Israeli Bank, Government Enter Deferred Prosecution Agreement

DAVID A. HUBBERT

4. The Bank Leumi Group Entities represent to the Government that this Agreement, the Information, the Statement of Facts, and all other exhibits to this Agreement were reviewed by their respective Boards of Directors and any officer, employee or agent deemed necessary by the Bank Leumi Group Entities in order to enter this Agreement. The Bank Leumi Group Entities, through their undersigned authorized representatives represent that the Statement of Facts contains truthful and accurate statements based upon the Bank Leumi Group Entities' internal investigation, and information provided to the Bank Leumi Group Entities by the Government.

5. The U.S. accounts as set forth more fully in paragraph 2 of this Agreement and the Statement of Facts, concerning the period between 2002 and 2010, are referred to hereinafter as the "Relevant Accounts."

6. Pursuant to this Agreement, based upon the conduct set forth in the Statement of Facts, the Bank Leumi Group Entities agree to pay to the United States a total of Two Hundred Seventy Million Dollars ($270,000,000)("the Resolution Amount") within 5 business days of the approval of this Agreement by the United States District Court. The Bank Leumi Group Entities agree that they shall pay $71,769,305 in restitution regarding unpaid taxes on interest, dividends, and capital gains of U.S. clients with respect to the Relevant Accounts, which the parties agree exceeds the gross profits related to the Relevant Accounts at Bank Leumi-Israel, Bank Leumi-Luxembourg, and Bank Leumi USA. The parties agree that the restitution amount shall be paid directly to the Internal Revenue Service, IRS-RACS, Attn: Mail Stop 6261/Restitution, 333 W. Pershing Ave., Kansas City, MO 64108 pursuant to payment instructions provided to the Bank Leumi Group Entities. The Bank Leumi Group Entities further agree to pay $198,230,695, which consists of (1) $157,000,000 for Bank Leumi-Switzerland, in lieu of restitution for all Relevant Accounts at Bank Leumi-Switzerland, consistent with the Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks announced on August 29, 2013, and (2) in light of the Bank Leumi Group Entities' extraordinary cooperation as stated in paragraphs 16 through 29, a monetary penalty of $41,230,695 for Bank Leumi-Israel, Bank Leumi-Luxembourg, and Bank Leumi USA (collectively, the "Penalty Amount"). The parties agree that the amount paid with respect to Bank Leumi-Switzerland exceeds the gross profits of Bank Leumi Switzerland related to the Relevant Accounts. The Penalty Amount shall be paid directly to the United States pursuant to payment instructions provided to the Bank Leumi Group Entities. The parties agree that if the Bank Leumi Group Entities fulfill their obligations set forth in this Agreement, the Government will take no further action to collect any additional criminal payment from the Bank Leumi Group Entities with respect to the criminal investigation and the matters referenced in the Statement of Facts and related to the Relevant Accounts.

7. The Bank Leumi Group Entities agree that no portion of the amounts that the Bank Leumi Group Entities agree to pay to the Government and/or the Internal Revenue Service pursuant to the terms of this Agreement is deductible on any United States federal, state, or local tax return. The Bank Leumi Group Entities further agree not to challenge or dispute any part of the Resolution Amount in any subsequent judicial or administrative proceeding against the United States or any agency thereof.

8. The Bank Leumi Group Entities acknowledge that the payment of the Resolution Amount is a final payment and shall not be refunded: (a) if the Government moves to dismiss the Information pursuant to this Agreement; or (b) should the Government later determine that any of the Bank Leumi Group Entities has breached this Agreement and brings a prosecution against any of the Bank Leumi Group Entities. Further, nothing in this Agreement shall be deemed an agreement by the United States that the Penalty Amount is the maximum amount that may be required in the event of any such prosecution and the Government shall not be precluded in any such prosecution from arguing that the Court should impose a higher amount. The Government agrees, however, that in the event of a breach of this Agreement and a subsequent prosecution against any of the Bank Leumi Group Entities, it will recommend to the Court that the Penalty Amount paid by the Bank Leumi Group Entities pursuant to this Agreement be credited toward any payment ordered by the Court as part of any judgment.

10. The Government recognizes that Bank Leumi-Israel, as the parent organization of the Bank Leumi Group, informed the Government prior to the execution of this Agreement that it had decided on its own initiative to cease all banking and investment services to U.S. taxpayers through Bank Leumi-Luxembourg (hereinafter "BLUX") and Leumi Private Bank (hereinafter "LPB"). BLUX and LPB agree that (a) BLUX and LPB shall cease to provide banking and investment services for all active accounts held or beneficially owned by a U.S. taxpayer by December 31, 2014; and (b) BLUX and LPB shall cease to provide banking and investment services for all accounts, both active and dormant, held or beneficially owned by a U.S. taxpayer by the end of the Deferral Period, as defined in paragraph 31 of this Agreement. The cessation of banking and investment services with respect to U.S. clients described in this paragraph is hereinafter referred to as the "BLUX/LPB Exit Program." The completion of the BLUX/LPB Exit Program as set forth in this paragraph is a material condition of this Agreement.

11. Pursuant to this Agreement, the Bank Leumi Group Entities agree that the Bank Leumi-Israel Deputy Chief Executive Officer or an executive appointed by Bank Leumi-Israel's Board of Directors shall provide to the United States Department of Justice periodic reports on the BLUX/LPB Exit Program. The first report shall be due on or before the two-month anniversary of the date this Agreement is approved by the Court in the Central District of California (the "Approval Date"), and every sixty (60) days thereafter until the completion of the BLUX/LPB Exit Program.

14. The Bank Leumi Group Entities agree to close any and all accounts of recalcitrant account holders as defined in 26 U.S.C. § 1471(d)(6). The development and implementation of the FATCA-related measures described in paragraphs 12 and 13 of this Agreement shall include procedures to prevent any of Bank Leumi Group's employees from assisting recalcitrant account holders to engage in acts of further concealment of assets and income in connection with closing any account or transferring any funds; and Bank Leumi-Israel shall ensure that the Bank Leumi Group will not open any U.S. accounts except on conditions that ensure that the account will be declared to the United States and will be subject to disclosure to the United States by the Bank Leumi Group.

15. With respect to Bank Leumi USA, Bank Leumi USA agrees to provide the Department of Justice periodic reports that identify any loan issued by Bank Leumi USA that is collateralized by a SBLC issued by any Foreign Leumi Group Entity, or any foreign affiliate of the Bank Leumi Group. The periodic reports shall further warrant that Bank Leumi USA is fully compliant with all applicable anti-money laundering regulations regarding such loans and that the relevant foreign affiliate has confirmed that the related foreign account is FATCA compliant. The periodic reports shall be due on the two-month anniversary of the Approval Date, and every one hundred eighty (180) days thereafter until the end of the Deferral Period.

17. In August 2013, Bank Leumi-Israel informed the Israel Association of Banks that it supported efforts to amend Israeli law to facilitate the exchange of information with the United States and would not join in a divergent view.

18. The Bank Leumi Group Entities conducted an extensive internal investigation of the Bank Leumi Group Entities' conduct, including the collection and review of millions of documents. During the Government's investigation, Bank Leumi-Israel timely provided over 481,000 pages of documents to the Government, some of which were voluntarily provided and in addition to the information sought by the Government pursuant to its requests under the Tax Treaty or other formal process. Bank Leumi-Israel voluntarily provided translations of produced documents, conducted over 40 internal interviews, and through counsel, proffered the substance of internal interviews conducted by counsel with the Bank Leumi Group Entities' employees and management upon the Government's request. Additionally, Bank Leumi-Israel made presentations to the Government regarding the results of its internal investigation.

19. The Bank Leumi Group Entities confirm that relevant senior officers and managers of the Bank Leumi Group Entities that were in place at the time the conduct set forth in the Statement of Facts occurred have been replaced.

20. The Government acknowledges that in connection with the Bank Leumi Group Entities' internal investigation, Bank Leumi-Israel engaged Deloitte Transactions and Business Analytics LLP ("Deloitte") as an independent forensic and accounting expert to collect and analyze data regarding U.S. accounts. Deloitte collected and analyzed electronic and hard copy documents from four countries. Deloitte made an in-person presentation to the Government supporting its data collection and analysis of U.S. accounts and cooperated in providing the production of additional explanatory materials as requested by the Government.

21. Bank Leumi-Israel cooperated with U.S. investigators by voluntarily and timely providing information that assisted the Government in connection with requests under the Tax Treaty and the Mutual Legal Assistance Treaty request to the Duchy of Luxembourg, in a manner that resulted in the production of additional information relevant to the Government's investigation.

22. The Government acknowledges that Bank Leumi-Israel has engaged special counsel to assist in requesting the Israeli Government to look favorably upon IRS requests for information and has requested that the Israeli Government agree to future IRS requests for information regarding U.S. accounts. The Government has been advised that Bank Leumi-Israel has recently approached the Israeli Government to amend Israeli Tax and Anti-Money-Laundering laws to require Israeli banks to consider the tax compliance of its customers.

23. The Government acknowledges that in 2012, Bank Leumi-Israel sent letters to its U.S. clients advising them of the IRS's Offshore Voluntary Disclosure Program.

24. The Government acknowledges that the Foreign Leumi Group Entities have provided data regarding outgoing transfers during the period between June 1, 2008, and December 31, 2012, which includes the value of the transfers, the number of accounts engaging in transfers, and the financial institutions to which such transfers were made.

25. The Government acknowledges that, prior to being contacted by the Government concerning this investigation, Bank Leumi USA began a process of conducting its own assessment of SBLC loans by reviewing all customer relationships with outstanding SBLC loan clients. Bank Leumi USA continued that process by either confirming that the SBLC-backed loans were U.S. tax-compliant or calling the loans and, where necessary, terminating non-compliant customer relationships.

26. The Bank Leumi Group Entities acknowledge and understand that the cooperation they have provided to date with the criminal investigation by the Government, and its pledge of continuing cooperation, are important and material factors underlying the Government's decision to enter into this Agreement. The Bank Leumi Group Entities agree to cooperate fully with the Department of Justice, the Internal Revenue Service, and any designated law enforcement agency regarding any matter related to the Government's criminal investigation of the Bank Leumi Group Entities' U.S. cross-border business, including in connection with any criminal investigation or prosecution based on information disclosed to the Government pursuant to this Agreement.

27. The Bank Leumi Group Entities agree that their continuing cooperation with the Government's investigation as set forth in the preceding paragraphs shall encompass, but not be limited to, the following:

29. The Bank Leumi Group Entities agree that their obligations to cooperate under the terms set forth in this Agreement will continue even after the dismissal of the Information, and the Bank Leumi Group Entities will continue to fulfill the cooperation obligations set forth in this Agreement in connection with any investigation, criminal prosecution, or civil proceeding brought by the Government arising out of the conduct set forth in the Information or the Statement of Facts relating in any way to the Government's investigation of the Bank Leumi Group Entities' U.S. cross-border business.

32. The Bank Leumi Group Entities also hereby agree to waive all rights, whether asserted directly or by a representative, to request or receive from any department or agency of the United States any records pertaining to the investigation or prosecution of this case, including without limitation any records that may be sought under the Freedom of Information Act, Title 5, United States Code, Section 552, or the Privacy Act, Title 5, United States Code, Section 552a.

33. The Government agrees that if the Bank Leumi Group Entities are in compliance with all of their obligations under this Agreement, the Government shall: (a) within thirty (30) days of the expiration of Deferral Period (including any extension thereof) hereunder, seek dismissal with prejudice as to the Bank Leumi Group Entities of the Information filed against them pursuant to paragraphs 1 and 31 above; and (b) during the term of this Agreement and thereafter, refrain from pursuing any additional charges against, or investigation of, the Bank Leumi Group Entities arising out of, in connection with, or otherwise relating to the conduct of the Bank Leumi Group Entities' U.S. cross-border business as admitted to or disclosed by the Bank Leumi Group Entities to the Government.

34. By entering into this Agreement, the United States does not compromise any civil liability, including but not limited to any tax liability, which the Bank Leumi Group may have incurred or may incur as a result of its conduct set forth in the Statement of Facts.

35. This Agreement does not provide any protection against prosecution for any crimes except as set forth above in paragraph 33(b). The Bank Leumi Group Entities and the Government understand that this Agreement to defer prosecution must be approved by the District Court in the Central District of California, in accordance with 18 U.S.C. § 3161(h)(2). Should the Court decline to approve the Agreement to defer prosecution for any reason, both the Government and the Bank Leumi Group Entities are released from any obligation imposed upon them by this Agreement, and any exhibits hereto, which shall be null and void.

36. It is further understood that should the Government in its sole discretion determine, after the date of the execution of this Agreement, that any of the Bank Leumi Group Entities: (a) gives false, incomplete, or misleading information; (b) violates any United States federal criminal law or fails to comply with any guidance, directive, regulation, or order issued by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, or the United States Department of the Treasury with respect to FATCA; or (c) otherwise commits a material violation of this Agreement, the Bank Leumi Group Entities shall, in the Government's sole discretion, thereafter be subject to prosecution for any federal criminal violations of which the Government has knowledge, including but not limited to a prosecution based on the conduct described in the Information and the Statement of Facts; any prosecution may be premised on any information provided by or on behalf of the Bank Leumi Group Entities at any time.

37. Any prosecutions that are not time-barred by the applicable statute of limitations on the date of the execution of this Agreement may be commenced against any of the Bank Leumi Group Entities within the applicable period governing the statute of limitations. In addition, the Bank Leumi Group Entities agree to toll, and exclude from any calculation of time, the running of the statute of limitations during the duration of this Agreement. By this Agreement, the Bank Leumi Group Entities expressly intend to and hereby do waive their rights in the foregoing respects, including any right to make claims premised on the statute of limitations, as well as any constitutional, statutory, or other claim concerning pre-indictment delay. These waivers are knowing, voluntary, and in express reliance of the advice of the Bank Leumi Group Entities' counsel.

38. It is further agreed that in the event the Government, in its sole discretion, determines that any of the Bank Leumi Group Entities has committed a material violation of this Agreement, including the Bank Leumi Group Entities' failure to meet their obligations under this Agreement: (a) all statements set forth in the Statement of Facts, as well as any testimony given by the Bank Leumi Group Entities or by any of its then-current employees before a grand jury, or otherwise, whether before or after the date of this Agreement, or any leads from statements or testimony, shall be admissible in evidence in any and all criminal proceedings hereinafter brought by the Government against any of the Bank Leumi Group Entities; and (b) none of the Bank Leumi Group Entities shall assert any claim under the United States Constitution, Rule 11(f) of the Federal Rules of Criminal Procedure, Rule 410 of the Federal Rules of Evidence, or any other federal rule, that statements made by or on behalf of the Bank Leumi Group Entities before or after the date of this Agreement, or any leads derived therefrom, should be suppressed or otherwise excluded from evidence. By executing this Agreement, it is the intent of the Bank Leumi Group Entities to waive any and all rights in the foregoing respects.

39. The Bank Leumi Group Entities agree that, in the event that the Government determines, in its sole discretion, during the Deferral Period described in paragraph 31 above (or any extension thereof) that any of the Bank Leumi Group Entities have committed a material violation of this Agreement, a one-year extension of the period of deferral of prosecution may be imposed in the sole discretion of the Government, and, in the event of continuing or additional violations, additional one-year extensions as appropriate; provided, however, that in no event shall the total term of the deferral of prosecution period of this Agreement exceed four (4) years.

40. The Bank Leumi Group Entities agree that they shall not, through their attorneys, agents, or employees, make any statement, in litigation or otherwise, contradicting any factual statement in the Statement of Facts or the Bank Leumi Group Entities' representations set forth in this Agreement; provided, however, that the restrictions set forth in this paragraph are not intended to and shall not apply to any current or former employee of any of the Bank Leumi Group Entities, or any other individual or entity, in the course of any criminal, regulatory, or civil case, investigation, or other proceeding, whether in the United States or any other jurisdiction, as long as the individual or entity is not authorized to speak on behalf of any of the Bank Leumi Group Entities in such proceedings. Any contradictory statement by any of the Bank Leumi Group Entities shall constitute a breach of this Agreement and any of the Bank Leumi Group Entities shall thereafter be subject to prosecution as specified in paragraphs 36 and 37 above, or the Deferral Period may be extended pursuant to paragraph 39 above.

41. The decision as to whether any contradictory statement will be imputed to any of the Bank Leumi Group Entities for the purpose of determining whether there was a breach of this Agreement shall be at the sole discretion of the Government. Upon the Government's reaching a determination that a contradictory statement was made by any of the Bank Leumi Group Entities, the Government shall promptly notify the Bank Leumi Group Entities in writing of the contradictory statement, and the Bank Leumi Group Entities may avoid a breach of this Agreement by repudiating the statement both to the recipient of the statement and to the Government within five (5) business days after receipt of notice from the Government. The Bank Leumi Group Entities consent to the public release by the Government, in its sole discretion, of any repudiation.

42. The Government agrees that nothing in this Agreement in any way prevents the Bank Leumi Group Entities from taking good faith positions in litigation involving private parties, including asserting defenses and affirmative defenses.

46. This Agreement may be executed in counterparts, each of which constitutes an original and all of which taken together constitute one and the same document.

47. The Bank Leumi Group Entities shall provide to the Government a certified copy of a resolution of the Board of Directors of Bank Leumi-Israel affirming that the Board of Directors has authority to enter into this Agreement on behalf of all of the Bank Leumi Group Entities and that each Bank Leumi Group Entity Board of Directors has (1) reviewed the Information and the Statement of Facts in this case; (2) reviewed this Agreement; (3) consulted with legal counsel in connection with this matter; (4) voted to enter into the proposed Agreement; and (5) voted to authorize the Bank Leumi-Israel corporate officer identified below to execute this Agreement on behalf of all of the Bank Leumi Group Entities and all other documents necessary to carry out the provisions of this Agreement.

48. Deloitte shall provide the Government with a statement summarizing the quality assurance processes that were executed in producing the computations provided to the Government and confirming that its work was performed in accordance with the American Institute of Certified Public Accountants Standards for Consulting Services.

49. This Agreement sets forth all of the terms of the Deferred Prosecution Agreement between the Bank Leumi Group Entities and the Government. No modifications or additions to this Agreement, in whole or in part, shall be valid unless they are set forth in writing and signed by the Government, the Bank Leumi Group Entities' attorneys, and a duly authorized representative of the Bank Leumi Group Entities.

BANK LEUMI GROUP ENTITIES

Date: 12/16/14