Translation Notice — This is an English translation of a Hebrew law and may contain inaccuracies. In any dispute or legal matter, the original Hebrew text as published in Reshumot (ספר החוקים) is the sole authoritative and legally binding version.

Law

Companies Law, 5759-1999

חוק החברות

Section I: Defects in the Convening of a Meeting

Defects in the Convening of a Meeting

91.

(a)The court may, upon the application of a shareholder, order the annulment of a resolution passed at a general meeting that was convened or conducted without fulfilling the conditions prescribed therefor under this Law or in the articles of association.

(b)Where the defect in the convening relates to the notice regarding the place or time of the meeting, a shareholder who attended the meeting notwithstanding the defect shall not be entitled to demand the annulment of the resolution.

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Chapter III: The Board of Directors

Section A: Powers of the Board of Directors

Powers and Duties of the Board of Directors

92.

[Amendment: 2005, 2011-4, 2013]

(a)The board of directors shall chart the Company's policy and supervise the performance of the duties and actions of the chief executive officer, including —

(1)it shall determine the Company's action plans, the principles for their financing, and the order of priorities among them;

(2)it shall examine the financial position of the Company and shall determine the credit framework that the Company is permitted to take;

(3)it shall determine the organizational structure and the remuneration and compensation policy;

(4)it may resolve on the issuance of a series of debentures;

(5)it is responsible for the preparation and approval of the financial statements, as provided in Section 171;

(6)it shall report to the annual general meeting on the state of the Company's affairs and on the business results, as provided in Section 173;

(7)it shall appoint and dismiss the chief executive officer, as provided in Section 250;

(8)it shall resolve on actions and transactions requiring its approval pursuant to the articles of association or pursuant to the provisions of Sections 255 and 268 to 275;

(9)it may allot shares and securities convertible into shares up to the limit of the registered share capital of the Company, pursuant to the provisions of Section 288;

(10)it may resolve on a distribution as provided in Sections 307 and 308;

(11)it shall express its opinion on a special tender offer as provided in Section 329;

(12)in a public company and in a private company that is a bond company — it shall determine the minimum number of directors on the board of directors who must possess accounting and financial expertise, within the meaning thereof under Section 240 (in this Law — directors with accounting and financial expertise); the board of directors shall determine the said minimum number having regard, inter alia, to the type of the Company, its size, the scope of the Company's activities and the complexity thereof, and subject to the number of directors prescribed in the articles of association pursuant to Section 219.

(b)The powers of the board of directors under this Section may not be delegated to the chief executive officer, except as set out in Section 288(b)(2).

Board of Directors Comprising One Person

93.

[Amendment: 2011-4]

(a)In a private company that is not a bond company, the board of directors may comprise one person.

(b)The provisions of this Section shall apply to a board of directors comprising one person; the provisions of Section F shall apply, with the necessary modifications, to resolutions of such a board of directors; the remaining provisions of this Chapter shall not apply to a board of directors comprising one person.

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Section B: Chairperson of the Board of Directors

Election of Chairperson of the Board of Directors

94.

[Amendment: 2011-4]

(a)The board of directors of a public company or of a private company that is a bond company shall elect one of its members to serve as chairperson of the board of directors, unless another manner of appointment is prescribed in the articles of association.

(b)In a private company that is not a bond company, there is no obligation to appoint a chairperson of the board of directors; if no chairperson of the board of directors has been appointed in a private company that is not a bond company, each of the directors shall be entitled to convene the board of directors and to set its agenda, unless otherwise prescribed in the articles of association.

Restriction on Election of Chairperson of the Board of Directors

95.

[Amendment: 2011-3, 2011-4]

(a)In a public company, the general manager of the company or a relative thereof shall not serve as chairperson of the board of directors, except in accordance with the provisions of Section 121(c); a person who is subordinate to the general manager, directly or indirectly, shall not serve as chairperson of the board of directors of a public company; a director in a corporation controlled by a public company may serve as chairperson of the board of directors of the public company.

(b)In a public company, the powers of the general manager shall not be vested in the chairperson of the board of directors or in a relative thereof, except in accordance with the provisions of Section 121(c); powers vested in a person who is subordinate to the general manager, directly or indirectly, shall not be conferred upon the chairperson of the board of directors of a public company; the chairperson of the board of directors of a public company shall not serve in any other position in that company or in a corporation controlled by it, but may serve as chairperson of the board of directors or as a director in a corporation controlled by the company.

(c)The provisions of subsection (a) shall not apply for three months from the date on which a company became a public company.

(d)The provisions of this section shall apply to a private company that is a bond company, with the necessary modifications and with the following modification: wherever the text reads "Section 121(c)", it shall be read as "Section 121(d)".

Conduct of Board of Directors Meetings

96.

(a)The chairperson of the board of directors shall conduct the meetings of the board of directors.

(b)If the chairperson of the board of directors is absent from a meeting, the board of directors shall elect one of its members to conduct the meeting and to sign the minutes of the deliberation; however, the person so elected shall not have an additional casting vote in board of directors votes as provided in Section 107, all unless otherwise prescribed in the articles of association.

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Section C: Convening Board of Directors Meetings

Board of Directors Meetings

97.

[Amendment: 2011-4]

The board of directors shall convene meetings as required by the needs of the company, and at least once a year, and in a public company as well as in a private company that is a bond company, at least once every three months.

Convening the Board of Directors

98.

(a)The chairperson of the board of directors may convene the board of directors at any time.

(b)The board of directors shall hold a meeting, on a matter to be specified, at the demand of any one of the following:

(1)Two directors, and in a company in which the board of directors has been appointed with up to five directors — one director;

(2)One director, if such a provision has been set forth in the articles of association of the company or if the circumstances set out in Section 257 have been met.

(c)The chairperson of the board of directors shall convene the board of directors upon a demand as referred to in subsection (b), or if the circumstances set out in Section 122(d) have been met by reason of a notice or report of the chief executive officer or by reason of a notice from the company's auditor pursuant to Section 169.

(d)If a board of directors meeting has not been convened within fourteen days from the date of the demand as referred to in subsection (b), or from the date of the notice or report of the chief executive officer in which the circumstances set out in Section 122(d) were met, or from the date of the auditor's notice pursuant to Section 169, any one of those enumerated in subsections (b) and (c) shall be entitled to convene a board of directors meeting to discuss the matter specified in the demand, notice, or report, as the case may be, unless a different provision regarding the time of convening has been set forth in the articles of association.

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Section D: Board of Directors Meetings and the Manner of Their Conduct

Agenda

99.

The agenda of board of directors meetings shall be determined by the chairperson of the board of directors, and shall include:

(1)matters determined by the chairperson of the board of directors;

(2)matters determined as provided in Section 98;

(3)any matter that a director or the general manager requested the chairperson of the board of directors, within a reasonable time prior to the convening of a board of directors meeting, to include on the agenda, unless otherwise provided in the articles of association.

Notice of a Board of Directors Meeting

100.

[Amendment: 2011-3, 2011-4]

(a)Notice of a board of directors meeting shall be delivered to all its members within a reasonable time prior to the date of the meeting, unless a different provision specifying the time of delivery has been set forth in the articles of association.

(b)Notice pursuant to subsection (a) shall be delivered to the address of the director provided in advance to the company, and shall indicate the date of the meeting and the place where it is to be convened, as well as a reasonable specification of all matters on the agenda, all unless otherwise provided in the articles of association.

(c)In a public company and in a private company that is a bond company, it is not possible to stipulate in the articles of association against the obligation to provide a reasonable specification of all matters on the agenda as part of the notice of the convening of a board of directors meeting, nor against the obligation pursuant to subsection (a).

Holding a Meeting by Means of Communication

101.

The board of directors may hold meetings by means of any communication technology, provided that all participating directors are able to hear one another simultaneously, unless such authority has been revoked in the articles of association.

Convening a Board of Directors Meeting Without Notice

102.

[Amendment: 2011-3, 2011-4]

Notwithstanding the provisions of Section 100, in a private company that is not a bond company, the board of directors may, with the consent of all directors, convene a meeting without notice, unless such authority has been revoked in the articles of association; and a board of directors of a private or public company may, in urgent cases and with the consent of a majority of the directors, convene a meeting without notice.

Adopting Resolutions Without Convening

103.

[Amendment: 2005]

(a)The board of directors may adopt resolutions even without actually convening, provided that all directors entitled to participate in the deliberation and to vote on a matter brought for resolution have agreed not to convene for deliberation on that matter, unless such authority has been revoked in the articles of association.

(b)Where resolutions have been adopted as provided in subsection (a), a record of the resolutions, including the resolution not to convene, shall be drawn up and signed by the chairperson of the board of directors.

(c)The provisions of Section 108 shall apply, mutatis mutandis, to a resolution as provided in subsection (a).

(d)The chairperson of the board of directors is responsible for the implementation of the provisions of this section.

Quorum at Board of Directors Meetings

104.

The quorum for opening a board of directors meeting shall be a majority of the members of the board of directors, unless otherwise provided in the articles of association.

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Section E: Voting at the Board of Directors

Voting at the Board of Directors

105.

In a vote at the Board of Directors, each director shall have one vote, unless otherwise provided in the articles of association.

Independent Judgment and Voting Agreements

106.

[Amendment: 2011-3]

(a)A director, in his capacity as such, shall exercise independent judgment when voting at the Board of Directors, shall not be a party to a voting agreement, and failure to exercise independent judgment as aforesaid or entry into a voting agreement shall be deemed a breach of fiduciary duty.

(b)No person shall fulfill any of the functions of a director unless duly appointed to the position of director, and no person shall impair the independent judgment of a director.

(c)Without derogating from the provisions of any law, the duties and liabilities applicable to directors under any law shall apply to a person who has breached the provision of subsection (b).

Decision Making

107.

Decisions at the Board of Directors shall be adopted by a simple majority; in the event of a tied vote, the chairperson of the Board of Directors shall have an additional casting vote, all unless otherwise provided in the articles of association.

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Section F: Minutes of Board of Directors Meetings

Minutes of Board of Directors Meetings

108.

[Amendment: 2005]

(a)A company shall prepare minutes of the proceedings at board of directors meetings, and shall keep them at its registered office or at another address in Israel of which the company has notified the Registrar, for a period of seven years from the date of the meeting.

(b)Minutes that have been approved and signed by the director who chaired the meeting shall serve as prima facie evidence of the contents thereof.

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Section G: Defects in the Convening of a Board of Directors Meeting

Defects in the Convening of a Meeting

109.

(a)A resolution passed at a board of directors meeting that was convened without the preconditions for its convening having been fulfilled (hereinafter – a convening defect) may be voided at the demand of any of the following:

(1)A director who was present at the meeting, provided that such director demanded to abstain from adopting the resolution in respect of which the defect occurred, prior to its adoption;

(2)A director who was entitled to be invited to the meeting but was not present thereat, within a reasonable time after becoming aware of the resolution and no later than the first board of directors meeting to be held after such director became aware of the resolution;

(3)Where the convening defect relates to a notice regarding the place or time of the meeting, a director who attended the meeting notwithstanding the said defect shall not be entitled to demand the annulment of the resolutions.

(b)Nothing in the provisions of subsection (a) shall derogate from the validity of an act performed on behalf of the Company in respect of which the provisions of the concluding part of Section 56(a) have been fulfilled.

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Section H: Board Committees

Establishment of Committees

110.

[Amendment: 2005]

(a)The board of directors may establish board committees, unless otherwise provided in the articles of association.

(b)A person who is not a member of the board of directors shall not serve on a board committee to which the board of directors has delegated its powers.

(c)A person who is not a member of the board of directors may also serve on a board committee whose function is solely to advise or make recommendations to the board of directors, unless otherwise provided in the articles of association.

Committee Actions

111.

[Amendment: 2005, 2011-3]

(a)A resolution adopted or an action taken by a board committee pursuant to authority delegated to it from the powers of the board of directors shall be deemed as a resolution adopted or an action taken by the board of directors, unless otherwise provided in the articles of association.

(b)A board committee shall report to the board of directors on an ongoing basis regarding its resolutions or recommendations; resolutions or recommendations of a board committee that require the approval of the board of directors shall be brought to the attention of the directors a reasonable time before the discussion at the board of directors.

(c)Sections B through G shall apply, with the necessary modifications, to the convening of committee meetings and the manner in which they are conducted.

(d)Minutes of board committees shall be prepared and kept as provided in Section 108.

Restriction on Delegation of Powers

112.

[Amendment: 2005]

(a)The board of directors may not delegate its powers to a board committee with respect to the following matters:

(1)Determination of the general policy of the company;

(2)Distribution, unless the matter concerns a repurchase of the company's shares in accordance with a framework established in advance by the board of directors;

(3)Determination of the board of directors' position on a matter requiring approval of the general meeting, or the issuance of an opinion as referred to in Section 329;

(4)Appointment of directors, where the board of directors is authorized to appoint them;

(5)Issuance or allotment of shares, or of securities convertible into shares or exercisable into shares, or of a series of debentures, except as specified in Section 288(b);

(6)Approval of financial statements;

(7)Board of directors approval of transactions and actions requiring the approval of the board of directors pursuant to the provisions of Sections 255 and 268 through 275.

(b)A company may not derogate in its articles of association from the provisions of subsection (a); however, it may stipulate in its articles of association additional matters in which resolutions shall be adopted by the board of directors alone.

(c)The board of directors may establish committees with respect to the matters enumerated in subsection (a) for the purpose of making recommendations only.

Revocation of Committee Resolutions

113.

The board of directors may revoke a resolution of a committee appointed by it; however, such revocation shall not affect the validity of a resolution of a committee upon which the company has acted vis-à-vis another person who was unaware of its revocation.

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