TRANSLATION OF THE ORIGINAL HEBREW TEXT BY THE BANK

Transcription

1 To: Israel Discount Bank Ltd. (the Bank ) APPENDIX Dear Sirs, 1. We hereby inform you that, on December 3, 2013 (during the night between December 2, 2013 and December 3, 2013, Israeli time), Treetops Acquisition Group LP ( Treetops ) and Treetops Acquisition Group II LP ( Treetops II ) signed an agreement for the sale of 44,262,511 Ordinary A shares of NIS 0.1 par value each from the Bank s capital (the Shares ) by Treetops and 29,508,340 Shares by Treetops II to Citigroup Global Markets Limited (the Agreement and City, respectively), in an offexchange transaction. 2. Pursuant to the Agreement, the price of a (one) share is NIS 6.679; accordingly, the amount of the total consideration for all the shares to be sold by Treetops, as referred to above, is NIS 295,629, and the amount of the total consideration for all the shares to be sold by Treetops II, as referred to above, is NIS 197,086, Pursuant to the agreement, the transfer date for the Shares to be sold by Treetops and Treetops II, against the receipt of the consideration, has been set for December 3, Should the Shares not be transferred for any reason whatsoever on December 3, 2013, the transfer will be deferred until the next day of trading on the Tel Aviv Stock Exchange Ltd., subject to the terms of the Agreement. Following the transfer of the Shares as referred to above, Treetops will hold 114,836,393 Shares in the Bank s capital and Treetops II will hold 76,557,597 Shares in the Bank s capital. The aforesaid Shares will be held by Treetops and Treetops II, through U-Bank Trust Company Ltd., as trustee for each of them. 4. Attached is the permit to hold the means of control of the Bank (the Holding Permit ) received by Bronfman Group individuals and by Mr. Rubin Schron (the Holders ) from the Governor of the Bank of Israel, together with the accompanying letter from the Supervisor of Banks, the Holding Permit will take effect from the date of transferring the Shares, as referred to above, provided that the aforesaid transfer takes place no later than December 12, The permit to control and hold the means of control of the Bank, which was granted to the Holders on January 26, 2006 (the Control Permit ), will be cancelled on the date that the Holding Permit takes effect. In addition, an amendment to the Control Permit is also attached (in section 2 of the Governor s permit), which will take effect on December 5, 2013, if the Holding Permit has not gone into effect by that date. We will inform the Bank regarding the closing of the transaction, following its execution. Treetops Acquisition Group LP pp the General Partner Treetops Acquisition Group Ltd. By: Mr. Matthew Bronfman Treetops Acquisition Group II LP pp the General Partner Treetops Acquisition Group II Ltd. By: Mr. Rubin Schron Date: December 3, 2013 (Israeli time) Date: December 3, 2013 (Israeli time) POB 780, Jerusalem Tel: /401 Fax:

2 BANK OF ISRAEL SUPERVISOR OF BANKS To: Mr. Edgar M. Bronfman Mr. Rubin Schron Mr. Matthew Bronfman Through: Adv Amnon Lorch Mr. Adam R. Bronfman Yigal Arnon & Co. Ms. Holly B. Lev 31 Hillel St.. Mr. Michael Rubinoff Jerusalem Mr. Philip Milstein (the Bronfman Group ) Through: Adv Ora Dvir. Weksler Bregman & Co., Attorneys 9 Ahad Ha Am St. Tel Aviv Jerusalem, Kislev 25, 5774 December 1, LM1607 R/09 - (r ) Dear Sirs, Re. Permit to Hold Means of Control and Amendment to the Israel Discount Bank Ltd. Control Permit Your applications dated October 9, 2013 and November 28, In response to your application dated November 28, 2013 and further to that stated in section 3(c) of the letter that accompanied the permit to control and hold the means of control of Israel Discount Bank Ltd. (the Control Permit and the Bank, respectively) attached is a permit to hold means of control of the Bank (the Holding Permit ) for a transition period, as defined in the appendix to the Holding Permit, which, upon taking effect, will replace and cancel the Control Permit and will enable the gradual decentralization of the Bank s control nucleus. Moreover, in response to your application dated October 9, 2013, attached is an amendment to the Control Permit, which will take effect on December 5, 2013, if the Holding Permit has not gone into effect by that date. POB 780, Jerusalem Tel: /401 Fax:

3 2 2. I hereby confirm that U-Bank Trust Company Ltd. (the Trustee ), with whom have been deposited the means of control of the Bank, which are held directly by Treetops Acquisition Group LP ( Treetops ) and Treetops Acquisition Group II LP ( Treetops II ), is entitled to act, with effect from the date of this letter, in accordance with that stated in section 4.4 of Addendum III to the trust agreement, which was approved by me on December 3, 2012 ( Addendum III to the Trust Agreement ). 3. It is hereby clarified that: 3.1 Even after the end of the transition period, as defined in the appendix to the Holding Permit (the Transition Period ), the Bronfman Group and Mr. Schron will be entitled to cooperate with regard to the sale by them of the means of control of the Bank, and this will not be treated as a joint holding, requiring a permit pursuant to the Banking (Licensing) Law, (the Law ). 3.2 Messrs. Rubin Schron, Matthew Bronfman and Michael Rubinoff will be entitled to participate in the consideration from the sale of the means of control of the Bank and also in the profits, in accordance with the cooperation agreement referred to in section 7 of the appendix to the Holding Permit, with this also being the case even after the end of the Transition Period and without the necessity for a permit to be granted for this, as prescribed by the Law. 4. With regard to outside directors, it is hereby clarified that: 4.1 In light of the aforesaid and due to the fact that in the Transition Period the Bank will become a bank without a control nucleus, the relevant rules in the Law, with regard to an interest of outside directors in a bank without a control nucleus, will apply. These rules include not holding an interest in excess of 2.5% in the means of control of the bank. 4.2 The service of the outside directors with the Bank (outside directors under the Companies Law and outside directors under Proper Conduct of Banking Business Directive 301, Board of Directors) will not be terminated as a result of the decentralization of control nucleus thereof. 5. You are hereby requested to report the following events to the Supervisor, shortly after their occurrence: 5.1 The completion of the first transfer of the means of control of the Bank, as defined in the Holding Permit, giving details of the percentage of the means of control sold and transferred by each of Treetops and Treetops II. 5.2 Every cumulative sale of 5% of the means of control of the Bank. 5.3 A sale which results in the holding of the Bronfman Group or Mr. Schron being no loner greater than 5%of any class of the means of control of the Bank. Yours sincerely, [signed] David Zaken Supervisor of Banks cc Governor of the Bank of Israel Legal Counsel of the Bank of Israel

4 THE GOVERNOR BANK OF ISRAEL Permit to Hold Means of Control and Amendment to Control Permit Pursuant to Banking (Licensing) Law, By virtue of my powers under Section 34(a) of the Banking (Licensing) Law, , and after consulting with the Licenses Committee 1. I permit - Mr. Edgar M. Bronfman Mr. Matthew Bronfman Mr. Adam R. Bronfman Ms. Holly B. Lev Mr. Michael Rubinoff Mr. Philip Milstein Mr. Rubin Schron (the Bronfman Group ) ( Mr. Schron ) to together hold means of control of Israel Discount Bank Ltd. (the Bank ) at a rate that is not to exceed the total rate of every class of the means of control that the holders will hold immediately after the transfer of the means of control of the Bank that are to be sold by Treetops Acquisition Group LP ( Treetops ) or Treetops Acquisition Group II LP ( Treetops II ), within the framework of the first sale of the means of control of the Bank; the means of control that the holders will hold after the first transfer of the means of control of the Bank will be held by them in the manner specified in the appendix to this permit and in accordance with the terms set forth therein (the Appendix ). The Appendix constitutes an integral part of this permit (the Holding Permit ). The Holding Permit also includes a permit to hold means of control, through the Bank, in banking corporations over which the Bank has control and holds the legal means of control, insofar as this may be the case from time to time. The holding permit will take effect on the date of the first transfer of the means of control, provided that the aforesaid first transfer takes place no later than December 12, POB 780, Jerusalem Tel: Fax:

5 2 The Holding Permit is valid until the end of the transition period, as defined in the Appendix; however: a. Should the transition period end earlier than six months from the date of its commencement, section 4(a) of the Appendix to the Holding Permit will remain in effect until the end of six months from the commencement of the transition period or until the end of the extended period decided upon by the supervisor in accordance with this section; b. Section 9 of the Appendix to the Holding Permit will remain in effect until the end of one year from the end of the transition period. The permit to control and hold means of control of the Bank, which was granted to the holders on January 29, 2006 (the Control Permit ), will be cancelled on the date that this Holding Permit takes effect. 2. I hereby amend the Control Permit as follows: In section 1(a) of the Appendix to the Control Permit, the words: during a period that will not exceed three years from the date of closing the public offer will be replaced by the words: during a period that will not exceed four years from the date of closing the public offer. The amendment to the Control Permit, as referred to above, will take effect from December 5, 2013, if the Holding Permit, as defined in section 1 above, has not gone into effect by that date. [signed] Karnit Flug Jerusalem, Kislev 25, 5774 December 1, 2013 R/09 (r )

6 3 APPENDIX TO PERMIT TO HOLD MEANS OF CONTROL OF ISRAEL DISCOUNT BANK LTD. 1. (a) With regard to this permit - The Transition Period The period that commences on the date of the first transfer of the means of control of the Bank and that ends on the earlier of the following dates: the end of two years from the date of the first transfer of the means of control of the Bank or the date on which on the one hand the Bronfman Group no longer holds more than 5% of any class of the means of control of the Bank and on which Mr. Schron also no longer holds more than 5% of any class of the means of control of the Bank. The Supervisor is entitled to extend the Transition Period by a further year. (b) The meaning of every other term in this permit will be its meaning in the Banking (Licensing) Law, (the Law ). 2. During the Transition Period the holders are only entitled to make sales of the means of control of the Bank, and may not make any acquisitions. 3. (a) The Bronfman Group is entitled to hold any class of means of control of the Bank, at a rate that does not exceed the rate that it will hold immediately following the first transfer of the means of control of the Bank; the aforesaid holding will be done by means of the entities specified in the addendum to this permit and at the rates specified in that addendum. Treetops is entitled to directly hold any class of means of control of the Bank, at a rate that does not exceed the rate that it will hold immediately following the first transfer of the means of control of the Bank. (b) Mr. Schron is entitled to hold any class of means of control of the Bank, at a rate that does not exceed the rate that he will hold immediately following the first transfer of the means of control of the Bank; the aforesaid holding will be done by means of the entities specified in the addendum to this permit and at the rates specified in that addendum. Treetops II is entitled to directly hold any class of means of control of the Bank, at a rate that does not exceed the rate that it will hold immediately following the first transfer of the means of control of the Bank. (c) All the corporations and trusts specified in the addendum (the Entities ) will be subject to the following restrictions: (1) 100% of the total of the balance-sheet assets of each of the Entities will be financed from capital.

7 4 Notwithstanding the aforesaid, each of Treetops or Treetops II will be entitled to receive credit, provided that not more than 5% of any class of the means of control of the Bank will be pledged to secure such credit, as referred to in subsection (d) below. (2) The aforesaid Entities are not to engage in any business other than the holding of the means of control of the Bank, in accordance with the addendum. (d) The holders are not to pledge the means of control, of the Bank or of any of the Entities. Notwithstanding the aforesaid, the pledging prohibition will not apply to 5% of any class of the means of control of the Bank, which will be held by the Bronfman Group or by Mr. Schron, separately. (e) (1) The holders will not agree, either expressly or implicitly, to the imposition of an attachment on the means of control, of the Bank or of any of the Entities; the holders will not take any other action that could in practice change the right of ownership of these means of control all the rights inherent therein and that are prescribed in the definition of means of control in Section 1 of the Law, except with regard to their sale pursuant to this permit. (2) Should an attachment be imposed, despite the aforesaid, on the means of control held by a holder, as referred to in subsection (1) above, that holder will act, using whatever means are available to him, to immediately remove the attachment. (f) Every trust in the Bronfman Group, as set forth in the addendum, has given to the Bronfman Group holder who is a beneficiary thereof a power of attorney to act on behalf of the trust in matters relating to the holding of the means of control of the Bank, using the text that was approved in advance and in writing by the Supervisor; the trusts in which the beneficiary is Mr. Edgar M Bronfman have given to Mr. Edgar M Bronfman and to Mr. Matthew Bronfman a power of attorney to act on their behalf in the matters referred to above, using the text that was approved in advance and in writing by the Supervisor. Moreover, each of the aforementioned trusts, has given an undertaking, using the text approved in advance and in writing by the Supervisor, to act in accordance with the terms of the permit. (g) With regard to the companies referred to in this section, capital - (1) Paid-up share capital, other than cumulative or redeemable preferred shares, with the addition of reserves arising from a premium paid at the time of the issue of the shares; for this purpose, only other preferred shares that have been approved by the Supervisor will be included in capital; (2) Other reserves, translation differences from foreign operations and retained earnings, net of losses, if any (not including adjustments for the presentation of available-for-sale securities at fair value);

8 5 (3) Receipts on account of shares, provided that there is an revocable commitment for their acquisition and allotment, as well as amounts received as consideration for options for the acquisition of shares, provided that such amounts are not refundable; (4) Quasi-capital liabilities approved by the Supervisor or contingent on terms approved by him. That stated above with regard to companies will also apply, mutatis mutandis, to partnerships and trusts. The capital as a percentage of the balance-sheet assets will be calculated according to the balance of the capital and the amount of the assets in the latest audited or reviewed financial statements, drawn up in accordance with the accounting principles that the relevant Entity is required to apply. 4. By virtue of their entire holdings in the means of control of the Bank, the holders will act and vote as follows: (a) (b) To terminate the duties of the directors that had or have an interest in any of the holders, as determined by the Supervisor, within six months from the commencement of the Transition Period, including by means of delivering a demand to the Bank s Board of Directors to convene a general meeting of shareholders on the agenda of which will be the aforesaid proposal, and to support the proposal by virtue of their entire holdings in the means of control of the Bank. The Supervisor may extend the aforesaid period, with regard to one or more directors, at his discretion. To demand, shortly after the commencement of the Transition Period, that the Bank s Board of Directors convene a general meeting of shareholders on the agenda of which will be a proposal to increase the authorized capital of the Bank by a rate of 15% and to support this proposal. 5. Cooperation between the holders: (a) (b) The Bronfman Group and Mr. Schron will be entitled to cooperate only with regard to the sale of the means of control held by them, as well as with regard to anything required for the purpose of acting and voting by virtue of their entire holdings in the Bank, as stated in section 4 above. At the end of six months from the commencement of the Transition Period, the Bronfman Group will not vote by virtue of the voting rights that exceed 5% of the means of control of the Bank and Mr. Schron will not vote by virtue of the voting rights that exceed 5% of the means of control of the Bank, other than on the matters referred to in section 4 above, regarding which the Bronfman Group and Mr. Schron will vote by virtue of their entire holdings in the means of control of the Bank.

9 6 It is hereby clarified that, during the first six months of the Transition Period, the holders will also be entitled to vote on matters other than those set forth in section 4 above, by virtue of the entire holdings in the means of control held by them, provided that the Bronfman Group and Mr. Schron do not coordinate how they are to vote on such matters. (c) Without derogating from that stated in subsection (b) above, the members of the Bronfman Group, who together hold the means of control of the Bank through Treetops, are entitled to continue to cooperate among themselves and to coordinate how they are to use the voting rights that they hold. 6. If, during the sale, the holdings of the Bronfman Group or of Mr. Schron should fall to a rate of 5% or less of the means of control of the Bank, which does not require the granting of a holding permit ( Partner A ), while the holdings of the other holder (the Bronfman Group or Mr. Schron, as the case may be, Partner B ) have not yet fallen below this rate, the terms of this permit that are set forth in section 3 above and section 8 below will be canceled with regard to Partner A. The aforesaid will also apply to Partner B on the date that his holdings fall to a rate of 5% or less of the means of control of the Bank, which does not require the granting of a holding permit. It is hereby clarified that the holding permit, altogether, will still be in effect and will enable the holders to continue to act pursuant to its terms, including coordinating the further sale of the means of control of the Bank and also to act and vote in accordance with the terms set forth in section 4 above. 7. The holders and the Entities through which the means of control are held, as specified in section 3 above and in the addendum, will be entitled to continue to act in accordance with the cooperation agreement (Summary of Principal Terms), which is attached as Appendix B to the investors agreement dated January 25, 2006, which was approved in advance and in writing by the Supervisor, subject to them not violating the terms set forth in this permit. 8. Means of control of the Bank that are held, directly, by Treetops and Treetops II will continue to be deposited with the trustee U-Bank Trust Company Ltd., pursuant to the amended version of the trust agreement, including being in accordance with Addendum III to the trust agreement that was approved by the Supervisor on December 3, 2012, or will be deposited with another trustee in which case, the trustee s identity, the trust deed and the instructions given to him in the trust agreement will be subject to approval in advance and in writing by the Supervisor. 9. During the Transition Period and during a further year (the Cooling-Off Period ), the holders will not be entitled to propose candidates to serve as directors of the Bank or to be involved in any way in the proposal of candidates to serve on the Board of Directors, and will not be entitled to propose the termination of a director s service, except as stated in section 4(a) above.

10 7 Without derogating from the aforesaid, it is hereby clarified that the holders will be entitled to vote with regard to the appointment or termination of service of directors, when this is not proposed by the holders, subject to the terms set forth in section 5(b) above. 10. During the Transition Period, no transactions at all are to take place between the holders and the Bank, unless specifically approved in advance and in writing by the Supervisor. During the Cooling-Off Period, the holders are to be treated as related parties and controlling shareholders for the purpose of the Proper Conduct of Banking Business Directives in relation to transactions of a banking corporation with related parties (Directive No. 312). 11. During the Transition Period, the holders, their relations or corporations controlled by any of them, are not to receive management fees or any consideration or other benefit from the Bank or from corporations under the Bank s control; however, they will be entitled to grant services that are provided in the normal course of business, while acting as service providers and at market prices, if this is approved by the Supervisor in advance and in writing. 12. (a) Unless approval is received in advance and in writing from the Supervisor, during the Transition Period, neither the holders nor any of them, nor corporations under their control, are to engage in any business in Israel relating to the receipt of the deposits and, even if less than thirty persons, relating to the grant of credit, or any other financial business in Israel that constitutes competition to the business of the Bank. (b) Unless approval is received in advance and in writing from the Supervisor, during the Transition Period, neither the holders nor any of them, nor corporations under their control, are to be interested parties, directors, or senior managers in corporations that are engaged in business of the kind referred to in subsection (a) above; for this purpose, interested party anyone holding 5% or more of any class of the means of control. 13. During the Transition Period, as required by the Supervisor, he is to be sent a report of the holding rate in the means of control of the Bank and of the actions of all the Entities through which the holders hold the means of control of the Bank and who are specified in section 3 above and in the addendum; for this purpose, a report financial statements or any other document or information that the Supervisor requires.

11 8 14. (a) The permit is granted on the basis of the information that the holders or any person acting on their behalf has sent to the Bank of Israel, either directly or by means of an agent, and on the information in the possession of the Bank of Israel at the time of granting the permit; if the Bank of Israel discovers that the information it was sent was not complete or accurate, or if additional or new information is discovered, that had any of the aforementioned been in the possession of the Bank of Israel prior to granting the permit, it would likely have affected the decision to grant the permit, this will provide sufficient cause for the cancellation of the permit in relation to any of the holders to whom the information relates. (b) Prior to deciding to cancel the permit, as referred to in subsection (a) above, the holders or any of them will be given a proper opportunity for their arguments to be heard and for the situation to be remedied, thereby removing the cause for canceling the permit to the satisfaction of the Supervisor. 15. (a) The holders will bring the permit and its terms to the attention of the members of the Bank s Board of Directors. Moreover, the holders will also bring to the attention of the members of the Board of Directors that the Bank is required to act in order for the procedures of the Bank to align and correlate with the provisions of the permit, as required and at any time. (b) The holders will act so that the memorandum, articles and all procedures of the Entities specified in section 3 above and in the addendum, through whom the means of control of the Bank are held, will align and correlate with the provisions of the permit, as required and at any time. 16. The provisions of the permit do not provide exemption from any other term or provision prescribed pursuant to any law or any other directive issued by the Supervisor to the Bank, and which is still in effect. ***

12 Addendum to Permit to Hold Means of Control of Israel Discount Bank Ltd. Dated December 1, 2013 Holdings Chart Power of attorney* Power of attorney Power of attorney Power of attorney 1) General partner of Treetops Acquisition Group LP see details of shareholders in Appendix 1. 2) For details of the limited partners of Treetops Special Limited Partner LP see Appendix 2. 3) General partner of Treetops Acquisition Group II LP. * Power of attorney has been given to Mr. Edgar Bronfman or to Mr. Edgar Bronfman together with Mr. Matthew Bronfman. ** The percentage to be held in the Bank by Treetops will not exceed the percentage to be held by it immediately following the first transfer of the means of control of the Bank, as defined in the permit. *** The percentage to be held in the Bank by Treetops II will not exceed the percentage to be held by it immediately following the first transfer of the means of control of the Bank, as defined in the permit.

13 Israel Discount Bank Ltd. Holdings Chart Appendix 1: The Holders in Treetops Acquisition Group Ltd. Power of attorney Power of attorney Power of attorney Power of attorney * Rubinoff IDB Holdings Ltd., in which Mr. Rubinoff holds 100% of the means of control, is the general partner of the limited partnership.

14 Israel Discount Bank Ltd. Holdings Chart Appendix 2: The Limited Partners in Treetops Special Limited Partner LP * The general partner of the limited partnership, TSLP-LP. ** Rubinoff IDB Holdings Ltd., in which Mr. Rubinoff holds 100% of the means of control, is the general partner of the limited partnership.