Immediate Report of an Event or Matter which Deviates from the Corporation's Ordinary Course of Business

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1 This document constitutes an English translation of the report, originally drafted and published in Hebrew. For legal purposes, it is clarified herein that whilst every effort was made to provide accurate information, this translation bears no legal status and the Bank shall not be held liable as to its accuracy and/or its contents. The authentic Hebrew text shall be regarded as the sole official text and readers are advised to consult it in all matters. MIZRAHI TEFAHOT BANK LTD No. with the Registrar of Companies: To Israel Securities Authority To Tel Aviv Stock Exchange Ltd T053 (Public) Date of transmission: November 28, Ref: Immediate Report of an Event or Matter which Deviates from the Corporation's Ordinary Course of Business Regulation 36(a) of the Securities Regulations (Immediate and Periodic Reports), Issue results must be reported under T20 and not under this form. Bond rating or corporation rating reports must be submitted through Form T125 Report on: A report whose submission was delayed Nature of the Event: Agreement with Shareholders at Union Bank 1. immediate_report_isa.pdf 2. Date and time at which the corporation first learned of the event: November 27, 2017 at 20:00. Report delayed per Regulation 36(b): 3. If the report was delayed, the reason due to which its submission was delayed: 4. On at the report embargo was removed 5. The company is a shell company, as defined in the TASE Rules and Regulations. The above report was signed by Nissan Levi, Deputy CEO and Head of the Planning, Operations and Customer Assets Division and Racheli Friedman, Adv., Deputy CEO and Chief Legal Advisor The reference numbers of previous documents on the subject (reference does not constitute incorporation by reference): Securities of a Corporation Listed for Trading Form structure revision date: November 6, 2017 on the Tel Aviv Stock Exchange Abbreviated Name: Mizrahi Tefahot Address: 7 Jabotinsky Street Ramat Gan, 52520, Israel Tel: Fax:

2 Previous name of the reporting entity: United Mizrahi Bank Ltd. Name of the person reporting electronically: Feller Maya Position: Bank Secretary Name of Employing Company: Address: 7 Jabotinsky Street, Ramat Gan, 52520, Israel Tel: Fax: E- mail: mangment@umtb.co.il

3 28 November 2017 To: Israel Securities Authority Via MAGNA To: Tel-Aviv Stock Exchange Ltd Via MAGNA Dear Sir or Madam, Re: Engagement in an Agreement with the Shareholders of Union Bank of Israel Ltd. Further to the immediate report dated July 31, 2017 (reference number: ); page 11 of the board of directors report attached to the second quarter report for 2017, as published on August 29, 2017 (reference number: ); and page 13 of the board of directors report attached to the third quarter report for 2017, as published on November 13, 2017 (reference number: ), of Mizrahi Tefahot Bank Ltd (hereinafter, the Bank ), regarding negotiations to formulate a transaction to acquire all of the shares in the issued and outstanding capital of the Union Bank of Israel Ltd (hereinafter, Union ), the Bank respectfully announces that per the board of directors resolution from November 27, 2017, the Bank has become engaged in an agreement, the principles of which shall be described below (hereinafter: the Agreement ), with Union shareholders 1, who together hold approximately 47.63% of Union s issued and outstanding capital (hereinafter: the Controlling Shareholders, as well as the shares of the Controlling Shareholders, respectively). Likewise, prior to engaging in the Agreement, a notice was received from another Union shareholder, who (through trustees) holds Union shares which constitute approx % of Union s issued and outstanding capital (hereinafter: the Other Shareholder ), all as detailed below. 1. The Principles of the Agreement, including the Acquisition Manner Thereof and the Notice from the Other Shareholder 1.1 According to the Agreement, subject to the fulfillment of the suspensory conditions, which are detailed in principle in section 1.8 below, the Bank will publish a full exchange purchase offer (hereinafter: Purchase Offer ) to acquire the shares of Union Bank per the instructions of the Companies Law Union shareholders who, according to reports by Union (which is a reporting corporation, as detailed in section 2 below), are Union s Controlling Shareholders, as follows: Yeshayahu Landau Holdings (1993) Ltd, Yeshayahu Landau Properties (1998) Ltd, David Lubinski Properties (Holdings) 1993 Ltd and Schroder Properties Ltd.

4 (hereinafter: Companies Law ) and the Securities Regulations (Purchase Offer) (hereinafter: Purchase Offer Regulations ); and inversely, the Controlling Shareholders and the Other Shareholder have undertaken to consent to the Purchase Offer, to be completed subject to the suspensory conditions established in the Agreement, which are detailed in principle in section 1.9 below. The Purchase Offer, which will be published subject to the fulfillment of the suspensory conditions, which are detailed in principle in section 1.8 below, shall be directed towards all of the shareholders at Union; and its accomplishment will be conditional, inter alia, upon achieving the rate of consent necessary to accept a full Purchase Offer, per the instructions of Article 337 of the Companies Law (hereinafter: the Minimum Rate of Consent ), in a manner which will allow to purchase all of the shares in Union s issued and outstanding capital, so that after the Purchase Offer is accomplished, Union will become a private company, per the definition in the Companies Law, fully owned by the Bank. 1.2 According to the agreement, at the time of the Purchase Offer s accomplishment, the Bank will purchase all of the shares in Union s issued and outstanding capital, including the shares of the Controlling Shareholders, as-is, without any right to any indemnification and without representations, net and free of any encumbrance, foreclosure, lien, debt, claim, right of first refusal, right to option (including call options) or any other third-party right. As specified in Section 3 below, insofar as the Purchase Offer will be published and accomplished, soon after Union s transformation into a private company, the Bank intends to merge Union as a target company with and into the Bank as the absorbing company (per the definition of these terms in the Companies Law) (hereinafter: the Planned Merger ). 1.3 The consideration per the Purchase Offer shall be paid via Bank shares, which shall be issued at An amount reflecting the ratio between a sum equal to 60% of Union s total capital, according to Union s financial reports for the period ending on June 30, 2017, after deducting the sum of the permitted distribution, per its definition in Section 1.11 below (if and insofar as it may be distributed); and the average of the adjusted closing price of the Bank s shares in the 90 trade days prior to June 30, 2017 (hereinafter: the Consideration Shares ). The Consideration Shares calculation method was established in the negotiations between the parties to the Agreement.

5 The aforesaid Consideration Shares shall be issued per the shelf offering report that will be included in the Purchase Offer s specifications, to be published subject to the fulfillment of the conditions detailed in Section 1.8 below. 1.4 Events have been determined under the Agreement, the fulfillment of which during the period beginning at the time of the Agreement s signing and until the accomplishment of the Purchase Offer or the alternative transaction (hereinafter: the Interim Period ), an adjustment shall be made to the amount of the Consideration Shares, in a manner reflecting the economic implication of these actions, as agreed between the parties, including inter alia: (1) A change in the issued and outstanding capital of Union and/or the Bank and/or the capital structure of either of the above; (2) An allotment of securities, including options (but except the exercise of Bank employees options, which had been granted in the past, provided that the rate of the bonus component therein does not exceed an accrued total of 0.3% of the Bank s fully-diluted issued capital) and/or other convertible securities (but excluding nonconvertible debentures and/or other nonconvertible debt instruments) and/or bonus shares; (3) A structural change at the Bank and/or Union, such as a merger, a reverse merger, liquidation, consolidation, split-off, reverse split, reclassification and a re-organization including a share exchange. Furthermore, a mechanism has been determined to adjust the amount of the Consideration Shares during distributions (per the definition of the term distribution in Article 1 of the Companies Law) (a) At Union, during the period beginning on June 30, 2017 and until the time at which either the Purchase Offer or the alternative transaction are accomplished (except for the permitted distribution, per its definition in Section 1.11 below) and/or (b) At the Bank, so that with respect to distributions at the Bank, the ex date (i.e. the effective entitlement date) falling from June 30, 2017 and until the time of the Agreement s signing, an adjustment was made as specified in the appendix to the Agreement, so that further adjustments shall only be made with respect to Bank distributions with an ex date (i.e. the effective entitlement date) that shall fall from the signing of this agreement and until the time at which the Purchase Offer and/or the Alternative Transaction shall be accomplished, all as detailed in the appendix included with the Agreement. 1.5 The Agreement includes a terminating condition, according to which insofar as this may be decided by the Bank s board of directors, per its absolute and exclusive judgment the value appraisal which will be received by the Bank after

6 the Agreement s signing does not support the consideration specified in the Agreement, including not basing the Consideration Shares amount as arising from the calculation according to the formula specified in the appendix to the Agreement, then the Bank s board of directors shall be entitled, per its absolute and exclusive judgment, to notify the Controlling Shareholders, until January 23, 2018 (with the date being extended until February 7, 2018, at the request of the Bank), that the Agreement is without any validity; and the Controlling Shareholders shall not have any allegation and/or claim in the matter. 1.6 It was established in the Agreement that should it not be possible to accomplish the transaction subject of the Agreement under a Purchase Offer outline, then the Bank and the Controlling Shareholders shall act to execute the transaction via statutory merger, the execution of which will require the authorization of the certified organs at the Bank and at Union, where Union will be the target company and the Bank as the absorbing company, per the definition of these terms in the Companies Law (hereinafter: the Alternative Transaction ). In this matter, it was established in the Agreement that insofar as the Alternative Transaction shall not be authorized by certified organs at the Bank and/or Union, the Agreement shall be cancelled. In this matter, see also the undertaking of the Other Controlling Shareholder, as detailed in Section 1.14b below. 1.7 The Agreement includes an instruction per which the parties will take all actions necessary so that the Consideration Shares are registered for trade on the TASE and no lock-up instructions apply thereto, except for the undertaking by each of the Controlling Shareholders, included in the Agreement, to avoid selling the Consideration Shares for six months, except for off-tase sales (under the conditions established in the Agreement) and/or encumbrance (under the conditions established in the Agreement). In this matter, see also the undertaking of the Other Controlling Shareholder, as detailed in Section 1.14c below. 1.8 The principles of the suspensory conditions established in the Agreement for the submission and publication of the Purchase Offer are detailed below: Receipt of a positive indication for the issuance of a preliminary permit from the Tax Authority, as soon as possible, and in any case prior to the accomplishment of the Purchase Offer, that: (a) The exchange of Union s shares with the Consideration Shares under the Purchase Offer or the Alternative Transaction shall be executed as an exchange of shares, per

7 the instructions of Article 104h of the Income Tax Ordinance (New Version) , except with respect to a seller who will update the Bank that he wishes to be excluded from the application of the aforementioned Article 104h; and (b) An exemption from tax deduction at the source shall apply due to the aforesaid exchange of shares Receipt of authorization from third parties, for which encumbrances were created over shares included in the Shares of the Controlling Shareholders to remove the aforesaid encumbrances, simultaneously and against the receipt of the consideration due to the aforementioned encumbered shares, under the Purchase Offer or the Alternative Transaction, as the case may be An agreed course of action shall be arranged, under the authorization of the Bank of Israel and/or any other certified authority, insofar as such an authority s authorization shall be required by law, which the Bank s controlling shareholders will take at the accomplishment of the Purchase Offer or the Alternative Transaction, with attention to the instructions that regulate the transitory period for holdings in significant financial corporations and real corporations in the Law for the Promotion of Competition and Reduction of Concentration, Per the Agreement, the Bank may waive the fulfillment of the suspensory condition in this subsection In addition, it was established that the submission of the Purchase Offer and its publication (or if the Alternative Transaction was chosen, the accomplishment of the Alternative Transaction, as the case may be) are also conditional upon the completion of a consultation process with Union s certified employee representatives; and agreeing with them upon an efficiency outline with respect to Union s employees (including with respect to the cost of the outline), which will be approved by the Bank, with the Bank being entitled to waive the fulfillment of the suspensory condition in this subsection above. 1.9 The principles of the suspensory conditions established in the Agreement for the accomplishment of the Purchase Offer or the Alternative Transaction are detailed below: Receipt of a permit from the Governor of the Bank of Israel to acquire all of the shares in the issued and outstanding capital of Union and complete

8 the Planned Merger (as defined above), under wording and conditions to the Bank s satisfaction; Receipt of an authorization from the General Director of the Israel Antitrust Authority to acquire all of the shares in the issued and outstanding capital of Union and complete the Planned Merger, unconditionally; or if such an authorization was conditional upon conditions to be imposed upon the Bank, Union or the activity of either bank, that these conditions would be to the bank s satisfaction; and if such an authorization was conditional upon conditions to be imposed upon the Controlling Shareholders, that these conditions would be to their satisfaction; The receipt and obtainment of any authorization, license, permit and/or agreement from a certified and/or governmental and/or regulatory authority, which is reasonably required to acquire all of the shares in the issued and outstanding capital of Union and/or accomplish the Purchase Offer and/or the Alternative Transaction, including from the Securities Authority, the TASE and the Capital Market, Insurance and Savings Authority, as the case may be and insofar as required; Achievement of the Minimum Rate of Consent, per the term s definition above, in a manner which will allow purchasing all of the shares in Union s issued and outstanding capital According to the Agreement, it was established that should any of the suspensory conditions for the publication of the Purchase Offer (specified in Section 1.8 above) not be fulfilled until six (6) calendar months have passed from the time of the Agreement s signing ( the Effective Date ), the Effective Date would be automatically extended so as to apply one month from the Effective Date (hereinafter: the Extended Effective Date ). It was likewise established that should the conditions for the publication of the Purchase Offer (specified in Section 1.8 above) be fulfilled prior to the Effective Date or the Extended Effective Date, then the last date for the fulfillment of the conditions for the accomplishment of the Purchase Offer and/or the Alternative Transaction (specified in Section 1.9 above) shall occur at the end of four (4) months from the Effective Date (hereinafter: the Final Date ), when insofar as the Final Date may fall during the Purchase Offer s acceptance period of the Purchase Offer, it shall be postponed until one business day prior to the last acceptance date. Insofar as the Final Date may fall after the Purchase Offer s last

9 acceptance date per the Purchase Offer s regulations, the Bank shall amend the specifications of the Purchase Offer it has published, as far as possible, per the Purchase Offer s regulations; if not possible, then it shall publish new specification for the Purchase offer, with the last acceptance date for the Purchase Offer being one business day after the Final Date, but no less than 45 days after the time of the publication of the specifications or the specifications amendment (and insofar as necessary, the Final Date shall be postponed accordingly). Furthermore, it was established that should any of the suspensory conditions for the publication of the Purchase Offer (specified in Section 1.8 above) not be fulfilled until the Extended Effective Date, or should any of the suspensory conditions for the accomplishment of the Purchase Offer and/or the Alternative Transaction (specified in Section 1.9 above) not be fulfilled until the Final Date, the Agreement shall be considered void ab initio (unless the parties will have agreed in writing to postpone either of the dates) and in such case, neither of the parties shall have any obligations deriving from the Agreement and/or allegations against the other parties to the Agreement According to the Agreement, the Controlling Shareholders shall be entitled to enact their means of control at Union, in order to cause a dividend distribution at Union in the sum total of ILS 100 million, to occur simultaneously with the accomplishment of the Purchase Offer (above and hereinafter: the Permitted Distribution ), subject to any law and any regulatory instruction, including an approval from the Supervisor of Banks. The Agreement includes the Controlling Shareholders undertaking to enact their means of control at Union in order to cause no further distribution to be made beyond the aforesaid distribution According to the Agreement, it was established that the parties agree that prior to the accomplishment of the Purchase Offer or the Alternative Transaction (as the case may be), Union s certified organs will grant their authorization to acquire insurance policies to insure any liability, guarantee and expense of the officers in service at the time of the Agreement s signing, and those who had previously served in such capacity at Union for a period no less than seven years from the time of the accomplishment of the Purchase Offer or the Alternative Transaction (as the case may be), at the customary scope at banks in Israel, which would be no less than what had been in place prior to the time of the Agreement s signing at Union. Likewise, the Agreement includes instructions per which no change, nor cancellation, will be made to undertakings for indemnification and/or exemptions and/or the continued acquisition of insurance policies to insure the liabilities,

10 guarantees and expenses of officers, as aforesaid, due to an act or an oversight committed thereby during the period of their office at Union. In this subsection, Union also includes Union s subsidiaries According to the Agreement, additional undertakings (including mutual undertakings) have been included, as customary in this type of agreements, including in the matters of cooperation, Interim Period limitations, including the avoidance of negotiations and/or engagement in a transaction regarding the shares of the Controlling Shareholders, a restriction on taking any action that could hinder the transaction subject of the Agreement and/or its worthiness and/or its value; and the Controlling Shareholders have undertaken to enact their means of control at Union during the Interim Period, in order to cause Union Bank to fulfill its part in appealing to the regulators, as required by the Agreement, and also that Union would not take unusual steps that could have a materially adverse impact on Union s financial results and/or the transaction s worthiness and/or its value; and likewise, the Agreement includes further instructions regarding the exclusivity and publication of reports by law The Notice of the Other Shareholder As aforesaid, near the time of the Agreement s signing, a written notice was received from the Other Shareholder, who (through trustees) holds approx % of Union s issued and outstanding capital 2, the principles of which are as follows: a. The Other Shareholder has undertaken to accept the Purchase Offer; b. Insofar as the Alternative Transaction may be carried out, per the Agreement s instructions, and the Alternative Transaction will require the approval of Union s general meeting, the Other Shareholder has undertaken to support and to enact his voting power at Union s general meeting in order to support the Alternative Transaction, as aforesaid, and has instructed the trustees who hold Union shares in trust on his behalf to act this way, insofar as necessary, except insofar as such a vote would be prohibited by power of a regulatory authority s instruction; c. The Other Shareholder has undertaken not to sell the Consideration Shares that shall be issued to him, per the Controlling Shareholders undertaking detailed in Section 1.7 above; 2 The Other Shareholder is Shlomo Eliahu Holding Ltd and Eliahu 1959 Ltd. According to reports by Union (which is a reporting corporation, as detailed in section 2 below), these shares do not currently grant the Other Shareholder voting rights at Union.

11 d. The Other Shareholder s notice shall expire on the earliest of the dates mentioned therein, including the date on which the Agreement shall either expire or be cancelled or April 28, 2019; e. The Other Shareholder has undertaken that during the period of the notice (as stated in Section 1.14d above), he shall avoid and instruct the trustees to avoid negotiations and/or engagement in a transaction regarding the transfer, sales and/or grant of a right to acquire the Other Shareholder s shares at Union, all or some, to a third party; f. The Other Shareholder has undertaken that at the time of the accomplishment of the Purchase Offer or the Alternative Transaction, the Other Shareholder s shares at Union shall be net and free of any encumbrance, foreclosure, lien, debt, claim, right of first refusal, right to option (including call options) or any other third-party right (subject to the fulfillment of the undertaking by one of the Controlling Shareholders to release the encumbrance with respect to the Other Shareholder s shares at Union, which constitute 2.5% of Union s issued and outstanding capital). The aforesaid notice of the Other Shareholder included the agreement of the trustees that hold Union s shares in trust on behalf of the Other Shareholder to the contents of the aforesaid notice of the Other Shareholder, as well as their undertaking to act accordingly. 2. Description of the Union Bank of Israel Ltd Union Bank of Israel Ltd is a banking corporation, per the term s definition in the Banking (Licensing) Law and a reporting corporation, per the term s definition in the Securities Law (hereinafter: Reporting Corporation ). Below is information about Union derived from reports, including immediate and periodic reports, published due to Union being a Reporting Corporation: 2.1 Per Union s financial reports for December 31, 2016, Union is the sixth largest bank in Israel s banking system (according to data published in the consolidated financial reports of all the banks in Israel for September 30, 2016). 2.2 Union s operations focus mainly on the following sectors: households; private banking; micro, small and large businesses; financial institutions; and financial management.

12 2.3 The following table presents Union s main financial figures, as published in Union s financial reports: Dec Dec Jun (In NIS million) Income from interest, net Non-interest income Net profit (loss) attributed to the 144 (49) 72 Bank s shareholders Total assets 40,888 40,988 42,050 Loans to the public, net 22,315 23,684 24,637 Deposits from the public 32,466 32,756 33, As noted in Union s financial reports, the aforesaid financial reports were drawn up per the Israeli GAAP and per the instructions and guidelines of the Supervisor of Banks. As aforesaid, the information above in this section is information published by Union. The Bank did not review or scrutinize this information and bears no responsibility thereto. 3. The Bank s Plans for Union As soon as possible after the accomplishment of the Purchase Offer and Union s transformation into a private company, the Bank intends to execute the Planned Merger. At the time of this immediate report, it is the Bank s intention to merge Union s business with the Bank s business, per the Bank s judgment, while enacting efficiency measures managing its resources, including the branch network, personnel and the technological systems. The Bank estimates that the costs anticipated after the acquisition amount to several hundred million NIS, the bulk of which will be carried out, in the Bank s assessment, over a period of approx. three years. The Bank s assessments, as detailed above, and the Bank s plans for Union, as detailed above, are forward-looking information, per its definition in the Securities Law , based, inter alia, on the information and assumptions that the Bank s management has at this time, including the information which the Bank has regarding Union. These assessments and/or plans might not be realized, all or some; and/or be realized in a

13 manner materially different from that anticipated above, as a result of events which are not necessarily under the Bank s control and/or due to a change in circumstances, as they are known to the Bank at this time, including with respect to Union, including regulatory and legislative changes, directives from supervisory elements, changes in work assumptions in light of information that may be received regarding Union and its business after the purchase, geo-political changes and other changes that might cause the assessments to not be realized and/or a change in the plans described above. As detailed above in this immediate report, the accomplishment of the transaction subject of the Agreement is subject, inter alia, to the fulfillment of various conditions, including such that are not under the Bank s control, among them the receipt of authorizations from third parties and regulatory elements. Accordingly, there can be no certainty that the transaction subject of the Agreement will be accomplished. Respectfully, Mizrahi Tefahot Bank Ltd By: Racheli Friedman, Chief Legal Advisor Nissan Levi, Head of the Planning, Operation and Customer Assets Division