that at least 20% of the shares are held by citizens and residents of Israel. Advent has undertaken to maintain at least 25% or any other level required by our license for so long as this is required by our license. See “Item 4B. Information on the Company—Business Overview—Regulation—Our License—License Conditions.”

Other undertakings

     Each party has undertaken to exercise its rights as a shareholder or through its appointees to the Board to ensure that our affairs are conducted in accordance with the Relationship Agreement, our license and those documents connected with the credit facility to which it is a party. In particular, the parties have agreed to procure that we shall not issue any shares or securities convertible into shares unless, following such issuance, we will be in compliance with the share pledge requirement in our credit facility.

Guarantees

     The obligations of each party to the Relationship Agreement are, unless the party itself has net assets of $50 million or more, to be guaranteed by their respective parent companies.

• Hutchison Telecommunications Limited guarantees the obligations of Advent Investments Pte Limited and Hutchison Telecommunications (Amsterdam) BV;

• Matav-Cable Systems Media Limited guarantees the obligations of Matav Investment Limited.

• Elbit Limited guarantees the obligations of Elbit.COM Limited;

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• Eurocom Communications Limited guarantees the obligations of Tapuz Cellular Systems Limited; and

• Eurocom Holding (1997) Limited guarantees the obligations of Eurocom Communications Limited.

Term and termination

     The Agreement continues in full force and effect until we are wound up. However, the agreement may be terminated if there is an insolvency event in relation to us. The agreement will terminate in relation to any individual party after it ceases to hold any share beneficially. For so long as the shares are pledged, a transfer of 50% or more of the shares held by our principal shareholders made as part of the foreclosure of such pledges will also cause the agreement to terminate.

     In addition, the undertaking of the parties to the Relationship Agreement, other than Matav Investments Ltd. and Eurocom Communications Ltd., to vote for the board nominations of the nominating parties under the Relationship Agreement will terminate if those parties cease to hold, in the aggregate, (i) more than 50% of our shares or, (ii) if we offer additional shares to the public, shares which constitute at least that percentage of our shares which they held immediately following such offering.

The Supplemental Agreement

     Upon the sale of shares in Partner beneficially owned by Matav-Cable System Media Ltd. to Hutchison Telecommunications (Amsterdam) B.V. on April 24, 2002, a Supplemental Agreement entered into between Matbit Telecommunication Systems Ltd., Matav Investments Ltd., Elbit.COM Ltd., Advent Investments Pte Ltd., Hutchison Telecommunications (Amsterdam) B.V., and Matav-Cable Systems Media Ltd. took effect.

     Pursuant to the Supplemental Agreement, Matav Investments Ltd. undertook that it will not, and that it will use its best efforts to procure that none of its affiliates will, take any action or allow any event to occur, which would cause us to become obliged, under the applicable rules of the Bank of Israel restricting loans to related parties, to repay amounts to, or alter the terms of any existing or subsequent credit facility with, any bank on terms substantially different from those applicable to other banks participating in such facility or on terms which would not apply were it not for the application of such rules. Matav-Cable Systems Media Ltd. guaranteed the performance of Matav Investments Ltd.’s obligations set forth in the Supplemental Agreement or arising in connection with the Supplemental Agreement.

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     If Matav Investments Ltd., in breach of its undertaking, causes us to become obliged as mentioned above under the rules of the Bank of Israel, our Board of Directors, excluding the representatives of Matav Investments Ltd., may require Matav Investments Ltd. to sell the amount of shares that our Board of Directors determines must be sold, at a price per share equal to 82.5% of the Market Price, as determined in the Relationship Agreement, in accordance with the provisions of the Relationship Agreement, in addition to, or as an alternative, to take such other actions as our Board of Directors and Matav Investments Ltd. agree will remedy the breach.

Transactions with affiliates

     We currently operate under an unwritten arrangement with Eurocom Communications Ltd., one of our principal shareholders, pursuant to which Eurocom sells our services or distributes handsets in connection with their sale of Nokia handsets in twelve outlets. Eurocom receives a commission for the activation of each handset that it sells to customers as one of our distributors and for the logistical support related to the supply of handsets.

     We also purchase a portion of our Nokia handsets from Eurocom. In the year ended December 31, 2002, purchases from Eurocom constituted approximately 28% of all of our handset purchases.

     We believe that our distribution arrangement and handset purchases from Eurocom are on commercial, arms-length terms.

     In addition, we have agreements with Eurocom Cellular Communication Ltd., a subsidiary of Eurocom Communications Ltd., according to which Eurocom will provide us with various content and interactive games and the right to use certain intellectual property.

     We have an agreement with Cellact Ltd., a subsidiary of Elbit Ltd., according to which Cellact is directly connected to our SMS server so that Cellact may send large amounts of SMSs to our subscribers and vice-versa.

     We have signed an agreement with NonStop Internet 1999 Limited, or NonStop, a subsidiary of Matav-Cable Systems Media Ltd., one of our shareholders. This agreement is part of a series of similar agreements with other providers of content and services, and is in the ordinary course of business. The agreement will not have a significant financial impact on us. In June 2001, NonStop assigned all of its rights and obligations under this agreement to Matav. In December 2001, we agreed with Matav to terminate the agreement, which termination was effective on February 26, 2002.

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     We have a strong relationship and are working with Hutchison Whampoa Limited, one of our principal shareholders, in connection with the development of products and services for UMTS third generation mobile communications. Hutchison is a global leader in UMTS third generation technology and, in particular the deployment and development of third generation cellular networks and products and services worldwide.

     In August 2002, we signed a Cost-Sharing Agreement, or the CSA, with Hutchison Telecommunications Limited, or HTL, and certain of its subsidiaries for the joint acquisition and development of information technology platforms and software solutions, hardware, content and other services, in connection with the UMTS third generation business.

     The CSA allows us to participate in acquisition and development projects with other UMTS third generation companies within the Hutchison Whampoa Limited group, and to benefit from the combined purchasing power and resources of the group which includes companies in Austria, Australia, Denmark, Hong Kong, Ireland, Italy, Sweden and the United Kingdom.

     As of December 31, 2002, we had given notice of our participation in four joint contracts. We expect that our share in these contracts in financial terms (including our share of joint expenses and liabilities) is not material.

     We believe that the CSA gives us an advantage unavailable to our competitors. The CSA gives us an opportunity to maximize economies of scale and operational efficiencies for development and procurement activities associated with our 3G business. See Note 14(c) to our consolidated financial statement.

     For more information, see “Item 3D. Risk Factors—Risks and uncertainties in connection with UMTS third generation technology mean that we may not make an economic return on investment in acquiring UMTS third generation spectrum, establishing a UMTS third generation network, or developing UMTS third generation services”.

     In December 2002, we signed an Interconnect Agreement with Matav-Cable Systems Media Ltd. See “Item 4B. Business Overview—Interconnection”.

     Certain of our directors, who are also controlling persons of our principal shareholders, are also, indirectly, part of the controlling group of shareholders of Bank Hapoalim B.M., which is a participating bank in our credit facility. For a description of our credit facility, see “Item 5B. Operating and Financial Review and Prospects—Liquidity and Capital Resources.”

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Foreign mobile radio telephone operator undertaking

     Our license requires a foreign mobile radio telephone operator to undertake to make available to us, if we request it, all know-how in its possession required to establish and operate a mobile radio telephone system for the provision of mobile radio telephone communications services, their marketing and sale. By virtue of Advent’s parent corporation being the controlling corporation of Hutchison Telephone Company Limited, this operator currently provides this undertaking, under which the know-how is to be provided to us, if requested, at market prices and on arms-length terms. If Advent’s parent ceases to be the controlling corporation of Hutchison Telephone Company Limited, Advent’s parent corporation will arrange an appropriate alternative foreign mobile radio telephone operator to provide the required undertaking.

Registration rights

     We have entered into a registration rights agreement with our principal shareholders in which we granted our principal shareholders the right to require us to register ordinary shares held by them under the Securities Act. We have agreed that, upon request from any of our principal shareholders, which request could not have been made until October 26, 2000, we will file a registration statement under the Securities Act to register ordinary shares held by them, subject to a maximum of one request in any 6-month period. There is no limit to the number of registrations that can be requested under the agreement. The minimum amount of shares that must be included in any registration requested under this agreement is 2.65% of our outstanding shares. We have also granted each of the principal shareholders the right to include their ordinary shares in any registration statement covering offerings of ordinary shares by us. The registration rights agreement will terminate with respect to each holder upon the earlier of October 26, 2009 and such time as the holder can sell its ordinary shares into the United States public market pursuant to an exemption from the registration requirements of the Securities Act without regard to holding period, volume or manner-of-sale limitations.

7C. Interests of Experts and Counsel

Not applicable.

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ITEM 8. FINANCIAL INFORMATION

8A. Consolidated financial statements and other financial information

     Audited financial statements for the three fiscal years ended December 31, 2002 are included under “Item 18. Financial Statements.”

Legal and arbitration proceedings

     In addition to the legal proceedings discussed below, we are party to a number of legal and administrative proceedings arising in the ordinary course of our business. We do not expect the outcome of such matters in the aggregate to have a material adverse effect upon our business and financial condition, results of operations and cash flows.

     We have experienced difficulties in obtaining building permits from local authorities for the erection of antennas, particularly before the signing of the agreement in principle with the Union of Local Authorities in Israel. As a result, we, like other mobile telephone operators in Israel, have erected antenna sites without the issuance of a building permit from the relevant local or regional authority. Currently, approximately 50% of our antenna sites are operating without local building permits. In addition, approximately 36% of the sites (base transceiver stations and microbase transceiver stations) are operating without permits from the Ministry of the Environment, although all third party environmental testing necessary for those permits has been successfully completed. Moreover, a small percentage of antenna sites are operating without permits from the Civil Aviation Authority and the Israeli Defense Forces. Applications have been submitted to the relevant local or regional authority and are at various stages of the approval process for approximately 20% of our antenna sites, and the application process has not been commenced for approximately 30% of our sites. We believe that a portion of the sites for which the application process has not been commenced do not require building permits under the Planning and Building Law. The erection of an antenna site without a required local building permit is a violation of the Planning and Building Law and, in some cases, has resulted in a demolition order being imposed on us and in the filing of criminal charges and civil proceedings by Israeli municipalities against us and our officers and directors.

     As of December 31, 2002, 235 criminal proceedings have been brought against us concerning the erection of antenna sites without building permits. 127 of those proceedings have also been brought against our officers and directors. 22 of those proceedings have been brought against us regarding failure to comply with demolition orders, of which five have been brought against our

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officers and directors and 19 have been settled. We are currently negotiating with the relevant local authority to reach a settlement regarding the relocation of affected sites or obtaining building permits for those sites. 199 of the criminal proceedings brought against us have been settled, with Partner, but not our directors or officers, admitting guilt and paying a fine, ranging from NIS 200 to NIS 48,000 per offense. The total amount of fines paid as of December 31, 2002, is approximately NIS 1.8 million, with NIS 0.5 million of that paid during 2000, NIS 0.3 million of that paid during 2001 and NIS 0.3 million of that paid during 2002. These settlements also resulted in the imposition of demolition orders for the relevant sites, the execution of which have been stayed for a period of time to allow us to obtain the necessary permits or to relocate the relevant antenna site. 108 of the criminal proceedings involving our officers and directors have been settled with no admission of guilt by any of the officers and directors. In addition, currently 68 administrative demolition order proceedings have been brought against us. Of these, 65 have been settled with the imposition of demolition orders, the execution of which has been stayed for a period of several months to allow us to obtain the necessary permits or to relocate the relevant antenna.

     There can be no assurance that we will continue to be successful in settling legal proceedings brought against us and our officers and directors or that we will not be faced with demolition orders and criminal charges, including against our officers and directors. See “Item 3D. Key Information—Risk Factors—We have had difficulties obtaining some of the permits for which we have applied and have not yet applied for other permits that are required for the erection of our antenna sites. These difficulties could continue and therefore affect our ability to erect or maintain antenna sites. This could have an adverse effect on the extent, quality and capacity of our network coverage which could prevent us from achieving or maintaining the network coverage and quality requirements contained in our license and adversely affect our business.”

     On October 28, 1999, a lawsuit was filed by “Consumer Hotline,” an Israeli consumer organization, in the Haifa District Court alleging a variety of consumer complaints against us and requesting recognition as a class action lawsuit. On March 20, 2002, the Haifa District Court decided to strike the claim because on December 31, 2001, Consumer Hotline lost the special status required under Israeli law for consumer organizations to file class action law-suits.

     Another claim, involving a substantial amount, which was filed by a private consumer who had previously asked to join the above class action, may be brought again before the court. The court had previously frozen the proceedings of the private consumer’s claim, until a decision is made in the case filed by the consumer organization. On June 20, 2002, legal counsel representing the consumer organization informed the company of his intention to resume these proceedings. At this stage, the Company and its legal counsel are unable to evaluate the probability of success of the claims, if and

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when re-opened, and therefore no provision has been made. See note 8(b)1 to our audited financial statements.

     On July 8, 2001 a claim was filed against us for alleged violation of a supplier’s exclusivity agreement. For filing purposes, the claim was set at NIS 18 million; however, this amount can be increased by the claimant. Since preliminary proceedings between the parties have yet to take place, and the claim concerns a contract interpretation issue, the Company and its legal counsel are unable to evaluate the probability of success of this litigation, and therefore no provision has been made. See Note 8b(2) to our consolidated financial statements.

     On December 31, 2001, a claim was filed against us and other Israeli telecommunication companies, together with a request to approve this claim as a class action. The claim is for air time charged in respect of calls which were terminated due to causes other than the termination of the call by the parties thereto. The amount of the claim against us is estimated at approximately NIS 21 million. On January 2003, a mutually-agreed motion to strike out the claim against the Company was granted by the court. See Note 8b(3) to our consolidated financial statements.

     On March 20, 2002, we received a demand from one of our former distributors, mainly for an alleged violation of his distribution agreement and understanding. The amount of the demand against us is set at NIS 130 million for filing purposes, although the claimant states that his damages far exceed the above amount. As of December 31, 2002, this demand has not been filed by way of a legal claim. At this stage, the Company and its legal counsel are unable to evaluate the probability of success of such a demand if filed by way of legal claim, and the amount it claims, therefore no provision has been made. See Note 8b(4) to our consolidated financial statements.

     On April 8, 2002, a claim was filed against us, alleging a variety of consumer complaints and requesting recognition as a class action. The amount of the claim against us is estimated at approximately NIS 545 million plus additional significant amounts related to other alleged damages. At this stage, no hearings have taken place and until the claim is certified as a class action, the Company and its legal counsel are unable to evaluate the probability of success of such claim, and therefore no provision has been made. In addition, the Company and its legal counsel are of the opinion that even if the request to approve this claim as a class action is granted, and even if the plaintiff’s arguments are accepted, the outcome of the claim will be significantly lower than the amount mentioned above.

     On May 21, 2002, a claim was filed against the Company and other Israeli telecommunication companies together with a request to approve this claim as a class action. According to the

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applicants, the defendants have entered into agreements with commercial entities that offer the public various content services via calls to cellular telephone numbers. The applicants allege that, in fact, the calls are not carried out through a wireless but via a fixed line, an act that is in violation of the law and the license. Accordingly, the applicants claim that the defendants must refund the public all the amounts that were charged in connection with these content services agreements. The applicants do not know the amount of the class action, but estimate it at NIS 600 million. At this stage, no hearings have taken place, and until the claim is certified as a class action, the Company and its legal counsel are unable to evaluate the probability of success of such claim and therefore no provision has been made. In addition, the Company and its legal counsel are of the opinion that in light of the facts known at this early stage, the amount mentioned above of the claim is excessive. See Note 8b(6) to our consolidated financial statements.

Dividend distribution policy

     We have never paid cash dividends to our shareholders, and we currently do not anticipate paying dividends for the foreseeable future. We expect that all available cash from operations, together with borrowings under our credit facility and a portion of the proceeds from our initial public offering and our August 2000 offering of 13% senior subordinated notes due 2010, will be used to meet our projected capital and other expenditure requirements and to settle or refinance our projected liabilities as they fall due. In addition, the terms of our credit facility restrict the amount of dividends we may pay to our shareholders and the timing of dividend payments.

     In the event we declare dividends in the future, we will pay those dividends in shekels. Under current Israeli regulations, any dividends or other distributions paid in respect of ordinary shares may be freely repatriated in non-Israeli currencies at the rate of exchange prevailing at the time of conversion, provided that Israeli income tax has been paid on or withheld from such dividends. Because exchange rates between the shekel and the US dollar fluctuate continuously, a holder of ADSs will be subject to currency fluctuation generally and, particularly, between the date when dividends are declared and the date dividends are paid.

8B. Significant changes

No significant change has occurred since the date of our financial statements.

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ITEM 9. THE OFFER AND LISTING

9A. Offer and Listing Details

     Our capital consists of ordinary shares, which are traded on the Tel Aviv Stock Exchange under the symbol “PTNR”. American Depositary Shares, or ADSs, each representing one of the Company’s ordinary shares are quoted on the Nasdaq National Market under the symbol “PTNR” and are traded on the London Stock Exchange under the symbol “PCCD”. The ADSs are evidenced by American Depositary Receipts, or ADRs, issued by JPMorgan Chase, as Depositary under a Deposit Agreement, dated as of November 1, 1999, among the Company, JPMorgan Chase and registered holders from time to time of ADRs. ADSs were first issued in October 1999.

     The table below sets forth, for the periods indicated, the reported high and low closing quotations, based on the Daily Official List of the London Stock Exchange, information supplied by the National Association of Securities Dealers, Inc., and information supplied by the Tel Aviv Stock Exchange.

										Tel Aviv Stock
										Exchange**
		Nasdaq				London Stock Exchange				(NIS per
		($ per ADS)				($ per ADS)				ordinary share)
		High		Low		High		Low		High		Low
Year Ended December 31,
1999*
	Fourth Quarter (from October 27)		25.88		14.88		25.00		14.93		—		—
2000			23.13		4.13		22.50		4.13		—		—
	First Quarter		23.13		14.25		22.50		14.83		—		—
	Second Quarter		14.81		6.26		15.13		7.03		—		—
	Third Quarter		10.00		7.50		10.05		7.43		—		—
	Fourth Quarter		7.63		4.13		7.75		4.13		—		—
2001			7.13		3.50		7.10		3.53		37.85		17.73
	First Quarter		7.13		4.25		7.10		4.25		—		—
	Second Quarter		4.78		3.50		4.63		3.53		—		—
	Third Quarter		6.80		3.89		6.95		4.15		37.85		17.73
	Fourth Quarter		6.85		4.50		6.95		4.43		30.79		18.90
2002			7.55		3.55		7.38		3.78		33.92		17.26
	First Quarter		7.55		4.70		7.38		4.70		33.92		21.29
	Second Quarter		5.00		4.00		4.93		4.05		24.04		19.19
	Third Quarter		4.77		3.86		4.68		3.88		22.53		18.51
	Fourth Quarter		4.50		3.55		4.53		3.78		21.67		17.26

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'

*	Because our ADSs were first issued on October 26, 1999, the high and low closing quotations for 1999 are the same as those for the Fourth Quarter.
**	Our ordinary shares began trading on the Tel Aviv Stock Exchange on July 3, 2001.

Previous Six Months

									Tel Aviv Stock
									Exchange**
	Nasdaq				London Stock Exchange				(NIS per
	($ per ADS)				($ per ADS)				ordinary share)
	High		Low		High		Low		High		Low
September 2002		4.52		3.96		4.62		4.07		21.85		19.67
October 2002		4.50		3.92		4.43		3.88		21.67		18.52
November 2002		4.08		3.87		4.18		3.92		19.63		18.40
December 2002		4.19		3.55		4.18		3.78		19.95		17.26
January 2003		3.45		2.91		3.58		3.03		16.47		14.72
February 2003		2.97		2.56		2.98		2.68		14.30		12.45

9B. Plan of Distribution

Not applicable.

9C. Markets

     Our ADSs are quoted on the Nasdaq National Market under the symbol “PTNR” and are traded on the London Stock Exchange under the symbol “PCCD”. Our ordinary shares are traded on the Tel Aviv Stock Exchange under the symbol “PTNR”.

9D. Selling Shareholders

Not applicable.

9E. Dilution

Not applicable.

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9F. Expenses of the Issue

Not applicable.

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ITEM 10. ADDITIONAL INFORMATION

10A. Share Capital

Not applicable.

10B. Memorandum and Articles of Association

Purposes and objects of the company

     We are a public company registered under the Israeli Companies Law as Partner Communications Company Ltd., registration number 52-004431-4.

     Pursuant to our memorandum of association, we were formed for the purpose of participating in the auction for the granting of license to operate mobile radio telephone services in Israel, to provide such services, and without derogating from the above, we are also empowered to hold any right, obligation or legal action and to operate in any business or matter approved by the Company.

     Pursuant to section three of our articles of association, our purpose is to operate in accordance with business considerations to generate profits; provided, however, that the Board of Directors is entitled to donate reasonable amounts to worthy causes, even if such donation is not within the frame of these business considerations.

     Pursuant to section four of our articles of association, our objective is to engage in any legal business.

The powers of the directors

     The power of our directors to vote on a proposal, arrangement or contract in which the director is materially interested is limited by the relevant provisions of the Companies Law. In addition, the power of our directors to vote compensation to themselves or any members of their body, requires the approval of the audit committee and the shareholders at a general meeting. See “Item 6C. Board Practices—Approval of Related Party Transactions.”

Rights attached to shares

     Our registered share capital consists of a single class of 235 million ordinary shares, par value NIS 0.01 per share, of which 181,595,222 ordinary shares were issued and outstanding as of

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December 31, 2002. All outstanding ordinary shares are validly issued, fully paid and non-assessable. The rights attached to the ordinary shares are as follows:

Dividend rights

     Holders of ordinary shares are entitled to the full amount of any cash or share dividend subsequently declared. The Board of Directors may propose a dividend with respect to any fiscal year only out of profits, in accordance with the provisions of the Companies Law. Declaration of a dividend requires approval by an ordinary shareholders’ resolution, which may decrease but not increase the amount proposed by the board of directors. See “Item 10E. Additional Information—Taxation.”

     Dormant shares retain the rights to receive dividends or other distributions to shareholders, and to participate in rights offerings, but no other rights.

     One year after a dividend has been declared and is still unclaimed, the board of directors is entitled to invest or utilize the unclaimed amount of dividend in any manner to the benefit of the Company until it is claimed. We are not be obligated to pay interest or linkage on an unclaimed dividend.

Voting rights

     Holders of ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders. Such voting rights may be affected by the grant of any special voting rights to the holders of a class of shares with preferential rights that may be authorized in the future. The quorum required for an ordinary meeting of shareholders consists of at least two shareholders present in person or by proxy who hold or represent, in the aggregate, at least one third of the voting rights of the issued share capital. In the event that a quorum is not present within thirty minutes of the scheduled time, the shareholders’ meeting will be adjourned to the same day of the following week, or the next business day thereafter, at the same time and place, or such time and place as the Board of Directors may determine. If at such reconvened meeting a quorum is not present at the time appointed for holding the meeting, one or more shareholders present in person or by proxy holding or representing in the aggregate at least 10% of the voting rights in us will constitute a quorum.

     Any shareholder seeking to vote at a general meeting of our shareholders must first notify us if any of the shareholder’s holdings in us requires the consent of the Minister of Communications. The instructions of a shareholder will not be valid unless accompanied by a certification by the shareholder as to whether or not the shareholder’s holdings in us or the shareholder’s vote requires the consent of

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the Ministry of Communications due to a breach by the shareholder of the restrictions on transfer or acquisition of means of control, or provisions regarding cross-ownership with other mobile telephone operators or shareholdings or agreements which may reduce or harm competition. If the shareholder does not provide such certification, his instructions will be invalid and his vote not counted.

     An ordinary resolution, such as a resolution for the election of directors, the declaration of dividends or the appointment of auditors, requires approval by the holders of a majority of the voting rights represented at the meeting, in person or by proxy, and voting thereon. Under our articles of association, resolutions such as a resolution amending the Memorandum or Articles of Association or approving any change in capitalization, liquidation, changes in the objectives of the company, or the name of the company, or other changes as specified in our articles of association, requires approval of a special majority, representing the holders of no less than 75% of the voting rights represented at the meeting, in person or by proxy, and voting thereon.

     Under our articles of association our directors are elected by an ordinary majority of the shareholders at each duly convened annual meeting, and they serve until the next annual meeting, provided that external directors shall be elected in accordance with applicable law and/or relevant stock exchange rules applicable to us. In each annual meeting the directors that were elected at the previous annual meeting are deemed to have resigned from their office, excluding an external director, who according to the Companies Law, is elected for a period of three years. A resigning director may be reelected. Each Ordinary Share represents one vote. No director may be elected or removed on the basis of a vote by dormant shares. The ordinary share do not have cumulative voting rights in the election of directors.

     Directors may be appointed also in certain circumstances by an extraordinary general meeting and by the Board of Directors upon approval of 75% of the directors. Such director, excluding an external director, shall serve for a term ending at the next annual general meeting.

Rights in the company’s profits

     Our shareholders have the rights to share in our profits distributed as a dividend and any other permitted distribution. See “Item 10B. Rights Attached to Shares—Dividend Rights.”

Rights in the event of liquidation

     All of our ordinary shares confer equal rights among them with respect to amounts distributed to shareholders in case of liquidation.

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Limitations on ownership and control

     Ownership and control of our ordinary shares are limited by the terms of our license and our articles of association. See “Item 4B. Information on the Company—Business Overview—Our License—License Conditions.”

     In order to comply with the conditions and restrictions imposed on us by the Ministry of Communications or under our License in relation to ownership or control over us, under certain events specified in our articles of association, the Board of Directors may determine that certain Ordinary Shares are dormant shares, as defined in the Companies Law. According to our articles of association, dormant shares bear no rights as long as they are dormant shares, except the right to receive dividends and other distributions to shareholders.

Changing rights attached to shares

     According to our articles of association, in order to change the rights attached to any class of shares, the general meeting of the shareholders must adopt a resolution to change such rights by a special majority, representing at least 75% of the votes of shareholders participating and voting in the general meeting, and in case of changing the rights attached to certain class of shares, the approval by special majority of each class meeting, is required.

Annual and extraordinary meetings

     The Board of Directors must convene an annual meeting of shareholders at least once every calendar year, within fifteen months of the last annual meeting. Notice of at least twenty-one days prior to the date of the meeting is required. An extraordinary meeting may be convened by the board of directors, as it decides or upon a demand of any two directors or 25% of the directors, whichever is lower, or of one or more shareholders holding in the aggregate at least 4.99% of our issued capital. An extraordinary meeting must be held not more than thirty-five days from the publication date of the announcement of the meeting. See “Item 10B. Rights Attached to Shares—Voting Rights.”

Limitations on the rights to own securities in us

     For limitations on the rights to own securities in us see “Item 4B. Information on the Company—Business Overview—Our License—License Conditions,” “—Our Permit Regarding Cross Ownership” and “Item 10B. Rights Attached to Shares—Limitations on ownership and control.”

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Limitations on change in control and disclosure duties

     For limitations on change in control, see “Item 4B. Information on the Company—Business Overview—Our License—License Conditions,” “Item 4B. Information on the Company—Business Overview—Our License—Our Permit Regarding Cross Ownership” and “Item 10B. Rights Attached to Shares—Limitations on ownership and control.”

Changes in our capital

     Changes in our capital are subject to the approval of the shareholders at a general meeting by a special majority of 75% of the votes of shareholders participating and voting in the general meeting.

10C. Material Contracts

     We are not a party to any material contracts other than those entered into in the ordinary course of business.

10D. Exchange Controls

     There are no Israeli government laws, decrees or regulations that restrict or that affect our export or import of capital or the remittance of dividends, interest or other payments to non-resident holders of our securities, including the availability of cash and cash equivalents for use by us and our wholly owned subsidiary, Partner Future Communications 2000 Ltd., except or otherwise as set forth under “Item 10E. Additional Information—Taxation.”

     Under Israeli law (and our Memorandum and Articles of Association), persons who are neither residents nor nationals of Israel may freely hold, vote and transfer ordinary shares in the same manner as Israeli residents or nationals.

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10E. Taxation

Israeli taxation

     The following is a summary of the current tax laws of the State of Israel as they relate to us and to our shareholders and also includes a discussion of the material Israeli tax consequences for persons purchasing our ordinary shares or ADSs, both referred to below as the “Shares”. To the extent that the discussion is based on legislation yet to be subject to judicial or administrative interpretation, there can be no assurance that the views expressed herein will accord with any such interpretation in the future. This discussion is not intended and should not be construed as legal or professional tax advice and does not cover all possible tax considerations.

Israeli Tax Reform

     On July 24, 2002, the Israeli Knesset enacted income tax reform legislation, commonly referred to as the “Tax Reform”. The Tax Reform has introduced fundamental and comprehensive changes into Israeli tax laws. Most of the legislative changes took effect on January 1, 2003. The Tax Reform has introduced a transition from a primarily territorial-based tax system to a personal-based system of taxation with respect to Israeli residents. The Tax Reform has also resulted in significant amendment of the international taxation provisions, and new provisions concerning the taxation of capital markets including the abolishment of currently “exempt investment routes” (e.g., capital gains generated by individuals from the sale of securities traded on the Tel-Aviv Stock Exchange). Various issues related to the Tax Reform remain unclear in view of the legislative language utilized and the lack of authoritative interpretations at this stage. The analysis below is therefore based on our current understanding of the new legislation.

     It should be noted that under the Tax Reform legislation the Shares are no longer regarded and defined as “foreign traded securities” and thus certain associated Israeli tax aspects will accordingly be subject to change as discussed below.

General corporate tax structure

     The regular rate of corporate tax in Israel is 36%.

     Our taxable income is determined under the Income Tax (Inflationary Adjustment) Law 1985, or the “Inflationary Adjustments Law”, which attempts to overcome some of the problems presented to a traditional tax system by rapid inflation. Generally, the Inflationary Adjustments Law provides tax

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deductions and adjustments to depreciation deductions and tax loss carry forwards to mitigate the effects resulting from an inflationary economy.

     The Israeli Income Tax Ordinance and regulations promulgated there under allow Foreign-Invested Companies, to adjust their tax returns based on exchange rate fluctuations of the shekel against the US Dollar rather than changes in the Israeli Consumer Price Index or “CPI”, in lieu of the principles set forth by the Inflationary Adjustments Law. For these purposes, a Foreign-Invested Company is a company in which more than 25% of the share capital in terms of rights to distributions, voting and appointment of directors, and of the combined share capital, including shareholder loans and capital notes, is held by persons who are not residents of Israel. A company that elects to measure its results for tax purposes based on the US Dollar exchange rate cannot change that election for a period of three years following the election. We adjust our tax returns based on the changes in the Israeli CPI. Because we qualify as a Foreign-Invested Company, we are entitled to elect measurement of our results for tax purposes on the basis of changes in the exchange rate of the US Dollar in future tax years.

Tax on capital gains of shareholders

• GENERAL. Israeli law imposes a capital gains tax on the sale of capital assets by an Israeli resident and on the sale of capital assets located in Israel or the sale of direct or indirect rights to assets located in Israel, including on the sale of our Shares by some of our shareholders (see discussion below). The Israeli Tax Ordinance distinguishes between “Real Gain” and “Inflationary Surplus”. Real Gain is the excess of the total capital gain over Inflationary Surplus computed on the basis of the increase in the Israeli CPI between the date of purchase and the date of sale. The Real Gain accrued at the sale of an asset purchased on or after January 1, 2003 is taxed at a 25% rate, both for individuals and for corporations, as opposed to the previous 36% rate applicable to corporations, and to the marginal tax rate of up to 50% applicable to individuals with respect to sale transactions effected prior to January 1, 2003.

Real Gains derived from the disposal after January 1, 2003 of an asset purchased prior to this date will be subject to capital gains tax at a blended rate. The previous capital gains tax rate (36% for a corporation and a marginal tax rate of up to 50% for individuals) will be applied to the gain amount which bears the same ratio to the total gain realized as the ratio which the holding period commencing at the acquisition date and terminating on January 1, 2003 bears to the total holding period. The remainder of the gain realized will be subject to capital gains tax at a 25% rate.

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Inflationary Surplus is exempt from tax.

Upon the sale of an asset subject to capital gains tax, a tax advance of 25% of the capital gain is payable within 30 days of the transaction. The Assessing Officer may accept the actual amount of tax payable, if this is lower, provided that a detailed return including a computation of the tax due is filed within that period. Capital gains are also reportable on annual income tax returns.

• TAXATION OF ISRAELI RESIDENTS—SHAREHOLDERS SUBJECT TO THE INFLATIONARY ADJUSTMENTS LAW. The Inflationary Adjustments Law includes provisions concerning taxation on gains from the sale of traded securities. These provisions apply to most corporate shareholders and to certain individuals. There is some uncertainty as to whether those provisions also apply to foreign corporations that hold our shares because non-resident companies are not expressly exempt from them. A shareholder who is subject to the Inflationary Adjustments Law will be taxed, upon the sale of his or her Shares, on the full amount of its gain at the tax rate applicable to that shareholder (36% for a corporation and a marginal tax rate of up to 50% for individuals). It should be noted that the Tax Reform has not altered significantly the legal situation concerning this aspect of Israeli taxation.

• TAXATION OF ISRAELI RESIDENTS—OTHER SHAREHOLDERS. In July 2001 our ordinary shares were listed for trading on the Tel Aviv Stock Exchange. As a result of our dual listing and due to the Tax Reform (inclusion of new provisions concerning the taxation of capital markets) and that since our ordinary shares are no longer considered “foreign traded securities”, the tax treatment of our shareholders under Israeli law has changed.

     The following is a summary of the most significant Israeli capital gains tax implications arising with respect to the sale of our Shares by shareholders who are not engaged in the business of trading securities or who are not subject to the Inflationary Adjustments Law. As demonstrated below, the timing of that the shareholder’s purchase of the shares will determine the tax outcomes in this regard.

     Our analysis is based partially on guidelines published by the Israeli Tax Authorities prior to enactment of the Tax Reform concerning the tax treatment of securities traded in the Tel Aviv Stock Exchange and on foreign stock exchanges. Accordingly, the analysis may change should new legislation or amended guidelines be published in the future.

Sale of shares purchased after January 1, 2003

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     The shareholder will be subject to tax at 15% rate on realized real capital gain. To the extent that the shareholder claims a deduction of financing expenses, the gain will be subject to tax at a rate of 25%.

Sale of shares purchased after the listing on the Tel Aviv Stock Exchange and before January 1, 2003

• The shareholder will be subject to tax on the gain derived commencing January 1, 2003 at a rate of 15%. The cost value of the shares for the purpose of the gain computation, will be based on the average price of the shares during the last three trading days preceding January 1, 2003 or the original cost of the shares, whichever is the higher. To the extent that the taxpayer claims a deduction of financing expenses, the gain will be subject to tax at a rate of 25%.

• The remainder of the gain realized (i.e., the real gain attributed to the period from the purchase date until January 1, 2003) will be exempt from Israeli tax.

Sale of shares purchased prior to the listing on the Tel Aviv Stock Exchange

     A shareholder who elected to recognize a tax event at the listing date on the Tel Aviv Stock Exchange or rescinded an election to defer the tax event.

     If a shareholder elected to recognize a tax event on the date of the listing of our Shares on the Tel Aviv Stock Exchange, or rescinded an election to defer the tax event until the date of actual sale of the shares on the Tel Aviv Stock Exchange, the profit realized will be allocated among three separate components: (i) profit or loss determined as of the date of listing on the Tel Aviv Stock Exchange; (ii) profit or loss accrued from the date of listing the shares on the Tel Aviv Stock Exchange until January 1, 2003 and (iii) Gain (or loss) accrued from January 1, 2003 until the actual sale of the shares.

     Regarding profits determined as of the listing date, the shareholder generally will be taxed at a rate of 35% for an individual shareholder or 36% for a corporate shareholder. If such shareholder elected to defer payment of the tax on the date of listing, the shareholder will be required to pay interest and linkage to the Israeli CPI on the tax amount from the date of listing.

     Profits accrued from the date of listing of the shares on the Tel Aviv Stock Exchange until January 1, 2003 are generally exempt from capital gains tax.

     Capital gain accrued from January 1, 2003 until the actual sale of the shares will be subject to tax at a rate of 15%. The cost basis of the shares for the purpose of the gain computation, will be

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based on the average price of the shares during the last three trading days preceding January 1, 2003 or the value at the listing date, whichever is higher. To the extent that the taxpayer claims a deduction of financing expenses, the gain will be subject to tax at a rate of 25%.

     A shareholder who elected to defer the tax event until the actual sale of the shares

     If a shareholder elected to defer the tax event until the date of the actual sale of the securities and has notified the tax authorities of the election, the shareholder will generally be taxed at a rate of 35% for an individual shareholder or 36% for a corporate shareholder on all gains realized from the sale of the securities.

     Under certain interpretations of the law, reduced tax rates may apply with respect to the gain accrued as from January 1, 2003 until the actual sale of the shares.

• TAXATION OF NON-ISRAELI RESIDENTS. As mentioned above, Israeli law generally imposes a capital gains tax on sales of capital assets, including securities and any other direct or indirect rights to capital assets located in Israel. This tax is also applicable to non-residents of Israel as follows:

• Foreign investors (individuals and corporations) that are not engaged in the business of trading securities through a permanent establishment in Israel and are not subject to the Inflationary Adjustments Law, who purchased the shares after the listing on the Tel Aviv Stock Exchange will be exempt from tax on capital gains derived from the sale of the Shares.

• Foreign investors (individuals and corporations) that are not engaged in the business of trading securities and are not subject to the Inflationary Adjustments Law, who purchased Shares before the listing on the Tel Aviv Stock Exchange or will be subject to similar capital gain tax treatment as Israeli residents. The tax applicable to foreign individual investors will be determined in accordance with the marginal tax rates of up to 50% and not in accordance to the preferential 35% tax rate applicable to Israeli individual investors. However, foreign investors may be exempt under the terms of an applicable bilateral double taxation treaty.

• TAXATION OF INVESTORS ENGAGED IN A BUSINESS OF TRADING SECURITIES

     Individual and corporate dealers in securities in Israel are taxed at tax rates applicable to business income.

• WITHHOLDING AT SOURCE FROM CAPITAL GAINS FROM TRADED SECURITIES. Under the Tax Reform, Israeli stockbrokers have a duty to withhold tax upon the sale of traded securities. The applicable withholding tax rate is 15% from the real gain. As an interim measure for 2003, the stockbroker

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will withhold tax on the consideration received upon the sale at the rate of 0.5% until June 30, 2003 and at the rate of 1% from July 1, 2003 until December 31, 2003.

Dividends

     We currently do not intend to pay dividends in the foreseeable future. However, the following Israeli tax consequences would apply in the event of actual payment of any dividends on ordinary shares or ADSs.

     The distribution of dividend income, other than bonus shares (stock dividends), to Israeli residents who purchased our Shares will generally be subject to income tax at a rate of 25% for individuals and will be exempt from income tax for corporations.

     Non-residents of Israel (both individuals and corporations) are subject to income tax on income accrued or derived from sources in Israel, including dividends from Israeli corporations. The distribution of dividend income, other than bonus shares (stock dividends), to non-residents of Israel will generally be subject to income tax at a rate of 25% by way of a tax withholding, unless a lower rate is stipulated by a treaty between Israel and the shareholder’s country of residence.

Taxation of residents of the United States under the US Treaty

     Residents of the United States will generally be subject to withholding tax in Israel on dividends paid, if any, on Shares (including ADS). Generally, under the Convention Between the Government of the United States of America and the Government of the State of Israel with Respect to Taxes on Income, or the US Treaty, the maximum rate of withholding tax on dividends paid to a holder of Shares (including ADS) who is a resident of the United States (as defined in the US Treaty) will be 25%.

     The US Treaty exempts from taxation in Israel any capital gain realized on the sale, exchange or other disposition of Shares (including ADS) by a holder that (a) is a resident of the United States for purposes of the US Treaty, and (b) owns directly or indirectly, less than 10% of our voting stock at all times during the 12-month period preceding such sale, exchange or other disposition.

     Purchasers of Shares (including ADS), who are residents of the United States and who hold 10% or more of the outstanding ordinary shares at any time during such 12-month period will be subject to Israeli capital gains tax. However, under the US treaty, residents of the United States (as defined in the US Treaty) generally would be permitted to claim a credit for this tax against US federal

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income tax imposed on the sale, exchange or other disposition, subject to the limitations in US laws applicable to the utilization of the foreign tax credits generally.

     The application of the US Treaty provisions to dividends and capital gains described above is conditioned upon the fact that such income is not effectively connected with a permanent establishment (as defined in the US Treaty) maintained by the non-Israeli resident in Israel.

     A non-resident of Israel that has dividend income derived from or accrued in Israel, from which tax was withheld at the source, is generally exempt from the duty to file tax returns in Israel in respect of such income, provided such income was not connected to or derived from a trade or business conducted in Israel by the tax payer.

Repatriation

     Non-residents of Israel who acquire any of the Shares (including ADSs) of the Company will be able to repatriate dividends, liquidation distributions and the proceeds from the sale of such ADSs or ordinary shares, in non-Israeli currencies at the rate of exchange prevailing at the time of repatriation provided that any applicable Israel income tax has been paid, or withheld, on such amounts. US holders should refer to the “United States Federal Income Taxation — Dividends” section below with respect to the US federal tax treatment of foreign currency gain or loss.

United States federal income taxation

     The following discussion is a summary of the material US federal income tax considerations applicable to a US holder (as defined below) regarding the acquisition, ownership and disposition of ordinary shares or ADSs. This summary is based on provisions of the Internal Revenue Code of 1986, as amended (the “Code”), existing and proposed US Treasury regulations, administrative pronouncements, rulings and judicial decisions in effect as of the date of this Annual Report. All of these authorities are subject to change, possibly with retroactive effect, and to change or changes in interpretation. In addition, this summary does not discuss all aspects of US federal income taxation that may be applicable to investors in light of their particular circumstances or to investors who are subject to special treatment under US federal income tax law, including US expatriates, insurance companies, securities broker-dealers, financial institutions, tax-exempt organizations, persons holding ordinary shares or ADSs as part of a straddle, hedging or conversion transaction, persons subject to the alternative minimum tax, persons who acquired their ordinary shares or ADSs, pursuant to the exercise of employee stock options or otherwise as compensation, persons having a functional

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currency other than the US dollar, persons owning (directly, indirectly or by attribution) 10% or more of our outstanding share capital, and persons not holding the ordinary shares or ADSs as capital assets.

     As used herein, the term “US holder” means a beneficial holder of an ordinary share or an ADS who is:

• an individual citizen or resident of the United States for US federal income tax purposes,

• a corporation or certain other entity created or organized in or under the laws of the United States or any political subdivision thereof (including the District of Columbia),

• an estate whose income is subject to US federal income taxation regardless of its source, or

• a trust if (A) a US court is able to exercise primary supervision over the trust’s administration and (B) one or more United States persons have the authority to control all of the trust’s substantial decisions.

     If a partnership holds ordinary shares or ADSs, the tax treatment of a partner generally will depend upon the status of the partner and the activities of the partnership. If a US holder is a partner in a partnership that holds ordinary shares or ADSs, the holder is urged to consult its own tax advisor regarding the specific tax consequences of owning and disposing of ordinary shares or ADSs.

     For US federal income tax purposes, US holders of ADRs will be treated as owners of the ADSs evidenced by the ADRs and the ordinary shares represented by the ADSs. The statements of US federal income tax laws set forth assume that each obligation in the Deposit Agreement and any related agreement will be performed in accordance with its terms.

     Holders of ordinary shares or ADSs should consult their own tax advisors concerning the specific Israeli, US Federal, state and local tax consequences of the ownership and disposition of the ordinary shares or ADSs in light of their particular situations as well as any consequences arising under the laws of any other taxing jurisdiction. In particular, US holders are urged to consult their own tax advisors concerning whether they will be treated as residents of the United States, and therefore be eligible for benefits, under the US Treaty.

Dividends

     We currently do not intend to pay dividends for the foreseeable future. However, in the event we make any distributions of cash or other property to a US holder of ordinary shares or ADSs, the US holder generally will be required to include in gross income as ordinary dividend income the

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amount of any distributions paid on the ordinary shares and ADSs, including the amount of any Israeli taxes withheld in respect of such dividend, to the extent that such distributions are paid out of our current or accumulated earnings and profits as determined for US federal income tax purposes. Distributions in excess of our earnings and profits will be applied against and will reduce the US holder’s tax basis in its ordinary shares or ADSs and, to the extent in excess of such tax basis, will be treated as gain from a sale or exchange of such ordinary shares or ADSs. Dividends paid by us will not qualify for the dividends-received deduction applicable in certain cases to US corporations.

     The amount of any distribution paid in NIS, including the amount of any Israeli withholding tax thereon, will be included in the gross income of a US holder of ordinary shares in an amount equal to the US dollar value of the NIS calculated by reference to the spot rate of exchange in effect on the date the distribution is received by the US holder or, in the case of ADSs, by the Depositary. If a US holder converts dividends paid in NIS into US dollars on the day such dividends are received, the US holder generally should not be required to recognize foreign currency gain or loss with respect to such conversion. If the NIS received in the distribution is not converted into US dollars on the date of receipt, any foreign currency gain or loss recognized upon a subsequent conversion or other disposition of the NIS will be treated as US source ordinary income or loss.

     Any dividends paid by us to a US holder on the ordinary shares or ADSs will be treated as foreign source income and will be categorized as “passive income” or, in the case of certain holders, “financial services income” for US foreign tax credit purposes. Subject to the limitations in the Code, as modified by the US Treaty, a US holder may elect to claim a foreign tax credit against its US federal income tax liability for Israeli income tax withheld from dividends received in respect of ordinary shares or ADSs. The US Treasury has expressed concerns that parties to whom ADSs are released may be taking actions that are inconsistent with the claiming of foreign tax credit for US holders of ADSs. Accordingly, the discussion above regarding the creditability of the Israeli withholding tax on dividends could be affected by future actions that may be taken by the US Treasury. The rules relating to the determination of the foreign tax credit are complex. Accordingly, if you are a US holder of ordinary shares or ADSs, you should consult your own tax advisor to determine whether and to what extent you would be entitled to the credit. US holders who do not elect to claim foreign tax credit may instead claim a deduction for Israeli income tax withheld, but only for a year in which the US holder elects to do so with respect to all foreign income taxes. A deduction does not reduce US tax on a dollar-for-dollar basis like a tax credit. The deduction, however, is not subject to the limitations applicable to foreign tax credits.

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Sale or other disposition

     Upon the sale or other disposition of ordinary shares or ADSs, a US holder generally will recognize capital gain or loss equal to the difference between the US dollar value of the amount realized on the disposition and the holder’s adjusted tax basis, determined in US dollars, in the ordinary shares or ADSs. Any gain or loss recognized upon the disposition of the ordinary shares or ADSs will be treated as long-term capital gain or loss if, at the time of the disposition, the holding period of the ordinary shares or ADSs exceeds one year. In the case of individual US holders, capital gains generally are subject to US federal income tax at preferential rates if specified minimum holding periods are met. The deductibility of capital losses by a US holder is subject to significant limitations.

     In general, gain or loss recognized by a US holder on the sale or other disposition of ordinary shares or ADSs will be US source income or loss for US foreign tax credit purposes. Pursuant to the US Treaty, however, gain from the sale or other disposition of ordinary shares or ADSs by a holder who is a US resident, for US Treaty purposes, and who sells the ordinary shares or ADSs within Israel may be treated as foreign source income for US foreign tax credit purposes.

     If a US holder receives NIS upon the sale of ordinary shares, that US holder may recognize ordinary income or loss as a result of currency fluctuations between the date of the sale of the ordinary shares and the date the sales proceeds are converted into US dollars, as described above in connection with the receipt of dividends.

Information reporting and backup withholding

     Dividend payments with respect to ordinary shares or ADSs and proceeds from the sale or other disposition of ordinary shares or ADSs may be subject to information reporting to the Internal Revenue Service (“IRS”) and possible US backup withholding at a current rate of 30%. Backup withholding will not apply, however, to a holder who furnishes a correct taxpayer identification number or certificate of foreign status and makes any other required certification or who is otherwise exempt from backup withholding. US persons who are required to establish their exempt status generally must provide IRS Form W-9 (Request for Taxpayer Identification Number and Certification). Non-US holders generally will not be subject to US information reporting or backup withholding. However, such holders may be required to provide certification of non-US status (generally on IRS Form W-8BEN) in connection with payments received in the United States or through certain US-related financial intermediaries.

     Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against a holder’s US federal income tax liability, and a holder may obtain a refund of any

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excess amounts withheld by filing the appropriate claim for refund with the IRS and furnishing any required information.

10F. Dividends and Paying Agents

Not applicable.

10G. Statement By Experts

Not applicable.

10H. Documents on Display

     Reports and other information of Partner filed electronically with the U.S. Securities and Exchange Commission may be found at www.sec.gov. They can also be inspected without charge and copied at prescribed rates at the public reference facilities maintained by the SEC in Room 1024, 450 Fifth Avenue, N.W., Washington, D.C. 20549 and, as long as our notes are listed on the Luxembourg Stock Exchange, at the office of the paying agent in Luxembourg. Copies of this material are also available by mail from the Public Reference Section of the SEC, at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.

10I. Subsidiary Information

Not applicable.

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ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

General

     We are exposed to market risk, including movements in foreign currency exchange rates. Where appropriate, we enter into derivative transactions to hedge underlying exposure to interest rates and foreign currencies. As a matter of policy we do not enter into transactions of a speculative or trading nature. Interest rate and foreign exchange exposures are monitored by tracking actual and projected commitments and through the use of sensitivity analysis.

     We have borrowings in US dollars, shekels linked to the Israeli CPI and unlinked shekels. The following table provides information derived from the financial statements about these borrowings.

Non-derivative instruments

	Book value(1) (NIS equivalent in
	millions, except percentages)
US Dollar Borrowings
Long term—subordinated notes		829
Fixed interest rate payable on our senior subordinated notes		13	%
NIS Linked to the Israeli CPI
Long-term—fixed		629
Weighted average interest rate payable on fixed rate debt		6.6	%
Unlinked NIS
Long-term—floating		1,839
Weighted average interest rate payable on floating rate debt		10.0	%
Total		3,297

(1) Book value approximates fair value at December 31, 2002.

Expected Maturity Dates:

     Our credit facility is divided into three tranches: A multi-currency term loan facility of $410 million (“Facility A”), a revolving multi-currency loan facility of $150 million (“Facility B”) and a fixed-term shekel loan facility of $150 million (“Facility C”).

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The total commitments under the Facilities will be reduced during each of the following years to the following amounts:*

	Dollars in millions
	A		B		C		Total
December 31, 2002		410		150		150		710
2003		385		150		150		685
2004		356		150		150		656
2005		266		150		141		557
2006		172		150		114		436
2007		62		150		84		296
2008		0		0		72		72
June 30, 2009		0		0		0		0

     On August 10, 2000, the Company completed an offering of $175 million of unsecured senior subordinated notes due 2010, which have been issued at their dollar par value. The notes bear interest at the rate of 13% per annum, which is payable semi-annually on each February 15 and August 15, commencing February 15, 2001. The Company may redeem up to 35% of the aggregate principal amount of the notes at any time prior to August 15, 2003, provided that immediately after giving effect to any such redemption, at least 65% of the aggregate principal amount of the notes remains outstanding.

Foreign exchange

     Substantially all of our revenues and a majority of our operating expenses are denominated in shekels. However, through December 31, 2002, a material amount of our operating expenses were linked to non-shekel currencies. These expenses related mainly to the acquisition of handsets where the price paid by us is based on various foreign currencies. In addition, a substantial majority of our capital expenditures are incurred in, or linked to, non-shekel currencies, and our notes are denominated in US dollars and require US dollar interest payments. Thus, any devaluation of the shekel against the dollar (or other foreign currencies), will increase the shekel cost of our non-shekel denominated or linked expenses. Such an increase may have an adverse impact on our results, which may be material. We hedge some of our foreign currency commitments, but we do not currently hedge the principal payable on our notes.

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     We are exposed from time to time to movements in foreign currency exchange rates on short-term liabilities to suppliers, denominated in US dollars or euros. Our hedging strategy is to neutralize and mitigate our currency exposures by entering into hedging transactions which convert into shekels the liabilities not denominated in shekels.

     We enter into foreign currency forward transactions and purchases and write foreign currency options in order to protect ourselves against the risk that the eventual dollar cash flows resulting from the existing assets and liabilities will be affected by changes in exchange rates. The writing of such options is part of a comprehensive hedging strategy and is designed to effectively swap the currencies relating to existing assets and liabilities. Each of the options written is combined with purchase of an option for the same period and the same notional amount. We do not hold or issue derivative financial instruments for trading purposes.

     The transactions are mainly designated to hedge the cash flows related to payments of dollar interest on notes payable as well as those related to anticipated payments in respect of purchases of handsets and capital expenditures in foreign currency. However, these contracts do not qualify for hedge accounting under FAS 133.

     The notional amount does not necessarily represent amounts exchanged by the parties and, therefore, is not a direct measure of our exposure.

     The following table provides information derived from the financial statements about our outstanding foreign exchange instruments.

Derivative instruments

		As of				Fair value at
		December 31,		Maturing		December 31,
		2002		in 2003		2002
		(NIS equivalent in millions)
Currency options purchased—for the exchange of:
	Dollars into NIS		431		431		2.8
Currency options written—for the exchange of:
	Dollars into NIS		431		431		(5.7	)
Forward transactions—for the exchange of:
	Dollars into NIS		264		264		(1.7	)
	Euros into NIS		52		52		2.7
Embedded derivatives—
	Dollars into NIS		41		41		(0.1	)

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ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND
USE OF PROCEEDS

None.

ITEM 15. CONTROLS AND PROCEDURES

     Our Chief Executive Officer and our Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in US Exchange Act rule 13a-14(c)) within 90 days of the date of this Form 20-F, have concluded that, as of such date, our disclosure controls and procedures were effective to ensure that material information relating to us was made known to them by others within the Company particularly during the period in which this Form 20-F was being prepared.

     There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date our Chief Executive Officer and our Chief Financial Officer completed their evaluation, nor were there any significant deficiencies or material weaknesses in our internal controls requiring corrective actions.

ITEM 16. [RESERVED]

ITEM 17. FINANCIAL STATEMENTS

The company has responded to “Item 18. Financial Statements” in lieu of responding to this item.

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ITEM 18. FINANCIAL STATEMENTS

The following financial statements are filed as part of this annual report.

		Page
Report of Independent Auditors			F-1
Financial Statements:
	Balance sheets at December 31, 2001 and 2002		F-2–F-3
	Statements of operations for the years ended December 31, 2000, 2001 and 2002		F-4
	Statements of changes in shareholders’ equity (capital deficiency) for the years ended December 31, 2000, 2001 and 2002		F-5–F-6
	Statements of cash flows for the years ended December 31, 2000, 2001 and 2002		F-7–F-8
	Notes to financial statements		F-9–F-45

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ITEM 19. EXHIBITS

Exhibit
Number	Description
1.1	Partner’s Articles of Association
*1.2	Partner’s Certificate of Incorporation
*1.3	Partner’s Memorandum of Association
**2.(a).1	Form of Share Certificate
**2.(a).2	Form of Deposit Agreement including Form of ADR Certificate
*2.(b)	Form of Indenture between Partner and The Bank of New York, as trustee, including form of note
**4.(a).1	Relationship Agreement dated October 10, 1999
**4.(a).2	License from the Israeli Ministry of Communications issued April 8, 1998
**4.(a).3	Bank Facility dated August 13, 1998
**4.(a).4	License Agreement for use of the Orange Brand in Israel dated September 14, 1998
**4.(a).5	Brand Support/Technology Transfer Agreement dated July 18, 1999
**4.(a).6	Agreement with Ericsson Radio Systems AB dated May 28, 1998
#4.(a).7	Agreement with LM Ericsson Israel Ltd. dated November 25, 2002
#***4.(a).8	Dealer Agreement with SuperPharm dated February 11, 2001
**4.(a).9	Lease Agreement with Mivnei Taasia dated July 2, 1998
**4.(a).10	Interconnect Agreement with Cellcom dated February 15, 1999
**4.(a).11	Interconnect Agreement with Pelephone dated May 1, 1999
*4.(a).12	Amending and Rescheduling Agreement dated July 9, 2000
4.(a).13	Supplemental Agreement dated April 18, 2002
+4.(a).14	Amendment to Relationship Agreement dated April 23, 2002
***4.(a).15	Amendment No. 1 to License from the Israeli Ministry of Communications issued May 11, 1999
***4.(a).16	Amendment No. 2 to License from the Israeli Ministry of Communications issued September 29, 1999
***4.(a).17	Amendment No. 3 to License from the Israeli Ministry of Communications issued October 3, 1999
***4.(a).18	Amendment No. 4 to License from the Israeli Ministry of Communications issued June 28, 2000
***4.(a).19	Amendment No. 5 to License from the Israeli Ministry of Communications issued September 10, 2000
***4.(a).20	Amendment No. 6 to License from the Israeli Ministry of Communications issued March 19, 2001
+4.(a).21	Amendment No. 7 to License from the Israeli Ministry of Communications issued September 23, 2001
+4.(a).22	Amendment No. 8 to License from the Israeli Ministry of Communications issued December 27, 2001
+4.(a).23	Amendment No. 9 to License from the Israeli Ministry of Communications issued March 13, 2002
+4.(a).24	Amendment No. 10 to License from the Israeli Ministry of Communications issued April 14, 2002
+4.(a).26	Amendment No. 11 to License from the Israeli Ministry of Communications issued April 25, 2002

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Exhibit
Number	Description
4.(a).27	Amendment No. 12 to License from the Israeli Ministry of Communications issued June 26, 2002
4.(a).28	Amendment No. 13 to License from the Israeli Ministry of Communications issued June 30, 2002
4.(a).29	Amendment No. 14 to License from the Israeli Ministry of Communications issued September 11, 2002
4.(a).30	Amendment No. 15 to License from the Israeli Ministry of Communications issued October 24, 2002
4.(a).31	Amendment No. 16 to License from the Israeli Ministry of Communications issued November 26, 2002
4.(a).32	Amendment No. 17 to License from the Israeli Ministry of Communications issued February 2, 2003
+4.(a).33	Amending Agreement to the Facility Agreement dated January 8, 2002
+4.(a).34	Amending Agreement to the Facility Agreement dated January 30, 2002
+4.(a).35	Amending Agreement to the Facility Agreement dated February 6, 2002
+4.(a).36	Amending Agreement to the Facility Agreement dated February 28, 2002
+4.(a).37	Amending Agreement to the Facility Agreement dated March 14, 2002
+4.(a).38	Amending Agreement to the Facility Agreement dated March 24, 2002
+4.(a).39	Amending Agreement to the Facility Agreement of April 2002
+4.(a).40	Amending Agreement to the Facility Agreement dated April 24, 2002
4.(a).41	Amending Agreement to the Facility Agreement dated December 31, 2002
6.	See Note 1q to our financial statements for information explaining how earnings (loss) per share information was calculated.
8.	List of Subsidiaries
10.(a).1	Consent of Kesselman & Kesselman
10.(a).2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*	Incorporated by reference to our registration statement on Form F-1 (No. 333-12340).
**	Incorporated by reference to our registration statement on Form F-1 (No. 333-10992).
***	Incorporated by reference to our annual report on Form 20-F for the fiscal year ended December 31, 2000.
+	Incorporated by reference to our annual report on Form 20-F for the fiscal year ended December 31, 2001.
#	Confidential treatment requested.

     Confidential material has been redacted and has been separately filed with the Securities and Exchange Commission.

Page 165

Glossary of Selected
Telecommunications Terms

     The following explanations are not intended as technical definitions, but to assist the reader to understand certain terms as used in this annual report.

AMPS	Advanced Mobile Phone System; the analogue cellular telephone technology adopted in the United States. Also N-AMPS (Narrowband AMPS), a more frequency-efficient variant of AMPS.
Analog Technology	A technology in which some property of an electrical signal is varied proportionally to the input signal being transmitted, stored or processed.
Base Transceiver Station (“BTS”)	Fixed transmitter/receiver equipment in each cell of a mobile telecommunications network that communicates by radio with all mobile telephones in that cell.
Base Station Controller (“BSC”)	Monitors and controls one or more base stations in order to exchange messages, handover mobile units from cell to cell and perform other system administrative tasks.
Blocked call	Where a mobile phone call fails because no channels are available in the cell in which the user is located.
CDMA	Code Division Multiple Access; a method by which many users sharing the same radio channel can be distinguished by unique code numbers.
Cell	In a cellular telephone system, the coverage area of a single base transceiver station or one sector therein.
Channel	A frequency or time slot in a telecommunications system over which distinct messages can be conveyed.
Churn	The number of customers who are disconnected from a network, either involuntarily, due to payment delinquency or suspected fraudulent use, or voluntarily, as customers switch to competing networks, relocate outside the network’s service area, or cease using mobile telephones permanently or temporarily.
Closed User Group	A group of users with a special mutual relationship (such as working for the same company or department within a company).
D-AMPS	Digital Advanced Mobile Phone System; a digital cellular system first implemented in the United States and intended initially to permit gradual upgrading of AMPS networks.
Digital Technology	A technology in which a signal is converted to a stream of numbers which are in turn stored, processed or transmitted in a binary (on-off) manner.
Dropped call	When a mobile phone call is involuntarily terminated.

Page 166

Dual band handsets	Handsets that operate on two bands, for example, GSM 900 and GSM 1800.
GPRS	General Packet Radio Services (GPRS) is a packet-based wireless communication service that enables data rates from 56 up to 114 Kbps and continuous connection to the Internet for mobile phone and computer users. GPRS is based on Global System for Mobile (GSM) communication.
GSM	The Global System for Mobile Communications, a comprehensive digital standard for the operation of all elements of a cellular telephone system. GSM originated in Europe, but is now the most popular digital mobile telephone standard worldwide.
GSM 900	GSM operation in the 900 MHz frequency band; the original frequency band allocated to GSM, later extended by 10 MHz (EGSM).
GSM 1800	GSM operation in the 1800 MHz frequency band; formerly known as DCS 1800 or PCN, first allocated for the expansion of mobile network competition in Europe, now used for the same purpose in many other areas.
GSM 1900	GSM operation in the 1900 MHz band; primarily used in North and South America
GSM Association	Formerly known as the GSM Memorandum of Understanding Association (GSM MoU), an organization of operators, government administrations, and equipment and service suppliers that promotes the development and promulgation of the GSM standard and relations between GSM operators.
HSCSD	High Speed Circuit Switched Data is an infrastructure development which enables the transmission of data at higher speeds than the 9600 Bps speed previously available on GSM networks.
Intelligent Network (“IN”)	Network architecture that centralizes the processing of calls and billing information of calls.
Microcells	A base transceiver station of limited range and capacity intended to serve a relatively small area, such as a building or mall.
Mobile Switching Center (“MSC”)	A large, computer-based device used to connect calls within a mobile network and as the interface of the cellular network to other networks.
PLMN	A Public Land Mobile Network, or a mobile telephone network which is available for use by the public.
PSTN	A Public Switched Telephone Network, or the fixed (landline) telephone network.
Roaming	The mobile telephone feature that permits subscribers of one network to use their mobile telephones and telephone numbers when in another operator’s network.

Page 167

SIM roaming	The use of a GSM customer’s SIM in a different handset while roaming in a network that operates on a frequency band or system incompatible with the subscriber’s own GSM handset.
SMS	Short message service, a service which enables mobile telephone users to send and receive written messages on their handsets.
Subscriber Identity Module	SIM or SIM Card; a small card or chip provided to each GSM network subscriber that is inserted into a GSM handset. The SIM is a computer processor that uniquely identifies a GSM network subscription and stores the subscriber’s personal phone book, sent and received text messages, network security codes and other programs that enable addition network features.
Switch	Element of a telephone network which connects telephone calls to and from one user or another on the same or other networks.
TDMA	Time Division Multiple Access; a method by which many users can share a single digit radio channel by dividing it into a number of repeating part-time channels to which each user has access in turn.
UMTS	Universal Mobile Telecommunications System, the “third generation” of mobile telecommunications standard also referred to as 3G.
Virtual Private Network (“VPN”)	A private network provided by means of the facilities of a public telephone network but which operates by logic as a closed user group thereby providing the convenience of a private network with the economy of scale of a public network.
WAP	Wireless Application Protocol, a language specifically developed for mobile telephones that facilitates internet usage.

Page 168

REPORT OF INDEPENDENT AUDITORS

To the Shareholders of

Partner Communications Company Ltd.

     We have audited the consolidated balance sheets of Partner Communications Company Ltd. and its subsidiary (collectively “the Company”) as of December 31, 2001 and 2002 and the related consolidated statements of operations, changes in shareholders’ equity (capital deficiency) and cash flows for each of the three years in the period ended December 31, 2002. These financial statements are the responsibility of the Company’s Board of Directors and management. Our responsibility is to express an opinion on these financial statements based on our audits.

     We conducted our audits in accordance with auditing standards generally accepted in Israel and in the United States, including those prescribed by the Israeli Auditors (Mode of Performance) Regulations, 1973. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above, present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2001 and 2002 and the consolidated results of operations, changes in shareholders’ equity (capital deficiency) and cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States.

	/s/ Kesselman & Kesselman
Tel-Aviv, Israel	Kesselman & Kesselman
March 13, 2003	Certified Public Accountants (Israel)

Kesselman & Kesselman is a member of PricewaterhouseCoopers International Limited,
a company limited by guarantee registered in England and Wales.

Page F-1

PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
CONSOLIDATED BALANCE SHEETS

				December 31
				2001		2002		2002
								Convenience
								translation
								into U.S. $
				New Israeli Shekels				(note 1a)
				In thousands
A s s e t s
CURRENT ASSETS:
	Cash and cash equivalents				5,272		1,360		287
	Security deposit (note 6)						107,794		22,756
	Accounts receivable (note 13):
		Trade			458,434		518,768		109,514
		Other			42,930		50,986		10,763
	Inventories				124,512		137,508		29,028
			T o t a l  current assets		631,148		816,416		172,348
INVESTMENTS AND LONG-TERM RECEIVABLES:
	Non-marketable securities (note 2)				8,244		3,530		745
	Security deposit (note 6)				100,869
	Accounts receivable—trade (note 13)				3,696
	Funds in respect of employee rights upon retirement (note 7)				28,160		42,461		8,964
					140,969		45,991		9,709
FIXED ASSETS, net of accumulated depreciation and amortization (note 3)					1,749,052		1,864,511		393,606
LICENSE AND DEFERRED CHARGES, net of accumulated amortization (note 4)					1,112,959		1,269,348		267,965
			T o t a l  assets		3,634,128		3,996,266		843,628

/s/ Amikam Cohen	/s/ Alan Gelman	/s/ Avraham Bigger
Amikam Cohen Chief Executive Officer	Alan Gelman Chief Financial Officer	Avraham Bigger Director

Page F-2

				December 31
				2001			2002			2002
										Convenience
										translation
										into U.S. $
				New Israeli Shekels						(Note 1a)
				In thousands
Liabilities, Net of Capital Deficiency
Current Liabilities:
	Current maturities of long-term bank loans (note 5)				483,897
	Accounts payable and accruals:
		Trade			524,642			532,987			112,516
		Other (note 13)			186,165			202,166			42,678
			T o t a l  current liabilities		1,194,704			735,153			155,194
Long-Term Liabilities:
	Bank loans, net of current maturities (note 5)				1,818,066			2,467,556			520,911
	Notes payable (note 6)				772,800			828,975			175,000
	Liability for employee rights upon retirement (note 7)				42,334			60,966			12,870
			T o t a l  long-term liabilities		2,633,200			3,357,497			708,781
Commitments and Contingent Liabilities (note 8)
			T o t a l  liabilities		3,827,904			4,092,650			863,975
Capital Deficiency (note 9):
	Share capital - ordinary shares of NIS 0.01 par value: authorized - December 31, 2001 200,000,000 shares and December 31, 2002 - 235,000,000 shares; issued and outstanding - December 31, 2001 - 178,924,585 shares and December 31, 2002 - 181,595,222 shares				1,789			1,816			383
	Capital surplus				2,298,080			2,293,270			484,119
	Deferred compensation				(24,362	)		(6,385	)		(1,348	)
	Accumulated deficit				(2,469,283	)		(2,385,085	)		(503,501	)
			T o t a l  capital deficiency		(193,776	)		(96,384	)		(20,347	)
					3,634,128			3,996,266			843,628

The accompanying notes are an integral part of the financial statements.

Page F-3

PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
CONSOLIDATED STATEMENTS OF OPERATIONS

			Year Ended December 31
			2000			2001			2002		2002
											Convenience
											translation
											into U.S. $
			New Israeli Shekels								(Note 1a)
			In Thousands (Except Per Share Data)
Revenues, net				2,103,859			3,249,349			4,054,563		855,935
Cost of Revenues				2,161,507			2,719,163			3,069,458		647,975
Gross Profit (Loss)				(57,648	)		530,186			985,105		207,960
Selling and Marketing Expenses				327,881			292,960			308,079		65,037
General and Administrative Expenses				154,637			134,282			143,594		30,313
Operating Profit (Loss)				(540,166	)		102,944			533,432		112,610
Financial Expenses, net				228,609			400,927			445,180		93,979
Loss on Impairment of Investments in Non-Marketable Securities (note 2)							8,862			4,054		856
Net Income (Loss) Before Cumulative Effect of a Change in Accounting Principles				(768,775	)		(306,845	)		84,198		17,775
Cumulative Effect, at Beginning of Year, of a Change in Accounting Principles (note 1)							3,483
Net Income (Loss) for the Year				(768,775	)		(303,362	)		84,198		17,775
Earnings (Loss) Per Share (“EPS”):
	Basic:
		Before cumulative effect		(4.30	)		(1.72	)		0.47		0.10
		Cumulative effect					0.02
				(4.30	)		(1.70	)		0.47		0.10
	Diluted:
		Before cumulative effect		(4.30	)		(1.72	)		0.46		0.10
		Cumulative effect					0.02
				(4.30	)		(1.70	)		0.46		0.10
Weighted Average Number of Shares Outstanding:
	Basic			178,888,888			178,909,274			179,984,090		179,984,090
	Diluted			178,888,888			178,909,274			183,069,394		183,069,394

The accompanying notes are an integral part of the financial statements.

Page F-4

Partner Communications Company Ltd.
(An Israeli Corporation)

Consolidated Statements Of Changes In Shareholders’ Equity (Capital Deficiency)

			Share capital
			Number of				Capital				Deferred			Accumulated
			shares		Amount		surplus				compensation			deficit			Total
										(In thousands)
New Israeli Shekels:
	Balance at December 31, 1999			178,888,888		1,789		2,280,968				(84,619	)		(1,397,146	)		800,992
	Changes During the Year Ended December 31, 2000:
		Receipts from exercise of stock options granted to employees on account of shares to be allotted						5										5
		Deferred compensation related to employee stock option grants						37,020				(37,020	)
		Amortization of deferred compensation related to employee stock options grants										56,618						56,618
		Loss													(768,775	)		(768,775	)
	Balance at December 31, 2000			178,888,888		1,789		2,317,993				(65,021	)		(2,165,921	)		88,840
	Changes During the Year Ended December 31, 2001:
		Exercise of options granted to employees		35,697		*		47										47
		Amortization of deferred compensation related to employee stock option grants net of deferred compensation with respect to stock options forfeited						(19,960	)			40,659						20,699
		Loss													(303,362	)		(303,362	)
	Balance at December 31, 2001			178,924,585		1,789		2,298,080				(24,362	)		(2,469,283	)		(193,776	)
	Changes During the Year Ended December 31, 2002:
		Exercise of options granted to employees		2,670,637		27		4,210										4,237
		Amortization of deferred compensation related to employee stock option grants net of deferred compensation with respect to stock options forfeited						(9,020	)			17,977						8,957
		Net income													84,198			84,198
	Balance at December 31, 2002			181,595,222		1,816		2,293,270				(6,385	)		(2,385,085	)		(96,384	)

* Representing an amount less than NIS 1,000

F-5

			Share capital
			Number of				Capital				Deferred			Accumulated
			shares		Amount		surplus				compensation			deficit			Total
										(In thousands)
Convenience translation into u.s. dollars (note 1a):
	Balance at January 1, 2002			178,924,585		377		485,135				(5,143	)		(521,276	)		(40,907	)
	Changes During the Year Ended December 31, 2002:
		Exercise of options granted to employees		2,670,637		6		888										894
		Amortization of deferred compensation related to employee stock option grants net of deferred compensation with respect to stock options forfeited						(1,904	)			3,795						1,891
		Net income													17,775			17,775
	Balance at December 31, 2002			181,595,222		383		484,119				(1,348	)		(503,501	)		(20,347	)

The accompanying notes are an integral part of the financial statements.

F-6

PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
CONSOLIDATED STATEMENTS OF CASH FLOWS

				Year ended December 31
				2000			2001			2002			2002
													Convenience
													translation
													into U.S. $
				New Israeli Shekels									(note 1a)
				In thousands
Cash Flows From Operating Activities:
	Net income (loss) for the year				(768,775	)		(303,362	)		84,198			17,775
	Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
		Depreciation and amortization			431,510			538,267			516,199			108,972
		Loss on impairment of investments in non-marketable securities						8,862			4,054			856
		Amortization of deferred compensation related to employee stock option grants, net			56,618			20,699			8,957			1,891
		Liability for employee rights upon retirement			11,581			18,736			18,632			3,933
		Accrued interest, exchange and linkage differences on (erosion of) long-term liabilities			(13,214	)		54,522			91,027			19,216
		Accrued interest and exchange differences on security deposit			(2,574	)		(6,590	)		(6,925	)		(1,462	)
		Amount carried to deferred charges			(7,489	)		(22	)		(3,805	)		(803	)
		Sundry			(181	)		1,647			839			177
	Changes in operating asset and liability items:
		Decrease (increase) in accounts receivable:
			Trade		(197,308	)		(55,944	)		(56,638	)		(11,957	)
			Other		23,970			(14,235	)		(8,056	)		(1,701	)
	Increase (decrease) in accounts payable and accruals:
			Trade		93,499			57,271			31,909			6,736
			Shareholder’s current account		20			(2,230	)
			Other		84,685			68,068			14,796			3,124
		Decrease (increase) in inventories			(65,614	)		36,859			(12,996	)		(2,744	)
	Net cash provided by (used in) operating activities				(353,272	)		422,548			682,191			144,013
Cash Flows From Investing Activities:
	Purchase of fixed assets				(712,377	)		(601,050	)		(599,769	)		(126,613	)
	Proceeds from sale of fixed assets				1,063			1,771			5,737			1,211
	Investment in non-marketable securities							(16,446	)
	Investment in security deposit				(91,705	)
	Purchase of additional spectrum										(207,635	)		(43,833	)
	Funds in respect of employee rights upon retirement				(6,712	)		(13,336	)		(14,301	)		(3,019	)
	Net cash used in investing activities				(809,731	)		(629,061	)		(815,968	)		(172,254	)

Page F-7

PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
CONSOLIDATED STATEMENTS OF CASH FLOWS

		Year Ended December 31
		2000			2001			2002			2002
											Convenience
											translation
											into U.S. $
		New Israeli Shekels									(note 1a)
		In thousands
CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from exercise of stock options granted to employees		5			47			4,237			894
	Proceeds from issuance of notes payable, net		684,463
	Long-term bank loans received		1,119,032			1,111,869			1,349,326			284,848
	Repayment of long-term bank loans		(1,054,725	)		(901,000	)		(1,223,698	)		(258,327	)
	Net cash provided by financing activities		748,775			210,916			129,865			27,415
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			(414,228	)		4,403			(3,912	)		(826	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR			415,097			869			5,272			1,113
CASH AND CASH EQUIVALENTS AT END OF YEAR			869			5,272			1,360			287
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION—CASH PAID DURING THE YEAR:
	Interest		164,198			285,465			323,841			68,364
	Advances to income tax authorities		1,440			5,617			5,207			1,099

Supplementary information on investing activities not involving cash flows

At December 31, 2000, 2001 and 2002, trade payables include NIS 144,482,000, NIS 148,276,000 and NIS 117,406,000 ($ 24,785,000), respectively, in respect of acquisition of fixed assets. In addition, at December 31, 2002, trade payables include NIS 7.2 million ($ 1.5 million) in respect of acquisition of additional spectrum. These balances will be given recognition in these cash flow statements upon payment.

The accompanying notes are an integral part of the financial statements.

Page F-8

PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies, applied on a consistent basis, are as follows:

a.	General:
	Nature of Operations:

1)	Partner Communications Company Ltd. (“the Company”) operates a mobile telecommunications network based upon the Global System for Mobile Communications (“GSM”) Standard in Israel.
2)	The Company was incorporated on September 29, 1997. The Company operates under a license granted by the Ministry of Communications to operate a cellular telephone network for a period of 10 years beginning April 7, 1998. At the beginning of January 1999, the Company commenced full commercial operations.
	The Company paid a “one-time” license fee of approximately new Israeli shekels (NIS) 1.6 billion which is presented under “license and deferred charges”. The Company is entitled to request extension of the license for an additional period of six years and then renewal for one or more further six year periods. Should the license not be renewed, the new license-holder is obliged to purchase the communications network and all the rights and obligations of the subscribers for a fair price, as agreed between the parties or as determined by an arbitrator.
	In December 2001, the Company was awarded additional spectrum (2G band (1800MHz) and 3G band (1900MHz and 2100MHz)). Following the award of the above spectrum, the Company’s license was amended and extended through 2017. During June 2002, the Minister of Communications amended and extended the license through 2022.
	As to the change in estimate of the useful life of the license see also note f(1) below.
	In consideration for the above additional spectrum the Company is committed to pay NIS 180 million ($38 million) for the 2G spectrum in two installments (payable by the end of 2003) and NIS 220 million ($46 million) for the 3G spectrum in six installments through

Page F-9

2006. Out of the above mentioned amounts, approximately NIS 208 million (approximately $44 million) was paid during the year ended December 31, 2002.

Under the terms of the amended license, the Company has provided a guarantee in NIS equivalent to $ 20 million to the State of Israel to secure the Company’s adherence to the terms of the license.

	Use of estimates in the preparation of financial statements
	The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting years. Actual results could differ from those estimates.
	Functional currency and reporting currency
	The functional currency of the Company and its subsidiary is the local currency New Israeli Shekels — NIS. The consolidated financial statements have been drawn up on the basis of the historical cost of Israeli currency and are presented in NIS.
	Convenience translation into U.S. dollars (“Dollars” or “$”)
	The NIS figures at December 31, 2002 and for the year then ended have been translated into dollars using the representative exchange rate of the dollar at December 31, 2002 ($1 = NIS 4.737). The translation was made solely for convenience. The translated dollar figures should not be construed as a representation that the Israeli currency amounts actually represent, or could be converted into, dollars.
	Accounting principles
	The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP).
b.	Principles of consolidation:

1)	The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary (together — the Group).
2)	Intercompany balances between the Company and its subsidiary have been eliminated.

Page F-10

c.	Inventories
	Inventories of cellular telephones (handsets) and accessories are stated at the lower of cost or net realizable value (which reflects the value to the business of the handsets in the hands of the subscribers). Cost is determined on the “first-in, first-out” basis.
d.	Non-marketable securities
	These investments are stated at cost, less of impairment losses.
e.	Fixed Assets:

1)	These assets are stated at cost, handsets for use abroad by subscribers are carried by the base stock method.
2)	Direct consultation and supervision costs and other direct costs relating to setting up the Company’s communications network and information systems for recording and billing calls are capitalized to cost of the assets.
3)	Interest costs in respect of loans and credit which served to finance the construction or acquisition of fixed assets — incurred until installation of the fixed assets is completed — are capitalized to cost of such assets.
4)	Assets are depreciated by the straight-line method, on basis of their estimated useful life. Annual rates of depreciation are as follows:

	%
Communications network	10 — 20 (mainly 15)
Computers, hardware and software for information systems	15-33
Vehicles	20
Office furniture and equipment	7-15

Leasehold improvements are amortized by the straight-line method over the term of the lease, or the estimated useful life of the improvements, whichever is shorter.

During 2002, the Company decided to terminate the lease agreement for one of its headquarter buildings on March 2003, in favor of a new building (see note 8a(2)d) and abandon part of its leasehold improvements.

Page F-11

	Following the abandonment of the leasehold improvements the amortized balance of the existing leasehold improvements is amortized on a straight-line basis as of October 1, 2002—over the period of 6 months ending March 31, 2003.
	As a result of that change, in 2002, amortization expenses increased and net income decreased by approximately NIS 7 million (approximately $ 1.5 million) and earnings per share, basic and diluted, decreased by NIS 0.04 ($ 0.01) compared to the figures computed based on the amortization rates used prior to the changes in the estimated useful life.
5)	Computer Software Costs
	The cost of internal-use software which has a useful life in excess of one year is capitalized in accordance with Statement of Position (SOP) No. 98-1, “ Accounting for the Costs of Computer Software Developed or Obtained for Internal Use.” Subsequent additions, modifications or upgrades to internal-use software are capitalized only to the extent that they allow the software to perform a task it previously did not perform. Software maintenance and training costs are expensed in the period in which they are incurred. Capitalized computer software costs are amortized using the straight-line method over a period of 5 to 7 years.

f. License and Deferred Charges:

1)	License (see also a(2) above): The license is stated at cost and is amortized by the straight-line method over the utilization period of the license (January 1, 1999—commencement).
	Through the period ended December 31, 2001 the license was amortized over 9.25 years.
	Following the extensions of the license (as described in note 1a. above) the amortized balance of the Company’s existing license as well as the cost of the additional spectrum put into service are amortized on a straight-line basis as follows: as of January 1, 2002—over the period ending in 2017; as of April 1, 2002—over the period ending in 2022.
	The costs relating to 3G band are not amortized since the utilization period has not yet commenced.
	As a result of that change, in 2002, license amortization expenses (included in “cost of revenues”) decreased and net income increased by approximately NIS 113 million (approximately $ 24 million) and earnings per share increased by NIS 0.63 ($ 0.13)

Page F-12

	compared to the figures computed based on the amortization rates used prior to the changes in the estimated useful life.
	Expenses in obtaining loans and credit which served to finance the license fee—incurred until the commencement of utilization of the license—are capitalized to cost of the license.
	During the year 2002—NIS 7 million ($ 1.5 million) interest costs were capitalized to the cost of the license.
2)	Deferred charges:

(a)	Costs relating to the obtaining of long-term credit lines are amortized using the effective interest rate stipulated for the borrowing transactions.
(b)	Issuance costs relating to Notes payable (see note 6) are amortized using the effective interest rate stipulated for the Notes.

g.	Impairment of Long-Lived Assets
	The Company has adopted Statement of Financial Accounting Standards No. 144 (FAS 144), “Accounting for the Impairment or Disposal of Long-Lived Assets” effective January 1, 2002. FAS 144 requires that long-lived assets, to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Under FAS 144, if the sum of the expected future cash flows (undiscounted and without interest charges) of the long-lived assets is less than the carrying amount of such assets, an impairment loss would be recognized, and the assets of written down to their estimated fair values.
	The adoption of FAS 144 did not have any impact on the consolidated financial position and results of operations.
h.	Cash equivalents
	The Company considers all highly liquid investments, which include short-term bank deposits (up to 3 months from date of deposit) that are not restricted as to withdrawal or use, to be cash equivalents.
i.	Comprehensive income
	The Company has no comprehensive income components other than net income (loss).

Page F-13

j.	Revenue recognition
	Revenues from telecommunication services primarily consist of charges for airtime, roaming and value added services provided to the Company’s customers, are recognized upon performance of the services. Revenues from pre-paid calling cards are recognized upon customer’s usage of the cards. Revenues from sale of handsets and accessories are recognized upon delivery and the transfer of ownership to the subscriber.
k.	Concentration of credit risks—allowance for doubtful accounts
	The Company’s revenues are derived from a large number of customers. Accordingly, the Company’s trade balances do not represent a substantial concentration of credit risk.
	An appropriate provision for doubtful accounts is included in the accounts of the Company. The allowance charged to expenses, determined as a percentage of specific debts doubtful of collection for the years ended December 31, 2000, 2001 and 2002 aggregated NIS 33,001,000 NIS 14,696,000 and NIS 12,753,000 ($ 2,692,000) (see also note 13a), respectively.
	The cash and cash equivalents and security deposit as of December 31, 2002 are deposited mainly with leading Israeli banks. Therefore, in the opinion of the Company, the credit risk inherent in these balances is remote.
	The Company factors most of its long-term trade receivables resulting from sales of handsets. The factoring is made through clearing companies, on a non-recourse basis. The transfer of accounts receivable was recorded by the Company as a sales transaction under the provisions of Statement of Financial Accounting Standards No.140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. The resulting costs are charged to “financial expenses-net”, as incurred. During the years ended December 31, 2000, 2001 and 2002, the Company factored NIS 98,023,000, NIS 180,302,000 and NIS 209,568,000 ($44,240,000), respectively, from long-term trade receivables.
l.	Handsets warranty obligations
	Until the year 2002 provision for warranty was not provided for, as the Company’s liability was covered by the handsets suppliers’ warranty. As of 2002, the Company has entered into several agreements under which the supplier does not provide any warranty but rather provides additional handsets to satisfy its warranty obligation. In these cases, the Company provides for

Page F-14

	warranty costs at the same time as the revenues are recognized. The annual provision is calculated at the rate of 1.5%-3.5% of these sales.
	As of December 31, 2002, the provision for warranty and the related expenses of the year then ended totaled NIS 2,589,000 ($ 547,000).
m.	Advertising expenses
	Advertising expenses are charged to the statement of operations as incurred. Advertising expenses for the years ended December 31, 2000, 2001 and 2002 aggregated NIS 134,969,000, NIS 91,681,000 and NIS 96,061,000 ($ 20,279,000), respectively.
n.	Deferred income taxes
	Deferred taxes are determined utilizing the asset and liability method, based on the differences between the amounts presented in these financial statements and those taken into account for tax purposes, in accordance with the related tax laws. Valuation allowances are included in respect of deferred tax assets when it is more likely than not that no such assets will be realized (see also note 10).
o.	Foreign currency transactions and balances
	Balances in, or linked to, foreign currency are stated on the basis of the exchange rates prevailing at balance sheet dates. For foreign currency transactions included in the statements of operations, the exchange rates at transaction dates are used. Transaction gains or losses arising from changes in the exchange rates used in the translation of such balances are carried to financial income or expenses.
p.	Derivative financial instruments (“Derivatives”)
	The Company has adopted FAS 133 as of January 1, 2001. FAS 133, as amended, establishes accounting and reporting standards for derivatives, including certain derivatives embedded in other contracts, and for hedging activities. Under FAS 133, all derivatives are recognized on the balance sheet at their fair value. On the date that the Company enters into a derivative contract, it designates the derivative, for accounting purposes, as: (1) hedging instrument, or (2) non-hedging instrument. Any changes in fair value are to be reflected as current gains or losses or other comprehensive gains or losses, depending upon whether the derivative is designated as a hedge and what type of hedging relationship exists. Changes in fair value of non-hedging instruments are carried to “financial expenses—net”, on a current basis.

Page F-15

	The Company occasionally enters into commercial (foreign currency) contracts in which a derivative instrument is “embedded”. This embedded derivative is separated from the host contract and carried at fair value when (1) the embedded derivative possesses economic characteristics that are not clearly and closely related to the economic characteristics of the host contract and (2) a separate, stand-alone instrument with the same terms would qualify as a derivative instrument.
	The adoption of FAS 133 resulted in recording additional income of approximately NIS 3.5 million included in the statement of operations of 2001 under “cumulative effect, at beginning of year, of a change in accounting principles”, which was recorded against an asset in the balance sheet, of the same amount. This cumulative effect reflects the fair value of embedded derivatives (see also note 12b.) as of that date.
	Prior to the adoption of FAS 133, the Company used separate, stand-alone derivative instruments (as apposed to embedded derivative), for accounting purposes, as hedging and non-hedging instruments. Gains and losses on derivatives that were hedged existing assets or liabilities were recognized in income commensurate with the results from those assets or liabilities.
	Foreign currency derivatives, which are designated to reduce the Company’s exposure to foreign currency risks pertaining to anticipated transactions and which do not qualify as hedging transactions, were presented at market value in each of the reported years and the income or losses in respect thereof are carried to “financial expenses—net” on a current basis, see also note 12b.
q.	Earnings (loss) per share (“EPS”)
	Basic EPS is computed by dividing net income (loss) by the weighted average number of shares outstanding during the years.
	Diluted EPS reflects the increase in the weighted average number of shares outstanding that would result from the assumed exercise of options, calculated using the treasury-stock-method (in 2000 and 2001, such effect was not included since it would have been anti-dilutive).

Page F-16

r.	Stock based compensation
	The Company accounts for its employee stock option plans using the treatment prescribed by APB No. 25, “Accounting for Stock Issued to Employees” and related interpretations.
	Under APB 25, compensation cost for employee stock option plans is charged to shareholders’ equity, on the date of grant of the options, under “deferred compensation costs” and is then amortized over the vesting period using the accelerated method of amortization.
	FAS No. 123 “Accounting for Stock-Based Compensation”, establishes a fair value based method of accounting for employee stock options or similar equity instruments, and encourages adoption of such method for stock compensation plans. However, it also allows companies to continue to account for those plans using the accounting treatment prescribed by APB 25. The Company has elected to continue accounting for employee stock option plans according to APB 25, and accordingly discloses pro forma data assuming the Company had accounted for employee stock option grants using the fair value based method as defined in FAS 123.
	The weighted average fair value of options granted using the Black & Scholes option-pricing model during 2000, 2001 and 2002 is NIS 23.25 (below market value—NIS 56.9, at market value—NIS 18.6), NIS 18.08 and NIS16.68 ($3.52), respectively. The fair value of each option granted is estimated on the date of grant based on the following weighted average assumptions: weighted average dividend yield of 0%; expected volatility of 75%, 83% and 69%, respectively; risk-free interest rate: in dollar terms—2000-6.5%; in NIS terms—2000-8%, 2001-6.9%, 2002-7.7%.; weighted expected life: plan A—2002, 9 years (2000 and 2001-8 years); Plan B—9 years in each year.
	The following table illustrates the effect on net income and earnings per share assuming the Company had applied the fair value recognition provisions of FAS 123 to its stock based employee compensation:

Page F-17

			Year ended December 31,
			2000			2001			2002			2002
												Convenience
												translation
			New Israeli Shekels									into dollars
			In thousands, except per share data
Net income (loss), as reported				(768,775	)		(303,362	)		84,198			17,775
Add: stock based employee Compensation expense, included in reported net income (loss)				56,618			20,699			8,957			1,891
Deduct: stock based employee Compensation expense determined under fair value method for all awards				(64,064	)		(59,476	)		(30,029	)		(6,339	)
Pro-forma net income (loss)				(776,221	)		(342,139	)		63,126			13,327
Earning (loss) per share—
	Basic—as reported:
		before cumulative effect		(4.30	)		(1.72	)		0.47			0.10
		cumulative effect					0.02
				(4.30	)		(1.70	)		0.47			0.10
	Basic—pro forma:
		before cumulative effect		(4.34	)		(1.93	)		0.35			0.07
		cumulative effect					0.02
				(4.34	)		(1.91	)		0.35			0.07
	Diluted—as reported:
		before cumulative effect		(4.30	)		(1.72	)		0.46			0.10
		cumulative effect					0.02
				(4.30	)		(1.70	)		0.46			0.10
	Diluted—pro-forma:
		before cumulative effect		(4.34	)		(1.93	)		0.34			0.07
		cumulative effect					0.02
				(4.34	)		(1.91	)		0.34			0.07

The Pro-forma net loss for the years ended December 31, 2000 and 2001 should have been NIS 776,221,000 and NIS 342,139,000 rather than NIS 769,043,000 and NIS 303,639,000 as reported in the prior years’ reports, respectively. The Pro-forma net loss per share, basic and diluted, for the years ended December 31, 2000 and 2001 should have been NIS 4.34 and NIS 1.91 rather than NIS 4.30 and NIS 1.70 as reported in the prior years’ reports, respectively.

Page F-18

s. Recently issued accounting pronouncements:

1)	FAS 143
	In July 2001, the FASB issued FAS 143, “Accounting for Asset Retirement Obligations” (“FAS 143”) . FAS 143 prescribes the accounting for retirement obligations associated with tangible long-lived assets, including the timing of liability recognition and initial measurement of the liability. FAS 143 requires that an asset retirement cost should be capitalized as part of the cost of the related long-lived asset and subsequently allocated to expense using a systematic and rational method. FAS 143 is effective for fiscal years beginning after June 15, 2002 (January 1, 2003 for the company).
	The Company does not expect the adoption of this standard to have a material effect on its consolidated financial statements.
2)	FAS 145
	In April 2002, the FASB issued FAS No. 145, “Revision of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Connections” (“FAS 145”). Among other amendments and rescissions, FAS 145 eliminates the requirement that gains and losses from the extinguishments of debt be aggregated and, if material, classified as an extraordinary item, net of the related income tax effect, unless such gains and losses meet the criteria in paragraph 20 of Accounting Principles Board Opinion No. 30, “Reporting the Results of Operation—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions”. FAS 145 is partially effective for transactions occurring after May 15, 2002 and partially effective for fiscal years beginning after May 15, 2002.
	The Company does not expect the adoption of this standard to have a material effect on its consolidated financial statements.
3)	FAS 146
	In June 2002, the FASB issued FAS No. 146 “Accounting for Costs Associated with Exit or Disposal activities” (“FAS 146”). FAS 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF 94-3 “Liability Recognition for Certain Employee Termination Benefits and other Costs to Exit an Activity (including Certain Costs Incurred in a restructuring)”. FAS 146 required that a liability for a cost associated with an exit or disposal activity to be recognized when the liability is incurred. Under EITF 94-3, a liability for an exit cost as generally defined in EITF 94-3 was recognized at the date of the commitment to an exit plan. FAS 146 states that a

Page F-19

	commitment to a plan, by itself, does not create an obligation that meets the definition of a liability. Therefore, FAS 146 eliminates the definition and requirements for recognition of exit costs in EITF 94-3. It also establishes that fair value is the objective for initial measurement of the liability. FAS 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002.
	The Company does not expect the adoption of this standard to have a material effect on its consolidated financial statements.
4)	FAS 148
	In December 2002, the FASB issued FAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of FASB Statement No. 123.” FAS No. 148 amends FAS No. 123, “Accounting for Stock-Based Compensation,” to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, FAS No. 148 amends the disclosure requirements of FAS No. 123 to require prominent disclosures in the financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The transition guidance and annual disclosure provisions of FAS No. 148 are effective for financial statements issued for fiscal years ending after December 15, 2002. The Company elected to continue accounting for employee stock based compensation in accordance with APB 25 and related interpretations and has applied the disclosure provisions in FAS No. 148 in these consolidated financial statements and the accompanying notes.
5)	FIN 45
	In November 2002, the FASB issued FASB Interpretation No. 45 “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”). FIN 45 requires the guarantor to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. It also elaborates on the disclosures to be made by a guarantor in its financial statements about its obligations under certain guarantees that it has issued and to be made in regard of product warranties. Disclosures required under FIN 45 are already included in these financial statements, however, the initial recognition and initial measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002.
	The Company does not expect the adoption of FIN 45 to have a material effect on its consolidated financial statements.

Page F-20

6)	FIN 46
	In January 2003, the FASB issued FASB Interpretation No. 46 “Consolidation of Variable Interest Entities” (FIN 46). Under this FIN entities are separated into two populations: (1) those for which voting interests are used to determine consolidation (this is the most common situation) and (2) those for which variable interests are used to determine consolidation. The FIN explains how to identify Variable Interest Entities (VIE) and how to determine when a business enterprise should include the assets, liabilities, no controlling interests, and results of activities of a VIE in its consolidated financial statements.
	The FIN is effective as follows: for variable interests in variable interest entities created after January 31, 2003 the FIN shall apply immediately, for variable interests in variable interest entities created before that date, the FIN shall apply—for public entities—as of the beginning of the first interim or annual reporting period beginning after June 15, 2003.
	The Company does not expect the adoption of this FIN to have any effect on its consolidated financial statements.

t. Reclassification

Certain comparative figures have been reclassified to conform to the current year presentation.

Page F-21

NOTE 2 – INVESTMENTS IN NON-MARKETABLE SECURITIES:

     The Company and its subsidiary have entered into agreements with a number of technological companies in the early stages of development of cellular products (hereafter—the start-up companies). Under the agreements, the Group is to supply infrastructure and support services, which the start-up companies need to develop their products, in consideration of options and shares in those companies. In some cases, the Group is also entitled to royalties on future sales of the products of the start-up companies. Based on the opinion of the financial advisors of the Group and the early stages of those companies, the fair value of the securities granted to the Group, on the grant date and as of December 31, 2002, is not material.

     The Group’s holdings in the start-up companies (current and fully diluted) do not exceed 15% of the share capital of any one of them and does not give the Group significant influence over any one of them. Therefore, the investments therein are presented on a cost basis.

     During 2002, the Company has recorded an impairment loss of approximately NIS 4.1 million (approximately $0.9 million) (2001—approximately NIS 8.9 million) in respect of the above investments, based on valuations by the Company’s financial advisor.

Page F-22

NOTE 3 – FIXED ASSETS:

a. Composition of fixed assets—net, is as follows:

	December 31
	2001		2002		2002
					Convenience
					translation
	New Israeli Shekels				into U.S. $
	in thousands
Communications network		1,989,474		2,398,907		506,419
Computers, hardware and software for information systems		370,620		471,079		99,447
Vehicles		28,372		24,955		5,268
Office furniture and equipment		28,723		31,641		6,679
Leasehold improvements		93,393		140,376		29,634
Cellular telephones—base stock		6,309		6,309		1,332
		2,516,891		3,073,267		648,779
Less—accumulated depreciation and amortization		767,839		1,208,756		255,173
		1,749,052		1,864,511		393,606

	Depreciation and amortization in respect of fixed assets totaled NIS 254,992,000, NIS 361,265,000 and NIS 446,970,000 ($94,357,000) for the years ended December 31, 2000, 2001 and 2002, respectively.
b.	Fixed assets include interest expenses, direct consultation and supervision costs and other direct costs of establishing the cellular communications network and information systems, which were capitalized (before commencing full commercial operations) in respect of:

	December 31
	2001		2002		2002
					Convenience
					translation into
	New Israeli Shekels				dollars
	in thousands
Communications network		69,858		69,858		14,747
Computers, hardware and software		15,566		15,566		3,286
		85,424		85,424		18,033
L e s s—accumulated depreciation		38,814		51,752		10,925
Depreciated balance		46,610		33,672		7,108

c. As to pledges on the fixed assets—see note 11.

Page F-23

NOTE 4 – LICENSE AND DEFERRED CHARGES:

				December 31
				2001		2002		2002
								Convenience
								translation
				New Israeli Shekels				into dollars
				in thousands
a. License (note 1a(2))					1,570,901		1,792,714		378,449
		Less—accumulated amortization			509,443		571,485		120,643
					1,061,458		1,221,229		257,806
b. Deferred charges—in respect of:
			Obtaining long-term credit lines		52,191		55,996		11,821
			Notes payable		22,017		22,017		4,648
					74,208		78,013		16,469
	Less—accumulated amortization				22,707		29,894		6,310
					51,501		48,119		10,159
					1,112,959		1,269,348		267,965

     License and deferred charges amortization expenses for the years ended December 31, 2000, 2001 and 2002 totaled NIS 176,517,000 NIS 177,002,000 and NIS 69,229,000 ($14,615,000), respectively, see also note 1f.

     The expected license amortization expenses for the next five years are as follows:

	New		Convenience
	Israeli		translation
	Shekels		into dollars
	in thousands
Year ended December 31:
2003		58,408		12,329
2004		64,256		13,565
2005		64,256		13,565
2006		64,256		13,565
2007		64,256		13,565

Page F-24

NOTE 5 – LONG-TERM BANK LOANS

     In December 2002, the Company entered into an Amending Agreement in connection with its primary secured bank credit facility, with Bank Leumi B.M., Bank Hapoalim B.M., Israel Discount Bank Ltd., The First International Bank of Israel Ltd., United Mizrahi Bank Ltd., Mercantile Discount Bank Ltd. and Citibank N.A., which amends the bank facility agreement dated August 1998 between the Company and the above mentioned banks, as amended from time to time.

     The amended facility is divided into three tranches: A multi-currency term loan facility of $410 million (“Facility A”), a revolving multi-currency loan facility of $150 million (“Facility B”) and a fixed-term NIS loan facility of $150 million (“Facility C”).

     The bank facility is a dollar denominated facility and it may be drawn in different currencies, see c. below.

a. Status of the facility at December 31, 2002 is as follows:

					Amounts
	The total		Amounts		available
	facility		drawn		for drawing
	Dollars in millions
Facility A		410		381		29
Facility B		150		138		12
Facility C		150				150
		710		*519		191

Page F-25

b. The amounts outstanding, classified by linkage terms and interest rates, are as follows:

			December 31
	December 31,
	2002		2001		2002		2002
	Weighted
	average
	interest rates		Amount
	%						Convenience
							translation
			New Israeli Shekels				into dollars
	In thousands
In NIS—linked to the Israeli consumer price index (CPI)(1)		6.6		1,076,689		629,056		132,796
In NIS—unlinked (2)		10.0		1,225,274		1,838,500		388,115
				2,301,963		2,467,556		*520,911

(1)	Linkage terms apply both to principal and interest.
(2)	The loans bear interest at the “on-call” rate (a varying inter-bank rate in Israel), prime rate or fixed unlinked rate.
*	The amounts outstanding differ from the amounts drawn, due to differing linkage terms.
c.	Facilities A and B, may be drawn in NIS, US dollars or Euros, provided that not less than 60% of the outstanding Facilities A and B shall, at any time, be in NIS and that only up to 40% of the outstanding facilities A and B may be in US dollars or Euros. Facility C, may be drown only in NIS.
d.	There is a range of options as to how interest is calculated on borrowings under the amended facility. These options include rates based on LIBOR, the bond rate, fixed linked rate, fixed unlinked rate, on-call rate and prime rate. The margin for facility A and B is 0.90% per annum and can be reduced down to 0.45% on fulfillment of some terms specified in the agreement. The margin for facility C is 1.25% per annum and may not be reduced.

Page F-26

e. The total commitments under the Facilities will be reduced during each of the following years to the following amounts*:

	Dollars in millions
	A		B		C		Total
December 31, 2002		410		150		150		710
2003		385		150		150		685
2004		356		150		150		656
2005		266		150		141		557
2006		172		150		114		436
2007		62		150		84		296
2008		0		0		72		72
June 30, 2009		0		0		0		0

*	In April 2002, the Company’s credit facility was amended to reflect the participation of Bank Hapoalim in the credit facility on the same terms as the other lending banks. Prior to April 2002, the portion of this loan (NIS 483,897,000), which had been advanced to the Company was required to be repaid on March 31, 2002 because of the restrictions of Bank of Israel relating to certain common ownership interests in the bank and the Company. As a result of the above amendment, the relevant balances owed to Bank Hapoalim under the credit facility, which were recorded in the Company’s annual financial statements for the year ended December 31, 2001 as short-term liabilities were classified in the balance sheet as of December 31, 2002 into long-term liabilities.
f.	Facility A may be drawn through March 31, 2003 and shall be repaid until June 30, 2008. Facility B may be drawn and repaid until June 30, 2008. Facility C may be drawn through December 31, 2004 and shall be repaid until June 30, 2009.
g.	Under the amended facility the Company is required, inter alia, to fulfill certain operational conditions and to maintain certain financial ratios. If the Company defaults on the covenants, the banks are entitled to demand early repayment of the credit facility—in whole or in part. The Company believes that it is in compliance with all covenants stipulated by the amended facility. Under the amended facility, the Company has undertaken not to transfer any amounts, including dividends, to its shareholders, except in cases specified in the Agreement.
h.	As to pledges to secure loans and liabilities and restrictions placed with respect thereto, see note 11.

Page F-27

NOTE 6 – NOTES PAYABLE:

     On August 10, 2000, the Company completed an offering of $175 million of unsecured Senior Subordinated Notes due 2010, which have been issued at their dollar par value. The Notes have been registered under the U.S. Securities Act of 1933. The net proceeds from the offering (approximately $170.5 million after deducting commissions and offering expenses) were used mainly to repay a portion of the indebtedness under the credit facility.

     The Notes bear interest at the rate of 13% per annum which are payable semi-annually on each February 15 and August 15, commencing February 15, 2001. The Company may redeem up to 35% of the aggregate principal amount of the Notes at any time prior to August 15, 2003, provided that immediately after giving effect to any such redemption, at least 65% of the aggregate principal amount of the Notes remains outstanding.

     On December 31, 2002, the Notes closing price was 109 points.

     Commission fees and offering expenses in respect of the Notes aggregated approximately NIS 22 million. These expenses are presented as deferred charges and the amortization in respect thereof is included in “financial expenses, net”.

     The Company is obligated to keep a restricted deposit in the amount of one year of interest payment until December 31, 2003, which was deposited and is presented in the balance sheet under “security deposit”. The deposit is denominated in dollars and bears an annual interest as of December 31, 2002 of 1.3%.

Page F-28

NOTE 7 – LIABILITY FOR EMPLOYEE RIGHTS UPON RETIREMENT:

a.

Israeli labor laws and agreements require payment of severance pay upon dismissal of an employee or upon termination of employment in certain other circumstances. The Company’s severance pay liability to its employees, mainly based upon length of service and the latest monthly salary (one month’s salary for each year worked), is reflected by the balance sheet accrual under the “liability for employee rights upon retirement”. The Company records the liability as if it was payable at each balance sheet date on an undiscounted basis. The liability is partly funded by purchase of insurance policies and the amounts funded are included in the balance sheet under investments and long-term receivables, as “funds in respect of employee rights upon retirement”. The policies are the Company’s assets and under labor agreements, subject to certain limitations, they may be transferred to the ownership of the beneficiary employees.

b.

The severance pay expenses for the years ended December 31, 2000, 2001 and 2002 were approximately NIS 16,151,000 NIS 21,113,000 and NIS 24,094,000 (approximately $ 5,086,000) respectively.

Page F-29

NOTE 8 – COMMITMENTS AND CONTINGENT LIABILITIES:

a. Commitments:

1)	Royalty Commitments
	The Company is committed to pay royalties to the Government of Israel on its “income from cellular services” as defined in the Regulations (see below), which includes all kinds of turnover of the licensee from the granting of Bezeq services under the license—including airtime, roaming services and non-recurring connection fees, but excluding: bad debts, income transferred to another holder of a communications license or payments to another communication licensee in respect of interconnection, payments for roaming services to foreign operators and expenses related to the sale of end equipment.
	On June 18, 2001, the Knesset’s Finance Committee approved the “Telecommunications (Royalties) Regulations, 2001” (hereafter—the Regulations). The principal change to the old regulations was the reduction of the percentage of royalties payable by mobile phone companies from 8% to 5% in 2001, 4.5% in 2002 and the further gradual reduction thereof to 3.5% in 2004. In addition, the basis in respect of which the royalties are paid has been expanded (as described above). The amendment is effective as from January 1, 2001.
	The royalty expenses for the years ended December 31, 2000, 2001 and 2002 were approximately NIS 116,846,000, NIS 112,201,000 and NIS 117,281,000 (approximately $ 24,758,000), respectively, and are included under “cost of revenues”.
2)	Operating leases
	The Company has entered into operating lease agreements as follows:

a)	Lease agreement for its headquarters facility in Rosh Ha’ayin for a twenty year period commencing in June 1998. The Company has an option to shorten the lease period by five to fifteen years. The rental payments are linked to the Israeli CPI.
b)	Lease agreements for service centers and retail stores for a period of two to five years. The Company has an option to extend the lease periods for up to twenty additional years (including the original lease periods). The rental payments are linked partly to the dollar and partly to the Israeli CPI.
c)	Lease agreements in respect of cell sites throughout Israel are for periods of two to three years. The Company has an option to extend the lease periods up to ten additional years (including the original lease periods). The lease fees are partly linked to the dollar and are partly linked to the Israeli CPI.

Page F-30

d)	Lease agreement for additional building for the head office in Rosh Ha’ayin, for a period of 16 years commencing in November 2002. The Company has options to shorten the lease period by five to ten years. The rental payments are linked to the Israeli CPI.
e)	The minimum projected rental payments (based upon agreements in force as of December 31, 2002) for the next five years, at rates in effect at December 31, 2002, are as follows:

					Convenience
			New Israeli		translation
			Shekels		into dollars
			In thousands
Year ended December 31
		2003		101,192		21,362
		2004		56,510		11,929
		2005		30,818		6,506
		2006		26,097		5,509
		2007		16,586		3,501
	2008 and thereafter			15,883		3,353
				247,086		52,160

f) The rental expenses for the years ended December 31, 2000, 2001 and 2002 were approximately NIS 68 million, NIS 93 million, and NIS 113 million (approximately $ 24 million), respectively.

3)	At December 31, 2002, the Company is committed to acquire fixed assets for approximately NIS 41 million (approximately $ 9 million).
4)	At December 31, 2001, the Company is committed to acquire handsets for approximately NIS 203 million (approximately $ 43 million).
5)	As to the Company commitment to pay NIS 202 million (approximately $ 43 million) regarding the award of the new spectrum, see note 1a.

Page F-31

b. Contingent Liabilities:

1)	On October 28, 1999, an Israeli consumer organization lodged a claim against the Company, alleging a variety of consumer complaints and requested that this claim be recognized as a class action. While the amount of the claim was substantial, the ultimate liability could not be determined because of the considerable uncertainties that exist. On March 20, 2002, the Haifa District Court decided to strike the claim, because the consumer organization lost, on December 31, 2001, a special status required under Israeli law for consumer organizations to file class action claims.
	Another claim, involving a substantial amount, which was filed by a private consumer who had previously asked to join the above class action, may be brought again before the court. The court had previously frozen the proceedings of the private consumer’s claim, until a decision was made in the case filed by the consumer organization.
	On June 20, 2002, legal counsel representing the consumer organization informed the Company of his intention to resume these proceedings.
	At this stage, the Company and its legal counsel are unable to evaluate the probability of success of the claims, if and when re-opened, and therefore no provision has been made.
2)	On July 8, 2001 a claim was filed against the Company for alleged violation of supplier’s exclusivity agreement. For filing purposes, the claim was set at NIS 18 million; however, this amount can be increased by the claimant.
	At this stage, since preliminary proceedings between the parties are yet to take place, and the claim concerns a contract interpretation issue, the company and its legal counsel are unable to evaluate the probability of success of the said litigation, and therefore no provision has been made.
3)	On December 31, 2001, a claim was filed against the Company and another Israeli telecommunication companies together with a request to approve this claim as a class action. The claim is for air time charged in respect of calls, which were terminated due to causes other than the termination of the call by the parties thereto. The amount of the claim against the Company is estimated at approximately NIS 21 million. On January 2003, a mutually-agreed motion to strike out the claim against the Company was granted by the court.
4)	On March 20, 2002, the Company received a demand by one of the company’s former distributors, mainly for alleged violation of his exclusive distribution agreement.

Page F-32

	The amount of the demand against the Company is set at NIS 130 million for filing purposes, although the claimant states that his damages far exceed the above amount.
	To the date of these financial statements, this demand has not been filed by the way of a legal claim.
	At this stage, the Company and its legal counsel are unable to evaluate the probability of success of the demand if filed by the way of legal claim, and the amount of the claim, therefore no provision has been made.
5)	On April 8, 2002, a claim was filed against the Company, together with a request to approve this claim as a class action, alleging a variety of consumer complaints. The amount of the claim against the Company is estimated at approximately NIS 545 million plus additional significant amounts related to other alleged damages.
	At this stage, no hearings have taken place and unless and until the claim is certified as a class action, the Company and its legal counsel are unable to evaluate the probability of success of such claim, and therefore no provision has been made.
	In addition, the Company and its legal counsel are of the opinion that even if the request to approve this claim as a class action is granted, and even if the plaintiff’s arguments are accepted, the outcome of the claim will be significantly lower than the abovementioned amount.
6)	On May 21, 2002, a claim was filed against the Company and other Israeli telecommunication companies together with a request to approve this claim as a class action. According to the applicants, the defendants have entered into agreements with commercial entities that offer the public various content services via calls to cellular telephone numbers. The applicants allege that, in fact, the calls are not carried out by wireless but via a fixed line, an act that is in violation of the law and the license. Accordingly, the applicants claim that the defendants must refund the public all the amounts that were charged in connection with said content services agreements. The applicants do not know the amount of the class action, but estimate it at NIS 600 million.
	At this stage, no hearings have taken place and unless and until the claim is certified as a class action, the Company and its legal counsel are unable to evaluate the probability of success of such claim, and therefore no provision has been made. In addition, the Company and its legal counsel are of the opinion that in light of those facts known at this early stage, the abovementioned amount of the claim is excessive.

Page F-33

7)	The Company does not have building permits for many of its cell sites and as a result is involved in numerous legal actions (including criminal proceedings against officers and directors) relating to this issue. Most of these proceedings have been settled under plea bargain arrangements, whereby the Company has paid fines of insignificant amounts.
	Management, based upon current experience and the opinion of legal counsel, does not believe that these legal actions will result in significant costs to the Company. The accounts do not include a provision in respect thereof.
8)	The Company is a party to various claims arising in the ordinary course of its operations. Management, based upon the opinion of its legal counsel, is of the opinion that the ultimate resolution of these claims will not have a material effect on the financial position of the Company. The accounts do not include a provision in respect thereof.

Page F-34

NOTE 9 – SHAREHOLDERS’ EQUITY (CAPITAL DEFICIENCY):

a.	Share Capital:
	The Company’s shares are traded on the London Stock Exchange (“LSE”) and, in the form of American Depository Receipts (“ADRs”), each of which represents one ordinary share, on the U.S. over the counter market (“Nasdaq—NSM”). During 2001, the company listed its shares in the Tel-Aviv stock exchange (TASE) according to the dual listing regulations. On December 31, 2002, the closing price per ADR on the NSM was $3.55; the shares were quoted on the LSE on that date at $3.72, and in TASE at NIS 17.26 ($3.64).
	Under the provisions of the license granted to the Company (note 1a(2)), restrictions are placed on transfer of Company shares and placing liens thereon. The restrictions include the requirement that the advance written consent of the Minister of Communications be received prior to transfer of 10% or more of the Company’s shares to a third party.
	On December 26, 2001, the Company filed a shelf registration statement on Form F-3 with the United States Securities and Exchange Commission for future offerings of its securities. Under the shelf registration, the company can raise up to $400 million from the issue of ordinary shares and debt securities.
b.	Employee Stock Option Plans:

1)	a.	On March 3, 1999, the Company’s Board of Directors approved an employee stock option plan (hereafter—Plan A), pursuant to which 5,833,333 ordinary shares were reserved for issuance upon the exercise of 5,833,333 options to be granted to key employees without consideration of which 729,165 options were later cancelled. Through to December 31, 2002—5,505,557 options were granted pursuant to Plan A, of which 573,834 options have been forfeited and 2,706,334 options have been exercised.
		The options will vest in five equal annual batches over a period of five years from the beginning date of employment of each employee, unless otherwise provided in the grant instrument, provided the employee is still in the Company’s employ. An option not exercised within 8 years from the date of its allotment shall expire. The exercise price per share of the options granted through December 31, 2000, which is denominated in dollars, is $0.343. During 2002, the Company granted options under plan A in accordance with the terms of plan B, including the exercise price, vesting schedule and expiration date (see b. below).

Page F-35

	As of December 31, 2002—172,445 options of plan A are available for future grant to the Company’s employees. The exercise price of these remaining options is pursuant to the terms of plan B (see b. below) unless otherwise provided in the grant instrument.
b.	In October 2000, the Company’s Board of Directors approved an employee stock option plan (hereafter—Plan B), pursuant to which 4,472,222 ordinary shares were reserved for issuance upon the exercise of 4,472,222 options to be granted to employees without consideration. An option not exercised within 9 years from the date of its allotment shall expire. The options will vest in four equal annual batches over a period of four years from the date of grant of the option, provided the employee is still in the Company’s employ. Through to December 31, 2002—5,317,555 options were granted pursuant to Plan A, of which 931,833 options have been forfeited.
	The exercise price, which is denominated in NIS, is equal to the market price of the Company’s shares on the date on which the options are granted. As of December 31, 2002—86,500 options of plan B are available for future grant to the Company’s employees.
c.	The ordinary shares derived from the exercise of the options shall confer the same rights as the other ordinary shares of the Company.
d.	The Plans are subject to the terms stipulated by Section 102 of the Israeli Income Tax Ordinance. Inter alia, the Ordinance provides that the Company will be allowed to claim as an expense for tax purposes the amounts credited to the employees as a benefit, when the related tax is paid by the employee. In December 2002, the Company signed an agreement with the tax authorities concerning the tax liabilities of its employees regarding the benefit arising from the options granted to them. According to the agreement, the individual tax rate on the taxable income received by the employees in connection with the benefit arising from the options will be reduced; in exchange, the Company will defer the deduction of such taxable income as an expense, for a period of 4 years from the date it commences paying income taxes.
	The agreement applies only to employees who have joined the agreement, and relates to (1) options that are exercised by December 31, 2002 and (2) options that vest by

Page F-36

December 31, 2003 and are exercised by March 31, 2004. In each case, the trustee must have held the options for a period of 24 months from the date on which they were granted.

2) Following is a summary of the status of the plans as of December 31, 2000, 2001 and 2002 and the changes therein during the years ended on those dates:

		Year ended December 31
		2000					2001					2002
					Weighted					Weighted					Weighted
					average					average					average
					exercise					exercise					exercise
		Number			price*		Number			price*		Number			price*
					NIS					NIS					NIS
Balance at beginning of year			4,655,285			1.424		8,541,669			12.296		8,962,235			12.746
Changes during the year:
Granted**			4,336,119			24.219		1,063,708			19.286		768,000			20.976
Exercised and paid			(3,383	)		1.386		(32,314	)		1.440		(2,670,637	)		1.591
Forfeited			(446,352	)		14.418		(610,828	)		19.286		(448,488	)		16.747
Balance outstanding at end of year			8,541,669			12.296		8,962,235			12.746		6,611,110			18.001
Options exercisable at December 31			1,723,147			1.386		3,501,109			7.386		2,728,806			17.740
	**Below market value		523,119			1.386
	**At market value		3,813,000			27.350		1,063,708			19.286		768,000			20.976

* Includes options under plan A, the exercise price of which is weighted based on the applicable date’s exchange rate.

     The following table summarizes information about options outstanding at December 31, 2002:

		Options outstanding						Options exercisable
				Weighted
		Number		average		Weighted		Number		Weighted
		outstanding at		remaining		average		exercisable		average
		December 31,		contractual		exercise		at December		exercise
Range of exercise price		2002		life		price		31,2002		price
NIS				Years		NIS				NIS
	1.625		1,898,235		3.9		1.625		938,795		1.625
17.25-22.23			1,779,208		7.8		20.06		258,427		19.33
	27.35		2,933,667		6.9		27.35		1,531,584		27.35
1.625-27.35			6,611,110		6.3		18.001		2,728,806		17.740

c.	Dividends
	As to restrictions with respect to cash dividend distributions, see note 5g.

Page F-37

NOTE 10 – TAXES ON INCOME:

a.	Measurement of Results for Tax Purposes under the Income Tax (Inflationary Adjustments) Law, 1985
	Under this law, results for tax purposes are measured in real terms, having regard to the changes in the Israeli CPI. The Company and its subsidiary are taxed under this law.
b.	Tax Rates Applicable to Income of the Company and its Subsidiary
	The income of the Company and its subsidiary are taxed at the regular rate of 36%.
c.	Losses Carried Forward to Future Years
	At December 31, 2002, the Group had carryforward losses of approximately NIS 2,000 million (approximately $ 422 million). The carryforward tax losses are linked to the Israeli CPI and can be utilized indefinitely.
d.	Deferred Income Taxes
	The deferred tax asset in respect of the balances of temporary differences (mostly in respect of carryforward losses, see c. above) and the related valuation allowance as of December 31, 2001 and 2002, are as follows:

	December 31
	2001			2002			2002
							Convenience
							translation
	New Israeli Shekels						into dollars
	In Thousands
Deferred tax asset		745,703			823,072			173,754
Less—valuation allowance		(745,703	)		(823,072	)		(173,754	)
		—,—			—,—			—,—

	During the year 2002, the Company had utilized approximately NIS 100 million ($ 21 million) of its carryforward losses to offset its taxable income for the year.
e.	Tax Assessments
	The Company and its subsidiary have not been assessed for tax purposes since incorporation.

Page F-38

NOTE 11 – LIABILITIES SECURED BY PLEDGES AND RESTRICTIONS PLACED IN RESPECT OF LIABILITIES

     At December 31, 2002, balances of liabilities of the Company in the amount of NIS 2,468 million ($ 521 million), are secured by fixed charges on the fixed assets (including leasehold rights), share capital and insurance rights, and by floating charges on the assets. The Company has also undertaken under the facility agreement (see note 5) not to register any further charges on its assets, with certain exceptions.

NOTE 12 – FINANCIAL INSTRUMENTS AND RISK MANAGEMENT:

a. Linkage of Monetary Balances:

1) As follows:

	December 31, 2002
	In or linked
	to foreign
	currencies		Linked to the
	(mainly dollars)		Israeli CPI		Unlinked
	In Thousands
NIS:
Assets		109,467		12,095		533,306
Liabilities		997,492		634,141		2,354,727
Convenience Translation into Dollars:
Assets		23,109		2,553		112,583
Liabilities		210,575		133,870		497,092

2) Data regarding the dollar exchange rate and the Israeli CPI:

		Exchange rate
		of one dollar			Israeli CPI*
At December 31:
	2002	NIS 4.737			182.01 points
	2001	NIS 4.416			170.91 points
	2000	NIS 4.041			168.53 points
	1999	NIS 4.153			168.53 points
Increase (decrease) during the year:
	2002		7.3	%		6.5	%
	2001		9.3	%		1.4	%
	2000		(2.7	)%		0.0	%

* Based on the index for the month ending on each balance sheet date, on the basis of 1993 average = 100.

Page F-39

b.	Derivative Financial Instrument—Foreign Exchange Risk Management
	The Company enters into foreign currency forward transactions and purchases and writes foreign currency options in order to protect itself against the risk that the eventual dollar cash flows resulting from the existing assets and liabilities will be affected by changes in exchange rates. The writing of such options is part of a comprehensive hedging strategy and is designed to effectively swap the currencies relating to existing assets and liabilities. Each of the options written is combined with purchase of an option for the same period and the same notional amount. The Company does not hold or issue derivative financial instruments for trading purposes.
	The transactions are mainly designated to hedge the cash flows related to payments of dollar interest on notes payable as well as those related to anticipated payments in respect of purchases of handsets and capital expenditures in foreign currency. However, these contracts do not qualify for hedge accounting under FAS 133.
	As the counterparties to the foreign currency options and forward transactions are Israeli banks, the Company considers the inherent credit risks remote.
	The notional amounts of foreign currency derivatives as of December 31, 2001 and 2002 are as follows:

		December 31
		2001		2002		2002
						Convenience
						translation
		New Israeli Shekels				into dollars
		(In Millions)
Currency options purchased—for the exchange of dollars into NIS			55		431		91
Currency options written—for the exchange of dollars into NIS					431		91
Forward transactions—for the exchange of:
	Dollars into NIS		242		264		56
	Euros into NIS		34		52		11
Embedded derivatives—Dollars into NIS			238		41		9

The derivatives financial instruments are for a period of up to 1.5 years. As of December 31, 2002, the remaining contractual lives are for periods up to 1 year.

Page F-40

c.	Fair Value of Financial Instruments
	The financial instruments of the Company as of December 31, 2002 consist mainly of non-derivative assets and liabilities (items included in working capital and long-term liabilities); the Company also has some derivatives, which are presented at their fair value.
	In view of their nature, the fair value of the financial instruments included in working capital is usually identical or close to their carrying value. The fair value of long-term loans approximates the carrying value, since they bear interest at rates close to the prevailing market rates.
	Regarding the fair value of Notes payable see note 6.
	The fair value of derivatives as of December 31, 2002, is a liability of approximately NIS 2.0 million ($ approximately 0.4 million) (2001—an asset of approximately NIS 8.0 million).

Page F-41

NOTE 13 – SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION:

a. Accounts Receivable:

		December 31
		2001			2002			2002
								Convenience
								translation
		NIS						into dollars
		In thousands
1)     Trade (current and long-term)
	The item is presented after the deduction of:
	(a)     Deferred interest income*		(2,355	)		(1,040	)		(220	)
	(b)     Allowance for doubtful accounts		(61,869	)		(74,622	)		(15,753	)

*	Long-term trade receivables (including current maturities) as of December 31, 2001 and 2002 in the amount of NIS 12,776,000 and NIS 4,561,000 ($963,000), respectively, bear no interest. These balances are in respect of handsets sold in installments (mostly 36 monthly payments).
	Income in respect of deferred interest is the difference between the original and the current amount of the debt. The current amount is computed on the basis of the interest rate relevant to the date of the transaction (8.8%—9.5%).
2)	Other:

	December 31
	2001		2002		2002
					Convenience
					translation
	NIS				into dollars
	In thousands
Government institutions		9,596		12,144		2,563
Derivatives instruments		7,987
Prepaid expenses		13,984		24,040		5,075
Sundry		11,363		14,802		3,125
		42,930		50,986		10,763

Page F-42

b. Accounts Payable and Accruals—Other:

	December 31
	2001		2002		2002
					Convenience
					translation
	NIS				into dollars
	In thousands
Employees and employee institutions		69,405		57,424		12,122
Provision for vacation and recreation pay		17,743		20,578		4,345
Government institutions		4,023		23,704		5,004
Income received in advance		34,613		40,979		8,651
Accrued interest on long-term liabilities		58,989		49,030		10,350
Sundry		1,392		10,451		2,206
		186,165		202,166		42,678

c.     Financial Expenses, Net:

				Year ended December 31
	2000			2001			2002			2002
										Convenience
										translation
	NIS									into dollars
	In thousands
Financial income		(5,980	)		(19,193	)		(13,354	)		(2,819	)
Exchange rate differences		(23,180	)		82,666			69,797			14,734
CPI Linkage differences		2,683			21,893			35,723			7,541
Factoring costs		5,203			9,006			9,614			2,030
Financial expenses		249,883			306,555			350,377			73,966
Less—capitalized interest								(6,977	)		(1,473	)
		228,609			400,927			445,180			93,979

Page F-43

d.	Diluted EPS
	Following are data relating to the net income (loss) and the weighted average number of shares that were taken into account in computing the basic and diluted EPS (the effect of the inclusion of the options for the years 2000 and 2001 is anti-dilutive):

	Year ended December 31
	2000			2001			2002		2002
									Convenience
									translation
	New Israeli Shekels								into dollars
	in thousands
Net income (loss) used for the computation of basic and diluted EPS (in thousands)		(768,775	)		(303,362	)		82,698		17,458
Weighted average number of shares used in computation of basic EPS		178,888,888			178,909,274			179,984,090		179,984,090
Add—net additional shares from assumed exercise of employee stock options		3,479,287			4,593,060			3,085,304		3,085,304
Weighted average number of shares used in computation of diluted EPS		182,368,175			183,502,334			183,069,394		183,069,394

Page F-44

NOTE 14 – TRANSACTIONS AND BALANCES WITH RELATED PARTIES:

a. Transactions with related parties:

	Year ended December 31
	2000		2001		2002		2002
							Convenience
							translation
	New Israeli Shekels						into dollars
	In thousands
Acquisition of handsets from related party		273,078		300,024		185,237		39,104
Financial expenses, net		73,270		60,202		81,212		17,144
Selling commissions and maintenance expenses		25,120		26,807		20,624		4,354

b. Balances with related parties:

	December 31
	2001		2002		2002
					Convenience
					translation
	NIS				into dollars
	In thousands
Cash and cash equivalents		2,617		643		136
Current liabilities		510,283		7,200		1,520
Long-term liabilities		354,417		692,572		146,205

c.	Cost sharing agreement
	The Company has entered into a Cost Sharing Agreement (“The agreement”) with Hutchison Whampoa Limited and certain of its wholly own subsidiaries (hereafter—“the Hutchison group”). The principal purpose of the agreement is to regulate the sharing of costs associated with various joint procurement and development activities relating to the future roll out and operation of a 3G Business.
	The agreement sets out the basis upon which expenses and liabilities are paid or discharged by the Hutchison group companies in connection with the joint procurement or development activities.

Under the agreement, the Company has the right to decide, and give notice of, which of the joint projects it wishes to participate in. As of December 31, 2002, the Company had given notice of its participation in four projects. The Company’s expected share in these projects in financial terms (including its share of joint expenses and liabilities) is not material.

Page F-45

SIGNATURES

     The Company hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

	Partner Communications Company Ltd.
By:	/s/ Alan Gelman
	Chief Financial Officer March 14, 2003
By:	/s/ Amikam Cohen
	Chief Executive Officer March 14, 2003

CERTIFICATIONS

I, Amikam Cohen, certify that:

(1)	I have reviewed this annual report on Form 20-F of Partner Communications Company Ltd.;
(2)	Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
(3)	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
(4)	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

(a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
(b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and
(c)	presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

(5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

(a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

(6) The registrant’s other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: March 14, 2003

/s/ AMIKAM COHEN
Chief Executive Officer

I, Alan Gelman, certify that:

(1)	I have reviewed this annual report on Form 20-F of Partner Communications Company Ltd.;
(2)	Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
(3)	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
(4)	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

(a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
(b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and
(c)	presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

(5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

(a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

(6) The registrant’s other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly

affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: March 14, 2003

/s/ ALAN GELMAN
Chief Financial Officer

EXHIBIT INDEX

Exhibit
Number	Description
1.1	Partner’s Articles of Association
*1.2	Partner’s Certificate of Incorporation
*1.3	Partner’s Memorandum of Association
**2.(a).1	Form of Share Certificate
**2.(a).2	Form of Deposit Agreement including Form of ADR Certificate
*2.(b)	Form of Indenture between Partner and The Bank of New York, as trustee, including form of note
**4.(a).1	Relationship Agreement dated October 10, 1999
**4.(a).2	License from the Israeli Ministry of Communications issued April 8, 1998
**4.(a).3	Bank Facility dated August 13, 1998
**4.(a).4	License Agreement for use of the Orange Brand in Israel dated September 14, 1998
**4.(a).5	Brand Support/Technology Transfer Agreement dated July 18, 1999
**4.(a).6	Agreement with Ericsson Radio Systems AB dated May 28, 1998
#4.(a).7	Agreement with LM Ericsson Israel Ltd. dated November 25, 2002
#***4.(a).8	Dealer Agreement with SuperPharm dated February 11, 2001
**4.(a).9	Lease Agreement with Mivnei Taasia dated July 2, 1998
**4.(a).10	Interconnect Agreement with Cellcom dated February 15, 1999
**4.(a).11	Interconnect Agreement with Pelephone dated May 1, 1999
*4.(a).12	Amending and Rescheduling Agreement dated July 9, 2000
4.(a).13	Supplemental Agreement dated April 18, 2002
+4.(a).14	Amendment to Relationship Agreement dated April 23, 2002
***4.(a).15	Amendment No. 1 to License from the Israeli Ministry of Communications issued May 11, 1999
***4.(a).16	Amendment No. 2 to License from the Israeli Ministry of Communications issued September 29, 1999
***4.(a).17	Amendment No. 3 to License from the Israeli Ministry of Communications issued October 3, 1999
***4.(a).18	Amendment No. 4 to License from the Israeli Ministry of Communications issued June 28, 2000
***4.(a).19	Amendment No. 5 to License from the Israeli Ministry of Communications issued September 10, 2000
***4.(a).20	Amendment No. 6 to License from the Israeli Ministry of Communications issued March 19, 2001
+4.(a).21	Amendment No. 7 to License from the Israeli Ministry of Communications issued September 23, 2001
+4.(a).22	Amendment No. 8 to License from the Israeli Ministry of Communications issued December 27, 2001
+4.(a).23	Amendment No. 9 to License from the Israeli Ministry of Communications issued March 13, 2002
+4.(a).24	Amendment No. 10 to License from the Israeli Ministry of Communications issued April 14, 2002
+4.(a).26	Amendment No. 11 to License from the Israeli Ministry of Communications issued April 25, 2002

Exhibit
Number	Description
4.(a).27	Amendment No. 12 to License from the Israeli Ministry of Communications issued June 26, 2002
4.(a).28	Amendment No. 13 to License from the Israeli Ministry of Communications issued June 30, 2002
4.(a).29	Amendment No. 14 to License from the Israeli Ministry of Communications issued September 11, 2002
4.(a).30	Amendment No. 15 to License from the Israeli Ministry of Communications issued October 24, 2002
4.(a).31	Amendment No. 16 to License from the Israeli Ministry of Communications issued November 26, 2002
4.(a).32	Amendment No. 17 to License from the Israeli Ministry of Communications issued February 2, 2003
+4.(a).33	Amending Agreement to the Facility Agreement dated January 8, 2002
+4.(a).34	Amending Agreement to the Facility Agreement dated January 30, 2002
+4.(a).35	Amending Agreement to the Facility Agreement dated February 6, 2002
+4.(a).36	Amending Agreement to the Facility Agreement dated February 28, 2002
+4.(a).37	Amending Agreement to the Facility Agreement dated March 14, 2002
+4.(a).38	Amending Agreement to the Facility Agreement dated March 24, 2002
+4.(a).39	Amending Agreement to the Facility Agreement of April 2002
+4.(a).40	Amending Agreement to the Facility Agreement dated April 24, 2002
4.(a).41	Amending Agreement to the Facility Agreement dated December 31, 2002
6.	See Note 1q to our financial statements for information explaining how earnings (loss) per share information was calculated.
8.	List of Subsidiaries
10.(a).1	Consent of Kesselman & Kesselman
10.(a).2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*	Incorporated by reference to our registration statement on Form F-1 (No. 333-12340).
**	Incorporated by reference to our registration statement on Form F-1 (No. 333-10992).
***	Incorporated by reference to our annual report on Form 20-F for the fiscal year ended December 31, 2000.
+	Incorporated by reference to our annual report on Form 20-F for the fiscal year ended December 31, 2001.
#	Confidential treatment requested.

     Confidential material has been redacted and has been separately filed with the Securities and Exchange Commission.

EX-1.1 3 u45961exv1w1.txt ARTICLES OF ASSOCIATION EXHIBIT 1.1 ARTICLES OF ASSOCIATION OF PARTNER COMMUNICATIONS COMPANY LTD. TABLE OF CONTENTS Chapter One - General.............................................................................3 1. Definitions and Interpretation.........................................................3 2. Public Company.........................................................................4 3. The Purpose of the Company.............................................................4 4. The Objectives of the Company..........................................................5 5. Limited Liability......................................................................5 Chapter Two - The Share Capital of the Company....................................................5 6. Share Capital..........................................................................5 7. The Issuance of Shares and Other Equity Securities.....................................5 8. Calls of Payment.......................................................................6 9. The Shareholder Registers of the Company and the Issuance of Share Certificates........8 10. Transfer of Shares of the Company......................................................8 10A. Limitations on Transfer of Shares.....................................................11 11. Bearer Share Certificate..............................................................12 12. Pledge of Shares......................................................................12 13. Changes in the Share Capital..........................................................13 Chapter Three - General Meetings.................................................................15 14. The Authority of the General Meeting..................................................15 15. Kinds of General Meetings.............................................................16 16. The Holding of General Meetings.......................................................17 17. The Agenda of General Meetings........................................................18 18. Discussions in General Meetings.......................................................18 19. Voting of the Shareholders............................................................20 20. The Appointment of a Proxy............................................................22 21. Deed of Vote..........................................................................24 Chapter Four - The Board of Directors............................................................27 22. The Authority of the Board of Directors...............................................27 23. The Appointment of Directors and the Termination of Their Office......................27 24. Actions of Directors..................................................................31 25. Committees of the Board of Directors..................................................34 26. Chairman of the Board of Directors....................................................35 Chapter Five - Officers who are not Directors and the Auditor....................................36 27. The General Manager...................................................................36 28. The Corporate Secretary, Internal Controller and Other Officers of the Company........38 29. The Auditor...........................................................................38 Chapter Six - The Share Capital of the Company and its Distribution..............................40 30. Permitted Distributions...............................................................40 31. Dividends and Bonus Shares............................................................40 32. The Acquisition of Shares.............................................................44 Chapter Seven - Insurance, Indemnification and Release of Officers...............................44 33. Insurance of Officers.................................................................44 34. Indemnification of Officers...........................................................45 35. Release of Officers...................................................................46 Chapter Eight - Liquidation and Reorganization of the Company....................................46 36. Liquidation...........................................................................46 37. Reorganization........................................................................47 Chapter Nine - Miscellaneous.....................................................................47 38. Notices...............................................................................47 Chapter 10 - Transitional Rules until the Companies Law shall be Effective.......................48 39. Applicability.........................................................................48 40. Indemnification of Officers...........................................................49 41. Exemption for Officers................................................................49 42. Interpretation........................................................................50 Chapter 11 - Compliance with the License/Limitations on Ownership and Control....................50 43. Compliance............................................................................50 44. Limitations on Ownership and Control..................................................50 2 CHAPTER ONE - GENERAL 1. DEFINITIONS AND INTERPRETATION 1.1. The following terms in these Articles of Association bear the meaning appearing alongside them below: Articles of Association The Articles of Association of the Company, as set forth herein or as amended, whether explicitly or pursuant to any Law. Business Day Sunday to Thursday, inclusive, with the exception of holidays and official days of rest in the State of Israel. Companies Law The Companies Law, 1999. Companies Ordinance The Companies Ordinance [New Version], 1983. Companies Regulations Regulations issued pursuant to the Companies Ordinance or Companies Law. Director A Director of the Company in accordance with the definition in Section 1 of the Companies Law, including an Alternate Director or an empowered representative. Document A printout and any other form of written or printed words, including documents transmitted in writing, via facsimile, telegram, telex, e-mail, on a computer or through any other electronic instrumentation, producing or allowing the production of a copy and/or an output of a document. Financial Statements The balance sheet, profit and loss statement, statement of changes in the share capital and cash flow statements, including the notes attached to them. Law The provisions of any law ("din") as defined in the Interpretation Law, 1981. License The Company's General License for the Provision of Mobile Radio Telephone Services using the Cellular Method in Israel dated April 7, 1998, and the permit issued by the Ministry of Communications dated April 7, 1998. Linkage Payments with respect to changes in the Israeli consumer price index or the representative exchange rate of NIS vis-a-vis the U.S. dollar, as published by the Bank of Israel, or any other rate which replaces such rate. NIS New Israeli Shekel 3 Office The registered office of the Company. Ordinary Majority A simple majority of the shareholders who are entitled to vote and who voted in a General Meeting in person, by means of a proxy or by means of a deed of voting. Periodic Statement According to its definition in Chapter B of the Securities Regulations (Periodic and Immediate Reports), 1970, or such Securities Regulations replacing them. Securities Shares, bonds, capital notes or securities negotiable into shares and certificates, conferring a right in such securities, or other securities issued by the Company. Securities Law The Securities Law, 1968. Securities Regulations Regulations issued pursuant to the Securities Law. Shares shares in the share capital of the Company. Shareholder Anyone registered as a shareholder in the Shareholder Register of the Company. Special Majority A majority of at least three quarters of the votes of shareholders who are entitled to vote and who voted in a general meeting, in person, by means of a proxy or by means of a deed of voting. 1.2. The provisions of Sections 3 through 10 of the Interpretation Law, 1981, shall also apply to the interpretation of these Articles of Association, mutatis mutandis, unless the context otherwise requires. 1.3. Except as otherwise provided in this Article, each word and expression in these Articles of Association shall have the meaning given to it in accordance with the Companies Law, and to the extent that no meaning is attached to it in the Companies Law, the meaning given to it in the Companies Regulations, and if they lack reference thereto, as stated, the meaning given to it in the Securities Law or Securities Regulations, and in the absence of any meaning, as stated, the meaning given to it in another Law, unless it contradicts the relevant provision or its contents. 2. PUBLIC COMPANY The Company is a public company. 3. THE PURPOSE OF THE COMPANY The purpose of the Company is to operate in accordance with business considerations to generate profits; provided, however, the Board of Directors is entitled to donate 4 reasonable amounts to worthy causes, even if such a donation is not within the framework of business considerations, as stated. 4. THE OBJECTIVES OF THE COMPANY The Company shall engage in any legal business. 5. LIMITED LIABILITY The liability of the Shareholders of the Company is limited, each one up to the full amount he undertook to pay for the Shares allotted to him, at the time of the allotment. CHAPTER TWO - THE SHARE CAPITAL OF THE COMPANY 6. SHARE CAPITAL 6.1. The authorized share capital of the Company is NIS 2,350,000, divided into 235,000,000 ordinary shares at a par value of NIS 0.01 each (hereinafter: the "Ordinary Shares"). 6.2. Each Ordinary Share shall confer upon its holder the right to receive notices of, and to attend and vote in, general meetings, and to one vote for each Ordinary Share held by him. 6.3. Each class of Shares shall also confer equal rights to each holder in the class with respect to the amounts of equity which were paid or credited as paid with respect to their par value, in all matters pertaining to dividends, the distribution of bonus shares and any other distribution, return of capital and participation in the distribution of the balance of the assets of the Company upon liquidation. 6.4. The provisions of these Articles of Association with respect to Shares, shall also apply to other Securities issued by the Company, mutatis mutandis. 7. THE ISSUANCE OF SHARES AND OTHER SECURITIES 7.1. The Board of Directors of the Company may issue Shares and other equity Securities of the Company, up to the limit of the registered share capital of the Company. In the event that the share capital of the Company includes several classes of Shares and other equity Securities, no shares and other equity Securities shall be issued above the limit of the registered share capital for its class. 7.2. The Board of Directors of the Company may issue redeemable Securities, having such rights and subject to such conditions as will be determined by the Board of Directors. 7.3. Subject to the provisions of these Articles of Association, the Board of Directors may allot Shares and other Securities according to such stipulations and conditions, at par value or by way of a premium, as it deems fit. 5 7.4. The Board of Directors may decide on the issuance of a series of bonds or other debt securities within the framework of its authority or to take a loan on behalf of the Company and within the limits of the same authority. 7.5. The Shareholders of the Company at any given time shall not have any preemption right or priority or any other right whatsoever with respect to the acquisition of Securities of the Company. The Board of Directors, in its sole discretion, may decide to offer Securities of the Company first to existing Shareholders or to any one or more of them. 7.6. The Company is entitled to pay a commission (including underwriting fees) to any person, in consideration for underwriting services, or the marketing or distribution of Securities of the Company, whether reserved or unreserved, as determined by the Board of Directors. Payments, as stated in this Article, may be paid in cash or in Securities of the Company, or partly in one manner and partly in another manner. 8. CALLS OF PAYMENT 8.1. In the event that according to the terms of a Share allotment, there is no fixed date for the payment of any part of the price that is to be paid for the Shares, the Board of Directors may issue from time to time calls of payment to the Shareholders with respect to the moneys which were not yet paid by them in relation to the Shares (hereinafter: "Calls of Payment" or "a Call of Payment", as the case may be). 8.2. A Call of Payment shall set a date, which will not be earlier than thirty days from the date of the notice, by which the amount indicated in the Call of Payment must be paid, together with interest, Linkage and expenses incurred in consequence of the non-payment, according to the rates and amounts set by the Board of Directors. The notice shall further specify that in the event of a failure to pay within the date fixed, the Shares in respect of which payment or the rate is required may be forfeited. In the event that a Shareholder fails to meet any of its obligations, under a Call of Payment, the Share in respect of which said notice was issued pursuant to the resolution of the Board of Directors may be forfeited at any time thereafter. The forfeiture of Shares shall include the forfeiture of all the dividends on same Shares which were not paid prior to the forfeiture, even if such dividends were declared. 8.3. Any amount, which according to the terms of a Share allotment, must be paid at the time of issuance or at a fixed date, whether at the par value of the Share or at a premium, shall be deemed for the purposes of these Articles of Association to be combined in a duly issued Call of Payment. In the event of non-payment of any such amount, all the provisions of these Articles of Association shall apply with respect to such an amount, as if a proper Call of Payment has been made and an appropriate notice thereof was given. 6 8.4. The Board of Directors, acting reasonably and in good faith, may differentiate among Shareholders with respect to amounts of Calls of Payment and/or their payment time. 8.5. The joint holders of Shares shall be liable, jointly and severally, for the payment of Calls of Payment in respect of such Shares. 8.6. Any payment for Shares shall be credited, pro rata, according to the par value of and according to the premium on such Shares. 8.7. A Call of Payment may be cancelled or deferred to another date, as may be decided by the Board of Directors. The Board of Directors may waive any interest, Linkage and expenses or any part of them. 8.8. The Board of Directors may receive from a Shareholder any payments for his Shares, in addition to the amount of any Call of Payment, and the Board of Directors may pay to the same Shareholder interest on amounts which were paid in advance, as stated above, or on same part of them, in excess of the amount of the Call of Payment, or to make any other arrangement with him which may compensate him for the advancement of the payment. 8.9. A Shareholder shall not be entitled to a dividend or to his other rights as a Shareholder, unless he has fully paid the amounts specified in the Calls of Payment issued to him, together with interest, Linkage and expenses, if any, unless otherwise determined by the Board of Directors. 8.10. The Board of Directors is entitled to sell, re-allot or transfer in any other manner any Share which was forfeited, in the manner it decides, with or without any amount paid on the Share or deemed as paid on it. 8.11. The Board of Directors is entitled at all times prior to the sale, reallotment or transfer of the forfeited Share to cancel the forfeiture on the conditions it may decide. 8.12. A person whose Shares have been forfeited shall, notwithstanding the forfeiture, remain liable to pay to the Company all moneys which, up until the date of forfeiture, were due and payable by him to the Company in respect of the Shares, including interest, Linkage and expenses up until the actual payment date in the same manner as if the Shares were not forfeited, and shall be compelled to fulfill all the requirements and claims which the Company was entitled to enforce with respect to the Shares up until the forfeiture date, without any decrease or discount for the value of the Shares at the time of forfeiture. His liability shall cease only if and when the Company receives the full payment set at the time of allotment of the Shares. 8.13. The Board of Directors may collect any Calls of Payment which were not paid on the forfeited Shares or any part of them, as it deems fit, but it is not obligated to do so. 7 8.14. The forfeiture of a Share shall cause, as of the time of forfeiture, the cancellation of all rights in the Company and of any claim or demand against the Company with respect to that Share, and of other rights and obligations of the Shareholder in respect of the Company, save as otherwise provided by Law. 9. THE SHAREHOLDER REGISTERS OF THE COMPANY AND THE ISSUANCE OF SHARE CERTIFICATES 9.1. The Company shall maintain a Shareholder Register and a Register of Significant Shareholders, together with a notation of any Exceptional Holdings in accordance with the provisions set forth in Article 10A below, to be administered by the corporate secretary of the Company, subject to the oversight of the Board of Directors. 9.2. A Shareholder is entitled to receive from the Company, free of charge, within two months after an allotment or the registration of a transfer (unless the conditions of the allotment fix a different period) one or several certificates with respect to all the Shares of a certain class registered in his favor, which certificate must specify the number of the Shares, the class of the Shares and the amount paid for them and also any other detail deemed important by the Board of Directors. In the event a Share is held jointly, the Company shall not be obligated to issue more than one certificate for all the joint holders, and the delivery of such a certificate to any of the joint holders shall be viewed as if it was delivered to all of them. 9.3. Each and every Share certificate shall be stamped with the seal or the stamp of the Company or bear the Company's printed name, and shall also bear the signature of one Director and of the corporate secretary of the Company, or of two Directors or of any other person appointed by the Board of Directors for this purpose. 9.4. The Company is entitled to issue a new Share certificate in place of an issued Share certificate which was lost or spoiled or corrupted, following evidence thereto and guarantees and indemnities, as may be required by the Company and the payment of an amount determined by the Board of Directors. 9.5. Where two people or more are registered as joint holders of Shares, each of them is entitled to acknowledge the receipt of a dividend or other payments in connection with such jointly held Shares, and such acknowledgement of any one of them shall be good discharge of the Company's obligation to pay such dividend or other payments. 10. TRANSFER OF SHARES 10.1. The Shares are transferable. The transfer of Shares shall not be registered unless the Company receives a deed of transfer (hereinafter: "Deed of Transfer") or other proper Document or instrument of transfer. A Deed of Transfer shall be drawn up in the following manner or in any substantially similar manner or in any other manner approved by the Board of Directors. 8 DEED OF TRANSFER I, _________________, (hereinafter: "The Transferor") of ____________, do hereby transfer to ___________ (hereinafter: "The Transferee") of __________, for valuable consideration paid to me, _________ Share(s) having a par value of NIS 0.01 each, numbered ________ to ________ (inclusive), of Partner Communications Company Ltd. (hereinafter: the "Company") to hold unto the Transferee, his executors, administrators and assigns, subject to the same terms and conditions on which I held the same at the time of the execution hereof; and I, the said Transferee, do hereby agree to take the said Share(s) subject to the aforesaid terms and conditions. In witness whereof we have hereunto set our hands this _____ day of _________, _____. The Transferor The Transferee Name: _______________ Name: _______________ Signature: ____________ Signature: ____________ Witness to the Signature of: The Transferor The Transferee Name: _____________ Name: _____________ Signature: ____________ Signature: ____________ 10.2. The transfer of Shares which are not fully paid, or Shares on which the Company has a lien or pledge, shall have no validity unless approved by the Board of Directors, which may, in its absolute discretion and without giving any reasoning thereto, decline the registration of such a transfer. The Board of Directors may deny a transfer of Shares as aforesaid and may also impose a condition of the transfer of Shares as aforesaid an undertaking by the transferee to meet the obligations of the transferor with respect to the Shares or the obligations for which the Company has a lien or pledge on the Shares, signed by the transferee together with the signature of a witness, authenticating the signature of the transferee. 10.3. The transfer of a fraction of a Share shall lack validity. 10.4. A transferor of Shares shall continue to be regarded as the holder of the transferred Shares, until the name of the transferee of the Shares is registered in the Shareholder Register of the Company. 10.5. A Deed of Transfer shall be filed with the Company's office for registration, together with the Share Certificates for the Shares which are to be transferred (if such are issued) and also any other evidence which the Company may require with respect to the proprietary right of the transferor or with respect to his right to transfer the Shares. Deeds of Transfer which are registered shall remain with the Company. The Company is not obligated to retain the Deeds of Transfer and the 9 Share Certificates, which may be cancelled, after the completion of a seven-year period from the registration of the transfer. 10.6. A joint Shareholder may transfer his right in a Share. In the event the transferring Shareholder does not hold the relevant Share Certificate, the transferor shall not be obligated to attach the Share Certificate to the Deed of Transfer, so long as the Deed of Transfer shall indicate that the transferor does not hold the Share Certificate, that the right he has in the Shares therein is being transferred, and that the transferred Share is held jointly with others, together with their details. 10.7. The Company may require payment of a fee for the registration of the transfer, at an amount or a rate determined by the Board of Directors from time to time. 10.8. The Board of Directors may close the Shareholder Register for a period of up to thirty days in each year. 10.9. Subject to Article 10.10, upon the death of a Shareholder, the Company shall recognize the custodians or administrators of the estate or executors of the will, and in the absence of such, the lawful heirs of the Shareholder, as the only holders of the right for the Shares of the deceased Shareholder, after receipt of evidence to the entitlement thereto, as determined by the Board of Directors. 10.10. In the event that a deceased Shareholder held Shares jointly with others, the Company shall acknowledge each survivor as a joint Shareholder with respect to said Shares, unless all the joint holders in the Share notify the Company in writing, prior to the death of any of them, of their will that the provisions of this Article shall not apply to them. The foregoing shall not release the estate of a joint Shareholder of any obligation in relation to a Share which is held jointly. 10.11. A person acquiring a right in Shares in consequence of being a custodian, administrator of the estate, the heir of a Shareholder, a receiver, liquidator or a trustee in a bankruptcy of a Shareholder or according to another provision of the Law, is entitled, after providing evidence to his right, to the satisfaction of the Board of Directors, to be registered as the Shareholder or to transfer such Shares to another person, subject to the provisions of these Articles of Association with respect to transfers. 10.12. A person becoming entitled to a Share because of the death of a Shareholder shall be entitled to receive, and to give receipts for, dividends or other payments paid or distributions made, with respect to the Share, but shall not be entitled to receive notices with respect to General Meetings of the Company or to participate or vote therein with respect to that Share, or to exercise any other right of a Shareholder, until he has been registered in the Shareholder Register as the holder of that Share. 10.13. Notwithstanding anything to the contrary in Articles 10.5 and 10.7, the transfer of Shares as a result of a realization of a share pledge entered into by a Shareholder of the Company in connection with the Company's $650 million credit facility dated August 13, 1998, as amended from time to time, will not require additional evidence with respect to the proprietary right of the transferor or with respect to 10 his right to transfer the shares other than a properly completed deed of transfer and valid Share Certificate (if issued), nor will the Company require a fee for the registration of said transfer. 10A. LIMITATIONS ON TRANSFER OF SHARES 10A.1. Exceptional Holdings shall be registered in the Register of Members (Shareholder Register) together with a notation that such holdings have been classified as "Exceptional Holdings", immediately upon the Company's learning of such matter. Notice of such registration shall be sent by the Company to the registered holder of the Exceptional Holding and to the Minister of Communications. 10A.2. Exceptional Holdings, registered in the manner set forth in Article 10A.1, shall not entitle the holder to any rights in respect to his holdings, and such holdings shall be considered "Dormant Shares" within the meaning of Section 308 of the Companies Law, except, however, that the holder of such shares shall be entitled to receive dividends and other distributions to shareholders (including the right to participate in a rights offering calculated on the basis of Means of Control of the Company (as defined in the License), provided, however, that such additional holdings shall be considered Exceptional Holdings). Therefore, any action taken or claim made on the basis of a right deriving from an Exceptional Holdings shall have no effect, except for the receipt of dividends or other distribution as stated above. Without derogating from the above: 10A2.1 A Shareholder participating in a vote of the General Meeting will certify to the Company prior to the vote or, if the vote is by Deed of Vote, on the Deed of Vote, as to whether or not his holdings in the Company or his vote require consent pursuant to Sections 21 and 23 to the License; in the event the shareholder does not provide notification as aforesaid, he shall not vote and his vote shall not be counted. 10A.2.2 No Director shall be appointed, elected or removed on the basis of Exceptional Holdings. In the event a Director is appointed, elected or removed from his position as a Director as set forth above, such appointment, election or removal shall have no effect. 10A.2.3 Exceptional Holdings shall have no voting rights at a General Meeting of the Company. For the purposes of this Article 10A, "EXCEPTIONAL HOLDINGS" means the holdings of Traded Means of Control held without the consent of the Minister of Communications pursuant to Section 21 to the License or as a result of a breach of the provisions of Section 23 to the License, and all holdings of a holder of Traded Means of Control who acted contrary to the provisions of Section 24 to the 11 License; and as long as the consent of the Minister of Communications is required but has not been obtained pursuant to Section 21 to the License, or the circumstances exist which constitute a violation of the provisions of Sections 23 or 24 to the License. For the purposes of this Article 10A, "TRADED MEANS OF CONTROL" means Means of Control (as defined in the License) including Global or American Depositary Shares (GDRs or ADRs) or similar certificates, registered for trade on a securities exchange in Israel or abroad or which have been offered to the public in connection with a prospectus, and are held by the public in Israel or abroad. 10A.3. The provisions of Article 10A shall not apply to those who were Shareholders of the Company on the eve of the first registration of the Company's Shares for trade. 11. BEARER SHARE CERTIFICATE The Company shall not issue bearer Share Certificates which grant the bearer rights in the Shares specified therein. 12. PLEDGE OF SHARES 12.1. The Company shall have a first degree pledge on, and a right to create a lien on, all Shares which are not fully paid and registered in the name of any Shareholder, and the proceeds of their sale, with respect to moneys (which payment time is due or not) whose payment was already called or are to be paid up within a fixed time. Furthermore, the Company shall have a first degree pledge right on all the Shares (other than Shares which were fully paid) registered in the name of any Shareholder to secure the payment of moneys which are due from him or from his property, whether with respect to his own debts or debts jointly with others. The said pledge shall also apply to dividends, declared from time to time, with respect to these Shares. 12.2. For purposes of the realization of any such pledge and or lien, the Board of Directors is entitled to sell the Shares which are the subject of the pledge or lien, or any part of them, as it deems fit. No sale, as aforesaid, shall be carried out, until the date fixed for the payment has passed and a notice in writing was transferred to same Shareholder with respect to the intention of the Company to sell them, on condition that the amounts were not paid within fourteen days after the notice. 12.3. The proceeds of any such sale, after deduction for the payment of the sale expenses, shall serve for the covering of the debts or obligations of said Shareholder, and the balance (if any) shall be paid to him. 12.4. In the event that a sale of Shares was carried out pursuant to the realization of a pledge or a lien, pursuant to the presumptive authority conferred above, the Board of Directors is entitled to register such Shares in the Shareholder Register in favor of the buyer, and the buyer shall not be under the obligation to examine the fitness 12 of such actions or the manner in which the purchase price paid for such Shares was used. After the said Shares are registered in the Shareholder Register in favor of the buyer, no person shall have the right to object to the validity of the sale. 13. CHANGES IN THE SHARE CAPITAL The General Meeting is entitled to take any of the following actions at all times, so long as the resolution of the General Meeting is adopted by a Special Majority. 13.1. Increasing the Share Capital To increase the share capital of the Company, regardless of whether all the Shares registered at such a time were issued or not. The increased share capital shall be divided into Shares having ordinary rights or preference rights or deferred rights or other special rights (subject to the special rights of an existing class of Shares) or subject to conditions and restrictions with respect to entitlement to dividend, return of capital, voting or other conditions, as may be instructed by the General Meeting in a resolution with respect to the increase of the share capital, and in the absence of a special provision, according to the terms determined by the Board of Directors. 13.2. Classes of Shares To divide the share capital of the Company into various classes of Shares, and to set and change the rights attaching to each class of Shares, according to the conditions specified below: 13.2.1. So long as it was not otherwise set in the Share allotment conditions, the rights of any class may be changed pursuant to a resolution of the General Meeting of the Shareholders of each class of Shares, separately, or upon the written consent of all the Shareholders of all classes. 13.2.2. The rights conferred on the holders of Shares of a certain class shall not be deemed to have been changed as a result of the creation or allotment of other Shares having identical rights, unless it was otherwise stipulated in the allotment conditions of said Shares. 13.3. Amalgamation and Redivision of the Share Capital To amalgamate and redivide the share capital of the Company, entirely or partially, into Shares having a higher or lesser par value than that stated in these Articles of Association. In the event that in consequence of such amalgamation, there are Shareholders left with fractions of Shares, the Board of Directors if approved by the Shareholders at a General Meeting in adopting the resolution for amalgamation of the capital, may agree as follows: 13 13.3.1. To sell the total of all the fractional shares and to appoint a trustee for this purpose, in whose name Share Certificates representing the fractions shall be issued, who will sell them, with the proceeds received after the deduction of commissions and expenses to be distributed to those entitled. The Board of Directors shall be entitled to decide that Shareholders who are entitled to proceeds which are below an amount determined by it, shall not receive the proceeds of the sale of the fractional shares, and their share in the proceeds shall be distributed among the Shareholders who are entitled to proceeds, in an amount greater than the amount that was determined, relative to the proceeds to which they are entitled; 13.3.2. To allot to any Shareholder, who is left with a fractional Share following the amalgamation, Shares of the class of Shares prior to the amalgamation, which are fully paid, in such a number, the amalgamation of which together with the fractional Share shall complete a whole Share, and an allotment as stated shall be viewed as valid shortly before the amalgamation; 13.3.3. To determine that Shareholders shall not be entitled to receive a Share in exchange for a fractional Share resulting from the amalgamation of a half or smaller fraction of the number of Shares, whose amalgamation creates a single Share, and they shall be entitled to receive a whole Share in exchange for a fractional Share, resulting from the amalgamation of more than a half of the number of Shares, whose amalgamation creates a whole Share. In the event that an action pursuant to Articles 13.3.2 or 13.3.3 above requires the allotment of additional Shares, their payment shall be effected in a manner similar to that applicable the payment of Bonus Shares. An amalgamation and redivision, as aforesaid, shall not be regarded as a change in the rights attaching to the Shares which are the subject of the amalgamation and redivision. 13.4. Cancellation of Unissued Share Capital To cancel registered share capital which has not yet been allotted, so long as the Company is not under an obligation to allot these Shares. 13.5. The Division of the Share Capital To divide the share capital of the Company, entirely or partially, into Shares having a lower par value than those stated in these Articles of Association, by way of dividing the Shares of the Company at such a time, entirely or partially. 13.6. The provisions specified in this Article 13 shall also apply to other equity Securities of the Company, mutatis mutandis. 14 CHAPTER THREE - GENERAL MEETINGS 14. THE AUTHORITY OF THE GENERAL MEETING 14.1. Subjects within the authority of the General Meeting The following matters shall require the approval of the General Meeting: 14.1.1. Changes in the Articles of Association, if adopted by a Special Majority. 14.1.2. The exercise of the authority of the Board of Directors, if resolved by a Special Majority that the Board of Directors is incapable of exercising its authority, and that the exercise of any of its authority is essential to the orderly management of the Company. 14.1.3. The appointment or reappointment of the Company's auditor, the termination or non-renewal of his service, and to the extent required by Law and not delegated to the Board of Directors, the determination of his fee. 14.1.4. The appointment of Directors, including external Directors. 14.1.5. To the extent required by the provisions of Section 255 of the Companies Law, the approval of actions and transactions with interested parties and also the approval of an action or a transaction of an officer which might constitute a breach of the duty of loyalty. 14.1.6. Changes in the share capital of the Company, if adopted by a Special Majority as set forth in Article 13 above. 14.1.7. A merger of the Company, as defined in the Companies Law. 14.1.8. Changes in the objectives of the Company as set forth in Article 4 above, if adopted by a Special Majority. 14.1.9. Changes in the name of the Company, if adopted by a Special Majority. 14.1.10. Liquidation, if adopted by a Special Majority. 14.1.11. Settlements or Arrangements pursuant to Section 233 of the Companies Ordinance. 14.1.12. Any other matters which applicable Law requires to be dealt with at General Meetings of the Company. 14.2. The authority of the General Meeting to transfer authorities between corporate organs. 15 The General Meeting, by a Special Majority, may assume the authority which is given to another corporate organ, and may transfer the authority which is given to the General Manager to the Board of Directors. The taking or transferring of authorities, as aforesaid, shall be with regard to a specific issue or for a specific period of time, all as stated in the resolution of the General Meeting. 15. KINDS OF GENERAL MEETINGS 15.1. Annual Meetings A General Meeting shall be convened at least once a year, within fifteen months of the last general meeting. The meeting shall be held at the registered offices of the Company, unless otherwise determined by the Board of Directors. These General Meetings shall be referred to as "Annual Meetings". 15.1.1. An Annual Meeting shall be convened to approve the following: (One) The Financial Statements and the Report of the Board of Directors, as of December 31st of the calendar year preceding the year of the annual meeting. (Two) The Report of the Board of Directors with respect to the fee paid to the Company's auditor. 15.1.2. The Annual Meeting shall be convened to adopt resolutions on the following matters: (One) The appointment of Directors and the termination of their office in accordance with Article 23 below. (Two) The appointment of an auditor or the renewal of his office, and authorization of the Board of Directors to determine his fee, subject to the provisions of Article 29 below. 15.2. Extraordinary Meetings General Meetings of the Shareholders of the Company which are not convened in accordance with the provisions of Article 15.1 above, shall be referred to as "Extraordinary Meetings". An Extraordinary Meeting shall discuss and decide in all matters which are not discussed and decided in the Annual Meeting, and for which the Extraordinary Meeting was convened. 16 15.3. Class Meetings The provisions of these Articles of Association with respect to General Meetings shall apply, mutatis mutandis, to meetings of a class of Shareholders of the Company. 16. THE HOLDING OF GENERAL MEETINGS 16.1. The Convening of the Annual Meeting The Board of Directors shall convene Annual Meetings in accordance with the provisions of Article 15.1 above. 16.2. The Convening of an Extraordinary Meeting The Board of Directors may convene an Extraordinary Meeting, as it decides, provided, however, that it shall be obligated to convene an Extraordinary Meeting upon the demand of one of the following: 16.2.1. Any two Directors or a quarter of the Directors, whichever is lower; or 16.2.2. any one or more Shareholders, holding alone or together at least 4.99% of the issued share capital of the Company. 16.3. Date of Convening an Extraordinary Meeting Upon Demand The Board of Directors, which is required to convene a general meeting in accordance with Article 16.2 above shall announce the convening of the General Meeting within twenty-one (21) days from the receipt of a demand in that respect, and the date fixed for the meeting shall not be more than thirty-five (35) days from the publication date of the announcement of the General Meeting. In the event that the Board of Directors shall not have convened an Extraordinary Meeting, as required in this Article, those demanding its convening or half of the Shareholders which demand it subject to Article 16.2.2, are entitled to convene the meeting themselves, so long as it is convened within three months from the date on which the demand was filed, and it shall be convened, inasmuch as possible, in the same manner by which meetings are convened by the Board of Directors. In the event that a General Meeting is convened as aforesaid, the Company shall bear the reasonable costs and expenses incurred by those demanding it. 16.4. Notice of Convening a General Meeting Unless otherwise prescribed by Law, a notice of a general meeting shall be sent to each registered Shareholder of the Company at least twenty-one (21) days prior to the date fixed for the meeting. 17 A General Meeting may be convened following a shorter notice period, if the written consent of all the Shareholders who are entitled at such time to receive notices has been obtained. A waiver by a Shareholder can also be made in writing after the fact and even after the convening of the General Meeting. 16.5. Contents of the Notice Subject to the provisions of any Law, a notice with respect to a general meeting shall specify the agenda of the meeting, the location, the proposed resolutions and also the arrangements for voting by means of a deed of voting or a deed of authorization, and the requirements of Article 10A.2.1. Any notice to be sent to the Shareholders shall also include a draft of the proposed resolutions or a concise description of their particulars. 17. THE AGENDA OF GENERAL MEETINGS 17.1. The agenda of the General Meeting shall be determined by the Board of Directors and shall also include issues for which an Extraordinary Meeting is being convened in accordance with Article 15.2 above, or demanded in accordance with Article 17.2 below. 17.2. One or more Shareholders holding alone or in the aggregate, 4.99% or more of the share capital of the Company may request that the Board of Directors include an issue on the agenda of a general meeting to be convened in the future. The Board of Directors shall incorporate such issue on the agenda of such a future general meeting, provided that the Board of Directors determines, in its discretion, such issue is suitable to be discussed in the General Meeting of the Company. 17.3. The General Meeting shall only adopt resolutions on issues which are on its agenda. 17.4. So long as it is not otherwise prescribed by Law, the General Meeting is entitled to accept or reject a proposed resolution which is on the agenda of the General Meeting, the draft or concise description of the particulars of which were published by the Company, including slight alterations, however, it is not entitled to take a resolution, which is materially different than the proposed resolution. 18. DISCUSSIONS IN GENERAL MEETINGS 18.1. Quorum No discussion shall be held in the General Meeting unless a lawful quorum is present. Subject to the requirements of the applicable Law in force at the time these Articles of Association come into force, the rules of the Nasdaq National Market, the London Stock Exchange and any other exchange on which the Company's securities are or may become quoted or listed, and the provisions of these Articles, any two Shareholders, present by themselves or by means of a 18 proxy, or who have delivered to the Company a Deed of Voting indicating their manner of voting, and who hold or represent at least one-third of the voting rights in the Company shall constitute a lawful quorum. A Shareholder or his proxy, who may also serve as a proxy for other Shareholders, shall be regarded as two Shareholders or more, in accordance with the number of Shareholders he is representing. 18.2. Deferral of the General Meeting in the Absence of Lawful Quorum In the event that a legal quorum is not present after the lapsing of 30 minutes from the time specified in the convening notice for the commencement of the meeting, the meeting may be adjourned to the same day of the following week (or the first business day thereafter) at the same time and venue, or to another time and venue, as determined by the Board of Directors in a notice to the Shareholders, and the adjourned meeting shall discuss the same issues for which the original meeting was convened. If at the adjourned meeting, a legal quorum is not present at the time specified for the commencement of the meeting, then and in such event one or more Shareholders holding or representing in the aggregate at least 10% of the voting rights in the Company shall be deemed to form a proper quorum, subject to the provisions of Section 79 of the Companies Law. 18.3. The Chairman of the General Meeting The chairman of the Board of Directors (if appointed) shall preside at each General Meeting. In the absence of the chairman, or if he fails to appear at the meeting within 15 minutes after the time fixed for the meeting, the Shareholders present at the meeting shall choose any one of the Directors of the Company as the chairman, and if there is no Director present at the meeting, one of the Shareholders shall be chosen to preside over the meeting. The chairman shall not have an additional vote or casting vote. 18.4. Adjourned Meeting Upon adoption of a resolution at a General Meeting at which a lawful quorum is present, the chairman may and upon demand of the General Meeting shall adjourn the General Meeting from time to time and from venue to venue, as the meeting may decide (for the purpose of this Article: an "Adjourned Meeting"). In the event that a meeting is adjourned for fourteen days or more, a notice of the Adjourned Meeting shall be given in the same manner as the notice of the original meeting. With the exception of the aforesaid, a Shareholder shall not be entitled to receive notice of an Adjourned Meeting or of the issues which are to be discussed in the Adjourned Meeting. The Adjourned Meeting shall only discuss issues that could have been discussed at the General Meeting which was adjourned. The provisions of Articles 17.1, 17.2 and 17.3 of the Articles of Association shall apply to an Adjourned Meeting. 19 19. VOTING OF THE SHAREHOLDERS 19.1. Resolutions In any General Meeting, a proposed resolution shall be adopted if it receives an Ordinary Majority, or any other majority of votes set by Law or in accordance with these Articles of Association. For the avoidance of doubt, any proposed resolution requiring a Special Majority under the Companies Ordinance shall continue to require the same Special Majority even after the effective date of the Companies Law. In the event of a tie vote, the resolution shall be deemed rejected. 19.2. Checking Majority 19.2.1. The checking of the majority shall be carried out by means of a count of votes, at which each Shareholder shall be entitled to vote in each case in accordance with rights fixed for such Shares, subject to Articles 10A above and Article 44 below. A Shareholder shall be entitled to a single vote for each share he holds which is fully paid or that Calls of Payment in respect of which was fully paid. 19.2.2. The announcement of the chairman that a resolution in the General Meeting was adopted or rejected, whether unanimously or with a specific majority, shall be regarded as prima facie evidence thereof. 19.3. Written Resolutions Subject to the provisions of applicable Law, a written resolution signed by all of the Shareholders of the Company holding Shares which entitle their holders to participate in General Meetings of the Company and vote therein, or of the same class of Shares to which the resolution refers, as the case may be, shall be regarded as a valid resolution for all purposes, and as a resolution adopted at a General Meeting of the Company or at a class meeting of the relevant class of Shares, as the case may be, which was properly summoned and convened, for the purpose of adopting such a resolution. Such a resolution could be stated in several copies of the same document, each of them signed by one Shareholder or by several Shareholders. 19.4. The Determining Date with Respect to Participation and Voting In the event that a General Meeting was summoned more than twenty-one (21) days prior to the date fixed for its convening, the Shareholders who are entitled to participate and vote in same General Meeting shall be those Shareholders who are registered in the Shareholder Register of the Company on the date twenty-one (21) 20 days prior to the date of the meeting. In the event that a General Meeting was summoned 21 days or less prior to the date fixed for its convening, the Shareholders who are entitled to participate and vote in the same General Meeting shall be those shareholders who are registered in the Shareholder Register of the Company on the date determined by the Board of Directors but in no event shall the date be less than four days prior to the date of the meeting. 19.5. A Right to Participate and Vote A Shareholder shall not be entitled to participate and vote in any General Meeting or to be counted among those present, so long as (i) he owes the Company a payment which was called for the Shares held by him, unless the allotment conditions of the Shares provide otherwise, and/or (ii) his holdings are registered in the Shareholder Register together with a notation that such holdings have been classified as Exceptional Holdings, as defined in Article 10A or Affected Shares, as defined in Article 44. 19.6. Personal Interest in Resolutions A Shareholder seeking to vote with respect to a resolution which requires that the majority for its adoption include at least a third of the votes of all those not having a personal interest (as defined in the Companies Law) in the resolution shall notify the registered office of the Company at least two business days prior to the date of the General Meeting, whether he has a personal interest in the resolution or not, as a condition for his right to vote and be counted with respect to such resolution. A Shareholder voting on a resolution, as aforesaid, by means of a Deed of Vote, may include his notice with regard to his personal interest on the Deed of Vote. 19.7. The Disqualification of Deeds of Vote Subject to the provisions of applicable Law, the corporate secretary of the Company may, in his discretion, disqualify Deeds of Vote and Deeds of Authorization and so notify the Shareholder who submitted a Deed of Vote or Deeds of Authorization in the following cases: 19.7.1. If there is a reasonable suspicion that they are forged; 19.7.2. If there is a reasonable suspicion that they are falsified, or given with respect to Shares for which one or more Deeds of Vote or deeds of authorization have been given and not withdrawn; or 19.7.3. If there is no note on the Deed of Vote or Deed of Authorization as to whether or not his holding in the Company or his vote require the consent of the Minister of Communications pursuant to Sections 21 and 23 to the License. 21 19.7.4. With respect to Deeds of Vote: (One) If more than one choice is marked for the same resolution; or (Two) With respect to resolutions which require that the majority for their adoption includes a third of the votes of those not having a personal interest in the approval of the resolution, where it was not marked whether the relevant Shareholder has a personal interest or not, as aforesaid. Any Shareholder shall be entitled to appeal on any such disqualification to the Board of Directors at least one business day prior to the relevant General Meeting. 19.8. The Voting of a Person without Legal Capacity A person without legal capacity is entitled to vote only by means of a trustee or a legal custodian. Such trustee or legal custodian may vote in person, by Deed of Vote or by means of a proxy. 19.9. The Voting of Joint Holders of a Share Where two or more Shareholders are registered joint holders of a Share, only the first named joint holder shall vote, either in person or by means of a proxy or by means of a Deed of Vote, without taking into account the other registered joint holders of the Share. For this purpose, the first named joint holder shall be the person whose name is registered first in the Shareholder Register. 19.10. Minutes of the General Meeting The chairman of the General Meeting shall cause that the minutes of each General Meeting shall be properly maintained and shall include the following: 19.10.1. The name of each Shareholder present in person, by Deed of Vote or by proxy and the number of Shares held or represented by him; 19.10.2. The principal issues of the discussion, all the resolutions which were adopted or rejected at the General Meeting, and if adopted - according to what majority. 20. THE APPOINTMENT OF A PROXY 20.1. Voting by Means of a Proxy A Shareholder registered in the Shareholder Register is entitled to appoint by deed of authorization a proxy to participate and vote in his stead, whether at a certain General Meeting or generally at General Meetings of the Company, whether personally or by means of a Deed of Vote, so long as the deed of authorization 22 with respect to the appointment of the proxy was delivered to the Company at least two Business Days prior to the date of the General Meeting. In the event that the deed of authorization is not limited to a certain General Meeting, then the deed of authorization, which was deposited prior to a certain General Meeting, shall also be good for other General Meetings thereafter. This Article 20 shall also apply to a Shareholder which is a corporation, appointing a person to participate and vote in a General Meeting in its stead. A proxy is not required to be a Shareholder of the Company. 20.2. The Draft of the Deed of Authorization The deed of authorization shall be signed by the Shareholder and shall be in or substantially in the form specified below or any such other form acceptable to the Board of Directors of the Company. The corporate secretary, in his discretion, may accept a deed of authorization differing from that set forth below provided the changes are immaterial. The corporate secretary shall only accept either an original deed of authorization, or a copy of the deed of authorization which is certified by a lawyer having an Israeli license or a notary. DEED OF AUTHORIZATION Date: -------- To: Partner Communications Company Ltd. Attn.: Corporate Secretary Re: [Annual/Extraordinary] General Meeting of the Company to be Held On __________________ I, the undersigned _________________, Identification No. / Registration No. _____________, of ________________, being the registered holder of ________ (*) Shares [Ordinary Shares having a par value of NIS 0.01, each], hereby authorize ___________, Identification No. ___________ (**) and/or ___________, Identification No. ___________ and/or ___________, Identification No. ___________ to participate and vote in my stead and on my behalf at the referenced meeting and in any adjournment of the referenced meeting of the Company / at any General Meeting of the Company, until I shall otherwise notify you . ----------------------- Signature - -------------------------------------------------------------------------------- (*) A Shareholder is entitled to give several deeds of authorization, each of which refers to a different quantity of Shares of the Company held by him, so long as he shall not give deeds of authorization with respect to an aggregate number of Shares exceeding the total number he holds. (**) In the event that the proxy does not hold an Israeli Identification number, indicate a passport number, if any, and the name of the country which issued the passport. 23 20.3. A vote in accordance with a deed of authorization shall be lawful even if prior to it, the appointer died or became incapacitated or bankrupt, or if it is a corporation - was liquidated, or if he cancelled the deed of authorization or transferred the Share in respect of which it was given, unless a notice in writing was received at the Office of the Company prior to the meeting with respect to the occurrence of such an event. 21. DEED OF VOTE 21.1. A Shareholder may vote in a General Meeting by means of a Deed of Vote on the issues specified below, unless the Company is entitled by Law to a partial or full exemption from the requirement for the delivery of Deeds of Vote, either generally or specifically: 21.1.1. The appointment and dismissal of Directors. 21.1.2. The approval of actions with interested parties, subject to sections 268-275 of the Companies Law. 21.1.3. The approval of an action by an officer which conflicts with his duty of loyalty toward the Company, subject to Section 255 of the Companies Law. 21.1.4. A merger subject to Section 320 of the Companies Law. 21.1.5. Any issue which the Articles of Association provide can be voted thereon by means of a Deed of Vote. 21.1.6. Other issues prescribed by Law. 21.2. The Draft of the Deed of Vote The Deed of Vote shall be signed by the Shareholder and shall be in or substantially in the form specified below, or any such other form acceptable to the Board of Directors of the Company. The corporate secretary or any one authorized by the Board of Directors to convene the meeting, shall be entitled to amend the form of the Deed of Vote in accordance with the resolutions on the agenda. 24 DEED OF VOTE Date: -------- Partner Communications Company Ltd. [Address of the Company] Re: [Annual/Extraordinary] General Meeting of the Shareholders to be on ___________________ I, the undersigned _________________, Identification No. / Registration No. _____________, of ________________, being the registered holder / the holder an appropriate Deed of Authorization, attached hereto (*) of ________ (**) Ordinary Shares having a par value of NIS 0.01 each, hereby notify you that my vote in the General Meeting and in any adjourned meeting of the Company is as specified below.

Item No. of the Personal Interest of the Resolution on Subject of the Shareholder in the the Agenda Resolution Vote (***) Resolution (****) - ------------------------ --------------------- ------------------------------------------- --------------------------------- In Favor Abstain Against Yes No - ------------------------ --------------------- ------------ -------------- --------------- ------------------ -------------- - ------------------------ --------------------- ------------ -------------- --------------- ------------------ -------------- - ------------------------ --------------------- ------------ -------------- --------------- ------------------ -------------- - ------------------------ --------------------- ------------ -------------- --------------- ------------------ --------------

[ ] I, the undersigned, hereby declare that either my holdings or my vote require the consent of the Minister of Communications pursuant to Sections 21 or 23 to the License. (*****) [ ] I, the undersigned, hereby declare that neither my holdings nor my vote, require the consent of the Minister of Communications pursuant to Sections 21 or 23 to the License. (*****) - ------------------------ Signature - -------------------------------------------------------------------------------- (*) In the event that the Shares are held by means of a Registration Company, a power of attorney on behalf of the Registration Company should be enclosed and the Deed of Vote should be signed. (**) In the event that a Shareholder wishes to vote in a different manner with respect to each part of his Shares, a separate Deed of Vote should be filed for each quantity of Shares in respect of which he intends to vote differently. 25 (***) An "X" should be marked in the appropriate column and with respect to each resolution. In the event that more than one choice are marked for a certain resolution, the vote in respect of that resolution shall be disqualified. (****) In resolutions for which a majority which includes a third of the votes of those not having a personal interest in the transaction is required for adoption, an X should be marked in the appropriate column. If an X is not marked in either column, the vote in respect of the same resolution shall be disqualified. (*****) An"X" should be marked in the appropriate column. If an X is not marked in either column, or if an X is marked in both column, the vote shall be disqualified. 21.3. The Sending of a Deed of Vote The Deed of Vote shall be sent by the Company to the Shareholders who are registered in the Shareholder Register of the Company and who are entitled to vote in the General Meeting, together with the notice with respect to General Meetings. The Deed of Vote shall be sent by the Company and at its expense. 21.4. Manner of Use of the Deed of Vote A duly executed Deed of Vote which was received at the Office of the Company at least two Business Days prior to the date of the General Meeting shall constitute the participation and voting of the Shareholder who has delivered it, for each and every purpose, including for the purpose of determining the lawful quorum at a meeting. A Deed of Vote received by the Company, in accordance with this Article, with respect to a certain issue, at which voting in the General Meeting did not take place, shall be viewed as an "abstain" with respect to the resolution to adjourn the meeting and, at the adjourned meeting, shall be voted in accordance with the manner set forth therein. 21.5. Board Recommendation The Board of Directors and any other person lawfully demanding the holding of an extraordinary General Meeting may send to the Shareholders a recommendation in order to persuade the Shareholders with respect to the items which are on the agenda of said meeting. The recommendation shall be delivered at the expense of the Company together with the Deed of Vote. In the event that a General Meeting is convened with respect to any of the issues specified in Article 21.1 above, a Shareholder may submit to the Company a request that a recommendation be delivered on his behalf to the other Shareholders. Unless it is otherwise prescribed by Law, the said recommendation shall be delivered at the expense of the Shareholder, and only if it was received at the registered office of the Company at least 10 days prior to the General Meeting. The Board of Directors of the Company may send to the Shareholders a recommendation in response to a recommendation delivered in accordance with the provisions of this Article, or in response to any other submission to the 26 Shareholders. Such recommendation shall be delivered at the expense of the Company. CHAPTER FOUR - THE BOARD OF DIRECTORS 22. THE AUTHORITY OF THE BOARD OF DIRECTORS 22.1. The authority of the Board of Directors is as specified both in the Law and in the provisions of these Articles of Association. 22.2. Signature Authority and Powers of Attorney 22.2.1. The Board of Directors shall determine the person(s) with authority to sign for and on behalf of the Company with respect to various issues. The signature of such person(s), appointed from time to time by the Board of Directors, whether generally or for a specific issue, whether alone or together with others, or together with the seal or the stamp of the Company or its printed name, shall bind the Company, subject to the terms and conditions set by the Board of Directors. 22.2.2. The Board of Directors may set separate signature authorities with respect to different issues and different amounts. 22.2.3. The Board of Directors may, from time to time, authorize any person to be the representative of the Company with respect to those objectives and subject to those conditions and for that time period, as the Board of Directors deems fit. The Board of Directors may also grant any representative the authority to delegate any or all of the authorities, powers and discretion given to the Board of Directors. 22.3. The Registered Office of the Company The Board of Directors shall fix the location of the Office of the Company. 23. THE APPOINTMENT OF DIRECTORS AND THE TERMINATION OF THEIR OFFICE 23.1. The Number of Directors The number of Directors in the Company shall not be less than seven (7) or more than seventeen (17). 23.2. The Identity of a Director 23.2.1. A member of the Board of Directors may hold another position with the Company. 27 23.2.2. A corporation may serve as a Director in the Company, subject to the provisions of Article 23.6 below. 23.2.3. For as long as any individual or an entity which is an Interested Party in the Company is also an Interested Party in Cellcom (Israel) Ltd. (hereinafter "Cellcom"), such Interested Party or an Office Holder of an Interested Party in Cellcom or an Office Holder of any entity controlled by an Interested Party in Cellcom (other than Elron Electronic Industries Ltd ("Elron") or an entity controlled by Elron) will not serve as an Office Holder of the Company, and no Interested Party in Cellcom or any entity controlled by such Interested Party, may appoint more than two Directors to the Board of Directors of the Company. For the purposes of this Article, the terms "control", "Interested Party" and "Office Holder" shall bear the same meaning as in, and shall be interpreted in accordance with, the License. 23.2.4. The Board of Directors shall include independent and/or external Directors required to comply with the applicable requirements of any Law, the Nasdaq Stock Market, the London Stock Exchange and any other investment exchange on which the securities of the Company are or may become quoted or listed. The requirements of the Companies Law applicable to an external Director (Dahatz) shall prevail over the provisions of these Articles of Association to the extent these Articles of Associations are inconsistent with the Companies Law, and shall apply to the extent these Articles of Associations are silent. 23.3. The Election of Directors and their Terms of Office 23.3.1. The Directors shall be elected at each Annual Meeting and shall serve in office until the close of the next Annual Meeting, unless their office becomes vacant earlier in accordance with the provisions of these Articles of Association. Each Director of the Company shall be elected by an Ordinary Majority at the Annual Meeting; provided, however, that external Directors shall be elected in accordance with applicable law and/or any relevant stock exchange rule applicable to the Company. The elected Directors shall commence their terms from the close of the Annual Meeting at which they are elected, unless a later date is stated in the resolution with respect to their appointment. 23.3.2. In each Annual Meeting, the Directors that were elected in the previous Annual Meeting, and thereafter, in any Extraordinary Meeting shall be deemed to have resigned from their office. A resigning Director may be reelected. 23.3.3. Notwithstanding the other provisions of these Articles of Association and without derogating from Article 23.4, an 28 Extraordinary Meeting of the Company may elect any person as a Director, to fill an office which became vacant or to serve as an external Director (Dahatz) or an independent Director and also in any event in which the number of the members of the Board of Directors is less than the minimum set in the Articles of Association. Any Director elected in such manner (excluding an external Director (Dahatz) shall serve in office until the coming Annual Meeting, unless his office becomes vacant earlier in accordance with the provisions of these Articles of Association and may be reelected. 23.3.4. An elected external Director (Dahatz) shall commence his term from the date of, and shall serve for the period stated in, the resolution of the General Meeting at which he was elected, notwithstanding Article 23.3 above, unless his office becomes vacant earlier in accordance with the provisions of the Companies Law. A General Meeting may reelect an external Director (Dahatz) for additional term(s) as permitted by the Companies Law. 23.4. The election of Directors by the Board of Directors The Board of Directors shall have the right, at all times, upon approval of at least 75% of the Directors of the Company, to elect any person as a Director, to fill an office which became vacant, and also in any event in which the number of the members of the Board of Directors is less than the minimum set in the Articles of Association. Any Director elected in such manner shall serve in office until the coming Annual Meeting and may be reelected. 23.5. Alternate Director Any Director may, from time to time, appoint for himself an alternate Director (hereinafter: the "Alternate Director"), dismiss such Alternate Director and also appoint another Alternate Director instead of any Alternate Director, whose office becomes vacant, due to whatever cause, whether for a certain meeting or generally. Anyone who is not qualified to be appointed as a Director and also anyone serving as a Director or as an existing Alternate Director shall not serve as an Alternate Director. 23.6. Representatives of a Director that is a Corporation A Director that is a corporation shall appoint an individual, qualified to be appointed as a Director in the Company, in order to serve on its behalf, either generally or for a certain meeting, or for a certain period of time and the said corporation may also dismiss that individual and appoint another in his stead (hereinafter: "Representatives of a Director"). 23.7. Manner of Appointment or Dismissal of an Alternate Director or a Representative of a Director that is a Corporation 29 Any appointment or dismissal of Representatives of Directors, when such Directors are corporations, or of Alternate Directors, shall be made by means of a notice in writing to the corporate secretary, signed by the appointing or dismissing body and shall become valid upon the date indicated in the appointment or dismissal notice or upon the date of its delivery to the corporate secretary, whichever is the later. 23.8. Miscellaneous Provisions with Respect to Alternate Directors and Representatives of Directors that are Corporations. 23.8.1. Any person, whether he is a Director or not, may serve as the representative of a Director, and any one person may serve as the representative of several Directors. 23.8.2. The Representative of a Director - in addition to his own vote, if he is serving as a Director - shall have a number of votes corresponding to the number of Directors represented by him. 23.8.3. An Alternate Director and the Representative of a Director shall have all the authority of the Director for whom he is serving as an Alternate Director or as a representative, with the exception of the authority to vote in meetings at which the Director is present in person. 23.8.4. The office of an Alternate Director or a representative of a Director shall automatically become vacant, if the office of the Director for whom he is serving as an Alternate Director or as a representative becomes vacant. 23.9. Termination of the Term of a Director The term of a Director shall be terminated in any of the following cases: 23.9.1. If he resigns from his office by way of a signed letter, filed with the corporate secretary at the Company's Office; 23.9.2. If he is declared bankrupt or if he reaches a settlement with his creditors within the framework of bankruptcy procedures; 23.9.3. If he is declared by an appropriate court to be incapacitated; 23.9.4. Upon his death and, in the event of a corporation, if a resolution has been adopted for its voluntary liquidation or a liquidation order has been issued to it; 23.9.5. If he is removed from his office by way of a resolution, adopted by the General Meeting of the Company, even prior to the completion of his term of office; 30 23.9.6. If he is convicted of a crime, as stated in Section 232 of the Companies Law; or 23.9.7. If his term is terminated by the Board of Directors in accordance with the provisions of Section 231 of the Companies Law. 23.10. The Implications on the Board of Directors of the Termination of the Term of a Director. In the event that an office of a Director becomes vacant, the remaining Directors are entitled to continue operating, so long as their number has not decreased below the minimum number of Directors set forth in Article 23.1. In the event that the number of Directors decreased below that minimum number, the remaining Directors shall be entitled to act solely for the convening of a General Meeting of the Company for the purpose of electing additional Directors to the Board of Directors. 23.11. Compensation of Members of the Board of Directors Members of the Board of Directors who do not hold other positions in the Company and who are not external Directors shall not receive any compensation from the Company, unless such compensation is approved by the General Meeting and according to the amount determined by the General Meeting, subject to the provisions of the Law. The compensation of the Directors may be fixed, as an all-inclusive payment or as payment for participation in meetings or in any combination thereof. The Company may reimburse expenses incurred by a Director in connection with the performance of his office, to the extent provided in a resolution of the Board of Directors. 24. ACTIONS OF DIRECTORS 24.1. Convening Meetings of the Board of Directors 24.1.1. The chairman of the Board of Directors may convene a meeting of the Board of Directors at any time. 24.1.2. The chairman of the Board of Directors shall convene a meeting of the Board of Directors at least four times a year, in a manner allowing the Company to fulfil the provisions of the Law with respect to the publication of Financial Statements and reporting to the public. 24.1.3. The chairman of the Board of Directors shall convene a meeting of the Board of Directors on a specific issue if requested by at least two 31 Directors or one Director, if he is an external Director, within no more than 14 days from the date of the request. 24.1.4. The chairman of the Board of Directors shall act forthwith for the convening of a meeting of the Board of Directors, within 14 days from the time that a Director in the Company has informed him of a matter related to the Company in which there is an apparent violation of the Law or a breach of proper management of the business, or from the time that the auditor of the Company has reported to him that he had become aware of material flaws in the accounting oversight of the Company. 24.1.5. In the event that a notice or a report of the General Manager requires an action of the Board of Directors, the chairman of the Board of Directors shall forthwith convene a meeting of the Board of Directors, which should be held within 14 days from the date of the notice or the report. 24.2. Convening of a Meeting of the Board of Directors 24.2.1. Any notice with respect to a meeting of the Board of Directors may be given in writing, so long as the notice is given at least 14 days prior to the date fixed for the meeting, unless all the members of the Board of Directors or their Alternate Directors or their representatives agree on a shorter time period. A notice, as stated, shall be delivered in writing or transmitted via facsimile or E-mail or through another means of communication, to the address or facsimile number or to the E-mail address or to an address where messages can be delivered through other means of communication, as the case may be, as the Director informed the corporate secretary, upon his appointment, or by means of a written notice to the corporate secretary thereafter. A notice, which was delivered or transmitted, as provided in this Article, shall be deemed to be personally delivered to the Director on its delivery date. 24.2.2. In the event that a Director appointed an Alternate Director or a representative, the notice shall be delivered to the Alternate Director or the representative, unless the Director instructed that the notice should be delivered to him as well. 24.2.3. The notice shall include the venue, date and time of the meeting of the Board of Directors, arrangements with respect to the manner of management of the meeting (in cases where telecommunications are used), the details of the issues on its agenda and any other material that the chairman of the Board of Directors requests be attached to the summoning notice with respect to the meeting. 32 24.3. The Agenda of Meetings of Board of Directors The agenda of meetings of the Board of Directors shall be determined by the chairman of the Board of Directors and shall include the following issues: 24.3.1. Issues determined by the chairman of the Board of Directors. 24.3.2. Issues for which the meeting is convened in accordance with Article 24.1 above. 24.3.3. Any issue requested by a Director or by the General Manager within a reasonable time prior to the date of the meeting of the Board of Directors (taking into account the nature of the issue). 24.4. Quorum The quorum for meetings of the Board of Directors shall be a majority of the Directors, which must include one external Director. 24.5. Conducting a Meeting Through Means of Communication The Board of Directors may conduct a meeting of the Board of Directors through the use of any means of communications, provided all of the participating Directors can hear each other simultaneously. 24.6. Voting in the Board of Directors Subject to Article 23.4 and Article 44, Issues presented at meetings of the Board of Directors shall be decided upon by a majority of the votes of the Directors present (or participating, in the case of a vote through a permitted means of communications) and voting, subject to the provisions of Article 23.8 above, with respect to Alternate Directors and representatives of Directors that are corporations. Each Director shall have a single vote. 24.7. Written Resolutions A written resolution signed by all the Directors shall be deemed as a resolution lawfully adopted at a meeting of the Board of Directors. Such a resolution may be made in several copies of the same Document, each of them signed by one Director or by several Directors. Such a resolution may be adopted by signature of only a portion of the Directors, if all of the Directors who have not signed the resolution were not entitled to participate in the discussion and to vote on such resolution in accordance with any Law whatsoever, so long as they confirm in writing that they are aware of the intention to adopt such a resolution. 24.8. Resolutions Approved by Means of Communications 33 A resolution approved by use of a means of communications by the Directors shall be deemed to be a resolution lawfully adopted at a meeting of the Board of Directors, and the provisions of Article 24.6 above shall apply to the said resolution. 24.9. The Validity of Actions of the Directors All actions taken in good faith in a meeting of the Board of Directors or by a committee of the Board of Directors or by any person acting as a Director shall be valid, even if it subsequently transpires that there was a flaw in the appointment of such a Director or person acting as such, or if any of them were disqualified, as if any such person was lawfully appointed and was qualified to serve as a Director. 24.10. Minutes of Meetings of the Board of Directors The chairman of the Board of Directors shall cause that the minutes of meetings of the Board of Directors shall be properly maintained and shall include the following: 24.10.1. Names of those present and participating at each meeting. 24.10.2. All the resolutions and particulars of the discussion of said meetings. Any such minutes signed by the chairman of the Board of Directors presiding over that meeting or by the chairman of the Board of Directors at the following meeting, shall be viewed as prima facie evidence of the issues recorded in the minutes. 25. COMMITTEES OF THE BOARD OF DIRECTORS 25.1. Subject to the provisions of the Companies Law, the Board of Directors may delegate its authorities or any part of them to committees, as they deem fit, and they may from time to time cancel the delegation of such an authority. Any such committee, while utilizing an authority as stated, is obligated to fulfil all of the instructions given to it from time to time by the Board of Directors. 25.2. Subject to the provisions of the Companies Law, each committee of the Board of Directors shall consist of at least two Directors, and it may include members who are not Directors, with the exception of the audit committee which shall consist of at least three (3) Directors, and all of the external Directors of the Company shall be members of it. 25.3. The provisions with respect to meetings of the Board of Directors shall apply to the meetings and discussions of each committee of the Board of Directors, with the appropriate changes, provided that no other terms are set by the Board of Directors in this matter, and provided that the lawful quorum for the meetings of the committee, as stated, shall be at least a majority of the members of the committee, unless otherwise required by Law. 34 26. CHAIRMAN OF THE BOARD OF DIRECTORS 26.1. Appointment 26.1.1. The Board of Directors shall choose one of its members to serve as the chairman of the Board of Directors, and shall set in the appointing resolution the term for his service. 26.1.2. Unless otherwise provided in the appointing resolution, the chairman of the Board of Directors shall be chosen each and every calendar year at the first meeting of the Board of Directors held after the General Meeting in which Directors were appointed to the Company. 26.1.3. In the event that the chairman of the Board of Directors ceases to serve as a Director in the Company, the Board of Directors in its first meeting held thereafter shall choose one of its members to serve as a new chairman who will serve in his position for the term set in the appointing resolution, and if no period is set, until the appointment of a chairman, as provided in this Article. 26.1.4. In the event that the chairman of the Board of Directors is absent from a meeting, the Board of Directors shall choose one of the Directors present to preside at the meeting. 26.2. Authority 26.2.1. The chairman of the Board of Directors shall preside over meetings of the Board of Directors. 26.2.2. In the event of a deadlock vote, the chairman of the Board of Directors shall not have an additional or casting vote. 26.2.3. The chairman of the Board of Directors is entitled, at all times, at his initiative or pursuant to a resolution of the Board of Directors, to require reports from the General Manager in matters pertaining to the business affairs of the Company. 26.3. Reservations with Regard to Actions of the Chairman of the Board of Directors 26.3.1. The chairman of the Board of Directors shall not serve as the General Manager of the Company, unless he is appointed in accordance with the provisions of Article 27.2 below. 26.3.2. The chairman of the Board of Directors shall not serve as a member of the Audit Committee. 35 CHAPTER FIVE - OFFICERS WHO ARE NOT DIRECTORS, AND THE AUDITOR 27. THE GENERAL MANAGER 27.1. The Appointment and Dismissal of the General Manager 27.1.1. The Board of Directors shall appoint a General Manager for a fixed period of time or for an indefinite period of time. The Board of Directors may appoint more than one General Manager. 27.1.2. The compensation and employment conditions of the General Manager shall be determined by the Board of Directors in any manner it deems fit. Where the compensation of the General Manager is regarded by the Board of Directors in accordance with the Company Law as an "exceptional transaction" and also in cases of the granting of a release, insurance, liability for indemnification or indemnification given by a permit, said compensation requires the prior approval of the audit committee. 27.1.3. The Board of Directors may from time to time remove the General Manager from his office or dismiss the General Manager and appoint another or others in his stead. 27.2. The Chairman of the Board of Directors as the General Manager 27.2.1. The General Meeting of the Company is entitled to authorize the chairman of the Board of Directors to fulfil the position of the General Manager and to exercise his authority, so long as the majority of the votes in the General Meeting adopting such a resolution include at least two thirds of the votes of Shareholders present and entitled to vote at the meeting who are not controlling Shareholders of the Company as defined in the Companies Law or representatives of any of them. "Abstain" votes shall not be taken into account in the counting of the votes of the Shareholders. 27.2.2. The validity of a resolution provided in Article 27.2.1 above is restricted to a maximum period of three years from the date of the adoption of the resolution by the General Meeting. In the event that no period was set in the resolution, the period shall be deemed to be for three years. Prior to the completion of the three year period, as aforesaid, and even after the end of this period, the General Meeting is entitled to extend the validity of such resolution. 27.2.3. A resolution, as stated, may relate to the authority of the chairman of the Board of Directors, generally, or to a specific person who is serving as the chairman of the Board of Directors. 27.3. The Authority of the General Manager and Subordination to the Board of Directors 36 27.3.1. The General Manager is responsible for the day-to-day management of the affairs of the Company within the framework of the policy set by the Board of Directors and subject to its instructions. The General Manager shall have all administrative and operational authority which were not conferred by Law or pursuant to these Articles of Association to any other corporate organ of the Company, and he shall be under the supervision of the Board of Directors and subject to its instructions. The General Manager shall appoint and dismiss officers of the Company, with the exception of Directors, and he shall also determine the terms of their employment, unless otherwise resolved by the Board of Directors and provided, however, that the appointment and dismissal of senior managers of the Company shall require consultation with and approval by the Board of Directors. 27.3.2. The Board of Directors may instruct the General Manager on how to act with respect to a certain issue. If the General Manager fails to fulfil the instruction, the Board of Directors may exercise the required authority in order to act in the place of the General Manager. The Board of Directors may assume the authority granted to the General Manager, either with respect to a certain issue or for a certain period of time. 27.3.3. In the event that the General Manager is unable to exercise his authority, the Board of Directors may exercise such authority in his stead, or authorize another to exercise such authority. 27.4. Reporting Duties of the General Manager The General Manager is obligated to notify the chairman of the Board of Directors of any exceptional matter which is material to the Company, or of any material deviation by the Company from the policy set by the Board of Directors. In the event that the Company shall be without a chairman of the Board of Directors for whatever reason the General Manager shall notify all the members of the Board of Directors, as aforesaid. The General Manager shall deliver to the Board of Directors reports on issues, at such time and in such scope, as is determined by the Board of Directors. 27.5. Delegating Authority of the General Manager The General Manager, upon approval of the Board of Directors, may delegate to his subordinates any of his authority. However, such delegation of authority shall not release the General Manager from his liability. 37 28. THE CORPORATE SECRETARY, INTERNAL CONTROLLER AND OTHER OFFICERS OF THE COMPANY 28.1. The corporate secretary 28.1.1. The Board of Directors is entitled to appoint a corporate secretary on terms it deems fit, joint secretaries, sub-secretaries and to determine the areas of their functions and authorities. 28.1.2. In the event that no corporate secretary has been appointed, the General Manager or anyone authorized by him shall fulfil the functions assigned to the corporate secretary, in accordance with any Law, to these Articles of Association and the resolutions of the Board of Directors. 28.1.3. The corporate secretary shall be responsible for all documents which are kept at the Office, as stated in Section 124 of the Companies Law, and he shall manage all the registries maintained by the Company in accordance with the Law or Companies Law. 28.2. Internal Controller 28.2.1. The internal controller of the Company shall report to the chairman of the Board of Directors. 28.2.2. The internal controller shall file with the Board of Directors a proposal for an annual or other periodic work plan, which shall be approved by the Board of Directors, subject to any changes it deems fit. 28.3. Other Officers of the Company The Board of Directors may decide that in addition to the General Manager and the corporate secretary, other officers may be appointed, whether generally or for a specific issue. In such event, the Board of Directors shall appoint the officer, define his position and authority, and set his compensation and terms of employment. The Board of Directors is entitled to authorize the General Manager to fulfil any or all of its authorities, as stated. 29. THE AUDITOR 29.1. The Shareholders at the Annual Meeting shall appoint an auditor for a period until the close of the following Annual Meeting. The Annual Meeting may appoint an auditor for a period not to extend beyond the close of the third Annual Meeting following the Annual Meeting in which he was appointed. In the event that the auditor was appointed for said period, the Annual Meeting shall not address the 38 appointment of the auditor during said period, unless a resolution is adopted with respect to the termination of his service. 29.2. The General Meeting is entitled at all times to terminate the service of the auditor or to decide not to renew it. 29.3. The Board of Directors shall determine the compensation of the auditor of the Company and it shall report in that respect to the Annual Meeting of the Company. 29.4. The Board of Directors shall set the compensation of the auditor for additional services which are not regarded as oversight activities, and it shall report in this respect at the Annual Meeting of the Company. 39 CHAPTER SIX - THE SHARE CAPITAL OF THE COMPANY AND ITS DISTRIBUTION 30. PERMITTED DISTRIBUTIONS 30.1. Definitions In this Chapter, the following terms shall be construed, in accordance with their definition in Sections 301 and 302 of the Companies Law: "distribution", "acquisition", "profits", "profit test", "adjusted financial statements" and "balances". 30.2. Distribution of Profits The Company shall not make any distribution except from its profits, provided that the Company shall not make any distribution if there is a reasonable fear that such distribution shall preclude the Company from having the ability to meet its present and anticipated liabilities, as they become due. Notwithstanding the aforesaid, the Company, with the approval of the Court, is entitled to make a distribution which fails to meet the profit test. 30.3. Allotment for a Consideration Below the Par Value In the event the Board of Directors decides to allot Shares having a par value, for consideration which is less than their par value, including Bonus Shares, the Company shall convert into share capital from its profits, premium on its Shares, or any other source, included in its shareholders equity, as stated in its most recent Financial Statements, an amount equal to the difference between the par value and the consideration. Even if the aforesaid is not done, with the approval of the Court, the Company shall be entitled to make an allotment of Shares, for consideration which is less than their par value. 31. DIVIDENDS AND BONUS SHARES 31.1. Right to Dividends or Bonus Shares 31.1.1. A Shareholder of the Company shall have the right to receive dividends or Bonus Shares, if the Company so decides in accordance with Article 31.2 below, consistent with the rights attaching to such Shares. 31.1.2. Dividends or Bonus Shares shall be distributed or allotted to those who are registered in the Shareholder Register on the date of the resolution approving the distribution or allotment or upon a latter date, if another date is determined for this purpose in same resolution (hereinafter: the "Determining Date"). 40 31.1.3. In the event that the share capital of the Company consists of Shares having various par values, dividends or Bonus Shares shall be distributed in proportion to the par value of each Share. 31.1.4. Subject to special rights conferred upon Shares in accordance with the conditions of their allotment, profits of the Company which the Company decides to distribute as a dividend or as Bonus Shares shall be paid in proportion to the amount which was paid or credited on the account of the par value of the Shares, held by the Shareholder. 31.1.5. In the event that it was not otherwise determined in the conditions applicable to the allotment of the Shares or in a resolution of the General Meeting, all the dividends or Bonus Shares with respect to Shares, which were not fully paid within the period in which the dividends or Bonus Shares are paid, shall be paid in proportion to the amounts which were actually paid or credited as paid on the par value of the Shares during any part of said period (pro rata temporis). 31.2. Resolution of the Company with Respect to a Dividend or Bonus Shares 31.2.1. The Authority to Distribute Dividends or Bonus Shares The resolution of the Company on the distribution of a dividend or Bonus Shares to be distributed to the Shareholders according to their respective rights and benefits, and on their time of payment, shall be made by the General Meeting, after the recommendation of the Board of Directors is presented. The General Meeting may accept the recommendation or diminish the amount, but it is not entitled to increase it, provided in each case the distribution is a permitted distribution, as specified in Article 30. 31.2.2. Funds The Board of Directors may, in its discretion, allocate to special funds any amount whatsoever from the profits of the Company or from the revaluation of its assets or its relative share in the revaluation of assets of "branch companies," and also to determine the designation of these funds. 31.3. The Payment of Dividends 31.3.1. Manner of Payment Unless otherwise provided in the resolution with respect to the distribution of the dividend, the Company may pay any dividend with the withholding of any tax required by Law, by way of a 41 cheque to the order of the beneficiary alone, which should be sent by means of registered mail to the registered address of the Shareholder entitled thereto, or by way of a bank transfer. Any cheque, as stated, shall be drawn up to the order of the person to whom it is intended. In the event of registered joint holders, the cheque shall be passed to the same Shareholder whose name is registered first in the Shareholder Register with respect to the joint holding. The sending of a cheque to a person whose name is registered in the Shareholder Register as the holder of the Share upon the Determining Date or, in the case of joint holders, to any of the joint holders, shall serve as evidence with respect to all the payments made in connection with same Shares. The Company may decide that a cheque under a certain amount shall not be sent and the amount of the dividend which was supposed to be paid shall be deemed to be an unclaimed dividend. 31.3.2. An Unclaimed Dividend The Board of Directors is entitled to invest the amount of any unclaimed dividend for one year after it was declared or to utilize it in any other manner to the benefit of the Company until it is claimed. The Company shall not be obligated to pay interest or Linkage on an unclaimed dividend. 31.3.3. Specific Dividend In the event the Company declares a dividend, as provided in Article 31.2.1 above, it may decide that same dividend shall be paid, entirely or partially, by way of the distribution of certain assets, including fully paid Shares or bonds of any other company or in any combination of these assets. 31.4. Manner of Capitalization of Profits and the Distribution of Bonus Shares 31.4.1. Subject to the provisions of Article 30 above in the event of a capitalization of profits and distribution of Bonus Shares, the undistributed profits of the Company, or premium on Shares, or funds derived from the revaluation of the assets of the Company, or funds derived on the basis of equity from the profits of "branch companies," or from the revaluation of assets of "branch companies" and capital redemption funds shall be capitalized and distributed among the Shareholders entitled thereto, as per the provisions of Article 31.1 above, to be held by the shareholders as capital, and that 42 this capital, entirely or partially, shall be used on behalf of same Shareholders as full payment, whether according to the par value of the Shares or together with premium decided upon, for Shares to be distributed accordingly, and that this distribution or payment shall be received by same Shareholders as full consideration for their portion of the benefit in the capitalized amount, as determined by the Board of Directors. The provisions of this chapter six shall also apply to the distribution of bonds. 31.4.2. The Company, in the resolution with respect to the distribution of Bonus Shares, is entitled in accordance with the recommendation of the Board of Directors, to decide that the Company shall transfer to a special fund, designated for the future distribution of Bonus Shares, an amount the capitalization of which shall be sufficient in order to allot to anyone having at such time a right to acquire Shares of the Company (including a right which can be exercised only upon a later date), Bonus Shares at the par value which would have been due to him had he exercised the right to acquire the Shares shortly before the Determining Date, at the price of the right in effect at such time. In the event that after the Determining Date, the holder of said right shall exercise his right to acquire the Shares or any part of them, the Board of Directors shall allot to him fully paid Bonus Shares at such par value and of such class, which would have been due to him had he exercised shortly before the Determining Date the right to acquire those Shares he actually acquired, by way of an appropriate capitalization made by the Board of Directors out of the special fund, as aforesaid. For the purpose of the determination of the par value of the Bonus Shares which are to be distributed, any amount transferred to the special fund, with respect to a previous distribution of previous Bonus Shares shall be viewed as if it had already been capitalized and that Shares entitling the holders to the right to acquire Shares of the Company were already allotted as Bonus Shares. 31.4.3. Upon the distribution of Bonus Shares, each Shareholder of the Company shall receive Shares of a uniform class or of the class which confers on its holder the right to receive the Bonus Shares, as determined by the Board of Directors. 31.4.4. For purposes of carrying out any resolution pursuant to the provisions of Article 30, the Board of Directors may settle, as it deems fit, any difficulty arising with regard to the distribution of Bonus Shares, and, in particular, to issue certificates for fractions of Shares and sell such fractions of Shares, in order to pay their consideration to those entitled thereto, and also to set the value for the distribution of certain assets and to decide that cash payments 43 shall be paid to the Shareholders on the basis of the value determined in such a way, or that fractions whose value is less than NIS 0.01 shall not be taken into account, pursuant to the adjustment of the rights of all parties. The Board of Directors may pay cash or convey these certain assets to trustees in trust in favor of those people who are entitled to a dividend or to a capitalized fund, as the Board of Directors shall deem beneficial. 32. ACQUISITION OF SHARES 32.1. The Company is entitled to acquire or to finance an acquisition, directly or indirectly, of Shares of the Company or securities convertible into Shares of the Company or which could be exercised into Shares of the Company, including incurring an obligation to take any of these actions, subject to the fulfillment of the conditions of a permissible distribution, as stated in Article 30 above. 32.2. In the event that the Company acquired any of its Shares, such a Share shall become a dormant Share, and shall not confer any rights, so long as it is in the holding of the Company. 32.3. A subsidiary or another corporation in the control of the Company is entitled to acquire Shares of the Company or securities convertible into Shares of the Company or which can be exercised into Shares of the Company, including an obligation to take any of these actions, to the same extent the Company may make a distribution, so long as the board of directors of the subsidiary or the managers of the acquiring corporation have determined that had the acquisition of the Shares been carried out by the Company it would have been regarded as a permissible distribution, as specified in Article 30 above. Notwithstanding the foregoing, an acquisition by a subsidiary or by another corporation in the control of the Company, which is not fully-owned by the Company, will be considered a distribution of an amount equal to the product of the amount acquired multiplied by the percentage of the rights in the capital of the subsidiary or in the capital of said corporation which is held by the Company. 32.4. In the event that a Share of the Company is acquired by a subsidiary or by a corporation in the control of the Company, the Share shall not confer any voting rights, for so long as said Share is held by the subsidiary or by said controlled corporation. CHAPTER SEVEN - INSURANCE, INDEMNIFICATION AND RELEASE OF OFFICERS 33. INSURANCE OF OFFICERS 33.1. The Company shall not insure the liability of an officer in the Company, other than pursuant to the provisions of this Article. 33.2. The Company may enter into an insurance contract or arrange and pay all premiums in respect of an insurance contract, for the insurance of the liability of 44 an officer in the Company, resulting from the consequence of an action by him in his capacity as an officer in the Company, for any of the following: 33.2.1. The breach of the duty of care toward the Company or toward any other person; 33.2.2. The breach of the duty of loyalty toward the Company provided the officer has acted in good faith and had reasonable grounds to assume that the action would not harm the Company; and 33.2.3. A financial liability imposed on him in favor of another person. 33.3. The Company shall not enter into a contract for the insurance of the liability of an officer in the Company for any of the following: 33.3.1. The breach of the duty of loyalty toward the Company, unless the officer acted in good faith and had reasonable grounds to assume that the action would not harm the Company; 33.3.2. The breach of the duty of care made intentionally or recklessly ("pezizut"), unless otherwise permitted by law; 33.3.3. An intentional act intended to unlawfully yield a personal profit; 33.3.4. A criminal fine or a penalty imposed on him. 34. INDEMNIFICATION OF OFFICERS 34.1. The Company shall not indemnify an officer in the Company, other than pursuant to the provisions of this Article. 34.2. Indemnification in Advance The Company may undertake in advance to indemnify an officer of the Company, provided the undertaking is restricted to events of a kind which the Board of Directors believes can be anticipated at the time of the making of the indemnification undertaking, with the exception of the events stated in Article 33.3 above, and at an amount that the Board of Directors determines is reasonable in the circumstances. 34.3. Indemnification after the Fact The Company may indemnify an officer in the Company for all kinds of events, retrospectively, with the exception of the events specified in Article 33.3 above. 34.4. The Company may indemnify an officer in the Company for liability or expense he incurs in consequence of an action made by him in the capacity of his position as an officer in the Company, as follows: 45 34.4.1. Any financial liability imposed on him in favor of another person in accordance with a judgment, including a judgment given in a settlement or a judgment of an arbitrator, approved by the Court. 34.4.2. Reasonable litigation expenses, including legal fees, incurred by the officer or which he was ordered to pay by the Court, within the framework of proceedings filed against him by the Company or on its behalf or by another person, or in a criminal proceeding in which he was acquitted, or in a criminal proceeding in which he was convicted of a felony which does not require a finding of criminal intent. 35. RELEASE OF OFFICERS 35.1. The Company shall not release an officer from his liability for a breach of the duty of care toward the Company, other than in accordance with the provisions of this Article. 35.2. The Company may release an officer in the Company, in advance, from his liability, entirely or partially, for damage in consequence of the breach of the duty of care toward the Company. 35.3. Notwithstanding the foregoing, the Company may not release an officer from his liability, resulting from any of the following events: 35.3.1. The breach of the duty of loyalty toward the Company. 35.3.2. The breach of the duty of care made intentionally or recklessly ("pezizut"); 35.3.3. An intentional act intended to unlawfully yield a personal profit; 35.3.4. A criminal fine or a penalty imposed on him. CHAPTER EIGHT - LIQUIDATION AND REORGANIZATION OF THE COMPANY 36. LIQUIDATION 36.1. In the event that the Company is liquidated, whether voluntarily or otherwise, the liquidator, upon the approval of an Extraordinary Meeting, may make a distribution in kind to the Shareholders of all or part of the property of the Company, and he may with a similar approval of the General Meeting, deposit any part of the property of the Company with trustees in favor of the Shareholders, as the liquidator with the aforementioned approval, deems fit. 36.2. The Shares of the Company shall confer equal rights among them with respect to capital amounts which were paid or which were credited as paid on the par value of the Shares, in all matters pertaining to the refund of the capital and to the 46 participation in the distribution of the balance of the assets of the Company in liquidation. 37. REORGANIZATION 37.1. Upon the sale of the property of the Company, the Board of Directors or the liquidators (in case of a liquidation), if they are so authorized by a resolution of the General Meeting of the Company adopted with a Special Majority, may receive fully or partially paid up Shares, bonds or securities of another company, either Israeli or foreign, whether incorporated or which is about to incorporated for the purpose of acquiring property of the Company, or any part thereof, and the Directors (if the profits of the Company allow for it) or the liquidators (in case of a liquidation) may distribute among the Shareholders the Shares or the securities mentioned above or any other property of the Company without selling them or depositing them with trustees on behalf of the Shareholders. 37.2. The General Meeting may, pursuant to a resolution adopted by a Special Majority, decide on the valuation of the securities or of the aforementioned property at a price and in the same manner as it deems appropriate and all the Shareholders shall be obligated to accept any valuation or distribution, authorized in accordance with the foregoing and to waive their rights in this matter, unless the Company is about to liquidate or is in a liquidation process, of same lawful rights (if any) which according to the provisions of the Law should not be altered or denied. CHAPTER NINE - MISCELLANEOUS 38. NOTICES 38.1. A notice or other document may be sent by the Company to any Shareholder appearing in the Shareholder Register of the Company either personally or by way of sending by registered mail, at the registered address of the Shareholder in the Shareholder Register, or at such address as the Shareholder shall have provided in writing to the Company as the address for the delivery of notices. 38.2. All the notices to be given to Shareholders, shall, in respect of Shares held jointly, be given to the person whose name is mentioned first in the Shareholder Register, and any notice given in such a manner shall be viewed as a sufficient notice to all the joint Shareholders. 38.3. Any Shareholder registered in the Shareholder Register, with an address, whether in Israel or overseas, is entitled to receive, at such address, any notice he is entitled to receive in accordance with the Articles of Association or according to the provisions of the Law. Unless otherwise stated above, no person who is not registered in the Shareholder Register shall be entitled to receive any notices from the Company. 38.4. Any notice or other document which is sent to a Shareholder in accordance with these Articles of Association shall be considered lawfully sent with respect to all 47 the Shares held by him (whether with respect to Shares held by him alone or held by him jointly with others) even if same Shareholder had died by that time or had become bankrupt or had received an order for its liquidation or if a trustee or a liquidator or a receiver was appointed with respect to his Shares (whether the Company was aware of it or not) until another person is registered in the Shareholder Register in his stead, as the holder thereof. The sending of a notice or other document, as aforesaid, shall be viewed as a sufficient sending to any person having a right in these Shares. 38.5. Any notice or other document which was sent by the Company via registered mail, to an address in Israel, shall be considered sent within 72 hours from its posting at the post office. In order to prove sufficient sending, it is enough to show that the letter containing the notice or the document was addressed to the correct address and was posted at the post office. 38.6. Any accidental omission with respect to the giving of a notice of a General Meeting to any Shareholder or the non-receipt of a notice with respect to a meeting or any other notice on the part of whatever Shareholder shall not cause the cancellation of a resolution taken at that meeting, or the cancellation of processes based on such notice. 38.7. Any Shareholder and any member of the Board of Directors may waive his right to receive notices or waive his right to receive notices during a specific time period and he may consent that a General Meeting of the Company or a meeting of the Board of Directors, as the case may be, shall be convened and held notwithstanding the fact that he did not receive a notice with respect to it, or notwithstanding the fact that the notice was not received by him within the required time, in each case subject to the provisions of any Law prohibiting any such waiver or consent. CHAPTER 10-TRANSITIONAL RULES UNTIL THE COMPANIES LAW SHALL BE EFFECTIVE. 39. APPLICABILITY The provisions of this chapter shall apply solely during the period commencing on the day on which the Articles of Association shall be effective until the day on which the Companies Law shall be effective (hereinafter the "Transitional Period"). The following provisions shall not apply during the Transitional Period: 39.1. Article 14.2-titled "The General Meeting's authority to transfer authority between the organs" 39.2. Article 28.2-titled "Internal Controller" 39.3. Article 32-titled "Purchase of the Company's Shares" 48 40. INDEMNIFICATION OF OFFICERS Notwithstanding the provisions of Article 34 above, during the Transitional Period Article 34 shall read as follows: "34 "INDEMNIFICATION OF OFFICERS" 34.1 The Company is entitled to indemnify an Officer of the Company and/or an employee of the Company for one of the following: 34.1.1 Financial liability imposed by judgment upon him for the benefit of a third party, including a settlement or arbitration decision certified by the Court, as a result of an act or omission committed by him in his capacity as an officer and/or employee of the Company. 34.1.2 Reasonable litigation fees, including attorney's fees, incurred by the officer and/or the employee of the Company or imposed upon him by a court, in a proceeding initiated against him by the Company or in its name or by another person, or in a criminal proceeding from which he is acquitted, provided that any such proceeding related to an act or omission committed by him in his capacity as an officer and/or employee of the Company. 34.2 These instructions are not intended nor will they be intended to limit the Company in any way in respect of the Company entering into an insurance contract and/or an indemnification agreement: 34.2.1 In respect of anyone who is not an officer of the Company, including employees, contractors or consultants of the Company who are not officers of the Company. 34.2.2 In respect of officers of the Company in the event that the insurance and/or the indemnification are not explicitly forbidden by any law." 41. EXEMPTION FOR OFFICERS The words "made intentionally or recklessly ("pezizut")" in Article 35.3.2 above shall not apply. The rules of the second schedule of the Companies Ordinance will not apply both during the Transitional Period and thereafter, including with respect to matters that have not been dealt with in the Articles of Association. 49 42. INTERPRETATION During the Transitional Period, all of the provisions and/or definitions in the Articles of Association that are incompatible with cognitive rules of the Companies Ordinance will be cancelled and the rules of the Companies Ordinance shall apply. CHAPTER 11 - COMPLIANCE WITH THE LICENSE / LIMITATIONS ON OWNERSHIP AND CONTROL 43. COMPLIANCE The Shareholders shall at all times comply with the terms of the License. Nothing herein shall be construed as requiring or permitting the performance of any acts which are inconsistent with the terms of the License. If any article of these Articles shall be found to be inconsistent with the terms of the License, the provisions of such article shall be null and void, but the validity, legality or enforceability of provisions of the other Articles shall not be affected thereby. 44. LIMITATIONS ON OWNERSHIP AND CONTROL 44.1. This Article is to ensure that so long as and to the extent that any Operating Right is conditional on or subject to any conditions or restrictions relating to ownership or control over the Company imposed by the Ministry, the Company is so owned and controlled. This Article shall not affect or influence in any way the interpretation or application of Article 10A. 44.2. In this Article: "AFFECTED SHARE" means any Share determined to be dealt with as such pursuant to Article 44.4; "AFFECTED SHARE NOTICE" means a notice in writing served in accordance with Article 44.5; "DEPOSITARY" means a custodian or other person appointed under contractual arrangements with the Company (or a nominee for such custodian or other person) whereby such custodian or other person holds or is interested in Shares and which issues securities evidencing the right to receive such Shares; "DEPOSITARY RECEIPTS" means receipts or similar documents of title issued by or on behalf of a Depositary; "DEPOSITARY SHARES" means the Shares held by a Depositary or in which a Depositary is interested in its capacity as a Depositary; 50 "INTERVENING ACT" means the refusal, withholding, suspension or revocation of any Operating Right applied for, granted to or enjoyed by the Company, or the imposition of any conditions or limitations upon any such Operating Right which materially inhibit the exercise thereof, in either case by any state, authority or person (including the Ministry) by reason of the nationality and/or activities of persons holding Shares in and/or controlling the Company; "MINISTRY" means the Ministry of Communications and/or Minister of Communications; "OPERATING RIGHT" means all or any part of any authority, permission, licence or privilege applied for, granted to or enjoyed by the Company, including the Licence, for the establishment, subsistence, maintenance and operation of a mobile radio telephone system using the cellular method and the provision of mobile radio telephone services to the public in Israel; "PERMITTED MAXIMUM" means the maximum aggregate permitted number of Relevant Shares specified by the Board of Directors in accordance with the terms of the Licence, any other requirements of the Ministry and any relevant requirements of Law; "RELEVANT PERSON" means: (a) any individual who is not a Citizen of Israel or Resident of Israel as defined in Section 14.1(G)(2) of the License; (b) any body corporate or unincorporate not incorporated, registered or otherwise established under the laws of Israel, including a government, governmental department or agency, statutory or other authority, any undertaking or body formed or established in a country or any part thereof other than Israel; (c) any person who, without the approval of the Ministry, acquires, directly or indirectly, any Means of Control (as defined in the Licence) in breach of Section 21 of the Licence other than a person who falls within Article 10A; or (d) any Interested Party (as defined in the Licence) who, or who has an Officer Holder (as defined in the Licence) who, is in breach of Sections 23 or 24 of the Licence other than a person who falls within Article 10A; "RELEVANT SHARE" means any Share (other than a Share removed from the Relevant Shares Register (defined in Article 44.3.2) pursuant to Article 44.3.5), in which a Relevant Person has an interest or which is declared to be a Relevant Share pursuant to Article 44.3.4; 44.3. 44.3.1. The Board of Directors shall not register a person as a holder of a Share unless the person has given to the Board of Directors a declaration (in a form prescribed by the Board of Directors) signed 51 by him or on his behalf, stating his name, nationality, that he is not a Relevant Person falling within paragraphs (c) or (d) of the definition of that term and other information required by the Board of Directors. 44.3.2. The Board of Directors shall maintain a register (the "Relevant Shares Register"), in which shall be entered particulars of any Share which has been: (a) acknowledged by the holder (or by a joint holder) to be a Relevant Share; (b) declared to be a Relevant Share pursuant to Article 44.3.4; or (c) determined to be an Affected Share pursuant to Article 44.4.2.; and which has not ceased to be a Relevant Share. The particulars in the Relevant Shares Register in respect of any Share shall include the identity of the holder or joint holders and information requested by and supplied to the Board of Directors. 44.3.3. Each registered holder of a Share which has not been acknowledged to be a Relevant Share who becomes aware that such Share is or has become a Relevant Share shall forthwith notify the Company accordingly. 44.3.4. The Board of Directors may notify in writing the registered holder of a Share which is not in the Relevant Shares Register and appears to be a Relevant Share, requiring him to show that the Share is not a Relevant Share. Any person to whom such notice has been issued may within 21 clear days after the issue of the notice (or such longer period as the Board of Directors may decide) represent to the Board of Directors why such Share should not be treated as a Relevant Share but if, after considering such representations and other relevant information, the Board of Directors is not so satisfied, it shall declare such Share to be a Relevant Share and treat it as such. 44.3.5. The Board of Directors shall remove a Relevant Share from the Relevant Shares Register if the holder of the Relevant Share gives to the Board of Directors a declaration (in a form prescribed by the Board of Directors), together with such other evidence as the Board of Directors may require, which satisfies it that such Share is no longer, or should not be treated, as a Relevant Share. 52 44.4. 44.4.1. Article 44.4.2 shall apply for so long as the Company holds or enjoys any Operating Right where the Board of Directors determines that it is necessary to take steps to protect any Operating Right because an Intervening Act is contemplated, threatened or intended, may take place or has taken place; 44.4.2. Where a determination has been made under Article 44.4.1, the Board of Directors shall take such of the following steps as they consider necessary or desirable to overcome, prevent or avoid an Intervening Act: 44.4.2.1. the Board of Directors may remove any Director from office, by a resolution passed by a majority of 75 per cent or more of the other Directors present and voting at the relevant meeting; 44.4.2.2. the Board of Directors may seek to identify those Relevant Shares which gave rise to the determination under Article 44.4.1 and by a resolution passed by a majority of 75 per cent or more of the Directors present and voting at the relevant meeting deal with such Shares as Affected Shares; and 44.4.2.3. when the aggregate number of Relevant Shares in the Relevant Shares Register exceeds the Permitted Maximum, the Board of Directors may deal with the Relevant Shares which it decides, by a resolution passed by a majority of 75 per cent or more of the Directors present and voting at the relevant meeting, are in excess of the Permitted Maximum as Affected Shares. 44.5. The Board of Directors shall give an Affected Share Notice to the registered holder of any Affected Share and state that Article 44.6 is to be applied forthwith in respect of such Affected Share. The registered holder of the Affected Share may within 21 clear days after the issue of the notice (or such longer period as the Board of Directors may decide) represent to the Board of Directors why such Share should not be treated as an Affected Share and if, after considering such representations and other relevant information, the Board of Directors considers that the Share should not be treated as an Affected Share it shall forthwith withdraw the Affected Share Notice and Article 44.6 shall no longer apply to the Share. 44.6. An Affected Share in respect of which an Affected Share Notice has been served shall be treated as a dormant share (as defined in section 308 of the Companies Law) except that the registered holder of the Affected Share shall continue to have 53 the right to receive dividends and other distributions of the Company and participate in bonus or rights issues of the Company in respect of such Share. 44.7. In deciding which Shares are to be treated as Affected Shares, the Board of Directors shall have regard to the Relevant Shares which in its opinion have directly or indirectly caused the determination under Article 44.4 and the chronological order in which Relevant Shares have been entered in the Relevant Shares Register (and accordingly treat as Affected Shares those Relevant Shares entered in the Relevant Shares Register most recently) except where such criterion would in their opinion be inequitable, in which event the Board of Directors shall apply such other criterion or criteria as they may consider appropriate. 44.8. Subject to the other provisions of this Article 44, the Board of Directors shall be entitled to assume without enquiry that: 44.8.1. all Shares not in the Relevant Shares Register and not falling within clause 44.8.2 are neither Relevant Shares nor Shares which would be or be capable of being treated as Affected Shares; and 44.8.2. all or some specified number of the Shares are Relevant Shares falling within paragraphs (a)-(b) in the definition of that term if they (or interests in them) are held by a Depositary unless and for so long as, in respect of any such Shares, it is established to their satisfaction that such Shares are not Relevant Shares. 44.9. Any resolution or determination of, or any decision or the exercise of any discretion or power by, the Board of Directors or any one of the Directors under this Article 44 shall be final and conclusive. 44.10. 44.10.1. On withdrawal of the determination under Article 44.4.1, the Board of Directors shall cease to act pursuant to such determination and inform every person on whom an Affected Share Notice has been served that Article 44.6 no longer applies in respect of such Share. The withdrawal of such a determination shall not affect the validity of any action taken by the Board of Directors under this Article whilst that determination remained in effect and such actions shall not be open to challenge on any ground whatsoever. 44.10.2. The Board of Directors shall, so long as it acts reasonably and in good faith, be under no liability to the Company or to any other person for failing to treat any Share as an Affected Share or any person as a Relevant Person in accordance with this Article and it shall not be liable to the Company or any other person if, having acted reasonably and in good faith it determines erroneously that any Share is an Affected Share, or any person is a Relevant Person or on the basis of such determination or any other determination or 54 resolution, they perform or exercise their duties, powers, rights or discretions under this Article in relation to such Share. 44.11. A person who has an interest in Shares by virtue of having an interest in Depositary Receipts shall be deemed to have an interest in the number of Shares represented by such Depositary Receipts and not (in the absence of any other reason why he should be so treated) in the remainder of the Depositary Shares held by the relevant Depositary. 55 EX-4.(A).7 4 u45961exv4wxayw7.txt AGREEMENT WITH LM ERICSSON (NOV 25, 2002) EXHIBIT 4.(a).7 AGREEMENT FOR THE SUPPLY OF TELECOMMUNICATION EQUIPMENT AND RELATED SERVICES TABLE OF CONTENTS

Page ---- DEFINITIONS 5 INTERPRETATION 11 AGREEMENT DOCUMENTS 12 1. SCOPE OF AGREEMENT 12 2. INTENTIONALLY DELETED 12 3. PURCHASE ORDER PROCEDURE 12 4. TIME SCHEDULE 14 5. FORECAST PROCEDURE 14 6. PURCHASE ORDER PRICES 14 7. DELIVERY OF EQUIPMENT AND COMPLETION OF IMPLEMENTATION SERVICES 14 7A. ADJUSTMENTS FOR LATE ACHIEVEMENT 16 8. INSPECTION AND ACCEPTANCE 17 9. TITLE AND ASSUMPTION OF RISK 20 10. WARRANTY OF EQUIPMENT AND SERVICES 20 11. PAYMENTS 24 12. TAXES, DUTIES AND LEVIES 26 12A ACCESS TO WORK IN PROGRESS AND INSPECTION OF TECHNICAL DATA AND INFORMATION 27 13. PROJECT MANAGEMENT 28 14. LICENSE AND INFORMATION 29

2 15. SOURCE AND OBJECT CODES 30 16. INTELLECTUAL PROPERTY RIGHTS - WARRANTY AND INDEMNITY 31 17. INFORMATION PROVIDED BY PARTNER - EXAMINATION 32 18. CONFIDENTIALITY 34 19. LOSS AND DAMAGE, INDEMNITY 35 20. INSURANCE. 36 20A. KEY PERSONNEL 39 21. CHANGES 39 22. ASSIGNMENT OF AGREEMENT 39 23. PUBLICITY RELATED TO AGREEMENT 40 24. ARBITRATION AND APPLICABLE LAW 41 25. TIME-LIMITS 41 26. FORCE MAJEURE 41 27. TERMINATION FOR DEFAULT 43 27A. TERMS AND TERMINATION FOR CONVENIENCE 45 28. INCENTIVE VOUCHER - ENTITLEMENT AND EXERCISE 46 29. GOVERNMENTAL AUTHORISATION 46 30. LANGUAGE AND COMMUNICATION 47 31. NOTICES AND REPORTS 47 32. WAIVER AND APPROVAL 47 33. ENTIRE AGREEMENT 47 34. NO PARTNERSHIP 48 3 35. SEVERABILITY 48 36. GENERAL LIMITATION OF LIABILITY 48 37. SUB-CONTRACTORS 49 38. SURVIVAL 50 4 AGREEMENT DATED NOVEMBER 25TH, 2002 BETWEEN: (1) PARTNER COMMUNICATIONS COMPANY LTD. of 8 Amal Street, Afek Industrial Park, Rosh Ha'ayin 48103, Israel ("Partner"); OF THE FIRST PART AND (3) LM ERICSSON ISRAEL LTD. of 17 Amal Street, Afek Industrial Park, Rosh Ha'ayin 48092, Israel ("EOI"); OF THE SECOND PART WHEREAS: WHEREAS, Partner and Ericsson Radio Systems AB have on the 29th of May 1998, entered into an agreement for the supply, delivery installation, commissioning and support of a GSM system together with its related equipment (hereinafter - THE SUPPLY AGREEMENT), which was performed by both Ericsson Radio Systems AB (currently renamed - Ericsson AB) (hereinafter - ERICSSON) and EOI; WHEREAS, Partner now wishes to purchase from EOI, not on a turn-key basis, and on a non exclusive basis, additional Equipment (Hardware, Software and Spare Parts, but excluding UMTS equipment), and Services, in accordance with the provisions of this framework purchase Agreement, based on the applicable business practice principles set and agreed between the parties; WHEREAS, EOI wishes to supply Equipment, and to provide Services, to Partner in accordance with the provisions of this Agreement; WHEREAS, all products and services provided by Ericsson and EOI since February 1, 1999 shall be governed by the terms and conditions of this Agreement, mutatis mutandis, in all applicable parts. Such products shall be deemed "Equipment" and such services be deemed "Services" in accordance with this Agreement. NOW, THEREFORE, in consideration of the mutual promises and the mutual covenants herein contained, the Parties agree as follows: DEFINITIONS Capitalized terms used within this Agreement are defined as follows: "Acceptance" shall mean with respect to any Equipment, the issuance of an Acceptance Certificate in accordance with Article 8, or deemed Acceptance under this Agreement; 5 "Acceptance Certificate" shall mean written notice issued in accordance with Article 8, indicating that the Acceptance Criteria for each and every Equipment A ordered and actually delivered to Partner, has been fully met. "Acceptance Criteria" Shall mean the criteria set forth in Annex 6, for successful Acceptance Tests of each Equipment A ordered and actually delivered to Partner under this Agreement, including but not limited to complete Implementation and integration into Partner's System, ready for Commercial Use; all - in accordance with the Specifications and the applicable Agreement Milestones as may be amended by agreement in writing between the Parties. "Acceptance Tests" shall mean the tests set out in Annex 6 with respect to each item of Equipment A ordered and actually delivered to Partner under this Agreement. "Agreement" means this agreement including all annexes, appendices and exhibits attached hereto. "Agreement Milestones" means the dates specified in Annex 4 (Time Schedule) as the dates by which, or before which, as the case may be, the Acceptance of Equipment is to be achieved. "Commercial Use" shall mean in relation to any Equipment purchased hereunder, the use of the same in commercial operation generating revenue, other than on a test under Annex 6 or a friendly user trial basis. "Critical Date" and/or Means Agreement Milestones against which "Critical Time Period" Liquidated Damages shall accrue in relation to each Agreement Milestone as specified in any relevant Time Schedule. "Delivery" shall mean with respect to Equipment, the delivery by EOI, of such Equipment to a Site or warehouse within the Territory designated by Partner. "Documentation" Means all softcopy and hardcopy of standard library as specified in Annex 1 and all hard copy and software of as built documentation (at least two hardcopies) and any other documents provided by EOI to Partner from time to time (including, without limitation, such materials provided electronically or by CD Rom). "Equipment" shall mean any item, to be supplied by EOI to Partner under this Agreement, including all Documentation relating thereto. For the avoidance of doubt, Equipment does not include UMTS equipment. "Equipment A" shall mean the items of Equipment with regard to which Implementation Services will be performed and/or procured by EOI. 6 "Equipment B" shall mean the items of Equipment, including all Documentation relating thereto, with regard to which no Implementation Services will be performed and/or procured by EOI. "Ericsson Group" shall mean the group of companies directly or indirectly controlled by Telefonaktiebolaget LM Ericsson, which is a Swedish limited liability company. "Force Majeure" shall have the meaning specified in Sub-Clause 26.1. "GSM License" shall mean the license issued to Partner on 7 April, 1998 by the Minister of Communications for the Provision of Mobile Radio Telephone Services Using the Cellular Method (MRT) in Israel, as amended from time to time. "Hardware" shall mean Equipment and Spare Parts (other than Software) to be supplied by EOI under this Agreement. "Implementation" and shall mean all of the activities and relevant "Implementation Services" Services to be carried out by EOI to meet the Acceptance Criteria. "Incentive Voucher" shall mean a voucher substantially in the form as set out in Annex 5 entitling Partner to free of charge purchase, delivery and/or Implementation of additional Equipment up to the incentive voucher value subject to the terms specified in Article 28. "Intellectual Property shall mean any patent, trademarks, service marks, Right" trade names, registered or unregistered design right, copyright, right to prevent disclosure of information and other forms of intellectual or industrial property (in each case in any part of the world save for patents and marks outside the Territory and whether or not registered or registrable and the full period thereof and all extensions and renewals thereof and applications for registration of, or otherwise in connection with, the foregoing), confidential trade secret and protected right and asset, and any license and permission in connection therewith. "LIBOR" shall mean in relation to any amount owed by either Party to the another Party on any day the rate per annum which would have been offered by the Standard Chartered Bank to prime banks in the London interbank market at those banks' request at or about 11.00 a.m (London time) on that day for deposits in US dollars of comparable amount to such amount for a period of 3 months. "Liquidated Damages" shall mean liquidated damages in the rates specified in Sub-Clause 7A.4. "Maintenance Agreement" shall mean the Support and Maintenance Agreement attached hereto as Annex 7. 7 "Maintenance Services" shall mean the services to be provided to Partner by EOI, under the Maintenance Agreement. "Network" shall mean any telecommunication network in Israel operated by any Telecommunication Operator. "Telecommunication means any licensee for the provision of any Operator" telecommunication services in Israel. "Option" Shall mean Partner's option to extend the Term by a period of one year each time, by serving EOI with a prior written notice to that effect, at least 30 days prior to the expiration of the Term or any extended period pursuant to exercise of the option, as the case may be. "Optimise" means in relation to any Equipment, rendering that Equipment in a state such that it will meet the requirements of this Agreement. "Parties" shall mean Partner and EOI. "Partner's Licenses" shall mean all telecommunication licenses awarded to Partner from time to time by the Minister of Communications in Israel, as amended from time to time. "Performance Bond" Shall mean the performance bond to be provided in accordance with Clause 17A, the form of which is contained in Annex 8. "Price List" shall mean the list of prices set out in Annex 1 for each item of Equipment and each Service or any other Service to be offered under this Agreement. "Project Managers" the officers appointed by each of Partner and EOI in accordance with Sub-Clauses 13.1 and 13.2 who will provide the formal point of contact between those Parties for all detailed correspondence and discussions in respect of the Agreement and who have the authority to exercise Partner's and EOI's rights (respectively) under the Agreement except where otherwise stated in the Agreement. "Purchase Order" means a written or electronic order from Partner to EOI, for Equipment or Services in connection thereof, to be purchased, licensed, performed or rendered under this Agreement, in accordance with the Purchase Order Procedure specified in Clause 3. "Purchase Order Price" means the price set forth in any Purchase Order, in accordance with the Price List, including any applicable discount and Vouchers, if used, for Equipment or Services ordered and actually delivered, rendered or performed, pursuant to such Purchase Order. 8 "Services" shall mean all of the activities and services to be carried out by EOI under this Agreement, including but not limited to, Implementation, or supervision of Implementation, training services, design, dimensioning, installation, integration into Partner's Network, interconnection with other Networks than Partner's Optimisation, commissioning, testing, and other services subject to and in accordance with any Purchase Order for the purchase of such Services. "Site" shall mean the locations within the Territory at which the Equipment is to be Delivered, and Services are to be provided, all in accordance with the terms of this Agreement. "Software" shall mean all computer programs, or parts thereof to be furnished by ERA under this Agreement including the computer software described in Annex 1, Software Updates and Software Upgrades. "Software Updates" Shall mean: (a) correction packages of the current major release of Software which fix, add to, improve or enhance licensed features and capabilities of the Software; and/or (b) Software "fixes" and/or "patches" or other corrections issued by Ericsson from time to time to correct or remove anomalies and bugs in the Software; and includes any Software issued as Software Updates by Ericsson from time to time. A Software Update shall contain the appropriate load file, implementation instructions and Documentation shall mean corrections of the Software based on Ericsson's and users fault reports and which are issued as Software Updates by Ericsson. "Software Upgrades" shall mean superseding releases of the then current release of Software which add to, improve or enhance licensed basic features and capabilities of the then current release of Software and which involve more extensive changes to the then current release of the Software than is the case in Software Updates. Software Upgrades may also correct Software anomalies or "bugs" in earlier releases and may introduce new basic features. A Software Upgrade shall contain the appropriate load file, implementation instructions and Documentation. "Spare Parts" means a spare or replacement part for any Equipment or part of Equipment. Once Delivered to Partner Spare Parts shall form part of the Equipment. "Specifications" shall mean those specifications which describe the technical and functional operation of the Equipment when fully Implemented and integrated into Partner's System, all Specifications set out in Annex 3 and shall include any additional specifications agreed in writing between EOI and Partner to be annexed hereto as part of this Agreement. "Sub-contract" shall mean any agreement between a Party or its Sub-contractors and a Sub-contractor. 9 "Sub-contractor" shall mean any contractor or direct or indirect sub-contractor or sub sub-contractor in relation to this Agreement. "System" or "Partner's shall mean any telecommunication system or System" sub-system operated, or which in the future shall be operated by Partner, including but not limited to the fully functional GPRS and GSM systems to be supported, Optimised and maintained by EOI in accordance with the relevant Specification comprising of, but not limited to, the switching subsystems, the base station subsystems, the network management system, the base transceiver stations, the base station controllers and any other equipment comprised in the GPRS and/or the GSM system. "Part of System" refers to any part of the System including any Equipment, Hardware or Software, included in the System or any Services required to be performed under this Agreement. "Term" shall mean the period of time commencing on January 1, 2003, and ending on December 31, 2007, which may be extended by Partner pursuant to exercise of the Option, during which Partner can place Purchase Orders under this Agreement. For ther avoidance of doubt, it is clarified that notwithstanding anything to the contrary in this Agreement, the provisions of this Agreement shall apply mutatis mutandis to any and all purchases of products and services by Partner from EOI and/.or Ericsson made between February 1st, 1999 and the date hereof. "Territory" means for each Equipment the area in which Partner is authorized to use such Equipment under the relevant Partner License. "Time Schedule" shall mean the time table and period of time for the (i) Delivery of Equipment, Documentation and Spare Parts; and (ii) the performance of Implementation Services, as set out in Annex 4. The respective time periods shall be noted in man-hours, man-days or man-weeks as applicable. "Training" the instructions, manuals and face-to-face teaching to be provided or produced by EOI, to or for Partner's staff, to assist them in utilizing the Equipment. "Warranty Period" shall mean a period of warranty as defined in Sub-Clause 10.2. "Year 2000 Compliant" means that neither the performance nor the functionality of any Equipment will be impaired by the advent of the year 2000, and in particular: (i) no value for current date will cause any interruption or error; (ii) all manipulations of time related data will produce the desired results for all valid date values prior to, through and beyond the year 2000, including leap year calculations; 10 (iii) date fields or elements in all Software and Hardware (including interfaces and data storage) will permit specifying the century to eliminate date ambiguity; (iv) where any date field or element is represented without a century, the correct century shall be unambiguous for all manipulations involving that element, using appropriate algorithms or inferencing rules; INTERPRETATION Headings are for convenience only and do not affect interpretation. The following rules of interpretation apply to this Agreement unless the context requires otherwise. 1) The singular includes the plural and conversely. 2) A gender includes all genders. 3) A reference to a Clause, Sub-Clause, Annex, Schedule or Appendix is to a clause or sub -clause of or annex, schedule or appendix to this Agreement all of which are by this reference incorporated into this Agreement and references to this Agreement shall be construed accordingly. 4) A reference to any part of this Agreement is to that part as amended or updated from time to time in accordance with this Agreement. 5) A reference to a person includes a body corporate, firm, an unincorporated body or other entity and conversely. 6) A reference to conduct or an act includes an omission, statement or undertaking whether or not in writing. 7) Mentioning anything after include, includes or including does not limit what else might be included unless expressly stated otherwise. An example does not limit what else might be included. 8) A reference to $ or US$ or US dollars is to the lawful currency of the United States of America from time to time. A reference to NIS is to the lawful currency of Israel from time to time. 11 AGREEMENT DOCUMENTS This Agreement shall consist of the following documents, as may be amended from time to time as provided herein. 1. This Agreement document. 2. The Annexes: Annex 1 Price List Annex 2 Ericsson's Letter of Guarantee Annex 3 Technical Specification Annex 4 Time Schedules Annex 5 Incentive Voucher Annex 6 Acceptance Tests, Criteria and Procedure Annex 7 Maintenance Agreement Annex 8 Form of Performance Bond Should there be any ambiguity, conflict or inconsistency between the terms and conditions of the documents listed above then they shall prevail between themselves according to the order in which they are listed. 1. SCOPE OF AGREEMENT 1.1. Partner shall purchase from EOI, and EOI shall sell Hardware and license Software to Partner subject to and in accordance with Purchase Orders issued by Partner to EOI for the purchase of the same. 1.2. Partner shall purchase from EOI, and EOI shall provide to Partner Services with respect to relevant Purchase Orders issued by Partner to EOI for the purchase of the same. 1.3. All Equipment and Services purchased following the execution of this Agreement and during its Term and/or any extension thereof pursuant to exercise of the Option by Partner, shall be governed by the terms of this Agreement. 1.4 This Agreement shall come into force upon its signature by all Parties. 1.5 Ericsson shall guarantee the full and complete performance of all of the obligations of EOI under this Agreement, in the form of the letter of Guarantee attached hereto and marked as Annex 2. 2. INTENTIONALLY DELETED 3. PURCHASE ORDER PROCEDURE 3.1 Purchase Orders for Equipment, Implementation Services or any other Service, shall be made on purchase order forms (written or electronic) issued by Partner's authorised representative, that shall specify the requested Equipment, quantity, and Services required, Site for Delivery, and all other relevant information and instructions with respect to such Purchase Order, as Partner shall deem fit, including but not only, the Purchase Order Price. 12 3.2 Only a Purchase Order duly executed by Partner's authorised representative shall constitute a firm commitment to purchase on the part of Partner. Partner shall keep updated with the recipient of Purchase Orders a list of its authorised representatives. A Purchase Order shall be effective and binding on the Parties as from the date it was submitted to EOI or the first business day thereafter if the Purchase Order was submitted during non-office hours of the receiving Party. If the Purchase Order contains information that is inconsistent with the provisions of Clause 3.1 above, then EOI, shall notify Partner before the end of the next business day and Partner shall correct the inconsistencies and submit a new Purchase Order in accordance with Clause 3.1 above, replacing the original Purchase Order. The original Purchase Order shall be effective and binding for all intents and purposes on the original date of submittance if EOI fails to notify Partner before the end of the next business day as aforesaid. 3.3 All Equipment, and Services ordered pursuant to any and all of the Purchase Orders shall be provided by EOI in accordance with the terms and conditions of each of the Purchase Orders and this Agreement. 3.4 Notwithstanding the aforesaid, Partner has the right to cancel, modify or change any Purchase Order prior to actual shipment of the Equipment or prior to the actual commencement of the relevant Services ordered pursuant thereof. Understanding that there are costs for EOI related to such canceled Purchase Orders, Partner shall pay EOI compensation for cancellation of Purchase Orders as follows:

PERCENTAGE OF VALUE OF CANCELED DAYS PRIOR TO SHIPMENT OF EQUIPMENT OR EQUIPMENT OR SERVICE COMMENCEMENT OF SERVICE - -------------------------------- ----------------------------------------------- [*]% [*]% - [*]% of lead time according to Annex 4 [*]% [*]% - [*]% of lead time according to Annex 4 [*]% [*]% - [*]% of lead time according to Annex 4 [*]% [*]% or higher of lead time according to Annex 4

Notwithstanding the foregoing, for cancellation of Purchase Order of Software, compensation is only applicable to the value of the third party software embedded in such Software. For purposes of lead times and Time Schedule, in the event of an increase of volume of Equipment or Services by modification or change of a Purchase Order the additional Equipment and/or Services ordered, will be deemed a separate Purchase Order. 3.5 The Purchase Order Procedure that shall apply to Purchase Orders placed using the TTC Global, for the benefits of both Parties, shall be subject to agreement between the parties concerning the terms and conditions thereof. In the event Ericsson elects to discontinue the supply or the production of any - --------------------------- Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 13 Equipment, then EOI shall provide Partner with one (1) year's written notice thereof, and allow Partner to place an end of life Purchase Order, at any time during such year. 3.6 Notwithstanding any other provision of this Agreement, EOI undertakes to ensure that Ericsson shall maintain an adequate and sufficient stock of Spare Parts so as to meet Partner's support and maintenance requirements for the same, during a period of at least 5 years from the date of supply of any Equipment under this Agreement. 4. TIME SCHEDULE EOI shall Deliver all items of Equipment and perform all Services ordered by Partner under any Purchase Order, in accordance with the applicable Time Schedule, which shall include specified Agreement Milestones and Critical Dates or Critical Time Periods, as the case may be. 5. FORECAST PROCEDURE 5.1 Regularly on the last business day of every three (3) months Partner shall make reasonable efforts to submit to EOI a forecast covering the next six (6) month period of Partner's estimated requirements broken down to quarterly intervals. Such forecasts shall be made in good faith for planning purposes only, and shall not be binding on either Party. 5.2 Upon execution of this Agreement, Partner shall make reasonable efforts to submit a forecast pursuant to Sub-Clause 5.1 above for the first six (6) months of the Agreement. 6. PURCHASE ORDER PRICES All Purchase Order Prices relating to Equipment shall include all transportation and related charges for Delivery of such Equipment, which means DDP (Delivery Duty Paid, according to Incoterms 2000) to Partner designated Sites. In line with the foregoing and to avoid any doubt, it is agreed that Partner shall pay Value Added Tax (VAT) payable in Israel in relation to the supply of Equipment and the provision of Services by EOI to Partner, in accordance with Clause 12 (Taxes, Duties and Levies). 7. DELIVERY OF EQUIPMENT AND COMPLETION OF IMPLEMENTATION SERVICES 7.1 (a) The times for completion of Delivery of Equipment and Documentation, completion of Services and for achievement of all Agreement Milestones are of the essence of this Agreement. (b) Delivery of Equipment and Documentation and completion of Services shall not be deemed to have occurred for the purpose of this Agreement until EOI has actually delivered all Equipment and Documentation and performed all Services to be performed in connection with such Equipment, Documentation or Services (as the case may require). The provision of such Equipment and Documentation and the performance of such Services is of the essence of this Agreement. 14 7.2 Subject to the provisions of clause 7.1 above, for Purposes of this Agreement - (a) Delivery of any Hardware constituting Equipment A shall only be deemed to have occurred upon its actual delivery at the designated Site at which it is required to be delivered and installed, in accordance with any relevant Purchase Order, Time Schedule and/or any other applicable provision of this Agreement, and in a condition fully conforming to the requirements of this Agreement but without prejudice to, or forfeiture of, Partner's rights under Clause 8; and (b) Delivery of any Software constituting Equipment A shall only be deemed to have occurred when it is actually supplied, installed and commissioned in accordance with any relevant Purchase Order, Time Schedule and/or any other applicable provision of this Agreement, but without prejudice to, or forfeiture of, Partner's rights under Clause 8. (c) Delivery of Services shall not be deemed to have occurred until EOI has fully completed the performance of the Service, to Partner's full satisfaction, in accordance with any relevant Purchase Order, Time Schedule and/or any other applicable provision of this Agreement but without prejudice to, or forfeiture of, Partner's rights under Clause 8. (d) Delivery of Equipment B shall be deemed to have occurred at the time Partner is notified in writing that the relevant Equipment B ordered has been delivered at Partner's designated Site, in accordance with any relevant Purchase Order, Time Schedule and/or any other applicable provision of this Agreement, and in a condition fully conforming to the requirements of this Agreement but without prejudice to, or forfeiture of, Partner's rights under Clause 8. Acceptance of Equipment B shall be deemed to have occurred upon Delivery of such Equipment in accordance with and subject to the aforsaid. 7.3 In the case of subsequent rejection of any Equipment or Services delivered, delivery shall be deemed not to have occurred for the purpose of this Agreement until the defects that resulted in such rejection have been satisfactorily remedied or replaced with conforming Equipment or Services (as the case may be). 7.4 Notwithstanding any other provision of this Agreement and without limiting any other right or remedy of Partner under this Agreement, or any applicable law, if at any time it becomes apparent that the Equipment and/or Services to be supplied by EOI, are insufficient to achieve the Specifications, and the other requirements of this Agreement including in terms of, coverage, capacity and reliability, then EOI shall promptly provide at its cost, additional Hardware, Software and/or Services in order to ensure that the Specifications, and such other requirements are fully met. To the extent they are reasonably capable of applying, all other terms of this Agreement other than cost as aforesaid, shall apply to such additional Hardware, Software and/or Services. 15 7A. ADJUSTMENTS FOR LATE ACHIEVEMENT 7A.1 EOI shall Deliver each Equipment and perform each Service on or before the relevant Agreement Milestone for that Equipment and Service, respectively. Equipment shall be Delivered, installed, integrated Implemented and commissioned in accordance with the Specifications Time Schedule and all other relevant requirements of this Agreement. 7A.2 To the extent that any Equipment and Service is not Delivered or performed in accordance with this Agreement by the relevant Agreement Milestone then EOI shall not be entitled to any extension of that Agreement Milestone other than if that delay is substantially due to an event of excusable delay as described in Sub-Clause 7A.3. If an event of excusable delay occurs, EOI shall be entitled to a day-to-day extension of that part of their unmet obligation reasonably affected by the event of excusable delay. Each overall extension of an Agreement Milestone shall not exceed the period of delay caused by the event of excusable delay. 7A.3 A Force Majeure event or other event caused by Partner, its sub-contractor, or any other third party supplier of Partner, causing delay to EOI in the execution of its obligation under Clause 7A.1 above, shall be deemed an excusable delay, provided, however, that EOI has complied with its entire obligations under this Agreement in relation to that event. Each party shall attempt to give reasonable advance notice to the other party if it is likely to become unable to perform an obligation in circumstances where a delay is thereby likely to be caused. For an event to be an event of excusable delay, EOI must have used and continue to use reasonable endeavours to avoid and minimise the delay and promptly give Partner notice of the relevant event and the period of extension to which it considers itself entitled. 7A.4 Subject to Sub-Clauses 7A.2 and 7A.3, if EOI fail to execute their obligations under Clause 7A.1 above, by the relevant Critical Date, then, in addition to any remedy to which Partner is entitled pursuant to this Agreement and/or the applicable law, Partner shall have the right to claim, and EOI shall pay, Liquidated Damages for each week or part thereof of delay, with respect to such delay (as liquidated damages and not as a penalty), of [*] % of the relevant Purchase Order Price delayed per full week of delay until all relevant Equipment required to be Delivered, Services required to be provided and matters required to be satisfied under this Agreement by the Critical Date have been Delivered, provided and satisfied, up to a maximum of [*]% of the relevant Purchase Order Price. For the avoidance of doubt it is clarified that in calculating Liquidated Damages for late performance of Services, the basis price shall include both the price of the relevant Equipment as well as the price of the relevant delayed Service in connection with such Equipment, in accordance with the Price List. It is further clarified that the price for purposes of calculating Liquidated Damages shall be the full price as specified in the Price List, as opposed to the Purchase Order Price, irrespective of whether or not Partner has utilized any Insentive Vaucher. - --------------------------- Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 16 7A.5 The Parties recognise and agree that the Liquidated Damages are reasonable pre-estimates of the damage which may occur to Partner taking into account all the relevant information available at the time of execution of this Agreement and that such sums are liquidated damages and in no way to be considered as penalties. 7A.6 In the event of delayed Delivery of Equipment or completion of Services or achievement of an Agreement Milestone, EOI shall take reasonable remedial action to minimise the delay. Nothing in this Clause shall be construed as limiting the rights of Partner to terminate this Agreement in whole or in part, or take other action in accordance with any provision of this Agreement as a consequence of such late Delivery of Equipment, completion of Services, or achievement of an Agreement Milestone. 7A.7 The payment of Liquidated Damages shall not relieve EOI from any of its obligations under this Agreement. 7A.8 The provisions of Clause 36 (General Limitation of Liability) shall not apply to Liquidated Damages and such Liquidated Damages shall not be excluded or limited by that Clause. 8. INSPECTION AND ACCEPTANCE 8.1 EOI undertakes to ensure that all Equipment shall be tested by Ericsson in accordance with Ericsson's relevant normal factory testing procedures and tests normally undertaken by Ericsson with respect to products of the type in question. Partner shall have the right to be present during the performance of such factory tests. Partner shall notify EOI of its representatives' arrival not later than seven (7) days in advance. All travelling expenses as well as all other costs for Partner or its representatives are to be borne by Partner. Partner acknowledges that Ericsson cannot guarantee that it is the specific Hardware, Software and Spare Parts dedicated for Partner that is tested when Partner is present unless Partner has indicated in the relevant Purchase Order its request to attend the factory tests for that Equipment. For such Equipment where Partner in the Purchase Order has indicated its request to be present during the factory test, EOI shall notify Partner fourteen (14) days in advance of the date of the factory tests. Partner shall also have the right to request Ericsson, through EOI, to conduct specific Acceptance tests with respect to specific Equipment dedicated to be supplied to Partner, which cannot be performed at Partner's laboratory, at no additional charge and EOI shall ensure that Ericsson shall perform such tests. 8.2 EOI warrants that each item of Equipment will only be delivered to Partner's designated Site, in accordance with Article 7 above, only after it has successfully passed Ericsson's relevant normal factory tests and other quality controls for Equipment of the type in question. 8.3 The Acceptance Tests, Criteria and Procedure ("ATP") for each Equipment, are attached hereto as Annex 6. The ATP indicates all tests, including, if and to the extent required by Partner, lab test, that may be performed for that Equipment, the Acceptance Criteria, and the duration of each test. 8.4 In the event Partner shall wish to delay the commencement of Implementation Services as set in the relevant Time Schedule with respect to any Equipment A ordered and Delivered to Partner, Partner shall for all such Equipment A inform EOI (i) the 17 requested commencement date of the Implementation for each respective Equipment, and (ii) what tests from the respective ATP Partner does not want to be performed under the Implementation, if at all. Agreement Milestones with respect of such Equipment A shall be delayed respectively. 8.5 Intentionally deleted. 8.6 EOI shall, unless informed otherwise by Partner, perform all laboratory tests at Partner's laboratory, in accordance with the relevant ATP. Partner shall be entitled to participate in the said laboratory tests in the manner and to the extent Partner wishes, at Partner's sole discretion. During the performance of the tests, Partner shall be entitled, inter alia, to give instructions to EOI, and to inspect the tests; and EOI undertakes to fully co-operate with Partner and comply with any relevant instructions given. Subject to the successful completion of the said laboratory tests, EOI shall proceed to the next phase of conducting the Acceptance Tests in the manner described in this section 8 below. 8.7 EOI shall carry out and complete the Acceptance Tests for Equipment A in accordance with the Time Schedule and both Parties shall provide all the resources that are required in order to perform such Acceptance Tests, including, without limitation, personnel, testing equipment etc. During the performance of the Acceptance Tests Partner shall be entitled, inter alia, to give instructions to EOI and to inspect the Implementation; EOI undertakes to fully co-operate with Partner and comply with any instructions given. With respect to any Equipment that has not yet any ATP agreed between the Parties, EOI shall provide Partner, before shipment of such Equipment, with a suggested ATP. Partner shall, within 10 business days from receipt of the suggested ATP, provide EOI with its comments and the Parties shall agree upon the ATP within 7 days after delivery of Partner's comments. 8.8 Upon the succesful completion of the Acceptance Tests, EOI shall prepare a detailed protocol designed to clearly verify that all of the relevant Acceptance Criteria are fully met. 8.9 Following the successful completion of the Acceptance Tests for the Equipment A in question and all related Services, subject to the receipt by Partner of the protocol referred to in clause 8.8 above, Partner shall give EOI a written notice, stating whether or not the Equipment A tested has satisfied the Acceptance Criteria for that Equipment. In the Event Partner's notice shall state that the relevant Equipment tested has satisfied the relevant Acceptance Criteria, the said notice shall, for the purposes of this Agreement, constitute an Acceptance Certificate. Partner may only withhold the provision of an Acceptance Certificate and provide EOI with a rejection notice, if Partner believes that the protocol provided by EOI does not verify whether the Acceptance Test Criteria is met or not. 18 8.10 If the relevant Equipment A is not accepted by Partner in accordance with Sub-Clause 8.9, Partner shall, in its rejection notice, to the extent it is reasonably able to do so, specify the particulars of the alleged deviation or failure to establish compliance with the Acceptance Criteria for the relevant Equipment A in question and where the same is alleged to exist or to have occurred. EOI shall with all reasonable speed under the circumstances, but in any event, within the timeframe designated to that end under the relevant Time Schedule, taking into account Partner's time used to produce the rejection notice described in Sub-Clause 8.9 and allowing EOI a reasonable time to remedy the rejection and at its own expense remedy the failure. The Acceptance Tests for the rejected Equipment A, or if Partner agrees in writing, that only the relevant or affected part thereof, shall, if Partner so requires, be repeated in accordance with the provisions of this Clause 8 until the Acceptance Criteria for the Equipment A in question have been fully satisfied, as shall be determined by Partner at its sole discretion. For the avoidance of doubt, in case the alleged deviation or failure to establish compliance with the Acceptance Criteria for the Equipment A in question is a result of the Equipment supplied, EOI shall replace such Equipment forthwith with Equipment conforming to all such Acceptance requirements. 8.11 If EOI has not received from Partner either an Acceptance Certificate or a rejection notice under clause 8.9, stating whether or not the Equipment A in question is accepted or not, within 45 days from completion of the Acceptance Tests for that Equipment or from Partner's receipt of the protocol referred to in clause 8.8 above, the latter of which, the Equipment in question shall be deemed accepted as of the last day of said 45 days period. 8.12 Acceptance of Equipment B shall be deemed to take place at Delivery, in accordance with the provisions of clause 7.2(d) above. 8.13 For each case described in Articles 8.11 and 8.12 above, EOI shall have the right to issue the Acceptance Certificate unless Partner has issued the Acceptance Certificate within five days from the date the relevant Equipment was Accepted, or was deemed Accepted. 8.14 Without limiting EOI obligations to Deliver the Equipment and provide the Services, in accordance with the Specifications, Time Schedule and any other applicable provision of this Agreement, remedy of any failures or deviations referred to in this Clause 8 and repeating tests shall be accomplished by EOI at its cost, within the Time Schedule designated to that end. If EOI shall fail to remedy any such failures or defects within such Time Schedule and such particulars remain unremedied after Partner's written notice of its intention to have it remedied through other means, Partner may elect to have any or all such failures or defects remedied through other means, in which event EOI shall pay the reasonable costs incurred by Partner in so remedying such defects or failures. 8.15 Notwithstanding EOI's obligation to remedy any failures or deviations referred to in this Clause 8, Partner shall have the option, at its sole discretion, to accept and retain any item of the Equipment without such particulars having been remedied, as Partner considers expedient, and at such reduced price as may be agreed between the Parties. 19 8.16 Nothing in this Clause 8 shall relieve EOI of its obligation to comply with the provisions of this Agreement, nor limit Partner's right to terminate this Agreement, in whole or in part, in accordance with the other provisions of this Agreement. The issue of any certificate by Partner (including an Acceptance Certificate) shall not prejudice or affect any of Partner's rights under this Agreement or allow EOI to claim any additional compensation or require any waiver or variation of this Agreement. 8.17 Nothing in this clause 8 shall prevent termination as a result of any defect of EOI's title to any Hardware or in relation to the right to license any Software. 8.18 Notwithstanding any other provision of this Agreement, Acceptance shall not be taken to have occurred if the performance of any such Equipment negatively affects the performance of Partner's System unless EOI can show that the negative effect of the performance of the System is because of equipment not delivered by EOI. 9. TITLE AND ASSUMPTION OF RISK 9.1 EOI warrants to Partner that it has and will deliver to Partner good and valid title to the Equipment to be delivered to Partner, free from any claim, lien, pledge, mortgage, security, interest or other encumbrances, and further warrants that with regard to any license rights granted in respect of Software and Documentation, it has the right and the power to grant the same. 9.2 Subject to Sub-Clauses 9.3 and 9.4 below, title to any Hardware Equipment shall pass to Partner upon delivery. or at an earlier time by which at least [*] ([*]%) percent of the Puchase Order Price of the item of Equipment has been paid to EOI. 9.3 Notwithstanding anything to the contrary, including but not limited to the passage of title in accordance with Sub-Clause 9.2, EOI shall bear the full risk of loss and/or damage for all items of Equipment until Acceptance or Commercial Use of such items, whichever occurs earlier. In the event that any item of Equipment is returned to EOI for remedy of any fault or non-performance risk shall pass to EOI at the point of despatch. 9.4 Title in Software is subject to the provisions of Clause 14. 10. WARRANTY OF EQUIPMENT AND SERVICES 10.1 Without limiting any other warranties or undertakings contained in this Agreement, EOI warrants and undertakes to Partner as follows: (a) All and every item of the Equipment will in all respects conform to, perform in accordance with, have the features and all interconnection capabilities as specified in the Specifications and all other requirements which every item of the Equipment must satisfy as set out in this Agreement, and shall operate and function during the entire Warranty Period free from defects. - --------------------------- Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 20 (b) all Equipment A shall be properly and completely installed, tested, commissioned, Optimised, integrated, Implemented and, all the Services to be provided under this Agreement shall be performed in a skillful and workmanlike manner and shall conform in design, performance, materialsand planning to the requirements of this Agreement and shall be free from defects in design, materials, planning, performance or workmanship for the entire Warranty Period and be of the most suitable grade and quality for the purpose intended, both in accordance with the Specifications and all other requirements of this Agreement; (c) each item of Equipment will be new (except for Replacement Units as defined in Annex 3B to the Maintenance Agreement) and compatible with other equipment, in accordance with the Specifications. Equipment A, shall be Implemented and integrated with every other item of Partner's System and interconnected to the Network and to any third party's equipment and/or software with which it is capable to interconnect and interface, as detailed in the Specifications. For avoidance of doubt, it is agreed that notwithstanding any other provision of this Agreement, Acceptance of any Equipment which is to be interconnected with the Network shall not be taken to have occurred unless and until such Equipment has been interconnected with the Network in accordance with the Specifications. (d) the Software will, as at Acceptance thereof, conform with the licensor's current published specifications and will represent the licensor's latest and most up to date new release version, unless Partner has indicated in writing that it does not wish to install such latest and most up to date new release version; However, in the event that a new release version is scheduled to be released during the period designated for conducting of Acceptance Tests with respect to any relevant Equipment, EOI shall provide Partner with the choice of either delaying the conducting of the relevant Acceptance Tests in wait for the release of the new release version, or conducting the Acceptance Tests in accordance with the applicable Time Schedule with the current release version, and have the new release version installed at a later point in time in accordance with Partner's requirements. (e) the Equipment is the most current and upgraded version, release or model of such item as of the date of shipment. (f) each item of the Equipment shall be Year 2000 Compliant and shall conform to and comply with the requirements of the GSM Licence. (g) it is a highly competent professional contractor with broad experience, great knowledge and an outstanding degree of skill in the field of the obligations undertaken by it under this Agreement and that it is well qualified and has adequate personnel to perform all such works; it is familiar with and shall perform all of its obligations hereunder in accordance with the most recent, and international standards including, without limitation, those referred to in the Specifications; 21 (h) it is adequately insured in a manner consistent with the international industry standards and in accordance with the requirements of this Agreement; (i) it shall perform all of its obligations hereunder in accordance with the provisions of this Agreement, the Specifications and any Purchase Order and relevant Time Schedule; (j) it has familiarized itself with the general nature and location of the Services to be carried out, as well as with all other general conditions and circumstances in Israel which may affect its ability to perform its obligations and undertaking under this Agreement, and, without limiting the relieves in Clause 28 (Force Majeure) hereby expressly waives any claim in this regard. The above warranties as well as all other expressed warranties elsewhere in this Agreement (collectively the "Warranties" and individually a "Warranty") shall constitute the only warranties made by EOI in respect of the Equipment and Services or any part thereof and are in lieu of all other warranties, express or implied. The Warranties shall continue to apply during the entire Warranty Period defined below notwithstanding any Acceptance of Equipment, or Services (as the case may be), or payment by Partner. EOI shall indemnify Partner and keep Partner free and harmless from liability arising under or pursuant to proceedings incurred or suffered by or brought against Partner as a result of any untruth or breach of the Warranties and from any other loss, damage, liabilities and expenses incurred or suffered by Partner as a result thereof. 10.2 Partner shall be entitled at any time during the Warranty Period (as defined below) and irrespective of prior inspections or Acceptance, to reject any part of the Equipment, or Services not conforming to the Warranties and to require that EOI, at its sole cost, shall correct or replace, such Equipment, or Services with conforming items or performance. EOI shall do so promptly after notification by Partner in accordance with this Agreement. If EOI shall fail to correct or replace such Equipment or Services with conforming items or performance promptly, and such particulars remain unremedied after Partner's written notice of its intention to have it corrected or replaced through other means, Partner may elect to have any or all such failures or defects corrected or replaced through other means, in which event EOI shall pay the reasonable costs incurred by Partner. Partner may elect not to require correction or replacement of such defective Equipment and/or Service and, in such event, EOI, if required by Partner, shall refund such portion of the relevant Purchase Order Price as is equitable in the circumstances or in default of agreement as determined under Clause 24. 10.3 The Warranty Period with respect to any Equipment (Hardware and Software) purchased under this Agreement shall be a period of [*] months commencing on the - --------------------------- Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 22 earlier of: (i) the date of Acceptance; and (ii) for Equipment A, the date on which such Equipment A is put into Commercial Use. The Warranties and Warranty Period shall be without prejudice and in addition to any other rights available to Partner under this Agreement. Without limiting the foregoing, the Warranties and the Warranty Period shall continue to apply to any corrected or replaced items until the expiry of a period of [*] months after the date of Acceptance by Partner of the original item of Equipment that was replaced or corrected, provided that Partner is able to demonstrate identification of any such particular corrected or replaced items of Equipment. Spare Parts for faulty Equipment shall be replaced by EOI at no charge, during the Warranty Period, according to the Lead Time specified in Appendix 1 to Annex 3b of the Maintenance Agreement. Shipping, freight warehousing and insurance charges, in respect of Warranty claims shall be incurred solely by EOI. 10.4 Any item replaced will be deemed to be on an exchange basis and the item provided to Partner in exchange shall be the sole property of Partner. Title of the item to be replaced shall pass to EOI on Acceptance of the new replacing item by Partner. Risk in the item to be replaced shall pass to EOI on despatch. Title and risk of the replacement item shall pass to Partner upon Acceptance of that item. Any replaced Equipment will be warranted in accordance with the applicable provisions of clause 10.3 above. 10.5 EOI shall not be liable to Partner for breach of a Warranty to the extent the breach is caused by any of the following: i) the failure of Partner to operate and maintain the Equipment (to the extent it is required to do so) in accordance with the reasonable requirements of the Documentation; ii) The defect, nonconformity or deviation was caused directly and exclusively by equipment not supplied by EOI, and which was provided subsequent to the provision of an Acceptance Certificate by Partner, the interface with which or use of which is not contemplated by the Specification; iii) Partner has not permitted EOI access to the Equipment to remedy the defect, non-conformity or deviation during the time period designated to that end in any applicable Time Schedule; iv) Partner has not permitted EOI to install an update to any Hardware or Software supplied by EOI which update is required for fault prevention purposes and which causes the Software to operate in a manner not in accordance with the Specification; - --------------------------- Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 23 v) The defect, nonconformity or deviation is attributable directly and exclusively to the fact that the Equipment has been modified by Partner in a material manner without the prior written consent of EOI. Notwithstanding the foregoing, EOI shall upon request by Partner remedy defects, non-conformities and deviations caused by any of the foregoing to the extent it is capable of doing so, at EOI's reasonable prevailing charges for work of the type concerned. 10.6 EOI warrants that it has good and valid title to the Equipment to be Delivered to Partner and with regard to any license rights granted in respect of Software and Documentation, that EOI has the right and the power to grant such rights. 10.7 Partner undertakes to comply with EOI's reasonable instructions concerning disposal of defective Hardware and Software once Partner receives replacements operating in accordance with the requirements of this Agreement. 11. PAYMENTS 11.1 In relation to each and every separate Purchase Order, payment of the corresponding Purchase Order Price shall be made by Partner, as follows: (i) For Equipment B - [*] %) of the Purchase Order Price shall be paid by Partner to EOI within [*] days of the end of the calendar month of the date of Delivery, provided that Partner has received a proper invoice from EOI with respect of the relevant Purchase Order and of the relevant Equipment at least 30 days before the due payment date. (ii) For Equipment A - [*] of the Purchase Order Price shall be paid by Partner to EOI within [*] days of the end of the calendar month of the date of Delivery, provided that Partner has received a proper invoice from EOI with respect of the relevant Purchase Order and of the relevant Equipment at least 30 days before the due payment date. [*] of the Purchase Order Price shall be paid by Partner upon the earlier of: (i) Acceptance of the relevant Equipment; or (ii) Commercial Use of the relevant Equipment, provided that Partner has received a proper invoice from EOI with respect of the relevant Purchase Order and of the relevant Equipment. Partner shall pay to EOI the VAT in respect of the invoices for Equipment A and B not later than the 15th day of the following month. For example, for an invoice issued on September 25th, Partner shall pay the VAT to EOI not later than October 15th. EOI shall provide Partner with itemised invoices identifying separately what products are Hardware and Software. Each invoice shall be delivered together with the Equipment. Each invoice shall also reflect the utilization by Partner of any Incentive Voucher. - --------------------------- Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 24 (iii) License fees due because of changes in software capacity shall be paid on a [*] basis, within [*] days from the date of issuance of the invoice. (iv) For Services (other than Maintenance Services) - [*] of the Purchase Order Price shall be paid by Partner to EOI within [*] days of the date of completion of the Services, subject to the approval by Partner that the relevant Services were completed during said [*] days, to Partner's full satisfaction. For the avoidance of doubt, issuance of an Acceptance Certificate shall be deemed as Partner's approval of completion to its full satisfaction. In the event Partner shall not provide EOI with such notice of approval, or rejection of completion of the relevant Service to its full satisfaction, as the case may be, within 7 days, Partner shall be deemed to have approved the completion of the relevant Service to its full satisfaction. For the avoidance of doubt, payment under Sub-Clauses (i) shall become due and be made with respect to each item of Equipment ordered independently. For illustration purposes, a Purchase Order that includes two different items of Equipment, the lead time for Acceptance of one of which is within [*] days and the lead time for Acceptance of the other within [*] days, then - subject to the terms and conditions of this Agreement, the payment schedule shall apply to each such item separately with respect to its specific actual Acceptance date. 11.2 Save with respect to Liquidated Damages, which should be dealt with in accordance with Clause 7A, any refund payable by EOI under this Agreement shall be paid within 30 days following formal written notification by Partner of the required refund. 11.3 All payments to EOI shall be made free and clear of any right of set-off or counterclaim, by telegraphic transfer directly to EOI'snominated bank account. Notwithstanding any other provision of this Agreement, in no event shall EOI be entitled to receive payment of an amount earlier than date falling 30 days after EOI has given to Partner written notice containing clear bank account details for the payment of that amount. 11.4 Partner shall reimburse EOI its reasonable expenses net of savings incurred as a result of delay by Partner in complying with its obligations under this Agreement in breach of its obligations under this Agreement to the extent not attributable to an event of Force Majeure or any breach or delay by EOI or any other third party. EOI shall use commercially reasonable endeavors to minimize such expenses. The obligation of Partner under this Sub-Clause shall be subject to the following: (a) The obligation of Partner under this Sub-Clause shall only apply to expenses which are exclusively related to the performance of EOI's obligations under this Agreement and which EOI could reasonably be expected to have incurred as a result of such delay. - --------------------------- Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 25 (b) Partner shall be repaid such expenses forthwith in the event that the expenses incurred as a result of the delays involved are able to be recovered by EOI. (c) This Sub-Clause shall not apply to expenses in the nature of overhead expenses or recurring expenses such as rents. (d) The aggregate liability of Partner under this Sub-Clause shall not exceed [*] or thereafter any multiple of [*] without the prior written consent of Partner. 11.5 EOI shall not be entitled to terminate this Agreement on grounds of any delay of Partner in complying with its obligations under this Agreement (other than any delay in respect of an obligation to pay any money, provided however that after the aggregate liability of Partner under this Sub-Clause has reached [*] or any multiple thereof with respect to any works EOI may issue a written request to Partner that Partner agree to continue to be liable under this Sub-Clause. If Partner does not agree to continue to be so liable within 14 days after receipt of a written request from EOI, EOI shall be entitled to exercise its right to terminate its obligation to perform any uncompleted part of this Agreement to the extent permitted under Clause 27.8 (Termination for Default) subject to the giving of notices required by that Clause. 11.6 Partner represents that it will have available sufficient funds to enable it to meet its obligations under this Agreement. If this representation ceases to be true prior to payment being made in full, Partner shall notify EOI in writing forthwith. EOI may in that event require that a letter of credit or similar security be established on reasonable terms to secure the obligations of Partner to EOI under this Agreement. 11.7 In the event that a Party fails to pay any amount to the other Party when it falls due for payment under this Agreement, that Party shall be entitled to charge interest on the amount due and payable at an interest rate of LIBOR plus [*]%) per annum calculated on a monthly basis from the date the amount falls due for payment to the date of actual payment in full. For avoidance of doubt, interest shall not be payable on the amounts payable by either party under this Sub-Clause unless and until either party fails to make the relevant payment required by its due date. 12. TAXES, DUTIES AND LEVIES 12.1 EOI shall be responsible for payment of any and all amounts of EOI general corporate income tax as well as personal income tax, and any and all charges relating to entry, work permits and stay in the Territory for its respective, employees, personnel, or any one acting on its behalf, whether imposed in the Territory or elsewhere. 12.2 All payments due under this Agreement shall be paid in United States Dollars. Value Added Tax (VAT)shall be paid by Partner directly to the relevant authority in Israel in accordance with the applicable laws and regulations relating thereto, subject to receipt - --------------------------- Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 26 of a proper VAT invoice. VAT relating to Services supplied by EOI shall be invoiced by EOI and paid by Partner in accordance with the applicable laws and regulations and prevailing accounting practises relating thereto. 12.3 EOI shall be recognized as the importer and/or exporter, as the case may be, with respect of any and all Equipment imported and/or exported into or out of the Territory under this Agreement. EOI shall be responsible for payment of any and all taxes, import, export and/or custom duties, charges, dues and levies related to the import and/or export of Equipment into and/or out of the Territory, as the case may be. EOI shall further be responsible for obtaining type approval from the Israeli Ministry of Communications, with respect of any and all Equipment imported into the Territory under this Agreement. 12.4 If in accordance with present or future laws in the Territory, EOI shall be obliged to pay, or Partner obliged to deduct from any payment to EOI, any amount with respect to any taxes or dues levied in the Territory, for which Partner is responsible as stated above, Partner shall increase the payment to EOI by an amount to cover such payment by EOI or deduction by Partner. 12.5 If in accordance with present or future laws in the Territory, Partner shall be obliged to pay any amount with respect to any taxes or dues levied in the Territory, for which EOI is responsible as stated above, EOI shall pay such amount to Partner on demand or Partner shall be entitled to deduct such amount from any amount due by Partner to EOI. 12.6 EOI on one side, and Partner on the other side shall bear equally the costs of stamp duties, if applicable, with respect to this Agreement. 12A ACCESS TO WORK IN PROGRESS AND INSPECTION OF TECHNICAL DATA AND INFORMATION 12A.1 EOI shall provide at its own cost, for design and progress review meetings with Partner. 12A.2 EOI shall make available to Partner upon request for examination, evaluation, inspection and copying all documentation relating to the performance of the Services, including technical data and information relative to the design and testing, including re-testing of any Equipment being furnished under this Agreement. 12A.3 EOI shall procure that all of their Sub-Contractors are required to comply with obligations substantially the same as those imposed on them under this Clause. 12A.4 For the avoidance of doubt in this Clause 12A, "Partner" includes its duly authorised agents and representatives. Such agents and representatives shall be bound by non-disclosure agreements substantially the same as the terms and conditions of Clause 18. 27 13. PROJECT MANAGEMENT 13.1 EOI shall act as project manager and shall be responsible for the full and complete integration and Implementation of all items of the Equipment purchased by Partner, with each other, Partner's System and any applicable third party's system including with the Network in accordance with the Specifications. 13.2 EOI shall appoint a Project Manager approved by Partner no later than seven days after execution of this Agreement. EOI's Project Manager shall be resident in the area of Tel Aviv and shall be fully conversant with all of the Equipment, or Services and shall have sufficient delegated authority to make day-to-day decisions on the Site(s) during progress of the Services to be provided under this Agreement. EOI's Project Manager shall have full control of its staff and the staff of its Sub-contractors on Site. The Project Manager shall be a "Key Person" and subject to the provisions of Clause 20A ("Key Personnel"). 13.3 Partner shall also appoint a Project Manager no later than seven days after the execution of this Agreement to liaise with EOI's Project Manager. Partner's Project Manager shall be paid by Partner. 13.4 EOI and Partner shall each be deemed to have granted its Project Manager all authority required for that Project Manager to carry out the obligations of a Project Manager under this Agreement. 13.5 EOI shall provide to Partner in a timely fashion all information which Partner may from time to time reasonably request in respect of the progress of the Services. 13.6 EOI shall carry out the Project Management Services in accordance with the reasonable directions of Partner. EOI shall exercise its own skill and judgement in carrying out all Services and Partner shall have no liability to EOI arising out of or in connection with those Services other than the obligation to pay for those Services as part of the pursuant to the Purchase Order Price under this Agreement. 13.7 At Partner's request, EOI shall provide Network Planning and Operational Support Services, as described in the Maintenance Agreement, for the periods, at the cost and on the additional terms as shall be agreed between the Parties. 13A. MARKET ADAPTATIONS Without derogating from Partner's rights, and EOI's obligations, under Clause 10 (Warranty), should changes in the configuration of existing System, Network or other third party network interoperating with the System necessitate modifications of the Equipment, then EOI shall upon request from Partner offer such Service specifying the price and Implementation plan of such modifications. 28 14. LICENSE AND INFORMATION 14.1 Subject to the terms and conditions set forth in this Clause 14, Partner is hereby granted a non-exclusive, perpetual (subject to revocation on ground of material breach) royalty free paid up licence to use the Software and Documentation (including any Intellectual Property Rights included in or arising from the Software or the Documentation), for the operation and maintenance of the Equipment or Part of Equipment in accordance with this Agreement. 14.2 Notwithstanding anything in this Agreement to the contrary, it is understood that Partner receives no title or ownership rights to the Software or Documentation, and all such rights shall remain with EOI or its suppliers. 14.3 Partner agrees that the Software or Documentation provided to it by EOI under this Agreement or any renewals, extensions, or expansions thereof, shall, be treated as proprietary and a trade secret of EOI or its suppliers, and be subject to the provisions of Clause 18 (Confidentiality). In pursuance of the foregoing Partner shall: (a) not provide or make the Software or Documentation or any portions or aspects thereof (including any methods or concepts utilised or expressed therein) available to any person except to its employees agents and contractors on a "need to know" basis; (b) not make any copies of Software or Documentation or parts thereof, except for archival backup purposes and except that this provision shall not prevent the use of CD Roms and the printing of materials from those CD Roms; (c) when making permitted copies as aforesaid transfer to the copy/copies any copyright or other marking on the Software or Documentation; (d) not translate, adapt, arrange or error correct or make any other alteration of the Software or Documentation; and (e) not use the Software or Documentation for any other purpose than permitted in this Clause 14 14.4 Partner and any successor to Partner's title to the Equipment or part of Equipment shall have the right without further consent of EOI to transfer the Software licence granted in Sub-Clause 14.1 to a third party which acquires the Equipment or part of the Equipment, provided that such third party agrees in writing to abide by all the terms and conditions of this license. 14.5 The obligations of Partner under this Clause 14 shall survive the termination or expiration of this Agreement for any reason. 14.6 The Software licensed under this Agreement is delivered in an inseparable package also containing other software programs than the Software. In order to avoid doubt Partner may not in any way use the other software programs. However, upon Partner's request, 29 EOI shall offer a licence to use such other software programs to Partner on the same terms and conditions as stipulated in this Agreement except for price. 14.7 EOI warrants that the Documentation includes all documentation referred to in the Specification or otherwise necessary or desirable to operate the Equipment in accordance with the provisions of this Agreement. EOI shall provide Partner with all technical literature and additional documentation from time to time as necessary or desirable to enable Partner to operate the Equipment properly from time to time. Without limiting the foregoing, in the event of supply of new or amended Hardware or Software from time to time EOI shall supply together with that Hardware or Software all ancillary documentation, such documentation to be provided in the same form and number of copies as the Documentation. 14.8 EOI shall provide Partner with all know how required for the establishment, operation and maintenance of the Equipment from time to time and at all times for the term of the Licence as renewed from time to time. Such know how shall be deemed licensed to Partner on the same terms as the terms of the Software, against consideration as shall be agreed between the parties. 14.9 In consideration of the payment by Partner for the applicable Maintenance Services if and to the extent purchased by Partner, in accordance with the Maintenance Agreement ,EOI shall supply, install and commission Software Upgrades. EOI shall supply all Software Upgrades at no extra charge other than the annual subscription charges as aforesaid. It is agreed that: (a) EOI shall give Partner as much advance notice in writing as is reasonably possible in relation to proposed Software Upgrades, but in any event not less than two months advance notice in writing. (b) EOI shall agree with Partner the manner and timetable of implementation of Software Upgrades and shall follow Partner's reasonable instructions to minimise disruption to the business of Partner in relation to the implementation of the Software Upgrades. 15. SOURCE AND OBJECT CODES 15.1 For the avoidance of doubt, EOI shall supply, and install copies of the object codes for or comprised in any Software to be provided under this Agreement. The ownership of and or rights to use such codes shall be as for the Software to which such codes relates. 15.2 EOI shall supply, install and commission all Software in object code form. However, if EOI: (a) ceases to carry on its business, throughout the Ericsson Group, for a period of at least [*] days other than due to occurrence of an even of Force Majeure; or - --------------------------- Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 30 (b) if Telefonaktiebolaget LM Ericsson is in a financial position described in Clause 27.1(c) below, EOI shall on demand by Partner deliver, or ensure that Ericsson shall deliver, all Software to Partner in source code form, other than Software owned by third parties that EOI, or Ericsson, as the case may be, is not authorised to provide. Partner shall only use that source code for maintenance in accordance with this Agreement. Partner may also provide that source code for the purpose of operation and maintenance of the Software and sub-licence its use to any third party employed by Partner to perform obligations previously required to be performed by EOI under this Agreement or the Maintenance Agreement. Partner may only do so if the third party first undertakes in writing to keep the source code confidential and only use it for the purpose of performing its obligations owed to Partner. Partner shall be responsible for any breach of this Agreement caused by the third party. 16. INTELLECTUAL PROPERTY RIGHTS - WARRANTY AND INDEMNITY 16.1 EOI warrants that it has or will obtain at its own cost and expenses all authorities and Intellectual Property Rights necessary to enable EOI to grant rights and to meet its obligations under this Agreement. 16.2 EOI further warrants that the supply of any item of the Equipment or Services will not infringe (or cause Partner to infringe) any Intellectual Property Right of any third party. EOI shall indemnify Partner completely and at all times from all damages costs and expenses arising from any claim or demand based wholly or partly on an allegation of such infringement (including without limitation any demand or claim brought against Partner by any sub-contractor, agent, or assign of Partner or their respective officers and employees) or the actions of EOI under this Clause. EOI shall, at the request of Partner, defend or settle at EOI's own cost any or all such claims or demands. Liability of EOI under this indemnity for any amount paid by Partner to a third party arising from a claim brought against Partner shall not be subject to any limit on liability set out elsewhere in this Agreement. This indemnity is subject to the following: (a) Partner without delay informing EOI (as applicable) in writing of any claim made by reason of alleged infringement as aforesaid and giving EOI a reasonable opportunity to elect by notice in writing to Partner to defend or settle the claim (including by taking the actions referred to in Sub-Clause 16.3) (the "Election"). Partner may require that EOI gives to Partner reasonable security for the payment by EOI of amounts due by EOI under this Clause as a condition of the Election. If EOI makes such an Election, and subject to the grant of reasonable security as aforesaid, Partner will refrain from acting on account of such claims without the previous approval of EOI in writing (which approval may not unreasonably be withheld or delayed); (b) Partner promptly informing EOI in writing if legal action is taken on account of such claim and if EOI has made the Election, EOI shall have full authority to the extent permitted by law to defend or settle the same through its counsel; 31 (c) if EOI makes the Election, and subject to the grant of reasonable security as referred to above, Partner refrains from all steps in any legal action which may prejudice EOI and which Partner is permitted by law to refrain from taking; (d) that EOI shall not be liable under this indemnity to the extent to which the infringement or alleged infringement arises out of the use of the Equipment in combination or conjunction with any other item not supplied or manufactured by EOI, the interface with which is not contemplated by the Specification. In case EOI fails to act promptly against such claims or actions once it makes the Election, Partner shall have the right to take appropriate legal action and shall be repaid any expenses incurred in so doing. If EOI exercises the Election, it shall keep Partner reasonably informed of the status of the claim and proceedings relating to the claim from time to time and shall provide Partner with documents and information reasonably requested relating to the same. 16.3 Without derogating from any of the aforesaid, in the event of any such claim or demand, or in the opinion of EOI such a claim or demand is likely, then EOI shall at its own option and expense either: (a) secure a license or any other arrangement to enable Partner to continue to use or receive the benefit of the Equipment provided by EOI; or (b) modify or replace that aspect of the Equipment which is claimed to be an infringement such that it no longer constitutes an infringement. Any such modification or replacement shall not degrade performance. 16.4 This Clause 16 provides EOI's sole liability and Partner's sole remedy for claims of infringements of intellectual property rights brought by a third party by reason of the proper use of the Equipment. 17. INFORMATION PROVIDED BY PARTNER - EXAMINATION 17.1 EOI shall exercise due care to ensure that any data and information, including but not limited to Site information, supplied by Partner for the performance of this Agreement is satisfactory, and shall notify Partner promptly if it is not so satisfied. 17.2 If the notification from EOI that such information is not complete is not received by Partner within thirty (30) days after despatch by Partner of such data and information to EOI or within such further reasonable time-limit as may be granted by Partner at the request of EOI, any right of the EOI under this Agreement arising from or in any way pertinent to the completeness of the receipt or the contents of such data or information, or both them, shall be deemed to the forfeited under this Agreement. 32 17.3 For the avoidance of doubt and without prejudice to the foregoing, nothing in this Article 17 shall limit the right for EOI to raise claims on the correctness and accuracy of the information. 17A PERFORMANCE BOND 17A.1 Not later than 30 days from the date hereof, EOI shall provide an autonomous, irrevocable and unconditional performance bond in the form attached as Annex 8 (the "Performance Bond") in an amount of [*]. The said Performance Bond in the amount of [*] shall be valid for 12 months as of the date of its issue. Thereafter, by not later than 30 days before the expiry of the said 12 months and so forth, during each year of this Agreement, EOI shall provide Partner with an autonomous, irrevocable and unconditional annual Performance Bond in the amount of [*]% of Partner's calendar annual purchasing forecast. Partner shall give EOI 72 hours prior written notice of its intention to make a demand on the Performance Bond specifying the reasons for the demand. For the avoidance of doubt, it is clarified that the requirement for specification of reasons for the demand referred to above shall neither derogate nor have any effect whatsoever on the autonomous and unconditional nature of the Performance Bond, thus, after giving such notice, Partner shall have the unconditional right to demand payment under the Performance Bond, in accordance with the terms and conditions of the Performance Bond, irrespective of whether ERA and/or EOI recognizes the validity of Partner's reasons for the demand or not. Upon any amount being drawn under the Performance Bond in excess of US$ [* ], EOI shall reinstate the Performance Bond to the then currently valid Performance Bond amount. 17A.2 The Performance Bond shall be provided by EOI at its own cost and no claim will be considered by Partner on account of interest or the charges related to the Performance Bond. 17A.3 The Performance Bond shall be issued by a first-class Israeli or other reputable international Bank acceptable to Partner. 17A.4 The Performance Bond shall be valid through the end of the Warranty Period. 17A.5 Partner shall be entitled to assign the benefit of the Performance Bond to a permitted assignee to whom it assigns the Agreement under Section 22. 17A.6 In the event that the EOI fails to provide the Performance Bond in accordance with this Clause, without limiting any other remedy of Partner under this Agreement, Partner shall, notwithstanding any other provision to the contrary in this Agreement, be entitled to withhold sums due to EOI under this Agreement, until Partner holds the amount equivalent to the amount of the Performance Bond. The sums so deducted shall - --------------------------- Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 33 be held by Partner in place of the Performance Bond and Partner shall be entitled to utilize such sums in the same way as if it had made calls on the Performance Bond. 18. CONFIDENTIALITY 18.1 The Parties undertake and agree that all the information concerning a disclosing Party and any of the disclosing Party's subsidiaries, affiliates, agents, assigns or representatives, the disclosing Party's telecommunications activities, subscribers, business, operations systems, software and any other information is confidential to such disclosing Party unless it is or becomes in the public domain other than through the default of receiving Party or its affiliates, already known to the receiving Party or received from any third party without any restriction and shall not be disclosed under any circumstances by the receiving Party, its Sub-contractors, affiliates, agents, or representatives, who shall not use the same or any part thereof or any knowledge acquired as a result of this Agreement or its dealings with any other company within the Territory. 18.2 Partner shall be entitled to use confidential proprietary information and information referred to in Sub-Clause 18.1 for the purpose of its business carried on under the GSM License. 18.3 The liability of the Parties under this Clause 18 shall not be excluded or limited under Clause 36. 18.4 EOI warrants and undertakes that each of their respective employees and agents and any other person involved in the provision of any Services will comply with the terms of this Clause 18 as if they were parties thereto and shall be responsible for any breach thereof as if such breach were committed by EOI. In addition, EOI shall upon request by Partner from time to time provide Partner with a list of all its employees engaged in the performance of any Services at any Site or premises occupied or to be occupied by Partner, together with their ID ("teudat zehut") or passport numbers. 18.5 The Parties undertake to procure that each of their respective Sub-contractor, affiliate, agent, or representative affected by this Clause 18 executes an undertaking to be bound by provisions substantially the same as those contained in this Clause 18. 18.6 Partner may require that prior to employees of EOI or its Sub-Contractors or other persons undertaking any Services, such persons or those of them designated by Partner undertake a security briefing to be organised by Partner. Partner reserves the right to refuse to permit persons to be involved in the provision of certain Services unless approved by Partner. EOI shall have the right to have a representative present at such briefings. 18.7 Notwithstanding the foregoing and Clause 23, either Party shall be entitled to disclose information concerning this Agreement or the other Party: (a) to the extent required by law; or (b) if requested or required to do so by any court of competent jurisdiction, government, governmental agency or authority;or 34 (c) to a shareholder of that Party provided that each Party shall be responsible for any breach by that Party's shareholder of this Clause 18 and shall bring to the attention of the shareholder the requirements of this Clause; or Partner shall be entitled to disclose information concerning this Agreement or EOI to the extent reasonably necessary in connection with the obtaining of funding. Partner shall use reasonable endeavours to secure a written confidentiality undertaking from the receiving party in this case. Notwithstanding any other regulation in this Contract, Partner hereby consents to the disclosure of such information in relation to this Contract limited to information specified in the EOI's normal invoice forms issued to Partner from time to time and that may be necessary for EOI to assign any receivables to any known bank or insurance company operating under a license granted by the relevant authority in such institution's jurisdiction, but not by way of public offering document, subject to the execution by such bank or insurance company of a confidentiality undertaking conforming to the provisions of this Clause 18. 19. LOSS AND DAMAGE, INDEMNITY 19.1 Each Party (for purposes of this Clause - "Indemnifying Party") shall be liable for, and shall indemnify the other Party/ies (for purposes of this Clause - "Indemnified Party") against any expense, liability, loss, claim or proceedings whatsoever arising under any statute or at common law in respect to personal injury to, or death of any person arising out of any act or omission of the Indemnifying Party or of any person for whom the Indemnifying Party is responsible. Liability under this Sub-clause shall not be limited by Clause 36 which shall not apply to liability under this Sub-Clause. 19.2 Each Party (also "Indemnifying Party") shall be liable for and shall indemnify the other Party/ies against any expense, liability, loss, claim or proceedings arising under any statute or any law in respect of loss, injury or damage to any property of another Party or of a third party insofar as loss, injury or damage arises out of any act or omission of the Indemnifying Party or any person for whom the Indemnifying Party is responsible and is not caused by the breach of this Agreement or negligence of the other Party/ies. Liability under this Sub-Clause shall not be limited by Clause 36 which shall not apply to liability under this Sub-Clause. The liability of either Party under this Sub-clause shall not exceed US$[*] for each occasion of damage, provided that the limitation of liability provided for in this Sub-Clause shall not apply to liability of the Indemnifying Party to the extent of any loss, injury or damage due to the negligence or wilful default of the Indemnifying Party or any person for whom the Party is responsible. For the purpose of this Sub-Clause, each Party shall have responsibility for its Sub-contractors. 19.3 Subject to Clause 36, each Party shall indemnify the other Party/ies and keep the other Party/ies indemnified against any expense, liability, loss, claim or proceedings brought - --------------------------- Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 35 against or suffered by the other Party/ies as a result of breach by that Party of any of its obligations and/or Warranties under this Agreement. 19.4 In the event of any workman or other person employed by EOI or any of its respective Sub-Contractors in connection with this Agreement, suffering death or any personal injury and whether there be a claim for a compensation or not, EOI shall without delay give notice in writing of such personal injury to Partner. 19.5 Neither Partner and/or any owner/lessor of any Site nor anyone acting on its or their behalf, shall be liable for any loss or damage, for any reason whatsoever, to any equipment, tools, materials and/or test gear of EOI or any of its Subcontractors or anyone acting or their behalf which is brought to any Site, and all such liability is hereby expressly waived by EOI, provided that the foregoing shall not apply in favor of any person who willfully caused such loss or damage. 20. INSURANCE. 20.1 Without derogating from EOI's liability under this Agreement or any applicable law EOI undertake to procure - through an authorized reputable insurance company (with S&P "A" rating or better or confirmation that reinsurers have S&P "A" rating or better)- and to maintain, at their sole expense, and for such time as they are required to perform any Delivery or Services hereunder or under the Maintenance Agreement and/or during the Warranty Period for any Equipment supplied hereunder, the insurances detailed hereunder (herein " EOI's Insurances"): 20.1.1 An Erection All Risks Insurance issued in the name of EOI and/or Sub-Contractors of any tier and/or Partner covering the following: Section 1 - All Risks Property Damage in respect loss or damage to property of any form forming part of the Delivery and/or Services (including incidental civil works and infrastructures of any form) occurring prior to issuance of Acceptance Certificate by Partner as well as in respect of loss or damage discovered or occurring during a maintenance period of 12 months from date of issuance of the Acceptance Certificate (herein"Insurance Maintenance Period") as a result of any insured cause which arose during the period of erection, Implementation and/or installation. This section shall be extended to cover: - loss of or damage to property worked upon or surrounding property subject to a limit of at least US$ 250,000.- per occurrence. - loss of or damage to any equipment, tools, materials and/or test gear utilised in the performance of the Delivery and/or Services. - Loss of or damage to property of any form forming part of the Equipment and/or Services whilst in transit into and/or within the Territory (including interim storage) either under this policy or covered under a separate policy. 36 Section 2 - Third Party Liability Insurance issued in the name of EOI and/or Sub-Contractors of any tier and/or Partner and/or those owners/lessors whom they have contracted to insure with a limit of at least US$ [*] - per occurrence and in the aggregate per Site, in respect of liability at law for death and/or bodily or personal injury and/or property damage caused by acts or omissions during the performance of the Delivery and/or Services hereunder or during the Insurance Maintenance Period. The policy is to include Auto Liability (excluding such liability insured under the "Compulsory Auto Insurance") in excess of any coverage insured under a standard Auto Policy or in excess of $[*] any one event whichever is the higher. Section 1 above shall include a waiver of subrogation in favor of the owners/lessors of the Sites as well as in favor of any other interested party towards whom Partner has so undertaken; provided however the said waiver shall not inure to the benefit of any person having willfully caused any loss or damage. 20.1.2 Employers Liability Insurance issued in the name of EOI subject to a limit of liability applicable to each policy of at least US$[*] - per occurrence and in the annual aggregate (and EOI will undertake to obtain from their Contractors or sub-contractors equivalent coverage - subject to a limit of liability of at least $[*] per occurrence and in the aggregate) covering liability at law for death, bodily injury, illness or disease sustained by any Employee engaged in the performance of the Delivery and/or Services during and as a result of performance of the Delivery and/or Services. These insurances shall be extended to indemnify Partner and/or the lessor/owner of any Site should they be deemed, for the purpose of any work related accident, to bear any duty as an employer towards such person engaged in the performance of the Delivery and/or Services. Furthermore the insurance shall include a waiver of subrogation in favor of Partner and/or such lessor/owner and anyone acting on their behalf. 20.1.3 Combined Products and Professional Liability Insurance issued in the name of EOI and/or Partner and/or those Landlords and/or Sub-Contractors of any tier whom they have contracted to insure subject to a limit of indemnity of a least US$ [*] - any one occurrence and US$ [*] - in the annual aggregate covering EOI's liability at law (including liability in respect of any act or omission of any person or entity acting on their behalf, whether as Sub-Contractors or otherwise) deriving from any act or omission in the performance of the Delivery and/or Services or from any defect of fault therein. This insurance shall be extended to indemnify Partner in respect of any liability deriving from the performance of the Delivery and/or Services or from any defect or fault therein. The policy will include a cross liability clause. 20.2 The insurances noted in clause 20.1 above shall include an express condition whereby they shall take precedence over any insurance maintained by Partner and/or - --------------------------- Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 37 any Site owner/lessor and the insurers shall waive any right as to participation by Partner and/or the Site owners/lessors insurers. 20.3 Furthermore the insurances noted in clause 20.1 above shall include an express condition whereby they shall neither be restricted, changed or cancelled without the express written permission of Partner. unless at least 60 days' prior written notice be given to Partner by registered mail. 20.4 Within 14 days of date of execution hereof , EOI (as applicable) shall, submit to Partner Insurance Certificates duly signed by their Insurer. The submission of such certificates and/or their review or inspection by Partner, shall not relieve EOI of any of its undertakings hereunder 20.5 In addition to the insurances noted in clause 20.1 above, where applicable, EOI shall procure (and/or undertake to obtain from their Contractors or sub-contractors confirmation that they have procured) and/or shall and maintain the following insurances in respect of any motor vehicle (including mobile cranes and any other mobile equipment) utilized in the performance of the Delivery and/or Services hereunder, respectively: 20.5.1 Compulsory insurance covering liability which is required to be insured under the requirements of the Vehicle insurance Ordinance [New Version], 1970. 20.5.2 Comprehensive motor insurance (subject to a waiver of indemnity in favor of Partner, any Site lessor/owner or anyone acting on their behalf) as well as third party liability insurance (excluding compulsory liability noted in clause 20.4.1 above) with a limit of liability of at least US$ 100,000.- which shall be extended to indemnify Partner and/or Site Lessor/owner in respect of any liability devolving upon thyem as a result of the utilization of such vehicles. 20.6 If at any time Partner is notified by EOI's insurer/s that any of EOI's Insurances are about to be cancelled, expire or be restricted, EOI shall re-procure (and/or undertake to obtain from their Contractors or sub-contractors confirmation that they have re-procured) such insurance no later than 30 days' prior to the date of such cancellation, expiry or restriction. 20.7 For avoidance of doubt, it is agreed the limits of indemnity noted in clauses 20.1 & 20.4 above represent a minimum requirement, EOI undertake to assess their exposure to liability and determine the limits of liability accordingly. 20.8 Throughout the performance of this Agreement, EOI shall comply with Israeli National Insurance Law and all regulations and orders thereunder so as to ensure that all Israeli personnel employed or engaged by or on behalf of EOI in the performance of such Delivery and/or Services, shall be entitled to the full benefits under such law. The foregoing shall not apply with respect to any non-Israeli personnel engaged in the performance of this Agreement, in respect of whom EOI shall effect and maintain National Insurance and/or Workmen's Compensation Insurance as required under the 38 law applying to the employment of such persons. Furthermore EOI shall procure adequate and suitable travelers insurance on behalf of all non-Israeli personnel, whilst sojourning in the Territory (including medical expenses, hospitalization and repatriation expenses). 20A. KEY PERSONNEL 20A.1 EOI shall identify prior to or within 7 days of the date of the execution of this Agreement, the individuals who are necessary for the successful performance of this Agreement ("Key Personnel" or "Key Person" as appropriate) and shall furnish Partner with a statement of qualifications and past experience, for each, sufficiently complete to enable Partner to assess the ability of such Key Personnel to provide for smooth co-operation with Partner, throughout the term of this Agreement. 20A.2 Key Personnel designated by EOI shall be subject to approval by Partner, such approval not to be unreasonably withheld. Key Personnel approved by Partner shall not be removed from the performance of the Services unless replaced with personnel of substantially equal qualifications and abilities, who are approved by Partner. Partner may require from time to time that any Key Personnel be replaced by other persons approved by Partner under this Sub-Clause if the Time Schedule is not being met, or if EOI is otherwise in breach of this Agreement, or if Partner reasonably forms the opinion that such replacement will benefit the Services. Nothing in this Clause 20A shall relieve EOI of any of their obligations or responsibility for any acts or omissions of their Key Personnel under this Agreement. 21. CHANGES 21.1 Either Party may, at any time, by change proposal, request changes to be made to the performance of this Agreement. The other Parties shall respond to such a proposal within 14 days after receipt. Upon such change proposal being made by either Party, EOI shall provide Partner within 14 days after the date of the proposal with the proposed schedule of all alterations which would need to be made in the performance of this Agreement and, if applicable, the modified prices, as a consequence of such proposed change. 21.2 If the Parties agreed in writing on the implementation of the proposed change, including any adjustment of the terms thereof, EOI shall proceed therewith, as agreed. It is specifically agreed that no such changes may affect any Purchase Order. 22. ASSIGNMENT OF AGREEMENT 22.1 Subject to Sub-Clause 22.3, 22.4 and Clause 37 (Sub-Contractor), neither Party shall assign, Sub-Contract or delegate, either in whole or in part, this Agreement or any of its rights, duties or obligations thereunder to any person or entity, use it as capital to establish a company, or set up an association with another company for its fulfilment, without prior express written approval of the other Parties. 22.2 Notwithstanding any conditions under which either Party ("Consentor") may grant its approval to any assignment by another Party ("Assignor") the Assignor shall remain a 39 guarantor to the Consentor of the performance in accordance with this Agreement and all applicable laws, of the assigned, subcontracted or delegated duties and obligations. 22.3 Partner may assign all or part of the benefit of this Agreement (including this right of assignment) to: (a) its lenders or financial investors and to any person upon the exercise of a power of sale by such lender or financial investor; (b) a purchaser of the business of Partner or part of that business; or (c) any affiliate of Partner. Partner shall give prior written notice of any assignment to ERA and EOI but shall not be required to seek their prior consent to that assignment. 22.4 EOI may assign all or part of the benefit of this Agreement to a member of the Ericsson Group, provided that EOI (as the case may be) shall continue to be responsible for their obligations under this Agreement and provided that assignment shall not be made to a company which, in the reasonable opinion of Partner, may prejudicially affect the relations of Partner with the government of Israel or which may infringe Israeli law or policy from time to time. EOI (as the case may be) shall give Partner not less than 14 days advance written notice of any proposed assignment under this Clause setting out details of the proposed assignment and shall supply Partner forthwith upon request with such further information it may reasonably require in relation to the same. 22.5 Notwithstanding any other regulation in this Agreement, Partner hereby consents to any assignment of any rights, of EOI in relation to any receivables arising under this Agreement, subject to all the terms and conditions of this Agreement. For the avoidance of doubt, any such assignment would in no way affect the obligations of EOI to Partner under this Agreement and would not lead to any additional obligations on the part of Partner and in particular, shall neither create any relationship whatsoever between Partner and such assignee of the Contractor, nor any obligation and/or liability of Partner towards such assignee and the provisions of this clause shall in no event be construed as inuring for the benefit of any third party whatsoever. 23. PUBLICITY RELATED TO AGREEMENT 23.1 Each Party shall obtain the prior express consent of the other Party (-ies) as to the issue, content and timing of any news releases, articles, brochures, advertisement, prepared speeches or other information releases related to this Agreement, to be issued by that Party, a sub-contractor or any employee, designee, assignee or consultant of that Party. Any such release shall be submitted in draft form, 14 days prior to the printing of same, to the other Party (-ies) for approval indicating the countries in which it will appear. This Sub-Clause shall only apply to Partner to the extent to which the release in question contains the name of the EOI or details of the terms and conditions of this Agreement. 40 23.2 If requested by Partner, EOI shall negotiate in good faith to enter into a separate agreement with Partner containing those parts of this Agreement Partner is required to disclose to the Government of Israel. 24. ARBITRATION AND APPLICABLE LAW 24.1 This Agreement shall be interpreted, construed and governed by the laws of the State of Israel. Any dispute arising under or in connection with this Agreement shall be finally and conclusively settled under the Rules of Arbitration of the International Chamber of Commerce in Tel Aviv by three arbitrators appointed according to said rules (the "Arbitrators") 24.2 The Arbitrators shall not be bound by the rules of evidence or procedure in conducting any arbitration hereunder. The Arbitrators' determination shall be conclusive and binding upon the Parties. All arbitration proceedings shall be conducted in English, in Tel Aviv. EOI shall bear one half of the costs of such arbitration and Partner shall bear the other half, unless the arbitration award shall determine otherwise. 24.3 This provision shall constitute an arbitration agreement. 24.4 EOI shall procure from each of their Subcontractors, their consent and agreement to be bound by the foregoing arbitration agreement, and to participate as a party at any such proceedings upon demand by EOI or Partner. 24.5 Disclosure of any Confidential Information in the course of arbitral proceedings shall not derogate from either Party's confidentiality obligations under Clause 18. Such Confidential Information shall continue to be Confidential Information, subject to Clause 18. The Parties undertake and agree that all arbitral proceedings conducted under this Clause, and the results thereof, shall be kept strictly confidential in accordance with the provisions Clause 18. 25. TIME-LIMITS Any time limit to which this Agreement obliges EOI or Partner shall be counted from the day following that of the event marking the start of the time limit and shall end on the last day of the period laid down. When the last day of the time limit is a Friday, Saturday or obligatory day of rest in the case of an obligation to be undertaken in Israel, or a Saturday, Sunday or legal holiday in any other case, this time-limit shall be extended to the first working day following. 26. FORCE MAJEURE 26.1 The term "Force Majeure" in respect of a Party means an event beyond the reasonable control of that Party without the fault or negligence of that Party, including acts of God, acts of government, fire, flood or storm damage, earthquakes, labor disputes, war, riot, or delays in the performance of its subcontractors cause by any such circumstances as referred to in this Section, but these events do not include in the case of: (a) any act or omission (including delay) of a supplier, carrier, Sub-contractor, agent or representative of the Party or its Sub-contractors other than due to an event of 41 the type described above beyond the reasonable control of that person and occurring without the fault or negligence of that person; (b) any failure to obtain any export or import licence or other authorisation for which EOI is expressly responsible for obtaining under this Agreement other than where such a failure is caused by an event described above, such as any government giving effect to a modification of export regulations hence prohibiting the Delivery; (c) any act or omission (including delay) of an associate or affiliate of the Party or its Sub-contractors unless due to an event of the type described above beyond the reasonable control of that person and occurring without the fault or negligence of that associate or affiliate; (d) lack of workers in the Territory, or other disruptions such as closure, curfew, acts of terrorism, actions regarding the "Intefada", and rainy days. The Parties warrant that they are not aware of any circumstances which are likely to give rise to any labor strike, dispute or disturbance which may affect the performance of their obligations under this Agreement. 26.2 Neither Party shall be responsible for delay in performing any obligation under this Agreement within the time limit required for such performance, due to Force Majeure affecting that Party provided that notice thereof is given to the other Parties within 10 days after such event has occurred. 26.3 Upon the occurrence of Force Majeure, and with proper notice as set forth above, such schedule or time-limit for performance shall be extended accordingly, provided that the Party wishing to rely upon the Force Majeure event makes commercially reasonable efforts to minimise such delay. If the delay continues beyond twelve (12) months after the date of proper notice as set forth in 26.2 above, taking into account the requirements of Partner in relation to the delayed Equipment or prompt performance of any other obligation under this Agreement, Partner may, upon notice of 30 days to EOI terminate this Agreement in whole or in part, without incurring any financial obligations to EOI as a consequence of such termination.. 26.4 In the event of the occurrence of Force Majeure which will result in EOI being unable to perform their obligations under this Agreement by the date being twelve (12) months after the date of proper notice as set forth in 26.2 above, EOI shall have the right to terminate this Agreement in whole or in part by 30 days written notice to Partner, without incurring any financial obligations to Partner as a consequence of such termination. 26.5 The following provisions shall apply in respect of termination of this Agreement for Force Majeure: the Purchase Order Price payable by Partner to EOI as applicable shall (after taking into account amounts previously paid under this Agreement) be the price (as specified in the relevant Purchase Order) of such parts of the Equipment, and Services as are Accepted at the date of termination. As for Equipment delivered but not yet Accepted by the date of termination Partner shall have the option to either (i) retain 42 the Equipment in consideration for paying such price that shall be mutually agreed by the parties, or (ii) notify EOI that it does not wish to retain the Equipment, in which case EOI has right to repossess the Equipment and EOI shall refund Partner all payments already made for such Equipment. 27. TERMINATION FOR DEFAULT 27.1 If: (a) EOI (other than as a result of breach of this Agreement by Partner or due to an event of Force Majeure) is delayed in the delivery of Equipment or the performance of Services beyond any Agreement Milestone, by a period of more than 30 days in total; or (b) either Party commits any material breach of the Agreement and fails to remedy such breach if it is capable of remedy, within 30 days of written notice from the other Party/ies setting out the nature of the breach or in the case of any amount payable by that Party fails to make payment within 20 days after such payment falls due for payment in the absence of a bona fide dispute as to that payment; or (c) either Party becomes insolvent or if its financial position is such that within the framework of its national law, legal action leading towards insolvency has been taken against it by its creditors and is not dismissed within 60 days of its commencement and fails to rectify the position within 14 days after written notice from the other Party/ies requiring it to do so; or (d) either Party resorts to fraudulent practices in connection with the Agreement, especially by deceit concerning the nature, quality or quantity of goods and services required to be rendered under this Agreement or by the giving or offering of gifts or remuneration for the purposes of bribery to any person in the employ of the other Party/ies or their consultants or agents or whatever nature, acting on behalf of them and the other Party/ies gives not less than 14 days notice in writing describing the facts alleged to fall within this Paragraph; the other Party/ies ("Terminating Party") may, subject to the following provisions of this Clause 27, by notice in writing to the Party concerned, terminate this Agreement. 27.2 In the event that the Terminating Party is Partner, Partner may terminate EOI's right to proceed with the Services. In such event Partner may take over the Implementation Services, and proceed with the same to completion of the Services and may upon payment of agreed fees for licenses and products take possession of any of EOI's software, equipment to the extent reasonably required to complete the Services. Any such software shall be licensed under the terms of Clause 14 (License and Information). Risk of loss to any such equipment shall pass to Partner upon Partner taking possession thereof and title to hardware shall pass upon full payment. EOI shall procure that the aforesaid is supplied promptly to Partner and shall also procure, from any of their Sub-contractors, identical rights as are provided in this Clause; and whether or not Partner's rights herein are exercised, termination under this Clause 27 of the Agreement shall take effect immediately. 43 27.3 Notwithstanding the foregoing, Partner shall notwithstanding any termination of this Agreement, be entitled to continue to use after termination on the terms of this Agreement any Hardware or Software delivered to Partner for which Partner has made full payment, provided that this paragraph shall be without prejudice to Partner's obligations with respect to the Software under Clause 14 of this Agreement. This Clause 27.3 is however not applicable if EOI terminates the Agreement, or revokes an IPR license, because of material breach by Partner. 27.4 If Partner so terminates EOI's right to proceed, EOI shall pay any reasonable increased costs occasioned by Partner in completing the Services. Partner shall take reasonable measures to mitigate its costs of doing so, provided that such steps do not hinder the Time Schedule for completion of the Services. 27.5 Prior to issuing to EOI a notice of termination of this Agreement as a result of an event set out in Paragraph (a) of Sub-clause 27.1, Partner shall give reasonable consideration to any written submission made by EOI under which EOI proposes a plan for the completion of delivery of Equipment and/or performance of Services without additional cost to Partner so that Acceptance will occur no later than 30 days after the date for Acceptance set out in the Time Schedule. If EOI establishes that it will do so, Partner shall not unreasonably terminate this Agreement as a result of the delay in question. 27.6 The rights of each Party under this Clause 27 are in addition to, and without prejudice to, or forfeiture of, any other rights or remedies that either Party may have under this Agreement as a consequence of any default by either Party under this Agreement, except as otherwise expressly stated. 27.7 Prior to either Party terminating this Agreement as a result of a failure to make payment under Paragraph 27.1(b) above, the Party proposing to terminate must give notice in writing of its intention to do so no less than 5 days prior to the date upon which the Party proposes to terminate this Agreement, setting out its intention to terminate. A Party claiming that there is a bona fide dispute for the purpose of that Paragraph must, within the 20 day period referred to in Paragragh 27.1(b), give written notice to the other Parties setting out the nature of the dispute. 27.8 If EOI become entitled to terminate this Agreement as a result of a failure by Partner to make payment, the requirements of Sub-Clause 27.7 having been satisfied and there being no bona fide dispute as to the payment, EOI may elect by notice in writing to Partner to delay the performance of their obligations under this Agreement until the payment in question has been made. The written notice shall set out the obligations proposed to be delayed. 44 27.9 If EOI is in breach of this Agreement and fail to provide any Equipment or Services in accordance with this Agreement within the Time Schedule required by this Agreement and Partner would be entitled to terminate this Agreement as a result thereof under Clause 27.1, Partner reserves the right in lieu of termination to purchase and/or use hardware, software or services from or through a third party. Partner shall in such case have the right to deduct the cost of hardware and software so purchased that are functionally identical to Hardware and Software ordered by Partner but not yet delivered by EOI. EOI shall not be responsible for the quality of such hardware, software or services purchased and/or used by Partner, or its compatibility with the Equipment. 27.10 Termination under this Clause 27 shall be without prejudice to rights accrued to either Party prior to termination. 27A. TERMS AND TERMINATION FOR CONVENIENCE 27A.1 This Agreement shall be valid and bind the parties hereto for the period of the Term, and any extension thereof, if and to the extent Partner exercises its Option. Notwithstanding the aforesaid, Partner may terminate this Agreement for its convenience at any time upon [*] . In the event of such termination by Partner, it is agreed that the termination charges shall be the reasonable cost incurred by EOI in connection with the performance of the the obligations under this Agreement prior to termination, including reasonable costs incurred with respects to termination and settlement with their Sub-contractors or suppliers as a result of such termination, and including a reasonable return on costs incurred for the period pending termination. The parties shall negotiate in good faith regarding the termination charges. EOI shall use commercially reasonable endeavours to minimise such costs and ensure that such costs are reasonable in all the circumstances. EOI shall comply with Partner's reasonable directions regarding reduction of such costs. 27A.2 EOI shall notify Partner of all proposed settlements with their Sub-contractors in the event of termination and shall not enter into any binding settlement until Partner has approved the proposed settlement. 27A.3 For Equipment and materials that were not yet shipped to Partner, EOI shall not be entitled to require Partner to take and pay for such Equipment or materials unless such Equipment or materials were purchased or manufactured specifically for the purposes of, and irrevocably allocated by EOI to the performance of, this Agreement, and are perfect and fit for use and cannot be used by EOI for any alternative purposes. 27A.4 Direct and indirect costs shall for the purpose of this Clause 27A be determined in accordance with the EOI's regular accounting procedures consistent however with generally accepted accounting principles and, if required by Partner, verified by the EOI's independent auditors or a reputable firm of accountants reasonably acceptable to both parties. Partner shall pay EOI the termination charges within 30 days following - --------------------------- Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 45 agreement of such total costs with Partner. Payment shall be in the amount of the total termination charges, less the following: (a) amounts previously paid by Partner to EOI with respect to the performance of Equipment and Services prior to termination; and (b) amounts representing EOI's total cost of items of Equipment or Spare Parts not desired by Partner which EOI elects to retain for its use and less Equipment referred to in Sub-Clause 27A.3 which EOI is not entitled to require Partner to take. 27A.5 In the event of such a termination, all Equipment and Spare Parts supplied or allocated under or for the purpose of this Agreement except as specified in paragraph (b) above shall, except for any Intellectual Property Rights, become the property of Partner upon payment in full for the same. 27A.6 In the event of termination of this Agreement under this Clause 27A, EOI shall, at Partner's first demand, vacate all Sites from any person or body. 28. INCENTIVE VOUCHER - ENTITLEMENT AND EXERCISE 28.1 Upon reaching the purchase milestone set out in Annex 5, Partner shall be entitled to receive from EOI Incentive Vouchers in accordance with Annex 5 which may be exercised with respect to additional purchases to be made under this Agreement, subject to the terms set out below. 28.2 Subject to any event under 28.1, each Incentive Voucher will be exercisable in accordance with the provisions of the Incentive Vauchers Scheme attached hereto and marked as Annex 5. 28.3 The Incentive Vouchers may not be exchanged. The sole benefit to be derived from them is in accordance with the specific terms set out herein. 28.4 Amounts subtracted as a result of the exercise of Incentive Vouchers shall be excluded from the valuation of purchases for purposes of issuance of additional Incentive Vouchers. 29. GOVERNMENTAL AUTHORISATION EOI, as the case may be, shall be responsible for obtaining all necessary governmental authorisations, including but not limited to, for export or import licenses necessary for the import of the Equipment into the Territory and for the performance of all of EOI's obligations hereunder. Without derogating from EOI's or EOI's responsibilities set out in this Clause, and at EOI's specific request thereof, Partner shall assist EOI in receiving such authorisations. If Partner is unable to provide such assistance, this shall not be deemed as any a of obligations under this Clause. 46 30. LANGUAGE AND COMMUNICATION 30.1 The Agreement and all documentation and communications required thereunder shall be in the English language. All Documentation shall be provided in English but Partner shall have the right to make one or more translations all or part of the same, provided that for the purpose of this Agreement, the English version shall prevail. 30.2 All communications pertinent to this Agreement shall be made or confirmed in the English language in writing, including facsimile. 31. NOTICES AND REPORTS All notices and reports to be provided to Partner or EOI pursuant to this Agreement shall be sent to Partner or EOI as follows: PARTNER Name: Menachem Tirosh Company: Partner Communications Company Ltd. Address: 8 Amal Street, Afek Industrial Park, Rosh Ha'ayin 48103, Israel. EOI Name: Bo Andersson Company: LM Ericsson Israel Ltd. Address: 17 Amal Street Afek Industrial Park Rosh Ha'ayin 48092, Israel or such other address as may be notified to the other Parties in accordance with this Clause. 32. WAIVER AND APPROVAL No failure or delay on the part of either Party in exercising any right, power or remedy hereunder, shall operate as a waiver of any such right, remedy or power. Any approval or consent given by a Party shall not constitute a binding precedent or create any operative custom between the Parties, nor constitute acceptance by that Party of any liability with respect to the subject-matter of such approval or consent, except as expressly stated herein. Any amendment of this Agreement, and any waiver on the part of any Party of any provision of this Agreement, shall be effective only if expressly made in writing, in accordance with the terms hereof. 33. ENTIRE AGREEMENT This Agreement constitutes the entire Agreement and shall apply in connection with the subject matter hereof, and there are no other agreements or understanding, written or oral, except as provided herein. Any amendments to or modification of this Agreement except in writing signed by the authorised representatives of the Parties hereto, shall be void and of no effect. 47 34. NO PARTNERSHIP The status of EOI hereunder is and shall be deemed, for all purposes, to be of an independent contractor. In no event shall there be deemed to be an employee-employer relationship between EOI, or any of their Sub-contractors or their respective employees, and Partner, and nothing herein shall be construed to create or evidence a partnership or joint venture relationship, or one of agency, between the Parties. 35. SEVERABILITY 35.1 The whole or any part of any Clause in this Agreement that is illegal or unenforceable: (1) will be: (a) read down to the extent necessary so that it is legal and enforceable; or (b) severed (if cannot be read down in accordance with Sub-Clause (a); and (2) will not affect the continued operation of the remaining provisions of this Agreement. 36. GENERAL LIMITATION OF LIABILITY 36.1 Except as expressly provided in this Clause 36 or elsewhere in this Agreement, neither Party shall in any event be liable to the other Party/ies under this Agreement for loss of production, loss of profit, loss of use, loss of business, loss of data or revenue or for any special, indirect, incidental or consequential damages, whether or not the possibility of such damages could have been reasonably foreseen. 36.2 Neither Party shall be liable in relation to any breach of this Agreement or act or omissions of that Party in relation to the obligations under this Agreement (including, in the case of liability of EOI amounts paid EOI to Partner by way of refunds but excluding Liquidated Damages and amounts paid under the Performance Bond) for an amount exceeding the greater of (i) [*] percent ([*]%) of the total value of all Purchase Orders of Equipment and/or Services ordered during the twelve (12) months prior to the breach, or (ii) [*] US Dollars. 36.3 [*] 36.4 No action, regardless of form, arising out of any alleged breach of this Agreement or obligations under this Agreement may be brought by either Party in relation to a claim after the expiration of three years after that Party become aware of all facts relevant to the claim. 36.5 A Party suffering loss or damages shall take reasonable measures to limit such loss or damage. - --------------------------- Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 48 37. SUB-CONTRACTORS 37.1 EOI may appoint Sub-contractors to execute any part of the obligations under this Agreement subject to the following. (a) EOI shall obtain Partner's Project Manager's prior written approval (such written approval not being unreasonably withheld) to the identity of that Sub-contractor and the general terms of the Sub-contract (prices and fees will not be disclosed). Such approval shall not be required in relation to the appointment of a member of the Ericsson Group as Sub-contractor. EOI shall in any event be responsible for any act or omission of such Sub-Contractor and the acts of such Sub-contractor shall be deemed to be acts of EOI for the purpose of this Agreement. (b) The Sub-contractor must enter into a written undertaking with Partner in terms reasonably acceptable to Partner if required by Partner. 37.2 Any performance undertaken by a Sub-Contractor of EOI shall be performed for the benefit of, and the provisions of any related subcontracting agreement shall inure to the benefit of Partner as a "third party beneficiary". Any rights which ERA and/or EOI may have or accrue in relation to such a Sub-Contractor's obligations under the Sub-contract, including, for avoidance of doubt, any member of Ericsson Group, shall be afforded by the parties thereto to Partner, without affecting any of EOI's or its Sub-contractor's obligations under such Sub-Contract and without Partner assuming or being deemed to have assumed, any of EOI's obligations thereunder. Partner may, without limiting the foregoing, in its discretion, require EOI to take such legal action as Partner reasonably requests against any such Sub-contractor. 37.3 EOI shall indemnify Partner and keep Partner indemnified against any claim by a Sub-Contractor of EOI arising in connection with this Agreement, other than to the extent caused by the breach by Partner of this Agreement. Clause 36 shall not apply to this indemnity and this indemnity shall not be limited by that Clause provided however that this indemnity is subject to the following: (a) Partner without delay informing EOI in writing of any such claim and giving EOI a reasonable opportunity to elect by notice in writing to Partner to defend or settle the claim (the "Election"). Partner may require that EOI gives to Partner reasonable security for the payment by EOI of amounts due by EOI under this Clause as a condition of the Election. If EOI makes such an Election, and subject to the grant of reasonable security as aforesaid, Partner will refrain from acting on account of such claims without the previous approval of EOI in writing (which approval may not unreasonably withheld or delayed); (b) Partner promptly informing EOI in writing if legal action is taken on account of such claim and if EOI has made the Election, EOI shall have full authority to the extent permitted by law to defend or settle the same through its counsel; (c) if EOI makes the Election, and subject to the grant of reasonable security as referred to above, Partner refrains from all steps in any legal action which may prejudice EOI and which Partner is permitted by law to refrain from taking. 49 In case EOI fails to act promptly against such claims or actions once it makes the Election, Partner shall have the right to take appropriate legal action and shall be repaid any expenses in so doing. If EOI exercises the Election, it shall keep Partner reasonably informed of the status of the claim and proceedings relating to the claim from time to time and shall provide Partner with documents and information reasonably requested relating to the same. 37.4 Each party shall be liable to the other party for the acts or omissions of its Sub-contractors and shall indemnify the other party and keep the other party indemnified from and against any and all claims, actions, proceedings, losses, liabilities and expenses arising from such acts or omissions. Clause 36 shall not apply to this indemnity and this indemnity shall not be limited by that Clause. 37.5 Without limiting the foregoing, upon any termination of the Agreement in whole or in part, EOI shall, upon demand by Partner, assign all or such portion requested of EOI's rights under its Sub-Contracts with respect to the Services to Partner, without prejudice to any other rights of Partner under the Agreement and without limiting any of the EOI's obligations under such Sub-Contract or hereunder. 38. SURVIVAL 38.1 Provisions contained in this Agreement that are expressed or by their sense and context are intended to survive the expiration or termination of this Agreement shall so survive the expiration or termination, including but not limited to Clauses 10 (Warranty), 14 (Licensed and Information), 15 (Source and Object Codes), 16 (Intellectual Property), 18 (Confidentiality) and 24 (Arbitration and Applicable Law). 38.2 The validity of this Agreement is subject to the approval of the Board of Directors of Partner. For and on behalf of: Partner Communications Company Limited "Partner" ______________________________ Signature ______________________________ Name Printed ______________________________ Position ______________________________ Date For and on behalf of: LM Ericsson Israel Ltd. "EOI" ______________________________ Signature ______________________________ Name Printed ______________________________ Position ______________________________ Date 50 SUPPORT AGREEMENT AGREEMENT REGARDING SUPPORT SERVICES BETWEEN PARTNER COMMUNICATIONS COMPANY LTD AND LM ERICSSON ISRAEL LTD SUPPORT AGREEMENT

CONTENTS 1 Heading 3 2 Preamble 3 3 Definitions 3 4 Scope of Agreement 4 5 Agreement documents and amendments 5 6 Scope of Services 5 7 Prices 5 8 Terms of payment 6 9 General Partner's Obligations 7 10 EOI's general obligations 8 11 Exclusions 10 11A Delays And Liquidated Damages 10 23. Governing law and dispute resolution 19 24 Waivers And Remedies 20 25 Amendments 20 26 Survival 20

SUPPORT AGREEMENT 1 HEADING This Agreement has this day November 25th, 2002, been entered into by and between: PARTNER COMMUNICATIONS COMPANY LTD., with its registered place of business in 8 Amal St., Afek Industrial Park, Rosh Ha'ayin 48103 Israel (hereinafter called "Partner") and LM ERICSSON ISRAEL LTD., with its registered place of business in 17 Amal St., Afek Industrial Park, Rosh Ha'ayin 48092 Israel (hereinafter called "EOI") 2 PREAMBLE WHEREAS, Partner has purchased GSM and GPRS Systems, as well as other ancillary systems and sub-systems and other Telecommunication Equipment from Ericsson Radio Systems AB, currently renamed Ericsson AB (hereinafter "Ericsson") in accordance with the Supply and Installation Contracts; WHEREAS, Partner would like to acquire Services for the Systems and the Telecommunication Equipment from EOI; WHEREAS, EOI would like to supply such Services to Partner in accordance with the terms and conditions of this Agreement. NOW, THEREFORE, in consideration of the foregoing, the Parties hereby agree as follows. Partner and EOI are hereinafter also called individually the "Party", or, collectively, the "Parties". 3 DEFINITIONS The following expressions shall have the meaning hereby assigned to them, unless the context would obviously require otherwise. AGREEMENT - shall mean this agreement regarding the Services entered into between the Parties and shall include all of its Annexes and any amendments thereto. DOCUMENTATION - shall mean all of the documentation provided under the Supply and Installation Contracts. ERICSSON GROUP - shall mean Telefonaktiebolaget LM Ericsson (publ) and its Subsidiaries. HARDWARE - shall mean any and all hardware parts supplied or to be supplied under the Supply and Installation Contracts, including all Documentation relating thereto and specified in ANNEX 2. SUPPORT AGREEMENT PROCEDURES MANUAL - The description of the pre agreed and defined daily working procedures to be applied by EOI and Partner, and shall cover areas such as processes, contact lists, escalation flows, meetings and measurement procedures. The Procedure Manual shall be attached hereto as ANNEX "5" and shall be updated from time to time and in any event of integration of a new platform into the network. SERVICES - shall mean the support and maintenance services to be provided by EOI to Partner under this Agreement, as described in the Service Specification forming ANNEX 3 hereto and in accordance with the provisions of ANNEX 2. SERVICE SPECIFICATION - shall mean the specification to each of the Services. as specified in ANNEX 3 hereto. SOFTWARE - shall mean any and all software parts supplied or to be supplied under the Supply and Installation Contracts, including all Software corrections, Software Updates and Software Upgrades (as defined in the Supply and Installation Contracts) and all Documentation related thereto, and specified in ANNEX 2. SUBSIDIARIES - shall mean any entity in which (i) fifty (50) per cent or more of the share capital is, directly or indirectly, owned or otherwise controlled, or (ii) fifty (50) per cent or more of the voting power can be, directly or indirectly, exercised or otherwise controlled by Telefonaktiebolaget LM Ericsson (publ). SUPPLY AND INSTALLATION CONTRACTS - shall mean the agreements entered into between the Parties hereto and Ericsson, for the supply and installation of GSM and GPRS Systems and Telecommunication Equipment, including any amendment thereto, to which this Agreement is an Annex. SYSTEMS - shall mean the Hardware and Software jointly forming the GSM and GPRS Systems specified in the Supply and Installation Contracts, as well as all other ancillary systems and sub-systems purchased by Partner from Ericsson and/or EOI. TELECOMMUNICATION EQUIPMENT - shall mean the Hardware and Software purchased by Partner under the Supply and Installation Contracts. Other capitalised expressions used in this Agreement shall have the meaning assigned to them in the Supply and and Installation Contracts or elsewhere in this Agreement. 4 SCOPE OF AGREEMENT Upon the terms and conditions set forth in this Agreement, Partner shall order and purchase from EOI and EOI shall provide the Services to Partner. Any specific terms and conditions relating to the respective Service shall be set out in the applicable Service Specification. SUPPORT AGREEMENT 5 AGREEMENT DOCUMENTS AND AMENDMENTS 5.1 This Agreement shall consist of this Agreement document and the following attached Annexes as may be amended from time to time. The documents shall prevail between themselves in the order listed below: This Agreement document ANNEX 3 Service Specifications; ANNEX 2 Hardware and Software covered by the Services; ANNEX 5 Procedures Manual ANNEX 4 Prices; ANNEX 1 List of Annexes; 5.2 The Annexes to this Agreement, which are listed in Annex 1, shall hereinafter by reference form an integral part of this Agreement. 5.3 This Agreement may be modified only by a written document duly signed by authorised representatives of both Parties and referencing this Agreement. 6 SCOPE OF SERVICES The scope of Services provided for by EOI under this Agreement shall be specified in one Service Specification per Service feature included in Annex 3. 7 PRICES 7.1 The annual charges shall be as follows: (i) For year 2002 - a cap of $[*] US dollars), subject to the provisions of Clause 7.1(ix) below. (ii) For year 2003 - a cap of $[*] US dollars), subject to the provisions of Clause 7.1(ix) below. (iii) For year 2004 - a cap of $[*] US dollars), subject to the provisions of Clause 7.1(ix) below. (iv) The annual charges for year 2005 and onwards shall be negotiated in good faith between the Parties. - --------------------------- Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. SUPPORT AGREEMENT (vi) The annual charges for years 2002-2004, as mentioned above, include the following Services: System Support Premium Service in accordance with Annex 3a and 4a, Software Base Subscription service in accordance with Annex 3c and 4c, and System Support Test Plant in accordance with Annex 3f. (vii) The annual charges for years 2002-2004, as mentioned above, shall also include Software Deployment Service in accordance with Annexe 3d, in accordance with the provisions of Annex 4d. (viii) The annual charges for years 2002-2004, as mentioned above, do not include the following Services, which shall be paid separately: Spare Parts Replacement service in accordance with Annexes 3b and 4b and Operational Assistance Services in accordance with Annexes 3e and 4e. (ix) In addition, the annual charges for years 2002-2004, as mentioned above, do not include Equipment that was purchased after 12.6.2002. For such Equipment, fees and charges for Services are set out in ANNEX 4 for each individual Service. (x) All prices are exclusive of VAT. Withholding Tax may be deducted by Partner if and to the extent necessary under any applicable law and Partner shall provide EOI with applicable documentation of such deduction. New Taxes, duties or levies shall be borne in accordance with the applicable provisions of the relevant law. 7.2 Any overdue payment shall carry an interest at a rate of LIBOR + [*]% per annum on the amount of the delayed payment. 8 TERMS OF PAYMENT 8.1 Payments for Services shall be made by Partner, after issuance of the relevant Purchase Order (according to the procedure described in Supply and Installation contract) and in arrears by not later than the lapse of [*] days from [*] ("The due date"), subject to receipt of an invoice by not later than [*] days before the due date, unless Partner has failed to issue the applicable Purchase Order by the last day of [*]. For the avoidance of doubt, it is clarified that in the event Partner did not receive EOI's invoice by [*] days before the due date, provided that EOI has received Partner's Purchase Order by the last day of the second month of [*], the payment date shall be postponed correspondingly. 8.2 Notwithstanding the provisions of Clause 8.1 above, the terms of payment for Operational Assistance Service (Annex 3e), shall be as follows - Partner shall issue a Purchase Order on a quarterly basis in advance. EOI shall provide Partner with an invoice on a monthly basis - --------------------------- Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. SUPPORT AGREEMENT pertaining to Services rendered in the previous month and payment shall be made within [*] days from the date of receipt of EOI's invoice. 8.3 The payment Currency shall be US Dollars. 9 GENERAL PARTNER'S OBLIGATIONS In order for EOI to be able to supply the Services to Partner in a professional and timely manner, Partner shall: a allow EOI designated personnel access to the Systems and/or relevant Telecommunication Equipment, including through remote means, agreed by Partner and defined and specified in the Service Specification, subject to compliance by EOI and its designated personnel with Partner's access and security requirements and b provide necessary operating supplies and consumables such as paper, magnetic tapes, ribbons, cards, format tapes, disc cartridges and such similar items as Partner would use during normal operation other than materials supplied by EOI not readily available from alternative sources and, if the Services are performed at Partner's premises and Sites, provide EOI's personnel with an unbarred telephone line(s) and fax machine at such Partner premises and Sites; and c provide EOI with statistical information regarding the performance of the Systems to the extent reasonably required by the Procedures Manual and all available information regarding any changes and modifications to the System carried out by Partner, other than through or with the knowledge of EOI, as well as information regarding any installed third-party hardware or software, installed by Partner, other than through or with the knowledge of EOI, that in the reasonable opinion of Partner may affect the performance of the System and Service; and d carry out the recommended operation and maintenance of the Systems in accordance with the reasonable requirements of the Documentation; and e comply with EOI's reasonable instructions concerning: - handling of Software, Hardware and Documentation for the respective Service; - disposal of defective or replaced Software, Hardware or Documentation; and - --------------------------- Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. SUPPORT AGREEMENT f implement (deploy) Software Updates and Software Upgrades in the System (if done by Partner) within no more than 60 days from the receipt thereof, unless agreed otherwise between the Parties and, during the term of this Contract, to keep all relevant Software licenses purchased by Partner independently (i.e., not through EOI) from any third party valid. g it shall appoint a suitable representative/s for the purpose of liaison with EOI relating to the Services, with adequate knowledge of the respective Service provided. h Provide a representative to be present at Partner's Site whenever EOI is performing Services on Site. 10 EOI'S GENERAL OBLIGATIONS 10.1 EOI shall provide the Services during the Term in a timely and diligent manner, at the highest professional standards and to the full satisfaction of Partner. 10.2 Without limiting the warranties and representations of EOI under the Supply and Installation Contracts, EOI covenants, warrants and represents that: a It has all the skills, qualifications and expertise that is necessary in order to conduct the Services in a professional manner and in accordance with the terms and conditions included in this Agreement; and b it shall appoint a suitable representative for the purpose of liaison with Partner relating to the Services and, for purposes of rendition of the Services, it shall assign personnel with expert knowledge of the respective Service provided; and c Perform all EOI's obligations as included in the applicable Service Specification or elsewhere in the Supply and Installation Contracts and in this Agreement; and d ensure that all its personnel including subcontractor's personnel conform to Partner's requirement for access to the Systems and security policy when work is carried out on Partner's premises or the premises of Partner's end-users. 10.3 EOI acknowledges that its obligation to provide Services under this Agreement extends to the provision of those Services in respect of the Systems, Telecommunication Equipment, Hardware, Software, Software Updates, Software Upgrades and software features acquired by Partner. EOI shall supply all Software Updates to Partner at no extra charge. It is further agreed that: SUPPORT AGREEMENT a EOI shall give Partner as much advance notice in writing as is reasonably possible in relation to proposed Software Updates and/or Software upgrades; and b EOI shall agree with Partner upon the manner and timetable of implementation of Software Updates and/or Software Upgrades and shall follow Partner's reasonable instructions to minimize disruption to the business of Partner; and c EOI shall provide Software Updates and/or Software Upgrades for all Hardware and Software purchased or licensed by Partner, and maintained under this Agreement such that they are running the latest version released by Ericsson, subject to Partner's request to purchase such latest version of Software Updates and/or Software Upgrades. d. EOI shall provide Partner with any Service under this Contract purchased by Partner provided that Partner shall maintain its System running under a Software Upgrade release version that is not more than either (i) one year old, or (ii) is no more than one Software Upgrade GA release versions old, the later of which. For the avoidance of doubt, it is clarified that in the event Partner's System shall run a Software Upgrade release version that is more than either (i) one year old, or (ii) is more than one Software Upgrade GA release versions old, EOI shall remain obliged to provide Partner with (a) any and all Services for Emergency Situations in accordance with the Resolution Times and all other applicable provisions of this Agreement; and (b) any and all other Maintenance Services that EOI is capable of rendering, but with respect to such other Services, EOI shall not be committed to the Resolution Times set under this Agreement with respect of said other Services. 10.4 If EOI fails to provide the Services in accordance with the Response Times or otherwise in the manner and time schedule required by this Agreement, due to reasons other than such attributable directly and exclusively to Partner (including in situations where Partner is an exclusive intermediary), Partner may remedy the relevant fault or defect itself and/or through any third party and recover the market cost, applicable under the relevant circumstances, from EOI. That remedy will not invalidate EOI's representations, warranties or obligations under this Agreement except to the extent that Partner or any third party on its behalf, causes physical damage to any part of the Systems or causes a non-compliance of the Systems with the Specifications and/or the GSM or GPRS standards, as the case may be. Partner undertakes to provide EOI with notice of its intention to remedy the relevant fault or defect as aforesaid. However, failure by Partner to provide EOI with said notice shall not derogate from Partner's rights under this clause. 10.5 EOI shall provide Partner's test labs with the Services in accordance with the provisions of ANNEX "3F". SUPPORT AGREEMENT 11 EXCLUSIONS 11.1 The Services provided in accordance with this Agreement do not include: a Items of hardware and software that are not listed in ANNEX 2. Notwithstanding the aforesaid or any other provision to the contrary in this Agreement, the Services provided in accordance with this Agreement shall apply to any and all Equipment purchased by Partner from EOI in accordance with the provisions of the Supply and Installation Contracts (which should be added to the list in Annex 2), whether or not such Equipment was in fact added, save for such Equipment that the Parties have agreed in writing that all or certain specific Services shall not apply thereto. b Hardware or Software damaged due to poor packing by Partner upon return of equipment to EOI, or damaged due to the failure by Partner to use the Hardware or Software in accordance with the reasonable requirements of the Documentation; c any change or modification to the Hardware or Software, other than by normal maintenance and operation undertaken by Partner, in accordance with the Documentation, or those included in this Agreement and the Service Specification through updating of the relevant Annexes; and d consumables, such as fuses and lamps. e Warranty Claims shall not be applicable to damages which are the result of Partner's wrongful handling, or in contradiction to the provisions of the Procedures Manual or in cases of Force Majeure. 11A DELAYS AND LIQUIDATED DAMAGES 11A.1 In the event that any of the Services are not executed in accordance with the terms of and within the respective times stipulated in this Agreement, other than by reason of an event of excusable delay (as defined in Clause 11A.2 below), Partner shall be entitled to Liquidated Damages with regard to these Services, the amount of which shall be calculated in accordance with this clause, without having to prove actual damage in conformity with the sums payable as Liquidated Damages as specified below. 11A.2 The following are events of excusable delay: a A Force Majeure event causes delay to EOI in the execution of that part of the Services, provided that EOI has complied with all of its obligations under this Agreement in relation to that event. b A failure by Partner to perform an obligation for which Partner is stated to be responsible under this Agreement (other than an obligation to pay money) causes delay to EOI in the execution of a related part of the Services. SUPPORT AGREEMENT Each party shall promptly give an advanced written notice to the other party if it is likely to become unable to perform an obligation in circumstances where a delay is thereby likely to be caused, and shall also specify in such notice the estimated period of the possible delay. For an event to be an event of excusable delay, EOI must have used and continue to use all reasonable endeavors to avoid and minimize the delay and promptly give Partner notice of the relevant event and the period of extension to which it considers itself entitled. 11A.3 EOI agrees that it shall pay to Partner by way of Liquidated Damages: a With respect to each incident which commences during the Warranty Period and/or after the expiration thereof, and which constitutes an Emergency Situation, US$ [*] for each full [*] hour of delay in complying with the Resolution Times, whether for a Remedy and/or a Solution, as the case may be, up to a maximum per incident of [*]% of the then relevant annual charge for the System Support Premium Service; 11A.4 With respect to delays in provision of Services in relation to High Problems, EOI shall pay Liquidated Damages in accordance with the following provisions: a With respect to each incident which commences during the Warranty Period and/or after the expiration thereof, US$ [*] for each full [*] hours of delay in complying with the Resolution Times set for the provision of a Remedy, and/or for each full [*] hours of delay in complying with the Resolution Times set for the provision of a Solution, up to a maximum per incident of [*]% of the then relevant annual charge for the System Support Premium Service; 11A.5 With respect to delays in provision of Services in relation to Medium Problems, EOI shall pay Liquidated Damages in accordance with the following provisions: a With respect to each incident which commences during the Warranty Period and/or after the expiration thereof, US$ [*] for each full [*] hours of delay in complying with the Resolution Times set for the provision of a Remedy, and/or for each full [*] hours of delay in complying with the Resolution Times set for the provision of a Solution, up to a maximum per incident of [*]% of the then relevant annual charge for the System Support Premium Service; 11A.6 With respect to delays in provision of Services in relation to Low Problems, EOI shall pay Liquidated Damages in accordance with the following provisions: - --------------------------- Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. SUPPORT AGREEMENT a With respect to each incident which commences during the Warranty Period and/or after the expiration thereof, US$ [*] for each full [*] hours of delay in complying with the Resolution Times set for the provision of a Remedy, and/or for each full [*] hours of delay in complying with the Resolution Times set for the provision of a Solution, up to a maximum per incident of [*]% of the then relevant annual charge for the System Support Premium Service; 11A.7 For the purpose of the foregoing provisions: a an incident with respect to which EOI has purported to respond in accordance with this Agreement shall be regarded as separate and distinct from a latter incident separately reported to EOI by Partner, even if it is of an on-going or similar in nature; b in the case of contemporaneous incidents, the defects must be of material difference or effect different parts of the relevant System or Telecommunication Equipment, in order to constitute separate incidents, provided that if the remedy of one part of the System or Telecommunication Equipment will automatically remedy the other part of the System or Telecommunication Equipment, this will be regarded as a single incident; and 11A.8 It is further agreed between the parties hereto, that notwithstanding any other provision to the contrary herein, the annual limit on any Liquidated Damages payable by EOI to Partner under this Maintenance Agreement is set on US $[*]. 11A.9 The Parties recognise that the above sums are reasonable pre-estimates of the damage which may occur to Partner, whether such damage shall actually materliaze or not, taking into account all the relevant information available at the time of signature of this Agreement and that such sums are Liquidated Damages and in no way to be considered as penalties. 11A.10 In the event of delayed provision of Services, EOI shall take all reasonable remedial action to minimize the delay. Nothing in this Clause shall be construed as limiting the rights of Partner to terminate this Agreement in whole or in part or take other action in accordance with any provision of this Agreement as a consequence of such late provision of Services. 11A.11 The payment of Liquidated Damages shall not relieve EOI from the obligation to provide Services in accordance with this Agreement. 11A.12 Partner shall be entitled to withhold and set-off from any amount owed to EOI under this Agreement, any amount which Partner is owed by, or otherwise entitled to receive from, EOI by way of Liquidated Damages under this Agreement. 12. INDEMNIFICATION - --------------------------- Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. SUPPORT AGREEMENT 12.1 Each party ("Indemnifying Party") shall be liable for, and shall indemnify the other party ("Indemnified Party") against any expense, liability, loss, claim or proceedings whatsoever arising under any statute or at common law in respect to personal injury to, or death of any person arising out of any act or omission of the Indemnifying Party or of any person for whom the Indemnifying Party is responsible in relation to this Agreement or the Services. Liability under this Sub-clause shall not be limited by Sub-Clauses 12.5 or 12.6, which shall not apply to liability under this Sub-Clause. 12.2 Each Party (also "Indemnifying Party") shall be liable for and shall indemnify the other party against any expense, liability, loss, claim or proceedings arising under any statute or at common law in respect of loss, injury or damage to any property of the other party or of a third party insofar as loss, injury or damage arises out of any act or omission of the Indemnifying Party or any person for whom the Indemnifying Party is responsible and is not caused by the breach of this Agreement or negligence of the other party. Liability under this Sub-clause shall not be limited by Sub-Clauses 12.5 or 12.6 which shall not apply to liability under this Sub-Clause. The liability of either party under this Sub-clause shall not exceed US$ [*] for each occasion of damage, provided that the limitation of liability provided for in this Sub-Clause shall not apply to liability of the Indemnifying Party to the extent of any loss, injury or damage due to the negligence, breach of contract or wilful default of the Indemnifying Party or any person for whom the Indemnifying Party is responsible. For the purpose of this Sub-clause, each party shall have responsibility for its Sub-contractors. 12.3 Subject to Sub-Clauses 12.5 and 12.6 each party shall indemnify the other party and keep the other party indemnified against any expense, liability, loss, claim or proceedings brought against or suffered by the other party as a result of breach by the other party of this Agreement. 12.4 In the event of any workman or other person employed by either Party, or its respective Sub-contractor, in connection with this Agreement, , suffering death or any personal injury and whether there be a claim for a compensation or not, either Party shall without delay give the other Party notice in writing of such personal injury or death. 12.5 Except as expressly provided in this Clause 12 or elsewhere in this Agreement, neither party shall in any event be liable to the other party under this Agreement for loss of production, loss of use, loss of business, loss of data or revenue or for any special, indirect, incidental or consequential damages, whether or not the possibility of such damages could have been reasonably foreseen. 12.6 Neither party shall be liable in relation to any breach of this Agreement or act or omissions of that party in relation to each year of this Agreement (including amounts paid by EOI to Partner by way of refunds but excluding Liquidated Damages) for an amount exceeding [*]% of the annual charges for that year (means four Quarterly Fees). - --------------------------- Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. SUPPORT AGREEMENT 12.7 The limitation of liability provided for in Sub - Clauses 12.5 and 12.6 shall not apply with respect to damages related to a breach of the obligations under the Confidentiality Clauses of the Supply and Installation Contracts and with respect of the indemnity provided for under Clauses 19.4 and 19.5 below (Sub-contractors). 12.8 No action, regardless of form, arising out of any alleged breach of this Agreement or obligations under this Agreement may be brought by either party in relation to a claim after the expiration of two years after the Project Manager of that party, or any person senior to him/her, becomes aware of all facts relevant to the claim. 12.9 A Party suffering loss or damage shall take reasonable measures to limit such loss or damage. 13. FORCE MAJEURE 13.1 The term "Force Majeure" in respect of party means an event beyond the reasonable control and without the fault or negligence of that party or its Sub-Contractors or suppliers hereunder, including acts of God, acts of government, fire, flood or storm damage, earthquakes, labour disputes, war or riot but does not include in the case of EOI: a any act or omission (including delay) of a supplier, carrier, sub-contractor, agent or representative of EOI or its Sub-contractors other than due to an event of the type described above beyond the reasonable control of that person and occurring without the fault or negligence of that person; b any failure to obtain any export or import licence or other authorisation for which EOI is expressly responsible for obtaining under this Agreement other than where such a failure is caused by an event described above; c any act or omission (including delay) of an associate or affiliate of EOI or its sub-contractors unless due to an event of the type described above beyond the reasonable control of that person and occurring without the fault or negligence of that associate or affiliate; d lack of workers in the Territory, or other disruptions such as closure, curfew, acts of terrorism, actions regarding the "Intefada", and rainy days. EOIwarrants that it is not aware of any circumstances, which are likely to give rise to any labour strike, dispute or disturbance which may affect the performance of its obligations under this Agreement. 13.2 Neither party shall be responsible for delay in provision of Services or in performing any other obligation under this Agreement within the time limit required for such performance, due to Force Majeure affecting that party provided that notice thereof is given to the other party within 10 days after such event has occurred. 13.3 Upon the occurrence of Force Majeure, and with proper notice as set forth above, such schedule or time-limit for performance shall be SUPPORT AGREEMENT extended accordingly, provided that the party wishing to rely upon the Force Majeure event makes commercially reasonable efforts to minimise such delay. If the delay continues beyond a reasonable period, taking into account the requirements of Partner in relation to the delayed performance of any obligation under this Agreement, Partner may, upon notice of 30 days to EOI terminate this Agreement in whole or in part, without incurring any financial obligations towards EOI as a consequence of such termination. 13.4 EOI shall have the right to terminate this Agreement in the event that an event of Force Majeure prevents performance by Partner under this Agreement for a continuous period exceeding one year. 14. TERM AND TERMINATION 14.1 This Agreement shall commence on its date of execution and terminate on the earlier of: a the period expiring 31 December, 2008 as that period may be extended by the written agreement of the parties from time to time; b the date it is otherwise terminated in accordance with its terms. 14.2 This Agreement shall terminate in the event of termination of the Supply and Installation Contracts if Partner elects by a 90 days advance notice in writing to terminate this Agreement and/or upon [*] days advance notice in writing served by Partner at Partner's discretion. 14.3 If: a either Party commits any material breach of this Agreement and fails to remedy such breach if it is capable of remedy, within 30 days of written notice from the other Party of the same; setting out the nature of the breach or in the case of any amount payable by that Party fails to make payment within 20 days after such payment falls due for payment in the absence of a bona fide dispute as to that payment; b either Party becomes insolvent or if its financial position is such that within he framework of its national law, legal action leading towards insolvency has been taken against it by its creditors and is not dismissed within 60 days of its commencement and fails to rectify the position within 14 days after written notice from the other Party requiring it to do so; then, the other Party ("Terminating Party") may, subject to the provisions of this Clause, by notice in writing to the Party concerned, terminate this Agreement. 14.4 The rights of each Party under this Clause 14 are in addition to, and without prejudice to, or forfeiture of, any other rights or remedies that - --------------------------- Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. SUPPORT AGREEMENT either Party may have under this Agreement or at law as a consequence of any default by either Party under this Agreement. 14.5 Prior to either Party terminating this Agreement as a result of a failure to make payment under Clause 14.3(a) above, the Terminating Party must give notice in writing of its intention to do so no less than 5 days prior to the date upon which the Terminating Party proposes to terminate this Agreement, setting out its intention to terminate. A party claiming that there is a bona fide dispute for the purpose of that Clause must, within the 20 day period referred to in Clause 14.3(a), give written notice to the other Party setting out the nature of the dispute. 14.6 Termination under Clauses 13 and 14 shall be without prejudice to rights accrued to either Party prior to termination. 15. PUBLICITY Neither Party shall advertise or publish any information related to this Agreement without the prior approval of the other Party, except that EOI may publish its appointment as contractor and the value of the Agreement. 16. NOTICES All written notices required by this Agreement shall be furnished by hand delivery, registered post, telefax or electronic mail to the following addresses: If to EOI: 17 Amal St., Afek Industrial Park, Rosh Ha'ayin 48092 Israel If to Partner: 8 Amal St., Afek Industrial Park, Rosh Ha'ayin 48103 Israel All notices shall be confirmed and become effective only on receipt. Either Party may change its address by a notice to the other Party in the manner set forth above. 17. LANGUAGE The English language shall be the language to be used in all documents and correspondence related to the execution of this Agreement. 18. ASSIGNMENT 18.1 Subject to Sub-Clauses 18.3 and 18.4, neither party shall assign, either in whole or in part, this Agreement or any of its rights, duties or obligations thereunder to any person or entity, use it as capital to establish a company or any entity, or set up an association with another entity for its fulfillment, without prior express written approval of the other party. SUPPORT AGREEMENT 18.2 Notwithstanding any conditions under which either party ("Consentor") may, at its sole discretion, grant its approval, to any assignment by the other party ("Assignor") Assignor shall remain a guarantor to the Consentor of the performance in accordance with this Agreement and all applicable laws, of the assigned, or delegated duties and obligations. 18.3 Partner may assign all or part of the benefit of this Agreement (including this right of assignment) to: a its lenders or financial investors and to any person upon the exercise of a power of sale by such lender or financial investor. b a purchaser of the business of Partner or part of that business; or c any affiliate of Partner. Partner shall give prior notice of any assignment to EOI but shall not be required to seek the prior consent of EOI to that assignment. 18.4 EOI may assign all or part of the benefit of this Agreement to a member of the Ericsson Group, provided that EOI shall continue to be responsible for its obligations under this Agreement. 19. SUBCONTRACTING 19.1 EOI may appoint Sub-contractors to execute any part of the Services subject to the following. 19.2 EOI must obtain the prior written approval of Partner to the identity of that Sub-contractor and the general terms of the Sub-contract (prices and fees will not be disclosed), Such approval not to be unreasonably withheld, and provided that such approval shall not be required in relation to the appointment of a member of the Ericsson Group as Sub-contractor provided further that EOI shall in any event be responsible for any act or omission of such Sub-contractor and the acts of such Sub-contractor shall be deemed to be acts of EOI for the purpose of this Agreement. 19.3 The Sub-contractor must enter into a written undertaking with Partner on terms reasonably acceptable to Partner if required by Partner. 19.4 EOI shall indemnify Partner and keep Partner indemnified against any claim by a Sub-contractor of EOI arising out of the execution of any part of the Services or arising out of this Agreement or the termination of this Agreement other than to the extent caused by the default of Partner. Sub-Clauses 12.5 and 12.6 shall not apply to this indemnity and this indemnity shall not be limited by that Clause provided however that this indemnity is subject to the following: a that without delay Partner informs EOI in writing of any such claim and gives EOI a reasonable opportunity to elect by notice in writing to Partner to defend or settle the claim (the "Election"). Partner may require that EOI shall give to Partner reasonable security for the payment by EOI of amounts due by EOI under this Clause as a SUPPORT AGREEMENT condition of the Election. If EOI makes such an Election, and subject to the grant of reasonable security as aforesaid, Partner will refrain from acting on account of such claims without the previous approval of EOI in writing (which approval may not be unreasonably withheld or delayed); b that Partner promptly informs the EOI in writing if legal action is taken on account of such claim and if EOI has made the Election, subject to the grant of reasonable security as referred to above, that EOI shall have full authority to the extent permitted by law to defend or settle the same through its counsel; c that if EOI makes the Election, and subject to the grant of reasonable security as referred to above, EOI is informed of all circumstances which may be of relevance in the legal action taken and Partner refrains from all steps in any legal action which may prejudice EOI and which Partner is permitted by law to refrain from taking. d In case EOI fails to act promptly against such claims or actions once it makes the Election, subject to the grant of reasonable security as referred to above, Partner shall have the right to take appropriate legal action and shall be repaid any expenses in so doing, including but not limited to the realisation of the reasonable security referred to above. If EOI exercises the Election, it shall keep Partner reasonably informed of the status of the claim and proceedings relating to the claim from time to time and shall provide Partner with documents and information reasonably requested relating to the same. 19.5 Each Party shall be liable to the other Party for the acts or omissions of its Sub-contractors and shall indemnify the other party and keep the other party indemnified from and against any and all claims, actions, proceedings, losses, liabilities and expenses arising from such acts or omissions. 20. ENTIRE AGREEMENT This Agreement constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes all previous negotiations, proposals, commitments, writings, oral statements, and understanding of any nature whatsoever concerning the subject matter hereof. 21. HEADINGS The headings in this Agreement are inserted for convenience and identification only and are not intended to describe, interpret, define, or limit the scope, extent, or intent of this Agreement or any provisions hereof. SUPPORT AGREEMENT 22. SEVERABILITY If any of the terms and conditions of this Agreement should be or become unenforceable for any cause or reason whatsoever, ensuing lack of enforceability shall not affect the other provisions hereof and in such event, the Parties shall endeavour to forthwith substitute said unenforceable provisions with new enforceable ones. The contents of the new provisions shall, to the utmost possible extent, closely correspond to the legal and commercial contents of the old terms and conditions. 23. GOVERNING LAW AND DISPUTE RESOLUTION 23.1 This Agreement shall be governed by and construed in accordance with the substantive laws of Israel. 23.2 All disputes, differences or questions between the Parties with respect to any matter arising out of or relating to this Agreement shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce, in Tel Aviv, Israel, by three (3) arbitrators appointed in accordance with the said Rules ("the Arbitrators") and the proceedings shall be conducted in the English language, or such other language the Parties agree on. The Arbitrators shall not be bound by the rules of evidence or procedure in conducting any arbitration hereunder, but shall have to provide the Parties with a reasoned opinion in writing. The parties shall bear equally the costs of such arbitration, unless otherwise determined by the Arbitrators. 23.3 The Arbitrator's determination shall be conclusive and binding upon the parties. All awards may if necessary be enforced by any court having jurisdiction in the same manner as a judgement in such court. This Clause 23 shall constitute an arbitration agreement and shall survive any termination of this Agreement. 23.4 EOI shall procure from each of its Subcontractors, their consent and agreement to be bound by the foregoing arbitration agreement, and to participate as a party at any such proceedings upon demand by the EOI or Partner. 23.5 Disclosure of any Confidential Information in the course of arbitral proceedings shall not derogate from either Party's confidentiality obligations. Such Confidential Information shall continue to be Confidential Information, subject to the Parties confidentiality obligations. The Parties undertake and agree that all arbitral proceedings conducted under this Article, and the results thereof, shall be kept strictly confidential in accordance with their confidentiality obligations. SUPPORT AGREEMENT 24 WAIVERS AND REMEDIES No failure or delay on the part of either Party in exercising any right, power or remedy hereunder, shall operate as a waiver of any such right, remedy or power. Any approval or consent given by either Party, shall not constitute a binding precedent or create any operative custom between the Parties, nor constitute acceptance by that Party of any liability with respect to the subject-matter of such approval or consent, except as expressly sated herein. Any amendment of this Agreement, and any waiver on the part of any Party of any provision of this Agreement, shall be effective only if expressly made in writing, in accordance with the terms hereof. 25 AMENDMENTS No provision of this Agreement may be amended, modified, waived, discharged or terminated, otherwise than by the express written agreement of the Parties. 26 SURVIVAL Provisions contained in this Agreement that are expressed or by their sense and context are intended to survive the expiration or termination of this Agreement shall survive the expiration or termination of this Agreement. This Agreement has been duly signed by the Parties in two (2) originals of which the Parties have taken one (1) each. SUPPORT AGREEMENT For and on behalf of: Partner Communications Company Limited "Partner" ______________________________ Signature ______________________________ Name Printed ______________________________ Position ______________________________ Date For and on behalf of: LM Ericsson Israel Ltd. "EOI" ______________________________ Signature ______________________________ Name Printed ______________________________ Position ______________________________ Date EX-4.(A).13 5 u45961exv4wxayw13.txt SUPPLEMENTAL AGREEMENT (APRIL 18, 2002) EXHIBIT 4.(a).13 Dated 18 April 2002 MATBIT TELECOMMUNICATION SYSTEMS LIMITED and MATAV INVESTMENTS LIMITED and ELBIT.COM LIMITED and ADVENT INVESTMENTS PTE LIMITED and HUTCHISON TELECOMMUNICATIONS (AMSTERDAM) BV and MATAV-CABLE SYSTEMS MEDIA LIMITED SUPPLEMENTAL AGREEMENT relating to Partner Communications Company Limited This Agreement is made on 18 April 2002 Between: (1) Matbit Telecommunication Systems Limited whose principal office is at c/o Avital, Dromi & Co Law Offices, at 4 Taas Street, Ramat Gan 52512, Israel ("Matbit"); (2) Matav Investments Limited whose principal office is at 42 Pinkas Street, North Industrial Area, Netanya 42134, Israel ("Matav"); (3) Elbit.COM Limited whose principal office is at Hutsot Shefayim, PO Box 286 Shefayim, 80990, Israel ("Elbit"); (4) Advent Investments Pte Limited whose principal office is at 10 Hoe Chiang Road, Number 16-02, Keppel Towers, Singapore ("Advent"); (5) Hutchison Telecommunications (Amsterdam) BV whose registered office is at Leidsekade 98, 1017 Amsterdam, Netherlands ("Hutchison"); and (6) Matav-Cable Systems Media Limited whose principal office is at 42 Pinkas Street, North Industrial Area, Netanya 42134, Israel ("Matav-Cable"). (and together referred to hereinafter as the "Parties" or Individually as a "Party"). Whereas: (A) Matbit and Matav are existing shareholders in the Company. (B) Pursuant to a share purchase agreement dated 10 April 2002 and made between (1) Matav, (2) Matbit, (3) Hutchison and (4) Matav-Cable Systems Media Limited, (the "SPA") Hutchison will also become a shareholder in the Company. (C) The Parties wish to record certain agreements between them in relation to the Company in accordance with the terms of this Agreement. It is agreed as follows: 1 Interpretation Terms used in this Agreement which are defined in a relationship agreement dated 10 October 1999 and made between (1) Advent, (2) Matbit, (3) Matav, (4) Elbit and (5) Tapuz Cellular Systems Limited Partnership (as amended) (the "Relationship Agreement"), shall have the same meaning as in the Relationship Agreement unless the context requires otherwise; "MOC" means the Minister of Communications of Israel and the Ministry of Communications of Israel; and "MOC Letters" means the letters from the Company to the MOC dated March 26, 2002, April 1, 2002 and April 4, 2002 and the response from the MOC dated 14 April 2002, all in the agreed terms. 1.1 Clauses etc. References to this Agreement include any Recitals to it and references to Clauses are to Clauses of this Agreement. 1.2 Headings Headings shall be ignored in construing this Agreement. Continuing obligations of Matbit and Matav Covenants by Matav 2.1.1 In accordance with clause 5.1.6(a) of the Relationship Agreement, Matav hereby irrevocably assigns to Hutchison the right of Matav to nominate a representative to serve as a Director. 2.1.2 Matav hereby further agrees, from the date of this Agreement, to irrevocably waive its rights pursuant to clause 6.1.2 of the Relationship Agreement to appoint three Directors and, subject as set out in Clause 2.1.3, for as long as it holds not less than 4.99 per cent of the Relevant Shares, agrees that it shall be entitled to appoint not more than two Directors. 2.1.3 Clause 2.1.2 shall not prevent a Nominating Party from transferring Shares to Matav, and assigning any rights such Nominating Party has to nominate one or more representatives to serve as Directors to Matav in accordance with clauses 6.1.4(c) or 6.1.5 of the Relationship Agreement. Avoidance and Consequences of an Occurrence of a Bank or Israel Event 2.2.1 Bank of Israel Event (i) (a) Matbit agrees and undertakes that it will not; and (b) Matav agrees and undertakes that it will not, that it will use its best efforts to procure that none of its Affiliates will and that it will not through the exercise of its rights as a shareholder in Matbit or through any representation on the Board of Matbit cause Matbit to, take any action, or allow any event to occur (being an event it or, in the case of Matav, Matav's Affiliates is/are reasonably capable of influencing) ("Relevant Action") which would cause the Company to become obliged, under applicable rules of the Bank of Israel (as in effect from time to time) which restrict loans to related parties, to repay amounts to, or alter the terms of any existing or subsequent credit facility with, any bank on terms substantially different from those applicable to other banks participating in such facility or on terms which would not apply were it not for the application of such rules (a "Bank of Israel Event"). (ii) If a Bank of Israel Event occurs in circumstances where there is no Relevant Action then Clauses 2.2.2, 2.2.3 and 2.2.4 shall not apply and the Parties shall all discuss in good faith with each other and co-operate in good faith with a view to reaching an agreement to ensure that such repayment or alteration is avoided and each Party shall indemnify the other Parties in respect of any failure by it to so co-operate. (iii) For the avoidance of doubt, in the event that the applicable rules of the Bank of Israel are changed and as a result of such change the percentage interest of any given shareholder causes the Company to be a related entity ("Ish Kashur") of the relevant banks and, as a result, the Company becomes obliged, under applicable rules of the Bank of Israel which restrict loans to related parties, to repay amounts to, or alter the terms of any existing or subsequent credit facility with, any bank on terms substantially different from those applicable to other banks participating in such facility or on terms which would not apply were it not for the application of such rules, then, absent a Relevant Action, in such circumstances, a Bank of Israel Event shall not occur nor shall there be a Breach (as defined in Clause 2.2.2 below), but the provisions of subsection (ii) above shall apply. 2.2.2 Notice of Breach If a breach of Clause 2.2.1(i) occurs (a "Breach"), the Party in Breach (the "Defaulting Party") shall notify the other Parties as soon as reasonably practicable. 2.2.3 Procedure on Breach Following a Breach, the Board, at a meeting in which the Directors nominated by the Defaulting Party will not be entitled to participate, may give written notice to the Defaulting Party within 60 Business Days of receiving notification of the Breach from the Defaulting Party or of becoming aware of the Breach, whichever is the earlier, requiring the Defaulting Party: (i) to sell the Sale Shares (as defined below) at a price per Share equal to 82.5 per cent of the Market Price of the Sale Shares but in all other respects in accordance with the provisions of clause 9.1 of the Relationship Agreement, in which case the provisions of clauses 9.2, 9.4, 9.5 and 10 of the Relationship Agreement shall apply, mutatis mutandis and as the case may be; and (ii) in addition to, or as an alternative to, requiring the sale of the Sale Shares as set out in (i) above to take such other actions which the Board (the composition of which shall exclude the Directors nominated by the Defaulting Party) and the Defaulting Party may together agree will remedy the Breach, whereupon the Defaulting Party shall be obliged to take such actions within the time agreed between the Defaulting Party and the Board; and in each such case the Defaulting Party shall indemnify the Company in respect of all costs and expenses incurred in connection with implementing the provisions of this Clause 2.2.3 For the purpose of this Clause 2.2.3 the "Sale Shares" means such number of the Shares held directly or indirectly (which shall include Shares which are held by Matbit for the benefit of Matav) by the Defaulting Party which the Board, at the meeting referred to above, determines need to be sold in order that the relevant Bank of Israel Event is no longer applicable. 2.2.4 Indemnity If the Defaulting Party fails to comply with the requirements imposed by Clause 2.2.3, or if it does not agree with the Board what actions it is to take to remedy the Breach then without prejudice to any contractual remedy available to Advent, Hutchison or the Company in respect of the relevant Breach or such failure, the Defaulting Party shall indemnify the Company against all costs and liabilities arising in connection with such Breach (including, without limitation, if applicable, costs and liabilities incurred in connection with any early repayment of, or the alteration of the then existing terms of, any then existing credit facility or the costs of any required refinancing or fund raising (it being understood that such indemnity shall not oblige the Defaulting Party to assume the Company's then existing obligations under any then existing credit facility (save to the extent they are increased (and then only in respect of the amount of the increase) as a result of the relevant Bank of Israel Event))). Guarantee Matav-Cable hereby guarantees the performance of all obligations of Matav set forth in, or arising in connection with, this Agreement. Matav-Cable hereby further covenants that it will not, and will procure that none of its Affiliates will, take any action or allow any event to occur (being an event it or its Affiliates is/are reasonably capable of influencing) which would cause a Bank of Israel Event to occur. Obligations in respect of MOC Letters Elbit, Matav and Matbit acknowledge the terms of the MOC Letters and each confirms that, in accordance with Clause 11.1 of the Relationship Agreement, it shall make best efforts to comply with any provisions of the MOC Letters which apply to it and that breach of such provision shall be an Event of Default for the purpose of Clause 9.3(a) of the Relationship Agreement, subject to the provisions of that Clause. Other Provisions Announcements No announcement in connection with the existence or the subject matter of this Agreement shall be made or issued by or on behalf of the Parties without the prior written approval of all the Parties. This shall not affect any announcement required by law or any regulatory body or the rules of any recognised stock exchange but the Party with an obligation to make an announcement shall consult with the other Parties insofar as is reasonably practicable before complying with such an obligation. Costs Each Party shall bear all costs incurred by it in connection with the preparation, negotiation and entry into of this Agreement. Notices Any notice or other communication in connection with this Agreement or with any legal proceedings under this Agreement shall be in writing in English (a "Notice") and shall be sufficiently given or served if delivered or sent. In the case of Matbit to: Matbit Telecommunication Systems Limited c/o Cable Systems Media Limited 42, Pinkas Street North Industrial Area Netanya 42134 Israel Tel: +972 9 8602261 Fax: +972 9 8602288 In the case of Matav to: Matav Investments Limited c/o Cable Systems Media Limited 42, Pinkas Street North Industrial Area Netanya 42134 Israel Tel: +972 9 8602261 Fax: +972 9 8602288 With a copy to Matav-Cable In the case of Elbit, to: Elbit.COM Limited c/o Elbit Limited Hutsot Shefayim PO Box 286 Shefayim 80990, Israel Tel: +972 9 9704100 Fax: +972 9 9704120 In the case of Advent or Hutchison, to: Hutchison Telecommunications (Amsterdam) BV Leidsekade 98, 1017 Amsterdam Netherlands With a copy to: The Deputy Group Managing Director Hutchison Telecommunications Limited 8/F Two Harbourfront 2 TiFung Street Lunghom Kowloon Hong Kong Tel: +852 2128 3222 Fax: +852 2827 1371 In the case of Matav-Cable to: Matav-Cable Systems Media Limited c/o Cable Systems Media Limited 42, Pinkas Street North Industrial Area Netanya 42134 Israel Tel: +972 9 8602261 Fax: +972 9 8602288 In the case of the Company to: The Company Secretary Partner Communications Company Limited 8 Amal Street, Afeq Industrial Park Tel: +972 6 7814888 Fax: +972 6 7814193 Any Notice may be delivered by hand or sent by fax (in the case of a fax, with a follow up copy sent by courier). Without prejudice to the foregoing, any Notice shall conclusively be deemed to have been received on the next working day in the place to which it is sent, if sent by fax, or at the time of delivery, if delivered by hand. 5.4 Third Party Beneficiary Each Party hereby acknowledges and confirms its intention that the Company be a third party beneficiary under this Agreement. Within 24 hours of execution of this Agreement, the Parties shall deliver a copy of this Agreement to the Company which delivery shall constitute notice to the Company of its rights under the Agreement. 5.5 Invalidity If any term in this Agreement shall be held to be illegal, invalid or unenforceable, in whole or in part, under any enactment or rule of law, such term or part shall to that extent be deemed not to form part of this Agreement but the legality, validity or enforceability of the remainder of this Agreement shall not be affected. 5.6 Counterparts This Agreement may be entered into in any number of counterparts, all of which taken together shall constitute one and the same instrument. Any party may enter into this Agreement by executing any such counterpart. 5.7 Governing Law and Submission to Jurisdiction 5.7.1 This Agreement and the documents to be entered into pursuant to it, shall be governed by and construed in accordance with the laws of the State of Israel. 5.7.2 All the Parties irrevocably agree that the courts of Tel Aviv/Jaffo are to have exclusive jurisdiction to settle any dispute which may arise out of or in connection with this Agreement and the documents to be entered into pursuant to it. All the Parties irrevocably submit to the jurisdiction of such courts and waive any objection to proceedings in any such court on the ground of venue or on the ground that proceedings have been brought in an inconvenient forum. In witness whereof this Agreement has been duly executed. SIGNED by on behalf of Matbit Telecommunication } Systems Limited in the presence of: SIGNED by on behalf of Matav Investments Limited } in the presence of: SIGNED by on behalf of Elbit.COM Limited } in the presence of: SIGNED by on behalf of Advent Investments Pte } Limited in the presence of: SIGNED by on behalf of Hutchison Telecommunications (Amsterdam) BV } in the presence of: SIGNED by on behalf of Matav-Cable } Systems Media Limited in the presence of: Tel: +972 6 7814888 Fax: +972 6 7814193 Any Notice may be delivered by hand or sent by fax (in the case of a fax, with a follow up copy sent by courier). Without prejudice to the foregoing, any Notice shall conclusively be deemed to have been received on the next working day in the place to which it is sent, if sent by fax, or at the time of delivery, if delivered by hand. 5.4 Third Party Beneficiary Each Party hereby acknowledges and confirms its intention that the Company be a third party beneficiary under this Agreement. Within 24 hours of execution of this Agreement, the Parties shall deliver a copy of this Agreement to the Company which delivery shall constitute notice to the Company of its rights under the Agreement. 5.5 Invalidity If any term in this Agreement shall be held to be illegal, invalid or unenforceable, in whole or in part, under any enactment or rule of law, such term or part shall to that extent be deemed not to form part of this Agreement but the legality, validity or enforceability of the remainder of this Agreement shall not be affected. 5.6 Counterparts This Agreement may be entered into in any number of counterparts, all of which taken together shall constitute one and the same instrument. Any party may enter into this Agreement by executing any such counterpart. 5.7 Governing Law and Submission to Jurisdiction 5.7.1 This Agreement and the documents to be entered into pursuant to it, shall be governed by and construed in accordance with the laws of the State of Israel. 5.7.2 All the Parties irrevocably agree that the courts of Tel Aviv/Jaffo are to have exclusive jurisdiction to settle any dispute which may arise out of or in connection with this Agreement and the documents to be entered into pursuant to it. All the Parties irrevocably submit to the jurisdiction of such courts and waive any objection to proceedings in any such court on the ground of venue or on the ground that proceedings have been brought in an inconvenient forum. In witness whereof this Agreement has been duly executed. SIGNED by on behalf of Matbit Telecommunication } Systems Limited in the presence of: SIGNED by on behalf of Matav Investments Limited } in the presence of: SIGNED by on behalf of Elbit.COM Limited } in the presence of: SIGNED by on behalf of Advent Investments Pte } Limited in the presence of: SIGNED by on behalf of Hutchison } Telecommunications (Amsterdam) BV in the presence of: SIGNED by on behalf of Matav-Cable } Systems Media Limited in the presence of: SIGNED by on behalf of Elbit.COM Limited } in the presence of: SIGNED by on behalf of Advent Investments Pte } Limited in the presence of: /s/ Steven P. Allen Steven P. Allen SIGNED by on behalf of Hutchison } Telecommunications (Amsterdam) BV in the presence of: SIGNED by on behalf of Matav-Cable } Systems Media Limited in the presence of: EX-4.(A).27 6 u45961exv4wxayw27.txt GENERAL LICENSE FOR PARTNER AMENDMENT # 12 [TRANSLATION FROM HEBREW] EXHIBIT 4.(a).27 [State Seal] GENERAL LICENSE FOR PARTNER COMMUNICATIONS COMPANY LTD. FOR THE PROVISION OF MOBILE RADIO PHONE SERVICES BY THE CELLULAR METHOD (MRP) AMENDMENT NO. 12 By virtue of my power under section 4(e) of the Communications (Telecommunications and Broadcasting) Law, 5742-1982, I hereby amend the general licence for the provision of mobile radio phone services by the cellular method (MRP) granted to Partner Communications Company Ltd. on 7th April 1998 as follows: AMENDMENT OF CLAUSE 75.9 1. In clause 75.9, footnote number 2, "1 July 2002", will be replaced by "1 September 2002". (sgd) 26 June, 2002 Reuven (Ruby) Rivlin Minister of Communications EX-4.(A).28 7 u45961exv4wxayw28.txt GENERAL LICENSE FOR PARTNER AMENDMENT # 13 [TRANSLATION FROM HEBREW] EXHIBIT 4.(a).28 [State Seal] GENERAL LICENSE FOR PARTNER COMMUNICATIONS COMPANY LTD. FOR THE PROVISION OF MOBILE RADIO PHONE SERVICES BY THE CELLULAR METHOD (MRP) AMENDMENT NO. 13 By virtue of my power under section 4(e) of the Communications (Telecommunications and Broadcasting) Law, 5742-1982, and after being presented with the position of Partner Communications Company Ltd ("The Company"), I hereby amend the general licence for the provision of mobile radio phone services by the cellular method (MRP) granted to Partner Communications Company Ltd. on 7th April 1998 as follows: AMENDMENT OF CLAUSE 9 1. After clause 9.4 shall come: "9.5 Notwithstanding the above, following the winning by the Licensee of Tender No. 1/01, the validity of this License shall be for a period of twenty (20) years that will begin on 19 Shvat 5762 (1 February 2002)". (sgd) June, 2002 Reuven (Ruby) Rivlin Minister of Communications EX-4.(A).29 8 u45961exv4wxayw29.txt GENERAL LICENSE FOR PARTNER AMENDMENT # 14 [TRANSLATION FROM HEBREW] EXHIBIT 4.(a).29 [State Emblem] THE STATE OF ISRAEL MINISTRY OF COMMUNICATIONS GENERAL LICENSE FOR PARTNER COMMUNICATIONS LTD. FOR THE PROVISION OF MOBILE RADIO TELEPHONE (MRT) SERVICES USING THE CELLULAR METHOD AMENDMENT NO. 14 By virtue of my powers under the Communications Law (Telecommunications and Broadcasts), 5742-1982, the Wireless Telegraph Ordinance [New Version], 5732-1972 and by all my other powers under any law, and pursuant to Tender No. 1/01 for an Integrated License for the Provision of MRT Services in Israel, and having considered the arguments of PARTNER COMMUNICATIONS COMPANY LTD. (hereinafter: "PARTNER") I hereby amend the General License granted to Partner on 7 April 1998 (hereinafter: the "GENERAL LICENSE"), as follows: AMENDMENT OF CLAUSE 1.1 1. The following shall be inserted after the definition of "TELECOMMUNICATIONS": " "FRANCHISEE" As defined in section 6L(1) of the Law;" 2. The following shall be inserted after the definition of "LICENSEE": " "GENERAL LICENSEE" A person who has received a general license to effect telecommunications activities and to provide telecommunications services; "BROADCAST LICENSEE" - as defined in the Law;" 3. The following shall replace the definition of "THE LAW": " "THE LAW" The Communications Law (Telecommunications and Broadcasts), 5742-1982(1);" 4. The following shall be inserted after the definition of "THE LAW": " "HOLDING" for the purposes of Means of Control, directly or indirectly, whether alone or jointly , including by way of another, and including by way of a trustee or agent, or by a right granted under any agreement, including an option to hold which does not arise from convertible securities, or any other means; "TRANSFER" for the purposes of Means of Control, directly or indirectly, for valuable consideration or otherwise, in perpetuity or for a fixed period, at once or in portions; "JOINTLY WITH OTHERS" cooperation on a permanent basis; and the following shall be deemed to be in cooperation on a permanent basis: in respect of an individual - the individual, a person related to him, and a corporation that either of them controls; and in respect of a corporation - the corporation, the person who controls it and a person controlled by either of them;" 5. The following shall replace the definition of "INTERFACE": " "INTERFACE" the physical connection, including optic or wireless, meeting between various operational telecommunications installations; 6. The following shall replace the definition of "TELECOMMUNICATIONS INSTALLATIONS": " "TELECOMMUNICATIONS INSTALLATION" an installation or device which is primarily designated for telecommunications purposes, including Terminal Equipment;" 7. The following shall be inserted after the definition of "TELECOMMUNICATIONS INSTALLATION": " "TENDER NO. 1/01" the tender published by the Ministry on 4 Nissan 5761 (28 March 2001), including clarifications given by the Ministry during the tender, and following which this License has been amended;" 8. The following shall replace the definition of "INTERNATIONAL TELECOMMUNICATIONS SYSTEM": - ----------------- (1) Sefer Hachukim, 5742, p.218; 5761, p.530. " "INTERNATIONAL TELECOMMUNICATIONS SYSTEM" a telecommunications installations system , connected or intended to be connected to a Public Telecommunications Network through an International Network Termination Point (NTP), which serves or intends to serve for the transmission of telecommunications messages between an international switch located in Israel and a Telecommunications Installation located outside of Israel, including a satellite ground station and other Telecommunications Installations (hereinafter: "COMPONENTS OF THE SYSTEM"), and including transmission facilities between Components of the System;" 9. The following shall be inserted after the definition of "MOBILE RADIO TELEPHONE SYSTEM" (MRT SYSTEM): " "DO (DOMESTIC OPERATOR)" a holder of a general license for the provision of wireline domestic telecommunications services;" 10. The following shall replace the definitions of "THE FIRST OPERATOR", "THE SECOND OPERATOR" and "COMPETING MRT OPERATOR": " "MRT OPERATOR" a holder of a general license for the provision of mobile radio telephone services; "COMPETING MRT OPERATOR" an MRT Operator that is not the Licensee;" 11. The following shall be inserted after the definition of "THE MINISTRY": " "TRANSFER SWITCH" a Telecommunications Installation which contains and operates switching, routing and transmission devices which enable the creation of a connection between various switching centers connected thereto , and the transmission of telecommunications messages between them , including monitoring and routing installations;" 12. The following shall be inserted in place of the definition of "OFFICE BEARER": " "OFFICE BEARER" a person serving as a director, general manager, chief executive officer, deputy general manager, vice general manager, or a person acting as a replacement of one of the above in a company even under a different title as well as any other manager directly subordinate to the general manager of the company;" 13. The following shall replace the definition of "APPENDIXES": " "APPENDIXES" The First Annex and the Appendixes set out in the Second Annex to the License;" 14. The following shall be inserted after the definition of "PTP (POINT TO POINT) LINE": "INTERCONNECTION" a physical or logical connection between the Public Telecommunications Network of one licensee and the Public Telecommunications Network of another licensee, enabling the transfer of telecommunications messages between the subscribers of both licensees or the provision of services by one licensee to the subscribers of another licensee;" 15. The following shall be inserted after the definition of "THE LICENSE": "THE NETWORK" The Licensee's MRT system;" 16. The following shall replace the definition of "PUBLIC TELECOMMUNICATIONS NETWORK": " "PUBLIC TELECOMMUNICATIONS NETWORK" - a system of Telecommunications Installations serving or designated to serve as a provider of Telecommunications Services to the entire public around the country, or at least in an area of service that includes exchanges and transmission switches, transmission equipment and an access network including an MRT system and an International Telecommunications System, and with the exception of a private network, Terminal Equipment and MRT Terminal Equipment;" 17. The following shall be inserted after the definition of "PUBLIC TELECOMMUNICATIONS NETWORK": " "WIRELINE PUBLIC TELECOMMUNICATIONS NETWORK" a public domestic telecommunications network, with the exception of an MRT system and an International Telecommunications System; "ACCESS NETWORK" components of a Public Telecommunications Network used to connect a switching center and a network termination point (NTP) using wireline infrastructure, wireless infrastructure or a combination of the two;" 18. The following shall be inserted after the definition of "The BEZEQ CORPORATION NETWORK": " "USE" access to a Telecommunications Installation of the Licensee, including to its Public Telecommunications Network or Access Network, in whole or in part, and the ability to use such , for the implementation of Telecommunications Activity and to provide Telecommunications Services thereby, including the installation of a Telecommunications Installation of another licensee on the Licensee's telecommunications facility or premises;" 19. The following shall replace the definition of "BASIC TELEPHONE SERVICE": " "BASIC TELEPHONE SERVICE" switched or routed bi-directional transmission , including via modem, speech or speech-like telecommunications messages, such as facsimile signals; "TELEPHONY SERVICE" Basic Telephone Service and Accompanying Services to such service;" 20. The following shall replace the definition of "ROAMING SERVICE": " "ROAMING SERVICE" an MRT Service provided overseas and in the territories under the Civil Administration of the Palestinian Council via the MRT system of a foreign MRT operator (hereinafter: a "FOREIGN OPERATOR"), whereby the Subscriber pays the Licensee for the service; and similarly - an MRT Service provided in Israel via the Licensee's MRT system, whereby the Licensee provides a service to a Foreign Operator for the subscribers of such operator; for this purpose, the "PALESTINIAN COUNCIL" - as defined in the Law for Implementation of the Interim Agreement regarding the West Bank and Gaza Strip Law (Jurisdictional Powers and Other Provisions) ( (Legislative Amendments), 5756-1998 [sic](2);" 21. The following shall replace the definition of "ACCOMPANYING SERVICE": " "ACCOMPANYING SERVICE" a service as set out in the First Annex to the License, provided on the basis of a Basic Telephone Service, which by its nature can only be provided by the provider of the basic service;" 22. The following shall replace the definition of "VALUE ADDED SERVICE": " "VALUE ADDED SERVICE" a service provided based on a Basic Telephone Service, which by its nature can also be granted by - ----------------- (2) Sefer Hachukim 5742 [sic], p. 34. another licensee who is not the supplier of the basic service; for the purposes of the services of the Licensee, such service as set out in the First Annex of the License;" 23. The following shall be inserted after the definition of "VALUE ADDED SERVICE": " "INFRASTRUCTURE SERVICE" an Interconnection or the ability of Use given to another licensee, a Franchisee or to a broadcast licensee;" " "WIRELINE DOMESTIC TELECOMMUNICATIONS SERVICES" Infrastructure Service, transmission, data communications and telephony services;" 24. The following shall replace the definition of "LICENSEE'S SERVICES": " "LICENSEE'S SERVICES" MRT Services, Telecommunications Services and other services that the Licensee is entitled to provide to its subscribers, to other licensees, to broadcast licensees, to Franchisees and to the Security Forces under this License;" 25. The following shall be inserted after the definition of "ENGINEERING PLAN": " "NUMBERING PLAN" as defined in section 5A(b) of the Law;" AMENDMENT OF CLAUSE 7 26. Clauses 7.1(j), 7.1(k) and 7.1(l) are deleted; AMENDMENT OF CLAUSE 8 27. The following shall replace clause 8, entitled "EXCLUSIVITY": "8. NO EXCLUSIVITY 8.1 The Licensee shall not have any form of exclusivity whatsoever in the provision of its services. 8.2 The Minister may at any time grant a license for the provision of MRT Services to additional operators. 8.3 Should the Minister publish a tender for the provision of MRT Services, the Licensee may submit a bid in the tender, however, the Minister may determine , as part of the conditions of such tender, that if the Licensee wins the tender, the receipt of a license shall be conditional upon the Licensee transferring its MRT System to another as the Minister may order, and on such conditions as he may prescribe, and that the Licensee shall cease to provide MRT Services." AMENDMENT OF CLAUSE 9 28. In clause 9.5, the words "in the context of extension of the License" shall be inserted following the words "Notwithstanding the aforesaid" and before the word "following". AMENDMENT OF CLAUSE 12 29. In clause 12.1, the words "clause 9.5" shall replace the words "clause 9.1". REPLACEMENT OF CLAUSE 30 30. The following shall replace clause 30, entitled "CONNECTION TO OTHER TELECOMMUNICATIONS SYSTEMS": "30. INTERCONNECTION OBLIGATION 30.1 The Licensee shall act in order to effect the Interconnection of the Network with any other Public Telecommunications Network operating in the area in which the law, jurisdiction and administration of the State of Israel apply (including settlements, military sites and military installations in Judea, Samaria and the Gaza Strip), and including to any Wireline Public Telecommunications Network, International Telecommunications System and the MRT System of another MRT operator. 30.2 The Interconnection between the Network and the Public Telecommunications Network of another licensee shall be effected in such a way as to enable the following: (a) Transfer of telecommunications messages between Terminal Equipment connected to the Network and Terminal Equipment connected to the other Public Telecommunications Network; (b) Proper and orderly provision of services by the Licensee to the subscribers of another licensee, and provision of services by the other licensee to subscribers of the Licensee. 30.3 Interconnection may be effected directly or indirectly, via the Public Telecommunications Network of another general licensee, provided that it allows for the provisions of clause 30.2. 30.4 In an Interconnection between the Network and a Wireline Public Telecommunications Network, the Licensee shall act to set up Interface points between the two Networks, for every type of service (infrastructure, transmission and data communications, telephony), with at least three main Transfer Switches; unless the Director has determined otherwise based upon a written application from the Licensee; the setting up of the above Interface points shall be effected under an agreement between the Licensee and the Domestic Operator; such an agreement shall contain, inter alia, the technical, operational and commercial particulars of the connection, and the number and location of connections. 30.5 In an Interconnection between the Network and an International Telecommunications System, the Licensee shall act in accordance with the provisions of Appendix J to the License. 30A. RULES REGARDING EFFECTING OF INTERCONNECTION The Licensee shall act to effect the Interconnection subject to all of the following: (a) The Licensee shall ensure that the technical and operational standards of the Network match the requirements for connection to the Public Telecommunications Network of the Domestic Operators, the other MRT operators and the international operators (hereinafter: "AN OTHER OPERATOR"), that the operations of the Network be properly integrated with the operations of the Public Telecommunications Network of the Other Operator and that the Interconnection shall not harm the proper operation of these systems or proper service to their subscribers; (b) The Licensee shall provide the Interconnection service on equal terms to every Other Operator and shall avoid any discrimination in effecting such Interconnection, including in respect of: (1) The supply of infrastructure installations and network connection services; (2) the availability of connection facilities; (3) methods, quality and durability of the connection; (4) switching alterations and adjustments to installations , protocols and Network Interface points; (5) payments for Iinterconnections; (6) Billing and collection arrangements and transfer of information to Subscribers; (7) commercial terms for effecting Interconnection; (8) provision of information regarding the Network and changes therein which relate to Interconnection; (c) The Licensee shall make available to the Other Operator any essential information that the Other Operator requires in order to provide its services via the Licensee's facilities; such information shall be provided subject to any law regarding protection of privacy or commercial confidentiality; where the parties do not reach an agreement as to the nature and scope of the essential information, the Minister shall rule on the matter; (d) The Licensee shall provide the Other Operator with information on planned changes to its Network, which might affect Interconnection with the Public Telecommunications Network of the Other Operator, or Interconnection between the Public Telecommunications Networks of the Other Operators; the Licensee shall supply the said information in such a manner as to allow the Other Operator to be reasonably prepared for the implementation of the said changes; (e) For the purposes of sub-clauses (c) and (d), the Licensee may make the provision of information to the Other Operator conditional upon execution of a reasonable confidentiality agreement, intended to protect the rights of the Licensee under any law, including commercial secrets, intellectual property rights and the like, relevant to the information regarding the change in the Network that is to be delivered to the Other Operator; (f) The conditions for Interconnection between the Network and the Public Telecommunications Network of an Other Operator shall be arranged by an agreement between the Licensee and the Other Operator; where the parties fail to reach an agreement, the Minister shall rule on the matter; (g) (1) The Licensee shall allow its Subscribers to receive all of the services offered to them by the Other Operator, and may allow the subscribers of the Other Operator to receive all of the services from the Licensee , provided that receipt of such services is possible under any law. (2) The Director may order the Licensee to allow subscribers of another licensee to receive the services given by the Licensee , provided that the receipt of such services as aforesaid is technically and legally possible. (3) Notwithstanding the provisions of paragraph (1), the Director may, upon a written application from the Licensee, exempt the Licensee from the obligation of providing its Subscribers with the possibility of receiving services from the Other Operator for technical, economic or other justifiable reasons. (h) The Licensee shall provide the Director with a signed copy of any agreement between the Licensee and the Other Operator regarding Interconnection; (i) The Licensee shall provide the Director, upon demand, with any information provided to the Other Operator pursuant to sub-clauses (c) and (d), and a copy of any confidentiality agreement pursuant sub-clause (e); (j) The Licensee shall act in accordance with any other instructions that the Minister may prescribe. 30B. PAYMENT FOR TRAFFIC COMPLETION AND INTERCONNECTION Where the Minister has not prescribed payment for Interconnection or payment deriving from Interconnection, the Licensee may charge a reasonable and non-discriminatory sum for these. 30C. PROHIBITION AGAINST DELAYING INTERCONNECTION The Minister shall give the Licensee a reasonable opportunity to make claims regarding the Minister's intention to instruct the Licensee regarding the manner of effecting Interconnection and the scope thereof, activities, services and Accompanying Services for effecting Interconnection, and payment for Interconnection; where the Minister has instructed the Licensee in respect of such matters, the Licensee shall not delay Interconnection to the Network in any manner, and shall fulfill its obligations in accordance with the instructions of the Minister, in good faith and properly, on the date prescribed for such and in full cooperation. 30D. PROVISION OF POSSIBILITY OF USE 30D.1 The Minister may instruct the Licensee regarding the provision of the possibility of use of its Telecommunications Installation in accordance with his powers under section 5 of the Law. 30D.2 The Licensee shall allow another licensee, in accordance with the instructions of the Minister, to provide Value Added Services via the Network; the Licensee shall ensure reasonable and equal conditions for any other licensee, in respect of the supply of Value Added Services by the other licensee to the Licensee's subscribers, including in respect of the matters set out in clause 30A, mutatis mutandis. 30D.3 For the purpose of provision of the possibility of Use, the provisions of clauses 30A through 30C shall apply, mutatis mutandis. 30E. INFRASTRUCTURE SERVICES TO AN AFFILIATED COMPANY 30E.1 The Licensee shall avoid giving preference to a licensee that is an Affiliated Company over any other licensee, in the provision of Infrastructure Services, in terms of either payment or service, in terms of the conditions or availability of the service, or in any other manner. 30E.2 (a) Upon the written request of the Licensee, the Director may permit limitations for the Licensee on the provisions of clause 30E.1 in respect of another licensee or broadcast licensee which is an Affiliated Company, provided that the following conditions apply: (1) such other licensee or Franchisee is not a Substantial Operator; (2) the Director is of the opinion that the giving of such approval shall not substantially harm competition in the field of telecommunications (b) Limitations as aforesaid in sub-clause (a) might permit the Licensee to provide the Affiliated Company with Use of its Telecommunications Installations under preferred conditions and may be limited by time or any other condition. (c) In considering the permit under this clause, the Director shall take into account the existence of a valid agreement, executed prior to Amendment No. 14 of this License, between the Licensee and an Affiliated Company, as aforesaid, inter alia regarding limitation of the permit by time or other conditions. 30E.3 In this clause, "AFFILIATED COMPANY", "SUBSIDIARY" and "SUBSTANTIAL OPERATOR" - as defined in the Telecommunications Regulations, (Proceedings and Conditions for Receipt of a General License for the Provision of Domestic Wireline Telecommunications Services) 5760-2000. 30F. NUMBERING PLAN 30F.1 The Licensee shall act in accordance with the Numbering Plan, and in accordance with the instructions of the Director regarding the activation and implementation of the Numbering Plan. 30F.2 Should the Director give instructions regarding number portability such that every subscriber of another MRT licensee shall be able to become a subscriber of the Licensee or receive services from the Licensee without altering his number, and vice versa, the Licensee shall integrate facilities in its Public Telecommunications Network that will allow for the implementation of such feature, on the date and in the manner to be prescribed by the Director." AMENDMENT OF CLAUSE 45 31. The following shall be added after clause 45.1(B): "(c) Frequency bands allocated exclusively for the Licensee's use as specified below : (1) From 1 February 2002 to 1 January 2004, the following bands shall be allocated: 1732 to 1738.4 MHz, and the matching domain 1827 to 1833.4MHz; 1937 to 1942 MHz, and the matching domain 2127 to 2132 MHz; (2) As of 1 January 2004, the following bands shall be allocated: 1730 to 1740 MHz and the matching domain 1825 to 1835 MHz; 1940 to 1950 MHz and the matching domain 2130 to 2140 MHz; (3) As of 1 January 2005, the frequency domain 1910 to 1915 MHz shall be allocated." (4) Notwithstanding the aforesaid, if the Licensee requests to postpone the date of the beginning of use of the bands set out in sub-clauses (1) to (3) or part of them, to a later date, the Director may suspend the band allocation until a date to be decided upon. AMENDMENT OF CLAUSE 60 32. The following shall replace clause 60.2: "60.2 Without derogating from the provisions of clause 75.3, the Licensee shall provide MRT Services and the Services Package, as defined in clause 73A, to every person so requesting, on equal and non-discriminatory terms, and at a non-discriminatory tariff." 33. The following shall be inserted in place of clause 60.3 which has been repealed: "60.3 Should the Director find that the Services Package might harm competition or consumers, he shall give notice of such to the Licensee noting the date on which the Licensee is to cease offering the Services Package to its subscribers. 60.4 If the Licensee provides any MRT Service to any person or body in return for payment, the service shall be available to every Subscriber in the entire coverage area of the system, while meeting the minimum requirements regarding quality of service, without discrimination, within 24 months of the commencement of provision of the service in return for payment. 60.5 Upon written application from the Licensee, the Director may permit the Licensee limitations on the provisions of clause 60.4, after being convinced that there is a real difficulty in supplying the service to all who request it, and that certain characteristics of the service give special and extraordinary grounds and justification for such." AMENDMENT OF CLAUSE 66 34. The following shall be inserted in place of clause 66, entitled "PROTECTION OF SUBSCRIBER PRIVACY AND COOPERATION WITH THE SECURITY FORCES" and clause 66A, entitled "SPECIAL SERVICES TO THE SECURITY FORCES": "66. PROTECTION OF SUBSCRIBER PRIVACY 66.1 Without derogating from the provisions of the Law, the Secret Monitoring Law, 5739-1979(3), the Protection of Privacy Law, 5741-1981(4), or any other law regarding protection of the privacy of a person, the Licensee shall not be entitled to listen to the telephone or any other communication of a Subscriber without the Subscriber's written consent, other than for the purpose of quality control of the service or the prevention of fraud. 66.2 Subject to the provisions of clause 66A, the Licensee, its employees, agents and any person acting on its behalf shall not be entitled to disclose lists or documents containing the name and address of a Subscriber or any other information regarding a Subscriber, including account details, call traffic, times and destinations to any person other than the Subscriber or a person authorized by the Subscriber for such. 66.3 Notwithstanding the provisions of clause 66.2, the Licensee may do the following: (a) provide details of the Subscriber to another licensee for the purpose of collection of monies owing from the Subscriber for services provided to it via the Network, provided that the details so provided are essential for the purpose of collecting money and accounting and that the other licensee has undertaken to maintain the privacy of the Subscribers; - ----------------- (3) Sefer Hachukim, 5739, p. 118; 5755, p. 180 (4) Sefer Hachukim, 5741, p. 128; 5756, p. 290 (b) provide the details of a Subscriber, to the extent that such details are in its possession, to another person under any power at law. 66A. SERVICES TO THE SECURITY FORCES 66A.1 The Licensee shall supply special services to the Security Forces, as set out in the Security Appendix (Confidential) attached to this License as Appendix K. 66A.2 The Licensee shall allow the Security Forces, as identified by the Director in writing, to exercise, subject to any law, their powers in respect of any telecommunications operation under the License, and shall be responsible for ensuring the existence, proper operation and technical adaptability of the equipment and infrastructure required to enable such performance, all in coordination with the Security Forces and as set out in Appendix K; the Security Forces shall bear payment under the provisions of section 13 of the Law. 66A.3 The Licensee shall be exempt from the obligation to indemnify the State under the provisions of clause 91.2 of the License and/or under any law, for the provision of the special services to the Security Forces. 66B. SECURITY PROVISIONS 66B.1 The Licensee shall appoint a security officer in accordance with the provisions of the Security Arrangements in Public Bodies Law, 5758-1998(5), and shall strictly adhere to the security provisions set out in Annex L to the License. 66B.2 The Licensee shall set out appropriate provisions in its foundation documents and regulations and shall act so that no person shall be appointed to act in a position or role set out in Annex L to this License unless he meets the following conditions: (a) he is an Israeli citizen, as defined in the Citizenship Law, 5712-1952(6), and a resident of Israel; (b) he has been given a security clearance from the General Security Services, under which there is nothing to prevent his so acting. 66B.3 The Licensee shall act to keep the activities of the Security Services confidential and shall act in accordance with the security instructions - ----------------- (5) Sefer Hachukim, 5758, p. 348; (6) Sefer Hachukim, 5712, p. 146; 5756, p. 362 of such Security Services, including with regard to the appropriate security classification for Office Bearers and persons with roles at the Licensee and the classification of information regarding the activities relating to the Security Services. 66B.4 The Licensee shall take such steps as are required in order to protect the system, components of the system, and the databases serving for the provision of services, operation and control of the system against the activities of unauthorized persons, under the provisions set out in Annex L of this License." AMENDMENT OF CLAUSE 67 35. The words "INFORMATION SERVICES AND ROAMING SERVICES" shall be deleted from the heading of clause 67. 36. The words "and the call traffic, services and tariff plans in respect of which the charge was made" shall be deleted from clause 67.1. 37. Clauses 67.4 through 67.7 shall be deleted. ADDITION OF CLAUSES 67A, 67B AND 67C 38. The following shall be inserted after clause 67, which bears the heading "BILLS TO SUBSCRIBERS": "67A. INFORMATION SERVICE 67A.1 The Licensee shall provide the public free of charge , by itself or via another person, with an information service for finding telephone numbers of its Subscribers, via one of the following: (a) A telephone information service; (b) A telephone directory which shall be updated once a year. 67A.2 Clause 67A.1 shall come into force on 28 Adar I, 5763 (2 March 2003). 67B. ACTIVATION OF SERVICE 67B.1 The Licensee shall supply a Basic Telephone Service, Accompanying Services, and Value Added Services on the dates and at the quality of service as set out in the First Annex. 67B.2 The Licensee shall notify the Director, no later than thirty (30) business days prior to the first activation of a service set out in the First Annex of it's intention to commence provision of the service. 67B.3 Should the Licensee wish to provide a service not included in the First Annex (hereinafter in this clause - a New Service), the Licensee shall notify the Director of it's intention thirty (30) business days before the date on which it intends to commence providing the New Service. The Licensee shall attach to the notice a document containing a summary of the description of the New Service, the manner in which it it to be provided, the tariff the Licensee intends to charge for the New Service and the indices for grade of service that it intends to meet. 67B.4 The Director may notify the Licensee, within thirty (30) business days from the date of receipt of the notice set out in clause 67B.3, that provision of the New Service is subject to the fulfillment of conditions that the Licensee must fulfill either before or after commencement of provision of the New Service, and he may instruct the Licensee not to provide the New Service, giving reasons for such notification. Should the Director not notify the Licensee as aforesaid, the Licensee may provide the New Service thirty (30) days after the date of giving of the notice to the Director. 67.5B Notwithstanding the provisions of clauses 67.2B, 67.3B and 67.4B, upon written application from the Licensee, the Director may permit the Licensee to commence provision of a service even earlier than thirty (30) business days after the date of giving of notice by the Licensee. 67.6B Any New Service that the Licensee might commence providing as set out in clause 67.4B shall be deemed to be part of the First Annex ; the First Annex shall be updated from time to time by the Director. 67C. SERVICE FILE Notwithstanding the provisions of clause 67B, the Director may require the Licensee to prepare a service file for all of its services in the format and on the date set out by the Director in his demand; the service file shall include, inter alia, documents that describe the service and the manner of provision of the service , and shall set out the tariffs and standards of quality of service in respect of it; every such service file shall be submitted to the Director for his approval, and after such approval shall be published in detail and in such a way that the Director shall determine; the Director may order at any time that approval of a service file is a condition of the provision of any service; for the purposes of tariffs not prescribed in regulations, the Director's approval of the service file shall not be deemed to be approval of the reasonableness of the tariff." AMENDMENT OF CLAUSE 75 39. In clause 75.3, the words " "Class of Subscribers" - a group of subscribers the characteristics of which give reasonable grounds to justify its being distinguished from another group" shall replace the words " "Class of Subscribers" - a group of subscribers meeting characteristics enabling them to be distinguished from another group of subscribers". REPLACEMENT OF CHAPTER 7, PART A 40. The following shall replace Chapter 7, Part A: "PART A - ROYALTIES AND PAYMENTS 84. ROYALTIES 84.1 The Licensee shall pay royalties as set out in the Telecommunications Regulations (Royalties), 5761-2001(7) or any other regulations that may replace those (hereinafter: the "ROYALTY REGULATIONS"). 84.2 The Licensee shall attach two copies of an unaudited quarterly income statement, signed by the Licensee and approved by an accountant, to any payment of royalties under this clause; such statement shall include details of the calculation of dutiable income in accordance with the Royalty Regulations, and any other detail upon which the Licensee based the sum of the royalties. 84.3 Upon submission of an annual audited statement of income, signed by the Licensee's accountant (hereinafter: the "AUDITED STATEMENT"), the Licensee shall submit a statement set out by quarters, detailing the correspondence between the income in respect of which it paid royalties and the income appearing in the Audited Statement (hereinafter: the "ADJUSTED STATEMENT"). 84.4 Where it becomes apparent that the sum of royalties that the Licensee was required to pay under the Adjusted Statement is higher than the sum paid by it for the quarter to which the Audited Statement relates, the Licensee shall pay royalty differentials, together with interest and linkage differentials as set out in the Royalty Regulations. 84.5 Where it becomes apparent that the sum of royalties that the Licensee is required to pay under the Adjusted Statement is lower than the sum paid by it for the quarter to which the Audited Statement relates, the Licensee shall be credited with the sum of the surplus payment; surplus payments to which the Licensee is entitled shall be set off, upon written approval by the Director, against the next royalties payment, and interest and linkage differentials shall be calculated in accordance with the last index published prior to the date of the setoff, - ----------------- (7) Kovetz Takanot, 5761, p. 985 as aforesaid; for these purposes, interest and linkage differentials shall be as set out in the Royalty Regulations. 85 DELAY IN PAYMENT OF ROYALTIES The Licensee shall pay linkage differentials, arrearage interest and collection costs as set out in the Royalty Regulations, on royalties not paid in the time prescribed for their payment under said regulations. 86. MANNER OF PAYMENT OF ROYALTIES Royalties and linkage differentials, arrearage interest, and collection fees therefor, shall be paid to the accountant of the Ministry of Communications by way of bank transfer into the account of the Ministry of Communications. 87. OTHER OBLIGATORY PAYMENTS The royalties under this section shall be in addition to any fee, tax or other obligatory payment that the Licensee is required to pay under the provisions of any law." AMENDMENT OF CLAUSE 94 41. In clause 94.1, the words "for twenty (20)" shall replace the words "for ten (10)". AMENDMENT OF CLAUSE 95 42. The following shall be inserted in place of clause 95.1(c): "(c) The Licensee charges its Subscribers with payments in contravention of the provisions of clause 75;" 43. The following shall be inserted after clause 95.1(l): "(m) The Licensee has not paid the license fee on the date required, in accordance with the provisions of clause 40.1 of the terms and conditions of Tender No. 1/01. (n) A monetary sanction under the Law has been imposed upon the Licensee and the sum required has not been paid on time, provided that a sum higher than the sum of the sanction shall not be forfeited." AMENDMENT OF CLAUSE 108 44. The following shall replace clause 108.2: "108.2 Where the License and the documents related to it are on public display, the public shall not have the opportunity to inspect the following documents, contained in the Second Annex of the License: (a) Appendix A - Details of the Licensee; (b) Appendix B - the Engineering Plan; (c) Appendix C - Maintenance Procedures; (d) Appendix G - Insurance Contract; (e) Appendix H - Bank Guarantee; (f) Appendix I - Letters of Undertaking; (g) Appendix K - Special Services for Security Forces; (h) Appendix L - Security Instructions." 45. The following shall be inserted after clause 108.3: "108.4 The Licensee shall allow the public to inspect the documents of the License via the internet; the Licensee may also do so through the Ministry of Communications' internet site as long as the Ministry of Communications publishes the License on its internet site. 108.5 The Ministry may publish the License, other than the Appendixes set out in clause 108.2, on such date and in such manner as it sees fit." FIRST ANNEX 46. The attached "FIRST ANNEX" shall replace the existing "FIRST ANNEX". AMENDMENT OF APPENDIX B IN THE SECOND ANNEX 47. The attached "ADDITION TO APPENDIX B - ENGINEERING PLAN" shall be added to Appendix B in the Second Annex. REPLACEMENT OF APPENDIX E IN THE SECOND ANNEX 48. The attached "APPENDIX E - MINIMUM REQUIREMENTS AND LEVEL OF SERVICE TO SUBSCRIBERS" shall replace Appendix E in the Second Annex. REPLACEMENT OF APPENDIX H IN THE SECOND ANNEX 49. The attached "Appendix H - BANK GUARANTEE" shall replace Appendix H in the Second Annex . REPLACEMENT OF APPENDIX I IN THE SECOND ANNEX 50. The attached "Appendix I - LETTERS OF UNDERTAKING" shall replace Appendix I in the Second ANNEX. Jerusalem, 5 Tishri 5763 (sgd.) (10 September, 2002) -------------------------- Reuven (Ruby) Rivlin Minister of Communications FIRST ANNEX LIST OF SERVICES AND GAUGES OF QUALITY OF SERVICE 1. GENERAL 1.1 This Annex contains the list of services that the Licensee is to supply, under the conditions set out in Part B of Chapter E - "LEVEL OF SERVICE TO SUBSCRIBERS". 1.2 The services shall be supplied using the technology operated by the Licensee, unless otherwise noted in the License or in an Annex to the License. 1.3 Wherever the words "SUPPORT IN VARIOUS LANGUAGES" appear, the intention is at least to support in the following four languages: Hebrew, Arabic, English and Russian. 2. LIST OF SERVICES TO BE ACTIVATED - USING GSM 900, GSM 1800 TECHNOLOGY 2.1 BASIC TELEPHONE SERVICES

GAUGES OF SUPPLY QUALITY OF NO. SERVICE NAME SERVICE DESCRIPTION DATE SERVICE* NOTES - ------------------------------------------------------------------------------------------------------------------------------ 1 ORDINARY Telephone conversations to and from Exists High sound TELEPHONE Subscribers of the Licensee to any quality and CONVERSATION telephone or other Terminal Equipment high level of (SPEECH) appropriate to the Licensee's Network and privacy to any other Public Telecommunications Network in Israel or around the world. - ------------------------------------------------------------------------------------------------------------------------------ 2 ACCESS TO Free dialing to such emergency services as Exists EMERGENCY shall be prescribed by the Director (e.g.: CALLS police, ambulance, fire department, and others). Caller to be directed to an emergency call center by way of definition of the service provider in the place where the Subscriber is. - ------------------------------------------------------------------------------------------------------------------------------

* The Licensee shall act in accordance with the definitions of the World GSM Organization, and in accordance with the standards of ETSI (the European Telecommunications Standards Institute), to the extent relevant for each service. 2.2 ACCOMPANYING SERVICES

- ------------------------------------------------------------------------------------------------------------------------------ GAUGES OF SUPPLY QUALITY OF NO. SERVICE NAME SERVICE DESCRIPTION DATE SERVICE* NOTES - ------------------------------------------------------------------------------------------------------------------------------ 1 VOICE Leaving and retrieving voice messages Exists Leaving and MAIL stored in a personal voice mailbox when retrieving the customer is not available or does not messages from wish to answer. Sending an indicator voice mail box when a message is waiting in the even when mailbox. Licensee to support various dialing from languages. other networks. - ------------------------------------------------------------------------------------------------------------------------------ 2 "FOLLOW Direction of incoming calls to another Exists ME" telephone number at the Subscriber's election (permanently, only when the Subscriber's number is engaged, only when the Subscriber does not answer or when the Subscriber is not available). The service also operates when the handset is not turned on or is outside a coverage area. - ------------------------------------------------------------------------------------------------------------------------------ 3 "HOLD" Directing a caller to a "hold" status, Exists when the Subscriber answers another call or calls another number. Skipping between the two calls. - ------------------------------------------------------------------------------------------------------------------------------ 4 CALL Indicator to Subscriber of an incoming Exists WAITING call using special sounds. The Subscriber can choose to answer, not answer, or ignore. - ------------------------------------------------------------------------------------------------------------------------------ 5 CALLER Display of the number of the caller on Exists Dependent upon ID the display screen of the handset. the number not being blocked by the caller - ------------------------------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------------------------------ 6 SHORT Sending and receiving of text, Exists Dependent upon MESSAGE graphic, voice and picture terminal handsets SERVICE (SMS) messages from and to Subscribers' handsets in the Licensee's Network or Subscribers' handsets on other networks in Israel and overseas who have reached an agreement with the Licensee. Sending such messages from a personal computer. Sending incoming messages to a facsimile machine. The Licensee shall support various languages. - ------------------------------------------------------------------------------------------------------------------------------ 7 24 HOUR Receipt of assistance from Exists See SUBSCRIBER subscriber service 24 hours a day, 7 Appendix E SERVICE days a week, in four languages (Hebrew, Arabic, English and Russian). - ------------------------------------------------------------------------------------------------------------------------------ 8 INFORMATION Finding out telephone numbers of Exists See Pursuant to SERVICE Subscribers on the Licensee's Appendix E provisions of the Network. License ----------------------------------------------------- Possibility of calling and receiving Future response by Short Message System (SMS). - ------------------------------------------------------------------------------------------------------------------------------ 9 CALLS TO Dialing to emergency services Exists 112 may be EMERGENCY (police, ambulance, fire dialed without a SERVICES department, and other emergency SIM card, under services, as prescribed by the ETSI. This is Director) by way of truncated directed to the dialing codes. These services are police. also available without an SIM card in the handset. - ------------------------------------------------------------------------------------------------------------------------------ 10 BILLING Sending invoice containing a Exists 100% SUMMARY summary of all billing (e.g., matching subscription fees, airtime with billing, taxes, other expenses). company Information on billing via records interactive answering service and SMS. - ------------------------------------------------------------------------------------------------------------------------------ 11 DETAILED Sending invoice containing details Exists 100% BILLING of all calls made for the entire matching billing period, upon request. with company Receipt of accounts, or specific records parts of accounts. - ------------------------------------------------------------------------------------------------------------------------------ - ----------------------------------------------------------------------------------------------------------------------------- 12 CONTROLLED The Subscriber determines the maximum Exists 100% matching BILLING level of use for each billing month in with company order to assist with budgeting. Receipt records of Short Message System (SMS) when billing reaches pre-determined level of use. Increase or decrease of level in real time. - ----------------------------------------------------------------------------------------------------------------------------- 13 PERSONAL Subscriber may use one number for all Exists NUMBER types of calls (speech, fax and data). ----------------------------------------------------- May be integrated with call screening Future using the "follow me" service, based on the hour of the day, the identity of the caller or the kind of call. - ------------------------------------------------------------------------------------------------------------------------------ 14 TRANSFER OF CALLS Transfer of calls to third party Exists - ------------------------------------------------------------------------------------------------------------------------------ 15 CALL SCREENING Receipt, transfer or rejection of calls Future based on identity of caller, or time. - ------------------------------------------------------------------------------------------------------------------------------ 16 LIST OF PREFERRED Allows Subscribers to receive calls from Future CALLERS a list of preferred callers. Other calls are sent automatically to the voice mail box or to another number. - ------------------------------------------------------------------------------------------------------------------------------ 17 SELECTION OF Subscriber can choose his telephone Exists NUMBER number in accordance with the Numbering Plan in Israel, as part of the Licensee's allotments - ------------------------------------------------------------------------------------------------------------------------------ 18 ABILITY TO CHANGE Change of Subscriber's telephone number, Exists NUMBER at Subscriber's request - ------------------------------------------------------------------------------------------------------------------------------ 19 ACCESS SERVICES Access from MRT Terminal Equipment to Exists Coordination Subject to TO INFORMATION specific information per geographic of information provisions of IN ACCORDANCE location of Subscriber within cell - protection of WITH LOCATION accuracy of Privacy Law, several 5741-1981 kilometers - ------------------------------------------------------------------------------------------------------------------------------ 20 CALL TO Request for any number Exists Via Bezeq INFORMATION listed in Israel: INCLUDING CALL COMPLETION --------------------------------------------------------------------------------------------- Connection to number thus located Future effected by exchange operator, caller doesn't need to write down number. --------------------------------------------------------------------------------------------- Confirmation of number by SMS for storage Future on SIM card - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ 21 LOADING "TELEPHONE Loading of telephone numbers by Licensee Future BOOK" directly into "telephone book" on Subscriber's SIM card, per list that Subscriber enters into system via exchange operator, answering service or internet - ------------------------------------------------------------------------------------------------------------------------------ 22 VOICE OPERATED Dialing numbers via Subscriber's voice Exists Dependent upon DIALING command (instead of manual dialing) terminal handset - ------------------------------------------------------------------------------------------------------------------------------ 23 AUTOMATIC REDIAL The system 'locks' on to an engaged line Exists Dependent upon (COMPLETION OF CALLS and the Network rings the Subscriber back terminal handset TO ENGAGED automatically when the engaged line SUBSCRIBERS) becomes free - ------------------------------------------------------------------------------------------------------------------------------ 24 RENEWAL OF LINE THAT Automatic renewal of calls that drop out Future DROPS OUT - ------------------------------------------------------------------------------------------------------------------------------ 25 TWO SIM CARDS FOR ONE Operating two pieces of MRT Terminal Exists Orange 2 NUMBER Equipment using identical number and identical account (eg. one handset in the car and one mobile) - ------------------------------------------------------------------------------------------------------------------------------ 26 TWO NUMBERS FOR ONE Operating two separate telephone numbers Future SIM CARD from the same MRT Terminal Equipment and SIM card (eg. a private line and a business line) The lines may be billed separately or together - ------------------------------------------------------------------------------------------------------------------------------ 27 BLOCKAGE OF Blocking of a Subscriber's ability to Exists INTERNATIONAL ACCESS make outgoing international calls in Israel; and incoming or outgoing calls when roaming outside of Israel - ------------------------------------------------------------------------------------------------------------------------------ 28 COLLECT CALLS Collect calling for calls to Future pre-determined numbers. The recipient of the call pays for the call - ------------------------------------------------------------------------------------------------------------------------------ 29 VIRTUAL PRIVATE Dialing MRT Terminal Equipment of Exists For corporations NETWORK (VPN) Subscribers within a corporation by with 50 or more calling extension numbers on users corporation's private exchange (PBX) or truncated number. - ------------------------------------------------------------------------------------------------------------------------------ 30 WIRELESS CENTREX Receipt of some of the benefits of VPN Future SERVICES for groups of subscribers who are not connected to a PBX. Dialing members of the group via truncated code instead of whole numbers - ------------------------------------------------------------------------------------------------------------------------------ 31 CLOSED USER GROUP Transfer of calls between subscribers in Future pre-determined groups - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ 32 AUTOMATIC Transfer of incoming calls automatically Future SUBSCRIBER to a list of telephone numbers in order LOCATION (HUNT to locate Subscriber GROUP) - ------------------------------------------------------------------------------------------------------------------------------ 33 CONFERENCE CALL Addition of third party to a call without Exists Dependent disconnecting the second party and upon terminal without needing to set up the service in handset advance through an exchange operator - ------------------------------------------------------------------------------------------------------------------------------ 34 DATA Connection to data communications Exists COMMUNICATIONS service via subscriber's PC or SERVICE telephone handset (eg. calling the computer or email). - ------------------------------------------------------------------------------------------------------------------------------ 35 VOICE INTEGRATED Speech followed by data service (Bearer Future DATA Service) without limitation - allows COMMUNICATIONS transfer of data between two mobile subscribers. May transfer data during the call or after the call has taken place - ------------------------------------------------------------------------------------------------------------------------------ 36 HIGH SPEED DATA The Licensee to implement accepted Exists TRANSMISSION standards from time to time at its discretion, such as GPRS (General Parcel Relay Service for wireless networks) or HSCSD (High Speed Circuit Switch Data) so as to offer Subscribers existing or new applications with high speed data communications - ------------------------------------------------------------------------------------------------------------------------------ 37 OVER THE AIR On line activation and alteration of SIM Exists ACTIVATION AND card memory so as to save a Subscriber's ALTERATIONS having to come to a service center - ------------------------------------------------------------------------------------------------------------------------------ 38 TEMPORARY Disconnection of service for a Subscriber Exists DISCONNECTION for a pre-determined period of time without losing the specific telephone number (eg. during holidays or temporary stay overseas) - ------------------------------------------------------------------------------------------------------------------------------ 39 CONSOLIDATED Receipt of one account combining bills Exists Full BILLING for all handsets for Subscribers with a coordination number of telephones or services with system records for accounts sent out - ------------------------------------------------------------------------------------------------------------------------------ 40 CLARIFICATION OF Clarification of up-to-date bill status Exists BILL STATUS via voice response, SMS or internet - ------------------------------------------------------------------------------------------------------------------------------ 41 ACCOUNT BILLING Typing in of identification code before Future Full every call (so as to distinguish between coordination business calls and private calls made on with system the same line). Receipt of monthly records for invoice with details of use per billing 100% of code. accounts sent - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ 42 ELECTRONIC BILLING Control and analysis of information on Exists Full / REPORTING billing and treatment of bills by coordination Subscriber, using special software with system records for 100% of accounts sent - ------------------------------------------------------------------------------------------------------------------------------ 43 ADDITIONAL COPY OF Receipt of more than one copy of every Exists ACCOUNT account, upon request - ------------------------------------------------------------------------------------------------------------------------------ 44 BILLING ON DEMAND Supply of report of all bills and credits Exists 100% as at the period requested by the coordination Subscriber with system records - ------------------------------------------------------------------------------------------------------------------------------ 2.3 VALUE ADDED SERVICES

- ------------------------------------------------------------------------------------------------------------------------------ SUPPLY QUALITY NO. SERVICE NAME SERVICE DESCRIPTION DATE GAUGES NOTES - ------------------------------------------------------------------------------------------------------------------------------ 1 ACCESS TO INTERNET Access to internet or to the Exists Access to / INTRANET private intranet network of a internet via company through an account the special access to which is via the internet Subscriber's Terminal Equipment, services computer, PDA or similar device licensee - ------------------------------------------------------------------------------------------------------------------------------ 2 IDENTIFICATION AND Identification and verification of Future VERIFICATION user upon access to intranet using Terminal Equipment - ------------------------------------------------------------------------------------------------------------------------------ 3 EMAIL Sending and receiving messages Future Via licensee using email address. Indication for email upon receipt of message into services mailbox of Subscriber. Licensee to support in various languages - ------------------------------------------------------------------------------------------------------------------------------ 4 VIDEO Sending photos, graphics or live Future COMMUNICATIONS video via the Network (eg. Subscribers who are far from one another can exchange photos and work interactively) - ------------------------------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------------------------------ 5 INTERNATIONAL Provision of MRT Services roaming Exists Under GSM Pursuant to ROAMING ON GSM agreements between the Licensee MoU agreements NETWORKS and other operators in other between Licensee countries with GSM systems. and foreign Provision of MRT Services when operators visiting Israel (for "roamers" from overseas). Provision of MRT cellular services when overseas by way of roaming agreements between the Licensee and other operators in other countries of the world with GSM systems. - ------------------------------------------------------------------------------------------------------------------------------ 5A INTERNATIONAL Provision of cellular services Future Pursuant to ROAMING TO during overseas stay via roaming agreements PRE-PAID agreements between the Licensee between Licensee SUBSCRIBERS and other operators in other and foreign countries with GSM systems operators - ------------------------------------------------------------------------------------------------------------------------------ 5B INTERNATIONAL Provision of cellular services Exists Pursuant to ROAMING ON OTHER during overseas stay via roaming special NETWORKS agreements between the Licensee agreements and other operators in other between Licensee countries where other systems and foreign are operated (IDEN, CDMA, etc.) operators - ------------------------------------------------------------------------------------------------------------------------------ 6 ADVANCED VOICE Sending and receiving speech Exists MAIL BOX messages with more advanced features and abilities: Fax box sending messages to more than one person at once Sending messages from one voice box to another, including transfer of messages received to another person, or direct response to sender. Sending messages using truncated dialing (can combine this feature with truncated dialing in a VPN). "Notice board" Sending and receiving longer notices than allowed during standard timeframes - ------------------------------------------------------------------------------------------------------------------------------ 7 PERSONAL Connection of callers to an Future SECRETARY SERVICE exchange operator to deal with more complex messages than voice mail service. Notice passed to Subscriber via speech or Short Message (SMS), per customer instructions (can work as a beeper service) - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ 8 GSM / SATELLITE Licensee to support handsets Future Conditional Conditional upon ROAMING with double GSM / satellite upon roaming roaming operating operating statuses agreement agreement with satellite operator and upon satellite network operator's having a license from the Director to provide its services in Israel - ------------------------------------------------------------------------------------------------------------------------------ 9 1800, 1900 GSM Licensee to sign roaming Exists Conditional Pursuant to ROAMING agreements with GSM 1800 and GSM upon roaming agreements between 1900 network operators in order to agreements Partner and foreign increase the number of countries to which its Subscribers can roam. Subscribers of the Licensee may use handsets with double operation statuses or rent appropriate handsets using their own SIM card. - ------------------------------------------------------------------------------------------------------------------------------ 10 INFORMATION AND Access to wide variety of Exists Via SMS, WAP, IVR CONTENT SERVICES information services via written ACCORDING TO messages or speech (eg. financial SUBSCRIBER NEEDS information, traffic reports, sports news and weather reports). Adjustment of menus in Terminal Equipment in order to allow for access to new services more quickly and efficiently - ------------------------------------------------------------------------------------------------------------------------------ 11 SERVICES BASED ON Combination of SMS and GPS Future Subject to the LOCATION (satellite navigation system) so Protection of as to offer customers Privacy Law, location-based services (eg. 5741-1981 whilst driving in a car). Subscriber can be quickly and accurately located. Receipt of navigation instructions based on location of Subscriber. Various services based on receipt of information regarding traffic situation on roads in Israel based on Subscriber's location. Following up movements of subscriber's vehicle (eg if car is stolen) - ------------------------------------------------------------------------------------------------------------------------------ 12 NOTIFICATION OF Checking status of Subscriber's Future ACTIVATION OF house alarm, car alarm or any ALARM other alarm using Terminal Equipment - ------------------------------------------------------------------------------------------------------------------------------ 13 MARKETING AND Receiving advertisements for Future SHOPPING BY products via speech or written TELEPHONE messages (by - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ request). Ordering products via Subscriber's terminal equipment - ------------------------------------------------------------------------------------------------------------------------------ 14 ELECTRONIC MONEY Storage and transfer of Future "electronic money" in the memory of the Subscriber's SIM card. Loading of SIM card with money using various, convenient means (such as direct transfer from bank account, from ATMs, from appropriate public telephones or computerized public information stands). - ------------------------------------------------------------------------------------------------------------------------------ 15 E-COMMERCE Purchase of products and services Exists To be updated in via Terminal Equipment, being accordance with billed via telephone account. the "Mobile Electronic Commerce" regulations, when published - ------------------------------------------------------------------------------------------------------------------------------ 16 ELECTRONIC BANKING Effecting basic banking operations Exists In accordance Conditional upon using Terminal Equipment (eg. with bank the approval of ordering check books, inspecting requirements the Supervisor bank account statements) the of Banks information being transferred to a Subscriber's Terminal Equipment via Short Message System (SMS) - ------------------------------------------------------------------------------------------------------------------------------ 16A ELECTRONIC Ability of clearance between a Future In accordance CLEARANCE trader and the credit card with company, using cellular Terminal requirements Equipment of credit card companies - ------------------------------------------------------------------------------------------------------------------------------ 17 FACSIMILE SERVICE Receipt, storage and retrieval of Exists facsimile message via Subscriber's Terminal Equipment (fax mail). Subscriber receives a Short Message (SMS) when new fax arrives. Retrieval of fax by redirecting fax message to the fax of the Subscriber's choice. The service also enables Subscribers to send a fax from MRT Terminal Equipment via SMS to a fax machine - ------------------------------------------------------------------------------------------------------------------------------ 18 TELEMETRY Enables Subscribers to perform Exists APPLICATIONS remote controlling and monitoring (such as electricity and water meters, traffic lights, cargo, safety warnings, remote readings from computer equipment, environmental monitoring, car parking, medical observation) - ------------------------------------------------------------------------------------------------------------------------------ 19 "YELLOW PAGES" Access to "Yellow Pages" Future - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ TYPE DIRECTORY type information via exchange operator using truncated dialing - ------------------------------------------------------------------------------------------------------------------------------ 20 PROVISION OF MRT Provision of Terminal Exists Not relevant TERMINAL Equipment for use in countries EQUIPMENT with different service bands than Israel (such as in GSM 1800 and 1900 networks) all charges being transferred to the Subscriber's GSM account in Israel - ------------------------------------------------------------------------------------------------------------------------------ 21 PROVISION OF SIM Provision of SIM card to visiting Future CARD "roamers" from countries that don't have a roaming agreement - ------------------------------------------------------------------------------------------------------------------------------ 22 REGIONAL TARIFFS A special tariff for calls that Future begin and end in a pre-ordained area (eg. house, office) - ------------------------------------------------------------------------------------------------------------------------------ 23 PRE-PAID CARD Enables a Subscriber to load his Exists MRT account with a pre-defined amount of money - ------------------------------------------------------------------------------------------------------------------------------ 24 ADVERTISEMENT Lower tariffs for Subscribers Future DURING CALL willing to listen to an advertisement at the beginning of the call. Advertiser pays for this discount - ------------------------------------------------------------------------------------------------------------------------------ 25 MAINTENANCE OF Repair or replacement of MRT Exists MRT TERMINAL Terminal Equipment dealt with EQUIPMENT by the Licensee - ------------------------------------------------------------------------------------------------------------------------------ 26 INSURANCE Comprehensive package covering Future Not relevant theft, loss and breakdown, subject to any law - ------------------------------------------------------------------------------------------------------------------------------ 3. SERVICES TO SUBSCRIBERS - UPON ACTIVATION OF UMTS SYSTEM (THIRD GENERATION- 3G) 3.1 GENERAL a) All of the services supplied shall be in keeping with the minimum requirements under Appendix E in the Second Annex (clause 15.2 of the conditions of the Tender 1/01). b) The gauges for quality of service (QoS) are based on the standards of the European Telecommunications Standards Institute (ETSI) and the standards of the Third Generation Standards Partnership Project (3GPP). c) The supply of services during the delay times set out are at a probability of 95%. Delay times relate to system delay times; the time it takes to transfer information will be prescribed in accordance with the size of the information (file, photograph, message) and the speed of data transfer defined for the service. 3.2 BASIC TELEPHONE SERVICE

- ------------------------------------------------------------------------------------------------------------------------------ SUPPLY NO. SERVICE NAME SERVICE DESCRIPTION DATE QoS GAUGES NOTES - ------------------------------------------------------------------------------------------------------------------------------ 1 ORDINARY Telephone calls to and Future Data transfer Developments in TELEPHONE CALLS from Subscribers of speed of 4 - infrastructure (SPEECH) Licensee to any other 12.5 kbps. capabilities and appropriate telephone or Loss of mobile devices Terminal Equipment information: will enable appropriate to any other FER (frame transfer of speech Public Telecommunications error rate) via internet Network in Israel or less than 3% protocol (IP), around the world using the benefits of package broadcasts - ------------------------------------------------------------------------------------------------------------------------------ 2 DATA Transfer of data via PC / Future * Data COMMUNICATIONS PDA (personal digital transfer rate assistant) / laptop up to 144 kbps connected to Subscriber's * Delay of mobile less than 10 seconds - ------------------------------------------------------------------------------------------------------------------------------ 3 FAX Transmission of fax from Future *Data transfer MRT Terminal Equipment to rate of 9.6 any fax machine at the kbps to 64 Subscriber's election kbps * Delay of less than 20 seconds - ------------------------------------------------------------------------------------------------------------------------------

3.3 ACCOMPANYING SERVICES

- ------------------------------------------------------------------------------------------------------------------------------ SUPPLY NO. SERVICE NAME SERVICE DESCRIPTION DATE QoS GAUGES NOTES - ------------------------------------------------------------------------------------------------------------------------------ 1 CALL WAITING The ability of a caller to move Future Availability HOLD from one call to another between at peak hours simultaneous calls at probability of 99% - ------------------------------------------------------------------------------------------------------------------------------ 2 IDENTIFICATION The ability to identify the Future Availability Unless OF INCOMING telephone number of an incoming at peak hours purposely CALL call at probability concealed by of 99% the caller or dependent on what the second operator does - ------------------------------------------------------------------------------------------------------------------------------ 3 CALL BLOCKING The ability to limit the entry or Future Availability exit of calls at peak hours at probability of 99% - ------------------------------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------------------------------ 4 FOLLOW ME The ability to redirect incoming Future Availability calls to pre-determined telephone at peak hours numbers at probability of 99% - ------------------------------------------------------------------------------------------------------------------------------ 5 VOICE MAIL The ability of callers to record Future Availability messages and of addressees to at peak hours return calls at probability of 99% - ------------------------------------------------------------------------------------------------------------------------------ 6 ROAMING Transfer of calls to a Subscriber Future Conditional who is overseas via a licensee to upon roaming provide International agreements and Telecommunications Services and the abilities the provision of basic wireless of the mobile telephone services and overseas Accompanying Services to a person operator visiting Israel (for roamers from overseas), all via roaming agreements with operators of UMTS systems in other countries - ------------------------------------------------------------------------------------------------------------------------------ 3.4 VALUE ADDED SERVICES

- ------------------------------------------------------------------------------------------------------------------------------ SUPPLY NO. SERVICE NAME SERVICE DESCRIPTION DATE QoS GAUGES NOTES - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ 1. Advanced Inter-Personal Communications - ------------------------------------------------------------------------------------------------------------------------------ 1.1 VIDEO The ability to have bi-directional Future Data transfer CONVERSATION video conversations between two rate of 32 to users 144 kbps Information loss less than 1% FER - ------------------------------------------------------------------------------------------------------------------------------ 2. Message Services - ------------------------------------------------------------------------------------------------------------------------------ 2.1 ELECTRONIC The ability to send, receive, Future Message transfer MESSAGES (SMS) store and redirect text messages time of less to and from various handsets than 4 seconds - ------------------------------------------------------------------------------------------------------------------------------ 2.2 PICTURE MESSAGE The ability to send, receive, Future Data transfer store and redirect pictures to rate of 14.4 to and from various handsets 64 kbps, message transfer time of less than 15 seconds - ------------------------------------------------------------------------------------------------------------------------------ 2.3 EMAIL The Subscriber has an email Future Data transfer address which can be available rate of 32 to using various types of devices 144 kbps, email (PC, PDA, mobile terminal transfer time of equipment) less than 10 seconds - ------------------------------------------------------------------------------------------------------------------------------ 2.4 MULTIMEDIA NOTICE The ability to send / receive / Future Data transfer store / redirect notices, whilst rate of 32 to using a wide range of various 144 kbps, types of media such as text, message transfer audio, fax, email, video rate of less than 30 seconds - ------------------------------------------------------------------------------------------------------------------------------ 2.5 COMBINED MESSAGES The ability of a Subscriber to Future Availability access various messages through during peak hours at one access point, - ------------------------------------------------------------------------------------------------------------------------------

without being dependent upon the probability of type of medium used to send the 99% message - ------------------------------------------------------------------------------------------------------------------------------ 3. Information and Entertainment Services - ------------------------------------------------------------------------------------------------------------------------------ 3.1 VIA SMS The ability to receive (by Future Message retrieval or request) textual transfertime of information on various topics less than 4 such as sports, economics, news seconds - ------------------------------------------------------------------------------------------------------------------------------ 3.2 VIA PICTURE The ability to receive (by Future Data transfer MESSAGE retrieval or request) information rate of 14.4 combined with pictures, to 64 kbps, including icons on various message topics such as sports, economics, transfer time news of less than 15 seconds - ------------------------------------------------------------------------------------------------------------------------------ 3.3 VIA MULTIMEDIA The ability to receive (by Future Data transfer MESSAGE retrieval or request) rate of 32 to information combining many kinds 144 kbps, of media such as text, fax, email, message audio, video; on various topics transfer time such as sports, economics, of less than 30 news seconds - ------------------------------------------------------------------------------------------------------------------------------ 3.4 CELLULAR GAMES The ability to download or access Future Data transfer a variety of games via various rate of 32 to kinds of devices and interfaces 44 kbps, delay such as SMS, WAP. of less than 4 seconds - ------------------------------------------------------------------------------------------------------------------------------ 4. Interconnection of Content - ------------------------------------------------------------------------------------------------------------------------------ 4.1 INTERNET ACCESS, The ability to connect to an Future Data transfer Depends on ISP VIA MOBILE Internet Service Provider (ISP), rate of 32 to performance HANDSET including transfer files, email 144 kbps, and to enter video and audio data browsing delay of less than 4 seconds per page - ------------------------------------------------------------------------------------------------------------------------------ 4.2 ACCESS TO The ability to supply access to Future Data transfer Depends on INTRANET / an organizational network rate of 32 to performance of EXTRANET VIA whether directly on to a local 144 kbps, delay organization MOBILE HANDSET area network (LAN) or a virtual of less than 4 network private network (VPN) seconds - ------------------------------------------------------------------------------------------------------------------------------ 5. Mobile e-commerce (M-Commerce) - ------------------------------------------------------------------------------------------------------------------------------ 5.1 PAYMENTS VIA The ability to make direct on line Future Delay of less MOBILE HANDSET purchases from a mobile handset. than 4 seconds The service will enable the performance of the entire transaction - verification of subscriber, ordering of goods, and payment - ------------------------------------------------------------------------------------------------------------------------------ 6 Machine to Machine - ------------------------------------------------------------------------------------------------------------------------------ 6.1 TELEMETRY The ability to enable connection Future Data transfer to machines and to monitor, rate of less control and assist. Eg., for than 64 kbps, vehicles, automatic sales delay of less machines, surveillance cameras, than 10 seconds and other remote controlled devices, wireline or mobile. - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ 7. Location-based - ------------------------------------------------------------------------------------------------------------------------------ 7.1 MOBILE WORK The ability to supervise, Future Exactness of Future FORCE MANAGEMENT visit and manage mobile location 300 tointegration of / LOCATING / employees, to assist in 500 meters GPS could NAVIGATION navigating them whilst improve the following up their location level of exactness of location information - ------------------------------------------------------------------------------------------------------------------------------ "ADDENDUM TO APPENDIX B - ENGINEERING PLAN The addendum to the Engineering Plan appears in the Application filed by the Licensee in Tender No. 1/01,containing the following: 3.4 QUALITY OF SERVICE 16 3.4.1 Systems performance 16 3.4.2 Prevention and treatment of fraud 28 3.4.3 Systems performances during various stages 32 3.5 ENGINEERING PLAN 34 3.5.1 Needs analysis 34 3.5.2 Rollout and amounts 45 3.5.3 Electromagnetic spectrum 62 3.5.4 Radio sub-system 78 3.5.5 Transmission sub-system 110 3.5.6 Switching and routing sub-system 121 3.5.7 Control sub-system 139 3.5.8 Information sub-system 144 3.5.9 Backup, viability and maintenance 165 3.5.10 Numbering plan and address aliases 169 3.5.11 Terminal equipment 173 3.5.12 Encryption, identification and authentication 177 3.5.13 Adjustment to Security Forces requirements 182 3.5.14 Safety 184 3.5.15 Examination plan 190 3.5.16 Ownership of infrastructure 193" " APPENDIX E - MINIMUM REQUIREMENTS AND LEVEL OF SERVICE TO SUBSCRIBER 1. SYSTEM PERFORMANCES 1.1 The system and its services shall meet the performances, features and gauges defined in the Engineering Plan in Appendix B. 1.2 The system and its services shall not, in any event, fall below the following minimum requirements: 1.2.1 DIGITAL TECHNOLOGY: The system and the services under the extension of the License shall be operated using digital technology, in accordance with relevant international standards. 1.2.2 SERVICE COVERAGE: Subject to the provisions of clause 60.5 of the License, every service will be provided in all of the system's coverage areas, in keeping with the minimum requirements regarding quality of service, within twenty-four (24) months of the date of provision of the service for payment; 1.2.3 QUALITY OF SERVICE (a) In this clause: (1) "BLOCKED CALLS" - calls or connections that cannot be established or messages that cannot be transferred immediately upon the call establishment command due to unavailability of MRT System resources or connection resources between the MRT System and other systems; (2) "DROPPED CALLS" - calls or connections that have terminated not at the initiation of the Subscriber who initiated the call / connection or the Subscriber who received the call; (b) Quality of the service on the MRT System shall not fall below the following: (1) the number of blocked calls during peak hour shall not increase above two percent (2%); (2) the number of dropped calls during peak hour shall not increase above two percent (2%); (c) The system shall meet the requirements set out in paragraphs (a) and (b) ninety-nine percent (99%) of the time during peak hours; (d) Subject to the provisions of clause 60.5 of the License, the system shall reach the level of the requirements set out above no later than twenty-four (24) months after the date of commencement of provision of services in return for payment; as of this date, the aforesaid quality of service shall be maintained in all of the coverage areas of the system; (e) The number of blocked calls and dropped calls shall be measured in the following manner: (1) the measurement shall relate to a time frame of one hour; (2) the peak hour to which the measurement shall relate shall be the busiest hour of the system on the day on which the measurement is taken; (3) the measurement shall be taken during peak hour on each of five (5) consecutive business days as aforesaid; (4) the final data expressing the probability of blocked calls and the probability of dropped calls shall refer to the average of the five (5) hours measured over the five (5) consecutive business days as aforesaid, and to each of the classes of service supplied by the system; (f) The measurement and calculation shall be effected separately for each cell, for each switch and for the system as a whole; notwithstanding the aforesaid, upon written application from the Licensee, the Director may permit limitations to the provisions of clause 1.2.3, after being convinced that there is a real difficulty in effecting such measurement and calculation as aforesaid, provided that an alternative method of measurement and calculation is proposed. 2. GAUGES OF QUALITY OF SERVICE TO CUSTOMERS AND SUBSCRIBERS 2.1 INFORMATION SUPPLY SERVICE TO CUSTOMERS AND SUBSCRIBERS: shall be granted upon application to service centers, at service stations, on the internet site, by email, by telephone requests and facsimile requests. 2.2 STANDARDS FOR ACCESSIBILITY AND PROVISION OF INFORMATION: (a) The telephone service center shall be accessible twenty-four (24) hours a day, every day of the year, other than the Day of Atonement (Yom Kippur). (b) The telephone service center shall be manned at least thirteen (13) hours Sundays through Thursdays and five (5) hours on Fridays and holiday eves. (c) Response at the telephone service center shall be within reasonable time. Should the Director be of the opinion that waiting times for responses at the telephone service center are not reasonable, he may prescribe gauges for response times. (d) A person who calls the telephone service center during hours when it is not manned shall be redirected to a voice mail box to leave a message and shall receive a response on the next following business day. (e) The Licensee shall operate additional channels which shall enable subscribers to contact it for the provision of information or for clarifications, such as: - a computerized IVR voice system; - contact via regular mail; - contact by fax; - contact by email. (f) The Licensee shall publish the address of the service office and the telephone number of the telephone service center, inter alia in the following ways: - in the contract with the Subscriber; - in bills sent to the Subscriber; - in a document sent on its behalf to a Subscriber in a matter relating to customer service; - in its telephone directories and at the telephone service center. 2.3 BILLS TO SUBSCRIBERS: (a) Subscribers' bills shall set out: (1) a monthly charge (fixed payment) (2) conversation duration or airtime duration (minutes, seconds) (3) volume of data consumption (kB, MB) - if the service provided is priced in accordance with data transfer volume. (4) other charges (such as for receipt of information, SMS transmission, M-Commerce) (5) a combination of the above billing methods. (b) Structure of the Bill: Bills shall be sent in a fixed structure as set out below: (1) After payment, the bill shall act as a receipt which includes: the sum to be paid without VAT, the amount of VAT and the total to be paid including VAT. This part shall also contain details of the identity of the Licensee and of the Subscriber. (2) The Licensee may include information regarding special offers and personal notices to the Subscriber. (c) Issue and Dispatch of Bills (1) The Licensee shall issue bills to its Subscribers on a monthly basis or at such other time, with the consent of its Subscribers. (2) A Subscriber wishing to disconnect from the Licensee shall receive a final bill on the nearest possible date, and no later than two months after the date of disconnection. (3) Bills may be sent to a Subscriber by mail or by any other means to be agreed upon with the Subscriber, to such address as the Subscriber shall elect. "APPENDIX H - BANK GUARANTEE To: The State of Israel - Ministry of Communications 23 Jaffa Road, Jerusalem Re: BANK GUARANTEE NO._____________________ 1. At the request of [name of Licensee] (hereinafter: the "APPLICANT"), we hereby guarantee to you to pay any sum, at your demand, up to the total sum in New Israeli Shekels equivalent to US $ 20,000,000 (Twenty Million United States Dollars) at the representative rate of the Dollar on the date of actual payment (hereinafter: the "Guarantee Sum"), in respect of the general license for MRT Services granted to the Applicant. 2. For the purposes of this Deed of Guarantee, the "REPRESENTATIVE RATE" - the exchange rate of the United States Dollar published by the Bank of Israel, known on the date of actual payment. 3. We undertake to pay you, upon your first written demand, any sum set out in such demand up to the Guarantee Sum, within ten days of the date of receipt of your demand. 4. Our undertaking under this Deed of Guarantee shall be unconditional, and in particular, you shall not be required to give details, grounds nor proof for your demand, nor first demand any sum from the Applicant. 5. This Guarantee shall be in force until [two years after the date of termination of the License]; however, if on such date the Applicant has not, to your satisfaction, paid all of its debts, the Guarantee shall be extended, each time for a period of one additional year, at your demand, which shall be submitted to us in writing no later than 21 days before the end of each year; the Applicant shall bear all expenses incurred in the exercise or extension of this Guarantee. Yours truly Bank______________________" " APPENDIX J - LETTERS OF UNDERTAKING The Letter of Undertaking shall be in this form To: The Director General Ministry of Communications 23 Jaffa Road Jerusalem Re: LETTER OF UNDERTAKING WHEREAS __________________ (hereinafter: the "Company") submitted an application to extend the Company's general license to provide MRT Services under Tender No. 1/01 (hereinafter: the "License"); and WHEREAS as a condition for the extension of the License, the Company is required to prove its ability to finance, in due course, the investments stemming from the business plan that it submitted as part of the basic application in Tender No. 1/01, or other requirements relating to the License; WE HEREBY DECLARE AS FOLLOWS: 1. We hereby undertake to you, that if the Company wins the extension of the License, in any event that the Company is required to pay a sum of money in order to meet the conditions of the License, or in order to meet the rest of the undertakings connected to the License, whether they stem from the conditions of the License or from any law, such sum shall be obtained and funded from the Company's direct sources or from external sources that the Company shall ensure to obtain. 2. We are aware that if the Company does not act in accordance with this undertaking, despite having received a written demand from the Director General of the Ministry of Communications, such shall be deemed to be a breach of the conditions of the License. 3. This undertaking is irrevocable, and shall remain in force so long as the License granted to us, if granted, remains in force. - ------------------------------------ [Name of person making undertaking] Name of Signatory / Signatories: His / her / their position: I hereby certify that the signatories to this Letter of Undertaking are authorized to bind [name of company ] by their signature. ___________________________, Advocate. EX-4.(A).30 9 u45961exv4wxayw30.txt GENERAL LICENSE FOR PARTNER AMENDMENT # 15 [TRANSLATION FROM HEBREW] EXHIBIT 4.(a).30 [State Seal] GENERAL LICENSE FOR PARTNER COMMUNICATIONS COMPANY LTD. FOR THE PROVISION OF MOBILE RADIO PHONE SERVICES BY THE CELLULAR METHOD (MRP) AMENDMENT NO. 15 By virtue of my power under section 4(e) of the Communications (Telecommunications and Broadcasting) Law, 5742-1982, I hereby amend the general licence for the provision of mobile radio phone services by the cellular method (MRP) granted to Partner Communications Company Ltd. on 7th April 1998 as follows: TEMPORARY MEASURE (b)- AMENDMENT OF CLAUSE 75.9 1. At the end of clause 75.9, add: "except to 1-800 numbers in the special numbering plan, that have been allocated for the use of the international operators for the purpose of providing international telecommunications message services, as defined in the license of the international operator (a)". (sgd) 24 October, 2002 Reuven (Ruby) Rivlin Minister of Communications a) Simultaneous bi-directional transmission of speech as well as simultaneous transmission of facsimile messages, in an international telecommunications system. b) This temporary measure will be in force until the 1-800 access codes that are being used by the international operators for the purpose of providing international telecommunications message services will be changed, or until article 75.9 will be changed, the earlier of the two. EX-4.(A).31 10 u45961exv4wxayw31.txt GENERAL LICENSE FOR PARTNER AMENDMENT # 16 [TRANSLATION FROM HEBREW] EXHIBIT 4.(a).31 [State Seal] GENERAL LICENSE FOR PARTNER COMMUNICATIONS COMPANY LTD. FOR THE PROVISION OF MOBILE RADIO PHONE SERVICES BY THE CELLULAR METHOD (MRP) AMENDMENT NO. 16 By virtue of my power under section 4(e) of the Communications Law (Telecommunications and Broadcasting), 5742-1982(1), and after hearing claims by Partner Communications Company Ltd. (hereinafter-"Partner") I hereby amend the general licence for the provision of mobile radio phone services by the cellular method (MRP) granted to Partner as follows: REPLACEMENT OF ARTICLE 75.9 1. Article 75.9 shall be replaced by: "75.9 (a) The licensee may collect from a subscriber that initiates a call using the 1-800 access code to a network of another licensee, a rate that is less than the rate charged to the subscriber for calls made not using the above-mentioned access code, as long as it does not exceed the amount agreed upon between the licensee and the other licensee and in the absence of such agreement, shall not exceed the amount set by the Minister(2). (b) The above-mentioned in sub-section (a) shall not apply to calls to 1-800 numbers in the special numbering plan, that have been allocated for the use of the international operators for the purpose of providing international telecommunications message services, as defined in the license of the international operator"(a). - ---------------------- (1) Sefer Hachukim; 5752 p.218; 5761 p.530 (2) On 26.11.02 the Minister ruled the following: for a call that originates in an MRT operator's network to a subscriber of the "Bezek" company with 1-800 service, "Bezek" will remit to the MRT operator the sum of 22 agorot per minute (not including V.A.T.); "Bezek" may collect the above sum from the 1-800 subscriber; In addition, the MRT operator will collect from it's subscriber who initiates the call a sum that does not exceed 22 agorot per minute (not including V.A.T.). (a) Simultaneous bi-directional transmission of speech as well as simultaneous transmission of facsimile messages, in an international telecommunications system. EFFECT 2. Article 75.9 shall take effect as of December 15, 2002. (signed) November 26, 2002 Reuven (Ruby) Rivlin Minister of Communications EX-4.(A).32 11 u45961exv4wxayw32.txt GENERAL LICENSE FOR PARTNER - AMENDMENT # 17 [TRANSLATION FROM HEBREW] EXHIBIT 4.(a).32 [State Emblem] GENERAL LICENSE FOR PARTNER COMMUNICATIONS LTD. FOR THE PROVISION OF MOBILE RADIO TELEPHONE (MRT) SERVICES USING THE CELLULAR METHOD AMENDMENT NO. 17 By virtue of my powers under the Communications Law (Telecommunications and Broadcasts), 5742-1982, the Wireless Telegraph Ordinance [New Version], 5732-1972 and by all my other powers under any law, and after having considered the arguments of PARTNER COMMUNICATIONS COMPANY LTD. (hereinafter: "PARTNER") I hereby amend the General License for the provision of mobile radio telephone (MRT) services using the cellular method granted to Partner on 7 April 1998, as follows: AMENDMENT OF APPENDIX "J" 1. In Appendix J, the following shall replace Article 4.5 (e): "(e) The Licensee shall transfer on a daily basis to all International Operators, a daily modification file of Subscriber Ascription (hereinafter- "Modification File") that includes the details of the Subscribers that ascribed to the International Operator or terminated the ascription that day. The Modification File shall be transferred in the time and manner that will be agreed upon between the Licensee and the International Operator. The file shall include the details of the Subscriber and at least the following: first and last name or corporation name, ID number or corporation number, address and telephone number ascribed to the International Operator." EFFECT 2. This Amendment shall take effect no later than May 1, 2003. (sgd.) ___________________________ (11 February, 2003) Reuven (Ruby) Rivlin Minister of Communications EX-4.(A).41 12 u45961exv4wxayw41.txt AMENDING AGREEMENT TO THE FACILITY AGREEMENT EXHIBIT NO. 4.(a).41 AMENDING AGREEMENT TO THE FACILITY AGREEMENT Made and entered into as of the 31st day of December 2002, by and between: (1) PARTNER COMMUNICATIONS COMPANY LTD. ("PARTNER") and (2) BANK LEUMI LE-ISRAEL B.M.; ISRAEL DISCOUNT BANK LTD; BANK HAPOALIM B.M.; THE FIRST INTERNATIONAL BANK OF ISRAEL LTD; UNITED MIZRAHI BANK LTD.; MERCANTILE DISCOUNT BANK LTD.; and CITIBANK N.A. (together, "THE PARTICIPATING BANKS") and (3) BANK LEUMI LE-ISRAEL B.M., in its respective capacities as Arranger, Facility Agent and Security Trustee and (4) BANK HAPOALIM B.M., in its capacity as Coordinating Agent WHEREAS: Partner, the Participating Banks, the Arranger, the Facility Agent and the Security Trustee are parties to a facility agreement dated 13 August 1998, as amended and restated through to 28 November 2002 ("THE FACILITY AGREEMENT"); and WHEREAS: Partner and the Participating Banks have agreed: (i) that Facility A shall be reduced and that a new Facility, Facility C (as defined in the Restated Facility Agreement), shall be granted to Partner; (ii) that Bank Hapoalim shall act as Coordinating Agent under the Facility Agreement; and (iii) to make further amendments to the Facility Agreement, all the aforegoing subject to the terms and conditions set out in this Amending Agreement below, NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: 1. INTERPRETATION 1.1. In this Agreement, including the Exhibits hereto: 1.1.1. "AMENDING AGREEMENT" - means this Amending Agreement; 1.1.2. "COMMENCEMENT DATE" - means the 5th (fifth) Business Day (or such other Business Day as the Instructing Group and Partner may agree) following the date on which the Instructing Group is satisfied that the condition precedent referred to in clause 3 below has been fulfilled in a form and substance reasonably satisfactory to the Instructing Group; 1.1.3. "RESTATED FACILITY AGREEMENT" - means the Facility Agreement, as amended and restated by this Amending Agreement, the terms of which are set out in EXHIBIT 1 hereto and initialled, for the purposes of identification, by the parties hereto. 1.2. Capitalised terms, words and expressions defined in the Facility Agreement not otherwise defined herein shall bear the same meaning as in the Facility Agreement and all provisions of the Facility Agreement concerning matters of construction and interpretation shall apply to this Amending Agreement. 1.3. All references in this Amending Agreement to specific numbered clauses of the Facility Agreement are references to those numbered clauses as set forth in the conformed copy of the Facility Agreement signed on 7 August 2000, as amended by further amendments made thereafter to the Facility Agreement, (as referred to in the first recital to this Amending Agreement). (2) 2. AMENDMENT AND RESTATEMENT OF THE FACILITY AGREEMENT With effect from the Commencement Date, the Facility Agreement (including the Schedules attached thereto) shall be amended and restated so that it shall be read and construed for all purposes as set forth in Exhibit 1 hereto (which Exhibit shall, for the avoidance of doubt, constitute the definitive and binding version of the Facility Agreement as amended by this Amending Agreement). 3. CONDITION PRECEDENT This Amending Agreement is subject to the condition precedent that the Facility Agent shall have received all of the following documents: 3.1. a copy, certified a true copy by a duly authorised officer of Partner, of the Charter of Partner; 3.2. copies, certified as true copies by a duly authorised officer of Partner, of a Board resolution, audit committee resolution and shareholders' resolution of Partner approving the execution, delivery and performance of this Amending Agreement and the terms and conditions thereof and a board resolution authorising a named person or persons to sign each of such Facility Documents and any other documents to be delivered by it pursuant thereto; 3.3. a certificate of a duly authorised officer of Partner setting out the names and signatures of the persons authorised to sign on its behalf, this Amending Agreement and any other documents to be delivered by it pursuant thereto; 3.4. an opinion of Gross, Kleinhendler, Hodak, Halevy, Greenberg & Co., external Israeli counsel to Partner. In the event that such condition precedent shall not have been fulfilled to the Instructing Group's satisfaction on or before 10:00 a.m., on 5 January 2003 or such later date as the Facility Agent (upon the instructions of the Instructing Group) may agree in writing, then, other than clause 7 below, this Amending Agreement shall cease to have any force or effect and none of the parties hereto shall have any liability in respect therewith and the provisions of the Facility Agreement shall remain in full force and effect, unchanged. (3) 4. REPRESENTATIONS AND WARRANTIES 4.1. Partner hereby represents and warrants to each of the Finance Parties: (i) that it has power to enter into this Amending Agreement and to perform its obligations hereunder and has taken all necessary action to authorise the entry into and performance of the transactions contemplated hereunder; and (ii) that this Amending Agreement constitutes its legal, valid, binding and enforceable obligations. 4.2. Partner, in respect of itself and each other Obligor, hereby makes the representations and warranties set out in clauses 15.2 to 15.20 of the Facility Agreement to each of the Finance Parties (as if, for the avoidance of doubt, each reference in such representations and warranties to "the Facility Documents" includes a reference to "this Amending Agreement" and "the Restated Facility Agreement") and such representations and warranties, together with the representations and warranties set out in clause 4.1 above, shall be deemed repeated, on the Commencement Date and, subject to the provisions of the Restated Facility Agreement relating to repetition of representations and warranties, also on each date that a Drawdown Request (as defined in the Restated Facility Agreement) is made. 4.3. Without derogating from the generality of the aforegoing, Partner hereby represents and warrants that the period of the Licence has been extended until 1 February 2022. 5. COMMISSION Partner shall, on the Commencement Date, or if the Commencement Date shall occur before 1 January 2003, on 1 January 2003, pay: (i) to each of the Participating Banks an upfront fee in an amount equal to the proportion which such Participating Bank's aggregate Commitments bears to the aggregate Commitments of all the Participating Banks as at 31 December 2002, of US $450,000 (four hundred and fifty thousand United States Dollars); and (ii) to the Arranger the fee specified in the letter dated 8 December 2002 from the Arranger to Partner. 6. GOVERNING LAW AND JURISDICTION This Amending Agreement shall be governed by and shall be construed in accordance with Israeli law and the competent court of Tel-Aviv-Jaffa shall have exclusive jurisdiction to hear any matters, provided that the Facility Agent and the Participating Banks shall be entitled to sue Partner in any jurisdiction in which it has an office or holds assets. 7. COUNTERPARTS (4) This Amending Agreement may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. 8. COPY TO THE MINISTRY Partner shall, as soon as practicable, but not later than 30 (thirty) days after the Commencement Date, deliver to the Ministry, for information purposes, a copy of the Restated Facility Agreement. 9. INCORPORATION OF TERMS The provisions of clauses 29 (Partial Invalidity), 30 (Amendments) and 37 (Notices) of the Facility Agreement shall be incorporated into this Amending Agreement as if set out in full in this Amending Agreement and as if reference in those clauses to the "Facility Documents" or "hereunder" are references to this Amending Agreement. IN WITNESS WHEREOF, THE PARTIES HAVE SIGNED THIS AMENDING AGREEMENT EFFECTIVE AS OF THE DATE FIRST MENTIONED ABOVE. PARTNER: for: PARTNER COMMUNICATIONS COMPANY LTD. By: ------------------------------- Title: ---------------------------- THE PARTICIPATING BANKS: for: BANK LEUMI LE-ISRAEL B.M. for: ISRAEL DISCOUNT BANK LTD. By: By: ------------------------------- ------------------------------- Title: Title: ---------------------------- ---------------------------- for: BANK HAPOALIM B.M. for: THE FIRST INTERNATIONAL BANK OF ISRAEL LTD. By: By: ------------------------------- ------------------------------- Title: Title: ---------------------------- ---------------------------- (5) for: UNITED MIZRAHI BANK LTD. for: MERCANTILE DISCOUNT BANK LTD. By: By: ------------------------------- ------------------------------ Title: Title: ---------------------------- ---------------------------- for: CITIBANK N.A. By: ------------------------------- Title: ---------------------------- for: BANK LEUMI LE-ISRAEL B.M. for: BANK HAPOALIM B.M. (in its capacity as Security Trustee, (in its capacity as Arranger and Facility Agent) Coordinating Agent) By: By: ------------------------------- ------------------------------ Title: Title: ---------------------------- --------------------------- (6) Exhibit "1" AMENDED AND RESTATED FACILITY AGREEMENT DATED 13 AUGUST 1998 (AS AMENDED AND RESTATED BY THE PARTIES THROUGH 31 DECEMBER 2002), BETWEEN, INTER ALIA, PARTNER COMMUNICATIONS COMPANY LTD., AS THE BORROWER AND THE PARTICIPATING BANKS (7) TABLE OF CONTENTS

CLAUSE NO. PAGE =============================================================================================================================== 1. INTERPRETATION.......................................................................1 1.1. Definitions...................................................................1 1.2. Accounts......................................................................1 1.3. Interpretation................................................................1 1.4. Currency Symbols..............................................................1 1.5. Statutes......................................................................1 1.6. Agreements....................................................................1 2. THE FACILITIES.......................................................................1 2.1. The Facilities................................................................1 2.2. Conversion of Outstanding Advances--Deleted...................................1 2.3. Lenders' Rights and Obligations...............................................1 2.4. Purpose.......................................................................1 3. CONDITIONS PRECEDENT--Deleted........................................................1 4. DRAWDOWNS............................................................................1 4.1. First Drawdown Request--Deleted...............................................1 4.2. Drawdown Request..............................................................1 4.3. Participating Bank's Participation............................................1 4.4. Notification of Advance--Deleted..............................................1 4.5. Outstandings in Proportion to Commitments.....................................1 5. REPAYMENT............................................................................1 5.1. Repayment of Facility A Loan..................................................1 5.2. Repayment of Facility B Loan..................................................1 5.3. Repayment of Facility C Loan..................................................1 5.4. Currency of Repayment.........................................................1 6. VOLUNTARY PREPAYMENT AND REBORROWING.................................................1 6.1. Prepayment....................................................................1 6.2. Conditions to Prepay..........................................................1 6.3. Effects of Notice of Prepayment...............................................1 6.4. Reborrowing...................................................................1 7. MANDATORY PREPAYMENT.................................................................1 7.1. Non-Compliance with Corrective Milestones--Deleted............................1 7.2. Disposals.....................................................................1 7.3. Investment by Partner in Subsidiaries.........................................1 7.4. Terms for Mandatory Prepayment................................................1 8. INTEREST.............................................................................1 8.1. Interest Rate.................................................................1 8.2. Payment of Interest...........................................................1 8.3. Default Interest..............................................................1 9. SUBSTITUTE INTEREST RATES............................................................1 9.1. Unavailable or Indeterminable Interest Rate...................................1 9.2. Negotiations for Determining Alternative Basis................................1 9.3. Agreed Alternative Basis......................................................1 9.4. Failure to Agree on Alternative Basis.........................................1 9.5. Return to Regular Determination Basis.........................................1 10. COMMISSIONS, FEES AND EXPENSES.......................................................1

TABLE OF CONTENTS (continued)

CLAUSE NO. PAGE =============================================================================================================================== 10.1. Commitment Commission--Facility A and Facility B..............................1 10.2. Applicable Percentage.........................................................1 10.2A. Commitment Commission--Facility C............................................67 10.3. Annual Payment to Security Trustee............................................1 10.4. Facility Agent's Fee..........................................................1 10.5. Payment of Upfront Fee--Deleted...............................................1 10.5A Coordinating Agent's Fee.....................................................68 10.6. Expenses......................................................................1 10.7. Stamp Taxes...................................................................1 10.8. Customary Commissions and Charges.............................................1 11. TAXES................................................................................1 11.1. Tax Gross-Up..................................................................1 11.2. Notification of Requirement to Deduct Tax.....................................1 11.3. Evidence of Payment of Tax....................................................1 11.4. Tax Saving....................................................................1 12. INCREASED COSTS......................................................................1 12.1. Increased Costs...............................................................1 12.2. Exceptions....................................................................1 13. ILLEGALITY...........................................................................1 14. MITIGATION...........................................................................1 14.1. Mitigation....................................................................1 14.2. Replacement of a Bank.........................................................1 15. REPRESENTATIONS AND WARRANTIES.......................................................1 15.1. Representations and Warranties................................................1 15.2. Status........................................................................1 15.3. Powers and Authority..........................................................1 15.4. Legal Validity................................................................1 15.5. Non-Conflict..................................................................1 15.6. No Default...................................................................76 15.7. Consents......................................................................1 15.8. Accounts......................................................................1 15.9. Litigation....................................................................1 15.10. Tax Liabilities...............................................................1 15.11. Encumbrance...................................................................1 15.12. Business Plan.................................................................1 15.13. Ownership of Assets...........................................................1 15.14. Documents.....................................................................1 15.15. Intellectual Property Rights..................................................1 15.16. Environmental Matters.........................................................1 15.17. Ranking of Security...........................................................1 15.18. Material Contracts............................................................1 15.19. Ownership of Partner..........................................................1 15.20. Borrowings....................................................................1 15.21. Repetition....................................................................1 16. UNDERTAKINGS.........................................................................1 16.1. Duration......................................................................1 16.2. Financial Information........................................................83 16.3. Information-Miscellaneous.....................................................1

(b) TABLE OF CONTENTS (continued)

CLAUSE NO. PAGE =============================================================================================================================== 16.4. Audit and Accounting Dates....................................................1 16.5. Accounting Standards..........................................................1 16.6. Negative Pledge...............................................................1 16.7. Sale and Leaseback............................................................1 16.8. Disposals.....................................................................1 16.9. Pari Passu Ranking............................................................1 16.10. Loans and Guarantees.........................................................94 16.11. Operating Leases..............................................................1 16.12. Receivables Discounting.......................................................1 16.13. Investments...................................................................1 16.14. Restricted Distributions......................................................1 16.15. Share Capital.................................................................1 16.16. Intellectual Property Rights..................................................1 16.17. Environmental Matters.........................................................1 16.18. Insurance.....................................................................1 16.19. Notification of Default.......................................................1 16.20. Change of Business............................................................1 16.21. Acquisitions and Mergers......................................................1 16.22. Borrowings....................................................................1 16.23. Arm's-Length Terms............................................................1 16.24. Compliance with Laws..........................................................1 16.25. Consents and Authorisations.................................................107 16.26. Licence.......................................................................1 16.27. Material Contracts and Constitutional Documents...............................1 16.28. Auditors......................................................................1 16.29. Hedging Agreements............................................................1 16.30. Subsidiaries..................................................................1 16.31. Taxation......................................................................1 16.32. Financial Undertakings........................................................1 16.33. Access........................................................................1 16.34. Interconnection...............................................................1 16.35. Reserve Account...............................................................1 16.36. Utilisation of Proceeds of Facilities.........................................1 16.37. Loans, Guarantees and Investments in Subsidiaries.............................1 16.38. Share Pledges.................................................................1 16.39. Non-Acquisition by Subsidiary.................................................1 17. DEFAULT............................................................................118 17.1. Events of Default.............................................................1 17.2. Non-Payment...................................................................1 17.3. Breach of Obligations.........................................................1 17.4. Misrepresentation/Breach of Warranty..........................................1 17.5. Cross-Acceleration and Cross-Default..........................................1 17.6. Invalidity....................................................................1 17.7. Insolvency and Rescheduling...................................................1 17.8. Winding-Up....................................................................1 17.9. Execution or Distress.........................................................1 17.10. Analogous Events..............................................................1 17.11. Governmental Intervention.....................................................1 17.12. Cessation.....................................................................1

(c) TABLE OF CONTENTS (continued)

CLAUSE NO. PAGE =============================================================================================================================== 17.13. Proceedings...................................................................1 17.14. Breach of the Licence or any Authorisation....................................1 17.15. Material Adverse Change.......................................................1 17.16. Breach of Material Contracts..................................................1 17.17. Repudiation...................................................................1 17.18. Counterparties................................................................1 17.19. Shareholders..................................................................1 17.20. Change of Ownership...........................................................1 17.21. Balance in Reserve Account....................................................1 17.22. Mandatory Prepayment..........................................................1 17.23. No Trading in Securities......................................................1 17.24. Non-Compliance with any Securities Authority..................................1 17.25. Acceleration..................................................................1 17.26. Advances Due on Demand........................................................1 17.27. Indemnity.....................................................................1 18. AGENCY PROVISIONS....................................................................1 18.1. Appointment...................................................................1 18.2. Facility Agent's Obligation...................................................1 18.2A Coordinating Agent's Obligation.............................................130 18.3. Discretions...................................................................1 18.4. Excluded Obligations..........................................................1 18.5. Indemnification...............................................................1 18.6. Exclusion of Liabilities......................................................1 18.7. No Actions....................................................................1 18.8. Participating Bank's Responsibility...........................................1 18.9. Resignation...................................................................1 18.10. Successor Agent.............................................................134 18.11. Rights and Obligations........................................................1 18.12. Business with the Group.......................................................1 19. BROKEN FUNDING INDEMNITY.............................................................1 19.1. Broken Funding Indemnity for US Dollars and Euros.............................1 19.2. Broken Funding Indemnity for NIS..............................................1 19.3. Partner's Indemnity...........................................................1 20. CURRENCY OF ACCOUNT..................................................................1 20.1. Currency of Account...........................................................1 20.2. Currency Indemnity............................................................1 21. PAYMENTS WITHOUT SET-OFF.............................................................1 22. SET-OFF..............................................................................1 23. APPLICATION AND REDISTRIBUTION OF PAYMENTS...........................................1 23.1. Application of Payments.......................................................1 23.2. Partial Payments..............................................................1 23.3. Redistribution on or after Default Date.......................................1 23.4. Repayable Recoveries..........................................................1 23.5. Recoveries Through Legal Proceedings..........................................1 24. CALCULATIONS AND EVIDENCE OF DEBT....................................................1 24.1. Basis of Accrual..............................................................1 24.2. Evidence of Debt..............................................................1 24.3. Prima Facie Evidence..........................................................1

(d) TABLE OF CONTENTS (continued)

CLAUSE NO. PAGE =============================================================================================================================== 24.4. Certificates of Participating Banks...........................................1 25. GUARANTEE AND INDEMNITY..............................................................1 25.1. Guarantee.....................................................................1 25.2. Indemnity.....................................................................1 25.3. Additional Security...........................................................1 25.4. Continuing Obligations........................................................1 25.5. Obligations not Discharged....................................................1 25.6. Settlement Conditional........................................................1 25.7. Exercise of Rights............................................................1 25.8. Deferral of Guarantor's Rights................................................1 25.9. Suspense Accounts.............................................................1 25.10. Waiver by Guarantor...........................................................1 26. ADDITIONAL GUARANTORS AND SECURITY...................................................1 26.1. Additional Guarantors.........................................................1 26.2. Security......................................................................1 27. ASSIGNMENTS AND TRANSFERS............................................................1 27.1. Binding Agreement.............................................................1 27.2. No Assignments and Transfers by the Obligors..................................1 27.3. Assignments and Transfers by Participating Banks..............................1 27.4. Assignments by Participating Banks............................................1 27.5. Transfers by Participating Banks..............................................1 27.6. Disclosure of Information.....................................................1 27.7. No Increased Costs............................................................1 28. COSTS AND EXPENSES...................................................................1 28.1. Agents' Costs.................................................................1 28.2. Amendment Costs...............................................................1 28.3. Participating Banks' Liabilities for Costs....................................1 29. PARTIAL INVALIDITY...................................................................1 30. AMENDMENTS...........................................................................1 31. INFORMATION..........................................................................1 32. RELEASE OF SHARE PLEDGES.............................................................1 32.1. Share Pledges.................................................................1 32.2. Release of Share Pledges......................................................1 32.3. Distribution of Tapuz Shares--Deleted.........................................1 33. RESPONSE TO REQUESTS FOR APPROVAL OR CONFIRMATION....................................1 34. COUNTERPARTS.........................................................................1 35. GOVERNING LAW AND JURISDICTION.......................................................1 36. REMEDIES AND WAIVERS.................................................................1 37. NOTICES..............................................................................1 37.1. Communications through Facility Agent.........................................1 37.2. Manner of Delivery............................................................1 38. CONFIDENTIALITY......................................................................1 39. ENTIRE AGREEMENT.....................................................................1

(e)

SCHEDULES DESCRIPTION ======================================================================================================================== SCHEDULE 1 Participating Banks' respective Commitments SCHEDULE 2 Form of Drawdown Request SCHEDULE 3 List of Facility Documents SCHEDULE 4 Form of Guarantor Accession Agreement SCHEDULE 5 List of Material Contracts SCHEDULE 6 Shareholder Loans Subordination Conditions SCHEDULE 7 Reservations SCHEDULE 8 List of Security Documents SCHEDULE 9 Principal Shareholders in Partner SCHEDULE 10 Form of Transfer Certificate SCHEDULE 11 Deleted SCHEDULE 12 Deleted SCHEDULE 13 Deleted SCHEDULE 14 Deleted SCHEDULE 15 Part A--Schedule for Reduction of Facility A Part B--Schedule for Reduction of Facility C SCHEDULE 16 Certificate by Partner's Chief Financial Officer permitting prepayment from Permitted Sources SCHEDULE 17 Pending Legal Actions concerning Partner SCHEDULE 18 Tax Liabilities SCHEDULE 19 Quarterly report to be submitted to the Participating Banks and the Facility Agent SCHEDULE 20 Form of letter by Partner to the Auditors SCHEDULE 21 Deleted SCHEDULE 22 Deleted SCHEDULE 23 Documents required in relation to Acceding Guarantors

THIS AGREEMENT was made on 13 August 1998 and amended and restated by the parties through 31 December 2002, the parties hereto, as at 31 December 2002, being: (1) PARTNER COMMUNICATIONS COMPANY LTD. ("PARTNER") AND (2) BANK LEUMI LE-ISRAEL B.M., ISRAEL DISCOUNT BANK LTD., BANK HAPOALIM B.M., THE FIRST INTERNATIONAL BANK OF ISRAEL LTD., UNITED MIZRAHI BANK LTD., MERCANTILE DISCOUNT BANK LTD. and CITIBANK N.A. (together, "THE PARTICIPATING BANKS") AND (3) BANK LEUMI LE-ISRAEL B.M., in its respective capacities as Arranger, Facility Agent and Security Trustee AND (4) BANK HAPOALIM B.M., in its capacity as Coordinating Agent 10. INTERPRETATION 10.1. DEFINITIONS In this Agreement, the following terms have the meanings given to them in this clause 1.1: 10.1.1. "ACCOUNTING PERIOD" in relation to any person means any period of approximately 3 (three) months, 6 (six) months or 1 (one) year for which Accounts of such person are prepared; (1) -2- 10.1.2. "ACCOUNTS" means at any time and from time to time: (a) the latest audited non-consolidated annual financial statements of Partner; (b) the latest audited annual financial statements of each Subsidiary of Partner; (c) the latest unaudited reviewed non-consolidated half- yearly financial statements of Partner; (d) the latest unaudited reviewed half-yearly financial statements of each Subsidiary of Partner; (e) the latest audited consolidated annual financial statements of Partner; (f) the latest unaudited reviewed quarterly consolidated financial statements of Partner, delivered or required to be delivered to the Participating Banks hereunder (together with all those notes thereto and certificates required to be attached thereto), or such of those accounts as the context requires; 10.1.3. "ACQUISITION" means the acquisition directly or indirectly (whether by one transaction or by a series of related transactions) of any interest whatsoever in the share capital (or equivalent) or the business or undertaking (including any franchise rights) or assets constituting a separate business or undertaking of any company or other person; 10.1.4. "ADDITIONAL GUARANTOR" means any entity which becomes party to this Agreement as a Guarantor by virtue of its execution of a Guarantor Accession Agreement; 10.1.5. "ADSCR" means EBITDA after SAC/Debt Service; 10.1.6. "ADVANCE" means an advance made or to be made under the Facilities or the principal amount thereof (for the removal of doubt, together with any Linkage Differentials in respect of such principal) outstanding from time to time; 10.1.7. "AFFILIATE" means in relation to a Participating Bank, and to any other company or any corporation, the Holding Company of that -3- Participating Bank, company or corporation and any person over 20% (twenty percent) of whose capital is beneficially owned, or the majority of whose voting rights are exercised, directly or indirectly by that Participating Bank, company or corporation or any Holding Company of that Participating Bank, company or corporation provided that, for the purpose of clause 27.3 (Assignments and Transfers by Participating Banks) below the reference to 20% (twenty percent) shall be deemed to be a reference to 50% (fifty percent); 10.1.8. "AGENTS" means the Facility Agent, the Coordinating Agent, the Security Trustee and the Arranger; 10.1.9. "AMENDING AND RESCHEDULING AGREEMENT" means the Amending and Rescheduling Agreement dated 9 July 2000 between the parties to this Agreement, amending the Original Facility Agreement with effect from the Effective Date; 10.1.10. "APPLICABLE ACCOUNTING PRINCIPLES" means in relation to Partner or any Subsidiary of Partner, the accounting principles and practices generally accepted in its jurisdiction of incorporation and/or where its securities are listed for trading, reconciled to the extent necessary in accordance with the generally accepted accounting principles in the United States of America; 10.1.11. "ARRANGER" means Bank Leumi Le-Israel B.M.; 10.1.12. "AUDITORS" means any internationally recognised firm of accountants or a leading firm of independent Israeli auditors affiliated to an internationally recognised firm of accountants; 10.1.13. "AUTHORISATIONS" means at any time all consents, approvals, authorisations, concessions, permits and licences (including Environmental Licences but excluding the Licence), and all filings, registrations and agreements with any government or other regulatory authority necessary in order to enable the Group to install, establish, maintain and operate the Network at such time; 10.1.14. "AVAILABLE COMMITMENT" means the Available Facility A Commitment, the Available Facility B Commitment and the Available Facility C Commitment or any of them, as the context may require; 10.1.15. "AVAILABLE FACILITY A COMMITMENT" means, in relation to a Participating Bank at any time, its Commitment under Facility A at such time, less the difference between: (i) the aggregate Original -4- Dollar Amount of all Advances made by such Participating Bank (and taking into account, where relevant, any Advances not yet made but Drawdown Requests in respect of which have been submitted to such Participating Bank) under Facility A at such time; and (ii) the Original Dollar Amount of all Advances under Facility A prepaid or repaid by Partner to such Participating Bank, which are capable of being reborrowed under clauses 5.1.2.(c), 6.4.1, 7.2.2 or 7.3 (Investment by Partner in Subsidiaries) below; 10.1.16. "AVAILABLE FACILITY B COMMITMENT" means, in relation to a Participating Bank at any time, its Commitment under Facility B at such time less the Dollar Amount of the aggregate amount of all outstanding Advances (for the removal of doubt, together with any Linkage Differentials on such Advances) made by such Participating Bank (and taking into account, where relevant, any Advances not yet made but Drawdown Requests in respect of which have been submitted to such Participating Bank) under Facility B at such time; 10.1.17. "AVAILABLE FACILITY C COMMITMENT" means, in relation to a Participating Bank at any time, its Commitment under Facility C at such time, less the difference between: (i) the aggregate Original Dollar Amount of all Advances made by such Participating Bank (and taking into account, where relevant, any Advances not yet made but Drawdown Requests in respect of which have been submitted to such Participating Bank) under Facility C at such time; and (ii) the Original Dollar Amount of all Advances under Facility C prepaid or repaid by Partner to such Participating Bank, which are capable of being reborrowed under clauses 5.3.2.(c), 6.4.1, 7.2.2 or 7.3 (Investment by Partner in Subsidiaries) below; 10.1.18. "AVAILABILITY PERIOD FACILITY A" means the period ending on 31 March 2003; 10.1.19. "AVAILABILITY PERIOD FACILITY C" means the period ending on December 31, 2004; 10.1.20. "BANK HAPOALIM" means Bank Hapoalim B.M.; 10.1.21. "BEZEQ" means Bezeq, Israel Telecommunication Corporation Ltd., a company incorporated under the laws of Israel; 10.1.22. "BEZEQ INTERCONNECTION AGREEMENT" means the Interconnection Agreement entered into or to be entered into with Bezeq or any other agreement with Bezeq (whether written or expressed by conduct) -5- pursuant to which Bezeq provides interconnection infrastructure and services to Partner; 10.1.23. "BLL" means Bank Leumi Le-Israel B.M.; 10.1.24. "BOND RATE" means the rate which is the aggregate of: (a) the arithmetic mean of the Average Daily Yield; the "AVERAGE DAILY YIELD" being the arithmetic mean of the gross yield to maturity (rounded upwards, if necessary, to four decimal places) as published by the Tel-Aviv Stock Exchange Ltd. ("TASE"), of six series of fixed rate bonds issued by the State of Israel and listed on the TASE and having a remaining period until maturity the same as, or closest to, the average duration (taking account of repayments) of the relevant Advance during the Duration Period of such Advance, denominated in NIS and fully linked to the Cost of Living Index, in each of the 10 (ten) (or, in the event that under clause 1.1.105(b) below the minimum prior notice for Drawdown of the relevant Advance is 5 (five) Business Days, then 5 (five)) trading days of the TASE immediately preceding the beginning of the Duration Period of such Advance; all as determined by the Participating Bank by which such Advance is to be made on the first day of such Duration Period; and (b) 0.60% (nought point sixty percent); 10.1.25. "BORROWING" means any Indebtedness in respect of or pursuant to: (a) monies borrowed or monies raised which are in the nature of borrowings or having the commercial effect of borrowing (including monies raised by the sale of receivables, invoices, bills or notes or other financial assets on terms that recourse may be had to the vendor in the event of non-payment of such receivables, invoices, bills or financial assets when due) and monies raised under acceptance credit facilities and through the issue of bonds, notes, debentures, bills, loan stocks and other debt securities (including any debt security convertible, but not at the relevant time converted, into share capital); (b) the acquisition cost of assets or services to the extent payable on deferred payment terms more than 180 (one hundred and eighty) days after the time of acquisition or possession thereof by the party liable (whether or not evidenced by any bond, note, debenture, loan stock or other debt security), excluding any such -6- cost payable on deferred payment terms which are treated as trade creditors in accordance with the Applicable Accounting Principles; (c) monies received in consideration for the supply of goods and/or services to the extent received more than 6 (six) months before the due date for such supply (but excluding any liability in respect of bona fide progress payments and deposits received from customers in the ordinary course of trade or any other liability treated as trade creditors in accordance with the Applicable Accounting Principles) where such arrangement is entered into primarily as a method of raising finance; (d) leases (whether in respect of land, machinery, equipment or otherwise) and hire purchase agreements, conditional sale agreements, sale and lease back, sale and repurchase and similar agreements and instruments, provided in the case of leases they are treated as finance leases in accordance with Applicable Accounting Principles; and/or (e) any guarantee, indemnity or other legally binding instrument to assure payment of, or against loss in respect of non-payment of, any of the indebtedness specified in this definition and any counter-indemnity in respect of any thereof or in respect of any letter of credit or guarantee issued by any bank or other financial institution in respect of any indebtedness referred to in this definition; provided that in computing an amount of Borrowings of any person or persons: (i) in respect of paragraph (d) only the liability for future payments under the finance lease as determined in accordance with the Applicable Accounting Principles shall be included; (ii) any item falling within paragraph (e) shall be included only to the extent that the same is required by the Applicable Accounting Principles to be quantified in the consolidated balance sheet included in consolidated Accounts of the Group, or in any notes to those Accounts, were any then to be prepared; (iii) any item falling within paragraph (e) shall not be included if it relates to indebtedness of another member of the Group already taken into account for the purposes of such calculation; and -7- (iv) such computation shall exclude any double counting; 10.1.26. "BUSINESS" means the business of installing, establishing, maintaining and operating a wireless telephony service in Israel as contemplated by the License and any other related business or activity which may be conveniently or advantageously carried on in connection or conjunction with such business; 10.1.27. "BUSINESS DAY" means: (a) with respect to payment or purchase of sums denominated in: (i) US Dollars, as a reference to a day (other than a Saturday or Sunday) on which banks generally are open for business in New York and Tel-Aviv; (ii) Euros, as a reference to a day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer payment system is open for settlement of payments in Euros and on which banks generally are open for business in Tel-Aviv and (iii) NIS, as a reference to a day (other than a Saturday) on which banks generally are open for business in Tel-Aviv; and (b) in all other cases, as a reference to a day (other than a Saturday) on which banks generally are open for business in Tel Aviv; 10.1.28. "BUSINESS PLAN" means the business plan (including the long term management forecasts contained therein) of Partner dated 7 July 2002, a copy of which was delivered to the Facility Agent and to the Coordinating Agent on 11 July 2002, as such business plan is updated from time to time pursuant to this Agreement; 10.1.29. "CAPITAL ADEQUACY REQUIREMENT" means a request or requirement relating to the maintenance of capital from any central bank or other fiscal, monetary or other authority; 10.1.30. "CAPITAL EXPENDITURE" means any expenditure which should be treated as capital expenditure in the audited non-consolidated Accounts of Partner in accordance with the Applicable Accounting Principles; -8- 10.1.31. a "CHANGE OF OWNERSHIP" shall occur when: (a) the HTL Group ceases to hold, directly or indirectly, a portion of Partner's equity share capital which carries at least 30% (thirty percent) of the voting rights in Partner; or (b) the HTL Group, Matav, Elbit, Eurocom Communications Limited, Hapoalim Electronic Communication Ltd. and Tapuz Cellular Systems Ltd. taken together, cease to hold, directly or indirectly, a portion of Partner's equity share capital which carries at least 51% (fifty-one percent) of the voting rights in Partner; or (c) HWL ceases to hold, directly or indirectly, at least 51% (fifty-one percent) of the equity share capital of HTL. For the avoidance of doubt, in calculating any indirect percentage ownership interest, account shall be taken of any intermediate holding companies which are not wholly-owned Subsidiaries and the indirect percentage ownership interest shall be reduced on a proportionate basis accordingly; 10.1.32. "CHARGOR" means any Shareholder which is party to a Share Pledge and "CHARGORS" means all of them; 10.1.33. "CHARTER" means, in respect of any company, corporation, partnership, governmental agency or other enterprise, its founding act, articles of incorporation and by-laws, memorandum and articles of association, articles of partnership, statute or similar instrument and other founding documents; 10.1.34. "COMMITMENT" means, in relation to a Participating Bank and a Facility at any time, the amount in US Dollars set opposite its name in SCHEDULE 1 (Participating Banks' respective Commitments) in relation to such Facility as reduced or cancelled from time to time in accordance with this Agreement; 10.1.35. "COMMENCEMENT DATE" shall have the same meaning ascribed to such term in the Amending Agreement to the Facility Agreement dated as of 31 December 2002 made between: (1) Partner; (2) the Participating Banks; (3) BLL, in its respective capacities as, Arranger, Facility Agent and Security Trustee; and (4) Bank Hapoalim, in its capacity as Coordinating Agent; -9- 10.1.36. "CONTRIBUTION" means, in relation to a Participating Bank at any time, the aggregate Dollar Amount of all Advances (for the removal of doubt, together with any Linkage Differentials on such Advances) made by such Participating Bank under each of Loan A, Loan B and Loan C outstanding at such time or, as the context may require, the aggregate Dollar Amount of all such Advances; 10.1.37. "COORDINATING AGENT" means Bank Hapoalim or, in the event Bank Hapoalim shall resign as Coordinating Agent pursuant to clause 18.9 (Resignation) below, the Facility Agent and its respective successors as referred to in clause 18.10 (Successor Agent) below; 10.1.38. "COST OF LIVING INDEX" means the index known as the Consumer Price Index (Cost of Living Index) including fruit and vegetables and published by the Israeli Central Bureau of Statistics, including such index even if published by any other official Israeli institution, and also including every official index in substitution therefor, whether based on the same data on which the existing index is based or not. If such index be substituted by another index published by any such body or institution and such body or institution has not prescribed the relationship between the former and the substitute index, such relationship shall be prescribed by the Israeli Central Bureau of Statistics and, in the event such relationship has not been so prescribed, the Facility Agent shall determine the relationship between such index and the substitute index in consultation with economic experts selected by it and applied by the Facility Agent to its other linked accounts; 10.1.39. "COUNTERPARTY" means each party to a Material Contract set out in paragraphs (a), (c) and (d) of Schedule 5 (Material Contracts) hereto) and Bezeq or any successor providing equivalent interconnection services to Bezeq, in each case other than an Obligor; 10.1.40. "CURRENCY HEDGE PROVIDER" means any counterparty to any Currency Hedging Agreement entered into by Partner. 10.1.41. "CURRENCY HEDGING AGREEMENT" means any agreement entered into by Partner for the purposes of entering into one or more Currency Hedging Transactions. 10.1.42. "CURRENCY HEDGING TRANSACTION" includes any foreign exchange transaction, currency swap transaction, cross currency rate swap -10- transaction, currency option or other similar transaction (including any option with respect thereto and any combination in respect thereof); 10.1.43. "DANGEROUS SUBSTANCE" means any radioactive or electromagnetic emissions and any natural or artificial substance (whether in the form of a solid, liquid, gas or vapour) the generation, transportation, storage, treatment, use or disposal of which (whether alone or in combination with any other substance) and including (without limitation) any controlled, special, hazardous, toxic, radioactive or dangerous waste, gives rise to a risk of causing harm to man or any other living organism or damaging the Environment or public health; 10.1.44. "DEBENTURE" means the debenture dated 10 September 1998 between Partner and the Security Trustee, as amended; 10.1.45. "DEBT SERVICE" means, in relation to each Ratio Period. the sum of: (i) Financial Costs in respect of such Ratio Period; (ii) the scheduled repayments of principal under the Facilities (together with any Linkage Differentials (to the extent not taken into account in the Financial Costs in respect of any preceding Ratio Period (provided that such preceding Ratio Period commences from 1 January 2002 or thereafter)) in respect of such principal), in respect of such Ratio Period; and (iii) scheduled repayments of principal under Permitted Borrowings (together with any Linkage Differentials in respect of such principal), in respect of such Ratio Period; 10.1.46. "DEFAULT DATE" means the first date on which the Facility Agent serves a notice under clause 17.26 (Advances Due on Demand) below or the date after an Event of Default which an Instructing Group determines is the Default Date; 10.1.47. "DOLLAR AMOUNT" means at any time: (a) in relation to an Advance denominated in US Dollars, the outstanding amount of such Advance at such time; (b) in relation to an Advance denominated in NIS, the Dollar equivalent of the outstanding NIS amount of such Advance at such time, together, for the removal of doubt, with all Linkage Differentials on such Advance; (c) in relation to an Advance denominated in Euros, the Dollar equivalent of the outstanding Euro amount of such Advance at such time; -11- 10.1.48. "DORMANT COMPANY" means any Subsidiary of Partner designated as a dormant company provided that (and for so long only as) it does not trade (whether for itself or as agent for another) or does not own legally and/or beneficially any property or assets; 10.1.49. "DOUBLE TAXATION TREATY" means any convention or agreement between the government of Israel and any other government for the avoidance of double taxation; 10.1.50. "DRAWDOWN DATE" means, in respect of any Drawdown Request, the proposed date for the making of the relevant Advance as set out in the relevant Drawdown Request; 10.1.51. "DRAWDOWN REQUEST" means a notice substantially in the form set out in SCHEDULE 2 (Drawdown Request) hereto; 10.1.52. "DURATION PERIOD" means: (a) in relation to an Advance made under Facility A or Facility C, the period commencing on the date on which the relevant Advance is made and expiring on the expiry date designated in the relevant Drawdown Request; provided that: (i) such expiry date shall not be less than 12 (twelve) months after the date such Advance is to be made under the relevant Drawdown Request; (ii) such period is a period customary at the relevant Participating Bank, having regard to the currency, amount and type of Advance requested under the relevant Drawdown Request; (iii) in the case of an Advance under Facility A, such expiry date shall not be later than the Facility A Maturity Date and, in the case of an Advance under Facility C, such expiry date shall not be later than the Facility C Maturity Date; and (iv) such expiry date shall be the last Interest Payment Date for such Advance; and (b) in relation to an Advance made under Facility B, the period commencing on the date on which the relevant Advance is made and expiring on the expiry date designated in the relevant Drawdown Request; provided that: (i) such expiry date shall not be more than 12 (twelve) months after the date such Advance is to be made under the relevant Drawdown Request; (ii) such expiry date shall be the last Interest Payment Date for such Advance; (iii) such period is a period customary at the relevant Participating Bank, having regard to the currency, amount and -12- type of Advance requested under the relevant Drawdown Request; and (iv) such expiry date shall not be later than June 30, 2008; -13- 10.1.53. "EBITDA AFTER SAC" means, in respect of any Ratio Period: (1) the sum of the following, all as appearing in Partner's non-consolidated Accounts for such Ratio Period: (a) the net profit of Partner before extraordinary items; provided that, for the removal of doubt: (i) all expenses other than Capital Expenditure shall be costs for the purposes of determining EBITDA; and (ii) Capital Expenditure as referred to above does not include SAC; (b) the amount of Taxes set against the net profits of Partner in the Accounts and (without double counting) any provision by Partner for Taxes; (c) any amortisation and depreciation reflected in such Accounts; (d) any Net Financial Expenses, less: (2) any non-cash profits included in Partner's non- consolidated Accounts in respect of such Ratio Period. For the purposes of the aforegoing, "NET FINANCIAL EXPENSES" means, for any Ratio Period, the Financial Costs for such Ratio Period, less the Interest receivable for such Ratio Period (as certified by Partner's Auditors and specified in the notes to the Accounts to be delivered pursuant to the provisions of this Agreement); 10.1.54. "THE EFFECTIVE DATE" means 7 August 2000; 10.1.55. "ELBIT" means Elbit Limited, a company incorporated in Israel with registered number 52-002750-9; 10.1.56. "ENCUMBRANCE" means: (a) a mortgage, charge, pledge, lien or other security interest securing any obligation of any person, (b) any arrangement under which money or claims to, or the benefit of, a bank or other account may be set-off or made subject to a combination of accounts so as to effect payment of sums owed or payable to any person or (c) any other type of preferential arrangement (including title transfer and retention arrangements) having a similar effect; -14- 10.1.57. "ENVIRONMENT" means all, or any of, the following media, the air (including the air within buildings and the air within other natural or man-made structures above or below ground), water (including ground and surface water) and land (including surface and sub-surface soil); 10.1.58. "ENVIRONMENTAL CLAIM" means any claim by any person: (a) in respect of any loss or liability suffered or incurred by that person as a result of or in connection with any violation of Environmental Law; or (b) that arises as a result of or in connection with Environmental Contamination and that could give rise to any remedy or penalty (whether interim or final) that may be enforced or assessed by private or public legal action or administrative order or proceedings including any such claim that arises from injury to persons or property; 10.1.59. "ENVIRONMENTAL CONTAMINATION" includes each of the following and their consequences: (a) any release, emission, leakage or spillage of any Dangerous Substance at or from any site owned or occupied by any member of the Group or from any cell phone or accessory supplied by any member of the Group into any part of the Environment; or (b) any accident, fire, explosion or sudden event at any site owned or occupied by any member of the Group which is directly caused by or attributable to any Dangerous Substance; or (c) any other pollution of the Environment arising at or from any site owned or occupied by any member of the Group. For the purposes of this definition, for the removal of doubt, a site occupied by any member of the Group shall be deemed to include also any site on or in which an antenna for transmitting or receiving signals has been erected or placed by or on behalf of any member of the Group; 10.1.60. "ENVIRONMENTAL LAW" means all applicable laws and regulations concerning pollution, the Environment or Dangerous Substances; -15- 10.1.61. "ENVIRONMENTAL LICENCE" means any permit, licence, authorisation, consent or other approval required by any Environmental Law applicable to the Group; 10.1.62. "ESCROW ACCOUNT" means the account with such Israeli bank as Partner elects, with the prior consent of the Facility Agent (which consent shall only be given if an Encumbrance can be granted over such account in favour of the Security Trustee and no other Encumbrance exists over such account) in the name of Partner pledged in favour of the Security Trustee pursuant to the Debenture; 10.1.63. "EVENT OF DEFAULT" means any circumstances described as such in clause 17 (Default) below; 10.1.64. "EXCESS CASH FLOW" means, for any Ratio Period, EBITDA after SAC for such Ratio Period, less the following: (a) Taxes payable by Partner in respect of such Ratio Period; (b) Capital Expenditure paid during such Ratio Period; (c) all Interest payable (whether or not paid) on any Advance, Partner being deemed to have drawn all the Facilities in full, provided by a Participating Bank under the Facilities and commissions or other charges arising from any banking or other financial services provided by the Participating Banks to Partner for such Ratio Period, plus all Linkage Differentials and similar amounts payable, including accrued (whether or not paid) in respect of principal of all Advances in such Ratio Period to the extent such Linkage Differentials and similar amounts were not already taken into account for the purpose of computing Excess Cash Flow in a prior Ratio Period; (d) all scheduled payments (whether or not paid) of Advances, Partner being deemed to have drawn all the Facilities in full (including all Linkage Differentials in respect of such Advances), but without double accounting in respect of Linkage Differentials referred to in (c) above; and (e) all scheduled payments (whether or not paid) of Interest and principal in respect of all Permitted Borrowings (other than under the Facilities) for such Ratio Period, plus all Linkage Differentials and similar amounts payable, including accrued (whether or not paid) in respect of such Permitted Borrowings in -16- such Ratio Period to the extent such Linkage Differentials and similar amounts were not already taken into account for the purpose of computing Excess Cash Flow in a prior Ratio Period; (f) losses during the relevant Ratio Period constituting extraordinary items and payable in cash; 10.1.65. "FACILITIES" means Facility A, Facility B and Facility C and "FACILITY" means any one of them as the context so requires; 10.1.66. "FACILITY A" means the fixed-term Dollar, NIS and/or Euro loan facility granted to Partner pursuant to clause 2.1.1(a) below; 10.1.67. "FACILITY A MATURITY DATE" means 30 June 2008, or if the day determined in accordance with the aforegoing is not a Business Day, the immediately preceding Business Day; 10.1.68. "FACILITY AGENT" means BLL or any successor Facility Agent appointed in accordance with clause 18.10 (Successor Agent) below; 10.1.69. "FACILITY B" means the revolving Dollar, NIS and/or Euro loan facility granted to Partner pursuant to clause 2.1.1(b) below; 10.1.70. "FACILITY C" means the fixed-term NIS loan facility granted to Partner pursuant to clause 2.1.1(c) below; 10.1.71. "FACILITY C MATURITY DATE" means 30 June 2009; 10.1.72. "FACILITY DEBT COVER RATIO" means, in relation to each Ratio Period, EBITDA after SAC for such Ratio Period, divided by the aggregate Contributions as at the last day of the Ratio Period; 10.1.73. "FACILITY DOCUMENTS" means those documents listed in SCHEDULE 3 (Facility Documents); 10.1.74. "FACILITY OFFICE" means, in relation to a Finance Party, the office designated by it for service of notices in clause 37.2 (Manner of Delivery) below or such other address as may be designated by it, from time to time, to Partner and the Coordinating Agent for the purposes of this Agreement (or, in the case of a Transferee, at the end of the Transfer Certificate to which it is a party as Transferee). For the purposes of clause 14.1 (Mitigation) and clause 27.7 (No Increased Costs) below, a change in, or substitution of, a Facility -17- Office shall only be deemed to occur where such change or substitution is to an office located outside the State of Israel; 10.1.75. "FINANCE PARTY" means the Facility Agent, the Arranger, the Coordinating Agent, each Participating Bank and the Security Trustee; 10.1.76. "FINANCIAL COSTS" means, for any Ratio Period, all Interest expenses (whether or not capitalised) of Partner during such Ratio Period, as well as all other costs, expenses, commissions (including credit card commissions) and other charges of whatsoever nature appearing in the item "Financial Expenses" in the Accounts for such Ratio Period (all the above as certified by Partner's Auditors and specified in the notes to the Accounts to be delivered pursuant to the provisions of this Agreement); save for: (a) Interest accrued during such Ratio Period on Shareholder Loans which is not permitted to be paid pursuant to this Agreement; (b) amounts accrued during such Ratio Period in respect of the principal outstanding on the Senior Secured Notes, due 2010, issued by Partner on August 10, 2000, as a result of a change in the rate of exchange between the US Dollar and the NIS; and (c) all fees and expenses paid by Partner to the Participating Banks on or before 31 December 2000, pursuant to the terms of this Agreement, in respect of the Facilities and which were deducted during such Ratio Period; 10.1.77. "FINANCIAL YEAR" means in relation to Partner, the accounting year commencing on 1 January and ending on the following 31 December, or such other annual Accounting Period of Partner as Partner may, with the consent of an Instructing Group, designate as its accounting year; 10.1.78. "FIXED CHARGE COVERAGE RATIO" means for any Ratio Period: (a) EBITDA after SAC for such Ratio Period, divided by: (b) the sum of: (i) Debt Service for such Ratio Period; (ii) Capital Expenditure actually paid during such Ratio Period, less equity and/or loan capital and/or income not deriving from the ordinary course of Business of Partner; in each case received by Partner and designated at the time of such receipt, for use in financing such Capital Expenditure only, and in fact utilised for such designated Capital Expenditure during such Ratio Period; provided that, for the removal of doubt, loan capital as referred to herein shall not include any amount received by Partner -18- within the framework of the Facilities; and (iii) Tax payments actually made by Partner during such Ratio Period; 10.1.79. "GROUP" means Partner and its Subsidiaries from time to time; 10.1.80. "GUARANTOR" means each Additional Guarantor; 10.1.81. "GUARANTOR ACCESSION AGREEMENT" means an agreement substantially in the form of SCHEDULE 4 (Guarantor Accession Agreement) to this Agreement made pursuant to clause 26.1 (Additional Guarantors) below; 10.1.82. "HEDGING AGREEMENT" means any Interest Rate Hedging Agreements and any Currency Hedging Agreements. 10.1.83. "HEDGING TRANSACTIONS" means any Interest Rate Hedging Transactions and any Currency Hedging Transactions; 10.1.84. "HOLDING COMPANY" of a company or corporation means any company or corporation of which the first-mentioned company or corporation is a Subsidiary; 10.1.85. "HTL" means Telecommunications Limited, a company incorporated in Hong Kong under registered number 166461; 10.1.86. "HTL GROUP" means HTL and its Subsidiaries; 10.1.87. "HWL" means Hutchison Whampoa Limited, a company incorporated in Hong Kong under registered number 054532; 10.1.88. "HWL GROUP" means HWL and its Subsidiaries; 10.1.89. "HWL HEDGING SUBSIDIARY" means any wholly owned Subsidiary of HWL which may from time to time enter into Interest Rate Hedging Transactions with Partner in accordance with clause 18.29(h) (Hedging Agreements) below; 10.1.90. "IDB PERFORMANCE BOND" means the performance guarantee in the maximum amount of NIS, equal, in accordance with the representative rate of exchange of the US Dollar published by the Bank of Israel, known on the date of actual payment, to US $10,000,000 (ten million United States Dollars) issued or to be issued by Israel Discount Bank Ltd. in favour of the Ministry at the request of Partner; -19- 10.1.91. "IDB PERFORMANCE BOND COUNTER INDEMNITY" means an agreement entered into or to be entered into between Israel Discount Bank Ltd. and Partner, pursuant to which Partner undertakes to indemnify Israel Discount Bank Ltd. in respect of any amounts payable under or in connection with the IDB Performance Bond; 10.1.92. "INCREASED COSTS" shall bear the meaning ascribed thereto in clause 12.1 (Increased Costs) below; 10.1.93. "INDEBTEDNESS" means any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent; 10.1.94. "INSTRUCTING GROUP" means: (a) prior to any acceleration pursuant to clauses 17.25(c) (Acceleration) or (d) or clause 17.26 (Advances Due on Demand) below, but including with respect to a decision to declare such acceleration, a Participating Bank or group of Participating Banks whose Commitments as at the Commencement Date amount in aggregate to more than 67% (sixty-seven percent) of the aggregate Commitments; and (b) after a decision to accelerate as aforesaid, a Participating Bank or group of Participating Banks whose Contributions amount in aggregate to more than 67% (sixty-seven percent) of the aggregate Contributions; 10.1.95. "INSURANCE ADVISER" means Sedgwick Limited acting through its trading division Sedgwick Bankrisk; 10.1.96. "INSURANCE REPORT" means the insurance report dated 8 July 1998 prepared by the Insurance Adviser addressed to Chase Manhattan International Ltd. on behalf of the Banks and the Arrangers (as such terms were defined in the Original Facility Agreement); 10.1.97. "INTELLECTUAL PROPERTY RIGHTS" means all know-how, patents, trademarks, designs, trading names, copyrights and other intellectual property rights (in each case whether registered or not and including all applications for the same); 10.1.98. "INTERCONNECTION AGREEMENT" means each bilateral interconnection agreement to be entered into between Partner and each of Bezeq and the other telecommunications operators in Israel; 10.1.99. "INTEREST" means: -20- (a) interest and amounts in the nature of interest (including the interest element of finance leases, Linkage Differentials and any similar payment in respect of indexation in each case with respect to such interest); (b) prepayment penalties or premiums incurred in repaying or prepaying any Borrowing (including, for the avoidance of doubt, amounts payable pursuant to clause 19 (Broken Funding Indemnity) below)); (c) discount fees and acceptance fees payable or deducted in respect of any Borrowing (including all commissions payable in connection with any letter of credit); and (d) any net payment (or, if appropriate in the context, receipt) under any interest rate hedging agreement or instrument, taking into account any premiums payable; -21- 10.1.100. "INTEREST PAYMENT DATE" means the last day of an Interest Period; 10.1.101. "INTEREST PERIOD" means: (i) in relation to an Advance under Facility A, successive periods of 3 (three) months, during the Availability Period Facility A, and successive Quarters during the period after the Availability Period Facility A; provided that any Interest Period commencing before the last day of the Availability Period Facility A shall end no later than the last day of the Availability Period Facility A; (ii) in relation to an Advance under Facility B, the period commencing on the date of the making of such Advance and ending on the date on which Interest of the type payable on such Advance would be paid or capitalised in accordance with the customary practice of the relevant Participating Bank; and (iii) in relation to an Advance under Facility C, successive periods of 3 (three) months during the Availability Period Facility C and successive Quarters during the period after the Availability Period Facility C; provided that any Interest Period commencing before the last day of the Availability Period Facility C shall end no later than the last day of the Availability Period Facility C; provided that: (a) each subsequent Interest Period shall commence on the expiry of the previous one; (b) any Interest Period which would otherwise end on a non-Business Day shall end on the preceding Business Day; (c) an Interest Period for any Advance shall not extend beyond: (A) the Repayment Date for such Advance; or (B) the Termination Date applicable to its Facility; and (d) in relation to any sums due and payable but unpaid by an Obligor under the Facility Documents, "INTEREST PERIOD" shall mean each period determined in accordance with clause 8.3.1 below; 10.1.102. "INTEREST RATE HEDGE PROVIDER" means any counterparty to any Interest Rate Hedging Agreement entered into by Partner; -22- 10.1.103. "INTEREST RATE HEDGING AGREEMENT" means any agreement entered into by Partner for the purposes of entering into one or more Interest Rate Hedging Transactions; 10.1.104. "INTEREST RATE HEDGING TRANSACTION" includes any rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, interest rate option, cap transaction, floor transaction, collar transaction or other similar transaction (including any option with respect thereto and any combination in respect thereof); 10.1.105. "LATEST DRAWDOWN REQUEST DATE" means: (a) subject to paragraph (c) below, in respect of an Advance denominated in NIS, the rate of Interest on which is based on an on-call rate, prime rate or a fixed unlinked rate: (i) for Advances, the aggregate amount of which for any Participating Bank on any Drawdown Date does not exceed the NIS equivalent of US $50,000,000 (fifty million United States Dollars), the date falling 5 (five) Business Days prior to such Drawdown Date; and (ii) for Advances, the aggregate amount of which for any Participating Bank on any Drawdown Date equals or exceeds the NIS equivalent of US $50,000,000 (fifty million United States Dollars), the date falling 10 (ten) Business Days prior to such Drawdown Date; (b) in respect of an Advance denominated in NIS, the rate of Interest on which is based on a fixed linked rate (including the Bond Rate): (i) for Advances, the aggregate amount of which for any Participating Bank on any Drawdown Date does not exceed the NIS equivalent of US $25,000,000 (twenty-five million United States Dollars), the date falling 5 (five) Business Days prior to such Drawdown Date; (ii) for Advances, the aggregate amount of which for any Participating Bank on any Drawdown Date equals or exceeds the NIS equivalent of US $25,000,000 (twenty-five million United States Dollars) but does not exceed the NIS equivalent of US $50,000,000 (fifty million United States Dollars), the date falling 10 (ten) Business Days prior to such Drawdown Date; and (iii) for Advances, the aggregate amount of which for any Participating Bank on any Drawdown Date exceeds the NIS equivalent of US $50,000,000 (fifty million United States Dollars), the date falling 20 (twenty) Business Days prior to such Drawdown Date; -23- (c) in respect of an Advance under Facility B denominated in NIS, the Interest rate on which is based on an on-call rate or prime rate: (i) for Advances, the aggregate amount of which for any Participating Bank on any Drawdown Date does not exceed the NIS equivalent of US $25,000,000 (twenty-five million United States Dollars), such Drawdown Date; (ii) for Advances, the aggregate amount of which for any Participating Bank on any Drawdown Date equals or exceeds the NIS equivalent of US $25,000,000 (twenty-five million United States Dollars), the Business Day prior to such Drawdown Date; (d) in the case of an Advance denominated in US Dollars or Euros:(i) for Advances, the aggregate amount of which for any Participating Bank on any Drawdown Date does not exceed the NIS equivalent of US $10,000,000 (ten million United States Dollars), such Drawdown Date; (ii) for Advances, the aggregate amount of which for any Participating Bank on any Drawdown Date equals or exceeds the NIS equivalent of US $10,000,000 (ten million United States Dollars) but does not exceed the NIS equivalent of US $25,000,000 (twenty-five million United States Dollars), the date falling 3 (three) Business Days prior to such Drawdown Date; (iii) for Advances, the aggregate amount of which for any Participating Bank on any Drawdown Date equals or exceeds the NIS equivalent of US $25,000,000 (twenty-five million United States Dollars) but does not exceed the NIS equivalent of US $50,000,000 (fifty million United States Dollars), the date falling 5 (five) Business Days prior to such Drawdown Date; and (iv) for Advances, the aggregate amount of which for any Participating Bank on any Drawdown Date equals or exceeds the NIS equivalent of US $50,000,000 (fifty million United States Dollars), the date falling 10 (ten) Business Days prior to such Drawdown Date; 10.1.106. "LIBOR" means, with respect to each Advance, the rate per annum (rounded upward, if necessary, to the nearest whole multiple of 1/8% (one-eight of one percent)) for Dollar deposits or Euro deposits, as the case may be, for a period equal to 1 (one) month, 3 (three) months, 6 (six) months or 1 (one) year (as selected by Partner in the Drawdown Request for such Advance (provided that, the period selected as aforesaid does not exceed the term of such Advance) offered in the London Interbank market, as quoted at or about 11:00 a.m. (London time) on the Business Day falling 2 (two) Business Days prior to the Drawdown Date for such Advance and if the period of LIBOR selected by Partner as aforesaid is shorter than the term of such -24- Advance, then also on the Business Day falling 2 (two) Business Days prior to each 1 (one) month (in the case of selection of a period of 1 (one) month) or, in other cases, each subsequent Interest Period, falling within the term of such Advance following expiry of each period selected by Partner as aforesaid ("THE INTEREST DETERMINATION DATE") on the display designated as page LIBOR 01 to subscribers of the REUTERS service ("REUTERS") or, in the absence of such page or pages, or if Reuters shall, for any reason whatsoever, amend, change or otherwise alter the data basis or the reference banks used by it on the date of signature of this Agreement, for quotations under said page LIBOR 01 , the rate of Interest as quoted at or about 11:00 a.m. London time on the relevant Interest Determination Date on such other page or pages of Reuters as shall be determined by an Instructing Group for a period equal to such 1 (one), 3 (three), 6 (six) or 12 (twelve) month period, as the case may be (rounded upward, if necessary, to the nearest whole multiple of 1/8% (one-eight of one percent)); 10.1.107. "LICENCE" means the Licence dated 7 April, 1998 (and terminating on 1 February 2022) granted to Partner for providing mobile radio telephone services using the cellular method together with a permit to install and use equipment in the network and frequency allocation as, without derogating from clause 16.26 (Licence) below or any other provision hereof, may be amended from time to time; 10.1.108. "LINKAGE DIFFERENTIALS" means any amount to be added to the principal of, or Interest in respect of, any Advance denominated in NIS as a result of any increase in the Cost of Living Index; 10.1.109. "LOAN" means, at any time, the aggregate Dollar Amount of Loan A, Loan B and Loan C for the time being outstanding hereunder or any of them as the context so requires and "LOANS" shall be construed to mean each of them respectively; 10.1.110. "LOAN A" means at any time, the aggregate Dollar Amount for the time being outstanding in relation to all Advances under Facility A (including, for the removal of doubt, all Linkage Differentials, if any, on such Advances); 10.1.111. "LOAN B" means at any time, the aggregate Dollar Amount for the time being outstanding in relation to all Advances under Facility B (including, for the removal of doubt, all Linkage Differentials, if any, on such Advances); -25- 10.1.112. "LOAN C" means, at any time, the aggregate Dollar Amount for the time being outstanding in relation to all Advances under Facility C (including, for the removal of doubt, all Linkage Differentials, if any, on such Advances); 10.1.113. "MAINTENANCE AGREEMENT" means the system services contract dated 29 May 1998 between Partner and Ericsson Radio Systems A.B. as annexed to the Principal Supplier Contract; 10.1.114. "MARGIN" means: (A) with respect to Facility A and Facility B: (a) in relation to the Availability Period Facility A, 0.9% (nought point nine percent) per annum; (b) in relation to the period from the expiry of the Availability Period Facility A until the date on which all amounts owing under the Facilities have been repaid, 0.9% (nought point nine percent) per annum; provided that: (1) in the event that for any one year Ratio Period: (I) each of the Facility Debt Cover Ratio, Total Debt Cover Ratio, Fixed Charge Coverage Ratio and ADSCR for such one year Ratio Period equals at least 135% (one hundred and thirty-five percent) of such minimum ratio required for such one year Ratio Period pursuant to clause 16.32 below; and (II) by the end of such Ratio Period, Partner shall have repaid (disregarding, for this purpose, any amount which has been repaid or prepaid and is capable of being reborrowed under the terms of this Agreement) to the Participating Banks on account of the Facilities, an amount equal to at least 50% (fifty percent) of the Total Commitments, then, for the period from the Interest Payment Date following receipt by the Participating Banks of the Accounts for such year and confirmation by the Coordinating Agent to Partner that the Margin may be reduced in the manner set out in this subclause (A) below until the date of publication of the Accounts for the next succeeding one year Ratio Period only, the Margin shall be 0.7% (nought point seven percent); and (2) in the event that for any one year Ratio Period: (I) each of the Facility Debt Cover Ratio, Total Debt Cover Ratio, Fixed Charge Coverage Ratio and ADSCR for such one year Ratio Period equals at least 175% (one hundred and seventy-five -26- percent) of such minimum ratio required for such one year Ratio Period pursuant to clause 16.32 below; and (II) by the end of such Ratio Period, Partner shall have repaid (disregarding, for this purpose, any amount which has been repaid or prepaid and is capable of being reborrowed under the terms of this Agreement) to the Participating Banks on account of the Facilities, an amount equal to at least 50% (fifty percent) of the Total Commitments, then, for the period from the Interest Payment Date following receipt by the Participating Banks of the Accounts for such year and confirmation by the Coordinating Agent to Partner that the Margin may be reduced in the manner set out in this subclause (A) below until the date of publication of the Accounts for the next succeeding one year Ratio Period only, the Margin shall be 0.45% (nought point four five percent). -27- Provided that: (i) if and for so long as an Event of Default (including the non-payment of any amount when due) has occurred and is continuing, the Margin during such period shall be 2.9% (two point nine) percent per annum; provided that, if such Event of Default does not relate to non-payment of any amount when due and the Participating Banks waive their rights to declare the Advances due and payable as a result of such Event of Default, the Margin, for so long as such Event of Default is continuing, shall be 1.9% (one point nine percent) per annum; (ii) for the removal of doubt, the Margin may increase and decrease in accordance with the above; and (iii) with regard to the Margin for the one year Ratio Period of 2007 and, thereafter, the Margin shall not be decreased unless it shall have been decreased for the one year Ratio Period of 2006. The Coordinating Agent shall, within 10 (ten) Business Days after receipt by it from Partner of the Accounts for any one year Ratio Period, together with all information required to determine the ratios referred to above, deliver to Partner, with a copy to the Participating Banks, a notice confirming that the Margin shall be decreased, increased or remain constant, all in accordance with (b) above; provided that, if it transpires after delivery of confirmation by the Coordinating Agent as aforesaid that the Margin as specified in such confirmation is in fact incorrect, then the correct Margin (as determined in accordance with (b) above) shall be applied retroactively with effect from the first Interest Payment Date in respect of which the correct Margin should have been applicable in accordance with (b) above and each of the Participating Banks shall reimburse Partner or, as the case may be, Partner shall pay any shortfall to each of the Participating Banks, resulting from such incorrect Margin as aforesaid; -28- and (B) with respect to Facility C, 1.25% (one point two five percent) per annum; provided that, if and for so long as an Event of Default (including the non-payment of any amount when due) has occurred and is continuing, the Margin during such period shall be 3.25% (three point two five percent) per annum; provided further that, if such Event of Default does not relate to non-payment of any amount when due and the Participating Banks waive their rights to declare the Advances due and payable as a result of such Event of Default, the Margin, for so long as such Event of Default is continuing, shall be 2.25% (two point two five percent) per annum; 10.1.115. "MATAV" means Matav-Cable Systems Media Limited, a company incorporated in Israel with registered number 52-004007-2; 10.1.116. "MATERIAL ADVERSE EFFECT" means any effect which is or is likely to be materially adverse to: (a) the business or financial condition of the Group taken as a whole; or (b) the ability of any Obligor to perform its obligations in any material respect under any of the Facility Documents; 10.1.117. "MATERIAL CONTRACTS" means those Material Contracts set out in SCHEDULE 5 (Material Contracts) hereto; 10.1.118. "MINISTRY" means the Ministry of Communications of the Israeli Government; 10.1.119. "NET PROCEEDS" means the aggregate value of consideration received by any Obligor or Obligors in respect of a sale, transfer, loan or other disposal of assets (including shares in other Group members) from an Obligor to any third party which is not an Obligor after deduction of: (a) all amounts paid or provided for or on account of Taxes applicable to, or to any gain resulting from, the disposal or the discharge of any liability secured on the relevant assets; and (b) all costs, fees, expenses and the like properly incurred by continuing members of the Group in arranging and effecting that disposal; -29- 10.1.120. "NETWORK" means any network operated by the Group and operated or run by it pursuant to the Licence (including all apparatus, equipment and telecommunication systems of every description which it is authorised to operate or run under the Licence); 10.1.121. "NUMBER OF SUBSCRIBERS" means, for any Ratio Period, the actual number of Partner subscribers as at the last day of such Ratio Period (for the removal of doubt, disregarding any subscriber which shall have ceased to be a subscriber prior to the end of such Ratio Period), as certified in writing by the Auditors; 10.1.122. "OBLIGOR" means Partner and each Guarantor; 10.1.123. "ORIGINAL DOLLAR AMOUNT" means, in relation to: (a) an Advance denominated in US Dollars, the amount thereof as at the date of the making of such Advance; and (b) an Advance denominated in NIS or Euros, the Dollar equivalent thereof as at the date of the making of such Advance; 10.1.124. "ORIGINAL FACILITY AGREEMENT" means the Facility Agreement dated 13 August 1998 (as amended and restated by an Amendment and Waiver Letter dated 21 October 1999 and by a letter dated 20 June 2000, but not by the Amending and Rescheduling Agreement or any subsequent amendment) between, inter alia, Partner and the Banks; 10.1.125. "PARTICIPATING BANKS" means: (a) BLL, Israel Discount Bank Ltd., Bank Hapoalim, The First International Bank of Israel Ltd., United Mizrahi Bank Ltd. Mercantile Discount Bank Ltd. and Citibank N.A.; and (b) any financial institution which has become a party to this Agreement in accordance with the provisions of this Agreement (in each case, other than one which has ceased to be a party to this Agreement in accordance with the terms hereof and the term "PARTICIPATING BANK" shall mean any of them) and any reference to a "Participating Bank" shall, unless the context otherwise requires, be deemed to include reference to such Participating Bank, in its capacity as a Secured Interest Rate Hedge Provider and, in the case of Israel -30- Discount Bank Ltd., as the Counterparty to the IDB Performance Bond Counter Indemnity; 10.1.126. "PERMITTED BORROWING" means: (a) Borrowing arising pursuant to the Facility Documents; (b) Permitted Loan Capital; (c) Borrowing or otherwise incurring Indebtedness by Partner from banks and/or other financial institutions of up to US $50,000,000 (fifty million United States Dollars), otherwise than as permitted pursuant to paragraphs (a), (b), (d)-(f) (inclusive) in respect of loans and credits, performance guarantees and letters of credit; provided that, the aggregate amount of such loans and credits do not exceed US $25,000,000 (twenty-five million United States Dollars) or its equivalent at any time; (d) Borrowing arising pursuant to Hedging Transactions permitted pursuant to this Agreement; (e) Borrowing created or subsisting with the prior written consent of an Instructing Group; and (f) Borrowing arising pursuant to the IDB Performance Bond Counter Indemnity; provided that, with respect to Borrowings referred to in paragraphs (c), (d) (other than with respect to Borrowings pursuant to Interest Rate Hedging Agreements with -31- counterparties which are Participating Banks and are thus secured under the Security Documents) and (e) above: (i) all such Borrowings received from any of the Participating Banks shall be subordinated to the Facilities as to collateral but may be secured by way of second ranking collateral over those assets secured by the Security Documents (ranking subordinate to the rights of the Participating Banks, Israel Discount Bank Ltd. (in respect of Borrowing arising pursuant to the IDB Performance Bond Counter Indemnity) and the Security Trustee in respect of the collateral created pursuant to the Security Documents); and (ii) Borrowings as aforesaid received from any source other than from a Participating Bank shall not be secured by any collateral whatsoever; (iii) no payment shall be made in respect of Borrowings referred to in paragraphs (c) (other than with respect to performance guarantees and letters of credit) and (e) above unless the conditions referred to in (b), (c), (d) and (f) of clause 16.14 (Restricted Distribution) below (provided that, for this purpose, the words "Potential Event of Default" shall be deleted from (f) of the definition of "Permitted Distribution" in clause 16.14 (Restricted Distribution) below) are fulfilled, it being agreed that any such payment, for the purpose hereof, is deemed to be a distribution for the purpose of clause 16.14 (Restricted Distribution) below; and (iv) Partner shall notify all providers of such Borrowings of the subordination conditions referred to in paragraphs (i) to (iii) (inclusive) above; 10.1.127. "PERMITTED DISPOSALS" means: (a) disposals in the ordinary course of business on or on terms no less favourable to the Group than arm's-length terms; (b) disposals of assets in exchange for or for investment in other assets performing substantially the same function which are comparable or superior as to type, value and quality; (c) (i) disposals of shares of a Subsidiary on arm's length terms where the business of that Subsidiary is not carried on -32- pursuant to the Licence or required for the efficient operation of the business of an Obligor and such business has been, or is in the process of being, terminated; (ii)disposals of surplus, obsolete or redundant plant and equipment or other assets, or of land or buildings in connection with the termination of any business or operation not carried on pursuant to the Licence or not required for the efficient operation of its business, in each case on arm's length terms; (d) the expenditure of cash in payment for assets or services acquired on arm's length terms in the course of its business carried on in compliance with the terms of the Facility Documents; (e) the payment of Permitted Distributions in compliance with the Facility Documents; (f) the disposal of Intellectual Property Rights, in compliance with clause 16.16 (Intellectual Property Rights) below; (g) disposals in connection with sale and leaseback transactions permitted by clause 16.7 (Sale and Leaseback) below; (h) disposal of assets on arm's length terms not otherwise permitted pursuant to (a) to (g) (inclusive), the Net Proceeds of which aggregated with the Net Proceeds of all other such disposals in any annual Accounting Period do not exceed US $3,000,000 (three million United States Dollars) or its equivalent; or (i) any other disposal with the prior written consent of the Facility Agent (acting on the instructions of an Instructing Group); 10.1.128. "PERMITTED DISTRIBUTIONS" shall bear the meaning assigned to such term in clause 16.14 (Restricted Distributions) below; 10.1.129. "PERMITTED ENCUMBRANCES" means any Encumbrance: (a) constituted or evidenced by the Security Documents; (b) arising by operation of law in the ordinary course of business; -33- (c) over goods and documents of title to goods arising in the ordinary course of letter of credit transactions entered into in the ordinary course of trade and not prohibited under the Facility Documents; (d) existing at the time of acquisition on or over any asset acquired by it in the ordinary course of business on arm's length terms after the Effective Date, where such Encumbrance was not created in contemplation of, or in connection with, the acquisition, provided always that the amount secured by such Encumbrance: (i) if a Borrowing, is a Permitted Borrowing; and (ii) shall not increase after the date of acquisition; (e) constituting operating leases or hire purchase arrangements affecting assets of any Obligor as permitted by the Facility Documents; (f) rising by way of rights of set-off arising by operation of law; (g) arising in relation to the netting of bank account balances; (h) arising by way of any retention of title of goods supplied where such retention is agreed in the ordinary course of its business; (i) created (other than by way of a floating charge) over specific assets or rights otherwise than pursuant to paragraphs (a) to (h) above (inclusive) securing Borrowings not exceeding an aggregate amount of US $1,000,000 (one million United States Dollars) (or its equivalent in other currencies); (j) created, to the extent permitted, under paragraph (i) of the definition of "Permitted Borrowings" as referred to in clause 1.1.126 above; 10.1.130. "PERMITTED INVESTMENTS" means investments in the following: (a) a demand or time deposit of any Participating Bank or any other depositary institution or trust company whose short term unsecured obligations are rated at least "A1" by Standard & Poor's ("S&P") or at least "P1" by Moody's Investors Service Inc. ("MOODY'S"); -34- (b) commercial paper issued by any Participating Bank or rated on the date of acquisition thereof at least "A1" by S&P or at least "P1" by Moody's; (c) bonds, notes and/or securities issued or guaranteed by either the Government of Israel or the Government of the United States of America; provided that, any investment made pursuant to paragraphs (a) and (b) above: (i) in or guaranteed by a single bank or other body corporate in excess of US $20,000,000 (twenty million United States Dollars) shall not be permitted provided that this paragraph (i) shall not apply to deposits; and (ii) shall be denominated in either NIS or US Dollars; 10.1.131. "PERMITTED LOAN CAPITAL" means the aggregate amount of Shareholder Loans and debentures (including, notes and other similar debt instruments) issued privately or publicly by Partner, all subject to the following conditions: (a) such Shareholder Loans and debentures shall be subordinated to the rights of the Participating Banks under the Facilities and to the rights of the Participating Banks with respect to Borrowings referred to in clause 1.1.126(c), (d), (e) and (f), with respect to principal, Interest and all other amounts payable under this Agreement, such subordination, in the case of the debentures, to be on terms and conditions satisfactory to an Instructing Group and, in the case of the Shareholder Loans, to be on the terms and conditions set out in SCHEDULE 6 (Shareholder Loans) hereto; (b) the aggregate maximum Dollar amount (or if not denominated in US Dollars, the Dollar equivalent thereof (from time to time)) of such debentures shall at no time exceed US $300,000,000 (three hundred million United States Dollars); (c) the terms and conditions of such debentures (including relating to covenants) shall be subject to the prior written approval of an Instructing Group, given through the Facility Agent. The Participating Banks shall be entitled to withhold their approval of any such terms and conditions in their sole discretion, provided that, if an Instructing Group is reasonably satisfied that -35- all of the restrictions imposed on Partner under the proposed terms and conditions of such debentures are less harsh to Partner than those applying under this Agreement and the subordination of such debentures is on terms and conditions satisfactory to an Instructing Group as referred to in (a) above, then the Participating Banks shall, subject to compliance with the other provisions of this clause 1.1.131, consent thereto. The Participating Banks shall, within 10 (ten) Business Days of receipt of documentation relating to the debentures as aforesaid, which includes all the terms and conditions of such debentures, respond to a request from Partner for approval of such terms and conditions; (d) such Shareholder Loans and debentures shall: (i) not contain any financial covenants, save for a covenant enabling Partner to incur additional indebtedness under such Shareholder Loans and debentures (subject at all times to the maximum amount specified in (b) above and, for the removal of doubt, subject at all times to the provisions of this Agreement restricting the ability of Partner to incur Indebtedness), in the event that the ratio of Partner's aggregate Indebtedness to its consolidated EBITDA for its most recent 4 (four) fiscal Quarters or for its most recent 2 (two) fiscal Quarters (annualised) meets the minimum ratio specified in such Shareholder Loans or debentures; and (ii)provide that if an event of default shall occur under such debentures, no amount shall be payable by Partner under the debentures until such time as all amounts owing by Partner under the Facilities have been paid in full; (e) save by way of Permitted Distribution, no repayment of whatsoever nature on account of Interest or principal of any such Shareholder Loans or principal of any such debentures shall be made prior to full payment of all amounts owing by Partner under the Facilities and of all amounts owing to the Participating Banks with respect to Borrowings referred to in clause 1.1.126(c), (d), (e) and (f); (f) immediately following issue of any such debentures and thereafter from time to time, Partner shall deduct from the proceeds of each such debentures and deposit in an account -36- ("THE RESERVE ACCOUNT") with one of the Participating Banks, duly pledged in favour of the Security Trustee (as trustee for itself and the Secured Creditors pursuant to the Debenture), as security for payment of all amounts under the Facilities, such amounts so that at all times the Reserve Account contains an aggregate amount equal to scheduled Interest payments in respect of such debentures for the immediately following 12 (twelve) month period, all the aforegoing until the earlier of: (i) 31 December 2003; or (ii) the date of receipt by the Participating Banks of Accounts for the first one year Ratio Period (if any) in respect of which all the conditions have been met for reducing the Margin with respect to Facility A and Facility B to 0.45% (nought point four five percent) per annum, in accordance with clause 1.1.114(A)(b) above; and (g) any such Shareholder Loans shall be subordinated to any such debentures as aforesaid in this clause 1.1.131, on terms and conditions satisfactory to an Instructing Group; 10.1.132. "PERMITTED SOURCES" means Permitted Borrowings referred to in paragraphs (b), (c) and (e) of the definition of "Permitted Borrowings", the proceeds from the issue by Partner of share capital and Excess Cash Flow; 10.1.133. "POTENTIAL EVENT OF DEFAULT" means any event which would (but for the passage of time, the giving of notice, the making of any determination hereunder or any combination thereof in each case as specified in clause 17 (Default) below) be an Event of Default; 10.1.134. "PRINCIPAL SUPPLIER CONTRACT" means the turnkey contract between Partner and Ericsson Radio Systems A.B. dated 29 May 1998 for the provision of the transmission and switching equipment, cell site construction and value added services platform and including, for the avoidance of doubt, the terms and conditions of civil works annexed thereto; 10.1.135. "PROPORTION" means, in relation to a Participating Bank at any time, the proportion borne by its Contribution to the aggregate Contributions outstanding at such time or, as the case may be, its Contribution with respect to Facility A, Facility B or Facility C, as the context requires, to the aggregate Contributions under Facility A, Facility B or Facility C at such time; -37- 10.1.136. "QUARTER" means each period commencing on the day after a Quarter Day and ending on the next following Quarter Day; 10.1.137. "QUARTER DAY" means 31 March, 30 June, 30 September and 31 December in any year and "QUARTER DAY" means any of them; 10.1.138. "RATIO PERIOD" means: (i) each period of 6 (six) calendar months ending on June 30, during the period of this Agreement; and (ii) each period of 1 (one) calendar year during the period of this Agreement; the periods referred to in (i) are also referred to as "SIX MONTH RATIO PERIODS" and the periods referred to in (ii) are also referred to as "ONE YEAR RATIO PERIODS"; 10.1.139. "REPAYMENT DATE" means in relation to an Advance, the date on which the Duration Period for such Advance expires; 10.1.140. "REPRESENTATIVE RATE" means, with respect to any currency other than NIS, the representative rate of exchange of the NIS and such currency, last published by the Bank of Israel immediately prior to the relevant date of payment or calculation (as the case may be) and, if the Bank of Israel shall cease to publish a representative rate, then any other rate of exchange of the NIS and such currency, officially published which comes in place of such representative rate, last published immediately prior to the relevant date of payment or calculation (as the case may be) and in the absence of any such official rate, then the average of the selling and buying rates of exchange of such currency, for NIS (for cheques and remittances) prevailing at the Facility Agent at the end of the last Business Day prior to the relevant date of payment or calculation (as the case may be); 10.1.141. "RESERVATIONS" means the reservations set out in SCHEDULE 7 (Reservations); 10.1.142. "RESERVE ACCOUNT" shall have the meaning ascribed to such term in clause 1.1.131(f) above; 10.1.143. "RESTRICTED PERSON" means: (a) the Shareholders, any Affiliate of a Shareholder or any partnership in which any of the Shareholders or any of their Affiliates is a partner (either directly or through any intermediate partnerships); or -38- (b) any person of which a Shareholder is an Affiliate or any partnership in which any such person is a partner (either directly or through intermediate partnerships); or (c) any Subordinated Creditor or any Affiliate of a Subordinated Creditor or any partnership in which a Subordinated Creditor or any of their Affiliates is a partner (either directly or through any intermediate partnerships); 10.1.144. "RESTRICTED PURCHASE" means any payment (whether in cash, property, securities or otherwise) on account of the purchase, redemption, reduction or other acquisition or retirement of any of the share capital of any member of the Group not held by a member of the Group; 10.1.145. "SAC" means, for any Ratio Period, Partner's subscriber acquisition costs paid or accrued during such Ratio Period, being the sum of: (i) the costs paid or accrued during such Ratio Period of acquisition by Partner of handsets and accessories, less revenues received or receivable by Partner during such Ratio Period from the sale of such handsets and accessories; (ii) dealers' commissions and other payments of a similar nature paid or accrued during such Ratio Period in respect of the sale of handsets and accessories; and (iii) preparation and distribution costs paid or accrued during such Ratio Period for handsets and accessories; 10.1.146. "SECURED CREDITORS" means the Security Trustee, the Facility Agent, the Coordinating Agent, the Participating Banks, the Arranger, Israel Discount Bank Ltd. (in respect of the IDB Performance Bond Counter Indemnity), any Secured Interest Rate Hedge Provider and any other persons who shall have acceded to the Security Trust Deed (other than a party which has ceased to be a party thereto in accordance with the terms of the Security Trust Deed); 10.1.147. "SECURED INTEREST RATE HEDGE PROVIDER" shall bear the meaning assigned to such term in clause 16.29(d) (Hedging Agreements) below; 10.1.148. "SECURED INTEREST RATE HEDGING AGREEMENT" means each Interest Rate Hedging Agreement where the counterparty is a Participating Bank; -39- 10.1.149. "SECURITY DOCUMENTS" means those documents listed in paragraphs (a)-(f), or contemplated by paragraph (g), of SCHEDULE 8 (Security Documents); 10.1.150. "SECURITY TRUST DEED" means the security trust and intercreditor agreement dated 18 August 1998; 10.1.151. "SHAREHOLDER LOANS" means the aggregate amount of subordinated debt made available by way of loans from the Shareholders (or any Affiliate thereof) from time to time to Partner, which loans, in each case, are subordinated in accordance with the provisions of Schedule 6 (Shareholder Loans) hereto; 10.1.152. "SHAREHOLDERS" means the shareholders in Partner listed in SCHEDULE 9 (Principal Shareholders in Partner) hereto or their permitted successors or assigns (as permitted pursuant to the terms of the Facility Documents); 10.1.153. "SHAREHOLDERS AGREEMENT" means the relationship agreement between the shareholders of Partner dated 10 October, 1999; 10.1.154. "SHARE PLEDGES" means the pledges over shares and Shareholder Loans granted by each of the Shareholders in favour of the Security Trustee prior to the Commencement Date, together with any other pledge given by any Shareholder or any Affiliate at any time in favour of the Security Trustee pursuant to the terms of any Facility Document and "SHARE PLEDGE" means any of them; 10.1.155. "STRATEGIC INVESTOR" shall bear the meaning ascribed to such term in clause 16.15 (Share Capital) below; 10.1.156. "SUBORDINATED CREDITOR" means any provider of Subordinated Debt; 10.1.157. "SUBORDINATED DEBT" means Borrowing made available by any person (other than Shareholders or their respective Affiliates) from time to time to any Obligor which is subordinated to the Facilities and all other obligations secured under the Security Documents on terms and conditions reasonably satisfactory to the Facility Agent (acting on the instructions of an Instructing Group) (including (if necessary) any consequential amendments approved by an Instructing Group to the financial ratios and covenants set out in this Agreement occasioned by the nature of such Subordinated Debt) other than Shareholder Loans; -40- 10.1.158. "SUBSIDIARY" of a company or corporation means any company or corporation: (a) which is controlled, directly or indirectly, by the first-mentioned company or corporation; (b) at least half the issued share capital of which is beneficially owned, directly or indirectly, by the first-mentioned company or corporation; or (c) which is a Subsidiary of another Subsidiary of the first-mentioned company or corporation and, for these purposes, a company or corporation shall be treated as being controlled by another if that other company or corporation is able to direct its affairs and/or to control the composition of its board of directors or equivalent body; 10.1.159. "SUPPLIER CONTRACTS" means the Principal Supplier Contract and the Maintenance Agreement and "SUPPLIER CONTRACT" means any of them; 10.1.160. "TAX ON OVERALL NET INCOME" of a person shall be construed as a reference to Tax (other than Tax deducted or withheld from any payment) imposed on that person by any jurisdiction on: (a) the net income, profits or gains of that person worldwide; or (b) such of its income, profits or gains as arise in or relate to the jurisdiction in which it is resident or in which its principal office (and/or its Facility Office) is located; 10.1.161. "TAXES" means all income and other taxes and levies, imposts, duties, charges, deductions and withholdings in the nature or on account of tax together with interest thereon and penalties and fees with respect thereto, if any, and any payments made on or in respect thereof, and "TAX" and "TAXATION" shall be construed accordingly; 10.1.162. "TELECOMMUNICATIONS LAWS" means the Telecommunications Law 1982 of Israel (as amended) and all other Israeli laws, statutes, regulations and judgments and all other laws having effect in Israel relating to telecommunications applicable to Partner and/or the business carried on by Partner; -41- 10.1.163. "TERMINATION DATE" means: (a) in relation to Facility A, the Facility A Maturity Date or, if earlier, the date upon which the Available Facility A Commitment for each of the Participating Banks is cancelled in full or reduced to zero; (b) in relation to Facility B, 30 June 2008 or, if earlier, the date upon which the Available Facility B Commitment for each of the Participating Banks is cancelled in full or reduced to zero; and (c) in relation to Facility C, the Facility C Maturity Date or, if earlier, the date upon which the Available Facility C Commitment for each of the Participating Banks is cancelled in full or reduced to zero; 10.1.164. "TOTAL COMMITMENTS" means the aggregate Commitments of all the Participating Banks for all the Facilities; -42- 10.1.165. "TOTAL DEBT" means, for any Ratio Period, the sum of: (i) the sum of the aggregate Contributions and outstanding Interest under the Facilities, both as at the last day of the Ratio Period; (ii) the excess (if any) of supplier's credit over current assets, as appearing in the Accounts for such Ratio Period. For the removal of doubt, nothing herein contained shall derogate from the provisions of this Agreement prohibiting Borrowing, other than Permitted Borrowing; and (iii) the balance on the last day of the Ratio Period of: (a) all Permitted Borrowings (other than as referred to in clause 1.1.126(d) above and other than Shareholder Loans (including, for the avoidance of doubt, any Linkage Differentials in respect of such balance)) and any Interest or other amounts payable on account of such Permitted Borrowings, all or any part of the principal of which Permitted Borrowings is payable or repayable by Partner prior to the date by which the Facilities shall have been repaid in full pursuant to clause 5 (Repayment) below; and (b) that amount of the principal of all Shareholder Loans (including, for the avoidance of doubt, any Linkage Differentials in respect of such amount) which is payable or repayable by Partner prior to the date by which the Facilities shall have been repaid in full pursuant to clause 5 (Repayment) below and any Interest or other amounts payable on account of such Shareholder Loans; all the above as set out in the Accounts in respect of such Ratio Period to be delivered pursuant to the provisions of this Agreement. 10.1.166. "TOTAL DEBT COVER RATIO" means in relation to each Ratio Period, EBITDA after SAC for such Ratio Period, divided by Total Debt; 10.1.167. "TRANSFER CERTIFICATE" means a certificate substantially in the form set out in SCHEDULE 10 (Transfer Certificate) signed by a Participating Bank and a Transferee whereby: (a) such Participating Bank seeks to procure the transfer to such Transferee of all or a part of such Participating Bank's rights, benefits and obligations hereunder as contemplated in clause 27.3 (Assignments and Transfers by Participating Banks) below; and -43- (b) such Transferee undertakes to perform the obligations it will assume as a result of delivery of such certificate to the Facility Agent as is contemplated in clause 27.5 (Transfers by Participating Banks) below; 10.1.168. "TRANSFER DATE" means, in relation to any Transfer Certificate, the date for the making of the transfer as specified in the schedule to such Transfer Certificate; 10.1.169. "TRANSFEREE" means a bank or other financial institution to which a Participating Bank seeks to transfer all or part of such Participating Bank's rights, benefits and obligations hereunder and under the Facility Documents; 10.1.170. "UNUTILISED CASH ACCOUNT" means each account opened by Partner for the purpose of payments contemplated under the 2.7 Letter; provided that, Partner shall maintain a separate Unutilised Cash Account in relation to each Shareholder, and "RELEVANT UNUTILISED CASH ACCOUNT" shall be construed accordingly; 10.1.171. "VENTURE SUBSIDIARY" shall bear the meaning ascribed to such term in clause 16.15 (Share Capital) below. 10.2. ACCOUNTS 10.2.1. All accounting expressions which are not otherwise defined herein shall be construed in accordance with the Applicable Accounting Principles. 10.2.2. Each of "ADSCR", "CAPITAL EXPENDITURE", "DEBT SERVICE", "EBITDA AFTER SAC", "EXCESS CASH FLOW", "FACILITY DEBT COVER RATIO", "FIXED CHARGE COVERAGE RATIO", "FINANCIAL COSTS", "INTEREST", "SAC", "TOTAL DEBT" and "TOTAL DEBT COVER RATIO" for any Ratio Period, shall be determined from the non-consolidated Accounts of Partner for the period of 6 (six) months or 1 (one) year, as the case may be, ending on the last day of such Ratio Period and delivered pursuant to this Agreement (adjusted to the extent necessary to determine compliance with clause 16.32 (Financial Undertakings) below), or if not included in the Accounts, shall be determined from a certificate signed by the Auditors delivered to the Participating Banks together with the Accounts. Without limiting the generality of the aforegoing, Partner shall procure that the Accounts shall include notes detailing all defined terms referred to above and all elements of such terms, to the extent not customarily detailed in the Accounts, -44- including: (i) all expenses which have been capitalised; (ii) all Interest scheduled to be paid during the relevant Ratio Period to which such Accounts relate; (iii) all scheduled repayments of principal of Borrowings; (iv) supplier's credit; and (v) those Taxes paid during the relevant Ratio Period and reserves made for Taxes but not paid during such Ratio Period (without derogating from any rights the Participating Banks may have arising from the failure to comply with the aforegoing, in the event that the Auditors fail to distinguish in a set of such Accounts between Taxes paid and reserves for Taxes not paid during a Ratio Period, then, for the purposes of any calculation to be made in connection with clause 16.32 (Financial Undertakings) below, all Taxes referred to in any such Accounts shall be deemed to have been paid during the Ratio Period in respect of which such Accounts were prepared). All of the terms referred to in this clause 1.2.2 shall be expressed in NIS (and if stated in another currency, the equivalent thereof in NIS) unless the context otherwise requires. 10.3. INTERPRETATION Any reference in this Agreement to: 10.3.1. the "EQUIVALENT" on any given date in one currency (the "FIRST CURRENCY") of an amount denominated in another currency (the "SECOND CURRENCY") means the amount of the first currency which could be purchased with the amount of the second currency at: (i) in the case that one of the two relevant currencies is NIS, the Representative Rate for the other currency; or (ii) in the case that neither of the relevant currencies is NIS, the rate equal to a fraction, the numerator of which is the Representative Rate of the second currency and the denominator of which is the Representative Rate of the first currency; 10.3.2. the "FACILITY AGENT", "COORDINATING AGENT", "SECURITY TRUSTEE", "ARRANGER", any "SECURED Creditor" or any "PARTICIPATING BANK" shall be construed so as to include its and any subsequent permitted successors, Transferees and permitted assigns in accordance with their respective interests; 10.3.3. a "LAW" includes any regulation, rule, official directive, request or guideline (having the force of law) of any governmental body, agency, department or regulatory, self-regulatory or other authority or organisation, including, without limitation, the position (guidelines) of -45- the Examiner of Banks with respect to proper conduct of bank affairs ("Nihul Bankai Takin"); 10.3.4. a "MONTH" is a reference to a period starting on one day in a calendar month and ending on the numerically corresponding day in the next succeeding calendar month save that, where any such period would otherwise end on a day which is not a Business Day, it shall end on the next succeeding Business Day, unless that day falls in the calendar month succeeding that in which it would otherwise have ended, in which case it shall end on the immediately preceding Business Day provided that, if a period starts on the last Business Day in a calendar month or if there is no numerically corresponding day in the month in which that period ends, that period shall end on the last Business Day in that later month; 10.3.5. a "PERSON" shall be construed as a reference to any person, firm, company, corporation, government, state or agency of a state or any association or partnership (whether or not having separate legal personality) or two or more of the foregoing; 10.3.6. any "SHAREHOLDER" shall be construed so as to include its permitted and any subsequent permitted successors in accordance with its respective interests; 10.3.7. "VAT" shall be construed as a reference to value added tax including any similar tax which may be imposed in place thereof from time to time; 10.3.8. a "WHOLLY-OWNED SUBSIDIARY" of a company or corporation shall be construed as a reference to any company or corporation which has no other members except that other company or corporation and that other company's or corporation's wholly-owned Subsidiaries or persons acting on behalf of that other company or corporation or its wholly-owned Subsidiaries; 10.3.9. the "WINDING-UP", "DISSOLUTION" or "ADMINISTRATION" of a company or corporation shall be construed so as to include any equivalent or analogous proceedings under the law of the jurisdiction in which such company or corporation is incorporated or any jurisdiction in which such company or corporation carries on business including the seeking of liquidation, winding-up, reorganisation, dissolution, administration, arrangement, adjustment, protection or relief of debtors; -46- 10.3.10. "INCLUDING" and "INCLUDES" means, including, without limiting the generality of any description preceding such terms. 10.4. CURRENCY SYMBOLS 10.4.1. "EURO" means the single currency introduced in the third stage of economic and monetary issues pursuant to the Treaty establishing the European Community, as amended from time to time; and 10.4.2. "$", "USD", "DOLLARS", "US DOLLARS" and "DOLLARS" denote the lawful currency of the United States of America. "NIS" and "SHEQELS" denote the lawful currency of Israel. 10.5. STATUTES Any reference in this Agreement to a statute shall be construed as a reference to such statute as the same may have been, or may from time to time be, amended or re-enacted. 10.6. AGREEMENTS Save where the contrary is indicated, any reference in this Agreement to this Agreement or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such other agreement or document as the same may have been, or may from time to time be, amended, varied, assigned, novated or supplemented in accordance with the terms hereof. -47- 11. THE FACILITIES 11.1. THE FACILITIES 11.1.1. The Facilities granted to Partner hereunder by the Participating Banks shall, with effect from the Commencement Date and subject to the terms and conditions of this Agreement, be as follows: (a) a NIS and, subject to clause 2.1.2 below, US Dollar and Euro multicurrency term loan facility in an aggregate amount equal to the total Facility A Commitments; (b) a NIS and, subject to clause 2.1.2 below, US Dollar and Euro multicurrency revolving loan facility in an aggregate amount equal to the total Facility B Commitments; and (c) a NIS term loan facility in an aggregate amount in NIS equivalent to the total Facility C Commitments. 11.1.2. For the purpose of this clause 2.1.2, "AMOUNT OF THE OUTSTANDING A AND B ADVANCES" shall mean the aggregate outstanding from time to time of: (i) the aggregate Original Dollar Amounts of all outstanding Advances under Facility A; and (ii) the aggregate of the Dollar Amounts under Facility B of all Advances, including any Linkage Differentials. Notwithstanding anything contained in this Agreement to the contrary, Partner shall procure that: (a) not less than 60% (sixty percent) of an amount equal to the Amount of the Outstanding A and B Advances shall, at any time, be denominated and owing in NIS; and (b) not more than 40% (forty percent) of an amount equal to the Amount of the Outstanding A and B Advances shall, at any time, be denominated and owing in Dollars or Euros; provided that not more than 35% (thirty-five percent) of such amount which may be denominated and owing in Dollars or Euros as aforesaid, shall, at any time, be denominated and owing in Euros. For the removal of doubt, no Participating Bank shall be bound to monitor or verify compliance by Partner with the above. The failure -48- by Partner to comply with the above provisions shall constitute an Event of Default as referred to in clause 17 (Default) below. 11.2. CONVERSION OF OUTSTANDING ADVANCES [Deleted.] 11.3. LENDERS' RIGHTS AND OBLIGATIONS 11.3.1. The obligations of each Participating Bank under this Agreement shall be several. 11.3.2. The obligations of each Participating Bank (acting as such) under this Agreement shall be to contribute its Available Commitment in respect of each Facility to be advanced hereunder. The failure by any Participating Bank to perform any of its obligations under this Agreement, shall not affect the obligations of Partner or any other Participating Bank towards any other party hereto, nor shall the Facility Agent, the Security Trustee, the Arranger, the Coordinating Agent or any other Participating Bank be liable or responsible for the failure by such Participating Bank to perform its obligations under this Agreement. 11.4. PURPOSE Partner shall, subject to the terms of this Agreement, apply all amounts borrowed by it under the Facilities for the purposes of: 11.4.1. financing the purchase of equipment, maintenance expenses, operating losses and daily operating expenses properly incurred in the establishment and operation of a wireless telephone service, as contemplated by the Licence, including capitalised financial expenses (if there is a shortfall in Partner's cash flow after financial expenses) and the financing of Partner's working capital needs for its Business, as well as for the establishment and operation of second and-a-half and third generation (known as 2.5 and 3G) wireless telephone services, all as contemplated in the version of the Business Plan dated 7 July 2002 delivered to the Facility Agent and the Coordinating Agent on 11 July 2002; and 11.4.2. the subscription or acquisition of such share or loan capital in companies which carry on business in the telecommunications sector in accordance with and subject to the limitations and restrictions set -49- out in clause 16.37(a) (Loans, Guarantees and Investments in Subsidiaries) below. No Participating Bank shall be bound to monitor or verify the application of any amount borrowed pursuant to this Agreement. 12. CONDITIONS PRECEDENT [Deleted.] 13. DRAWDOWNS 13.1. FIRST DRAWDOWN REQUEST [Deleted.] 13.2. DRAWDOWN REQUEST A drawdown under the Facilities (including a drawdown constituting a reborrowing permitted under this Agreement) shall be made by way of delivery by Partner to the Participating Bank from whom it wishes to receive an Advance (with, in the case of a Drawdown under Facility A or Facility C, a copy thereof being simultaneously delivered to the Coordinating Agent), of a duly completed Drawdown Request. A Drawdown Request is irrevocable and shall not be regarded as having been duly completed and delivered unless: 13.2.1. it identifies the Facility to be utilised; 13.2.2. it identifies the Participating Bank from whom Partner wishes to receive an Advance; 13.2.3. the amount of the Advance requested does not exceed the Available Commitment in relation to the Facility requested of the relevant Participating Bank; 13.2.4. it is received not later than 12 noon (Tel-Aviv time) on the Latest Drawdown Request Date; 13.2.5. the proposed date for the making of such Advance is a Business Day and, in the case of: (i) Facility A (other than a drawdown in respect of a reborrowing permitted under this Agreement) is within the Availability Period Facility A; or (ii) Facility C (other than a -50- drawdown in respect of a reborrowing permitted under this Agreement) is within the Availability Period Facility C; 13.2.6. with respect to Facility A and Facility B, without derogating from clause 2.1.2 above, the currency of the Advance requested is Dollars, Euros or NIS and, with respect to Facility C, the currency of the Advance requested is NIS; 13.2.7. in the case of a Facility A Advance or a Facility C Advance, the proposed Original Dollar Amount of such Advance is a minimum amount of US $10,000,000 (ten million United States Dollars); 13.2.8. in the case of a Facility B Advance, the proposed Original Dollar Amount of such Advance is a minimum amount of US $3,000,000 (three million United States Dollars); provided that: (a) in the case of a Facility B Advance drawn for the purposes only of paying Interest (whether in respect of Facility A or Facility B) during the Availability Period Facility A or of paying Interest in respect of Facility C during the Availability Period Facility C which, in each case, is applied immediately after such drawing in payment of such Interest, such minimum requirement shall not be applicable; and (b) any Participating Bank may, with respect to any Facility B Advance, agree with Partner that such Advance shall be in an amount less than the minimum as aforesaid; 13.2.9. no Event of Default or Potential Event of Default hereunder has occurred and is continuing which has not been waived by an Instructing Group in accordance with the terms of this Agreement and no Event of Default or Potential Event of Default shall occur as a result of such Advance and the representations and warranties referred to in clause 15 (Representations and Warranties) below which are deemed to be repeated pursuant to the terms thereof are true and accurate in all respects on and as of the proposed date for the making of such Advance by reference to the facts and circumstances then existing; 13.2.10. no Change of Ownership has occurred. 13.3. PARTICIPATING BANK'S PARTICIPATION If the conditions set out in clause 4.2 (Drawdown Request) above have been met in relation to a Drawdown Request, then, subject to the provisions of this Agreement, the Participating Bank from whom such Advance was requested under such Drawdown Request shall advance (subject to the -51- proviso set out in this clause 4.3) to Partner the amount requested in such Drawdown Request under its Available Facility A Commitment, Available Facility B Commitment or Available Facility C Commitment, as applicable, such Advance to be governed by the terms of this Agreement and by such other terms and conditions, including relating to types of Advances, commissions and other terms relating to banking facilities (to the extent that such other terms and conditions are not inconsistent with the terms and conditions of this Agreement) as are agreed to between Partner and such Participating Bank with respect to such Advance; provided that, for the avoidance of doubt, if the relevant Available Commitment of the relevant Participating Bank is reduced in accordance with the provisions hereof after the relevant Participating Bank has received such Drawdown Request, then the amount of such Advance shall be reduced accordingly. 13.4. NOTIFICATION OF ADVANCE [Deleted.] 13.5. OUTSTANDINGS IN PROPORTION TO COMMITMENTS Notwithstanding anything to the contrary in this Agreement, Partner shall procure that its drawdowns of Advances from each Participating Bank under each of the Facilities and its repayments and prepayments to each Participating Bank under each of the Facilities, are made in proportion to such Participating Bank's Commitment with respect to such Facility, such that: (a) with respect to each of Facility A and Facility C, at all times, the Proportion of such Participating Bank with respect to such Facility is equal to the proportion which such Participating Bank's Commitment in respect of such Facility constitutes of the aggregate Commitments for such Facility; and (b) with respect to Facility B, as at the last day of each Quarter, the Proportion of such Participating Bank with respect to Facility B is equal to the proportion which such Participating Bank's Commitment in respect of Facility B constitutes of the aggregate Commitments for Facility B. For the removal of doubt, no Participating Bank shall be bound to monitor or verify compliance by Partner with the above. 14. REPAYMENT 14.1. REPAYMENT OF FACILITY A LOAN 14.1.1. As from the expiry of the Availability Period Facility A, each Participating Bank's Commitment for Facility A shall be reduced, on each Quarter Date, to the amount set out opposite its name, in relation to such Quarter Date, in PART A of SCHEDULE 15 (Reduction of -52- Facility A) (each such Quarter Date, "A FACILITY A COMMITMENT REDUCTION DATE"). (a) Partner shall, on or before each Facility A Commitment Reduction Date, repay to each Participating Bank Advances in an aggregate amount, such that after such repayment, the aggregate Original Dollar Amount of all outstanding Advances made by such Participating Bank under Facility A, equals or is less than the amount set out opposite such Participating Bank's name in Part A of Schedule 15 (Reduction of Facility A) on such Facility A Commitment Reduction Date. For the removal of doubt: (i) all Advances repaid as aforesaid shall be repaid together with Interest, Linkage Differentials and other amounts (if any) payable to each such Participating Bank under such Facility in respect of such Advances; and (ii) Partner, in making all repayments, shall comply with clause 4.5(a) (Outstandings in Proportion to Commitments--Facility A) above. (b) Without derogating from clause 5.1.2(a) above, Partner shall repay to each Participating Bank that has made an Advance under Facility A, such Advance (together with Interest thereon, Linkage Differentials and other amounts (if any) payable to such Participating Bank in relation to such Advance under this Agreement) on the Repayment Date for such Advance. (c) Subject to clause 5.1.1 above, Partner shall be entitled to reborrow under Facility A, an amount up to the Original Dollar Amount (or, if such reborrowing shall be denominated in NIS or Euro, the equivalent thereof at the date of such reborrowing) of all Advances repaid pursuant to clause 5.1.2(b) from the Participating Bank to whom such repayment was made; provided that, such reborrowing is within such Participating Bank's Available Commitment for Facility A at the time of such reborrowing. (d) Any part of any Commitment under Facility A of a Participating Bank which remains undrawn at the end of the Availability Period Facility A, shall be automatically and immediately cancelled. 14.2. REPAYMENT OF FACILITY B LOAN 14.2.1. Partner shall repay to each Participating Bank each outstanding Advance made by a Participating Bank under Facility B (together with -53- Interest, Linkage Differentials and other amounts (if any) payable to each such Participating Bank under Facility B with respect to such Advance) on its Repayment Date. For the removal of doubt, all outstanding Advances under Facility B (together with Interest, Linkage Differentials and other amounts (if any) payable with respect to such Advances) shall be repaid by no later than 30 June 2008. 14.2.2. Subject to the provisions of this clause 5.2.2 below, if before 12 noon Tel-Aviv time on the Latest Drawdown Request Date before the Repayment Date of an Advance made by a Participating Bank under Facility B ("THE ORIGINAL ADVANCE"), Partner has not: (a) delivered a Drawdown Request to the relevant Participating Bank under Facility B in accordance with clause 4.2 (Drawdown Request) above, for a new Advance in respect of the Original Advance made by such Participating Bank; or (b) notified the relevant Participating Bank that it proposes to repay the Original Advance on its Repayment Date without requesting such Participating Bank for a new Advance under Facility B in respect of the Original Advance made by such Participating Bank, then a duly completed Drawdown Request shall be deemed to have been delivered to the relevant Participating Bank, in accordance with clause 4.2 (Drawdown Request), for an Advance ("THE NEW ADVANCE") under Facility B and in the same principal amount (together with all Linkage Differentials in respect thereof, if applicable), Duration Period and currency of denomination and based on the same type of rate of Interest as the Original Advance, save that: (i) that part of the rate of Interest of the New Advance based on Cost of Funds (as referred to in clause 8.1 (Interest Rate) below) of the relevant Participating Bank shall be determined by such Participating Bank in relation to such Participating Bank's Cost of Funds for making Advances of the same type, amount, duration and currency denomination as the deemed New Advance as at the date such New Advance is deemed to have been made and, for the removal of doubt, the Margin shall be that prevailing during such new Duration Period; (ii) if, on the date such New Advance is made, the Original Dollar Amount of such New Advance exceeds the Available Commitment of the relevant Participating Bank under -54- Facility B, Partner shall, on such date, pay to the relevant Participating Bank, an amount equal to the amount by which such New Advance would (but for the operation of this paragraph (ii)) exceed such Available Commitment and the New Advance shall be the amount of the Available Facility B Commitment of such Participating Bank; and (iii) no Advance shall be made pursuant to this clause 5.2.2 if the Duration Period in respect of such Advance shall extend beyond 30 June 2008; and (iv) no Advance shall be made pursuant to this clause 5.2.2, unless the provisions of clause 4.2.9 above have been complied with in respect of such Advance. 14.3. REPAYMENT OF FACILITY C LOAN 14.3.1. As from the expiry of the Availability Period Facility C, each Participating Bank's Commitment for Facility C shall be reduced, on each Quarter Date, to the amount set out opposite its name, in relation to such Quarter Date, in Part B of Schedule 15 (Reduction of Facility C) (each such Quarter Date, "A FACILITY C COMMITMENT REDUCTION DATE"). (a) Partner shall, on or before each Facility C Commitment Reduction Date, repay to each Participating Bank Advances in an aggregate amount, such that after such repayment, the aggregate Original Dollar Amount of all outstanding Advances made by such Participating Bank under Facility C, equals or is less than the amount set out opposite such Participating Bank's name in PART B of SCHEDULE 15 (Reduction of Facility C) on such Facility C Commitment Reduction Date. For the removal of doubt: (i) all Advances repaid as aforesaid shall be repaid together with Interest, Linkage Differentials and other amounts (if any) payable to each such Participating Bank under such Facility in respect of such Advances; and (ii) Partner, in making all repayments, shall comply with clause 4.5(a) (Outstandings in Proportion to Commitments--Facility C ) above. (b) Without derogating from clause 5.3.2(a) above, Partner shall repay to each Participating Bank that has made an Advance under Facility C, such Advance (together with Interest thereon, Linkage Differentials and other amounts (if any) payable to such -55- Participating Bank in relation to such Advance under this Agreement) on the Repayment Date for such Advance. (c) Subject to clause 5.3.1 above, Partner shall be entitled to reborrow under Facility C, an amount up to the NIS equivalent of the Original Dollar Amount as at the date of such reborrowing, of all Advances repaid pursuant to clause 5.3.2(b) from the Participating Bank to whom such repayment was made; provided that, such reborrowing is within such Participating Bank's Available Commitment for Facility C at the time of such reborrowing. (d) Any part of any Commitment under Facility C of a Participating Bank which remains undrawn at the end of the Availability Period Facility C, shall be automatically and immediately cancelled. 14.4. CURRENCY OF REPAYMENT All repayments shall be made in the currency in which the relevant Advance was made. 15. VOLUNTARY PREPAYMENT AND REBORROWING 15.1. PREPAYMENT Partner may, in the manner set out below, prepay a Participating Bank in whole or in part, any outstanding Advances made by such Participating Bank; provided that such prepayments are made in such a manner so as to ensure compliance by Partner with clause 4.5 (Outstandings in Proportion to Commitments) above. 15.2. CONDITIONS TO PREPAY No prepayment may be made under clause 6.1 (Prepayment) above unless: 15.2.1. Partner shall have given due notice to the relevant Participating Bank (with a copy thereof being sent simultaneously to the Facility Agent and the Coordinating Agent). Such notice must specify the date or dates upon which the prepayment is to be made, the amount of the prepayment and the currency of the outstanding Advance to be prepaid as aforesaid and must be given at least: -56- (i) in respect of a prepayment to a Participating Bank of up to US $25,000,000 (twenty-five million United States Dollars) (or the Dollar equivalent thereof), 10 (ten) days prior to such prepayment; (ii) in respect of a prepayment to a Participating Bank of between US $25,000,000 (twenty-five million United States Dollars) and US $50,000,000 (fifty million United States Dollars) (or the Dollar equivalent thereof), 15 (fifteen) days prior to such prepayment; (iii) in respect of a prepayment to a Participating Bank of between US $50,000,000 (fifty million United States Dollars) and US $75,000,000 (seventy-five million United States Dollars) (or the Dollar equivalent thereof), 25 (twenty-five) days prior to such prepayment; or (iv) in respect of a prepayment to a Participating Bank in excess of US $75,000,000 (seventy-five million United States Dollars) (or the Dollar equivalent thereof), 30 (thirty) days prior to such prepayment; 15.2.2. in the event that such prepayment is to be funded from Permitted Sources, there is attached to such notice a certificate of Partner, in the form set out in SCHEDULE 16 (Certificate by Partner's Chief Financial Officer) signed by the Chief Financial Officer of Partner, confirming that all the monies to be utilised by Partner to make the relevant prepayment are from Permitted Sources and specifying details of the relevant Permitted Source; and 15.2.3. such prepayment shall be in a minimum amount of US $5,000,000 (five million United States Dollars) or the Dollar equivalent thereof, as applicable. 15.3. EFFECTS OF NOTICE OF PREPAYMENT 15.3.1. A notice of prepayment given by Partner to a Participating Bank, as referred to in clause 6.2 (Conditions to Prepay) above, shall be irrevocable and shall oblige Partner to make the relevant prepayment on the date specified therefor in such notice of prepayment. 15.3.2. All prepayments shall be made together with: (a) any accrued but unpaid Interest on the amount being prepaid (including all amounts payable on account of broken funding as referred to in clause 19 -57- (Broken Funding) below); (b) a prepayment commission equal to 0.1% (nought point one percent) of the amount of the Advance prepaid, for each 12 (twelve) months by which the date of prepayment is earlier than the relevant Repayment Date, pro rata for part of 12 (twelve) months; and (c) if such prepayment is made other than from Permitted Sources: (i) with respect to Advances under Facility A or Facility B, a commission at a rate equal, if prepaid during the Availability Period Facility A, to 0.5% (nought point five percent) of the amount being prepaid; or if prepaid after the Availability Period Facility A, such percentage reduced annually by 0.1% (nought point one percent) per annum, such that if prepayment is made during the first year after the Availability Period Facility A, such commission will be 0.4% (nought point four percent) of the amount of the prepayment, if a prepayment is made during the second year after the Availability Period Facility A, such commission will be 0.3% (nought point three percent) and so on and so forth; provided that, such percentage shall in no event be less than 0.1% (nought point one percent); and (ii) with respect to Advances under Facility C, a commission at a rate equal, if prepaid during the Availability Period Facility C, to 0.5% (nought point five percent) of the amount being prepaid; or if prepaid after the Availability Period Facility C, such percentage reduced annually by 0.1% (nought point one percent) per annum, such that if prepayment is made during the first year after the Availability Period Facility C, such commission will be 0.4% (nought point four percent) of the amount of the prepayment, if a prepayment is made during the second year after the Availability Period Facility C, such commission will be 0.3% (nought point three percent) and so on and so forth; provided that, such percentage shall in no event be less than 0.1% (nought point one percent). 15.3.3. A prepayment of an Advance shall be made in the currency in which such Advance was made. 15.3.4. A prepayment of an Advance shall be made together with all Linkage Differentials and other amounts, if any, accrued in connection with such Advance. 15.3.5. Partner shall not repay all or any part of the Loans, except at the times and in the manner expressly provided in this Agreement. 15.4. REBORROWING 15.4.1. Subject to clause 4.5 above, Partner shall be entitled: (a) until the Facility A Maturity Date, to reborrow, under Facility A, the Original -58- Dollar Amount of all Advances prepaid from Permitted Sources, from the Participating Bank to whom such prepayment was made; provided that, such reborrowing is within such Participating Bank's Available Facility A Commitment at the time of such reborrowing; and (b) until the Facility C Maturity Date, to reborrow, under Facility C, the Original Dollar Amount of all Advances prepaid from Permitted Sources, from the Participating Bank to whom such prepayment was made; provided that, such reborrowing is within such Participating Bank's Available Facility C Commitment at the time of such reborrowing. 15.4.2. Save as expressly set out in clause 6.4.1 above and clause 7.2.2 below, Partner may not reborrow any part of Facility A or Facility C which is prepaid. 15.4.3. (a) Partner may, by giving to the Facility Agent not less than 5 (five) Business Days' prior notice to that effect, cancel the whole or any part of any Facility, any such cancellation to reduce the Available Commitments of each of the Participating Banks under such Facility pro rata to their respective Commitments under such Facility. (b) Any notice of cancellation given by Partner as aforesaid shall be irrevocable and shall specify the date upon which such cancellation is to be made, the Facility to be cancelled and the amount of such cancellation. (c) Partner shall not be entitled to borrow any amount of a Facility which has been cancelled. 15.4.4. Any part of Facility B which is prepaid or repaid may be reborrowed in accordance with the terms of this Agreement; provided that, such reborrowing is within such Participating Bank's Available Facility B Commitment at the time of such reborrowing. 16. MANDATORY PREPAYMENT 16.1. NON-COMPLIANCE WITH CORRECTIVE MILESTONES [Deleted.] 16.2. DISPOSALS -59- 16.2.1. If Partner sells, transfers, lends, leases or otherwise disposes of any of its assets (including securities Partner holds (directly or indirectly) in any Subsidiary (for the removal of doubt, subject to any such disposal being permitted under the Facility Documents)), Partner shall prepay an amount equal to the Net Proceeds resulting from such sale, transfer, loan, lease or disposal (provided such Net Proceeds are greater than US $1,000,000 (one million United States Dollars) or its equivalent and, when aggregated with any other Net Proceeds received during the Financial Year in which the relevant Net Proceeds are received, exceed an aggregate amount equal to US $2,500,000 (two million five hundred thousand United States Dollars) or its equivalent) on the next Business Day after receipt of Net Proceeds from such sale, transfer, loan, lease or disposal. For the purposes of this clause 7.2.1, in the event that any such sale of assets is made for full value for cash and that the proceeds of such sale have been applied within 30 (thirty) days after such sale in the acquisition or improvement of assets of the Business, then such sale of assets shall not constitute a disposal. 16.2.2. A mandatory prepayment made under clause 7.2.1 above, shall be capable of being reborrowed; provided that, such reborrowing is within the relevant Participating Bank's Available Facility A Commitment or Available Facility C Commitment, as applicable, at the time of such reborrowing. 16.3. INVESTMENT BY PARTNER IN SUBSIDIARIES In the event Partner makes any investment, whether by way of share or loan capital (including guarantees) in any Subsidiary in the manner permitted under 16.37(a) (Loans, Guarantees and Investments in Subsidiaries) below which exceeds, in the aggregate, US $5,000,000 (five million United States Dollars) or its equivalent, and: (i) such investment was funded, directly or indirectly, from the proceeds of the Facilities; and (ii) Partner raises financing, at any time, by way of Permitted Loan Capital comprising debentures, Partner shall, within 10 (ten) Business Days after raising any such Permitted Loan Capital comprising debentures, mandatorily prepay to the Participating Banks all amounts raised as aforesaid until an amount equal to such excess over US $5,000,000 (five million United States Dollars) (together with all Interest, Linkage Differentials and other amounts accrued in connection therewith) has been prepaid. For the removal of doubt, a mandatory prepayment made under this clause 7.3 shall be capable of being reborrowed, provided that, such reborrowing is within the relevant Participating Bank's Available Facility A Commitment or Available Facility C Commitment, as the case may be, at the time of such reborrowing. -60- 16.4. TERMS FOR MANDATORY PREPAYMENT 16.4.1. Unless specifically otherwise stated in this Agreement, Partner shall not be entitled to reborrow any amount mandatorily prepaid. 16.4.2. In making a mandatory prepayment under this clause 7, Partner shall: (a) make proportional prepayments to each of the Participating Banks in accordance with clause 4.5 (Outstandings in Proportion to Commitments) above; (b) without derogating from (a) above, be at liberty to choose on account of which Facility or Facilities any such mandatory prepayment is being made, provided that: (i) Partner shall give notice to the Facility Agent and to each of the Participating Banks as soon as reasonably practicable (and, in any event, at least 1 (one) Business Day before the date Partner is obliged to make any such prepayment) containing details of all amounts to be prepaid as aforesaid and the amount and currency of the Advances to be prepaid to the Participating Banks on a Facility-by-Facility basis; (ii) in effecting any such mandatory prepayment, Partner shall ensure that the amount of any Advances outstanding to any Participating Bank under any Facility is not greater than such Participating Bank's Available Facility A Commitment, Available Facility B Commitment or Available Facility C Commitment (as the case may be); and (iii) any mandatory prepayment shall be made together with any accrued but unpaid Interest on the amount being prepaid (including amounts payable on account of broken funding as referred to in clause 19 (Broken Funding) below), Linkage Differentials and all other amounts accrued in connection with such amount being prepaid; and (c) in the event that Partner shall fail to elect to make a choice as referred to in clause 7.4.2 above in respect of any particular mandatory prepayment, then any such prepayment shall be paid to the Participating Banks pro rata to, and on account of, the -61- Original Dollar Amount of their respective outstanding Advances under each of Facility A and Facility C and pro rata as amongst each of such Advances, as at the date immediately before such mandatory prepayment is payable under the Facilities. 16.4.3. A mandatory prepayment of an Advance shall be made in the currency in which such Advance was made. 17. INTEREST 17.1. INTEREST RATE The rate of Interest on each Advance made under the Facilities for each Interest Period will be the percent per annum which is the aggregate of: 17.1.1. the Margin (with respect to the relevant Facility); and 17.1.2. the Cost of Funds of the applicable Participating Bank in providing the relevant Advance. "COST OF FUNDS" shall mean, in relation to an Advance, the rate of Interest which is deemed by the relevant Participating Bank, providing such Advance, as reflecting such Participating Bank's cost, before the application of any margin, for the purpose of determining the rate of Interest to be charged by such Participating Bank in respect of loans of the same type as the Advance requested under the relevant Drawdown Request, to its customers in amounts similar to the amount requested as aforesaid and for similar periods as such drawing; provided that, with respect to NIS denominated Advances requested from a Participating Bank under a Drawdown Request designating that the applicable Interest rate be a fixed linked Interest rate, Partner shall be entitled on the date that it is notified by such Participating Bank of its Cost of Funds for such Advance, to notify such Participating Bank that instead of such Cost of Funds, as notified, the Cost of Funds shall be the Bond Rate. For the removal of doubt, in the event that a Participating Bank shall determine its Cost of Funds for any Advance under Facility A or Facility B on the basis of LIBOR, "LIBOR" shall have the meaning assigned to such term in clause 1.1.106 above. 17.2. PAYMENT OF INTEREST Partner shall pay to each Participating Bank in respect of each Advance made by such Participating Bank all Interest accruing on such Advance -62- during any Interest Period on the Interest Payment Date for such Interest Period. 17.3. DEFAULT INTEREST 17.3.1. If Partner fails to pay any sum payable by it to a Participating Bank under a Facility Document on account of repayment or prepayment of an Advance, Interest thereon or Linkage Differentials or otherwise any other sum payable under any Facility Document (any such sum, "AN UNPAID SUM") on its due date, Interest shall accrue, notwithstanding that any Event of Default arising from such failure may be subsequently waived by the Participating Banks, on such unpaid sum from the due date up to the date of actual payment at the rate of Interest referred to in clause 8.1 (Interest Rate); provided that, if such unpaid sum is on account of: (a) an Advance, or Linkage Differentials thereon (not constituting Interest), the Margin shall, for the removal of doubt, be, in relation to an Advance (or Linkage Differentials, as aforesaid, thereon) under Facility A or Facility B (or Linkage Differentials, as aforesaid, thereon), 2.9% (two point nine percent) or, if such Event of Default does not relate to the non-payment of monies and the Participating Banks waive their rights to declare the Advances due and payable as a result of such Event of Default as aforesaid, then 1.9% (one point nine percent) or, in relation to an Advance under Facility C (or Linkage Differentials, as aforesaid, thereon), 3.25% (three point two five percent) or, if such Event of Default does not relate to the non-payment of monies and the Participating Banks waive their rights to declare the Advances due and payable as a result of such Event of Default as aforesaid, then 2.25% (two point two five percent); or (b) Interest, then such unpaid sum shall be deemed, for the purposes of calculating Interest as aforesaid, an Advance of the same type and currency and from the same Facility as that on which such Interest had accrued; or (c) any amount payable under any Facility Document (save for repayment or prepayment of an Advance, Interest thereon or Linkage Differentials), then such unpaid sum shall be deemed, for the purpose of calculating Interest as aforesaid, an Advance under Facility B, denominated in the same currency in which such unpaid sum is payable and of such type as the relevant Participating Bank, acting reasonably, may elect); -63- provided that, if such unpaid sum, failed to be paid as aforesaid, remains owing after the relevant Repayment Date, Interest Payment Date or due date, as the case may be, or if such unpaid sum is, pursuant to this Agreement due and payable, then the relevant Participating Bank shall be entitled to determine its Cost of Funds (as referred to in clause 8.1 (Interest Rate) above) on the unpaid sum as at the date such sum became due and payable, as if the unpaid sum had, during the period of non-payment, constituted an Advance made by such Participating Bank of the same type, in the same currency and under the same Facility as such unpaid sum is on account of (or if such unpaid sum is not on account of any Advance, Linkage Differentials or Interest thereon, then such unpaid sum shall be deemed to be on account of an Advance under Facility B, denominated in the currency and of such type as referred to in paragraph (c) above of this clause 8.3.1) on such date and on the first day of each Interest Period (as defined below) therefor. The period beginning on such due date and ending on the date of actual payment shall be divided into successive periods, each of which (other than the first) shall start on the last day of such preceding period and the duration of which shall be selected by the relevant Participating Bank (such periods, "INTEREST PERIODS"). Any Interest accruing under this clause 8.3 shall be immediately due and payable by Partner on demand of the relevant Participating Bank. 17.3.2. Default Interest (if unpaid) arising on an overdue amount will be compounded with the overdue amount at the end of each Interest Period applicable to that overdue amount but will remain immediately due and payable. 17.3.3. Reference to a "Participating Bank" and/or "the Participating Banks" in this clause 8.3 shall also be deemed to include a reference to such Participating Bank, whether in its capacity as such and whether in its capacity as Facility Agent and/or Arranger and/or Security Trustee and/or a Secured Creditor (as applicable). 17.3.4. Any unpaid sum (together with all Linkage Differentials in respect thereof) shall (for the purposes of this clause 8.3, clause 12.1 (Increased Costs) and clause 19 (Broken Funding Indemnity) together with any indemnities of Partner in this Agreement) be treated as an advance and accordingly in this clause 8.3, clause 12.1 (Increased Costs) and clause 19 (Broken Funding Indemnity) the term "ADVANCE" includes any unpaid sum (together with all Linkage Differentials in respect thereof) and the term "INTEREST PERIOD", in -64- relation to an unpaid sum, includes each such period relating thereto as is mentioned in this clause 8.3. 18. SUBSTITUTE INTEREST RATES 18.1. UNAVAILABLE OR INDETERMINABLE INTEREST RATE If and whenever, with respect to any Advance and any Interest Period relating thereto, at any time prior to such Interest Period, a Participating Bank determines that any rate determined pursuant to clause 8.1.2 above is not available or that such rate does not constitute an accurate base for the determination of the cost to such Participating Bank of such Advance, then such Participating Bank shall forthwith give notice ("A DETERMINATION NOTICE") of such event to Partner and to the Facility Agent (a Determination Notice to contain particulars of the relevant circumstances giving rise to its issue) and the Cost of Funds for such Advance for such Interest Period shall be determined in accordance with this clause 9 below. 18.2. NEGOTIATIONS FOR DETERMINING ALTERNATIVE BASIS Within 5 (five) Business Days of receipt of such notification, the relevant Participating Bank and Partner shall enter into negotiations in good faith for a period of up to 30 (thirty) days with a view to agreeing an alternative basis for determining the Cost of Funds applicable to such Advance for such Interest Period. -65- 18.3. AGREED ALTERNATIVE BASIS Any alternative basis agreed under clause 9.2 (Negotiations for Determining Alternative Basis) above will be binding on Partner and such Participating Bank once agreed and effective from the commencement of the Interest Period concerned. 18.4. FAILURE TO AGREE ON ALTERNATIVE BASIS If no alternative basis is agreed in accordance with clause 9.2 (Negotiations for Determining Alternative Basis) above, such Participating Bank shall certify on or before the last day of the Interest Period to which the notification relates, or, if earlier, within 10 (ten) days after the expiry of the 30 (thirty) day period referred to in clause 9.2 (Negotiations for Determining Alternative Basis) above an alternative basis for determining the Cost of Funds for such Interest Period of such Advance and so long as this clause 9 applies and no alternative basis has been agreed in accordance with clause 9.2 (Negotiations for Determining Alternative Basis) above, the Cost of Funds applicable to such Advance for the relevant Interest Period shall be the rate notified by such Participating Bank in accordance with this clause 9.4 above. 18.5. RETURN TO REGULAR DETERMINATION BASIS So long as any alternative basis is in force in accordance with this clause 9, the relevant Participating Bank shall, from time to time, but not less frequently than monthly, review with Partner whether or not the circumstances referred to in clause 9.1 (Unavailable or Indeterminable Interest Rate) still prevail with a view to returning to the normal provisions of this Agreement in relation to determining Cost of Funds as soon as reasonably practicable. 19. COMMISSIONS, FEES AND EXPENSES 19.1. COMMITMENT COMMISSION--FACILITY A AND FACILITY B Partner shall pay to each Participating Bank, with respect to Facility A and Facility B (taken together), a commitment commission of the Applicable Percentage (as defined in clause 10.2 (Applicable Percentage) below) per annum of the daily amount of the undrawn aggregate Commitments of the relevant Participating Bank with respect to Facility A and Facility B. For the removal of doubt, such commitment commission shall be calculated on the aggregate undrawn Commitments for Facility A and Facility B, taken together. The commitment commission under such Facilities shall be -66- payable quarterly, in arrears, until the Termination Date. If the Termination Date shall not be a Quarter Day, then the Commitment commission in respect of the period commencing from the preceding Quarter Day to the Termination Date shall be paid on the Termination Date. 19.2. APPLICABLE PERCENTAGE The Applicable Percentage shall be: 19.2.1. 0.125% (nought point one two five percent), in relation to the aggregate Commitments of a Participating Bank, with respect to Facility A and Facility B, of which at least 80% (eighty percent) thereof is being utilised by Partner; 19.2.2. 0.25% (nought point two five percent), in relation to the aggregate Commitments of a Participating Bank, with respect to Facility A and Facility B, of which less than 80% (eighty percent) but more than 50% (fifty percent) thereof is being utilised by Partner; 19.2.3. 0.375% (nought point three seven five percent), in relation to the aggregate Commitments of a Participating Bank, with respect to Facility A and Facility B, of which 50% (fifty percent) or a lower percentage thereof is being utilised by Partner. 10.2A. COMMITMENT COMMISSION--FACILITY C Partner shall pay to each Participating Bank a commitment commission at the rate of 0.35% (nought point three five percent) per annum of the daily amount of the undrawn Commitment of the relevant Participating Bank under Facility C. The commitment commission shall accrue from the Commencement Date and shall be payable quarterly, in arrears, until the Termination Date. If the Termination Date shall not be a Quarter Day, then the Commitment commission in respect of the period commencing from the preceding Quarter Day to the Termination Date shall be paid on the Termination Date. -67- 19.3. ANNUAL PAYMENT TO SECURITY TRUSTEE Partner shall pay to the Security Trustee for its own account the fees specified in the letter dated 9 July 2000 from the Security Trustee to Partner at the times and in the amounts specified in such letter. 19.4. FACILITY AGENT'S FEE Partner shall pay to the Facility Agent for its own account the fees specified in the letter dated 9 July 2000 from the Facility Agent to Partner at the times and in the amounts specified in such letter. 19.5. PAYMENT OF UPFRONT FEE [Deleted.] 10.5A COORDINATING AGENT'S FEE Partner shall pay to the Coordinating Agent the fees specified in the letter dated as of 31 December 2002 from the Coordinating Agent to Partner at the times and in the amounts specified in such letter. 19.6. EXPENSES 19.6.1. Partner shall pay to the Facility Agent on demand all costs and expenses (including, without limitation, legal fees for external counsel and of an independent engineer and other out-of-pocket expenses) incurred by the Agents in connection with the negotiation, preparation and execution of the Facility Documents and all amendments or restatements to any of the Facility Documents and the completion of the transactions therein contemplated, subject to such limits (if any) agreed in writing between Partner and the Facility Agent. All expenses payable pursuant to this clause 10.6.1 shall be paid together with VAT (if any) thereon. 19.6.2. Partner shall, from time to time, on demand, reimburse each Agent or Participating Bank for all costs and expenses (including, without limitation, legal fees for external counsel and other out-of-pocket expenses) incurred in connection with the preservation and/or enforcement of any of the rights of the Participating Banks and the Agents under the Facility Documents. All expenses payable pursuant to this clause 10.6.2 shall be paid together with VAT (if any) thereon. -68- 19.7. STAMP TAXES Partner shall pay all stamp, documentary, registration or other like duties or Taxes imposed on or payable in connection with the this Agreement or any of the Facility Documents and shall indemnify the Agents and the Participating Banks against any liabilities, costs, claims and expenses resulting from any failure to pay or any delay in paying any such duties or Taxes. 19.8. CUSTOMARY COMMISSIONS AND CHARGES Partner shall pay to each Participating Bank their respective commissions, fees and reasonable expenses usually payable to banks in connection with banking transactions to be performed by the relevant Participating Banks, in connection with the Facilities. 20. TAXES 20.1. TAX GROSS-UP All payments to be made by each Obligor to any Finance Party hereunder shall be made free and clear of and without deduction for or on account of Tax unless the relevant Obligor is required by law to make such payment subject to the deduction or withholding of Tax, in which case the sum payable by such Obligor in respect of which such deduction or withholding is required to be made shall be increased to the extent necessary to ensure that, after the making of the required deduction or withholding, such Finance Party receives and retains (free from any liability in respect of any such deduction or withholding) a net sum equal to the sum which it would have received and so retained had no such deduction or withholding been made or required to be made. 20.2. NOTIFICATION OF REQUIREMENT TO DEDUCT TAX If, at any time, any Obligor is required by law to make any deduction or withholding from any sum payable by it hereunder (or if thereafter there is any change in the rates at which or the manner in which such deductions or withholdings are calculated), such Obligor shall as soon as reasonably practicable notify the relevant Finance Party. -69- 20.3. EVIDENCE OF PAYMENT OF TAX If any Obligor makes any payment hereunder in respect of which it is required to make any deduction or withholding, it shall pay the full amount required to be deducted or withheld to the relevant taxation or other authority within the time allowed for such payment under applicable law and shall deliver to the Facility Agent and to the Finance Party, to whom a payment has been made, which required any such deduction or withholding, as soon as reasonably practicable after it has made such payment to the applicable authority, an original receipt (or a certified copy thereof) issued by such authority evidencing the payment to such authority of all amounts so required to be deducted or withheld in respect of the payment made to such Finance Party. 20.4. TAX SAVING (a) In the event that, following the imposition of any Tax on any payment by any Obligor in consequence of which the relevant Obligor is required under clause 11.1 (Tax Gross-Up) above to pay such tax or to pay any additional amount in respect of it, any Finance Party shall in its sole opinion and based on its own interpretation of any relevant laws or regulations (but acting in good faith) receive or be granted a repayment of Tax or a credit against or remission for or deduction from or in respect of any Tax payable by it, taking into account all tax jurisdictions applicable to the Finance Party and any direct or indirect controlling shareholders of the Finance Party (any of the foregoing, to the extent so reasonably identifiable and quantifiable, being referred to as a "SAVING"), such Finance Party shall, to the extent that it can do so without prejudice to the retention of the relevant saving and subject to the relevant Obligor's obligation to repay the amount to such Finance Party if the relevant saving is subsequently disallowed or cancelled (which repayment shall be made promptly on receipt of notice by the relevant Obligor from such person of such disallowance or cancellation), reimburse the relevant Obligor promptly after receipt of such saving by such person with such amount as such person shall in its sole opinion but in good faith have concluded to be the finally determined amount or value of the relevant saving. (b) Nothing contained in this Agreement shall interfere with the right of any Finance Party to arrange its tax and other affairs in whatever manner it thinks fit and, in particular, no Finance Party shall be under any obligation to claim relief from Tax on its corporate profits, or from any similar Tax liability, in respect of the Tax, or to claim relief in priority to any other claims, reliefs, credits or deductions available -70- to it or to disclose details of its Tax affairs. No Finance Party shall be required to disclose any confidential information relating to the organisation of its affairs. (c) Each Finance Party will notify the relevant Obligor promptly of the receipt by such person of any saving and of such Finance Party's opinion as to the amount or value of that saving. 21. INCREASED COSTS 21.1. INCREASED COSTS Subject to clause 12.2 (Exceptions) below, if, by reason of: (a) any change in or the introduction of, or any change in the interpretation, administration or application by any competent court, authority or organisation in the relevant jurisdiction generally of, any law, regulation or treaty or in or of any official directive, guideline or official request from, or the rules of, any governmental, fiscal, monetary or regulatory (including self-regulatory) authority, organisation or agency (including, position (guidelines) of the Examiner of Banks with respect to proper conduct of bank affairs ("Nihul Bankai Takin") (whether or not having, in any such case, the force of law but, if not having the force of law, being a regulation, treaty, official directive, guidelines, official request or rule which it is the practice of banks in the relevant jurisdiction to comply with) after the date of this Agreement which affects banks or financial institutions of the same type as any Finance Party in that jurisdiction; or (b) compliance by any Finance Party (or its Holding Company) with any such change or introduction; including, in each case, those relating to Taxation, reserves, special deposit, cash ratio, liquidity or capital adequacy requirements or other forms of banking, fiscal, monetary or regulatory controls: (i) any Finance Party (or any Holding Company of such Finance Party) incurs an increased cost as a result of its (or such Holding Company's) having entered into, and/or performing and/or maintaining and/or funding its (or such Holding Company's) obligations under, any Facility Document; or -71- (ii) any Finance Party (or any Holding Company of such Finance Party) incurs an increased cost in making, funding or maintaining all or any Advances comprised in a class of Advances formed by or including its (or such Holding Company's) participation in some or all of the Advances made or to be made under this Agreement; or (iii) any amount receivable by any Finance Party under any Facility Document is reduced (save to the extent matched by a reduction in the cost of providing the Facilities) or the effective rate of return to any Finance Party (or any Holding Company of such Finance Party) under any Facility Document or on its (or such Holding Company's) capital employed for the purposes of this Agreement is reduced; or (iv) any Finance Party (or any Holding Company of such Finance Party) makes any payment or forgoes any Interest or other return on or calculated by reference to any amount received or receivable by it (or by such Holding Company) from any Obligor or the Facility Agent or the Security Trustee or any other Finance Party under any Facility Document; and such increased cost (or the relevant proportion thereof), reduction, payment, forgone Interest or other return is not compensated for by any other provision of this Agreement, then and in each such case: (A) such Finance Party shall notify Partner of that event promptly upon its becoming aware of the event including, in reasonable detail, particulars of the event; and (B) within 5 (five) Business Days after receipt by Partner of a demand from time to time by such Finance Party accompanied by a certificate of such Finance Party specifying the amount of compensation claimed and setting out the calculation of the amount in reasonable detail, Partner shall pay to such Finance Party (or, as the case may be, Holding Company of such Finance Party) such amount as shall compensate such Finance Party (or such Holding Company) for such increased cost (or, in the case of (iii) above, the portion of such increased cost as is attributable to its making, funding or maintaining Advances), reduction, payment or forgone Interest or other return. Nothing in this clause 12.1 shall oblige any Finance Party (or any Holding Company of such Bank) to disclose any confidential information relating to the organisation of its affairs. -72- 21.2. EXCEPTIONS Clause 12.1 (Increased Costs) above shall not apply so as to oblige Partner to compensate any Finance Party for any increased cost, reduction, payment or forgone Interest or other return resulting from any change in or the introduction of, or any change in the interpretation or application of, any law, regulation, treaty, directive, request or rules relating to, or any change in the rate of, Tax on Overall Net Income of such Finance Party. 22. ILLEGALITY If any change in, or the introduction of, any law, regulation, treaty or official directive, guideline, official request or rule of any governmental, fiscal, monetary or regulatory (including self regulatory) authority, organisation or agency (including, position (guidelines) of the Examiner of Banks with respect to proper conduct of bank affairs ("Nihul Bankai Takin") having jurisdiction (whether or not having, in any such case, the force of law but, if not having the force of law, being one with which it is the practice of banks in the relevant jurisdiction to comply) (together "LAWS"), or any change in the interpretation, administration or application of Laws by a competent court or the relevant authority, organisation or agency or compliance by any Finance Party with any such change or introduction of Laws or change in interpretation, administration or application of Laws, shall make it (or make it apparent that it is) unlawful or a breach of Laws for any Finance Party to make available or fund or maintain the Advances or any part of the Advances under this Agreement or to give effect to its obligations and exercise its rights as contemplated by this Agreement, that Finance Party may, by notice to Partner, with a copy sent to the Facility Agent, declare that to the extent necessary to avoid any such illegality or breach of Laws its obligations to Partner under the Facility Documents shall be terminated forthwith or, if later, on the latest date to which the obligations may remain in effect without causing such Finance Party to be in breach of Laws, whereupon: (a) PREPAY: Partner will forthwith, or by such later date as shall be immediately prior to the illegality or breach in question taking effect, prepay all outstanding Advances made by such Finance Party together with all Interest and other charges accrued thereon to the date of the prepayment (as well as amounts payable under clause 19 (Broken Funding Indemnity) below) and all other amounts payable to such Finance Party under the Facility Documents as shall be necessary to avoid any such illegality or breach by such Finance Party of any Laws; and (b) COMMITMENTS: to the extent necessary to avoid any such illegality or breach of Laws such Finance Party's Commitments shall be cancelled and reduced to nil. -73- 23. MITIGATION 23.1. MITIGATION If circumstances arise in respect of any Finance Party which would, or upon the giving of notice would, result in the operation of clause 9 (Substitute Interest Rates), 11 (Taxes), 12 (Increased Costs) or 13 (Illegality) to the detriment of Partner, such Finance Party shall promptly upon becoming aware of the same notify Partner and, upon the written request of Partner, shall enter into discussions with Partner with a view to determining what mitigating action might be taken by such Finance Party, including transfer of its participation in the Facilities and its Commitments to another bank or financial institution. Without limiting or reducing the obligations of the Obligors (or any of them) under clauses 9 (Substitute Interest Rates), 11 (Taxes), 12 (Increased Costs) or 13 (Illegality), the relevant Finance Party shall, upon the written request of Partner, take such reasonable steps as may be practical and open to it to mitigate or remove the effects of such circumstances or transfer of its participation in the Facilities and its Commitment to another bank or financial institution reasonably acceptable to Partner or the restructuring of its participation in this Agreement in a manner which will avoid the circumstances in question and on terms acceptable to the Facility Agent, Participating Banks and Partner, provided that nothing in this clause 14.1 shall oblige any Finance Party to take any such step if, in the opinion of such Finance Party (such opinion being conclusive) any such step might reasonably be expected to have an adverse effect upon its business, operations or financial condition or the management of its Tax affairs or its return in relation to the outstanding Advances made by it or cause it to incur any material costs or expenses. 23.2. REPLACEMENT OF A BANK If such circumstances as are referred to in clause 14.1 (Mitigation) shall arise, the Facility Agent, at the request of Partner, will consult with Partner with a view to identifying and approaching bank(s) and financial institution(s) acceptable to Partner who may be willing to become party to this Agreement as Participating Bank(s) in replacement for the relevant Participating Bank(s). 24. REPRESENTATIONS AND WARRANTIES 24.1. REPRESENTATIONS AND WARRANTIES -74- Partner, in respect of itself and each other Obligor, and each other Obligor in respect of itself, makes the representations and warranties set out in this clause 15 to each of the Finance Parties. 24.2. STATUS It is a company limited by shares, duly incorporated and validly existing under the laws of the place of its incorporation and has the power to own its property and assets and carry on its business as it is now being and will be conducted. No event has occurred with respect of it which would constitute an Event of Default under clause 17.8 (Winding-Up) below were the proviso to such clause deleted. 24.3. POWERS AND AUTHORITY It has the power to enter into and perform the Facility Documents and Material Contracts to which it is a party and the transactions to be implemented pursuant thereto and has taken all necessary action to authorise the entry into and performance of those documents and transactions. Without limiting the generality of the aforegoing, Partner represents and warrants that: (a) it has power to enter into all Facility Documents to which it is a party and to perform its obligations thereunder and hereunder and has taken all necessary action to authorise the entry into and performance of the transactions contemplated thereunder and hereunder; and (b) this Agreement constitutes its legal, valid, binding and enforceable obligations. -75- 24.4. LEGAL VALIDITY Each Facility Document and Material Contract to which it is at any time a party (when executed by it or on its behalf) constitutes its legal, valid, binding and enforceable obligations and (without limiting the generality of the foregoing) each Security Document to which it is a party validly and effectively creates the Encumbrances which that Security Document purports to create or, as the case may be, accurately evidences an Encumbrance which has been validly created, in each case subject to the Reservations. 24.5. NON-CONFLICT The entry into and performance of each Facility Document and Material Contract to which it is a party and the transactions to be implemented pursuant thereto do not and will not conflict with: (a) any law or regulation or any official or judicial order applicable to it, in any respect, or (b) its constitutional documents or any of its resolutions (having current effect) in any respect, or (c) any agreement or instrument to which it or any Subsidiary of it is a party or which is binding upon any of them or on its assets or those of any such Subsidiary, in such a manner or to such an extent which would be reasonably likely to have a Material Adverse Effect or in a manner or to an extent which is reasonably likely to result in any liability on the part of any of the Finance Parties to any third party by reason of any such conflict, nor will it result in the creation or imposition of any Encumbrance on any of its assets or those of any of its Subsidiaries (save for any Encumbrance created pursuant to the Security Documents). 24.6. NO DEFAULT (a) No Event of Default has occurred and is continuing which has not been waived; and -76- (b) No event has occurred and is continuing which has not been waived and which constitutes or which, with the giving of notice, expiry of any cure period, determination of materiality or satisfaction of any other condition in each case provided for in any such agreement or document, is reasonably likely to constitute a default under or in respect of any other agreement or document to which it or any Subsidiary of it is a party in such a manner or to such an extent which would be reasonably likely to have a Material Adverse Effect. 24.7. CONSENTS (a) All Authorisations, exemptions and other matters required by law (including, for the avoidance of doubt, the Licence) for or in consequence of the entry into and performance by it of and/or the validity of any of the Facility Documents or Material Contracts to which it is a party or the transactions to be implemented pursuant thereto, the failure to obtain or effect which would be reasonably likely materially to affect the interests of the Participating Banks under the Facility Documents, have been obtained or effected or will be obtained or effected prior to the date required by law, save for registration with the Pledges Registry, the Registrar of Companies, the Land Registry and the Patents Registry, as applicable. (b) The Licence is in full force and effect and each Obligor is in compliance in all material respects with all provisions thereof such that the Licence is not the subject of any pending or, to the best of its knowledge, threatened attack, suspension or revocation by any competent authority. The period of the Licence is until 1 February 2022. All the Authorisations are in full force and effect, it is in compliance in all material respects with all provisions thereof and the Authorisations are not the subject of any pending or, to the best of its knowledge, threatened attack or revocation by any competent authority. To the best of its knowledge, it is not aware of any material breach of any Authorisation. 24.8. ACCOUNTS (a) Its Accounts most recently delivered to the Coordinating Agent (or, if prior to the Commencement Date, to the Facility Agent) and, where applicable, the Participating Banks under clause 16.2.1 below, for the members of the Group have been prepared, save as disclosed in notes to or accompanying those Accounts, in accordance with the provisions of clause 16.5 (Accounting Standards) below and fairly present in all material respects its and (if consolidated Accounts) its Subsidiaries' -77- financial position as at the date to which the same were prepared and/or (as appropriate) the results of operations and (in the case of annual Accounts) changes in financial position during the Accounting Period, subject, in the case of half yearly and quarterly Accounts, to normal year end adjustments made in accordance with Applicable Accounting Principles. (b) Save for any disposal or acquisition of any interest in any company or any business or any merger of any members of the Group, or any dissolution or liquidation of any member of the Group (in each case as permitted by the terms hereof), each of the consolidated Accounts of the Group delivered to the Coordinating Agent (or, if prior to the Commencement Date, to the Facility Agent) and, where applicable, the Participating Banks under clause 16.2.1 below includes or consolidates into such Accounts the results of each member of the Group for the relevant Accounting Period. (c) All forecasts and projections contained in the Business Plan delivered to the Coordinating Agent (or, if prior to the Commencement Date, to the Facility Agent) and, where applicable, the Participating Banks under clause 16.2.1 below were arrived at after careful consideration, were fair and were based on reasonable grounds and as at the date of their delivery to the Coordinating Agent (or, if prior to the Commencement Date, to the Facility Agent) and, where applicable, the Participating Banks were not misleading in any material respect. (d) Nothing has occurred since the date of signature of the Amending and Rescheduling Agreement or, if later, the date of the audited consolidated Accounts most recently delivered to the Coordinating Agent (or, if prior to the Commencement Date, to the Facility Agent) and, where applicable, the Participating Banks pursuant to clause 16.2.1 below which would have a material adverse effect on the business, operations or financial condition of the Group (taken as a whole) (other than as contemplated in the Business Plan) (for which purposes the Facility Agent shall consult with Partner prior to any determination as to the occurrence of such an effect). 24.9. LITIGATION Except as described in SCHEDULE 17 (Claims served on Partner or any of its Subsidiaries) or specifically stated in the notes to the latest set of Accounts of Partner delivered to the Facility Agent before the Commencement Date, no litigation, arbitration or administrative or regulatory proceedings or investigations for which process or initiation claims have been served on it -78- or any of its Subsidiaries are current and, to its knowledge, no litigation, arbitration, administrative or regulatory proceedings involving it or any of its Subsidiaries are pending or threatened which, if adversely determined, would have a Material Adverse Effect or which involves a liquidated claim or alleged liability which is likely to be in excess of US $15,000,000 (fifteen million United States Dollars) or its equivalent. 24.10. TAX LIABILITIES Except as described in SCHEDULE 18 (Tax Claims asserted against Partner or any of its Subsidiaries) or specifically stated in the notes to the latest set of Accounts of Partner delivered to the Facility Agent before the Commencement Date, no claims are being asserted against it or any of its Subsidiaries with respect to Taxes which are reasonably likely to be determined adversely to it or to such Subsidiary, in each case, which, if so adversely determined, would have a Material Adverse Effect. It is not materially overdue in the filing of any Tax returns required to be filed by it (where such late filing might result in any material fine or penalty on it) and it has paid all Taxes shown to be due on any Tax returns required to be filed by it or on any assessments made against it for non-payment, or a claim for payment, non-payment of which would in each such case have a Material Adverse Effect. 24.11. ENCUMBRANCE No Encumbrance exists over its or any of its Subsidiaries' assets which would cause a breach of clause 16.6 (Negative Pledge) below. -79- 24.12. BUSINESS PLAN Any factual information provided by an Obligor for the purposes of the Business Plan was true and accurate in all material respects as at the date it was provided or as at the date (if any) at which it is stated. All forecasts and projections contained in the Business Plan are fair and were prepared on the basis of recent historical information and on the basis of reasonable assumptions. Nothing has occurred or been omitted from the Business Plan and no information has been given or withheld that results in the information contained in the Business Plan being untrue or misleading in any material respect. 24.13. OWNERSHIP OF ASSETS As at the time this representation is given or repeated, it has good title to or valid leases or licences of or is otherwise lawfully entitled to use all material assets necessary to conduct its business as and to the extent conducted by it at such time. 24.14. DOCUMENTS The documents delivered to the Facility Agent by or on behalf of any Obligor pursuant to clause 3 (Conditions Precedent) of the Original Facility Agreement, clause 3 (Conditions Precedent) of the Amending and Rescheduling Agreement, clause 3 of the Amending Agreement dated as of 31 December 2002 and under any other provision of the Facility Documents were genuine and in the case of copy documents, were at the date of delivery true, complete and accurate copies in all material respects, of originals which had not been amended, varied, supplemented or superseded in any way which would be likely materially to affect the interests of the Finance Parties under the Facility Documents. 24.15. INTELLECTUAL PROPERTY RIGHTS (a) It (or another Obligor) owns or has the legal right to use all the Intellectual Property Rights which are material to the Business and the conduct of the business of any member of the Group from time to time or are required by it in order for it to carry on its business in all material respects as it is then being conducted and as far as it is aware it does not, in carrying on its business, infringe any Intellectual Property Rights of any third party in any way which would have a Material Adverse Effect. -80- (b) None of the Intellectual Property Rights which are material in the context of the business of any member of the Group is, to its knowledge, being infringed nor, to its knowledge, is there any threatened infringement of those Intellectual Property Rights, by any third party which would be reasonably likely to have a Material Adverse Effect. (c) All registered Intellectual Property Rights owned by it and which are material to the conduct of the business of any member of the Group are subsisting and in full force and effect. 24.16. ENVIRONMENTAL MATTERS (a) It: (i) has obtained all requisite Environmental Licences required for the carrying on of its business as currently conducted and (ii) has at all times complied with the terms and conditions of such Environmental Licences and (iii) has at all times complied with all other applicable Environmental Law, which in each such case, if not obtained or complied with, would have a Material Adverse Effect. (b) There is no Environmental Claim pending or threatened against that Obligor which is reasonably likely to be decided against that Obligor and which, if so decided, would have a Material Adverse Effect. (c) So far as each Obligor is aware, no Dangerous Substance has been used, disposed of, generated, stored, transported, dumped, released, deposited, buried or emitted at, on, from or under any premises (whether or not owned, leased, occupied or controlled by any Obligor or any of its Subsidiaries and including any offsite waste management or disposal location utilised by any Obligor or any such Subsidiary) in circumstances where this would be reasonably likely to result in a liability on any Obligor which would have a Material Adverse Effect. 24.17. RANKING OF SECURITY The security conferred by the Security Documents constitutes a priority security interest of the type therein described over the security assets therein referred to which are not subject to any prior or pari passu Encumbrances except as permitted by clause 16.6 (Negative Pledge) below. 24.18. MATERIAL CONTRACTS (a) The Material Contracts to which any Obligor is party are in full force and effect. -81- (b) No Obligor is and, so far as it is aware (after having made all reasonable enquiries within the relevant Obligor), no Counterparty is, in breach of any material term of any Material Contracts. (c) There are no material disputes subsisting between any Obligor and any other party to any Material Contract. (d) No waivers have been granted by or in favour of any Obligor pursuant to any material term of any Material Contract in any respect which would be reasonably likely to be adverse to the interests of the Participating Banks under the Facility Documents. (e) No material amendments have been made to any Material Contract in any respect which would be reasonably likely to be adverse to the interests of the Participating Banks under the Facility Documents, save for amendments on or prior to the date of signature of the Amending and Rescheduling Agreement which have been disclosed to the Facility Agent in writing prior to the date thereof. (f) There are no other agreements which are material to the Business (or any part thereof) and would be reasonably likely to affect adversely the decision of a Participating Bank when considering the provision of the Facilities on the terms and subject to the conditions set out herein. 24.19. OWNERSHIP OF PARTNER The share capital in Partner is owned by the Shareholders in the respective percentages as set out in Schedule 9 (Principal Shareholders of Partner) and Partner has no Subsidiaries save for the Guarantors. -82- 24.20. BORROWINGS No Obligor has any Borrowings other than Borrowings which qualify as Permitted Borrowings. 24.21. REPETITION The representations and warranties set out in this clause 15 shall survive the execution of the Amending and Rescheduling Agreement and the making of each Advance hereunder and shall be deemed to be repeated on the Commencement Date and (except in the case of the second sentence of clause 15.2 (Status), clauses 15.7 (Consents), 15.8(d) (Accounts), 15.9 (Litigation), 15.12 (Business Plan), 15.14 (Documents), 15.18 (Material Contracts), 15.19 (Ownership of Partner) and 15.20 (Borrowings)) shall be deemed to be repeated on the date of delivery of each Drawdown Request hereunder and on each date on which Advance is made and on the first day of each Interest Period, with reference to the facts and circumstances then subsisting, as if made at each such time. 25. UNDERTAKINGS 25.1. DURATION The undertakings in this clause 16 shall remain in force so long as any amount is or may be outstanding under any Facility Document or any Commitment is in force. 25.2. FINANCIAL INFORMATION 25.2.1. Partner shall furnish or procure that there shall be furnished to the Participating Banks and the Coordinating Agent: (a) as soon as the Accounts referred to in (i) and (ii) below are published (and in any event within 120 (one hundred and twenty) days) after the end of each annual Accounting Period): (i) the audited consolidated Accounts of the Group for that financial year (which shall include notes setting out nominal NIS figures); and (ii) in the case of Partner and each Subsidiary of Partner, the non-consolidated audited Accounts for that financial year for Partner and for each Subsidiary of Partner; -83- (b) as soon as practicable (and in any event within 70 (seventy days)) after the end of the first half-year of each of its financial years, the unaudited non-consolidated reviewed Accounts of Partner and of each Subsidiary of Partner, for that half-year; (c) as soon as practicable (and in any event within 45 (forty-five) days after the end of each of the first 3 (three) Quarters), the unaudited non-consolidated reviewed financial statements of Partner and the unaudited consolidated reviewed Accounts of Partner, for that Quarter; (d) as soon as practicable (and in any event within 45 (forty-five) days after the end of each Quarter, a report in an agreed form setting out statistics covering the level of, inter alia, subscribers, subscriber penetration, build-out, revenue per subscriber, churn and Capital Expenditure of Partner for that Quarter and on a cumulative basis for the calendar year in which such Quarter falls, such reports to distinguish between subscribers for each of GSM and 3rd Generation UMTS and Capital Expenditure in the 3rd Generation UMTS network; (e) at the same time as the annual and semi-annual Accounts are delivered pursuant to paragraph (a) above, a certificate of the Auditors, in a form reasonably satisfactory to the Instructing Group: (i) setting out in reasonable detail computations establishing, as at the date of such Accounts, whether each of the financial ratios set out in clause 16.32 (Financial Undertakings) below were complied with; and (ii) setting out in reasonable detail computations establishing the Excess Cash Flow as at the date of such Accounts; and (iii) stating that the Auditors did not, in the course of their audit or review, as applicable, discover any breach of the obligations set out in clause 16.32 (Financial Undertakings) below; All Accounts as aforesaid shall, in addition to any other requirements under this clause 16.2.1, contain all the notes and be accompanied by all the certificates referred to in clause 1.2.2 above; -84- (f) not less than 15 (fifteen) days nor more than 90 (ninety) days before the end of each annual Accounting Period, a revised business plan and revised cash flow projections approved by the Board of Directors of Partner containing cash flow projections to 30 June 2009 in substantially the same form as in the Business Plan; provided that the obligation to provide the revised business plan and cash flow projections referred to in this paragraph (f) shall cease on the date on which Partner has repaid at least 75% (seventy-five percent) of the Facilities, such that the aggregate Commitments shall be no more than 25% (twenty-five percent) of the aggregate Facilities as at the Commencement Date; provided that, in respect of the one year Ratio Period immediately preceding such date, the Margin for Facility A and Facility B has in accordance with clause 1.1.114 above been reduced to 0.7% (nought point seven percent). 25.2.2. Partner shall supply to the Coordinating Agent: (a) together with the quarterly Accounts specified in clause 16.2.1 above; and (b) (in the case of paragraph (iii) below,) promptly at any other time, if the Coordinating Agent so reasonably requests, a certificate signed by the Chief Financial Officer of Partner on its behalf setting out in reasonable detail computations establishing, as at the date of such Accounts, whether each of -85- the financial ratios set out in clause 16.32 (Financial Undertakings) below were complied with and certifying that: (i) the relevant Accounts fairly present (in relation to the relevant Accounting Period), the financial position of the relevant Obligor; (ii) the relevant Accounts were prepared in accordance with the Applicable Accounting Principles; and (iii) no Event of Default or Potential Event of Default is outstanding or, if an Event of Default or Potential Event of Default is outstanding, specifying the Event of Default or Potential Event of Default and the steps, if any, being taken to remedy it. (c) together with the quarterly Accounts specified in clause 16.2.1 above, as to the amount of Partner's Excess Cash Flow for such Quarter. 25.2.3. If in the course of any annual Accounting Period Partner updates or revises any of the assumptions underlying the projections furnished to the Participating Banks pursuant to clause 16.2.1(f) above in any material respect, Partner shall furnish or procure that there shall be furnished to the Participating Banks such updated assumptions. 25.2.4. The format of any financial reports (including, annual audited accounts, quarterly reports and the such like) to be delivered under this clause 16.2.1 shall, in addition, be in a format consistent with the Business Plan. 25.2.5. As soon as practicable (and, in any event, within 5 (five) Business Days after the end of each Quarter), Partner shall send to the Coordinating Agent (with sufficient copies for each of the Participating Banks): (a) a certificate signed by Partner's General Manager and Chief Financial Officer certifying that Partner is in full compliance with all of the terms and conditions of each of the Facility Documents and if not so in compliance, specifying the relevant non-compliance and the steps, if any, being taken to remedy it; (b) a report certified by the General Manager and Chief Financial Officer of Partner detailing the occurrences of any of the following that have taken place during the preceding Quarter: -86- (i) a Permitted Investment made or resolved to be made by Partner in an aggregate amount equal to or in excess of US $10,000,000 (ten million United States Dollars); (ii) the receipt of any Permitted Borrowing (save for Permitted Borrowings as referred to in clauses 1.1.126(a) and (f)) that has taken place (including, the entering into of any agreement whereunder Partner may receive any Permitted Borrowing), the amount of which Permitted Borrowing equals or exceeds US $2,500,000 (two million five hundred thousand United States Dollars), as well as the receipt of any type of Permitted Borrowings, the cumulative aggregate of which equals or exceeds US $10,000,000 (ten million United States Dollars)); (iii) a resolution of any organ of Partner to make, or evidencing any intention to make, whether conditionally or unconditionally, preparations for the issuance of a prospectus and/or any offer to the public (whether or not any such offer requires the approval or publication of a prospectus), in any jurisdiction, relating to the sale or offer of any securities or debentures of Partner; (iv) any loans, guarantees or investments made by Partner as referred to in clause 16.37 (Loans, Guarantees and Investments in Subsidiaries) below; (v) any disposal as referred to in clause 7.2.1 above, the Dollar Amount (or, if denominated in a currency other than US Dollars, the Dollar equivalent) of the Net Proceeds of which exceeds when aggregated with the Net Proceeds of all such other disposals in the Fiscal Year in which such Quarter occurs, US $2,500,000 (two million five hundred thousand United States Dollars). 25.2.6. Partner's ability to make any Permitted Investment under this Agreement will be conditional upon such Permitted Investment being first pledged in favour of the Security Trustee (acting as trustee for itself and for the Secured Creditors) by way of a first pledge and charge under the Debenture or any other charge, in a form satisfactory to the Security Trustee. -87- 25.2.7. Without derogating from any other obligations imposed on Partner under this Agreement to provide information, Partner shall furnish to the Facility Agent and the Coordinating Agent (with sufficient copies for each of the Participating Banks): (i) promptly, all filings, documents, forms, reports and notices filed by or on behalf of Partner, or by any of its Shareholders with respect to Partner (to the extent Partner is aware of such Shareholders' filing), with the US Securities and Exchange Commission, the London Stock Exchange, NASDAQ, any other stock exchange or any securities regulatory authority, from time to time; and (ii) promptly, all such other information as shall reasonably be requested, from time to time, by any of the Participating Banks. (iii) as soon as practicable (and in any event within 5 (five) Business Days) after each Quarter, a report setting out in a form as set out in SCHEDULE 19 (Quarterly Report), details of: (a) with respect to each of Facility A and Facility C, all Drawdown Requests made during the preceding Quarter (such information to include the amount of the Advance requested by Partner under each such Drawdown Request, the currency of the Advance requested as aforesaid, the amount and/or currency advanced by a Participating Bank if different to that requested under the relevant Drawdown Request, the type of Advance and rate of Interest applicable and the identity of the Participating Banks to whom such Drawdown Requests were made) and, with respect to Facility B, the aggregate amount of Advances requested by Partner from each Participating Bank during the preceding Quarter (such information to include the aggregate of Advances classified also in accordance with each currency, each type of Advance and each type of rate of Interest applicable). Each Participating Bank shall after receipt of such report, advise Partner in writing (with a copy to the Coordinating Agent) as to whether such report, to the extent relating to such Participating Bank, is accurate and, if not, shall indicate which part of such report is inaccurate; (b) all payments made during the preceding Quarter by Partner under the Facilities (or, in the case of Facility B, -88- the aggregate of such payments during such Quarter), specifying the identity of the Participating Banks to whom any such payments were made, the currency of such payment, the amount of such payment, whether such payments were made on account of Interest, Linkage Differentials, if applicable, principal of the outstanding Advances or on account of any other amount, whether, in the case of a prepayment pursuant to clause 6 (Voluntary Prepayment and Reborrowing) above, any of such payments were made from a Permitted Source (and, if so, a copy of the certificate referred to in clause 6 (Voluntary Prepayment and Reborrowing) above relating thereto shall be attached to such report), or a mandatory prepayment (together with details thereof) and which of the Facilities any of such payments were made on account of); (c) the outstanding amounts owed by Partner to each Participating Bank under each of the Facilities: (i) expressed in US Dollars (or, if denominated in NIS or Euros, in their Dollar equivalent); (ii) expressed in the currency of which such amounts are due; and (iii) specifying the percentage of the Amount of the Outstanding A and B Advances (as defined in clause 2.1.2 above) denominated in each of US Dollars, Euros and NIS as at the Quarter Day for such Quarter. -89- 25.3. INFORMATION-MISCELLANEOUS Partner shall furnish or procure that there shall be furnished to the Facility Agent in sufficient copies for each of the Participating Banks: (a) promptly, all notices, reports or other documents required by statute or any applicable rules to be despatched by any Obligor to its shareholders generally (or any class of them) and all notices, reports or other documents relating to the financial difficulties or debt obligations of any Obligor despatched by or on behalf of any Obligor to its creditors generally (in their capacity as creditors); (b) as soon as the same are instituted or, to its knowledge, threatened, details of any litigation, arbitration or administrative proceedings involving it or any of its Subsidiaries which, if adversely determined, would have a Material Adverse Effect or which involves a liquidated claim or alleged liability which is likely to be in excess of US $15,000,000 (fifteen million United States Dollars) or its equivalent; (c) promptly, such further information regarding its financial condition, business and assets and that of the Group and/or any member thereof (including any requested amplification or explanation of any item in any Accounts, any business plan, forecasts, projection or other material provided by any Obligor hereunder) as the Facility Agent or any Participating Bank may reasonably request from time to time provided that where any information is subject to a confidentiality agreement entered into by the relevant member of the Group in the ordinary course of its business, it shall use its reasonable endeavours to obtain, or shall procure that the relevant member of the Group uses its reasonable endeavours to obtain, consent to disclose such information but if such consent is not forthcoming, this clause 16.3 will not be breached by the failure to deliver the information subject to the confidentiality agreement with someone other than a Restricted Person; (d) promptly, upon being notified of the same, details of the occurrence of a Change of Ownership or details of any proposed Change of Ownership of which it is aware; (e) promptly on request by the Facility Agent, a copy of any agreements and arrangements between the Shareholders (or any Affiliates of the Shareholders) which may replace or amend the Shareholders Agreement. -90- 25.4. AUDIT AND ACCOUNTING DATES Partner will ensure that: (a) the annual Accounts to be delivered to the Coordinating Agent and the Participating Banks pursuant to clause 16.2.1 above are audited by the Auditors; (b) each Obligor shall at all times have duly appointed Auditors; and (c) Partner will not, and no Obligor will, change its financial year end without the prior written consent of the Facility Agent other than (in the case of any other Obligor) to conform its financial year end to that of Partner. 25.5. ACCOUNTING STANDARDS (a) Partner will ensure that: (i) all Accounts shall be prepared in accordance with the Applicable Accounting Principles (consistently applied) or shall indicate in notes to or accompanying such Accounts any material departures from the Applicable Accounting Principles; (ii) each set of Accounts delivered to the Coordinating Agent and the Participating Banks is prepared on substantially the same basis (including, for the avoidance of doubt, adopting the same treatment and classification of items of income and expenditure) as was used in the preparation of the Accounts previously delivered to the Coordinating Agent (or, prior to the Commencement Date, to the Facility Agent) and the Participating Banks, provided that in the case of the first set of Accounts so delivered they shall be prepared on the same basis as was used in the preparation of the financial statements included in the Business Plan previously delivered to the Coordinating Agent (or, prior to the Commencement Date, to the Facility Agent) and the Participating Banks, save to the extent that good practice or law requires otherwise; and (iii) in the event that any Accounts are delivered which are not prepared on a substantially consistent basis (including, for the avoidance of doubt, a consistent treatment and classification of items of income and expenditure) to Accounts previously -91- delivered hereunder, such Accounts are accompanied by an explanation of any changes to the accounting basis used in respect of the accounting basis used in the Business Plan and with a reconciliation of all changes to allow for consistent testing of the covenants in clause 16.32 (Financial Undertakings) below. (b) Partner will ensure that all Accounts shall fairly present in all material respects (subject to adjustments which fall to be made at the end of the financial year in accordance with Applicable Accounting Principles) the consolidated financial position and results of operations of the relevant member of the Group and its Subsidiaries (in the case of consolidated Accounts) or its financial position and results of operations (in the case of unconsolidated Accounts), as at the end of and for the Accounting Period to which they relate. (c) Partner shall, at the same time as it delivers to the Coordinating Agent any audited consolidated annual Accounts of the Group pursuant to clause 16.2.1 above deliver to the Coordinating Agent a letter explaining any differences between the format, headings and characterisations used in such audited consolidated annual Accounts of the Group and in the half-yearly or quarterly consolidated Accounts of the Group delivered pursuant to clause 16.2.1 above where those differences would affect the ability of the Facility Agent to calculate the components of the financial ratios in clause 16.32 (Financial Undertakings) below. 25.6. NEGATIVE PLEDGE No Obligor will, and each Obligor will procure that none of its Subsidiaries will, without the prior consent of the Facility Agent, acting on the instructions of an Instructing Group, create or permit to -92- subsist any Encumbrance on the whole or any part of its respective present or future business, assets or undertaking, except: (i) that Partner may create or permit to subsist a Permitted Encumbrance; (ii) without derogating from the second sentence of clause 16.22 (Borrowings) below, that a Subsidiary (other than a Venture Subsidiary and any Subsidiary of a Venture Subsidiary) may create or permit to subsist a Permitted Encumbrance; and (iii) that a Venture Subsidiary and any Subsidiary of a Venture Subsidiary may create or permit to subsist an Encumbrance to the extent, and only to the extent, any such Encumbrance secures Borrowings that such Venture Subsidiary or Subsidiary, as the case may be, is entitled to incur pursuant to the second sentence of clause 16.22 (Borrowings) below; provided that any order of attachment or injunction restraining disposal of assets or similar legal process arising in connection with court proceedings being contested in good faith with a reasonable prospect of success which does not result from proceedings which would constitute an Event of Default pursuant to clause 17.9 (Execution or Distress) below shall not constitute a breach of this clause 16.6. 25.7. SALE AND LEASEBACK No Obligor will, and each Obligor will procure that none of its Subsidiaries will sell, transfer or otherwise dispose of any of its assets or any interest therein on terms whereby such asset is or may be leased to or re-acquired or acquired by any member of the Group in circumstances where the transaction is entered into primarily as a method of raising finance or of financing the acquisition of an asset except pursuant to finance leases permitted under clause 16.22 (Borrowings) below. 25.8. DISPOSALS No Obligor will, and each Obligor will procure that none of its Subsidiaries will, either in a single transaction or in a series of transactions whether related or not and whether voluntarily or involuntarily, sell, transfer, lease or otherwise dispose of all or any part of or interest in its respective assets or undertaking to any person who is not an Obligor, other than a Permitted Disposal. Nothing in this clause 16.8, however, will permit the disposal of any assets which are the subject of fixed security created by any Security Document except in accordance with the relevant Security Document -93- without the consent of all Participating Banks. Without derogating from the last sentence of this clause 16.8, without the consent of the Instructing Group, no such sale, transfer, lease or disposal of all or any part of or interest in any asset or undertaking shall be made to an Affiliate of Partner unless it is made on arm's length terms. 25.9. PARI PASSU RANKING Each Obligor undertakes that its obligations under this Agreement rank and will at all times rank at least pari passu in right and priority of payment and in point of security (save by reason of and to the extent of the security afforded thereto by the Security Documents) with all its other present and future unsecured and unsubordinated obligations, other than obligations which are mandatorily preferred by law applying to companies generally. 25.10. LOANS AND GUARANTEES No Obligor will, and each Obligor will procure that none of its Subsidiaries will: (a) make any loans; or (b) give any guarantee to or for the benefit of any person, other than loans or guarantees: (i) arising under the Facility Documents; (ii) arising in the ordinary course of its business; (iii) to, or in respect of the obligations of, another Obligor; or (iv) permitted under clause 16.37 (Loans, Guarantees and Investments in Subsidiaries) below. 25.11. OPERATING LEASES No Obligor will, and each Obligor will procure that none of its Subsidiaries will, after the date of this Agreement enter into any operating lease of or in respect of equipment, machinery or plant (other than any private circuits, leased lines and motor vehicles and other than any computer or information technology systems used in the ordinary course of business of any member of the Group) if the equipment, machinery or plant concerned is of such importance in the business of the Group taken as a whole that such business -94- would be materially and adversely affected were the leases for such equipment, machinery or plant to be terminated early and the right to possession of the equipment, machinery or plant lost to the Group. 25.12. RECEIVABLES DISCOUNTING No Obligor will, and each Obligor will procure that none of its Subsidiaries will sell or otherwise dispose of any of its receivables other than: (i) the sale, on arm's' length terms, of debts owing to the Group which are more than 90 (ninety) days' overdue; or (ii) the sale, on arm's length terms, of debts owing to the Group incurred in connection with the sales of handsets, provided the aggregate amount of receivables permitted to be sold pursuant to this paragraph (ii) shall not at any time exceed an aggregate amount equal to US $20,000,000 (twenty million United States Dollars) or its equivalent. 25.13. INVESTMENTS No Obligor will, and each Obligor will procure that none of its Subsidiaries will, make any investment with cash other than a Permitted Investment or in the business of the Group as permitted hereby or such other investments as are permitted under clause 16.37 (Loans, Guarantees and Investments in Subsidiaries) below. 25.14. RESTRICTED DISTRIBUTIONS Partner will not and will procure that no member of the Group will: (i) make or resolve to make any distribution (including, any distribution defined as such under the Companies Law, 1999), dividend or other similar payment (in cash or in kind) on or in respect of any share capital or equivalent of a member of the Group (except to Partner and, in the case of a Strategic Investor in a Venture Subsidiary, except for distributions by such Subsidiary to such Strategic Investor) or any repayment, prepayment or payment (in cash or in kind) of the principal of, or Interest (whether or not capitalised) or any other amount on or in respect of Subordinated Debt or Shareholder Loans (except to Partner and, in the case of a Strategic Investor in a Venture Subsidiary, except for distributions by such Subsidiary to such Strategic Investor), other than a Permitted Distribution; (ii) make or resolve to make any purchase, redemption, repurchase, defeasance, retirement, return or repayment of any of its share capital or equivalent or any loan capital or any debenture of a member of the -95- Group (other than by way of a reduction of share capital without any payment to Shareholders), except to or for the benefit of Partner; (iii) make or resolve to make any other transfer of assets to or Restricted Purchases from any Shareholder or other Restricted Person (except as permitted under clause 16.23 (Arm's-Length Terms) below); or (iv) exercise any right of set-off in respect of any Shareholder Loans or Subordinated Debt. Where any payment is proposed to be made under this clause 16.14, Partner shall, prior to making such payment, provide to the Instructing Group not less than 10 Business Days before the proposed date for payment, a certificate signed by an authorised signatory of Partner showing: (x) the date and amount of such proposed payment; and (y) such calculations in reasonable details as are necessary to show how the payment figure was arrived at and that the provisions of the definition of 'Permitted Distributions' have been complied with. "PERMITTED DISTRIBUTION" means: (i) a distribution of dividends on or in respect of any share capital of Partner; (ii) a distribution of principal, Interest or any other payments under any Shareholder Loans; (iii) a distribution of principal under any Subordinated Debt (including, for the avoidance of doubt, debentures included in Permitted Loan Capital); (iv) a distribution of Interest under any Permitted Loan Capital comprising debentures, on condition, with respect to (i)-(iii) (inclusive) above, that all the conditions referred to in (a)-(j) below are fulfilled and, on condition, with respect to (iv) above, that the conditions referred to in (b), (c), (d), (f) and (j) are fulfilled: (a) Partner is able, in accordance with its Cash Flow as shown in its most recent Accounts, to pay all outstanding operating expenditure -96- requirements (including Taxes and investment requirements) and would remain able to do so after such payment; (b) no amount due to be paid to the Security Trustee or any other Agent under the Facility Agreement, on or before the date of payment of the distribution, is unpaid; (c) no amount due to be paid to any Participating Bank, on or before the date of payment of the distribution, on account of Interest on any Advance provided by a Participating Bank under the Facilities, or on account of commitment commissions or other charges arising from any banking or other financial services provided by a Participating Bank to Partner, is unpaid; (d) no amount due to any Participating Bank, on or before the date of payment of the distribution, on account of any repayment of any of the Facilities, is unpaid; (e) Permitted Distributions may not, in a given Financial Year, exceed, in aggregate, an amount equal to 50% (fifty percent) of Excess Cash Flow arising in relation to the previous Financial Year; (f) no Event of Default or Potential Event of Default is outstanding or would exist after such payment; (g) such distribution is made no earlier than one year after the expiry of the Availability Period Facility C; (h) Partner has repaid (disregarding, for this purpose, any amount which has been prepaid and is capable of being reborrowed under the terms of this Agreement) to the Participating Banks on account of the Facilities an amount equal to at least 50% (fifty percent) of the Total Commitments; (i) with respect to distributions to be made: (a) in any one year Ratio Period ("THE DISTRIBUTION RATIO PERIOD") during the period 2003-2007 (inclusive), each of the Facility Debt Cover Ratio, Total Debt Cover Ratio, Fixed Charge Coverage Ratio and ADSCR for the one year Ratio Period immediately preceding the Distribution Ratio Period, shall be not less than 135% (one hundred and thirty-five percent) of such minimum ratio required for such immediately preceding one year Ratio Period pursuant to the table in clause 16.32 below; -97- (b) in the one year Ratio Period 2008, the Total Debt Cover Ratio for the 2007 one year Ratio Period shall be not less than 135% (one hundred and thirty-five percent); and (c) in the one year Ratio Period 2009, the Total Debt Cover Ratio for the 2008 one year Ratio Period shall be not less than 280% (two hundred and eighty percent) (j) Partner shall have complied with the provisions of clause 1.1.131(f) above. 25.15. SHARE CAPITAL (a) Save only as permitted pursuant to the provisions of this clause 16.15 below, no Obligor, other than Partner, will and Partner will procure that, none of its Subsidiaries will, issue any new share capital or grant any option over any shares to any person other than to Partner or any wholly-owned Subsidiary of Partner. Any shares or options issued to Partner or any wholly-owned Subsidiary of Partner as aforesaid shall first be charged in favour of the Security Trustee (as trustee for itself and the Secured Creditors), as security for, inter alia, Partner's obligations under the Facility Documents, to the reasonable satisfaction of the Security Trustee. Notwithstanding the foregoing, in the event a Strategic Investor agrees to subscribe for shares in a Subsidiary for an aggregate issuance price, payable on allotment in cash that reflects the fair market value of such shares and that, upon such subscription, such Strategic Investor would, if an Affiliate of Partner, hold 20% (twenty percent) or more or, if not an Affiliate of Partner, 10% (ten percent) or more of the issued share capital and voting rights of the Subsidiary, then, provided that: (i) Partner provides the Participating Banks with a certificate to the Instructing Group's satisfaction from an independent appraiser reasonably acceptable to an Instructing Group certifying that the issue price for such shares is their fair market value; and (ii) in the case that the Strategic Investor is an Affiliate of Partner, the subscription is otherwise on arm's length terms, Partner shall be entitled to request the Facility Agent, acting on the instructions of an Instructing Group, to: (1) waive the requirements under this clause 16.15 that: (a) do not permit the issuance of shares in such Subsidiary agreed to be subscribed for by such Strategic Investor; (b) require security to be granted over the shares to be issued to the Strategic Investor in favour of the Security Trustee (as trustee for itself and the Participating Banks); and (c) require security to be given to the Security Trustee (as -98- trustee for itself and the Secured Creditors) over the shares of any Subsidiary of such Subsidiary; and (2) release such Subsidiary from the obligation to guarantee the obligations of Partner under the Facility Documents. Any such request shall be signed by the General Manager of Partner and shall provide all such information regarding any such proposed subscription necessary, so as to enable the Participating Banks to consider, on a case-by-case basis, whether to give such consent, such consent not to be unreasonably withheld. Any Subsidiary in respect of which the Participating Banks shall have given a waiver and release in accordance with this clause 16.15 above (which, pursuant to this clause 16.15, has issued shares to such Strategic Investor as aforesaid), shall hereinafter be referred to as "A VENTURE SUBSIDIARY". "STRATEGIC INVESTOR" shall mean a person or an Affiliate thereof (which is not an Affiliate of Partner or any of its substantial shareholders, as defined in the Companies Law, 1999) which is a reputable well-established company in the telecommunications' or associated fields and can reasonably be expected to add value to the business of the Venture Subsidiary. (b) Partner agrees that any rights of first refusal, limitations on the transfer of Shares in Partner or other provisions of the Shareholders Agreement which may restrict the pledge of the Pledged Assets (as defined in the Share Pledges) (or any of them in accordance with the Share Pledges) or which may restrict the free transfer of any Pledged Assets in the course of realisation of any security under the Share Pledges, shall not apply to the Share Pledges or to any transfer made as part of any realisation under the Share Pledges (except as otherwise required under the Licence). (c) Partner undertakes that it shall not issue any shares or other securities convertible into shares which would cause a Change of Ownership to occur. 25.16. INTELLECTUAL PROPERTY RIGHTS Each Obligor will, and will procure that each of its Subsidiaries will: (a) make such registrations and pay such fees and similar amounts as are necessary to keep those registered Intellectual Property Rights owned by the Group: (i) which are material to the conduct of the business of any member of the Group from time to time; or (ii) over which the Participating Banks have been granted fixed security pursuant to the -99- Security Documents (if any) in force and to record its interest in those Intellectual Property Rights; (b) take such steps as are necessary and commercially reasonable (including the institution of legal proceedings) to prevent third parties infringing those Intellectual Property Rights referred to in paragraph (a) above and (without prejudice to paragraph (a) above) take such other steps as are reasonably practicable to maintain and preserve its interests in those rights; (c) promptly upon being required to do so by the Security Trustee, comply with all proper instructions of the Security Trustee which the Security Trustee is entitled to give under the Security Documents in respect of its Intellectual Property Rights referred to in paragraph (a)(ii) above; (d) not sell, transfer, lease, license on an exclusive basis or otherwise dispose of all or any part of its interest in any of the Intellectual Property Rights referred to in paragraph (a) above (whether in a single transaction or in a series of transactions whether related or not and whether voluntarily or involuntarily) save: (i) as effected pursuant to any of the Security Documents; or (ii) for any licence arrangements in respect of those rights entered into with any Obligor for so long as it remains an Obligor; or (iii) for any licence arrangements in respect of those rights entered into with any third party, where those licence arrangements are entered into on arm's length terms and in the ordinary course of business and which do not materially and adversely affect the interests of the Participating Banks under the Facility Documents or the conduct of business of any member of the Group; and (e) not permit any registration of any of the Intellectual Property Rights referred to in paragraph (a) above to be abandoned, cancelled or lapsed or to be liable to any claim of abandonment for non-use or otherwise. 25.17. ENVIRONMENTAL MATTERS Each Obligor will and will procure that each of its Subsidiaries will: -100- (a) (i) obtain all requisite Environmental Licences; (ii) comply with the terms and conditions of all Environmental Licences applicable to it; and (iii) comply with all other applicable Environmental Law, in each case where failure to do so would have a Material Adverse Effect; and (b) promptly upon receipt of the same, notify the Coordinating Agent and the Security Trustee of any claim, notice or other communication served on it in respect of any alleged breach of or corrective or remedial obligation or liability under any Environmental Law which would, if substantiated have a Material Adverse Effect. 25.18. INSURANCE (a) Each Obligor will, and will procure that each of its Subsidiaries will, with effect from the date upon which the first Advance is requested by Partner hereunder, insure and keep insured all such properties and assets of such Obligor or Subsidiary with insurance companies or underwriters (including facultative reinsurance companies) approved by the Facility Agent (such approval not to be unreasonably withheld or delayed) to such extent, at such times and against such risks as described in pages 29-31 of the Insurance Report (including with respect to deductibles, exclusions and exceptions) (other than departures from such basis which are not adverse in any material respect (taking into account market availability and cost and the views of any insurance advisers) to the interests of the Finance Parties, or otherwise as the Facility Agent (acting on the instructions of the Instructing Group) may approve). (b) Each Obligor will, and will procure that each of its Subsidiaries will, with reasonable promptness after becoming aware of the relevant requirement, effect and maintain all insurances required by the terms of any applicable law or any contract binding on it (including for the avoidance of doubt, the Licence). (c) Partner will ensure that it has such insurance coverage in respect of any risks or liabilities other than those specified in the Insurance Report as would from time to time generally be insured by a prudent operator of a GSM telephony network (including also 2.5 generation and 3rd generation) (financed on a project finance basis) of a size, and with general characteristics (including location) comparable to the Business which does not self-insure (except by means of reasonable deductibles required by insurers generally) and having regard to all the circumstances (including the interests of the Participating Banks), and taking into account, among other things, market availability in respect -101- of risks, liabilities and amounts of insurance and the financial position of Partner. (d) Subject as hereinafter provided, Partner may, or any Obligor may, at any time, effect such other insurances in addition to or supplementing those referred to in this clause 16.18 as it may think fit. Provided that such supplementary insurance shall not adversely affect any insured party's rights or ability to recover under the insurance referred to in this clause 16.18 and Partner shall notify the Facility Agent at least annually of any material insurances effected since the previous such notification pursuant to this paragraph (d). (e) Each Obligor will promptly supply to the Facility Agent on request evidence reasonably satisfactory to the Facility Agent of payment of all premiums and other amounts payable by it under, and a certified copy of, each insurance policy required to be taken out and maintained by it pursuant to this clause 16.18 (or, in the case of any marine cargo insurance policy taken out by the Counterparty to the Principal Supplier Contract, a certified summary of key terms) together with such other information as to the insurance policies taken out pursuant hereto (including regarding renewals thereof) as the Facility Agent may reasonably request (except for miscellaneous insurances as referred to in the schedule to the Insurance Report). (f) Partner shall ensure that, in respect of each policy of insurance and reinsurance taken out by any Obligor pursuant to this clause 16.18 (except for miscellaneous insurances as referred to in the schedule to the Insurance Report): (i) a clause is endorsed upon such policy whereby the insurer agrees that the insurance cover shall not be invalidated so far as the Security Trustee is concerned by any breach of the insuring conditions or any other act or omission unknown to or beyond the control of the Security Trustee on the part of the relevant Obligor or any other person; (ii) an undertaking is endorsed upon such policy by the insurer to notify the Security Trustee promptly in writing if the premium or other moneys payable under such policy are not paid when due and to refrain from cancelling such policy by reason only of the non-payment of such monies for a period of at least 30 (thirty) days from the due date; -102- (iii) a provision is endorsed upon such policy to the effect that the relevant insurance company waives any rights of contribution arising against any other insurance taken out by the Agents and the Participating Banks (or any of them) in respect of payments made by it and any rights of subrogation arising in respect of the rights of the Agents and the Participating Banks (or any of them) under the Facility Documents, (iv) a notice of assignment is duly given to the brokers or the underwriters and insurance companies in accordance with the Debenture; (v) the Security Trustee (for the benefit of itself and the Secured Creditors) is joined as an additional insured thereunder and the interest of the Security Trustee (for the benefit of itself and the Secured Creditors) is duly noted and endorsed upon all slips, cover notes, policies or other instruments of insurance issued or to be issued in connection therewith; subject to each of such clauses, undertakings and provisions being viable commercially in the Israeli and international insurance market. If facultative reinsurance is effected in relation to any policy of insurance taken out pursuant hereto, Partner shall use all reasonable endeavours to ensure that, if practicable in the insurance market and achievable at no material extra cost, a provision is endorsed thereon whereby each reinsurer agrees that in the event of a claim under the policy of the reassured, in lieu of payment to the reassured, their successors in interest and assigns, the reinsurers shall pay that portion of any loss due direct to the insured parties (less the premium, if any, due to the reinsurers) and whereby it is understood and agreed that any such payment shall fully discharge the reinsurers from any and all further liability in connection therewith. If Partner cannot effect reinsurance with such a provision endorsed thereon, in place of reinsurance it will: (i) place the relevant insurance on a co-insured basis with insurers approved by the Facility Agent (such approval not to be unreasonably withheld or delayed); or (ii) obtain an assignment of facultative reinsurance by the insurers to the Security Trustee. (g) Each Obligor will ensure that (except for public liability and miscellaneous insurances (as referred to in the schedule to the Insurance Report)) all of the insurance policies required to be taken out and maintained by it pursuant to this clause 16.18 shall contain loss payee provisions acceptable to the Security Trustee noting the -103- Security Trustee's interest thereon and naming the Security Trustee as the payee in circumstances where an Event of Default has been notified in writing to the insurer or broker as applicable by the Security Trustee and is continuing unwaived. (h) Save in the circumstances referred to in clause 16.18(i) below, all moneys received or receivable under any insurances in respect of property or assets damaged or destroyed or business interruption shall promptly (subject to the rights and claims of any person having prior rights thereto) be applied: (i) subject to (ii) below, at the option of Partner, either: (A) in repairing, replacing, restoring or rebuilding the property or assets damaged or destroyed or (in the case of business interruption insurance) in the Business as Partner reasonably see fit as permitted pursuant to this Agreement or (in the case of third party liability cover) in satisfaction of the third party liability in question; or (B) in payment of amounts due under the Facility Documents; or (ii) on and after the occurrence of any Event of Default and for so long as such event is continuing, at the option of the Security Trustee: (A) to prepay the outstanding Advances in accordance with clause 6 (Voluntary Prepayment and Reborrowing) above, as if such prepayment was a voluntary prepayment; or (B) in repairing, replacing, restoring or rebuilding the property or assets damaged or destroyed or (in the case of business interruption insurance) in the Business as the Security Trustee reasonably see fit as permitted pursuant to this Agreement or (in the case of third party liability cover) in satisfaction of the third party liability in question and if any such moneys shall be received by Partner where the circumstances in sub-paragraph (ii) apply, Partner shall (subject to the rights and claims of any person as aforesaid) hold such moneys upon trust for the Security Trustee pending payment to the Security Trustee for application in accordance with the Security Trust Deed, or as the case may be, application by Partner in repairing, replacing, restoring or rebuilding the property or assets damaged or destroyed. (i) All moneys received or receivable under any insurances whilst a Potential Event of Default (but not an Event of Default) has occurred and is continuing shall be placed to the credit of a blocked account subject to an encumbrance in favour of the Security Trustee until the Potential Event of Default ceases to exist or is waived (in which case Partner may apply insurance proceeds in accordance with clause 16.18(h)(i) above) or the relevant Potential Event of Default becomes an Event of Default (in which case the Security Trustee may apply insurance proceeds in accordance with clause 16.18(h)(ii) above). -104- (j) Partner shall: (i) promptly notify the Facility Agent of any insurance claim where the amount of such claim exceeds US $2,500,000 (two million five hundred thousand United States Dollars) (or its equivalent, on the date on which the claim is made, in the currency in which such claim is made); (ii) take all action reasonably within its power to procure that nothing is done or offered to be done whereby any of the insurances taken out hereunder may be rendered void, voidable, unenforceable, suspended or impaired in whole or in part or to otherwise render any sum paid out under any such policy repayable in whole or in part. (k) If, at any time, owing to changes in the Israeli or international insurance market or in the capacity or availability or cost of insurance coverage in those markets or any other change in circumstances giving rise to changes in the insurance coverage being necessary or desirable, Partner or, as the case may be, the Facility Agent serve notice upon one another that it believes that the insurance provisions in this Agreement no longer reflect the insurance coverage of the risks or liabilities which would be insured by a prudent operator of a GSM telephony network (including also 2.5 generation and 3rd generation) (financed on a project finance basis) of a size, and with the characteristics (including, with limitation, location), comparable to that of the Group which does not self-insure (except by means of reasonable deductibles required by insurers generally) or that the premia for any insurances effected pursuant hereto are unreasonably expensive in the context of Partner's business and financial condition, as soon as practicable thereafter, Partner and the Facility Agent shall consult, in good faith, and take reasonable steps to ensure that the insurance arrangements to be effected by Partner are revised such that the level of insurance of risks or liabilities to be covered are those which would be insured by a prudent operator of a GSM telephony network (including also 2.5 generation and 3rd generation) (financed on a project finance basis) of a size, with the characteristics (including location) comparable to that of Partner which does not self-insure (except by means of reasonable deductibles required by insurers generally). 25.19. NOTIFICATION OF DEFAULT -105- Each Obligor shall notify the Facility Agent of any Event of Default or Potential Event of Default of which it is aware (and the steps, if any, being taken to remedy it) promptly upon becoming aware of it. 25.20. CHANGE OF BUSINESS (a) No Obligor will, and each Obligor will procure that none of its Subsidiaries will: (i) make or threaten to make any substantial change in the nature of its respective business (save as contemplated in the Business Plan or as may result from a disposal of assets permitted by this Agreement); or (ii) carry on any business other than the Business; provided that, in respect of a Venture Subsidiary or any Subsidiary thereof, such Venture Subsidiary or Subsidiary thereof may carry on a business which is in the telecommunications sector. (b) No Obligor shall bid for any other telephone licence (other than any licence for activities ancillary to its GSM business and its business of establishing and operating second and-a-half and third generation (known as 2.5 and 3G) wireless telephone services (all as contemplated in the version of the Business Plan dated 7 July 2002 delivered to the Facility Agent on 11 July 2002 which would use existing infrastructure and require no material Capital Expenditure) unless: (i) it shall have received the prior written consent of an Instructing Group (not to be unreasonably withheld); (ii) the financing of such bid and all activities contemplated thereby shall be financed from a source other than under the Facilities; and (iii) the making of such bid, or the carrying out of any activities contemplated by such bid, would not result in a Material Adverse Effect. -106- 25.21. ACQUISITIONS AND MERGERS Neither Partner nor any of the Subsidiaries shall enter into or resolve to approve any merger or consolidation, scheme of reconstruction, liquidation, or to transfer its Business or part thereof to, or make any Acquisition, other than: (a) disposals permitted pursuant to clause 16.8 (Disposals) above; (b) Acquisitions or mergers or consolidations to which the prior consent of all the Participating Banks has been obtained; (c) Acquisitions, the funding of which is from the Permitted Loan Capital or the sale by Partner of securities permitted hereunder; or (d) Acquisitions by Subsidiaries. 25.22. BORROWINGS Partner shall not incur any Borrowings, other than Permitted Borrowings. A Subsidiary of Partner shall be entitled to incur Borrowings, provided that, the debt to equity ratio (as the terms "debt" and "equity" are defined in accordance with Applicable Accounting Principles; "equity" to include shareholder loans made to such Subsidiary) of such Subsidiary in accordance with such Subsidiary's consolidated Accounts shall at all times not exceed 60:40. 25.23. ARM'S-LENGTH TERMS No Obligor will, and each Obligor will procure that none of its Subsidiaries will incur any liability to or for the benefit of any Restricted Person (other than in relation to Shareholder Loans or Paid-in Equity) otherwise than under agreements which are on terms no worse to the Group than on an arm's length terms in the ordinary course of business and, in respect of agreements entered into after the date of this Agreement, where there have been bona fide negotiations relating to such terms. 25.24. COMPLIANCE WITH LAWS Each Obligor will, and will procure that each of its Subsidiaries will, comply in all respects material to the Participating Banks with all applicable laws, rules, regulations and orders of any governmental authority, having jurisdiction over it or any of its assets. -107- 25.25. CONSENTS AND AUTHORISATIONS (a) Each Obligor will, and will procure that each of its Subsidiaries will, obtain or cause to be obtained: (i) every consent, authorisation, licence or approval of, or registration with or declaration to, governmental or public bodies or authorities or courts; and (ii) every notarisation, filing, recording, registration or enrolment in any court or public office in Israel, in each case required by any Obligor to authorise, or required by any Obligor in connection with, the execution, delivery, validity, enforceability or admissibility in evidence of the Facility Documents and Material Contracts or the performance by any Obligor of its respective obligations under the Facility Documents and Material Contracts to which it is a party. (b) Each Obligor will, and will procure that each of its Subsidiaries will obtain or cause to be obtained every Authorisation relevant to it and ensure that: (i) none of the Authorisations is revoked, cancelled, suspended, withdrawn, terminated, expires and is not renewed or otherwise ceases to be in full force and effect; and (ii) no Authorisation is modified and no member of the Group commits any breach of the terms or conditions of any Authorisation which, in the case of (i) or (ii), would or is reasonably likely to have a Material Adverse Effect. 25.26. LICENCE Partner: (a) will notify the Facility Agent promptly upon the occurrence of any breach of the Licence or upon the receipt of any notice or communication between the Ministry and Partner or any other member of the Group in connection with the Licence which either: (i) claims a breach of the Licence; or (ii) which could reasonably be expected to give rise to a revocation, termination, amendment, suspension or withdrawal of the Licence; or (iii) which otherwise may be likely to have a Material Adverse Effect (including, for the avoidance of doubt, any notice or communication regarding the non-extension of the Licence or any reduction of frequency spectrum). Partner will do all such things (at the expense of Partner) as -108- reasonably requested by the Facility Agent if the Facility Agent reasonably believes: (x) the Licence to be in danger of revocation, termination, amendment, suspension or withdrawal, to mitigate the revocation, termination, amendment, suspension or withdrawal of the Licence, or (y) that any such matters so notified to it may be reasonably likely to have an adverse effect upon the interests of the Finance Parties under the Facility Documents. Partner shall, at the request of the Facility Agent, consult with the Facility Agent in good faith with a view to the making of any oral or written submissions or responses to be made in relation to any matter or thing which gives rise to the Facility Agent having any such reasonable belief as referred to above and to the possibility of representatives of the Finance Parties attending any meetings with the Ministry in connection therewith. Following the occurrence of an Event of Default or a Potential Event of Default which is continuing, upon the request of the Facility Agent, Partner shall use its reasonable endeavours to make oral or written submissions to the Ministry on behalf of the Finance Parties and, if required by the Facility Agent, seek the Ministry's agreement to representatives of the Finance Parties attending any meetings with the Ministry; (b) will do all such things and take such steps as are necessary to ensure the Licence remains in full force and effect and, will not take any steps or action which would prejudice in any material respect its ability to renew the Licence and will notify the Facility Agent promptly upon the receipt of any material notice or communication in connection with such renewal; (c) will not dispose of any of its rights under the Licence; (d) will not agree to any material amendment to or material variation of the Licence or waive any material right thereunder; (e) will deliver to the Facility Agent in sufficient copies for the Agents and the Participating Banks any notice or communications referred to in paragraph (a) of this clause 16.26 together with copies of all other material notices between Partner and the Ministry. -109- 25.27. MATERIAL CONTRACTS AND CONSTITUTIONAL DOCUMENTS (a) Each Obligor shall comply with the terms of each of the Material Contracts to which it is party save to the extent that failure to comply with any such term would not be reasonably likely to result in a Material Adverse Effect. (b) No Obligor shall, without the prior written consent of the Facility Agent (acting on the instructions of an Instructing Group), amend, cancel, supplement, supersede or waive any term of a Material Contract to which it is a party in any respect save to extent that the same is not materially adverse to the interests of the Participating Banks under the Facility Documents. (c) Partner shall notify the Facility Agent promptly after the entry into by any Obligor of any agreement, deed or contract which it reasonably considers may constitute a Material Contract. (d) Each Obligor shall take all reasonable action necessary to perfect, preserve and enforce all of its rights under the Material Contracts (if any) to which it is a party. (e) No Obligor shall amend its Charter in any respect materially adverse to the interests of the Participating Banks without the prior written consent of the Facility Agent (acting on the instructions of an Instructing Group). 25.28. AUDITORS (a) If Partner wishes to change its Auditors it will notify the Facility Agent as to the reasons for any such proposed change and if the Facility Agent so requests, will instruct the audit partner of each of the outgoing firm of Auditors and the replacement firm of Auditors to discuss the financial position of the Group with the Facility Agent. (b) Partner will authorise the Auditors to discuss the Group's and/or any Group member's financial position with the Facility Agent on its reasonable request or at the reasonable request of the Facility Agent, at the expense of Partner, pursuant to a letter to be sent by Partner to the Auditors in the form set out in SCHEDULE 20 (Letter to Auditors) hereto. If the Facility Agent so requests any discussion with the Auditors, the Facility Agent shall give Partner reasonable notice of any meeting or other forum used for such discussion which shall take place at a reasonable time and the Facility Agent shall (if so requested -110- by Partner) enable a representative of Partner to be present at the relevant discussion. 25.29. HEDGING AGREEMENTS (a) Partner shall ensure it manages its Interest rate and currency exchange exposure in a prudent manner and shall on the last Business Day of each month notify details of any Hedging Transactions entered into during the preceding month to the Facility Agent. (b) Partner shall not enter into any Hedging Transaction other than: (i) Interest Rate Hedging Transactions entered into for the purposes of clause 16.29(a) (Hedging Agreements); (ii) spot foreign exchange contracts entered into in the ordinary course of business; and (iii) foreign exchange transactions, currency swaps or currency options entered into for the purposes of hedging actual or projected foreign exchange exposures arising in the ordinary course of business carried on in compliance with the terms of this Agreement. (c) Partner shall not enter into any Hedging Transactions for any speculative purpose. (d) Partner shall only enter into Interest Rate Hedging Agreements with Counterparties which are: (i) Participating Banks; (ii) financial institutions rated at least "A-" by S&P or equivalent by Moody's; (iii) the Arranger; or (iv) subject to paragraph (g) below, HWL or any HWL Hedging Subsidiary. Such Counterparties will be Secured Creditors provided that the relevant Interest Rate Hedge Provider is a Participating Bank (in such capacity a "SECURED INTEREST RATE HEDGE PROVIDER"). (e) Partner shall enter into Currency Hedging Agreements other than spot foreign exchange contracts entered into in the ordinary course of business with counterparties which are: (i) Participating Banks; or (ii) other financial institutions rated at least "A-" by S&P or "A3" by Moody's; or (iii) the Arranger. -111- (f) Partner shall ensure that at all times its rights and benefits under any Hedging Agreement are assigned by way of security to the Security Trustee. (g) Partner may only enter into Interest Rate Hedging Transactions with HWL or any HWL Hedging Subsidiary provided that: (i) each Interest Rate Hedging Agreement is documented pursuant to an 1992 ISDA Master Agreement (Multi-currency-Cross Border) Agreement (together with the applicable Schedule and confirmation); (ii) HWL is rated not less than "A" by S&P or equivalent by Moody's at the time such Interest Rate Hedging Transaction is entered into; (iii) Partner certifies that such Interest Rate Hedging Transaction is on terms at least as favourable to Partner as those available to Partner in the market, which certificate shall attach quotes from two leading banks which generally operate in the swap market; (iv) for the avoidance of doubt HWL may not be a Secured Interest Rate Hedge Provider; and (v) (1) HWL and (in the case of any HWL Hedging Subsidiary), the relevant HWL Hedging Subsidiary, shall have first executed an undertaking in substantially the same form as was given, prior to its release on 3 November 1999, by HWL under clauses 7.2 and 7.3 of the HWL Counter Guarantee (as defined in the Original Facility Agreement), save that HWL and, if applicable, the HWL Hedging Subsidiary, shall, in such undertaking, submit to the exclusive jurisdiction of the competent courts of Tel-Aviv-Jaffa and appoint, in connection therewith, an agent for service of proceedings located in Israel and that such undertaking shall otherwise be in form and substance satisfactory to the Facility Agent; (2) that, in the case of any HWL Hedging Subsidiary, HWL has executed a guarantee in favour of Partner in respect of the relevant HWL Hedging Subsidiary's obligations arising under the Interest Rate Hedging Transaction concerned; -112- (3) that there has been provided to the Facility Agent such constitutive board resolutions and certificates in relation to paragraphs (1) and (2) above as it may reasonably require, together with a legal opinion in form and substance satisfactory to the Facility Agent; and (4) that where any undertaking as referred to in (1) above, has been given, that HWL and, if applicable, any HWL Hedging Subsidiary that has given an undertaking as aforesaid, are in full compliance with the same. 25.30. SUBSIDIARIES No Obligor shall, without the prior written consent of the Instructing Group, acquire (by subscription or otherwise) any shares or equity-related securities in any other entity and, in particular but without limitation, shall not acquire or establish any new Subsidiary unless such Subsidiary: (a) is a Dormant Company; or (b) is a Venture Subsidiary or a Subsidiary of a Venture Subsidiary; or (c) is a wholly-owned Subsidiary that becomes an Additional Guarantor in accordance with clause 26.1 (Additional Guarantors) and provides such Encumbrances in respect of the Facilities as required pursuant to clause 26.2 (Security). 25.31. TAXATION Each Obligor shall file or cause to be filed all tax returns required to be filed in all jurisdictions in which it is situated or carries on business or otherwise subject to pay Tax and will promptly pay all Taxes which are due and payable on such returns or any assessment made against it except for non-payment, or a claim for payment, non-payment of which would in each such case not have a Material Adverse Effect. 25.32. FINANCIAL UNDERTAKINGS The covenants set out in this clause 16.32 (Financial Undertakings) below for any Ratio Period shall be based on the Accounts (including the Auditors' certificates and notes referred to in clause 1.2.2 above) for such Ratio Period (whether Accounts for 6 (six) months, in the case of six month Ratio Periods, or for 1 (one) year, in the case of one year Ratio Periods), subject, with respect to six month Ratio Periods, to those adjustments set out below. -113- Partner will procure that for each of the one year Ratio Periods set out below, and for each of the six month Ratio Periods set out below, each of the financial ratios set out in the table below shall be no less than the percentage set out in the table for such one year Ratio Period or six month Ratio Period, as the case may be, opposite such financial ratios:

FACILITY DEBT TOTAL DEBT FIXED CHARGE COVER RATIO COVER RATIO COVERAGE RATIO ADSCR YEAR ============================ =========================== ========================== ========================= 1st Six 1st Six One Year 1st Six One Year Month One Year 1st Six One Year Month Ratio Ratio Month Ratio Ratio Ratio Ratio Month Ratio Ratio Period Period Period Period Period Period Period Period 2002 33% 25% 83% 200% 2003 35% 37% 26% 27% 75% 75% 200% 200% 2004 38% 40% 28% 29% 88% 95% 183% 172% 2005 45% 50% 31% 33% 97% 99% 150% 150% 2006 57% 65% 39% 45% 102% 105% 150% 150% 2007 65% 65% 45% 45% 105% 105% 150% 150% 2008 65% 45% 105% 165%

Provided that, in the event that: (a) for any Ratio Period there is, with respect to not more than 2 (two) ratios (and if there is a deviation with respect to 2 (two) ratios, one of which is ADSCR) a deviation from the requirement set out in the above table for such ratio of not more than 5% (five percent) (such that the actual ratio shall not be less than 95% (ninety-five percent) of the ratio as required in the table); and (b) there has not been in respect of any one or both of the ratios referred to in (a) above (in respect of which there is a deviation of 5% (five percent) or less for such Ratio Period), any deviation in any one of the 3 (three) Ratio Periods (disregarding, for the avoidance of doubt, any Ratio Period prior to the 2002 one year Ratio Period) preceding such Ratio Period, then Partner shall be deemed to have complied with this clause 16.32.2 in respect of such Ratio Period. -114- For the purposes of all the conditions in this clause 16.32, insofar as applicable to six month Ratio Periods, in calculating EBITDA after SAC, the amount of EBITDA after SAC must be multiplied by 2 (two). For the removal of doubt, the permitted deviations referred to in this clause 16.32 (Financial Undertakings) above are permitted only for the purposes of this clause 16.32 (Financial Undertakings) and not for any other purpose under this Agreement. 25.33. ACCESS At any time whilst a Potential Event of Default or Event of Default is continuing, or the Facility Agent reasonably believes a Potential Event of Default or Event of Default may be in existence: (a) Partner shall ensure, as far as it is able, that at reasonable times, on reasonable prior notice by the Facility Agent (acting upon the instructions of an Instructing Group), any professional adviser to the Facility Agent or representative of the Facility Agent or any other Agent be afforded access to, and be permitted to inspect or observe, all or any part of the Business subject to any reasonable confidentiality undertaking required by it; and (b) Partner shall permit any professional adviser to the Facility Agent or representative of the Facility Agent or the Agents, at reasonable times and on reasonable prior notice by the Facility Agent, to have access to books, records, accounts, documents, computer programmes, data or other information in the possession of or available to it subject to any reasonable confidentiality undertaking required by it and to take such copies as may be considered appropriate by such representative or professional adviser acting reasonably. 25.34. INTERCONNECTION (a) Partner shall keep the Facility Agent promptly informed of all material developments relating to the entry into the Bezeq Interconnection Agreement. Promptly following execution of any Interconnection Agreement, Partner shall deliver to the Facility Agent a copy of such Interconnection Agreement (provided that Partner may delete any reference contained therein which it reasonably believes to be commercially sensitive price or tariff information prior to the supply of such Interconnection Agreement). (b) Each of the parties hereto agree that the Facility Agent may only supply copies of any Interconnection Agreement delivered to it under clause 16.34(a) (Interconnection) above to (i) the Security Trustee if such Interconnection Agreement is assigned by way of security in favour of the Security Trustee; and (ii) any other Finance Party -115- (including the Security Trustee) if any Potential Event of Default or Event of Default of whatsoever nature is outstanding or if the Facility Agent reasonably believes that a Potential Event of Default or Event of Default may have occurred by reason of any event, matter or circumstance occurring with respect to such Interconnection Agreement. (c) Partner shall ensure that Interconnection Agreements are entered into with such other persons (apart from Bezeq) and on such terms as may in each case be reasonably necessary or appropriate for the purposes of carrying out the Business as contemplated by the Business Plan. (d) Partner shall promptly notify the Facility Agent upon it becoming aware of any action or inaction or intended action or inaction of Bezeq which is reasonably likely to have a materially adverse effect on the provision of interconnection infrastructure and services by Bezeq to Partner. 25.35. RESERVE ACCOUNT Partner shall, in accordance with clause 1.1.131(f) above, establish, maintain and supplement the Reserve Account, charged, in accordance with clause 1.1.131(f) above, in favour of the Security Trustee (as trustee for itself and the Secured Creditors pursuant to the Debenture), unless and until no longer required to do so pursuant to paragraphs (i) or (ii) of clause 1.1.131(f). -116- 25.36. UTILISATION OF PROCEEDS OF FACILITIES Partner shall not utilise the proceeds from any Advance received under the Facilities, except for those purposes referred to in clause 2 (The Facilities) of this Agreement. 25.37. LOANS, GUARANTEES AND INVESTMENTS IN SUBSIDIARIES (a) Partner shall be permitted to utilise the proceeds of Advances under the Facilities in order to make loans, to give guarantees in respect of, or to make investments in the share capital of, a Subsidiary in which Partner holds, at least, 75% (seventy-five percent) of the issued share capital and voting rights, provided that: (i) the business of such Subsidiary is exclusively in the field of the Business; (ii) the aggregate amount of any such loans, guarantees or investments in any such Subsidiary shall not exceed, individually, US $2,000,000 (two million United States Dollars); and (iii) the aggregate amount, at any time, of any such investments, loans and guarantees in all such Subsidiaries shall not exceed US $5,000,000 (five million United States Dollars), all subject to the provisions of clause 7.3 (Investment by Partner in Subsidiaries) above. (b) Partner shall be permitted to make loans, to give guarantees in respect of, or make investments in, the share capital of: (i) any Subsidiary, after the Effective Date, from the proceeds of Permitted Loan Capital or the issue of shares in Partner; (ii) subject to clauses 16.22 (Borrowings) and 16.8 (Disposals) above, any Subsidiary, where such loan, guarantee or investment is made for the purpose of financing the purchase from Partner of assets; provided that: (1) in the case of an asset which is the subject of fixed security under any Security Document (or an asset which comprises of any shares held by Partner), such assets are acquired by such Subsidiary subject to such fixed security under the Security Documents, such security is duly registered and valid and has the same priority as if such Subsidiary had originally pledged such asset under such Security Document in place of Partner and, (2) in any other case, such Subsidiary shall have first granted a first-ranking fixed charge over such assets in favour of the Security Trustee (for the benefit of itself and the Secured Creditors) in a form substantially similar to the security granted by Partner under the Debenture; and that (3) in the event the consideration payable -117- for such assets is in excess of US $10,000,000 (ten million United States Dollars) (or is in excess of such amount when aggregated with other consideration paid in respect of any other assets purchased from Partner as aforesaid during the preceding 12 (twelve) months), a certificate, in a form reasonably acceptable to the Instructing Group, from an appraiser certifying that the consideration paid for all of such assets was its fair value, is provided to the Participating Banks prior to such purchase. (c) Save as permitted under this clause 16.37 above, Partner shall not be entitled to make loans to, give guarantees in respect of, or make investments in the share capital of, any Subsidiary. 25.38. SHARE PLEDGES Subject to clause 34.2 (Release of Share Pledges) below, Partner shall procure that at all times not less than 51% (fifty-one percent) of Partner's issued share capital (including, for this purpose, any securities convertible or realisable into shares of Partner), from time to time, are pledged by the Chargors under the Share Pledges and Partner shall not issue any such shares or securities, unless immediately prior to such issue, the number of shares pledged by the Chargors as aforesaid is such that immediately after such issue, Partner shall comply with the provisions of this clause 16.38. 25.39. NON-ACQUISITION BY SUBSIDIARY Partner shall procure that no Subsidiary of Partner shall acquire any share or other securities of Partner, nor the rights with respect to any Indebtedness owed to Partner. 26. DEFAULT 26.1. EVENTS OF DEFAULT Each of the events set out in clause 17.2 (Non-Payment) to clause 17.24 (Non-Compliance with any Securities Authority) (inclusive) below is an Event of Default (whether or not caused by any reason outside the control of any or all of the Obligors or any other person). 26.2. NON-PAYMENT Any Obligor does not pay on the due date any amount payable by it under any Facility Document at the place and in the funds expressed to be payable, -118- provided that this clause 17.2 (Non-Payment) shall not apply: (i) to unpaid amounts of principal which are paid in full within two Business Days of the due date for payment; or (ii) to unpaid amounts of Interest or other amounts (except principal) which are paid in full within 5 (five) Business Days after the due date for payment. 26.3. BREACH OF OBLIGATIONS (a) There is any breach of any of clauses 2.1.2, 2.4 (Purpose), 4.5(b) (Outstandings in Proportion to Commitments--Facility B), 16.6 (Negative Pledge), 16.7 (Sale and Leaseback), 16.8 (Disposals), 16.10 (Loans and Guarantees) to 16.15 (Share Capital) (inclusive), 16.22 (Borrowings), 16.32 (Financial Undertakings) or 16.35 (Reserve Account) to 16.39 (Non-Acquisition by Subsidiary) (inclusive), above. (b) Partner fails to comply with the provisions of clause 4.5(a) (Outstandings in Proportion to Commitments--Facility A and Facility C) above and within 21 (twenty-one) days after the earlier of Partner becoming aware of such default and receipt by Partner of written notice from the Coordinating Agent requiring the failure to be remedied, Partner shall have failed to cure such default. (c) Any Obligor fails to comply with any undertaking or obligation contained in any Facility Document and, if such default is capable of remedy within such period, within 30 (thirty) days after the earlier of the Obligor becoming aware of such default and receipt by the Obligor of written notice from the Facility Agent requiring the failure to be remedied, that Obligor shall have failed to cure such default. 26.4. MISREPRESENTATION/BREACH OF WARRANTY (a) Any representation or warranty contained in clauses 15.7 (Consents), 15.8(c) or (d) (Accounts), 15.10 (Tax Liabilities), 15.12 (Business Plan), 15.13 (Ownership of Assets), 15.14 (Documents), 15.15(a) (Intellectual Property Rights), 15.16 (Environmental Matters) or 15.18 (Material Contracts) is incorrect or misleading in any respect when made or deemed repeated by reference to the facts and circumstances then subsisting. (b) Any representation or warranty contained in clauses 15.5(c) (Non Conflict), 15.6(b) (No Default), 15.10 (Tax Liabilities) or 15.15(b) (Intellectual Property Rights) is incorrect or misleading in any respect when deemed repeated pursuant to clause 15.21 (Repetition). -119- (c) Any other representation or warranty made or repeated by or on behalf of any Obligor in any Facility Document, or in any certificate or statement delivered by or on behalf of any Obligor or other member of the Group under any Facility Document, is incorrect or misleading in any material respect when made or deemed to be made or repeated by reference to the facts and circumstances then subsisting. 26.5. CROSS-ACCELERATION AND CROSS-DEFAULT (a) Any amount in respect of Borrowings of any one or more members of the Group (taken together if more than one) which aggregate US $5,000,000 (five million United States Dollars), or its equivalent, or more at any one time outstanding: (i) becomes prematurely due and payable; (ii) becomes due for redemption before its normal maturity date; or (iii) is placed on demand, in each such case by reason of the occurrence of an event of default (howsoever characterised) or any event having the same effect resulting from a default by a member of the Group. (b) Any amount in respect of such Borrowings which aggregate US $5,000,000 (five million United States Dollars), or its equivalent, or more, are not paid when due (whether falling due by demand, at scheduled maturity or otherwise) or within any applicable grace period provided for in the document evidencing or constituting those Borrowings. (c) Any Encumbrances over any assets of any one or more members of the Group (taken together if more than one) securing an aggregate of US $5,000,000 (five million United States Dollars), or its equivalent, or more become enforceable and steps are taken to enforce the same. (d) Any Obligor fails to discharge in full any judgment debt entered against it in excess of an aggregate amount of US $5,000,000 (five million United States Dollars), or its equivalent, within 30 (thirty) days of the relevant judgment being entered against the relevant Obligor unless such judgment is being contested in good faith on reasonable grounds following external legal advice. -120- (e) For the purposes of this clause 17.5 only, "BORROWINGS" shall include Indebtedness pursuant to Hedging Transactions and, in any such case the "amount" in respect of such Hedging Transactions shall be the amount under the relevant Hedging Transaction which becomes prematurely due and payable, due for redemption before its normal maturity date, placed on demand or is not paid when due or within any applicable grace period. (f) There is any event of default under any debenture comprising Permitted Loan Capital. 26.6. INVALIDITY Any of the Facility Documents shall cease to be in full force and effect in any material respect or shall cease to constitute the legal, valid, binding and enforceable obligation of any Obligor party to it or, in the case of any Security Document, fail to provide effective perfected security in favour of the Security Trustee (for the benefit of itself and the Secured Creditors) over the assets over which security is intended to be given by that Security Document (save for any Reservations), or it shall be unlawful for any Obligor to perform any of its material obligations under any of the Facility Documents. -121- 26.7. INSOLVENCY AND RESCHEDULING Any Obligor is unable to pay its debts as they fall due or admits inability to pay its debts as they fall due, commences negotiations with any one or more of its creditors with a view to the general readjustment or rescheduling of its Indebtedness or makes a general assignment for the benefit of or a composition with its creditors. 26.8. WINDING-UP Any Obligor takes any corporate action or other steps are taken or legal proceedings are started (or are consented to or any order is made) for its winding-up, liquidation, bankruptcy, dissolution, administration or re-organisation (or for the suspension of payments generally or any process giving protection against creditors) or for the appointment of a liquidator, receiver, administrator, administrative receiver, conservator, custodian, trustee or similar officer of it or of all or any material part of its revenues or assets or such a person is appointed provided that this clause 17.8 shall not apply to: (a) any such action relating to a solvent reconstruction, amalgamation, reorganisation or merger of such Obligor save where the Facility Agent (acting on the instructions of an Instructing Group) believes that such action will reasonably be expected to have an adverse effect on the ability of that Obligor to comply with its obligations under the Facility Documents; or (b) any such action which is frivolous or vexatious and which such Obligor is contesting in good faith on reasonable grounds or in respect of which an Instructing Group is satisfied that the ability of that Obligor to comply with its obligations under the Facility Documents will not be materially and adversely affected and which in either case is discharged or dismissed as soon as reasonably practicable. 26.9. EXECUTION OR DISTRESS Any distress, execution, attachment, sequestration or other process arising out of any claim by any third party against any member of the Group for an aggregate amount of US $5,000,000 (five million United States Dollars) or its equivalent (taking all such members of the Group together) or more affects any material asset of any Obligor save where (i) that Obligor is, in good faith on reasonable grounds, contesting the distress, execution, attachment, sequestration or other process by appropriate proceedings diligently pursued and (ii) an Instructing Group is satisfied that the ability of -122- that Obligor to comply with its obligations under the Facility Documents will not be materially and adversely affected whilst such distress, execution, attachment, diligence or other process is being so contested. 26.10. ANALOGOUS EVENTS Any event occurs which has a similar or analogous effect or purpose to any of those events mentioned in clause 17.7 (Insolvency and Rescheduling), clause 17.8 (Winding-Up) or clause 17.9 (Execution or Distress). 26.11. GOVERNMENTAL INTERVENTION By or under the authority of the Government of Israel or any other competent Israeli authority: (a) all or the majority of the management of any Obligor is displaced or the authority of any Obligor in the conduct of its business is wholly or materially curtailed; or (b) all or a majority of the issued shares of any Obligor or the whole or any part (the book value of which is 10% (ten percent) or more of the book value of the whole) of the revenues or assets of any Obligor is seized, nationalised, expropriated or compulsorily acquired; or (c) any law is introduced after the date hereof imposing material restrictions on the free transfer of funds out of Israel and/or the exchange of sheqels for dollars or Euros in each such case which will apply to payments made or to be made under any of the Facilities. 26.12. CESSATION Any Obligor ceases, or threatens to cease, to carry on all or a substantial part of its business (save in consequence of any reorganisation, reconstruction or amalgamation permitted under this Agreement and save as may result from any disposal of assets permitted by the terms of this Agreement or where such business or part thereof is carried on by another Obligor or for any solvent liquidation, dissolution or winding-up of any member of the Group previously approved in writing by an Instructing Group) or all or a material part of the Business is abandoned. 26.13. PROCEEDINGS There is current or pending any litigation, dispute, arbitration, administrative, regulatory or other proceedings or enquiry concerning or -123- involving any member of the Group which is reasonably likely to have a Material Adverse Effect. 26.14. BREACH OF THE LICENCE OR ANY AUTHORISATION (a) The Licence or any Authorisation necessary for any Obligor to comply with its obligations under the Facility Documents is in whole or in part: (i) surrendered, terminated, withdrawn, suspended, cancelled or revoked or does not remain in full force and effect or otherwise expires and is not renewed prior to its expiry (in each case, without replacement by a Licence(s) or Authorisation, as applicable having substantially equivalent effect); or (ii) modified in any material respect or breached (unless, in the case of any Authorisation, such modification or breach is reasonably likely not to have a Material Adverse Effect); provided that any change in the spectrum made available under the Licence will be construed to be a modification of the Licence for the purposes of this paragraph (a). (b) Any event occurs which is reasonably likely to give rise to the revocation, termination, cancellation or suspension of the Licence (without replacement) in such circumstance where Partner is unable to demonstrate to the reasonable satisfaction of the Instructing Group within 30 (thirty) days of such event occurring that such termination, suspension or revocation will not occur. (c) For the avoidance of doubt, nothing in this Agreement shall be construed as a waiver by the Finance Parties of their rights under this clause 17.14 arising from any breach of the Licence. -124- 26.15. MATERIAL ADVERSE CHANGE Any event or series of events occur which in the reasonable opinion of an Instructing Group after discussion with Partner, is likely to have a material adverse effect on the business or financial condition of the Group (as a whole) or on the ability of any Obligor to perform its material obligations under the Facility Documents. 26.16. BREACH OF MATERIAL CONTRACTS (a) Any Obligor fails duly to perform or comply with any obligation expressed to be assumed by it in any of the Material Contracts to which it is a party (other than the Licence), where such failure would be reasonably likely to have a Material Adverse Effect. (b) Any Authorisation necessary for any Obligor to comply with any Material Contract or any Material Contract (other than the Licence) is cancelled, suspended, withdrawn, revoked or terminated or expires by effluxion of time in a manner or circumstances (in whole or in part) without being replaced as soon as reasonably practicable on terms not materially less favourable than such Material Contract. 26.17. REPUDIATION Any Obligor repudiates or purports to repudiate or threatens to repudiate any of the Facility Documents or Material Contracts to which it is a party. 26.18. COUNTERPARTIES Any Counterparty: (a) fails duly to perform or comply with any obligation expressed to be assumed by it in any Material Contract to which it is a party where such failure would be reasonably likely to have a Material Adverse Effect; or (b) repudiates, or purports or threatens to repudiate, any Material Contract to which it is a party and (in the case of any Supplier Contract) a replacement contract on terms not materially less favourable with an internationally recognised equivalent supplier is not entered into by Partner within 90 (ninety) days from the date of such failure, repudiation or purported or threatened repudiation. -125- 26.19. SHAREHOLDERS (a) (i) The Shareholders Agreement ceases to be valid, binding and enforceable; or (ii) the Shareholders Agreement is revoked, terminated, cancelled or suspended without being at such time replaced with a new shareholders agreement with all material terms being acceptable to an Instructing Group; or (iii) any material provision of the Shareholders Agreement is amended or waivers granted in relation thereto or any new provisions are included in the Shareholders Agreement; or (iv) any party to the Shareholders Agreement is in breach of any term thereof and if such breach is capable of remedy, is not remedied within 30 (thirty) days and such event or circumstance is reasonably likely to result in a Material Adverse Effect. (b) (i) Any of the representations and warranties by any Chargor in any Share Pledge to which it is a party are incorrect or misleading in any material respect when made by such Chargor by reference to the facts and circumstances then existing if the fact, matter or event giving rise to such representation being incorrect or misleading is not remedied or cured to the satisfaction of Facility Agent (acting on the instructions of an Instructing Group) within 14 (fourteen) days after the earlier of the relevant Chargor becoming aware of the same and receipt by the relevant Chargor of written notice from Facility Agent requiring the remedy of the relevant fact, matter or event. (ii) Any Chargor fails to comply with any undertaking or obligation contained in any Share Pledge to which it is a party and, if such default is capable of remedy within such period, within 30 (thirty) days after the earlier of the Chargor becoming aware of such default and receipt by the Chargor of written notice from Facility Agent requiring the failure to be remedied, that Chargor shall have failed to cure such default. (iii) Any Share Pledge shall cease to be in full force and effect in any material respect or shall cease to constitute the legal, valid, binding and enforceable obligation of any Chargor party to it or -126- fail to provide effective perfected security in accordance with the terms of the Share Pledge in favour of the Security Trustee (for the benefit of itself and the Secured Creditors) over the assets over which security is intended to be given by that Share Pledge (save for any Reservations), or it shall be unlawful for any Chargor to perform any of its material obligations under any of the Share Pledges. (iv) Any Chargor repudiates or purports to repudiate or threatens to repudiate in writing the Share Pledge to which it is a party. 26.20. CHANGE OF OWNERSHIP Upon the occurrence of a Change of Ownership, unless Partner has received the prior consent of the Participating Banks to such occurrence. 26.21. BALANCE IN RESERVE ACCOUNT If the balance standing to the credit of the Reserve Account shall at any time be less than the amount required under clause 1.1.131(f) above. 26.22. MANDATORY PREPAYMENT In the event that Partner shall fail to make any mandatory prepayment in accordance with clause 7 (Mandatory Prepayment) above within the time limits respectively specified therefor under the relevant subsections of clause 7 (Mandatory Prepayment). 26.23. NO TRADING IN SECURITIES In the event that with respect to any shares or other securities convertible into shares of Partner which are traded on a stock exchange, there is no trading in such shares or other convertible securities for a consecutive period of 10 (ten) or more days on which trading is conducted on such stock exchange. 26.24. NON-COMPLIANCE WITH ANY SECURITIES AUTHORITY In the event that Partner breaches or fails to comply with any material undertakings or obligations entered into by it, or imposed on it, in favour of any securities authority in any country or state in which share, securities or debentures of Partner are traded or fails to comply with any material rules, regulations or other law of any such securities authority. -127- 26.25. ACCELERATION Upon the occurrence of an Event of Default and at any time thereafter while the same is continuing, the Facility Agent may, and shall if so directed by an Instructing Group, by notice to Partner: (a) declare that an Event of Default has occurred; and/or (b) declare that any undrawn portion of all or any of the Available Facilities shall be cancelled forthwith, whereupon the same shall be so cancelled and the applicable Available Facility or Facilities shall be zero and all fees payable in relation to the Available Facilities shall become immediately due and payable; and/or (c) declare that the Advances or any one or more of them (as specified in such notice), together with all Interest and Linkage Differentials accrued on those Advances and all other amounts (including amounts due under clause 19.1 (Broken Funding Indemnity), to the extent applicable) payable by Partner (as specified in such notice) or any of them under the Facility Documents from time to time, shall thenceforth be repayable on demand being made by the Facility Agent (and in the event of any such demand those Advances, such Interest and such other amounts shall be immediately due and payable); and/or (d) declare the Advances or any one or more of them (as specified in such notice) immediately due and payable, whereupon they shall become immediately due and payable together with all Interest and Linkage Differentials accrued on those Advances and all other amounts payable by Partner under the Facility Documents (including amounts due under clause 19.1 (Broken Funding Indemnity), to the extent applicable). 26.26. ADVANCES DUE ON DEMAND If, pursuant to clause 17.25 (Acceleration), the Facility Agent declares the Advances to be due and payable on demand then, and at any time thereafter so long as any Event of Default is continuing or has not been waived, the Facility Agent may by written notice to Partner (upon instruction from an Instructing Group) require repayment of the Advances on such date as the Facility Agent (upon instruction from an Instructing Group) may specify in such notice (whereupon the same shall become due and payable on such date together with accrued Interest and Linkage Differentials thereon and any other sums then owed by Partner hereunder) or withdraw such declaration with effect from such date as it may specify in such notice. -128- 26.27. INDEMNITY Partner shall indemnify each Finance Party against any losses, charges or expenses which such Finance Party may sustain or incur as a consequence of: (a) the occurrence of any Event of Default or Potential Event of Default; or (b) the operation of clause 17.25 (Acceleration), including any losses, charges or expenses on account of funds acquired, contracted for or utilised to fund any amount payable under this Agreement, any amount repaid or prepaid or any Advance (as the case may be). A certificate of such Finance Party as to the amount of any such loss or expense shall be prima facie evidence in the absence of manifest error. 27. AGENCY PROVISIONS 27.1. APPOINTMENT 27.1.1. Each Participating Bank hereby appoints the Facility Agent to act as its agent in connection with the Facility Documents as specified therein and authorises the Facility Agent to exercise such rights, powers, authorities and discretions as are specifically delegated to the Facility Agent, respectively, by the terms thereof, together with all such rights, powers, authorities and discretions as are reasonably incidental thereto. The Facility Agent shall, however, not have any duties, obligations or liabilities to the Participating Banks or any of them beyond those expressly stated in this Agreement. In acting in its capacity hereunder, the Facility Agent acts solely as the agent of each of the Participating Banks and shall not assume any obligations to, or fiduciary relationship with, the Participating Banks. 27.1.2. Each Participating Bank hereby appoints the Coordinating Agent to act as its agent in connection with the Facility Documents as specified therein and authorises the Coordinating Agent to exercise such rights, powers, authorities and discretions as are specifically delegated to the Coordinating Agent, respectively, by the terms thereof, together with all such rights, powers, authorities and discretions as are reasonably incidental thereto. The Coordinating Agent shall, however, not have any duties, obligations or liabilities to the Participating Banks or any of them beyond those expressly stated in this Agreement. In acting in -129- its capacity hereunder, the Coordinating Agent acts solely as the agent of each of the Participating Banks and shall not assume any obligations to, or fiduciary relationship with, the Participating Banks. 27.2. FACILITY AGENT'S OBLIGATION Without derogating from clause 18.8 (Participating Bank's Responsibility) below, the Facility Agent shall: 27.2.1. promptly inform each Participating Bank of the contents of any notice or document received by it in its capacity as Facility Agent from Partner under any of the Facility Documents; 27.2.2. monitor the compliance of Partner with the Facility Documents to which it is a party and promptly notify each Participating Bank of the occurrence of any Event of Default of which it becomes aware (including, monitor compliance with the financial undertakings specified in clause 16.32 (Financial Undertakings) above; 27.2.3. receive from Partner and each of the Participating Banks reports regarding all Advances made, amounts prepaid, repaid and paid (whether on account of principal, Interest or otherwise), including details as to the currency and amount of each Advance and payment, and the dates thereof; 27.2.4. collect from Partner and make the payments of the commissions, fees, expenses and stamp duties as referred to in clauses 10.6 (Expenses) and 10.7 (Stamp Taxes) above. 18.2A COORDINATING AGENT'S OBLIGATION Without derogating from clause 18.8 (Participating Bank's Responsibility) below, the Coordinating Agent shall: 18.2A.1. deliver to the Facility Agent and the Participating Banks copies of any notice or document received by it in its capacity as Coordinating Agent under the Facility Documents; and 18.2A.2. based, solely, on the documents provided to the Coordinating Agent by Partner under clauses 4.2, 6.2.1 and 16.2.7 above, monitor (provided that the Coordinating Agent shall be under no obligation to monitor more frequently than once per Quarter) the compliance of Partner with its obligations under clause 4.5(a) (Outstandings in -130- Proportion to Commitments--Facility A and Facility C) and promptly notify the Facility Agent of any non-compliance therewith. 27.3. DISCRETIONS Each of the Facility Agent and the Coordinating Agent may: 27.3.1. assume, unless it has, in its capacity as agent for the Participating Banks received notice to the contrary from any other party to any of the Facility Documents, that: (a) any representation made by Partner in connection therewith is true; and (b) any right, power, authority or discretion vested therein upon an Instructing Group or any other person or group of persons has not been exercised; 27.3.2. engage and pay for the advice or services of any lawyers, accountants or other experts whose advice or services may seem to it necessary, expedient or desirable and rely upon any advice so obtained; 27.3.3. rely as to any matters of fact which might reasonably be expected to be within the knowledge of Partner upon a certificate signed by or on behalf of Partner; 27.3.4. rely upon any communication or document believed by it to be genuine; and 27.3.5. refrain from exercising any right, power of appointment or other power or discretion vested in it as agent under any of the Facility Documents or making any determination of acceptability, any judgment or agreement in the capacity as agent, unless and until instructed by an Instructing Group as to whether or not such right, power or discretion is to be exercised and, if it is to be exercised, as to the manner in which it should be exercised. 27.4. EXCLUDED OBLIGATIONS Notwithstanding anything to the contrary expressed or implied in any of the Facility Documents, neither the Facility Agent nor the Coordinating Agent shall: 27.4.1. be bound to enquire as to whether or not any representation made by Partner in connection with any of the Facility Documents is true; 27.4.2. be bound to account to any Participating Bank for any sum or the profit element of any sum received by them for their own account; -131- 27.4.3. be bound to disclose to any other person any information relating to Partner if such disclosure would or might in their opinion constitute a breach of any law or regulation or be otherwise actionable at the suit of any person; or 27.4.4. be under any obligations other than those for which express provision is made herein or any of the Facility Documents. 27.5. INDEMNIFICATION To the extent that Partner does not do so on demand or is not obliged to do so, each Participating Bank shall, from time to time on demand by the Facility Agent or the Coordinating Agent, indemnify the Agents, in its Proportion against any and all costs, claims, losses, expenses (including legal fees) and liabilities, together with any VAT thereon which the Facility Agent or the Coordinating Agent may incur, otherwise than by reason of its own gross negligence or wilful misconduct, in acting in its capacity as the Facility Agent or the Coordinating Agent hereunder. 27.6. EXCLUSION OF LIABILITIES Neither the Facility Agent nor the Coordinating Agent accepts any responsibility for the accuracy and/or completeness of any information supplied by Partner in connection with any of the Facility Documents or for the legality, validity, adequacy or enforceability of any of the Facility Documents and the Facility Agent shall not be under any liability as a result of taking or omitting to take any action in relation to any of the Facility Documents, save in the case of gross negligence or wilful misconduct. Neither the Facility Agent nor the Coordinating Agent shall have any liability for any loss or damage arising from any act, default, omission or misconduct on the part of any persons whose services have been engaged as contemplated pursuant to clause 18.3.2 above, save where such loss or damage arises due to the gross negligence or wilful misconduct of such person and the Facility Agent or the Coordinating Agent (as the case may be) is considered by a final decision of a court or arbitral tribunal to have failed to have taken reasonable care in the selection of the person providing the services concerned. 27.7. NO ACTIONS Each of the Participating Banks agrees that it will not assert or seek to assert against any director, officer or employee of the Facility Agent or the -132- Coordinating Agent any claim it might have against any of them in respect of the matters referred to in clause 18.6 (Exclusion of Liabilities). 27.8. PARTICIPATING BANK'S RESPONSIBILITY It is understood and agreed by each Participating Bank that it has itself been, and will continue to be, solely responsible for making its own independent appraisal of and investigations into the financial condition, creditworthiness, condition, affairs, status and nature of Partner and that (as between the Facility Agent and the Coordinating Agent, on the one hand and the Participating Banks on the other hand) each Participating Bank shall also be responsible for monitoring compliance by Partner with its obligations under this Agreement (including monitoring compliance with the financial undertakings specified in clause 16.32 (Financial Undertakings) above). Each Participating Bank warrants to the Facility Agent and the Coordinating Agent that it has not relied on and will not hereafter rely on the Facility Agent or the Coordinating Agent: 27.8.1. to check or enquire on its behalf into the adequacy, accuracy or completeness of any information provided by Partner or its advisers in connection with the Facility Documents, this Agreement or the transactions therein contemplated (whether or not such information has been or is hereafter circulated to such Participating Bank by the Facility Agent or the Coordinating Agent or any of them); or 27.8.2. to assess or keep under review on its behalf the financial condition, creditworthiness, condition, affairs, status or nature of Partner. In addition, each Participating Bank shall give to the Facility Agent and the Coordinating Agent notice regarding the occurrences of any Default of which such Participating Bank becomes aware (including non-compliance with the financial undertakings specified in clause 16.32 (Financial Undertakings) above). 27.9. RESIGNATION The Facility Agent may resign, provided that no such resignation shall be effective until a successor for the Facility Agent is appointed in accordance with the succeeding provisions of clause 18.10 (Successor Agent) below. Bank Hapoalim may resign as Coordinating Agent by giving notice to such effect to Partner and the Facility Agent, such resignation to become effective upon service of such notice as aforesaid. Upon such resignation by Bank Hapoalim, as aforesaid, the Facility Agent shall be appointed as the successor to the Coordinating Agent. -133- 27.10. SUCCESSOR AGENT If the Facility Agent gives notice of its resignation pursuant to clause 18.9 (Resignation) above, then any reputable and experienced bank or other financial institution may, with the prior written consent of Partner (such consent not to be unreasonably withheld), be appointed as a successor to the Facility Agent (such successor to the Facility Agent, for the avoidance of doubt, shall, in the event the Facility Agent is the Coordinating Agent pursuant to clause 18.9 (Resignation) above, also be appointed as successor to the Coordinating Agent) by an Instructing Group during the period of such notice but, if no such successor is so appointed, the Facility Agent may itself appoint as its successor any reputable and experienced bank or other financial institution. 27.11. RIGHTS AND OBLIGATIONS If a successor to the Facility Agent or the Coordinating Agent (as the case may be) is appointed under the provisions of clause 18.10 (Successor Agent), then: (a) the departing Facility Agent or the Coordinating Agent (as the case may be) shall be discharged from any further obligation under the Facility Documents, in its capacity as Facility Agent or the Coordinating Agent (as the case may be), but shall remain entitled to the benefit of the provisions of this clause 18.11; and (b) its successors and each of the other parties hereto shall have the same rights and obligations amongst themselves as they would have had if such successor had been a party hereto. 27.12. BUSINESS WITH THE GROUP The Facility Agent, the Arranger and the Coordinating Agent may accept deposits from, lend money to and generally engage in any kind of banking or other business with Partner. 28. BROKEN FUNDING INDEMNITY 28.1. BROKEN FUNDING INDEMNITY FOR US DOLLARS AND EUROS If any Participating Bank receives or recovers all or any part of any Advance (not denominated in NIS) made by such Participating Bank otherwise than on the last day of the Duration Period relating to that Advance, Partner shall pay, on demand, to such Participating Bank an amount equal to the amount (if any) (but excluding, for the avoidance of doubt, any loss of margin) by which: (a) the additional Interest which would -134- have been payable on the amount so received or recovered had it been received or recovered on the last day of such Duration Period exceeds (b) the amount of Interest which in the reasonable opinion of the relevant Participating Bank would have been payable to such Participating Bank on the last day of such Duration Period in respect of a deposit in the relevant currency of the amount so received or recovered equal to the amount so received or recovered placed by it with a prime bank in London for a period starting on the third Business Day following the date of such receipt or recovery and ending on the last day of such Duration Period. 28.2. BROKEN FUNDING INDEMNITY FOR NIS If any Participating Bank receives or recovers all or any part of any Advance (denominated in NIS) made by such Participating Bank otherwise than on the scheduled date of repayment of such amount, Partner shall pay, on demand, to such Participating Bank: (a) in the event that the rate of Interest on such Advance was based on a prime rate or on an on-call rate and the payment to the relevant Participating Bank was made without the giving to such Participating Bank of at least seven Business Days' prior written notice regarding such payment, an amount equal to the Interest which would have been payable under this Agreement on the amount so received or recovered in respect of the period of 7 (seven) Business Days (or, if prior written notice was given, the number of Business Days below 7 (seven) of which prior written notice was in fact given) after the date of such receipt or recovery; (b) in the event that the rate of Interest on such Advance was based on the Bond Rate or a fixed linked rate, and (i) the remaining average period (taking into account scheduled repayments of such Advance) of the Duration Period for such Advance is 1 (one) year or more, the net present value of the amount, if any (excluding, for the avoidance of doubt, any loss of margin) by which: (1) the amount of Interest which would have been payable under this Agreement on the amount so received or recovered on the dates specified therefore during such Duration Period, exceeds (2) the amount of Interest which would be payable on the amount so received or recovered at the Bond Rate less 0.6% (nought point six percent) as at the date or dates of such receipt or recovery, for a period equal to the remaining average period (taking into account scheduled repayments of such Advance) of such Duration Period; or -135- (ii) the remaining average period (taking into account scheduled repayments of such Advance) of the Duration Period for such Advance is less than 1 (one) year, the net present value of the amount, if any (excluding, for the avoidance of doubt, any loss of margin) by which: (1) the amount of Interest which would have been payable under this Agreement on the amount so received or recovered on the dates specified therefor during such Duration Period exceeds (2) the arithmetic mean of the Average Daily Yield; "THE AVERAGE DAILY YIELD" being the arithmetic mean of the gross yields to maturity (rounded upwards, if necessary, to four decimal places) as published by the Tel-Aviv Stock Exchange ("TASE") of all of the series of fixed rate bonds issued by the State of Israel listed on the TASE, with a remaining period to maturity of between 6 (six) months and 1 (one) year which are denominated in NIS and fully linked to the Cost of Living Index on the 5 (five) trading days of the TASE immediately preceding the date of actual payment, all as determined by the Facility Agent; (c) in the event that rate of Interest on such Advance was based on a fixed unlinked rate and: (i) the remaining average period (taking into account scheduled repayments of such Advance) of the Duration Period for such Advance is 1 (one) year or less, the net present value of the amount (excluding, for the avoidance of doubt, any loss of margin) by which: (1) the amount of Interest which would have been payable under this Agreement on the amount so received or recovered had it been received or recovered on the dates specified therefore during such Duration Period, exceeds (2) the amount of Interest which would have been payable on the amount so received or recovered at the Interest rate on short-term loan notes issued by the Bank of Israel (Makam) for a period equal to the remaining average period (taking into account scheduled repayments of such Advance) of such Duration Period; or (ii) the remaining average period (taking into account scheduled repayments of such Advance) of such Rate Period is more than one year, the net present value of the amount, if any (excluding, for the avoidance of doubt, any loss of margin) by which: (1) the amount of Interest which would have been payable under this Agreement on the amount so received or recovered on the dates -136- specified therefor during the relevant Rate Period exceeds (2) the arithmetic mean of the Average Daily Yield; "THE AVERAGE DAILY YIELD" being the arithmetic mean of the gross yields to maturity (rounded upwards, if necessary, to four decimal places) as published by the TASE of six, or if less, less, series of fixed rate bonds issued by the State of Israel listed on the TASE, with a remaining period to maturity similar to the remaining average period (taking into account scheduled repayments of such Advance) of such Rate Period, which are denominated in NIS and not linked to the Cost of Living Index, on the 5 (five) trading days of the TASE immediately preceding the date of actual payment, all as determined by the Facility Agent; (d) In each of paragraphs (i) and (ii) of (b) and (c) above, the net present value shall be discounted at the rate referred to in (2) of the relevant paragraph. 28.3. PARTNER'S INDEMNITY Partner undertakes to indemnify each Participating Bank against any loss it may suffer or incur as a result of its funding or making arrangements to fund an Advance requested by Partner hereunder but not made by reason of the operation of any one or more of the provisions hereof (other than by reason of a default by such Participating Bank), upon provision by any Participating Bank claiming hereunder of a written statement setting out in reasonable detail the basis of the calculation. 29. CURRENCY OF ACCOUNT 29.1. CURRENCY OF ACCOUNT With respect to all of the Facilities: (a) each repayment of an Advance or part thereof shall be made in the currency in which such Advance was made; (b) each payment of Interest shall be made in the currency in which the sum in respect of which such Interest is payable is denominated; (c) any amount expressed to be payable in another currency shall be paid in that other currency; (d) each payment in respect of costs and expenses shall be made in the currency in which the same were incurred; and -137- (e) each payment pursuant to clause 13.1 (Increased Costs) shall be made in the currency specified by the party claiming thereunder. 29.2. CURRENCY INDEMNITY If any sum due from Partner under any Facility Document or any order or judgment given or made in relation thereto has to be converted from the currency ("THE FIRST CURRENCY") in which the same is payable thereunder or under such order or judgment into another currency ("THE SECOND CURRENCY") for the purpose of: (a) making or filing a claim or proof against Partner; (b) obtaining an order or judgment in any court or other tribunal; or (c) enforcing any order or judgment given or made in relation thereto, Partner shall indemnify and hold harmless each of the persons to whom such sum is due from and against any loss suffered or incurred as a result of any difference between (i) the rate of exchange used for such purpose to convert the sum in question from the first currency into the second currency; and (ii) the rate or rates of exchange at which such person may in the ordinary course of business purchase the first currency with the second currency upon receipt of a sum paid to it in satisfaction, in whole or in part, of any such order, judgment, claim or proof. 30. PAYMENTS WITHOUT SET-OFF All payments required to be made by Partner under the Facility Documents shall be calculated without reference to any set-off or counterclaim and shall be made free and clear of and without any deduction for or on account of any set-off or counterclaim. 31. SET-OFF Each Finance Party may (but shall not be obliged to) set-off against any obligation of any Obligor due and payable by it to or for the account of such Finance Party under this Agreement and not paid on the due date or within any applicable grace period any moneys held by such Finance Party for the account of such Obligor at any office of such Finance Party anywhere and in any currency, whether or not matured. Such Finance Party may effect such currency exchanges as are appropriate to implement the set-off and any usual charges in relation to such currency exchanges shall be paid by such Obligor. Any Finance Party which has set off shall give notice of that fact to the relevant Obligor as soon as reasonably practicable. 32. APPLICATION AND REDISTRIBUTION OF PAYMENTS -138- 32.1. APPLICATION OF PAYMENTS (a) If after the Default Date the Security Trustee or any Receiver appointed under any Security Document receives payment insufficient to discharge all amounts then due and payable by the Obligors under the Facility Documents, the Security Trustee or Receiver, as applicable, shall apply such payment towards the obligations of the Obligors under the Facility Documents in the following order (after converting the payment into the currency necessary to make payment of all amounts due as aforesaid in the equivalent of the currencies in which such amounts are due): (i) first, in or towards payment of any unpaid fees, costs and expenses of the Facility Agent, the Coordinating Agent, the Security Trustee and/or any Receiver pro rata between the amounts of such unpaid fees, costs and expenses; (ii) secondly, in or towards payment pro rata to the Dollar equivalent of all amounts due to: (1) each Participating Bank under the Facility Documents; and (2) Israel Discount Bank Ltd., pursuant to the IDB Performance Bond Counter Indemnity; and (iii) thirdly, in or towards payment, pro rata, to all amounts due to each Participating Bank on account of Borrowings, as referred to in paragraphs (c), (d) and (e) of the definition of "Permitted Borrowings", received by any Obligor from any such Participating Bank. (b) The Facility Agent shall, if so directed by all the Secured Creditors, vary the order set out in sub-paragraphs (a)(i), (ii) and (iii) above. (c) Paragraphs (a) and (b) above will override any appropriation made by any Obligor or Shareholder. (d) For the purposes of this clause 23.1 any Dollar equivalent shall be calculated as at the date 2 (two) Business Days prior to the date the Security Trustee or the Receiver, as applicable, makes any relevant application. 32.2. PARTIAL PAYMENTS (a) If a Finance Party receives before the Default Date a payment that is insufficient to discharge all the amounts then due and payable to such -139- Finance Party by an Obligor under the Facility Documents, then that Finance Party shall apply such payment towards the obligations of the Obligor to such Finance Party, under the Facility Documents, in the following order: (i) first, in or towards payment of any unpaid fees, costs and expenses of such Finance Party under the Facility Documents; (ii) secondly, in or towards payment of any accrued Interest or commission due to such Finance Party but unpaid, under this Agreement; (iii) thirdly, in or towards payment of any principal, together with Linkage Differentials, due to such Finance Party but unpaid, under this Agreement; and (iv) fourthly, in or towards payment of any other sum due to such Finance Party but unpaid, under the Facility Documents. (b) A Finance Party shall be at liberty to vary the order set out in paragraphs (a)(i) to (iv) (inclusive) above. (c) Paragraphs (a) and (b) above will override any appropriation made by an Obligor. 32.3. REDISTRIBUTION ON OR AFTER DEFAULT DATE Subject to clause 23.5 (Recoveries Through Legal Proceedings), if, at any time on or after the Default Date, the proportion which any Secured Creditor ("A RECOVERING SECURED CREDITOR") has received or recovered from any Obligor or any Shareholder (whether by payment, the exercise of a right of set-off or combination of accounts or otherwise) other than in accordance with the applicable priority at the relevant time set out in clause 23.1 (Application of Proceeds), in respect of its portion of all sums due from any Obligor or Shareholder under the Facility Documents on or after the Default Date is greater (the excess proportion being herein called "AN EXCESS SUM") than the proportion of such sum due so received or recovered by the Secured Creditor or Creditors receiving or recovering the smallest proportion thereof (including a nil receipt), then: (a) such Recovering Secured Creditor shall inform the Security Trustee of such receipt or recovery and pay to the Security Trustee an amount equal to such Excess Sum; -140- (b) as between the relevant person and such Recovering Secured Creditor, the Excess Sum shall be treated as not having been paid; and (c) the Security Trustee shall treat the amount received by it from such Recovering Secured Creditor pursuant to paragraph (a) above as if such amount had been received by it from the relevant person on account of such sum and shall pay the same to the persons entitled thereto (including such Recovering Secured Creditor) pro rata to their respective entitlements thereto in accordance with clause 23.1 (Application of Proceeds). 32.4. REPAYABLE RECOVERIES If any sum ("A RELEVANT SUM") received or recovered by a Recovering Secured Creditor in respect of any amount owing to it by any Obligor or Shareholder becomes repayable and is repaid by such Recovering Secured Creditor, then: (a) each Secured Creditor (other than a Recovering Secured Creditor) which has received a share of such Relevant Sum by reason of the implementation of clause 23.3 (Redistribution on or after Default Date) shall, upon request of the Security Trustee, pay to the Security Trustee for account of such Recovering Secured Creditor an amount equal to its share of such Relevant Sum; and (b) as between the relevant Obligor or Shareholder and each such Secured Creditor, the amount repaid by such Secured Creditor pursuant to paragraph (a) above shall be treated as not having been paid. 32.5. RECOVERIES THROUGH LEGAL PROCEEDINGS (a) If any Participating Bank shall commence any action or proceeding in any court to enforce its rights (if so permitted or contemplated) under any of the Facility Documents after consultation with the other Participating Banks and with the consent of an Instructing Group (such consent not to be unreasonably withheld) and, as a result thereof or in connection therewith, shall receive any Excess Sum (as defined in clause 23.3 (Redistribution on or after Default Date)), then such Participating Bank shall not be required to share any portion of such amount with any Participating Bank or other Secured Creditor which has the legal right to, but does not, join in such action or proceeding or commence and diligently prosecute a separate action or proceeding to enforce its rights in another court. -141- (b) Any Participating Bank may (upon giving to the other Participating Banks no less than 10 (ten) Business Days' notice to such effect) commence any action or proceeding in any court to enforce its rights (if so permitted or contemplated) under any of the Facility Documents without consulting any other Participating Bank, but such Participating Bank shall be required to share any Excess Sum received with the other Participating Banks. 33. CALCULATIONS AND EVIDENCE OF DEBT 33.1. BASIS OF ACCRUAL Interest and commitment commission shall accrue from day to day and shall be calculated on the basis of a year of 360 (three hundred and sixty) days in relation to amounts denominated in US Dollars or Euros (or 365 (three hundred and sixty-five days) in relation to Interest on amounts denominated in NIS) and the actual number of days elapsed. -142- 33.2. EVIDENCE OF DEBT Each Participating Bank shall maintain, in accordance with its usual practice, accounts evidencing the amounts from time to time lent by and owing to it hereunder. 33.3. PRIMA FACIE EVIDENCE In any legal action or proceeding arising out of or in connection with this Agreement: (a) the entries made in the accounts maintained pursuant to clause 24.2 (Evidence of Debt) above shall, in the absence of manifest or proven error, be prima facie evidence of the existence and amounts of the specified obligations of Partner; and (b) a certificate of any Participating Bank signed by a relevant senior officer as to its Cost of Funds for the purpose of determining the Interest rate in respect of an Advance shall constitute prima facie evidence of such Cost of Funds. 33.4. CERTIFICATES OF PARTICIPATING BANKS A certificate of a Finance Party as to: (a) the amount by which a sum payable to it hereunder is to be increased under clause 11.1 (Tax Gross-Up) above; or (b) the amount for the time being required to indemnify it against any such cost, payment or liability as is mentioned in clause 12.1 (Increased Costs) above shall, in the absence of manifest or proven error, be prima facie evidence of the existence and amounts of the specified obligations of Partner. 34. GUARANTEE AND INDEMNITY 34.1. GUARANTEE Each Guarantor irrevocably and unconditionally guarantees to the Agents, the Arranger and the other Secured Creditors the due and punctual observance and performance of all the terms, conditions and undertakings on the part of Partner contained in this Agreement and the other Facility Documents and agrees to pay to the Facility Agent, the Coordinating Agent and each Participating Bank from time to time on demand any and every sum or sums of money which Partner is at any time liable to pay to the Agents, the Arranger, the Coordinating Agent and the Participating Banks or any of them under or pursuant to this Agreement and the other Facility Documents (whether actual or contingent) and which has become due and payable but has not been paid at the time such demand is made. 34.2. INDEMNITY -143- Each Guarantor irrevocably and unconditionally agrees as a primary obligation and not merely as surety to indemnify the Agents, the Arranger and the Participating Banks from time to time on demand by the Facility Agent (upon instruction of an Instructing Group) from and against any loss incurred by the Agents, the Arranger and such Participating Bank or any of them as a result of any of the obligations of Partner under or pursuant to this Agreement or any other Facility Document being or becoming void, voidable, unenforceable or ineffective as against Partner for any reason whatsoever, whether or not known to the Agents, the Arranger and the Participating Banks or any of them or any other person, the amount of such loss being the amount which the person or persons suffering it would otherwise have been entitled to recover from Partner. 34.3. ADDITIONAL SECURITY The obligations of each Guarantor herein contained shall be in addition to and independent of every other security held by the Security Trustee upon trust for the Agents, the Arranger and the Participating Banks or any of them may at any time hold in respect of any of Partner's obligations hereunder. 34.4. CONTINUING OBLIGATIONS The obligations of each Guarantor herein contained shall constitute and be continuing obligations notwithstanding any settlement of account or other matter or thing whatsoever and shall not be considered satisfied by any intermediate payment or satisfaction of all or any of the obligations of Partner under this Agreement and shall continue in full force and effect until final payment in full of all amounts owing by Partner hereunder and total satisfaction of all Partner's actual and contingent obligations hereunder. 34.5. OBLIGATIONS NOT DISCHARGED Neither the obligations of any Guarantor herein contained nor the rights, powers and remedies conferred in respect of any Guarantor upon the Agents, the Arranger and the Participating Banks or any of -144- them by this Agreement or by law shall be discharged, impaired or otherwise affected by: (a) the winding-up, dissolution, administration or re-organisation of Partner or any other person or any change in its status, function, control or ownership; (b) any of the obligations of Partner or any other person hereunder or under any other security taken in respect of any of its obligations hereunder being or becoming illegal, invalid, unenforceable or ineffective in any respect; (c) time or other indulgence being granted or agreed to be granted to Partner in respect of its obligations hereunder or under any such other security; (d) any amendment to, or any variation, waiver or release of, any obligation of Partner hereunder or under any such other security; (e) any failure to take, or fully to take, any security contemplated hereby or otherwise agreed to be taken in respect of Partner's obligations hereunder; (f) any failure to realise or fully to realise the value of, or any release, discharge, exchange or substitution of, any security taken in respect of Partner's obligations hereunder; or (g) any other act, event or omission which, but for this clause 25.5, might operate to discharge, impair or otherwise affect any of the obligations of any Guarantor herein contained or any of the rights, powers or remedies conferred upon the Agents, the Arranger and the Participating Banks or any of them by this Agreement or by law. 34.6. SETTLEMENT CONDITIONAL Any settlement or discharge between any Guarantor and the Agents, the Arranger and the Participating Banks or any of them shall be conditional upon no security or payment to the Agents, the Arranger and the Participating Banks or any of them by Partner or any Guarantor or any other person on behalf of Partner or, as the case may be, any Guarantor being avoided or reduced by virtue of any provisions or enactments relating to bankruptcy, insolvency, liquidation or similar laws of general application for the time being in force and, if any such security or payment is so avoided or reduced, the Agents, the Arranger and the Participating Banks -145- shall each be entitled to recover the value or amount of such security or payment from the relevant Guarantor subsequently as if such settlement or discharge had not occurred. 34.7. EXERCISE OF RIGHTS Neither the Agents, the Arranger nor the Participating Banks nor any of them shall be obliged before exercising any of the rights, powers or remedies conferred upon them in respect of any Guarantor by this Agreement or by law: (a) to make any demand of Partner; (b) to take any action or obtain judgment in any court against Partner; (c) to make or file any claim or proof in a winding-up or dissolution of Partner; or (d) to enforce or seek to enforce any other security taken in respect of any of the obligations of Partner hereunder. 34.8. DEFERRAL OF GUARANTOR'S RIGHTS Each Guarantor agrees that, so long as any amounts are or may be owed by Partner hereunder or Partner is under any actual or contingent obligations hereunder, any rights which the relevant Guarantor may at any time have by reason of performance by it of its obligations hereunder or in respect of any other moneys for the time being due to the relevant Guarantor from the Partner: (a) to claim payment from or be indemnified by Partner; and/or (b) to claim any contribution from any other guarantor of Partner's obligations hereunder or in respect of any such other moneys; and/or (c) to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Agents, the Arranger and the Participating Banks hereunder or of any other person in respect of such moneys or of any other security taken pursuant to, or in connection with, this Agreement by all or any of the Agents, the Arranger and the Participating Banks or taken by any other person in respect of such moneys, -146- shall be exercised by the relevant Guarantor only if and to the extent that the Facility Agent (upon instructions from an Instructing Group) so requires and in such manner and upon such terms as the Facility Agent (upon instructions from an Instructing Group) may specify and the relevant Guarantor further agrees to hold any moneys at any time received by it as a result of the exercise of any such rights on trust for and on behalf of, and to the order of, the Participating Banks for application in or towards payment of any sums at any time owed by Partner hereunder. 34.9. SUSPENSE ACCOUNTS All moneys received, recovered or realised by a Participating Bank by virtue of clause 25.1 (Guarantee) or clause 25.2 (Indemnity) may, in that Participating Bank's discretion, be credited to a suspense or impersonal account and may be held in such account for so long as such Participating Bank thinks fit pending the application from time to time (as such Participating Bank may think fit) of such moneys in or towards the payment and discharge of any amounts owing by any of the Obligors to such Participating Bank hereunder. 34.10. WAIVER BY GUARANTOR Without derogating from any other provisions of this Agreement which exclude the application of, or constitute a waiver by a Guarantor of, certain defences or rights under the Guarantee Law, 1967 ("THE GUARANTEE LAW") (which defences or rights would, but for such provision, have been available to such Guarantor), each Guarantor hereby waives all rights and defences under the Guarantee Law and confirms that the provisions of the Guarantee Law affording such rights or defences to a guarantor shall not apply to this Agreement. 35. ADDITIONAL GUARANTORS AND SECURITY 35.1. ADDITIONAL GUARANTORS (a) The Obligors shall procure that any Subsidiary (other than a Venture Subsidiary or a Subsidiary of a Venture Subsidiary) shall become, as soon as practicable and in any event within 30 (thirty) days of becoming a Subsidiary, an Additional Guarantor by entering into a Guarantor Accession Agreement. (b) On each date that a Guarantor Accession Agreement is entered into Partner shall procure that certified copies of each of the documents listed in SCHEDULE 23 (Documents Required for Acceding Guarantors) -147- are delivered in respect of the Additional Guarantor, the Guarantor Accession Agreement duly executed and any security document required for the purposes of compliance with clause 26.2 (Security) each in form and substance reasonably satisfactory to the Facility Agent. 35.2. SECURITY The Obligors shall procure that on the date that a Guarantor Accession Agreement is delivered in accordance with clause 32.1 (Additional Guarantors) above, the Subsidiary shall grant security in favour of the Security Trustee (for the benefit of itself and the Secured Creditors) which is similar to the security granted by the Debenture. 36. ASSIGNMENTS AND TRANSFERS 36.1. BINDING AGREEMENT This Agreement shall be binding upon and enure to the benefit of each party hereto and its or any subsequent successors, Transferees and permitted assigns. 36.2. NO ASSIGNMENTS AND TRANSFERS BY THE OBLIGORS No Obligor shall be entitled to assign or transfer all or any of its rights, benefits and obligations under any of the Facility Documents. 36.3. ASSIGNMENTS AND TRANSFERS BY PARTICIPATING BANKS Any Participating Bank may with the consent of Partner (such consent not to be unreasonably withheld or delayed) unless such assignment or transfer is to an Affiliate of a Participating Bank or an Event of Default has occurred and is continuing (in which event no consents will be required), at any time, assign all or any of its rights and benefits under the Facility Documents or transfer in accordance with clause 27.5 (Transfers by Participating Banks) all or any of its rights, benefits and obligations under the Facility Documents to any bank or financial institution. Subject to the aforegoing, a Participating Bank may assign to any person, in whole or in part, any of its rights, benefits and obligations under the Facility Documents. An assignment by a Participating Bank of the whole or part of its outstanding Advances shall be made together with an assignment of the Commitment in respect thereof. An assignment or transfer of any such Advance shall be in respect of at least a minimum amount of US $5,000,000 (five million United States Dollars) (or its equivalent). Where a Participating Bank has -148- transferred to a Transferee any part of its Commitment under Facility A or Facility C, as the case may be, such Transferee's Commitment under such Facility (transferred to it as aforesaid) and, if applicable, the Commitment under Facility A or Facility C, as the case may be, of the relevant transferring Participating Bank (to the extent not transferred as aforesaid), shall be reduced, on each Facility A Commitment Reduction Date or Facility C Commitment Reduction Date, as the case may be, by the same percentage as the other Participating Banks' respective Commitments under such Facility are reduced under clause 5.1.1 or 5.3.1, as applicable, of this Agreement. 36.4. ASSIGNMENTS BY PARTICIPATING BANKS If any Participating Bank assigns all or any of its rights and benefits under the Facility Documents in accordance with clause 27.3 (Assignments and Transfers by Participating Banks), then, unless and until the assignee has agreed with the Agents, the Arranger and the other Participating Banks that it shall be under the same obligations towards each of them as it would have been under if it had been an original party to each of the Facility Documents as a Participating Bank (whereupon such assignee shall become a party to the Facility Documents as a "PARTICIPATING BANK"), the Agents, the Arranger and the other Participating Banks shall not be obliged to recognise such assignee as having the rights against each of them which it would have had if it had been such a party to the Facility Documents. For the avoidance of doubt, a Participating Bank that has assigned all its interest and which is a counterparty to an Interest Rate Hedging Agreement shall, upon such assignment, cease to be a Secured Interest Rate Hedge Provider. 36.5. TRANSFERS BY PARTICIPATING BANKS If any Participating Bank wishes to transfer all or any of its rights, benefits and/or obligations under the Facility Documents as contemplated in clause 27.3 (Assignments and Transfers by Participating Banks), then such transfer may be effected by the delivery to the Facility Agent of a duly completed and duly executed Transfer Certificate (together with a copy to Partner for information purposes only), accompanied by such other documentation as may be required for the purposes of such transfer under the Security Documents, in which event, on the later of the Transfer Date specified in such Transfer Certificate and the 5th (fifth) Business Day after (or such earlier Business Day endorsed by the Facility Agent on such Transfer Certificate falling on or after) the date of delivery of such Transfer Certificate to the Facility Agent: -149- (a) to the extent that in such Transfer Certificate the Participating Bank party thereto seeks to transfer its rights, benefits and obligations under the Facility Documents, each of the Obligors and such Participating Bank shall be released from further obligations towards one another hereunder and their respective rights against one another shall be cancelled (such rights and obligations being referred to in this clause 27.5 as "DISCHARGED RIGHTS AND OBLIGATIONS"); (b) the Obligors and the Transferee party thereto shall assume obligations towards one another and/or acquire rights against one another which differ from such discharged rights and obligations only insofar as such Obligor and such Transferee have assumed and/or acquired the same in place of such Obligor and such Participating Bank; (c) the Agents, the Arranger, such Transferee and the other Participating Banks shall acquire the same rights and benefits and assume the same obligations between themselves as they would have acquired and assumed had such Transferee been an original party to the Facility Documents as a Participating Bank with the rights, benefits and/or obligations acquired or assumed by it as a result of such transfer; and (d) such Transferee shall become a party to the Facility Documents as a "PARTICIPATING BANK". 36.6. DISCLOSURE OF INFORMATION Any Participating Bank may at any time disclose to any actual or potential assignee or Transferee or subparticipant (or other party entering into contractual arrangements to assume risks in relation to the Facilities or any of them) in respect of the Facility Documents such information about the Business, the Facility Documents, the Material Contracts and the Obligors as such Participating Bank shall consider appropriate but only having first obtained from such potential assignee or Transferee or subparticipant or equivalent a confidentiality undertaking equivalent in effect to the confidentiality arrangements set out in clause 38 (Confidentiality) in writing addressed to the relevant Participating Bank and Partner. 36.7. NO INCREASED COSTS If any assignment or transfer of all or any part of the rights or obligations of a Participating Bank pursuant to this clause 27 or if any change in or substitution of a Participating Bank's Facility Office would, but for this clause 27, result, as a consequence of circumstances prevailing or foreseeable at that time, in any Obligor having any obligation to pay any -150- amount under clause 11.1 (Tax Gross-Up) or clause 12.1 (Increased Costs) then, unless such assignment, transfer or change in or substitution of Facility Office arises as a consequence of the provisions of clause 14.1 (Mitigation) or is made with the written consent of Partner, the assignee, or Transferee or Participating Bank acting through its new Facility Office shall be entitled to receive such amounts only to that extent that the relevant assignor, or transferor or Participating Bank acting through its relevant Facility Office would have been so entitled had there been no assignment, or transfer, change in or substitution of Facility Office (as the case may be). 37. COSTS AND EXPENSES 37.1. AGENTS' COSTS Partner shall, from time to time on demand of the relevant Agent (and without prejudice to the provisions of clause 10.6.2 above and clause 28.2 (Amendment Costs)) compensate the relevant Agent for all costs and expenses (including telephone, fax, copying, travel, personnel and legal costs) incurred by such Agent in connection with its taking such action as it may deem appropriate or in complying with any instructions from an Instructing Group or any request by any Obligor or in connection with: (a) the granting or proposed granting of any waiver or consent requested under any of the Facility Documents by any Obligor; (b) any actual, potential or suspected breach by any Obligor of its obligations under any of the Facility Documents; (c) the occurrence of any event which is an Event of Default or a Potential Event of Default; or (d) any amendment or proposed amendment to any of the Facility Documents requested by any Obligor. 37.2. AMENDMENT COSTS If any amendment or waiver is requested, required or agreed by Partner in accordance with clause 30 (Amendments) then Partner shall, on demand of the Facility Agent (acting on its own motion or otherwise upon the request of the Arranger or a Participating Bank), reimburse the Agents, the Arranger and the Participating Banks for all reasonable costs and expenses submitted to Partner together with appropriate evidence thereof (including legal fees but excluding any charges for management time) together with any VAT -151- thereon incurred by the Agents, the Arranger and the Participating Banks in responding to or complying with such requests. 37.3. PARTICIPATING BANKS' LIABILITIES FOR COSTS If Partner fails to perform any of its obligations under this clause 28 and clauses 10.6 (Expenses) and 10.7 (Stamp Taxes) above, each Participating Bank shall, in its Proportion (or, if the Loan has been repaid in full, immediately prior to the final repayment thereof), indemnify each of the Agents and the Arranger against any loss incurred by any of them as a result of such failure and Partner shall forthwith reimburse each Participating Bank for any payment made by it pursuant to this clause 28 and clauses 10.6 (Expenses) and 10.7 (Stamp Taxes) above. 38. PARTIAL INVALIDITY If any provision of any of the Facility Documents is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions hereof nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby. -152- 39. AMENDMENTS The Facility Agent, if it has the prior written consent of an Instructing Group, and Partner may, from time to time, agree in writing to amend any of the Facility Documents or to waive, prospectively or retrospectively, any of the requirements of any of the Facility Documents and any amendments or waivers so agreed shall be binding on all the Participating Banks, the Arranger, the Facility Agent, the Coordinating Agent and the Obligors provided that: (a) no such waiver or amendment shall subject any party hereto to any new or additional obligations without the consent of such party; (b) without the prior written consent of all the Participating Banks and Partner, no such amendment or waiver shall: (i) amend or waive any provision of clause 23 (Application and Redistribution of Payments) or this clause 30; (ii) reduce the proportion of any amount received or recovered (whether by way of set-off, combination of accounts or otherwise) in respect of any amount due from any Obligor hereunder to which any Participating Bank is entitled; (iii) change the principal amount of or currency of any Advance, or defer any payment date other than in accordance with the terms of this Agreement; (iv) change the Margin, change the amount or currency or defer the date for any payment of interest, fees or any other amount payable hereunder to all or any of the Agents, the Arranger and the Participating Banks; (v) defer the Termination Date; (vi) amend the definition of "Instructing Group"; or (vii) amend any provision which contemplates the need for the consent or approval of all the Participating Banks; (c) the Security Trustee shall not release any security over any asset or assets or any part thereof constituted pursuant to any Security Document without the consent of all of the Secured Creditors, if the relevant asset, assets or part thereof over which such security is constituted will not be, immediately following such release, disposed of or transferred outside the Group -153- following such release or if the proceeds of sale or replacement assets will not be subject to first ranking security interests in favour of the Security Trustee (for the benefit of itself and the Secured Creditors); and (d) notwithstanding any other provisions hereof, the Facility Agent shall not be obliged to agree to any such amendment or waiver if the same would: (i) amend or waive any provision of this clause 30, clauses 10.6 (Expenses), 10.7 (Stamp Taxes), 28 (Costs and Expenses) or 18 (Agency Provisions) above; or (ii) otherwise amend or waive any of the Agents' rights under any of the Facility Documents or subject the Agents or the Arranger to any additional obligations under any of the Facility Documents. 40. INFORMATION Without derogating from clause 27.6 (Disclosure of Information) above, Partner hereby agrees that the Participating Banks may at any time, amongst themselves, disclose to each other any information in respect of: (i) Drawdown Requests received, Advances made and payments received from or by Partner, as the case may be, under the Facilities; and (ii) any other information in respect of the Business, the Facility Documents, the Material Contracts and obligations as the Participating Bank, disclosing the same, deems appropriate. 41. RELEASE OF SHARE PLEDGES 41.1. SHARE PLEDGES In the event that in any one year Ratio Period ("THE DETERMINING RATIO PERIOD"): 41.1.1. Partner shall (as of the end of the Determining Ratio Period) have made payment under the Facilities to the Participating Banks (disregarding for this purpose, any repayment or prepayment capable of being reborrowed under this Agreement) of an amount equal to half the amount of the Total Commitments; and 41.1.2. (a) if the Determining Ratio Period falls during the period 2003-2007 (inclusive), each of the Facility Debt Cover Ratio, Total Debt Cover Ratio, Fixed Charge Coverage Ratio and ADSCR for the one year Ratio Period immediately preceding the Determining Ratio Period was not less than 135% (one hundred and thirty-five percent) of such minimum ratio required for such -154- immediately preceding one year Ratio Period pursuant to the table in clause 16.32 below; or (b) if the Determining Ratio Period is the one year Ratio Period 2008, the Total Debt Cover Ratio for the 2007 one year Ratio Period was not less than 135% (one hundred and thirty-five percent); or (c) if the Determining Ratio Period is the one year Ratio Period 2009, the Total Debt Cover Ratio for the 2008 one year Ratio Period was not less than 280% (two hundred and eighty percent), then the Participating Banks shall, as soon as reasonably practicable after the publication and receipt by the Participating Banks of the Accounts for the Determining Ratio Period, procure the irrevocable release of the Share Pledges over the Chargors' shares in Partner. 41.2. RELEASE OF SHARE PLEDGES Upon the release of all such Share Pledges, the provisions of clause 17.19(b) (Shareholders) above shall thereupon cease to have any force or effect (except in relation to any antecedent breach thereof). 41.3. DISTRIBUTION OF TAPUZ SHARES [Deleted.] 42. RESPONSE TO REQUESTS FOR APPROVAL OR CONFIRMATION 42.1. Save where expressly stated otherwise in this Agreement, the Facility Agent shall endeavour to respond promptly to any request by Partner for an approval or confirmation in accordance with this Agreement and shall, in any event, respond by not later than 14 (fourteen) Business Days after receipt of the said request, together with all reports, statements and other information required hereunder to be supplied by Partner, together with such request; failing which response, the Facility Agent shall be deemed not to have given its consent. 42.2. Save where expressly stated otherwise in this Agreement, the Participating Banks shall endeavour to respond promptly to any request by Partner for an approval or confirmation in accordance with this Agreement and shall, in any event, respond by not later than 21 (twenty-one) Business Days after receipt of the said request, together with all reports, statements and other -155- information required hereunder to be supplied by Partner, together with such request; failing which response, the Participating Banks shall be deemed not to have given their consent. 43. COUNTERPARTS This Agreement may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. 44. GOVERNING LAW AND JURISDICTION This Agreement shall be governed by and shall be construed in accordance with Israeli law and the competent court of Tel-Aviv-Jaffa shall have exclusive jurisdiction to hear any matters, provided that the Facility Agent and the Participating Banks shall be entitled to sue Partner or any other Obligor in any jurisdiction in which it has an office or holds assets. 45. REMEDIES AND WAIVERS No failure to exercise, nor any delay in exercising, on the part of the Agents, the Arranger and the Participating Banks or any of them, any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise thereof or the exercise of any other right or remedy. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law. 46. NOTICES 46.1. COMMUNICATIONS THROUGH FACILITY AGENT Every notice, request, demand or other communication under this Agreement to be given by Partner to any other party shall be given to such party, with a copy to the Facility Agent, to be delivered in accordance with clause 37.2 (Manner of Delivery) below. Every notice, request, demand or other communication under this Agreement to be given to Partner shall be delivered to Partner in accordance with clause 37.2 (Manner of Delivery) below, with a copy to be given to the Facility Agent. 46.2. MANNER OF DELIVERY (a) Notices to be given hereunder shall be in writing and may be given personally, by facsimile or, if not available, as required by clause 37.2(b) below. Any notice to be given personally or by -156- facsimile to the Facility Agent, the Coordinating Agent or any Participating Bank must be given during normal banking hours of the Facility Agent, the Coordinating Agent or any Participating Bank to the persons and at the addresses respectively designated below. If notice is sent by facsimile, it shall be deemed to have been served when confirmation of receipt by the intended recipient has been received. All notices given by facsimile shall be confirmed by letter despatched in the manner provided in clause 37.2(b) within 24 (twenty-four) hours of transmission. (b) Any other notices to be given hereunder shall be served on a party by prepaid express registered letter (or nearest equivalent) to its address given below or such other address as may from time to time be notified for this purpose and any notice so served shall be deemed to have been served within 5 (five) days after the time at which such notice was posted and in proving such service, it shall be sufficient to prove that the notice was properly addressed and posted: to Partner at: 8 Amal Street Afeq Industrial Zone Rosh Haayin 48103 Israel Facsimile: 067 815 282 Attention: Mr. Meir Mulla, Treasurer with a copy to: Gross, Kleinhendler, Hodak, Halevy, Greenberg & Co. Round Building, 40th Floor Azrieli Centre Tel-Aviv 67021 Israel Facsimile: (03) 607 4422 Attention: Richard J. Mann, Adv. to the Facility Agent at: Bank Leumi Le-Israel B.M. Technology Section Corporate Division 32 Yehuda Halevi Street Tel-Aviv Facsimile: (03) 514 9514 Attention: Sector Manager to the Coordinating Agent at: Bank Hapoalim B.M. Telecommunications and Infrastructure Sector Corporate Division Zion Building 45 Rothschild Boulevard -157- Tel-Aviv Facsimile: (03) 567 3849 Attention: Manager of Telecommunications and Infrastructure Sector to the Participating Banks at-- (i) BLL: Technology Section Corporate Division 32 Yehuda Halevi Street Tel-Aviv Facsimile: (03) 514 9017 Attention: Sector Manager (ii) ISRAEL DISCOUNT BANK LTD.: 29 Yehuda Halevi Street Tel-Aviv Facsimile: (03) 514 6364 Attention: Senior Manager (iii) BANK HAPOALIM : Telecommunications and Infrastructure Sector Corporate Division Zion Building 45 Rothschild Boulevard Tel-Aviv Facsimile: (03) 567 3849 Attention: Manager of Telecommunications and Infrastructure Sector -158- (iv) THE FIRST INTERNATIONAL BANK OF ISRAEL LTD.: The First International Bank of Israel Ltd. Haifa Main Branch 3 Habankim Street Haifa Facsimile: (04) 853 6269 Attention: Branch Manager (v) UNITED MIZRAHI BANK LTD.: 48 Lilienblum Street Tel-Aviv Facsimile: (03) 567 9916 Attention: Manager, Tel-Aviv Main Branch (vi) MERCANTILE DISCOUNT BANK LTD.: 103 Allenby Street Tel-Aviv Facsimile: (03) 566 6919 Attention: Head of Corporate Division (viii) CITIBANK N.A.: Tel-Aviv Branch Platinum Building 21 Ha'arbah'a Street Tel-Aviv Israel Facsimile: (03) 684 2402 Attention: Branch Manager (vii) in the case the address designed by it to the of a Facility Agent and Partner for Transferee: such purpose at the end of the Transfer Certificate to which it is a party as Transferee; (viii) or, in respect delivered to such other address of a as may be designated by it for Finance Party: such purpose by notice to the Facility Agent and Partner. 47. CONFIDENTIALITY Subject to clause 27.6 (Disclosure of Information) the Arranger, each Participating Bank and Agent shall keep confidential all confidential information concerning Partner, the Shareholders, the Business and the terms and conditions of the Facility Documents and the Material Contracts, and will not disclose any such information to any third party without the prior written consent of Partner unless such disclosure is: -159- (a) made in connection with any proceedings arising out of or in connection with any Facility Document, to the extent that such a party reasonably considers it necessary to protect its interests; or (b) required by an order of a court of competent jurisdiction; or (c) made or required pursuant to any law or legal process in accordance with which the relevant party concerned is required to act or otherwise required to be disclosed by any banking or other regulatory or examining authorities or enquirers (whether governmental or otherwise); or (d) made to its auditors for the purpose of enabling them to undertake any audit or to its legal advisers when seeking bona fide legal advice in connection with the Facility Documents or otherwise to any of its officers and employees considered to need to know the information concerned. The restriction contained in this clause 38 shall continue to bind the Arranger, each Participating Bank and Agent after termination of, or after the termination of its participation in, the Facilities, without limit in time. For the purpose of the above, "CONFIDENTIAL INFORMATION" shall exclude: (i) information which at the time of disclosure to the Arranger, any Participating Bank or Agent (or any of their advisers) is in the public domain (other than through a breach of this clause 38 by the Arranger, such Participating Bank or Agent); (ii) information which, after such disclosure, becomes generally available to third parties or otherwise in the public domain by publication or through no fault of the Arranger, any Participating Bank or the Facility Agent (or any of their advisers); and (iii) information which is lawfully in the possession of the Arranger, any Participating Bank or Agent (or any of their advisers) prior to such disclosure or subsequently comes into any of their respective possessions, other than by reason of any breach of any confidentiality undertaking in favour of Partner. -160- 48. ENTIRE AGREEMENT This document constitutes an amended and restated version of the Facility Agreement, as amended, rescheduled and restated through 31 December 2002 and shall be deemed to be the binding version of the Facility Agreement. IN WITNESS WHEREOF, THE PARTIES HAVE SIGNED THIS AGREEMENT ON THE DATE FIRST MENTIONED ABOVE. PARTNER: for: PARTNER COMMUNICATIONS COMPANY LTD. By: ------------------------ Title: ------------------------ THE PARTICIPATING BANKS: for: BANK LEUMI LE-ISRAEL B.M. for: ISRAEL DISCOUNT BANK LTD. By: By: ------------------------ ----------------------- Title: Title: ------------------------ ----------------------- for: BANK HAPOALIM B.M. for: THE FIRST INTERNATIONAL BANK OF ISRAEL LTD. By: By: ------------------------ ----------------------- Title: Title: ------------------------ ----------------------- for: UNITED MIZRAHI BANK LTD. for: MERCANTILE DISCOUNT BANK LTD. By: By: ------------------------ ----------------------- Title: Title ------------------------ ----------------------- for: CITIBANK N.A. By: ------------------------ Title: ------------------------ for: BANK LEUMI LE-ISRAEL B.M. for: BANK HAPOALIM B.M. (in its capacity as Security (in its capacity as Trustee, Arranger and Facility Coordinating Agent) Agent) By: By: ------------------------ ----------------------- Title Title ------------------------ ----------------------- EX-8 13 u45961exv8.txt LIST OF SUBSIDIARIES . . . EXHIBIT 8 The following is a list of our significant subsidiaries:

COUNTRY COMPANY OF INCORPORATION - ------- ---------------- Partner Future Communications 2000 Ltd. Israel

EX-10.(A).1 14 u45961exv10wxayw1.txt CONSENT OF KESSELMAN & KESSELMAN EXHIBIT 10.(a).1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS We hereby consent to the inclusion in the Annual Report on Form 20-F of Partner Communications Company Ltd. (hereafter "Partner") for the fiscal year ended December 31, 2002, and to the incorporation by reference into the Registration Statement on Form F-3 filed on December 26, 2001 and related prospectus of Partner, of our report dated March, 2003, on the financial statements of Partner, which are included in the Form 20-F of Partner. We also consent to the reference to our firm in Partner's above referenced annual report under the caption "Selected Financial Data". /s/ Kesselman & Kesselman ------------------------------------ Tel-Aviv, Israel Kesselman & Kesselman March 13, 2003 Certified Public Accountants (Isr.) EX-10.(A).2 15 u45961exv10wxayw2.txt SECTION 906 CERTIFICATIONS EXHIBIT 10.(a).2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Partner Communications Company Ltd (the "Company") on Form 20-F for the period ending December 31, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned hereby certify that to the best of our knowledge: 1. The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: March 14, 2003 /s/ AMIKAM COHEN ------------------------------ Name: Amikam Cohen Title: Chief Executive Officer Date: March 14, 2003 /s/ ALAN GELMAN ------------------------------ Name: Alan Gelman Title: Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----

EX-1.1

                                                                     EXHIBIT 1.1

                             ARTICLES OF ASSOCIATION
                                       OF
                       PARTNER COMMUNICATIONS COMPANY LTD.

                                TABLE OF CONTENTS

                                                                                              
Chapter One - General.............................................................................3
   1.      Definitions and Interpretation.........................................................3
   2.      Public Company.........................................................................4
   3.      The Purpose of the Company.............................................................4
   4.      The Objectives of the Company..........................................................5
   5.      Limited Liability......................................................................5
Chapter Two - The Share Capital of the Company....................................................5
   6.      Share Capital..........................................................................5
   7.      The Issuance of Shares and Other Equity Securities.....................................5
   8.      Calls of Payment.......................................................................6
   9.      The Shareholder Registers of the Company and the Issuance of Share Certificates........8
   10.     Transfer of Shares of the Company......................................................8
   10A.    Limitations on Transfer of Shares.....................................................11
   11.     Bearer Share Certificate..............................................................12
   12.     Pledge of Shares......................................................................12
   13.     Changes in the Share Capital..........................................................13
Chapter Three - General Meetings.................................................................15
   14.     The Authority of the General Meeting..................................................15
   15.     Kinds of General Meetings.............................................................16
   16.     The Holding of General Meetings.......................................................17
   17.     The Agenda of General Meetings........................................................18
   18.     Discussions in General Meetings.......................................................18
   19.     Voting of the Shareholders............................................................20
   20.     The Appointment of a Proxy............................................................22
   21.     Deed of Vote..........................................................................24
Chapter Four - The Board of Directors............................................................27
   22.     The Authority of the Board of Directors...............................................27
   23.     The Appointment of Directors and the Termination of Their Office......................27
   24.     Actions of Directors..................................................................31
   25.     Committees of the Board of Directors..................................................34
   26.     Chairman of the Board of Directors....................................................35






                                                                                             
Chapter Five - Officers who are not Directors and the Auditor....................................36
   27.     The General Manager...................................................................36
   28.     The Corporate Secretary, Internal Controller and Other Officers of the Company........38
   29.     The Auditor...........................................................................38
Chapter Six - The Share Capital of the Company and its Distribution..............................40
   30.     Permitted Distributions...............................................................40
   31.     Dividends and Bonus Shares............................................................40
   32.     The Acquisition of Shares.............................................................44
Chapter Seven - Insurance, Indemnification and Release of Officers...............................44
   33.     Insurance of Officers.................................................................44
   34.     Indemnification of Officers...........................................................45
   35.     Release of Officers...................................................................46
Chapter Eight - Liquidation and Reorganization of the Company....................................46
   36.     Liquidation...........................................................................46
   37.     Reorganization........................................................................47
Chapter Nine - Miscellaneous.....................................................................47
   38.     Notices...............................................................................47
Chapter 10 - Transitional Rules until the Companies Law shall be Effective.......................48
   39.     Applicability.........................................................................48
   40.     Indemnification of Officers...........................................................49
   41.     Exemption for Officers................................................................49
   42.     Interpretation........................................................................50
Chapter 11 - Compliance with the License/Limitations on Ownership and Control....................50
   43.     Compliance............................................................................50
   44.     Limitations on Ownership and Control..................................................50





                                       2

                             CHAPTER ONE - GENERAL

1.       DEFINITIONS AND INTERPRETATION

         1.1.     The following terms in these Articles of Association bear the
                  meaning appearing alongside them below:

         Articles of Association The      Articles of Association of the
                                          Company, as set forth herein or as
                                          amended, whether explicitly or
                                          pursuant to any Law.

         Business Day                     Sunday to Thursday, inclusive, with
                                          the exception of holidays and official
                                          days of rest in the State of Israel.

         Companies Law                    The Companies Law, 1999.

         Companies Ordinance              The Companies Ordinance [New Version],
                                          1983.

         Companies Regulations            Regulations issued pursuant to the
                                          Companies Ordinance or Companies Law.

         Director                         A Director of the Company in
                                          accordance with the definition in
                                          Section 1 of the Companies Law,
                                          including an Alternate Director or an
                                          empowered representative.

         Document                         A printout and any other form of
                                          written or printed words, including
                                          documents transmitted in writing, via
                                          facsimile, telegram, telex, e-mail, on
                                          a computer or through any other
                                          electronic instrumentation, producing
                                          or allowing the production of a copy
                                          and/or an output of a document.

         Financial                        Statements The balance sheet, profit
                                          and loss statement, statement of
                                          changes in the share capital and cash
                                          flow statements, including the notes
                                          attached to them.

         Law                              The provisions of any law ("din") as
                                          defined in the Interpretation Law,
                                          1981.

         License                          The Company's General License for the
                                          Provision of Mobile Radio Telephone
                                          Services using the Cellular Method in
                                          Israel dated April 7, 1998, and the
                                          permit issued by the Ministry of
                                          Communications dated April 7, 1998.

         Linkage                          Payments with respect to changes in
                                          the Israeli consumer price index or
                                          the representative exchange rate of
                                          NIS vis-a-vis the U.S. dollar, as
                                          published by the Bank of Israel, or
                                          any other rate which replaces such
                                          rate.

         NIS                              New Israeli Shekel



                                       3





         Office                           The registered office of the Company.

         Ordinary Majority                A simple majority of the shareholders
                                          who are entitled to vote and who voted
                                          in a General Meeting in person, by
                                          means of a proxy or by means of a deed
                                          of voting.

         Periodic Statement               According to its definition in Chapter
                                          B of the Securities Regulations
                                          (Periodic and Immediate Reports),
                                          1970, or such Securities Regulations
                                          replacing them.

         Securities                       Shares, bonds, capital notes or
                                          securities negotiable into shares and
                                          certificates, conferring a right in
                                          such securities, or other securities
                                          issued by the Company.

         Securities Law                   The Securities Law, 1968.

         Securities Regulations           Regulations issued pursuant to the
                                          Securities Law.

         Shares                           shares in the share capital of the
                                          Company.

         Shareholder                      Anyone registered as a shareholder in
                                          the Shareholder Register of the
                                          Company.

         Special Majority                 A majority of at least three quarters
                                          of the votes of shareholders who are
                                          entitled to vote and who voted in a
                                          general meeting, in person, by means
                                          of a proxy or by means of a deed of
                                          voting.

         1.2.     The provisions of Sections 3 through 10 of the Interpretation
                  Law, 1981, shall also apply to the interpretation of these
                  Articles of Association, mutatis mutandis, unless the context
                  otherwise requires.

         1.3.     Except as otherwise provided in this Article, each word and
                  expression in these Articles of Association shall have the
                  meaning given to it in accordance with the Companies Law, and
                  to the extent that no meaning is attached to it in the
                  Companies Law, the meaning given to it in the Companies
                  Regulations, and if they lack reference thereto, as stated,
                  the meaning given to it in the Securities Law or Securities
                  Regulations, and in the absence of any meaning, as stated, the
                  meaning given to it in another Law, unless it contradicts the
                  relevant provision or its contents.

2.       PUBLIC COMPANY

         The Company is a public company.

3.       THE PURPOSE OF THE COMPANY

         The purpose of the Company is to operate in accordance with business
         considerations to generate profits; provided, however, the Board of
         Directors is entitled to donate

                                       4



         reasonable amounts to worthy causes, even if such a donation is not
         within the framework of business considerations, as stated.

4.       THE OBJECTIVES OF THE COMPANY

         The Company shall engage in any legal business.

5.       LIMITED LIABILITY

         The liability of the Shareholders of the Company is limited, each one
         up to the full amount he undertook to pay for the Shares allotted to
         him, at the time of the allotment.

                 CHAPTER TWO - THE SHARE CAPITAL OF THE COMPANY

6.       SHARE CAPITAL

         6.1.     The authorized share capital of the Company is NIS 2,350,000,
                  divided into 235,000,000 ordinary shares at a par value of NIS
                  0.01 each (hereinafter: the "Ordinary Shares").

         6.2.     Each Ordinary Share shall confer upon its holder the right to
                  receive notices of, and to attend and vote in, general
                  meetings, and to one vote for each Ordinary Share held by him.

         6.3.     Each class of Shares shall also confer equal rights to each
                  holder in the class with respect to the amounts of equity
                  which were paid or credited as paid with respect to their par
                  value, in all matters pertaining to dividends, the
                  distribution of bonus shares and any other distribution,
                  return of capital and participation in the distribution of the
                  balance of the assets of the Company upon liquidation.

         6.4.     The provisions of these Articles of Association with respect
                  to Shares, shall also apply to other Securities issued by the
                  Company, mutatis mutandis.

7.       THE ISSUANCE OF SHARES AND OTHER SECURITIES

         7.1.     The Board of Directors of the Company may issue Shares and
                  other equity Securities of the Company, up to the limit of the
                  registered share capital of the Company. In the event that the
                  share capital of the Company includes several classes of
                  Shares and other equity Securities, no shares and other equity
                  Securities shall be issued above the limit of the registered
                  share capital for its class.

         7.2.     The Board of Directors of the Company may issue redeemable
                  Securities, having such rights and subject to such conditions
                  as will be determined by the Board of Directors.

         7.3.     Subject to the provisions of these Articles of Association,
                  the Board of Directors may allot Shares and other Securities
                  according to such stipulations and conditions, at par value or
                  by way of a premium, as it deems fit.



                                       5


         7.4.     The Board of Directors may decide on the issuance of a series
                  of bonds or other debt securities within the framework of its
                  authority or to take a loan on behalf of the Company and
                  within the limits of the same authority.

         7.5.     The Shareholders of the Company at any given time shall not
                  have any preemption right or priority or any other right
                  whatsoever with respect to the acquisition of Securities of
                  the Company. The Board of Directors, in its sole discretion,
                  may decide to offer Securities of the Company first to
                  existing Shareholders or to any one or more of them.

         7.6.     The Company is entitled to pay a commission (including
                  underwriting fees) to any person, in consideration for
                  underwriting services, or the marketing or distribution of
                  Securities of the Company, whether reserved or unreserved, as
                  determined by the Board of Directors. Payments, as stated in
                  this Article, may be paid in cash or in Securities of the
                  Company, or partly in one manner and partly in another manner.

8.       CALLS OF PAYMENT

         8.1.     In the event that according to the terms of a Share allotment,
                  there is no fixed date for the payment of any part of the
                  price that is to be paid for the Shares, the Board of
                  Directors may issue from time to time calls of payment to the
                  Shareholders with respect to the moneys which were not yet
                  paid by them in relation to the Shares (hereinafter: "Calls of
                  Payment" or "a Call of Payment", as the case may be).

         8.2.     A Call of Payment shall set a date, which will not be earlier
                  than thirty days from the date of the notice, by which the
                  amount indicated in the Call of Payment must be paid, together
                  with interest, Linkage and expenses incurred in consequence of
                  the non-payment, according to the rates and amounts set by the
                  Board of Directors. The notice shall further specify that in
                  the event of a failure to pay within the date fixed, the
                  Shares in respect of which payment or the rate is required may
                  be forfeited. In the event that a Shareholder fails to meet
                  any of its obligations, under a Call of Payment, the Share in
                  respect of which said notice was issued pursuant to the
                  resolution of the Board of Directors may be forfeited at any
                  time thereafter. The forfeiture of Shares shall include the
                  forfeiture of all the dividends on same Shares which were not
                  paid prior to the forfeiture, even if such dividends were
                  declared.

         8.3.     Any amount, which according to the terms of a Share allotment,
                  must be paid at the time of issuance or at a fixed date,
                  whether at the par value of the Share or at a premium, shall
                  be deemed for the purposes of these Articles of Association to
                  be combined in a duly issued Call of Payment. In the event of
                  non-payment of any such amount, all the provisions of these
                  Articles of Association shall apply with respect to such an
                  amount, as if a proper Call of Payment has been made and an
                  appropriate notice thereof was given.



                                       6


         8.4.     The Board of Directors, acting reasonably and in good faith,
                  may differentiate among Shareholders with respect to amounts
                  of Calls of Payment and/or their payment time.

         8.5.     The joint holders of Shares shall be liable, jointly and
                  severally, for the payment of Calls of Payment in respect of
                  such Shares.

         8.6.     Any payment for Shares shall be credited, pro rata, according
                  to the par value of and according to the premium on such
                  Shares.

         8.7.     A Call of Payment may be cancelled or deferred to another
                  date, as may be decided by the Board of Directors. The Board
                  of Directors may waive any interest, Linkage and expenses or
                  any part of them.

         8.8.     The Board of Directors may receive from a Shareholder any
                  payments for his Shares, in addition to the amount of any Call
                  of Payment, and the Board of Directors may pay to the same
                  Shareholder interest on amounts which were paid in advance, as
                  stated above, or on same part of them, in excess of the amount
                  of the Call of Payment, or to make any other arrangement with
                  him which may compensate him for the advancement of the
                  payment.

         8.9.     A Shareholder shall not be entitled to a dividend or to his
                  other rights as a Shareholder, unless he has fully paid the
                  amounts specified in the Calls of Payment issued to him,
                  together with interest, Linkage and expenses, if any, unless
                  otherwise determined by the Board of Directors.

         8.10.    The Board of Directors is entitled to sell, re-allot or
                  transfer in any other manner any Share which was forfeited, in
                  the manner it decides, with or without any amount paid on the
                  Share or deemed as paid on it.

         8.11.    The Board of Directors is entitled at all times prior to the
                  sale, reallotment or transfer of the forfeited Share to cancel
                  the forfeiture on the conditions it may decide.

         8.12.    A person whose Shares have been forfeited shall,
                  notwithstanding the forfeiture, remain liable to pay to the
                  Company all moneys which, up until the date of forfeiture,
                  were due and payable by him to the Company in respect of the
                  Shares, including interest, Linkage and expenses up until the
                  actual payment date in the same manner as if the Shares were
                  not forfeited, and shall be compelled to fulfill all the
                  requirements and claims which the Company was entitled to
                  enforce with respect to the Shares up until the forfeiture
                  date, without any decrease or discount for the value of the
                  Shares at the time of forfeiture. His liability shall cease
                  only if and when the Company receives the full payment set at
                  the time of allotment of the Shares.

         8.13.    The Board of Directors may collect any Calls of Payment which
                  were not paid on the forfeited Shares or any part of them, as
                  it deems fit, but it is not obligated to do so.



                                       7


         8.14.    The forfeiture of a Share shall cause, as of the time of
                  forfeiture, the cancellation of all rights in the Company and
                  of any claim or demand against the Company with respect to
                  that Share, and of other rights and obligations of the
                  Shareholder in respect of the Company, save as otherwise
                  provided by Law.

9.       THE SHAREHOLDER REGISTERS OF THE COMPANY AND THE ISSUANCE OF SHARE
         CERTIFICATES

         9.1.     The Company shall maintain a Shareholder Register and a
                  Register of Significant Shareholders, together with a notation
                  of any Exceptional Holdings in accordance with the provisions
                  set forth in Article 10A below, to be administered by the
                  corporate secretary of the Company, subject to the oversight
                  of the Board of Directors.

         9.2.     A Shareholder is entitled to receive from the Company, free of
                  charge, within two months after an allotment or the
                  registration of a transfer (unless the conditions of the
                  allotment fix a different period) one or several certificates
                  with respect to all the Shares of a certain class registered
                  in his favor, which certificate must specify the number of the
                  Shares, the class of the Shares and the amount paid for them
                  and also any other detail deemed important by the Board of
                  Directors. In the event a Share is held jointly, the Company
                  shall not be obligated to issue more than one certificate for
                  all the joint holders, and the delivery of such a certificate
                  to any of the joint holders shall be viewed as if it was
                  delivered to all of them.

         9.3.     Each and every Share certificate shall be stamped with the
                  seal or the stamp of the Company or bear the Company's printed
                  name, and shall also bear the signature of one Director and of
                  the corporate secretary of the Company, or of two Directors or
                  of any other person appointed by the Board of Directors for
                  this purpose.

         9.4.     The Company is entitled to issue a new Share certificate in
                  place of an issued Share certificate which was lost or spoiled
                  or corrupted, following evidence thereto and guarantees and
                  indemnities, as may be required by the Company and the payment
                  of an amount determined by the Board of Directors.

         9.5.     Where two people or more are registered as joint holders of
                  Shares, each of them is entitled to acknowledge the receipt of
                  a dividend or other payments in connection with such jointly
                  held Shares, and such acknowledgement of any one of them shall
                  be good discharge of the Company's obligation to pay such
                  dividend or other payments.

10.      TRANSFER OF SHARES

         10.1.    The Shares are transferable. The transfer of Shares shall not
                  be registered unless the Company receives a deed of transfer
                  (hereinafter: "Deed of Transfer") or other proper Document or
                  instrument of transfer. A Deed of Transfer shall be drawn up
                  in the following manner or in any substantially similar manner
                  or in any other manner approved by the Board of Directors.




                                       8




                                DEED OF TRANSFER

 I, _________________, (hereinafter: "The Transferor") of ____________, do
 hereby transfer to ___________ (hereinafter: "The Transferee") of __________,
 for valuable consideration paid to me, _________ Share(s) having a par value of
 NIS 0.01 each, numbered ________ to ________ (inclusive), of Partner
 Communications Company Ltd. (hereinafter: the "Company") to hold unto the
 Transferee, his executors, administrators and assigns, subject to the same
 terms and conditions on which I held the same at the time of the execution
 hereof; and I, the said Transferee, do hereby agree to take the said Share(s)
 subject to the aforesaid terms and conditions.

                In witness whereof we have hereunto set our hands this _____ day
                of _________, _____.

                The Transferor                      The Transferee
                Name: _______________               Name: _______________
                Signature: ____________             Signature: ____________

                Witness to the Signature of:
                The Transferor                      The Transferee
                Name: _____________                 Name: _____________
                Signature: ____________             Signature: ____________

10.2.    The transfer of Shares which are not fully paid, or Shares on which the
         Company has a lien or pledge, shall have no validity unless approved by
         the Board of Directors, which may, in its absolute discretion and
         without giving any reasoning thereto, decline the registration of such
         a transfer. The Board of Directors may deny a transfer of Shares as
         aforesaid and may also impose a condition of the transfer of Shares as
         aforesaid an undertaking by the transferee to meet the obligations of
         the transferor with respect to the Shares or the obligations for which
         the Company has a lien or pledge on the Shares, signed by the
         transferee together with the signature of a witness, authenticating the
         signature of the transferee.

10.3.    The transfer of a fraction of a Share shall lack validity.

10.4.    A transferor of Shares shall continue to be regarded as the holder of
         the transferred Shares, until the name of the transferee of the Shares
         is registered in the Shareholder Register of the Company.

10.5.    A Deed of Transfer shall be filed with the Company's office for
         registration, together with the Share Certificates for the Shares which
         are to be transferred (if such are issued) and also any other evidence
         which the Company may require with respect to the proprietary right of
         the transferor or with respect to his right to transfer the Shares.
         Deeds of Transfer which are registered shall remain with the Company.
         The Company is not obligated to retain the Deeds of Transfer and the



                                       9


         Share Certificates, which may be cancelled, after the completion of a
         seven-year period from the registration of the transfer.

10.6.    A joint Shareholder may transfer his right in a Share. In the event the
         transferring Shareholder does not hold the relevant Share Certificate,
         the transferor shall not be obligated to attach the Share Certificate
         to the Deed of Transfer, so long as the Deed of Transfer shall indicate
         that the transferor does not hold the Share Certificate, that the right
         he has in the Shares therein is being transferred, and that the
         transferred Share is held jointly with others, together with their
         details.

10.7.    The Company may require payment of a fee for the registration of the
         transfer, at an amount or a rate determined by the Board of Directors
         from time to time.

10.8.    The Board of Directors may close the Shareholder Register for a period
         of up to thirty days in each year.

10.9.    Subject to Article 10.10, upon the death of a Shareholder, the Company
         shall recognize the custodians or administrators of the estate or
         executors of the will, and in the absence of such, the lawful heirs of
         the Shareholder, as the only holders of the right for the Shares of the
         deceased Shareholder, after receipt of evidence to the entitlement
         thereto, as determined by the Board of Directors.

10.10.   In the event that a deceased Shareholder held Shares jointly with
         others, the Company shall acknowledge each survivor as a joint
         Shareholder with respect to said Shares, unless all the joint holders
         in the Share notify the Company in writing, prior to the death of any
         of them, of their will that the provisions of this Article shall not
         apply to them. The foregoing shall not release the estate of a joint
         Shareholder of any obligation in relation to a Share which is held
         jointly.

10.11.   A person acquiring a right in Shares in consequence of being a
         custodian, administrator of the estate, the heir of a Shareholder, a
         receiver, liquidator or a trustee in a bankruptcy of a Shareholder or
         according to another provision of the Law, is entitled, after providing
         evidence to his right, to the satisfaction of the Board of Directors,
         to be registered as the Shareholder or to transfer such Shares to
         another person, subject to the provisions of these Articles of
         Association with respect to transfers.

10.12.   A person becoming entitled to a Share because of the death of a
         Shareholder shall be entitled to receive, and to give receipts for,
         dividends or other payments paid or distributions made, with respect to
         the Share, but shall not be entitled to receive notices with respect to
         General Meetings of the Company or to participate or vote therein with
         respect to that Share, or to exercise any other right of a Shareholder,
         until he has been registered in the Shareholder Register as the holder
         of that Share.

10.13.   Notwithstanding anything to the contrary in Articles 10.5 and 10.7, the
         transfer of Shares as a result of a realization of a share pledge
         entered into by a Shareholder of the Company in connection with the
         Company's $650 million credit facility dated August 13, 1998, as
         amended from time to time, will not require additional evidence with
         respect to the proprietary right of the transferor or with respect to



                                       10


         his right to transfer the shares other than a properly completed deed
         of transfer and valid Share Certificate (if issued), nor will the
         Company require a fee for the registration of said transfer.

10A.     LIMITATIONS ON TRANSFER OF SHARES

                  10A.1.   Exceptional Holdings shall be registered in the
                           Register of Members (Shareholder Register) together
                           with a notation that such holdings have been
                           classified as "Exceptional Holdings", immediately
                           upon the Company's learning of such matter. Notice of
                           such registration shall be sent by the Company to the
                           registered holder of the Exceptional Holding and to
                           the Minister of Communications.

                  10A.2.   Exceptional Holdings, registered in the manner set
                           forth in Article 10A.1, shall not entitle the holder
                           to any rights in respect to his holdings, and such
                           holdings shall be considered "Dormant Shares" within
                           the meaning of Section 308 of the Companies Law,
                           except, however, that the holder of such shares shall
                           be entitled to receive dividends and other
                           distributions to shareholders (including the right to
                           participate in a rights offering calculated on the
                           basis of Means of Control of the Company (as defined
                           in the License), provided, however, that such
                           additional holdings shall be considered Exceptional
                           Holdings). Therefore, any action taken or claim made
                           on the basis of a right deriving from an Exceptional
                           Holdings shall have no effect, except for the receipt
                           of dividends or other distribution as stated above.

                           Without derogating from the above:

                  10A2.1   A Shareholder participating in a vote of the General
                           Meeting will certify to the Company prior to the vote
                           or, if the vote is by Deed of Vote, on the Deed of
                           Vote, as to whether or not his holdings in the
                           Company or his vote require consent pursuant to
                           Sections 21 and 23 to the License; in the event the
                           shareholder does not provide notification as
                           aforesaid, he shall not vote and his vote shall not
                           be counted.

                  10A.2.2  No Director shall be appointed, elected or removed on
                           the basis of Exceptional Holdings. In the event a
                           Director is appointed, elected or removed from his
                           position as a Director as set forth above, such
                           appointment, election or removal shall have no
                           effect.

                  10A.2.3  Exceptional Holdings shall have no voting rights at a
                           General Meeting of the Company.

For the purposes of this Article 10A, "EXCEPTIONAL HOLDINGS" means the holdings
of Traded Means of Control held without the consent of the Minister of
Communications pursuant to Section 21 to the License or as a result of a breach
of the provisions of Section 23 to the License, and all holdings of a holder of
Traded Means of Control who acted contrary to the provisions of Section 24 to
the



                                       11

License; and as long as the consent of the Minister of Communications is
required but has not been obtained pursuant to Section 21 to the License, or the
circumstances exist which constitute a violation of the provisions of Sections
23 or 24 to the License.

For the purposes of this Article 10A, "TRADED MEANS OF CONTROL" means Means of
Control (as defined in the License) including Global or American Depositary
Shares (GDRs or ADRs) or similar certificates, registered for trade on a
securities exchange in Israel or abroad or which have been offered to the public
in connection with a prospectus, and are held by the public in Israel or abroad.

                  10A.3.   The provisions of Article 10A shall not apply to
                           those who were Shareholders of the Company on the eve
                           of the first registration of the Company's Shares for
                           trade.

11.      BEARER SHARE CERTIFICATE

         The Company shall not issue bearer Share Certificates which grant the
         bearer rights in the Shares specified therein.

12.      PLEDGE OF SHARES

         12.1.    The Company shall have a first degree pledge on, and a right
                  to create a lien on, all Shares which are not fully paid and
                  registered in the name of any Shareholder, and the proceeds of
                  their sale, with respect to moneys (which payment time is due
                  or not) whose payment was already called or are to be paid up
                  within a fixed time. Furthermore, the Company shall have a
                  first degree pledge right on all the Shares (other than Shares
                  which were fully paid) registered in the name of any
                  Shareholder to secure the payment of moneys which are due from
                  him or from his property, whether with respect to his own
                  debts or debts jointly with others. The said pledge shall also
                  apply to dividends, declared from time to time, with respect
                  to these Shares.

         12.2.    For purposes of the realization of any such pledge and or
                  lien, the Board of Directors is entitled to sell the Shares
                  which are the subject of the pledge or lien, or any part of
                  them, as it deems fit. No sale, as aforesaid, shall be carried
                  out, until the date fixed for the payment has passed and a
                  notice in writing was transferred to same Shareholder with
                  respect to the intention of the Company to sell them, on
                  condition that the amounts were not paid within fourteen days
                  after the notice.

         12.3.    The proceeds of any such sale, after deduction for the payment
                  of the sale expenses, shall serve for the covering of the
                  debts or obligations of said Shareholder, and the balance (if
                  any) shall be paid to him.

         12.4.    In the event that a sale of Shares was carried out pursuant to
                  the realization of a pledge or a lien, pursuant to the
                  presumptive authority conferred above, the Board of Directors
                  is entitled to register such Shares in the Shareholder
                  Register in favor of the buyer, and the buyer shall not be
                  under the obligation to examine the fitness


                                       12



                  of such actions or the manner in which the purchase price paid
                  for such Shares was used. After the said Shares are registered
                  in the Shareholder Register in favor of the buyer, no person
                  shall have the right to object to the validity of the sale.

13.      CHANGES IN THE SHARE CAPITAL

         The General Meeting is entitled to take any of the following actions at
         all times, so long as the resolution of the General Meeting is adopted
         by a Special Majority.

         13.1.    Increasing the Share Capital

To increase the share capital of the Company, regardless of whether all the
Shares registered at such a time were issued or not. The increased share capital
shall be divided into Shares having ordinary rights or preference rights or
deferred rights or other special rights (subject to the special rights of an
existing class of Shares) or subject to conditions and restrictions with respect
to entitlement to dividend, return of capital, voting or other conditions, as
may be instructed by the General Meeting in a resolution with respect to the
increase of the share capital, and in the absence of a special provision,
according to the terms determined by the Board of Directors.

         13.2.    Classes of Shares

To divide the share capital of the Company into various classes of Shares, and
to set and change the rights attaching to each class of Shares, according to the
conditions specified below:

                  13.2.1.  So long as it was not otherwise set in the Share
                           allotment conditions, the rights of any class may be
                           changed pursuant to a resolution of the General
                           Meeting of the Shareholders of each class of Shares,
                           separately, or upon the written consent of all the
                           Shareholders of all classes.

                  13.2.2.  The rights conferred on the holders of Shares of a
                           certain class shall not be deemed to have been
                           changed as a result of the creation or allotment of
                           other Shares having identical rights, unless it was
                           otherwise stipulated in the allotment conditions of
                           said Shares.

         13.3.    Amalgamation and Redivision of the Share Capital

To amalgamate and redivide the share capital of the Company, entirely or
partially, into Shares having a higher or lesser par value than that stated in
these Articles of Association. In the event that in consequence of such
amalgamation, there are Shareholders left with fractions of Shares, the Board of
Directors if approved by the Shareholders at a General Meeting in adopting the
resolution for amalgamation of the capital, may agree as follows:


                                       13



                  13.3.1.  To sell the total of all the fractional shares and to
                           appoint a trustee for this purpose, in whose name
                           Share Certificates representing the fractions shall
                           be issued, who will sell them, with the proceeds
                           received after the deduction of commissions and
                           expenses to be distributed to those entitled. The
                           Board of Directors shall be entitled to decide that
                           Shareholders who are entitled to proceeds which are
                           below an amount determined by it, shall not receive
                           the proceeds of the sale of the fractional shares,
                           and their share in the proceeds shall be distributed
                           among the Shareholders who are entitled to proceeds,
                           in an amount greater than the amount that was
                           determined, relative to the proceeds to which they
                           are entitled;

                  13.3.2.  To allot to any Shareholder, who is left with a
                           fractional Share following the amalgamation, Shares
                           of the class of Shares prior to the amalgamation,
                           which are fully paid, in such a number, the
                           amalgamation of which together with the fractional
                           Share shall complete a whole Share, and an allotment
                           as stated shall be viewed as valid shortly before the
                           amalgamation;

                  13.3.3.  To determine that Shareholders shall not be entitled
                           to receive a Share in exchange for a fractional Share
                           resulting from the amalgamation of a half or smaller
                           fraction of the number of Shares, whose amalgamation
                           creates a single Share, and they shall be entitled to
                           receive a whole Share in exchange for a fractional
                           Share, resulting from the amalgamation of more than a
                           half of the number of Shares, whose amalgamation
                           creates a whole Share.

                  In the event that an action pursuant to Articles 13.3.2 or
                  13.3.3 above requires the allotment of additional Shares,
                  their payment shall be effected in a manner similar to that
                  applicable the payment of Bonus Shares. An amalgamation and
                  redivision, as aforesaid, shall not be regarded as a change in
                  the rights attaching to the Shares which are the subject of
                  the amalgamation and redivision.

         13.4.    Cancellation of Unissued Share Capital

To cancel registered share capital which has not yet been allotted, so long as
the Company is not under an obligation to allot these Shares.

         13.5.    The Division of the Share Capital

To divide the share capital of the Company, entirely or partially, into Shares
having a lower par value than those stated in these Articles of Association, by
way of dividing the Shares of the Company at such a time, entirely or partially.

         13.6.    The provisions specified in this Article 13 shall also apply
                  to other equity Securities of the Company, mutatis mutandis.


                                       14



                        CHAPTER THREE - GENERAL MEETINGS

14.      THE AUTHORITY OF THE GENERAL MEETING

         14.1.    Subjects within the authority of the General Meeting

                  The following matters shall require the approval of the
                  General Meeting:

                  14.1.1.  Changes in the Articles of Association, if adopted by
                           a Special Majority.

                  14.1.2.  The exercise of the authority of the Board of
                           Directors, if resolved by a Special Majority that the
                           Board of Directors is incapable of exercising its
                           authority, and that the exercise of any of its
                           authority is essential to the orderly management of
                           the Company.

                  14.1.3.  The appointment or reappointment of the Company's
                           auditor, the termination or non-renewal of his
                           service, and to the extent required by Law and not
                           delegated to the Board of Directors, the
                           determination of his fee.

                  14.1.4.  The appointment of Directors, including external
                           Directors.

                  14.1.5.  To the extent required by the provisions of Section
                           255 of the Companies Law, the approval of actions and
                           transactions with interested parties and also the
                           approval of an action or a transaction of an officer
                           which might constitute a breach of the duty of
                           loyalty.

                  14.1.6.  Changes in the share capital of the Company, if
                           adopted by a Special Majority as set forth in Article
                           13 above.

                  14.1.7.  A merger of the Company, as defined in the Companies
                           Law.

                  14.1.8.  Changes in the objectives of the Company as set forth
                           in Article 4 above, if adopted by a Special Majority.

                  14.1.9.  Changes in the name of the Company, if adopted by a
                           Special Majority.

                  14.1.10. Liquidation, if adopted by a Special Majority.

                  14.1.11. Settlements or Arrangements pursuant to Section 233
                           of the Companies Ordinance.

                  14.1.12. Any other matters which applicable Law requires to be
                           dealt with at General Meetings of the Company.

         14.2.    The authority of the General Meeting to transfer authorities
                  between corporate organs.


                                       15



The General Meeting, by a Special Majority, may assume the authority which is
given to another corporate organ, and may transfer the authority which is given
to the General Manager to the Board of Directors.

The taking or transferring of authorities, as aforesaid, shall be with regard to
a specific issue or for a specific period of time, all as stated in the
resolution of the General Meeting.

15.      KINDS OF GENERAL MEETINGS

         15.1.    Annual Meetings

A General Meeting shall be convened at least once a year, within fifteen months
of the last general meeting. The meeting shall be held at the registered offices
of the Company, unless otherwise determined by the Board of Directors. These
General Meetings shall be referred to as "Annual Meetings".

                  15.1.1.  An Annual Meeting shall be convened to approve the
                           following:

                           (One) The Financial Statements and the Report of the
                           Board of Directors, as of December 31st of the
                           calendar year preceding the year of the annual
                           meeting.

                           (Two) The Report of the Board of Directors with
                           respect to the fee paid to the Company's auditor.

                  15.1.2.  The Annual Meeting shall be convened to adopt
                           resolutions on the following matters:

                           (One) The appointment of Directors and the
                           termination of their office in accordance with
                           Article 23 below.

                           (Two) The appointment of an auditor or the renewal of
                           his office, and authorization of the Board of
                           Directors to determine his fee, subject to the
                           provisions of Article 29 below.

         15.2.    Extraordinary Meetings

General Meetings of the Shareholders of the Company which are not convened in
accordance with the provisions of Article 15.1 above, shall be referred to as
"Extraordinary Meetings". An Extraordinary Meeting shall discuss and decide in
all matters which are not discussed and decided in the Annual Meeting, and for
which the Extraordinary Meeting was convened.


                                       16



         15.3.    Class Meetings

The provisions of these Articles of Association with respect to General Meetings
shall apply, mutatis mutandis, to meetings of a class of Shareholders of the
Company.

16.      THE HOLDING OF GENERAL MEETINGS

         16.1.    The Convening of the Annual Meeting

The Board of Directors shall convene Annual Meetings in accordance with the
provisions of Article 15.1 above.

         16.2.    The Convening of an Extraordinary Meeting

The Board of Directors may convene an Extraordinary Meeting, as it decides,
provided, however, that it shall be obligated to convene an Extraordinary
Meeting upon the demand of one of the following:

                  16.2.1.  Any two Directors or a quarter of the Directors,
                           whichever is lower; or

                  16.2.2.  any one or more Shareholders, holding alone or
                           together at least 4.99% of the issued share capital
                           of the Company.

         16.3.    Date of Convening an Extraordinary Meeting Upon Demand

The Board of Directors, which is required to convene a general meeting in
accordance with Article 16.2 above shall announce the convening of the General
Meeting within twenty-one (21) days from the receipt of a demand in that
respect, and the date fixed for the meeting shall not be more than thirty-five
(35) days from the publication date of the announcement of the General Meeting.

In the event that the Board of Directors shall not have convened an
Extraordinary Meeting, as required in this Article, those demanding its
convening or half of the Shareholders which demand it subject to Article 16.2.2,
are entitled to convene the meeting themselves, so long as it is convened within
three months from the date on which the demand was filed, and it shall be
convened, inasmuch as possible, in the same manner by which meetings are
convened by the Board of Directors. In the event that a General Meeting is
convened as aforesaid, the Company shall bear the reasonable costs and expenses
incurred by those demanding it.

         16.4.    Notice of Convening a General Meeting

Unless otherwise prescribed by Law, a notice of a general meeting shall be sent
to each registered Shareholder of the Company at least twenty-one (21) days
prior to the date fixed for the meeting.


                                       17



A General Meeting may be convened following a shorter notice period, if the
written consent of all the Shareholders who are entitled at such time to receive
notices has been obtained. A waiver by a Shareholder can also be made in writing
after the fact and even after the convening of the General Meeting.

16.5.    Contents of the Notice

Subject to the provisions of any Law, a notice with respect to a general meeting
shall specify the agenda of the meeting, the location, the proposed resolutions
and also the arrangements for voting by means of a deed of voting or a deed of
authorization, and the requirements of Article 10A.2.1.

Any notice to be sent to the Shareholders shall also include a draft of the
proposed resolutions or a concise description of their particulars.

17.      THE AGENDA OF GENERAL MEETINGS

         17.1.    The agenda of the General Meeting shall be determined by the
                  Board of Directors and shall also include issues for which an
                  Extraordinary Meeting is being convened in accordance with
                  Article 15.2 above, or demanded in accordance with Article
                  17.2 below.

         17.2.    One or more Shareholders holding alone or in the aggregate,
                  4.99% or more of the share capital of the Company may request
                  that the Board of Directors include an issue on the agenda of
                  a general meeting to be convened in the future. The Board of
                  Directors shall incorporate such issue on the agenda of such a
                  future general meeting, provided that the Board of Directors
                  determines, in its discretion, such issue is suitable to be
                  discussed in the General Meeting of the Company.

         17.3.    The General Meeting shall only adopt resolutions on issues
                  which are on its agenda.

         17.4.    So long as it is not otherwise prescribed by Law, the General
                  Meeting is entitled to accept or reject a proposed resolution
                  which is on the agenda of the General Meeting, the draft or
                  concise description of the particulars of which were published
                  by the Company, including slight alterations, however, it is
                  not entitled to take a resolution, which is materially
                  different than the proposed resolution.

18.      DISCUSSIONS IN GENERAL MEETINGS

         18.1.    Quorum

No discussion shall be held in the General Meeting unless a lawful quorum is
present. Subject to the requirements of the applicable Law in force at the time
these Articles of Association come into force, the rules of the Nasdaq National
Market, the London Stock Exchange and any other exchange on which the Company's
securities are or may become quoted or listed, and the provisions of these
Articles, any two Shareholders, present by themselves or by means of a


                                       18



proxy, or who have delivered to the Company a Deed of Voting indicating their
manner of voting, and who hold or represent at least one-third of the voting
rights in the Company shall constitute a lawful quorum. A Shareholder or his
proxy, who may also serve as a proxy for other Shareholders, shall be regarded
as two Shareholders or more, in accordance with the number of Shareholders he is
representing.

         18.2.    Deferral of the General Meeting in the Absence of Lawful
                  Quorum

In the event that a legal quorum is not present after the lapsing of 30 minutes
from the time specified in the convening notice for the commencement of the
meeting, the meeting may be adjourned to the same day of the following week (or
the first business day thereafter) at the same time and venue, or to another
time and venue, as determined by the Board of Directors in a notice to the
Shareholders, and the adjourned meeting shall discuss the same issues for which
the original meeting was convened. If at the adjourned meeting, a legal quorum
is not present at the time specified for the commencement of the meeting, then
and in such event one or more Shareholders holding or representing in the
aggregate at least 10% of the voting rights in the Company shall be deemed to
form a proper quorum, subject to the provisions of Section 79 of the Companies
Law.

         18.3.    The Chairman of the General Meeting

The chairman of the Board of Directors (if appointed) shall preside at each
General Meeting. In the absence of the chairman, or if he fails to appear at the
meeting within 15 minutes after the time fixed for the meeting, the Shareholders
present at the meeting shall choose any one of the Directors of the Company as
the chairman, and if there is no Director present at the meeting, one of the
Shareholders shall be chosen to preside over the meeting. The chairman shall not
have an additional vote or casting vote.

         18.4.    Adjourned Meeting

Upon adoption of a resolution at a General Meeting at which a lawful quorum is
present, the chairman may and upon demand of the General Meeting shall adjourn
the General Meeting from time to time and from venue to venue, as the meeting
may decide (for the purpose of this Article: an "Adjourned Meeting"). In the
event that a meeting is adjourned for fourteen days or more, a notice of the
Adjourned Meeting shall be given in the same manner as the notice of the
original meeting. With the exception of the aforesaid, a Shareholder shall not
be entitled to receive notice of an Adjourned Meeting or of the issues which are
to be discussed in the Adjourned Meeting. The Adjourned Meeting shall only
discuss issues that could have been discussed at the General Meeting which was
adjourned. The provisions of Articles 17.1, 17.2 and 17.3 of the Articles of
Association shall apply to an Adjourned Meeting.


                                       19



19.      VOTING OF THE SHAREHOLDERS

         19.1.    Resolutions

In any General Meeting, a proposed resolution shall be adopted if it receives an
Ordinary Majority, or any other majority of votes set by Law or in accordance
with these Articles of Association. For the avoidance of doubt, any proposed
resolution requiring a Special Majority under the Companies Ordinance shall
continue to require the same Special Majority even after the effective date of
the Companies Law.

In the event of a tie vote, the resolution shall be deemed rejected.

         19.2.    Checking Majority

                  19.2.1.  The checking of the majority shall be carried out by
                           means of a count of votes, at which each Shareholder
                           shall be entitled to vote in each case in accordance
                           with rights fixed for such Shares, subject to
                           Articles 10A above and Article 44 below. A
                           Shareholder shall be entitled to a single vote for
                           each share he holds which is fully paid or that Calls
                           of Payment in respect of which was fully paid.

                  19.2.2.  The announcement of the chairman that a resolution in
                           the General Meeting was adopted or rejected, whether
                           unanimously or with a specific majority, shall be
                           regarded as prima facie evidence thereof.

         19.3.    Written Resolutions

Subject to the provisions of applicable Law, a written resolution signed by all
of the Shareholders of the Company holding Shares which entitle their holders to
participate in General Meetings of the Company and vote therein, or of the same
class of Shares to which the resolution refers, as the case may be, shall be
regarded as a valid resolution for all purposes, and as a resolution adopted at
a General Meeting of the Company or at a class meeting of the relevant class of
Shares, as the case may be, which was properly summoned and convened, for the
purpose of adopting such a resolution.

Such a resolution could be stated in several copies of the same document, each
of them signed by one Shareholder or by several Shareholders.

         19.4.    The Determining Date with Respect to Participation and Voting

In the event that a General Meeting was summoned more than twenty-one (21) days
prior to the date fixed for its convening, the Shareholders who are entitled to
participate and vote in same General Meeting shall be those Shareholders who are
registered in the Shareholder Register of the Company on the date twenty-one
(21)


                                       20



days prior to the date of the meeting. In the event that a General Meeting was
summoned 21 days or less prior to the date fixed for its convening, the
Shareholders who are entitled to participate and vote in the same General
Meeting shall be those shareholders who are registered in the Shareholder
Register of the Company on the date determined by the Board of Directors but in
no event shall the date be less than four days prior to the date of the meeting.

         19.5.    A Right to Participate and Vote

A Shareholder shall not be entitled to participate and vote in any General
Meeting or to be counted among those present, so long as (i) he owes the Company
a payment which was called for the Shares held by him, unless the allotment
conditions of the Shares provide otherwise, and/or (ii) his holdings are
registered in the Shareholder Register together with a notation that such
holdings have been classified as Exceptional Holdings, as defined in Article 10A
or Affected Shares, as defined in Article 44.

         19.6.    Personal Interest in Resolutions

A Shareholder seeking to vote with respect to a resolution which requires that
the majority for its adoption include at least a third of the votes of all those
not having a personal interest (as defined in the Companies Law) in the
resolution shall notify the registered office of the Company at least two
business days prior to the date of the General Meeting, whether he has a
personal interest in the resolution or not, as a condition for his right to vote
and be counted with respect to such resolution.

A Shareholder voting on a resolution, as aforesaid, by means of a Deed of Vote,
may include his notice with regard to his personal interest on the Deed of Vote.

         19.7.    The Disqualification of Deeds of Vote

Subject to the provisions of applicable Law, the corporate secretary of the
Company may, in his discretion, disqualify Deeds of Vote and Deeds of
Authorization and so notify the Shareholder who submitted a Deed of Vote or
Deeds of Authorization in the following cases:

                  19.7.1.  If there is a reasonable suspicion that they are
                           forged;

                  19.7.2.  If there is a reasonable suspicion that they are
                           falsified, or given with respect to Shares for which
                           one or more Deeds of Vote or deeds of authorization
                           have been given and not withdrawn; or

                  19.7.3.  If there is no note on the Deed of Vote or Deed of
                           Authorization as to whether or not his holding in the
                           Company or his vote require the consent of the
                           Minister of Communications pursuant to Sections 21
                           and 23 to the License.


                                       21



                  19.7.4.  With respect to Deeds of Vote:

                           (One) If more than one choice is marked for the same
                           resolution; or

                           (Two) With respect to resolutions which require that
                           the majority for their adoption includes a third of
                           the votes of those not having a personal interest in
                           the approval of the resolution, where it was not
                           marked whether the relevant Shareholder has a
                           personal interest or not, as aforesaid.

                  Any Shareholder shall be entitled to appeal on any such
                  disqualification to the Board of Directors at least one
                  business day prior to the relevant General Meeting.

         19.8.    The Voting of a Person without Legal Capacity

A person without legal capacity is entitled to vote only by means of a trustee
or a legal custodian. Such trustee or legal custodian may vote in person, by
Deed of Vote or by means of a proxy.

         19.9.    The Voting of Joint Holders of a Share

Where two or more Shareholders are registered joint holders of a Share, only the
first named joint holder shall vote, either in person or by means of a proxy or
by means of a Deed of Vote, without taking into account the other registered
joint holders of the Share. For this purpose, the first named joint holder shall
be the person whose name is registered first in the Shareholder Register.

         19.10.   Minutes of the General Meeting

The chairman of the General Meeting shall cause that the minutes of each General
Meeting shall be properly maintained and shall include the following:

                  19.10.1. The name of each Shareholder present in person, by
                           Deed of Vote or by proxy and the number of Shares
                           held or represented by him;

                  19.10.2. The principal issues of the discussion, all the
                           resolutions which were adopted or rejected at the
                           General Meeting, and if adopted - according to what
                           majority.

20.      THE APPOINTMENT OF A PROXY

         20.1.    Voting by Means of a Proxy

A Shareholder registered in the Shareholder Register is entitled to appoint by
deed of authorization a proxy to participate and vote in his stead, whether at a
certain General Meeting or generally at General Meetings of the Company, whether
personally or by means of a Deed of Vote, so long as the deed of authorization


                                       22



with respect to the appointment of the proxy was delivered to the Company at
least two Business Days prior to the date of the General Meeting.

In the event that the deed of authorization is not limited to a certain General
Meeting, then the deed of authorization, which was deposited prior to a certain
General Meeting, shall also be good for other General Meetings thereafter. This
Article 20 shall also apply to a Shareholder which is a corporation, appointing
a person to participate and vote in a General Meeting in its stead. A proxy is
not required to be a Shareholder of the Company.

         20.2.    The Draft of the Deed of Authorization

The deed of authorization shall be signed by the Shareholder and shall be in or
substantially in the form specified below or any such other form acceptable to
the Board of Directors of the Company. The corporate secretary, in his
discretion, may accept a deed of authorization differing from that set forth
below provided the changes are immaterial.

The corporate secretary shall only accept either an original deed of
authorization, or a copy of the deed of authorization which is certified by a
lawyer having an Israeli license or a notary.

                              DEED OF AUTHORIZATION
                                                                   Date:
                                                                        --------

To:      Partner Communications Company Ltd.
Attn.:   Corporate Secretary

            Re: [Annual/Extraordinary] General Meeting of the Company
                        to be Held On __________________

         I, the undersigned _________________, Identification No. / Registration
No. _____________, of ________________, being the registered holder of ________
(*) Shares [Ordinary Shares having a par value of NIS 0.01, each], hereby
authorize ___________, Identification No. ___________ (**) and/or ___________,
Identification No. ___________ and/or ___________, Identification No.
___________ to participate and vote in my stead and on my behalf at the
referenced meeting and in any adjournment of the referenced meeting of the
Company / at any General Meeting of the Company, until I shall otherwise notify
you .

                                         -----------------------
                                         Signature

- --------------------------------------------------------------------------------
(*)      A Shareholder is entitled to give several deeds of authorization, each
         of which refers to a different quantity of Shares of the Company held
         by him, so long as he shall not give deeds of authorization with
         respect to an aggregate number of Shares exceeding the total number he
         holds.

(**)     In the event that the proxy does not hold an Israeli Identification
         number, indicate a passport number, if any, and the name of the country
         which issued the passport.


                                       23



         20.3.    A vote in accordance with a deed of authorization shall be
                  lawful even if prior to it, the appointer died or became
                  incapacitated or bankrupt, or if it is a corporation - was
                  liquidated, or if he cancelled the deed of authorization or
                  transferred the Share in respect of which it was given, unless
                  a notice in writing was received at the Office of the Company
                  prior to the meeting with respect to the occurrence of such an
                  event.

21.      DEED OF VOTE

         21.1.    A Shareholder may vote in a General Meeting by means of a Deed
                  of Vote on the issues specified below, unless the Company is
                  entitled by Law to a partial or full exemption from the
                  requirement for the delivery of Deeds of Vote, either
                  generally or specifically:

                  21.1.1.  The appointment and dismissal of Directors.

                  21.1.2.  The approval of actions with interested parties,
                           subject to sections 268-275 of the Companies Law.

                  21.1.3.  The approval of an action by an officer which
                           conflicts with his duty of loyalty toward the
                           Company, subject to Section 255 of the Companies Law.

                  21.1.4.  A merger subject to Section 320 of the Companies Law.

                  21.1.5.  Any issue which the Articles of Association provide
                           can be voted thereon by means of a Deed of Vote.

                  21.1.6.  Other issues prescribed by Law.

         21.2.    The Draft of the Deed of Vote

The Deed of Vote shall be signed by the Shareholder and shall be in or
substantially in the form specified below, or any such other form acceptable to
the Board of Directors of the Company. The corporate secretary or any one
authorized by the Board of Directors to convene the meeting, shall be entitled
to amend the form of the Deed of Vote in accordance with the resolutions on the
agenda.


                                       24



                                  DEED OF VOTE
                                                                  Date:
                                                                        --------
Partner Communications Company Ltd.
[Address of the Company]

         Re: [Annual/Extraordinary] General Meeting of the Shareholders
                          to be on ___________________

         I, the undersigned _________________, Identification No. / Registration
No. _____________, of ________________, being the registered holder / the holder
an appropriate Deed of Authorization, attached hereto (*) of ________ (**)
Ordinary Shares having a par value of NIS 0.01 each, hereby notify you that my
vote in the General Meeting and in any adjourned meeting of the Company is as
specified below.



   Item No. of the                                                                            Personal Interest of the
    Resolution on           Subject of the                                                        Shareholder in the
      the Agenda              Resolution                      Vote (***)                           Resolution (****)
- ------------------------ --------------------- ------------------------------------------- ---------------------------------
                                                 In Favor      Abstain         Against            Yes               No
- ------------------------ --------------------- ------------ -------------- --------------- ------------------ --------------
                                                                                            
- ------------------------ --------------------- ------------ -------------- --------------- ------------------ --------------

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

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



[ ] I, the undersigned, hereby declare that either my holdings or my vote
    require the consent of the Minister of Communications pursuant to Sections
    21 or 23 to the License. (*****)

[ ] I, the undersigned, hereby declare that neither my holdings nor my vote,
    require the consent of the Minister of Communications pursuant to Sections
    21 or 23 to the License. (*****)


- ------------------------
       Signature

- --------------------------------------------------------------------------------
(*)      In the event that the Shares are held by means of a Registration
         Company, a power of attorney on behalf of the Registration Company
         should be enclosed and the Deed of Vote should be signed.

(**)     In the event that a Shareholder wishes to vote in a different manner
         with respect to each part of his Shares, a separate Deed of Vote should
         be filed for each quantity of Shares in respect of which he intends to
         vote differently.


                                       25



(***)    An "X" should be marked in the appropriate column and with respect to
         each resolution. In the event that more than one choice are marked for
         a certain resolution, the vote in respect of that resolution shall be
         disqualified.

(****)   In resolutions for which a majority which includes a third of the votes
         of those not having a personal interest in the transaction is required
         for adoption, an X should be marked in the appropriate column. If an X
         is not marked in either column, the vote in respect of the same
         resolution shall be disqualified.

(*****)  An"X" should be marked in the appropriate column. If an X is not marked
         in either column, or if an X is marked in both column, the vote shall
         be disqualified.

         21.3.    The Sending of a Deed of Vote

The Deed of Vote shall be sent by the Company to the Shareholders who are
registered in the Shareholder Register of the Company and who are entitled to
vote in the General Meeting, together with the notice with respect to General
Meetings.

The Deed of Vote shall be sent by the Company and at its expense.

         21.4.    Manner of Use of the Deed of Vote

A duly executed Deed of Vote which was received at the Office of the Company at
least two Business Days prior to the date of the General Meeting shall
constitute the participation and voting of the Shareholder who has delivered it,
for each and every purpose, including for the purpose of determining the lawful
quorum at a meeting. A Deed of Vote received by the Company, in accordance with
this Article, with respect to a certain issue, at which voting in the General
Meeting did not take place, shall be viewed as an "abstain" with respect to the
resolution to adjourn the meeting and, at the adjourned meeting, shall be voted
in accordance with the manner set forth therein.

         21.5.    Board Recommendation

The Board of Directors and any other person lawfully demanding the holding of an
extraordinary General Meeting may send to the Shareholders a recommendation in
order to persuade the Shareholders with respect to the items which are on the
agenda of said meeting. The recommendation shall be delivered at the expense of
the Company together with the Deed of Vote. In the event that a General Meeting
is convened with respect to any of the issues specified in Article 21.1 above, a
Shareholder may submit to the Company a request that a recommendation be
delivered on his behalf to the other Shareholders. Unless it is otherwise
prescribed by Law, the said recommendation shall be delivered at the expense of
the Shareholder, and only if it was received at the registered office of the
Company at least 10 days prior to the General Meeting.

The Board of Directors of the Company may send to the Shareholders a
recommendation in response to a recommendation delivered in accordance with the
provisions of this Article, or in response to any other submission to the


                                       26



Shareholders. Such recommendation shall be delivered at the expense of the
Company.

                      CHAPTER FOUR - THE BOARD OF DIRECTORS

22.      THE AUTHORITY OF THE BOARD OF DIRECTORS

         22.1.    The authority of the Board of Directors is as specified both
                  in the Law and in the provisions of these Articles of
                  Association.

         22.2.    Signature Authority and Powers of Attorney

                  22.2.1.  The Board of Directors shall determine the person(s)
                           with authority to sign for and on behalf of the
                           Company with respect to various issues. The signature
                           of such person(s), appointed from time to time by the
                           Board of Directors, whether generally or for a
                           specific issue, whether alone or together with
                           others, or together with the seal or the stamp of the
                           Company or its printed name, shall bind the Company,
                           subject to the terms and conditions set by the Board
                           of Directors.

                  22.2.2.  The Board of Directors may set separate signature
                           authorities with respect to different issues and
                           different amounts.

                  22.2.3.  The Board of Directors may, from time to time,
                           authorize any person to be the representative of the
                           Company with respect to those objectives and subject
                           to those conditions and for that time period, as the
                           Board of Directors deems fit. The Board of Directors
                           may also grant any representative the authority to
                           delegate any or all of the authorities, powers and
                           discretion given to the Board of Directors.

         22.3.    The Registered Office of the Company

The Board of Directors shall fix the location of the Office of the Company.

23.      THE APPOINTMENT OF DIRECTORS AND THE TERMINATION OF THEIR OFFICE

         23.1.    The Number of Directors

The number of Directors in the Company shall not be less than seven (7) or more
than seventeen (17).

         23.2.    The Identity of a Director

                  23.2.1.  A member of the Board of Directors may hold another
                           position with the Company.


                                       27



                  23.2.2.  A corporation may serve as a Director in the Company,
                           subject to the provisions of Article 23.6 below.

                  23.2.3.  For as long as any individual or an entity which is
                           an Interested Party in the Company is also an
                           Interested Party in Cellcom (Israel) Ltd.
                           (hereinafter "Cellcom"), such Interested Party or an
                           Office Holder of an Interested Party in Cellcom or an
                           Office Holder of any entity controlled by an
                           Interested Party in Cellcom (other than Elron
                           Electronic Industries Ltd ("Elron") or an entity
                           controlled by Elron) will not serve as an Office
                           Holder of the Company, and no Interested Party in
                           Cellcom or any entity controlled by such Interested
                           Party, may appoint more than two Directors to the
                           Board of Directors of the Company. For the purposes
                           of this Article, the terms "control", "Interested
                           Party" and "Office Holder" shall bear the same
                           meaning as in, and shall be interpreted in accordance
                           with, the License.

                  23.2.4.  The Board of Directors shall include independent
                           and/or external Directors required to comply with the
                           applicable requirements of any Law, the Nasdaq Stock
                           Market, the London Stock Exchange and any other
                           investment exchange on which the securities of the
                           Company are or may become quoted or listed. The
                           requirements of the Companies Law applicable to an
                           external Director (Dahatz) shall prevail over the
                           provisions of these Articles of Association to the
                           extent these Articles of Associations are
                           inconsistent with the Companies Law, and shall apply
                           to the extent these Articles of Associations are
                           silent.

         23.3.    The Election of Directors and their Terms of Office


                  23.3.1.  The Directors shall be elected at each Annual Meeting
                           and shall serve in office until the close of the next
                           Annual Meeting, unless their office becomes vacant
                           earlier in accordance with the provisions of these
                           Articles of Association. Each Director of the Company
                           shall be elected by an Ordinary Majority at the
                           Annual Meeting; provided, however, that external
                           Directors shall be elected in accordance with
                           applicable law and/or any relevant stock exchange
                           rule applicable to the Company. The elected Directors
                           shall commence their terms from the close of the
                           Annual Meeting at which they are elected, unless a
                           later date is stated in the resolution with respect
                           to their appointment.

                  23.3.2.  In each Annual Meeting, the Directors that were
                           elected in the previous Annual Meeting, and
                           thereafter, in any Extraordinary Meeting shall be
                           deemed to have resigned from their office. A
                           resigning Director may be reelected.

                  23.3.3.  Notwithstanding the other provisions of these
                           Articles of Association and without derogating from
                           Article 23.4, an


                                       28



                           Extraordinary Meeting of the Company may elect any
                           person as a Director, to fill an office which became
                           vacant or to serve as an external Director (Dahatz)
                           or an independent Director and also in any event in
                           which the number of the members of the Board of
                           Directors is less than the minimum set in the
                           Articles of Association. Any Director elected in such
                           manner (excluding an external Director (Dahatz) shall
                           serve in office until the coming Annual Meeting,
                           unless his office becomes vacant earlier in
                           accordance with the provisions of these Articles of
                           Association and may be reelected.

                  23.3.4.  An elected external Director (Dahatz) shall commence
                           his term from the date of, and shall serve for the
                           period stated in, the resolution of the General
                           Meeting at which he was elected, notwithstanding
                           Article 23.3 above, unless his office becomes vacant
                           earlier in accordance with the provisions of the
                           Companies Law. A General Meeting may reelect an
                           external Director (Dahatz) for additional term(s) as
                           permitted by the Companies Law.

         23.4.    The election of Directors by the Board of Directors

                  The Board of Directors shall have the right, at all times,
                  upon approval of at least 75% of the Directors of the Company,
                  to elect any person as a Director, to fill an office which
                  became vacant, and also in any event in which the number of
                  the members of the Board of Directors is less than the minimum
                  set in the Articles of Association. Any Director elected in
                  such manner shall serve in office until the coming Annual
                  Meeting and may be reelected.

         23.5.    Alternate Director

Any Director may, from time to time, appoint for himself an alternate Director
(hereinafter: the "Alternate Director"), dismiss such Alternate Director and
also appoint another Alternate Director instead of any Alternate Director, whose
office becomes vacant, due to whatever cause, whether for a certain meeting or
generally. Anyone who is not qualified to be appointed as a Director and also
anyone serving as a Director or as an existing Alternate Director shall not
serve as an Alternate Director.

         23.6.    Representatives of a Director that is a Corporation

A Director that is a corporation shall appoint an individual, qualified to be
appointed as a Director in the Company, in order to serve on its behalf, either
generally or for a certain meeting, or for a certain period of time and the said
corporation may also dismiss that individual and appoint another in his stead
(hereinafter: "Representatives of a Director").

         23.7.    Manner of Appointment or Dismissal of an Alternate Director or
                  a Representative of a Director that is a Corporation


                                       29



                  Any appointment or dismissal of Representatives of Directors,
                  when such Directors are corporations, or of Alternate
                  Directors, shall be made by means of a notice in writing to
                  the corporate secretary, signed by the appointing or
                  dismissing body and shall become valid upon the date indicated
                  in the appointment or dismissal notice or upon the date of its
                  delivery to the corporate secretary, whichever is the later.

         23.8.    Miscellaneous Provisions with Respect to Alternate Directors
                  and Representatives of Directors that are Corporations.

                  23.8.1.  Any person, whether he is a Director or not, may
                           serve as the representative of a Director, and any
                           one person may serve as the representative of several
                           Directors.

                  23.8.2.  The Representative of a Director - in addition to his
                           own vote, if he is serving as a Director - shall have
                           a number of votes corresponding to the number of
                           Directors represented by him.

                  23.8.3.  An Alternate Director and the Representative of a
                           Director shall have all the authority of the Director
                           for whom he is serving as an Alternate Director or as
                           a representative, with the exception of the authority
                           to vote in meetings at which the Director is present
                           in person.

                  23.8.4.  The office of an Alternate Director or a
                           representative of a Director shall automatically
                           become vacant, if the office of the Director for whom
                           he is serving as an Alternate Director or as a
                           representative becomes vacant.

         23.9.    Termination of the Term of a Director

         The term of a Director shall be terminated in any of the following
         cases:

                  23.9.1.  If he resigns from his office by way of a signed
                           letter, filed with the corporate secretary at the
                           Company's Office;

                  23.9.2.  If he is declared bankrupt or if he reaches a
                           settlement with his creditors within the framework of
                           bankruptcy procedures;

                  23.9.3.  If he is declared by an appropriate court to be
                           incapacitated;

                  23.9.4.  Upon his death and, in the event of a corporation, if
                           a resolution has been adopted for its voluntary
                           liquidation or a liquidation order has been issued to
                           it;

                  23.9.5.  If he is removed from his office by way of a
                           resolution, adopted by the General Meeting of the
                           Company, even prior to the completion of his term of
                           office;


                                       30



                  23.9.6.  If he is convicted of a crime, as stated in Section
                           232 of the Companies Law; or

                  23.9.7.  If his term is terminated by the Board of Directors
                           in accordance with the provisions of Section 231 of
                           the Companies Law.

         23.10.   The Implications on the Board of Directors of the Termination
                  of the Term of a Director.

In the event that an office of a Director becomes vacant, the remaining
Directors are entitled to continue operating, so long as their number has not
decreased below the minimum number of Directors set forth in Article 23.1.

In the event that the number of Directors decreased below that minimum number,
the remaining Directors shall be entitled to act solely for the convening of a
General Meeting of the Company for the purpose of electing additional Directors
to the Board of Directors.

         23.11.   Compensation of Members of the Board of Directors

Members of the Board of Directors who do not hold other positions in the Company
and who are not external Directors shall not receive any compensation from the
Company, unless such compensation is approved by the General Meeting and
according to the amount determined by the General Meeting, subject to the
provisions of the Law.

                 The compensation of the Directors may be fixed, as an
                 all-inclusive payment or as payment for participation in
                 meetings or in any combination thereof.

The Company may reimburse expenses incurred by a Director in connection with the
performance of his office, to the extent provided in a resolution of the Board
of Directors.

24.      ACTIONS OF DIRECTORS

         24.1.    Convening Meetings of the Board of Directors

                  24.1.1.  The chairman of the Board of Directors may convene a
                           meeting of the Board of Directors at any time.

                  24.1.2.  The chairman of the Board of Directors shall convene
                           a meeting of the Board of Directors at least four
                           times a year, in a manner allowing the Company to
                           fulfil the provisions of the Law with respect to the
                           publication of Financial Statements and reporting to
                           the public.

                  24.1.3.  The chairman of the Board of Directors shall convene
                           a meeting of the Board of Directors on a specific
                           issue if requested by at least two


                                       31



                           Directors or one Director, if he is an external
                           Director, within no more than 14 days from the date
                           of the request.

                  24.1.4.  The chairman of the Board of Directors shall act
                           forthwith for the convening of a meeting of the Board
                           of Directors, within 14 days from the time that a
                           Director in the Company has informed him of a matter
                           related to the Company in which there is an apparent
                           violation of the Law or a breach of proper management
                           of the business, or from the time that the auditor of
                           the Company has reported to him that he had become
                           aware of material flaws in the accounting oversight
                           of the Company.

                  24.1.5.  In the event that a notice or a report of the General
                           Manager requires an action of the Board of Directors,
                           the chairman of the Board of Directors shall
                           forthwith convene a meeting of the Board of
                           Directors, which should be held within 14 days from
                           the date of the notice or the report.

         24.2.    Convening of a Meeting of the Board of Directors

                  24.2.1.  Any notice with respect to a meeting of the Board of
                           Directors may be given in writing, so long as the
                           notice is given at least 14 days prior to the date
                           fixed for the meeting, unless all the members of the
                           Board of Directors or their Alternate Directors or
                           their representatives agree on a shorter time period.
                           A notice, as stated, shall be delivered in writing or
                           transmitted via facsimile or E-mail or through
                           another means of communication, to the address or
                           facsimile number or to the E-mail address or to an
                           address where messages can be delivered through other
                           means of communication, as the case may be, as the
                           Director informed the corporate secretary, upon his
                           appointment, or by means of a written notice to the
                           corporate secretary thereafter.

                           A notice, which was delivered or transmitted, as
                           provided in this Article, shall be deemed to be
                           personally delivered to the Director on its delivery
                           date.

                  24.2.2.  In the event that a Director appointed an Alternate
                           Director or a representative, the notice shall be
                           delivered to the Alternate Director or the
                           representative, unless the Director instructed that
                           the notice should be delivered to him as well.

                  24.2.3.  The notice shall include the venue, date and time of
                           the meeting of the Board of Directors, arrangements
                           with respect to the manner of management of the
                           meeting (in cases where telecommunications are used),
                           the details of the issues on its agenda and any other
                           material that the chairman of the Board of Directors
                           requests be attached to the summoning notice with
                           respect to the meeting.


                                       32



         24.3.    The Agenda of Meetings of Board of Directors

                  The agenda of meetings of the Board of Directors shall be
                  determined by the chairman of the Board of Directors and shall
                  include the following issues:

                  24.3.1.  Issues determined by the chairman of the Board of
                           Directors.

                  24.3.2.  Issues for which the meeting is convened in
                           accordance with Article 24.1 above.

                  24.3.3.  Any issue requested by a Director or by the General
                           Manager within a reasonable time prior to the date of
                           the meeting of the Board of Directors (taking into
                           account the nature of the issue).

         24.4.    Quorum

The quorum for meetings of the Board of Directors shall be a majority of the
Directors, which must include one external Director.

         24.5.    Conducting a Meeting Through Means of Communication

                  The Board of Directors may conduct a meeting of the Board of
                  Directors through the use of any means of communications,
                  provided all of the participating Directors can hear each
                  other simultaneously.

         24.6.    Voting in the Board of Directors

Subject to Article 23.4 and Article 44, Issues presented at meetings of the
Board of Directors shall be decided upon by a majority of the votes of the
Directors present (or participating, in the case of a vote through a permitted
means of communications) and voting, subject to the provisions of Article 23.8
above, with respect to Alternate Directors and representatives of Directors that
are corporations.

Each Director shall have a single vote.

         24.7.    Written Resolutions

A written resolution signed by all the Directors shall be deemed as a resolution
lawfully adopted at a meeting of the Board of Directors. Such a resolution may
be made in several copies of the same Document, each of them signed by one
Director or by several Directors. Such a resolution may be adopted by signature
of only a portion of the Directors, if all of the Directors who have not signed
the resolution were not entitled to participate in the discussion and to vote on
such resolution in accordance with any Law whatsoever, so long as they confirm
in writing that they are aware of the intention to adopt such a resolution.

         24.8.    Resolutions Approved by Means of Communications


                                       33



A resolution approved by use of a means of communications by the Directors shall
be deemed to be a resolution lawfully adopted at a meeting of the Board of
Directors, and the provisions of Article 24.6 above shall apply to the said
resolution.

         24.9.    The Validity of Actions of the Directors

All actions taken in good faith in a meeting of the Board of Directors or by a
committee of the Board of Directors or by any person acting as a Director shall
be valid, even if it subsequently transpires that there was a flaw in the
appointment of such a Director or person acting as such, or if any of them were
disqualified, as if any such person was lawfully appointed and was qualified to
serve as a Director.

         24.10.   Minutes of Meetings of the Board of Directors

The chairman of the Board of Directors shall cause that the minutes of meetings
of the Board of Directors shall be properly maintained and shall include the
following:

                  24.10.1. Names of those present and participating at each
                           meeting.

                  24.10.2. All the resolutions and particulars of the discussion
                           of said meetings.

Any such minutes signed by the chairman of the Board of Directors presiding over
that meeting or by the chairman of the Board of Directors at the following
meeting, shall be viewed as prima facie evidence of the issues recorded in the
minutes.

25.      COMMITTEES OF THE BOARD OF DIRECTORS

         25.1.    Subject to the provisions of the Companies Law, the Board of
                  Directors may delegate its authorities or any part of them to
                  committees, as they deem fit, and they may from time to time
                  cancel the delegation of such an authority. Any such
                  committee, while utilizing an authority as stated, is
                  obligated to fulfil all of the instructions given to it from
                  time to time by the Board of Directors.

         25.2.    Subject to the provisions of the Companies Law, each committee
                  of the Board of Directors shall consist of at least two
                  Directors, and it may include members who are not Directors,
                  with the exception of the audit committee which shall consist
                  of at least three (3) Directors, and all of the external
                  Directors of the Company shall be members of it.

         25.3.    The provisions with respect to meetings of the Board of
                  Directors shall apply to the meetings and discussions of each
                  committee of the Board of Directors, with the appropriate
                  changes, provided that no other terms are set by the Board of
                  Directors in this matter, and provided that the lawful quorum
                  for the meetings of the committee, as stated, shall be at
                  least a majority of the members of the committee, unless
                  otherwise required by Law.


                                       34



26.      CHAIRMAN OF THE BOARD OF DIRECTORS

         26.1.    Appointment

                  26.1.1.  The Board of Directors shall choose one of its
                           members to serve as the chairman of the Board of
                           Directors, and shall set in the appointing resolution
                           the term for his service.

                  26.1.2.  Unless otherwise provided in the appointing
                           resolution, the chairman of the Board of Directors
                           shall be chosen each and every calendar year at the
                           first meeting of the Board of Directors held after
                           the General Meeting in which Directors were appointed
                           to the Company.

                  26.1.3.  In the event that the chairman of the Board of
                           Directors ceases to serve as a Director in the
                           Company, the Board of Directors in its first meeting
                           held thereafter shall choose one of its members to
                           serve as a new chairman who will serve in his
                           position for the term set in the appointing
                           resolution, and if no period is set, until the
                           appointment of a chairman, as provided in this
                           Article.

                  26.1.4.  In the event that the chairman of the Board of
                           Directors is absent from a meeting, the Board of
                           Directors shall choose one of the Directors present
                           to preside at the meeting.

         26.2.    Authority

                  26.2.1.  The chairman of the Board of Directors shall preside
                           over meetings of the Board of Directors.

                  26.2.2.  In the event of a deadlock vote, the chairman of the
                           Board of Directors shall not have an additional or
                           casting vote.

                  26.2.3.  The chairman of the Board of Directors is entitled,
                           at all times, at his initiative or pursuant to a
                           resolution of the Board of Directors, to require
                           reports from the General Manager in matters
                           pertaining to the business affairs of the Company.

         26.3.    Reservations with Regard to Actions of the Chairman of the
                  Board of Directors

                  26.3.1.  The chairman of the Board of Directors shall not
                           serve as the General Manager of the Company, unless
                           he is appointed in accordance with the provisions of
                           Article 27.2 below.

                  26.3.2.  The chairman of the Board of Directors shall not
                           serve as a member of the Audit Committee.


                                       35



         CHAPTER FIVE - OFFICERS WHO ARE NOT DIRECTORS, AND THE AUDITOR

27.      THE GENERAL MANAGER

         27.1.    The Appointment and Dismissal of the General Manager

                  27.1.1.  The Board of Directors shall appoint a General
                           Manager for a fixed period of time or for an
                           indefinite period of time. The Board of Directors may
                           appoint more than one General Manager.

                  27.1.2.  The compensation and employment conditions of the
                           General Manager shall be determined by the Board of
                           Directors in any manner it deems fit. Where the
                           compensation of the General Manager is regarded by
                           the Board of Directors in accordance with the Company
                           Law as an "exceptional transaction" and also in cases
                           of the granting of a release, insurance, liability
                           for indemnification or indemnification given by a
                           permit, said compensation requires the prior approval
                           of the audit committee.

                  27.1.3.  The Board of Directors may from time to time remove
                           the General Manager from his office or dismiss the
                           General Manager and appoint another or others in his
                           stead.

         27.2.    The Chairman of the Board of Directors as the General Manager

                  27.2.1.  The General Meeting of the Company is entitled to
                           authorize the chairman of the Board of Directors to
                           fulfil the position of the General Manager and to
                           exercise his authority, so long as the majority of
                           the votes in the General Meeting adopting such a
                           resolution include at least two thirds of the votes
                           of Shareholders present and entitled to vote at the
                           meeting who are not controlling Shareholders of the
                           Company as defined in the Companies Law or
                           representatives of any of them. "Abstain" votes shall
                           not be taken into account in the counting of the
                           votes of the Shareholders.

                  27.2.2.  The validity of a resolution provided in Article
                           27.2.1 above is restricted to a maximum period of
                           three years from the date of the adoption of the
                           resolution by the General Meeting. In the event that
                           no period was set in the resolution, the period shall
                           be deemed to be for three years. Prior to the
                           completion of the three year period, as aforesaid,
                           and even after the end of this period, the General
                           Meeting is entitled to extend the validity of such
                           resolution.

                  27.2.3.  A resolution, as stated, may relate to the authority
                           of the chairman of the Board of Directors, generally,
                           or to a specific person who is serving as the
                           chairman of the Board of Directors.

         27.3.    The Authority of the General Manager and Subordination to the
                  Board of Directors


                                       36



                  27.3.1.  The General Manager is responsible for the day-to-day
                           management of the affairs of the Company within the
                           framework of the policy set by the Board of Directors
                           and subject to its instructions.

The General Manager shall have all administrative and operational authority
which were not conferred by Law or pursuant to these Articles of Association to
any other corporate organ of the Company, and he shall be under the supervision
of the Board of Directors and subject to its instructions.

The General Manager shall appoint and dismiss officers of the Company, with the
exception of Directors, and he shall also determine the terms of their
employment, unless otherwise resolved by the Board of Directors and provided,
however, that the appointment and dismissal of senior managers of the Company
shall require consultation with and approval by the Board of Directors.

                  27.3.2.  The Board of Directors may instruct the General
                           Manager on how to act with respect to a certain
                           issue. If the General Manager fails to fulfil the
                           instruction, the Board of Directors may exercise the
                           required authority in order to act in the place of
                           the General Manager.

The Board of Directors may assume the authority granted to the General Manager,
either with respect to a certain issue or for a certain period of time.

                  27.3.3.  In the event that the General Manager is unable to
                           exercise his authority, the Board of Directors may
                           exercise such authority in his stead, or authorize
                           another to exercise such authority.

         27.4.    Reporting Duties of the General Manager

The General Manager is obligated to notify the chairman of the Board of
Directors of any exceptional matter which is material to the Company, or of any
material deviation by the Company from the policy set by the Board of Directors.
In the event that the Company shall be without a chairman of the Board of
Directors for whatever reason the General Manager shall notify all the members
of the Board of Directors, as aforesaid. The General Manager shall deliver to
the Board of Directors reports on issues, at such time and in such scope, as is
determined by the Board of Directors.

         27.5.    Delegating Authority of the General Manager

The General Manager, upon approval of the Board of Directors, may delegate to
his subordinates any of his authority. However, such delegation of authority
shall not release the General Manager from his liability.


                                       37



28.      THE CORPORATE SECRETARY, INTERNAL CONTROLLER AND OTHER OFFICERS OF THE
         COMPANY

         28.1.    The corporate secretary

                  28.1.1.  The Board of Directors is entitled to appoint a
                           corporate secretary on terms it deems fit, joint
                           secretaries, sub-secretaries and to determine the
                           areas of their functions and authorities.

                  28.1.2.  In the event that no corporate secretary has been
                           appointed, the General Manager or anyone authorized
                           by him shall fulfil the functions assigned to the
                           corporate secretary, in accordance with any Law, to
                           these Articles of Association and the resolutions of
                           the Board of Directors.

                  28.1.3.  The corporate secretary shall be responsible for all
                           documents which are kept at the Office, as stated in
                           Section 124 of the Companies Law, and he shall manage
                           all the registries maintained by the Company in
                           accordance with the Law or Companies Law.

         28.2.    Internal Controller

                  28.2.1.  The internal controller of the Company shall report
                           to the chairman of the Board of Directors.

                  28.2.2.  The internal controller shall file with the Board of
                           Directors a proposal for an annual or other periodic
                           work plan, which shall be approved by the Board of
                           Directors, subject to any changes it deems fit.

         28.3.    Other Officers of the Company

The Board of Directors may decide that in addition to the General Manager and
the corporate secretary, other officers may be appointed, whether generally or
for a specific issue. In such event, the Board of Directors shall appoint the
officer, define his position and authority, and set his compensation and terms
of employment.

The Board of Directors is entitled to authorize the General Manager to fulfil
any or all of its authorities, as stated.

29.      THE AUDITOR

         29.1.    The Shareholders at the Annual Meeting shall appoint an
                  auditor for a period until the close of the following Annual
                  Meeting. The Annual Meeting may appoint an auditor for a
                  period not to extend beyond the close of the third Annual
                  Meeting following the Annual Meeting in which he was
                  appointed. In the event that the auditor was appointed for
                  said period, the Annual Meeting shall not address the


                                       38



                  appointment of the auditor during said period, unless a
                  resolution is adopted with respect to the termination of his
                  service.

         29.2.    The General Meeting is entitled at all times to terminate the
                  service of the auditor or to decide not to renew it.

         29.3.    The Board of Directors shall determine the compensation of the
                  auditor of the Company and it shall report in that respect to
                  the Annual Meeting of the Company.

         29.4.    The Board of Directors shall set the compensation of the
                  auditor for additional services which are not regarded as
                  oversight activities, and it shall report in this respect at
                  the Annual Meeting of the Company.


                                       39



       CHAPTER SIX - THE SHARE CAPITAL OF THE COMPANY AND ITS DISTRIBUTION

30.      PERMITTED DISTRIBUTIONS

         30.1.    Definitions

In this Chapter, the following terms shall be construed, in accordance with
their definition in Sections 301 and 302 of the Companies Law: "distribution",
"acquisition", "profits", "profit test", "adjusted financial statements" and
"balances".

         30.2.    Distribution of Profits

The Company shall not make any distribution except from its profits, provided
that the Company shall not make any distribution if there is a reasonable fear
that such distribution shall preclude the Company from having the ability to
meet its present and anticipated liabilities, as they become due.
Notwithstanding the aforesaid, the Company, with the approval of the Court, is
entitled to make a distribution which fails to meet the profit test.

         30.3.    Allotment for a Consideration Below the Par Value

In the event the Board of Directors decides to allot Shares having a par value,
for consideration which is less than their par value, including Bonus Shares,
the Company shall convert into share capital from its profits, premium on its
Shares, or any other source, included in its shareholders equity, as stated in
its most recent Financial Statements, an amount equal to the difference between
the par value and the consideration.

Even if the aforesaid is not done, with the approval of the Court, the Company
shall be entitled to make an allotment of Shares, for consideration which is
less than their par value.

31.      DIVIDENDS AND BONUS SHARES

         31.1.    Right to Dividends or Bonus Shares

                  31.1.1.  A Shareholder of the Company shall have the right to
                           receive dividends or Bonus Shares, if the Company so
                           decides in accordance with Article 31.2 below,
                           consistent with the rights attaching to such Shares.

                  31.1.2.  Dividends or Bonus Shares shall be distributed or
                           allotted to those who are registered in the
                           Shareholder Register on the date of the resolution
                           approving the distribution or allotment or upon a
                           latter date, if another date is determined for this
                           purpose in same resolution (hereinafter: the
                           "Determining Date").


                                       40



                  31.1.3.  In the event that the share capital of the Company
                           consists of Shares having various par values,
                           dividends or Bonus Shares shall be distributed in
                           proportion to the par value of each Share.

                  31.1.4.  Subject to special rights conferred upon Shares in
                           accordance with the conditions of their allotment,
                           profits of the Company which the Company decides to
                           distribute as a dividend or as Bonus Shares shall be
                           paid in proportion to the amount which was paid or
                           credited on the account of the par value of the
                           Shares, held by the Shareholder.

                  31.1.5.  In the event that it was not otherwise determined in
                           the conditions applicable to the allotment of the
                           Shares or in a resolution of the General Meeting, all
                           the dividends or Bonus Shares with respect to Shares,
                           which were not fully paid within the period in which
                           the dividends or Bonus Shares are paid, shall be paid
                           in proportion to the amounts which were actually paid
                           or credited as paid on the par value of the Shares
                           during any part of said period (pro rata temporis).

         31.2.    Resolution of the Company with Respect to a Dividend or Bonus
                  Shares

                  31.2.1.  The Authority to Distribute Dividends or Bonus Shares

The resolution of the Company on the distribution of a dividend or Bonus Shares
to be distributed to the Shareholders according to their respective rights and
benefits, and on their time of payment, shall be made by the General Meeting,
after the recommendation of the Board of Directors is presented. The General
Meeting may accept the recommendation or diminish the amount, but it is not
entitled to increase it, provided in each case the distribution is a permitted
distribution, as specified in Article 30.

                  31.2.2.  Funds

The Board of Directors may, in its discretion, allocate to special funds any
amount whatsoever from the profits of the Company or from the revaluation of its
assets or its relative share in the revaluation of assets of "branch companies,"
and also to determine the designation of these funds.

         31.3.    The Payment of Dividends

                  31.3.1.  Manner of Payment

Unless otherwise provided in the resolution with respect to the distribution of
the dividend, the Company may pay any dividend with the withholding of any tax
required by Law, by way of a


                                       41



cheque to the order of the beneficiary alone, which should be sent by means of
registered mail to the registered address of the Shareholder entitled thereto,
or by way of a bank transfer. Any cheque, as stated, shall be drawn up to the
order of the person to whom it is intended.

In the event of registered joint holders, the cheque shall be passed to the same
Shareholder whose name is registered first in the Shareholder Register with
respect to the joint holding.

The sending of a cheque to a person whose name is registered in the Shareholder
Register as the holder of the Share upon the Determining Date or, in the case of
joint holders, to any of the joint holders, shall serve as evidence with respect
to all the payments made in connection with same Shares.

                           The Company may decide that a cheque under a certain
                           amount shall not be sent and the amount of the
                           dividend which was supposed to be paid shall be
                           deemed to be an unclaimed dividend.

                  31.3.2.  An Unclaimed Dividend

The Board of Directors is entitled to invest the amount of any unclaimed
dividend for one year after it was declared or to utilize it in any other manner
to the benefit of the Company until it is claimed. The Company shall not be
obligated to pay interest or Linkage on an unclaimed dividend.

                  31.3.3.  Specific Dividend

In the event the Company declares a dividend, as provided in Article 31.2.1
above, it may decide that same dividend shall be paid, entirely or partially, by
way of the distribution of certain assets, including fully paid Shares or bonds
of any other company or in any combination of these assets.

         31.4.    Manner of Capitalization of Profits and the Distribution of
                  Bonus Shares

                  31.4.1.  Subject to the provisions of Article 30 above in the
                           event of a capitalization of profits and distribution
                           of Bonus Shares, the undistributed profits of the
                           Company, or premium on Shares, or funds derived from
                           the revaluation of the assets of the Company, or
                           funds derived on the basis of equity from the profits
                           of "branch companies," or from the revaluation of
                           assets of "branch companies" and capital redemption
                           funds shall be capitalized and distributed among the
                           Shareholders entitled thereto, as per the provisions
                           of Article 31.1 above, to be held by the shareholders
                           as capital, and that


                                       42



                           this capital, entirely or partially, shall be used on
                           behalf of same Shareholders as full payment, whether
                           according to the par value of the Shares or together
                           with premium decided upon, for Shares to be
                           distributed accordingly, and that this distribution
                           or payment shall be received by same Shareholders as
                           full consideration for their portion of the benefit
                           in the capitalized amount, as determined by the Board
                           of Directors.

                           The provisions of this chapter six shall also apply
                           to the distribution of bonds.

                  31.4.2.  The Company, in the resolution with respect to the
                           distribution of Bonus Shares, is entitled in
                           accordance with the recommendation of the Board of
                           Directors, to decide that the Company shall transfer
                           to a special fund, designated for the future
                           distribution of Bonus Shares, an amount the
                           capitalization of which shall be sufficient in order
                           to allot to anyone having at such time a right to
                           acquire Shares of the Company (including a right
                           which can be exercised only upon a later date), Bonus
                           Shares at the par value which would have been due to
                           him had he exercised the right to acquire the Shares
                           shortly before the Determining Date, at the price of
                           the right in effect at such time. In the event that
                           after the Determining Date, the holder of said right
                           shall exercise his right to acquire the Shares or any
                           part of them, the Board of Directors shall allot to
                           him fully paid Bonus Shares at such par value and of
                           such class, which would have been due to him had he
                           exercised shortly before the Determining Date the
                           right to acquire those Shares he actually acquired,
                           by way of an appropriate capitalization made by the
                           Board of Directors out of the special fund, as
                           aforesaid. For the purpose of the determination of
                           the par value of the Bonus Shares which are to be
                           distributed, any amount transferred to the special
                           fund, with respect to a previous distribution of
                           previous Bonus Shares shall be viewed as if it had
                           already been capitalized and that Shares entitling
                           the holders to the right to acquire Shares of the
                           Company were already allotted as Bonus Shares.

                  31.4.3.  Upon the distribution of Bonus Shares, each
                           Shareholder of the Company shall receive Shares of a
                           uniform class or of the class which confers on its
                           holder the right to receive the Bonus Shares, as
                           determined by the Board of Directors.

                  31.4.4.  For purposes of carrying out any resolution pursuant
                           to the provisions of Article 30, the Board of
                           Directors may settle, as it deems fit, any difficulty
                           arising with regard to the distribution of Bonus
                           Shares, and, in particular, to issue certificates for
                           fractions of Shares and sell such fractions of
                           Shares, in order to pay their consideration to those
                           entitled thereto, and also to set the value for the
                           distribution of certain assets and to decide that
                           cash payments


                                       43



                           shall be paid to the Shareholders on the basis of the
                           value determined in such a way, or that fractions
                           whose value is less than NIS 0.01 shall not be taken
                           into account, pursuant to the adjustment of the
                           rights of all parties. The Board of Directors may pay
                           cash or convey these certain assets to trustees in
                           trust in favor of those people who are entitled to a
                           dividend or to a capitalized fund, as the Board of
                           Directors shall deem beneficial.

32.      ACQUISITION OF SHARES

         32.1.    The Company is entitled to acquire or to finance an
                  acquisition, directly or indirectly, of Shares of the Company
                  or securities convertible into Shares of the Company or which
                  could be exercised into Shares of the Company, including
                  incurring an obligation to take any of these actions, subject
                  to the fulfillment of the conditions of a permissible
                  distribution, as stated in Article 30 above.

         32.2.    In the event that the Company acquired any of its Shares, such
                  a Share shall become a dormant Share, and shall not confer any
                  rights, so long as it is in the holding of the Company.

         32.3.    A subsidiary or another corporation in the control of the
                  Company is entitled to acquire Shares of the Company or
                  securities convertible into Shares of the Company or which can
                  be exercised into Shares of the Company, including an
                  obligation to take any of these actions, to the same extent
                  the Company may make a distribution, so long as the board of
                  directors of the subsidiary or the managers of the acquiring
                  corporation have determined that had the acquisition of the
                  Shares been carried out by the Company it would have been
                  regarded as a permissible distribution, as specified in
                  Article 30 above. Notwithstanding the foregoing, an
                  acquisition by a subsidiary or by another corporation in the
                  control of the Company, which is not fully-owned by the
                  Company, will be considered a distribution of an amount equal
                  to the product of the amount acquired multiplied by the
                  percentage of the rights in the capital of the subsidiary or
                  in the capital of said corporation which is held by the
                  Company.

         32.4.    In the event that a Share of the Company is acquired by a
                  subsidiary or by a corporation in the control of the Company,
                  the Share shall not confer any voting rights, for so long as
                  said Share is held by the subsidiary or by said controlled
                  corporation.

       CHAPTER SEVEN - INSURANCE, INDEMNIFICATION AND RELEASE OF OFFICERS

33.      INSURANCE OF OFFICERS

         33.1.    The Company shall not insure the liability of an officer in
                  the Company, other than pursuant to the provisions of this
                  Article.

         33.2.    The Company may enter into an insurance contract or arrange
                  and pay all premiums in respect of an insurance contract, for
                  the insurance of the liability of


                                       44



                  an officer in the Company, resulting from the consequence of
                  an action by him in his capacity as an officer in the Company,
                  for any of the following:

                  33.2.1.  The breach of the duty of care toward the Company or
                           toward any other person;

                  33.2.2.  The breach of the duty of loyalty toward the Company
                           provided the officer has acted in good faith and had
                           reasonable grounds to assume that the action would
                           not harm the Company; and

                  33.2.3.  A financial liability imposed on him in favor of
                           another person.

         33.3.    The Company shall not enter into a contract for the insurance
                  of the liability of an officer in the Company for any of the
                  following:

                  33.3.1.  The breach of the duty of loyalty toward the Company,
                           unless the officer acted in good faith and had
                           reasonable grounds to assume that the action would
                           not harm the Company;

                  33.3.2.  The breach of the duty of care made intentionally or
                           recklessly ("pezizut"), unless otherwise permitted by
                           law;

                  33.3.3.  An intentional act intended to unlawfully yield a
                           personal profit;

                  33.3.4.  A criminal fine or a penalty imposed on him.

34.      INDEMNIFICATION OF OFFICERS

         34.1.    The Company shall not indemnify an officer in the Company,
                  other than pursuant to the provisions of this Article.

         34.2.    Indemnification in Advance

The Company may undertake in advance to indemnify an officer of the Company,
provided the undertaking is restricted to events of a kind which the Board of
Directors believes can be anticipated at the time of the making of the
indemnification undertaking, with the exception of the events stated in Article
33.3 above, and at an amount that the Board of Directors determines is
reasonable in the circumstances.

         34.3.    Indemnification after the Fact

The Company may indemnify an officer in the Company for all kinds of events,
retrospectively, with the exception of the events specified in Article 33.3
above.

         34.4.    The Company may indemnify an officer in the Company for
                  liability or expense he incurs in consequence of an action
                  made by him in the capacity of his position as an officer in
                  the Company, as follows:


                                       45



                  34.4.1.  Any financial liability imposed on him in favor of
                           another person in accordance with a judgment,
                           including a judgment given in a settlement or a
                           judgment of an arbitrator, approved by the Court.

                  34.4.2.  Reasonable litigation expenses, including legal fees,
                           incurred by the officer or which he was ordered to
                           pay by the Court, within the framework of proceedings
                           filed against him by the Company or on its behalf or
                           by another person, or in a criminal proceeding in
                           which he was acquitted, or in a criminal proceeding
                           in which he was convicted of a felony which does not
                           require a finding of criminal intent.

35.      RELEASE OF OFFICERS

         35.1.    The Company shall not release an officer from his liability
                  for a breach of the duty of care toward the Company, other
                  than in accordance with the provisions of this Article.

         35.2.    The Company may release an officer in the Company, in advance,
                  from his liability, entirely or partially, for damage in
                  consequence of the breach of the duty of care toward the
                  Company.

         35.3.    Notwithstanding the foregoing, the Company may not release an
                  officer from his liability, resulting from any of the
                  following events:

                  35.3.1.  The breach of the duty of loyalty toward the Company.

                  35.3.2.  The breach of the duty of care made intentionally or
                           recklessly ("pezizut");

                  35.3.3.  An intentional act intended to unlawfully yield a
                           personal profit;

                  35.3.4.  A criminal fine or a penalty imposed on him.

          CHAPTER EIGHT - LIQUIDATION AND REORGANIZATION OF THE COMPANY

36.      LIQUIDATION

         36.1.    In the event that the Company is liquidated, whether
                  voluntarily or otherwise, the liquidator, upon the approval of
                  an Extraordinary Meeting, may make a distribution in kind to
                  the Shareholders of all or part of the property of the
                  Company, and he may with a similar approval of the General
                  Meeting, deposit any part of the property of the Company with
                  trustees in favor of the Shareholders, as the liquidator with
                  the aforementioned approval, deems fit.

         36.2.    The Shares of the Company shall confer equal rights among them
                  with respect to capital amounts which were paid or which were
                  credited as paid on the par value of the Shares, in all
                  matters pertaining to the refund of the capital and to the


                                       46



                  participation in the distribution of the balance of the assets
                  of the Company in liquidation.

37.      REORGANIZATION

         37.1.    Upon the sale of the property of the Company, the Board of
                  Directors or the liquidators (in case of a liquidation), if
                  they are so authorized by a resolution of the General Meeting
                  of the Company adopted with a Special Majority, may receive
                  fully or partially paid up Shares, bonds or securities of
                  another company, either Israeli or foreign, whether
                  incorporated or which is about to incorporated for the purpose
                  of acquiring property of the Company, or any part thereof, and
                  the Directors (if the profits of the Company allow for it) or
                  the liquidators (in case of a liquidation) may distribute
                  among the Shareholders the Shares or the securities mentioned
                  above or any other property of the Company without selling
                  them or depositing them with trustees on behalf of the
                  Shareholders.

         37.2.    The General Meeting may, pursuant to a resolution adopted by a
                  Special Majority, decide on the valuation of the securities or
                  of the aforementioned property at a price and in the same
                  manner as it deems appropriate and all the Shareholders shall
                  be obligated to accept any valuation or distribution,
                  authorized in accordance with the foregoing and to waive their
                  rights in this matter, unless the Company is about to
                  liquidate or is in a liquidation process, of same lawful
                  rights (if any) which according to the provisions of the Law
                  should not be altered or denied.

                          CHAPTER NINE - MISCELLANEOUS

38.      NOTICES

         38.1.    A notice or other document may be sent by the Company to any
                  Shareholder appearing in the Shareholder Register of the
                  Company either personally or by way of sending by registered
                  mail, at the registered address of the Shareholder in the
                  Shareholder Register, or at such address as the Shareholder
                  shall have provided in writing to the Company as the address
                  for the delivery of notices.

         38.2.    All the notices to be given to Shareholders, shall, in respect
                  of Shares held jointly, be given to the person whose name is
                  mentioned first in the Shareholder Register, and any notice
                  given in such a manner shall be viewed as a sufficient notice
                  to all the joint Shareholders.

         38.3.    Any Shareholder registered in the Shareholder Register, with
                  an address, whether in Israel or overseas, is entitled to
                  receive, at such address, any notice he is entitled to receive
                  in accordance with the Articles of Association or according to
                  the provisions of the Law. Unless otherwise stated above, no
                  person who is not registered in the Shareholder Register shall
                  be entitled to receive any notices from the Company.

         38.4.    Any notice or other document which is sent to a Shareholder in
                  accordance with these Articles of Association shall be
                  considered lawfully sent with respect to all


                                       47



                  the Shares held by him (whether with respect to Shares held by
                  him alone or held by him jointly with others) even if same
                  Shareholder had died by that time or had become bankrupt or
                  had received an order for its liquidation or if a trustee or a
                  liquidator or a receiver was appointed with respect to his
                  Shares (whether the Company was aware of it or not) until
                  another person is registered in the Shareholder Register in
                  his stead, as the holder thereof. The sending of a notice or
                  other document, as aforesaid, shall be viewed as a sufficient
                  sending to any person having a right in these Shares.

         38.5.    Any notice or other document which was sent by the Company via
                  registered mail, to an address in Israel, shall be considered
                  sent within 72 hours from its posting at the post office. In
                  order to prove sufficient sending, it is enough to show that
                  the letter containing the notice or the document was addressed
                  to the correct address and was posted at the post office.

         38.6.    Any accidental omission with respect to the giving of a notice
                  of a General Meeting to any Shareholder or the non-receipt of
                  a notice with respect to a meeting or any other notice on the
                  part of whatever Shareholder shall not cause the cancellation
                  of a resolution taken at that meeting, or the cancellation of
                  processes based on such notice.

         38.7.    Any Shareholder and any member of the Board of Directors may
                  waive his right to receive notices or waive his right to
                  receive notices during a specific time period and he may
                  consent that a General Meeting of the Company or a meeting of
                  the Board of Directors, as the case may be, shall be convened
                  and held notwithstanding the fact that he did not receive a
                  notice with respect to it, or notwithstanding the fact that
                  the notice was not received by him within the required time,
                  in each case subject to the provisions of any Law prohibiting
                  any such waiver or consent.

    CHAPTER 10-TRANSITIONAL RULES UNTIL THE COMPANIES LAW SHALL BE EFFECTIVE.

39.      APPLICABILITY

         The provisions of this chapter shall apply solely during the period
         commencing on the day on which the Articles of Association shall be
         effective until the day on which the Companies Law shall be effective
         (hereinafter the "Transitional Period").

         The following provisions shall not apply during the Transitional
         Period:

         39.1.    Article 14.2-titled "The General Meeting's authority to
                  transfer authority between the organs"

         39.2.    Article 28.2-titled "Internal Controller"

         39.3.    Article 32-titled "Purchase of the Company's Shares"


                                       48



40.      INDEMNIFICATION OF OFFICERS

                  Notwithstanding the provisions of Article 34 above, during the
                  Transitional Period Article 34 shall read as follows:

         "34      "INDEMNIFICATION OF OFFICERS"

         34.1     The Company is entitled to indemnify an Officer of the Company
                  and/or an employee of the Company for one of the following:

                  34.1.1   Financial liability imposed by judgment upon him for
                           the benefit of a third party, including a settlement
                           or arbitration decision certified by the Court, as a
                           result of an act or omission committed by him in his
                           capacity as an officer and/or employee of the
                           Company.

                  34.1.2   Reasonable litigation fees, including attorney's
                           fees, incurred by the officer and/or the employee of
                           the Company or imposed upon him by a court, in a
                           proceeding initiated against him by the Company or in
                           its name or by another person, or in a criminal
                           proceeding from which he is acquitted, provided that
                           any such proceeding related to an act or omission
                           committed by him in his capacity as an officer and/or
                           employee of the Company.

         34.2     These instructions are not intended nor will they be intended
                  to limit the Company in any way in respect of the Company
                  entering into an insurance contract and/or an indemnification
                  agreement:

                  34.2.1   In respect of anyone who is not an officer of the
                           Company, including employees, contractors or
                           consultants of the Company who are not officers of
                           the Company.

                  34.2.2   In respect of officers of the Company in the event
                           that the insurance and/or the indemnification are not
                           explicitly forbidden by any law."

41.      EXEMPTION FOR OFFICERS

         The words "made intentionally or recklessly ("pezizut")" in Article
         35.3.2 above shall not apply.

         The rules of the second schedule of the Companies Ordinance will not
         apply both during the Transitional Period and thereafter, including
         with respect to matters that have not been dealt with in the Articles
         of Association.


                                       49



42.      INTERPRETATION

         During the Transitional Period, all of the provisions and/or
         definitions in the Articles of Association that are incompatible with
         cognitive rules of the Companies Ordinance will be cancelled and the
         rules of the Companies Ordinance shall apply.

                   CHAPTER 11 - COMPLIANCE WITH THE LICENSE /
                      LIMITATIONS ON OWNERSHIP AND CONTROL

43.      COMPLIANCE

         The Shareholders shall at all times comply with the terms of the
         License. Nothing herein shall be construed as requiring or permitting
         the performance of any acts which are inconsistent with the terms of
         the License. If any article of these Articles shall be found to be
         inconsistent with the terms of the License, the provisions of such
         article shall be null and void, but the validity, legality or
         enforceability of provisions of the other Articles shall not be
         affected thereby.

44.      LIMITATIONS ON OWNERSHIP AND CONTROL

         44.1.    This Article is to ensure that so long as and to the extent
                  that any Operating Right is conditional on or subject to any
                  conditions or restrictions relating to ownership or control
                  over the Company imposed by the Ministry, the Company is so
                  owned and controlled. This Article shall not affect or
                  influence in any way the interpretation or application of
                  Article 10A.

         44.2.    In this Article:

                  "AFFECTED SHARE" means any Share determined to be dealt with
                  as such pursuant to Article 44.4;

                  "AFFECTED SHARE NOTICE" means a notice in writing served in
                  accordance with Article 44.5;

                  "DEPOSITARY" means a custodian or other person appointed under
                  contractual arrangements with the Company (or a nominee for
                  such custodian or other person) whereby such custodian or
                  other person holds or is interested in Shares and which issues
                  securities evidencing the right to receive such Shares;

                  "DEPOSITARY RECEIPTS" means receipts or similar documents of
                  title issued by or on behalf of a Depositary;

                  "DEPOSITARY SHARES" means the Shares held by a Depositary or
                  in which a Depositary is interested in its capacity as a
                  Depositary;


                                       50



                  "INTERVENING ACT" means the refusal, withholding, suspension
                  or revocation of any Operating Right applied for, granted to
                  or enjoyed by the Company, or the imposition of any conditions
                  or limitations upon any such Operating Right which materially
                  inhibit the exercise thereof, in either case by any state,
                  authority or person (including the Ministry) by reason of the
                  nationality and/or activities of persons holding Shares in
                  and/or controlling the Company;

                  "MINISTRY" means the Ministry of Communications and/or
                  Minister of Communications;

                  "OPERATING RIGHT" means all or any part of any authority,
                  permission, licence or privilege applied for, granted to or
                  enjoyed by the Company, including the Licence, for the
                  establishment, subsistence, maintenance and operation of a
                  mobile radio telephone system using the cellular method and
                  the provision of mobile radio telephone services to the public
                  in Israel;

                  "PERMITTED MAXIMUM" means the maximum aggregate permitted
                  number of Relevant Shares specified by the Board of Directors
                  in accordance with the terms of the Licence, any other
                  requirements of the Ministry and any relevant requirements of
                  Law;

                  "RELEVANT PERSON" means:

                  (a)      any individual who is not a Citizen of Israel or
                           Resident of Israel as defined in Section 14.1(G)(2)
                           of the License;

                  (b)      any body corporate or unincorporate not incorporated,
                           registered or otherwise established under the laws of
                           Israel, including a government, governmental
                           department or agency, statutory or other authority,
                           any undertaking or body formed or established in a
                           country or any part thereof other than Israel;

                  (c)      any person who, without the approval of the Ministry,
                           acquires, directly or indirectly, any Means of
                           Control (as defined in the Licence) in breach of
                           Section 21 of the Licence other than a person who
                           falls within Article 10A; or

                  (d)      any Interested Party (as defined in the Licence) who,
                           or who has an Officer Holder (as defined in the
                           Licence) who, is in breach of Sections 23 or 24 of
                           the Licence other than a person who falls within
                           Article 10A;

                  "RELEVANT SHARE" means any Share (other than a Share removed
                  from the Relevant Shares Register (defined in Article 44.3.2)
                  pursuant to Article 44.3.5), in which a Relevant Person has an
                  interest or which is declared to be a Relevant Share pursuant
                  to Article 44.3.4;

         44.3.

                  44.3.1.  The Board of Directors shall not register a person as
                           a holder of a Share unless the person has given to
                           the Board of Directors a declaration (in a form
                           prescribed by the Board of Directors) signed


                                       51



                           by him or on his behalf, stating his name,
                           nationality, that he is not a Relevant Person falling
                           within paragraphs (c) or (d) of the definition of
                           that term and other information required by the Board
                           of Directors.

                  44.3.2.  The Board of Directors shall maintain a register (the
                           "Relevant Shares Register"), in which shall be
                           entered particulars of any Share which has been:

                           (a)      acknowledged by the holder (or by a joint
                                    holder) to be a Relevant Share;

                           (b)      declared to be a Relevant Share pursuant to
                                    Article 44.3.4; or

                           (c)      determined to be an Affected Share pursuant
                                    to Article 44.4.2.;

                                    and which has not ceased to be a Relevant
                                    Share. The particulars in the Relevant
                                    Shares Register in respect of any Share
                                    shall include the identity of the holder or
                                    joint holders and information requested by
                                    and supplied to the Board of Directors.

                  44.3.3.  Each registered holder of a Share which has not been
                           acknowledged to be a Relevant Share who becomes aware
                           that such Share is or has become a Relevant Share
                           shall forthwith notify the Company accordingly.

                  44.3.4.  The Board of Directors may notify in writing the
                           registered holder of a Share which is not in the
                           Relevant Shares Register and appears to be a Relevant
                           Share, requiring him to show that the Share is not a
                           Relevant Share. Any person to whom such notice has
                           been issued may within 21 clear days after the issue
                           of the notice (or such longer period as the Board of
                           Directors may decide) represent to the Board of
                           Directors why such Share should not be treated as a
                           Relevant Share but if, after considering such
                           representations and other relevant information, the
                           Board of Directors is not so satisfied, it shall
                           declare such Share to be a Relevant Share and treat
                           it as such.

                  44.3.5.  The Board of Directors shall remove a Relevant Share
                           from the Relevant Shares Register if the holder of
                           the Relevant Share gives to the Board of Directors a
                           declaration (in a form prescribed by the Board of
                           Directors), together with such other evidence as the
                           Board of Directors may require, which satisfies it
                           that such Share is no longer, or should not be
                           treated, as a Relevant Share.


                                       52



         44.4.

                  44.4.1.  Article 44.4.2 shall apply for so long as the Company
                           holds or enjoys any Operating Right where the Board
                           of Directors determines that it is necessary to take
                           steps to protect any Operating Right because an
                           Intervening Act is contemplated, threatened or
                           intended, may take place or has taken place;

                  44.4.2.  Where a determination has been made under Article
                           44.4.1, the Board of Directors shall take such of the
                           following steps as they consider necessary or
                           desirable to overcome, prevent or avoid an
                           Intervening Act:

                           44.4.2.1. the Board of Directors may remove any
                                     Director from office, by a resolution
                                     passed by a majority of 75 per cent or more
                                     of the other Directors present and voting
                                     at the relevant meeting;

                           44.4.2.2. the Board of Directors may seek to identify
                                     those Relevant Shares which gave rise to
                                     the determination under Article 44.4.1 and
                                     by a resolution passed by a majority of 75
                                     per cent or more of the Directors present
                                     and voting at the relevant meeting deal
                                     with such Shares as Affected Shares; and

                           44.4.2.3. when the aggregate number of Relevant
                                     Shares in the Relevant Shares Register
                                     exceeds the Permitted Maximum, the Board of
                                     Directors may deal with the Relevant Shares
                                     which it decides, by a resolution passed by
                                     a majority of 75 per cent or more of the
                                     Directors present and voting at the
                                     relevant meeting, are in excess of the
                                     Permitted Maximum as Affected Shares.

         44.5.    The Board of Directors shall give an Affected Share Notice to
                  the registered holder of any Affected Share and state that
                  Article 44.6 is to be applied forthwith in respect of such
                  Affected Share. The registered holder of the Affected Share
                  may within 21 clear days after the issue of the notice (or
                  such longer period as the Board of Directors may decide)
                  represent to the Board of Directors why such Share should not
                  be treated as an Affected Share and if, after considering such
                  representations and other relevant information, the Board of
                  Directors considers that the Share should not be treated as an
                  Affected Share it shall forthwith withdraw the Affected Share
                  Notice and Article 44.6 shall no longer apply to the Share.

         44.6.    An Affected Share in respect of which an Affected Share Notice
                  has been served shall be treated as a dormant share (as
                  defined in section 308 of the Companies Law) except that the
                  registered holder of the Affected Share shall continue to have


                                       53



                  the right to receive dividends and other distributions of the
                  Company and participate in bonus or rights issues of the
                  Company in respect of such Share.

         44.7.    In deciding which Shares are to be treated as Affected Shares,
                  the Board of Directors shall have regard to the Relevant
                  Shares which in its opinion have directly or indirectly caused
                  the determination under Article 44.4 and the chronological
                  order in which Relevant Shares have been entered in the
                  Relevant Shares Register (and accordingly treat as Affected
                  Shares those Relevant Shares entered in the Relevant Shares
                  Register most recently) except where such criterion would in
                  their opinion be inequitable, in which event the Board of
                  Directors shall apply such other criterion or criteria as they
                  may consider appropriate.

         44.8.    Subject to the other provisions of this Article 44, the Board
                  of Directors shall be entitled to assume without enquiry that:

                  44.8.1.  all Shares not in the Relevant Shares Register and
                           not falling within clause 44.8.2 are neither Relevant
                           Shares nor Shares which would be or be capable of
                           being treated as Affected Shares; and

                  44.8.2.  all or some specified number of the Shares are
                           Relevant Shares falling within paragraphs (a)-(b) in
                           the definition of that term if they (or interests in
                           them) are held by a Depositary unless and for so long
                           as, in respect of any such Shares, it is established
                           to their satisfaction that such Shares are not
                           Relevant Shares.

         44.9.    Any resolution or determination of, or any decision or the
                  exercise of any discretion or power by, the Board of Directors
                  or any one of the Directors under this Article 44 shall be
                  final and conclusive.

         44.10.

                  44.10.1. On withdrawal of the determination under Article
                           44.4.1, the Board of Directors shall cease to act
                           pursuant to such determination and inform every
                           person on whom an Affected Share Notice has been
                           served that Article 44.6 no longer applies in respect
                           of such Share. The withdrawal of such a determination
                           shall not affect the validity of any action taken by
                           the Board of Directors under this Article whilst that
                           determination remained in effect and such actions
                           shall not be open to challenge on any ground
                           whatsoever.

                  44.10.2. The Board of Directors shall, so long as it acts
                           reasonably and in good faith, be under no liability
                           to the Company or to any other person for failing to
                           treat any Share as an Affected Share or any person as
                           a Relevant Person in accordance with this Article and
                           it shall not be liable to the Company or any other
                           person if, having acted reasonably and in good faith
                           it determines erroneously that any Share is an
                           Affected Share, or any person is a Relevant Person or
                           on the basis of such determination or any other
                           determination or


                                       54



                  resolution, they perform or exercise their duties,
                  powers, rights or discretions under this Article in
                  relation to such Share.

         44.11.   A person who has an interest in Shares by virtue of having an
                  interest in Depositary Receipts shall be deemed to have an
                  interest in the number of Shares represented by such
                  Depositary Receipts and not (in the absence of any other
                  reason why he should be so treated) in the remainder of the
                  Depositary Shares held by the relevant Depositary.



                                       55

EX-4.(A).7

                                                               EXHIBIT 4.(a).7

                                    AGREEMENT

                                FOR THE SUPPLY OF

                           TELECOMMUNICATION EQUIPMENT

                                       AND

                                RELATED SERVICES




                                TABLE OF CONTENTS



                                                                                       Page
                                                                                       ----
                                                                                    
DEFINITIONS                                                                              5

INTERPRETATION                                                                          11

AGREEMENT DOCUMENTS                                                                     12

1.    SCOPE OF AGREEMENT                                                                12

2.    INTENTIONALLY DELETED                                                             12

3.    PURCHASE ORDER PROCEDURE                                                          12

4.    TIME SCHEDULE                                                                     14

5.    FORECAST PROCEDURE                                                                14

6.    PURCHASE ORDER PRICES                                                             14

7.    DELIVERY OF EQUIPMENT AND COMPLETION OF IMPLEMENTATION SERVICES                   14

7A.   ADJUSTMENTS FOR LATE ACHIEVEMENT                                                  16

8.    INSPECTION AND ACCEPTANCE                                                         17

9.    TITLE AND ASSUMPTION OF RISK                                                      20

10.   WARRANTY OF EQUIPMENT AND SERVICES                                                20

11.   PAYMENTS                                                                          24

12.   TAXES, DUTIES AND LEVIES                                                          26

12A   ACCESS TO WORK IN PROGRESS AND INSPECTION OF TECHNICAL DATA AND INFORMATION       27

13.   PROJECT MANAGEMENT                                                                28

14.   LICENSE AND INFORMATION                                                           29


                                                                               2



                                                                                    
15.   SOURCE AND OBJECT CODES                                                           30

16.   INTELLECTUAL PROPERTY RIGHTS - WARRANTY AND INDEMNITY                             31

17.   INFORMATION PROVIDED BY PARTNER - EXAMINATION                                     32

18.   CONFIDENTIALITY                                                                   34

19.   LOSS AND DAMAGE, INDEMNITY                                                        35

20.   INSURANCE.                                                                        36

20A.  KEY PERSONNEL                                                                     39

21.   CHANGES                                                                           39

22.   ASSIGNMENT OF AGREEMENT                                                           39

23.   PUBLICITY RELATED TO AGREEMENT                                                    40

24.   ARBITRATION AND APPLICABLE LAW                                                    41

25.   TIME-LIMITS                                                                       41

26.   FORCE MAJEURE                                                                     41

27.   TERMINATION FOR DEFAULT                                                           43

27A.  TERMS AND TERMINATION FOR CONVENIENCE                                             45

28.   INCENTIVE VOUCHER - ENTITLEMENT AND EXERCISE                                      46

29.   GOVERNMENTAL AUTHORISATION                                                        46

30.   LANGUAGE AND COMMUNICATION                                                        47

31.   NOTICES AND REPORTS                                                               47

32.   WAIVER AND APPROVAL                                                               47

33.   ENTIRE AGREEMENT                                                                  47

34.   NO PARTNERSHIP                                                                    48



                                                                               3



                                                                                    
35.   SEVERABILITY                                                                      48

36.   GENERAL LIMITATION OF LIABILITY                                                   48

37.   SUB-CONTRACTORS                                                                   49

38.   SURVIVAL                                                                          50



                                                                               4



AGREEMENT DATED NOVEMBER 25TH, 2002

BETWEEN:

(1)      PARTNER COMMUNICATIONS COMPANY LTD. of 8 Amal Street, Afek Industrial
         Park, Rosh Ha'ayin 48103, Israel ("Partner");

                                                               OF THE FIRST PART

                                       AND

(3)      LM ERICSSON ISRAEL LTD. of 17 Amal Street, Afek Industrial Park,
         Rosh Ha'ayin 48092, Israel ("EOI");

                                                              OF THE SECOND PART

WHEREAS:

WHEREAS, Partner and Ericsson Radio Systems AB have on the 29th of May 1998,
entered into an agreement for the supply, delivery installation, commissioning
and support of a GSM system together with its related equipment (hereinafter -
THE SUPPLY AGREEMENT), which was performed by both Ericsson Radio Systems AB
(currently renamed - Ericsson AB) (hereinafter - ERICSSON) and EOI;

WHEREAS, Partner now wishes to purchase from EOI, not on a turn-key basis, and
on a non exclusive basis, additional Equipment (Hardware, Software and Spare
Parts, but excluding UMTS equipment), and Services, in accordance with the
provisions of this framework purchase Agreement, based on the applicable
business practice principles set and agreed between the parties;

WHEREAS, EOI wishes to supply Equipment, and to provide Services, to Partner in
accordance with the provisions of this Agreement;

WHEREAS, all products and services provided by Ericsson and EOI since February
1, 1999 shall be governed by the terms and conditions of this Agreement, mutatis
mutandis, in all applicable parts. Such products shall be deemed "Equipment" and
such services be deemed "Services" in accordance with this Agreement.

NOW, THEREFORE, in consideration of the mutual promises and the mutual covenants
herein contained, the Parties agree as follows:

DEFINITIONS

Capitalized terms used within this Agreement are defined as follows:

"Acceptance"               shall mean with respect to any Equipment, the
                           issuance of an Acceptance Certificate in accordance
                           with Article 8, or deemed Acceptance under this
                           Agreement;

                                                                               5



"Acceptance Certificate"   shall mean written notice issued in accordance with
                           Article 8, indicating that the Acceptance Criteria
                           for each and every Equipment A ordered and actually
                           delivered to Partner, has been fully met.

"Acceptance Criteria"      Shall mean the criteria set forth in Annex 6, for
                           successful Acceptance Tests of each Equipment A
                           ordered and actually delivered to Partner under this
                           Agreement, including but not limited to complete
                           Implementation and integration into Partner's System,
                           ready for Commercial Use; all - in accordance with
                           the Specifications and the applicable Agreement
                           Milestones as may be amended by agreement in writing
                           between the Parties.

"Acceptance Tests"         shall mean the tests set out in Annex 6 with respect
                           to each item of Equipment A ordered and actually
                           delivered to Partner under this Agreement.

"Agreement"                means this agreement including all annexes,
                           appendices and exhibits attached hereto.

"Agreement Milestones"     means the dates specified in Annex 4 (Time Schedule)
                           as the dates by which, or before which, as the case
                           may be, the Acceptance of Equipment is to be
                           achieved.

"Commercial Use"           shall mean in relation to any Equipment purchased
                           hereunder, the use of the same in commercial
                           operation generating revenue, other than on a test
                           under Annex 6 or a friendly user trial basis.

"Critical Date" and/or     Means Agreement Milestones against which
"Critical Time Period"     Liquidated Damages shall accrue in relation to each
                           Agreement Milestone as specified in any relevant Time
                           Schedule.

"Delivery"                 shall mean with respect to Equipment, the delivery by
                           EOI, of such Equipment to a Site or warehouse within
                           the Territory designated by Partner.

"Documentation"            Means all softcopy and hardcopy of standard library
                           as specified in Annex 1 and all hard copy and
                           software of as built documentation (at least two
                           hardcopies) and any other documents provided by EOI
                           to Partner from time to time (including, without
                           limitation, such materials provided electronically or
                           by CD Rom).

"Equipment"                shall mean any item, to be supplied by EOI to Partner
                           under this Agreement, including all Documentation
                           relating thereto. For the avoidance of doubt,
                           Equipment does not include UMTS equipment.

"Equipment A"              shall mean the items of Equipment with regard to
                           which Implementation Services will be performed
                           and/or procured by EOI.

                                                                               6



"Equipment B"              shall mean the items of Equipment, including all
                           Documentation relating thereto, with regard to which
                           no Implementation Services will be performed and/or
                           procured by EOI.

"Ericsson Group"           shall mean the group of companies directly or
                           indirectly controlled by Telefonaktiebolaget LM
                           Ericsson, which is a Swedish limited liability
                           company.

"Force Majeure"            shall have the meaning specified in Sub-Clause 26.1.

"GSM License"              shall mean the license issued to Partner on 7 April,
                           1998 by the Minister of Communications for the
                           Provision of Mobile Radio Telephone Services Using
                           the Cellular Method (MRT) in Israel, as amended from
                           time to time.

"Hardware"                 shall mean Equipment and Spare Parts (other than
                           Software) to be supplied by EOI under this Agreement.

"Implementation" and       shall mean all of the activities and relevant
"Implementation Services"  Services to be carried out by EOI to meet the
                           Acceptance Criteria.

"Incentive Voucher"        shall mean a voucher substantially in the form as set
                           out in Annex 5 entitling Partner to free of charge
                           purchase, delivery and/or Implementation of
                           additional Equipment up to the incentive voucher
                           value subject to the terms specified in Article 28.

"Intellectual Property     shall mean any patent, trademarks, service marks,
Right"                     trade names, registered or unregistered design right,
                           copyright, right to prevent disclosure of information
                           and other forms of intellectual or industrial
                           property (in each case in any part of the world save
                           for patents and marks outside the Territory and
                           whether or not registered or registrable and the full
                           period thereof and all extensions and renewals
                           thereof and applications for registration of, or
                           otherwise in connection with, the foregoing),
                           confidential trade secret and protected right and
                           asset, and any license and permission in connection
                           therewith.

"LIBOR"                    shall mean in relation to any amount owed by either
                           Party to the another Party on any day the rate per
                           annum which would have been offered by the Standard
                           Chartered Bank to prime banks in the London interbank
                           market at those banks' request at or about 11.00 a.m
                           (London time) on that day for deposits in US dollars
                           of comparable amount to such amount for a period of 3
                           months.

"Liquidated Damages"       shall mean liquidated damages in the rates specified
                           in Sub-Clause 7A.4.

"Maintenance Agreement"    shall mean the Support and Maintenance Agreement
                           attached hereto as Annex 7.

                                                                               7



"Maintenance Services"     shall mean the services to be provided to Partner by
                           EOI, under the Maintenance Agreement.

"Network"                  shall mean any telecommunication network in Israel
                           operated by any Telecommunication Operator.

"Telecommunication         means any licensee for the provision of any
Operator"                  telecommunication services in Israel.

"Option"                   Shall mean Partner's option to extend the Term by a
                           period of one year each time, by serving EOI with a
                           prior written notice to that effect, at least 30 days
                           prior to the expiration of the Term or any extended
                           period pursuant to exercise of the option, as the
                           case may be.

"Optimise"                 means in relation to any Equipment, rendering that
                           Equipment in a state such that it will meet the
                           requirements of this Agreement.

"Parties"                  shall mean Partner and EOI.

"Partner's Licenses"       shall mean all telecommunication licenses awarded to
                           Partner from time to time by the Minister of
                           Communications in Israel, as amended from time to
                           time.

"Performance Bond"         Shall mean the performance bond to be provided in
                           accordance with Clause 17A, the form of which is
                           contained in Annex 8.

"Price List"               shall mean the list of prices set out in Annex 1 for
                           each item of Equipment and each Service or any other
                           Service to be offered under this Agreement.

"Project Managers"         the officers appointed by each of Partner and EOI in
                           accordance with Sub-Clauses 13.1 and 13.2 who will
                           provide the formal point of contact between those
                           Parties for all detailed correspondence and
                           discussions in respect of the Agreement and who have
                           the authority to exercise Partner's and EOI's
                           rights (respectively) under the Agreement except
                           where otherwise stated in the Agreement.

"Purchase Order"           means a written or electronic order from Partner to
                           EOI, for Equipment or Services in connection thereof,
                           to be purchased, licensed, performed or rendered
                           under this Agreement, in accordance with the Purchase
                           Order Procedure specified in Clause 3.

"Purchase Order Price"     means the price set forth in any Purchase Order, in
                           accordance with the Price List, including any
                           applicable discount and Vouchers, if used, for
                           Equipment or Services ordered and actually delivered,
                           rendered or performed, pursuant to such Purchase
                           Order.

                                                                               8



"Services"                 shall mean all of the activities and services to be
                           carried out by EOI under this Agreement, including
                           but not limited to, Implementation, or supervision of
                           Implementation, training services, design,
                           dimensioning, installation, integration into
                           Partner's Network, interconnection with other
                           Networks than Partner's Optimisation, commissioning,
                           testing, and other services subject to and in
                           accordance with any Purchase Order for the purchase
                           of such Services.

"Site"                     shall mean the locations within the Territory at
                           which the Equipment is to be Delivered, and Services
                           are to be provided, all in accordance with the terms
                           of this Agreement.

"Software"                 shall mean all computer programs, or parts thereof to
                           be furnished by ERA under this Agreement including
                           the computer software described in Annex 1, Software
                           Updates and Software Upgrades.

"Software Updates"         Shall mean: (a) correction packages of the
                           current major release of Software which fix, add to,
                           improve or enhance licensed features and capabilities
                           of the Software; and/or (b) Software "fixes" and/or
                           "patches" or other corrections issued by Ericsson
                           from time to time to correct or remove anomalies and
                           bugs in the Software; and includes any Software
                           issued as Software Updates by Ericsson from time to
                           time. A Software Update shall contain the appropriate
                           load file, implementation instructions and
                           Documentation shall mean corrections of the Software
                           based on Ericsson's and users fault reports and which
                           are issued as Software Updates by Ericsson.

"Software Upgrades"        shall mean superseding releases of the then
                           current release of Software which add to, improve or
                           enhance licensed basic features and capabilities of
                           the then current release of Software and which
                           involve more extensive changes to the then current
                           release of the Software than is the case in Software
                           Updates. Software Upgrades may also correct Software
                           anomalies or "bugs" in earlier releases and may
                           introduce new basic features. A Software Upgrade
                           shall contain the appropriate load file,
                           implementation instructions and Documentation.

"Spare Parts"              means a spare or replacement part for any Equipment
                           or part of Equipment. Once Delivered to Partner Spare
                           Parts shall form part of the Equipment.

"Specifications"           shall mean those specifications which describe the
                           technical and functional operation of the Equipment
                           when fully Implemented and integrated into Partner's
                           System, all Specifications set out in Annex 3 and
                           shall include any additional specifications agreed in
                           writing between EOI and Partner to be annexed hereto
                           as part of this Agreement.

"Sub-contract"             shall mean any agreement between a Party or its
                           Sub-contractors and a Sub-contractor.

                                                                               9



"Sub-contractor"           shall mean any contractor or direct or indirect
                           sub-contractor or sub sub-contractor in relation to
                           this Agreement.

"System" or "Partner's     shall mean any telecommunication system or
 System"                   sub-system operated, or which in the future shall
                           be operated by Partner, including but not limited to
                           the fully functional GPRS and GSM systems to be
                           supported, Optimised and maintained by EOI in
                           accordance with the relevant Specification comprising
                           of, but not limited to, the switching subsystems, the
                           base station subsystems, the network management
                           system, the base transceiver stations, the base
                           station controllers and any other equipment comprised
                           in the GPRS and/or the GSM system. "Part of System"
                           refers to any part of the System including any
                           Equipment, Hardware or Software, included in the
                           System or any Services required to be performed under
                           this Agreement.

"Term"                     shall mean the period of time commencing on January
                           1, 2003, and ending on December 31, 2007, which may
                           be extended by Partner pursuant to exercise of the
                           Option, during which Partner can place Purchase
                           Orders under this Agreement. For ther avoidance of
                           doubt, it is clarified that notwithstanding anything
                           to the contrary in this Agreement, the provisions of
                           this Agreement shall apply mutatis mutandis to any
                           and all purchases of products and services by Partner
                           from EOI and/.or Ericsson made between February 1st,
                           1999 and the date hereof.

"Territory"                means for each Equipment the area in which Partner is
                           authorized to use such Equipment under the relevant
                           Partner License.

"Time Schedule"            shall mean the time table and period of time for the
                           (i) Delivery of Equipment, Documentation and Spare
                           Parts; and (ii) the performance of Implementation
                           Services, as set out in Annex 4. The respective time
                           periods shall be noted in man-hours, man-days or
                           man-weeks as applicable.

"Training"                 the instructions, manuals and face-to-face teaching
                           to be provided or produced by EOI, to or for
                           Partner's staff, to assist them in utilizing the
                           Equipment.

"Warranty Period"          shall mean a period of warranty as defined in
                           Sub-Clause 10.2.

"Year 2000 Compliant"      means that neither the performance nor the
                           functionality of any Equipment will be impaired by
                           the advent of the year 2000, and in particular:

                           (i)   no value for current date will cause any
                                 interruption or error;

                           (ii)  all manipulations of time related data will
                                 produce the desired results for all valid date
                                 values prior to, through and beyond the year
                                 2000, including leap year calculations;

                                                                              10



                           (iii) date fields or elements in all Software and
                                 Hardware (including interfaces and data
                                 storage) will permit specifying the century to
                                 eliminate date ambiguity;

                           (iv)  where any date field or element is represented
                                 without a century, the correct century shall be
                                 unambiguous for all manipulations involving
                                 that element, using appropriate algorithms or
                                 inferencing rules;

INTERPRETATION

Headings are for convenience only and do not affect interpretation. The
following rules of interpretation apply to this Agreement unless the context
requires otherwise.

         1)       The singular includes the plural and conversely.

         2)       A gender includes all genders.

         3)       A reference to a Clause, Sub-Clause, Annex, Schedule or
                  Appendix is to a clause or sub -clause of or annex, schedule
                  or appendix to this Agreement all of which are by this
                  reference incorporated into this Agreement and references to
                  this Agreement shall be construed accordingly.

         4)       A reference to any part of this Agreement is to that part as
                  amended or updated from time to time in accordance with this
                  Agreement.

         5)       A reference to a person includes a body corporate, firm, an
                  unincorporated body or other entity and conversely.

         6)       A reference to conduct or an act includes an omission,
                  statement or undertaking whether or not in writing.

         7)       Mentioning anything after include, includes or including does
                  not limit what else might be included unless expressly stated
                  otherwise. An example does not limit what else might be
                  included.

         8)       A reference to $ or US$ or US dollars is to the lawful
                  currency of the United States of America from time to time. A
                  reference to NIS is to the lawful currency of Israel from time
                  to time.

                                                                              11



AGREEMENT DOCUMENTS

This Agreement shall consist of the following documents, as may be amended from
time to time as provided herein.

1.       This Agreement document.

2.       The Annexes:

         Annex 1     Price List
         Annex 2     Ericsson's Letter of Guarantee
         Annex 3     Technical Specification
         Annex 4     Time Schedules
         Annex 5     Incentive Voucher
         Annex 6     Acceptance Tests, Criteria and Procedure
         Annex 7     Maintenance Agreement
         Annex 8     Form of Performance Bond

Should there be any ambiguity, conflict or inconsistency between the terms and
conditions of the documents listed above then they shall prevail between
themselves according to the order in which they are listed.

1.       SCOPE OF AGREEMENT

         1.1.      Partner shall purchase from EOI, and EOI shall sell Hardware
                   and license Software to Partner subject to and in accordance
                   with Purchase Orders issued by Partner to EOI for the
                   purchase of the same.

         1.2.      Partner shall purchase from EOI, and EOI shall provide to
                   Partner Services with respect to relevant Purchase Orders
                   issued by Partner to EOI for the purchase of the same.

         1.3.      All Equipment and Services purchased following the execution
                   of this Agreement and during its Term and/or any extension
                   thereof pursuant to exercise of the Option by Partner, shall
                   be governed by the terms of this Agreement.

         1.4       This Agreement shall come into force upon its signature by
                   all Parties.

         1.5       Ericsson shall guarantee the full and complete performance of
                   all of the obligations of EOI under this Agreement, in the
                   form of the letter of Guarantee attached hereto and marked as
                   Annex 2.

2.       INTENTIONALLY DELETED

3.       PURCHASE ORDER PROCEDURE

         3.1       Purchase Orders for Equipment, Implementation Services or any
                   other Service, shall be made on purchase order forms (written
                   or electronic) issued by Partner's authorised representative,
                   that shall specify the requested Equipment, quantity, and
                   Services required, Site for Delivery, and all other relevant
                   information and instructions with respect to such Purchase
                   Order, as Partner shall deem fit, including but not only, the
                   Purchase Order Price.

                                                                              12



         3.2       Only a Purchase Order duly executed by Partner's authorised
                   representative shall constitute a firm commitment to purchase
                   on the part of Partner. Partner shall keep updated with the
                   recipient of Purchase Orders a list of its authorised
                   representatives. A Purchase Order shall be effective and
                   binding on the Parties as from the date it was submitted to
                   EOI or the first business day thereafter if the Purchase
                   Order was submitted during non-office hours of the receiving
                   Party. If the Purchase Order contains information that is
                   inconsistent with the provisions of Clause 3.1 above, then
                   EOI, shall notify Partner before the end of the next business
                   day and Partner shall correct the inconsistencies and submit
                   a new Purchase Order in accordance with Clause 3.1 above,
                   replacing the original Purchase Order. The original Purchase
                   Order shall be effective and binding for all intents and
                   purposes on the original date of submittance if EOI fails to
                   notify Partner before the end of the next business day as
                   aforesaid.

         3.3       All Equipment, and Services ordered pursuant to any and all
                   of the Purchase Orders shall be provided by EOI in accordance
                   with the terms and conditions of each of the Purchase Orders
                   and this Agreement.

         3.4       Notwithstanding the aforesaid, Partner has the right to
                   cancel, modify or change any Purchase Order prior to actual
                   shipment of the Equipment or prior to the actual commencement
                   of the relevant Services ordered pursuant thereof.

                   Understanding that there are costs for EOI related to such
                   canceled Purchase Orders, Partner shall pay EOI compensation
                   for cancellation of Purchase Orders as follows:



PERCENTAGE OF VALUE OF CANCELED           DAYS PRIOR TO SHIPMENT OF EQUIPMENT OR
     EQUIPMENT OR SERVICE                       COMMENCEMENT OF SERVICE
- --------------------------------      -----------------------------------------------
                                   
             [*]%                     [*]% - [*]% of lead time according to Annex 4
             [*]%                     [*]% - [*]% of lead time according to Annex 4
             [*]%                     [*]% - [*]% of lead time according to Annex 4
             [*]%                     [*]% or higher of lead time according to Annex 4


                   Notwithstanding the foregoing, for cancellation of Purchase
                   Order of Software, compensation is only applicable to the
                   value of the third party software embedded in such Software.

                   For purposes of lead times and Time Schedule, in the event of
                   an increase of volume of Equipment or Services by
                   modification or change of a Purchase Order the additional
                   Equipment and/or Services ordered, will be deemed a separate
                   Purchase Order.

         3.5       The Purchase Order Procedure that shall apply to Purchase
                   Orders placed using the TTC Global, for the benefits of both
                   Parties, shall be subject to agreement between the parties
                   concerning the terms and conditions thereof.

                   In the event Ericsson elects to discontinue the supply or the
                   production of any

- ---------------------------
Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.

                                                                              13



                   Equipment, then EOI shall provide Partner with one (1) year's
                   written notice thereof, and allow Partner to place an end of
                   life Purchase Order, at any time during such year.

         3.6       Notwithstanding any other provision of this Agreement, EOI
                   undertakes to ensure that Ericsson shall maintain an adequate
                   and sufficient stock of Spare Parts so as to meet Partner's
                   support and maintenance requirements for the same, during a
                   period of at least 5 years from the date of supply of any
                   Equipment under this Agreement.

4.       TIME SCHEDULE

         EOI shall Deliver all items of Equipment and perform all Services
         ordered by Partner under any Purchase Order, in accordance with the
         applicable Time Schedule, which shall include specified Agreement
         Milestones and Critical Dates or Critical Time Periods, as the case may
         be.

5.       FORECAST PROCEDURE

         5.1       Regularly on the last business day of every three (3) months
                   Partner shall make reasonable efforts to submit to EOI a
                   forecast covering the next six (6) month period of Partner's
                   estimated requirements broken down to quarterly intervals.
                   Such forecasts shall be made in good faith for planning
                   purposes only, and shall not be binding on either Party.

         5.2       Upon execution of this Agreement, Partner shall make
                   reasonable efforts to submit a forecast pursuant to
                   Sub-Clause 5.1 above for the first six (6) months of the
                   Agreement.

6.       PURCHASE ORDER PRICES

         All Purchase Order Prices relating to Equipment shall include all
         transportation and related charges for Delivery of such Equipment,
         which means DDP (Delivery Duty Paid, according to Incoterms 2000) to
         Partner designated Sites.

         In line with the foregoing and to avoid any doubt, it is agreed that
         Partner shall pay Value Added Tax (VAT) payable in Israel in relation
         to the supply of Equipment and the provision of Services by EOI to
         Partner, in accordance with Clause 12 (Taxes, Duties and Levies).

7.       DELIVERY OF EQUIPMENT AND COMPLETION OF IMPLEMENTATION SERVICES

         7.1 (a)   The times for completion of Delivery of Equipment and
                   Documentation, completion of Services and for achievement of
                   all Agreement Milestones are of the essence of this
                   Agreement.

             (b)   Delivery of Equipment and Documentation and completion of
                   Services shall not be deemed to have occurred for the purpose
                   of this Agreement until EOI has actually delivered all
                   Equipment and Documentation and performed all Services to be
                   performed in connection with such Equipment, Documentation or
                   Services (as the case may require). The provision of such
                   Equipment and Documentation and the performance of such
                   Services is of the essence of this Agreement.

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         7.2       Subject to the provisions of clause 7.1 above, for Purposes
                   of this Agreement -

                   (a)  Delivery of any Hardware constituting Equipment A shall
                        only be deemed to have occurred upon its actual delivery
                        at the designated Site at which it is required to be
                        delivered and installed, in accordance with any relevant
                        Purchase Order, Time Schedule and/or any other
                        applicable provision of this Agreement, and in a
                        condition fully conforming to the requirements of this
                        Agreement but without prejudice to, or forfeiture of,
                        Partner's rights under Clause 8; and

                   (b)  Delivery of any Software constituting Equipment A shall
                        only be deemed to have occurred when it is actually
                        supplied, installed and commissioned in accordance with
                        any relevant Purchase Order, Time Schedule and/or any
                        other applicable provision of this Agreement, but
                        without prejudice to, or forfeiture of, Partner's rights
                        under Clause 8.

                   (c)  Delivery of Services shall not be deemed to have
                        occurred until EOI has fully completed the performance
                        of the Service, to Partner's full satisfaction, in
                        accordance with any relevant Purchase Order, Time
                        Schedule and/or any other applicable provision of this
                        Agreement but without prejudice to, or forfeiture of,
                        Partner's rights under Clause 8.

                   (d)  Delivery of Equipment B shall be deemed to have occurred
                        at the time Partner is notified in writing that the
                        relevant Equipment B ordered has been delivered at
                        Partner's designated Site, in accordance with any
                        relevant Purchase Order, Time Schedule and/or any other
                        applicable provision of this Agreement, and in a
                        condition fully conforming to the requirements of this
                        Agreement but without prejudice to, or forfeiture of,
                        Partner's rights under Clause 8. Acceptance of Equipment
                        B shall be deemed to have occurred upon Delivery of such
                        Equipment in accordance with and subject to the
                        aforsaid.

         7.3       In the case of subsequent rejection of any Equipment or
                   Services delivered, delivery shall be deemed not to have
                   occurred for the purpose of this Agreement until the defects
                   that resulted in such rejection have been satisfactorily
                   remedied or replaced with conforming Equipment or Services
                   (as the case may be).

         7.4       Notwithstanding any other provision of this Agreement and
                   without limiting any other right or remedy of Partner under
                   this Agreement, or any applicable law, if at any time it
                   becomes apparent that the Equipment and/or Services to be
                   supplied by EOI, are insufficient to achieve the
                   Specifications, and the other requirements of this Agreement
                   including in terms of, coverage, capacity and reliability,
                   then EOI shall promptly provide at its cost, additional
                   Hardware, Software and/or Services in order to ensure that
                   the Specifications, and such other requirements are fully
                   met. To the extent they are reasonably capable of applying,
                   all other terms of this Agreement other than cost as
                   aforesaid, shall apply to such additional Hardware, Software
                   and/or Services.

                                                                              15



7A.      ADJUSTMENTS FOR LATE ACHIEVEMENT

         7A.1      EOI shall Deliver each Equipment and perform each Service on
                   or before the relevant Agreement Milestone for that Equipment
                   and Service, respectively. Equipment shall be Delivered,
                   installed, integrated Implemented and commissioned in
                   accordance with the Specifications Time Schedule and all
                   other relevant requirements of this Agreement.

         7A.2      To the extent that any Equipment and Service is not Delivered
                   or performed in accordance with this Agreement by the
                   relevant Agreement Milestone then EOI shall not be entitled
                   to any extension of that Agreement Milestone other than if
                   that delay is substantially due to an event of excusable
                   delay as described in Sub-Clause 7A.3. If an event of
                   excusable delay occurs, EOI shall be entitled to a day-to-day
                   extension of that part of their unmet obligation reasonably
                   affected by the event of excusable delay. Each overall
                   extension of an Agreement Milestone shall not exceed the
                   period of delay caused by the event of excusable delay.

         7A.3      A Force Majeure event or other event caused by Partner, its
                   sub-contractor, or any other third party supplier of Partner,
                   causing delay to EOI in the execution of its obligation under
                   Clause 7A.1 above, shall be deemed an excusable delay,
                   provided, however, that EOI has complied with its entire
                   obligations under this Agreement in relation to that event.

                   Each party shall attempt to give reasonable advance notice to
                   the other party if it is likely to become unable to perform
                   an obligation in circumstances where a delay is thereby
                   likely to be caused. For an event to be an event of excusable
                   delay, EOI must have used and continue to use reasonable
                   endeavours to avoid and minimise the delay and promptly give
                   Partner notice of the relevant event and the period of
                   extension to which it considers itself entitled.

         7A.4      Subject to Sub-Clauses 7A.2 and 7A.3, if EOI fail to execute
                   their obligations under Clause 7A.1 above, by the relevant
                   Critical Date, then, in addition to any remedy to which
                   Partner is entitled pursuant to this Agreement and/or the
                   applicable law, Partner shall have the right to claim, and
                   EOI shall pay, Liquidated Damages for each week or part
                   thereof of delay, with respect to such delay (as liquidated
                   damages and not as a penalty), of [*] % of the relevant
                   Purchase Order Price delayed per full week of delay until all
                   relevant Equipment required to be Delivered, Services
                   required to be provided and matters required to be satisfied
                   under this Agreement by the Critical Date have been
                   Delivered, provided and satisfied, up to a maximum of [*]% of
                   the relevant Purchase Order Price.

                   For the avoidance of doubt it is clarified that in
                   calculating Liquidated Damages for late performance of
                   Services, the basis price shall include both the price of the
                   relevant Equipment as well as the price of the relevant
                   delayed Service in connection with such Equipment, in
                   accordance with the Price List.

                   It is further clarified that the price for purposes of
                   calculating Liquidated Damages shall be the full price as
                   specified in the Price List, as opposed to the Purchase Order
                   Price, irrespective of whether or not Partner has utilized
                   any Insentive Vaucher.

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         7A.5      The Parties recognise and agree that the Liquidated Damages
                   are reasonable pre-estimates of the damage which may occur to
                   Partner taking into account all the relevant information
                   available at the time of execution of this Agreement and that
                   such sums are liquidated damages and in no way to be
                   considered as penalties.

         7A.6      In the event of delayed Delivery of Equipment or completion
                   of Services or achievement of an Agreement Milestone, EOI
                   shall take reasonable remedial action to minimise the delay.
                   Nothing in this Clause shall be construed as limiting the
                   rights of Partner to terminate this Agreement in whole or in
                   part, or take other action in accordance with any provision
                   of this Agreement as a consequence of such late Delivery of
                   Equipment, completion of Services, or achievement of an
                   Agreement Milestone.

         7A.7      The payment of Liquidated Damages shall not relieve EOI from
                   any of its obligations under this Agreement.

         7A.8      The provisions of Clause 36 (General Limitation of Liability)
                   shall not apply to Liquidated Damages and such Liquidated
                   Damages shall not be excluded or limited by that Clause.

8.       INSPECTION AND ACCEPTANCE

         8.1       EOI undertakes to ensure that all Equipment shall be tested
                   by Ericsson in accordance with Ericsson's relevant normal
                   factory testing procedures and tests normally undertaken by
                   Ericsson with respect to products of the type in question.
                   Partner shall have the right to be present during the
                   performance of such factory tests. Partner shall notify EOI
                   of its representatives' arrival not later than seven (7) days
                   in advance. All travelling expenses as well as all other
                   costs for Partner or its representatives are to be borne by
                   Partner. Partner acknowledges that Ericsson cannot guarantee
                   that it is the specific Hardware, Software and Spare Parts
                   dedicated for Partner that is tested when Partner is present
                   unless Partner has indicated in the relevant Purchase Order
                   its request to attend the factory tests for that Equipment.
                   For such Equipment where Partner in the Purchase Order has
                   indicated its request to be present during the factory test,
                   EOI shall notify Partner fourteen (14) days in advance of the
                   date of the factory tests. Partner shall also have the right
                   to request Ericsson, through EOI, to conduct specific
                   Acceptance tests with respect to specific Equipment dedicated
                   to be supplied to Partner, which cannot be performed at
                   Partner's laboratory, at no additional charge and EOI shall
                   ensure that Ericsson shall perform such tests.

         8.2       EOI warrants that each item of Equipment will only be
                   delivered to Partner's designated Site, in accordance with
                   Article 7 above, only after it has successfully passed
                   Ericsson's relevant normal factory tests and other quality
                   controls for Equipment of the type in question.

         8.3       The Acceptance Tests, Criteria and Procedure ("ATP") for each
                   Equipment, are attached hereto as Annex 6. The ATP indicates
                   all tests, including, if and to the extent required by
                   Partner, lab test, that may be performed for that Equipment,
                   the Acceptance Criteria, and the duration of each test.

         8.4       In the event Partner shall wish to delay the commencement of
                   Implementation Services as set in the relevant Time Schedule
                   with respect to any Equipment A ordered and Delivered to
                   Partner, Partner shall for all such Equipment A inform EOI
                   (i) the

                                                                              17



                   requested commencement date of the Implementation for each
                   respective Equipment, and (ii) what tests from the respective
                   ATP Partner does not want to be performed under the
                   Implementation, if at all. Agreement Milestones with respect
                   of such Equipment A shall be delayed respectively.

         8.5       Intentionally deleted.

         8.6       EOI shall, unless informed otherwise by Partner, perform all
                   laboratory tests at Partner's laboratory, in accordance with
                   the relevant ATP. Partner shall be entitled to participate in
                   the said laboratory tests in the manner and to the extent
                   Partner wishes, at Partner's sole discretion. During the
                   performance of the tests, Partner shall be entitled, inter
                   alia, to give instructions to EOI, and to inspect the tests;
                   and EOI undertakes to fully co-operate with Partner and
                   comply with any relevant instructions given.

                   Subject to the successful completion of the said laboratory
                   tests, EOI shall proceed to the next phase of conducting the
                   Acceptance Tests in the manner described in this section 8
                   below.

         8.7       EOI shall carry out and complete the Acceptance Tests for
                   Equipment A in accordance with the Time Schedule and both
                   Parties shall provide all the resources that are required in
                   order to perform such Acceptance Tests, including, without
                   limitation, personnel, testing equipment etc. During the
                   performance of the Acceptance Tests Partner shall be
                   entitled, inter alia, to give instructions to EOI and to
                   inspect the Implementation; EOI undertakes to fully
                   co-operate with Partner and comply with any instructions
                   given.

                   With respect to any Equipment that has not yet any ATP agreed
                   between the Parties, EOI shall provide Partner, before
                   shipment of such Equipment, with a suggested ATP.

                   Partner shall, within 10 business days from receipt of the
                   suggested ATP, provide EOI with its comments and the Parties
                   shall agree upon the ATP within 7 days after delivery of
                   Partner's comments.

         8.8       Upon the succesful completion of the Acceptance Tests, EOI
                   shall prepare a detailed protocol designed to clearly verify
                   that all of the relevant Acceptance Criteria are fully met.

         8.9       Following the successful completion of the Acceptance Tests
                   for the Equipment A in question and all related Services,
                   subject to the receipt by Partner of the protocol referred to
                   in clause 8.8 above, Partner shall give EOI a written notice,
                   stating whether or not the Equipment A tested has satisfied
                   the Acceptance Criteria for that Equipment. In the Event
                   Partner's notice shall state that the relevant Equipment
                   tested has satisfied the relevant Acceptance Criteria, the
                   said notice shall, for the purposes of this Agreement,
                   constitute an Acceptance Certificate. Partner may only
                   withhold the provision of an Acceptance Certificate and
                   provide EOI with a rejection notice, if Partner believes that
                   the protocol provided by EOI does not verify whether the
                   Acceptance Test Criteria is met or not.

                                                                              18



         8.10      If the relevant Equipment A is not accepted by Partner in
                   accordance with Sub-Clause 8.9, Partner shall, in its
                   rejection notice, to the extent it is reasonably able to do
                   so, specify the particulars of the alleged deviation or
                   failure to establish compliance with the Acceptance Criteria
                   for the relevant Equipment A in question and where the same
                   is alleged to exist or to have occurred. EOI shall with all
                   reasonable speed under the circumstances, but in any event,
                   within the timeframe designated to that end under the
                   relevant Time Schedule, taking into account Partner's time
                   used to produce the rejection notice described in Sub-Clause
                   8.9 and allowing EOI a reasonable time to remedy the
                   rejection and at its own expense remedy the failure. The
                   Acceptance Tests for the rejected Equipment A, or if Partner
                   agrees in writing, that only the relevant or affected part
                   thereof, shall, if Partner so requires, be repeated in
                   accordance with the provisions of this Clause 8 until the
                   Acceptance Criteria for the Equipment A in question have been
                   fully satisfied, as shall be determined by Partner at its
                   sole discretion. For the avoidance of doubt, in case the
                   alleged deviation or failure to establish compliance with the
                   Acceptance Criteria for the Equipment A in question is a
                   result of the Equipment supplied, EOI shall replace such
                   Equipment forthwith with Equipment conforming to all such
                   Acceptance requirements.

         8.11      If EOI has not received from Partner either an Acceptance
                   Certificate or a rejection notice under clause 8.9, stating
                   whether or not the Equipment A in question is accepted or
                   not, within 45 days from completion of the Acceptance Tests
                   for that Equipment or from Partner's receipt of the protocol
                   referred to in clause 8.8 above, the latter of which, the
                   Equipment in question shall be deemed accepted as of the last
                   day of said 45 days period.

         8.12      Acceptance of Equipment B shall be deemed to take place at
                   Delivery, in accordance with the provisions of clause 7.2(d)
                   above.

         8.13      For each case described in Articles 8.11 and 8.12 above, EOI
                   shall have the right to issue the Acceptance Certificate
                   unless Partner has issued the Acceptance Certificate within
                   five days from the date the relevant Equipment was Accepted,
                   or was deemed Accepted.

         8.14      Without limiting EOI obligations to Deliver the Equipment and
                   provide the Services, in accordance with the Specifications,
                   Time Schedule and any other applicable provision of this
                   Agreement, remedy of any failures or deviations referred to
                   in this Clause 8 and repeating tests shall be accomplished by
                   EOI at its cost, within the Time Schedule designated to that
                   end. If EOI shall fail to remedy any such failures or defects
                   within such Time Schedule and such particulars remain
                   unremedied after Partner's written notice of its intention to
                   have it remedied through other means, Partner may elect to
                   have any or all such failures or defects remedied through
                   other means, in which event EOI shall pay the reasonable
                   costs incurred by Partner in so remedying such defects or
                   failures.

         8.15      Notwithstanding EOI's obligation to remedy any failures or
                   deviations referred to in this Clause 8, Partner shall have
                   the option, at its sole discretion, to accept and retain any
                   item of the Equipment without such particulars having been
                   remedied, as Partner considers expedient, and at such reduced
                   price as may be agreed between the Parties.

                                                                              19



         8.16      Nothing in this Clause 8 shall relieve EOI of its obligation
                   to comply with the provisions of this Agreement, nor limit
                   Partner's right to terminate this Agreement, in whole or in
                   part, in accordance with the other provisions of this
                   Agreement. The issue of any certificate by Partner (including
                   an Acceptance Certificate) shall not prejudice or affect any
                   of Partner's rights under this Agreement or allow EOI to
                   claim any additional compensation or require any waiver or
                   variation of this Agreement.

         8.17      Nothing in this clause 8 shall prevent termination as a
                   result of any defect of EOI's title to any Hardware or in
                   relation to the right to license any Software.

         8.18      Notwithstanding any other provision of this Agreement,
                   Acceptance shall not be taken to have occurred if the
                   performance of any such Equipment negatively affects the
                   performance of Partner's System unless EOI can show that the
                   negative effect of the performance of the System is because
                   of equipment not delivered by EOI.

9.       TITLE AND ASSUMPTION OF RISK

         9.1       EOI warrants to Partner that it has and will deliver to
                   Partner good and valid title to the Equipment to be delivered
                   to Partner, free from any claim, lien, pledge, mortgage,
                   security, interest or other encumbrances, and further
                   warrants that with regard to any license rights granted in
                   respect of Software and Documentation, it has the right and
                   the power to grant the same.

         9.2       Subject to Sub-Clauses 9.3 and 9.4 below, title to any
                   Hardware Equipment shall pass to Partner upon delivery. or at
                   an earlier time by which at least [*] ([*]%) percent of the
                   Puchase Order Price of the item of Equipment has been paid to
                   EOI.

         9.3       Notwithstanding anything to the contrary, including but not
                   limited to the passage of title in accordance with Sub-Clause
                   9.2, EOI shall bear the full risk of loss and/or damage for
                   all items of Equipment until Acceptance or Commercial Use of
                   such items, whichever occurs earlier. In the event that any
                   item of Equipment is returned to EOI for remedy of any fault
                   or non-performance risk shall pass to EOI at the point of
                   despatch.

         9.4       Title in Software is subject to the provisions of Clause 14.

10.      WARRANTY OF EQUIPMENT AND SERVICES

         10.1      Without limiting any other warranties or undertakings
                   contained in this Agreement, EOI warrants and undertakes to
                   Partner as follows:

                   (a)  All and every item of the Equipment will in all respects
                        conform to, perform in accordance with, have the
                        features and all interconnection capabilities as
                        specified in the Specifications and all other
                        requirements which every item of the Equipment must
                        satisfy as set out in this Agreement, and shall operate
                        and function during the entire Warranty Period free from
                        defects.

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                   (b)  all Equipment A shall be properly and completely
                        installed, tested, commissioned, Optimised, integrated,
                        Implemented and, all the Services to be provided under
                        this Agreement shall be performed in a skillful and
                        workmanlike manner and shall conform in design,
                        performance, materialsand planning to the requirements
                        of this Agreement and shall be free from defects in
                        design, materials, planning, performance or workmanship
                        for the entire Warranty Period and be of the most
                        suitable grade and quality for the purpose intended,
                        both in accordance with the Specifications and all other
                        requirements of this Agreement;

                   (c)  each item of Equipment will be new (except for
                        Replacement Units as defined in Annex 3B to the
                        Maintenance Agreement) and compatible with other
                        equipment, in accordance with the Specifications.
                        Equipment A, shall be Implemented and integrated with
                        every other item of Partner's System and interconnected
                        to the Network and to any third party's equipment and/or
                        software with which it is capable to interconnect and
                        interface, as detailed in the Specifications.

                        For avoidance of doubt, it is agreed that
                        notwithstanding any other provision of this Agreement,
                        Acceptance of any Equipment which is to be
                        interconnected with the Network shall not be taken to
                        have occurred unless and until such Equipment has been
                        interconnected with the Network in accordance with the
                        Specifications.

                   (d)  the Software will, as at Acceptance thereof, conform
                        with the licensor's current published specifications and
                        will represent the licensor's latest and most up to date
                        new release version, unless Partner has indicated in
                        writing that it does not wish to install such latest and
                        most up to date new release version; However, in the
                        event that a new release version is scheduled to be
                        released during the period designated for conducting of
                        Acceptance Tests with respect to any relevant Equipment,
                        EOI shall provide Partner with the choice of either
                        delaying the conducting of the relevant Acceptance Tests
                        in wait for the release of the new release version, or
                        conducting the Acceptance Tests in accordance with the
                        applicable Time Schedule with the current release
                        version, and have the new release version installed at a
                        later point in time in accordance with Partner's
                        requirements.

                   (e)  the Equipment is the most current and upgraded version,
                        release or model of such item as of the date of
                        shipment.

                   (f)  each item of the Equipment shall be Year 2000 Compliant
                        and shall conform to and comply with the requirements of
                        the GSM Licence.

                   (g)  it is a highly competent professional contractor with
                        broad experience, great knowledge and an outstanding
                        degree of skill in the field of the obligations
                        undertaken by it under this Agreement and that it is
                        well qualified and has adequate personnel to perform all
                        such works; it is familiar with and shall perform all of
                        its obligations hereunder in accordance with the most
                        recent, and international standards including, without
                        limitation, those referred to in the Specifications;

                                                                              21



                   (h)  it is adequately insured in a manner consistent with the
                        international industry standards and in accordance with
                        the requirements of this Agreement;

                   (i)  it shall perform all of its obligations hereunder in
                        accordance with the provisions of this Agreement, the
                        Specifications and any Purchase Order and relevant Time
                        Schedule;

                   (j)  it has familiarized itself with the general nature and
                        location of the Services to be carried out, as well as
                        with all other general conditions and circumstances in
                        Israel which may affect its ability to perform its
                        obligations and undertaking under this Agreement, and,
                        without limiting the relieves in Clause 28 (Force
                        Majeure) hereby expressly waives any claim in this
                        regard.

                   The above warranties as well as all other expressed
                   warranties elsewhere in this Agreement (collectively the
                   "Warranties" and individually a "Warranty") shall constitute
                   the only warranties made by EOI in respect of the Equipment
                   and Services or any part thereof and are in lieu of all other
                   warranties, express or implied. The Warranties shall continue
                   to apply during the entire Warranty Period defined below
                   notwithstanding any Acceptance of Equipment, or Services (as
                   the case may be), or payment by Partner. EOI shall indemnify
                   Partner and keep Partner free and harmless from liability
                   arising under or pursuant to proceedings incurred or suffered
                   by or brought against Partner as a result of any untruth or
                   breach of the Warranties and from any other loss, damage,
                   liabilities and expenses incurred or suffered by Partner as a
                   result thereof.

         10.2      Partner shall be entitled at any time during the Warranty
                   Period (as defined below) and irrespective of prior
                   inspections or Acceptance, to reject any part of the
                   Equipment, or Services not conforming to the Warranties and
                   to require that EOI, at its sole cost, shall correct or
                   replace, such Equipment, or Services with conforming items or
                   performance. EOI shall do so promptly after notification by
                   Partner in accordance with this Agreement.

                   If EOI shall fail to correct or replace such Equipment or
                   Services with conforming items or performance promptly, and
                   such particulars remain unremedied after Partner's written
                   notice of its intention to have it corrected or replaced
                   through other means, Partner may elect to have any or all
                   such failures or defects corrected or replaced through other
                   means, in which event EOI shall pay the reasonable costs
                   incurred by Partner. Partner may elect not to require
                   correction or replacement of such defective Equipment and/or
                   Service and, in such event, EOI, if required by Partner,
                   shall refund such portion of the relevant Purchase Order
                   Price as is equitable in the circumstances or in default of
                   agreement as determined under Clause 24.

         10.3      The Warranty Period with respect to any Equipment (Hardware
                   and Software) purchased under this Agreement shall be a
                   period of [*] months commencing on the

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                   earlier of: (i) the date of Acceptance; and (ii) for
                   Equipment A, the date on which such Equipment A is put into
                   Commercial Use.

                   The Warranties and Warranty Period shall be without prejudice
                   and in addition to any other rights available to Partner
                   under this Agreement. Without limiting the foregoing, the
                   Warranties and the Warranty Period shall continue to apply to
                   any corrected or replaced items until the expiry of a period
                   of [*] months after the date of Acceptance by Partner of the
                   original item of Equipment that was replaced or corrected,
                   provided that Partner is able to demonstrate identification
                   of any such particular corrected or replaced items of
                   Equipment.

                   Spare Parts for faulty Equipment shall be replaced by EOI at
                   no charge, during the Warranty Period, according to the Lead
                   Time specified in Appendix 1 to Annex 3b of the Maintenance
                   Agreement.

                   Shipping, freight warehousing and insurance charges, in
                   respect of Warranty claims shall be incurred solely by EOI.

         10.4      Any item replaced will be deemed to be on an exchange basis
                   and the item provided to Partner in exchange shall be the
                   sole property of Partner. Title of the item to be replaced
                   shall pass to EOI on Acceptance of the new replacing item by
                   Partner. Risk in the item to be replaced shall pass to EOI on
                   despatch. Title and risk of the replacement item shall pass
                   to Partner upon Acceptance of that item. Any replaced
                   Equipment will be warranted in accordance with the applicable
                   provisions of clause 10.3 above.

         10.5      EOI shall not be liable to Partner for breach of a Warranty
                   to the extent the breach is caused by any of the following:

                   i)   the failure of Partner to operate and maintain the
                        Equipment (to the extent it is required to do so) in
                        accordance with the reasonable requirements of the
                        Documentation;

                   ii)  The defect, nonconformity or deviation was caused
                        directly and exclusively by equipment not supplied by
                        EOI, and which was provided subsequent to the provision
                        of an Acceptance Certificate by Partner, the interface
                        with which or use of which is not contemplated by the
                        Specification;

                   iii) Partner has not permitted EOI access to the Equipment to
                        remedy the defect, non-conformity or deviation during
                        the time period designated to that end in any applicable
                        Time Schedule;

                   iv)  Partner has not permitted EOI to install an update to
                        any Hardware or Software supplied by EOI which update is
                        required for fault prevention purposes and which causes
                        the Software to operate in a manner not in accordance
                        with the Specification;

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                   v)   The defect, nonconformity or deviation is attributable
                        directly and exclusively to the fact that the Equipment
                        has been modified by Partner in a material manner
                        without the prior written consent of EOI.

                   Notwithstanding the foregoing, EOI shall upon request by
                   Partner remedy defects, non-conformities and deviations
                   caused by any of the foregoing to the extent it is capable of
                   doing so, at EOI's reasonable prevailing charges for work of
                   the type concerned.

         10.6      EOI warrants that it has good and valid title to the
                   Equipment to be Delivered to Partner and with regard to any
                   license rights granted in respect of Software and
                   Documentation, that EOI has the right and the power to grant
                   such rights.

         10.7      Partner undertakes to comply with EOI's reasonable
                   instructions concerning disposal of defective Hardware and
                   Software once Partner receives replacements operating in
                   accordance with the requirements of this Agreement.

11.      PAYMENTS

         11.1      In relation to each and every separate Purchase Order,
                   payment of the corresponding Purchase Order Price shall be
                   made by Partner, as follows:

                   (i)  For Equipment B - [*] %) of the Purchase Order Price
                        shall be paid by Partner to EOI within [*] days of the
                        end of the calendar month of the date of Delivery,
                        provided that Partner has received a proper invoice from
                        EOI with respect of the relevant Purchase Order and of
                        the relevant Equipment at least 30 days before the due
                        payment date.

                   (ii) For Equipment A - [*] of the Purchase Order Price shall
                        be paid by Partner to EOI within [*] days of the end of
                        the calendar month of the date of Delivery, provided
                        that Partner has received a proper invoice from EOI with
                        respect of the relevant Purchase Order and of the
                        relevant Equipment at least 30 days before the due
                        payment date. [*] of the Purchase Order Price shall be
                        paid by Partner upon the earlier of: (i) Acceptance of
                        the relevant Equipment; or (ii) Commercial Use of the
                        relevant Equipment, provided that Partner has received a
                        proper invoice from EOI with respect of the relevant
                        Purchase Order and of the relevant Equipment. Partner
                        shall pay to EOI the VAT in respect of the invoices for
                        Equipment A and B not later than the 15th day of the
                        following month. For example, for an invoice issued on
                        September 25th, Partner shall pay the VAT to EOI not
                        later than October 15th.

                        EOI shall provide Partner with itemised invoices
                        identifying separately what products are Hardware and
                        Software. Each invoice shall be delivered together with
                        the Equipment.

                        Each invoice shall also reflect the utilization by
                        Partner of any Incentive Voucher.

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                   (iii) License fees due because of changes in software
                         capacity shall be paid on a [*] basis, within [*] days
                         from the date of issuance of the invoice.

                   (iv)  For Services (other than Maintenance Services) - [*] of
                         the Purchase Order Price shall be paid by Partner to
                         EOI within [*] days of the date of completion of the
                         Services, subject to the approval by Partner that the
                         relevant Services were completed during said [*] days,
                         to Partner's full satisfaction. For the avoidance of
                         doubt, issuance of an Acceptance Certificate shall be
                         deemed as Partner's approval of completion to its full
                         satisfaction.

                         In the event Partner shall not provide EOI with such
                         notice of approval, or rejection of completion of the
                         relevant Service to its full satisfaction, as the case
                         may be, within 7 days, Partner shall be deemed to have
                         approved the completion of the relevant Service to its
                         full satisfaction.

                   For the avoidance of doubt, payment under Sub-Clauses (i)
                   shall become due and be made with respect to each item of
                   Equipment ordered independently. For illustration purposes, a
                   Purchase Order that includes two different items of
                   Equipment, the lead time for Acceptance of one of which is
                   within [*] days and the lead time for Acceptance of the other
                   within [*] days, then - subject to the terms and conditions
                   of this Agreement, the payment schedule shall apply to each
                   such item separately with respect to its specific actual
                   Acceptance date.

         11.2      Save with respect to Liquidated Damages, which should be
                   dealt with in accordance with Clause 7A, any refund payable
                   by EOI under this Agreement shall be paid within 30 days
                   following formal written notification by Partner of the
                   required refund.

         11.3      All payments to EOI shall be made free and clear of any right
                   of set-off or counterclaim, by telegraphic transfer directly
                   to EOI'snominated bank account. Notwithstanding any other
                   provision of this Agreement, in no event shall EOI be
                   entitled to receive payment of an amount earlier than date
                   falling 30 days after EOI has given to Partner written notice
                   containing clear bank account details for the payment of that
                   amount.

         11.4      Partner shall reimburse EOI its reasonable expenses net of
                   savings incurred as a result of delay by Partner in complying
                   with its obligations under this Agreement in breach of its
                   obligations under this Agreement to the extent not
                   attributable to an event of Force Majeure or any breach or
                   delay by EOI or any other third party. EOI shall use
                   commercially reasonable endeavors to minimize such expenses.
                   The obligation of Partner under this Sub-Clause shall be
                   subject to the following:

                   (a)  The obligation of Partner under this Sub-Clause shall
                        only apply to expenses which are exclusively related to
                        the performance of EOI's obligations under this
                        Agreement and which EOI could reasonably be expected to
                        have incurred as a result of such delay.

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                   (b)  Partner shall be repaid such expenses forthwith in the
                        event that the expenses incurred as a result of the
                        delays involved are able to be recovered by EOI.

                   (c)  This Sub-Clause shall not apply to expenses in the
                        nature of overhead expenses or recurring expenses such
                        as rents.

                   (d)  The aggregate liability of Partner under this Sub-Clause
                        shall not exceed [*] or thereafter any multiple of [*]
                        without the prior written consent of Partner.

         11.5      EOI shall not be entitled to terminate this Agreement on
                   grounds of any delay of Partner in complying with its
                   obligations under this Agreement (other than any delay in
                   respect of an obligation to pay any money, provided however
                   that after the aggregate liability of Partner under this
                   Sub-Clause has reached [*] or any multiple thereof with
                   respect to any works EOI may issue a written request to
                   Partner that Partner agree to continue to be liable under
                   this Sub-Clause. If Partner does not agree to continue to be
                   so liable within 14 days after receipt of a written request
                   from EOI, EOI shall be entitled to exercise its right to
                   terminate its obligation to perform any uncompleted part of
                   this Agreement to the extent permitted under Clause 27.8
                   (Termination for Default) subject to the giving of notices
                   required by that Clause.

         11.6      Partner represents that it will have available sufficient
                   funds to enable it to meet its obligations under this
                   Agreement. If this representation ceases to be true prior to
                   payment being made in full, Partner shall notify EOI in
                   writing forthwith. EOI may in that event require that a
                   letter of credit or similar security be established on
                   reasonable terms to secure the obligations of Partner to EOI
                   under this Agreement.

         11.7      In the event that a Party fails to pay any amount to the
                   other Party when it falls due for payment under this
                   Agreement, that Party shall be entitled to charge interest on
                   the amount due and payable at an interest rate of LIBOR plus
                   [*]%) per annum calculated on a monthly basis from the date
                   the amount falls due for payment to the date of actual
                   payment in full.

                   For avoidance of doubt, interest shall not be payable on the
                   amounts payable by either party under this Sub-Clause unless
                   and until either party fails to make the relevant payment
                   required by its due date.

12.      TAXES, DUTIES AND LEVIES

         12.1      EOI shall be responsible for payment of any and all amounts
                   of EOI general corporate income tax as well as personal
                   income tax, and any and all charges relating to entry, work
                   permits and stay in the Territory for its respective,
                   employees, personnel, or any one acting on its behalf,
                   whether imposed in the Territory or elsewhere.

         12.2      All payments due under this Agreement shall be paid in United
                   States Dollars. Value Added Tax (VAT)shall be paid by Partner
                   directly to the relevant authority in Israel in accordance
                   with the applicable laws and regulations relating thereto,
                   subject to receipt

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                   of a proper VAT invoice. VAT relating to Services supplied by
                   EOI shall be invoiced by EOI and paid by Partner in
                   accordance with the applicable laws and regulations and
                   prevailing accounting practises relating thereto.

         12.3      EOI shall be recognized as the importer and/or exporter, as
                   the case may be, with respect of any and all Equipment
                   imported and/or exported into or out of the Territory under
                   this Agreement. EOI shall be responsible for payment of any
                   and all taxes, import, export and/or custom duties, charges,
                   dues and levies related to the import and/or export of
                   Equipment into and/or out of the Territory, as the case may
                   be. EOI shall further be responsible for obtaining type
                   approval from the Israeli Ministry of Communications, with
                   respect of any and all Equipment imported into the Territory
                   under this Agreement.

         12.4      If in accordance with present or future laws in the
                   Territory, EOI shall be obliged to pay, or Partner obliged to
                   deduct from any payment to EOI, any amount with respect to
                   any taxes or dues levied in the Territory, for which Partner
                   is responsible as stated above, Partner shall increase the
                   payment to EOI by an amount to cover such payment by EOI or
                   deduction by Partner.

         12.5      If in accordance with present or future laws in the
                   Territory, Partner shall be obliged to pay any amount with
                   respect to any taxes or dues levied in the Territory, for
                   which EOI is responsible as stated above, EOI shall pay such
                   amount to Partner on demand or Partner shall be entitled to
                   deduct such amount from any amount due by Partner to EOI.

         12.6      EOI on one side, and Partner on the other side shall bear
                   equally the costs of stamp duties, if applicable, with
                   respect to this Agreement.

12A      ACCESS TO WORK IN PROGRESS AND INSPECTION OF TECHNICAL DATA AND
         INFORMATION

         12A.1     EOI shall provide at its own cost, for design and progress
                   review meetings with Partner.

         12A.2     EOI shall make available to Partner upon request for
                   examination, evaluation, inspection and copying all
                   documentation relating to the performance of the Services,
                   including technical data and information relative to the
                   design and testing, including re-testing of any Equipment
                   being furnished under this Agreement.

         12A.3     EOI shall procure that all of their Sub-Contractors are
                   required to comply with obligations substantially the same as
                   those imposed on them under this Clause.

         12A.4     For the avoidance of doubt in this Clause 12A, "Partner"
                   includes its duly authorised agents and representatives. Such
                   agents and representatives shall be bound by non-disclosure
                   agreements substantially the same as the terms and conditions
                   of Clause 18.

                                                                              27



13.      PROJECT MANAGEMENT

         13.1      EOI shall act as project manager and shall be responsible for
                   the full and complete integration and Implementation of all
                   items of the Equipment purchased by Partner, with each other,
                   Partner's System and any applicable third party's system
                   including with the Network in accordance with the
                   Specifications.

         13.2      EOI shall appoint a Project Manager approved by Partner no
                   later than seven days after execution of this Agreement.
                   EOI's Project Manager shall be resident in the area of Tel
                   Aviv and shall be fully conversant with all of the Equipment,
                   or Services and shall have sufficient delegated authority to
                   make day-to-day decisions on the Site(s) during progress of
                   the Services to be provided under this Agreement. EOI's
                   Project Manager shall have full control of its staff and the
                   staff of its Sub-contractors on Site. The Project Manager
                   shall be a "Key Person" and subject to the provisions of
                   Clause 20A ("Key Personnel").

         13.3      Partner shall also appoint a Project Manager no later than
                   seven days after the execution of this Agreement to liaise
                   with EOI's Project Manager. Partner's Project Manager
                   shall be paid by Partner.

         13.4      EOI and Partner shall each be deemed to have granted its
                   Project Manager all authority required for that Project
                   Manager to carry out the obligations of a Project Manager
                   under this Agreement.

         13.5      EOI shall provide to Partner in a timely fashion all
                   information which Partner may from time to time reasonably
                   request in respect of the progress of the Services.

         13.6      EOI shall carry out the Project Management Services in
                   accordance with the reasonable directions of Partner. EOI
                   shall exercise its own skill and judgement in carrying out
                   all Services and Partner shall have no liability to EOI
                   arising out of or in connection with those Services other
                   than the obligation to pay for those Services as part of the
                   pursuant to the Purchase Order Price under this Agreement.

         13.7      At Partner's request, EOI shall provide Network Planning and
                   Operational Support Services, as described in the Maintenance
                   Agreement, for the periods, at the cost and on the additional
                   terms as shall be agreed between the Parties.

13A.     MARKET ADAPTATIONS

         Without derogating from Partner's rights, and EOI's obligations, under
         Clause 10 (Warranty), should changes in the configuration of existing
         System, Network or other third party network interoperating with the
         System necessitate modifications of the Equipment, then EOI shall upon
         request from Partner offer such Service specifying the price and
         Implementation plan of such modifications.

                                                                              28



14.      LICENSE AND INFORMATION

         14.1      Subject to the terms and conditions set forth in this Clause
                   14, Partner is hereby granted a non-exclusive, perpetual
                   (subject to revocation on ground of material breach) royalty
                   free paid up licence to use the Software and Documentation
                   (including any Intellectual Property Rights included in or
                   arising from the Software or the Documentation), for the
                   operation and maintenance of the Equipment or Part of
                   Equipment in accordance with this Agreement.

         14.2      Notwithstanding anything in this Agreement to the contrary,
                   it is understood that Partner receives no title or ownership
                   rights to the Software or Documentation, and all such rights
                   shall remain with EOI or its suppliers.

         14.3      Partner agrees that the Software or Documentation provided to
                   it by EOI under this Agreement or any renewals, extensions,
                   or expansions thereof, shall, be treated as proprietary and a
                   trade secret of EOI or its suppliers, and be subject to the
                   provisions of Clause 18 (Confidentiality). In pursuance of
                   the foregoing Partner shall:

                   (a)  not provide or make the Software or Documentation or any
                        portions or aspects thereof (including any methods or
                        concepts utilised or expressed therein) available to any
                        person except to its employees agents and contractors on
                        a "need to know" basis;

                   (b)  not make any copies of Software or Documentation or
                        parts thereof, except for archival backup purposes and
                        except that this provision shall not prevent the use of
                        CD Roms and the printing of materials from those CD
                        Roms;

                   (c)  when making permitted copies as aforesaid transfer to
                        the copy/copies any copyright or other marking on the
                        Software or Documentation;

                   (d)  not translate, adapt, arrange or error correct or make
                        any other alteration of the Software or Documentation;
                        and

                   (e)  not use the Software or Documentation for any other
                        purpose than permitted in this Clause 14

         14.4      Partner and any successor to Partner's title to the Equipment
                   or part of Equipment shall have the right without further
                   consent of EOI to transfer the Software licence granted in
                   Sub-Clause 14.1 to a third party which acquires the Equipment
                   or part of the Equipment, provided that such third party
                   agrees in writing to abide by all the terms and conditions of
                   this license.

         14.5      The obligations of Partner under this Clause 14 shall survive
                   the termination or expiration of this Agreement for any
                   reason.

         14.6      The Software licensed under this Agreement is delivered in an
                   inseparable package also containing other software programs
                   than the Software. In order to avoid doubt Partner may not in
                   any way use the other software programs. However, upon
                   Partner's request,

                                                                              29



                   EOI shall offer a licence to use such other software programs
                   to Partner on the same terms and conditions as stipulated in
                   this Agreement except for price.

         14.7      EOI warrants that the Documentation includes all
                   documentation referred to in the Specification or otherwise
                   necessary or desirable to operate the Equipment in accordance
                   with the provisions of this Agreement. EOI shall provide
                   Partner with all technical literature and additional
                   documentation from time to time as necessary or desirable to
                   enable Partner to operate the Equipment properly from time to
                   time. Without limiting the foregoing, in the event of supply
                   of new or amended Hardware or Software from time to time EOI
                   shall supply together with that Hardware or Software all
                   ancillary documentation, such documentation to be provided in
                   the same form and number of copies as the Documentation.

         14.8      EOI shall provide Partner with all know how required for the
                   establishment, operation and maintenance of the Equipment
                   from time to time and at all times for the term of the
                   Licence as renewed from time to time. Such know how shall be
                   deemed licensed to Partner on the same terms as the terms of
                   the Software, against consideration as shall be agreed
                   between the parties.

         14.9      In consideration of the payment by Partner for the applicable
                   Maintenance Services if and to the extent purchased by
                   Partner, in accordance with the Maintenance Agreement ,EOI
                   shall supply, install and commission Software Upgrades. EOI
                   shall supply all Software Upgrades at no extra charge other
                   than the annual subscription charges as aforesaid. It is
                   agreed that:

                   (a)  EOI shall give Partner as much advance notice in writing
                        as is reasonably possible in relation to proposed
                        Software Upgrades, but in any event not less than two
                        months advance notice in writing.

                   (b)  EOI shall agree with Partner the manner and timetable of
                        implementation of Software Upgrades and shall follow
                        Partner's reasonable instructions to minimise disruption
                        to the business of Partner in relation to the
                        implementation of the Software Upgrades.

15.      SOURCE AND OBJECT CODES

         15.1      For the avoidance of doubt, EOI shall supply, and install
                   copies of the object codes for or comprised in any Software
                   to be provided under this Agreement. The ownership of and or
                   rights to use such codes shall be as for the Software to
                   which such codes relates.

         15.2      EOI shall supply, install and commission all Software in
                   object code form. However, if EOI:

                   (a)  ceases to carry on its business, throughout the Ericsson
                        Group, for a period of at least [*] days other than due
                        to occurrence of an even of Force Majeure; or

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                   (b)  if Telefonaktiebolaget LM Ericsson is in a financial
                        position described in Clause 27.1(c) below,

                   EOI shall on demand by Partner deliver, or ensure that
                   Ericsson shall deliver, all Software to Partner in source
                   code form, other than Software owned by third parties that
                   EOI, or Ericsson, as the case may be, is not authorised to
                   provide. Partner shall only use that source code for
                   maintenance in accordance with this Agreement. Partner may
                   also provide that source code for the purpose of operation
                   and maintenance of the Software and sub-licence its use to
                   any third party employed by Partner to perform obligations
                   previously required to be performed by EOI under this
                   Agreement or the Maintenance Agreement. Partner may only do
                   so if the third party first undertakes in writing to keep the
                   source code confidential and only use it for the purpose of
                   performing its obligations owed to Partner. Partner shall be
                   responsible for any breach of this Agreement caused by the
                   third party.

16.      INTELLECTUAL PROPERTY RIGHTS - WARRANTY AND INDEMNITY

         16.1      EOI warrants that it has or will obtain at its own cost and
                   expenses all authorities and Intellectual Property Rights
                   necessary to enable EOI to grant rights and to meet its
                   obligations under this Agreement.

         16.2      EOI further warrants that the supply of any item of the
                   Equipment or Services will not infringe (or cause Partner to
                   infringe) any Intellectual Property Right of any third party.
                   EOI shall indemnify Partner completely and at all times from
                   all damages costs and expenses arising from any claim or
                   demand based wholly or partly on an allegation of such
                   infringement (including without limitation any demand or
                   claim brought against Partner by any sub-contractor, agent,
                   or assign of Partner or their respective officers and
                   employees) or the actions of EOI under this Clause. EOI
                   shall, at the request of Partner, defend or settle at EOI's
                   own cost any or all such claims or demands. Liability of EOI
                   under this indemnity for any amount paid by Partner to a
                   third party arising from a claim brought against Partner
                   shall not be subject to any limit on liability set out
                   elsewhere in this Agreement.

                   This indemnity is subject to the following:

                   (a)  Partner without delay informing EOI (as applicable) in
                        writing of any claim made by reason of alleged
                        infringement as aforesaid and giving EOI a reasonable
                        opportunity to elect by notice in writing to Partner to
                        defend or settle the claim (including by taking the
                        actions referred to in Sub-Clause 16.3) (the
                        "Election"). Partner may require that EOI gives to
                        Partner reasonable security for the payment by EOI of
                        amounts due by EOI under this Clause as a condition of
                        the Election. If EOI makes such an Election, and subject
                        to the grant of reasonable security as aforesaid,
                        Partner will refrain from acting on account of such
                        claims without the previous approval of EOI in writing
                        (which approval may not unreasonably be withheld or
                        delayed);

                   (b)  Partner promptly informing EOI in writing if legal
                        action is taken on account of such claim and if EOI has
                        made the Election, EOI shall have full authority to the
                        extent permitted by law to defend or settle the same
                        through its counsel;

                                                                              31



                   (c)  if EOI makes the Election, and subject to the grant of
                        reasonable security as referred to above, Partner
                        refrains from all steps in any legal action which may
                        prejudice EOI and which Partner is permitted by law to
                        refrain from taking;

                   (d)  that EOI shall not be liable under this indemnity to the
                        extent to which the infringement or alleged infringement
                        arises out of the use of the Equipment in combination or
                        conjunction with any other item not supplied or
                        manufactured by EOI, the interface with which is not
                        contemplated by the Specification.

                   In case EOI fails to act promptly against such claims or
                   actions once it makes the Election, Partner shall have the
                   right to take appropriate legal action and shall be repaid
                   any expenses incurred in so doing. If EOI exercises the
                   Election, it shall keep Partner reasonably informed of the
                   status of the claim and proceedings relating to the claim
                   from time to time and shall provide Partner with documents
                   and information reasonably requested relating to the same.

         16.3      Without derogating from any of the aforesaid, in the event of
                   any such claim or demand, or in the opinion of EOI such a
                   claim or demand is likely, then EOI shall at its own option
                   and expense either:

                   (a)  secure a license or any other arrangement to enable
                        Partner to continue to use or receive the benefit of the
                        Equipment provided by EOI; or

                   (b)  modify or replace that aspect of the Equipment which is
                        claimed to be an infringement such that it no longer
                        constitutes an infringement. Any such modification or
                        replacement shall not degrade performance.

         16.4      This Clause 16 provides EOI's sole liability and Partner's
                   sole remedy for claims of infringements of intellectual
                   property rights brought by a third party by reason of the
                   proper use of the Equipment.

17.      INFORMATION PROVIDED BY PARTNER - EXAMINATION

         17.1      EOI shall exercise due care to ensure that any data and
                   information, including but not limited to Site information,
                   supplied by Partner for the performance of this Agreement is
                   satisfactory, and shall notify Partner promptly if it is not
                   so satisfied.

         17.2      If the notification from EOI that such information is not
                   complete is not received by Partner within thirty (30) days
                   after despatch by Partner of such data and information to EOI
                   or within such further reasonable time-limit as may be
                   granted by Partner at the request of EOI, any right of the
                   EOI under this Agreement arising from or in any way pertinent
                   to the completeness of the receipt or the contents of such
                   data or information, or both them, shall be deemed to the
                   forfeited under this Agreement.

                                                                              32



         17.3      For the avoidance of doubt and without prejudice to the
                   foregoing, nothing in this Article 17 shall limit the right
                   for EOI to raise claims on the correctness and accuracy of
                   the information.

17A      PERFORMANCE BOND

         17A.1     Not later than 30 days from the date hereof, EOI shall
                   provide an autonomous, irrevocable and unconditional
                   performance bond in the form attached as Annex 8 (the
                   "Performance Bond") in an amount of [*]. The said Performance
                   Bond in the amount of [*] shall be valid for 12 months as of
                   the date of its issue. Thereafter, by not later than 30 days
                   before the expiry of the said 12 months and so forth, during
                   each year of this Agreement, EOI shall provide Partner with
                   an autonomous, irrevocable and unconditional annual
                   Performance Bond in the amount of [*]% of Partner's calendar
                   annual purchasing forecast. Partner shall give EOI 72 hours
                   prior written notice of its intention to make a demand on the
                   Performance Bond specifying the reasons for the demand.

                   For the avoidance of doubt, it is clarified that the
                   requirement for specification of reasons for the demand
                   referred to above shall neither derogate nor have any effect
                   whatsoever on the autonomous and unconditional nature of the
                   Performance Bond, thus, after giving such notice, Partner
                   shall have the unconditional right to demand payment under
                   the Performance Bond, in accordance with the terms and
                   conditions of the Performance Bond, irrespective of whether
                   ERA and/or EOI recognizes the validity of Partner's reasons
                   for the demand or not.

                   Upon any amount being drawn under the Performance Bond in
                   excess of US$ [* ], EOI shall reinstate the Performance Bond
                   to the then currently valid Performance Bond amount.

         17A.2     The Performance Bond shall be provided by EOI at its own cost
                   and no claim will be considered by Partner on account of
                   interest or the charges related to the Performance Bond.

         17A.3     The Performance Bond shall be issued by a first-class Israeli
                   or other reputable international Bank acceptable to Partner.

         17A.4     The Performance Bond shall be valid through the end of the
                   Warranty Period.

         17A.5     Partner shall be entitled to assign the benefit of the
                   Performance Bond to a permitted assignee to whom it assigns
                   the Agreement under Section 22.

         17A.6     In the event that the EOI fails to provide the Performance
                   Bond in accordance with this Clause, without limiting any
                   other remedy of Partner under this Agreement, Partner shall,
                   notwithstanding any other provision to the contrary in this
                   Agreement, be entitled to withhold sums due to EOI under this
                   Agreement, until Partner holds the amount equivalent to the
                   amount of the Performance Bond. The sums so deducted shall

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                   be held by Partner in place of the Performance Bond and
                   Partner shall be entitled to utilize such sums in the same
                   way as if it had made calls on the Performance Bond.

18.      CONFIDENTIALITY

         18.1      The Parties undertake and agree that all the information
                   concerning a disclosing Party and any of the disclosing
                   Party's subsidiaries, affiliates, agents, assigns or
                   representatives, the disclosing Party's telecommunications
                   activities, subscribers, business, operations systems,
                   software and any other information is confidential to such
                   disclosing Party unless it is or becomes in the public domain
                   other than through the default of receiving Party or its
                   affiliates, already known to the receiving Party or received
                   from any third party without any restriction and shall not be
                   disclosed under any circumstances by the receiving Party, its
                   Sub-contractors, affiliates, agents, or representatives, who
                   shall not use the same or any part thereof or any knowledge
                   acquired as a result of this Agreement or its dealings with
                   any other company within the Territory.

         18.2      Partner shall be entitled to use confidential proprietary
                   information and information referred to in Sub-Clause 18.1
                   for the purpose of its business carried on under the GSM
                   License.

         18.3      The liability of the Parties under this Clause 18 shall not
                   be excluded or limited under Clause 36.

         18.4      EOI warrants and undertakes that each of their respective
                   employees and agents and any other person involved in the
                   provision of any Services will comply with the terms of this
                   Clause 18 as if they were parties thereto and shall be
                   responsible for any breach thereof as if such breach were
                   committed by EOI. In addition, EOI shall upon request by
                   Partner from time to time provide Partner with a list of all
                   its employees engaged in the performance of any Services at
                   any Site or premises occupied or to be occupied by Partner,
                   together with their ID ("teudat zehut") or passport numbers.

         18.5      The Parties undertake to procure that each of their
                   respective Sub-contractor, affiliate, agent, or
                   representative affected by this Clause 18 executes an
                   undertaking to be bound by provisions substantially the same
                   as those contained in this Clause 18.

         18.6      Partner may require that prior to employees of EOI or its
                   Sub-Contractors or other persons undertaking any Services,
                   such persons or those of them designated by Partner undertake
                   a security briefing to be organised by Partner. Partner
                   reserves the right to refuse to permit persons to be involved
                   in the provision of certain Services unless approved by
                   Partner. EOI shall have the right to have a representative
                   present at such briefings.

         18.7      Notwithstanding the foregoing and Clause 23, either Party
                   shall be entitled to disclose information concerning this
                   Agreement or the other Party:

                   (a)  to the extent required by law; or

                   (b)  if requested or required to do so by any court of
                        competent jurisdiction, government, governmental agency
                        or authority;or

                                                                              34



                   (c)  to a shareholder of that Party provided that each Party
                        shall be responsible for any breach by that Party's
                        shareholder of this Clause 18 and shall bring to the
                        attention of the shareholder the requirements of this
                        Clause; or

                   Partner shall be entitled to disclose information concerning
                   this Agreement or EOI to the extent reasonably necessary in
                   connection with the obtaining of funding. Partner shall use
                   reasonable endeavours to secure a written confidentiality
                   undertaking from the receiving party in this case.

                   Notwithstanding any other regulation in this Contract,
                   Partner hereby consents to the disclosure of such information
                   in relation to this Contract limited to information specified
                   in the EOI's normal invoice forms issued to Partner from time
                   to time and that may be necessary for EOI to assign any
                   receivables to any known bank or insurance company operating
                   under a license granted by the relevant authority in such
                   institution's jurisdiction, but not by way of public offering
                   document, subject to the execution by such bank or insurance
                   company of a confidentiality undertaking conforming to the
                   provisions of this Clause 18.

19.      LOSS AND DAMAGE, INDEMNITY

         19.1      Each Party (for purposes of this Clause - "Indemnifying
                   Party") shall be liable for, and shall indemnify the other
                   Party/ies (for purposes of this Clause - "Indemnified Party")
                   against any expense, liability, loss, claim or proceedings
                   whatsoever arising under any statute or at common law in
                   respect to personal injury to, or death of any person arising
                   out of any act or omission of the Indemnifying Party or of
                   any person for whom the Indemnifying Party is responsible.
                   Liability under this Sub-clause shall not be limited by
                   Clause 36 which shall not apply to liability under this
                   Sub-Clause.

         19.2      Each Party (also "Indemnifying Party") shall be liable for
                   and shall indemnify the other Party/ies against any expense,
                   liability, loss, claim or proceedings arising under any
                   statute or any law in respect of loss, injury or damage to
                   any property of another Party or of a third party insofar as
                   loss, injury or damage arises out of any act or omission of
                   the Indemnifying Party or any person for whom the
                   Indemnifying Party is responsible and is not caused by the
                   breach of this Agreement or negligence of the other
                   Party/ies. Liability under this Sub-Clause shall not be
                   limited by Clause 36 which shall not apply to liability under
                   this Sub-Clause. The liability of either Party under this
                   Sub-clause shall not exceed US$[*] for each occasion of
                   damage, provided that the limitation of liability provided
                   for in this Sub-Clause shall not apply to liability of the
                   Indemnifying Party to the extent of any loss, injury or
                   damage due to the negligence or wilful default of the
                   Indemnifying Party or any person for whom the Party is
                   responsible. For the purpose of this Sub-Clause, each Party
                   shall have responsibility for its Sub-contractors.

         19.3      Subject to Clause 36, each Party shall indemnify the other
                   Party/ies and keep the other Party/ies indemnified against
                   any expense, liability, loss, claim or proceedings brought

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                   against or suffered by the other Party/ies as a result of
                   breach by that Party of any of its obligations and/or
                   Warranties under this Agreement.

         19.4      In the event of any workman or other person employed by EOI
                   or any of its respective Sub-Contractors in connection with
                   this Agreement, suffering death or any personal injury and
                   whether there be a claim for a compensation or not, EOI shall
                   without delay give notice in writing of such personal injury
                   to Partner.

         19.5      Neither Partner and/or any owner/lessor of any Site nor
                   anyone acting on its or their behalf, shall be liable for any
                   loss or damage, for any reason whatsoever, to any equipment,
                   tools, materials and/or test gear of EOI or any of its
                   Subcontractors or anyone acting or their behalf which is
                   brought to any Site, and all such liability is hereby
                   expressly waived by EOI, provided that the foregoing shall
                   not apply in favor of any person who willfully caused such
                   loss or damage.

20.      INSURANCE.

         20.1      Without derogating from EOI's liability under this Agreement
                   or any applicable law EOI undertake to procure - through an
                   authorized reputable insurance company (with S&P "A" rating
                   or better or confirmation that reinsurers have S&P "A" rating
                   or better)- and to maintain, at their sole expense, and for
                   such time as they are required to perform any Delivery or
                   Services hereunder or under the Maintenance Agreement and/or
                   during the Warranty Period for any Equipment supplied
                   hereunder, the insurances detailed hereunder (herein " EOI's
                   Insurances"):

                   20.1.1 An Erection All Risks Insurance issued in the name of
                   EOI and/or Sub-Contractors of any tier and/or Partner
                   covering the following:

                   Section 1 - All Risks Property Damage in respect loss or
                               damage to property of any form forming part of
                               the Delivery and/or Services (including
                               incidental civil works and infrastructures of any
                               form) occurring prior to issuance of Acceptance
                               Certificate by Partner as well as in respect of
                               loss or damage discovered or occurring during a
                               maintenance period of 12 months from date of
                               issuance of the Acceptance Certificate
                               (herein"Insurance Maintenance Period") as a
                               result of any insured cause which arose during
                               the period of erection, Implementation and/or
                               installation. This section shall be extended to
                               cover:

                             - loss of or damage to property worked upon or
                               surrounding property subject to a limit of at
                               least US$ 250,000.- per occurrence.

                             - loss of or damage to any equipment, tools,
                               materials and/or test gear utilised in the
                               performance of the Delivery and/or Services.

                             - Loss of or damage to property of any form
                               forming part of the Equipment and/or Services
                               whilst in transit into and/or within the
                               Territory (including interim storage) either
                               under this policy or covered under a separate
                               policy.

                                                                              36



                   Section 2 - Third Party Liability Insurance issued in the
                               name of EOI and/or Sub-Contractors of any tier
                               and/or Partner and/or those owners/lessors whom
                               they have contracted to insure with a limit of at
                               least US$ [*] - per occurrence and in the
                               aggregate per Site, in respect of liability at
                               law for death and/or bodily or personal injury
                               and/or property damage caused by acts or
                               omissions during the performance of the Delivery
                               and/or Services hereunder or during the Insurance
                               Maintenance Period.

                   The policy is to include Auto Liability (excluding such
                   liability insured under the "Compulsory Auto Insurance") in
                   excess of any coverage insured under a standard Auto Policy
                   or in excess of $[*] any one event whichever is the higher.

                   Section 1 above shall include a waiver of subrogation in
                   favor of the owners/lessors of the Sites as well as in favor
                   of any other interested party towards whom Partner has so
                   undertaken; provided however the said waiver shall not inure
                   to the benefit of any person having willfully caused any loss
                   or damage.

                   20.1.2 Employers Liability Insurance issued in the name of
                   EOI subject to a limit of liability applicable to each policy
                   of at least US$[*] - per occurrence and in the annual
                   aggregate (and EOI will undertake to obtain from their
                   Contractors or sub-contractors equivalent coverage - subject
                   to a limit of liability of at least $[*] per occurrence and
                   in the aggregate) covering liability at law for death, bodily
                   injury, illness or disease sustained by any Employee engaged
                   in the performance of the Delivery and/or Services during and
                   as a result of performance of the Delivery and/or Services.
                   These insurances shall be extended to indemnify Partner
                   and/or the lessor/owner of any Site should they be deemed,
                   for the purpose of any work related accident, to bear any
                   duty as an employer towards such person engaged in the
                   performance of the Delivery and/or Services. Furthermore the
                   insurance shall include a waiver of subrogation in favor of
                   Partner and/or such lessor/owner and anyone acting on their
                   behalf.

                   20.1.3 Combined Products and Professional Liability Insurance
                   issued in the name of EOI and/or Partner and/or those
                   Landlords and/or Sub-Contractors of any tier whom they have
                   contracted to insure subject to a limit of indemnity of a
                   least US$ [*] - any one occurrence and US$ [*] - in the
                   annual aggregate covering EOI's liability at law (including
                   liability in respect of any act or omission of any person or
                   entity acting on their behalf, whether as Sub-Contractors or
                   otherwise) deriving from any act or omission in the
                   performance of the Delivery and/or Services or from any
                   defect of fault therein. This insurance shall be extended to
                   indemnify Partner in respect of any liability deriving from
                   the performance of the Delivery and/or Services or from any
                   defect or fault therein. The policy will include a cross
                   liability clause.

         20.2      The insurances noted in clause 20.1 above shall include an
                   express condition whereby they shall take precedence over any
                   insurance maintained by Partner and/or

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                   any Site owner/lessor and the insurers shall waive any right
                   as to participation by Partner and/or the Site owners/lessors
                   insurers.

         20.3      Furthermore the insurances noted in clause 20.1 above shall
                   include an express condition whereby they shall neither be
                   restricted, changed or cancelled without the express written
                   permission of Partner. unless at least 60 days' prior written
                   notice be given to Partner by registered mail.

         20.4      Within 14 days of date of execution hereof , EOI (as
                   applicable) shall, submit to Partner Insurance Certificates
                   duly signed by their Insurer. The submission of such
                   certificates and/or their review or inspection by Partner,
                   shall not relieve EOI of any of its undertakings hereunder

         20.5      In addition to the insurances noted in clause 20.1 above,
                   where applicable, EOI shall procure (and/or undertake to
                   obtain from their Contractors or sub-contractors confirmation
                   that they have procured) and/or shall and maintain the
                   following insurances in respect of any motor vehicle
                   (including mobile cranes and any other mobile equipment)
                   utilized in the performance of the Delivery and/or Services
                   hereunder, respectively:

                   20.5.1     Compulsory insurance covering liability which is
                              required to be insured under the requirements of
                              the Vehicle insurance Ordinance [New Version],
                              1970.

                   20.5.2     Comprehensive motor insurance (subject to a waiver
                              of indemnity in favor of Partner, any Site
                              lessor/owner or anyone acting on their behalf) as
                              well as third party liability insurance (excluding
                              compulsory liability noted in clause 20.4.1 above)
                              with a limit of liability of at least US$
                              100,000.- which shall be extended to indemnify
                              Partner and/or Site Lessor/owner in respect of any
                              liability devolving upon thyem as a result of the
                              utilization of such vehicles.

         20.6      If at any time Partner is notified by EOI's insurer/s that
                   any of EOI's Insurances are about to be cancelled, expire or
                   be restricted, EOI shall re-procure (and/or undertake to
                   obtain from their Contractors or sub-contractors confirmation
                   that they have re-procured) such insurance no later than 30
                   days' prior to the date of such cancellation, expiry or
                   restriction.

         20.7      For avoidance of doubt, it is agreed the limits of indemnity
                   noted in clauses 20.1 & 20.4 above represent a minimum
                   requirement, EOI undertake to assess their exposure to
                   liability and determine the limits of liability accordingly.

         20.8      Throughout the performance of this Agreement, EOI shall
                   comply with Israeli National Insurance Law and all
                   regulations and orders thereunder so as to ensure that all
                   Israeli personnel employed or engaged by or on behalf of EOI
                   in the performance of such Delivery and/or Services, shall be
                   entitled to the full benefits under such law. The foregoing
                   shall not apply with respect to any non-Israeli personnel
                   engaged in the performance of this Agreement, in respect of
                   whom EOI shall effect and maintain National Insurance and/or
                   Workmen's Compensation Insurance as required under the

                                                                              38



                   law applying to the employment of such persons. Furthermore
                   EOI shall procure adequate and suitable travelers insurance
                   on behalf of all non-Israeli personnel, whilst sojourning in
                   the Territory (including medical expenses, hospitalization
                   and repatriation expenses).

20A.     KEY PERSONNEL

         20A.1     EOI shall identify prior to or within 7 days of the date of
                   the execution of this Agreement, the individuals who are
                   necessary for the successful performance of this Agreement
                   ("Key Personnel" or "Key Person" as appropriate) and shall
                   furnish Partner with a statement of qualifications and past
                   experience, for each, sufficiently complete to enable Partner
                   to assess the ability of such Key Personnel to provide for
                   smooth co-operation with Partner, throughout the term of this
                   Agreement.

         20A.2     Key Personnel designated by EOI shall be subject to approval
                   by Partner, such approval not to be unreasonably withheld.
                   Key Personnel approved by Partner shall not be removed from
                   the performance of the Services unless replaced with
                   personnel of substantially equal qualifications and
                   abilities, who are approved by Partner. Partner may require
                   from time to time that any Key Personnel be replaced by other
                   persons approved by Partner under this Sub-Clause if the Time
                   Schedule is not being met, or if EOI is otherwise in breach
                   of this Agreement, or if Partner reasonably forms the opinion
                   that such replacement will benefit the Services. Nothing in
                   this Clause 20A shall relieve EOI of any of their obligations
                   or responsibility for any acts or omissions of their Key
                   Personnel under this Agreement.

21.      CHANGES

         21.1      Either Party may, at any time, by change proposal, request
                   changes to be made to the performance of this Agreement. The
                   other Parties shall respond to such a proposal within 14 days
                   after receipt. Upon such change proposal being made by either
                   Party, EOI shall provide Partner within 14 days after the
                   date of the proposal with the proposed schedule of all
                   alterations which would need to be made in the performance of
                   this Agreement and, if applicable, the modified prices, as a
                   consequence of such proposed change.

         21.2      If the Parties agreed in writing on the implementation of the
                   proposed change, including any adjustment of the terms
                   thereof, EOI shall proceed therewith, as agreed. It is
                   specifically agreed that no such changes may affect any
                   Purchase Order.

22.     ASSIGNMENT OF AGREEMENT

         22.1      Subject to Sub-Clause 22.3, 22.4 and Clause 37
                   (Sub-Contractor), neither Party shall assign, Sub-Contract or
                   delegate, either in whole or in part, this Agreement or any
                   of its rights, duties or obligations thereunder to any person
                   or entity, use it as capital to establish a company, or set
                   up an association with another company for its fulfilment,
                   without prior express written approval of the other Parties.

         22.2      Notwithstanding any conditions under which either Party
                   ("Consentor") may grant its approval to any assignment by
                   another Party ("Assignor") the Assignor shall remain a

                                                                              39



                   guarantor to the Consentor of the performance in accordance
                   with this Agreement and all applicable laws, of the assigned,
                   subcontracted or delegated duties and obligations.

         22.3      Partner may assign all or part of the benefit of this
                   Agreement (including this right of assignment) to:

                   (a)     its lenders or financial investors and to any person
                           upon the exercise of a power of sale by such lender
                           or financial investor;

                   (b)     a purchaser of the business of Partner or part of
                           that business; or

                   (c)     any affiliate of Partner.

                   Partner shall give prior written notice of any assignment to
                   ERA and EOI but shall not be required to seek their prior
                   consent to that assignment.

         22.4      EOI may assign all or part of the benefit of this Agreement
                   to a member of the Ericsson Group, provided that EOI (as the
                   case may be) shall continue to be responsible for their
                   obligations under this Agreement and provided that assignment
                   shall not be made to a company which, in the reasonable
                   opinion of Partner, may prejudicially affect the relations of
                   Partner with the government of Israel or which may infringe
                   Israeli law or policy from time to time. EOI (as the case may
                   be) shall give Partner not less than 14 days advance written
                   notice of any proposed assignment under this Clause setting
                   out details of the proposed assignment and shall supply
                   Partner forthwith upon request with such further information
                   it may reasonably require in relation to the same.

         22.5      Notwithstanding any other regulation in this Agreement,
                   Partner hereby consents to any assignment of any rights, of
                   EOI in relation to any receivables arising under this
                   Agreement, subject to all the terms and conditions of this
                   Agreement. For the avoidance of doubt, any such assignment
                   would in no way affect the obligations of EOI to Partner
                   under this Agreement and would not lead to any additional
                   obligations on the part of Partner and in particular, shall
                   neither create any relationship whatsoever between Partner
                   and such assignee of the Contractor, nor any obligation
                   and/or liability of Partner towards such assignee and the
                   provisions of this clause shall in no event be construed as
                   inuring for the benefit of any third party whatsoever.

23.      PUBLICITY RELATED TO AGREEMENT

         23.1      Each Party shall obtain the prior express consent of the
                   other Party (-ies) as to the issue, content and timing of any
                   news releases, articles, brochures, advertisement, prepared
                   speeches or other information releases related to this
                   Agreement, to be issued by that Party, a sub-contractor or
                   any employee, designee, assignee or consultant of that Party.
                   Any such release shall be submitted in draft form, 14 days
                   prior to the printing of same, to the other Party (-ies) for
                   approval indicating the countries in which it will appear.
                   This Sub-Clause shall only apply to Partner to the extent to
                   which the release in question contains the name of the EOI or
                   details of the terms and conditions of this Agreement.

                                                                              40



         23.2      If requested by Partner, EOI shall negotiate in good faith to
                   enter into a separate agreement with Partner containing those
                   parts of this Agreement Partner is required to disclose to
                   the Government of Israel.

24.      ARBITRATION AND APPLICABLE LAW

         24.1      This Agreement shall be interpreted, construed and governed
                   by the laws of the State of Israel. Any dispute arising under
                   or in connection with this Agreement shall be finally and
                   conclusively settled under the Rules of Arbitration of the
                   International Chamber of Commerce in Tel Aviv by three
                   arbitrators appointed according to said rules (the
                   "Arbitrators")

         24.2      The Arbitrators shall not be bound by the rules of evidence
                   or procedure in conducting any arbitration hereunder. The
                   Arbitrators' determination shall be conclusive and binding
                   upon the Parties. All arbitration proceedings shall be
                   conducted in English, in Tel Aviv. EOI shall bear one half of
                   the costs of such arbitration and Partner shall bear the
                   other half, unless the arbitration award shall determine
                   otherwise.

         24.3      This provision shall constitute an arbitration agreement.

         24.4      EOI shall procure from each of their Subcontractors, their
                   consent and agreement to be bound by the foregoing
                   arbitration agreement, and to participate as a party at any
                   such proceedings upon demand by EOI or Partner.

         24.5      Disclosure of any Confidential Information in the course of
                   arbitral proceedings shall not derogate from either Party's
                   confidentiality obligations under Clause 18. Such
                   Confidential Information shall continue to be Confidential
                   Information, subject to Clause 18. The Parties undertake and
                   agree that all arbitral proceedings conducted under this
                   Clause, and the results thereof, shall be kept strictly
                   confidential in accordance with the provisions Clause 18.

25.      TIME-LIMITS

         Any time limit to which this Agreement obliges EOI or Partner shall be
         counted from the day following that of the event marking the start of
         the time limit and shall end on the last day of the period laid down.
         When the last day of the time limit is a Friday, Saturday or obligatory
         day of rest in the case of an obligation to be undertaken in Israel, or
         a Saturday, Sunday or legal holiday in any other case, this time-limit
         shall be extended to the first working day following.

26.      FORCE MAJEURE

         26.1      The term "Force Majeure" in respect of a Party means an event
                   beyond the reasonable control of that Party without the fault
                   or negligence of that Party, including acts of God, acts of
                   government, fire, flood or storm damage, earthquakes, labor
                   disputes, war, riot, or delays in the performance of its
                   subcontractors cause by any such circumstances as referred to
                   in this Section, but these events do not include in the case
                   of:

                   (a)     any act or omission (including delay) of a supplier,
                           carrier, Sub-contractor, agent or representative of
                           the Party or its Sub-contractors other than due to an
                           event of

                                                                              41



                           the type described above beyond the
                           reasonable control of that person and occurring
                           without the fault or negligence of that person;

                   (b)     any failure to obtain any export or import licence or
                           other authorisation for which EOI is expressly
                           responsible for obtaining under this Agreement other
                           than where such a failure is caused by an event
                           described above, such as any government giving effect
                           to a modification of export regulations hence
                           prohibiting the Delivery;

                   (c)     any act or omission (including delay) of an associate
                           or affiliate of the Party or its Sub-contractors
                           unless due to an event of the type described above
                           beyond the reasonable control of that person and
                           occurring without the fault or negligence of that
                           associate or affiliate;

                   (d)     lack of workers in the Territory, or other
                           disruptions such as closure, curfew, acts of
                           terrorism, actions regarding the "Intefada", and
                           rainy days.

                   The Parties warrant that they are not aware of any
                   circumstances which are likely to give rise to any labor
                   strike, dispute or disturbance which may affect the
                   performance of their obligations under this Agreement.

         26.2      Neither Party shall be responsible for delay in performing
                   any obligation under this Agreement within the time limit
                   required for such performance, due to Force Majeure affecting
                   that Party provided that notice thereof is given to the other
                   Parties within 10 days after such event has occurred.

         26.3      Upon the occurrence of Force Majeure, and with proper notice
                   as set forth above, such schedule or time-limit for
                   performance shall be extended accordingly, provided that the
                   Party wishing to rely upon the Force Majeure event makes
                   commercially reasonable efforts to minimise such delay. If
                   the delay continues beyond twelve (12) months after the date
                   of proper notice as set forth in 26.2 above, taking into
                   account the requirements of Partner in relation to the
                   delayed Equipment or prompt performance of any other
                   obligation under this Agreement, Partner may, upon notice of
                   30 days to EOI terminate this Agreement in whole or in part,
                   without incurring any financial obligations to EOI as a
                   consequence of such termination..

         26.4      In the event of the occurrence of Force Majeure which will
                   result in EOI being unable to perform their obligations under
                   this Agreement by the date being twelve (12) months after the
                   date of proper notice as set forth in 26.2 above, EOI shall
                   have the right to terminate this Agreement in whole or in
                   part by 30 days written notice to Partner, without incurring
                   any financial obligations to Partner as a consequence of such
                   termination.

         26.5      The following provisions shall apply in respect of
                   termination of this Agreement for Force Majeure: the Purchase
                   Order Price payable by Partner to EOI as applicable shall
                   (after taking into account amounts previously paid under this
                   Agreement) be the price (as specified in the relevant
                   Purchase Order) of such parts of the Equipment, and Services
                   as are Accepted at the date of termination. As for Equipment
                   delivered but not yet Accepted by the date of termination
                   Partner shall have the option to either (i) retain

                                                                              42



                   the Equipment in consideration for paying such price that
                   shall be mutually agreed by the parties, or (ii) notify EOI
                   that it does not wish to retain the Equipment, in which case
                   EOI has right to repossess the Equipment and EOI shall refund
                   Partner all payments already made for such Equipment.

27.      TERMINATION FOR DEFAULT

         27.1      If:

                   (a)     EOI (other than as a result of breach of this
                           Agreement by Partner or due to an event of Force
                           Majeure) is delayed in the delivery of Equipment or
                           the performance of Services beyond any Agreement
                           Milestone, by a period of more than 30 days in total;
                           or

                   (b)     either Party commits any material breach of the
                           Agreement and fails to remedy such breach if it is
                           capable of remedy, within 30 days of written notice
                           from the other Party/ies setting out the nature of
                           the breach or in the case of any amount payable by
                           that Party fails to make payment within 20 days after
                           such payment falls due for payment in the absence of
                           a bona fide dispute as to that payment; or

                   (c)     either Party becomes insolvent or if its financial
                           position is such that within the framework of its
                           national law, legal action leading towards insolvency
                           has been taken against it by its creditors and is not
                           dismissed within 60 days of its commencement and
                           fails to rectify the position within 14 days after
                           written notice from the other Party/ies requiring it
                           to do so; or

                   (d)     either Party resorts to fraudulent practices in
                           connection with the Agreement, especially by deceit
                           concerning the nature, quality or quantity of goods
                           and services required to be rendered under this
                           Agreement or by the giving or offering of gifts or
                           remuneration for the purposes of bribery to any
                           person in the employ of the other Party/ies or their
                           consultants or agents or whatever nature, acting on
                           behalf of them and the other Party/ies gives not less
                           than 14 days notice in writing describing the facts
                           alleged to fall within this Paragraph;

                   the other Party/ies ("Terminating Party") may, subject to the
                   following provisions of this Clause 27, by notice in writing
                   to the Party concerned, terminate this Agreement.

         27.2      In the event that the Terminating Party is Partner, Partner
                   may terminate EOI's right to proceed with the Services. In
                   such event Partner may take over the Implementation Services,
                   and proceed with the same to completion of the Services and
                   may upon payment of agreed fees for licenses and products
                   take possession of any of EOI's software, equipment to the
                   extent reasonably required to complete the Services. Any such
                   software shall be licensed under the terms of Clause 14
                   (License and Information). Risk of loss to any such equipment
                   shall pass to Partner upon Partner taking possession thereof
                   and title to hardware shall pass upon full payment. EOI shall
                   procure that the aforesaid is supplied promptly to Partner
                   and shall also procure, from any of their Sub-contractors,
                   identical rights as are provided in this Clause; and whether
                   or not Partner's rights herein are exercised, termination
                   under this Clause 27 of the Agreement shall take effect
                   immediately.

                                                                              43



         27.3      Notwithstanding the foregoing, Partner shall notwithstanding
                   any termination of this Agreement, be entitled to continue to
                   use after termination on the terms of this Agreement any
                   Hardware or Software delivered to Partner for which Partner
                   has made full payment, provided that this paragraph shall be
                   without prejudice to Partner's obligations with respect to
                   the Software under Clause 14 of this Agreement. This Clause
                   27.3 is however not applicable if EOI terminates the
                   Agreement, or revokes an IPR license, because of material
                   breach by Partner.

         27.4      If Partner so terminates EOI's right to proceed, EOI shall
                   pay any reasonable increased costs occasioned by Partner in
                   completing the Services. Partner shall take reasonable
                   measures to mitigate its costs of doing so, provided that
                   such steps do not hinder the Time Schedule for completion of
                   the Services.

         27.5      Prior to issuing to EOI a notice of termination of this
                   Agreement as a result of an event set out in Paragraph (a) of
                   Sub-clause 27.1, Partner shall give reasonable consideration
                   to any written submission made by EOI under which EOI
                   proposes a plan for the completion of delivery of Equipment
                   and/or performance of Services without additional cost to
                   Partner so that Acceptance will occur no later than 30 days
                   after the date for Acceptance set out in the Time Schedule.
                   If EOI establishes that it will do so, Partner shall not
                   unreasonably terminate this Agreement as a result of the
                   delay in question.

         27.6      The rights of each Party under this Clause 27 are in addition
                   to, and without prejudice to, or forfeiture of, any other
                   rights or remedies that either Party may have under this
                   Agreement as a consequence of any default by either Party
                   under this Agreement, except as otherwise expressly stated.

         27.7      Prior to either Party terminating this Agreement as a result
                   of a failure to make payment under Paragraph 27.1(b) above,
                   the Party proposing to terminate must give notice in writing
                   of its intention to do so no less than 5 days prior to the
                   date upon which the Party proposes to terminate this
                   Agreement, setting out its intention to terminate. A Party
                   claiming that there is a bona fide dispute for the purpose of
                   that Paragraph must, within the 20 day period referred to in
                   Paragragh 27.1(b), give written notice to the other Parties
                   setting out the nature of the dispute.

         27.8      If EOI become entitled to terminate this Agreement as a
                   result of a failure by Partner to make payment, the
                   requirements of Sub-Clause 27.7 having been satisfied and
                   there being no bona fide dispute as to the payment, EOI may
                   elect by notice in writing to Partner to delay the
                   performance of their obligations under this Agreement until
                   the payment in question has been made. The written notice
                   shall set out the obligations proposed to be delayed.

                                                                              44



         27.9      If EOI is in breach of this Agreement and fail to provide any
                   Equipment or Services in accordance with this Agreement
                   within the Time Schedule required by this Agreement and
                   Partner would be entitled to terminate this Agreement as a
                   result thereof under Clause 27.1, Partner reserves the right
                   in lieu of termination to purchase and/or use hardware,
                   software or services from or through a third party. Partner
                   shall in such case have the right to deduct the cost of
                   hardware and software so purchased that are functionally
                   identical to Hardware and Software ordered by Partner but not
                   yet delivered by EOI. EOI shall not be responsible for the
                   quality of such hardware, software or services purchased
                   and/or used by Partner, or its compatibility with the
                   Equipment.

         27.10     Termination under this Clause 27 shall be without prejudice
                   to rights accrued to either Party prior to termination.

27A.     TERMS AND TERMINATION FOR CONVENIENCE

         27A.1     This Agreement shall be valid and bind the parties hereto for
                   the period of the Term, and any extension thereof, if and to
                   the extent Partner exercises its Option. Notwithstanding the
                   aforesaid, Partner may terminate this Agreement for its
                   convenience at any time upon [*] . In the event of such
                   termination by Partner, it is agreed that the termination
                   charges shall be the reasonable cost incurred by EOI in
                   connection with the performance of the the obligations under
                   this Agreement prior to termination, including reasonable
                   costs incurred with respects to termination and settlement
                   with their Sub-contractors or suppliers as a result of such
                   termination, and including a reasonable return on costs
                   incurred for the period pending termination. The parties
                   shall negotiate in good faith regarding the termination
                   charges. EOI shall use commercially reasonable endeavours to
                   minimise such costs and ensure that such costs are reasonable
                   in all the circumstances. EOI shall comply with Partner's
                   reasonable directions regarding reduction of such costs.

         27A.2     EOI shall notify Partner of all proposed settlements with
                   their Sub-contractors in the event of termination and shall
                   not enter into any binding settlement until Partner has
                   approved the proposed settlement.

         27A.3     For Equipment and materials that were not yet shipped to
                   Partner, EOI shall not be entitled to require Partner to take
                   and pay for such Equipment or materials unless such Equipment
                   or materials were purchased or manufactured specifically for
                   the purposes of, and irrevocably allocated by EOI to the
                   performance of, this Agreement, and are perfect and fit for
                   use and cannot be used by EOI for any alternative purposes.

         27A.4     Direct and indirect costs shall for the purpose of this
                   Clause 27A be determined in accordance with the EOI's regular
                   accounting procedures consistent however with generally
                   accepted accounting principles and, if required by Partner,
                   verified by the EOI's independent auditors or a reputable
                   firm of accountants reasonably acceptable to both parties.
                   Partner shall pay EOI the termination charges within 30 days
                   following

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                                                                              45



                   agreement of such total costs with Partner. Payment
                   shall be in the amount of the total termination charges, less
                   the following:

                   (a)     amounts previously paid by Partner to EOI with
                           respect to the performance of Equipment and Services
                           prior to termination; and

                   (b)     amounts representing EOI's total cost of items of
                           Equipment or Spare Parts not desired by Partner which
                           EOI elects to retain for its use and less Equipment
                           referred to in Sub-Clause 27A.3 which EOI is not
                           entitled to require Partner to take.

         27A.5     In the event of such a termination, all Equipment and Spare
                   Parts supplied or allocated under or for the purpose of this
                   Agreement except as specified in paragraph (b) above shall,
                   except for any Intellectual Property Rights, become the
                   property of Partner upon payment in full for the same.

         27A.6     In the event of termination of this Agreement under this
                   Clause 27A, EOI shall, at Partner's first demand, vacate all
                   Sites from any person or body.

28.      INCENTIVE VOUCHER - ENTITLEMENT AND EXERCISE

         28.1      Upon reaching the purchase milestone set out in Annex 5,
                   Partner shall be entitled to receive from EOI Incentive
                   Vouchers in accordance with Annex 5 which may be exercised
                   with respect to additional purchases to be made under this
                   Agreement, subject to the terms set out below.

         28.2      Subject to any event under 28.1, each Incentive Voucher will
                   be exercisable in accordance with the provisions of the
                   Incentive Vauchers Scheme attached hereto and marked as Annex
                   5.

         28.3      The Incentive Vouchers may not be exchanged. The sole benefit
                   to be derived from them is in accordance with the specific
                   terms set out herein.

         28.4      Amounts subtracted as a result of the exercise of Incentive
                   Vouchers shall be excluded from the valuation of purchases
                   for purposes of issuance of additional Incentive Vouchers.

29.      GOVERNMENTAL AUTHORISATION

         EOI, as the case may be, shall be responsible for obtaining all
         necessary governmental authorisations, including but not limited to,
         for export or import licenses necessary for the import of the Equipment
         into the Territory and for the performance of all of EOI's obligations
         hereunder. Without derogating from EOI's or EOI's responsibilities set
         out in this Clause, and at EOI's specific request thereof, Partner
         shall assist EOI in receiving such authorisations. If Partner is unable
         to provide such assistance, this shall not be deemed as any a of
         obligations under this Clause.

                                                                              46



30.      LANGUAGE AND COMMUNICATION

         30.1      The Agreement and all documentation and communications
                   required thereunder shall be in the English language. All
                   Documentation shall be provided in English but Partner shall
                   have the right to make one or more translations all or part
                   of the same, provided that for the purpose of this Agreement,
                   the English version shall prevail.

         30.2      All communications pertinent to this Agreement shall be made
                   or confirmed in the English language in writing, including
                   facsimile.

31.      NOTICES AND REPORTS

All notices and reports to be provided to Partner or EOI pursuant to this
Agreement shall be sent to Partner or EOI as follows:

PARTNER
Name:      Menachem Tirosh
Company:   Partner Communications Company Ltd.
Address:   8 Amal Street, Afek Industrial Park, Rosh Ha'ayin 48103,
           Israel.

EOI
Name:      Bo Andersson
Company:   LM Ericsson Israel Ltd.
Address:   17 Amal Street
           Afek Industrial Park
           Rosh Ha'ayin 48092, Israel

or such other address as may be notified to the other Parties in accordance with
this Clause.

32.      WAIVER AND APPROVAL

         No failure or delay on the part of either Party in exercising any
         right, power or remedy hereunder, shall operate as a waiver of any such
         right, remedy or power. Any approval or consent given by a Party shall
         not constitute a binding precedent or create any operative custom
         between the Parties, nor constitute acceptance by that Party of any
         liability with respect to the subject-matter of such approval or
         consent, except as expressly stated herein. Any amendment of this
         Agreement, and any waiver on the part of any Party of any provision of
         this Agreement, shall be effective only if expressly made in writing,
         in accordance with the terms hereof.

33.      ENTIRE AGREEMENT

         This Agreement constitutes the entire Agreement and shall apply in
         connection with the subject matter hereof, and there are no other
         agreements or understanding, written or oral, except as provided
         herein. Any amendments to or modification of this Agreement except in
         writing signed by the authorised representatives of the Parties hereto,
         shall be void and of no effect.

                                                                              47



34.      NO PARTNERSHIP

         The status of EOI hereunder is and shall be deemed, for all purposes,
         to be of an independent contractor. In no event shall there be deemed
         to be an employee-employer relationship between EOI, or any of their
         Sub-contractors or their respective employees, and Partner, and nothing
         herein shall be construed to create or evidence a partnership or joint
         venture relationship, or one of agency, between the Parties.

35.      SEVERABILITY

         35.1      The whole or any part of any Clause in this Agreement that is
                   illegal or unenforceable:

                   (1)     will be:

                           (a)      read down to the extent necessary so that it
                                    is legal and enforceable; or

                           (b)      severed (if cannot be read down in
                                    accordance with Sub-Clause (a); and

                   (2)     will not affect the continued operation of the
                           remaining provisions of this Agreement.

36.      GENERAL LIMITATION OF LIABILITY

         36.1      Except as expressly provided in this Clause 36 or elsewhere
                   in this Agreement, neither Party shall in any event be liable
                   to the other Party/ies under this Agreement for loss of
                   production, loss of profit, loss of use, loss of business,
                   loss of data or revenue or for any special, indirect,
                   incidental or consequential damages, whether or not the
                   possibility of such damages could have been reasonably
                   foreseen.

         36.2      Neither Party shall be liable in relation to any breach of
                   this Agreement or act or omissions of that Party in relation
                   to the obligations under this Agreement (including, in the
                   case of liability of EOI amounts paid EOI to Partner by way
                   of refunds but excluding Liquidated Damages and amounts paid
                   under the Performance Bond) for an amount exceeding the
                   greater of (i) [*] percent ([*]%) of the total value of all
                   Purchase Orders of Equipment and/or Services ordered during
                   the twelve (12) months prior to the breach, or (ii) [*] US
                   Dollars.

         36.3      [*]

         36.4      No action, regardless of form, arising out of any alleged
                   breach of this Agreement or obligations under this Agreement
                   may be brought by either Party in relation to a claim after
                   the expiration of three years after that Party become aware
                   of all facts relevant to the claim.

         36.5      A Party suffering loss or damages shall take reasonable
                   measures to limit such loss or damage.

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                                                                              48



37.      SUB-CONTRACTORS

         37.1      EOI may appoint Sub-contractors to execute any part of the
                   obligations under this Agreement subject to the following.

                   (a)     EOI shall obtain Partner's Project Manager's prior
                           written approval (such written approval not being
                           unreasonably withheld) to the identity of that
                           Sub-contractor and the general terms of the
                           Sub-contract (prices and fees will not be disclosed).
                           Such approval shall not be required in relation to
                           the appointment of a member of the Ericsson Group as
                           Sub-contractor. EOI shall in any event be responsible
                           for any act or omission of such Sub-Contractor and
                           the acts of such Sub-contractor shall be deemed to be
                           acts of EOI for the purpose of this Agreement.

                   (b)     The Sub-contractor must enter into a written
                           undertaking with Partner in terms reasonably
                           acceptable to Partner if required by Partner.

         37.2      Any performance undertaken by a Sub-Contractor of EOI shall
                   be performed for the benefit of, and the provisions of any
                   related subcontracting agreement shall inure to the benefit
                   of Partner as a "third party beneficiary". Any rights which
                   ERA and/or EOI may have or accrue in relation to such a
                   Sub-Contractor's obligations under the Sub-contract,
                   including, for avoidance of doubt, any member of Ericsson
                   Group, shall be afforded by the parties thereto to Partner,
                   without affecting any of EOI's or its Sub-contractor's
                   obligations under such Sub-Contract and without Partner
                   assuming or being deemed to have assumed, any of EOI's
                   obligations thereunder. Partner may, without limiting the
                   foregoing, in its discretion, require EOI to take such legal
                   action as Partner reasonably requests against any such
                   Sub-contractor.

         37.3      EOI shall indemnify Partner and keep Partner indemnified
                   against any claim by a Sub-Contractor of EOI arising in
                   connection with this Agreement, other than to the extent
                   caused by the breach by Partner of this Agreement. Clause 36
                   shall not apply to this indemnity and this indemnity shall
                   not be limited by that Clause provided however that this
                   indemnity is subject to the following:

                   (a)     Partner without delay informing EOI in writing of any
                           such claim and giving EOI a reasonable opportunity to
                           elect by notice in writing to Partner to defend or
                           settle the claim (the "Election"). Partner may
                           require that EOI gives to Partner reasonable security
                           for the payment by EOI of amounts due by EOI under
                           this Clause as a condition of the Election. If EOI
                           makes such an Election, and subject to the grant of
                           reasonable security as aforesaid, Partner will
                           refrain from acting on account of such claims without
                           the previous approval of EOI in writing (which
                           approval may not unreasonably withheld or delayed);

                   (b)     Partner promptly informing EOI in writing if legal
                           action is taken on account of such claim and if EOI
                           has made the Election, EOI shall have full authority
                           to the extent permitted by law to defend or settle
                           the same through its counsel;

                   (c)     if EOI makes the Election, and subject to the grant
                           of reasonable security as referred to above, Partner
                           refrains from all steps in any legal action which may
                           prejudice EOI and which Partner is permitted by law
                           to refrain from taking.

                                                                              49



                   In case EOI fails to act promptly against such claims
                   or actions once it makes the Election, Partner shall
                   have the right to take appropriate legal action and
                   shall be repaid any expenses in so doing. If EOI
                   exercises the Election, it shall keep Partner
                   reasonably informed of the status of the claim and
                   proceedings relating to the claim from time to time
                   and shall provide Partner with documents and
                   information reasonably requested relating to the
                   same.

         37.4      Each party shall be liable to the other party for the acts or
                   omissions of its Sub-contractors and shall indemnify the
                   other party and keep the other party indemnified from and
                   against any and all claims, actions, proceedings, losses,
                   liabilities and expenses arising from such acts or omissions.
                   Clause 36 shall not apply to this indemnity and this
                   indemnity shall not be limited by that Clause.

         37.5      Without limiting the foregoing, upon any termination of the
                   Agreement in whole or in part, EOI shall, upon demand by
                   Partner, assign all or such portion requested of EOI's rights
                   under its Sub-Contracts with respect to the Services to
                   Partner, without prejudice to any other rights of Partner
                   under the Agreement and without limiting any of the EOI's
                   obligations under such Sub-Contract or hereunder.

38.      SURVIVAL

         38.1      Provisions contained in this Agreement that are expressed or
                   by their sense and context are intended to survive the
                   expiration or termination of this Agreement shall so survive
                   the expiration or termination, including but not limited to
                   Clauses 10 (Warranty), 14 (Licensed and Information), 15
                   (Source and Object Codes), 16 (Intellectual Property), 18
                   (Confidentiality) and 24 (Arbitration and Applicable Law).

         38.2      The validity of this Agreement is subject to the approval of
                   the Board of Directors of Partner.

For and on behalf of:

Partner Communications Company Limited                             "Partner"

______________________________                                     Signature
______________________________                                     Name Printed
______________________________                                     Position
______________________________                                     Date

For and on behalf of:

LM Ericsson Israel Ltd.                                           "EOI"

______________________________                                     Signature
______________________________                                     Name Printed
______________________________                                     Position
______________________________                                     Date

                                                                              50


                                SUPPORT AGREEMENT


                                    AGREEMENT

                                    REGARDING

                                SUPPORT SERVICES

                                     BETWEEN

                       PARTNER COMMUNICATIONS COMPANY LTD

                                       AND

                             LM ERICSSON ISRAEL LTD



                                SUPPORT AGREEMENT




 CONTENTS
                                                                                 
1         Heading                                                                       3
2         Preamble                                                                      3
3         Definitions                                                                   3
4         Scope of Agreement                                                            4
5         Agreement documents and amendments                                            5
6         Scope of Services                                                             5
7         Prices                                                                        5
8         Terms of payment                                                              6
9         General Partner's Obligations                                                 7
10        EOI's general obligations                                                     8
11        Exclusions                                                                   10
11A       Delays And Liquidated Damages                                                10
23.       Governing law and dispute resolution                                         19
24        Waivers And Remedies                                                         20
25        Amendments                                                                   20
26        Survival                                                                     20




                                SUPPORT AGREEMENT

1        HEADING

         This Agreement has this day November 25th, 2002, been entered into by
         and between:

         PARTNER COMMUNICATIONS COMPANY LTD., with its registered place of
         business in 8 Amal St., Afek Industrial Park, Rosh Ha'ayin 48103 Israel
         (hereinafter called "Partner") and

         LM ERICSSON ISRAEL LTD., with its registered place of business in 17
         Amal St., Afek Industrial Park, Rosh Ha'ayin 48092 Israel (hereinafter
         called "EOI")

2        PREAMBLE

         WHEREAS, Partner has purchased GSM and GPRS Systems, as well as other
         ancillary systems and sub-systems and other Telecommunication Equipment
         from Ericsson Radio Systems AB, currently renamed Ericsson AB
         (hereinafter "Ericsson") in accordance with the Supply and Installation
         Contracts;

         WHEREAS, Partner would like to acquire Services for the Systems and the
         Telecommunication Equipment from EOI;

         WHEREAS, EOI would like to supply such Services to Partner in
         accordance with the terms and conditions of this Agreement.

         NOW, THEREFORE, in consideration of the foregoing, the Parties hereby
         agree as follows.

         Partner and EOI are hereinafter also called individually the "Party",
         or, collectively, the "Parties".

3        DEFINITIONS

         The following expressions shall have the meaning hereby assigned to
         them, unless the context would obviously require otherwise.

         AGREEMENT - shall mean this agreement regarding the Services entered
         into between the Parties and shall include all of its Annexes and any
         amendments thereto.

         DOCUMENTATION - shall mean all of the documentation provided under the
         Supply and Installation Contracts.

         ERICSSON GROUP - shall mean Telefonaktiebolaget LM Ericsson (publ) and
         its Subsidiaries.

         HARDWARE - shall mean any and all hardware parts supplied or to be
         supplied under the Supply and Installation Contracts, including all
         Documentation relating thereto and specified in ANNEX 2.



                                SUPPORT AGREEMENT

         PROCEDURES MANUAL - The description of the pre agreed and defined daily
         working procedures to be applied by EOI and Partner, and shall cover
         areas such as processes, contact lists, escalation flows, meetings and
         measurement procedures. The Procedure Manual shall be attached hereto
         as ANNEX "5" and shall be updated from time to time and in any event of
         integration of a new platform into the network.

         SERVICES - shall mean the support and maintenance services to be
         provided by EOI to Partner under this Agreement, as described in the
         Service Specification forming ANNEX 3 hereto and in accordance with the
         provisions of ANNEX 2.

         SERVICE SPECIFICATION - shall mean the specification to each of the
         Services. as specified in ANNEX 3 hereto.

         SOFTWARE - shall mean any and all software parts supplied or to be
         supplied under the Supply and Installation Contracts, including all
         Software corrections, Software Updates and Software Upgrades (as
         defined in the Supply and Installation Contracts) and all Documentation
         related thereto, and specified in ANNEX 2.

         SUBSIDIARIES - shall mean any entity in which (i) fifty (50) per cent
         or more of the share capital is, directly or indirectly, owned or
         otherwise controlled, or (ii) fifty (50) per cent or more of the voting
         power can be, directly or indirectly, exercised or otherwise controlled
         by Telefonaktiebolaget LM Ericsson (publ).

         SUPPLY AND INSTALLATION CONTRACTS - shall mean the agreements entered
         into between the Parties hereto and Ericsson, for the supply and
         installation of GSM and GPRS Systems and Telecommunication Equipment,
         including any amendment thereto, to which this Agreement is an Annex.

         SYSTEMS - shall mean the Hardware and Software jointly forming the GSM
         and GPRS Systems specified in the Supply and Installation Contracts, as
         well as all other ancillary systems and sub-systems purchased by
         Partner from Ericsson and/or EOI.

         TELECOMMUNICATION EQUIPMENT - shall mean the Hardware and Software
         purchased by Partner under the Supply and Installation Contracts.

         Other capitalised expressions used in this Agreement shall have the
         meaning assigned to them in the Supply and and Installation Contracts
         or elsewhere in this Agreement.

4        SCOPE OF AGREEMENT

         Upon the terms and conditions set forth in this Agreement, Partner
         shall order and purchase from EOI and EOI shall provide the Services to
         Partner. Any specific terms and conditions relating to the respective
         Service shall be set out in the applicable Service Specification.



                                SUPPORT AGREEMENT

5        AGREEMENT DOCUMENTS AND AMENDMENTS

5.1      This Agreement shall consist of this Agreement document and the
         following attached Annexes as may be amended from time to time. The
         documents shall prevail between themselves in the order listed below:

         This Agreement document

         ANNEX 3  Service Specifications;

         ANNEX 2  Hardware and Software covered by the Services;

         ANNEX 5  Procedures Manual

         ANNEX 4  Prices;

         ANNEX 1  List of Annexes;

5.2      The Annexes to this Agreement, which are listed in Annex 1, shall
         hereinafter by reference form an integral part of this Agreement.

5.3      This Agreement may be modified only by a written document duly signed
         by authorised representatives of both Parties and referencing this
         Agreement.

6        SCOPE OF SERVICES

         The scope of Services provided for by EOI under this Agreement shall be
         specified in one Service Specification per Service feature included in
         Annex 3.

7        PRICES

7.1      The annual charges shall be as follows:

         (i)      For year 2002 - a cap of $[*] US dollars), subject to the
                  provisions of Clause 7.1(ix) below.

         (ii)     For year 2003 - a cap of $[*] US dollars), subject to the
                  provisions of Clause 7.1(ix) below.

         (iii)    For year 2004 - a cap of $[*] US dollars), subject to the
                  provisions of Clause 7.1(ix) below.

         (iv)     The annual charges for year 2005 and onwards shall be
                  negotiated in good faith between the Parties.

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                                SUPPORT AGREEMENT

         (vi)     The annual charges for years 2002-2004, as mentioned above,
                  include the following Services: System Support Premium Service
                  in accordance with Annex 3a and 4a, Software Base Subscription
                  service in accordance with Annex 3c and 4c, and System Support
                  Test Plant in accordance with Annex 3f.

         (vii)    The annual charges for years 2002-2004, as mentioned above,
                  shall also include Software Deployment Service in accordance
                  with Annexe 3d, in accordance with the provisions of Annex 4d.

         (viii)   The annual charges for years 2002-2004, as mentioned above, do
                  not include the following Services, which shall be paid
                  separately: Spare Parts Replacement service in accordance with
                  Annexes 3b and 4b and Operational Assistance Services in
                  accordance with Annexes 3e and 4e.

         (ix)     In addition, the annual charges for years 2002-2004, as
                  mentioned above, do not include Equipment that was purchased
                  after 12.6.2002. For such Equipment, fees and charges for
                  Services are set out in ANNEX 4 for each individual Service.

         (x)      All prices are exclusive of VAT. Withholding Tax may be
                  deducted by Partner if and to the extent necessary under any
                  applicable law and Partner shall provide EOI with applicable
                  documentation of such deduction. New Taxes, duties or levies
                  shall be borne in accordance with the applicable provisions of
                  the relevant law.

7.2      Any overdue payment shall carry an interest at a rate of LIBOR + [*]%
         per annum on the amount of the delayed payment.

8        TERMS OF PAYMENT

8.1      Payments for Services shall be made by Partner, after issuance of the
         relevant Purchase Order (according to the procedure described in Supply
         and Installation contract) and in arrears by not later than the lapse
         of [*] days from [*] ("The due date"), subject to receipt of an invoice
         by not later than [*] days before the due date, unless Partner has
         failed to issue the applicable Purchase Order by the last day of [*].
         For the avoidance of doubt, it is clarified that in the event Partner
         did not receive EOI's invoice by [*] days before the due date, provided
         that EOI has received Partner's Purchase Order by the last day of the
         second month of [*], the payment date shall be postponed
         correspondingly.

8.2      Notwithstanding the provisions of Clause 8.1 above, the terms of
         payment for Operational Assistance Service (Annex 3e), shall be as
         follows - Partner shall issue a Purchase Order on a quarterly basis in
         advance. EOI shall provide Partner with an invoice on a monthly basis

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                                SUPPORT AGREEMENT

         pertaining to Services rendered in the previous month and payment shall
         be made within [*] days from the date of receipt of EOI's invoice.

8.3      The payment Currency shall be US Dollars.

9        GENERAL PARTNER'S OBLIGATIONS

         In order for EOI to be able to supply the Services to Partner in a
         professional and timely manner, Partner shall:

         a     allow EOI designated personnel access to the Systems and/or
               relevant Telecommunication Equipment, including through remote
               means, agreed by Partner and defined and specified in the Service
               Specification, subject to compliance by EOI and its designated
               personnel with Partner's access and security requirements and

         b     provide necessary operating supplies and consumables such as
               paper, magnetic tapes, ribbons, cards, format tapes, disc
               cartridges and such similar items as Partner would use during
               normal operation other than materials supplied by EOI not readily
               available from alternative sources and, if the Services are
               performed at Partner's premises and Sites, provide EOI's
               personnel with an unbarred telephone line(s) and fax machine at
               such Partner premises and Sites; and

         c     provide EOI with statistical information regarding the
               performance of the Systems to the extent reasonably required by
               the Procedures Manual and all available information regarding any
               changes and modifications to the System carried out by Partner,
               other than through or with the knowledge of EOI, as well as
               information regarding any installed third-party hardware or
               software, installed by Partner, other than through or with the
               knowledge of EOI, that in the reasonable opinion of Partner may
               affect the performance of the System and Service; and

         d     carry out the recommended operation and maintenance of the
               Systems in accordance with the reasonable requirements of the
               Documentation; and

         e     comply with EOI's reasonable instructions concerning:

         -     handling of Software, Hardware and Documentation for the
               respective Service;

         -     disposal of defective or replaced Software, Hardware or
               Documentation; and

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                                SUPPORT AGREEMENT

         f     implement (deploy) Software Updates and Software Upgrades in the
               System (if done by Partner) within no more than 60 days from the
               receipt thereof, unless agreed otherwise between the Parties and,
               during the term of this Contract, to keep all relevant Software
               licenses purchased by Partner independently (i.e., not through
               EOI) from any third party valid.

         g     it shall appoint a suitable representative/s for the purpose of
               liaison with EOI relating to the Services, with adequate
               knowledge of the respective Service provided.

         h     Provide a representative to be present at Partner's Site whenever
               EOI is performing Services on Site.

10       EOI'S GENERAL OBLIGATIONS

10.1     EOI shall provide the Services during the Term in a timely and diligent
         manner, at the highest professional standards and to the full
         satisfaction of Partner.

10.2     Without limiting the warranties and representations of EOI under the
         Supply and Installation Contracts, EOI covenants, warrants and
         represents that:

         a     It has all the skills, qualifications and expertise that is
               necessary in order to conduct the Services in a professional
               manner and in accordance with the terms and conditions included
               in this Agreement; and

         b     it shall appoint a suitable representative for the purpose of
               liaison with Partner relating to the Services and, for purposes
               of rendition of the Services, it shall assign personnel with
               expert knowledge of the respective Service provided; and

         c     Perform all EOI's obligations as included in the applicable
               Service Specification or elsewhere in the Supply and Installation
               Contracts and in this Agreement; and

         d     ensure that all its personnel including subcontractor's personnel
               conform to Partner's requirement for access to the Systems and
               security policy when work is carried out on Partner's premises or
               the premises of Partner's end-users.

10.3     EOI acknowledges that its obligation to provide Services under this
         Agreement extends to the provision of those Services in respect of the
         Systems, Telecommunication Equipment, Hardware, Software, Software
         Updates, Software Upgrades and software features acquired by Partner.
         EOI shall supply all Software Updates to Partner at no extra charge. It
         is further agreed that:



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         a     EOI shall give Partner as much advance notice in writing as is
               reasonably possible in relation to proposed Software Updates
               and/or Software upgrades; and

         b     EOI shall agree with Partner upon the manner and timetable of
               implementation of Software Updates and/or Software Upgrades and
               shall follow Partner's reasonable instructions to minimize
               disruption to the business of Partner; and

         c     EOI shall provide Software Updates and/or Software Upgrades for
               all Hardware and Software purchased or licensed by Partner, and
               maintained under this Agreement such that they are running the
               latest version released by Ericsson, subject to Partner's request
               to purchase such latest version of Software Updates and/or
               Software Upgrades.

         d.    EOI shall provide Partner with any Service under this Contract
               purchased by Partner provided that Partner shall maintain its
               System running under a Software Upgrade release version that is
               not more than either (i) one year old, or (ii) is no more than
               one Software Upgrade GA release versions old, the later of which.

               For the avoidance of doubt, it is clarified that in the event
               Partner's System shall run a Software Upgrade release version
               that is more than either (i) one year old, or (ii) is more than
               one Software Upgrade GA release versions old, EOI shall remain
               obliged to provide Partner with (a) any and all Services for
               Emergency Situations in accordance with the Resolution Times and
               all other applicable provisions of this Agreement; and (b) any
               and all other Maintenance Services that EOI is capable of
               rendering, but with respect to such other Services, EOI shall not
               be committed to the Resolution Times set under this Agreement
               with respect of said other Services.

10.4     If EOI fails to provide the Services in accordance with the Response
         Times or otherwise in the manner and time schedule required by this
         Agreement, due to reasons other than such attributable directly and
         exclusively to Partner (including in situations where Partner is an
         exclusive intermediary), Partner may remedy the relevant fault or
         defect itself and/or through any third party and recover the market
         cost, applicable under the relevant circumstances, from EOI. That
         remedy will not invalidate EOI's representations, warranties or
         obligations under this Agreement except to the extent that Partner or
         any third party on its behalf, causes physical damage to any part of
         the Systems or causes a non-compliance of the Systems with the
         Specifications and/or the GSM or GPRS standards, as the case may be.

         Partner undertakes to provide EOI with notice of its intention to
         remedy the relevant fault or defect as aforesaid. However, failure by
         Partner to provide EOI with said notice shall not derogate from
         Partner's rights under this clause.

10.5     EOI shall provide Partner's test labs with the Services in accordance
         with the provisions of ANNEX "3F".



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11       EXCLUSIONS

11.1     The Services provided in accordance with this Agreement do not include:

         a     Items of hardware and software that are not listed in ANNEX 2.
               Notwithstanding the aforesaid or any other provision to the
               contrary in this Agreement, the Services provided in accordance
               with this Agreement shall apply to any and all Equipment
               purchased by Partner from EOI in accordance with the provisions
               of the Supply and Installation Contracts (which should be added
               to the list in Annex 2), whether or not such Equipment was in
               fact added, save for such Equipment that the Parties have agreed
               in writing that all or certain specific Services shall not apply
               thereto.

         b     Hardware or Software damaged due to poor packing by Partner upon
               return of equipment to EOI, or damaged due to the failure by
               Partner to use the Hardware or Software in accordance with the
               reasonable requirements of the Documentation;

         c     any change or modification to the Hardware or Software, other
               than by normal maintenance and operation undertaken by Partner,
               in accordance with the Documentation, or those included in this
               Agreement and the Service Specification through updating of the
               relevant Annexes; and

         d     consumables, such as fuses and lamps.

         e     Warranty Claims shall not be applicable to damages which are the
               result of Partner's wrongful handling, or in contradiction to the
               provisions of the Procedures Manual or in cases of Force Majeure.

11A      DELAYS AND LIQUIDATED DAMAGES

11A.1    In the event that any of the Services are not executed in accordance
         with the terms of and within the respective times stipulated in this
         Agreement, other than by reason of an event of excusable delay (as
         defined in Clause 11A.2 below), Partner shall be entitled to Liquidated
         Damages with regard to these Services, the amount of which shall be
         calculated in accordance with this clause, without having to prove
         actual damage in conformity with the sums payable as Liquidated Damages
         as specified below.

11A.2    The following are events of excusable delay:

         a     A Force Majeure event causes delay to EOI in the execution of
               that part of the Services, provided that EOI has complied with
               all of its obligations under this Agreement in relation to that
               event.

         b     A failure by Partner to perform an obligation for which Partner
               is stated to be responsible under this Agreement (other than an
               obligation to pay money) causes delay to EOI in the execution of
               a related part of the Services.



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               Each party shall promptly give an advanced written notice to the
               other party if it is likely to become unable to perform an
               obligation in circumstances where a delay is thereby likely to be
               caused, and shall also specify in such notice the estimated
               period of the possible delay.

               For an event to be an event of excusable delay, EOI must have
               used and continue to use all reasonable endeavors to avoid and
               minimize the delay and promptly give Partner notice of the
               relevant event and the period of extension to which it considers
               itself entitled.

11A.3    EOI agrees that it shall pay to Partner by way of Liquidated Damages:

         a     With respect to each incident which commences during the Warranty
               Period and/or after the expiration thereof, and which constitutes
               an Emergency Situation, US$ [*] for each full [*] hour of delay
               in complying with the Resolution Times, whether for a Remedy
               and/or a Solution, as the case may be, up to a maximum per
               incident of [*]% of the then relevant annual charge for the
               System Support Premium Service;

11A.4    With respect to delays in provision of Services in relation to High
         Problems, EOI shall pay Liquidated Damages in accordance with the
         following provisions:

         a     With respect to each incident which commences during the Warranty
               Period and/or after the expiration thereof, US$ [*] for each full
               [*] hours of delay in complying with the Resolution Times set for
               the provision of a Remedy, and/or for each full [*] hours of
               delay in complying with the Resolution Times set for the
               provision of a Solution, up to a maximum per incident of [*]% of
               the then relevant annual charge for the System Support Premium
               Service;

11A.5    With respect to delays in provision of Services in relation to Medium
         Problems, EOI shall pay Liquidated Damages in accordance with the
         following provisions:

         a     With respect to each incident which commences during the Warranty
               Period and/or after the expiration thereof, US$ [*] for each full
               [*] hours of delay in complying with the Resolution Times set for
               the provision of a Remedy, and/or for each full [*] hours of
               delay in complying with the Resolution Times set for the
               provision of a Solution, up to a maximum per incident of [*]% of
               the then relevant annual charge for the System Support Premium
               Service;

11A.6    With respect to delays in provision of Services in relation to Low
         Problems, EOI shall pay Liquidated Damages in accordance with the
         following provisions:

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         a     With respect to each incident which commences during the Warranty
               Period and/or after the expiration thereof, US$ [*] for each full
               [*] hours of delay in complying with the Resolution Times set for
               the provision of a Remedy, and/or for each full [*] hours of
               delay in complying with the Resolution Times set for the
               provision of a Solution, up to a maximum per incident of [*]% of
               the then relevant annual charge for the System Support Premium
               Service;

11A.7    For the purpose of the foregoing provisions:

         a     an incident with respect to which EOI has purported to respond in
               accordance with this Agreement shall be regarded as separate and
               distinct from a latter incident separately reported to EOI by
               Partner, even if it is of an on-going or similar in nature;

         b     in the case of contemporaneous incidents, the defects must be of
               material difference or effect different parts of the relevant
               System or Telecommunication Equipment, in order to constitute
               separate incidents, provided that if the remedy of one part of
               the System or Telecommunication Equipment will automatically
               remedy the other part of the System or Telecommunication
               Equipment, this will be regarded as a single incident; and

11A.8    It is further agreed between the parties hereto, that notwithstanding
         any other provision to the contrary herein, the annual limit on any
         Liquidated Damages payable by EOI to Partner under this Maintenance
         Agreement is set on US $[*].

11A.9    The Parties recognise that the above sums are reasonable pre-estimates
         of the damage which may occur to Partner, whether such damage shall
         actually materliaze or not, taking into account all the relevant
         information available at the time of signature of this Agreement and
         that such sums are Liquidated Damages and in no way to be considered as
         penalties.

11A.10   In the event of delayed provision of Services, EOI shall take all
         reasonable remedial action to minimize the delay. Nothing in this
         Clause shall be construed as limiting the rights of Partner to
         terminate this Agreement in whole or in part or take other action in
         accordance with any provision of this Agreement as a consequence of
         such late provision of Services.

11A.11   The payment of Liquidated Damages shall not relieve EOI from the
         obligation to provide Services in accordance with this Agreement.

11A.12   Partner shall be entitled to withhold and set-off from any amount owed
         to EOI under this Agreement, any amount which Partner is owed by, or
         otherwise entitled to receive from, EOI by way of Liquidated Damages
         under this Agreement.

12.      INDEMNIFICATION

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12.1     Each party ("Indemnifying Party") shall be liable for, and shall
         indemnify the other party ("Indemnified Party") against any expense,
         liability, loss, claim or proceedings whatsoever arising under any
         statute or at common law in respect to personal injury to, or death of
         any person arising out of any act or omission of the Indemnifying Party
         or of any person for whom the Indemnifying Party is responsible in
         relation to this Agreement or the Services. Liability under this
         Sub-clause shall not be limited by Sub-Clauses 12.5 or 12.6, which
         shall not apply to liability under this Sub-Clause.

12.2     Each Party (also "Indemnifying Party") shall be liable for and shall
         indemnify the other party against any expense, liability, loss, claim
         or proceedings arising under any statute or at common law in respect of
         loss, injury or damage to any property of the other party or of a third
         party insofar as loss, injury or damage arises out of any act or
         omission of the Indemnifying Party or any person for whom the
         Indemnifying Party is responsible and is not caused by the breach of
         this Agreement or negligence of the other party. Liability under this
         Sub-clause shall not be limited by Sub-Clauses 12.5 or 12.6 which shall
         not apply to liability under this Sub-Clause. The liability of either
         party under this Sub-clause shall not exceed US$ [*] for each occasion
         of damage, provided that the limitation of liability provided for in
         this Sub-Clause shall not apply to liability of the Indemnifying Party
         to the extent of any loss, injury or damage due to the negligence,
         breach of contract or wilful default of the Indemnifying Party or any
         person for whom the Indemnifying Party is responsible. For the purpose
         of this Sub-clause, each party shall have responsibility for its
         Sub-contractors.

12.3     Subject to Sub-Clauses 12.5 and 12.6 each party shall indemnify the
         other party and keep the other party indemnified against any expense,
         liability, loss, claim or proceedings brought against or suffered by
         the other party as a result of breach by the other party of this
         Agreement.

12.4     In the event of any workman or other person employed by either Party,
         or its respective Sub-contractor, in connection with this Agreement, ,
         suffering death or any personal injury and whether there be a claim for
         a compensation or not, either Party shall without delay give the other
         Party notice in writing of such personal injury or death.

12.5     Except as expressly provided in this Clause 12 or elsewhere in this
         Agreement, neither party shall in any event be liable to the other
         party under this Agreement for loss of production, loss of use, loss of
         business, loss of data or revenue or for any special, indirect,
         incidental or consequential damages, whether or not the possibility of
         such damages could have been reasonably foreseen.

12.6     Neither party shall be liable in relation to any breach of this
         Agreement or act or omissions of that party in relation to each year of
         this Agreement (including amounts paid by EOI to Partner by way of
         refunds but excluding Liquidated Damages) for an amount exceeding [*]%
         of the annual charges for that year (means four Quarterly Fees).

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12.7     The limitation of liability provided for in Sub - Clauses 12.5 and 12.6
         shall not apply with respect to damages related to a breach of the
         obligations under the Confidentiality Clauses of the Supply and
         Installation Contracts and with respect of the indemnity provided for
         under Clauses 19.4 and 19.5 below (Sub-contractors).

12.8     No action, regardless of form, arising out of any alleged breach of
         this Agreement or obligations under this Agreement may be brought by
         either party in relation to a claim after the expiration of two years
         after the Project Manager of that party, or any person senior to
         him/her, becomes aware of all facts relevant to the claim.

12.9     A Party suffering loss or damage shall take reasonable measures to
         limit such loss or damage.

13.      FORCE MAJEURE

13.1     The term "Force Majeure" in respect of party means an event beyond the
         reasonable control and without the fault or negligence of that party or
         its Sub-Contractors or suppliers hereunder, including acts of God, acts
         of government, fire, flood or storm damage, earthquakes, labour
         disputes, war or riot but does not include in the case of EOI:

         a     any act or omission (including delay) of a supplier, carrier,
               sub-contractor, agent or representative of EOI or its
               Sub-contractors other than due to an event of the type described
               above beyond the reasonable control of that person and occurring
               without the fault or negligence of that person;

         b     any failure to obtain any export or import licence or other
               authorisation for which EOI is expressly responsible for
               obtaining under this Agreement other than where such a failure is
               caused by an event described above;

         c     any act or omission (including delay) of an associate or
               affiliate of EOI or its sub-contractors unless due to an event of
               the type described above beyond the reasonable control of that
               person and occurring without the fault or negligence of that
               associate or affiliate;

         d     lack of workers in the Territory, or other disruptions such as
               closure, curfew, acts of terrorism, actions regarding the
               "Intefada", and rainy days.

         EOIwarrants that it is not aware of any circumstances, which are likely
         to give rise to any labour strike, dispute or disturbance which may
         affect the performance of its obligations under this Agreement.

13.2     Neither party shall be responsible for delay in provision of Services
         or in performing any other obligation under this Agreement within the
         time limit required for such performance, due to Force Majeure
         affecting that party provided that notice thereof is given to the other
         party within 10 days after such event has occurred.

13.3     Upon the occurrence of Force Majeure, and with proper notice as set
         forth above, such schedule or time-limit for performance shall be



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         extended accordingly, provided that the party wishing to rely upon the
         Force Majeure event makes commercially reasonable efforts to minimise
         such delay. If the delay continues beyond a reasonable period, taking
         into account the requirements of Partner in relation to the delayed
         performance of any obligation under this Agreement, Partner may, upon
         notice of 30 days to EOI terminate this Agreement in whole or in part,
         without incurring any financial obligations towards EOI as a
         consequence of such termination.

13.4     EOI shall have the right to terminate this Agreement in the event that
         an event of Force Majeure prevents performance by Partner under this
         Agreement for a continuous period exceeding one year.

14.      TERM AND TERMINATION

14.1     This Agreement shall commence on its date of execution and terminate on
         the earlier of:

         a     the period expiring 31 December, 2008 as that period may be
               extended by the written agreement of the parties from time to
               time;

         b     the date it is otherwise terminated in accordance with its terms.

14.2     This Agreement shall terminate in the event of termination of the
         Supply and Installation Contracts if Partner elects by a 90 days
         advance notice in writing to terminate this Agreement and/or upon [*]
         days advance notice in writing served by Partner at Partner's
         discretion.

14.3     If:

         a     either Party commits any material breach of this Agreement and
               fails to remedy such breach if it is capable of remedy, within 30
               days of written notice from the other Party of the same; setting
               out the nature of the breach or in the case of any amount payable
               by that Party fails to make payment within 20 days after such
               payment falls due for payment in the absence of a bona fide
               dispute as to that payment;

         b     either Party becomes insolvent or if its financial position is
               such that within he framework of its national law, legal action
               leading towards insolvency has been taken against it by its
               creditors and is not dismissed within 60 days of its commencement
               and fails to rectify the position within 14 days after written
               notice from the other Party requiring it to do so;

         then, the other Party ("Terminating Party") may, subject to the
         provisions of this Clause, by notice in writing to the Party
         concerned, terminate this Agreement.

14.4     The rights of each Party under this Clause 14 are in addition to, and
         without prejudice to, or forfeiture of, any other rights or remedies
         that

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         either Party may have under this Agreement or at law as a consequence
         of any default by either Party under this Agreement.

14.5     Prior to either Party terminating this Agreement as a result of a
         failure to make payment under Clause 14.3(a) above, the Terminating
         Party must give notice in writing of its intention to do so no less
         than 5 days prior to the date upon which the Terminating Party proposes
         to terminate this Agreement, setting out its intention to terminate. A
         party claiming that there is a bona fide dispute for the purpose of
         that Clause must, within the 20 day period referred to in Clause
         14.3(a), give written notice to the other Party setting out the nature
         of the dispute.

14.6     Termination under Clauses 13 and 14 shall be without prejudice to
         rights accrued to either Party prior to termination.

15.      PUBLICITY

         Neither Party shall advertise or publish any information related to
         this Agreement without the prior approval of the other Party, except
         that EOI may publish its appointment as contractor and the value of the
         Agreement.

16.      NOTICES

         All written notices required by this Agreement shall be furnished by
         hand delivery, registered post, telefax or electronic mail to the
         following addresses:

         If to EOI:

         17 Amal St., Afek Industrial Park, Rosh Ha'ayin 48092 Israel

         If to Partner:

         8 Amal St., Afek Industrial Park, Rosh Ha'ayin 48103 Israel

         All notices shall be confirmed and become effective only on receipt.

         Either Party may change its address by a notice to the other Party in
         the manner set forth above.

17.      LANGUAGE

         The English language shall be the language to be used in all documents
         and correspondence related to the execution of this Agreement.

18.      ASSIGNMENT

18.1     Subject to Sub-Clauses 18.3 and 18.4, neither party shall assign,
         either in whole or in part, this Agreement or any of its rights, duties
         or obligations thereunder to any person or entity, use it as capital to
         establish a company or any entity, or set up an association with
         another entity for its fulfillment, without prior express written
         approval of the other party.



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18.2     Notwithstanding any conditions under which either party ("Consentor")
         may, at its sole discretion, grant its approval, to any assignment by
         the other party ("Assignor") Assignor shall remain a guarantor to the
         Consentor of the performance in accordance with this Agreement and all
         applicable laws, of the assigned, or delegated duties and obligations.

18.3     Partner may assign all or part of the benefit of this Agreement
         (including this right of assignment) to:

         a     its lenders or financial investors and to any person upon the
               exercise of a power of sale by such lender or financial investor.

         b     a purchaser of the business of Partner or part of that business;
               or

         c     any affiliate of Partner.

         Partner shall give prior notice of any assignment to EOI but
         shall not be required to seek the prior consent of EOI to that
         assignment.

18.4     EOI may assign all or part of the benefit of this Agreement to a member
         of the Ericsson Group, provided that EOI shall continue to be
         responsible for its obligations under this Agreement.

19.      SUBCONTRACTING

19.1     EOI may appoint Sub-contractors to execute any part of the Services
         subject to the following.

19.2     EOI must obtain the prior written approval of Partner to the identity
         of that Sub-contractor and the general terms of the Sub-contract
         (prices and fees will not be disclosed), Such approval not to be
         unreasonably withheld, and provided that such approval shall not be
         required in relation to the appointment of a member of the Ericsson
         Group as Sub-contractor provided further that EOI shall in any event be
         responsible for any act or omission of such Sub-contractor and the acts
         of such Sub-contractor shall be deemed to be acts of EOI for the
         purpose of this Agreement.

19.3     The Sub-contractor must enter into a written undertaking with Partner
         on terms reasonably acceptable to Partner if required by Partner.

19.4     EOI shall indemnify Partner and keep Partner indemnified against any
         claim by a Sub-contractor of EOI arising out of the execution of any
         part of the Services or arising out of this Agreement or the
         termination of this Agreement other than to the extent caused by the
         default of Partner. Sub-Clauses 12.5 and 12.6 shall not apply to this
         indemnity and this indemnity shall not be limited by that Clause
         provided however that this indemnity is subject to the following:

         a     that without delay Partner informs EOI in writing of any such
               claim and gives EOI a reasonable opportunity to elect by notice
               in writing to Partner to defend or settle the claim (the
               "Election"). Partner may require that EOI shall give to Partner
               reasonable security for the payment by EOI of amounts due by EOI
               under this Clause as a



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               condition of the Election. If EOI makes such an Election, and
               subject to the grant of reasonable security as aforesaid, Partner
               will refrain from acting on account of such claims without the
               previous approval of EOI in writing (which approval may not be
               unreasonably withheld or delayed);

         b     that Partner promptly informs the EOI in writing if legal action
               is taken on account of such claim and if EOI has made the
               Election, subject to the grant of reasonable security as referred
               to above, that EOI shall have full authority to the extent
               permitted by law to defend or settle the same through its
               counsel;

         c     that if EOI makes the Election, and subject to the grant of
               reasonable security as referred to above, EOI is informed of all
               circumstances which may be of relevance in the legal action taken
               and Partner refrains from all steps in any legal action which may
               prejudice EOI and which Partner is permitted by law to refrain
               from taking.

         d     In case EOI fails to act promptly against such claims or actions
               once it makes the Election, subject to the grant of reasonable
               security as referred to above, Partner shall have the right to
               take appropriate legal action and shall be repaid any expenses in
               so doing, including but not limited to the realisation of the
               reasonable security referred to above. If EOI exercises the
               Election, it shall keep Partner reasonably informed of the status
               of the claim and proceedings relating to the claim from time to
               time and shall provide Partner with documents and information
               reasonably requested relating to the same.

19.5     Each Party shall be liable to the other Party for the acts or omissions
         of its Sub-contractors and shall indemnify the other party and keep the
         other party indemnified from and against any and all claims, actions,
         proceedings, losses, liabilities and expenses arising from such acts or
         omissions.

20.      ENTIRE AGREEMENT

         This Agreement constitutes the entire agreement between the Parties
         with respect to the subject matter hereof and supersedes all previous
         negotiations, proposals, commitments, writings, oral statements, and
         understanding of any nature whatsoever concerning the subject matter
         hereof.

21.      HEADINGS

         The headings in this Agreement are inserted for convenience and
         identification only and are not intended to describe, interpret,
         define, or limit the scope, extent, or intent of this Agreement or any
         provisions hereof.



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22.      SEVERABILITY

         If any of the terms and conditions of this Agreement should be or
         become unenforceable for any cause or reason whatsoever, ensuing lack
         of enforceability shall not affect the other provisions hereof and in
         such event, the Parties shall endeavour to forthwith substitute said
         unenforceable provisions with new enforceable ones. The contents of the
         new provisions shall, to the utmost possible extent, closely correspond
         to the legal and commercial contents of the old terms and conditions.

23.      GOVERNING LAW AND DISPUTE RESOLUTION

23.1     This Agreement shall be governed by and construed in accordance with
         the substantive laws of Israel.

23.2     All disputes, differences or questions between the Parties with respect
         to any matter arising out of or relating to this Agreement shall be
         finally settled under the Rules of Arbitration of the International
         Chamber of Commerce, in Tel Aviv, Israel, by three (3) arbitrators
         appointed in accordance with the said Rules ("the Arbitrators") and the
         proceedings shall be conducted in the English language, or such other
         language the Parties agree on.

         The Arbitrators shall not be bound by the rules of evidence or
         procedure in conducting any arbitration hereunder, but shall have to
         provide the Parties with a reasoned opinion in writing. The parties
         shall bear equally the costs of such arbitration, unless otherwise
         determined by the Arbitrators.

23.3     The Arbitrator's determination shall be conclusive and binding upon the
         parties. All awards may if necessary be enforced by any court having
         jurisdiction in the same manner as a judgement in such court. This
         Clause 23 shall constitute an arbitration agreement and shall survive
         any termination of this Agreement.

23.4     EOI shall procure from each of its Subcontractors, their consent and
         agreement to be bound by the foregoing arbitration agreement, and to
         participate as a party at any such proceedings upon demand by the EOI
         or Partner.

23.5     Disclosure of any Confidential Information in the course of arbitral
         proceedings shall not derogate from either Party's confidentiality
         obligations. Such Confidential Information shall continue to be
         Confidential Information, subject to the Parties confidentiality
         obligations. The Parties undertake and agree that all arbitral
         proceedings conducted under this Article, and the results thereof,
         shall be kept strictly confidential in accordance with their
         confidentiality obligations.



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24       WAIVERS AND REMEDIES

         No failure or delay on the part of either Party in exercising any
         right, power or remedy hereunder, shall operate as a waiver of any such
         right, remedy or power. Any approval or consent given by either Party,
         shall not constitute a binding precedent or create any operative custom
         between the Parties, nor constitute acceptance by that Party of any
         liability with respect to the subject-matter of such approval or
         consent, except as expressly sated herein. Any amendment of this
         Agreement, and any waiver on the part of any Party of any provision of
         this Agreement, shall be effective only if expressly made in writing,
         in accordance with the terms hereof.

25       AMENDMENTS

         No provision of this Agreement may be amended, modified, waived,
         discharged or terminated, otherwise than by the express written
         agreement of the Parties.

26       SURVIVAL

         Provisions contained in this Agreement that are expressed or by their
         sense and context are intended to survive the expiration or termination
         of this Agreement shall survive the expiration or termination of this
         Agreement.

         This Agreement has been duly signed by the Parties in two (2) originals
         of which the Parties have taken one (1) each.



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                          For and on behalf of:

                          Partner Communications Company Limited    "Partner"

                          ______________________________            Signature
                          ______________________________            Name Printed
                          ______________________________            Position
                          ______________________________            Date

                          For and on behalf of:

                          LM Ericsson Israel Ltd.                   "EOI"

                          ______________________________            Signature
                          ______________________________            Name Printed
                          ______________________________            Position
                          ______________________________            Date

EX-4.(A).13

                                                               EXHIBIT 4.(a).13





                              Dated 18 April 2002



                    MATBIT TELECOMMUNICATION SYSTEMS LIMITED

                                      and

                           MATAV INVESTMENTS LIMITED

                                      and

                               ELBIT.COM LIMITED

                                      and

                         ADVENT INVESTMENTS PTE LIMITED

                                      and

                  HUTCHISON TELECOMMUNICATIONS (AMSTERDAM) BV

                                      and

                       MATAV-CABLE SYSTEMS MEDIA LIMITED



                             SUPPLEMENTAL AGREEMENT

                                  relating to

                     Partner Communications Company Limited


This Agreement is made on 18 April 2002

Between:

(1)   Matbit Telecommunication Systems Limited whose principal office is at c/o
      Avital, Dromi & Co Law Offices, at 4 Taas Street, Ramat Gan 52512, Israel
      ("Matbit");

(2)   Matav Investments Limited whose principal office is at 42 Pinkas Street,
      North Industrial Area, Netanya 42134, Israel ("Matav");

(3)   Elbit.COM Limited whose principal office is at Hutsot Shefayim, PO Box 286
      Shefayim, 80990, Israel ("Elbit");

(4)   Advent Investments Pte Limited whose principal office is at 10 Hoe Chiang
      Road, Number 16-02, Keppel Towers, Singapore ("Advent");

(5)   Hutchison Telecommunications (Amsterdam) BV whose registered office is at
      Leidsekade 98, 1017 Amsterdam, Netherlands ("Hutchison"); and

(6)   Matav-Cable Systems Media Limited whose principal office is at 42 Pinkas
      Street, North Industrial Area, Netanya 42134, Israel ("Matav-Cable").

      (and together referred to hereinafter as the "Parties" or Individually as
      a "Party").

Whereas:

(A)   Matbit and Matav are existing shareholders in the Company.

(B)   Pursuant to a share purchase agreement dated 10 April 2002 and made
      between (1) Matav, (2) Matbit, (3) Hutchison and (4) Matav-Cable Systems
      Media Limited, (the "SPA") Hutchison will also become a shareholder in the
      Company.

(C)   The Parties wish to record certain agreements between them in relation to
      the Company in accordance with the terms of this Agreement.

It is agreed as follows:

1     Interpretation

      Terms used in this Agreement which are defined in a relationship agreement
      dated 10 October 1999 and made between (1) Advent, (2) Matbit, (3) Matav,
      (4) Elbit and (5) Tapuz Cellular Systems Limited Partnership (as amended)
      (the "Relationship Agreement"), shall have the same meaning as in the
      Relationship Agreement unless the context requires otherwise;

      "MOC" means the Minister of Communications of Israel and the Ministry of
      Communications of Israel; and

      "MOC Letters" means the letters from the Company to the MOC dated March
      26, 2002, April 1, 2002 and April 4, 2002 and the response from the MOC
      dated 14 April 2002, all in the agreed terms.

1.1   Clauses etc.

      References to this Agreement include any Recitals to it and references to
      Clauses are to Clauses of this Agreement.

1.2   Headings

      Headings shall be ignored in construing this Agreement.

Continuing obligations of Matbit and Matav

Covenants by Matav

2.1.1   In accordance with clause 5.1.6(a) of the Relationship Agreement, Matav
        hereby irrevocably assigns to Hutchison the right of Matav to nominate a
        representative to serve as a Director.

2.1.2   Matav hereby further agrees, from the date of this Agreement, to
        irrevocably waive its rights pursuant to clause 6.1.2 of the
        Relationship Agreement to appoint three Directors and, subject as set
        out in Clause 2.1.3, for as long as it holds not less than 4.99 per cent
        of the Relevant Shares, agrees that it shall be entitled to appoint not
        more than two Directors.

2.1.3   Clause 2.1.2 shall not prevent a Nominating Party from transferring
        Shares to Matav, and assigning any rights such Nominating Party has to
        nominate one or more representatives to serve as Directors to Matav in
        accordance with clauses 6.1.4(c) or 6.1.5 of the Relationship Agreement.

Avoidance and Consequences of an Occurrence of a Bank or Israel Event

2.2.1   Bank of Israel Event

        (i)

              (a)  Matbit agrees and undertakes that it will not; and

              (b)  Matav agrees and undertakes that it will not, that it will
                   use its best efforts to procure that none of its Affiliates
                   will and that it will not through the exercise of its rights
                   as a shareholder in Matbit or through any representation on
                   the Board of Matbit cause Matbit to,

              take any action, or allow any event to occur (being an event it
              or, in the case of Matav, Matav's Affiliates is/are reasonably
              capable of influencing) ("Relevant Action") which would cause the
              Company to become obliged, under applicable rules of the Bank of
              Israel (as in effect from time to time) which restrict loans to
              related parties, to repay amounts to, or alter the terms of any
              existing or subsequent credit facility with, any bank on terms
              substantially different from those applicable to other banks
              participating in such facility or on terms which would not apply
              were it not for the application of such rules (a "Bank of Israel
              Event").

        (ii)  If a Bank of Israel Event occurs in circumstances where there is
              no Relevant Action then Clauses 2.2.2, 2.2.3 and 2.2.4 shall not
              apply and the Parties shall all discuss in good faith with each
              other and co-operate in good faith with a view to reaching an
              agreement to ensure that such repayment or alteration is avoided
              and each Party shall indemnify the other Parties in respect of any
              failure by it to so co-operate.

        (iii) For the avoidance of doubt, in the event that the applicable rules
              of the Bank of Israel are changed and as a result of such change
              the percentage interest of any given shareholder causes the
              Company to be a related entity ("Ish Kashur") of the relevant
              banks and, as a result, the Company becomes obliged, under
              applicable rules of the Bank of Israel which restrict loans to
              related parties, to repay amounts to, or alter the terms of any
              existing or

              subsequent credit facility with, any bank on terms substantially
              different from those applicable to other banks participating in
              such facility or on terms which would not apply were it not for
              the application of such rules, then, absent a Relevant Action, in
              such circumstances, a Bank of Israel Event shall not occur nor
              shall there be a Breach (as defined in Clause 2.2.2 below), but
              the provisions of subsection (ii) above shall apply.

2.2.2   Notice of Breach

        If a breach of Clause 2.2.1(i) occurs (a "Breach"), the Party in Breach
        (the "Defaulting Party") shall notify the other Parties as soon as
        reasonably practicable.

2.2.3   Procedure on Breach

        Following a Breach, the Board, at a meeting in which the Directors
        nominated by the Defaulting Party will not be entitled to participate,
        may give written notice to the Defaulting Party within 60 Business Days
        of receiving notification of the Breach from the Defaulting Party or of
        becoming aware of the Breach, whichever is the earlier, requiring the
        Defaulting Party:

        (i)   to sell the Sale Shares (as defined below) at a price per Share
              equal to 82.5 per cent of the Market Price of the Sale Shares but
              in all other respects in accordance with the provisions of clause
              9.1 of the Relationship Agreement, in which case the provisions of
              clauses 9.2, 9.4, 9.5 and 10 of the Relationship Agreement shall
              apply, mutatis mutandis and as the case may be; and

        (ii)  in addition to, or as an alternative to, requiring the sale of the
              Sale Shares as set out in (i) above to take such other actions
              which the Board (the composition of which shall exclude the
              Directors nominated by the Defaulting Party) and the Defaulting
              Party may together agree will remedy the Breach, whereupon the
              Defaulting Party shall be obliged to take such actions within the
              time agreed between the Defaulting Party and the Board;

        and in each such case the Defaulting Party shall indemnify the Company
        in respect of all costs and expenses incurred in connection with
        implementing the provisions of this Clause 2.2.3 For the purpose of this
        Clause 2.2.3 the "Sale Shares" means such number of the Shares held
        directly or indirectly (which shall include Shares which are held by
        Matbit for the benefit of Matav) by the Defaulting Party which the
        Board, at the meeting referred to above, determines need to be sold in
        order that the relevant Bank of Israel Event is no longer applicable.

2.2.4   Indemnity

        If the Defaulting Party fails to comply with the requirements imposed by
        Clause 2.2.3, or if it does not agree with the Board what actions it is
        to take to remedy the Breach then without prejudice to any contractual
        remedy available to Advent, Hutchison or the Company in respect of the
        relevant Breach or such failure, the Defaulting Party shall indemnify
        the Company against all costs and liabilities arising in connection with
        such Breach (including, without limitation, if applicable, costs and
        liabilities incurred in connection with any early repayment of, or the
        alteration of the then existing terms of, any then existing credit
        facility or the costs of any required refinancing or fund raising (it
        being understood that such indemnity shall not oblige the Defaulting
        Party to assume the Company's then existing obligations under any then
        existing credit facility

     (save to the extent they are increased (and then only in respect of the
     amount of the increase) as a result of the relevant Bank of Israel
     Event))).

Guarantee

Matav-Cable hereby guarantees the performance of all obligations of Matav set
forth in, or arising in connection with, this Agreement.

Matav-Cable hereby further covenants that it will not, and will procure that
none of its Affiliates will, take any action or allow any event to occur (being
an event it or its Affiliates is/are reasonably capable of influencing) which
would cause a Bank of Israel Event to occur.

Obligations in respect of MOC Letters

Elbit, Matav and Matbit acknowledge the terms of the MOC Letters and each
confirms that, in accordance with Clause 11.1 of the Relationship Agreement, it
shall make best efforts to comply with any provisions of the MOC Letters which
apply to it and that breach of such provision shall be an Event of Default for
the purpose of Clause 9.3(a) of the Relationship Agreement, subject to the
provisions of that Clause.

Other Provisions

Announcements

No announcement in connection with the existence or the subject matter of this
Agreement shall be made or issued by or on behalf of the Parties without the
prior written approval of all the Parties. This shall not affect any
announcement required by law or any regulatory body or the rules of any
recognised stock exchange but the Party with an obligation to make an
announcement shall consult with the other Parties insofar as is reasonably
practicable before complying with such an obligation.

Costs

Each Party shall bear all costs incurred by it in connection with the
preparation, negotiation and entry into of this Agreement.

Notices

Any notice or other communication in connection with this Agreement or with any
legal proceedings under this Agreement shall be in writing in English (a
"Notice") and shall be sufficiently given or served if delivered or sent.

In the case of Matbit to:

Matbit Telecommunication Systems Limited
c/o Cable Systems Media Limited
42, Pinkas Street
North Industrial Area
Netanya 42134 Israel
Tel: +972 9 8602261
Fax: +972 9 8602288

In the case of Matav to:

Matav Investments Limited
c/o Cable Systems Media Limited
42, Pinkas Street
North Industrial Area
Netanya 42134 Israel
Tel: +972 9 8602261
Fax: +972 9 8602288

With a copy to Matav-Cable

In the case of Elbit, to:

Elbit.COM Limited
c/o Elbit Limited
Hutsot Shefayim
PO Box 286 Shefayim 80990, Israel
Tel: +972 9 9704100
Fax: +972 9 9704120

In the case of Advent or Hutchison, to:

Hutchison Telecommunications (Amsterdam) BV
Leidsekade 98,
1017 Amsterdam
Netherlands

With a copy to:

The Deputy Group Managing Director
Hutchison Telecommunications Limited
8/F Two Harbourfront
2 TiFung Street
Lunghom
Kowloon
Hong Kong
Tel: +852 2128 3222
Fax: +852 2827 1371

In the case of Matav-Cable to:

Matav-Cable Systems Media Limited
c/o Cable Systems Media Limited
42, Pinkas Street
North Industrial Area
Netanya 42134 Israel
Tel: +972 9 8602261
Fax: +972 9 8602288

In the case of the Company to:

The Company Secretary
Partner Communications Company Limited
8 Amal Street, Afeq Industrial Park




     Tel: +972 6 7814888
     Fax: +972 6 7814193

     Any Notice may be delivered by hand or sent by fax (in the case of a fax,
     with a follow up copy sent by courier). Without prejudice to the foregoing,
     any Notice shall conclusively be deemed to have been received on the next
     working day in the place to which it is sent, if sent by fax, or at the
     time of delivery, if delivered by hand.

5.4  Third Party Beneficiary

     Each Party hereby acknowledges and confirms its intention that the Company
     be a third party beneficiary under this Agreement. Within 24 hours of
     execution of this Agreement, the Parties shall deliver a copy of this
     Agreement to the Company which delivery shall constitute notice to the
     Company of its rights under the Agreement.

5.5  Invalidity

     If any term in this Agreement shall be held to be illegal, invalid or
     unenforceable, in whole or in part, under any enactment or rule of law,
     such term or part shall to that extent be deemed not to form part of this
     Agreement but the legality, validity or enforceability of the remainder of
     this Agreement shall not be affected.

5.6  Counterparts

     This Agreement may be entered into in any number of counterparts, all of
     which taken together shall constitute one and the same instrument. Any
     party may enter into this Agreement by executing any such counterpart.

5.7  Governing Law and Submission to Jurisdiction

     5.7.1  This Agreement and the documents to be entered into pursuant to it,
            shall be governed by and construed in accordance with the laws of
            the State of Israel.

     5.7.2  All the Parties irrevocably agree that the courts of Tel Aviv/Jaffo
            are to have exclusive jurisdiction to settle any dispute which may
            arise out of or in connection with this Agreement and the documents
            to be entered into pursuant to it. All the Parties irrevocably
            submit to the jurisdiction of such courts and waive any objection to
            proceedings in any such court on the ground of venue or on the
            ground that proceedings have been brought in an inconvenient forum.


In witness whereof this Agreement has been duly executed.


SIGNED by
on behalf of Matbit Telecommunication     }
Systems Limited in the presence of:



SIGNED by
on behalf of Matav Investments Limited    }
in the presence of:

SIGNED by
on behalf of Elbit.COM Limited          }
in the presence of:



SIGNED by
on behalf of Advent Investments Pte     }
Limited
in the presence of:



SIGNED by
on behalf of Hutchison
Telecommunications (Amsterdam) BV       }
in the presence of:



SIGNED by
on behalf of Matav-Cable                }
Systems Media Limited
in the presence of:


      Tel: +972 6 7814888
      Fax: +972 6 7814193

      Any Notice may be delivered by hand or sent by fax (in the case of a fax,
      with a follow up copy sent by courier). Without prejudice to the
      foregoing, any Notice shall conclusively be deemed to have been received
      on the next working day in the place to which it is sent, if sent by fax,
      or at the time of delivery, if delivered by hand.

5.4   Third Party Beneficiary

      Each Party hereby acknowledges and confirms its intention that the Company
      be a third party beneficiary under this Agreement. Within 24 hours of
      execution of this Agreement, the Parties shall deliver a copy of this
      Agreement to the Company which delivery shall constitute notice to the
      Company of its rights under the Agreement.

5.5   Invalidity

      If any term in this Agreement shall be held to be illegal, invalid or
      unenforceable, in whole or in part, under any enactment or rule of law,
      such term or part shall to that extent be deemed not to form part of this
      Agreement but the legality, validity or enforceability of the remainder
      of this Agreement shall not be affected.

5.6   Counterparts

      This Agreement may be entered into in any number of counterparts, all of
      which taken together shall constitute one and the same instrument. Any
      party may enter into this Agreement by executing any such counterpart.

5.7   Governing Law and Submission to Jurisdiction

      5.7.1   This Agreement and the documents to be entered into pursuant to
              it, shall be governed by and construed in accordance with the laws
              of the State of Israel.

      5.7.2   All the Parties irrevocably agree that the courts of Tel
              Aviv/Jaffo are to have exclusive jurisdiction to settle any
              dispute which may arise out of or in connection with this
              Agreement and the documents to be entered into pursuant to it. All
              the Parties irrevocably submit to the jurisdiction of such courts
              and waive any objection to proceedings in any such court on the
              ground of venue or on the ground that proceedings have been
              brought in an inconvenient forum.

In witness whereof this Agreement has been duly executed.

SIGNED by
on behalf of Matbit Telecommunication     }
Systems Limited in the presence of:

SIGNED by
on behalf of Matav Investments Limited    }
in the presence of:

SIGNED by
on behalf of Elbit.COM Limited         }
in the presence of:




SIGNED by
on behalf of Advent Investments Pte    }
Limited
in the presence of:




SIGNED by
on behalf of Hutchison                 }
Telecommunications (Amsterdam) BV
in the presence of:




SIGNED by
on behalf of Matav-Cable               }
Systems Media Limited
in the presence of:




SIGNED by
on behalf of Elbit.COM Limited           }
in the presence of:





SIGNED by
on behalf of Advent Investments Pte      }
Limited
in the presence of:

/s/ Steven P. Allen

Steven P. Allen



SIGNED by
on behalf of Hutchison                   }
Telecommunications (Amsterdam) BV
in the presence of:





SIGNED by
on behalf of Matav-Cable                 }
Systems Media Limited
in the presence of:

EX-4.(A).27

[TRANSLATION FROM HEBREW]

EXHIBIT 4.(a).27

                                  [State Seal]

             GENERAL LICENSE FOR PARTNER COMMUNICATIONS COMPANY LTD.
             FOR THE PROVISION OF MOBILE RADIO PHONE SERVICES BY THE
                              CELLULAR METHOD (MRP)

                                AMENDMENT NO. 12

By virtue of my power under section 4(e) of the Communications
(Telecommunications and Broadcasting) Law, 5742-1982, I hereby amend the general
licence for the provision of mobile radio phone services by the cellular method
(MRP) granted to Partner Communications Company Ltd. on 7th April 1998 as
follows:

AMENDMENT OF CLAUSE 75.9

         1.       In clause 75.9, footnote number 2, "1 July 2002", will be
                  replaced by "1 September 2002".

                                                      (sgd)
                  26 June, 2002                       Reuven (Ruby) Rivlin
                                                      Minister of Communications

EX-4.(A).28

[TRANSLATION FROM HEBREW]

EXHIBIT 4.(a).28

                                  [State Seal]

             GENERAL LICENSE FOR PARTNER COMMUNICATIONS COMPANY LTD.
             FOR THE PROVISION OF MOBILE RADIO PHONE SERVICES BY THE
                              CELLULAR METHOD (MRP)

                                AMENDMENT NO. 13

By virtue of my power under section 4(e) of the Communications
(Telecommunications and Broadcasting) Law, 5742-1982, and after being presented
with the position of Partner Communications Company Ltd ("The Company"), I
hereby amend the general licence for the provision of mobile radio phone
services by the cellular method (MRP) granted to Partner Communications Company
Ltd. on 7th April 1998 as follows:

AMENDMENT OF CLAUSE 9

         1.       After clause 9.4 shall come:

                  "9.5     Notwithstanding the above, following the winning by
                           the Licensee of Tender No. 1/01, the validity of this
                           License shall be for a period of twenty (20) years
                           that will begin on 19 Shvat 5762 (1 February 2002)".

                                                    (sgd)
                  June, 2002                        Reuven (Ruby) Rivlin
                                                    Minister of Communications

EX-4.(A).29

[TRANSLATION FROM HEBREW]

EXHIBIT 4.(a).29

                                 [State Emblem]

                               THE STATE OF ISRAEL

                           MINISTRY OF COMMUNICATIONS

      GENERAL LICENSE FOR PARTNER COMMUNICATIONS LTD. FOR THE PROVISION OF
         MOBILE RADIO TELEPHONE (MRT) SERVICES USING THE CELLULAR METHOD

                                AMENDMENT NO. 14

By virtue of my powers under the Communications Law (Telecommunications and
Broadcasts), 5742-1982, the Wireless Telegraph Ordinance [New Version],
5732-1972 and by all my other powers under any law, and pursuant to Tender No.
1/01 for an Integrated License for the Provision of MRT Services in Israel, and
having considered the arguments of PARTNER COMMUNICATIONS COMPANY LTD.
(hereinafter: "PARTNER") I hereby amend the General License granted to Partner
on 7 April 1998 (hereinafter: the "GENERAL LICENSE"), as follows:

AMENDMENT OF CLAUSE 1.1

1.       The following shall be inserted after the definition of
         "TELECOMMUNICATIONS":

         " "FRANCHISEE"             As defined in section 6L(1) of the Law;"

2.       The following shall be inserted after the definition of "LICENSEE":

         " "GENERAL LICENSEE"       A person who has received a general license
                                    to effect telecommunications activities and
                                    to provide telecommunications services;

         "BROADCAST LICENSEE"       - as defined in the Law;"

3.       The following shall replace the definition of "THE LAW":



         " "THE LAW"                The Communications Law (Telecommunications
                                    and Broadcasts), 5742-1982(1);"

4.       The following shall be inserted after the definition of "THE LAW":

         " "HOLDING"                for the purposes of Means of Control,
                                    directly or indirectly, whether alone or
                                    jointly , including by way of another, and
                                    including by way of a trustee or agent, or
                                    by a right granted under any agreement,
                                    including an option to hold which does not
                                    arise from convertible securities, or any
                                    other means;

         "TRANSFER"                 for the purposes of Means of Control,
                                    directly or indirectly, for valuable
                                    consideration or otherwise, in perpetuity or
                                    for a fixed period, at once or in portions;

         "JOINTLY WITH OTHERS"      cooperation on a permanent basis; and the
                                    following shall be deemed to be in
                                    cooperation on a permanent basis: in respect
                                    of an individual - the individual, a person
                                    related to him, and a corporation that
                                    either of them controls; and in respect of a
                                    corporation - the corporation, the person
                                    who controls it and a person controlled by
                                    either of them;"

5.       The following shall replace the definition of "INTERFACE":

         " "INTERFACE"              the physical connection, including optic or
                                    wireless, meeting between various
                                    operational telecommunications
                                    installations;

6.       The following shall replace the definition of "TELECOMMUNICATIONS
         INSTALLATIONS":

         " "TELECOMMUNICATIONS INSTALLATION" an installation or device which is
                                    primarily designated for telecommunications
                                    purposes, including Terminal Equipment;"

7.       The following shall be inserted after the definition of
         "TELECOMMUNICATIONS INSTALLATION":

         " "TENDER NO. 1/01"        the tender published by the Ministry on 4
                                    Nissan 5761 (28 March 2001), including
                                    clarifications given by the Ministry during
                                    the tender, and following which this License
                                    has been amended;"

8.       The following shall replace the definition of "INTERNATIONAL
         TELECOMMUNICATIONS SYSTEM":

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

(1) Sefer Hachukim, 5742, p.218; 5761, p.530.



         " "INTERNATIONAL TELECOMMUNICATIONS SYSTEM" a telecommunications
                                    installations system , connected or intended
                                    to be connected to a Public
                                    Telecommunications Network through an
                                    International Network Termination Point
                                    (NTP), which serves or intends to serve for
                                    the transmission of telecommunications
                                    messages between an international switch
                                    located in Israel and a Telecommunications
                                    Installation located outside of Israel,
                                    including a satellite ground station and
                                    other Telecommunications Installations
                                    (hereinafter: "COMPONENTS OF THE SYSTEM"),
                                    and including transmission facilities
                                    between Components of the System;"

9.       The following shall be inserted after the definition of "MOBILE RADIO
         TELEPHONE SYSTEM" (MRT SYSTEM):

         " "DO (DOMESTIC OPERATOR)" a holder of a general license for the
                                    provision of wireline domestic
                                    telecommunications services;"

10.      The following shall replace the definitions of "THE FIRST OPERATOR",
         "THE SECOND OPERATOR" and "COMPETING MRT OPERATOR":

         " "MRT OPERATOR"           a holder of a general license for the
                                    provision of mobile radio telephone
                                    services;

         "COMPETING MRT OPERATOR"   an MRT Operator that is not the Licensee;"

11.      The following shall be inserted after the definition of "THE MINISTRY":

         " "TRANSFER SWITCH"        a Telecommunications Installation which
                                    contains and operates switching, routing and
                                    transmission devices which enable the
                                    creation of a connection between various
                                    switching centers connected thereto , and
                                    the transmission of telecommunications
                                    messages between them , including monitoring
                                    and routing installations;"

12.      The following shall be inserted in place of the definition of "OFFICE
         BEARER":

         " "OFFICE BEARER"          a person serving as a director, general
                                    manager, chief executive officer, deputy
                                    general manager, vice general manager, or a
                                    person acting as a replacement of one of the
                                    above in a company even under a different
                                    title as well as any other manager directly
                                    subordinate to the general manager of the
                                    company;"

13.      The following shall replace the definition of "APPENDIXES":



         " "APPENDIXES"             The First Annex and the Appendixes set out
                                    in the Second Annex to the License;"

14.      The following shall be inserted after the definition of "PTP (POINT TO
         POINT) LINE":

         "INTERCONNECTION"          a physical or logical connection between the
                                    Public Telecommunications Network of one
                                    licensee and the Public Telecommunications
                                    Network of another licensee, enabling the
                                    transfer of telecommunications messages
                                    between the subscribers of both licensees or
                                    the provision of services by one licensee to
                                    the subscribers of another licensee;"

15.      The following shall be inserted after the definition of "THE LICENSE":

         "THE NETWORK"              The Licensee's MRT system;"

16.      The following shall replace the definition of "PUBLIC
         TELECOMMUNICATIONS NETWORK":

         " "PUBLIC TELECOMMUNICATIONS NETWORK" - a system of Telecommunications
                                    Installations serving or designated to serve
                                    as a provider of Telecommunications Services
                                    to the entire public around the country, or
                                    at least in an area of service that includes
                                    exchanges and transmission switches,
                                    transmission equipment and an access network
                                    including an MRT system and an International
                                    Telecommunications System, and with the
                                    exception of a private network, Terminal
                                    Equipment and MRT Terminal Equipment;"

17.      The following shall be inserted after the definition of "PUBLIC
         TELECOMMUNICATIONS NETWORK":

         " "WIRELINE PUBLIC TELECOMMUNICATIONS NETWORK" a public domestic
                                    telecommunications network, with the
                                    exception of an MRT system and an
                                    International Telecommunications System;

         "ACCESS NETWORK"           components of a Public Telecommunications
                                    Network used to connect a switching center
                                    and a network termination point (NTP) using
                                    wireline infrastructure, wireless
                                    infrastructure or a combination of the two;"

18.      The following shall be inserted after the definition of "The BEZEQ
         CORPORATION NETWORK":

         " "USE"                    access to a Telecommunications Installation
                                    of the Licensee, including to its Public
                                    Telecommunications



                                    Network or Access Network, in whole or in
                                    part, and the ability to use such , for the
                                    implementation of Telecommunications
                                    Activity and to provide Telecommunications
                                    Services thereby, including the installation
                                    of a Telecommunications Installation of
                                    another licensee on the Licensee's
                                    telecommunications facility or premises;"

19.      The following shall replace the definition of "BASIC TELEPHONE
         SERVICE":

         " "BASIC TELEPHONE SERVICE" switched or routed bi-directional
                                    transmission , including via modem, speech
                                    or speech-like telecommunications messages,
                                    such as facsimile signals;

         "TELEPHONY SERVICE"        Basic Telephone Service and Accompanying
                                    Services to such service;"

20.      The following shall replace the definition of "ROAMING SERVICE":

         " "ROAMING SERVICE"        an MRT Service provided overseas and in the
                                    territories under the Civil Administration
                                    of the Palestinian Council via the MRT
                                    system of a foreign MRT operator
                                    (hereinafter: a "FOREIGN OPERATOR"), whereby
                                    the Subscriber pays the Licensee for the
                                    service; and similarly - an MRT Service
                                    provided in Israel via the Licensee's MRT
                                    system, whereby the Licensee provides a
                                    service to a Foreign Operator for the
                                    subscribers of such operator; for this
                                    purpose, the "PALESTINIAN COUNCIL" - as
                                    defined in the Law for Implementation of the
                                    Interim Agreement regarding the West Bank
                                    and Gaza Strip Law (Jurisdictional Powers
                                    and Other Provisions) ( (Legislative
                                    Amendments), 5756-1998 [sic](2);"

21.      The following shall replace the definition of "ACCOMPANYING SERVICE":

         " "ACCOMPANYING SERVICE"   a service as set out in the First Annex to
                                    the License, provided on the basis of a
                                    Basic Telephone Service, which by its nature
                                    can only be provided by the provider of the
                                    basic service;"

22.      The following shall replace the definition of "VALUE ADDED SERVICE":

         " "VALUE ADDED SERVICE"    a service provided based on a Basic
                                    Telephone Service, which by its nature can
                                    also be granted by

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

(2) Sefer Hachukim 5742 [sic], p. 34.



                                    another licensee who is not the supplier of
                                    the basic service; for the purposes of the
                                    services of the Licensee, such service as
                                    set out in the First Annex of the License;"

23.      The following shall be inserted after the definition of "VALUE ADDED
         SERVICE":

         " "INFRASTRUCTURE SERVICE" an Interconnection or the ability of Use
                                    given to another licensee, a Franchisee or
                                    to a broadcast licensee;"

         " "WIRELINE DOMESTIC TELECOMMUNICATIONS SERVICES" Infrastructure
                                    Service, transmission, data communications
                                    and telephony services;"

24.      The following shall replace the definition of "LICENSEE'S SERVICES":

         " "LICENSEE'S SERVICES"    MRT Services, Telecommunications Services
                                    and other services that the Licensee is
                                    entitled to provide to its subscribers, to
                                    other licensees, to broadcast licensees, to
                                    Franchisees and to the Security Forces under
                                    this License;"

25.      The following shall be inserted after the definition of "ENGINEERING
         PLAN":

         " "NUMBERING PLAN"         as defined in section 5A(b) of the Law;"

AMENDMENT OF CLAUSE 7

26.      Clauses 7.1(j), 7.1(k) and 7.1(l) are deleted;

AMENDMENT OF CLAUSE 8

27.      The following shall replace clause 8, entitled "EXCLUSIVITY":

         "8.      NO EXCLUSIVITY

         8.1      The Licensee shall not have any form of exclusivity whatsoever
                  in the provision of its services.

         8.2      The Minister may at any time grant a license for the provision
                  of MRT Services to additional operators.

         8.3      Should the Minister publish a tender for the provision of MRT
                  Services, the Licensee may submit a bid in the tender,
                  however, the Minister may determine , as part of the
                  conditions of such tender, that if the Licensee wins the
                  tender, the receipt of a license shall be conditional upon the
                  Licensee transferring its MRT System to another



                  as the Minister may order, and on such conditions as he may
                  prescribe, and that the Licensee shall cease to provide MRT
                  Services."

AMENDMENT OF CLAUSE 9

28.      In clause 9.5, the words "in the context of extension of the License"
         shall be inserted following the words "Notwithstanding the aforesaid"
         and before the word "following".

AMENDMENT OF CLAUSE 12

29.      In clause 12.1, the words "clause 9.5" shall replace the words "clause
         9.1".

REPLACEMENT OF CLAUSE 30

30.      The following shall replace clause 30, entitled "CONNECTION TO OTHER
         TELECOMMUNICATIONS SYSTEMS":

         "30.     INTERCONNECTION OBLIGATION

         30.1     The Licensee shall act in order to effect the Interconnection
                  of the Network with any other Public Telecommunications
                  Network operating in the area in which the law, jurisdiction
                  and administration of the State of Israel apply (including
                  settlements, military sites and military installations in
                  Judea, Samaria and the Gaza Strip), and including to any
                  Wireline Public Telecommunications Network, International
                  Telecommunications System and the MRT System of another MRT
                  operator.

         30.2     The Interconnection between the Network and the Public
                  Telecommunications Network of another licensee shall be
                  effected in such a way as to enable the following:

                  (a)      Transfer of telecommunications messages between
                           Terminal Equipment connected to the Network and
                           Terminal Equipment connected to the other Public
                           Telecommunications Network;

                  (b)      Proper and orderly provision of services by the
                           Licensee to the subscribers of another licensee, and
                           provision of services by the other licensee to
                           subscribers of the Licensee.

         30.3     Interconnection may be effected directly or indirectly, via
                  the Public Telecommunications Network of another general
                  licensee, provided that it allows for the provisions of clause
                  30.2.

         30.4     In an Interconnection between the Network and a Wireline
                  Public Telecommunications Network, the Licensee shall act to
                  set up



                  Interface points between the two Networks, for every type of
                  service (infrastructure, transmission and data communications,
                  telephony), with at least three main Transfer Switches; unless
                  the Director has determined otherwise based upon a written
                  application from the Licensee; the setting up of the above
                  Interface points shall be effected under an agreement between
                  the Licensee and the Domestic Operator; such an agreement
                  shall contain, inter alia, the technical, operational and
                  commercial particulars of the connection, and the number and
                  location of connections.

         30.5     In an Interconnection between the Network and an International
                  Telecommunications System, the Licensee shall act in
                  accordance with the provisions of Appendix J to the License.

         30A.     RULES REGARDING EFFECTING OF INTERCONNECTION

                  The Licensee shall act to effect the Interconnection subject
                  to all of the following:

                  (a)      The Licensee shall ensure that the technical and
                           operational standards of the Network match the
                           requirements for connection to the Public
                           Telecommunications Network of the Domestic Operators,
                           the other MRT operators and the international
                           operators (hereinafter: "AN OTHER OPERATOR"), that
                           the operations of the Network be properly integrated
                           with the operations of the Public Telecommunications
                           Network of the Other Operator and that the
                           Interconnection shall not harm the proper operation
                           of these systems or proper service to their
                           subscribers;

                  (b)      The Licensee shall provide the Interconnection
                           service on equal terms to every Other Operator and
                           shall avoid any discrimination in effecting such
                           Interconnection, including in respect of:

                           (1)      The supply of infrastructure installations
                                    and network connection services;

                           (2)      the availability of connection facilities;

                           (3)      methods, quality and durability of the
                                    connection;

                           (4)      switching alterations and adjustments to
                                    installations , protocols and Network
                                    Interface points;

                           (5)      payments for Iinterconnections;

                           (6)      Billing and collection arrangements and
                                    transfer of information to Subscribers;

                           (7)      commercial terms for effecting
                                    Interconnection;

                           (8)      provision of information regarding the
                                    Network and changes therein which relate to
                                    Interconnection;



                  (c)      The Licensee shall make available to the Other
                           Operator any essential information that the Other
                           Operator requires in order to provide its services
                           via the Licensee's facilities; such information shall
                           be provided subject to any law regarding protection
                           of privacy or commercial confidentiality; where the
                           parties do not reach an agreement as to the nature
                           and scope of the essential information, the Minister
                           shall rule on the matter;

                  (d)      The Licensee shall provide the Other Operator with
                           information on planned changes to its Network, which
                           might affect Interconnection with the Public
                           Telecommunications Network of the Other Operator, or
                           Interconnection between the Public Telecommunications
                           Networks of the Other Operators; the Licensee shall
                           supply the said information in such a manner as to
                           allow the Other Operator to be reasonably prepared
                           for the implementation of the said changes;

                  (e)      For the purposes of sub-clauses (c) and (d), the
                           Licensee may make the provision of information to the
                           Other Operator conditional upon execution of a
                           reasonable confidentiality agreement, intended to
                           protect the rights of the Licensee under any law,
                           including commercial secrets, intellectual property
                           rights and the like, relevant to the information
                           regarding the change in the Network that is to be
                           delivered to the Other Operator;

                  (f)      The conditions for Interconnection between the
                           Network and the Public Telecommunications Network of
                           an Other Operator shall be arranged by an agreement
                           between the Licensee and the Other Operator; where
                           the parties fail to reach an agreement, the Minister
                           shall rule on the matter;

                  (g)      (1)      The Licensee shall allow its Subscribers to
                                    receive all of the services offered to them
                                    by the Other Operator, and may allow the
                                    subscribers of the Other Operator to receive
                                    all of the services from the Licensee ,
                                    provided that receipt of such services is
                                    possible under any law.

                           (2)      The Director may order the Licensee to allow
                                    subscribers of another licensee to receive
                                    the services given by the Licensee ,
                                    provided that the receipt of such services
                                    as aforesaid is technically and legally
                                    possible.

                           (3)      Notwithstanding the provisions of paragraph
                                    (1), the Director may, upon a written
                                    application from the Licensee, exempt the
                                    Licensee from the obligation of providing
                                    its Subscribers with the possibility of
                                    receiving services from the Other Operator
                                    for technical, economic or other justifiable
                                    reasons.



                  (h)      The Licensee shall provide the Director with a signed
                           copy of any agreement between the Licensee and the
                           Other Operator regarding Interconnection;

                  (i)      The Licensee shall provide the Director, upon demand,
                           with any information provided to the Other Operator
                           pursuant to sub-clauses (c) and (d), and a copy of
                           any confidentiality agreement pursuant sub-clause
                           (e);

                  (j)      The Licensee shall act in accordance with any other
                           instructions that the Minister may prescribe.

         30B.     PAYMENT FOR TRAFFIC COMPLETION AND INTERCONNECTION

                  Where the Minister has not prescribed payment for
                  Interconnection or payment deriving from Interconnection, the
                  Licensee may charge a reasonable and non-discriminatory sum
                  for these.

         30C.     PROHIBITION AGAINST DELAYING INTERCONNECTION

                  The Minister shall give the Licensee a reasonable opportunity
                  to make claims regarding the Minister's intention to instruct
                  the Licensee regarding the manner of effecting Interconnection
                  and the scope thereof, activities, services and Accompanying
                  Services for effecting Interconnection, and payment for
                  Interconnection; where the Minister has instructed the
                  Licensee in respect of such matters, the Licensee shall not
                  delay Interconnection to the Network in any manner, and shall
                  fulfill its obligations in accordance with the instructions of
                  the Minister, in good faith and properly, on the date
                  prescribed for such and in full cooperation.

         30D.     PROVISION OF POSSIBILITY OF USE

         30D.1    The Minister may instruct the Licensee regarding the provision
                  of the possibility of use of its Telecommunications
                  Installation in accordance with his powers under section 5 of
                  the Law.

         30D.2    The Licensee shall allow another licensee, in accordance with
                  the instructions of the Minister, to provide Value Added
                  Services via the Network; the Licensee shall ensure reasonable
                  and equal conditions for any other licensee, in respect of the
                  supply of Value Added Services by the other licensee to the
                  Licensee's subscribers, including in respect of the matters
                  set out in clause 30A, mutatis mutandis.

         30D.3    For the purpose of provision of the possibility of Use, the
                  provisions of clauses 30A through 30C shall apply, mutatis
                  mutandis.



         30E.     INFRASTRUCTURE SERVICES TO AN AFFILIATED COMPANY

         30E.1    The Licensee shall avoid giving preference to a licensee that
                  is an Affiliated Company over any other licensee, in the
                  provision of Infrastructure Services, in terms of either
                  payment or service, in terms of the conditions or availability
                  of the service, or in any other manner.

         30E.2    (a)      Upon the written request of the Licensee, the
                           Director may permit limitations for the Licensee on
                           the provisions of clause 30E.1 in respect of another
                           licensee or broadcast licensee which is an Affiliated
                           Company, provided that the following conditions
                           apply:

                           (1)      such other licensee or Franchisee is not a
                                    Substantial Operator;

                           (2)      the Director is of the opinion that the
                                    giving of such approval shall not
                                    substantially harm competition in the field
                                    of telecommunications

                  (b)      Limitations as aforesaid in sub-clause (a) might
                           permit the Licensee to provide the Affiliated Company
                           with Use of its Telecommunications Installations
                           under preferred conditions and may be limited by time
                           or any other condition.

                  (c)      In considering the permit under this clause, the
                           Director shall take into account the existence of a
                           valid agreement, executed prior to Amendment No. 14
                           of this License, between the Licensee and an
                           Affiliated Company, as aforesaid, inter alia
                           regarding limitation of the permit by time or other
                           conditions.

         30E.3    In this clause, "AFFILIATED COMPANY", "SUBSIDIARY" and
                  "SUBSTANTIAL OPERATOR" - as defined in the Telecommunications
                  Regulations, (Proceedings and Conditions for Receipt of a
                  General License for the Provision of Domestic Wireline
                  Telecommunications Services) 5760-2000.

         30F.     NUMBERING PLAN

         30F.1    The Licensee shall act in accordance with the Numbering Plan,
                  and in accordance with the instructions of the Director
                  regarding the activation and implementation of the Numbering
                  Plan.

         30F.2    Should the Director give instructions regarding number
                  portability such that every subscriber of another MRT licensee
                  shall be able to become a subscriber of the Licensee or
                  receive services from the Licensee without altering his
                  number, and vice versa, the Licensee shall integrate
                  facilities in its Public Telecommunications Network that will
                  allow for the implementation of such feature, on the date and
                  in the manner to be prescribed by the Director."



AMENDMENT OF CLAUSE 45

31.      The following shall be added after clause 45.1(B):

         "(c)     Frequency bands allocated exclusively for the Licensee's use
                  as specified below :

                  (1)      From 1 February 2002 to 1 January 2004, the following
                           bands shall be allocated:

                                    1732 to 1738.4 MHz, and the matching domain
                                    1827 to 1833.4MHz;

                                    1937 to 1942 MHz, and the matching domain
                                    2127 to 2132 MHz;

                  (2)      As of 1 January 2004, the following bands shall be
                           allocated:

                                    1730 to 1740 MHz and the matching domain
                                    1825 to 1835 MHz;

                                    1940 to 1950 MHz and the matching domain
                                    2130 to 2140 MHz;

                  (3)      As of 1 January 2005, the frequency domain 1910 to
                           1915 MHz shall be allocated."

                  (4)      Notwithstanding the aforesaid, if the Licensee
                           requests to postpone the date of the beginning of use
                           of the bands set out in sub-clauses (1) to (3) or
                           part of them, to a later date, the Director may
                           suspend the band allocation until a date to be
                           decided upon.

AMENDMENT OF CLAUSE 60

32.      The following shall replace clause 60.2:

         "60.2    Without derogating from the provisions of clause 75.3, the
                  Licensee shall provide MRT Services and the Services Package,
                  as defined in clause 73A, to every person so requesting, on
                  equal and non-discriminatory terms, and at a
                  non-discriminatory tariff."

33.      The following shall be inserted in place of clause 60.3 which has been
         repealed:

         "60.3    Should the Director find that the Services Package might harm
                  competition or consumers, he shall give notice of such to the
                  Licensee noting the date on which the Licensee is to cease
                  offering the Services Package to its subscribers.



         60.4     If the Licensee provides any MRT Service to any person or body
                  in return for payment, the service shall be available to every
                  Subscriber in the entire coverage area of the system, while
                  meeting the minimum requirements regarding quality of service,
                  without discrimination, within 24 months of the commencement
                  of provision of the service in return for payment.

         60.5     Upon written application from the Licensee, the Director may
                  permit the Licensee limitations on the provisions of clause
                  60.4, after being convinced that there is a real difficulty in
                  supplying the service to all who request it, and that certain
                  characteristics of the service give special and extraordinary
                  grounds and justification for such."

AMENDMENT OF CLAUSE 66

34.      The following shall be inserted in place of clause 66, entitled
         "PROTECTION OF SUBSCRIBER PRIVACY AND COOPERATION WITH THE SECURITY
         FORCES" and clause 66A, entitled "SPECIAL SERVICES TO THE SECURITY
         FORCES":

         "66.     PROTECTION OF SUBSCRIBER PRIVACY

         66.1     Without derogating from the provisions of the Law, the Secret
                  Monitoring Law, 5739-1979(3), the Protection of Privacy Law,
                  5741-1981(4), or any other law regarding protection of the
                  privacy of a person, the Licensee shall not be entitled to
                  listen to the telephone or any other communication of a
                  Subscriber without the Subscriber's written consent, other
                  than for the purpose of quality control of the service or the
                  prevention of fraud.

         66.2     Subject to the provisions of clause 66A, the Licensee, its
                  employees, agents and any person acting on its behalf shall
                  not be entitled to disclose lists or documents containing the
                  name and address of a Subscriber or any other information
                  regarding a Subscriber, including account details, call
                  traffic, times and destinations to any person other than the
                  Subscriber or a person authorized by the Subscriber for such.

         66.3     Notwithstanding the provisions of clause 66.2, the Licensee
                  may do the following:

                  (a)      provide details of the Subscriber to another licensee
                           for the purpose of collection of monies owing from
                           the Subscriber for services provided to it via the
                           Network, provided that the details so provided are
                           essential for the purpose of collecting money and
                           accounting and that the other licensee has undertaken
                           to maintain the privacy of the Subscribers;

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

(3) Sefer Hachukim, 5739, p. 118; 5755, p. 180

(4) Sefer Hachukim, 5741, p. 128; 5756, p. 290



                  (b)      provide the details of a Subscriber, to the extent
                           that such details are in its possession, to another
                           person under any power at law.

         66A.     SERVICES TO THE SECURITY FORCES

         66A.1    The Licensee shall supply special services to the Security
                  Forces, as set out in the Security Appendix (Confidential)
                  attached to this License as Appendix K.

         66A.2    The Licensee shall allow the Security Forces, as identified by
                  the Director in writing, to exercise, subject to any law,
                  their powers in respect of any telecommunications operation
                  under the License, and shall be responsible for ensuring the
                  existence, proper operation and technical adaptability of the
                  equipment and infrastructure required to enable such
                  performance, all in coordination with the Security Forces and
                  as set out in Appendix K; the Security Forces shall bear
                  payment under the provisions of section 13 of the Law.

         66A.3    The Licensee shall be exempt from the obligation to indemnify
                  the State under the provisions of clause 91.2 of the License
                  and/or under any law, for the provision of the special
                  services to the Security Forces.

         66B.     SECURITY PROVISIONS

         66B.1    The Licensee shall appoint a security officer in accordance
                  with the provisions of the Security Arrangements in Public
                  Bodies Law, 5758-1998(5), and shall strictly adhere to the
                  security provisions set out in Annex L to the License.

         66B.2    The Licensee shall set out appropriate provisions in its
                  foundation documents and regulations and shall act so that no
                  person shall be appointed to act in a position or role set out
                  in Annex L to this License unless he meets the following
                  conditions:

                  (a)      he is an Israeli citizen, as defined in the
                           Citizenship Law, 5712-1952(6), and a resident of
                           Israel;

                  (b)      he has been given a security clearance from the
                           General Security Services, under which there is
                           nothing to prevent his so acting.

         66B.3    The Licensee shall act to keep the activities of the Security
                  Services confidential and shall act in accordance with the
                  security instructions

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

(5) Sefer Hachukim, 5758, p. 348;

(6) Sefer Hachukim, 5712, p. 146; 5756, p. 362



                  of such Security Services, including with regard to the
                  appropriate security classification for Office Bearers and
                  persons with roles at the Licensee and the classification of
                  information regarding the activities relating to the Security
                  Services.

         66B.4    The Licensee shall take such steps as are required in order to
                  protect the system, components of the system, and the
                  databases serving for the provision of services, operation and
                  control of the system against the activities of unauthorized
                  persons, under the provisions set out in Annex L of this
                  License."

AMENDMENT OF CLAUSE 67

35.      The words "INFORMATION SERVICES AND ROAMING SERVICES" shall be deleted
         from the heading of clause 67.

36.      The words "and the call traffic, services and tariff plans in respect
         of which the charge was made" shall be deleted from clause 67.1.

37.      Clauses 67.4 through 67.7 shall be deleted.

ADDITION OF CLAUSES 67A, 67B AND 67C

38.      The following shall be inserted after clause 67, which bears the
         heading "BILLS TO SUBSCRIBERS":

         "67A.    INFORMATION SERVICE

         67A.1    The Licensee shall provide the public free of charge , by
                  itself or via another person, with an information service for
                  finding telephone numbers of its Subscribers, via one of the
                  following:

                  (a)      A telephone information service;

                  (b)      A telephone directory which shall be updated once a
                           year.

         67A.2    Clause 67A.1 shall come into force on 28 Adar I, 5763 (2 March
                  2003).

         67B.     ACTIVATION OF SERVICE

         67B.1    The Licensee shall supply a Basic Telephone Service,
                  Accompanying Services, and Value Added Services on the dates
                  and at the quality of service as set out in the First Annex.

         67B.2    The Licensee shall notify the Director, no later than thirty
                  (30) business days prior to the first activation of a service
                  set out in the First Annex of it's intention to commence
                  provision of the service.



         67B.3    Should the Licensee wish to provide a service not included in
                  the First Annex (hereinafter in this clause - a New Service),
                  the Licensee shall notify the Director of it's intention
                  thirty (30) business days before the date on which it intends
                  to commence providing the New Service. The Licensee shall
                  attach to the notice a document containing a summary of the
                  description of the New Service, the manner in which it it to
                  be provided, the tariff the Licensee intends to charge for the
                  New Service and the indices for grade of service that it
                  intends to meet.

         67B.4    The Director may notify the Licensee, within thirty (30)
                  business days from the date of receipt of the notice set out
                  in clause 67B.3, that provision of the New Service is subject
                  to the fulfillment of conditions that the Licensee must
                  fulfill either before or after commencement of provision of
                  the New Service, and he may instruct the Licensee not to
                  provide the New Service, giving reasons for such notification.
                  Should the Director not notify the Licensee as aforesaid, the
                  Licensee may provide the New Service thirty (30) days after
                  the date of giving of the notice to the Director.

         67.5B    Notwithstanding the provisions of clauses 67.2B, 67.3B and
                  67.4B, upon written application from the Licensee, the
                  Director may permit the Licensee to commence provision of a
                  service even earlier than thirty (30) business days after the
                  date of giving of notice by the Licensee.

         67.6B    Any New Service that the Licensee might commence providing as
                  set out in clause 67.4B shall be deemed to be part of the
                  First Annex ; the First Annex shall be updated from time to
                  time by the Director.

         67C.     SERVICE FILE

                  Notwithstanding the provisions of clause 67B, the Director may
                  require the Licensee to prepare a service file for all of its
                  services in the format and on the date set out by the Director
                  in his demand; the service file shall include, inter alia,
                  documents that describe the service and the manner of
                  provision of the service , and shall set out the tariffs and
                  standards of quality of service in respect of it; every such
                  service file shall be submitted to the Director for his
                  approval, and after such approval shall be published in detail
                  and in such a way that the Director shall determine; the
                  Director may order at any time that approval of a service file
                  is a condition of the provision of any service; for the
                  purposes of tariffs not prescribed in regulations, the
                  Director's approval of the service file shall not be deemed to
                  be approval of the reasonableness of the tariff."



AMENDMENT OF CLAUSE 75

39.      In clause 75.3, the words " "Class of Subscribers" - a group of
         subscribers the characteristics of which give reasonable grounds to
         justify its being distinguished from another group" shall replace the
         words " "Class of Subscribers" - a group of subscribers meeting
         characteristics enabling them to be distinguished from another group of
         subscribers".

REPLACEMENT OF CHAPTER 7, PART A

40.      The following shall replace Chapter 7, Part A:

                        "PART A - ROYALTIES AND PAYMENTS

         84.      ROYALTIES

         84.1     The Licensee shall pay royalties as set out in the
                  Telecommunications Regulations (Royalties), 5761-2001(7) or
                  any other regulations that may replace those (hereinafter: the
                  "ROYALTY REGULATIONS").

         84.2     The Licensee shall attach two copies of an unaudited quarterly
                  income statement, signed by the Licensee and approved by an
                  accountant, to any payment of royalties under this clause;
                  such statement shall include details of the calculation of
                  dutiable income in accordance with the Royalty Regulations,
                  and any other detail upon which the Licensee based the sum of
                  the royalties.

         84.3     Upon submission of an annual audited statement of income,
                  signed by the Licensee's accountant (hereinafter: the "AUDITED
                  STATEMENT"), the Licensee shall submit a statement set out by
                  quarters, detailing the correspondence between the income in
                  respect of which it paid royalties and the income appearing in
                  the Audited Statement (hereinafter: the "ADJUSTED STATEMENT").

         84.4     Where it becomes apparent that the sum of royalties that the
                  Licensee was required to pay under the Adjusted Statement is
                  higher than the sum paid by it for the quarter to which the
                  Audited Statement relates, the Licensee shall pay royalty
                  differentials, together with interest and linkage
                  differentials as set out in the Royalty Regulations.

         84.5     Where it becomes apparent that the sum of royalties that the
                  Licensee is required to pay under the Adjusted Statement is
                  lower than the sum paid by it for the quarter to which the
                  Audited Statement relates, the Licensee shall be credited with
                  the sum of the surplus payment; surplus payments to which the
                  Licensee is entitled shall be set off, upon written approval
                  by the Director, against the next royalties payment, and
                  interest and linkage differentials shall be calculated in
                  accordance with the last index published prior to the date of
                  the setoff,

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

(7) Kovetz Takanot, 5761, p. 985



                  as aforesaid; for these purposes, interest and linkage
                  differentials shall be as set out in the Royalty Regulations.

         85       DELAY IN PAYMENT OF ROYALTIES

                  The Licensee shall pay linkage differentials, arrearage
                  interest and collection costs as set out in the Royalty
                  Regulations, on royalties not paid in the time prescribed for
                  their payment under said regulations.

         86.      MANNER OF PAYMENT OF ROYALTIES

                  Royalties and linkage differentials, arrearage interest, and
                  collection fees therefor, shall be paid to the accountant of
                  the Ministry of Communications by way of bank transfer into
                  the account of the Ministry of Communications.

         87.      OTHER OBLIGATORY PAYMENTS

                  The royalties under this section shall be in addition to any
                  fee, tax or other obligatory payment that the Licensee is
                  required to pay under the provisions of any law."

AMENDMENT OF CLAUSE 94

41.      In clause 94.1, the words "for twenty (20)" shall replace the words
         "for ten (10)".

AMENDMENT OF CLAUSE 95

42.      The following shall be inserted in place of clause 95.1(c):

         "(c)     The Licensee charges its Subscribers with payments in
                  contravention of the provisions of clause 75;"

43.      The following shall be inserted after clause 95.1(l):

         "(m)     The Licensee has not paid the license fee on the date
                  required, in accordance with the provisions of clause 40.1 of
                  the terms and conditions of Tender No. 1/01.

         (n)      A monetary sanction under the Law has been imposed upon the
                  Licensee and the sum required has not been paid on time,
                  provided that a sum higher than the sum of the sanction shall
                  not be forfeited."



AMENDMENT OF CLAUSE 108

44.      The following shall replace clause 108.2:

         "108.2   Where the License and the documents related to it are on
                  public display, the public shall not have the opportunity to
                  inspect the following documents, contained in the Second Annex
                  of the License:

                  (a)      Appendix  A - Details of the Licensee;

                  (b)      Appendix  B - the Engineering Plan;

                  (c)      Appendix  C - Maintenance Procedures;

                  (d)      Appendix  G - Insurance Contract;

                  (e)      Appendix  H - Bank Guarantee;

                  (f)      Appendix  I - Letters of Undertaking;

                  (g)      Appendix  K - Special Services for Security Forces;

                  (h)      Appendix  L - Security Instructions."

45.      The following shall be inserted after clause 108.3:

         "108.4   The Licensee shall allow the public to inspect the documents
                  of the License via the internet; the Licensee may also do so
                  through the Ministry of Communications' internet site as long
                  as the Ministry of Communications publishes the License on its
                  internet site.

         108.5    The Ministry may publish the License, other than the
                  Appendixes set out in clause 108.2, on such date and in such
                  manner as it sees fit."

FIRST ANNEX

46.      The attached "FIRST ANNEX" shall replace the existing "FIRST ANNEX".

AMENDMENT OF APPENDIX B IN THE SECOND ANNEX

47.      The attached "ADDITION TO APPENDIX B - ENGINEERING PLAN" shall be added
         to Appendix B in the Second Annex.

REPLACEMENT OF APPENDIX E IN THE SECOND ANNEX

48.      The attached "APPENDIX E - MINIMUM REQUIREMENTS AND LEVEL OF SERVICE TO
         SUBSCRIBERS" shall replace Appendix E in the Second Annex.

REPLACEMENT OF APPENDIX H IN THE SECOND ANNEX

49.      The attached "Appendix H - BANK GUARANTEE" shall replace Appendix H in
         the Second Annex .



REPLACEMENT OF APPENDIX I IN THE SECOND ANNEX

50.      The attached "Appendix I - LETTERS OF UNDERTAKING" shall replace
         Appendix I in the Second ANNEX.

Jerusalem, 5 Tishri 5763                                      (sgd.)
         (10 September, 2002)                       --------------------------
                                                    Reuven (Ruby) Rivlin
                                                    Minister of Communications



                                   FIRST ANNEX

                LIST OF SERVICES AND GAUGES OF QUALITY OF SERVICE

1.       GENERAL

1.1      This Annex contains the list of services that the Licensee is to
         supply, under the conditions set out in Part B of Chapter E - "LEVEL OF
         SERVICE TO SUBSCRIBERS".

1.2      The services shall be supplied using the technology operated by the
         Licensee, unless otherwise noted in the License or in an Annex to the
         License.

1.3      Wherever the words "SUPPORT IN VARIOUS LANGUAGES" appear, the
         intention is at least to support in the following four languages:
         Hebrew, Arabic, English and Russian.

2.       LIST OF SERVICES TO BE ACTIVATED - USING GSM 900, GSM 1800 TECHNOLOGY

2.1      BASIC TELEPHONE SERVICES



                                                                                        GAUGES OF
                                                                             SUPPLY     QUALITY OF
NO.      SERVICE NAME            SERVICE DESCRIPTION                         DATE       SERVICE*          NOTES
- ------------------------------------------------------------------------------------------------------------------------------
                                                                                           
1        ORDINARY                Telephone conversations to and from         Exists      High sound
         TELEPHONE               Subscribers of the Licensee to any                      quality and
         CONVERSATION            telephone or other Terminal Equipment                   high level of
         (SPEECH)                appropriate to the Licensee's Network and               privacy
                                 to any other Public Telecommunications
                                 Network in Israel or around the world.
- ------------------------------------------------------------------------------------------------------------------------------
2        ACCESS TO               Free dialing to such emergency services as  Exists
         EMERGENCY               shall be prescribed by the Director (e.g.:
         CALLS                   police, ambulance, fire department, and
                                 others).
                                 Caller to be directed to an emergency call
                                 center by way of definition of the service
                                 provider in the place where the Subscriber
                                 is.
- ------------------------------------------------------------------------------------------------------------------------------


*        The Licensee shall act in accordance with the definitions of the World
         GSM Organization, and in accordance with the standards of ETSI (the
         European Telecommunications Standards Institute), to the extent
         relevant for each service.



2.2      ACCOMPANYING SERVICES



- ------------------------------------------------------------------------------------------------------------------------------
                                                                                        GAUGES OF
                                                                             SUPPLY     QUALITY OF
NO.      SERVICE NAME            SERVICE DESCRIPTION                         DATE       SERVICE*          NOTES
- ------------------------------------------------------------------------------------------------------------------------------
                                                                                           
1        VOICE                   Leaving and retrieving voice messages       Exists                       Leaving and
         MAIL                    stored in a personal voice mailbox when                                  retrieving
                                 the customer is not available or does not                                messages from
                                 wish to answer. Sending an indicator                                     voice mail box
                                 when a message is waiting in the                                         even when
                                 mailbox. Licensee to support various                                     dialing from
                                 languages.                                                               other networks.
- ------------------------------------------------------------------------------------------------------------------------------
2        "FOLLOW                 Direction of incoming calls to another      Exists
         ME"                     telephone number at the Subscriber's
                                 election (permanently, only when the
                                 Subscriber's number is engaged, only
                                 when the Subscriber does not answer or
                                 when the Subscriber is not available).
                                 The service also operates when the
                                 handset is not turned on or is outside a
                                 coverage area.
- ------------------------------------------------------------------------------------------------------------------------------
3        "HOLD"                  Directing a caller to a "hold" status,      Exists
                                 when the Subscriber answers another
                                 call or calls another number. Skipping
                                 between the two calls.
- ------------------------------------------------------------------------------------------------------------------------------
4        CALL                    Indicator to Subscriber of an incoming      Exists
         WAITING                 call using special sounds. The
                                 Subscriber can choose to answer, not
                                 answer, or ignore.
- ------------------------------------------------------------------------------------------------------------------------------
5        CALLER                  Display of the number of the caller on      Exists                       Dependent upon
         ID                      the display screen of the handset.                                       the number not
                                                                                                          being blocked by
                                                                                                          the caller
- ------------------------------------------------------------------------------------------------------------------------------





- ------------------------------------------------------------------------------------------------------------------------------
                                                                                           
6        SHORT                   Sending and receiving of text,              Exists                       Dependent upon
         MESSAGE                 graphic, voice and picture                                               terminal handsets
         SERVICE (SMS)           messages from and to Subscribers'
                                 handsets in the Licensee's Network
                                 or Subscribers' handsets on other
                                 networks in Israel and overseas
                                 who have reached an agreement
                                 with the Licensee.
                                 Sending such messages from a
                                 personal computer.
                                 Sending incoming messages to a
                                 facsimile machine.
                                 The Licensee shall support various
                                 languages.
- ------------------------------------------------------------------------------------------------------------------------------
7        24 HOUR                 Receipt of assistance from                  Exists     See
         SUBSCRIBER              subscriber service 24 hours a day, 7                   Appendix E
         SERVICE                 days a week, in four languages
                                 (Hebrew, Arabic, English and
                                 Russian).
- ------------------------------------------------------------------------------------------------------------------------------
8        INFORMATION             Finding out telephone numbers of            Exists     See               Pursuant to
         SERVICE                 Subscribers on the Licensee's                          Appendix E        provisions of the
                                 Network.                                                                 License

                                 -----------------------------------------------------
                                 Possibility of calling and receiving        Future
                                 response by Short Message System
                                 (SMS).
- ------------------------------------------------------------------------------------------------------------------------------
9        CALLS TO                Dialing to emergency services               Exists                       112 may be
         EMERGENCY               (police, ambulance, fire                                                 dialed without a
         SERVICES                department, and other emergency                                          SIM card, under
                                 services, as prescribed by the                                           ETSI. This is
                                 Director) by way of truncated                                            directed to the
                                 dialing codes. These services are                                        police.
                                 also available without an SIM card
                                 in the handset.
- ------------------------------------------------------------------------------------------------------------------------------
10       BILLING                 Sending invoice containing a                Exists     100%
         SUMMARY                 summary of all billing (e.g.,                          matching
                                 subscription fees, airtime                             with
                                 billing, taxes, other expenses).                       company
                                 Information on billing via                             records
                                 interactive answering service and
                                 SMS.
- ------------------------------------------------------------------------------------------------------------------------------
11       DETAILED                Sending invoice containing details          Exists     100%
         BILLING                 of all calls made for the entire                       matching
                                 billing period, upon request.                          with company
                                 Receipt of accounts, or specific                       records
                                 parts of accounts.
- ------------------------------------------------------------------------------------------------------------------------------





- -----------------------------------------------------------------------------------------------------------------------------
                                                                                           
12       CONTROLLED              The Subscriber determines the maximum       Exists     100% matching
         BILLING                 level of use for each billing month in                 with company
                                 order to assist with budgeting. Receipt                records
                                 of Short Message System (SMS) when
                                 billing reaches pre-determined level of
                                 use. Increase or decrease of level in
                                 real time.
- -----------------------------------------------------------------------------------------------------------------------------
13       PERSONAL                Subscriber may use one number for all       Exists
         NUMBER                  types of calls (speech, fax and data).

                                 -----------------------------------------------------
                                 May be integrated with call screening       Future
                                 using the "follow me" service, based on
                                 the hour of the day, the identity of the
                                 caller or the kind of call.
- ------------------------------------------------------------------------------------------------------------------------------
14       TRANSFER OF CALLS       Transfer of calls to third party            Exists
- ------------------------------------------------------------------------------------------------------------------------------
15       CALL SCREENING          Receipt, transfer or rejection of calls     Future
                                 based on identity of caller, or time.
- ------------------------------------------------------------------------------------------------------------------------------
16       LIST OF PREFERRED       Allows Subscribers to receive calls from    Future
         CALLERS                 a list of preferred callers. Other calls
                                 are sent automatically to the voice mail
                                 box or to another number.
- ------------------------------------------------------------------------------------------------------------------------------
17       SELECTION OF            Subscriber can choose his telephone         Exists
         NUMBER                  number in accordance with the Numbering
                                 Plan in Israel, as part of the Licensee's
                                 allotments
- ------------------------------------------------------------------------------------------------------------------------------
18       ABILITY TO CHANGE       Change of Subscriber's telephone number,    Exists
         NUMBER                  at Subscriber's request
- ------------------------------------------------------------------------------------------------------------------------------
19       ACCESS SERVICES         Access from MRT Terminal Equipment to       Exists     Coordination      Subject to
         TO INFORMATION          specific information per geographic                    of information    provisions of
         IN ACCORDANCE           location of Subscriber                                 within cell -     protection of
         WITH LOCATION                                                                  accuracy of       Privacy Law,
                                                                                        several           5741-1981
                                                                                        kilometers
- ------------------------------------------------------------------------------------------------------------------------------
20       CALL TO                 Request for any number                      Exists                       Via Bezeq
         INFORMATION             listed in Israel:
         INCLUDING CALL
         COMPLETION              ---------------------------------------------------------------------------------------------
                                 Connection to number thus located           Future
                                 effected by exchange operator, caller
                                 doesn't need to write down number.
                                 ---------------------------------------------------------------------------------------------
                                 Confirmation of number by SMS for storage   Future
                                 on SIM card
- ------------------------------------------------------------------------------------------------------------------------------





- ------------------------------------------------------------------------------------------------------------------------------
                                                                                           
21       LOADING "TELEPHONE      Loading of telephone numbers by Licensee    Future
         BOOK"                   directly into "telephone book" on
                                 Subscriber's SIM card, per list that
                                 Subscriber enters into system via
                                 exchange operator, answering service or
                                 internet
- ------------------------------------------------------------------------------------------------------------------------------
22       VOICE OPERATED          Dialing numbers via Subscriber's voice      Exists                       Dependent upon
         DIALING                 command (instead of manual dialing)                                      terminal handset
- ------------------------------------------------------------------------------------------------------------------------------
23       AUTOMATIC REDIAL        The system 'locks' on to an engaged line    Exists                       Dependent upon
         (COMPLETION OF CALLS    and the Network rings the Subscriber back                                terminal handset
         TO ENGAGED              automatically when the engaged line
         SUBSCRIBERS)            becomes free
- ------------------------------------------------------------------------------------------------------------------------------
24       RENEWAL OF LINE THAT    Automatic renewal of calls that drop out    Future
         DROPS OUT
- ------------------------------------------------------------------------------------------------------------------------------
25       TWO SIM CARDS FOR ONE   Operating two pieces of MRT Terminal        Exists                       Orange 2
         NUMBER                  Equipment using identical number and
                                 identical account (eg. one handset in the
                                 car and one mobile)
- ------------------------------------------------------------------------------------------------------------------------------
26       TWO NUMBERS FOR ONE     Operating two separate telephone numbers    Future
         SIM CARD                from the same MRT Terminal Equipment and
                                 SIM card (eg. a private line and a
                                 business line)  The lines may be billed
                                 separately or together
- ------------------------------------------------------------------------------------------------------------------------------
27       BLOCKAGE OF             Blocking of a Subscriber's ability to       Exists
         INTERNATIONAL ACCESS    make outgoing international calls in
                                 Israel; and incoming or outgoing calls
                                 when roaming outside of Israel
- ------------------------------------------------------------------------------------------------------------------------------
28       COLLECT CALLS           Collect calling for calls to                Future
                                 pre-determined numbers.
                                 The recipient of the call pays for the
                                 call
- ------------------------------------------------------------------------------------------------------------------------------
29       VIRTUAL PRIVATE         Dialing MRT Terminal Equipment of           Exists                       For corporations
         NETWORK (VPN)           Subscribers within a corporation by                                      with 50 or more
                                 calling extension numbers on                                             users
                                 corporation's private exchange (PBX) or
                                 truncated number.
- ------------------------------------------------------------------------------------------------------------------------------
30       WIRELESS CENTREX        Receipt of some of the benefits of VPN      Future
         SERVICES                for groups of subscribers who are not
                                 connected to a PBX. Dialing members of
                                 the group via truncated code instead of
                                 whole numbers
- ------------------------------------------------------------------------------------------------------------------------------
31       CLOSED USER GROUP       Transfer of calls between subscribers in    Future
                                 pre-determined groups
- ------------------------------------------------------------------------------------------------------------------------------





- ------------------------------------------------------------------------------------------------------------------------------
                                                                                           
32       AUTOMATIC               Transfer of incoming calls automatically    Future
         SUBSCRIBER              to a list of telephone numbers in order
         LOCATION (HUNT          to locate Subscriber
         GROUP)
- ------------------------------------------------------------------------------------------------------------------------------
33       CONFERENCE CALL         Addition of third party to a call without   Exists                       Dependent
                                 disconnecting the second party and                                       upon terminal
                                 without needing to set up the service in                                 handset
                                 advance through an exchange operator

- ------------------------------------------------------------------------------------------------------------------------------
34       DATA                    Connection to data communications           Exists
         COMMUNICATIONS          service via subscriber's PC or
         SERVICE                 telephone handset (eg. calling
                                 the computer or email).
- ------------------------------------------------------------------------------------------------------------------------------
35       VOICE INTEGRATED        Speech followed by data service (Bearer     Future
         DATA                    Service) without limitation - allows
         COMMUNICATIONS          transfer of data between two mobile
                                 subscribers. May transfer data during
                                 the call or after the call has taken
                                 place
- ------------------------------------------------------------------------------------------------------------------------------
36       HIGH SPEED DATA         The Licensee to implement accepted          Exists
         TRANSMISSION            standards from time to time at its
                                 discretion, such as GPRS (General Parcel
                                 Relay Service for wireless networks) or
                                 HSCSD (High Speed Circuit Switch Data)
                                 so as to offer Subscribers existing or
                                 new applications with high speed data
                                 communications
- ------------------------------------------------------------------------------------------------------------------------------
37       OVER THE AIR            On line activation and alteration of SIM    Exists
         ACTIVATION AND          card memory so as to save a Subscriber's
         ALTERATIONS             having to come to a service center
- ------------------------------------------------------------------------------------------------------------------------------
38       TEMPORARY               Disconnection of service for a Subscriber   Exists
         DISCONNECTION           for a pre-determined period of time
                                 without losing the specific telephone
                                 number (eg. during holidays or temporary
                                 stay overseas)
- ------------------------------------------------------------------------------------------------------------------------------
39       CONSOLIDATED            Receipt of one account combining bills      Exists     Full
         BILLING                 for all handsets for Subscribers with a                coordination
                                 number of telephones or services                       with system
                                                                                        records for
                                                                                        accounts sent
                                                                                        out
- ------------------------------------------------------------------------------------------------------------------------------
40       CLARIFICATION OF        Clarification of up-to-date bill status     Exists
         BILL STATUS             via voice response, SMS or internet
- ------------------------------------------------------------------------------------------------------------------------------
41       ACCOUNT BILLING         Typing in of identification code before     Future     Full
                                 every call (so as to distinguish between               coordination
                                 business calls and private calls made on               with system
                                 the same line). Receipt of monthly                     records for
                                 invoice with details of use per billing                100% of
                                 code.                                                  accounts sent
- ------------------------------------------------------------------------------------------------------------------------------





- ------------------------------------------------------------------------------------------------------------------------------
                                                                                           
42       ELECTRONIC BILLING      Control and analysis of information on      Exists     Full
         / REPORTING             billing and treatment of bills by                      coordination
                                 Subscriber, using special software                     with system
                                                                                        records for
                                                                                        100% of
                                                                                        accounts sent
- ------------------------------------------------------------------------------------------------------------------------------
43       ADDITIONAL COPY OF      Receipt of more than one copy of every      Exists
         ACCOUNT                 account, upon request
- ------------------------------------------------------------------------------------------------------------------------------
44       BILLING ON DEMAND       Supply of report of all bills and credits   Exists     100%
                                 as at the period requested by the                      coordination
                                 Subscriber                                             with system
                                                                                        records
- ------------------------------------------------------------------------------------------------------------------------------


2.3      VALUE ADDED SERVICES



- ------------------------------------------------------------------------------------------------------------------------------
                                                                             SUPPLY     QUALITY
NO.      SERVICE NAME            SERVICE DESCRIPTION                         DATE       GAUGES            NOTES
- ------------------------------------------------------------------------------------------------------------------------------
                                                                                           
1        ACCESS TO INTERNET      Access to internet or to the                Exists                       Access to
         / INTRANET              private intranet network of a                                            internet via
                                 company through an account the                                           special
                                 access to which is via the                                               internet
                                 Subscriber's Terminal Equipment,                                         services
                                 computer, PDA or similar device                                          licensee
- ------------------------------------------------------------------------------------------------------------------------------
2        IDENTIFICATION AND      Identification and verification of          Future
         VERIFICATION            user upon access to intranet using
                                 Terminal Equipment
- ------------------------------------------------------------------------------------------------------------------------------
3        EMAIL                   Sending and receiving messages              Future                       Via licensee
                                 using email address. Indication                                          for email
                                 upon receipt of message into                                             services
                                 mailbox of Subscriber. Licensee
                                 to support in various languages
- ------------------------------------------------------------------------------------------------------------------------------
4        VIDEO                   Sending photos, graphics or live            Future
         COMMUNICATIONS          video via the Network (eg.
                                 Subscribers who are far from one
                                 another can exchange photos and
                                 work interactively)
- ------------------------------------------------------------------------------------------------------------------------------





- ------------------------------------------------------------------------------------------------------------------------------
                                                                                           
5        INTERNATIONAL           Provision of MRT Services roaming           Exists     Under GSM         Pursuant to
         ROAMING ON GSM          agreements between the Licensee                        MoU               agreements
         NETWORKS                and other operators in other                                             between Licensee
                                 countries with GSM systems.                                              and foreign
                                 Provision of MRT Services when                                           operators
                                 visiting Israel (for "roamers"
                                 from overseas). Provision of MRT
                                 cellular services when overseas by
                                 way of roaming agreements between
                                 the Licensee and other operators
                                 in other countries of the world
                                 with GSM systems.
- ------------------------------------------------------------------------------------------------------------------------------
5A       INTERNATIONAL           Provision of cellular services              Future                       Pursuant to
         ROAMING TO              during overseas stay via roaming                                         agreements
         PRE-PAID                agreements between the Licensee                                          between Licensee
         SUBSCRIBERS             and other operators in other                                             and foreign
                                 countries with GSM systems                                               operators

- ------------------------------------------------------------------------------------------------------------------------------
5B       INTERNATIONAL           Provision of cellular services              Exists                       Pursuant to
         ROAMING ON OTHER        during overseas stay via roaming                                         special
         NETWORKS                agreements between the Licensee                                          agreements
                                 and other operators in other                                             between Licensee
                                 countries where other systems                                            and foreign
                                 are operated (IDEN, CDMA, etc.)                                          operators

- ------------------------------------------------------------------------------------------------------------------------------
6        ADVANCED VOICE          Sending and receiving speech                Exists
         MAIL BOX                messages with more advanced
                                 features and abilities: Fax box
                                 sending messages to more than one
                                 person at once Sending messages
                                 from one voice box to another,
                                 including transfer of messages
                                 received to another person, or
                                 direct response to sender. Sending
                                 messages using truncated dialing
                                 (can combine this feature with
                                 truncated dialing in a VPN).
                                 "Notice board" Sending and
                                 receiving longer notices than
                                 allowed during standard timeframes
- ------------------------------------------------------------------------------------------------------------------------------
7        PERSONAL                Connection of callers to an                 Future
         SECRETARY SERVICE       exchange operator to deal with
                                 more complex messages than voice
                                 mail service. Notice passed to
                                 Subscriber via speech or Short
                                 Message (SMS), per customer
                                 instructions (can work as a
                                 beeper service)
- ------------------------------------------------------------------------------------------------------------------------------





- ------------------------------------------------------------------------------------------------------------------------------
                                                                                           
8        GSM / SATELLITE         Licensee to support handsets                Future     Conditional       Conditional upon
         ROAMING                 with double GSM / satellite                            upon roaming      roaming operating
                                 operating statuses                                     agreement         agreement with
                                                                                                          satellite
                                                                                                          operator and
                                                                                                          upon satellite
                                                                                                          network operator's
                                                                                                          having a license
                                                                                                          from the Director to
                                                                                                          provide its
                                                                                                          services in
                                                                                                          Israel
- ------------------------------------------------------------------------------------------------------------------------------
9        1800, 1900 GSM          Licensee to sign roaming                    Exists     Conditional       Pursuant to
         ROAMING                 agreements with GSM 1800 and GSM                       upon roaming      agreements between
                                 1900 network operators in order to                     agreements        Partner and foreign
                                 increase the number of countries
                                 to which its Subscribers
                                 can roam. Subscribers of the
                                 Licensee may use handsets with
                                 double operation statuses or rent
                                 appropriate handsets using their
                                 own SIM card.
- ------------------------------------------------------------------------------------------------------------------------------
10       INFORMATION AND         Access to wide variety of                   Exists                       Via SMS, WAP, IVR
         CONTENT SERVICES        information services via written
         ACCORDING TO            messages or speech (eg. financial
         SUBSCRIBER NEEDS        information, traffic reports,
                                 sports news and weather reports).
                                 Adjustment of menus in Terminal
                                 Equipment in order to allow for
                                 access to new services more
                                 quickly and efficiently
- ------------------------------------------------------------------------------------------------------------------------------
11       SERVICES BASED ON       Combination of SMS and GPS                  Future                       Subject to the
         LOCATION                (satellite navigation system) so                                         Protection of
                                 as to offer customers                                                    Privacy Law,
                                 location-based services (eg.                                             5741-1981
                                 whilst driving in a car).
                                 Subscriber can be quickly and
                                 accurately located. Receipt of
                                 navigation instructions based on
                                 location of Subscriber. Various
                                 services based on receipt of
                                 information regarding traffic
                                 situation on roads in Israel based
                                 on Subscriber's location.
                                 Following up movements of
                                 subscriber's vehicle (eg if car is
                                 stolen)
- ------------------------------------------------------------------------------------------------------------------------------
12       NOTIFICATION OF         Checking status of Subscriber's             Future
         ACTIVATION OF           house alarm, car alarm or any
         ALARM                   other alarm using Terminal
                                 Equipment
- ------------------------------------------------------------------------------------------------------------------------------
13       MARKETING AND           Receiving advertisements for                Future
         SHOPPING BY             products via speech or written
         TELEPHONE               messages (by
- ------------------------------------------------------------------------------------------------------------------------------





- ------------------------------------------------------------------------------------------------------------------------------
                                                                                           
                                 request). Ordering products
                                 via Subscriber's terminal
                                 equipment
- ------------------------------------------------------------------------------------------------------------------------------
14       ELECTRONIC MONEY        Storage and transfer of                     Future
                                 "electronic money" in the memory
                                 of the Subscriber's SIM card.
                                 Loading of SIM card with money
                                 using various, convenient means
                                 (such as direct transfer from bank
                                 account, from ATMs, from
                                 appropriate public telephones
                                 or computerized public information
                                 stands).
- ------------------------------------------------------------------------------------------------------------------------------
15       E-COMMERCE              Purchase of products and services           Exists                       To be updated in
                                 via Terminal Equipment, being                                            accordance with
                                 billed via telephone account.                                            the "Mobile
                                                                                                          Electronic
                                                                                                          Commerce"
                                                                                                          regulations,
                                                                                                          when published
- ------------------------------------------------------------------------------------------------------------------------------
16       ELECTRONIC BANKING      Effecting basic banking operations          Exists     In accordance     Conditional upon
                                 using Terminal Equipment (eg.                          with bank         the approval of
                                 ordering check books, inspecting                       requirements      the Supervisor
                                 bank account statements) the                                             of Banks
                                 information being transferred to a
                                 Subscriber's Terminal Equipment
                                 via Short Message System (SMS)
- ------------------------------------------------------------------------------------------------------------------------------
16A      ELECTRONIC              Ability of clearance between a              Future     In accordance
         CLEARANCE               trader and the credit card                             with
                                 company, using cellular Terminal                       requirements
                                 Equipment                                              of credit
                                                                                        card
                                                                                        companies
- ------------------------------------------------------------------------------------------------------------------------------
17       FACSIMILE SERVICE       Receipt, storage and retrieval of           Exists
                                 facsimile message via Subscriber's
                                 Terminal Equipment (fax mail).
                                 Subscriber receives a Short
                                 Message (SMS) when new fax
                                 arrives. Retrieval of fax by
                                 redirecting fax message to the fax
                                 of the Subscriber's choice. The
                                 service also enables Subscribers
                                 to send a fax from MRT Terminal
                                 Equipment via SMS to a fax
                                 machine
- ------------------------------------------------------------------------------------------------------------------------------
18       TELEMETRY               Enables Subscribers to perform              Exists
         APPLICATIONS            remote controlling and monitoring
                                 (such as electricity and water
                                 meters, traffic lights, cargo,
                                 safety warnings, remote readings
                                 from computer equipment,
                                 environmental monitoring, car
                                 parking, medical observation)
- ------------------------------------------------------------------------------------------------------------------------------
19       "YELLOW PAGES"          Access to "Yellow Pages"                    Future
- ------------------------------------------------------------------------------------------------------------------------------





- ------------------------------------------------------------------------------------------------------------------------------
                                                                                           
         TYPE DIRECTORY          type information via exchange
                                 operator using truncated
                                 dialing
- ------------------------------------------------------------------------------------------------------------------------------
20       PROVISION OF MRT        Provision of Terminal                       Exists     Not relevant
         TERMINAL                Equipment for use in countries
         EQUIPMENT              with different service bands than
                                 Israel (such as in GSM 1800 and
                                 1900 networks) all charges being
                                 transferred to the Subscriber's
                                 GSM account in Israel
- ------------------------------------------------------------------------------------------------------------------------------
21       PROVISION OF SIM        Provision of SIM card to visiting           Future
         CARD                    "roamers" from countries that
                                 don't have a roaming agreement
- ------------------------------------------------------------------------------------------------------------------------------
22       REGIONAL TARIFFS        A special tariff for calls that             Future
                                 begin and end in a pre-ordained
                                 area (eg. house, office)
- ------------------------------------------------------------------------------------------------------------------------------
23       PRE-PAID CARD           Enables a Subscriber to load his            Exists
                                 MRT account with a pre-defined
                                 amount of money
- ------------------------------------------------------------------------------------------------------------------------------
24       ADVERTISEMENT           Lower tariffs for Subscribers               Future
         DURING CALL             willing to listen to an
                                 advertisement at the beginning of
                                 the   call. Advertiser pays for
                                 this discount
- ------------------------------------------------------------------------------------------------------------------------------
25       MAINTENANCE OF          Repair or replacement of MRT                Exists
         MRT TERMINAL            Terminal Equipment dealt with
         EQUIPMENT               by the Licensee
- ------------------------------------------------------------------------------------------------------------------------------
26       INSURANCE               Comprehensive package covering              Future     Not relevant
                                 theft, loss and breakdown, subject
                                 to any law
- ------------------------------------------------------------------------------------------------------------------------------


3.       SERVICES TO SUBSCRIBERS - UPON ACTIVATION OF UMTS SYSTEM (THIRD
         GENERATION- 3G)

3.1      GENERAL

         a)       All of the services supplied shall be in keeping with the
                  minimum requirements under Appendix E in the Second Annex
                  (clause 15.2 of the conditions of the Tender 1/01).

         b)       The gauges for quality of service (QoS) are based on the
                  standards of the European Telecommunications Standards
                  Institute (ETSI) and the standards of the Third Generation
                  Standards Partnership Project (3GPP).

         c)       The supply of services during the delay times set out are at a
                  probability of 95%. Delay times relate to system delay times;
                  the time it takes to transfer information will be prescribed
                  in accordance with



                  the size of the information (file, photograph, message) and
                  the speed of data transfer defined for the service.

3.2      BASIC TELEPHONE SERVICE



- ------------------------------------------------------------------------------------------------------------------------------
                                                                              SUPPLY
NO.      SERVICE NAME                   SERVICE DESCRIPTION                    DATE          QoS GAUGES      NOTES
- ------------------------------------------------------------------------------------------------------------------------------
                                                                                           
1        ORDINARY                Telephone calls to and                      Future     Data transfer     Developments in
         TELEPHONE CALLS         from Subscribers of                                    speed of 4 -      infrastructure
         (SPEECH)                Licensee to any other                                  12.5 kbps.        capabilities and
                                 appropriate telephone or                               Loss of           mobile devices
                                 Terminal Equipment                                     information:      will enable
                                 appropriate to any other                               FER (frame        transfer of speech
                                 Public Telecommunications                              error rate)       via internet
                                 Network in Israel or                                   less than 3%      protocol (IP),
                                 around the world                                                         using the benefits
                                                                                                          of package
                                                                                                          broadcasts
- ------------------------------------------------------------------------------------------------------------------------------
2        DATA                    Transfer of data via PC /                   Future     * Data
         COMMUNICATIONS          PDA (personal digital                                  transfer rate
                                 assistant) / laptop                                    up to 144 kbps
                                 connected to Subscriber's                              * Delay of
                                 mobile                                                 less than 10
                                                                                        seconds
- ------------------------------------------------------------------------------------------------------------------------------
3        FAX                     Transmission of fax from                    Future     *Data transfer
                                 MRT Terminal Equipment to                              rate of 9.6
                                 any fax machine at the                                 kbps to 64
                                 Subscriber's election                                  kbps
                                                                                        * Delay of
                                                                                        less than 20
                                                                                        seconds
- ------------------------------------------------------------------------------------------------------------------------------


3.3      ACCOMPANYING SERVICES



- ------------------------------------------------------------------------------------------------------------------------------
                                                                              SUPPLY
NO.      SERVICE NAME                   SERVICE DESCRIPTION                    DATE          QoS GAUGES      NOTES
- ------------------------------------------------------------------------------------------------------------------------------
                                                                                           
1        CALL WAITING            The ability of a caller to move             Future     Availability
         HOLD                    from one call to another between                       at peak hours
                                 simultaneous calls                                     at probability
                                                                                        of 99%
- ------------------------------------------------------------------------------------------------------------------------------
2        IDENTIFICATION          The ability to identify the                 Future     Availability      Unless
         OF INCOMING             telephone number of an incoming                        at peak hours     purposely
         CALL                    call                                                   at probability    concealed by
                                                                                        of 99%            the caller or
                                                                                                          dependent on
                                                                                                          what the
                                                                                                          second
                                                                                                          operator does
- ------------------------------------------------------------------------------------------------------------------------------
3        CALL BLOCKING           The ability to limit the entry or           Future     Availability
                                 exit of calls                                          at peak hours
                                                                                        at probability
                                                                                        of 99%
- ------------------------------------------------------------------------------------------------------------------------------





- ------------------------------------------------------------------------------------------------------------------------------
                                                                                            
4        FOLLOW ME               The ability to redirect incoming            Future     Availability
                                 calls to pre-determined telephone                      at peak hours
                                 numbers                                                at probability
                                                                                        of 99%
- ------------------------------------------------------------------------------------------------------------------------------
5        VOICE MAIL              The ability of callers to record            Future     Availability
                                 messages and of addressees to                          at peak hours
                                 return calls                                           at probability
                                                                                        of 99%
- ------------------------------------------------------------------------------------------------------------------------------
6        ROAMING                 Transfer of calls to a Subscriber           Future     Conditional
                                 who is overseas via a licensee to                      upon roaming
                                 provide International                                  agreements and
                                 Telecommunications Services and                        the abilities
                                 the provision of basic wireless                        of the
                                 mobile telephone services and                          overseas
                                 Accompanying Services to a person                      operator
                                 visiting Israel (for roamers from
                                 overseas), all via roaming
                                 agreements with operators of UMTS
                                 systems in other countries
- ------------------------------------------------------------------------------------------------------------------------------


3.4      VALUE ADDED SERVICES



- ------------------------------------------------------------------------------------------------------------------------------
                                                                              SUPPLY
NO.      SERVICE NAME                   SERVICE DESCRIPTION                    DATE          QoS GAUGES      NOTES
- ------------------------------------------------------------------------------------------------------------------------------
                                                                                           
- ------------------------------------------------------------------------------------------------------------------------------
1.       Advanced Inter-Personal Communications
- ------------------------------------------------------------------------------------------------------------------------------
1.1      VIDEO                   The ability to have bi-directional          Future     Data transfer
         CONVERSATION            video conversations between two                        rate of 32 to
                                 users                                                  144 kbps
                                                                                        Information
                                                                                        loss less than
                                                                                        1% FER
- ------------------------------------------------------------------------------------------------------------------------------
2.       Message Services
- ------------------------------------------------------------------------------------------------------------------------------
2.1      ELECTRONIC              The ability to send, receive,               Future     Message transfer
         MESSAGES (SMS)          store and redirect text messages                       time of less
                                 to and from various handsets                           than 4 seconds

- ------------------------------------------------------------------------------------------------------------------------------
2.2      PICTURE MESSAGE         The ability to send, receive,               Future     Data transfer
                                 store and redirect pictures to                         rate of 14.4 to
                                 and from various handsets                              64 kbps, message
                                                                                        transfer time of
                                                                                        less than 15
                                                                                        seconds
- ------------------------------------------------------------------------------------------------------------------------------
2.3      EMAIL                   The Subscriber has an email                 Future     Data transfer
                                 address which can be available                         rate of 32 to
                                 using various types of devices                         144 kbps, email
                                 (PC, PDA, mobile terminal                              transfer time of
                                 equipment)                                             less than 10
                                                                                        seconds
- ------------------------------------------------------------------------------------------------------------------------------
2.4      MULTIMEDIA NOTICE       The ability to send / receive /             Future     Data transfer
                                 store / redirect notices, whilst                       rate of 32 to
                                 using a wide range of various                          144 kbps,
                                 types of media such as text,                           message transfer
                                 audio, fax, email, video                               rate of less
                                                                                        than 30 seconds

- ------------------------------------------------------------------------------------------------------------------------------
2.5      COMBINED MESSAGES       The ability of a Subscriber to              Future     Availability
                                 access various messages through                        during peak
                                 hours at one access point,
- ------------------------------------------------------------------------------------------------------------------------------




                                                                                           
                                 without being dependent upon the                       probability of
                                 type of medium used to send the                        99%
                                 message
- ------------------------------------------------------------------------------------------------------------------------------
3.       Information and Entertainment Services
- ------------------------------------------------------------------------------------------------------------------------------
3.1      VIA SMS                 The ability to receive (by                  Future     Message
                                 retrieval or request)  textual                         transfertime of
                                 information on various topics                          less than 4
                                 such as sports, economics, news                        seconds
- ------------------------------------------------------------------------------------------------------------------------------
3.2      VIA PICTURE             The ability to receive (by                  Future     Data transfer
         MESSAGE                 retrieval or request) information                      rate of 14.4
                                 combined with pictures,                                to 64 kbps,
                                 including icons on various                             message
                                 topics such as sports, economics,                      transfer time
                                 news                                                   of less than 15
                                                                                        seconds
- ------------------------------------------------------------------------------------------------------------------------------
3.3      VIA MULTIMEDIA          The ability to receive (by                  Future     Data transfer
         MESSAGE                 retrieval or request)                                  rate of 32 to
                                 information combining many kinds                       144 kbps,
                                 of media such as text, fax, email,                     message
                                 audio, video; on various topics                        transfer time
                                 such as sports, economics,                             of less than 30
                                 news                                                   seconds
- ------------------------------------------------------------------------------------------------------------------------------
3.4      CELLULAR GAMES          The ability to download or access           Future     Data transfer
                                 a variety of games via various                         rate of 32 to
                                 kinds of devices and interfaces                        44 kbps, delay
                                 such as SMS, WAP.                                      of less than 4
                                                                                        seconds
- ------------------------------------------------------------------------------------------------------------------------------
4.       Interconnection of Content
- ------------------------------------------------------------------------------------------------------------------------------
4.1      INTERNET ACCESS,        The ability to connect to an                Future     Data transfer     Depends on ISP
         VIA MOBILE              Internet Service Provider (ISP),                       rate of 32 to     performance
         HANDSET                 including transfer files, email                        144 kbps,
                                 and to enter video and audio data                      browsing delay
                                                                                        of less than 4
                                                                                        seconds per
                                                                                        page
- ------------------------------------------------------------------------------------------------------------------------------
4.2      ACCESS TO               The ability to supply access to             Future     Data transfer     Depends on
         INTRANET /              an organizational network                              rate of 32 to     performance of
         EXTRANET VIA            whether directly on to a local                         144 kbps, delay   organization
         MOBILE HANDSET          area network (LAN) or a virtual                        of less than 4    network
                                 private network (VPN)                                  seconds
- ------------------------------------------------------------------------------------------------------------------------------
5.       Mobile e-commerce (M-Commerce)
- ------------------------------------------------------------------------------------------------------------------------------
5.1      PAYMENTS VIA            The ability to make direct on line          Future     Delay of less
         MOBILE HANDSET          purchases from a mobile handset.                       than 4 seconds
                                 The service will enable the
                                 performance of the entire
                                 transaction - verification of
                                 subscriber, ordering of goods,
                                 and payment
- ------------------------------------------------------------------------------------------------------------------------------
6        Machine to Machine
- ------------------------------------------------------------------------------------------------------------------------------
6.1      TELEMETRY               The ability to enable connection            Future     Data transfer
                                 to machines and to monitor,                            rate of less
                                 control and assist. Eg., for                           than 64 kbps,
                                 vehicles, automatic sales                              delay of less
                                 machines, surveillance cameras,                        than 10 seconds
                                 and other remote controlled
                                 devices, wireline or mobile.
- ------------------------------------------------------------------------------------------------------------------------------





                                                                                           
- ------------------------------------------------------------------------------------------------------------------------------
7.       Location-based
- ------------------------------------------------------------------------------------------------------------------------------
7.1      MOBILE WORK             The ability to supervise,                   Future     Exactness of      Future
         FORCE MANAGEMENT        visit and manage mobile                                location 300      tointegration of
         / LOCATING /            employees, to assist in                                500 meters        GPS could
         NAVIGATION              navigating them whilst                                                   improve the
                                 following up their location                                              level of
                                                                                                          exactness of
                                                                                                          location
                                                                                                          information
- ------------------------------------------------------------------------------------------------------------------------------





                   "ADDENDUM TO APPENDIX B - ENGINEERING PLAN

         The addendum to the Engineering Plan appears in the Application
         filed by the Licensee in Tender No. 1/01,containing the
         following:

                                                                      
3.4         QUALITY OF SERVICE                                               16
3.4.1       Systems performance                                              16
3.4.2       Prevention and treatment of fraud                                28
3.4.3       Systems performances during various stages                       32

3.5         ENGINEERING PLAN                                                 34
3.5.1       Needs analysis                                                   34
3.5.2       Rollout and amounts                                              45
3.5.3       Electromagnetic spectrum                                         62
3.5.4       Radio sub-system                                                 78
3.5.5       Transmission sub-system                                         110
3.5.6       Switching and routing sub-system                                121
3.5.7       Control sub-system                                              139
3.5.8       Information sub-system                                          144
3.5.9       Backup, viability and maintenance                               165
3.5.10      Numbering plan and address aliases                              169
3.5.11      Terminal equipment                                              173
3.5.12      Encryption, identification and authentication                   177
3.5.13      Adjustment to Security Forces requirements                      182
3.5.14      Safety                                                          184
3.5.15      Examination plan                                                190
3.5.16      Ownership of infrastructure                                     193"





     " APPENDIX E - MINIMUM REQUIREMENTS AND LEVEL OF SERVICE TO SUBSCRIBER

1.       SYSTEM PERFORMANCES

1.1      The system and its services shall meet the performances, features
         and gauges defined in the Engineering Plan in Appendix B.

1.2      The system and its services shall not, in any event, fall below the
         following minimum requirements:

1.2.1    DIGITAL TECHNOLOGY: The system and the services under the extension of
         the License shall be operated using digital technology, in accordance
         with relevant international standards.

1.2.2    SERVICE COVERAGE:

         Subject to the provisions of clause 60.5 of the License, every service
         will be provided in all of the system's coverage areas, in keeping with
         the minimum requirements regarding quality of service, within
         twenty-four (24) months of the date of provision of the service for
         payment;

1.2.3    QUALITY OF SERVICE

         (a)      In this clause:

                  (1)      "BLOCKED CALLS" - calls or connections that cannot be
                           established or messages that cannot be transferred
                           immediately upon the call establishment command due
                           to unavailability of MRT System resources or
                           connection resources between the MRT System and other
                           systems;

                  (2)      "DROPPED CALLS" - calls or connections that have
                           terminated not at the initiation of the Subscriber
                           who initiated the call / connection or the Subscriber
                           who received the call;

         (b)      Quality of the service on the MRT System shall not fall below
                  the following:

                  (1)      the number of blocked calls during peak hour shall
                           not increase above two percent (2%);

                  (2)      the number of dropped calls during peak hour shall
                           not increase above two percent (2%);

         (c)      The system shall meet the requirements set out in paragraphs
                  (a) and (b) ninety-nine percent (99%) of the time during
                  peak hours;



         (d)      Subject to the provisions of clause 60.5 of the License, the
                  system shall reach the level of the requirements set out above
                  no later than twenty-four (24) months after the date of
                  commencement of provision of services in return for payment;
                  as of this date, the aforesaid quality of service shall be
                  maintained in all of the coverage areas of the system;

         (e)      The number of blocked calls and dropped calls shall be
                  measured in the following manner:

                  (1)      the measurement shall relate to a time frame of one
                           hour;

                  (2)      the peak hour to which the measurement shall relate
                           shall be the busiest hour of the system on the day on
                           which the measurement is taken;

                  (3)      the measurement shall be taken during peak hour on
                           each of five (5) consecutive business days as
                           aforesaid;

                  (4)      the final data expressing the probability of blocked
                           calls and the probability of dropped calls shall
                           refer to the average of the five (5) hours measured
                           over the five (5) consecutive business days as
                           aforesaid, and to each of the classes of service
                           supplied by the system;

         (f)      The measurement and calculation shall be effected separately
                  for each cell, for each switch and for the system as a whole;
                  notwithstanding the aforesaid, upon written application from
                  the Licensee, the Director may permit limitations to the
                  provisions of clause 1.2.3, after being convinced that there
                  is a real difficulty in effecting such measurement and
                  calculation as aforesaid, provided that an alternative method
                  of measurement and calculation is proposed.

2.       GAUGES OF QUALITY OF SERVICE TO CUSTOMERS AND SUBSCRIBERS

2.1      INFORMATION SUPPLY SERVICE TO CUSTOMERS AND SUBSCRIBERS: shall be
         granted upon application to service centers, at service stations, on
         the internet site, by email, by telephone requests and facsimile
         requests.

2.2      STANDARDS FOR ACCESSIBILITY AND PROVISION OF INFORMATION:

         (a)      The telephone service center shall be accessible twenty-four
                  (24) hours a day, every day of the year, other than the Day of
                  Atonement (Yom Kippur).

         (b)      The telephone service center shall be manned at least thirteen
                  (13) hours Sundays through Thursdays and five (5) hours on
                  Fridays and holiday eves.

         (c)      Response at the telephone service center shall be within
                  reasonable time. Should the Director be of the opinion that
                  waiting times for



                  responses at the telephone service center are not reasonable,
                  he may prescribe gauges for response times.

         (d)      A person who calls the telephone service center during hours
                  when it is not manned shall be redirected to a voice mail box
                  to leave a message and shall receive a response on the next
                  following business day.

         (e)      The Licensee shall operate additional channels which shall
                  enable subscribers to contact it for the provision of
                  information or for clarifications, such as:

                  - a computerized IVR voice system;

                  - contact via regular mail;

                  - contact by fax;

                  - contact by email.

         (f)      The Licensee shall publish the address of the service office
                  and the telephone number of the telephone service center,
                  inter alia in the following ways:

                  - in the contract with the Subscriber;

                  - in bills sent to the Subscriber;

                  - in a document sent on its behalf to a Subscriber in a matter
                  relating to customer service;

                  - in its telephone directories and at the telephone service
                  center.

2.3      BILLS TO SUBSCRIBERS:

         (a)      Subscribers' bills shall set out:

                  (1)      a monthly charge (fixed payment)

                  (2)      conversation duration or airtime duration (minutes,
                           seconds)

                  (3)      volume of data consumption (kB, MB) - if the service
                           provided is priced in accordance with data transfer
                           volume.

                  (4)      other charges (such as for receipt of information,
                           SMS transmission, M-Commerce)

                  (5)      a combination of the above billing methods.

         (b)      Structure of the Bill:

                  Bills shall be sent in a fixed structure as set out below:

                  (1)      After payment, the bill shall act as a receipt which
                           includes: the sum to be paid without VAT, the amount
                           of VAT and the total to be paid including VAT. This
                           part shall also contain details of the identity of
                           the Licensee and of the Subscriber.

                  (2)      The Licensee may include information regarding
                           special offers and personal notices to the
                           Subscriber.



         (c)      Issue and Dispatch of Bills

                  (1)      The Licensee shall issue bills to its Subscribers
                           on a monthly basis or at such other time, with the
                           consent of its Subscribers.

                  (2)      A Subscriber wishing to disconnect from the Licensee
                           shall receive a final bill on the nearest possible
                           date, and no later than two months after the date of
                           disconnection.

                  (3)      Bills may be sent to a Subscriber by mail or by any
                           other means to be agreed upon with the Subscriber, to
                           such address as the Subscriber shall elect.



                          "APPENDIX H - BANK GUARANTEE

To:
The State of Israel - Ministry of Communications
23 Jaffa Road, Jerusalem

                     Re: BANK GUARANTEE NO._____________________

1.       At the request of [name of Licensee] (hereinafter: the "APPLICANT"), we
         hereby guarantee to you to pay any sum, at your demand, up to the total
         sum in New Israeli Shekels equivalent to US $ 20,000,000 (Twenty
         Million United States Dollars) at the representative rate of the Dollar
         on the date of actual payment (hereinafter: the "Guarantee Sum"), in
         respect of the general license for MRT Services granted to the
         Applicant.

2.       For the purposes of this Deed of Guarantee, the "REPRESENTATIVE RATE" -
         the exchange rate of the United States Dollar published by the Bank of
         Israel, known on the date of actual payment.

3.       We undertake to pay you, upon your first written demand, any sum set
         out in such demand up to the Guarantee Sum, within ten days of the date
         of receipt of your demand.

4.       Our undertaking under this Deed of Guarantee shall be unconditional,
         and in particular, you shall not be required to give details, grounds
         nor proof for your demand, nor first demand any sum from the Applicant.

5.       This Guarantee shall be in force until [two years after the date of
         termination of the License]; however, if on such date the Applicant has
         not, to your satisfaction, paid all of its debts, the Guarantee shall
         be extended, each time for a period of one additional year, at your
         demand, which shall be submitted to us in writing no later than 21 days
         before the end of each year; the Applicant shall bear all expenses
         incurred in the exercise or extension of this Guarantee.

                                                             Yours truly

                                                    Bank______________________"



                      " APPENDIX J - LETTERS OF UNDERTAKING

                 The Letter of Undertaking shall be in this form

To:
The Director General
Ministry of Communications
23 Jaffa Road
Jerusalem

                            Re: LETTER OF UNDERTAKING

WHEREAS           __________________ (hereinafter:  the "Company")  submitted an
                  application to extend the Company's general license to provide
                  MRT Services under Tender No. 1/01 (hereinafter: the
                  "License");  and

WHEREAS           as a condition for the extension of the License, the Company
                  is required to prove its ability to finance, in due course,
                  the investments stemming from the business plan that it
                  submitted as part of the basic application in Tender No. 1/01,
                  or other requirements relating to the License;

WE HEREBY DECLARE AS FOLLOWS:

1.       We hereby undertake to you, that if the Company wins the extension of
         the License, in any event that the Company is required to pay a sum of
         money in order to meet the conditions of the License, or in order to
         meet the rest of the undertakings connected to the License, whether
         they stem from the conditions of the License or from any law, such sum
         shall be obtained and funded from the Company's direct sources or from
         external sources that the Company shall ensure to obtain.

2.       We are aware that if the Company does not act in accordance with this
         undertaking, despite having received a written demand from the Director
         General of the Ministry of Communications, such shall be deemed to be a
         breach of the conditions of the License.

3.       This undertaking is irrevocable, and shall remain in force so long
         as the License granted to us, if granted, remains in force.

- ------------------------------------
[Name of person making undertaking]

Name of Signatory / Signatories:



His / her / their position:

I hereby certify that the signatories to this Letter of Undertaking are
authorized to bind [name of company ] by their signature.

___________________________, Advocate.

EX-4.(A).30

[TRANSLATION FROM HEBREW]

EXHIBIT 4.(a).30
                                  [State Seal]

         GENERAL LICENSE FOR PARTNER COMMUNICATIONS COMPANY LTD.
         FOR THE PROVISION OF MOBILE RADIO PHONE SERVICES BY THE
                           CELLULAR METHOD (MRP)

                           AMENDMENT NO. 15

By virtue of my power under section 4(e) of the Communications
(Telecommunications and Broadcasting) Law, 5742-1982, I hereby amend the general
licence for the provision of mobile radio phone services by the cellular method
(MRP) granted to Partner Communications Company Ltd. on 7th April 1998 as
follows:

TEMPORARY MEASURE (b)- AMENDMENT OF CLAUSE 75.9

     1.   At the end of clause 75.9, add:

         "except to 1-800 numbers in the special numbering plan, that have been
         allocated for the use of the international operators for the purpose of
         providing international telecommunications message services, as defined
         in the license of the international operator (a)".

                                      (sgd)
              24 October, 2002        Reuven (Ruby) Rivlin
                                      Minister of Communications

     a)   Simultaneous bi-directional transmission of speech as well as
          simultaneous transmission of facsimile messages, in an international
          telecommunications system.

     b)   This temporary measure will be in force until the 1-800 access codes
          that are being used by the international operators for the purpose of
          providing international telecommunications message services will be
          changed, or until article 75.9 will be changed, the earlier of the
          two.

EX-4.(A).31

[TRANSLATION FROM HEBREW]

EXHIBIT 4.(a).31

                                  [State Seal]

             GENERAL LICENSE FOR PARTNER COMMUNICATIONS COMPANY LTD.
             FOR THE PROVISION OF MOBILE RADIO PHONE SERVICES BY THE
                              CELLULAR METHOD (MRP)

                                AMENDMENT NO. 16

By virtue of my power under section 4(e) of the Communications Law
(Telecommunications and Broadcasting), 5742-1982(1), and after hearing claims by
Partner Communications Company Ltd. (hereinafter-"Partner") I hereby amend the
general licence for the provision of mobile radio phone services by the cellular
method (MRP) granted to Partner as follows:

REPLACEMENT OF ARTICLE 75.9

     1.   Article 75.9 shall be replaced by:

          "75.9   (a)   The licensee may collect from a subscriber that
                        initiates a call using the 1-800 access code to a
                        network of another licensee, a rate that is less than
                        the rate charged to the subscriber for calls made not
                        using the above-mentioned access code, as long as it
                        does not exceed the amount agreed upon between the
                        licensee and the other licensee and in the absence of
                        such agreement, shall not exceed the amount set by the
                        Minister(2).

                  (b)   The above-mentioned in sub-section (a) shall not apply
                        to calls to 1-800 numbers in the special numbering plan,
                        that have been allocated for the use of the
                        international operators for the purpose of providing
                        international telecommunications message services, as
                        defined in the license of the international
                        operator"(a).

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

(1) Sefer Hachukim; 5752 p.218; 5761 p.530

(2) On 26.11.02 the Minister ruled the following: for a call that originates in
an MRT operator's network to a subscriber of the "Bezek" company with 1-800
service, "Bezek" will remit to the MRT operator the sum of 22 agorot per minute
(not including V.A.T.); "Bezek" may collect the above sum from the 1-800
subscriber; In addition, the MRT operator will collect from it's subscriber who
initiates the call a sum that does not exceed 22 agorot per minute (not
including V.A.T.).

(a) Simultaneous bi-directional transmission of speech as well as simultaneous
transmission of facsimile messages, in an international telecommunications
system.



EFFECT

     2.   Article 75.9 shall take effect as of December 15, 2002.

                                    (signed)

November 26, 2002                   Reuven (Ruby) Rivlin
                                    Minister of Communications

EX-4.(A).32

[TRANSLATION FROM HEBREW]

EXHIBIT 4.(a).32

                                 [State Emblem]

      GENERAL LICENSE FOR PARTNER COMMUNICATIONS LTD. FOR THE PROVISION OF
         MOBILE RADIO TELEPHONE (MRT) SERVICES USING THE CELLULAR METHOD

                                AMENDMENT NO. 17

By virtue of my powers under the Communications Law (Telecommunications and
Broadcasts), 5742-1982, the Wireless Telegraph Ordinance [New Version],
5732-1972 and by all my other powers under any law, and after having considered
the arguments of PARTNER COMMUNICATIONS COMPANY LTD. (hereinafter: "PARTNER") I
hereby amend the General License for the provision of mobile radio telephone
(MRT) services using the cellular method granted to Partner on 7 April 1998, as
follows:

AMENDMENT OF APPENDIX "J"

     1.   In Appendix J, the following shall replace Article 4.5 (e):

          "(e)    The Licensee shall transfer on a daily basis to all
                  International Operators, a daily modification file of
                  Subscriber Ascription (hereinafter- "Modification File") that
                  includes the details of the Subscribers that ascribed to the
                  International Operator or terminated the ascription that day.
                  The Modification File shall be transferred in the time and
                  manner that will be agreed upon between the Licensee and the
                  International Operator. The file shall include the details of
                  the Subscriber and at least the following: first and last name
                  or corporation name, ID number or corporation number, address
                  and telephone number ascribed to the International Operator."

 EFFECT

     2.   This Amendment shall take effect no later than May 1, 2003.

                                                              (sgd.)
                                                     ___________________________



         (11 February, 2003)                         Reuven (Ruby) Rivlin
                                                     Minister of Communications

EX-4.(A).41

                                                            EXHIBIT NO. 4.(a).41

                               AMENDING AGREEMENT
                            TO THE FACILITY AGREEMENT



         Made and entered into as of the 31st day of December 2002, by and
         between:

         (1)  PARTNER COMMUNICATIONS COMPANY LTD. ("PARTNER")


         and

         (2)  BANK LEUMI LE-ISRAEL B.M.; ISRAEL DISCOUNT BANK LTD; BANK
              HAPOALIM B.M.; THE FIRST INTERNATIONAL BANK OF ISRAEL LTD;
              UNITED MIZRAHI BANK LTD.; MERCANTILE DISCOUNT BANK LTD.; and
              CITIBANK N.A. (together, "THE PARTICIPATING BANKS")


         and

         (3)  BANK LEUMI LE-ISRAEL B.M., in its respective capacities as
              Arranger, Facility Agent and Security Trustee


         and

         (4)  BANK HAPOALIM B.M., in its capacity as Coordinating Agent


WHEREAS:      Partner, the Participating Banks, the Arranger, the Facility
              Agent and the Security Trustee are parties to a facility
              agreement dated






              13 August 1998, as amended and restated through to 28 November
              2002 ("THE FACILITY AGREEMENT"); and

WHEREAS:      Partner and the Participating Banks have agreed: (i) that
              Facility A shall be reduced and that a new Facility, Facility
              C (as defined in the Restated Facility Agreement), shall be
              granted to Partner; (ii) that Bank Hapoalim shall act as
              Coordinating Agent under the Facility Agreement; and (iii) to
              make further amendments to the Facility Agreement, all the
              aforegoing subject to the terms and conditions set out in this
              Amending Agreement below,


NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

1.     INTERPRETATION

1.1.     In this Agreement, including the Exhibits hereto:

1.1.1.        "AMENDING AGREEMENT" - means this Amending Agreement;

1.1.2.        "COMMENCEMENT DATE" - means the 5th (fifth) Business Day (or such
              other Business Day as the Instructing Group and Partner may agree)
              following the date on which the Instructing Group is satisfied
              that the condition precedent referred to in clause 3 below has
              been fulfilled in a form and substance reasonably satisfactory to
              the Instructing Group;

1.1.3.        "RESTATED
              FACILITY AGREEMENT" - means the Facility Agreement, as amended and
              restated by this Amending Agreement, the terms of which are set
              out in EXHIBIT 1 hereto and initialled, for the purposes of
              identification, by the parties hereto.

1.2.          Capitalised terms, words and expressions defined in the
              Facility Agreement not otherwise defined herein shall bear the
              same meaning as in the Facility Agreement and all provisions
              of the Facility Agreement concerning matters of construction
              and interpretation shall apply to this Amending Agreement.

1.3.          All references in this Amending Agreement to specific numbered
              clauses of the Facility Agreement are references to those
              numbered clauses as set forth in the conformed copy of the
              Facility Agreement signed on 7 August 2000, as amended by
              further amendments made thereafter to the Facility Agreement,
              (as referred to in the first recital to this Amending
              Agreement).


                                       (2)



2.     AMENDMENT AND RESTATEMENT OF THE FACILITY AGREEMENT

       With effect from the Commencement Date, the Facility Agreement (including
       the Schedules attached thereto) shall be amended and restated so that it
       shall be read and construed for all purposes as set forth in Exhibit 1
       hereto (which Exhibit shall, for the avoidance of doubt, constitute the
       definitive and binding version of the Facility Agreement as amended by
       this Amending Agreement).

3.     CONDITION PRECEDENT

       This Amending Agreement is subject to the condition precedent that the
       Facility Agent shall have received all of the following documents:

3.1.          a copy, certified a true copy by a duly authorised officer of
              Partner, of the Charter of Partner;

3.2.          copies, certified as true copies by a duly authorised officer of
              Partner, of a Board resolution, audit committee resolution and
              shareholders' resolution of Partner approving the execution,
              delivery and performance of this Amending Agreement and the terms
              and conditions thereof and a board resolution authorising a named
              person or persons to sign each of such Facility Documents and any
              other documents to be delivered by it pursuant thereto;

3.3.          a certificate of a duly authorised officer of Partner setting out
              the names and signatures of the persons authorised to sign on its
              behalf, this Amending Agreement and any other documents to be
              delivered by it pursuant thereto;

3.4.          an opinion of Gross, Kleinhendler, Hodak, Halevy, Greenberg & Co.,
              external Israeli counsel to Partner.

       In the event that such condition precedent shall not have been fulfilled
       to the Instructing Group's satisfaction on or before 10:00 a.m., on 5
       January 2003 or such later date as the Facility Agent (upon the
       instructions of the Instructing Group) may agree in writing, then, other
       than clause 7 below, this Amending Agreement shall cease to have any
       force or effect and none of the parties hereto shall have any liability
       in respect therewith and the provisions of the Facility Agreement shall
       remain in full force and effect, unchanged.


                                       (3)




4.     REPRESENTATIONS AND WARRANTIES

4.1.          Partner hereby represents and warrants to each of the Finance
              Parties: (i) that it has power to enter into this Amending
              Agreement and to perform its obligations hereunder and has taken
              all necessary action to authorise the entry into and performance
              of the transactions contemplated hereunder; and (ii) that this
              Amending Agreement constitutes its legal, valid, binding and
              enforceable obligations.

4.2.          Partner, in respect of itself and each other Obligor, hereby makes
              the representations and warranties set out in clauses 15.2 to
              15.20 of the Facility Agreement to each of the Finance Parties (as
              if, for the avoidance of doubt, each reference in such
              representations and warranties to "the Facility Documents"
              includes a reference to "this Amending Agreement" and "the
              Restated Facility Agreement") and such representations and
              warranties, together with the representations and warranties set
              out in clause 4.1 above, shall be deemed repeated, on the
              Commencement Date and, subject to the provisions of the Restated
              Facility Agreement relating to repetition of representations and
              warranties, also on each date that a Drawdown Request (as defined
              in the Restated Facility Agreement) is made.

4.3.          Without derogating from the generality of the aforegoing, Partner
              hereby represents and warrants that the period of the Licence has
              been extended until 1 February 2022.

5.     COMMISSION

       Partner shall, on the Commencement Date, or if the Commencement Date
       shall occur before 1 January 2003, on 1 January 2003, pay: (i) to each of
       the Participating Banks an upfront fee in an amount equal to the
       proportion which such Participating Bank's aggregate Commitments bears to
       the aggregate Commitments of all the Participating Banks as at 31
       December 2002, of US $450,000 (four hundred and fifty thousand United
       States Dollars); and (ii) to the Arranger the fee specified in the letter
       dated 8 December 2002 from the Arranger to Partner.

6.     GOVERNING LAW AND JURISDICTION

       This Amending Agreement shall be governed by and shall be construed in
       accordance with Israeli law and the competent court of Tel-Aviv-Jaffa
       shall have exclusive jurisdiction to hear any matters, provided that the
       Facility Agent and the Participating Banks shall be entitled to sue
       Partner in any jurisdiction in which it has an office or holds assets.

7.     COUNTERPARTS



                                       (4)



       This Amending Agreement may be executed in any number of counterparts and
       all of such counterparts taken together shall be deemed to constitute one
       and the same instrument.

8.     COPY TO THE MINISTRY

       Partner shall, as soon as practicable, but not later than 30 (thirty)
       days after the Commencement Date, deliver to the Ministry, for
       information purposes, a copy of the Restated Facility Agreement.

9.     INCORPORATION OF TERMS

       The provisions of clauses 29 (Partial Invalidity), 30 (Amendments) and 37
       (Notices) of the Facility Agreement shall be incorporated into this
       Amending Agreement as if set out in full in this Amending Agreement and
       as if reference in those clauses to the "Facility Documents" or
       "hereunder" are references to this Amending Agreement.


IN WITNESS WHEREOF, THE PARTIES HAVE SIGNED THIS AMENDING AGREEMENT EFFECTIVE AS
OF THE DATE FIRST MENTIONED ABOVE.


PARTNER:

for:   PARTNER COMMUNICATIONS
       COMPANY LTD.

By:
   -------------------------------
Title:
      ----------------------------


THE PARTICIPATING BANKS:

for:  BANK LEUMI LE-ISRAEL B.M.               for:  ISRAEL DISCOUNT BANK LTD.

By:                                           By:
   -------------------------------               -------------------------------
Title:                                        Title:
      ----------------------------                  ----------------------------


for:  BANK HAPOALIM B.M.                      for:  THE FIRST INTERNATIONAL
                                                    BANK OF ISRAEL LTD.

By:                                           By:
   -------------------------------               -------------------------------
Title:                                        Title:
      ----------------------------                  ----------------------------



                                       (5)




for:  UNITED MIZRAHI BANK LTD.                for:  MERCANTILE DISCOUNT
                                                    BANK LTD.

By:                                           By:
   -------------------------------               ------------------------------
Title:                                        Title:
      ----------------------------                  ----------------------------


for:  CITIBANK N.A.

By:
   -------------------------------
Title:
      ----------------------------


for:  BANK LEUMI LE-ISRAEL B.M.               for:  BANK HAPOALIM B.M.
      (in its capacity as Security Trustee,         (in its capacity as
      Arranger and Facility Agent)                   Coordinating Agent)

By:                                           By:
   -------------------------------               ------------------------------
Title:                                        Title:
      ----------------------------                  ---------------------------



                                       (6)



                                   Exhibit "1"
                              AMENDED AND RESTATED
                               FACILITY AGREEMENT





                              DATED 13 AUGUST 1998





                 (AS AMENDED AND RESTATED BY THE PARTIES THROUGH
                 31 DECEMBER 2002), BETWEEN, INTER ALIA, PARTNER
                       COMMUNICATIONS COMPANY LTD., AS THE
                      BORROWER AND THE PARTICIPATING BANKS





                                       (7)





                                TABLE OF CONTENTS



CLAUSE NO.                                                                                          PAGE
===============================================================================================================================

                                                                                                   
1.                INTERPRETATION.......................................................................1
1.1.                     Definitions...................................................................1
1.2.                     Accounts......................................................................1
1.3.                     Interpretation................................................................1
1.4.                     Currency Symbols..............................................................1
1.5.                     Statutes......................................................................1
1.6.                     Agreements....................................................................1

2.                THE FACILITIES.......................................................................1
2.1.                     The Facilities................................................................1
2.2.                     Conversion of Outstanding Advances--Deleted...................................1
2.3.                     Lenders' Rights and Obligations...............................................1
2.4.                     Purpose.......................................................................1

3.                CONDITIONS PRECEDENT--Deleted........................................................1

4.                DRAWDOWNS............................................................................1
4.1.                     First Drawdown Request--Deleted...............................................1
4.2.                     Drawdown Request..............................................................1
4.3.                     Participating Bank's Participation............................................1
4.4.                     Notification of Advance--Deleted..............................................1
4.5.                     Outstandings in Proportion to Commitments.....................................1

5.                REPAYMENT............................................................................1
5.1.                     Repayment of Facility A Loan..................................................1
5.2.                     Repayment of Facility B Loan..................................................1
5.3.                     Repayment of Facility C Loan..................................................1
5.4.                     Currency of Repayment.........................................................1

6.                VOLUNTARY PREPAYMENT AND REBORROWING.................................................1
6.1.                     Prepayment....................................................................1
6.2.                     Conditions to Prepay..........................................................1
6.3.                     Effects of Notice of Prepayment...............................................1
6.4.                     Reborrowing...................................................................1

7.                MANDATORY PREPAYMENT.................................................................1
7.1.                     Non-Compliance with Corrective Milestones--Deleted............................1
7.2.                     Disposals.....................................................................1
7.3.                     Investment by Partner in Subsidiaries.........................................1
7.4.                     Terms for Mandatory Prepayment................................................1

8.                INTEREST.............................................................................1
8.1.                     Interest Rate.................................................................1
8.2.                     Payment of Interest...........................................................1
8.3.                     Default Interest..............................................................1

9.                SUBSTITUTE INTEREST RATES............................................................1
9.1.                     Unavailable or Indeterminable Interest Rate...................................1
9.2.                     Negotiations for Determining Alternative Basis................................1
9.3.                     Agreed Alternative Basis......................................................1
9.4.                     Failure to Agree on Alternative Basis.........................................1
9.5.                     Return to Regular Determination Basis.........................................1

10.               COMMISSIONS, FEES AND EXPENSES.......................................................1





                                TABLE OF CONTENTS
                                   (continued)



CLAUSE NO.                                                                                          PAGE
===============================================================================================================================

                                                                                                   
10.1.                    Commitment Commission--Facility A and Facility B..............................1
10.2.                    Applicable Percentage.........................................................1
10.2A.                   Commitment Commission--Facility C............................................67
10.3.                    Annual Payment to Security Trustee............................................1
10.4.                    Facility Agent's Fee..........................................................1
10.5.                    Payment of Upfront Fee--Deleted...............................................1
10.5A                    Coordinating Agent's Fee.....................................................68
10.6.                    Expenses......................................................................1
10.7.                    Stamp Taxes...................................................................1
10.8.                    Customary Commissions and Charges.............................................1

11.               TAXES................................................................................1
11.1.                    Tax Gross-Up..................................................................1
11.2.                    Notification of Requirement to Deduct Tax.....................................1
11.3.                    Evidence of Payment of Tax....................................................1
11.4.                    Tax Saving....................................................................1

12.               INCREASED COSTS......................................................................1
12.1.                    Increased Costs...............................................................1
12.2.                    Exceptions....................................................................1

13.               ILLEGALITY...........................................................................1

14.               MITIGATION...........................................................................1
14.1.                    Mitigation....................................................................1
14.2.                    Replacement of a Bank.........................................................1

15.               REPRESENTATIONS AND WARRANTIES.......................................................1
15.1.                    Representations and Warranties................................................1
15.2.                    Status........................................................................1
15.3.                    Powers and Authority..........................................................1
15.4.                    Legal Validity................................................................1
15.5.                    Non-Conflict..................................................................1
15.6.                    No Default...................................................................76
15.7.                    Consents......................................................................1
15.8.                    Accounts......................................................................1
15.9.                    Litigation....................................................................1
15.10.                   Tax Liabilities...............................................................1
15.11.                   Encumbrance...................................................................1
15.12.                   Business Plan.................................................................1
15.13.                   Ownership of Assets...........................................................1
15.14.                   Documents.....................................................................1
15.15.                   Intellectual Property Rights..................................................1
15.16.                   Environmental Matters.........................................................1
15.17.                   Ranking of Security...........................................................1
15.18.                   Material Contracts............................................................1
15.19.                   Ownership of Partner..........................................................1
15.20.                   Borrowings....................................................................1
15.21.                   Repetition....................................................................1

16.               UNDERTAKINGS.........................................................................1
16.1.                    Duration......................................................................1
16.2.                    Financial Information........................................................83
16.3.                    Information-Miscellaneous.....................................................1



                                      (b)



                                TABLE OF CONTENTS
                                   (continued)



CLAUSE NO.                                                                                          PAGE
===============================================================================================================================

                                                                                                   
16.4.                    Audit and Accounting Dates....................................................1
16.5.                    Accounting Standards..........................................................1
16.6.                    Negative Pledge...............................................................1
16.7.                    Sale and Leaseback............................................................1
16.8.                    Disposals.....................................................................1
16.9.                    Pari Passu Ranking............................................................1
16.10.                   Loans and Guarantees.........................................................94
16.11.                   Operating Leases..............................................................1
16.12.                   Receivables Discounting.......................................................1
16.13.                   Investments...................................................................1
16.14.                   Restricted Distributions......................................................1
16.15.                   Share Capital.................................................................1
16.16.                   Intellectual Property Rights..................................................1
16.17.                   Environmental Matters.........................................................1
16.18.                   Insurance.....................................................................1
16.19.                   Notification of Default.......................................................1
16.20.                   Change of Business............................................................1
16.21.                   Acquisitions and Mergers......................................................1
16.22.                   Borrowings....................................................................1
16.23.                   Arm's-Length Terms............................................................1
16.24.                   Compliance with Laws..........................................................1
16.25.                   Consents and Authorisations.................................................107
16.26.                   Licence.......................................................................1
16.27.                   Material Contracts and Constitutional Documents...............................1
16.28.                   Auditors......................................................................1
16.29.                   Hedging Agreements............................................................1
16.30.                   Subsidiaries..................................................................1
16.31.                   Taxation......................................................................1
16.32.                   Financial Undertakings........................................................1
16.33.                   Access........................................................................1
16.34.                   Interconnection...............................................................1
16.35.                   Reserve Account...............................................................1
16.36.                   Utilisation of Proceeds of Facilities.........................................1
16.37.                   Loans, Guarantees and Investments in Subsidiaries.............................1
16.38.                   Share Pledges.................................................................1
16.39.                   Non-Acquisition by Subsidiary.................................................1

17.               DEFAULT............................................................................118
17.1.                    Events of Default.............................................................1
17.2.                    Non-Payment...................................................................1
17.3.                    Breach of Obligations.........................................................1
17.4.                    Misrepresentation/Breach of Warranty..........................................1
17.5.                    Cross-Acceleration and Cross-Default..........................................1
17.6.                    Invalidity....................................................................1
17.7.                    Insolvency and Rescheduling...................................................1
17.8.                    Winding-Up....................................................................1
17.9.                    Execution or Distress.........................................................1
17.10.                   Analogous Events..............................................................1
17.11.                   Governmental Intervention.....................................................1
17.12.                   Cessation.....................................................................1



                                      (c)





                                TABLE OF CONTENTS
                                   (continued)



CLAUSE NO.                                                                                          PAGE
===============================================================================================================================

                                                                                                   
17.13.                   Proceedings...................................................................1
17.14.                   Breach of the Licence or any Authorisation....................................1
17.15.                   Material Adverse Change.......................................................1
17.16.                   Breach of Material Contracts..................................................1
17.17.                   Repudiation...................................................................1
17.18.                   Counterparties................................................................1
17.19.                   Shareholders..................................................................1
17.20.                   Change of Ownership...........................................................1
17.21.                   Balance in Reserve Account....................................................1
17.22.                   Mandatory Prepayment..........................................................1
17.23.                   No Trading in Securities......................................................1
17.24.                   Non-Compliance with any Securities Authority..................................1
17.25.                   Acceleration..................................................................1
17.26.                   Advances Due on Demand........................................................1
17.27.                   Indemnity.....................................................................1

18.               AGENCY PROVISIONS....................................................................1
18.1.                    Appointment...................................................................1
18.2.                    Facility Agent's Obligation...................................................1
18.2A                    Coordinating Agent's Obligation.............................................130
18.3.                    Discretions...................................................................1
18.4.                    Excluded Obligations..........................................................1
18.5.                    Indemnification...............................................................1
18.6.                    Exclusion of Liabilities......................................................1
18.7.                    No Actions....................................................................1
18.8.                    Participating Bank's Responsibility...........................................1
18.9.                    Resignation...................................................................1
18.10.                   Successor Agent.............................................................134
18.11.                   Rights and Obligations........................................................1
18.12.                   Business with the Group.......................................................1

19.               BROKEN FUNDING INDEMNITY.............................................................1
19.1.                    Broken Funding Indemnity for US Dollars and Euros.............................1
19.2.                    Broken Funding Indemnity for NIS..............................................1
19.3.                    Partner's Indemnity...........................................................1

20.               CURRENCY OF ACCOUNT..................................................................1
20.1.                    Currency of Account...........................................................1
20.2.                    Currency Indemnity............................................................1

21.               PAYMENTS WITHOUT SET-OFF.............................................................1

22.               SET-OFF..............................................................................1

23.               APPLICATION AND REDISTRIBUTION OF PAYMENTS...........................................1
23.1.                    Application of Payments.......................................................1
23.2.                    Partial Payments..............................................................1
23.3.                    Redistribution on or after Default Date.......................................1
23.4.                    Repayable Recoveries..........................................................1
23.5.                    Recoveries Through Legal Proceedings..........................................1

24.               CALCULATIONS AND EVIDENCE OF DEBT....................................................1
24.1.                    Basis of Accrual..............................................................1
24.2.                    Evidence of Debt..............................................................1
24.3.                    Prima Facie Evidence..........................................................1



                                      (d)




                                TABLE OF CONTENTS
                                   (continued)



CLAUSE NO.                                                                                          PAGE
===============================================================================================================================

                                                                                                   
24.4.                    Certificates of Participating Banks...........................................1

25.               GUARANTEE AND INDEMNITY..............................................................1
25.1.                    Guarantee.....................................................................1
25.2.                    Indemnity.....................................................................1
25.3.                    Additional Security...........................................................1
25.4.                    Continuing Obligations........................................................1
25.5.                    Obligations not Discharged....................................................1
25.6.                    Settlement Conditional........................................................1
25.7.                    Exercise of Rights............................................................1
25.8.                    Deferral of Guarantor's Rights................................................1
25.9.                    Suspense Accounts.............................................................1
25.10.                   Waiver by Guarantor...........................................................1

26.               ADDITIONAL GUARANTORS AND SECURITY...................................................1
26.1.                    Additional Guarantors.........................................................1
26.2.                    Security......................................................................1

27.               ASSIGNMENTS AND TRANSFERS............................................................1
27.1.                    Binding Agreement.............................................................1
27.2.                    No Assignments and Transfers by the Obligors..................................1
27.3.                    Assignments and Transfers by Participating Banks..............................1
27.4.                    Assignments by Participating Banks............................................1
27.5.                    Transfers by Participating Banks..............................................1
27.6.                    Disclosure of Information.....................................................1
27.7.                    No Increased Costs............................................................1

28.               COSTS AND EXPENSES...................................................................1
28.1.                    Agents' Costs.................................................................1
28.2.                    Amendment Costs...............................................................1
28.3.                    Participating Banks' Liabilities for Costs....................................1

29.               PARTIAL INVALIDITY...................................................................1

30.               AMENDMENTS...........................................................................1

31.               INFORMATION..........................................................................1

32.               RELEASE OF SHARE PLEDGES.............................................................1
32.1.                    Share Pledges.................................................................1
32.2.                    Release of Share Pledges......................................................1
32.3.                    Distribution of Tapuz Shares--Deleted.........................................1

33.               RESPONSE TO REQUESTS FOR APPROVAL OR CONFIRMATION....................................1

34.               COUNTERPARTS.........................................................................1

35.               GOVERNING LAW AND JURISDICTION.......................................................1

36.               REMEDIES AND WAIVERS.................................................................1

37.               NOTICES..............................................................................1
37.1.                    Communications through Facility Agent.........................................1
37.2.                    Manner of Delivery............................................................1

38.               CONFIDENTIALITY......................................................................1

39.               ENTIRE AGREEMENT.....................................................................1



                                      (e)







   SCHEDULES                  DESCRIPTION
========================================================================================================================
                           

   SCHEDULE 1                 Participating Banks' respective Commitments

   SCHEDULE 2                 Form of Drawdown Request

   SCHEDULE 3                 List of Facility Documents

   SCHEDULE 4                 Form of Guarantor Accession Agreement

   SCHEDULE 5                 List of Material Contracts

   SCHEDULE 6                 Shareholder Loans Subordination Conditions

   SCHEDULE 7                 Reservations

   SCHEDULE 8                 List of Security Documents

   SCHEDULE 9                 Principal Shareholders in Partner

   SCHEDULE 10                Form of Transfer Certificate

   SCHEDULE 11                Deleted

   SCHEDULE 12                Deleted

   SCHEDULE 13                Deleted

   SCHEDULE 14                Deleted

   SCHEDULE 15                Part A--Schedule for Reduction of Facility A
                              Part B--Schedule for Reduction of Facility C

   SCHEDULE 16                Certificate by Partner's Chief Financial Officer permitting prepayment from Permitted
                              Sources

   SCHEDULE 17                Pending Legal Actions concerning Partner

   SCHEDULE 18                Tax Liabilities

   SCHEDULE 19                Quarterly report to be submitted to the Participating Banks and the Facility Agent

   SCHEDULE 20                Form of letter by Partner to the Auditors

   SCHEDULE 21                Deleted

   SCHEDULE 22                Deleted

   SCHEDULE 23                Documents required in relation to Acceding Guarantors








              THIS AGREEMENT was made on 13 August 1998 and amended and restated
              by the parties through 31 December 2002, the parties hereto, as at
              31 December 2002, being:

              (1) PARTNER COMMUNICATIONS COMPANY LTD. ("PARTNER")


              AND

              (2) BANK LEUMI LE-ISRAEL B.M., ISRAEL DISCOUNT BANK LTD., BANK
                  HAPOALIM B.M., THE FIRST INTERNATIONAL BANK OF ISRAEL LTD.,
                  UNITED MIZRAHI BANK LTD., MERCANTILE DISCOUNT BANK LTD. and
                  CITIBANK N.A.
                  (together, "THE PARTICIPATING BANKS")


              AND

              (3) BANK LEUMI LE-ISRAEL B.M., in its respective capacities as
                  Arranger, Facility Agent and Security Trustee


              AND

              (4) BANK HAPOALIM B.M., in its capacity as Coordinating Agent



10.    INTERPRETATION

10.1.    DEFINITIONS

         In this Agreement, the following terms have the meanings given to them
         in this clause 1.1:

10.1.1.           "ACCOUNTING PERIOD" in relation to any person means any
                  period of approximately 3 (three) months, 6 (six) months or 1
                  (one) year for which Accounts of such person are prepared;


                                      (1)





                                       -2-


10.1.2.           "ACCOUNTS" means at any time and from time to time:

                  (a)  the latest audited non-consolidated annual financial
                       statements of Partner;

                  (b)  the latest audited annual financial statements of each
                       Subsidiary of Partner;

                  (c)  the latest unaudited reviewed non-consolidated half-
                       yearly financial statements of Partner;

                  (d)  the latest unaudited reviewed half-yearly financial
                       statements of each Subsidiary of Partner;

                  (e)  the latest audited consolidated annual financial
                       statements of Partner;

                  (f)  the latest unaudited reviewed quarterly consolidated
                       financial statements of Partner,

                  delivered or required to be delivered to the Participating
                  Banks hereunder (together with all those notes thereto and
                  certificates required to be attached thereto), or such of
                  those accounts as the context requires;

10.1.3.           "ACQUISITION" means the acquisition directly or indirectly
                  (whether by one transaction or by a series of related
                  transactions) of any interest whatsoever in the share capital
                  (or equivalent) or the business or undertaking (including any
                  franchise rights) or assets constituting a separate business
                  or undertaking of any company or other person;

10.1.4.           "ADDITIONAL GUARANTOR" means any entity which becomes party to
                  this Agreement as a Guarantor by virtue of its execution of a
                  Guarantor Accession Agreement;

10.1.5.           "ADSCR" means EBITDA after SAC/Debt Service;

10.1.6.           "ADVANCE" means an advance made or to be made under the
                  Facilities or the principal amount thereof (for the removal
                  of doubt, together with any Linkage Differentials in
                  respect of such principal) outstanding from time to time;

10.1.7.           "AFFILIATE" means in relation to a Participating Bank, and to
                  any other company or any corporation, the Holding Company of
                  that





                                       -3-


                  Participating Bank, company or corporation and any person over
                  20% (twenty percent) of whose capital is beneficially owned,
                  or the majority of whose voting rights are exercised, directly
                  or indirectly by that Participating Bank, company or
                  corporation or any Holding Company of that Participating Bank,
                  company or corporation provided that, for the purpose of
                  clause 27.3 (Assignments and Transfers by Participating Banks)
                  below the reference to 20% (twenty percent) shall be deemed to
                  be a reference to 50% (fifty percent);

10.1.8.           "AGENTS" means the Facility Agent, the Coordinating Agent, the
                  Security Trustee and the Arranger;

10.1.9.           "AMENDING AND RESCHEDULING AGREEMENT" means the Amending and
                  Rescheduling Agreement dated 9 July 2000 between the parties
                  to this Agreement, amending the Original Facility Agreement
                  with effect from the Effective Date;

10.1.10.          "APPLICABLE ACCOUNTING PRINCIPLES" means in relation to
                  Partner or any Subsidiary of Partner, the accounting
                  principles and practices generally accepted in its
                  jurisdiction of incorporation and/or where its securities are
                  listed for trading, reconciled to the extent necessary in
                  accordance with the generally accepted accounting principles
                  in the United States of America;

10.1.11.          "ARRANGER" means Bank Leumi Le-Israel B.M.;

10.1.12.          "AUDITORS" means any internationally recognised firm of
                  accountants or a leading firm of independent Israeli auditors
                  affiliated to an internationally recognised firm of
                  accountants;

10.1.13.          "AUTHORISATIONS" means at any time all consents, approvals,
                  authorisations, concessions, permits and licences (including
                  Environmental Licences but excluding the Licence), and all
                  filings, registrations and agreements with any government or
                  other regulatory authority necessary in order to enable the
                  Group to install, establish, maintain and operate the Network
                  at such time;

10.1.14.          "AVAILABLE COMMITMENT" means the Available Facility A
                  Commitment, the Available Facility B Commitment and the
                  Available Facility C Commitment or any of them, as the context
                  may require;

10.1.15.          "AVAILABLE FACILITY A COMMITMENT" means, in relation to a
                  Participating Bank at any time, its Commitment under Facility
                  A at such time, less the difference between: (i) the aggregate
                  Original




                                       -4-

                  Dollar Amount of all Advances made by such Participating Bank
                  (and taking into account, where relevant, any Advances not yet
                  made but Drawdown Requests in respect of which have been
                  submitted to such Participating Bank) under Facility A at such
                  time; and (ii) the Original Dollar Amount of all Advances
                  under Facility A prepaid or repaid by Partner to such
                  Participating Bank, which are capable of being reborrowed
                  under clauses 5.1.2.(c), 6.4.1, 7.2.2 or 7.3 (Investment by
                  Partner in Subsidiaries) below;

10.1.16.          "AVAILABLE FACILITY B COMMITMENT" means, in relation to a
                  Participating Bank at any time, its Commitment under Facility
                  B at such time less the Dollar Amount of the aggregate amount
                  of all outstanding Advances (for the removal of doubt,
                  together with any Linkage Differentials on such Advances) made
                  by such Participating Bank (and taking into account, where
                  relevant, any Advances not yet made but Drawdown Requests in
                  respect of which have been submitted to such Participating
                  Bank) under Facility B at such time;

10.1.17.          "AVAILABLE FACILITY C COMMITMENT" means, in relation to a
                  Participating Bank at any time, its Commitment under Facility
                  C at such time, less the difference between: (i) the aggregate
                  Original Dollar Amount of all Advances made by such
                  Participating Bank (and taking into account, where relevant,
                  any Advances not yet made but Drawdown Requests in respect of
                  which have been submitted to such Participating Bank) under
                  Facility C at such time; and (ii) the Original Dollar Amount
                  of all Advances under Facility C prepaid or repaid by Partner
                  to such Participating Bank, which are capable of being
                  reborrowed under clauses 5.3.2.(c), 6.4.1, 7.2.2 or 7.3
                  (Investment by Partner in Subsidiaries) below;

10.1.18.          "AVAILABILITY PERIOD FACILITY A" means the period ending on
                  31 March 2003;

10.1.19.          "AVAILABILITY PERIOD FACILITY C" means the period ending on
                  December 31, 2004;

10.1.20.          "BANK HAPOALIM" means Bank Hapoalim B.M.;

10.1.21.          "BEZEQ" means Bezeq, Israel Telecommunication Corporation
                  Ltd., a company incorporated under the laws of Israel;

10.1.22.          "BEZEQ INTERCONNECTION AGREEMENT" means the Interconnection
                  Agreement entered into or to be entered into with Bezeq or any
                  other agreement with Bezeq (whether written or expressed by
                  conduct)





                                       -5-


                  pursuant to which Bezeq provides interconnection
                  infrastructure and services to Partner;

10.1.23.          "BLL" means Bank Leumi Le-Israel B.M.;

10.1.24.          "BOND RATE" means the rate which is the aggregate of:

                  (a)   the arithmetic mean of the Average Daily Yield; the
                        "AVERAGE DAILY YIELD" being the arithmetic mean of the
                        gross yield to maturity (rounded upwards, if necessary,
                        to four decimal places) as published by the Tel-Aviv
                        Stock Exchange Ltd. ("TASE"), of six series of fixed
                        rate bonds issued by the State of Israel and listed on
                        the TASE and having a remaining period until maturity
                        the same as, or closest to, the average duration (taking
                        account of repayments) of the relevant Advance during
                        the Duration Period of such Advance, denominated in NIS
                        and fully linked to the Cost of Living Index, in each of
                        the 10 (ten) (or, in the event that under clause
                        1.1.105(b) below the minimum prior notice for Drawdown
                        of the relevant Advance is 5 (five) Business Days, then
                        5 (five)) trading days of the TASE immediately preceding
                        the beginning of the Duration Period of such Advance;
                        all as determined by the Participating Bank by which
                        such Advance is to be made on the first day of such
                        Duration Period; and

                  (b)   0.60% (nought point sixty percent);

10.1.25.          "BORROWING" means any Indebtedness in respect of or pursuant
                  to:

                  (a)   monies borrowed or monies raised which are in the nature
                        of borrowings or having the commercial effect of
                        borrowing (including monies raised by the sale of
                        receivables, invoices, bills or notes or other financial
                        assets on terms that recourse may be had to the vendor
                        in the event of non-payment of such receivables,
                        invoices, bills or financial assets when due) and monies
                        raised under acceptance credit facilities and through
                        the issue of bonds, notes, debentures, bills, loan
                        stocks and other debt securities (including any debt
                        security convertible, but not at the relevant time
                        converted, into share capital);

                  (b)   the acquisition cost of assets or services to the extent
                        payable on deferred payment terms more than 180 (one
                        hundred and eighty) days after the time of acquisition
                        or possession thereof by the party liable (whether or
                        not evidenced by any bond, note, debenture, loan stock
                        or other debt security), excluding any such





                                       -6-


                        cost payable on deferred payment terms which are treated
                        as trade creditors in accordance with the Applicable
                        Accounting Principles;

                  (c)   monies received in consideration for the supply of goods
                        and/or services to the extent received more than 6 (six)
                        months before the due date for such supply (but
                        excluding any liability in respect of bona fide progress
                        payments and deposits received from customers in the
                        ordinary course of trade or any other liability treated
                        as trade creditors in accordance with the Applicable
                        Accounting Principles) where such arrangement is entered
                        into primarily as a method of raising finance;

                  (d)   leases (whether in respect of land, machinery, equipment
                        or otherwise) and hire purchase agreements, conditional
                        sale agreements, sale and lease back, sale and
                        repurchase and similar agreements and instruments,
                        provided in the case of leases they are treated as
                        finance leases in accordance with Applicable Accounting
                        Principles; and/or

                  (e)   any guarantee, indemnity or other legally binding
                        instrument to assure payment of, or against loss in
                        respect of non-payment of, any of the indebtedness
                        specified in this definition and any counter-indemnity
                        in respect of any thereof or in respect of any letter of
                        credit or guarantee issued by any bank or other
                        financial institution in respect of any indebtedness
                        referred to in this definition;

                  provided that in computing an amount of Borrowings of any
                  person or persons:

                  (i)   in respect of paragraph (d) only the liability for
                        future payments under the finance lease as determined in
                        accordance with the Applicable Accounting Principles
                        shall be included;

                  (ii)  any item falling within paragraph (e) shall be included
                        only to the extent that the same is required by the
                        Applicable Accounting Principles to be quantified in the
                        consolidated balance sheet included in consolidated
                        Accounts of the Group, or in any notes to those
                        Accounts, were any then to be prepared;

                  (iii) any item falling within paragraph (e) shall not be
                        included if it relates to indebtedness of another
                        member of the Group already taken into account for the
                        purposes of such calculation; and





                                       -7-


                  (iv)  such computation shall exclude any double counting;

10.1.26.          "BUSINESS" means the business of installing, establishing,
                  maintaining and operating a wireless telephony service in
                  Israel as contemplated by the License and any other related
                  business or activity which may be conveniently or
                  advantageously carried on in connection or conjunction with
                  such business;

10.1.27.          "BUSINESS DAY" means:

                  (a)   with respect to payment or purchase of sums denominated
                        in:

                        (i)  US Dollars, as a reference to a day (other than a
                             Saturday or Sunday) on which banks generally are
                             open for business in New York and Tel-Aviv;

                        (ii) Euros, as a reference to a day on which the
                             Trans-European Automated Real-Time Gross Settlement
                             Express Transfer payment system is open for
                             settlement of payments in Euros and on which banks
                             generally are open for business in Tel-Aviv and

                       (iii) NIS, as a reference to a day (other than a
                             Saturday) on which banks generally are open for
                             business in Tel-Aviv; and

                  (b)   in all other cases, as a reference to a day (other than
                        a Saturday) on which banks generally are open for
                        business in Tel Aviv;

10.1.28.          "BUSINESS PLAN" means the business plan (including the long
                  term management forecasts contained therein) of Partner dated
                  7 July 2002, a copy of which was delivered to the Facility
                  Agent and to the Coordinating Agent on 11 July 2002, as such
                  business plan is updated from time to time pursuant to this
                  Agreement;

10.1.29.          "CAPITAL ADEQUACY REQUIREMENT" means a request or requirement
                  relating to the maintenance of capital from any central bank
                  or other fiscal, monetary or other authority;

10.1.30.          "CAPITAL EXPENDITURE" means any expenditure which should be
                  treated as capital expenditure in the audited non-consolidated
                  Accounts of Partner in accordance with the Applicable
                  Accounting Principles;





                                       -8-


10.1.31.          a "CHANGE OF OWNERSHIP" shall occur when:

                  (a)   the HTL Group ceases to hold, directly or indirectly,
                        a portion of Partner's equity share capital which
                        carries at least 30% (thirty percent) of the voting
                        rights in Partner; or

                  (b)   the HTL Group, Matav, Elbit, Eurocom Communications
                        Limited, Hapoalim Electronic Communication Ltd. and
                        Tapuz Cellular Systems Ltd. taken together, cease to
                        hold, directly or indirectly, a portion of Partner's
                        equity share capital which carries at least 51%
                        (fifty-one percent) of the voting rights in Partner; or

                  (c)   HWL ceases to hold, directly or indirectly, at least 51%
                        (fifty-one percent) of the equity share capital of HTL.

                  For the avoidance of doubt, in calculating any indirect
                  percentage ownership interest, account shall be taken of any
                  intermediate holding companies which are not wholly-owned
                  Subsidiaries and the indirect percentage ownership interest
                  shall be reduced on a proportionate basis accordingly;

10.1.32.          "CHARGOR" means any Shareholder which is party to a Share
                  Pledge and "CHARGORS" means all of them;

10.1.33.          "CHARTER" means, in respect of any company, corporation,
                  partnership, governmental agency or other enterprise, its
                  founding act, articles of incorporation and by-laws,
                  memorandum and articles of association, articles of
                  partnership, statute or similar instrument and other founding
                  documents;

10.1.34.          "COMMITMENT" means, in relation to a Participating Bank and a
                  Facility at any time, the amount in US Dollars set opposite
                  its name in SCHEDULE 1 (Participating Banks' respective
                  Commitments) in relation to such Facility as reduced or
                  cancelled from time to time in accordance with this Agreement;

10.1.35.          "COMMENCEMENT DATE" shall have the same meaning ascribed to
                  such term in the Amending Agreement to the Facility Agreement
                  dated as of 31 December 2002 made between: (1) Partner; (2)
                  the Participating Banks; (3) BLL, in its respective capacities
                  as, Arranger, Facility Agent and Security Trustee; and (4)
                  Bank Hapoalim, in its capacity as Coordinating Agent;





                                       -9-


10.1.36.          "CONTRIBUTION" means, in relation to a Participating Bank at
                  any time, the aggregate Dollar Amount of all Advances (for the
                  removal of doubt, together with any Linkage Differentials on
                  such Advances) made by such Participating Bank under each of
                  Loan A, Loan B and Loan C outstanding at such time or, as the
                  context may require, the aggregate Dollar Amount of all such
                  Advances;

10.1.37.          "COORDINATING AGENT" means Bank Hapoalim or, in the event Bank
                  Hapoalim shall resign as Coordinating Agent pursuant to clause
                  18.9 (Resignation) below, the Facility Agent and its
                  respective successors as referred to in clause 18.10
                  (Successor Agent) below;

10.1.38.          "COST OF LIVING INDEX" means the index known as the Consumer
                  Price Index (Cost of Living Index) including fruit and
                  vegetables and published by the Israeli Central Bureau of
                  Statistics, including such index even if published by any
                  other official Israeli institution, and also including every
                  official index in substitution therefor, whether based on the
                  same data on which the existing index is based or not. If such
                  index be substituted by another index published by any such
                  body or institution and such body or institution has not
                  prescribed the relationship between the former and the
                  substitute index, such relationship shall be prescribed by the
                  Israeli Central Bureau of Statistics and, in the event such
                  relationship has not been so prescribed, the Facility Agent
                  shall determine the relationship between such index and the
                  substitute index in consultation with economic experts
                  selected by it and applied by the Facility Agent to its other
                  linked accounts;

10.1.39.          "COUNTERPARTY" means each party to a Material Contract set out
                  in paragraphs (a), (c) and (d) of Schedule 5 (Material
                  Contracts) hereto) and Bezeq or any successor providing
                  equivalent interconnection services to Bezeq, in each case
                  other than an Obligor;

10.1.40.          "CURRENCY HEDGE PROVIDER" means any counterparty to any
                  Currency Hedging Agreement entered into by Partner.

10.1.41.          "CURRENCY HEDGING AGREEMENT" means any agreement entered into
                  by Partner for the purposes of entering into one or more
                  Currency Hedging Transactions.

10.1.42.          "CURRENCY HEDGING TRANSACTION" includes any foreign exchange
                  transaction, currency swap transaction, cross currency rate
                  swap



                                      -10-


                  transaction, currency option or other similar transaction
                  (including any option with respect thereto and any combination
                  in respect thereof);

10.1.43.          "DANGEROUS SUBSTANCE" means any radioactive or electromagnetic
                  emissions and any natural or artificial substance (whether in
                  the form of a solid, liquid, gas or vapour) the generation,
                  transportation, storage, treatment, use or disposal of which
                  (whether alone or in combination with any other substance) and
                  including (without limitation) any controlled, special,
                  hazardous, toxic, radioactive or dangerous waste, gives rise
                  to a risk of causing harm to man or any other living organism
                  or damaging the Environment or public health;

10.1.44.          "DEBENTURE" means the debenture dated 10 September 1998
                  between Partner and the Security Trustee, as amended;

10.1.45.          "DEBT SERVICE" means, in relation to each Ratio Period. the
                  sum of: (i) Financial Costs in respect of such Ratio Period;
                  (ii) the scheduled repayments of principal under the
                  Facilities (together with any Linkage Differentials (to the
                  extent not taken into account in the Financial Costs in
                  respect of any preceding Ratio Period (provided that such
                  preceding Ratio Period commences from 1 January 2002 or
                  thereafter)) in respect of such principal), in respect of such
                  Ratio Period; and (iii) scheduled repayments of principal
                  under Permitted Borrowings (together with any Linkage
                  Differentials in respect of such principal), in respect of
                  such Ratio Period;

10.1.46.          "DEFAULT DATE" means the first date on which the Facility
                  Agent serves a notice under clause 17.26 (Advances Due on
                  Demand) below or the date after an Event of Default which an
                  Instructing Group determines is the Default Date;

10.1.47.          "DOLLAR AMOUNT" means at any time:

                  (a)   in relation to an Advance denominated in US Dollars, the
                        outstanding amount of such Advance at such time;

                  (b)   in relation to an Advance denominated in NIS, the Dollar
                        equivalent of the outstanding NIS amount of such Advance
                        at such time, together, for the removal of doubt, with
                        all Linkage Differentials on such Advance;

                  (c)   in relation to an Advance denominated in Euros, the
                        Dollar equivalent of the outstanding Euro amount of such
                        Advance at such time;



                                      -11-


10.1.48.                "DORMANT COMPANY" means any Subsidiary of Partner
                        designated as a dormant company provided that (and for
                        so long only as) it does not trade (whether for itself
                        or as agent for another) or does not own legally and/or
                        beneficially any property or assets;

10.1.49.                "DOUBLE TAXATION TREATY" means any convention or
                        agreement between the government of Israel and any other
                        government for the avoidance of double taxation;

10.1.50.                "DRAWDOWN DATE" means, in respect of any Drawdown
                        Request, the proposed date for the making of the
                        relevant Advance as set out in the relevant Drawdown
                        Request;

10.1.51.                "DRAWDOWN REQUEST" means a notice substantially in the
                        form set out in SCHEDULE 2 (Drawdown Request) hereto;

10.1.52.                "DURATION PERIOD" means:

                        (a) in relation to an Advance made under Facility A or
                            Facility C, the period commencing on the date on
                            which the relevant Advance is made and expiring on
                            the expiry date designated in the relevant Drawdown
                            Request; provided that: (i) such expiry date shall
                            not be less than 12 (twelve) months after the date
                            such Advance is to be made under the relevant
                            Drawdown Request; (ii) such period is a period
                            customary at the relevant Participating Bank, having
                            regard to the currency, amount and type of Advance
                            requested under the relevant Drawdown Request; (iii)
                            in the case of an Advance under Facility A, such
                            expiry date shall not be later than the Facility A
                            Maturity Date and, in the case of an Advance under
                            Facility C, such expiry date shall not be later than
                            the Facility C Maturity Date; and (iv) such expiry
                            date shall be the last Interest Payment Date for
                            such Advance; and

                        (b) in relation to an Advance made under Facility B, the
                            period commencing on the date on which the relevant
                            Advance is made and expiring on the expiry date
                            designated in the relevant Drawdown Request;
                            provided that: (i) such expiry date shall not be
                            more than 12 (twelve) months after the date such
                            Advance is to be made under the relevant Drawdown
                            Request; (ii) such expiry date shall be the last
                            Interest Payment Date for such Advance; (iii) such
                            period is a period customary at the relevant
                            Participating Bank, having regard to the currency,
                            amount and



                                      -12-


                            type of Advance requested under the relevant
                            Drawdown Request; and (iv) such expiry date shall
                            not be later than June 30, 2008;






                                      -13-



10.1.53.          "EBITDA AFTER SAC" means, in respect of any Ratio Period:

                  (1)   the sum of the following, all as appearing in Partner's
                        non-consolidated Accounts for such Ratio Period:

                        (a) the net profit of Partner before extraordinary
                            items; provided that, for the removal of doubt:
                            (i) all expenses other than Capital Expenditure
                            shall be costs for the purposes of determining
                            EBITDA; and (ii) Capital Expenditure as referred to
                            above does not include SAC;

                        (b) the amount of Taxes set against the net profits of
                            Partner in the Accounts and (without double
                            counting) any provision by Partner for Taxes;

                        (c) any amortisation and depreciation reflected in such
                            Accounts;

                        (d) any Net Financial Expenses,

                        less:

                  (2)   any non-cash profits included in Partner's non-
                        consolidated Accounts in respect of such Ratio Period.

                  For the purposes of the aforegoing, "NET FINANCIAL EXPENSES"
                  means, for any Ratio Period, the Financial Costs for such
                  Ratio Period, less the Interest receivable for such Ratio
                  Period (as certified by Partner's Auditors and specified in
                  the notes to the Accounts to be delivered pursuant to the
                  provisions of this Agreement);

10.1.54.          "THE EFFECTIVE DATE" means 7 August 2000;

10.1.55.          "ELBIT" means Elbit Limited, a company incorporated in Israel
                  with registered number 52-002750-9;

10.1.56.          "ENCUMBRANCE" means: (a) a mortgage, charge, pledge, lien or
                  other security interest securing any obligation of any person,
                  (b) any arrangement under which money or claims to, or the
                  benefit of, a bank or other account may be set-off or made
                  subject to a combination of accounts so as to effect payment
                  of sums owed or payable to any person or (c) any other type of
                  preferential arrangement (including title transfer and
                  retention arrangements) having a similar effect;



                                      -14-


10.1.57.          "ENVIRONMENT" means all, or any of, the following media, the
                  air (including the air within buildings and the air within
                  other natural or man-made structures above or below ground),
                  water (including ground and surface water) and land (including
                  surface and sub-surface soil);

10.1.58.          "ENVIRONMENTAL CLAIM" means any claim by any person:

                  (a)   in respect of any loss or liability suffered or incurred
                        by that person as a result of or in connection with any
                        violation of Environmental Law; or

                  (b)   that arises as a result of or in connection with
                        Environmental Contamination and that could give rise to
                        any remedy or penalty (whether interim or final) that
                        may be enforced or assessed by private or public legal
                        action or administrative order or proceedings including
                        any such claim that arises from injury to persons or
                        property;

10.1.59.          "ENVIRONMENTAL CONTAMINATION" includes each of the following
                  and their consequences:

                  (a)   any release, emission, leakage or spillage of any
                        Dangerous Substance at or from any site owned or
                        occupied by any member of the Group or from any cell
                        phone or accessory supplied by any member of the Group
                        into any part of the Environment; or

                  (b)   any accident, fire, explosion or sudden event at any
                        site owned or occupied by any member of the Group which
                        is directly caused by or attributable to any Dangerous
                        Substance; or

                  (c)   any other pollution of the Environment arising at or
                        from any site owned or occupied by any member of the
                        Group.

                  For the purposes of this definition, for the removal of doubt,
                  a site occupied by any member of the Group shall be deemed to
                  include also any site on or in which an antenna for
                  transmitting or receiving signals has been erected or placed
                  by or on behalf of any member of the Group;

10.1.60.          "ENVIRONMENTAL LAW" means all applicable laws and regulations
                  concerning pollution, the Environment or Dangerous Substances;



                                      -15-


10.1.61.          "ENVIRONMENTAL LICENCE" means any permit, licence,
                  authorisation, consent or other approval required by any
                  Environmental Law applicable to the Group;

10.1.62.          "ESCROW ACCOUNT" means the account with such Israeli bank as
                  Partner elects, with the prior consent of the Facility Agent
                  (which consent shall only be given if an Encumbrance can be
                  granted over such account in favour of the Security Trustee
                  and no other Encumbrance exists over such account) in the name
                  of Partner pledged in favour of the Security Trustee pursuant
                  to the Debenture;

10.1.63.          "EVENT OF DEFAULT" means any circumstances described as such
                  in clause 17 (Default) below;

10.1.64.          "EXCESS CASH FLOW" means, for any Ratio Period, EBITDA after
                  SAC for such Ratio Period, less the following:

                  (a)   Taxes payable by Partner in respect of such Ratio
                        Period;

                  (b)   Capital Expenditure paid during such Ratio Period;

                  (c)   all Interest payable (whether or not paid) on any
                        Advance, Partner being deemed to have drawn all the
                        Facilities in full, provided by a Participating Bank
                        under the Facilities and commissions or other charges
                        arising from any banking or other financial services
                        provided by the Participating Banks to Partner for such
                        Ratio Period, plus all Linkage Differentials and
                        similar amounts payable, including accrued (whether or
                        not paid) in respect of principal of all Advances in
                        such Ratio Period to the extent such Linkage
                        Differentials and similar amounts were not already
                        taken into account for the purpose of computing Excess
                        Cash Flow in a prior Ratio Period;

                  (d)   all scheduled payments (whether or not paid) of
                        Advances, Partner being deemed to have drawn all the
                        Facilities in full (including all Linkage Differentials
                        in respect of such Advances), but without double
                        accounting in respect of Linkage Differentials referred
                        to in (c) above; and

                  (e)   all scheduled payments (whether or not paid) of
                        Interest and principal in respect of all Permitted
                        Borrowings (other than under the Facilities) for such
                        Ratio Period, plus all Linkage Differentials and similar
                        amounts payable, including accrued (whether or not paid)
                        in respect of such Permitted Borrowings in



                                      -16-


                        such Ratio Period to the extent such Linkage
                        Differentials and similar amounts were not already taken
                        into account for the purpose of computing Excess Cash
                        Flow in a prior Ratio Period;

                  (f)   losses during the relevant Ratio Period constituting
                        extraordinary items and payable in cash;

10.1.65.          "FACILITIES" means Facility A, Facility B and Facility C and
                  "FACILITY" means any one of them as the context so requires;

10.1.66.          "FACILITY A" means the fixed-term Dollar, NIS and/or Euro loan
                  facility granted to Partner pursuant to clause 2.1.1(a) below;

10.1.67.          "FACILITY A MATURITY DATE" means 30 June 2008, or if the day
                  determined in accordance with the aforegoing is not a Business
                  Day, the immediately preceding Business Day;

10.1.68.          "FACILITY AGENT" means BLL or any successor Facility Agent
                  appointed in accordance with clause 18.10 (Successor Agent)
                  below;

10.1.69.          "FACILITY B" means the revolving Dollar, NIS and/or Euro loan
                  facility granted to Partner pursuant to clause 2.1.1(b) below;

10.1.70.          "FACILITY C" means the fixed-term NIS loan facility granted to
                  Partner pursuant to clause 2.1.1(c) below;

10.1.71.          "FACILITY C MATURITY DATE" means 30 June 2009;

10.1.72.          "FACILITY DEBT COVER RATIO" means, in relation to each Ratio
                  Period, EBITDA after SAC for such Ratio Period, divided by the
                  aggregate Contributions as at the last day of the Ratio
                  Period;

10.1.73.          "FACILITY DOCUMENTS" means those documents listed in SCHEDULE
                  3 (Facility Documents);

10.1.74.          "FACILITY OFFICE" means, in relation to a Finance Party, the
                  office designated by it for service of notices in clause 37.2
                  (Manner of Delivery) below or such other address as may be
                  designated by it, from time to time, to Partner and the
                  Coordinating Agent for the purposes of this Agreement (or, in
                  the case of a Transferee, at the end of the Transfer
                  Certificate to which it is a party as Transferee). For the
                  purposes of clause 14.1 (Mitigation) and clause 27.7 (No
                  Increased Costs) below, a change in, or substitution of, a
                  Facility



                                      -17-


                  Office shall only be deemed to occur where such change or
                  substitution is to an office located outside the State of
                  Israel;

10.1.75.          "FINANCE PARTY" means the Facility Agent, the Arranger, the
                  Coordinating Agent, each Participating Bank and the Security
                  Trustee;

10.1.76.          "FINANCIAL COSTS" means, for any Ratio Period, all Interest
                  expenses (whether or not capitalised) of Partner during such
                  Ratio Period, as well as all other costs, expenses,
                  commissions (including credit card commissions) and other
                  charges of whatsoever nature appearing in the item "Financial
                  Expenses" in the Accounts for such Ratio Period (all the above
                  as certified by Partner's Auditors and specified in the notes
                  to the Accounts to be delivered pursuant to the provisions of
                  this Agreement); save for:

                  (a)   Interest accrued during such Ratio Period on
                        Shareholder Loans which is not permitted to be paid
                        pursuant to this Agreement;

                  (b)   amounts accrued during such Ratio Period in respect of
                        the principal outstanding on the Senior Secured Notes,
                        due 2010, issued by Partner on August 10, 2000, as a
                        result of a change in the rate of exchange between the
                        US Dollar and the NIS; and

                  (c)   all fees and expenses paid by Partner to the
                        Participating Banks on or before 31 December 2000,
                        pursuant to the terms of this Agreement, in respect of
                        the Facilities and which were deducted during such Ratio
                        Period;

10.1.77.          "FINANCIAL YEAR" means in relation to Partner, the accounting
                  year commencing on 1 January and ending on the following 31
                  December, or such other annual Accounting Period of Partner as
                  Partner may, with the consent of an Instructing Group,
                  designate as its accounting year;

10.1.78.          "FIXED CHARGE COVERAGE RATIO" means for any Ratio Period: (a)
                  EBITDA after SAC for such Ratio Period, divided by: (b) the
                  sum of: (i) Debt Service for such Ratio Period; (ii) Capital
                  Expenditure actually paid during such Ratio Period, less
                  equity and/or loan capital and/or income not deriving from the
                  ordinary course of Business of Partner; in each case received
                  by Partner and designated at the time of such receipt, for use
                  in financing such Capital Expenditure only, and in fact
                  utilised for such designated Capital Expenditure during such
                  Ratio Period; provided that, for the removal of doubt, loan
                  capital as referred to herein shall not include any amount
                  received by Partner



                                      -18-


                  within the framework of the Facilities; and (iii) Tax payments
                  actually made by Partner during such Ratio Period;

10.1.79.          "GROUP" means Partner and its Subsidiaries from time to time;

10.1.80.          "GUARANTOR" means each Additional Guarantor;

10.1.81.          "GUARANTOR ACCESSION AGREEMENT" means an agreement
                  substantially in the form of SCHEDULE 4 (Guarantor Accession
                  Agreement) to this Agreement made pursuant to clause 26.1
                  (Additional Guarantors) below;

10.1.82.          "HEDGING AGREEMENT" means any Interest Rate Hedging Agreements
                  and any Currency Hedging Agreements.

10.1.83.          "HEDGING TRANSACTIONS" means any Interest Rate Hedging
                  Transactions and any Currency Hedging Transactions;

10.1.84.          "HOLDING COMPANY" of a company or corporation means any
                  company or corporation of which the first-mentioned company or
                  corporation is a Subsidiary;

10.1.85.          "HTL" means Telecommunications Limited, a company incorporated
                  in Hong Kong under registered number 166461;

10.1.86.          "HTL GROUP" means HTL and its Subsidiaries;

10.1.87.          "HWL" means Hutchison Whampoa Limited, a company incorporated
                  in Hong Kong under registered number 054532;

10.1.88.          "HWL GROUP" means HWL and its Subsidiaries;

10.1.89.          "HWL HEDGING SUBSIDIARY" means any wholly owned Subsidiary of
                  HWL which may from time to time enter into Interest Rate
                  Hedging Transactions with Partner in accordance with clause
                  18.29(h) (Hedging Agreements) below;

10.1.90.          "IDB PERFORMANCE BOND" means the performance guarantee in the
                  maximum amount of NIS, equal, in accordance with the
                  representative rate of exchange of the US Dollar published by
                  the Bank of Israel, known on the date of actual payment, to
                  US $10,000,000 (ten million United States Dollars) issued or
                  to be issued by Israel Discount Bank Ltd. in favour of the
                  Ministry at the request of Partner;



                                      -19-


10.1.91.          "IDB PERFORMANCE BOND COUNTER INDEMNITY" means an agreement
                  entered into or to be entered into between Israel Discount
                  Bank Ltd. and Partner, pursuant to which Partner undertakes to
                  indemnify Israel Discount Bank Ltd. in respect of any amounts
                  payable under or in connection with the IDB Performance Bond;

10.1.92.          "INCREASED COSTS" shall bear the meaning ascribed thereto in
                  clause 12.1 (Increased Costs) below;

10.1.93.          "INDEBTEDNESS" means any obligation (whether incurred as
                  principal or as surety) for the payment or repayment of money,
                  whether present or future, actual or contingent;

10.1.94.          "INSTRUCTING GROUP" means: (a) prior to any acceleration
                  pursuant to clauses 17.25(c) (Acceleration) or (d) or clause
                  17.26 (Advances Due on Demand) below, but including with
                  respect to a decision to declare such acceleration, a
                  Participating Bank or group of Participating Banks whose
                  Commitments as at the Commencement Date amount in aggregate to
                  more than 67% (sixty-seven percent) of the aggregate
                  Commitments; and (b) after a decision to accelerate as
                  aforesaid, a Participating Bank or group of Participating
                  Banks whose Contributions amount in aggregate to more than 67%
                  (sixty-seven percent) of the aggregate Contributions;

10.1.95.          "INSURANCE ADVISER" means Sedgwick Limited acting through its
                  trading division Sedgwick Bankrisk;

10.1.96.          "INSURANCE REPORT" means the insurance report dated 8 July
                  1998 prepared by the Insurance Adviser addressed to Chase
                  Manhattan International Ltd. on behalf of the Banks and the
                  Arrangers (as such terms were defined in the Original Facility
                  Agreement);

10.1.97.          "INTELLECTUAL PROPERTY RIGHTS" means all know-how, patents,
                  trademarks, designs, trading names, copyrights and other
                  intellectual property rights (in each case whether registered
                  or not and including all applications for the same);

10.1.98.          "INTERCONNECTION AGREEMENT" means each bilateral
                  interconnection agreement to be entered into between Partner
                  and each of Bezeq and the other telecommunications operators
                  in Israel;

10.1.99.          "INTEREST" means:



                                      -20-


                     (a)    interest and amounts in the nature of interest
                            (including the interest element of finance leases,
                            Linkage Differentials and any similar payment in
                            respect of indexation in each case with respect to
                            such interest);

                     (b)    prepayment penalties or premiums incurred in
                            repaying or prepaying any Borrowing (including, for
                            the avoidance of doubt, amounts payable pursuant to
                            clause 19 (Broken Funding Indemnity) below));

                     (c)    discount fees and acceptance fees payable or
                            deducted in respect of any Borrowing (including all
                            commissions payable in connection with any letter of
                            credit); and

                     (d)    any net payment (or, if appropriate in the context,
                            receipt) under any interest rate hedging agreement
                            or instrument, taking into account any premiums
                            payable;



                                      -21-


10.1.100.         "INTEREST PAYMENT DATE" means the last day of an Interest
                  Period;

10.1.101.         "INTEREST PERIOD" means:

                  (i)   in relation to an Advance under Facility A, successive
                        periods of 3 (three) months, during the Availability
                        Period Facility A, and successive Quarters during the
                        period after the Availability Period Facility A;
                        provided that any Interest Period commencing before the
                        last day of the Availability Period Facility A shall end
                        no later than the last day of the Availability Period
                        Facility A;

                  (ii)  in relation to an Advance under Facility B, the period
                        commencing on the date of the making of such Advance and
                        ending on the date on which Interest of the type payable
                        on such Advance would be paid or capitalised in
                        accordance with the customary practice of the relevant
                        Participating Bank; and

                  (iii) in relation to an Advance under Facility C, successive
                        periods of 3 (three) months during the Availability
                        Period Facility C and successive Quarters during the
                        period after the Availability Period Facility C;
                        provided that any Interest Period commencing before the
                        last day of the Availability Period Facility C shall end
                        no later than the last day of the Availability Period
                        Facility C;

                  provided that:

                  (a)   each subsequent Interest Period shall commence on the
                        expiry of the previous one;

                  (b)   any Interest Period which would otherwise end on a
                        non-Business Day shall end on the preceding Business
                        Day;

                  (c)   an Interest Period for any Advance shall not extend
                        beyond: (A) the Repayment Date for such Advance; or (B)
                        the Termination Date applicable to its Facility; and

                  (d)   in relation to any sums due and payable but unpaid by an
                        Obligor under the Facility Documents, "INTEREST PERIOD"
                        shall mean each period determined in accordance with
                        clause 8.3.1 below;

10.1.102.         "INTEREST RATE HEDGE PROVIDER" means any counterparty to any
                  Interest Rate Hedging Agreement entered into by Partner;



                                      -22-


10.1.103.         "INTEREST RATE HEDGING AGREEMENT" means any agreement entered
                  into by Partner for the purposes of entering into one or more
                  Interest Rate Hedging Transactions;

10.1.104.         "INTEREST RATE HEDGING TRANSACTION" includes any rate swap
                  transaction, basis swap, forward rate transaction, commodity
                  swap, commodity option, equity or equity index swap, equity or
                  equity index option, interest rate option, cap transaction,
                  floor transaction, collar transaction or other similar
                  transaction (including any option with respect thereto and any
                  combination in respect thereof);

10.1.105.         "LATEST DRAWDOWN REQUEST DATE" means:

                  (a)   subject to paragraph (c) below, in respect of an Advance
                        denominated in NIS, the rate of Interest on which is
                        based on an on-call rate, prime rate or a fixed unlinked
                        rate: (i) for Advances, the aggregate amount of which
                        for any Participating Bank on any Drawdown Date does not
                        exceed the NIS equivalent of US $50,000,000 (fifty
                        million United States Dollars), the date falling 5
                        (five) Business Days prior to such Drawdown Date; and
                        (ii) for Advances, the aggregate amount of which for any
                        Participating Bank on any Drawdown Date equals or
                        exceeds the NIS equivalent of US $50,000,000
                        (fifty million United States Dollars), the date falling
                        10 (ten) Business Days prior to such Drawdown Date;

                  (b)   in respect of an Advance denominated in NIS, the rate of
                        Interest on which is based on a fixed linked rate
                        (including the Bond Rate): (i) for Advances, the
                        aggregate amount of which for any Participating Bank on
                        any Drawdown Date does not exceed the NIS equivalent of
                        US $25,000,000 (twenty-five million United States
                        Dollars), the date falling 5 (five) Business Days prior
                        to such Drawdown Date; (ii) for Advances, the aggregate
                        amount of which for any Participating Bank on any
                        Drawdown Date equals or exceeds the NIS equivalent of
                        US $25,000,000 (twenty-five million United States
                        Dollars) but does not exceed the NIS equivalent of US
                        $50,000,000 (fifty million United States Dollars), the
                        date falling 10 (ten) Business Days prior to such
                        Drawdown Date; and (iii) for Advances, the aggregate
                        amount of which for any Participating Bank on any
                        Drawdown Date exceeds the NIS equivalent of US
                        $50,000,000 (fifty million United States Dollars), the
                        date falling 20 (twenty) Business Days prior to such
                        Drawdown Date;



                                      -23-


                  (c)   in respect of an Advance under Facility B denominated in
                        NIS, the Interest rate on which is based on an on-call
                        rate or prime rate: (i) for Advances, the aggregate
                        amount of which for any Participating Bank on any
                        Drawdown Date does not exceed the NIS equivalent of US
                        $25,000,000 (twenty-five million United States Dollars),
                        such Drawdown Date; (ii) for Advances, the aggregate
                        amount of which for any Participating Bank on any
                        Drawdown Date equals or exceeds the NIS equivalent of US
                        $25,000,000 (twenty-five million United States Dollars),
                        the Business Day prior to such Drawdown Date;

                  (d)   in the case of an Advance denominated in US Dollars or
                        Euros:(i) for Advances, the aggregate amount of which
                        for any Participating Bank on any Drawdown Date does not
                        exceed the NIS equivalent of US $10,000,000 (ten million
                        United States Dollars), such Drawdown Date; (ii) for
                        Advances, the aggregate amount of which for any
                        Participating Bank on any Drawdown Date equals or
                        exceeds the NIS equivalent of US $10,000,000 (ten
                        million United States Dollars) but does not exceed the
                        NIS equivalent of US $25,000,000 (twenty-five million
                        United States Dollars), the date falling 3 (three)
                        Business Days prior to such Drawdown Date; (iii) for
                        Advances, the aggregate amount of which for any
                        Participating Bank on any Drawdown Date equals or
                        exceeds the NIS equivalent of US $25,000,000
                        (twenty-five million United States Dollars) but does not
                        exceed the NIS equivalent of US $50,000,000 (fifty
                        million United States Dollars), the date falling 5
                        (five) Business Days prior to such Drawdown Date; and
                        (iv) for Advances, the aggregate amount of which for any
                        Participating Bank on any Drawdown Date equals or
                        exceeds the NIS equivalent of US $50,000,000 (fifty
                        million United States Dollars), the date falling 10
                        (ten) Business Days prior to such Drawdown Date;

10.1.106.         "LIBOR" means, with respect to each Advance, the rate per
                  annum (rounded upward, if necessary, to the nearest whole
                  multiple of 1/8% (one-eight of one percent)) for Dollar
                  deposits or Euro deposits, as the case may be, for a period
                  equal to 1 (one) month, 3 (three) months, 6 (six) months or 1
                  (one) year (as selected by Partner in the Drawdown Request for
                  such Advance (provided that, the period selected as aforesaid
                  does not exceed the term of such Advance) offered in the
                  London Interbank market, as quoted at or about 11:00 a.m.
                  (London time) on the Business Day falling 2 (two) Business
                  Days prior to the Drawdown Date for such Advance and if the
                  period of LIBOR selected by Partner as aforesaid is shorter
                  than the term of such



                                      -24-


                  Advance, then also on the Business Day falling 2 (two)
                  Business Days prior to each 1 (one) month (in the case of
                  selection of a period of 1 (one) month) or, in other cases,
                  each subsequent Interest Period, falling within the term of
                  such Advance following expiry of each period selected by
                  Partner as aforesaid ("THE INTEREST DETERMINATION DATE") on
                  the display designated as page LIBOR 01  to
                  subscribers of the REUTERS service ("REUTERS") or, in the
                  absence of such page or pages, or if Reuters shall, for any
                  reason whatsoever, amend, change or otherwise alter the data
                  basis or the reference banks used by it on the date of
                  signature of this Agreement, for quotations under said page
                  LIBOR 01 , the rate of Interest as quoted at or about
                  11:00 a.m. London time on the relevant Interest Determination
                  Date on such other page or pages of Reuters as shall be
                  determined by an Instructing Group for a period equal to such
                  1 (one), 3 (three), 6 (six) or 12 (twelve) month period, as
                  the case may be (rounded upward, if necessary, to the nearest
                  whole multiple of 1/8% (one-eight of one percent));

10.1.107.         "LICENCE" means the Licence dated 7 April, 1998 (and
                  terminating on 1 February 2022) granted to Partner for
                  providing mobile radio telephone services using the cellular
                  method together with a permit to install and use equipment in
                  the network and frequency allocation as, without derogating
                  from clause 16.26 (Licence) below or any other provision
                  hereof, may be amended from time to time;

10.1.108.         "LINKAGE DIFFERENTIALS" means any amount to be added to the
                  principal of, or Interest in respect of, any Advance
                  denominated in NIS as a result of any increase in the Cost of
                  Living Index;

10.1.109.         "LOAN" means, at any time, the aggregate Dollar Amount of Loan
                  A, Loan B and Loan C for the time being outstanding hereunder
                  or any of them as the context so requires and "LOANS" shall be
                  construed to mean each of them respectively;

10.1.110.         "LOAN A" means at any time, the aggregate Dollar Amount for
                  the time being outstanding in relation to all Advances under
                  Facility A (including, for the removal of doubt, all Linkage
                  Differentials, if any, on such Advances);

10.1.111.         "LOAN B" means at any time, the aggregate Dollar Amount for
                  the time being outstanding in relation to all Advances under
                  Facility B (including, for the removal of doubt, all Linkage
                  Differentials, if any, on such Advances);



                                      -25-


10.1.112.         "LOAN C" means, at any time, the aggregate Dollar Amount for
                  the time being outstanding in relation to all Advances under
                  Facility C (including, for the removal of doubt, all Linkage
                  Differentials, if any, on such Advances);

10.1.113.         "MAINTENANCE AGREEMENT" means the system services contract
                  dated 29 May 1998 between Partner and Ericsson Radio Systems
                  A.B. as annexed to the Principal Supplier Contract;

10.1.114.         "MARGIN" means:

                  (A) with respect to Facility A and Facility B:

                        (a) in relation to the Availability Period Facility A,
                            0.9% (nought point nine percent) per annum;

                        (b) in relation to the period from the expiry of the
                            Availability Period Facility A until the date on
                            which all amounts owing under the Facilities have
                            been repaid, 0.9% (nought point nine percent) per
                            annum; provided that: (1) in the event that for any
                            one year Ratio Period: (I) each of the Facility Debt
                            Cover Ratio, Total Debt Cover Ratio, Fixed Charge
                            Coverage Ratio and ADSCR for such one year Ratio
                            Period equals at least 135% (one hundred and
                            thirty-five percent) of such minimum ratio required
                            for such one year Ratio Period pursuant to clause
                            16.32 below; and (II) by the end of such Ratio
                            Period, Partner shall have repaid (disregarding, for
                            this purpose, any amount which has been repaid or
                            prepaid and is capable of being reborrowed under the
                            terms of this Agreement) to the Participating Banks
                            on account of the Facilities, an amount equal to at
                            least 50% (fifty percent) of the Total Commitments,
                            then, for the period from the Interest Payment Date
                            following receipt by the Participating Banks of the
                            Accounts for such year and confirmation by the
                            Coordinating Agent to Partner that the Margin may be
                            reduced in the manner set out in this subclause (A)
                            below until the date of publication of the Accounts
                            for the next succeeding one year Ratio Period only,
                            the Margin shall be 0.7% (nought point seven
                            percent); and (2) in the event that for any one year
                            Ratio Period: (I) each of the Facility Debt Cover
                            Ratio, Total Debt Cover Ratio, Fixed Charge Coverage
                            Ratio and ADSCR for such one year Ratio Period
                            equals at least 175% (one hundred and seventy-five



                                      -26-


                            percent) of such minimum ratio required for such one
                            year Ratio Period pursuant to clause 16.32 below;
                            and (II) by the end of such Ratio Period, Partner
                            shall have repaid (disregarding, for this purpose,
                            any amount which has been repaid or prepaid and is
                            capable of being reborrowed under the terms of this
                            Agreement) to the Participating Banks on account of
                            the Facilities, an amount equal to at least 50%
                            (fifty percent) of the Total Commitments, then, for
                            the period from the Interest Payment Date following
                            receipt by the Participating Banks of the Accounts
                            for such year and confirmation by the Coordinating
                            Agent to Partner that the Margin may be reduced in
                            the manner set out in this subclause (A) below until
                            the date of publication of the Accounts for the next
                            succeeding one year Ratio Period only, the Margin
                            shall be 0.45% (nought point four five percent).







                                      -27-


                            Provided that:

                            (i)    if and for so long as an Event of Default
                                   (including the non-payment of any amount when
                                   due) has occurred and is continuing, the
                                   Margin during such period shall be 2.9% (two
                                   point nine) percent per annum; provided that,
                                   if such Event of Default does not relate to
                                   non-payment of any amount when due and the
                                   Participating Banks waive their rights to
                                   declare the Advances due and payable as a
                                   result of such Event of Default, the Margin,
                                   for so long as such Event of Default is
                                   continuing, shall be 1.9% (one point nine
                                   percent) per annum;

                            (ii)   for the removal of doubt, the Margin may
                                   increase and decrease in accordance with the
                                   above; and

                            (iii)  with regard to the Margin for the one year
                                   Ratio Period of 2007 and, thereafter, the
                                   Margin shall not be decreased unless it shall
                                   have been decreased for the one year Ratio
                                   Period of 2006.

                            The Coordinating Agent shall, within 10 (ten)
                            Business Days after receipt by it from Partner of
                            the Accounts for any one year Ratio Period, together
                            with all information required to determine the
                            ratios referred to above, deliver to Partner, with a
                            copy to the Participating Banks, a notice confirming
                            that the Margin shall be decreased, increased or
                            remain constant, all in accordance with (b) above;
                            provided that, if it transpires after delivery of
                            confirmation by the Coordinating Agent as aforesaid
                            that the Margin as specified in such confirmation is
                            in fact incorrect, then the correct Margin (as
                            determined in accordance with (b) above) shall be
                            applied retroactively with effect from the first
                            Interest Payment Date in respect of which the
                            correct Margin should have been applicable in
                            accordance with (b) above and each of the
                            Participating Banks shall reimburse Partner or, as
                            the case may be, Partner shall pay any shortfall to
                            each of the Participating Banks, resulting from such
                            incorrect Margin as aforesaid;




                                      -28-



                  and

                  (B)   with respect to Facility C, 1.25% (one point two five
                        percent) per annum; provided that, if and for so long as
                        an Event of Default (including the non-payment of any
                        amount when due) has occurred and is continuing, the
                        Margin during such period shall be 3.25% (three point
                        two five percent) per annum; provided further that, if
                        such Event of Default does not relate to non-payment of
                        any amount when due and the Participating Banks waive
                        their rights to declare the Advances due and payable as
                        a result of such Event of Default, the Margin, for so
                        long as such Event of Default is continuing, shall be
                        2.25% (two point two five percent) per annum;

10.1.115.         "MATAV" means Matav-Cable Systems Media Limited, a company
                  incorporated in Israel with registered number 52-004007-2;

10.1.116.         "MATERIAL ADVERSE EFFECT" means any effect which is or is
                  likely to be materially adverse to:

                  (a)   the business or financial condition of the Group taken
                        as a whole; or

                  (b)   the ability of any Obligor to perform its obligations in
                        any material respect under any of the Facility
                        Documents;

10.1.117.         "MATERIAL CONTRACTS" means those Material Contracts set out in
                  SCHEDULE 5 (Material Contracts) hereto;

10.1.118.         "MINISTRY" means the Ministry of Communications of the Israeli
                  Government;

10.1.119.         "NET PROCEEDS" means the aggregate value of consideration
                  received by any Obligor or Obligors in respect of a sale,
                  transfer, loan or other disposal of assets (including shares
                  in other Group members) from an Obligor to any third party
                  which is not an Obligor after deduction of:

                  (a)   all amounts paid or provided for or on account of
                        Taxes applicable to, or to any gain resulting from, the
                        disposal or the discharge of any liability secured on
                        the relevant assets; and

                  (b)   all costs, fees, expenses and the like properly incurred
                        by continuing members of the Group in arranging and
                        effecting that disposal;



                                      -29-


10.1.120.         "NETWORK" means any network operated by the Group and operated
                  or run by it pursuant to the Licence (including all apparatus,
                  equipment and telecommunication systems of every description
                  which it is authorised to operate or run under the Licence);

10.1.121.         "NUMBER OF SUBSCRIBERS" means, for any Ratio Period, the
                  actual number of Partner subscribers as at the last day of
                  such Ratio Period (for the removal of doubt, disregarding any
                  subscriber which shall have ceased to be a subscriber prior to
                  the end of such Ratio Period), as certified in writing by the
                  Auditors;

10.1.122.         "OBLIGOR" means Partner and each Guarantor;

10.1.123.         "ORIGINAL DOLLAR AMOUNT" means, in relation to:

                  (a)   an Advance denominated in US Dollars, the amount thereof
                        as at the date of the making of such Advance; and

                  (b)   an Advance denominated in NIS or Euros, the Dollar
                        equivalent thereof as at the date of the making of such
                        Advance;

10.1.124.         "ORIGINAL FACILITY AGREEMENT" means the Facility Agreement
                  dated 13 August 1998 (as amended and restated by an Amendment
                  and Waiver Letter dated 21 October 1999 and by a letter dated
                  20 June 2000, but not by the Amending and Rescheduling
                  Agreement or any subsequent amendment) between, inter alia,
                  Partner and the Banks;

10.1.125.         "PARTICIPATING BANKS" means:

                  (a)   BLL, Israel Discount Bank Ltd., Bank Hapoalim, The First
                        International Bank of Israel Ltd., United Mizrahi Bank
                        Ltd. Mercantile Discount Bank Ltd. and Citibank N.A.;
                        and

                  (b)   any financial institution which has become a party to
                        this Agreement in accordance with the provisions of this
                        Agreement

                  (in each case, other than one which has ceased to be a party
                  to this Agreement in accordance with the terms hereof and the
                  term "PARTICIPATING BANK" shall mean any of them) and any
                  reference to a "Participating Bank" shall, unless the context
                  otherwise requires, be deemed to include reference to such
                  Participating Bank, in its capacity as a Secured Interest Rate
                  Hedge Provider and, in the case of Israel



                                      -30-


                  Discount Bank Ltd., as the Counterparty to the IDB Performance
                  Bond Counter Indemnity;

10.1.126.         "PERMITTED BORROWING" means:

                  (a)   Borrowing arising pursuant to the Facility Documents;

                  (b)   Permitted Loan Capital;

                  (c)   Borrowing or otherwise incurring Indebtedness by Partner
                        from banks and/or other financial institutions of up to
                        US $50,000,000 (fifty million United States Dollars),
                        otherwise than as permitted pursuant to paragraphs (a),
                        (b), (d)-(f) (inclusive) in respect of loans and
                        credits, performance guarantees and letters of credit;
                        provided that, the aggregate amount of such loans and
                        credits do not exceed US $25,000,000 (twenty-five
                        million United States Dollars) or its equivalent at any
                        time;

                  (d)   Borrowing arising pursuant to Hedging Transactions
                        permitted pursuant to this Agreement;

                  (e)   Borrowing created or subsisting with the prior written
                        consent of an Instructing Group; and

                  (f)   Borrowing arising pursuant to the IDB Performance Bond
                        Counter Indemnity;

                  provided that, with respect to Borrowings referred to in
                  paragraphs (c), (d) (other than with respect to Borrowings
                  pursuant to Interest Rate Hedging Agreements with



                                      -31-


                  counterparties which are Participating Banks and are thus
                  secured under the Security Documents) and (e) above:

                  (i)   all such Borrowings received from any of the
                        Participating Banks shall be subordinated to the
                        Facilities as to collateral but may be secured by way of
                        second ranking collateral over those assets secured by
                        the Security Documents (ranking subordinate to the
                        rights of the Participating Banks, Israel Discount Bank
                        Ltd. (in respect of Borrowing arising pursuant to the
                        IDB Performance Bond Counter Indemnity) and the Security
                        Trustee in respect of the collateral created pursuant to
                        the Security Documents); and

                  (ii)  Borrowings as aforesaid received from any source other
                        than from a Participating Bank shall not be secured by
                        any collateral whatsoever;

                  (iii) no payment shall be made in respect of Borrowings
                        referred to in paragraphs (c) (other than with respect
                        to performance guarantees and letters of credit) and (e)
                        above unless the conditions referred to in (b), (c), (d)
                        and (f) of clause 16.14 (Restricted Distribution) below
                        (provided that, for this purpose, the words "Potential
                        Event of Default" shall be deleted from (f) of the
                        definition of "Permitted Distribution" in clause 16.14
                        (Restricted Distribution) below) are fulfilled, it being
                        agreed that any such payment, for the purpose hereof, is
                        deemed to be a distribution for the purpose of clause
                        16.14 (Restricted Distribution) below; and

                  (iv)  Partner shall notify all providers of such Borrowings of
                        the subordination conditions referred to in paragraphs
                        (i) to (iii) (inclusive) above;

10.1.127.         "PERMITTED DISPOSALS" means:

                  (a)   disposals in the ordinary course of business on or on
                        terms no less favourable to the Group than arm's-length
                        terms;

                  (b)   disposals of assets in exchange for or for investment in
                        other assets performing substantially the same function
                        which are comparable or superior as to type, value and
                        quality;

                  (c)   (i) disposals of shares of a Subsidiary on arm's length
                            terms where the business of that Subsidiary is not
                            carried on



                                      -32-


                            pursuant to the Licence or required for the
                            efficient operation of the business of an Obligor
                            and such business has been, or is in the process of
                            being, terminated;

                        (ii)disposals of surplus, obsolete or redundant plant
                            and equipment or other assets, or of land or
                            buildings in connection with the termination of any
                            business or operation not carried on pursuant to the
                            Licence or not required for the efficient operation
                            of its business, in each case on arm's length terms;

                  (d)   the expenditure of cash in payment for assets or
                        services acquired on arm's length terms in the course of
                        its business carried on in compliance with the terms of
                        the Facility Documents;

                  (e)   the payment of Permitted Distributions in compliance
                        with the Facility Documents;

                  (f)   the disposal of Intellectual Property Rights, in
                        compliance with clause 16.16 (Intellectual Property
                        Rights) below;

                  (g)   disposals in connection with sale and leaseback
                        transactions permitted by clause 16.7 (Sale and
                        Leaseback) below;

                  (h)   disposal of assets on arm's length terms not otherwise
                        permitted pursuant to (a) to (g) (inclusive), the Net
                        Proceeds of which aggregated with the Net Proceeds of
                        all other such disposals in any annual Accounting Period
                        do not exceed US $3,000,000 (three million United States
                        Dollars) or its equivalent; or

                  (i)   any other disposal with the prior written consent of the
                        Facility Agent (acting on the instructions of an
                        Instructing Group);

10.1.128.         "PERMITTED DISTRIBUTIONS" shall bear the meaning assigned to
                  such term in clause 16.14 (Restricted Distributions) below;

10.1.129.         "PERMITTED ENCUMBRANCES" means any Encumbrance:

                  (a)   constituted or evidenced by the Security Documents;

                  (b)   arising by operation of law in the ordinary course of
                        business;



                                      -33-


                     (c)    over goods and documents of title to goods arising
                            in the ordinary course of letter of credit
                            transactions entered into in the ordinary course of
                            trade and not prohibited under the Facility
                            Documents;

                     (d)    existing at the time of acquisition on or over any
                            asset acquired by it in the ordinary course of
                            business on arm's length terms after the Effective
                            Date, where such Encumbrance was not created in
                            contemplation of, or in connection with, the
                            acquisition, provided always that the amount secured
                            by such Encumbrance: (i) if a Borrowing, is a
                            Permitted Borrowing; and (ii) shall not increase
                            after the date of acquisition;

                     (e)    constituting operating leases or hire purchase
                            arrangements affecting assets of any Obligor as
                            permitted by the Facility Documents;

                     (f)    rising by way of rights of set-off arising by
                            operation of law;

                     (g)    arising in relation to the netting of bank account
                            balances;

                     (h)    arising by way of any retention of title of goods
                            supplied where such retention is agreed in the
                            ordinary course of its business;

                     (i)    created (other than by way of a floating charge)
                            over specific assets or rights otherwise than
                            pursuant to paragraphs (a) to (h) above (inclusive)
                            securing Borrowings not exceeding an aggregate
                            amount of US $1,000,000 (one million United States
                            Dollars) (or its equivalent in other currencies);

                     (j)    created, to the extent permitted, under paragraph
                            (i) of the definition of "Permitted Borrowings" as
                            referred to in clause 1.1.126 above;

10.1.130.            "PERMITTED INVESTMENTS" means investments in the following:

                     (a)    a demand or time deposit of any Participating Bank
                            or any other depositary institution or trust company
                            whose short term unsecured obligations are rated at
                            least "A1" by Standard & Poor's ("S&P") or at least
                            "P1" by Moody's Investors Service Inc. ("MOODY'S");



                                      -34-


                     (b)    commercial paper issued by any Participating Bank or
                            rated on the date of acquisition thereof at least
                            "A1" by S&P or at least "P1" by Moody's;

                     (c)    bonds, notes and/or securities issued or guaranteed
                            by either the Government of Israel or the Government
                            of the United States of America;

                     provided that, any investment made pursuant to paragraphs
                     (a) and (b) above:

                     (i)    in or guaranteed by a single bank or other body
                            corporate in excess of US $20,000,000 (twenty
                            million United States Dollars) shall not be
                            permitted provided that this paragraph (i) shall not
                            apply to deposits; and

                     (ii)   shall be denominated in either NIS or US Dollars;

10.1.131.            "PERMITTED LOAN CAPITAL" means the aggregate amount of
                     Shareholder Loans and debentures (including, notes and
                     other similar debt instruments) issued privately or
                     publicly by Partner, all subject to the following
                     conditions:

                     (a)    such Shareholder Loans and debentures shall be
                            subordinated to the rights of the Participating
                            Banks under the Facilities and to the rights of the
                            Participating Banks with respect to Borrowings
                            referred to in clause 1.1.126(c), (d), (e) and (f),
                            with respect to principal, Interest and all other
                            amounts payable under this Agreement, such
                            subordination, in the case of the debentures, to be
                            on terms and conditions satisfactory to an
                            Instructing Group and, in the case of the
                            Shareholder Loans, to be on the terms and conditions
                            set out in SCHEDULE 6 (Shareholder Loans) hereto;

                     (b)    the aggregate maximum Dollar amount (or if not
                            denominated in US Dollars, the Dollar equivalent
                            thereof (from time to time)) of such debentures
                            shall at no time exceed US $300,000,000 (three
                            hundred million United States Dollars);

                     (c)    the terms and conditions of such debentures
                            (including relating to covenants) shall be subject
                            to the prior written approval of an Instructing
                            Group, given through the Facility Agent. The
                            Participating Banks shall be entitled to withhold
                            their approval of any such terms and conditions in
                            their sole discretion, provided that, if an
                            Instructing Group is reasonably satisfied that



                                      -35-


                            all of the restrictions imposed on Partner under the
                            proposed terms and conditions of such debentures are
                            less harsh to Partner than those applying under this
                            Agreement and the subordination of such debentures
                            is on terms and conditions satisfactory to an
                            Instructing Group as referred to in (a) above, then
                            the Participating Banks shall, subject to compliance
                            with the other provisions of this clause 1.1.131,
                            consent thereto. The Participating Banks shall,
                            within 10 (ten) Business Days of receipt of
                            documentation relating to the debentures as
                            aforesaid, which includes all the terms and
                            conditions of such debentures, respond to a request
                            from Partner for approval of such terms and
                            conditions;

                     (d)    such Shareholder Loans and debentures shall:

                            (i) not contain any financial covenants, save for a
                                covenant enabling Partner to incur additional
                                indebtedness under such Shareholder Loans and
                                debentures (subject at all times to the maximum
                                amount specified in (b) above and, for the
                                removal of doubt, subject at all times to the
                                provisions of this Agreement restricting the
                                ability of Partner to incur Indebtedness), in
                                the event that the ratio of Partner's aggregate
                                Indebtedness to its consolidated EBITDA for its
                                most recent 4 (four) fiscal Quarters or for its
                                most recent 2 (two) fiscal Quarters (annualised)
                                meets the minimum ratio specified in such
                                Shareholder Loans or debentures; and

                            (ii)provide that if an event of default shall occur
                                under such debentures, no amount shall be
                                payable by Partner under the debentures until
                                such time as all amounts owing by Partner under
                                the Facilities have been paid in full;

                     (e)    save by way of Permitted Distribution, no repayment
                            of whatsoever nature on account of Interest or
                            principal of any such Shareholder Loans or principal
                            of any such debentures shall be made prior to full
                            payment of all amounts owing by Partner under the
                            Facilities and of all amounts owing to the
                            Participating Banks with respect to Borrowings
                            referred to in clause 1.1.126(c), (d), (e) and (f);

                     (f)    immediately following issue of any such debentures
                            and thereafter from time to time, Partner shall
                            deduct from the proceeds of each such debentures and
                            deposit in an account



                                      -36-


                            ("THE RESERVE ACCOUNT") with one of the
                            Participating Banks, duly pledged in favour of the
                            Security Trustee (as trustee for itself and the
                            Secured Creditors pursuant to the Debenture), as
                            security for payment of all amounts under the
                            Facilities, such amounts so that at all times the
                            Reserve Account contains an aggregate amount equal
                            to scheduled Interest payments in respect of such
                            debentures for the immediately following 12 (twelve)
                            month period, all the aforegoing until the earlier
                            of: (i) 31 December 2003; or (ii) the date of
                            receipt by the Participating Banks of Accounts for
                            the first one year Ratio Period (if any) in respect
                            of which all the conditions have been met for
                            reducing the Margin with respect to Facility A and
                            Facility B to 0.45% (nought point four five percent)
                            per annum, in accordance with clause 1.1.114(A)(b)
                            above; and

                     (g)    any such Shareholder Loans shall be subordinated to
                            any such debentures as aforesaid in this clause
                            1.1.131, on terms and conditions satisfactory to an
                            Instructing Group;

10.1.132.            "PERMITTED SOURCES" means Permitted Borrowings referred to
                     in paragraphs (b), (c) and (e) of the definition of
                     "Permitted Borrowings", the proceeds from the issue by
                     Partner of share capital and Excess Cash Flow;

10.1.133.            "POTENTIAL EVENT OF DEFAULT" means any event which would
                     (but for the passage of time, the giving of notice, the
                     making of any determination hereunder or any combination
                     thereof in each case as specified in clause 17 (Default)
                     below) be an Event of Default;

10.1.134.            "PRINCIPAL SUPPLIER CONTRACT" means the turnkey contract
                     between Partner and Ericsson Radio Systems A.B. dated 29
                     May 1998 for the provision of the transmission and
                     switching equipment, cell site construction and value added
                     services platform and including, for the avoidance of
                     doubt, the terms and conditions of civil works annexed
                     thereto;

10.1.135.            "PROPORTION" means, in relation to a Participating Bank at
                     any time, the proportion borne by its Contribution to the
                     aggregate Contributions outstanding at such time or, as the
                     case may be, its Contribution with respect to Facility A,
                     Facility B or Facility C, as the context requires, to the
                     aggregate Contributions under Facility A, Facility B or
                     Facility C at such time;



                                      -37-


10.1.136.            "QUARTER" means each period commencing on the day after a
                     Quarter Day and ending on the next following Quarter Day;

10.1.137.            "QUARTER DAY" means 31 March, 30 June, 30 September and 31
                     December in any year and "QUARTER DAY" means any of them;

10.1.138.            "RATIO PERIOD" means: (i) each period of 6 (six) calendar
                     months ending on June 30, during the period of this
                     Agreement; and (ii) each period of 1 (one) calendar year
                     during the period of this Agreement; the periods referred
                     to in (i) are also referred to as "SIX MONTH RATIO PERIODS"
                     and the periods referred to in (ii) are also referred to as
                     "ONE YEAR RATIO PERIODS";

10.1.139.            "REPAYMENT DATE" means in relation to an Advance, the date
                     on which the Duration Period for such Advance expires;

10.1.140.            "REPRESENTATIVE RATE" means, with respect to any currency
                     other than NIS, the representative rate of exchange of the
                     NIS and such currency, last published by the Bank of Israel
                     immediately prior to the relevant date of payment or
                     calculation (as the case may be) and, if the Bank of Israel
                     shall cease to publish a representative rate, then any
                     other rate of exchange of the NIS and such currency,
                     officially published which comes in place of such
                     representative rate, last published immediately prior to
                     the relevant date of payment or calculation (as the case
                     may be) and in the absence of any such official rate, then
                     the average of the selling and buying rates of exchange of
                     such currency, for NIS (for cheques and remittances)
                     prevailing at the Facility Agent at the end of the last
                     Business Day prior to the relevant date of payment or
                     calculation (as the case may be);

10.1.141.            "RESERVATIONS" means the reservations set out in SCHEDULE 7
                     (Reservations);

10.1.142.            "RESERVE ACCOUNT" shall have the meaning ascribed to such
                     term in clause 1.1.131(f) above;

10.1.143.            "RESTRICTED PERSON" means:

                     (a)    the Shareholders, any Affiliate of a Shareholder or
                            any partnership in which any of the Shareholders or
                            any of their Affiliates is a partner (either
                            directly or through any intermediate partnerships);
                            or



                                      -38-


                     (b)    any person of which a Shareholder is an Affiliate or
                            any partnership in which any such person is a
                            partner (either directly or through intermediate
                            partnerships); or

                     (c)    any Subordinated Creditor or any Affiliate of a
                            Subordinated Creditor or any partnership in which a
                            Subordinated Creditor or any of their Affiliates is
                            a partner (either directly or through any
                            intermediate partnerships);

10.1.144.            "RESTRICTED PURCHASE" means any payment (whether in cash,
                     property, securities or otherwise) on account of the
                     purchase, redemption, reduction or other acquisition or
                     retirement of any of the share capital of any member of the
                     Group not held by a member of the Group;

10.1.145.            "SAC" means, for any Ratio Period, Partner's subscriber
                     acquisition costs paid or accrued during such Ratio Period,
                     being the sum of: (i) the costs paid or accrued during such
                     Ratio Period of acquisition by Partner of handsets and
                     accessories, less revenues received or receivable by
                     Partner during such Ratio Period from the sale of such
                     handsets and accessories; (ii) dealers' commissions and
                     other payments of a similar nature paid or accrued during
                     such Ratio Period in respect of the sale of handsets and
                     accessories; and (iii) preparation and distribution costs
                     paid or accrued during such Ratio Period for handsets and
                     accessories;

10.1.146.            "SECURED CREDITORS" means the Security Trustee, the
                     Facility Agent, the Coordinating Agent, the Participating
                     Banks, the Arranger, Israel Discount Bank Ltd. (in respect
                     of the IDB Performance Bond Counter Indemnity), any Secured
                     Interest Rate Hedge Provider and any other persons who
                     shall have acceded to the Security Trust Deed (other than a
                     party which has ceased to be a party thereto in accordance
                     with the terms of the Security Trust Deed);

10.1.147.            "SECURED INTEREST RATE HEDGE PROVIDER" shall bear the
                     meaning assigned to such term in clause 16.29(d) (Hedging
                     Agreements) below;

10.1.148.            "SECURED INTEREST RATE HEDGING AGREEMENT" means each
                     Interest Rate Hedging Agreement where the counterparty is a
                     Participating Bank;



                                      -39-


10.1.149.            "SECURITY DOCUMENTS" means those documents listed in
                     paragraphs (a)-(f), or contemplated by paragraph (g), of
                     SCHEDULE 8 (Security Documents);

10.1.150.            "SECURITY TRUST DEED" means the security trust and
                     intercreditor agreement dated 18 August 1998;

10.1.151.            "SHAREHOLDER LOANS" means the aggregate amount of
                     subordinated debt made available by way of loans from the
                     Shareholders (or any Affiliate thereof) from time to time
                     to Partner, which loans, in each case, are subordinated in
                     accordance with the provisions of Schedule 6 (Shareholder
                     Loans) hereto;

10.1.152.            "SHAREHOLDERS" means the shareholders in Partner listed in
                     SCHEDULE 9 (Principal Shareholders in Partner) hereto or
                     their permitted successors or assigns (as permitted
                     pursuant to the terms of the Facility Documents);

10.1.153.            "SHAREHOLDERS AGREEMENT" means the relationship agreement
                     between the shareholders of Partner dated 10 October, 1999;

10.1.154.            "SHARE PLEDGES" means the pledges over shares and
                     Shareholder Loans granted by each of the Shareholders in
                     favour of the Security Trustee prior to the Commencement
                     Date, together with any other pledge given by any
                     Shareholder or any Affiliate at any time in favour of the
                     Security Trustee pursuant to the terms of any Facility
                     Document and "SHARE PLEDGE" means any of them;

10.1.155.            "STRATEGIC INVESTOR" shall bear the meaning ascribed to
                     such term in clause 16.15 (Share Capital) below;

10.1.156.            "SUBORDINATED CREDITOR" means any provider of Subordinated
                     Debt;

10.1.157.            "SUBORDINATED DEBT" means Borrowing made available by any
                     person (other than Shareholders or their respective
                     Affiliates) from time to time to any Obligor which is
                     subordinated to the Facilities and all other obligations
                     secured under the Security Documents on terms and
                     conditions reasonably satisfactory to the Facility Agent
                     (acting on the instructions of an Instructing Group)
                     (including (if necessary) any consequential amendments
                     approved by an Instructing Group to the financial ratios
                     and covenants set out in this Agreement occasioned by the
                     nature of such Subordinated Debt) other than Shareholder
                     Loans;



                                      -40-


10.1.158.            "SUBSIDIARY" of a company or corporation means any company
                     or corporation:

                     (a)   which is controlled, directly or indirectly, by the
                           first-mentioned company or corporation;

                     (b)   at least half the issued share capital of which is
                           beneficially owned, directly or indirectly, by the
                           first-mentioned company or corporation; or

                     (c)   which is a Subsidiary of another Subsidiary of the
                           first-mentioned company or corporation

                     and, for these purposes, a company or corporation shall be
                     treated as being controlled by another if that other
                     company or corporation is able to direct its affairs and/or
                     to control the composition of its board of directors or
                     equivalent body;

10.1.159.            "SUPPLIER CONTRACTS" means the Principal Supplier
                     Contract and the Maintenance Agreement and "SUPPLIER
                     CONTRACT" means any of them;

10.1.160.            "TAX ON OVERALL NET INCOME" of a person shall be construed
                     as a reference to Tax (other than Tax deducted or withheld
                     from any payment) imposed on that person by any
                     jurisdiction on:

                     (a)   the net income, profits or gains of that person
                           worldwide; or

                     (b)   such of its income, profits or gains as arise in or
                           relate to the jurisdiction in which it is resident or
                           in which its principal office (and/or its Facility
                           Office) is located;

10.1.161.            "TAXES" means all income and other taxes and levies,
                     imposts, duties, charges, deductions and withholdings in
                     the nature or on account of tax together with interest
                     thereon and penalties and fees with respect thereto, if
                     any, and any payments made on or in respect thereof, and
                     "TAX" and "TAXATION" shall be construed accordingly;

10.1.162.            "TELECOMMUNICATIONS LAWS" means the Telecommunications Law
                     1982 of Israel (as amended) and all other Israeli laws,
                     statutes, regulations and judgments and all other laws
                     having effect in Israel relating to telecommunications
                     applicable to Partner and/or the business carried on by
                     Partner;



                                      -41-



10.1.163.            "TERMINATION DATE" means: (a) in relation to Facility A,
                     the Facility A Maturity Date or, if earlier, the date upon
                     which the Available Facility A Commitment for each of the
                     Participating Banks is cancelled in full or reduced to
                     zero; (b) in relation to Facility B, 30 June 2008 or, if
                     earlier, the date upon which the Available Facility B
                     Commitment for each of the Participating Banks is cancelled
                     in full or reduced to zero; and (c) in relation to Facility
                     C, the Facility C Maturity Date or, if earlier, the date
                     upon which the Available Facility C Commitment for each of
                     the Participating Banks is cancelled in full or reduced to
                     zero;

10.1.164.            "TOTAL COMMITMENTS" means the aggregate Commitments of all
                     the Participating Banks for all the Facilities;




                                      -42-



10.1.165.            "TOTAL DEBT" means, for any Ratio Period, the sum of:

                     (i)   the sum of the aggregate Contributions and
                           outstanding Interest under the Facilities, both as at
                           the last day of the Ratio Period;

                     (ii)  the excess (if any) of supplier's credit over
                           current assets, as appearing in the Accounts for
                           such Ratio Period. For the removal of doubt, nothing
                           herein contained shall derogate from the provisions
                           of this Agreement prohibiting Borrowing, other than
                           Permitted Borrowing; and

                     (iii) the balance on the last day of the Ratio Period of:
                           (a) all Permitted Borrowings (other than as referred
                           to in clause 1.1.126(d) above and other than
                           Shareholder Loans (including, for the avoidance of
                           doubt, any Linkage Differentials in respect of such
                           balance)) and any Interest or other amounts payable
                           on account of such Permitted Borrowings, all or any
                           part of the principal of which Permitted Borrowings
                           is payable or repayable by Partner prior to the date
                           by which the Facilities shall have been repaid in
                           full pursuant to clause 5 (Repayment) below; and (b)
                           that amount of the principal of all Shareholder
                           Loans (including, for the avoidance of doubt, any
                           Linkage Differentials in respect of such amount)
                           which is payable or repayable by Partner prior to
                           the date by which the Facilities shall have been
                           repaid in full pursuant to clause 5 (Repayment)
                           below and any Interest or other amounts payable on
                           account of such Shareholder Loans; all the above as
                           set out in the Accounts in respect of such Ratio
                           Period to be delivered pursuant to the provisions of
                           this Agreement.

10.1.166.            "TOTAL DEBT COVER RATIO" means in relation to each Ratio
                     Period, EBITDA after SAC for such Ratio Period, divided by
                     Total Debt;

10.1.167.            "TRANSFER CERTIFICATE" means a certificate substantially in
                     the form set out in SCHEDULE 10 (Transfer Certificate)
                     signed by a Participating Bank and a Transferee whereby:

                     (a)   such Participating Bank seeks to procure the transfer
                           to such Transferee of all or a part of such
                           Participating Bank's rights, benefits and obligations
                           hereunder as contemplated in clause 27.3 (Assignments
                           and Transfers by Participating Banks) below; and



                                      -43-


                     (b)   such Transferee undertakes to perform the
                           obligations it will assume as a result of delivery
                           of such certificate to the Facility Agent as is
                           contemplated in clause 27.5 (Transfers by
                           Participating Banks) below;

10.1.168.            "TRANSFER DATE" means, in relation to any Transfer
                     Certificate, the date for the making of the transfer as
                     specified in the schedule to such Transfer Certificate;

10.1.169.            "TRANSFEREE" means a bank or other financial institution to
                     which a Participating Bank seeks to transfer all or part of
                     such Participating Bank's rights, benefits and obligations
                     hereunder and under the Facility Documents;

10.1.170.            "UNUTILISED CASH ACCOUNT" means each account opened by
                     Partner for the purpose of payments contemplated under the
                     2.7 Letter; provided that, Partner shall maintain a
                     separate Unutilised Cash Account in relation to each
                     Shareholder, and "RELEVANT UNUTILISED CASH ACCOUNT" shall
                     be construed accordingly;

10.1.171.            "VENTURE SUBSIDIARY" shall bear the meaning ascribed to
                     such term in clause 16.15 (Share Capital) below.

10.2.         ACCOUNTS

10.2.1.              All accounting expressions which are not otherwise defined
                     herein shall be construed in accordance with the Applicable
                     Accounting Principles.

10.2.2.              Each of "ADSCR", "CAPITAL EXPENDITURE", "DEBT SERVICE",
                     "EBITDA AFTER SAC", "EXCESS CASH FLOW", "FACILITY DEBT
                     COVER RATIO", "FIXED CHARGE COVERAGE RATIO", "FINANCIAL
                     COSTS", "INTEREST", "SAC", "TOTAL DEBT" and "TOTAL DEBT
                     COVER RATIO" for any Ratio Period, shall be determined from
                     the non-consolidated Accounts of Partner for the period of
                     6 (six) months or 1 (one) year, as the case may be, ending
                     on the last day of such Ratio Period and delivered pursuant
                     to this Agreement (adjusted to the extent necessary to
                     determine compliance with clause 16.32 (Financial
                     Undertakings) below), or if not included in the Accounts,
                     shall be determined from a certificate signed by the
                     Auditors delivered to the Participating Banks together with
                     the Accounts. Without limiting the generality of the
                     aforegoing, Partner shall procure that the Accounts shall
                     include notes detailing all defined terms referred to above
                     and all elements of such terms, to the extent not
                     customarily detailed in the Accounts,



                                      -44-


                     including: (i) all expenses which have been capitalised;
                     (ii) all Interest scheduled to be paid during the relevant
                     Ratio Period to which such Accounts relate; (iii) all
                     scheduled repayments of principal of Borrowings; (iv)
                     supplier's credit; and (v) those Taxes paid during the
                     relevant Ratio Period and reserves made for Taxes but not
                     paid during such Ratio Period (without derogating from any
                     rights the Participating Banks may have arising from the
                     failure to comply with the aforegoing, in the event that
                     the Auditors fail to distinguish in a set of such Accounts
                     between Taxes paid and reserves for Taxes not paid during a
                     Ratio Period, then, for the purposes of any calculation to
                     be made in connection with clause 16.32 (Financial
                     Undertakings) below, all Taxes referred to in any such
                     Accounts shall be deemed to have been paid during the Ratio
                     Period in respect of which such Accounts were prepared).
                     All of the terms referred to in this clause 1.2.2 shall be
                     expressed in NIS (and if stated in another currency, the
                     equivalent thereof in NIS) unless the context otherwise
                     requires.

10.3.         INTERPRETATION

              Any reference in this Agreement to:

10.3.1.              the "EQUIVALENT" on any given date in one currency (the
                     "FIRST CURRENCY") of an amount denominated in another
                     currency (the "SECOND CURRENCY") means the amount of the
                     first currency which could be purchased with the amount of
                     the second currency at: (i) in the case that one of the two
                     relevant currencies is NIS, the Representative Rate for the
                     other currency; or (ii) in the case that neither of the
                     relevant currencies is NIS, the rate equal to a fraction,
                     the numerator of which is the Representative Rate of the
                     second currency and the denominator of which is the
                     Representative Rate of the first currency;

10.3.2.              the "FACILITY AGENT", "COORDINATING AGENT", "SECURITY
                     TRUSTEE", "ARRANGER", any "SECURED Creditor" or any
                     "PARTICIPATING BANK" shall be construed so as to include
                     its and any subsequent permitted successors, Transferees
                     and permitted assigns in accordance with their respective
                     interests;

10.3.3.              a "LAW" includes any regulation, rule, official directive,
                     request or guideline (having the force of law) of any
                     governmental body, agency, department or regulatory,
                     self-regulatory or other authority or organisation,
                     including, without limitation, the position (guidelines) of



                                      -45-


                     the Examiner of Banks with respect to proper conduct of
                     bank affairs ("Nihul Bankai Takin");

10.3.4.              a "MONTH" is a reference to a period starting on one day in
                     a calendar month and ending on the numerically
                     corresponding day in the next succeeding calendar month
                     save that, where any such period would otherwise end on a
                     day which is not a Business Day, it shall end on the next
                     succeeding Business Day, unless that day falls in the
                     calendar month succeeding that in which it would otherwise
                     have ended, in which case it shall end on the immediately
                     preceding Business Day provided that, if a period starts on
                     the last Business Day in a calendar month or if there is no
                     numerically corresponding day in the month in which that
                     period ends, that period shall end on the last Business Day
                     in that later month;

10.3.5.              a "PERSON" shall be construed as a reference to any person,
                     firm, company, corporation, government, state or agency of
                     a state or any association or partnership (whether or not
                     having separate legal personality) or two or more of the
                     foregoing;

10.3.6.              any "SHAREHOLDER" shall be construed so as to include its
                     permitted and any subsequent permitted successors in
                     accordance with its respective interests;

10.3.7.              "VAT" shall be construed as a reference to value added tax
                     including any similar tax which may be imposed in place
                     thereof from time to time;

10.3.8.              a "WHOLLY-OWNED SUBSIDIARY" of a company or corporation
                     shall be construed as a reference to any company or
                     corporation which has no other members except that other
                     company or corporation and that other company's or
                     corporation's wholly-owned Subsidiaries or persons acting
                     on behalf of that other company or corporation or its
                     wholly-owned Subsidiaries;

10.3.9.              the "WINDING-UP", "DISSOLUTION" or "ADMINISTRATION" of a
                     company or corporation shall be construed so as to include
                     any equivalent or analogous proceedings under the law of
                     the jurisdiction in which such company or corporation is
                     incorporated or any jurisdiction in which such company or
                     corporation carries on business including the seeking of
                     liquidation, winding-up, reorganisation, dissolution,
                     administration, arrangement, adjustment, protection or
                     relief of debtors;



                                      -46-



10.3.10.             "INCLUDING" and "INCLUDES" means, including, without
                     limiting the generality of any description preceding such
                     terms.

10.4.         CURRENCY SYMBOLS

10.4.1.              "EURO" means the single currency introduced in the third
                     stage of economic and monetary issues pursuant to the
                     Treaty establishing the European Community, as amended from
                     time to time; and

10.4.2.              "$", "USD", "DOLLARS", "US DOLLARS" and "DOLLARS" denote
                     the lawful currency of the United States of America. "NIS"
                     and "SHEQELS" denote the lawful currency of Israel.

10.5.         STATUTES

              Any reference in this Agreement to a statute shall be construed as
              a reference to such statute as the same may have been, or may from
              time to time be, amended or re-enacted.

10.6.         AGREEMENTS

              Save where the contrary is indicated, any reference in this
              Agreement to this Agreement or any other agreement or document
              shall be construed as a reference to this Agreement or, as the
              case may be, such other agreement or document as the same may have
              been, or may from time to time be, amended, varied, assigned,
              novated or supplemented in accordance with the terms hereof.







                                      -47-

11.    THE FACILITIES

11.1.      THE FACILITIES

11.1.1.              The Facilities granted to Partner hereunder by the
                     Participating Banks shall, with effect from the
                     Commencement Date and subject to the terms and conditions
                     of this Agreement, be as follows:

                     (a)    a NIS and, subject to clause 2.1.2 below, US Dollar
                            and Euro multicurrency term loan facility in an
                            aggregate amount equal to the total Facility A
                            Commitments;

                     (b)    a NIS and, subject to clause 2.1.2 below, US Dollar
                            and Euro multicurrency revolving loan facility in an
                            aggregate amount equal to the total Facility B
                            Commitments; and

                     (c)    a NIS term loan facility in an aggregate amount in
                            NIS equivalent to the total Facility C Commitments.

11.1.2.              For the purpose of this clause 2.1.2, "AMOUNT OF THE
                     OUTSTANDING A AND B ADVANCES" shall mean the aggregate
                     outstanding from time to time of: (i) the aggregate
                     Original Dollar Amounts of all outstanding Advances under
                     Facility A; and (ii) the aggregate of the Dollar Amounts
                     under Facility B of all Advances, including any Linkage
                     Differentials.

                     Notwithstanding anything contained in this Agreement to the
                     contrary, Partner shall procure that:

                     (a)    not less than 60% (sixty percent) of an amount equal
                            to the Amount of the Outstanding A and B Advances
                            shall, at any time, be denominated and owing in NIS;
                            and

                     (b)    not more than 40% (forty percent) of an amount equal
                            to the Amount of the Outstanding A and B Advances
                            shall, at any time, be denominated and owing in
                            Dollars or Euros; provided that not more than 35%
                            (thirty-five percent) of such amount which may be
                            denominated and owing in Dollars or Euros as
                            aforesaid, shall, at any time, be denominated and
                            owing in Euros.

                     For the removal of doubt, no Participating Bank shall be
                     bound to monitor or verify compliance by Partner with the
                     above. The failure


                                      -48-




                     by Partner to comply with the above provisions shall
                     constitute an Event of Default as referred to in clause 17
                     (Default) below.

11.2.         CONVERSION OF OUTSTANDING ADVANCES

              [Deleted.]

11.3.         LENDERS' RIGHTS AND OBLIGATIONS

11.3.1.              The obligations of each Participating Bank under this
                     Agreement shall be several.

11.3.2.              The obligations of each Participating Bank (acting as such)
                     under this Agreement shall be to contribute its Available
                     Commitment in respect of each Facility to be advanced
                     hereunder. The failure by any Participating Bank to perform
                     any of its obligations under this Agreement, shall not
                     affect the obligations of Partner or any other
                     Participating Bank towards any other party hereto, nor
                     shall the Facility Agent, the Security Trustee, the
                     Arranger, the Coordinating Agent or any other Participating
                     Bank be liable or responsible for the failure by such
                     Participating Bank to perform its obligations under this
                     Agreement.

11.4.         PURPOSE

              Partner shall, subject to the terms of this Agreement, apply all
              amounts borrowed by it under the Facilities for the purposes of:

11.4.1.              financing the purchase of equipment, maintenance expenses,
                     operating losses and daily operating expenses properly
                     incurred in the establishment and operation of a wireless
                     telephone service, as contemplated by the Licence,
                     including capitalised financial expenses (if there is a
                     shortfall in Partner's cash flow after financial expenses)
                     and the financing of Partner's working capital needs for
                     its Business, as well as for the establishment and
                     operation of second and-a-half and third generation (known
                     as 2.5 and 3G) wireless telephone services, all as
                     contemplated in the version of the Business Plan dated 7
                     July 2002 delivered to the Facility Agent and the
                     Coordinating Agent on 11 July 2002; and

11.4.2.              the subscription or acquisition of such share or loan
                     capital in companies which carry on business in the
                     telecommunications sector in accordance with and subject to
                     the limitations and restrictions set


                                      -49-


                     out in clause 16.37(a)
                     (Loans, Guarantees and Investments in Subsidiaries) below.

              No Participating Bank shall be bound to monitor or verify the
              application of any amount borrowed pursuant to this Agreement.

12.    CONDITIONS PRECEDENT

       [Deleted.]

13.    DRAWDOWNS

13.1.         FIRST DRAWDOWN REQUEST

              [Deleted.]

13.2.         DRAWDOWN REQUEST

              A drawdown under the Facilities (including a drawdown constituting
              a reborrowing permitted under this Agreement) shall be made by way
              of delivery by Partner to the Participating Bank from whom it
              wishes to receive an Advance (with, in the case of a Drawdown
              under Facility A or Facility C, a copy thereof being
              simultaneously delivered to the Coordinating Agent), of a duly
              completed Drawdown Request. A Drawdown Request is irrevocable and
              shall not be regarded as having been duly completed and delivered
              unless:

13.2.1.              it identifies the Facility to be utilised;

13.2.2.              it identifies the Participating Bank from whom Partner
                     wishes to receive an Advance;

13.2.3.              the amount of the Advance requested does not exceed the
                     Available Commitment in relation to the Facility requested
                     of the relevant Participating Bank;

13.2.4.              it is received not later than 12 noon (Tel-Aviv time) on
                     the Latest Drawdown Request Date;

13.2.5.              the proposed date for the making of such Advance is a
                     Business Day and, in the case of: (i) Facility A (other
                     than a drawdown in respect of a reborrowing permitted under
                     this Agreement) is within the Availability Period Facility
                     A; or (ii) Facility C (other than a



                                      -50-


                     drawdown in respect of a reborrowing permitted under this
                     Agreement) is within the Availability Period Facility C;

13.2.6.              with respect to Facility A and Facility B, without
                     derogating from clause 2.1.2 above, the currency of the
                     Advance requested is Dollars, Euros or NIS and, with
                     respect to Facility C, the currency of the Advance
                     requested is NIS;

13.2.7.              in the case of a Facility A Advance or a Facility C
                     Advance, the proposed Original Dollar Amount of such
                     Advance is a minimum amount of US $10,000,000 (ten million
                     United States Dollars);

13.2.8.              in the case of a Facility B Advance, the proposed Original
                     Dollar Amount of such Advance is a minimum amount of US
                     $3,000,000 (three million United States Dollars); provided
                     that: (a) in the case of a Facility B Advance drawn for the
                     purposes only of paying Interest (whether in respect of
                     Facility A or Facility B) during the Availability Period
                     Facility A or of paying Interest in respect of Facility C
                     during the Availability Period Facility C which, in each
                     case, is applied immediately after such drawing in payment
                     of such Interest, such minimum requirement shall not be
                     applicable; and (b) any Participating Bank may, with
                     respect to any Facility B Advance, agree with Partner that
                     such Advance shall be in an amount less than the minimum as
                     aforesaid;

13.2.9.              no Event of Default or Potential Event of Default hereunder
                     has occurred and is continuing which has not been waived by
                     an Instructing Group in accordance with the terms of this
                     Agreement and no Event of Default or Potential Event of
                     Default shall occur as a result of such Advance and the
                     representations and warranties referred to in clause 15
                     (Representations and Warranties) below which are deemed to
                     be repeated pursuant to the terms thereof are true and
                     accurate in all respects on and as of the proposed date for
                     the making of such Advance by reference to the facts and
                     circumstances then existing;

13.2.10.             no Change of Ownership has occurred.

13.3.         PARTICIPATING BANK'S PARTICIPATION

              If the conditions set out in clause 4.2 (Drawdown Request) above
              have been met in relation to a Drawdown Request, then, subject to
              the provisions of this Agreement, the Participating Bank from whom
              such Advance was requested under such Drawdown Request shall
              advance (subject to the



                                      -51-


              proviso set out in this clause 4.3) to Partner the amount
              requested in such Drawdown Request under its Available Facility A
              Commitment, Available Facility B Commitment or Available Facility
              C Commitment, as applicable, such Advance to be governed by the
              terms of this Agreement and by such other terms and conditions,
              including relating to types of Advances, commissions and other
              terms relating to banking facilities (to the extent that such
              other terms and conditions are not inconsistent with the terms and
              conditions of this Agreement) as are agreed to between Partner and
              such Participating Bank with respect to such Advance; provided
              that, for the avoidance of doubt, if the relevant Available
              Commitment of the relevant Participating Bank is reduced in
              accordance with the provisions hereof after the relevant
              Participating Bank has received such Drawdown Request, then the
              amount of such Advance shall be reduced accordingly.

13.4.         NOTIFICATION OF ADVANCE

              [Deleted.]

13.5.         OUTSTANDINGS IN PROPORTION TO COMMITMENTS

              Notwithstanding anything to the contrary in this Agreement,
              Partner shall procure that its drawdowns of Advances from each
              Participating Bank under each of the Facilities and its repayments
              and prepayments to each Participating Bank under each of the
              Facilities, are made in proportion to such Participating Bank's
              Commitment with respect to such Facility, such that: (a) with
              respect to each of Facility A and Facility C, at all times, the
              Proportion of such Participating Bank with respect to such
              Facility is equal to the proportion which such Participating
              Bank's Commitment in respect of such Facility constitutes of the
              aggregate Commitments for such Facility; and (b) with respect to
              Facility B, as at the last day of each Quarter, the Proportion of
              such Participating Bank with respect to Facility B is equal to the
              proportion which such Participating Bank's Commitment in respect
              of Facility B constitutes of the aggregate Commitments for
              Facility B. For the removal of doubt, no Participating Bank shall
              be bound to monitor or verify compliance by Partner with the
              above.

14.    REPAYMENT

14.1.         REPAYMENT OF FACILITY A LOAN

14.1.1.              As from the expiry of the Availability Period Facility A,
                     each Participating Bank's Commitment for Facility A shall
                     be reduced, on each Quarter Date, to the amount set out
                     opposite its name, in relation to such Quarter Date, in
                     PART A of SCHEDULE 15 (Reduction of



                                      -52-


                     Facility A) (each such Quarter Date, "A FACILITY A
                     COMMITMENT REDUCTION DATE").

                     (a)    Partner shall, on or before each Facility A
                            Commitment Reduction Date, repay to each
                            Participating Bank Advances in an aggregate amount,
                            such that after such repayment, the aggregate
                            Original Dollar Amount of all outstanding Advances
                            made by such Participating Bank under Facility A,
                            equals or is less than the amount set out opposite
                            such Participating Bank's name in Part A of Schedule
                            15 (Reduction of Facility A) on such Facility A
                            Commitment Reduction Date. For the removal of doubt:
                            (i) all Advances repaid as aforesaid shall be repaid
                            together with Interest, Linkage Differentials and
                            other amounts (if any) payable to each such
                            Participating Bank under such Facility in respect of
                            such Advances; and (ii) Partner, in making all
                            repayments, shall comply with clause 4.5(a)
                            (Outstandings in Proportion to Commitments--Facility
                            A) above.

                     (b)    Without derogating from clause 5.1.2(a) above,
                            Partner shall repay to each Participating Bank that
                            has made an Advance under Facility A, such Advance
                            (together with Interest thereon, Linkage
                            Differentials and other amounts (if any) payable to
                            such Participating Bank in relation to such Advance
                            under this Agreement) on the Repayment Date for such
                            Advance.

                     (c)    Subject to clause 5.1.1 above, Partner shall be
                            entitled to reborrow under Facility A, an amount up
                            to the Original Dollar Amount (or, if such
                            reborrowing shall be denominated in NIS or Euro, the
                            equivalent thereof at the date of such reborrowing)
                            of all Advances repaid pursuant to clause 5.1.2(b)
                            from the Participating Bank to whom such repayment
                            was made; provided that, such reborrowing is within
                            such Participating Bank's Available Commitment for
                            Facility A at the time of such reborrowing.

                     (d)    Any part of any Commitment under Facility A of a
                            Participating Bank which remains undrawn at the end
                            of the Availability Period Facility A, shall be
                            automatically and immediately cancelled.

14.2.         REPAYMENT OF FACILITY B LOAN

14.2.1.              Partner shall repay to each Participating Bank each
                     outstanding Advance made by a Participating Bank under
                     Facility B (together with



                                      -53-


                     Interest, Linkage Differentials and other amounts (if
                     any) payable to each such Participating Bank under
                     Facility B with respect to such Advance) on its
                     Repayment Date. For the removal of doubt, all
                     outstanding Advances under Facility B (together with
                     Interest, Linkage Differentials and other amounts (if
                     any) payable with respect to such Advances) shall be
                     repaid by no later than 30 June 2008.

14.2.2.              Subject to the provisions of this clause 5.2.2 below, if
                     before 12 noon Tel-Aviv time on the Latest Drawdown Request
                     Date before the Repayment Date of an Advance made by a
                     Participating Bank under Facility B ("THE ORIGINAL
                     ADVANCE"), Partner has not:

                     (a)    delivered a Drawdown Request to the relevant
                            Participating Bank under Facility B in accordance
                            with clause 4.2 (Drawdown Request) above, for a new
                            Advance in respect of the Original Advance made by
                            such Participating Bank; or

                     (b)    notified the relevant Participating Bank that it
                            proposes to repay the Original Advance on its
                            Repayment Date without requesting such Participating
                            Bank for a new Advance under Facility B in respect
                            of the Original Advance made by such Participating
                            Bank,

                     then a duly completed Drawdown Request shall be deemed to
                     have been delivered to the relevant Participating Bank, in
                     accordance with clause 4.2 (Drawdown Request), for an
                     Advance ("THE NEW ADVANCE") under Facility B and in the
                     same principal amount (together with all Linkage
                     Differentials in respect thereof, if applicable), Duration
                     Period and currency of denomination and based on the same
                     type of rate of Interest as the Original Advance, save
                     that:

                     (i)    that part of the rate of Interest of the New Advance
                            based on Cost of Funds (as referred to in clause 8.1
                            (Interest Rate) below) of the relevant Participating
                            Bank shall be determined by such Participating Bank
                            in relation to such Participating Bank's Cost of
                            Funds for making Advances of the same type, amount,
                            duration and currency denomination as the deemed New
                            Advance as at the date such New Advance is deemed to
                            have been made and, for the removal of doubt, the
                            Margin shall be that prevailing during such new
                            Duration Period;

                     (ii)   if, on the date such New Advance is made, the
                            Original Dollar Amount of such New Advance exceeds
                            the Available Commitment of the relevant
                            Participating Bank under



                                      -54-


                            Facility B, Partner shall,
                            on such date, pay to the relevant Participating
                            Bank, an amount equal to the amount by which such
                            New Advance would (but for the operation of this
                            paragraph (ii)) exceed such Available Commitment and
                            the New Advance shall be the amount of the Available
                            Facility B Commitment of such Participating Bank;
                            and

                     (iii)  no Advance shall be made pursuant to this clause
                            5.2.2 if the Duration Period in respect of such
                            Advance shall extend beyond 30 June 2008; and

                     (iv)   no Advance shall be made pursuant to this clause
                            5.2.2, unless the provisions of clause 4.2.9 above
                            have been complied with in respect of such Advance.

14.3.         REPAYMENT OF FACILITY C LOAN

14.3.1.              As from the expiry of the Availability Period Facility C,
                     each Participating Bank's Commitment for Facility C shall
                     be reduced, on each Quarter Date, to the amount set out
                     opposite its name, in relation to such Quarter Date, in
                     Part B of Schedule 15 (Reduction of Facility C) (each such
                     Quarter Date, "A FACILITY C COMMITMENT REDUCTION DATE").


                     (a)    Partner shall, on or before each Facility C
                            Commitment Reduction Date, repay to each
                            Participating Bank Advances in an aggregate amount,
                            such that after such repayment, the aggregate
                            Original Dollar Amount of all outstanding Advances
                            made by such Participating Bank under Facility C,
                            equals or is less than the amount set out opposite
                            such Participating Bank's name in PART B of SCHEDULE
                            15 (Reduction of Facility C) on such Facility C
                            Commitment Reduction Date. For the removal of doubt:
                            (i) all Advances repaid as aforesaid shall be repaid
                            together with Interest, Linkage Differentials and
                            other amounts (if any) payable to each such
                            Participating Bank under such Facility in respect of
                            such Advances; and (ii) Partner, in making all
                            repayments, shall comply with clause 4.5(a)
                            (Outstandings in Proportion to Commitments--Facility
                            C ) above.

                     (b)    Without derogating from clause 5.3.2(a) above,
                            Partner shall repay to each Participating Bank that
                            has made an Advance under Facility C, such Advance
                            (together with Interest thereon, Linkage
                            Differentials and other amounts (if any) payable to
                            such



                                      -55-


                            Participating Bank in relation to such Advance
                            under this Agreement) on the Repayment Date for such
                            Advance.

                     (c)    Subject to clause 5.3.1 above, Partner shall be
                            entitled to reborrow under Facility C, an amount up
                            to the NIS equivalent of the Original Dollar Amount
                            as at the date of such reborrowing, of all Advances
                            repaid pursuant to clause 5.3.2(b) from the
                            Participating Bank to whom such repayment was made;
                            provided that, such reborrowing is within such
                            Participating Bank's Available Commitment for
                            Facility C at the time of such reborrowing.

                     (d)    Any part of any Commitment under Facility C of a
                            Participating Bank which remains undrawn at the end
                            of the Availability Period Facility C, shall be
                            automatically and immediately cancelled.

14.4.         CURRENCY OF REPAYMENT

              All repayments shall be made in the currency in which the relevant
Advance was made.

15.    VOLUNTARY PREPAYMENT AND REBORROWING

15.1.         PREPAYMENT

              Partner may, in the manner set out below, prepay a Participating
              Bank in whole or in part, any outstanding Advances made by such
              Participating Bank; provided that such prepayments are made in
              such a manner so as to ensure compliance by Partner with clause
              4.5 (Outstandings in Proportion to Commitments) above.

15.2.         CONDITIONS TO PREPAY

              No prepayment may be made under clause 6.1 (Prepayment) above
unless:

15.2.1.              Partner shall have given due notice to the relevant
                     Participating Bank (with a copy thereof being sent
                     simultaneously to the Facility Agent and the Coordinating
                     Agent). Such notice must specify the date or dates upon
                     which the prepayment is to be made, the amount of the
                     prepayment and the currency of the outstanding Advance to
                     be prepaid as aforesaid and must be given at least:



                                      -56-


                     (i)    in respect of a prepayment to a Participating Bank
                            of up to US $25,000,000 (twenty-five million United
                            States Dollars) (or the Dollar equivalent thereof),
                            10 (ten) days prior to such prepayment;

                     (ii)   in respect of a prepayment to a Participating Bank
                            of between US $25,000,000 (twenty-five million
                            United States Dollars) and US $50,000,000 (fifty
                            million United States Dollars) (or the Dollar
                            equivalent thereof), 15 (fifteen) days prior to such
                            prepayment;

                     (iii)  in respect of a prepayment to a Participating Bank
                            of between US $50,000,000 (fifty million United
                            States Dollars) and US $75,000,000 (seventy-five
                            million United States Dollars) (or the Dollar
                            equivalent thereof), 25 (twenty-five) days prior to
                            such prepayment; or

                     (iv)   in respect of a prepayment to a Participating Bank
                            in excess of US $75,000,000 (seventy-five million
                            United States Dollars) (or the Dollar equivalent
                            thereof), 30 (thirty) days prior to such prepayment;

15.2.2.              in the event that such prepayment is to be funded from
                     Permitted Sources, there is attached to such notice a
                     certificate of Partner, in the form set out in SCHEDULE 16
                     (Certificate by Partner's Chief Financial Officer) signed
                     by the Chief Financial Officer of Partner, confirming that
                     all the monies to be utilised by Partner to make the
                     relevant prepayment are from Permitted Sources and
                     specifying details of the relevant Permitted Source; and

15.2.3.              such prepayment shall be in a minimum amount of US
                     $5,000,000 (five million United States Dollars) or the
                     Dollar equivalent thereof, as applicable.

15.3.         EFFECTS OF NOTICE OF PREPAYMENT

15.3.1.              A notice of prepayment given by Partner to a Participating
                     Bank, as referred to in clause 6.2 (Conditions to Prepay)
                     above, shall be irrevocable and shall oblige Partner to
                     make the relevant prepayment on the date specified therefor
                     in such notice of prepayment.

15.3.2.              All prepayments shall be made together with: (a) any
                     accrued but unpaid Interest on the amount being prepaid
                     (including all amounts payable on account of broken funding
                     as referred to in clause 19



                                      -57-


                     (Broken Funding) below); (b) a prepayment commission equal
                     to 0.1% (nought point one percent) of the amount of the
                     Advance prepaid, for each 12 (twelve) months by which the
                     date of prepayment is earlier than the relevant Repayment
                     Date, pro rata for part of 12 (twelve) months; and (c) if
                     such prepayment is made other than from Permitted Sources:
                     (i) with respect to Advances under Facility A or Facility
                     B, a commission at a rate equal, if prepaid during the
                     Availability Period Facility A, to 0.5% (nought point five
                     percent) of the amount being prepaid; or if prepaid after
                     the Availability Period Facility A, such percentage reduced
                     annually by 0.1% (nought point one percent) per annum, such
                     that if prepayment is made during the first year after the
                     Availability Period Facility A, such commission will be
                     0.4% (nought point four percent) of the amount of the
                     prepayment, if a prepayment is made during the second year
                     after the Availability Period Facility A, such commission
                     will be 0.3% (nought point three percent) and so on and so
                     forth; provided that, such percentage shall in no event be
                     less than 0.1% (nought point one percent); and (ii) with
                     respect to Advances under Facility C, a commission at a
                     rate equal, if prepaid during the Availability Period
                     Facility C, to 0.5% (nought point five percent) of the
                     amount being prepaid; or if prepaid after the Availability
                     Period Facility C, such percentage reduced annually by 0.1%
                     (nought point one percent) per annum, such that if
                     prepayment is made during the first year after the
                     Availability Period Facility C, such commission will be
                     0.4% (nought point four percent) of the amount of the
                     prepayment, if a prepayment is made during the second year
                     after the Availability Period Facility C, such commission
                     will be 0.3% (nought point three percent) and so on and so
                     forth; provided that, such percentage shall in no event be
                     less than 0.1% (nought point one percent).

15.3.3.              A prepayment of an Advance shall be made in the currency in
                     which such Advance was made.

15.3.4.              A prepayment of an Advance shall be made together with all
                     Linkage Differentials and other amounts, if any, accrued in
                     connection with such Advance.

15.3.5.              Partner shall not repay all or any part of the Loans,
                     except at the times and in the manner expressly provided in
                     this Agreement.

15.4.         REBORROWING

15.4.1.              Subject to clause 4.5 above, Partner shall be entitled: (a)
                     until the Facility A Maturity Date, to reborrow, under
                     Facility A, the Original



                                      -58-


                     Dollar Amount of all Advances prepaid from Permitted
                     Sources, from the Participating Bank to whom such
                     prepayment was made; provided that, such reborrowing is
                     within such Participating Bank's Available Facility A
                     Commitment at the time of such reborrowing; and (b) until
                     the Facility C Maturity Date, to reborrow, under Facility
                     C, the Original Dollar Amount of all Advances prepaid from
                     Permitted Sources, from the Participating Bank to whom such
                     prepayment was made; provided that, such reborrowing is
                     within such Participating Bank's Available Facility C
                     Commitment at the time of such reborrowing.

15.4.2.              Save as expressly set out in clause 6.4.1 above and clause
                     7.2.2 below, Partner may not reborrow any part of Facility
                     A or Facility C which is prepaid.

15.4.3.              (a)    Partner may, by giving to the Facility Agent not
                            less than 5 (five) Business Days' prior notice to
                            that effect, cancel the whole or any part of any
                            Facility, any such cancellation to reduce the
                            Available Commitments of each of the Participating
                            Banks under such Facility pro rata to their
                            respective Commitments under such Facility.

                     (b)    Any notice of cancellation given by Partner as
                            aforesaid shall be irrevocable and shall specify the
                            date upon which such cancellation is to be made, the
                            Facility to be cancelled and the amount of such
                            cancellation.

                     (c)    Partner shall not be entitled to borrow any amount
                            of a Facility which has been cancelled.

15.4.4.              Any part of Facility B which is prepaid or repaid may be
                     reborrowed in accordance with the terms of this Agreement;
                     provided that, such reborrowing is within such
                     Participating Bank's Available Facility B Commitment at the
                     time of such reborrowing.

16.    MANDATORY PREPAYMENT

16.1.         NON-COMPLIANCE WITH CORRECTIVE MILESTONES

              [Deleted.]

16.2.         DISPOSALS



                                      -59-


16.2.1.              If Partner sells, transfers, lends, leases or otherwise
                     disposes of any of its assets (including securities Partner
                     holds (directly or indirectly) in any Subsidiary (for the
                     removal of doubt, subject to any such disposal being
                     permitted under the Facility Documents)), Partner shall
                     prepay an amount equal to the Net Proceeds resulting from
                     such sale, transfer, loan, lease or disposal (provided such
                     Net Proceeds are greater than US $1,000,000 (one million
                     United States Dollars) or its equivalent and, when
                     aggregated with any other Net Proceeds received during the
                     Financial Year in which the relevant Net Proceeds are
                     received, exceed an aggregate amount equal to US $2,500,000
                     (two million five hundred thousand United States Dollars)
                     or its equivalent) on the next Business Day after receipt
                     of Net Proceeds from such sale, transfer, loan, lease or
                     disposal.

                     For the purposes of this clause 7.2.1, in the event that
                     any such sale of assets is made for full value for cash and
                     that the proceeds of such sale have been applied within 30
                     (thirty) days after such sale in the acquisition or
                     improvement of assets of the Business, then such sale of
                     assets shall not constitute a disposal.

16.2.2.              A mandatory prepayment made under clause 7.2.1 above, shall
                     be capable of being reborrowed; provided that, such
                     reborrowing is within the relevant Participating Bank's
                     Available Facility A Commitment or Available Facility C
                     Commitment, as applicable, at the time of such reborrowing.

16.3.         INVESTMENT BY PARTNER IN SUBSIDIARIES

              In the event Partner makes any investment, whether by way of share
              or loan capital (including guarantees) in any Subsidiary in the
              manner permitted under 16.37(a) (Loans, Guarantees and Investments
              in Subsidiaries) below which exceeds, in the aggregate, US
              $5,000,000 (five million United States Dollars) or its equivalent,
              and: (i) such investment was funded, directly or indirectly, from
              the proceeds of the Facilities; and (ii) Partner raises financing,
              at any time, by way of Permitted Loan Capital comprising
              debentures, Partner shall, within 10 (ten) Business Days after
              raising any such Permitted Loan Capital comprising debentures,
              mandatorily prepay to the Participating Banks all amounts raised
              as aforesaid until an amount equal to such excess over US
              $5,000,000 (five million United States Dollars) (together with all
              Interest, Linkage Differentials and other amounts accrued in
              connection therewith) has been prepaid. For the removal of doubt,
              a mandatory prepayment made under this clause 7.3 shall be capable
              of being reborrowed, provided that, such reborrowing is within the
              relevant Participating Bank's Available Facility A Commitment or
              Available Facility C Commitment, as the case may be, at the time
              of such reborrowing.



                                      -60-



16.4.         TERMS FOR MANDATORY PREPAYMENT

16.4.1.              Unless specifically otherwise stated in this Agreement,
                     Partner shall not be entitled to reborrow any amount
                     mandatorily prepaid.

16.4.2.              In making a mandatory prepayment under this clause 7,
                     Partner shall:

                     (a)    make proportional prepayments to each of the
                            Participating Banks in accordance with clause 4.5
                            (Outstandings in Proportion to Commitments) above;

                     (b)    without derogating from (a) above, be at liberty to
                            choose on account of which Facility or Facilities
                            any such mandatory prepayment is being made,
                            provided that:

                            (i)    Partner shall give notice to the Facility
                                   Agent and to each of the Participating Banks
                                   as soon as reasonably practicable (and, in
                                   any event, at least 1 (one) Business Day
                                   before the date Partner is obliged to make
                                   any such prepayment) containing details of
                                   all amounts to be prepaid as aforesaid and
                                   the amount and currency of the Advances to be
                                   prepaid to the Participating Banks on a
                                   Facility-by-Facility basis;

                            (ii)   in effecting any such mandatory prepayment,
                                   Partner shall ensure that the amount of any
                                   Advances outstanding to any Participating
                                   Bank under any Facility is not greater than
                                   such Participating Bank's Available Facility
                                   A Commitment, Available Facility B Commitment
                                   or Available Facility C Commitment (as the
                                   case may be); and

                            (iii)  any mandatory prepayment shall be made
                                   together with any accrued but unpaid Interest
                                   on the amount being prepaid (including
                                   amounts payable on account of broken funding
                                   as referred to in clause 19 (Broken Funding)
                                   below), Linkage Differentials and all other
                                   amounts accrued in connection with such
                                   amount being prepaid; and

                     (c)    in the event that Partner shall fail to elect to
                            make a choice as referred to in clause 7.4.2 above
                            in respect of any particular mandatory prepayment,
                            then any such prepayment shall be paid to the
                            Participating Banks pro rata to, and on account of,
                            the



                                      -61-


                            Original Dollar Amount of their respective
                            outstanding Advances under each of Facility A and
                            Facility C and pro rata as amongst each of such
                            Advances, as at the date immediately before such
                            mandatory prepayment is payable under the
                            Facilities.

16.4.3.              A mandatory prepayment of an Advance shall be made in the
                     currency in which such Advance was made.

17.    INTEREST

17.1.         INTEREST RATE

              The rate of Interest on each Advance made under the Facilities for
              each Interest Period will be the percent per annum which is the
              aggregate of:

17.1.1.              the Margin (with respect to the relevant Facility); and

17.1.2.              the Cost of Funds of the applicable Participating Bank in
                     providing the relevant Advance.

              "COST OF FUNDS" shall mean, in relation to an Advance, the rate of
              Interest which is deemed by the relevant Participating Bank,
              providing such Advance, as reflecting such Participating Bank's
              cost, before the application of any margin, for the purpose of
              determining the rate of Interest to be charged by such
              Participating Bank in respect of loans of the same type as the
              Advance requested under the relevant Drawdown Request, to its
              customers in amounts similar to the amount requested as aforesaid
              and for similar periods as such drawing; provided that, with
              respect to NIS denominated Advances requested from a Participating
              Bank under a Drawdown Request designating that the applicable
              Interest rate be a fixed linked Interest rate, Partner shall be
              entitled on the date that it is notified by such Participating
              Bank of its Cost of Funds for such Advance, to notify such
              Participating Bank that instead of such Cost of Funds, as
              notified, the Cost of Funds shall be the Bond Rate. For the
              removal of doubt, in the event that a Participating Bank shall
              determine its Cost of Funds for any Advance under Facility A or
              Facility B on the basis of LIBOR, "LIBOR" shall have the meaning
              assigned to such term in clause 1.1.106 above.

17.2.         PAYMENT OF INTEREST

              Partner shall pay to each Participating Bank in respect of each
              Advance made by such Participating Bank all Interest accruing on
              such Advance



                                      -62-


              during any Interest Period on the Interest Payment Date for such
              Interest Period.

17.3.         DEFAULT INTEREST

17.3.1.              If Partner fails to pay any sum payable by it to a
                     Participating Bank under a Facility Document on account of
                     repayment or prepayment of an Advance, Interest thereon or
                     Linkage Differentials or otherwise any other sum payable
                     under any Facility Document (any such sum, "AN UNPAID SUM")
                     on its due date, Interest shall accrue, notwithstanding
                     that any Event of Default arising from such failure may be
                     subsequently waived by the Participating Banks, on such
                     unpaid sum from the due date up to the date of actual
                     payment at the rate of Interest referred to in clause 8.1
                     (Interest Rate); provided that, if such unpaid sum is on
                     account of:

                     (a)    an Advance, or Linkage Differentials thereon (not
                            constituting Interest), the Margin shall, for the
                            removal of doubt, be, in relation to an Advance (or
                            Linkage Differentials, as aforesaid, thereon) under
                            Facility A or Facility B (or Linkage Differentials,
                            as aforesaid, thereon), 2.9% (two point nine
                            percent) or, if such Event of Default does not
                            relate to the non-payment of monies and the
                            Participating Banks waive their rights to declare
                            the Advances due and payable as a result of such
                            Event of Default as aforesaid, then 1.9% (one point
                            nine percent) or, in relation to an Advance under
                            Facility C (or Linkage Differentials, as aforesaid,
                            thereon), 3.25% (three point two five percent) or,
                            if such Event of Default does not relate to the
                            non-payment of monies and the Participating Banks
                            waive their rights to declare the Advances due and
                            payable as a result of such Event of Default as
                            aforesaid, then 2.25% (two point two five percent);
                            or

                     (b)    Interest, then such unpaid sum shall be deemed, for
                            the purposes of calculating Interest as aforesaid,
                            an Advance of the same type and currency and from
                            the same Facility as that on which such Interest had
                            accrued; or

                     (c)    any amount payable under any Facility Document (save
                            for repayment or prepayment of an Advance, Interest
                            thereon or Linkage Differentials), then such unpaid
                            sum shall be deemed, for the purpose of calculating
                            Interest as aforesaid, an Advance under Facility B,
                            denominated in the same currency in which such
                            unpaid sum is payable and of such type as the
                            relevant Participating Bank, acting reasonably, may
                            elect);



                                      -63-


                     provided that, if such unpaid sum, failed to be paid as
                     aforesaid, remains owing after the relevant Repayment Date,
                     Interest Payment Date or due date, as the case may be, or
                     if such unpaid sum is, pursuant to this Agreement due and
                     payable, then the relevant Participating Bank shall be
                     entitled to determine its Cost of Funds (as referred to in
                     clause 8.1 (Interest Rate) above) on the unpaid sum as at
                     the date such sum became due and payable, as if the unpaid
                     sum had, during the period of non-payment, constituted an
                     Advance made by such Participating Bank of the same type,
                     in the same currency and under the same Facility as such
                     unpaid sum is on account of (or if such unpaid sum is not
                     on account of any Advance, Linkage Differentials or
                     Interest thereon, then such unpaid sum shall be deemed to
                     be on account of an Advance under Facility B, denominated
                     in the currency and of such type as referred to in
                     paragraph (c) above of this clause 8.3.1) on such date and
                     on the first day of each Interest Period (as defined below)
                     therefor. The period beginning on such due date and ending
                     on the date of actual payment shall be divided into
                     successive periods, each of which (other than the first)
                     shall start on the last day of such preceding period and
                     the duration of which shall be selected by the relevant
                     Participating Bank (such periods, "INTEREST PERIODS"). Any
                     Interest accruing under this clause 8.3 shall be
                     immediately due and payable by Partner on demand of the
                     relevant Participating Bank.

17.3.2.              Default Interest (if unpaid) arising on an overdue amount
                     will be compounded with the overdue amount at the end of
                     each Interest Period applicable to that overdue amount but
                     will remain immediately due and payable.

17.3.3.              Reference to a "Participating Bank" and/or "the
                     Participating Banks" in this clause 8.3 shall also be
                     deemed to include a reference to such Participating Bank,
                     whether in its capacity as such and whether in its capacity
                     as Facility Agent and/or Arranger and/or Security Trustee
                     and/or a Secured Creditor (as applicable).

17.3.4.              Any unpaid sum (together with all Linkage Differentials in
                     respect thereof) shall (for the purposes of this clause
                     8.3, clause 12.1 (Increased Costs) and clause 19 (Broken
                     Funding Indemnity) together with any indemnities of Partner
                     in this Agreement) be treated as an advance and accordingly
                     in this clause 8.3, clause 12.1 (Increased Costs) and
                     clause 19 (Broken Funding Indemnity) the term "ADVANCE"
                     includes any unpaid sum (together with all Linkage
                     Differentials in respect thereof) and the term "INTEREST
                     PERIOD", in



                                      -64-


                     relation to an unpaid sum, includes each such period
                     relating thereto as is mentioned in this clause 8.3.

18.    SUBSTITUTE INTEREST RATES

18.1.         UNAVAILABLE OR INDETERMINABLE INTEREST RATE

              If and whenever, with respect to any Advance and any Interest
              Period relating thereto, at any time prior to such Interest
              Period, a Participating Bank determines that any rate determined
              pursuant to clause 8.1.2 above is not available or that such rate
              does not constitute an accurate base for the determination of the
              cost to such Participating Bank of such Advance, then such
              Participating Bank shall forthwith give notice ("A DETERMINATION
              NOTICE") of such event to Partner and to the Facility Agent (a
              Determination Notice to contain particulars of the relevant
              circumstances giving rise to its issue) and the Cost of Funds for
              such Advance for such Interest Period shall be determined in
              accordance with this clause 9 below.

18.2.         NEGOTIATIONS FOR DETERMINING ALTERNATIVE BASIS

              Within 5 (five) Business Days of receipt of such notification, the
              relevant Participating Bank and Partner shall enter into
              negotiations in good faith for a period of up to 30 (thirty) days
              with a view to agreeing an alternative basis for determining the
              Cost of Funds applicable to such Advance for such Interest Period.



                                      -65-



18.3.         AGREED ALTERNATIVE BASIS

              Any alternative basis agreed under clause 9.2 (Negotiations for
              Determining Alternative Basis) above will be binding on Partner
              and such Participating Bank once agreed and effective from the
              commencement of the Interest Period concerned.

18.4.         FAILURE TO AGREE ON ALTERNATIVE BASIS

              If no alternative basis is agreed in accordance with clause 9.2
              (Negotiations for Determining Alternative Basis) above, such
              Participating Bank shall certify on or before the last day of the
              Interest Period to which the notification relates, or, if earlier,
              within 10 (ten) days after the expiry of the 30 (thirty) day
              period referred to in clause 9.2 (Negotiations for Determining
              Alternative Basis) above an alternative basis for determining the
              Cost of Funds for such Interest Period of such Advance and so long
              as this clause 9 applies and no alternative basis has been agreed
              in accordance with clause 9.2 (Negotiations for Determining
              Alternative Basis) above, the Cost of Funds applicable to such
              Advance for the relevant Interest Period shall be the rate
              notified by such Participating Bank in accordance with this clause
              9.4 above.

18.5.         RETURN TO REGULAR DETERMINATION BASIS

              So long as any alternative basis is in force in accordance with
              this clause 9, the relevant Participating Bank shall, from time to
              time, but not less frequently than monthly, review with Partner
              whether or not the circumstances referred to in clause 9.1
              (Unavailable or Indeterminable Interest Rate) still prevail with a
              view to returning to the normal provisions of this Agreement in
              relation to determining Cost of Funds as soon as reasonably
              practicable.

19.    COMMISSIONS, FEES AND EXPENSES

19.1.         COMMITMENT COMMISSION--FACILITY A AND FACILITY B

              Partner shall pay to each Participating Bank, with respect to
              Facility A and Facility B (taken together), a commitment
              commission of the Applicable Percentage (as defined in clause 10.2
              (Applicable Percentage) below) per annum of the daily amount of
              the undrawn aggregate Commitments of the relevant Participating
              Bank with respect to Facility A and Facility B. For the removal of
              doubt, such commitment commission shall be calculated on the
              aggregate undrawn Commitments for Facility A and Facility B, taken
              together. The commitment commission under such Facilities shall be


                                      -66-


              payable quarterly, in arrears, until the Termination Date. If the
              Termination Date shall not be a Quarter Day, then the Commitment
              commission in respect of the period commencing from the preceding
              Quarter Day to the Termination Date shall be paid on the
              Termination Date.

19.2.         APPLICABLE PERCENTAGE

              The Applicable Percentage shall be:

19.2.1.              0.125% (nought point one two five percent), in relation to
                     the aggregate Commitments of a Participating Bank, with
                     respect to Facility A and Facility B, of which at least 80%
                     (eighty percent) thereof is being utilised by Partner;

19.2.2.              0.25% (nought point two five percent), in relation to the
                     aggregate Commitments of a Participating Bank, with respect
                     to Facility A and Facility B, of which less than 80%
                     (eighty percent) but more than 50% (fifty percent) thereof
                     is being utilised by Partner;

19.2.3.              0.375% (nought point three seven five percent), in relation
                     to the aggregate Commitments of a Participating Bank, with
                     respect to Facility A and Facility B, of which 50% (fifty
                     percent) or a lower percentage thereof is being utilised by
                     Partner.

10.2A.        COMMITMENT COMMISSION--FACILITY C

              Partner shall pay to each Participating Bank a commitment
              commission at the rate of 0.35% (nought point three five percent)
              per annum of the daily amount of the undrawn Commitment of the
              relevant Participating Bank under Facility C. The commitment
              commission shall accrue from the Commencement Date and shall be
              payable quarterly, in arrears, until the Termination Date. If the
              Termination Date shall not be a Quarter Day, then the Commitment
              commission in respect of the period commencing from the preceding
              Quarter Day to the Termination Date shall be paid on the
              Termination Date.



                                      -67-



19.3.         ANNUAL PAYMENT TO SECURITY TRUSTEE

              Partner shall pay to the Security Trustee for its own account the
              fees specified in the letter dated 9 July 2000 from the Security
              Trustee to Partner at the times and in the amounts specified in
              such letter.

19.4.         FACILITY AGENT'S FEE

              Partner shall pay to the Facility Agent for its own account the
              fees specified in the letter dated 9 July 2000 from the Facility
              Agent to Partner at the times and in the amounts specified in such
              letter.

19.5.         PAYMENT OF UPFRONT FEE

              [Deleted.]

10.5A         COORDINATING AGENT'S FEE

              Partner shall pay to the Coordinating Agent the fees specified in
              the letter dated as of 31 December 2002 from the Coordinating
              Agent to Partner at the times and in the amounts specified in such
              letter.

19.6.         EXPENSES

19.6.1.              Partner shall pay to the Facility Agent on demand all costs
                     and expenses (including, without limitation, legal fees for
                     external counsel and of an independent engineer and other
                     out-of-pocket expenses) incurred by the Agents in
                     connection with the negotiation, preparation and execution
                     of the Facility Documents and all amendments or
                     restatements to any of the Facility Documents and the
                     completion of the transactions therein contemplated,
                     subject to such limits (if any) agreed in writing between
                     Partner and the Facility Agent. All expenses payable
                     pursuant to this clause 10.6.1 shall be paid together with
                     VAT (if any) thereon.

19.6.2.              Partner shall, from time to time, on demand, reimburse each
                     Agent or Participating Bank for all costs and expenses
                     (including, without limitation, legal fees for external
                     counsel and other out-of-pocket expenses) incurred in
                     connection with the preservation and/or enforcement of any
                     of the rights of the Participating Banks and the Agents
                     under the Facility Documents. All expenses payable pursuant
                     to this clause 10.6.2 shall be paid together with VAT (if
                     any) thereon.



                                      -68-


19.7.         STAMP TAXES

              Partner shall pay all stamp, documentary, registration or other
              like duties or Taxes imposed on or payable in connection with the
              this Agreement or any of the Facility Documents and shall
              indemnify the Agents and the Participating Banks against any
              liabilities, costs, claims and expenses resulting from any failure
              to pay or any delay in paying any such duties or Taxes.

19.8.         CUSTOMARY COMMISSIONS AND CHARGES

              Partner shall pay to each Participating Bank their respective
              commissions, fees and reasonable expenses usually payable to banks
              in connection with banking transactions to be performed by the
              relevant Participating Banks, in connection with the Facilities.

20.    TAXES

20.1.         TAX GROSS-UP

              All payments to be made by each Obligor to any Finance Party
              hereunder shall be made free and clear of and without deduction
              for or on account of Tax unless the relevant Obligor is required
              by law to make such payment subject to the deduction or
              withholding of Tax, in which case the sum payable by such Obligor
              in respect of which such deduction or withholding is required to
              be made shall be increased to the extent necessary to ensure that,
              after the making of the required deduction or withholding, such
              Finance Party receives and retains (free from any liability in
              respect of any such deduction or withholding) a net sum equal to
              the sum which it would have received and so retained had no such
              deduction or withholding been made or required to be made.

20.2.         NOTIFICATION OF REQUIREMENT TO DEDUCT TAX

              If, at any time, any Obligor is required by law to make any
              deduction or withholding from any sum payable by it hereunder (or
              if thereafter there is any change in the rates at which or the
              manner in which such deductions or withholdings are calculated),
              such Obligor shall as soon as reasonably practicable notify the
              relevant Finance Party.




                                      -69-



20.3.         EVIDENCE OF PAYMENT OF TAX

              If any Obligor makes any payment hereunder in respect of which it
              is required to make any deduction or withholding, it shall pay the
              full amount required to be deducted or withheld to the relevant
              taxation or other authority within the time allowed for such
              payment under applicable law and shall deliver to the Facility
              Agent and to the Finance Party, to whom a payment has been made,
              which required any such deduction or withholding, as soon as
              reasonably practicable after it has made such payment to the
              applicable authority, an original receipt (or a certified copy
              thereof) issued by such authority evidencing the payment to such
              authority of all amounts so required to be deducted or withheld in
              respect of the payment made to such Finance Party.

20.4.         TAX SAVING

                     (a)    In the event that, following the imposition of any
                            Tax on any payment by any Obligor in consequence of
                            which the relevant Obligor is required under clause
                            11.1 (Tax Gross-Up) above to pay such tax or to pay
                            any additional amount in respect of it, any Finance
                            Party shall in its sole opinion and based on its own
                            interpretation of any relevant laws or regulations
                            (but acting in good faith) receive or be granted a
                            repayment of Tax or a credit against or remission
                            for or deduction from or in respect of any Tax
                            payable by it, taking into account all tax
                            jurisdictions applicable to the Finance Party and
                            any direct or indirect controlling shareholders of
                            the Finance Party (any of the foregoing, to the
                            extent so reasonably identifiable and quantifiable,
                            being referred to as a "SAVING"), such Finance Party
                            shall, to the extent that it can do so without
                            prejudice to the retention of the relevant saving
                            and subject to the relevant Obligor's obligation to
                            repay the amount to such Finance Party if the
                            relevant saving is subsequently disallowed or
                            cancelled (which repayment shall be made promptly on
                            receipt of notice by the relevant Obligor from such
                            person of such disallowance or cancellation),
                            reimburse the relevant Obligor promptly after
                            receipt of such saving by such person with such
                            amount as such person shall in its sole opinion but
                            in good faith have concluded to be the finally
                            determined amount or value of the relevant saving.

                     (b)    Nothing contained in this Agreement shall interfere
                            with the right of any Finance Party to arrange its
                            tax and other affairs in whatever manner it thinks
                            fit and, in particular, no Finance Party shall be
                            under any obligation to claim relief from Tax on its
                            corporate profits, or from any similar Tax
                            liability, in respect of the Tax, or to claim relief
                            in priority to any other claims, reliefs, credits or
                            deductions available



                                      -70-


                            to it or to disclose details of its Tax affairs. No
                            Finance Party shall be required to disclose any
                            confidential information relating to the
                            organisation of its affairs.

                     (c)    Each Finance Party will notify the relevant Obligor
                            promptly of the receipt by such person of any saving
                            and of such Finance Party's opinion as to the amount
                            or value of that saving.

21.    INCREASED COSTS

21.1.         INCREASED COSTS

              Subject to clause 12.2 (Exceptions) below, if, by reason of:

              (a)           any change in or the introduction of, or any change
                            in the interpretation, administration or application
                            by any competent court, authority or organisation in
                            the relevant jurisdiction generally of, any law,
                            regulation or treaty or in or of any official
                            directive, guideline or official request from, or
                            the rules of, any governmental, fiscal, monetary or
                            regulatory (including self-regulatory) authority,
                            organisation or agency (including, position
                            (guidelines) of the Examiner of Banks with respect
                            to proper conduct of bank affairs ("Nihul Bankai
                            Takin") (whether or not having, in any such case,
                            the force of law but, if not having the force of
                            law, being a regulation, treaty, official directive,
                            guidelines, official request or rule which it is the
                            practice of banks in the relevant jurisdiction to
                            comply with) after the date of this Agreement which
                            affects banks or financial institutions of the same
                            type as any Finance Party in that jurisdiction; or

              (b)           compliance by any Finance Party (or its Holding
                            Company) with any such change or introduction;

              including, in each case, those relating to Taxation, reserves,
              special deposit, cash ratio, liquidity or capital adequacy
              requirements or other forms of banking, fiscal, monetary or
              regulatory controls:

              (i)           any Finance Party (or any Holding Company of such
                            Finance Party) incurs an increased cost as a result
                            of its (or such Holding Company's) having entered
                            into, and/or performing and/or maintaining and/or
                            funding its (or such Holding Company's) obligations
                            under, any Facility Document; or



                                      -71-


              (ii)   any Finance Party (or any Holding Company of such Finance
                     Party) incurs an increased cost in making, funding or
                     maintaining all or any Advances comprised in a class of
                     Advances formed by or including its (or such Holding
                     Company's) participation in some or all of the Advances
                     made or to be made under this Agreement; or

              (iii)  any amount receivable by any Finance Party under any
                     Facility Document is reduced (save to the extent matched by
                     a reduction in the cost of providing the Facilities) or the
                     effective rate of return to any Finance Party (or any
                     Holding Company of such Finance Party) under any Facility
                     Document or on its (or such Holding Company's) capital
                     employed for the purposes of this Agreement is reduced; or

              (iv)   any Finance Party (or any Holding Company of such Finance
                     Party) makes any payment or forgoes any Interest or other
                     return on or calculated by reference to any amount received
                     or receivable by it (or by such Holding Company) from any
                     Obligor or the Facility Agent or the Security Trustee or
                     any other Finance Party under any Facility Document;

              and such increased cost (or the relevant proportion thereof),
              reduction, payment, forgone Interest or other return is not
              compensated for by any other provision of this Agreement, then and
              in each such case:

              (A)           such Finance Party shall notify Partner of that
                            event promptly upon its becoming aware of the event
                            including, in reasonable detail, particulars of the
                            event; and


              (B)           within 5 (five) Business Days after receipt by
                            Partner of a demand from time to time by such
                            Finance Party accompanied by a certificate of such
                            Finance Party specifying the amount of compensation
                            claimed and setting out the calculation of the
                            amount in reasonable detail, Partner shall pay to
                            such Finance Party (or, as the case may be, Holding
                            Company of such Finance Party) such amount as shall
                            compensate such Finance Party (or such Holding
                            Company) for such increased cost (or, in the case of
                            (iii) above, the portion of such increased cost as
                            is attributable to its making, funding or
                            maintaining Advances), reduction, payment or forgone
                            Interest or other return. Nothing in this clause
                            12.1 shall oblige any Finance Party (or any Holding
                            Company of such Bank) to disclose any confidential
                            information relating to the organisation of its
                            affairs.


                                      -72-


21.2.         EXCEPTIONS

              Clause 12.1 (Increased Costs) above shall not apply so as to
              oblige Partner to compensate any Finance Party for any increased
              cost, reduction, payment or forgone Interest or other return
              resulting from any change in or the introduction of, or any change
              in the interpretation or application of, any law, regulation,
              treaty, directive, request or rules relating to, or any change in
              the rate of, Tax on Overall Net Income of such Finance Party.

22.    ILLEGALITY

       If any change in, or the introduction of, any law, regulation, treaty or
       official directive, guideline, official request or rule of any
       governmental, fiscal, monetary or regulatory (including self regulatory)
       authority, organisation or agency (including, position (guidelines) of
       the Examiner of Banks with respect to proper conduct of bank affairs
       ("Nihul Bankai Takin") having jurisdiction (whether or not having, in any
       such case, the force of law but, if not having the force of law, being
       one with which it is the practice of banks in the relevant jurisdiction
       to comply) (together "LAWS"), or any change in the interpretation,
       administration or application of Laws by a competent court or the
       relevant authority, organisation or agency or compliance by any Finance
       Party with any such change or introduction of Laws or change in
       interpretation, administration or application of Laws, shall make it (or
       make it apparent that it is) unlawful or a breach of Laws for any Finance
       Party to make available or fund or maintain the Advances or any part of
       the Advances under this Agreement or to give effect to its obligations
       and exercise its rights as contemplated by this Agreement, that Finance
       Party may, by notice to Partner, with a copy sent to the Facility Agent,
       declare that to the extent necessary to avoid any such illegality or
       breach of Laws its obligations to Partner under the Facility Documents
       shall be terminated forthwith or, if later, on the latest date to which
       the obligations may remain in effect without causing such Finance Party
       to be in breach of Laws, whereupon:

       (a)    PREPAY: Partner will forthwith, or by such later date as shall be
              immediately prior to the illegality or breach in question taking
              effect, prepay all outstanding Advances made by such Finance Party
              together with all Interest and other charges accrued thereon to
              the date of the prepayment (as well as amounts payable under
              clause 19 (Broken Funding Indemnity) below) and all other amounts
              payable to such Finance Party under the Facility Documents as
              shall be necessary to avoid any such illegality or breach by such
              Finance Party of any Laws; and

       (b)    COMMITMENTS: to the extent necessary to avoid any such illegality
              or breach of Laws such Finance Party's Commitments shall be
              cancelled and reduced to nil.



                                      -73-


23.    MITIGATION

23.1.         MITIGATION

              If circumstances arise in respect of any Finance Party which
              would, or upon the giving of notice would, result in the operation
              of clause 9 (Substitute Interest Rates), 11 (Taxes), 12 (Increased
              Costs) or 13 (Illegality) to the detriment of Partner, such
              Finance Party shall promptly upon becoming aware of the same
              notify Partner and, upon the written request of Partner, shall
              enter into discussions with Partner with a view to determining
              what mitigating action might be taken by such Finance Party,
              including transfer of its participation in the Facilities and its
              Commitments to another bank or financial institution.

              Without limiting or reducing the obligations of the Obligors (or
              any of them) under clauses 9 (Substitute Interest Rates), 11
              (Taxes), 12 (Increased Costs) or 13 (Illegality), the relevant
              Finance Party shall, upon the written request of Partner, take
              such reasonable steps as may be practical and open to it to
              mitigate or remove the effects of such circumstances or transfer
              of its participation in the Facilities and its Commitment to
              another bank or financial institution reasonably acceptable to
              Partner or the restructuring of its participation in this
              Agreement in a manner which will avoid the circumstances in
              question and on terms acceptable to the Facility Agent,
              Participating Banks and Partner, provided that nothing in this
              clause 14.1 shall oblige any Finance Party to take any such step
              if, in the opinion of such Finance Party (such opinion being
              conclusive) any such step might reasonably be expected to have an
              adverse effect upon its business, operations or financial
              condition or the management of its Tax affairs or its return in
              relation to the outstanding Advances made by it or cause it to
              incur any material costs or expenses.

23.2.         REPLACEMENT OF A BANK

              If such circumstances as are referred to in clause 14.1
              (Mitigation) shall arise, the Facility Agent, at the request of
              Partner, will consult with Partner with a view to identifying and
              approaching bank(s) and financial institution(s) acceptable to
              Partner who may be willing to become party to this Agreement as
              Participating Bank(s) in replacement for the relevant
              Participating Bank(s).

24.    REPRESENTATIONS AND WARRANTIES

24.1.         REPRESENTATIONS AND WARRANTIES



                                      -74-


              Partner, in respect of itself and each other Obligor, and each
              other Obligor in respect of itself, makes the representations and
              warranties set out in this clause 15 to each of the Finance
              Parties.

24.2.         STATUS

              It is a company limited by shares, duly incorporated and validly
              existing under the laws of the place of its incorporation and has
              the power to own its property and assets and carry on its business
              as it is now being and will be conducted. No event has occurred
              with respect of it which would constitute an Event of Default
              under clause 17.8 (Winding-Up) below were the proviso to such
              clause deleted.

24.3.         POWERS AND AUTHORITY

              It has the power to enter into and perform the Facility Documents
              and Material Contracts to which it is a party and the transactions
              to be implemented pursuant thereto and has taken all necessary
              action to authorise the entry into and performance of those
              documents and transactions. Without limiting the generality of the
              aforegoing, Partner represents and warrants that: (a) it has power
              to enter into all Facility Documents to which it is a party and to
              perform its obligations thereunder and hereunder and has taken all
              necessary action to authorise the entry into and performance of
              the transactions contemplated thereunder and hereunder; and (b)
              this Agreement constitutes its legal, valid, binding and
              enforceable obligations.




                                      -75-



24.4.         LEGAL VALIDITY

              Each Facility Document and Material Contract to which it is at any
              time a party (when executed by it or on its behalf) constitutes
              its legal, valid, binding and enforceable obligations and (without
              limiting the generality of the foregoing) each Security Document
              to which it is a party validly and effectively creates the
              Encumbrances which that Security Document purports to create or,
              as the case may be, accurately evidences an Encumbrance which has
              been validly created, in each case subject to the Reservations.

24.5.         NON-CONFLICT

              The entry into and performance of each Facility Document and
              Material Contract to which it is a party and the transactions to
              be implemented pursuant thereto do not and will not conflict with:

              (a)    any law or regulation or any official or judicial order
                     applicable to it, in any respect, or

              (b)    its constitutional documents or any of its resolutions
                     (having current effect) in any respect, or

              (c)    any agreement or instrument to which it or any Subsidiary
                     of it is a party or which is binding upon any of them or on
                     its assets or those of any such Subsidiary, in such a
                     manner or to such an extent which would be reasonably
                     likely to have a Material Adverse Effect or in a manner or
                     to an extent which is reasonably likely to result in any
                     liability on the part of any of the Finance Parties to any
                     third party by reason of any such conflict,

              nor will it result in the creation or imposition of any
              Encumbrance on any of its assets or those of any of its
              Subsidiaries (save for any Encumbrance created pursuant to the
              Security Documents).

24.6.         NO DEFAULT

              (a)    No Event of Default has occurred and is continuing which
                     has not been waived; and




                                      -76-



              (b)    No event has occurred and is continuing which has not been
                     waived and which constitutes or which, with the giving of
                     notice, expiry of any cure period, determination of
                     materiality or satisfaction of any other condition in each
                     case provided for in any such agreement or document, is
                     reasonably likely to constitute a default under or in
                     respect of any other agreement or document to which it or
                     any Subsidiary of it is a party in such a manner or to such
                     an extent which would be reasonably likely to have a
                     Material Adverse Effect.

24.7.         CONSENTS

              (a)    All Authorisations, exemptions and other matters required
                     by law (including, for the avoidance of doubt, the Licence)
                     for or in consequence of the entry into and performance by
                     it of and/or the validity of any of the Facility Documents
                     or Material Contracts to which it is a party or the
                     transactions to be implemented pursuant thereto, the
                     failure to obtain or effect which would be reasonably
                     likely materially to affect the interests of the
                     Participating Banks under the Facility Documents, have been
                     obtained or effected or will be obtained or effected prior
                     to the date required by law, save for registration with the
                     Pledges Registry, the Registrar of Companies, the Land
                     Registry and the Patents Registry, as applicable.

              (b)    The Licence is in full force and effect and each Obligor is
                     in compliance in all material respects with all provisions
                     thereof such that the Licence is not the subject of any
                     pending or, to the best of its knowledge, threatened
                     attack, suspension or revocation by any competent
                     authority. The period of the Licence is until 1 February
                     2022. All the Authorisations are in full force and effect,
                     it is in compliance in all material respects with all
                     provisions thereof and the Authorisations are not the
                     subject of any pending or, to the best of its knowledge,
                     threatened attack or revocation by any competent authority.
                     To the best of its knowledge, it is not aware of any
                     material breach of any Authorisation.

24.8.         ACCOUNTS

              (a)    Its Accounts most recently delivered to the Coordinating
                     Agent (or, if prior to the Commencement Date, to the
                     Facility Agent) and, where applicable, the Participating
                     Banks under clause 16.2.1 below, for the members of the
                     Group have been prepared, save as disclosed in notes to or
                     accompanying those Accounts, in accordance with the
                     provisions of clause 16.5 (Accounting Standards) below and
                     fairly present in all material respects its and (if
                     consolidated Accounts) its Subsidiaries'



                                      -77-


                     financial position as at the date to which the same were
                     prepared and/or (as appropriate) the results of operations
                     and (in the case of annual Accounts) changes in financial
                     position during the Accounting Period, subject, in the case
                     of half yearly and quarterly Accounts, to normal year end
                     adjustments made in accordance with Applicable Accounting
                     Principles.

              (b)    Save for any disposal or acquisition of any interest in any
                     company or any business or any merger of any members of the
                     Group, or any dissolution or liquidation of any member of
                     the Group (in each case as permitted by the terms hereof),
                     each of the consolidated Accounts of the Group delivered to
                     the Coordinating Agent (or, if prior to the Commencement
                     Date, to the Facility Agent) and, where applicable, the
                     Participating Banks under clause 16.2.1 below includes or
                     consolidates into such Accounts the results of each member
                     of the Group for the relevant Accounting Period.

              (c)    All forecasts and projections contained in the Business
                     Plan delivered to the Coordinating Agent (or, if prior to
                     the Commencement Date, to the Facility Agent) and, where
                     applicable, the Participating Banks under clause 16.2.1
                     below were arrived at after careful consideration, were
                     fair and were based on reasonable grounds and as at the
                     date of their delivery to the Coordinating Agent (or, if
                     prior to the Commencement Date, to the Facility Agent) and,
                     where applicable, the Participating Banks were not
                     misleading in any material respect.

              (d)    Nothing has occurred since the date of signature of the
                     Amending and Rescheduling Agreement or, if later, the date
                     of the audited consolidated Accounts most recently
                     delivered to the Coordinating Agent (or, if prior to the
                     Commencement Date, to the Facility Agent) and, where
                     applicable, the Participating Banks pursuant to clause
                     16.2.1 below which would have a material adverse effect on
                     the business, operations or financial condition of the
                     Group (taken as a whole) (other than as contemplated in the
                     Business Plan) (for which purposes the Facility Agent shall
                     consult with Partner prior to any determination as to the
                     occurrence of such an effect).

24.9.         LITIGATION

              Except as described in SCHEDULE 17 (Claims served on Partner or
              any of its Subsidiaries) or specifically stated in the notes to
              the latest set of Accounts of Partner delivered to the Facility
              Agent before the Commencement Date, no litigation, arbitration or
              administrative or regulatory proceedings or investigations for
              which process or initiation claims have been served on it



                                      -78-


              or any of its Subsidiaries are current and, to its knowledge, no
              litigation, arbitration, administrative or regulatory proceedings
              involving it or any of its Subsidiaries are pending or threatened
              which, if adversely determined, would have a Material Adverse
              Effect or which involves a liquidated claim or alleged liability
              which is likely to be in excess of US $15,000,000 (fifteen million
              United States Dollars) or its equivalent.

24.10.        TAX LIABILITIES

              Except as described in SCHEDULE 18 (Tax Claims asserted against
              Partner or any of its Subsidiaries) or specifically stated in the
              notes to the latest set of Accounts of Partner delivered to the
              Facility Agent before the Commencement Date, no claims are being
              asserted against it or any of its Subsidiaries with respect to
              Taxes which are reasonably likely to be determined adversely to it
              or to such Subsidiary, in each case, which, if so adversely
              determined, would have a Material Adverse Effect. It is not
              materially overdue in the filing of any Tax returns required to be
              filed by it (where such late filing might result in any material
              fine or penalty on it) and it has paid all Taxes shown to be due
              on any Tax returns required to be filed by it or on any
              assessments made against it for non-payment, or a claim for
              payment, non-payment of which would in each such case have a
              Material Adverse Effect.

24.11.        ENCUMBRANCE

              No Encumbrance exists over its or any of its Subsidiaries' assets
              which would cause a breach of clause 16.6 (Negative Pledge) below.




                                      -79-



24.12.        BUSINESS PLAN

              Any factual information provided by an Obligor for the purposes of
              the Business Plan was true and accurate in all material respects
              as at the date it was provided or as at the date (if any) at which
              it is stated. All forecasts and projections contained in the
              Business Plan are fair and were prepared on the basis of recent
              historical information and on the basis of reasonable assumptions.
              Nothing has occurred or been omitted from the Business Plan and no
              information has been given or withheld that results in the
              information contained in the Business Plan being untrue or
              misleading in any material respect.

24.13.        OWNERSHIP OF ASSETS

              As at the time this representation is given or repeated, it has
              good title to or valid leases or licences of or is otherwise
              lawfully entitled to use all material assets necessary to conduct
              its business as and to the extent conducted by it at such time.

24.14.        DOCUMENTS

              The documents delivered to the Facility Agent by or on behalf of
              any Obligor pursuant to clause 3 (Conditions Precedent) of the
              Original Facility Agreement, clause 3 (Conditions Precedent) of
              the Amending and Rescheduling Agreement, clause 3 of the Amending
              Agreement dated as of 31 December 2002 and under any other
              provision of the Facility Documents were genuine and in the case
              of copy documents, were at the date of delivery true, complete and
              accurate copies in all material respects, of originals which had
              not been amended, varied, supplemented or superseded in any way
              which would be likely materially to affect the interests of the
              Finance Parties under the Facility Documents.

24.15.        INTELLECTUAL PROPERTY RIGHTS

              (a)    It (or another Obligor) owns or has the legal right to use
                     all the Intellectual Property Rights which are material to
                     the Business and the conduct of the business of any member
                     of the Group from time to time or are required by it in
                     order for it to carry on its business in all material
                     respects as it is then being conducted and as far as it is
                     aware it does not, in carrying on its business, infringe
                     any Intellectual Property Rights of any third party in any
                     way which would have a Material Adverse Effect.



                                      -80-


              (b)    None of the Intellectual Property Rights which are material
                     in the context of the business of any member of the Group
                     is, to its knowledge, being infringed nor, to its
                     knowledge, is there any threatened infringement of those
                     Intellectual Property Rights, by any third party which
                     would be reasonably likely to have a Material Adverse
                     Effect.

              (c)    All registered Intellectual Property Rights owned by it and
                     which are material to the conduct of the business of any
                     member of the Group are subsisting and in full force and
                     effect.

24.16.        ENVIRONMENTAL MATTERS

              (a)    It: (i) has obtained all requisite Environmental Licences
                     required for the carrying on of its business as currently
                     conducted and (ii) has at all times complied with the terms
                     and conditions of such Environmental Licences and (iii) has
                     at all times complied with all other applicable
                     Environmental Law, which in each such case, if not obtained
                     or complied with, would have a Material Adverse Effect.

              (b)    There is no Environmental Claim pending or threatened
                     against that Obligor which is reasonably likely to be
                     decided against that Obligor and which, if so decided,
                     would have a Material Adverse Effect.

              (c)    So far as each Obligor is aware, no Dangerous Substance has
                     been used, disposed of, generated, stored, transported,
                     dumped, released, deposited, buried or emitted at, on, from
                     or under any premises (whether or not owned, leased,
                     occupied or controlled by any Obligor or any of its
                     Subsidiaries and including any offsite waste management or
                     disposal location utilised by any Obligor or any such
                     Subsidiary) in circumstances where this would be reasonably
                     likely to result in a liability on any Obligor which would
                     have a Material Adverse Effect.

24.17.        RANKING OF SECURITY

              The security conferred by the Security Documents constitutes a
              priority security interest of the type therein described over the
              security assets therein referred to which are not subject to any
              prior or pari passu Encumbrances except as permitted by clause
              16.6 (Negative Pledge) below.

24.18.        MATERIAL CONTRACTS

              (a)    The Material Contracts to which any Obligor is party are in
                     full force and effect.



                                      -81-


              (b)    No Obligor is and, so far as it is aware (after having made
                     all reasonable enquiries within the relevant Obligor), no
                     Counterparty is, in breach of any material term of any
                     Material Contracts.

              (c)    There are no material disputes subsisting between any
                     Obligor and any other party to any Material Contract.

              (d)    No waivers have been granted by or in favour of any Obligor
                     pursuant to any material term of any Material Contract in
                     any respect which would be reasonably likely to be adverse
                     to the interests of the Participating Banks under the
                     Facility Documents.

              (e)    No material amendments have been made to any Material
                     Contract in any respect which would be reasonably likely to
                     be adverse to the interests of the Participating Banks
                     under the Facility Documents, save for amendments on or
                     prior to the date of signature of the Amending and
                     Rescheduling Agreement which have been disclosed to the
                     Facility Agent in writing prior to the date thereof.

              (f)    There are no other agreements which are material to the
                     Business (or any part thereof) and would be reasonably
                     likely to affect adversely the decision of a Participating
                     Bank when considering the provision of the Facilities on
                     the terms and subject to the conditions set out herein.

24.19.        OWNERSHIP OF PARTNER

              The share capital in Partner is owned by the Shareholders in the
              respective percentages as set out in Schedule 9 (Principal
              Shareholders of Partner) and Partner has no Subsidiaries save for
              the Guarantors.










                                      -82-




24.20.        BORROWINGS

              No Obligor has any Borrowings other than Borrowings which qualify
              as Permitted Borrowings.

24.21.        REPETITION

              The representations and warranties set out in this clause 15 shall
              survive the execution of the Amending and Rescheduling Agreement
              and the making of each Advance hereunder and shall be deemed to be
              repeated on the Commencement Date and (except in the case of the
              second sentence of clause 15.2 (Status), clauses 15.7 (Consents),
              15.8(d) (Accounts), 15.9 (Litigation), 15.12 (Business Plan),
              15.14 (Documents), 15.18 (Material Contracts), 15.19 (Ownership of
              Partner) and 15.20 (Borrowings)) shall be deemed to be repeated on
              the date of delivery of each Drawdown Request hereunder and on
              each date on which Advance is made and on the first day of each
              Interest Period, with reference to the facts and circumstances
              then subsisting, as if made at each such time.

25.    UNDERTAKINGS

25.1.         DURATION

              The undertakings in this clause 16 shall remain in force so long
              as any amount is or may be outstanding under any Facility Document
              or any Commitment is in force.

25.2.         FINANCIAL INFORMATION

25.2.1.             Partner shall furnish or procure that there shall be
                    furnished to the Participating Banks and the Coordinating
                    Agent:

                     (a)    as soon as the Accounts referred to in (i) and (ii)
                            below are published (and in any event within 120
                            (one hundred and twenty) days) after the end of each
                            annual Accounting Period):

                            (i)    the audited consolidated Accounts of the
                                   Group for that financial year (which shall
                                   include notes setting out nominal NIS
                                   figures); and

                            (ii)   in the case of Partner and each Subsidiary of
                                   Partner, the non-consolidated audited
                                   Accounts for that financial year for Partner
                                   and for each Subsidiary of Partner;


                                      -83-



                     (b)    as soon as practicable (and in any event within 70
                            (seventy days)) after the end of the first half-year
                            of each of its financial years, the unaudited
                            non-consolidated reviewed Accounts of Partner and of
                            each Subsidiary of Partner, for that half-year;

                     (c)    as soon as practicable (and in any event within 45
                            (forty-five) days after the end of each of the first
                            3 (three) Quarters), the unaudited non-consolidated
                            reviewed financial statements of Partner and the
                            unaudited consolidated reviewed Accounts of Partner,
                            for that Quarter;

                     (d)    as soon as practicable (and in any event within 45
                            (forty-five) days after the end of each Quarter, a
                            report in an agreed form setting out statistics
                            covering the level of, inter alia, subscribers,
                            subscriber penetration, build-out, revenue per
                            subscriber, churn and Capital Expenditure of Partner
                            for that Quarter and on a cumulative basis for the
                            calendar year in which such Quarter falls, such
                            reports to distinguish between subscribers for each
                            of GSM and 3rd Generation UMTS and Capital
                            Expenditure in the 3rd Generation UMTS network;

                     (e)    at the same time as the annual and semi-annual
                            Accounts are delivered pursuant to paragraph (a)
                            above, a certificate of the Auditors, in a form
                            reasonably satisfactory to the Instructing Group:

                           (i)      setting out in reasonable detail
                                    computations establishing, as at the date of
                                    such Accounts, whether each of the financial
                                    ratios set out in clause 16.32 (Financial
                                    Undertakings) below were complied with; and

                           (ii)     setting out in reasonable detail
                                    computations establishing the Excess Cash
                                    Flow as at the date of such Accounts; and

                           (iii)    stating that the Auditors did not, in the
                                    course of their audit or review, as
                                    applicable, discover any breach of the
                                    obligations set out in clause 16.32
                                    (Financial Undertakings) below;

                            All Accounts as aforesaid shall, in addition to any
                            other requirements under this clause 16.2.1, contain
                            all the notes and be accompanied by all the
                            certificates referred to in clause 1.2.2 above;


                                      -84-



                           (f)      not less than 15 (fifteen) days nor more
                                    than 90 (ninety) days before the end of each
                                    annual Accounting Period, a revised business
                                    plan and revised cash flow projections
                                    approved by the Board of Directors of
                                    Partner containing cash flow projections to
                                    30 June 2009 in substantially the same form
                                    as in the Business Plan; provided that the
                                    obligation to provide the revised business
                                    plan and cash flow projections referred to
                                    in this paragraph (f) shall cease on the
                                    date on which Partner has repaid at least
                                    75% (seventy-five percent) of the
                                    Facilities, such that the aggregate
                                    Commitments shall be no more than 25%
                                    (twenty-five percent) of the aggregate
                                    Facilities as at the Commencement Date;
                                    provided that, in respect of the one year
                                    Ratio Period immediately preceding such
                                    date, the Margin for Facility A and Facility
                                    B has in accordance with clause 1.1.114
                                    above been reduced to 0.7% (nought point
                                    seven percent).

25.2.2.       Partner shall supply to the Coordinating Agent:

                  (a)      together with the quarterly Accounts specified in
                           clause 16.2.1 above; and

                  (b)      (in the case of paragraph (iii) below,) promptly at
                           any other time, if the Coordinating Agent so
                           reasonably requests,

                  a certificate signed by the Chief Financial Officer of Partner
                  on its behalf setting out in reasonable detail computations
                  establishing, as at the date of such Accounts, whether each of



                                      -85-





                  the financial ratios set out in clause 16.32 (Financial
                  Undertakings) below were complied with and certifying that:

                  (i)      the relevant Accounts fairly present (in relation to
                           the relevant Accounting Period), the financial
                           position of the relevant Obligor;

                  (ii)     the relevant Accounts were prepared in accordance
                           with the Applicable Accounting Principles; and

                  (iii)    no Event of Default or Potential Event of Default is
                           outstanding or, if an Event of Default or Potential
                           Event of Default is outstanding, specifying the Event
                           of Default or Potential Event of Default and the
                           steps, if any, being taken to remedy it.

                  (c)      together with the quarterly Accounts specified in
                           clause 16.2.1 above, as to the amount of Partner's
                           Excess Cash Flow for such Quarter.

25.2.3.           If in the course of any annual Accounting Period Partner
                  updates or revises any of the assumptions underlying the
                  projections furnished to the Participating Banks pursuant to
                  clause 16.2.1(f) above in any material respect, Partner shall
                  furnish or procure that there shall be furnished to the
                  Participating Banks such updated assumptions.

25.2.4.           The format of any financial reports (including, annual audited
                  accounts, quarterly reports and the such like) to be delivered
                  under this clause 16.2.1 shall, in addition, be in a format
                  consistent with the Business Plan.

25.2.5.           As soon as practicable (and, in any event, within 5 (five)
                  Business Days after the end of each Quarter), Partner shall
                  send to the Coordinating Agent (with sufficient copies for
                  each of the Participating Banks):

                  (a)    a certificate signed by Partner's General Manager and
                         Chief Financial Officer certifying that Partner is in
                         full compliance with all of the terms and conditions of
                         each of the Facility Documents and if not so in
                         compliance, specifying the relevant non-compliance and
                         the steps, if any, being taken to remedy it;

                  (b)    a report certified by the General Manager and Chief
                         Financial Officer of Partner detailing the occurrences
                         of any of the following that have taken place during
                         the preceding Quarter:


                                      -86-




                           (i)      a Permitted Investment made or resolved to
                                    be made by Partner in an aggregate amount
                                    equal to or in excess of US $10,000,000 (ten
                                    million United States Dollars);

                           (ii)     the receipt of any Permitted Borrowing (save
                                    for Permitted Borrowings as referred to in
                                    clauses 1.1.126(a) and (f)) that has taken
                                    place (including, the entering into of any
                                    agreement whereunder Partner may receive any
                                    Permitted Borrowing), the amount of which
                                    Permitted Borrowing equals or exceeds US
                                    $2,500,000 (two million five hundred
                                    thousand United States Dollars), as well as
                                    the receipt of any type of Permitted
                                    Borrowings, the cumulative aggregate of
                                    which equals or exceeds US $10,000,000 (ten
                                    million United States Dollars));

                           (iii)    a resolution of any organ of Partner to
                                    make, or evidencing any intention to make,
                                    whether conditionally or unconditionally,
                                    preparations for the issuance of a
                                    prospectus and/or any offer to the public
                                    (whether or not any such offer requires the
                                    approval or publication of a prospectus), in
                                    any jurisdiction, relating to the sale or
                                    offer of any securities or debentures of
                                    Partner;

                           (iv)     any loans, guarantees or investments made by
                                    Partner as referred to in clause 16.37
                                    (Loans, Guarantees and Investments in
                                    Subsidiaries) below;

                           (v)      any disposal as referred to in clause 7.2.1
                                    above, the Dollar Amount (or, if denominated
                                    in a currency other than US Dollars, the
                                    Dollar equivalent) of the Net Proceeds of
                                    which exceeds when aggregated with the Net
                                    Proceeds of all such other disposals in the
                                    Fiscal Year in which such Quarter occurs, US
                                    $2,500,000 (two million five hundred
                                    thousand United States Dollars).

25.2.6.              Partner's ability to make any Permitted Investment under
                     this Agreement will be conditional upon such Permitted
                     Investment being first pledged in favour of the Security
                     Trustee (acting as trustee for itself and for the Secured
                     Creditors) by way of a first pledge and charge under the
                     Debenture or any other charge, in a form satisfactory to
                     the Security Trustee.



                                      -87-



25.2.7.              Without derogating from any other obligations imposed on
                     Partner under this Agreement to provide information,
                     Partner shall furnish to the Facility Agent and the
                     Coordinating Agent (with sufficient copies for each of the
                     Participating Banks):

                     (i)    promptly, all filings, documents, forms, reports and
                            notices filed by or on behalf of Partner, or by any
                            of its Shareholders with respect to Partner (to the
                            extent Partner is aware of such Shareholders'
                            filing), with the US Securities and Exchange
                            Commission, the London Stock Exchange, NASDAQ, any
                            other stock exchange or any securities regulatory
                            authority, from time to time; and

                     (ii)   promptly, all such other information as shall
                            reasonably be requested, from time to time, by any
                            of the Participating Banks.

                     (iii)  as soon as practicable (and in any event within 5
                            (five) Business Days) after each Quarter, a report
                            setting out in a form as set out in SCHEDULE 19
                            (Quarterly Report), details of:

                           (a)      with respect to each of Facility A and
                                    Facility C, all Drawdown Requests made
                                    during the preceding Quarter (such
                                    information to include the amount of the
                                    Advance requested by Partner under each such
                                    Drawdown Request, the currency of the
                                    Advance requested as aforesaid, the amount
                                    and/or currency advanced by a Participating
                                    Bank if different to that requested under
                                    the relevant Drawdown Request, the type of
                                    Advance and rate of Interest applicable and
                                    the identity of the Participating Banks to
                                    whom such Drawdown Requests were made) and,
                                    with respect to Facility B, the aggregate
                                    amount of Advances requested by Partner from
                                    each Participating Bank during the preceding
                                    Quarter (such information to include the
                                    aggregate of Advances classified also in
                                    accordance with each currency, each type of
                                    Advance and each type of rate of Interest
                                    applicable). Each Participating Bank shall
                                    after receipt of such report, advise Partner
                                    in writing (with a copy to the Coordinating
                                    Agent) as to whether such report, to the
                                    extent relating to such Participating Bank,
                                    is accurate and, if not, shall indicate
                                    which part of such report is inaccurate;

                           (b)      all payments made during the preceding
                                    Quarter by Partner under the Facilities (or,
                                    in the case of Facility B,


                                      -88-




                                    the aggregate of such payments during such
                                    Quarter), specifying the identity of the
                                    Participating Banks to whom any such
                                    payments were made, the currency of such
                                    payment, the amount of such payment, whether
                                    such payments were made on account of
                                    Interest, Linkage Differentials, if
                                    applicable, principal of the outstanding
                                    Advances or on account of any other amount,
                                    whether, in the case of a prepayment
                                    pursuant to clause 6 (Voluntary Prepayment
                                    and Reborrowing) above, any of such payments
                                    were made from a Permitted Source (and, if
                                    so, a copy of the certificate referred to in
                                    clause 6 (Voluntary Prepayment and
                                    Reborrowing) above relating thereto shall be
                                    attached to such report), or a mandatory
                                    prepayment (together with details thereof)
                                    and which of the Facilities any of such
                                    payments were made on account of);

                           (c)      the outstanding amounts owed by Partner to
                                    each Participating Bank under each of the
                                    Facilities: (i) expressed in US Dollars (or,
                                    if denominated in NIS or Euros, in their
                                    Dollar equivalent); (ii) expressed in the
                                    currency of which such amounts are due; and
                                    (iii) specifying the percentage of the
                                    Amount of the Outstanding A and B Advances
                                    (as defined in clause 2.1.2 above)
                                    denominated in each of US Dollars, Euros and
                                    NIS as at the Quarter Day for such Quarter.




                                      -89-






25.3.    INFORMATION-MISCELLANEOUS

         Partner shall furnish or procure that there shall be furnished to the
         Facility Agent in sufficient copies for each of the Participating
         Banks:

         (a)      promptly, all notices, reports or other documents required by
                  statute or any applicable rules to be despatched by any
                  Obligor to its shareholders generally (or any class of them)
                  and all notices, reports or other documents relating to the
                  financial difficulties or debt obligations of any Obligor
                  despatched by or on behalf of any Obligor to its creditors
                  generally (in their capacity as creditors);

         (b)      as soon as the same are instituted or, to its knowledge,
                  threatened, details of any litigation, arbitration or
                  administrative proceedings involving it or any of its
                  Subsidiaries which, if adversely determined, would have a
                  Material Adverse Effect or which involves a liquidated claim
                  or alleged liability which is likely to be in excess of US
                  $15,000,000 (fifteen million United States Dollars) or its
                  equivalent;

         (c)      promptly, such further information regarding its financial
                  condition, business and assets and that of the Group and/or
                  any member thereof (including any requested amplification or
                  explanation of any item in any Accounts, any business plan,
                  forecasts, projection or other material provided by any
                  Obligor hereunder) as the Facility Agent or any Participating
                  Bank may reasonably request from time to time provided that
                  where any information is subject to a confidentiality
                  agreement entered into by the relevant member of the Group in
                  the ordinary course of its business, it shall use its
                  reasonable endeavours to obtain, or shall procure that the
                  relevant member of the Group uses its reasonable endeavours to
                  obtain, consent to disclose such information but if such
                  consent is not forthcoming, this clause 16.3 will not be
                  breached by the failure to deliver the information subject to
                  the confidentiality agreement with someone other than a
                  Restricted Person;

         (d)      promptly, upon being notified of the same, details of the
                  occurrence of a Change of Ownership or details of any proposed
                  Change of Ownership of which it is aware;

         (e)      promptly on request by the Facility Agent, a copy of any
                  agreements and arrangements between the Shareholders (or any
                  Affiliates of the Shareholders) which may replace or amend the
                  Shareholders Agreement.



                                      -90-




25.4.    AUDIT AND ACCOUNTING DATES

         Partner  will ensure that:

         (a)      the annual Accounts to be delivered to the Coordinating Agent
                  and the Participating Banks pursuant to clause 16.2.1 above
                  are audited by the Auditors;

         (b)      each Obligor shall at all times have duly appointed Auditors;
                  and

         (c)      Partner will not, and no Obligor will, change its financial
                  year end without the prior written consent of the Facility
                  Agent other than (in the case of any other Obligor) to conform
                  its financial year end to that of Partner.

25.5.    ACCOUNTING STANDARDS

         (a)      Partner will ensure that:

                  (i)      all Accounts shall be prepared in accordance with the
                           Applicable Accounting Principles (consistently
                           applied) or shall indicate in notes to or
                           accompanying such Accounts any material departures
                           from the Applicable Accounting Principles;

                  (ii)     each set of Accounts delivered to the Coordinating
                           Agent and the Participating Banks is prepared on
                           substantially the same basis (including, for the
                           avoidance of doubt, adopting the same treatment and
                           classification of items of income and expenditure) as
                           was used in the preparation of the Accounts
                           previously delivered to the Coordinating Agent (or,
                           prior to the Commencement Date, to the Facility
                           Agent) and the Participating Banks, provided that in
                           the case of the first set of Accounts so delivered
                           they shall be prepared on the same basis as was used
                           in the preparation of the financial statements
                           included in the Business Plan previously delivered to
                           the Coordinating Agent (or, prior to the Commencement
                           Date, to the Facility Agent) and the Participating
                           Banks, save to the extent that good practice or law
                           requires otherwise; and

                  (iii)    in the event that any Accounts are delivered which
                           are not prepared on a substantially consistent basis
                           (including, for the avoidance of doubt, a consistent
                           treatment and classification of items of income and
                           expenditure) to Accounts previously



                                      -91-




                           delivered hereunder, such Accounts are accompanied by
                           an explanation of any changes to the accounting basis
                           used in respect of the accounting basis used in the
                           Business Plan and with a reconciliation of all
                           changes to allow for consistent testing of the
                           covenants in clause 16.32 (Financial Undertakings)
                           below.

         (b)      Partner will ensure that all Accounts shall fairly present in
                  all material respects (subject to adjustments which fall to be
                  made at the end of the financial year in accordance with
                  Applicable Accounting Principles) the consolidated financial
                  position and results of operations of the relevant member of
                  the Group and its Subsidiaries (in the case of consolidated
                  Accounts) or its financial position and results of operations
                  (in the case of unconsolidated Accounts), as at the end of and
                  for the Accounting Period to which they relate.

         (c)      Partner shall, at the same time as it delivers to the
                  Coordinating Agent any audited consolidated annual Accounts of
                  the Group pursuant to clause 16.2.1 above deliver to the
                  Coordinating Agent a letter explaining any differences between
                  the format, headings and characterisations used in such
                  audited consolidated annual Accounts of the Group and in the
                  half-yearly or quarterly consolidated Accounts of the Group
                  delivered pursuant to clause 16.2.1 above where those
                  differences would affect the ability of the Facility Agent to
                  calculate the components of the financial ratios in clause
                  16.32 (Financial Undertakings) below.

25.6.    NEGATIVE PLEDGE

         No Obligor will, and each Obligor will procure that none of its
         Subsidiaries will, without the prior consent of the Facility Agent,
         acting on the instructions of an Instructing Group, create or permit to



                                      -92-





         subsist any Encumbrance on the whole or any part of its respective
         present or future business, assets or undertaking, except:

         (i)      that Partner may create or permit to subsist a Permitted
                  Encumbrance;

         (ii)     without derogating from the second sentence of clause 16.22
                  (Borrowings) below, that a Subsidiary (other than a Venture
                  Subsidiary and any Subsidiary of a Venture Subsidiary) may
                  create or permit to subsist a Permitted Encumbrance; and

         (iii)    that a Venture Subsidiary and any Subsidiary of a Venture
                  Subsidiary may create or permit to subsist an Encumbrance to
                  the extent, and only to the extent, any such Encumbrance
                  secures Borrowings that such Venture Subsidiary or Subsidiary,
                  as the case may be, is entitled to incur pursuant to the
                  second sentence of clause 16.22 (Borrowings) below;

         provided that any order of attachment or injunction restraining
         disposal of assets or similar legal process arising in connection with
         court proceedings being contested in good faith with a reasonable
         prospect of success which does not result from proceedings which would
         constitute an Event of Default pursuant to clause 17.9 (Execution or
         Distress) below shall not constitute a breach of this clause 16.6.

25.7.    SALE AND LEASEBACK

         No Obligor will, and each Obligor will procure that none of its
         Subsidiaries will sell, transfer or otherwise dispose of any of its
         assets or any interest therein on terms whereby such asset is or may be
         leased to or re-acquired or acquired by any member of the Group in
         circumstances where the transaction is entered into primarily as a
         method of raising finance or of financing the acquisition of an asset
         except pursuant to finance leases permitted under clause 16.22
         (Borrowings) below.

25.8.    DISPOSALS

         No Obligor will, and each Obligor will procure that none of its
         Subsidiaries will, either in a single transaction or in a series of
         transactions whether related or not and whether voluntarily or
         involuntarily, sell, transfer, lease or otherwise dispose of all or any
         part of or interest in its respective assets or undertaking to any
         person who is not an Obligor, other than a Permitted Disposal. Nothing
         in this clause 16.8, however, will permit the disposal of any assets
         which are the subject of fixed security created by any Security
         Document except in accordance with the relevant Security Document


                                      -93-




         without the consent of all Participating Banks. Without derogating from
         the last sentence of this clause 16.8, without the consent of the
         Instructing Group, no such sale, transfer, lease or disposal of all or
         any part of or interest in any asset or undertaking shall be made to an
         Affiliate of Partner unless it is made on arm's length terms.

25.9.    PARI PASSU RANKING

         Each Obligor undertakes that its obligations under this Agreement rank
         and will at all times rank at least pari passu in right and priority of
         payment and in point of security (save by reason of and to the extent
         of the security afforded thereto by the Security Documents) with all
         its other present and future unsecured and unsubordinated obligations,
         other than obligations which are mandatorily preferred by law applying
         to companies generally.

25.10.   LOANS AND GUARANTEES

         No Obligor will, and each Obligor will procure that none of its
         Subsidiaries will:

         (a)      make any loans; or

         (b)      give any guarantee to or for the benefit of any person,

         other than loans or guarantees:

         (i)      arising under the Facility Documents;

         (ii)     arising in the ordinary course of its business;

         (iii)    to, or in respect of the obligations of, another Obligor; or

         (iv)     permitted under clause 16.37 (Loans, Guarantees and
                  Investments in Subsidiaries) below.

25.11.   OPERATING LEASES

         No Obligor will, and each Obligor will procure that none of its
         Subsidiaries will, after the date of this Agreement enter into any
         operating lease of or in respect of equipment, machinery or plant
         (other than any private circuits, leased lines and motor vehicles and
         other than any computer or information technology systems used in the
         ordinary course of business of any member of the Group) if the
         equipment, machinery or plant concerned is of such importance in the
         business of the Group taken as a whole that such business


                                      -94-




         would be materially and adversely affected were the leases for such
         equipment, machinery or plant to be terminated early and the right to
         possession of the equipment, machinery or plant lost to the Group.

25.12.   RECEIVABLES DISCOUNTING

         No Obligor will, and each Obligor will procure that none of its
         Subsidiaries will sell or otherwise dispose of any of its receivables
         other than: (i) the sale, on arm's' length terms, of debts owing to the
         Group which are more than 90 (ninety) days' overdue; or (ii) the sale,
         on arm's length terms, of debts owing to the Group incurred in
         connection with the sales of handsets, provided the aggregate amount of
         receivables permitted to be sold pursuant to this paragraph (ii) shall
         not at any time exceed an aggregate amount equal to US $20,000,000
         (twenty million United States Dollars) or its equivalent.

25.13.   INVESTMENTS

         No Obligor will, and each Obligor will procure that none of its
         Subsidiaries will, make any investment with cash other than a Permitted
         Investment or in the business of the Group as permitted hereby or such
         other investments as are permitted under clause 16.37 (Loans,
         Guarantees and Investments in Subsidiaries) below.

25.14.   RESTRICTED DISTRIBUTIONS

         Partner will not and will procure that no member of the Group will:

         (i)      make or resolve to make any distribution (including, any
                  distribution defined as such under the Companies Law, 1999),
                  dividend or other similar payment (in cash or in kind) on or
                  in respect of any share capital or equivalent of a member of
                  the Group (except to Partner and, in the case of a Strategic
                  Investor in a Venture Subsidiary, except for distributions by
                  such Subsidiary to such Strategic Investor) or any repayment,
                  prepayment or payment (in cash or in kind) of the principal
                  of, or Interest (whether or not capitalised) or any other
                  amount on or in respect of Subordinated Debt or Shareholder
                  Loans (except to Partner and, in the case of a Strategic
                  Investor in a Venture Subsidiary, except for distributions by
                  such Subsidiary to such Strategic Investor), other than a
                  Permitted Distribution;

         (ii)     make or resolve to make any purchase, redemption, repurchase,
                  defeasance, retirement, return or repayment of any of its
                  share capital or equivalent or any loan capital or any
                  debenture of a member of the


                                      -95-




                  Group (other than by way of a reduction of share capital
                  without any payment to Shareholders), except to or for the
                  benefit of Partner;

         (iii)    make or resolve to make any other transfer of assets to or
                  Restricted Purchases from any Shareholder or other Restricted
                  Person (except as permitted under clause 16.23 (Arm's-Length
                  Terms) below); or

         (iv)     exercise any right of set-off in respect of any Shareholder
                  Loans or Subordinated Debt.

         Where any payment is proposed to be made under this clause 16.14,
         Partner shall, prior to making such payment, provide to the Instructing
         Group not less than 10 Business Days before the proposed date for
         payment, a certificate signed by an authorised signatory of Partner
         showing:

         (x)      the date and amount of such proposed payment; and

         (y)      such calculations in reasonable details as are necessary to
                  show how the payment figure was arrived at and that the
                  provisions of the definition of 'Permitted Distributions' have
                  been complied with.

         "PERMITTED DISTRIBUTION" means:

         (i)      a distribution of dividends on or in respect of any share
                  capital of Partner;

         (ii)     a distribution of principal, Interest or any other payments
                  under any Shareholder Loans;

         (iii)    a distribution of principal under any Subordinated Debt
                  (including, for the avoidance of doubt, debentures included in
                  Permitted Loan Capital);

         (iv)     a distribution of Interest under any Permitted Loan Capital
                  comprising debentures,

         on condition, with respect to (i)-(iii) (inclusive) above, that all the
         conditions referred to in (a)-(j) below are fulfilled and, on
         condition, with respect to (iv) above, that the conditions referred to
         in (b), (c), (d), (f) and (j) are fulfilled:

         (a)      Partner is able, in accordance with its Cash Flow as shown in
                  its most recent Accounts, to pay all outstanding operating
                  expenditure



                                      -96-





                  requirements (including Taxes and investment requirements) and
                  would remain able to do so after such payment;

         (b)      no amount due to be paid to the Security Trustee or any other
                  Agent under the Facility Agreement, on or before the date of
                  payment of the distribution, is unpaid;

         (c)      no amount due to be paid to any Participating Bank, on or
                  before the date of payment of the distribution, on account of
                  Interest on any Advance provided by a Participating Bank under
                  the Facilities, or on account of commitment commissions or
                  other charges arising from any banking or other financial
                  services provided by a Participating Bank to Partner, is
                  unpaid;

         (d)      no amount due to any Participating Bank, on or before the date
                  of payment of the distribution, on account of any repayment of
                  any of the Facilities, is unpaid;

         (e)      Permitted Distributions may not, in a given Financial Year,
                  exceed, in aggregate, an amount equal to 50% (fifty percent)
                  of Excess Cash Flow arising in relation to the previous
                  Financial Year;

         (f)      no Event of Default or Potential Event of Default is
                  outstanding or would exist after such payment;

         (g)      such distribution is made no earlier than one year after the
                  expiry of the Availability Period Facility C;

         (h)      Partner has repaid (disregarding, for this purpose, any amount
                  which has been prepaid and is capable of being reborrowed
                  under the terms of this Agreement) to the Participating Banks
                  on account of the Facilities an amount equal to at least 50%
                  (fifty percent) of the Total Commitments;

         (i)      with respect to distributions to be made:

                     (a)    in any one year Ratio Period ("THE DISTRIBUTION
                            RATIO PERIOD") during the period 2003-2007
                            (inclusive), each of the Facility Debt Cover Ratio,
                            Total Debt Cover Ratio, Fixed Charge Coverage Ratio
                            and ADSCR for the one year Ratio Period immediately
                            preceding the Distribution Ratio Period, shall be
                            not less than 135% (one hundred and thirty-five
                            percent) of such minimum ratio required for such
                            immediately preceding one year Ratio Period pursuant
                            to the table in clause 16.32 below;


                                      -97-






                     (b)    in the one year Ratio Period 2008, the Total Debt
                            Cover Ratio for the 2007 one year Ratio Period shall
                            be not less than 135% (one hundred and thirty-five
                            percent); and

                     (c)    in the one year Ratio Period 2009, the Total Debt
                            Cover Ratio for the 2008 one year Ratio Period shall
                            be not less than 280% (two hundred and eighty
                            percent)

         (j)      Partner shall have complied with the provisions of clause
                  1.1.131(f) above.

25.15. SHARE CAPITAL

         (a)      Save only as permitted pursuant to the provisions of this
                  clause 16.15 below, no Obligor, other than Partner, will and
                  Partner will procure that, none of its Subsidiaries will,
                  issue any new share capital or grant any option over any
                  shares to any person other than to Partner or any wholly-owned
                  Subsidiary of Partner. Any shares or options issued to Partner
                  or any wholly-owned Subsidiary of Partner as aforesaid shall
                  first be charged in favour of the Security Trustee (as trustee
                  for itself and the Secured Creditors), as security for, inter
                  alia, Partner's obligations under the Facility Documents, to
                  the reasonable satisfaction of the Security Trustee.
                  Notwithstanding the foregoing, in the event a Strategic
                  Investor agrees to subscribe for shares in a Subsidiary for an
                  aggregate issuance price, payable on allotment in cash that
                  reflects the fair market value of such shares and that, upon
                  such subscription, such Strategic Investor would, if an
                  Affiliate of Partner, hold 20% (twenty percent) or more or, if
                  not an Affiliate of Partner, 10% (ten percent) or more of the
                  issued share capital and voting rights of the Subsidiary,
                  then, provided that: (i) Partner provides the Participating
                  Banks with a certificate to the Instructing Group's
                  satisfaction from an independent appraiser reasonably
                  acceptable to an Instructing Group certifying that the issue
                  price for such shares is their fair market value; and (ii) in
                  the case that the Strategic Investor is an Affiliate of
                  Partner, the subscription is otherwise on arm's length terms,
                  Partner shall be entitled to request the Facility Agent,
                  acting on the instructions of an Instructing Group, to: (1)
                  waive the requirements under this clause 16.15 that: (a) do
                  not permit the issuance of shares in such Subsidiary agreed to
                  be subscribed for by such Strategic Investor; (b) require
                  security to be granted over the shares to be issued to the
                  Strategic Investor in favour of the Security Trustee (as
                  trustee for itself and the Participating Banks); and (c)
                  require security to be given to the Security Trustee (as


                                      -98-





                  trustee for itself and the Secured Creditors) over the shares
                  of any Subsidiary of such Subsidiary; and (2) release such
                  Subsidiary from the obligation to guarantee the obligations of
                  Partner under the Facility Documents. Any such request shall
                  be signed by the General Manager of Partner and shall provide
                  all such information regarding any such proposed subscription
                  necessary, so as to enable the Participating Banks to
                  consider, on a case-by-case basis, whether to give such
                  consent, such consent not to be unreasonably withheld. Any
                  Subsidiary in respect of which the Participating Banks shall
                  have given a waiver and release in accordance with this clause
                  16.15 above (which, pursuant to this clause 16.15, has issued
                  shares to such Strategic Investor as aforesaid), shall
                  hereinafter be referred to as "A VENTURE SUBSIDIARY".

                  "STRATEGIC INVESTOR" shall mean a person or an Affiliate
                  thereof (which is not an Affiliate of Partner or any of its
                  substantial shareholders, as defined in the Companies Law,
                  1999) which is a reputable well-established company in the
                  telecommunications' or associated fields and can reasonably be
                  expected to add value to the business of the Venture
                  Subsidiary.

         (b)      Partner agrees that any rights of first refusal, limitations
                  on the transfer of Shares in Partner or other provisions of
                  the Shareholders Agreement which may restrict the pledge of
                  the Pledged Assets (as defined in the Share Pledges) (or any
                  of them in accordance with the Share Pledges) or which may
                  restrict the free transfer of any Pledged Assets in the course
                  of realisation of any security under the Share Pledges, shall
                  not apply to the Share Pledges or to any transfer made as part
                  of any realisation under the Share Pledges (except as
                  otherwise required under the Licence).

         (c)      Partner undertakes that it shall not issue any shares or other
                  securities convertible into shares which would cause a Change
                  of Ownership to occur.

25.16.   INTELLECTUAL PROPERTY RIGHTS

         Each Obligor will, and will procure that each of its Subsidiaries will:

         (a)      make such registrations and pay such fees and similar amounts
                  as are necessary to keep those registered Intellectual
                  Property Rights owned by the Group: (i) which are material to
                  the conduct of the business of any member of the Group from
                  time to time; or (ii) over which the Participating Banks have
                  been granted fixed security pursuant to the



                                      -99-



                  Security Documents (if any) in force and to record its
                  interest in those Intellectual Property Rights;


         (b)      take such steps as are necessary and commercially reasonable
                  (including the institution of legal proceedings) to prevent
                  third parties infringing those Intellectual Property Rights
                  referred to in paragraph (a) above and (without prejudice to
                  paragraph (a) above) take such other steps as are reasonably
                  practicable to maintain and preserve its interests in those
                  rights;

         (c)      promptly upon being required to do so by the Security Trustee,
                  comply with all proper instructions of the Security Trustee
                  which the Security Trustee is entitled to give under the
                  Security Documents in respect of its Intellectual Property
                  Rights referred to in paragraph (a)(ii) above;

         (d)      not sell, transfer, lease, license on an exclusive basis or
                  otherwise dispose of all or any part of its interest in any of
                  the Intellectual Property Rights referred to in paragraph (a)
                  above (whether in a single transaction or in a series of
                  transactions whether related or not and whether voluntarily or
                  involuntarily) save:

                  (i)      as effected pursuant to any of the Security
                           Documents; or

                  (ii)     for any licence arrangements in respect of those
                           rights entered into with any Obligor for so long as
                           it remains an Obligor; or

                  (iii)    for any licence arrangements in respect of those
                           rights entered into with any third party, where those
                           licence arrangements are entered into on arm's length
                           terms and in the ordinary course of business and
                           which do not materially and adversely affect the
                           interests of the Participating Banks under the
                           Facility Documents or the conduct of business of any
                           member of the Group; and

         (e)      not permit any registration of any of the Intellectual
                  Property Rights referred to in paragraph (a) above to be
                  abandoned, cancelled or lapsed or to be liable to any claim of
                  abandonment for non-use or otherwise.

25.17.   ENVIRONMENTAL MATTERS

         Each Obligor will and will procure that each of its Subsidiaries will:



                                     -100-





         (a)      (i) obtain all requisite Environmental Licences; (ii) comply
                  with the terms and conditions of all Environmental Licences
                  applicable to it; and (iii) comply with all other applicable
                  Environmental Law, in each case where failure to do so would
                  have a Material Adverse Effect; and

         (b)      promptly upon receipt of the same, notify the Coordinating
                  Agent and the Security Trustee of any claim, notice or other
                  communication served on it in respect of any alleged breach of
                  or corrective or remedial obligation or liability under any
                  Environmental Law which would, if substantiated have a
                  Material Adverse Effect.

25.18.   INSURANCE

         (a)      Each Obligor will, and will procure that each of its
                  Subsidiaries will, with effect from the date upon which the
                  first Advance is requested by Partner hereunder, insure and
                  keep insured all such properties and assets of such Obligor or
                  Subsidiary with insurance companies or underwriters (including
                  facultative reinsurance companies) approved by the Facility
                  Agent (such approval not to be unreasonably withheld or
                  delayed) to such extent, at such times and against such risks
                  as described in pages 29-31 of the Insurance Report (including
                  with respect to deductibles, exclusions and exceptions) (other
                  than departures from such basis which are not adverse in any
                  material respect (taking into account market availability and
                  cost and the views of any insurance advisers) to the interests
                  of the Finance Parties, or otherwise as the Facility Agent
                  (acting on the instructions of the Instructing Group) may
                  approve).

         (b)      Each Obligor will, and will procure that each of its
                  Subsidiaries will, with reasonable promptness after becoming
                  aware of the relevant requirement, effect and maintain all
                  insurances required by the terms of any applicable law or any
                  contract binding on it (including for the avoidance of doubt,
                  the Licence).

         (c)      Partner will ensure that it has such insurance coverage in
                  respect of any risks or liabilities other than those specified
                  in the Insurance Report as would from time to time generally
                  be insured by a prudent operator of a GSM telephony network
                  (including also 2.5 generation and 3rd generation) (financed
                  on a project finance basis) of a size, and with general
                  characteristics (including location) comparable to the
                  Business which does not self-insure (except by means of
                  reasonable deductibles required by insurers generally) and
                  having regard to all the circumstances (including the
                  interests of the Participating Banks), and taking into
                  account, among other things, market availability in respect

                                     -101-





                  of risks, liabilities and amounts of insurance and the
                  financial position of Partner.

         (d)      Subject as hereinafter provided, Partner may, or any Obligor
                  may, at any time, effect such other insurances in addition to
                  or supplementing those referred to in this clause 16.18 as it
                  may think fit. Provided that such supplementary insurance
                  shall not adversely affect any insured party's rights or
                  ability to recover under the insurance referred to in this
                  clause 16.18 and Partner shall notify the Facility Agent at
                  least annually of any material insurances effected since the
                  previous such notification pursuant to this paragraph (d).

         (e)      Each Obligor will promptly supply to the Facility Agent on
                  request evidence reasonably satisfactory to the Facility Agent
                  of payment of all premiums and other amounts payable by it
                  under, and a certified copy of, each insurance policy required
                  to be taken out and maintained by it pursuant to this clause
                  16.18 (or, in the case of any marine cargo insurance policy
                  taken out by the Counterparty to the Principal Supplier
                  Contract, a certified summary of key terms) together with such
                  other information as to the insurance policies taken out
                  pursuant hereto (including regarding renewals thereof) as the
                  Facility Agent may reasonably request (except for
                  miscellaneous insurances as referred to in the schedule to the
                  Insurance Report).

         (f)      Partner shall ensure that, in respect of each policy of
                  insurance and reinsurance taken out by any Obligor pursuant to
                  this clause 16.18 (except for miscellaneous insurances as
                  referred to in the schedule to the Insurance Report):

                  (i)      a clause is endorsed upon such policy whereby the
                           insurer agrees that the insurance cover shall not be
                           invalidated so far as the Security Trustee is
                           concerned by any breach of the insuring conditions or
                           any other act or omission unknown to or beyond the
                           control of the Security Trustee on the part of the
                           relevant Obligor or any other person;

                  (ii)     an undertaking is endorsed upon such policy by the
                           insurer to notify the Security Trustee promptly in
                           writing if the premium or other moneys payable under
                           such policy are not paid when due and to refrain from
                           cancelling such policy by reason only of the
                           non-payment of such monies for a period of at least
                           30 (thirty) days from the due date;


                                     -102-




                  (iii)    a provision is endorsed upon such policy to the
                           effect that the relevant insurance company waives any
                           rights of contribution arising against any other
                           insurance taken out by the Agents and the
                           Participating Banks (or any of them) in respect of
                           payments made by it and any rights of subrogation
                           arising in respect of the rights of the Agents and
                           the Participating Banks (or any of them) under the
                           Facility Documents,

                  (iv)     a notice of assignment is duly given to the brokers
                           or the underwriters and insurance companies in
                           accordance with the Debenture;

                  (v)      the Security Trustee (for the benefit of itself and
                           the Secured Creditors) is joined as an additional
                           insured thereunder and the interest of the Security
                           Trustee (for the benefit of itself and the Secured
                           Creditors) is duly noted and endorsed upon all slips,
                           cover notes, policies or other instruments of
                           insurance issued or to be issued in connection
                           therewith;

                  subject to each of such clauses, undertakings and provisions
                  being viable commercially in the Israeli and international
                  insurance market.

                  If facultative reinsurance is effected in relation to any
                  policy of insurance taken out pursuant hereto, Partner shall
                  use all reasonable endeavours to ensure that, if practicable
                  in the insurance market and achievable at no material extra
                  cost, a provision is endorsed thereon whereby each reinsurer
                  agrees that in the event of a claim under the policy of the
                  reassured, in lieu of payment to the reassured, their
                  successors in interest and assigns, the reinsurers shall pay
                  that portion of any loss due direct to the insured parties
                  (less the premium, if any, due to the reinsurers) and whereby
                  it is understood and agreed that any such payment shall fully
                  discharge the reinsurers from any and all further liability in
                  connection therewith. If Partner cannot effect reinsurance
                  with such a provision endorsed thereon, in place of
                  reinsurance it will: (i) place the relevant insurance on a
                  co-insured basis with insurers approved by the Facility Agent
                  (such approval not to be unreasonably withheld or delayed); or
                  (ii) obtain an assignment of facultative reinsurance by the
                  insurers to the Security Trustee.

         (g)      Each Obligor will ensure that (except for public liability and
                  miscellaneous insurances (as referred to in the schedule to
                  the Insurance Report)) all of the insurance policies required
                  to be taken out and maintained by it pursuant to this clause
                  16.18 shall contain loss payee provisions acceptable to the
                  Security Trustee noting the



                                     -103-




                  Security Trustee's interest thereon and naming the Security
                  Trustee as the payee in circumstances where an Event of
                  Default has been notified in writing to the insurer or broker
                  as applicable by the Security Trustee and is continuing
                  unwaived.

         (h)      Save in the circumstances referred to in clause 16.18(i)
                  below, all moneys received or receivable under any insurances
                  in respect of property or assets damaged or destroyed or
                  business interruption shall promptly (subject to the rights
                  and claims of any person having prior rights thereto) be
                  applied: (i) subject to (ii) below, at the option of Partner,
                  either: (A) in repairing, replacing, restoring or rebuilding
                  the property or assets damaged or destroyed or (in the case of
                  business interruption insurance) in the Business as Partner
                  reasonably see fit as permitted pursuant to this Agreement or
                  (in the case of third party liability cover) in satisfaction
                  of the third party liability in question; or (B) in payment of
                  amounts due under the Facility Documents; or (ii) on and after
                  the occurrence of any Event of Default and for so long as such
                  event is continuing, at the option of the Security Trustee:
                  (A) to prepay the outstanding Advances in accordance with
                  clause 6 (Voluntary Prepayment and Reborrowing) above, as if
                  such prepayment was a voluntary prepayment; or (B) in
                  repairing, replacing, restoring or rebuilding the property or
                  assets damaged or destroyed or (in the case of business
                  interruption insurance) in the Business as the Security
                  Trustee reasonably see fit as permitted pursuant to this
                  Agreement or (in the case of third party liability cover) in
                  satisfaction of the third party liability in question and if
                  any such moneys shall be received by Partner where the
                  circumstances in sub-paragraph (ii) apply, Partner shall
                  (subject to the rights and claims of any person as aforesaid)
                  hold such moneys upon trust for the Security Trustee pending
                  payment to the Security Trustee for application in accordance
                  with the Security Trust Deed, or as the case may be,
                  application by Partner in repairing, replacing, restoring or
                  rebuilding the property or assets damaged or destroyed.

         (i)      All moneys received or receivable under any insurances whilst
                  a Potential Event of Default (but not an Event of Default) has
                  occurred and is continuing shall be placed to the credit of a
                  blocked account subject to an encumbrance in favour of the
                  Security Trustee until the Potential Event of Default ceases
                  to exist or is waived (in which case Partner may apply
                  insurance proceeds in accordance with clause 16.18(h)(i)
                  above) or the relevant Potential Event of Default becomes an
                  Event of Default (in which case the Security Trustee may apply
                  insurance proceeds in accordance with clause 16.18(h)(ii)
                  above).


                                     -104-





         (j)      Partner shall:

                  (i)      promptly notify the Facility Agent of any insurance
                           claim where the amount of such claim exceeds US
                           $2,500,000 (two million five hundred thousand United
                           States Dollars) (or its equivalent, on the date on
                           which the claim is made, in the currency in which
                           such claim is made);

                  (ii)     take all action reasonably within its power to
                           procure that nothing is done or offered to be done
                           whereby any of the insurances taken out hereunder may
                           be rendered void, voidable, unenforceable, suspended
                           or impaired in whole or in part or to otherwise
                           render any sum paid out under any such policy
                           repayable in whole or in part.

         (k)      If, at any time, owing to changes in the Israeli or
                  international insurance market or in the capacity or
                  availability or cost of insurance coverage in those
                  markets or any other change in circumstances giving
                  rise to changes in the insurance coverage being
                  necessary or desirable, Partner or, as the case may
                  be, the Facility Agent serve notice upon one another
                  that it believes that the insurance provisions in
                  this Agreement no longer reflect the insurance
                  coverage of the risks or liabilities which would be
                  insured by a prudent operator of a GSM telephony
                  network (including also 2.5 generation and 3rd
                  generation) (financed on a project finance basis) of
                  a size, and with the characteristics (including, with
                  limitation, location), comparable to that of the
                  Group which does not self-insure (except by means of
                  reasonable deductibles required by insurers
                  generally) or that the premia for any insurances
                  effected pursuant hereto are unreasonably expensive
                  in the context of Partner's business and financial
                  condition, as soon as practicable thereafter, Partner
                  and the Facility Agent shall consult, in good faith,
                  and take reasonable steps to ensure that the
                  insurance arrangements to be effected by Partner are
                  revised such that the level of insurance of risks or
                  liabilities to be covered are those which would be
                  insured by a prudent operator of a GSM telephony
                  network (including also 2.5 generation and 3rd
                  generation) (financed on a project finance basis) of
                  a size, with the characteristics (including location)
                  comparable to that of Partner which does not
                  self-insure (except by means of reasonable
                  deductibles required by insurers generally).

25.19.        NOTIFICATION OF DEFAULT



                                     -105-




         Each Obligor shall notify the Facility Agent of any Event of Default or
         Potential Event of Default of which it is aware (and the steps, if any,
         being taken to remedy it) promptly upon becoming aware of it.

25.20.   CHANGE OF BUSINESS

         (a)      No Obligor will, and each Obligor will procure that none of
                  its Subsidiaries will:

                  (i)      make or threaten to make any substantial change in
                           the nature of its respective business (save as
                           contemplated in the Business Plan or as may result
                           from a disposal of assets permitted by this
                           Agreement); or

                  (ii)     carry on any business other than the Business;
                           provided that, in respect of a Venture Subsidiary or
                           any Subsidiary thereof, such Venture Subsidiary or
                           Subsidiary thereof may carry on a business which is
                           in the telecommunications sector.

         (b)      No Obligor shall bid for any other telephone licence (other
                  than any licence for activities ancillary to its GSM business
                  and its business of establishing and operating second
                  and-a-half and third generation (known as 2.5 and 3G) wireless
                  telephone services (all as contemplated in the version of the
                  Business Plan dated 7 July 2002 delivered to the Facility
                  Agent on 11 July 2002 which would use existing infrastructure
                  and require no material Capital Expenditure) unless: (i) it
                  shall have received the prior written consent of an
                  Instructing Group (not to be unreasonably withheld); (ii) the
                  financing of such bid and all activities contemplated thereby
                  shall be financed from a source other than under the
                  Facilities; and (iii) the making of such bid, or the carrying
                  out of any activities contemplated by such bid, would not
                  result in a Material Adverse Effect.



                                     -106-



25.21.   ACQUISITIONS AND MERGERS

         Neither Partner nor any of the Subsidiaries shall enter into or resolve
         to approve any merger or consolidation, scheme of reconstruction,
         liquidation, or to transfer its Business or part thereof to, or make
         any Acquisition, other than: (a) disposals permitted pursuant to clause
         16.8 (Disposals) above; (b) Acquisitions or mergers or consolidations
         to which the prior consent of all the Participating Banks has been
         obtained; (c) Acquisitions, the funding of which is from the Permitted
         Loan Capital or the sale by Partner of securities permitted hereunder;
         or (d) Acquisitions by Subsidiaries.

25.22.   BORROWINGS

         Partner shall not incur any Borrowings, other than Permitted
         Borrowings. A Subsidiary of Partner shall be entitled to incur
         Borrowings, provided that, the debt to equity ratio (as the terms
         "debt" and "equity" are defined in accordance with Applicable
         Accounting Principles; "equity" to include shareholder loans made to
         such Subsidiary) of such Subsidiary in accordance with such
         Subsidiary's consolidated Accounts shall at all times not exceed 60:40.

25.23.   ARM'S-LENGTH TERMS

         No Obligor will, and each Obligor will procure that none of its
         Subsidiaries will incur any liability to or for the benefit of any
         Restricted Person (other than in relation to Shareholder Loans or
         Paid-in Equity) otherwise than under agreements which are on terms no
         worse to the Group than on an arm's length terms in the ordinary course
         of business and, in respect of agreements entered into after the date
         of this Agreement, where there have been bona fide negotiations
         relating to such terms.

25.24.   COMPLIANCE WITH LAWS

         Each Obligor will, and will procure that each of its Subsidiaries will,
         comply in all respects material to the Participating Banks with all
         applicable laws, rules, regulations and orders of any governmental
         authority, having jurisdiction over it or any of its assets.



                                     -107-





25.25.   CONSENTS AND AUTHORISATIONS

         (a)      Each Obligor will, and will procure that each of its
                  Subsidiaries will, obtain or cause to be obtained:

                  (i)      every consent, authorisation, licence or approval of,
                           or registration with or declaration to, governmental
                           or public bodies or authorities or courts; and

                  (ii)     every notarisation, filing, recording, registration
                           or enrolment in any court or public office in Israel,

                  in each case required by any Obligor to authorise, or required
                  by any Obligor in connection with, the execution, delivery,
                  validity, enforceability or admissibility in evidence of the
                  Facility Documents and Material Contracts or the performance
                  by any Obligor of its respective obligations under the
                  Facility Documents and Material Contracts to which it is a
                  party.

         (b)      Each Obligor will, and will procure that each of its
                  Subsidiaries will obtain or cause to be obtained every
                  Authorisation relevant to it and ensure that: (i) none of the
                  Authorisations is revoked, cancelled, suspended, withdrawn,
                  terminated, expires and is not renewed or otherwise ceases to
                  be in full force and effect; and (ii) no Authorisation is
                  modified and no member of the Group commits any breach of the
                  terms or conditions of any Authorisation which, in the case of
                  (i) or (ii), would or is reasonably likely to have a Material
                  Adverse Effect.

25.26.   LICENCE

         Partner:

         (a)      will notify the Facility Agent promptly upon the occurrence of
                  any breach of the Licence or upon the receipt of any notice or
                  communication between the Ministry and Partner or any other
                  member of the Group in connection with the Licence which
                  either: (i) claims a breach of the Licence; or (ii) which
                  could reasonably be expected to give rise to a revocation,
                  termination, amendment, suspension or withdrawal of the
                  Licence; or (iii) which otherwise may be likely to have a
                  Material Adverse Effect (including, for the avoidance of
                  doubt, any notice or communication regarding the non-extension
                  of the Licence or any reduction of frequency spectrum).
                  Partner will do all such things (at the expense of Partner) as


                                     -108-




                  reasonably requested by the Facility Agent if the Facility
                  Agent reasonably believes: (x) the Licence to be in danger of
                  revocation, termination, amendment, suspension or withdrawal,
                  to mitigate the revocation, termination, amendment, suspension
                  or withdrawal of the Licence, or (y) that any such matters so
                  notified to it may be reasonably likely to have an adverse
                  effect upon the interests of the Finance Parties under the
                  Facility Documents. Partner shall, at the request of the
                  Facility Agent, consult with the Facility Agent in good faith
                  with a view to the making of any oral or written submissions
                  or responses to be made in relation to any matter or thing
                  which gives rise to the Facility Agent having any such
                  reasonable belief as referred to above and to the possibility
                  of representatives of the Finance Parties attending any
                  meetings with the Ministry in connection therewith. Following
                  the occurrence of an Event of Default or a Potential Event of
                  Default which is continuing, upon the request of the Facility
                  Agent, Partner shall use its reasonable endeavours to make
                  oral or written submissions to the Ministry on behalf of the
                  Finance Parties and, if required by the Facility Agent, seek
                  the Ministry's agreement to representatives of the Finance
                  Parties attending any meetings with the Ministry;

         (b)      will do all such things and take such steps as are necessary
                  to ensure the Licence remains in full force and effect and,
                  will not take any steps or action which would prejudice in any
                  material respect its ability to renew the Licence and will
                  notify the Facility Agent promptly upon the receipt of any
                  material notice or communication in connection with such
                  renewal;

         (c)      will not dispose of any of its rights under the Licence;

         (d)      will not agree to any material amendment to or material
                  variation of the Licence or waive any material right
                  thereunder;

         (e)      will deliver to the Facility Agent in sufficient copies for
                  the Agents and the Participating Banks any notice or
                  communications referred to in paragraph (a) of this clause
                  16.26 together with copies of all other material notices
                  between Partner and the Ministry.


                                     -109-





25.27.   MATERIAL CONTRACTS AND CONSTITUTIONAL DOCUMENTS

         (a)      Each Obligor shall comply with the terms of each of the
                  Material Contracts to which it is party save to the extent
                  that failure to comply with any such term would not be
                  reasonably likely to result in a Material Adverse Effect.

         (b)      No Obligor shall, without the prior written consent of the
                  Facility Agent (acting on the instructions of an Instructing
                  Group), amend, cancel, supplement, supersede or waive any term
                  of a Material Contract to which it is a party in any respect
                  save to extent that the same is not materially adverse to the
                  interests of the Participating Banks under the Facility
                  Documents.

         (c)      Partner shall notify the Facility Agent promptly after the
                  entry into by any Obligor of any agreement, deed or contract
                  which it reasonably considers may constitute a Material
                  Contract.

         (d)      Each Obligor shall take all reasonable action necessary to
                  perfect, preserve and enforce all of its rights under the
                  Material Contracts (if any) to which it is a party.

         (e)      No Obligor shall amend its Charter in any respect materially
                  adverse to the interests of the Participating Banks without
                  the prior written consent of the Facility Agent (acting on the
                  instructions of an Instructing Group).

25.28.   AUDITORS

         (a)      If Partner wishes to change its Auditors it will notify the
                  Facility Agent as to the reasons for any such proposed change
                  and if the Facility Agent so requests, will instruct the audit
                  partner of each of the outgoing firm of Auditors and the
                  replacement firm of Auditors to discuss the financial position
                  of the Group with the Facility Agent.

         (b)      Partner will authorise the Auditors to discuss the Group's
                  and/or any Group member's financial position with the Facility
                  Agent on its reasonable request or at the reasonable request
                  of the Facility Agent, at the expense of Partner, pursuant to
                  a letter to be sent by Partner to the Auditors in the form set
                  out in SCHEDULE 20 (Letter to Auditors) hereto. If the
                  Facility Agent so requests any discussion with the Auditors,
                  the Facility Agent shall give Partner reasonable notice of any
                  meeting or other forum used for such discussion which shall
                  take place at a reasonable time and the Facility Agent shall
                  (if so requested



                                     -110-




         by Partner) enable a representative of Partner to be present at the
         relevant discussion.

25.29.   HEDGING AGREEMENTS

         (a)      Partner shall ensure it manages its Interest rate and currency
                  exchange exposure in a prudent manner and shall on the last
                  Business Day of each month notify details of any Hedging
                  Transactions entered into during the preceding month to the
                  Facility Agent.

         (b)      Partner shall not enter into any Hedging Transaction other
                  than:

                  (i)      Interest Rate Hedging Transactions entered into for
                           the purposes of clause 16.29(a) (Hedging Agreements);

                  (ii)     spot foreign exchange contracts entered into in the
                           ordinary course of business; and

                  (iii)    foreign exchange transactions, currency swaps or
                           currency options entered into for the purposes of
                           hedging actual or projected foreign exchange
                           exposures arising in the ordinary course of business
                           carried on in compliance with the terms of this
                           Agreement.

         (c)      Partner shall not enter into any Hedging Transactions for any
                  speculative purpose.

         (d)      Partner shall only enter into Interest Rate Hedging Agreements
                  with Counterparties which are: (i) Participating Banks; (ii)
                  financial institutions rated at least "A-" by S&P or
                  equivalent by Moody's; (iii) the Arranger; or (iv) subject to
                  paragraph (g) below, HWL or any HWL Hedging Subsidiary. Such
                  Counterparties will be Secured Creditors provided that the
                  relevant Interest Rate Hedge Provider is a Participating Bank
                  (in such capacity a "SECURED INTEREST RATE HEDGE PROVIDER").

         (e)      Partner shall enter into Currency Hedging Agreements other
                  than spot foreign exchange contracts entered into in the
                  ordinary course of business with counterparties which are: (i)
                  Participating Banks; or (ii) other financial institutions
                  rated at least "A-" by S&P or "A3" by Moody's; or (iii) the
                  Arranger.


                                     -111-




         (f)      Partner shall ensure that at all times its rights and benefits
                  under any Hedging Agreement are assigned by way of security to
                  the Security Trustee.

         (g)      Partner may only enter into Interest Rate Hedging Transactions
                  with HWL or any HWL Hedging Subsidiary provided that:

                  (i)      each Interest Rate Hedging Agreement is documented
                           pursuant to an 1992 ISDA Master Agreement
                           (Multi-currency-Cross Border) Agreement (together
                           with the applicable Schedule and confirmation);

                  (ii)     HWL is rated not less than "A" by S&P or equivalent
                           by Moody's at the time such Interest Rate Hedging
                           Transaction is entered into;

                  (iii)    Partner certifies that such Interest Rate Hedging
                           Transaction is on terms at least as favourable to
                           Partner as those available to Partner in the market,
                           which certificate shall attach quotes from two
                           leading banks which generally operate in the swap
                           market;

                  (iv)     for the avoidance of doubt HWL may not be a Secured
                           Interest Rate Hedge Provider; and

                  (v)      (1)    HWL and (in the case of any HWL Hedging
                                  Subsidiary), the relevant HWL Hedging
                                  Subsidiary, shall have first executed an
                                  undertaking in substantially the same form as
                                  was given, prior to its release on 3 November
                                  1999, by HWL under clauses 7.2 and 7.3 of the
                                  HWL Counter Guarantee (as defined in the
                                  Original Facility Agreement), save that HWL
                                  and, if applicable, the HWL Hedging
                                  Subsidiary, shall, in such undertaking, submit
                                  to the exclusive jurisdiction of the competent
                                  courts of Tel-Aviv-Jaffa and appoint, in
                                  connection therewith, an agent for service of
                                  proceedings located in Israel and that such
                                  undertaking shall otherwise be in form and
                                  substance satisfactory to the Facility Agent;

                           (2)    that, in the case of any HWL Hedging
                                  Subsidiary, HWL has executed a guarantee in
                                  favour of Partner in respect of the relevant
                                  HWL Hedging Subsidiary's obligations arising
                                  under the Interest Rate Hedging Transaction
                                  concerned;



                                     -112-




                  (3)      that there has been provided to the Facility Agent
                           such constitutive board resolutions and certificates
                           in relation to paragraphs (1) and (2) above as it may
                           reasonably require, together with a legal opinion in
                           form and substance satisfactory to the Facility
                           Agent; and

                  (4)      that where any undertaking as referred to in (1)
                           above, has been given, that HWL and, if applicable,
                           any HWL Hedging Subsidiary that has given an
                           undertaking as aforesaid, are in full compliance with
                           the same.

25.30.   SUBSIDIARIES

         No Obligor shall, without the prior written consent of the Instructing
         Group, acquire (by subscription or otherwise) any shares or
         equity-related securities in any other entity and, in particular but
         without limitation, shall not acquire or establish any new Subsidiary
         unless such Subsidiary:

         (a)      is a Dormant Company; or

         (b)      is a Venture Subsidiary or a Subsidiary of a Venture
                  Subsidiary; or

         (c)      is a wholly-owned Subsidiary that becomes an Additional
                  Guarantor in accordance with clause 26.1 (Additional
                  Guarantors) and provides such Encumbrances in respect of the
                  Facilities as required pursuant to clause 26.2 (Security).

25.31.   TAXATION

         Each Obligor shall file or cause to be filed all tax returns required
         to be filed in all jurisdictions in which it is situated or carries on
         business or otherwise subject to pay Tax and will promptly pay all
         Taxes which are due and payable on such returns or any assessment made
         against it except for non-payment, or a claim for payment, non-payment
         of which would in each such case not have a Material Adverse Effect.

25.32. FINANCIAL UNDERTAKINGS

         The covenants set out in this clause 16.32 (Financial Undertakings)
         below for any Ratio Period shall be based on the Accounts (including
         the Auditors' certificates and notes referred to in clause 1.2.2 above)
         for such Ratio Period (whether Accounts for 6 (six) months, in the case
         of six month Ratio Periods, or for 1 (one) year, in the case of one
         year Ratio Periods), subject, with respect to six month Ratio Periods,
         to those adjustments set out below.


                                     -113-




         Partner will procure that for each of the one year Ratio Periods set
         out below, and for each of the six month Ratio Periods set out below,
         each of the financial ratios set out in the table below shall be no
         less than the percentage set out in the table for such one year Ratio
         Period or six month Ratio Period, as the case may be, opposite such
         financial ratios:






                      FACILITY DEBT                 TOTAL DEBT                FIXED CHARGE
                       COVER RATIO                 COVER RATIO               COVERAGE RATIO                 ADSCR YEAR
               ============================ =========================== ========================== =========================
                                                                          1st Six
                  1st Six       One Year      1st Six       One Year      Month      One Year        1st Six     One Year
                Month Ratio      Ratio       Month Ratio     Ratio        Ratio       Ratio          Month Ratio   Ratio
                  Period         Period        Period        Period       Period     Period           Period       Period
                                                                                         

    2002                          33%                         25%                          83%                      200%

    2003            35%           37%           26%           27%            75%           75%          200%        200%

    2004            38%           40%           28%           29%            88%           95%          183%        172%

    2005            45%           50%           31%           33%            97%           99%          150%        150%

    2006            57%           65%           39%           45%           102%          105%          150%        150%

    2007            65%           65%           45%           45%           105%          105%          150%        150%

    2008            65%                         45%                         105%                        165%




         Provided that, in the event that:

         (a)      for any Ratio Period there is, with respect to not more than 2
                  (two) ratios (and if there is a deviation with respect to 2
                  (two) ratios, one of which is ADSCR) a deviation from the
                  requirement set out in the above table for such ratio of not
                  more than 5% (five percent) (such that the actual ratio shall
                  not be less than 95% (ninety-five percent) of the ratio as
                  required in the table); and

         (b)      there has not been in respect of any one or both of the ratios
                  referred to in (a) above (in respect of which there is a
                  deviation of 5% (five percent) or less for such Ratio Period),
                  any deviation in any one of the 3 (three) Ratio Periods
                  (disregarding, for the avoidance of doubt, any Ratio Period
                  prior to the 2002 one year Ratio Period) preceding such Ratio
                  Period,

         then Partner shall be deemed to have complied with this clause 16.32.2
         in respect of such Ratio Period.



                                     -114-




         For the purposes of all the conditions in this clause 16.32, insofar as
         applicable to six month Ratio Periods, in calculating EBITDA after SAC,
         the amount of EBITDA after SAC must be multiplied by 2 (two).

         For the removal of doubt, the permitted deviations referred to in this
         clause 16.32 (Financial Undertakings) above are permitted only for the
         purposes of this clause 16.32 (Financial Undertakings) and not for any
         other purpose under this Agreement.

25.33.   ACCESS

         At any time whilst a Potential Event of Default or Event of Default is
         continuing, or the Facility Agent reasonably believes a Potential Event
         of Default or Event of Default may be in existence: (a) Partner shall
         ensure, as far as it is able, that at reasonable times, on reasonable
         prior notice by the Facility Agent (acting upon the instructions of an
         Instructing Group), any professional adviser to the Facility Agent or
         representative of the Facility Agent or any other Agent be afforded
         access to, and be permitted to inspect or observe, all or any part of
         the Business subject to any reasonable confidentiality undertaking
         required by it; and (b) Partner shall permit any professional adviser
         to the Facility Agent or representative of the Facility Agent or the
         Agents, at reasonable times and on reasonable prior notice by the
         Facility Agent, to have access to books, records, accounts, documents,
         computer programmes, data or other information in the possession of or
         available to it subject to any reasonable confidentiality undertaking
         required by it and to take such copies as may be considered appropriate
         by such representative or professional adviser acting reasonably.

25.34.   INTERCONNECTION

         (a)      Partner shall keep the Facility Agent promptly informed of all
                  material developments relating to the entry into the Bezeq
                  Interconnection Agreement. Promptly following execution of any
                  Interconnection Agreement, Partner shall deliver to the
                  Facility Agent a copy of such Interconnection Agreement
                  (provided that Partner may delete any reference contained
                  therein which it reasonably believes to be commercially
                  sensitive price or tariff information prior to the supply of
                  such Interconnection Agreement).

         (b)      Each of the parties hereto agree that the Facility Agent may
                  only supply copies of any Interconnection Agreement delivered
                  to it under clause 16.34(a) (Interconnection) above to (i) the
                  Security Trustee if such Interconnection Agreement is assigned
                  by way of security in favour of the Security Trustee; and (ii)
                  any other Finance Party


                                     -115-




                  (including the Security Trustee) if any Potential Event of
                  Default or Event of Default of whatsoever nature is
                  outstanding or if the Facility Agent reasonably believes that
                  a Potential Event of Default or Event of Default may have
                  occurred by reason of any event, matter or circumstance
                  occurring with respect to such Interconnection Agreement.

         (c)      Partner shall ensure that Interconnection Agreements are
                  entered into with such other persons (apart from Bezeq) and on
                  such terms as may in each case be reasonably necessary or
                  appropriate for the purposes of carrying out the Business as
                  contemplated by the Business Plan.

         (d)      Partner shall promptly notify the Facility Agent upon it
                  becoming aware of any action or inaction or intended action or
                  inaction of Bezeq which is reasonably likely to have a
                  materially adverse effect on the provision of interconnection
                  infrastructure and services by Bezeq to Partner.

25.35.   RESERVE ACCOUNT

         Partner shall, in accordance with clause 1.1.131(f) above, establish,
         maintain and supplement the Reserve Account, charged, in accordance
         with clause 1.1.131(f) above, in favour of the Security Trustee (as
         trustee for itself and the Secured Creditors pursuant to the
         Debenture), unless and until no longer required to do so pursuant to
         paragraphs (i) or (ii) of clause 1.1.131(f).


                                     -116-




25.36.   UTILISATION OF PROCEEDS OF FACILITIES

         Partner shall not utilise the proceeds from any Advance received under
         the Facilities, except for those purposes referred to in clause 2 (The
         Facilities) of this Agreement.

25.37.   LOANS, GUARANTEES AND INVESTMENTS IN SUBSIDIARIES

         (a)      Partner shall be permitted to utilise the proceeds of Advances
                  under the Facilities in order to make loans, to give
                  guarantees in respect of, or to make investments in the share
                  capital of, a Subsidiary in which Partner holds, at least, 75%
                  (seventy-five percent) of the issued share capital and voting
                  rights, provided that: (i) the business of such Subsidiary is
                  exclusively in the field of the Business; (ii) the aggregate
                  amount of any such loans, guarantees or investments in any
                  such Subsidiary shall not exceed, individually, US $2,000,000
                  (two million United States Dollars); and (iii) the aggregate
                  amount, at any time, of any such investments, loans and
                  guarantees in all such Subsidiaries shall not exceed US
                  $5,000,000 (five million United States Dollars), all subject
                  to the provisions of clause 7.3 (Investment by Partner in
                  Subsidiaries) above.

         (b)      Partner shall be permitted to make loans, to give guarantees
                  in respect of, or make investments in, the share capital of:

                  (i)      any Subsidiary, after the Effective Date, from the
                           proceeds of Permitted Loan Capital or the issue of
                           shares in Partner;

                  (ii)     subject to clauses 16.22 (Borrowings) and 16.8
                           (Disposals) above, any Subsidiary, where such loan,
                           guarantee or investment is made for the purpose of
                           financing the purchase from Partner of assets;
                           provided that: (1) in the case of an asset which is
                           the subject of fixed security under any Security
                           Document (or an asset which comprises of any shares
                           held by Partner), such assets are acquired by such
                           Subsidiary subject to such fixed security under the
                           Security Documents, such security is duly registered
                           and valid and has the same priority as if such
                           Subsidiary had originally pledged such asset under
                           such Security Document in place of Partner and, (2)
                           in any other case, such Subsidiary shall have first
                           granted a first-ranking fixed charge over such assets
                           in favour of the Security Trustee (for the benefit of
                           itself and the Secured Creditors) in a form
                           substantially similar to the security granted by
                           Partner under the Debenture; and that (3) in the
                           event the consideration payable


                                     -117-




                           for such assets is in excess of US $10,000,000 (ten
                           million United States Dollars) (or is in excess of
                           such amount when aggregated with other consideration
                           paid in respect of any other assets purchased from
                           Partner as aforesaid during the preceding 12 (twelve)
                           months), a certificate, in a form reasonably
                           acceptable to the Instructing Group, from an
                           appraiser certifying that the consideration paid for
                           all of such assets was its fair value, is provided to
                           the Participating Banks prior to such purchase.

                  (c)      Save as permitted under this clause 16.37 above,
                           Partner shall not be entitled to make loans to, give
                           guarantees in respect of, or make investments in the
                           share capital of, any Subsidiary.

25.38.   SHARE PLEDGES

         Subject to clause 34.2 (Release of Share Pledges) below, Partner shall
         procure that at all times not less than 51% (fifty-one percent) of
         Partner's issued share capital (including, for this purpose, any
         securities convertible or realisable into shares of Partner), from time
         to time, are pledged by the Chargors under the Share Pledges and
         Partner shall not issue any such shares or securities, unless
         immediately prior to such issue, the number of shares pledged by the
         Chargors as aforesaid is such that immediately after such issue,
         Partner shall comply with the provisions of this clause 16.38.

25.39.   NON-ACQUISITION BY SUBSIDIARY

         Partner shall procure that no Subsidiary of Partner shall acquire any
         share or other securities of Partner, nor the rights with respect to
         any Indebtedness owed to Partner.

26. DEFAULT

26.1.    EVENTS OF DEFAULT

         Each of the events set out in clause 17.2 (Non-Payment) to clause 17.24
         (Non-Compliance with any Securities Authority) (inclusive) below is an
         Event of Default (whether or not caused by any reason outside the
         control of any or all of the Obligors or any other person).

26.2.    NON-PAYMENT

         Any Obligor does not pay on the due date any amount payable by it under
         any Facility Document at the place and in the funds expressed to be
         payable,


                                     -118-



         provided that this clause 17.2 (Non-Payment) shall not apply: (i) to
         unpaid amounts of principal which are paid in full within two Business
         Days of the due date for payment; or (ii) to unpaid amounts of Interest
         or other amounts (except principal) which are paid in full within 5
         (five) Business Days after the due date for payment.

26.3.    BREACH OF OBLIGATIONS

         (a)      There is any breach of any of clauses 2.1.2, 2.4 (Purpose),
                  4.5(b) (Outstandings in Proportion to Commitments--Facility
                  B), 16.6 (Negative Pledge), 16.7 (Sale and Leaseback), 16.8
                  (Disposals), 16.10 (Loans and Guarantees) to 16.15 (Share
                  Capital) (inclusive), 16.22 (Borrowings), 16.32 (Financial
                  Undertakings) or 16.35 (Reserve Account) to 16.39
                  (Non-Acquisition by Subsidiary) (inclusive), above.

         (b)      Partner fails to comply with the provisions of clause 4.5(a)
                  (Outstandings in Proportion to Commitments--Facility A and
                  Facility C) above and within 21 (twenty-one) days after the
                  earlier of Partner becoming aware of such default and receipt
                  by Partner of written notice from the Coordinating Agent
                  requiring the failure to be remedied, Partner shall have
                  failed to cure such default.

         (c)      Any Obligor fails to comply with any undertaking or obligation
                  contained in any Facility Document and, if such default is
                  capable of remedy within such period, within 30 (thirty) days
                  after the earlier of the Obligor becoming aware of such
                  default and receipt by the Obligor of written notice from the
                  Facility Agent requiring the failure to be remedied, that
                  Obligor shall have failed to cure such default.

26.4.    MISREPRESENTATION/BREACH OF WARRANTY

         (a)      Any representation or warranty contained in clauses 15.7
                  (Consents), 15.8(c) or (d) (Accounts), 15.10 (Tax
                  Liabilities), 15.12 (Business Plan), 15.13 (Ownership of
                  Assets), 15.14 (Documents), 15.15(a) (Intellectual Property
                  Rights), 15.16 (Environmental Matters) or 15.18 (Material
                  Contracts) is incorrect or misleading in any respect when made
                  or deemed repeated by reference to the facts and circumstances
                  then subsisting.

         (b)      Any representation or warranty contained in clauses 15.5(c)
                  (Non Conflict), 15.6(b) (No Default), 15.10 (Tax Liabilities)
                  or 15.15(b) (Intellectual Property Rights) is incorrect or
                  misleading in any respect when deemed repeated pursuant to
                  clause 15.21 (Repetition).


                                     -119-




         (c)      Any other representation or warranty made or repeated by or on
                  behalf of any Obligor in any Facility Document, or in any
                  certificate or statement delivered by or on behalf of any
                  Obligor or other member of the Group under any Facility
                  Document, is incorrect or misleading in any material respect
                  when made or deemed to be made or repeated by reference to the
                  facts and circumstances then subsisting.

26.5.    CROSS-ACCELERATION AND CROSS-DEFAULT

         (a)      Any amount in respect of Borrowings of any one or more members
                  of the Group (taken together if more than one) which aggregate
                  US $5,000,000 (five million United States Dollars), or its
                  equivalent, or more at any one time outstanding:

                  (i)      becomes prematurely due and payable;

                  (ii)     becomes due for redemption before its normal maturity
                           date; or

                  (iii)    is placed on demand,

                  in each such case by reason of the occurrence of an event of
                  default (howsoever characterised) or any event having the same
                  effect resulting from a default by a member of the Group.

         (b)      Any amount in respect of such Borrowings which aggregate US
                  $5,000,000 (five million United States Dollars), or its
                  equivalent, or more, are not paid when due (whether falling
                  due by demand, at scheduled maturity or otherwise) or within
                  any applicable grace period provided for in the document
                  evidencing or constituting those Borrowings.

         (c)      Any Encumbrances over any assets of any one or more members of
                  the Group (taken together if more than one) securing an
                  aggregate of US $5,000,000 (five million United States
                  Dollars), or its equivalent, or more become enforceable and
                  steps are taken to enforce the same.

         (d)      Any Obligor fails to discharge in full any judgment debt
                  entered against it in excess of an aggregate amount of US
                  $5,000,000 (five million United States Dollars), or its
                  equivalent, within 30 (thirty) days of the relevant judgment
                  being entered against the relevant Obligor unless such
                  judgment is being contested in good faith on reasonable
                  grounds following external legal advice.


                                     -120-




         (e)      For the purposes of this clause 17.5 only, "BORROWINGS" shall
                  include Indebtedness pursuant to Hedging Transactions and, in
                  any such case the "amount" in respect of such Hedging
                  Transactions shall be the amount under the relevant Hedging
                  Transaction which becomes prematurely due and payable, due for
                  redemption before its normal maturity date, placed on demand
                  or is not paid when due or within any applicable grace period.

         (f)      There is any event of default under any debenture comprising
                  Permitted Loan Capital.

26.6.    INVALIDITY

                  Any of the Facility Documents shall cease to be in full force
                  and effect in any material respect or shall cease to
                  constitute the legal, valid, binding and enforceable
                  obligation of any Obligor party to it or, in the case of any
                  Security Document, fail to provide effective perfected
                  security in favour of the Security Trustee (for the benefit of
                  itself and the Secured Creditors) over the assets over which
                  security is intended to be given by that Security Document
                  (save for any Reservations), or it shall be unlawful for any
                  Obligor to perform any of its material obligations under any
                  of the Facility Documents.



                                     -121-



26.7.    INSOLVENCY AND RESCHEDULING

         Any Obligor is unable to pay its debts as they fall due or admits
         inability to pay its debts as they fall due, commences negotiations
         with any one or more of its creditors with a view to the general
         readjustment or rescheduling of its Indebtedness or makes a general
         assignment for the benefit of or a composition with its creditors.

26.8.    WINDING-UP

         Any Obligor takes any corporate action or other steps are taken or
         legal proceedings are started (or are consented to or any order is
         made) for its winding-up, liquidation, bankruptcy, dissolution,
         administration or re-organisation (or for the suspension of payments
         generally or any process giving protection against creditors) or for
         the appointment of a liquidator, receiver, administrator,
         administrative receiver, conservator, custodian, trustee or similar
         officer of it or of all or any material part of its revenues or assets
         or such a person is appointed provided that this clause 17.8 shall not
         apply to:

         (a)      any such action relating to a solvent reconstruction,
                  amalgamation, reorganisation or merger of such Obligor save
                  where the Facility Agent (acting on the instructions of an
                  Instructing Group) believes that such action will reasonably
                  be expected to have an adverse effect on the ability of that
                  Obligor to comply with its obligations under the Facility
                  Documents; or

         (b)      any such action which is frivolous or vexatious and which such
                  Obligor is contesting in good faith on reasonable grounds or
                  in respect of which an Instructing Group is satisfied that the
                  ability of that Obligor to comply with its obligations under
                  the Facility Documents will not be materially and adversely
                  affected and which in either case is discharged or dismissed
                  as soon as reasonably practicable.

26.9.    EXECUTION OR DISTRESS

         Any distress, execution, attachment, sequestration or other process
         arising out of any claim by any third party against any member of the
         Group for an aggregate amount of US $5,000,000 (five million United
         States Dollars) or its equivalent (taking all such members of the Group
         together) or more affects any material asset of any Obligor save where
         (i) that Obligor is, in good faith on reasonable grounds, contesting
         the distress, execution, attachment, sequestration or other process by
         appropriate proceedings diligently pursued and (ii) an Instructing
         Group is satisfied that the ability of


                                     -122-





         that Obligor to comply with its obligations under the Facility
         Documents will not be materially and adversely affected whilst such
         distress, execution, attachment, diligence or other process is being so
         contested.

26.10.   ANALOGOUS EVENTS

         Any event occurs which has a similar or analogous effect or purpose to
         any of those events mentioned in clause 17.7 (Insolvency and
         Rescheduling), clause 17.8 (Winding-Up) or clause 17.9 (Execution or
         Distress).

26.11.   GOVERNMENTAL INTERVENTION

         By or under the authority of the Government of Israel or any other
         competent Israeli authority:

         (a)      all or the majority of the management of any Obligor is
                  displaced or the authority of any Obligor in the conduct of
                  its business is wholly or materially curtailed; or

         (b)      all or a majority of the issued shares of any Obligor or the
                  whole or any part (the book value of which is 10% (ten
                  percent) or more of the book value of the whole) of the
                  revenues or assets of any Obligor is seized, nationalised,
                  expropriated or compulsorily acquired; or

         (c)      any law is introduced after the date hereof imposing material
                  restrictions on the free transfer of funds out of Israel
                  and/or the exchange of sheqels for dollars or Euros in each
                  such case which will apply to payments made or to be made
                  under any of the Facilities.

26.12.   CESSATION

         Any Obligor ceases, or threatens to cease, to carry on all or a
         substantial part of its business (save in consequence of any
         reorganisation, reconstruction or amalgamation permitted under this
         Agreement and save as may result from any disposal of assets permitted
         by the terms of this Agreement or where such business or part thereof
         is carried on by another Obligor or for any solvent liquidation,
         dissolution or winding-up of any member of the Group previously
         approved in writing by an Instructing Group) or all or a material part
         of the Business is abandoned.

26.13.   PROCEEDINGS

         There is current or pending any litigation, dispute, arbitration,
         administrative, regulatory or other proceedings or enquiry concerning
         or


                                     -123-




         involving any member of the Group which is reasonably likely to have a
         Material Adverse Effect.

26.14.   BREACH OF THE LICENCE OR ANY AUTHORISATION

         (a)      The Licence or any Authorisation necessary for any Obligor to
                  comply with its obligations under the Facility Documents is in
                  whole or in part:

                  (i)      surrendered, terminated, withdrawn, suspended,
                           cancelled or revoked or does not remain in full force
                           and effect or otherwise expires and is not renewed
                           prior to its expiry (in each case, without
                           replacement by a Licence(s) or Authorisation, as
                           applicable having substantially equivalent effect);
                           or

                  (ii)     modified in any material respect or breached (unless,
                           in the case of any Authorisation, such modification
                           or breach is reasonably likely not to have a Material
                           Adverse Effect);

                  provided that any change in the spectrum made available under
                  the Licence will be construed to be a modification of the
                  Licence for the purposes of this paragraph (a).

         (b)      Any event occurs which is reasonably likely to give rise to
                  the revocation, termination, cancellation or suspension of the
                  Licence (without replacement) in such circumstance where
                  Partner is unable to demonstrate to the reasonable
                  satisfaction of the Instructing Group within 30 (thirty) days
                  of such event occurring that such termination, suspension or
                  revocation will not occur.

         (c)      For the avoidance of doubt, nothing in this Agreement shall be
                  construed as a waiver by the Finance Parties of their rights
                  under this clause 17.14 arising from any breach of the
                  Licence.



                                     -124-





26.15.   MATERIAL ADVERSE CHANGE

         Any event or series of events occur which in the reasonable opinion of
         an Instructing Group after discussion with Partner, is likely to have a
         material adverse effect on the business or financial condition of the
         Group (as a whole) or on the ability of any Obligor to perform its
         material obligations under the Facility Documents.

26.16.   BREACH OF MATERIAL CONTRACTS

         (a)      Any Obligor fails duly to perform or comply with any
                  obligation expressed to be assumed by it in any of the
                  Material Contracts to which it is a party (other than the
                  Licence), where such failure would be reasonably likely to
                  have a Material Adverse Effect.

         (b)      Any Authorisation necessary for any Obligor to comply with any
                  Material Contract or any Material Contract (other than the
                  Licence) is cancelled, suspended, withdrawn, revoked or
                  terminated or expires by effluxion of time in a manner or
                  circumstances (in whole or in part) without being replaced as
                  soon as reasonably practicable on terms not materially less
                  favourable than such Material Contract.

26.17.   REPUDIATION

         Any Obligor repudiates or purports to repudiate or threatens to
         repudiate any of the Facility Documents or Material Contracts to which
         it is a party.

26.18.   COUNTERPARTIES

         Any Counterparty:

         (a)      fails duly to perform or comply with any obligation expressed
                  to be assumed by it in any Material Contract to which it is a
                  party where such failure would be reasonably likely to have a
                  Material Adverse Effect; or

         (b)      repudiates, or purports or threatens to repudiate, any
                  Material Contract to which it is a party

         and (in the case of any Supplier Contract) a replacement contract on
         terms not materially less favourable with an internationally recognised
         equivalent supplier is not entered into by Partner within 90 (ninety)
         days from the date of such failure, repudiation or purported or
         threatened repudiation.


                                     -125-




26.19.   SHAREHOLDERS

         (a)      (i)      The Shareholders Agreement ceases to be valid,
                           binding and enforceable; or

                  (ii)     the Shareholders Agreement is revoked, terminated,
                           cancelled or suspended without being at such time
                           replaced with a new shareholders agreement with all
                           material terms being acceptable to an Instructing
                           Group; or

                  (iii)    any material provision of the Shareholders Agreement
                           is amended or waivers granted in relation thereto or
                           any new provisions are included in the Shareholders
                           Agreement; or

                  (iv)     any party to the Shareholders Agreement is in breach
                           of any term thereof and if such breach is capable of
                           remedy, is not remedied within 30 (thirty) days

                  and such event or circumstance is reasonably likely to result
                  in a Material Adverse Effect.

        (b)       (i)      Any of the representations and warranties by any
                           Chargor in any Share Pledge to which it is a party
                           are incorrect or misleading in any material respect
                           when made by such Chargor by reference to the facts
                           and circumstances then existing if the fact, matter
                           or event giving rise to such representation being
                           incorrect or misleading is not remedied or cured to
                           the satisfaction of Facility Agent (acting on the
                           instructions of an Instructing Group) within 14
                           (fourteen) days after the earlier of the relevant
                           Chargor becoming aware of the same and receipt by the
                           relevant Chargor of written notice from Facility
                           Agent requiring the remedy of the relevant fact,
                           matter or event.

                  (ii)     Any Chargor fails to comply with any undertaking or
                           obligation contained in any Share Pledge to which it
                           is a party and, if such default is capable of remedy
                           within such period, within 30 (thirty) days after the
                           earlier of the Chargor becoming aware of such default
                           and receipt by the Chargor of written notice from
                           Facility Agent requiring the failure to be remedied,
                           that Chargor shall have failed to cure such default.

                  (iii)    Any Share Pledge shall cease to be in full force and
                           effect in any material respect or shall cease to
                           constitute the legal, valid, binding and enforceable
                           obligation of any Chargor party to it or


                                     -126-




                           fail to provide effective perfected security in
                           accordance with the terms of the Share Pledge in
                           favour of the Security Trustee (for the benefit of
                           itself and the Secured Creditors) over the assets
                           over which security is intended to be given by that
                           Share Pledge (save for any Reservations), or it shall
                           be unlawful for any Chargor to perform any of its
                           material obligations under any of the Share Pledges.

                  (iv)     Any Chargor repudiates or purports to repudiate or
                           threatens to repudiate in writing the Share Pledge to
                           which it is a party.

26.20.   CHANGE OF OWNERSHIP

         Upon the occurrence of a Change of Ownership, unless Partner has
         received the prior consent of the Participating Banks to such
         occurrence.

26.21.   BALANCE IN RESERVE ACCOUNT

         If the balance standing to the credit of the Reserve Account shall at
         any time be less than the amount required under clause 1.1.131(f)
         above.

26.22.   MANDATORY PREPAYMENT

         In the event that Partner shall fail to make any mandatory prepayment
         in accordance with clause 7 (Mandatory Prepayment) above within the
         time limits respectively specified therefor under the relevant
         subsections of clause 7 (Mandatory Prepayment).

26.23.   NO TRADING IN SECURITIES

         In the event that with respect to any shares or other securities
         convertible into shares of Partner which are traded on a stock
         exchange, there is no trading in such shares or other convertible
         securities for a consecutive period of 10 (ten) or more days on which
         trading is conducted on such stock exchange.

26.24.   NON-COMPLIANCE WITH ANY SECURITIES AUTHORITY

         In the event that Partner breaches or fails to comply with any material
         undertakings or obligations entered into by it, or imposed on it, in
         favour of any securities authority in any country or state in which
         share, securities or debentures of Partner are traded or fails to
         comply with any material rules, regulations or other law of any such
         securities authority.



                                     -127-




26.25.   ACCELERATION

         Upon the occurrence of an Event of Default and at any time thereafter
         while the same is continuing, the Facility Agent may, and shall if so
         directed by an Instructing Group, by notice to Partner:

         (a)      declare that an Event of Default has occurred; and/or

         (b)      declare that any undrawn portion of all or any of the
                  Available Facilities shall be cancelled forthwith, whereupon
                  the same shall be so cancelled and the applicable Available
                  Facility or Facilities shall be zero and all fees payable in
                  relation to the Available Facilities shall become immediately
                  due and payable; and/or

         (c)      declare that the Advances or any one or more of them (as
                  specified in such notice), together with all Interest and
                  Linkage Differentials accrued on those Advances and all other
                  amounts (including amounts due under clause 19.1 (Broken
                  Funding Indemnity), to the extent applicable) payable by
                  Partner (as specified in such notice) or any of them under the
                  Facility Documents from time to time, shall thenceforth be
                  repayable on demand being made by the Facility Agent (and in
                  the event of any such demand those Advances, such Interest and
                  such other amounts shall be immediately due and payable);
                  and/or

         (d)      declare the Advances or any one or more of them (as specified
                  in such notice) immediately due and payable, whereupon they
                  shall become immediately due and payable together with all
                  Interest and Linkage Differentials accrued on those Advances
                  and all other amounts payable by Partner under the Facility
                  Documents (including amounts due under clause 19.1 (Broken
                  Funding Indemnity), to the extent applicable).

26.26.   ADVANCES DUE ON DEMAND

         If, pursuant to clause 17.25 (Acceleration), the Facility Agent
         declares the Advances to be due and payable on demand then, and at any
         time thereafter so long as any Event of Default is continuing or has
         not been waived, the Facility Agent may by written notice to Partner
         (upon instruction from an Instructing Group) require repayment of the
         Advances on such date as the Facility Agent (upon instruction from an
         Instructing Group) may specify in such notice (whereupon the same shall
         become due and payable on such date together with accrued Interest and
         Linkage Differentials thereon and any other sums then owed by Partner
         hereunder) or withdraw such declaration with effect from such date as
         it may specify in such notice.



                                     -128-




26.27.   INDEMNITY

         Partner shall indemnify each Finance Party against any losses, charges
         or expenses which such Finance Party may sustain or incur as a
         consequence of:

         (a)      the occurrence of any Event of Default or Potential Event of
                  Default; or

         (b)      the operation of clause 17.25 (Acceleration),

         including any losses, charges or expenses on account of funds acquired,
         contracted for or utilised to fund any amount payable under this
         Agreement, any amount repaid or prepaid or any Advance (as the case may
         be). A certificate of such Finance Party as to the amount of any such
         loss or expense shall be prima facie evidence in the absence of
         manifest error.

27.    AGENCY PROVISIONS

27.1.             APPOINTMENT

27.1.1.           Each Participating Bank hereby appoints the Facility Agent to
                  act as its agent in connection with the Facility Documents as
                  specified therein and authorises the Facility Agent to
                  exercise such rights, powers, authorities and discretions as
                  are specifically delegated to the Facility Agent,
                  respectively, by the terms thereof, together with all such
                  rights, powers, authorities and discretions as are reasonably
                  incidental thereto. The Facility Agent shall, however, not
                  have any duties, obligations or liabilities to the
                  Participating Banks or any of them beyond those expressly
                  stated in this Agreement. In acting in its capacity hereunder,
                  the Facility Agent acts solely as the agent of each of the
                  Participating Banks and shall not assume any obligations to,
                  or fiduciary relationship with, the Participating Banks.

27.1.2.           Each Participating Bank hereby appoints the Coordinating Agent
                  to act as its agent in connection with the Facility Documents
                  as specified therein and authorises the Coordinating Agent to
                  exercise such rights, powers, authorities and discretions as
                  are specifically delegated to the Coordinating Agent,
                  respectively, by the terms thereof, together with all such
                  rights, powers, authorities and discretions as are reasonably
                  incidental thereto. The Coordinating Agent shall, however, not
                  have any duties, obligations or liabilities to the
                  Participating Banks or any of them beyond those expressly
                  stated in this Agreement. In acting in


                                     -129-




                  its capacity hereunder, the Coordinating Agent acts solely as
                  the agent of each of the Participating Banks and shall not
                  assume any obligations to, or fiduciary relationship with, the
                  Participating Banks.

27.2.    FACILITY AGENT'S OBLIGATION

         Without derogating from clause 18.8 (Participating Bank's
         Responsibility) below, the Facility Agent shall:

27.2.1.      promptly inform each Participating Bank of the contents of any
             notice or document received by it in its capacity as Facility Agent
             from Partner under any of the Facility Documents;

27.2.2.      monitor the compliance of Partner with the Facility Documents to
             which it is a party and promptly notify each Participating Bank of
             the occurrence of any Event of Default of which it becomes aware
             (including, monitor compliance with the financial undertakings
             specified in clause 16.32 (Financial Undertakings) above;

27.2.3.      receive from Partner and each of the Participating Banks reports
             regarding all Advances made, amounts prepaid, repaid and paid
             (whether on account of principal, Interest or otherwise), including
             details as to the currency and amount of each Advance and payment,
             and the dates thereof;

27.2.4.      collect from Partner and make the payments of the commissions,
             fees, expenses and stamp duties as referred to in clauses 10.6
             (Expenses) and 10.7 (Stamp Taxes) above.

18.2A    COORDINATING AGENT'S OBLIGATION

         Without derogating from clause 18.8 (Participating Bank's
         Responsibility) below, the Coordinating Agent shall:

18.2A.1.     deliver to the Facility Agent and the Participating Banks copies of
             any notice or document received by it in its capacity as
             Coordinating Agent under the Facility Documents; and

18.2A.2.     based, solely, on the documents provided to the Coordinating Agent
             by Partner under clauses 4.2, 6.2.1 and 16.2.7 above, monitor
             (provided that the Coordinating Agent shall be under no obligation
             to monitor more frequently than once per Quarter) the compliance of
             Partner with its obligations under clause 4.5(a) (Outstandings in



                                     -130-




         Proportion to Commitments--Facility A and Facility C) and promptly
         notify the Facility Agent of any non-compliance therewith.

27.3.    DISCRETIONS

         Each of the Facility Agent and the Coordinating Agent may:

27.3.1.      assume, unless it has, in its capacity as agent for the
             Participating Banks received notice to the contrary from any other
             party to any of the Facility Documents, that: (a) any
             representation made by Partner in connection therewith is true; and
             (b) any right, power, authority or discretion vested therein upon
             an Instructing Group or any other person or group of persons has
             not been exercised;

27.3.2.      engage and pay for the advice or services of any lawyers,
             accountants or other experts whose advice or services may seem to
             it necessary, expedient or desirable and rely upon any advice so
             obtained;

27.3.3.      rely as to any matters of fact which might reasonably be expected
             to be within the knowledge of Partner upon a certificate signed by
             or on behalf of Partner;

27.3.4.      rely upon any communication or document believed by it to be
             genuine; and

27.3.5.      refrain from exercising any right, power of appointment or other
             power or discretion vested in it as agent under any of the Facility
             Documents or making any determination of acceptability, any
             judgment or agreement in the capacity as agent, unless and until
             instructed by an Instructing Group as to whether or not such right,
             power or discretion is to be exercised and, if it is to be
             exercised, as to the manner in which it should be exercised.

27.4.    EXCLUDED OBLIGATIONS

         Notwithstanding anything to the contrary expressed or implied in any of
         the Facility Documents, neither the Facility Agent nor the Coordinating
         Agent shall:

27.4.1.      be bound to enquire as to whether or not any representation made by
             Partner in connection with any of the Facility Documents is true;

27.4.2.      be bound to account to any Participating Bank for any sum or the
             profit element of any sum received by them for their own account;


                                     -131-



27.4.3.      be bound to disclose to any other person any information relating
             to Partner if such disclosure would or might in their opinion
             constitute a breach of any law or regulation or be otherwise
             actionable at the suit of any person; or

27.4.4.      be under any obligations other than those for which express
             provision is made herein or any of the Facility Documents.

27.5.    INDEMNIFICATION

         To the extent that Partner does not do so on demand or is not obliged
         to do so, each Participating Bank shall, from time to time on demand by
         the Facility Agent or the Coordinating Agent, indemnify the Agents, in
         its Proportion against any and all costs, claims, losses, expenses
         (including legal fees) and liabilities, together with any VAT thereon
         which the Facility Agent or the Coordinating Agent may incur, otherwise
         than by reason of its own gross negligence or wilful misconduct, in
         acting in its capacity as the Facility Agent or the Coordinating Agent
         hereunder.

27.6. EXCLUSION OF LIABILITIES

         Neither the Facility Agent nor the Coordinating Agent accepts any
         responsibility for the accuracy and/or completeness of any information
         supplied by Partner in connection with any of the Facility Documents or
         for the legality, validity, adequacy or enforceability of any of the
         Facility Documents and the Facility Agent shall not be under any
         liability as a result of taking or omitting to take any action in
         relation to any of the Facility Documents, save in the case of gross
         negligence or wilful misconduct. Neither the Facility Agent nor the
         Coordinating Agent shall have any liability for any loss or damage
         arising from any act, default, omission or misconduct on the part of
         any persons whose services have been engaged as contemplated pursuant
         to clause 18.3.2 above, save where such loss or damage arises due to
         the gross negligence or wilful misconduct of such person and the
         Facility Agent or the Coordinating Agent (as the case may be) is
         considered by a final decision of a court or arbitral tribunal to have
         failed to have taken reasonable care in the selection of the person
         providing the services concerned.

27.7.    NO ACTIONS

         Each of the Participating Banks agrees that it will not assert or seek
         to assert against any director, officer or employee of the Facility
         Agent or the


                                     -132-




         Coordinating Agent any claim it might have against any of them in
         respect of the matters referred to in clause 18.6 (Exclusion of
         Liabilities).

27.8.    PARTICIPATING BANK'S RESPONSIBILITY

         It is understood and agreed by each Participating Bank that it has
         itself been, and will continue to be, solely responsible for making its
         own independent appraisal of and investigations into the financial
         condition, creditworthiness, condition, affairs, status and nature of
         Partner and that (as between the Facility Agent and the Coordinating
         Agent, on the one hand and the Participating Banks on the other hand)
         each Participating Bank shall also be responsible for monitoring
         compliance by Partner with its obligations under this Agreement
         (including monitoring compliance with the financial undertakings
         specified in clause 16.32 (Financial Undertakings) above). Each
         Participating Bank warrants to the Facility Agent and the Coordinating
         Agent that it has not relied on and will not hereafter rely on the
         Facility Agent or the Coordinating Agent:

27.8.1.      to check or enquire on its behalf into the adequacy, accuracy or
             completeness of any information provided by Partner or its advisers
             in connection with the Facility Documents, this Agreement or the
             transactions therein contemplated (whether or not such information
             has been or is hereafter circulated to such Participating Bank by
             the Facility Agent or the Coordinating Agent or any of them); or

27.8.2.      to assess or keep under review on its behalf the financial
             condition, creditworthiness, condition, affairs, status or nature
             of Partner.

         In addition, each Participating Bank shall give to the Facility Agent
         and the Coordinating Agent notice regarding the occurrences of any
         Default of which such Participating Bank becomes aware (including
         non-compliance with the financial undertakings specified in clause
         16.32 (Financial Undertakings) above).

27.9.    RESIGNATION

         The Facility Agent may resign, provided that no such resignation shall
         be effective until a successor for the Facility Agent is appointed in
         accordance with the succeeding provisions of clause 18.10 (Successor
         Agent) below. Bank Hapoalim may resign as Coordinating Agent by giving
         notice to such effect to Partner and the Facility Agent, such
         resignation to become effective upon service of such notice as
         aforesaid. Upon such resignation by Bank Hapoalim, as aforesaid, the
         Facility Agent shall be appointed as the successor to the Coordinating
         Agent.


                                     -133-




27.10.   SUCCESSOR AGENT

         If the Facility Agent gives notice of its resignation pursuant to
         clause 18.9 (Resignation) above, then any reputable and experienced
         bank or other financial institution may, with the prior written consent
         of Partner (such consent not to be unreasonably withheld), be appointed
         as a successor to the Facility Agent (such successor to the Facility
         Agent, for the avoidance of doubt, shall, in the event the Facility
         Agent is the Coordinating Agent pursuant to clause 18.9 (Resignation)
         above, also be appointed as successor to the Coordinating Agent) by an
         Instructing Group during the period of such notice but, if no such
         successor is so appointed, the Facility Agent may itself appoint as its
         successor any reputable and experienced bank or other financial
         institution.

27.11.   RIGHTS AND OBLIGATIONS

         If a successor to the Facility Agent or the Coordinating Agent (as the
         case may be) is appointed under the provisions of clause 18.10
         (Successor Agent), then: (a) the departing Facility Agent or the
         Coordinating Agent (as the case may be) shall be discharged from any
         further obligation under the Facility Documents, in its capacity as
         Facility Agent or the Coordinating Agent (as the case may be), but
         shall remain entitled to the benefit of the provisions of this clause
         18.11; and (b) its successors and each of the other parties hereto
         shall have the same rights and obligations amongst themselves as they
         would have had if such successor had been a party hereto.

27.12.   BUSINESS WITH THE GROUP

         The Facility Agent, the Arranger and the Coordinating Agent may accept
         deposits from, lend money to and generally engage in any kind of
         banking or other business with Partner.

28. BROKEN FUNDING INDEMNITY

28.1.    BROKEN FUNDING INDEMNITY FOR US DOLLARS AND EUROS

         If any Participating Bank receives or recovers all or any part of any
         Advance (not denominated in NIS) made by such Participating Bank
         otherwise than on the last day of the Duration Period relating to that
         Advance, Partner shall pay, on demand, to such Participating Bank an
         amount equal to the amount (if any) (but excluding, for the avoidance
         of doubt, any loss of margin) by which: (a) the additional Interest
         which would



                                     -134-





         have been payable on the amount so received or recovered had it been
         received or recovered on the last day of such Duration Period exceeds
         (b) the amount of Interest which in the reasonable opinion of the
         relevant Participating Bank would have been payable to such
         Participating Bank on the last day of such Duration Period in respect
         of a deposit in the relevant currency of the amount so received or
         recovered equal to the amount so received or recovered placed by it
         with a prime bank in London for a period starting on the third Business
         Day following the date of such receipt or recovery and ending on the
         last day of such Duration Period.

28.2.    BROKEN FUNDING INDEMNITY FOR NIS

         If any Participating Bank receives or recovers all or any part of any
         Advance (denominated in NIS) made by such Participating Bank otherwise
         than on the scheduled date of repayment of such amount, Partner shall
         pay, on demand, to such Participating Bank:

         (a)      in the event that the rate of Interest on such Advance was
                  based on a prime rate or on an on-call rate and the payment to
                  the relevant Participating Bank was made without the giving to
                  such Participating Bank of at least seven Business Days' prior
                  written notice regarding such payment, an amount equal to the
                  Interest which would have been payable under this Agreement on
                  the amount so received or recovered in respect of the period
                  of 7 (seven) Business Days (or, if prior written notice was
                  given, the number of Business Days below 7 (seven) of which
                  prior written notice was in fact given) after the date of such
                  receipt or recovery;

         (b)      in the event that the rate of Interest on such Advance was
                  based on the Bond Rate or a fixed linked rate, and

                  (i)      the remaining average period (taking into account
                           scheduled repayments of such Advance) of the Duration
                           Period for such Advance is 1 (one) year or more, the
                           net present value of the amount, if any (excluding,
                           for the avoidance of doubt, any loss of margin) by
                           which: (1) the amount of Interest which would have
                           been payable under this Agreement on the amount so
                           received or recovered on the dates specified
                           therefore during such Duration Period, exceeds (2)
                           the amount of Interest which would be payable on the
                           amount so received or recovered at the Bond Rate less
                           0.6% (nought point six percent) as at the date or
                           dates of such receipt or recovery, for a period equal
                           to the remaining average period (taking into account
                           scheduled repayments of such Advance) of such
                           Duration Period; or



                                     -135-




                  (ii)      the remaining average period (taking into account
                           scheduled repayments of such Advance) of the Duration
                           Period for such Advance is less than 1 (one) year,
                           the net present value of the amount, if any
                           (excluding, for the avoidance of doubt, any loss of
                           margin) by which: (1) the amount of Interest which
                           would have been payable under this Agreement on the
                           amount so received or recovered on the dates
                           specified therefor during such Duration Period
                           exceeds (2) the arithmetic mean of the Average Daily
                           Yield; "THE AVERAGE DAILY YIELD" being the arithmetic
                           mean of the gross yields to maturity (rounded
                           upwards, if necessary, to four decimal places) as
                           published by the Tel-Aviv Stock Exchange ("TASE") of
                           all of the series of fixed rate bonds issued by the
                           State of Israel listed on the TASE, with a remaining
                           period to maturity of between 6 (six) months and 1
                           (one) year which are denominated in NIS and fully
                           linked to the Cost of Living Index on the 5 (five)
                           trading days of the TASE immediately preceding the
                           date of actual payment, all as determined by the
                           Facility Agent;

         (c)      in the event that rate of Interest on such Advance was based
                  on a fixed unlinked rate and:

                  (i)      the remaining average period (taking into account
                           scheduled repayments of such Advance) of the Duration
                           Period for such Advance is 1 (one) year or less, the
                           net present value of the amount (excluding, for the
                           avoidance of doubt, any loss of margin) by which: (1)
                           the amount of Interest which would have been payable
                           under this Agreement on the amount so received or
                           recovered had it been received or recovered on the
                           dates specified therefore during such Duration
                           Period, exceeds (2) the amount of Interest which
                           would have been payable on the amount so received or
                           recovered at the Interest rate on short-term loan
                           notes issued by the Bank of Israel (Makam) for a
                           period equal to the remaining average period (taking
                           into account scheduled repayments of such Advance) of
                           such Duration Period; or

                  (ii)     the remaining average period (taking into account
                           scheduled repayments of such Advance) of such Rate
                           Period is more than one year, the net present value
                           of the amount, if any (excluding, for the avoidance
                           of doubt, any loss of margin) by which: (1) the
                           amount of Interest which would have been payable
                           under this Agreement on the amount so received or
                           recovered on the dates


                                     -136-




                           specified therefor during the relevant Rate Period
                           exceeds (2) the arithmetic mean of the Average Daily
                           Yield; "THE AVERAGE DAILY YIELD" being the arithmetic
                           mean of the gross yields to maturity (rounded
                           upwards, if necessary, to four decimal places) as
                           published by the TASE of six, or if less, less,
                           series of fixed rate bonds issued by the State of
                           Israel listed on the TASE, with a remaining period to
                           maturity similar to the remaining average period
                           (taking into account scheduled repayments of such
                           Advance) of such Rate Period, which are denominated
                           in NIS and not linked to the Cost of Living Index, on
                           the 5 (five) trading days of the TASE immediately
                           preceding the date of actual payment, all as
                           determined by the Facility Agent;

              (d)    In each of paragraphs (i) and (ii) of (b) and (c) above,
                     the net present value shall be discounted at the rate
                     referred to in (2) of the relevant paragraph.

28.3.    PARTNER'S INDEMNITY

         Partner undertakes to indemnify each Participating Bank against any
         loss it may suffer or incur as a result of its funding or making
         arrangements to fund an Advance requested by Partner hereunder but not
         made by reason of the operation of any one or more of the provisions
         hereof (other than by reason of a default by such Participating Bank),
         upon provision by any Participating Bank claiming hereunder of a
         written statement setting out in reasonable detail the basis of the
         calculation.

29. CURRENCY OF ACCOUNT

29.1.    CURRENCY OF ACCOUNT

         With respect to all of the Facilities:

         (a)      each repayment of an Advance or part thereof shall be made in
                  the currency in which such Advance was made;

         (b)      each payment of Interest shall be made in the currency in
                  which the sum in respect of which such Interest is payable is
                  denominated;

         (c)      any amount expressed to be payable in another currency shall
                  be paid in that other currency;

         (d)      each payment in respect of costs and expenses shall be made in
                  the currency in which the same were incurred; and



                                     -137-





         (e)      each payment pursuant to clause 13.1 (Increased Costs) shall
                  be made in the currency specified by the party claiming
                  thereunder.

29.2.    CURRENCY INDEMNITY

         If any sum due from Partner under any Facility Document or any order or
         judgment given or made in relation thereto has to be converted from the
         currency ("THE FIRST CURRENCY") in which the same is payable thereunder
         or under such order or judgment into another currency ("THE SECOND
         CURRENCY") for the purpose of: (a) making or filing a claim or proof
         against Partner; (b) obtaining an order or judgment in any court or
         other tribunal; or (c) enforcing any order or judgment given or made in
         relation thereto, Partner shall indemnify and hold harmless each of the
         persons to whom such sum is due from and against any loss suffered or
         incurred as a result of any difference between (i) the rate of exchange
         used for such purpose to convert the sum in question from the first
         currency into the second currency; and (ii) the rate or rates of
         exchange at which such person may in the ordinary course of business
         purchase the first currency with the second currency upon receipt of a
         sum paid to it in satisfaction, in whole or in part, of any such order,
         judgment, claim or proof.

30. PAYMENTS WITHOUT SET-OFF

         All payments required to be made by Partner under the Facility
         Documents shall be calculated without reference to any set-off or
         counterclaim and shall be made free and clear of and without any
         deduction for or on account of any set-off or counterclaim.

31.      SET-OFF

         Each Finance Party may (but shall not be obliged to) set-off against
         any obligation of any Obligor due and payable by it to or for the
         account of such Finance Party under this Agreement and not paid on the
         due date or within any applicable grace period any moneys held by such
         Finance Party for the account of such Obligor at any office of such
         Finance Party anywhere and in any currency, whether or not matured.
         Such Finance Party may effect such currency exchanges as are
         appropriate to implement the set-off and any usual charges in relation
         to such currency exchanges shall be paid by such Obligor. Any Finance
         Party which has set off shall give notice of that fact to the relevant
         Obligor as soon as reasonably practicable.

32.    APPLICATION AND REDISTRIBUTION OF PAYMENTS


                                     -138-




32.1.    APPLICATION OF PAYMENTS

         (a)      If after the Default Date the Security Trustee or any Receiver
                  appointed under any Security Document receives payment
                  insufficient to discharge all amounts then due and payable by
                  the Obligors under the Facility Documents, the Security
                  Trustee or Receiver, as applicable, shall apply such payment
                  towards the obligations of the Obligors under the Facility
                  Documents in the following order (after converting the payment
                  into the currency necessary to make payment of all amounts due
                  as aforesaid in the equivalent of the currencies in which such
                  amounts are due):

                  (i)      first, in or towards payment of any unpaid fees,
                           costs and expenses of the Facility Agent, the
                           Coordinating Agent, the Security Trustee and/or any
                           Receiver pro rata between the amounts of such unpaid
                           fees, costs and expenses;

                  (ii)     secondly, in or towards payment pro rata to the
                           Dollar equivalent of all amounts due to: (1) each
                           Participating Bank under the Facility Documents; and
                           (2) Israel Discount Bank Ltd., pursuant to the IDB
                           Performance Bond Counter Indemnity; and

                  (iii)    thirdly, in or towards payment, pro rata, to all
                           amounts due to each Participating Bank on account of
                           Borrowings, as referred to in paragraphs (c), (d) and
                           (e) of the definition of "Permitted Borrowings",
                           received by any Obligor from any such Participating
                           Bank.

         (b)      The Facility Agent shall, if so directed by all the Secured
                  Creditors, vary the order set out in sub-paragraphs (a)(i),
                  (ii) and (iii) above.

         (c)      Paragraphs (a) and (b) above will override any appropriation
                  made by any Obligor or Shareholder.

         (d)      For the purposes of this clause 23.1 any Dollar equivalent
                  shall be calculated as at the date 2 (two) Business Days prior
                  to the date the Security Trustee or the Receiver, as
                  applicable, makes any relevant application.

32.2.    PARTIAL PAYMENTS

         (a)      If a Finance Party receives before the Default Date a payment
                  that is insufficient to discharge all the amounts then due and
                  payable to such


                                     -139-



                  Finance Party by an Obligor under the Facility Documents, then
                  that Finance Party shall apply such payment towards the
                  obligations of the Obligor to such Finance Party, under the
                  Facility Documents, in the following order:

                  (i)      first, in or towards payment of any unpaid fees,
                           costs and expenses of such Finance Party under the
                           Facility Documents;

                  (ii)     secondly, in or towards payment of any accrued
                           Interest or commission due to such Finance Party but
                           unpaid, under this Agreement;

                  (iii)    thirdly, in or towards payment of any principal,
                           together with Linkage Differentials, due to such
                           Finance Party but unpaid, under this Agreement; and

                  (iv)     fourthly, in or towards payment of any other sum due
                           to such Finance Party but unpaid, under the Facility
                           Documents.

         (b)      A Finance Party shall be at liberty to vary the order set out
                  in paragraphs (a)(i) to (iv) (inclusive) above.

         (c)      Paragraphs (a) and (b) above will override any appropriation
                  made by an Obligor.

32.3.    REDISTRIBUTION ON OR AFTER DEFAULT DATE

         Subject to clause 23.5 (Recoveries Through Legal Proceedings), if, at
         any time on or after the Default Date, the proportion which any Secured
         Creditor ("A RECOVERING SECURED CREDITOR") has received or recovered
         from any Obligor or any Shareholder (whether by payment, the exercise
         of a right of set-off or combination of accounts or otherwise) other
         than in accordance with the applicable priority at the relevant time
         set out in clause 23.1 (Application of Proceeds), in respect of its
         portion of all sums due from any Obligor or Shareholder under the
         Facility Documents on or after the Default Date is greater (the excess
         proportion being herein called "AN EXCESS SUM") than the proportion of
         such sum due so received or recovered by the Secured Creditor or
         Creditors receiving or recovering the smallest proportion thereof
         (including a nil receipt), then:

         (a)      such Recovering Secured Creditor shall inform the Security
                  Trustee of such receipt or recovery and pay to the Security
                  Trustee an amount equal to such Excess Sum;



                                     -140-





         (b)      as between the relevant person and such Recovering Secured
                  Creditor, the Excess Sum shall be treated as not having been
                  paid; and

         (c)      the Security Trustee shall treat the amount received by it
                  from such Recovering Secured Creditor pursuant to paragraph
                  (a) above as if such amount had been received by it from the
                  relevant person on account of such sum and shall pay the same
                  to the persons entitled thereto (including such Recovering
                  Secured Creditor) pro rata to their respective entitlements
                  thereto in accordance with clause 23.1 (Application of
                  Proceeds).

32.4.    REPAYABLE RECOVERIES

         If any sum ("A RELEVANT SUM") received or recovered by a Recovering
         Secured Creditor in respect of any amount owing to it by any Obligor or
         Shareholder becomes repayable and is repaid by such Recovering Secured
         Creditor, then:

         (a)      each Secured Creditor (other than a Recovering Secured
                  Creditor) which has received a share of such Relevant Sum by
                  reason of the implementation of clause 23.3 (Redistribution on
                  or after Default Date) shall, upon request of the Security
                  Trustee, pay to the Security Trustee for account of such
                  Recovering Secured Creditor an amount equal to its share of
                  such Relevant Sum; and

         (b)      as between the relevant Obligor or Shareholder and each such
                  Secured Creditor, the amount repaid by such Secured Creditor
                  pursuant to paragraph (a) above shall be treated as not having
                  been paid.

32.5.    RECOVERIES THROUGH LEGAL PROCEEDINGS

         (a)      If any Participating Bank shall commence any action or
                  proceeding in any court to enforce its rights (if so permitted
                  or contemplated) under any of the Facility Documents after
                  consultation with the other Participating Banks and with the
                  consent of an Instructing Group (such consent not to be
                  unreasonably withheld) and, as a result thereof or in
                  connection therewith, shall receive any Excess Sum (as defined
                  in clause 23.3 (Redistribution on or after Default Date)),
                  then such Participating Bank shall not be required to share
                  any portion of such amount with any Participating Bank or
                  other Secured Creditor which has the legal right to, but does
                  not, join in such action or proceeding or commence and
                  diligently prosecute a separate action or proceeding to
                  enforce its rights in another court.


                                     -141-




         (b)      Any Participating Bank may (upon giving to the other
                  Participating Banks no less than 10 (ten) Business Days'
                  notice to such effect) commence any action or proceeding in
                  any court to enforce its rights (if so permitted or
                  contemplated) under any of the Facility Documents without
                  consulting any other Participating Bank, but such
                  Participating Bank shall be required to share any Excess Sum
                  received with the other Participating Banks.

33. CALCULATIONS AND EVIDENCE OF DEBT

33.1.    BASIS OF ACCRUAL

         Interest and commitment commission shall accrue from day to day and
         shall be calculated on the basis of a year of 360 (three hundred and
         sixty) days in relation to amounts denominated in US Dollars or Euros
         (or 365 (three hundred and sixty-five days) in relation to Interest on
         amounts denominated in NIS) and the actual number of days elapsed.



                                     -142-





33.2.    EVIDENCE OF DEBT

         Each Participating Bank shall maintain, in accordance with its usual
         practice, accounts evidencing the amounts from time to time lent by and
         owing to it hereunder.

33.3.    PRIMA FACIE EVIDENCE

         In any legal action or proceeding arising out of or in connection with
         this Agreement: (a) the entries made in the accounts maintained
         pursuant to clause 24.2 (Evidence of Debt) above shall, in the absence
         of manifest or proven error, be prima facie evidence of the existence
         and amounts of the specified obligations of Partner; and (b) a
         certificate of any Participating Bank signed by a relevant senior
         officer as to its Cost of Funds for the purpose of determining the
         Interest rate in respect of an Advance shall constitute prima facie
         evidence of such Cost of Funds.

33.4.    CERTIFICATES OF PARTICIPATING BANKS

         A certificate of a Finance Party as to: (a) the amount by which a sum
         payable to it hereunder is to be increased under clause 11.1 (Tax
         Gross-Up) above; or (b) the amount for the time being required to
         indemnify it against any such cost, payment or liability as is
         mentioned in clause 12.1 (Increased Costs) above shall, in the absence
         of manifest or proven error, be prima facie evidence of the existence
         and amounts of the specified obligations of Partner.

34.      GUARANTEE AND INDEMNITY

34.1.    GUARANTEE

         Each Guarantor irrevocably and unconditionally guarantees to the
         Agents, the Arranger and the other Secured Creditors the due and
         punctual observance and performance of all the terms, conditions and
         undertakings on the part of Partner contained in this Agreement and the
         other Facility Documents and agrees to pay to the Facility Agent, the
         Coordinating Agent and each Participating Bank from time to time on
         demand any and every sum or sums of money which Partner is at any time
         liable to pay to the Agents, the Arranger, the Coordinating Agent and
         the Participating Banks or any of them under or pursuant to this
         Agreement and the other Facility Documents (whether actual or
         contingent) and which has become due and payable but has not been paid
         at the time such demand is made.

34.2.    INDEMNITY


                                     -143-





         Each Guarantor irrevocably and unconditionally agrees as a primary
         obligation and not merely as surety to indemnify the Agents, the
         Arranger and the Participating Banks from time to time on demand by the
         Facility Agent (upon instruction of an Instructing Group) from and
         against any loss incurred by the Agents, the Arranger and such
         Participating Bank or any of them as a result of any of the obligations
         of Partner under or pursuant to this Agreement or any other Facility
         Document being or becoming void, voidable, unenforceable or ineffective
         as against Partner for any reason whatsoever, whether or not known to
         the Agents, the Arranger and the Participating Banks or any of them or
         any other person, the amount of such loss being the amount which the
         person or persons suffering it would otherwise have been entitled to
         recover from Partner.

34.3.    ADDITIONAL SECURITY

         The obligations of each Guarantor herein contained shall be in addition
         to and independent of every other security held by the Security Trustee
         upon trust for the Agents, the Arranger and the Participating Banks or
         any of them may at any time hold in respect of any of Partner's
         obligations hereunder.

34.4.    CONTINUING OBLIGATIONS

         The obligations of each Guarantor herein contained shall constitute and
         be continuing obligations notwithstanding any settlement of account or
         other matter or thing whatsoever and shall not be considered satisfied
         by any intermediate payment or satisfaction of all or any of the
         obligations of Partner under this Agreement and shall continue in full
         force and effect until final payment in full of all amounts owing by
         Partner hereunder and total satisfaction of all Partner's actual and
         contingent obligations hereunder.

34.5.    OBLIGATIONS NOT DISCHARGED

         Neither the obligations of any Guarantor herein contained nor the
         rights, powers and remedies conferred in respect of any Guarantor upon
         the Agents, the Arranger and the Participating Banks or any of


                                     -144-




         them by this Agreement or by law shall be discharged, impaired or
         otherwise affected by:

         (a)      the winding-up, dissolution, administration or re-organisation
                  of Partner or any other person or any change in its status,
                  function, control or ownership;

         (b)      any of the obligations of Partner or any other person
                  hereunder or under any other security taken in respect of any
                  of its obligations hereunder being or becoming illegal,
                  invalid, unenforceable or ineffective in any respect;

         (c)      time or other indulgence being granted or agreed to be granted
                  to Partner in respect of its obligations hereunder or under
                  any such other security;

         (d)      any amendment to, or any variation, waiver or release of, any
                  obligation of Partner hereunder or under any such other
                  security;

         (e)      any failure to take, or fully to take, any security
                  contemplated hereby or otherwise agreed to be taken in respect
                  of Partner's obligations hereunder;

         (f)      any failure to realise or fully to realise the value of, or
                  any release, discharge, exchange or substitution of, any
                  security taken in respect of Partner's obligations hereunder;
                  or

         (g)      any other act, event or omission which, but for this clause
                  25.5, might operate to discharge, impair or otherwise affect
                  any of the obligations of any Guarantor herein contained or
                  any of the rights, powers or remedies conferred upon the
                  Agents, the Arranger and the Participating Banks or any of
                  them by this Agreement or by law.

34.6.    SETTLEMENT CONDITIONAL

         Any settlement or discharge between any Guarantor and the Agents, the
         Arranger and the Participating Banks or any of them shall be
         conditional upon no security or payment to the Agents, the Arranger and
         the Participating Banks or any of them by Partner or any Guarantor or
         any other person on behalf of Partner or, as the case may be, any
         Guarantor being avoided or reduced by virtue of any provisions or
         enactments relating to bankruptcy, insolvency, liquidation or similar
         laws of general application for the time being in force and, if any
         such security or payment is so avoided or reduced, the Agents, the
         Arranger and the Participating Banks


                                     -145-



         shall each be entitled to recover the value or amount of such security
         or payment from the relevant Guarantor subsequently as if such
         settlement or discharge had not occurred.

34.7.    EXERCISE OF RIGHTS

         Neither the Agents, the Arranger nor the Participating Banks nor any of
         them shall be obliged before exercising any of the rights, powers or
         remedies conferred upon them in respect of any Guarantor by this
         Agreement or by law:

         (a)      to make any demand of Partner;

         (b)      to take any action or obtain judgment in any court against
                  Partner;

         (c)      to make or file any claim or proof in a winding-up or
                  dissolution of Partner; or

         (d)      to enforce or seek to enforce any other security taken in
                  respect of any of the obligations of Partner hereunder.

34.8.    DEFERRAL OF GUARANTOR'S RIGHTS

         Each Guarantor agrees that, so long as any amounts are or may be owed
         by Partner hereunder or Partner is under any actual or contingent
         obligations hereunder, any rights which the relevant Guarantor may at
         any time have by reason of performance by it of its obligations
         hereunder or in respect of any other moneys for the time being due to
         the relevant Guarantor from the Partner:

         (a)      to claim payment from or be indemnified by Partner; and/or

         (b)      to claim any contribution from any other guarantor of
                  Partner's obligations hereunder or in respect of any such
                  other moneys; and/or

         (c)      to take the benefit (in whole or in part and whether by way of
                  subrogation or otherwise) of any rights of the Agents, the
                  Arranger and the Participating Banks hereunder or of any other
                  person in respect of such moneys or of any other security
                  taken pursuant to, or in connection with, this Agreement by
                  all or any of the Agents, the Arranger and the Participating
                  Banks or taken by any other person in respect of such moneys,



                                     -146-



                  shall be exercised by the relevant Guarantor only if and to
                  the extent that the Facility Agent (upon instructions from an
                  Instructing Group) so requires and in such manner and upon
                  such terms as the Facility Agent (upon instructions from an
                  Instructing Group) may specify and the relevant Guarantor
                  further agrees to hold any moneys at any time received by it
                  as a result of the exercise of any such rights on trust for
                  and on behalf of, and to the order of, the Participating Banks
                  for application in or towards payment of any sums at any time
                  owed by Partner hereunder.

34.9.    SUSPENSE ACCOUNTS

         All moneys received, recovered or realised by a Participating Bank by
         virtue of clause 25.1 (Guarantee) or clause 25.2 (Indemnity) may, in
         that Participating Bank's discretion, be credited to a suspense or
         impersonal account and may be held in such account for so long as such
         Participating Bank thinks fit pending the application from time to time
         (as such Participating Bank may think fit) of such moneys in or towards
         the payment and discharge of any amounts owing by any of the Obligors
         to such Participating Bank hereunder.

34.10.   WAIVER BY GUARANTOR

         Without derogating from any other provisions of this Agreement which
         exclude the application of, or constitute a waiver by a Guarantor of,
         certain defences or rights under the Guarantee Law, 1967 ("THE
         GUARANTEE LAW") (which defences or rights would, but for such
         provision, have been available to such Guarantor), each Guarantor
         hereby waives all rights and defences under the Guarantee Law and
         confirms that the provisions of the Guarantee Law affording such rights
         or defences to a guarantor shall not apply to this Agreement.

35. ADDITIONAL GUARANTORS AND SECURITY

35.1.    ADDITIONAL GUARANTORS

         (a)      The Obligors shall procure that any Subsidiary (other than a
                  Venture Subsidiary or a Subsidiary of a Venture Subsidiary)
                  shall become, as soon as practicable and in any event within
                  30 (thirty) days of becoming a Subsidiary, an Additional
                  Guarantor by entering into a Guarantor Accession Agreement.

         (b)      On each date that a Guarantor Accession Agreement is entered
                  into Partner shall procure that certified copies of each of
                  the documents listed in SCHEDULE 23 (Documents Required for
                  Acceding Guarantors)


                                     -147-




                  are delivered in respect of the Additional Guarantor, the
                  Guarantor Accession Agreement duly executed and any security
                  document required for the purposes of compliance with clause
                  26.2 (Security) each in form and substance reasonably
                  satisfactory to the Facility Agent.

35.2.    SECURITY

         The Obligors shall procure that on the date that a Guarantor Accession
         Agreement is delivered in accordance with clause 32.1 (Additional
         Guarantors) above, the Subsidiary shall grant security in favour of the
         Security Trustee (for the benefit of itself and the Secured Creditors)
         which is similar to the security granted by the Debenture.

36.      ASSIGNMENTS AND TRANSFERS

36.1.    BINDING AGREEMENT

         This Agreement shall be binding upon and enure to the benefit of each
         party hereto and its or any subsequent successors, Transferees and
         permitted assigns.

36.2.    NO ASSIGNMENTS AND TRANSFERS BY THE OBLIGORS

         No Obligor shall be entitled to assign or transfer all or any of its
         rights, benefits and obligations under any of the Facility Documents.

36.3.    ASSIGNMENTS AND TRANSFERS BY PARTICIPATING BANKS

         Any Participating Bank may with the consent of Partner (such consent
         not to be unreasonably withheld or delayed) unless such assignment or
         transfer is to an Affiliate of a Participating Bank or an Event of
         Default has occurred and is continuing (in which event no consents will
         be required), at any time, assign all or any of its rights and benefits
         under the Facility Documents or transfer in accordance with clause 27.5
         (Transfers by Participating Banks) all or any of its rights, benefits
         and obligations under the Facility Documents to any bank or financial
         institution. Subject to the aforegoing, a Participating Bank may assign
         to any person, in whole or in part, any of its rights, benefits and
         obligations under the Facility Documents. An assignment by a
         Participating Bank of the whole or part of its outstanding Advances
         shall be made together with an assignment of the Commitment in respect
         thereof. An assignment or transfer of any such Advance shall be in
         respect of at least a minimum amount of US $5,000,000 (five million
         United States Dollars) (or its equivalent). Where a Participating Bank
         has


                                     -148-




         transferred to a Transferee any part of its Commitment under Facility A
         or Facility C, as the case may be, such Transferee's Commitment under
         such Facility (transferred to it as aforesaid) and, if applicable, the
         Commitment under Facility A or Facility C, as the case may be, of the
         relevant transferring Participating Bank (to the extent not transferred
         as aforesaid), shall be reduced, on each Facility A Commitment
         Reduction Date or Facility C Commitment Reduction Date, as the case may
         be, by the same percentage as the other Participating Banks' respective
         Commitments under such Facility are reduced under clause 5.1.1 or
         5.3.1, as applicable, of this Agreement.

36.4.    ASSIGNMENTS BY PARTICIPATING BANKS

         If any Participating Bank assigns all or any of its rights and benefits
         under the Facility Documents in accordance with clause 27.3
         (Assignments and Transfers by Participating Banks), then, unless and
         until the assignee has agreed with the Agents, the Arranger and the
         other Participating Banks that it shall be under the same obligations
         towards each of them as it would have been under if it had been an
         original party to each of the Facility Documents as a Participating
         Bank (whereupon such assignee shall become a party to the Facility
         Documents as a "PARTICIPATING BANK"), the Agents, the Arranger and the
         other Participating Banks shall not be obliged to recognise such
         assignee as having the rights against each of them which it would have
         had if it had been such a party to the Facility Documents. For the
         avoidance of doubt, a Participating Bank that has assigned all its
         interest and which is a counterparty to an Interest Rate Hedging
         Agreement shall, upon such assignment, cease to be a Secured Interest
         Rate Hedge Provider.

36.5.    TRANSFERS BY PARTICIPATING BANKS

         If any Participating Bank wishes to transfer all or any of its rights,
         benefits and/or obligations under the Facility Documents as
         contemplated in clause 27.3 (Assignments and Transfers by Participating
         Banks), then such transfer may be effected by the delivery to the
         Facility Agent of a duly completed and duly executed Transfer
         Certificate (together with a copy to Partner for information purposes
         only), accompanied by such other documentation as may be required for
         the purposes of such transfer under the Security Documents, in which
         event, on the later of the Transfer Date specified in such Transfer
         Certificate and the 5th (fifth) Business Day after (or such earlier
         Business Day endorsed by the Facility Agent on such Transfer
         Certificate falling on or after) the date of delivery of such Transfer
         Certificate to the Facility Agent:



                                     -149-




         (a)      to the extent that in such Transfer Certificate the
                  Participating Bank party thereto seeks to transfer its rights,
                  benefits and obligations under the Facility Documents, each of
                  the Obligors and such Participating Bank shall be released
                  from further obligations towards one another hereunder and
                  their respective rights against one another shall be cancelled
                  (such rights and obligations being referred to in this clause
                  27.5 as "DISCHARGED RIGHTS AND OBLIGATIONS");

         (b)      the Obligors and the Transferee party thereto shall assume
                  obligations towards one another and/or acquire rights against
                  one another which differ from such discharged rights and
                  obligations only insofar as such Obligor and such Transferee
                  have assumed and/or acquired the same in place of such Obligor
                  and such Participating Bank;

         (c)      the Agents, the Arranger, such Transferee and the other
                  Participating Banks shall acquire the same rights and benefits
                  and assume the same obligations between themselves as they
                  would have acquired and assumed had such Transferee been an
                  original party to the Facility Documents as a Participating
                  Bank with the rights, benefits and/or obligations acquired or
                  assumed by it as a result of such transfer; and

         (d)      such Transferee shall become a party to the Facility Documents
                  as a "PARTICIPATING BANK".

36.6.    DISCLOSURE OF INFORMATION

         Any Participating Bank may at any time disclose to any actual or
         potential assignee or Transferee or subparticipant (or other party
         entering into contractual arrangements to assume risks in relation to
         the Facilities or any of them) in respect of the Facility Documents
         such information about the Business, the Facility Documents, the
         Material Contracts and the Obligors as such Participating Bank shall
         consider appropriate but only having first obtained from such potential
         assignee or Transferee or subparticipant or equivalent a
         confidentiality undertaking equivalent in effect to the confidentiality
         arrangements set out in clause 38 (Confidentiality) in writing
         addressed to the relevant Participating Bank and Partner.

36.7.    NO INCREASED COSTS

         If any assignment or transfer of all or any part of the rights or
         obligations of a Participating Bank pursuant to this clause 27 or if
         any change in or substitution of a Participating Bank's Facility Office
         would, but for this clause 27, result, as a consequence of
         circumstances prevailing or foreseeable at that time, in any Obligor
         having any obligation to pay any



                                     -150-




         amount under clause 11.1 (Tax Gross-Up) or clause 12.1 (Increased
         Costs) then, unless such assignment, transfer or change in or
         substitution of Facility Office arises as a consequence of the
         provisions of clause 14.1 (Mitigation) or is made with the written
         consent of Partner, the assignee, or Transferee or Participating Bank
         acting through its new Facility Office shall be entitled to receive
         such amounts only to that extent that the relevant assignor, or
         transferor or Participating Bank acting through its relevant Facility
         Office would have been so entitled had there been no assignment, or
         transfer, change in or substitution of Facility Office (as the case may
         be).

37. COSTS AND EXPENSES

37.1.    AGENTS' COSTS

         Partner shall, from time to time on demand of the relevant Agent (and
         without prejudice to the provisions of clause 10.6.2 above and clause
         28.2 (Amendment Costs)) compensate the relevant Agent for all costs and
         expenses (including telephone, fax, copying, travel, personnel and
         legal costs) incurred by such Agent in connection with its taking such
         action as it may deem appropriate or in complying with any instructions
         from an Instructing Group or any request by any Obligor or in
         connection with:

         (a)      the granting or proposed granting of any waiver or consent
                  requested under any of the Facility Documents by any Obligor;

         (b)      any actual, potential or suspected breach by any Obligor of
                  its obligations under any of the Facility Documents;

         (c)      the occurrence of any event which is an Event of Default or a
                  Potential Event of Default; or

         (d)      any amendment or proposed amendment to any of the Facility
                  Documents requested by any Obligor.

37.2.    AMENDMENT COSTS

         If any amendment or waiver is requested, required or agreed by Partner
         in accordance with clause 30 (Amendments) then Partner shall, on demand
         of the Facility Agent (acting on its own motion or otherwise upon the
         request of the Arranger or a Participating Bank), reimburse the Agents,
         the Arranger and the Participating Banks for all reasonable costs and
         expenses submitted to Partner together with appropriate evidence
         thereof (including legal fees but excluding any charges for management
         time) together with any VAT


                                     -151-





         thereon incurred by the Agents, the Arranger and the Participating
         Banks in responding to or complying with such requests.

37.3.    PARTICIPATING BANKS' LIABILITIES FOR COSTS

         If Partner fails to perform any of its obligations under this clause 28
         and clauses 10.6 (Expenses) and 10.7 (Stamp Taxes) above, each
         Participating Bank shall, in its Proportion (or, if the Loan has been
         repaid in full, immediately prior to the final repayment thereof),
         indemnify each of the Agents and the Arranger against any loss incurred
         by any of them as a result of such failure and Partner shall forthwith
         reimburse each Participating Bank for any payment made by it pursuant
         to this clause 28 and clauses 10.6 (Expenses) and 10.7 (Stamp Taxes)
         above.

38.      PARTIAL INVALIDITY

         If any provision of any of the Facility Documents is or becomes
         illegal, invalid or unenforceable in any respect under the law of any
         jurisdiction, neither the legality, validity or enforceability of the
         remaining provisions hereof nor the legality, validity or
         enforceability of such provision under the law of any other
         jurisdiction shall in any way be affected or impaired thereby.



                                     -152-





39. AMENDMENTS

         The Facility Agent, if it has the prior written consent of an
         Instructing Group, and Partner may, from time to time, agree in writing
         to amend any of the Facility Documents or to waive, prospectively or
         retrospectively, any of the requirements of any of the Facility
         Documents and any amendments or waivers so agreed shall be binding on
         all the Participating Banks, the Arranger, the Facility Agent, the
         Coordinating Agent and the Obligors provided that:

         (a)      no such waiver or amendment shall subject any party hereto to
                  any new or additional obligations without the consent of such
                  party;

         (b)      without the prior written consent of all the Participating
                  Banks and Partner, no such amendment or waiver shall:

                  (i)      amend or waive any provision of clause 23
                           (Application and Redistribution of Payments) or this
                           clause 30;

                  (ii)     reduce the proportion of any amount received or
                           recovered (whether by way of set-off, combination of
                           accounts or otherwise) in respect of any amount due
                           from any Obligor hereunder to which any Participating
                           Bank is entitled;

                  (iii)    change the principal amount of or currency of any
                           Advance, or defer any payment date other than in
                           accordance with the terms of this Agreement;

                  (iv)     change the Margin, change the amount or currency or
                           defer the date for any payment of interest, fees or
                           any other amount payable hereunder to all or any of
                           the Agents, the Arranger and the Participating Banks;

                  (v)      defer the Termination Date;

                  (vi)     amend the definition of "Instructing Group"; or

                  (vii)    amend any provision which contemplates the need for
                           the consent or approval of all the Participating
                           Banks;

         (c)      the Security Trustee shall not release any security over any
                  asset or assets or any part thereof constituted pursuant to
                  any Security Document without the consent of all of the
                  Secured Creditors, if the relevant asset, assets or part
                  thereof over which such security is constituted will not be,
                  immediately following such release, disposed of or transferred
                  outside the Group


                                     -153-





                  following such release or if the proceeds of sale or
                  replacement assets will not be subject to first ranking
                  security interests in favour of the Security Trustee (for the
                  benefit of itself and the Secured Creditors); and

         (d)      notwithstanding any other provisions hereof, the Facility
                  Agent shall not be obliged to agree to any such amendment or
                  waiver if the same would:

                  (i)      amend or waive any provision of this clause 30,
                           clauses 10.6 (Expenses), 10.7 (Stamp Taxes), 28
                           (Costs and Expenses) or 18 (Agency Provisions) above;
                           or

                  (ii)     otherwise amend or waive any of the Agents' rights
                           under any of the Facility Documents or subject the
                           Agents or the Arranger to any additional obligations
                           under any of the Facility Documents.

40.      INFORMATION

         Without derogating from clause 27.6 (Disclosure of Information) above,
         Partner hereby agrees that the Participating Banks may at any time,
         amongst themselves, disclose to each other any information in respect
         of: (i) Drawdown Requests received, Advances made and payments received
         from or by Partner, as the case may be, under the Facilities; and (ii)
         any other information in respect of the Business, the Facility
         Documents, the Material Contracts and obligations as the Participating
         Bank, disclosing the same, deems appropriate.

41. RELEASE OF SHARE PLEDGES

41.1.    SHARE PLEDGES

         In the event that in any one year Ratio Period ("THE DETERMINING RATIO
         PERIOD"):

41.1.1.       Partner shall (as of the end of the Determining Ratio Period) have
              made payment under the Facilities to the Participating Banks
              (disregarding for this purpose, any repayment or prepayment
              capable of being reborrowed under this Agreement) of an amount
              equal to half the amount of the Total Commitments; and


41.1.2.  (a)      if the Determining Ratio Period falls during the period
                  2003-2007 (inclusive), each of the Facility Debt Cover Ratio,
                  Total Debt Cover Ratio, Fixed Charge Coverage Ratio and ADSCR
                  for the one year Ratio Period immediately preceding the
                  Determining Ratio Period was not less than 135% (one hundred
                  and thirty-five percent) of such minimum ratio required for
                  such



                                     -154-





                  immediately preceding one year Ratio Period pursuant to the
                  table in clause 16.32 below; or

         (b)      if the Determining Ratio Period is the one year Ratio Period
                  2008, the Total Debt Cover Ratio for the 2007 one year Ratio
                  Period was not less than 135% (one hundred and thirty-five
                  percent); or

         (c)      if the Determining Ratio Period is the one year Ratio Period
                  2009, the Total Debt Cover Ratio for the 2008 one year Ratio
                  Period was not less than 280% (two hundred and eighty
                  percent),

         then the Participating Banks shall, as soon as reasonably practicable
         after the publication and receipt by the Participating Banks of the
         Accounts for the Determining Ratio Period, procure the irrevocable
         release of the Share Pledges over the Chargors' shares in Partner.

41.2.    RELEASE OF SHARE PLEDGES

         Upon the release of all such Share Pledges, the provisions of clause
         17.19(b) (Shareholders) above shall thereupon cease to have any force
         or effect (except in relation to any antecedent breach thereof).

41.3.    DISTRIBUTION OF TAPUZ SHARES

         [Deleted.]

42.      RESPONSE TO REQUESTS FOR APPROVAL OR CONFIRMATION

42.1.    Save where expressly stated otherwise in this Agreement, the Facility
         Agent shall endeavour to respond promptly to any request by Partner for
         an approval or confirmation in accordance with this Agreement and
         shall, in any event, respond by not later than 14 (fourteen) Business
         Days after receipt of the said request, together with all reports,
         statements and other information required hereunder to be supplied by
         Partner, together with such request; failing which response, the
         Facility Agent shall be deemed not to have given its consent.

42.2.    Save where expressly stated otherwise in this Agreement, the
         Participating Banks shall endeavour to respond promptly to any request
         by Partner for an approval or confirmation in accordance with this
         Agreement and shall, in any event, respond by not later than 21
         (twenty-one) Business Days after receipt of the said request, together
         with all reports, statements and other



                                     -155-



         information required hereunder to be supplied by Partner, together with
         such request; failing which response, the Participating Banks shall be
         deemed not to have given their consent.

43.      COUNTERPARTS

         This Agreement may be executed in any number of counterparts and all of
         such counterparts taken together shall be deemed to constitute one and
         the same instrument.

44.      GOVERNING LAW AND JURISDICTION

         This Agreement shall be governed by and shall be construed in
         accordance with Israeli law and the competent court of Tel-Aviv-Jaffa
         shall have exclusive jurisdiction to hear any matters, provided that
         the Facility Agent and the Participating Banks shall be entitled to sue
         Partner or any other Obligor in any jurisdiction in which it has an
         office or holds assets.

45.      REMEDIES AND WAIVERS

         No failure to exercise, nor any delay in exercising, on the part of the
         Agents, the Arranger and the Participating Banks or any of them, any
         right or remedy hereunder shall operate as a waiver thereof, nor shall
         any single or partial exercise of any right or remedy prevent any
         further or other exercise thereof or the exercise of any other right or
         remedy. The rights and remedies herein provided are cumulative and not
         exclusive of any rights or remedies provided by law.

46.      NOTICES

46.1.    COMMUNICATIONS THROUGH FACILITY AGENT

         Every notice, request, demand or other communication under this
         Agreement to be given by Partner to any other party shall be given to
         such party, with a copy to the Facility Agent, to be delivered in
         accordance with clause 37.2 (Manner of Delivery) below. Every notice,
         request, demand or other communication under this Agreement to be given
         to Partner shall be delivered to Partner in accordance with clause 37.2
         (Manner of Delivery) below, with a copy to be given to the Facility
         Agent.

46.2.    MANNER OF DELIVERY

         (a)      Notices to be given hereunder shall be in writing and may be
                  given personally, by facsimile or, if not available, as
                  required by clause 37.2(b) below. Any notice to be given
                  personally or by


                                     -156-




                  facsimile to the Facility Agent, the Coordinating Agent or any
                  Participating Bank must be given during normal banking hours
                  of the Facility Agent, the Coordinating Agent or any
                  Participating Bank to the persons and at the addresses
                  respectively designated below. If notice is sent by facsimile,
                  it shall be deemed to have been served when confirmation of
                  receipt by the intended recipient has been received. All
                  notices given by facsimile shall be confirmed by letter
                  despatched in the manner provided in clause 37.2(b) within 24
                  (twenty-four) hours of transmission.

         (b)      Any other notices to be given hereunder shall be served on a
                  party by prepaid express registered letter (or nearest
                  equivalent) to its address given below or such other address
                  as may from time to time be notified for this purpose and any
                  notice so served shall be deemed to have been served within 5
                  (five) days after the time at which such notice was posted and
                  in proving such service, it shall be sufficient to prove that
                  the notice was properly addressed and posted:

                  to Partner at:               8 Amal Street
                                               Afeq Industrial Zone
                                               Rosh Haayin 48103
                                               Israel
                                               Facsimile: 067 815 282
                                               Attention: Mr. Meir Mulla,
                                                          Treasurer

                  with a copy to:              Gross, Kleinhendler, Hodak,
                                               Halevy, Greenberg & Co.
                                               Round Building, 40th Floor
                                               Azrieli Centre
                                               Tel-Aviv 67021
                                               Israel
                                               Facsimile: (03) 607 4422
                                               Attention:  Richard J. Mann, Adv.

                  to the Facility Agent at:    Bank Leumi Le-Israel B.M.
                                               Technology Section
                                               Corporate Division
                                               32 Yehuda Halevi Street
                                               Tel-Aviv
                                               Facsimile:   (03) 514 9514
                                               Attention:    Sector Manager

                  to the Coordinating
                  Agent at:                    Bank Hapoalim B.M.
                                               Telecommunications and
                                               Infrastructure Sector
                                               Corporate Division
                                               Zion Building
                                               45 Rothschild Boulevard


                                     -157-





                                               Tel-Aviv
                                               Facsimile:    (03) 567 3849
                                               Attention:    Manager of
                                               Telecommunications and
                                               Infrastructure Sector

                  to the Participating
                  Banks at--

                  (i)    BLL:                  Technology Section
                                               Corporate Division
                                               32 Yehuda Halevi Street
                                               Tel-Aviv
                                               Facsimile:    (03) 514 9017
                                               Attention:    Sector Manager

                  (ii)   ISRAEL DISCOUNT
                         BANK LTD.:            29 Yehuda Halevi Street
                                               Tel-Aviv
                                               Facsimile:    (03) 514 6364
                                               Attention:    Senior Manager

                  (iii)  BANK HAPOALIM :       Telecommunications and
                                               Infrastructure Sector
                                               Corporate Division
                                               Zion Building
                                               45 Rothschild Boulevard
                                               Tel-Aviv
                                               Facsimile:    (03) 567 3849
                                               Attention:    Manager of
                                               Telecommunications and
                                               Infrastructure Sector




                                     -158-





            (iv)   THE FIRST INTERNATIONAL
                   BANK OF ISRAEL LTD.:        The First International
                                               Bank of Israel Ltd.
                                               Haifa Main Branch
                                               3 Habankim Street
                                               Haifa
                                               Facsimile:     (04) 853 6269
                                               Attention:    Branch Manager

            (v)    UNITED MIZRAHI
                   BANK LTD.:                  48 Lilienblum Street
                                               Tel-Aviv
                                               Facsimile:    (03) 567 9916
                                               Attention:    Manager, Tel-Aviv
                                                              Main Branch

            (vi)   MERCANTILE
                   DISCOUNT BANK LTD.:         103 Allenby Street
                                               Tel-Aviv
                                               Facsimile:  (03) 566 6919
                                               Attention:  Head of Corporate
                                                                Division

            (viii) CITIBANK N.A.:              Tel-Aviv Branch
                                               Platinum Building
                                               21 Ha'arbah'a Street
                                               Tel-Aviv
                                               Israel
                                               Facsimile:  (03) 684 2402
                                               Attention:  Branch Manager


            (vii)  in the case                 the address designed by it to the
                   of a                        Facility Agent and Partner for
                   Transferee:                 such purpose at the end of the
                                               Transfer Certificate to which it
                                               is a party as Transferee;




            (viii) or, in respect              delivered to such other address
                   of a                        as may be designated by it for
                   Finance Party:              such purpose by notice to the
                                               Facility Agent and Partner.


47.    CONFIDENTIALITY

       Subject to clause 27.6 (Disclosure of Information) the Arranger, each
       Participating Bank and Agent shall keep confidential all confidential
       information concerning Partner, the Shareholders, the Business and the
       terms and conditions of the Facility Documents and the Material
       Contracts, and will not disclose any such information to any third party
       without the prior written consent of Partner unless such disclosure is:



                                     -159-





       (a)    made in connection with any proceedings arising out of or in
              connection with any Facility Document, to the extent that such a
              party reasonably considers it necessary to protect its interests;
              or

       (b)    required by an order of a court of competent jurisdiction; or

       (c)    made or required pursuant to any law or legal process in
              accordance with which the relevant party concerned is required to
              act or otherwise required to be disclosed by any banking or other
              regulatory or examining authorities or enquirers (whether
              governmental or otherwise); or

       (d)    made to its auditors for the purpose of enabling them to undertake
              any audit or to its legal advisers when seeking bona fide legal
              advice in connection with the Facility Documents or otherwise to
              any of its officers and employees considered to need to know the
              information concerned.

       The restriction contained in this clause 38 shall continue to bind the
       Arranger, each Participating Bank and Agent after termination of, or
       after the termination of its participation in, the Facilities, without
       limit in time.

       For the purpose of the above, "CONFIDENTIAL INFORMATION" shall exclude:

       (i)    information which at the time of disclosure to the Arranger, any
              Participating Bank or Agent (or any of their advisers) is in the
              public domain (other than through a breach of this clause 38 by
              the Arranger, such Participating Bank or Agent);

       (ii)   information which, after such disclosure, becomes generally
              available to third parties or otherwise in the public domain by
              publication or through no fault of the Arranger, any Participating
              Bank or the Facility Agent (or any of their advisers); and

       (iii)  information which is lawfully in the possession of the Arranger,
              any Participating Bank or Agent (or any of their advisers) prior
              to such disclosure or subsequently comes into any of their
              respective possessions, other than by reason of any breach of any
              confidentiality undertaking in favour of Partner.


                                     -160-





48.    ENTIRE AGREEMENT

       This document constitutes an amended and restated version of the Facility
       Agreement, as amended, rescheduled and restated through 31 December 2002
       and shall be deemed to be the binding version of the Facility Agreement.


IN WITNESS WHEREOF, THE PARTIES HAVE SIGNED THIS AGREEMENT ON THE DATE FIRST
MENTIONED ABOVE.

PARTNER:

for:   PARTNER COMMUNICATIONS
       COMPANY LTD.

By:
       ------------------------
Title:
       ------------------------

THE PARTICIPATING BANKS:

for:   BANK LEUMI LE-ISRAEL B.M.           for:   ISRAEL DISCOUNT BANK LTD.

By:                                        By:
       ------------------------                   -----------------------
Title:                                     Title:
       ------------------------                   -----------------------
for:   BANK HAPOALIM B.M.                  for:   THE FIRST INTERNATIONAL
                                                  BANK OF ISRAEL LTD.

By:                                        By:
       ------------------------                   -----------------------
Title:                                     Title:
       ------------------------                   -----------------------
for:   UNITED MIZRAHI BANK LTD.            for:   MERCANTILE DISCOUNT
                                                  BANK LTD.
By:                                        By:
       ------------------------                   -----------------------
Title:                                     Title
       ------------------------                   -----------------------
for:   CITIBANK N.A.

By:
       ------------------------
Title:
       ------------------------



for:   BANK LEUMI LE-ISRAEL B.M.           for:   BANK HAPOALIM B.M.
       (in its capacity as Security               (in its capacity as
       Trustee, Arranger and Facility             Coordinating Agent)
       Agent)

By:                                        By:
       ------------------------                   -----------------------
Title                                      Title
       ------------------------                   -----------------------

EX-8

                                                                               .
                                                                               .
                                                                               .

                                                                       EXHIBIT 8



The following is a list of our significant subsidiaries:



                                                                  COUNTRY
COMPANY                                                       OF INCORPORATION
- -------                                                       ----------------
                                                           
Partner Future Communications 2000 Ltd.                            Israel

EX-10.(A).1

                                                                EXHIBIT 10.(a).1

                    CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

We hereby consent to the inclusion in the Annual Report on Form 20-F of Partner
Communications Company Ltd. (hereafter "Partner") for the fiscal year ended
December 31, 2002, and to the incorporation by reference into the Registration
Statement on Form F-3 filed on December 26, 2001 and related prospectus of
Partner, of our report dated March, 2003, on the financial statements of
Partner, which are included in the Form 20-F of Partner.

We also consent to the reference to our firm in Partner's above referenced
annual report under the caption "Selected Financial Data".

                                            /s/ Kesselman & Kesselman
                                            ------------------------------------
Tel-Aviv, Israel                            Kesselman & Kesselman
March 13, 2003                              Certified Public Accountants (Isr.)

EX-10.(A).2

                                                                EXHIBIT 10.(a).2

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

         In connection with the Annual Report of Partner Communications Company
Ltd (the "Company") on Form 20-F for the period ending December 31, 2002, as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), the undersigned hereby certify that to the best of our knowledge:

                  1.   The Report fully complies with the requirements of
Section 13(a) of the Securities Exchange Act of 1934; and

                  2.   The information contained in the Report fairly presents,
in all material respects, the financial condition and results of operations of
the Company.

Date: March 14, 2003             /s/    AMIKAM COHEN
                                 ------------------------------
                                 Name:  Amikam Cohen
                                 Title: Chief Executive Officer

Date: March 14, 2003             /s/    ALAN GELMAN
                                 ------------------------------
                                 Name:  Alan Gelman
                                 Title: Chief Financial Officer