CONVENIENCE TRANSLATION The Hebrew version is the binding version. STRAUSS GROUP LTD. (The Company )

Transcription

1 CONVENIENCE TRANSLATION The Hebrew version is the binding version STRAUSS GROUP LTD. (The Company ) November 25, 2018 Messrs The Israel Securities Authority Via MAGNA Messrs Tel Aviv Stock Exchange Ltd. Via MAGNA Dear Sir/Madam: Re: Immediate Report Regarding the Convening of an Annual General and Special Meeting of the Company In accordance with the provisions of the Companies Law, 1999 (the Companies Law ), the Securities Regulations (Periodic and Immediate Reports), 1970 (the Reporting Regulations ), the Companies Regulations (Written Votes and Position Statements), 2005 (the Voting Regulations ) and the Companies Regulations (Notice and Announcement of General Meetings and Class Meetings in Publicly Owned Companies and Addition of an Item to the Agenda), 2000 (the Notice and Announcement Regulations ), an Immediate Report is hereby given with regard to the convening of an Annual General and Special Meeting of the Shareholders of the Company, which shall be held on Monday, December 31, 2018 at 3:00 p.m. at the offices of the Company at 49 Hasivim Street, Petach Tikva (hereinafter: the Meeting ). 1. Items on the Agenda and Proposed Resolutions 1.1 Discussion pertaining to the Annual Financial Statements of the Company and the Board of Directors Report for the year ended December 31, 2017, published by the Company on March 14, 2018 (reference no ) (the 2017 Periodic Report ), with no resolution being passed. 1.2 Reappointment of the auditor in light of their experience and professionalism, reappoint KPMG Somekh Chaikin of 17 Ha arba a Street, Millennium Tower, Tel Aviv as the Company s auditors until the next Annual General Meeting and empower the Board of Directors of the Company to determine their fee. A report will also be given on the auditors fee for 2017 (for information on the auditors fee for 2017, see the Board of Directors Report Regarding the Company s Business Position, which is attached to the 2017 Periodic Report). Proposed resolution: Appoint KMPG Somekh Chaikin of 17 Ha arba a Street, Millennium Tower, Tel Aviv as the Company s auditors until the next Annual General Meeting, and empower the Board of Directors of the Company to determine their fee. 1.3 Reappointment of directors

2 Reappoint Mr. Adi Strauss, Mr. Meir Shanie and Ms. Galia Maor, who are retiring by rotation in accordance with the provisions of the Articles of Association of the Company, as directors of the Company. The directors terms of office shall remain unchanged, as set forth in section 2 of this report. Proposed resolution (to clarify, the vote with respect to each director shall be taken separately): Reappoint Mr. Adi Strauss, Mr. Meir Shanie and Ms. Galia Maor, who are retiring by rotation in accordance with the provisions of the Articles of Association of the Company, as directors of the Company Reappoint Mr. Joshua (Shuki) Shemer (independent director) and Mr. Gil Midyan, who were appointed as directors by the Board of Directors of the Company in accordance with the Articles of Association of the Company on March 13, 2018 and July 1, 2018, respectively. For information, see the Immediate Reports of the Company of March 14, 2018 and July 2, 2018 (reference no and , respectively), which are included herein by reference. The directors terms of office shall remain unchanged, as set forth in section 2 of this report. Proposed resolution (to clarify, the vote with respect to each director shall be taken separately): Reappoint Mr. Joshua (Shuki) Shemer (independent director) and Mr. Gil Midyan as directors of the Company. 1.4 Approval of the terms of office and employment of the Chief Executive Officer of the Company Approval of the terms of office and employment of the Company CEO, Mr. Giora Bardea, as set forth in section 3 of this report below. The proposed resolution: Approve the terms of office and employment of the Company CEO, Mr. Bardea, as set forth in section 3 of the convening report. 2. Reappointment of Directors (Item 1.3 on the Agenda) 2.1 The fees and terms of office of each of the directors, as the case may be, shall remain unchanged, including the compensation paid to the directors in accordance with the Companies Regulations (Rules Regarding Compensation and Expense Reimbursement of an External Director), 2000 (the Compensation Regulations ), which is the maximum amount determined in the Compensation Regulations (the compensation that shall be paid to the directors, with the exception of Mr. Adi Strauss and Mr. Gil Midyan, is the compensation payable to an expert director). Additionally, the directors are entitled to all other arrangements in place in the Company with respect to insurance, indemnification, exemption, etc., which shall remain in force and effect with respect to the directors serving and who shall serve on the Board of Directors of the Company from time to time. For further information on the terms of office of directors of the Company, see regulation 21 in the chapter Additional Information on the Company in the Company s 2017 Periodic Report, which is included herein by reference. With respect to Mr. Adi Strauss (who is a relative of the controlling shareholders of the Company) 1, the General Meeting of Shareholders of the Company approved the grant of a letter of undertaking of indemnification to Mr. Adi Strauss and the amendment thereto 1 Mr. Adi Strauss is the son of Mr. Michael Strauss and the brother of Ms. Ofra Strauss, controlling shareholders of the Company (indirectly) through their holdings in Strauss Holdings Ltd. ( Strauss Holdings ) and through a direct holding of the Company s shares by Mr. Michael Strauss.

3 3 on September 27, 2016 and November 8, 2017, respectively 2. Further, Mr. Adi Strauss s terms of office pertaining to compensation and insurance were approved by the Board of Directors (subsequent to approval by the Remuneration Committee) on May 28, 2017 in accordance with the Companies Regulations (Relief in Transactions with Interested Parties), 2000, and on July 9, 2018 the General Meeting of Shareholders of the Company approved the renewal of the grant of a letter of exemption to Mr. Adi Strauss 3. For further information on Mr. Adi Strauss s terms of office, see regulations 21 and 22 in the chapter Additional Information on the Company in the Company s 2017 Periodic Report, which is included herein by reference. 2.2 For information required pursuant to Regulation 36B(10) of the Reporting Regulations with respect to the candidates for the office of director, see regulation 26 in the chapter Additional Information on the Company in the Company s 2017 Periodic Report, which is included herein by reference, and also the voting deed attached to this convening report; see also the Immediate Reports of the Company of March 14, 2018 and July 2, 2018 (reference no and , respectively). 2.3 The candidates for reelection to the Board of Directors of the Company have signed the required declarations pursuant to section 224B of the Companies Law, and said declarations are attached as Annex A to this convening report. 2.4 To clarify, the vote with respect to each candidate for the office of director shall be taken separately. 3. Approval of the Terms of Office and Employment of the Company CEO (Item 1.4 on the Agenda) 3.1 On September 5, 2018 the Board of Directors appointed Mr. Giora Bardea as CEO of the Company. For information on Mr. Bardea s qualifications and experience, see the Company s Immediate Report of September 5, 2018 (reference no ), which is included herein by reference. The heads of Mr. Bardea s (hereinafter: the CEO ) terms of employment are presented below. 3.2 The CEO will be employed by the Company in a full-time position. 3.3 Salary and accompanying benefits: The CEO s gross monthly salary shall be NIS 153,000 and shall be updated in accordance with the Cost of Living Index in Israel, with no cap on the amount. The CEO shall be entitled to provisions to a pension fund and/or managers insurance and to an advanced study fund, in accordance with his terms of employment. The CEO shall further be entitled to accompanying benefits, including a car (of the cost and type determined in Company policy and as approved by the Board of Directors from time to time), convalescence allowance, mobile phone, leave (25 workdays), sick leave (30 days), reimbursement of reasonable expenses and other accompanying benefits awarded to executives in the Company, according to the accepted practice in the Company from time to time, all of the foregoing in accordance with his terms of employment and the Company s procedures. 2 For information, see the Immediate Reports of September 27, 2016 and November 9, 2017 (reference no and , respectively). 3 For information, see the Immediate Reports of May 29, 2017 and July 9, 2018 (reference no and , respectively).

4 4 3.4 Termination, advance notice and adjustment: The CEO s employment is for an indefinite period, and either party may terminate the employment relationship by giving six (6) months advance notice to the counterparty ( Advance Notice Period ) at any time and for any reason (other than in special circumstances, in which case the Company may terminate the employment relationship immediately without notice, such as circumstances in which severance pay may be denied by law ( Special Circumstances )). In the Advance Notice Period the CEO is obliged to continue to serve in his position. The Advance Notice Period shall be counted as part of the employment period for all intents and purposes (including with regard to entitlement to the various remuneration components, inclusive of social benefits, incentives, vesting of options). Notwithstanding the foregoing, the Company may, at any time in the Advance Notice Period, waive actual work by the CEO, and in such case the employment relationship shall continue until the end of the Advance Notice Period, and in respect of the remaining Advance Notice Period (from the date on which the CEO s work is waived through to the end of the Advance Notice Period), the Company shall continue to pay the CEO, each month, all compensation and benefits owed to him pursuant to his employment agreement, with the exception of an incentive and/or a new equity award and/or payments made for actual work (e.g. reimbursement of expenses incurred on the job). Should the CEO request that the Advance Notice Period be shortened and the date of termination of the employment relationship expedited (by a period that is not less than the period set forth in the law) and the Company accedes to the CEO s request, no payments shall be made to the CEO for the Advance Notice Period that was shortened. After the end of the Advance Notice Period the employment relationship shall terminate and the CEO shall be paid a lump sum equal to the compensation and benefits owed to the CEO according to his employment agreement for nine months of work, with the exception of an incentive or a new equity award or payments made for actual work (e.g. reimbursement of expenses incurred on the job) ( Adjustment Compensation ). If the employment relationship is terminated in the Advance Notice Period by the CEO or in Special Circumstances, the CEO shall not be entitled to Adjustment Compensation. If the employment relationship between the parties is terminated in the Advance Notice Period as a result of incapacity or death, the CEO shall be entitled to a lump sum equal to the total compensation owed to him for the Advance Notice Period (or its remaining portion, according to the circumstances) and to Adjustment Compensation. 3.5 Incentive Commencing on the date of the CEO s appointment, the CEO shall be entitled to an annual incentive calculated exclusively on the basis of the achievement of financial goals, based on the Group s budget (as approved by the Board of Directors from time to time, including revisions), and to a discretionary incentive and a special bonus, all of the foregoing in accordance with the provisions of the Remuneration Policy pertaining to the CEO see section 20 of the Remuneration Policy for Officers of the Company, which was attached to the notice convening the General Meeting published on August 18, 2016, reference no With respect to the year 2018 until the date of the CEO s appointment: The Company holds the discussion on the annual incentive after the end of the calendar year in which respect the incentive is paid, meaning that the discussion on the annual incentive for 2018 will take place in early 2019, when Mr. Bardea

5 5 already serves in the office of CEO. According to the Remuneration Policy, the formula for calculating the annual incentive for the CEO and Chairperson of the Board is based on financial goals only, which do not require the use of discretion. However, since the annual incentive for senior officers in the Group is also determined on the basis of the achievement of functional goals, the Company wishes to exclude the functional goal components from the incentive formula that was defined for Mr. Bardea during his service as Deputy CEO, in such manner that the incentive that is calculated for Mr. Bardea for 2018 until his appointment as CEO shall be based on financial goals only. It is emphasized that these financial goals were set at the beginning of 2018 by the Remuneration Committee and the Board of Directors, and do not require the use of discretion. Consequently, the formula for the calculation of Mr. Bardea s incentive for said period shall be as follows: Extent of achievement of financial goals Score of 1 or less Score of 2 Score of 3 Score of 4 Score of 5 Cash incentive (number of salaries) 0 salaries 5 salaries 7 salaries 8 salaries 9 salaries 3.6 Equity award (including the information required pursuant to the Securities Regulations (Private Placement of Securities in a Listed Company), Following approval by the General Meeting, the Company shall grant the CEO, for no consideration, a total of 353,333 options exercisable for 353,333 Ordinary Shares of the Company of NIS 1 par value each, at the exercise price and under the terms and conditions set forth below. The options are granted under the option plan for senior officers of the Group, subject to the changes described below. To clarify, as at the date of the report and prior to the allotment contemplated hereunder, the CEO holds 160,000 options that were granted in March 2017, which, at the date of this report, have not yet vested, and 240,000 options granted in August 2014, which, at the date of this report, have vested in full Percentage of voting rights and issued capital: Under the theoretical assumption that all options are exercised for shares of the Company, the underlying shares shall constitute approximately 0.31% of the issued and paid-up share capital of the Company and the voting rights therein (excluding dormant shares) (approximately 0.63% in full dilution). It is emphasized that according to the terms and conditions of the option plan, upon the exercise of the options the CEO shall not de facto be granted all of the resulting underlying shares, but only shares of a quantity that reflects the amount of the financial benefit embodied in the options, which is equal to the amount obtained in one of the following calculations according to the offeree s order to exercise: (1) if the offeree has given an order to exercise in which a minimum exercise price is specified ( Limit Order ): the amount of the difference between the Limit Order price and the exercise price multiplied by the number of warrants in which respect notice of exercise was given, divided by the Limit Order price; (2) if the offeree has not given a Limit Order: the amount of the difference between the closing price of an Ordinary Share on the last trading day preceding the exercise date ( Market Price ) and the exercise price, multiplied by the number of options in which respect notice of exercise was given, divided by the Market Price.

6 Exercise price: The exercise price of each option is NIS 82.54, linked to the CPI published on November 15, 2018, and was determined according to the average closing price of the Company s share in the 30 trading days on the Tel Aviv Stock Exchange that preceded the date of approval of the allotment by the Board of Directors of the Company (i.e. November 22, 2018), linked to the index as provided above. However, as mentioned above, the options shall be exercised without payment of the exercise price, and the CEO shall be allotted underlying shares of a quantity that reflects the amount of the financial benefit embodied in the options that are exercised, as calculated on the exercise date. The underlying shares that shall be allotted upon exercise of the options shall be of a number that, in addition to the bonus component, also reflects payment of the par value that the CEO shall be required to pay for the shares allotted to him. For the avoidance of doubt, it is understood that upon exercise, the shares shall be allotted in consideration for the payment of their par value in cash Vesting period: The CEO s entitlement to the shares resulting from the options offered to him shall vest in two (2) tranches (commencing on the date of his appointment as CEO), the first on September 5, 2020, and the second on September 5, 2021 (50% of the total number of options in each tranche) Exercise period: The right to exercise each tranche shall be available to the CEO for a period of 4 years from the date on which the CEO s entitlement to receive the tranche had crystallized Expiration: After September 5, 2024 (for the first tranche) and September 5, 2025 (for the second tranche), any options that were not exercised shall expire and shall not confer any rights whatsoever Provisions for termination: In the event of termination of employment (with the exception of termination by the Company in circumstances permitting an employee to be dismissed without severance pay according to law), options that were not exercised shall not expire and may be exercised according to the original exercise period of each tranche. Additionally, the Company may, with the approval of the Remuneration Committee and the Board of Directors, approve the early vesting of options scheduled to vest within 9 months from the termination date The options shall not be listed on the Tel Aviv Stock Exchange ( TASE ). The underlying shares resulting from the exercise of the options shall be registered in the name of the nominee company and shall be listed on TASE, subject to the receipt of TASE s approval The underlying shares shall rank pari passu in all respects with the existing Ordinary Shares of NIS 1 par value of the Company Adjustments to the exercise price or conversion ratio The conversion ratio of each option warrant to underlying shares shall be adjusted pro rata according to the rate of the benefit for any increase or decrease in the number of issued Ordinary Shares of the Company, occurring after the record date but before the exercise date as a result of the allotment of bonus shares (if and insofar as the Company shall allot bonus shares in the future), or any other increase or decrease in the number of Ordinary Shares in which respect the Company has not

7 7 received a consideration (excluding the allotment of shares to an offeree under the plan and to offerees in other plans); this arrangement shall prevail until decided otherwise by the Company. The Company reserves the right to decide otherwise with respect to the adjustment mechanism at any time in the future The conversion ratio of each option warrant to underlying shares shall be adjusted pro rata for any consolidation and sub-division of the Company s shares into shares of a different par value, occurring after the record date but before the exercise date Should the Company issue rights to the holders of Ordinary Shares of the Company after the record date but before the exercise date, the exercise price of each option warrant (as yet unexercised) shall be reduced by an amount equal to the value of the theoretical ex bonus embodied in the rights issue. For this purpose, the value of the bonus means the difference between the share price on TASE, which, according to the rights issue prospectus, served as the basis for calculating the ex-rights share price quoted in the prospectus, and the exrights share price according to said prospectus If the Company has paid a cash dividend and the record date determining a shareholder s entitlement to the dividend precedes the exercise date of the options, the offeree s rights shall be reserved for the entire period in which the options are valid by reducing the exercise price of the options by an amount equal to 100% of the dividend declared per share, linked to the CPI from the known index on the record date for entitlement to a dividend through to the last index known on the exercise date (for example, if the Company has declared a dividend of NIS 1 per share, the exercise price shall be reduced by NIS 1 and linked to the index as described above) The adjustments that are required, as provided above, to the exercise price and/or conversion ratio of the options shall be determined by the Company in conjunction with its auditor and approved by the Board of Directors. The Board s decision on the subject shall be binding and final Allotment of the options falls within the bounds of a material private placement, as defined in regulation 1 of the Private Placement Regulations Consideration: As stated, the options are granted for no consideration, as part of the terms of employment in the Company. For the exercise price, see clause above. For information on the method of calculation of the consideration and the Board of Directors explanations, see clause 3.12 below Fair value of the options: The fair value of the options on the date of approval of the allotment by the Board of Directors was calculated according to the Black- Scholes model and estimated at NIS per warrant. The main assumptions used in determining the fair value of the options are the following: share price NIS 84.15; annual standardized deviation 18.88%-19.11%; risk-free interest rate (0.06%)-(0.31%); exercise price NIS 82.54; projected dividend rate 0%; and life of the warrants years In addition to the allotment of the options as described above (the First Allotment ), the Company shall be entitled to grant the CEO, for no

8 8 consideration, at the discretion of the Remuneration Committee and the Board of Directors (without the need for further approval by the General Meeting), an additional 400,000 options exercisable for 400,000 Ordinary Shares of NIS 1 par value each of the Company, which shall be allotted (if and insofar as they shall be allotted) two years after the date of his appointment as CEO (the Second Allotment ). Under the theoretical assumption that all options in the First Allotment and Second Allotment are exercised for shares of the Company, the underlying shares shall constitute approximately 0.65% of the issued and paid-up share capital of the Company and the voting rights therein (excluding dormant shares) (approximately 0.96% in full dilution). The Second Allotment shall be made for an exercise price that shall be determined according to the average closing price of the Company s share in the 30 trading days on TASE that preceded the date of approval of the allotment by the Board of Directors of the Company (if and insofar as it is approved), linked to the known index on the date of approval of the allotment. The Second Allotment shares shall also vest in two tranches, the first two years after the allotment date (if and insofar as the allotment is made), and the second three years after the allotment date (if and insofar as the allotment is made) (50% of the options shall vest in each tranche). The terms and conditions set forth above with respect to the First Allotment shall also apply to the Second Allotment, except for the exercise period of the warrants in the event of termination as provided in clause above, which shall be the later of 24 months from the vesting date of each tranche or 180 days after the termination of employment. The fair value of the options in the Second Allotment (which shall be estimated according to the total economic value on the grant date, equally divided by the number of years until the date on which the options are fully vested) shall be no more than NIS 3,500,000 per year Personal interest of a material shareholder or officer of the Company: To the best of the Company s knowledge, there is no material shareholder or officer of the Company, other than the offeree CEO, who has a personal interest in the approval of the allotment or the consideration for the allotment Agreements between the offeree CEO and shareholders: To the best of the Company s knowledge, on the basis of any inquiry made with the CEO, there are no agreements between shareholders of the Company and the CEO pertaining to the purchase or sale of securities of the Company or the voting rights therein Approvals required for purposes of the allotment of the securities offered and the grant date: As set forth in clause 3.11 below, the allotment of the options to the CEO pursuant to this report was approved by the Remuneration Committee and Board of Directors of the Company. The allotment of the securities offered under this report is subject to the approval of the General Meeting summoned in this report, and requires the approval of TASE for the listing of the underlying shares that shall be issued on the exercise thereof Prevention or limitation of the execution of transactions pertaining to the securities offered: There are limitations on the sale of the securities offered in trading on TASE, which shall apply to the offeree by virtue of the provisions of section 15C(a) of the Securities Law and the provisions of the Securities Regulations (Details with Regard to Sections 15A to 15C of the Law), In addition, limitations shall apply pursuant to the provisions of section 102 of the Income Tax Ordinance. 4 The Company shall apply to TASE for approval of the listing of the abovementioned underlying shares.

9 9 Shareholder Information on the share capital of the Company: On the date of this report, the authorized share capital of the Company is NIS 150,000,000, comprising 150,000,000 Ordinary Shares of NIS 1 par value each. Of said authorized share capital, on the date of this report 115,137,581 Ordinary Shares of the Company are issued and paid-up (not including 867,940 dormant shares held by the Company) Following is an itemization of the holdings of the offeree, interested parties and other shareholders in the issued and paid-up share capital of the Company (voting and equity rights, excluding dormant shares), to the best of the Company s knowledge, on or about the date of publication of this report: Quantity and percentage of holdings in the issued and paidup share capital and voting rights in the Company before the allotment of the securities offered as contemplated in this report, excluding dormant shares % holding in No. of shares/ equity and Quantity and percentage of holdings in the issued and paidup share capital and voting rights in the Company, assuming that the offeree (only) exercises all securities offered as contemplated in this report, excluding dormant shares % holding in equity and Quantity and percentage of holdings in the issued and paidup share capital and voting rights in the Company, assuming full dilution (i.e. exercise of all convertible securities of the Company), excluding dormant shares [1] % holding in equity and voting (options) voting No. of shares voting No. of shares Strauss Holdings Ltd. 66,423, % 66,423, % 66,423, % Michael Strauss 21, % 21, % 21, % Strauss Group Ltd. 867, , , Migdal Insurance and Financial Holdings Ltd. profit participating Migdal Insurance and Financial Holdings Ltd. Pension & Provident Funds Migdal Insurance and Financial Holdings Ltd. Mutual Funds & Capital Markets Migdal Insurance and Financial Holdings Ltd. Nostro Giora Bardea (offeree) Other shareholders (incl. employees who are not interested parties) Total share capital of Company, excluding dormant shares 3,507, % 3,507, % 3,507, % 2,686, % 2,686, % 2,686, % 199, % 199, % 199, % 108, % 108, % 108, % (400,000 options previously granted) 0.00% 353,333 options granted under this report (excl. exercise of 400,000 options previously granted) 0.31% 753,333 options (assuming exercise of all options held by offeree, incl. options granted hereunder) 0.63% 42,218, % 42,218, % 42,209, % 115,166, % 115,519, % 119,909, % [1] Full dilution under the theoretical assumption that all 4,308,182 non-marketable options granted to senior employees in the Group (including 400,000 options granted to Mr. Bardea) and 82,317 PSUs granted to the former CEO are exercised, as well as the exercise of 353,333 options granted to the CEO pursuant to this report. It is emphasized that according to the option plan, upon the exercise of the options offerees shall not be allotted all of the underlying shares, but only shares of a quantity that reflects the amount of the financial benefit embodied in the options. Therefore, the de facto of number of shares allotted in respect of the exercise of the options is lower than the number set forth above.

10 The CEO shall be entitled to a letter of undertaking of indemnification and a letter of exemption in the same form as those granted to other officers of the Company, and to inclusion in the Company s Directors and Officers (D&O) liability insurance policy. 3.8 Ratio between the terms of office and employment of the CEO and those of the Company s employees: To clarify, the estimated ratio between the cost of the terms of office and employment offered to the Company CEO (base salary, inclusive of provisions for social benefits, accompanying benefits, including retirement conditions and target incentive) and the average and median wage costs of the rest of the employees of the Company and its subsidiaries (including contract employees) (based on data for the 2017 calendar year) is 37 and 48, respectively. In the Company s opinion, these differences do not adversely impact labor relations in the Company, among other reasons noting the nature of the Company, its size and complexity and the geographies in which it operates. 3.9 Ratio between variable and fixed components: According to the figures for a typical year, the ratio between the yearly cost of variable components and the yearly cost of fixed components in the CEO s terms of office is 45% fixed components and 55% variable components Following is an estimate of the compensation that shall be paid for a typical year (figures are in NIS thousands and refer to a 12-month period): Recipient s particulars Name Position Job scope % holding in share capital (a) Compensation for services (at cost to the Company) in NIS thousands (according to the Company s non-gaap management reports) Total salary (b) Bonus (c) Giora Bardea CEO 100% 0.31% 2,650 1,377 (according to the target incentive ) Share-based payment (d) Total 1,889 5,916 (a) (b) (c) The holding percentage reflects the number of shares that shall be held by the CEO under the theoretical assumption that all 353,333 option warrants that shall be granted hereunder shall be exercised into all underlying shares (not including the exercise of 400,000 options previously granted to the CEO) and excludes dormant shares. Salary is presented at cost to the Company and is inclusive of accompanying benefits, including social benefits, social provisions and customary accompanying benefits such as car maintenance and telephone. It is noted that the value of the accompanying benefits in a typical year is an estimate only (based on unknown variables, such as leave utilization, and does not include possible nonrecurring provisions that may be made in respect of an increase in salary and retirement conditions), and it is therefore possible that at year-end the exact data will be different. Calculated under the assumption that the CEO will be entitled to an annual incentive equal to the target incentive (which reflects the accomplishment of all goals) of 9 monthly salaries. The CEO s entitlement to an annual incentive is limited to 12 salaries (according to a calculated annual incentive) plus 3 additional salaries (discretionary). The total annual incentive, assuming that the CEO will be entitled to the maximum annual incentive (12 monthly salaries) and to a discretionary bonus (3 salaries) is NIS 2,295 million; In addition, the CEO may also be awarded a special bonus (in the circumstances enumerated in the Remuneration Policy, of up to 4 salaries), provided that the total amount of the yearly bonus and special bonus shall not, in the relevant year in which the special bonus is awarded, exceed the cap for the annual incentive defined in the Remuneration Policy. The bonus includes a portion postponed to the following year when the amount of the incentive exceeds the salaries defined as the target incentive (which reflects the accomplishment of all goals), provided that in the following year the threshold condition for the receipt of the annual incentive for that year is satisfied.

11 11 (d) Includes the economic value of the grant proposed hereunder and the value of the options granted in the past that have not yet vested on the date of this report, which refers to the period from the date of the CEO s appointment through to the end of the vesting period of said options, linearly spread over a 3-year vesting period Names of the directors who participated in the discussions The Company s Remuneration Committee, in its meetings of July 25, 2018; September 6, 2018; September 20, 2018; October 7, 2018; October 15, 2018; October 21, 2018; October 28, 2018; November 8, 2018; November 13, 2018 and November 19, 2018, unanimously resolved to recommend the approval of Mr. Bardea s terms of office and employment. The following directors were present at the committee meeting in which the terms of employment were approved: Ms. Dalia Narkys, Mr. Arie Ovadia and Mr. Samer Haj-Yehia After considering the recommendation of the Remuneration Committee, in its meeting on November 22, 2018 the Board of Directors of the Company unanimously resolved to approve Mr. Bardea s terms of office and employment. The directors who attended said meeting of the Board are Ofra Strauss, Chairperson, Samer Haj-Yehia, Gil Midyan, Dalia Narkys, Arie Ovadia, Shuki Shemer, Meir Shanie and Adi Strauss Justifications by the Remuneration Committee and the Board of Directors for the approval of the CEO s terms of office and employment The Remuneration Committee and Board of Directors found the CEO s remuneration conditions to be reasonable and appropriate for the following reasons: The Company has large-scale operations, is active in different geographical regions and diverse product categories and has a broad global deployment. The Company has a complex business portfolio and maintains collaborations and partnerships in such manner that managerial complexity is extremely high and requires the management of a global system in conditions of fierce competition Mr. Bardea has been employed by the Company for 22 years and has a profound knowledge of the Company s businesses, its global spread, its various partnerships and collaborations and its managerial complexity as described above. During the period of his employment by the Company Mr. Bardea has successfully served in a broad variety of senior executive positions, among others Deputy CEO of the Group for the past four years, and has contributed significantly to the Company s operations and its development The incentive formula is based on the Company s performance taking a long-term view and on the CEO s contribution to this performance, and incentivizes the CEO to work to improve the Company s business results based on the Company s policies and its business plan The Remuneration Committee and the Board of Directors were presented with a comparative study prepared by Prof. Moshe Zviran, which compares the remuneration of the Group CEO with the remuneration of CEOs in similar companies in terms of their business area and scale. In light of the comparative figures and the reasons described, the Remuneration Committee and the Board of Directors reached the conclusion that the proposed compensation is fitting and reasonable, also in comparison to the customary compensation paid to CEOs in Israel.

12 The Remuneration Committee and the Board of Directors reviewed the ratio between the CEO s employment terms and the salaries of the employees of the Company and its subsidiaries, and particularly the ratio to their average and median salaries; said ratio is reasonable and appropriate, and the differences in compensation will not adversely impact labor relations in the Company Mr. Bardea s employment terms are also reasonable and fitting in relation to the terms of employment of the Company s previous CEO, and are lower than those of the previous CEO in the equity award component, since they do not include the grant of Performance Share Units (PSUs), which were granted to the previous CEO Mr. Bardea s terms of office and employment are in alignment with the Company s Remuneration Policy, with the exception of the following: the ratio between the fixed compensation component and the variable component (approximately 45% fixed and 55% variable compensation, in lieu of 20%-40% fixed and 60%-80% variable); the terms and conditions pertaining to termination of the employment relationship the Advance Notice Period (6 months in lieu of 3 months); the adjustment period (9 months in lieu of 6 months, which shall be paid as a lump sum in lieu of an employment relationship in said period); the possibility of accelerated vesting (for options due to vest within 9 months from the date of termination, in lieu of 6 months), and the exercise period of option warrants in the event of termination (which shall be the original exercise period in lieu of an exercise period of days as defined in the option plan plus a possible extension for a further 180 days, as prescribed in the Remuneration Policy). Said terms and conditions differ from the Remuneration Policy for officers of the Company in light of special reasons that justify this, notably in light of Mr. Bardea having been with Strauss Group for over 22 years in which he filled a broad variety of senior executive positions; Mr. Bardea s contribution to key milestones in the Company s development in the past two decades and his contribution to the Group s global operations and to crafting the Group s strategy; the scope and nature of Mr. Bardea s positions; and considering that Mr. Bardea s employment terms are inferior to those of the previous CEO and do not include the grant of PSUs For the reasons enumerated above, the members of the Remuneration Committee and the Board of Directors found that the engagement with the new CEO in the employment contract and the approval of his employment terms are reasonable and in the interests of the Company. 4. Meeting Type, Date and Venue Notice is hereby given that on Monday, December 31, 2018 at 3:00 p.m. an Annual General and Special Meeting of Shareholders of the Company will convene at the offices of the Company at 49 Hasivim Street, Petach Tikva, on the agenda of which is the adoption of resolutions on the items set forth in clause 1 above. 5. Required Majority 5.1 The majority required in the Meeting for the adoption of the proposed resolutions pertaining to items 1.2, and on the agenda is the majority of votes of the shareholders present in the Meeting, in person or by proxy, who are entitled to vote and who participate in the vote (the tally of votes shall not include abstaining votes).

13 13 As at the date of this report the controlling shareholders of the Company are Mr. Michael Strauss and Ms. Ofra Strauss, (indirectly) through their holdings in Strauss Holdings and through a direct holding of the Company s shares by Mr. Michael Strauss. To the best of the Company s knowledge, the holdings of the controlling shareholders on the Record Date, as defined below, shall grant them the necessary majority for the adoption of the proposed resolutions pertaining to items 1.2, and on the agenda. 5.2 The majority required for the adoption of the proposed resolution pertaining to item 1.4 on the agenda is the majority of votes of the shareholders present in the Meeting, in person or by proxy, who are entitled to participate in the vote, provided, however, that one of the following is fulfilled: (a) the majority of votes in the General Meeting will include a majority of all votes of shareholders who are not controlling shareholders of the Company and/or who do not have a personal interest in the approval of the transaction, who participate in the vote; the tally of all votes of the aforesaid shareholders will not include abstaining votes; the provisions of section 276 of the Companies Law, mutatis mutandis, shall apply to shareholders who have a personal interest; (b) the total opposing votes among the shareholders mentioned in paragraph (a) do not exceed two percent (2%) of all voting rights in the Company. 6. Notice of a Personal Interest A shareholder participating in the vote on the resolution proposed with respect to item 1.4 on the agenda shall inform the Company prior to the vote in the Meeting, or, if the vote is via a voting deed, shall indicate in part B of the voting deed in the designated space, if he is considered or represents a controlling shareholder of the Company or if he has or does not have a personal interest in the approval of said resolution. Where a shareholder has failed to give such notice, he shall not vote and his vote shall not be counted with respect to said resolutions. 7. Quorum and Adjourned Meeting The meeting shall be deemed quorate when at least two shareholders are present, in person or by proxy, who hold or represent 25% of the voting rights in the Company ( Quorum ). If within half-an-hour from the time appointed for the Meeting a Quorum is not present, the Meeting shall stand adjourned to Monday, January 7, 2019, to the same time and place (the Adjourned Meeting ). If within half-an-hour from the time appointed for the Adjourned Meeting a Quorum is not present, the number of shareholders present shall be deemed a Quorum. 8. Record Date and Persons Entitled to Vote in the Meeting 8.1 The record date for determining the entitlement of shareholders of the Company to participate and vote in the Annual Meeting and the Adjourned Meeting, as provided in section 182(B) of the Companies Law and in regulation 3 of the Voting Regulations, is the close of trading on the Tel Aviv Stock Exchange ( TASE ) on Thursday, November 29, 2018 (the Record Date ). If there is no trading on the Record Date, the Record Date shall be the last trading day prior thereto. 8.2 In accordance with the Companies Regulations (Proof of Ownership of a Share for the Purpose of Voting at a General Meeting), 2000, a shareholder in whose favor a share is registered in street name, and such share is included among the shares of the Company that are registered in the Register of Shareholders in the name of the nominee company (hereinafter: Unregistered Shareholder ), who wishes to vote in the General Meeting, will submit to the Company confirmation from the TASE member with whom his title to the share is registered pertaining to his title to the share on the Record Date, in accordance with the form in the schedule to said regulations. An Unregistered Shareholder may direct the TASE member to deliver his title to the share to the Company via the electronic voting

14 14 system. Without derogating from the foregoing, pursuant to said regulations, an electronic mail approved pursuant to section 44K5 of the Securities Law with regard to the particulars of users of the electronic voting system shall be deemed tantamount to confirmation of title with respect to all shareholders included therein. 8.3 A shareholder may vote in person or via a proxy in accordance with the provisions of the Articles of Association of the Company, subject to the Companies Law. Instruments of proxy and the power of attorney by virtue of which the instrument of proxy was signed (if any) shall be deposited at the registered office of the Company at least 48 hours before the time appointed for the Meeting or the Adjourned Meeting. Notwithstanding the foregoing, the chairman of the Meeting may, at his discretion, accept an instrument of proxy and a power of attorney as provided in this clause above also after said time, if he so deems fit, at his discretion. 9. Voting via a Voting Deed and Position Statements 9.1 According to the Voting Regulations, a shareholder who is entitled to participate and vote in the Meeting may vote on the resolutions on the agenda brought for approval by the Meeting via a voting deed. For this purpose, the vote of a shareholder who voted via a voting deed shall be considered a vote by a shareholder who was present and participated in the Meeting. 9.2 The form of the voting deed and position statements (if any) is available on the Israel Security Authority s distribution site at (the Distribution Site ) and on the TASE website at The vote will be cast by using the second part of the voting deed, as published on the Distribution Site. 9.4 A shareholder may contact the Company directly to obtain the voting deed and position statements (if any). 9.5 The voting deed of an Unregistered Shareholder shall be delivered to the Company together with confirmation of title, in such manner that the voting deed shall reach the offices of the Company by no later than four hours before the time appointed for the Meeting. 9.6 A shareholder who is registered in the Register of Shareholders shall deliver the voting deed to the Company together with a photocopy of his ID card or passport or certificate of incorporation, in such manner that the voting deed shall reach the offices of the Company by no later than four hours before the time appointed for the Meeting. 9.7 A shareholder may visit the registered office of the Company, and after having proved his identity, may withdraw his voting deed and confirmation of title up to 24 hours before the time appointed for the Meeting. 9.8 The final date for submitting position statements is up to ten days before the date appointed for the Meeting, i.e. until December 21, The final date for submitting a position statement on the Company s behalf, which includes the Board of Directors response to position statements submitted by shareholders, is not later than five days before the date appointed for the Meeting, i.e. until December 26, 2018.

15 The TASE member will send via , for no consideration, a link to the form of the voting deed and position statements (if any) on the Distribution Site to any shareholder who is not registered in the Register of Shareholders whose shares are registered in street name, unless the shareholder has advised the TASE member that he does not wish to receive said link, provided that the notice was given with respect to a particular securities account and before the Record Date A shareholder whose shares are registered in street name is entitled to receive confirmation of his title to the shares from the TASE member through which his shares are held, at the branch of the TASE member or by mail to the shareholder s address in consideration for the payment of postage only, if he has so requested. A request to this effect shall be made in advance for a particular securities account One or more shareholders who, on the Record Date, hold shares constituting five percent or more of all voting rights in the Company, and a shareholder or shareholders holding said percentage of all voting rights that are not held by the controlling shareholder of the Company, as defined in section 268 of the Companies Law, may inspect the voting deeds as set forth in regulation 10 of the Voting Regulations. 10. Voting via the Electronic Voting System 10.1 An Unregistered Shareholder may vote via a voting deed that shall be delivered to the Company via the electronic voting system as defined in the Voting Regulations, subject to the terms and conditions set forth in the Voting Regulations ( Electronic Voting Deed ) The Electronic Voting Deed shall be opened for voting at the close of the Record Date. Upon receipt of an identifying number and access code from the TASE member and after completing an identification process, an Unregistered Shareholder may vote via the electronic voting system at Voting via the electronic voting system closes 6 hours before the time appointed for the Meeting (i.e. on Monday, December 31, 2018 at 9:00 a.m.), when the Electronic Voting System shall be closed. The electronic vote may be changed or cancelled until the closing of the electronic voting system, after which it cannot be changed via the system. Where a shareholder has voted by more than one method the last of his votes shall be counted, with the vote of the shareholder in person or by proxy in the Meeting being deemed later than the vote via the Electronic Voting Deed. 11. Final Date for Inclusion of an Item on the Agenda by a Shareholder The final date for submitting requests by shareholders pursuant to section 66(B) of the Companies Law to include an item on the agenda for the Meeting is up to seven (7) days before the time appointed for the Meeting. It is noted that if a request is submitted there may be changes in the agenda for the Meeting, including the addition of an item or addition of a position statement, and the up-to-date agenda and position statements may be reviewed in the Company s reports on the Distribution Site. 12. Inspection of Documents Shareholders of the Company may review this report and other documents pertaining to the proposed resolutions on the agenda, subject to applicable law, at the offices of the Company at 49 Hasivim Street, Petach Tikva on Sunday to Thursday from 9:00 a.m. to 4:00 p.m. following prior coordination by telephone at , and on the ISA Distribution Site at and the TASE website at