ARTICLE 2 Guarantee of Supply

The Government of the Arab Republic of Egypt guarantees the continuous and
uninterrupted supply of the Natural Gas contracted and/or to be contracted
such as between EMG and IEC for the initial 15 years as well as for any
extended period, according to the provisions of the contract and for a
yearly total amount of up to 7 BCM (Seven Billion Cubic Meters). The same
guarantee shall apply to any other entity importing Gas from Egypt to
Israel.

This guarantee will start on the date of the activation of any contract of
purchase of Natural Gas from Egypt.

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MEMORANDUM OF UNDERSTANDING RELATING TO THE PURCHASE AND TRANSMISSION OF
NATURAL GAS THROUGH A PIPELINE BETWEEN THE GOVERNMENT OF THE ST ATE OF
ISRAEL AND THE GOVERNMENT OF THE ARAB REPUBLIC OF EGYPT
http://www.mfa.gov.il/mfa/usercontrols/TreatFile.aspx?SAFA=2&AMANA=2308

The Government of the State of Israel and the Government of the Arab
Republic of Egypt - hereinafter referred to as "the Parties";

Recalling the Treaty of Peace between the State of Israel and the Arab
Republic of Egypt of 26 March 1979, and in particular Annex III thereof,
concerning the economic
relations between the Parties;

Affirm their willingness to develop bilateral economic cooperation in all
fields including the gas sector;

Emphasizing that the supply of natural gas from Egypt to Israel will
contribute to enhancing peace and stability in the Middle East and to the
establishment of an environment of comprehensive security and cooperation;

Aware of the resolution of the Cabinet of Ministers of the Arab Republic of
Egypt during its meeting held on 18 September 2000, authorizing the Egyptian
Ministry of Petroleum represented by the Egyptian General Petroleum
Corporation to conclude the necessary contract with East Mediterranean Gas
Company, an Egyptian joint-stock company, hereinafter referred to as -"EMG",
for the export of quantities of Egyptian Natural Gas to the consuming
markets in the Mediterranean countries as well as the European Markets;

Welcoming contracts between EMG and Israeli companies such as the contract
between the Israel Electric Corporation Ltd., hereinafter referred to as-
"IEC" and EMG for the supply of natural gas originating from Egypt to
Israel, through a pipeline to be constructed between El-Arish and Ashkelon,
for a period of 15 ( fifteen) years, renewable by mutual agreement, as well
as additional contracts to be concluded between EMG and other Israeli
companies;

Have agreed on the following:

ARTICLE 1 General

The purchase of Natural Gas, its transmission through a Pipeline between
EI-Arish and Ashkelon, including the construction of the Pipeline and its
operation shall be in accordance with the terms of this Memorandum of
Understanding and in accordance with and subject to the laws of the State
under whose jurisdiction it lies.

ARTICLE 2 Guarantee of Supply

The Government of the Arab Republic of Egypt guarantees the continuous and
uninterrupted supply of the Natural Gas contracted and/or to be contracted
such as between EMG and IEC for the initial 15 years as well as for any
extended period, according to the provisions of the contract and for a
yearly total amount of up to 7 BCM (Seven Billion Cubic Meters). The same
guarantee shall apply to any other entity importing Gas from Egypt to
Israel.

This guarantee will start on the date of the activation of any contract of
purchase of Natural Gas from Egypt.

ARTICLE 3

Subject to its law and the provisions of this MOU each Party shall
facilitate the implementation of this MOU.

ARTICLE 4 Safety arid Security

(1) Each Government shall have the right to determine, in accordance with
its own laws, the safety and security measures which are to govern the
construction and operation of the part of the Pipeline under its
jurisdiction:

(2) Operation of the Pipeline, or any part thereof, shall not commence until
each Party has issued all necessary authorizations and permits .in
accordance with their national legal requirements.

ARTICLE 5 Environmental Protection

Each Party shall have the right to ensure, in accordance with and subject to
its laws, that the laying and operation of the Pipeline shall not cause
pollution to the marine, coastal or land environment, or damage to
facilities onshore or offshore, amenities, vessels or fishing gear.

ARTICLE 6 Tax

Based on the authority of the Israeli Minister of Finance under Article 16a
of the Israeli Income Tax Ordinance (New Version) -1961, EMG, an Egyptian
resident company, shall be exempt from taxes in Israel for its income from
the sale and transportation of natural gas from Egypt to Israel and its
delivery at the delivery station in Ashkelon.

This exemption does not and will not apply to any current or future Israeli
shareholder in EMG, whether such shareholders holdings in EMG are direct or
indirect. For any change in Israeli holdings in EMG, directly or indirectly,
the Israeli shareholders shall need the advance approval of the Director
General ofIsrael's Tax Authority.
EMG will not be required to open file with the Israeli Income Tax
Authorities, nor will it be required to file yearly income tax reports in
Israel.

This tax exemption, as well as the waiver on the need to open file with the
Israeli Tax Authorities and to file yearly income tax reports, shall be in
force as long as the majority of shares in EMG are not held, directly or
indirectly, by Israeli residents or citizens, and the control and management
of EMG's operations, including the management of its day to day operations
(except for the operation of the Delivery Station in Ashkelon), are carried
out outside the territory of the State of Israel by a management team which
does not include residents or citizens of the State of Israel, either
directly or indirectly, except for a number of Israeli members of the board
of directors corresponding to direct or indirect holdings in EMG shares
of25%. All the activity of the entire EMG board-of directors shall be
carried out outside the State of Israel.

This exemption shall remain in force for the entire period of the contract
between EMG and IEC (15 years plus an option for an. additional 5 'years)
and will also apply to EMG's income and its gains derived in Israel from
other similar gas agreements between the EMG and other Israeli entities
during this period.

ARTICLE 7 Tripartite Agreement

The Egyptian Government designates the Egyptian General Petroleum
Corporation (EGPC) and the Egyptian Gas Holding Company (EGAS) as
representatives of the Egyptian Ministry of Petroleum in signing the
tripartite agreement as the First Party in the agreement guaranteeing
natural gas supply, with EMG as the Second Party in the agreement, and lEC
as the Third Party in the agreement.

The same shall apply to any other entity importing Gas from Egypt into
Israel and/or consuming Gas from Egypt in Israel.

ARTICLE 8 Consultations

The Parties, recognizing each other's legitimate interest in safeguarding
the supply of natural gas from Egypt to Israel may consult each other with a
view to find a solution to outstanding issues.

Article 9
Entry into force

(1) This Memorandum shall enter into force on the date of the latter of the
Diplomatic Notes by which the Parties notify each other that their internal
legal requirements for the entering into force of the memorandum has been
complied with.

(2) The implementation of this MOU is subject to the written authorization
of the track of the pipeline by the competent Israeli authorities.

Done at Cairo Egypt, on the 30 day of June 2005, which corresponds to the
23rd day of Sivan 5765, in two original copies in the English language.

Minister of National Infrastructure on behalf of the Government of the State
of Israel

Minister of Petroleum on behalf of the Government of the Arab Republic of
Egypt.