PROCEDURE FOR THE ELECTION OF A CONTROLLING … · No. 7 dated 2.1.2012 and Notice No. 8 dated 17.1.2012. The language of this Version 1.03, as marked and revised herein, is the binding

Version: 1.03 Published on January 31, 2012

THE STATE OF ISRAEL GOVERNMENT COMPANIES AUTHORITY

MINISTRY1 OF FINANCE

AND

ISRAEL ELECTRIC CORPORATION LTD.

PROCEDURE FOR THE ELECTION OF A CONTROLLING SHAREHOLDER, INVESTOR AND CO-

FOUNDER OF THE TELECOMMUNICATION COMPANY TO BE JOINTLY ESTABLISHED BY THE

ELECTED CONTROLLING SHAREHOLDER AND ISRAEL ELECTRIC CORPORATION LTD.

DATE: January 31st, 2012

This revised Version No. 1.03 includes amendments published in Notice No. 2 dated 25.10.2011, Notice No. 3 dated 16.11.2011, Notice No. 4 dated 22.11.2011, Notice

No. 7 dated 2.1.2012 and Notice No. 8 dated 17.1.2012.

The language of this Version 1.03, as marked and revised herein, is the binding version of the Procedure as per Notice No. 10 dated 31.1.2012.

Previous Versions: Version 1.00 – Oct 14, 2011 Version 1.01 – Oct 24, 2011 Version 1.02 – Nov. 16, 2011

1 Notice No. 2, 25.10.2011, Ver 1.01


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TABLE OF CONTENTS2

Chapter A – General

1. Background and Introduction

1.1. On July 15th, 2010, the Government of the state of Israel (the "Government" and the "State" respectively), has by virtue of resolution No. 2024, resolved to instruct the Minister of National Infrastructures and the Minister of Finance to authorize the Israel Electric Corporation Ltd. ("IEC"), to operate in the telecommunication sector through a company to be established to that end.

1.2. On March 6th, 2011 the Government has by virtue of resolution

No. 2949, resolved to approve the establishment by IEC together with another (the designated Controlling Shareholder), of a company that shall use and operate a fixed FTTH telecommunication infrastructure based on telecommunication infrastructure deployed on the electricity network, for purposes of providing Telecommunication Services (the "Telecommunication Company"). In addition, within said resolution No. 2949 of March 6th, 2011, the Government has introduced and adopted certain amendments to its resolution No. 2024 of July 15th, 2010. The Government resolutions No. 2024 and No. 2949 shall hereinafter be referred to as the "Government Resolutions" and are attached as Schedule 1 hereof.

1.3. In accordance with the provisions of the Government

Resolutions an election committee, comprised of 4 (four) members, 2 (two) of whom are representatives of the State and the other 2 (two) are representatives of IEC (the "Election Committee"), has been established in order to conduct a public, competitive, equal and transparent process for the election of the Controlling Shareholder and the incorporation of the Telecommunication Company (the "Election Process").

2. The Election Process and Procedure

2.1. The Election Process shall be conducted by the Election Committee in accordance with the provisions of this procedure for the election of a Controlling Shareholder (the "Procedure").

2.2. The purpose of the Procedure is to set out and define the rules of participation in the Election Process and the manner and stages in which the Election Process shall be conducted.

2 Notice No. 2, 25.11.2011, Ver. 1.01


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2.3. By virtue of Regulation 3(14) of the Mandatory Tenders Regulations, the Election Process and the Election Procedure were exempted from being conducted as a tender that is subject to the provisions of the Mandatory Tenders Law. It is therefore clarified that the Election Process and the Election Procedure are not a tender of any kind (including a public or closed tender) or a "quasi-tender", and hence, neither the State, nor the Authority, IEC, the Election Committee and any Person acting on their respective behalf within the framework of the Election Process, takes upon itself any limitation or obligation other than such expressly stipulated by each of them.

2.4. The Election Process will be conducted in three principal stages;

all - as set forth in this Procedure:

2.4.1. The Preliminary Project Business Model stage, within the framework of which, the Preliminary Project Business Model shall be prepared and submitted to the Election Committee subject to and in accordance with the provisions of this Procedure. For the avoidance of doubt, it is clarified that no screening shall be conducted by the Election Committee at this stage and that the materials and information submitted within the framework of this stage are and shall be submitted on a non-binding basis (the "Preliminary Project Business Model Stage").

2.4.2. The Basic Proposal stage, within the framework of which the Basic Proposal shall be prepared and submitted and the Election Committee shall conduct the Basic Proposal Examination and the Basic Proposal Stage Screening; all – subject to and in accordance with the provisions of this Procedure (the "Basic Proposal Stage"). An Applicant whose Basic Proposal shall be found by the Election Committee to have successfully passed the Basic Proposal Stage Screening in accordance with the provisions of Section 17 hereof, and who itself, or whose Basic Proposal, has not otherwise been disqualified in accordance with the provisions of this Procedure (an "Eligible Applicant"), shall be invited to participate in the Financial Competition Stage, subject to the provisions of Sections 17.2 and 17.3 hereof; and

2.4.3. The Financial Competition Stage during which the

Bidding Process shall be conducted and in which Eligible Applicants shall compete for the opportunity to be the elected Controlling Shareholder, by submitting their Bids subject to and in accordance with the provisions of Sections 18 and 19 hereof (the "Financial Competition Stage").


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2.5. The timetable of the Election Process shall include and comprise of the following milestones: 2.5.1. The date of release of the announcement of the

Election Process (the "Announcement") and publication of the invitation to register for participation in the Election Process and availability for download from the Procedure Web Page of the Announcement (Exhibit 1), the Outline of the Election Process and the Election Procedure (Exhibit 2) and the Registration Form (Annex "A"), including the Non-Disclosure and Restrictive Use Undertaking attached as Appendix 1 thereof - October 9th, 2011;

2.5.2. The date from which onwards, until The final date and time for submission of the Preliminary Project Business Model Form (Annex "B"), specified in Section 2.5.4 hereof, registration for participation in the Election Process shall commence and subject to completion of which in accordance with the provisions hereof, the full set of the Procedure Documents shall be available to access by Registrants on the Procedure Web Page, in accordance with the provisions of Section 6 hereof –October 23rd, 2011;

2.5.3. A Registrants conference shall be held at IEC's Offices

on November 28th3, 2011, at 11am;

2.5.4. The final date and time for submission of the Preliminary Project Business Model Form (Annex "B") filed in accordance with the provisions of Annex "B" hereof – 4pm on4 January31st5, 20126;

2.5.5. The final date and time for submission of questions,

requests for clarifications and comments pertaining to the Election Process and/or the Procedure Documents, in accordance with the provisions of Section 8 hereof – 4pm7 on January31st8, 2012;

3 Notified to the Registrants by e-mail on 9.11.2011 and published under Notice no. 3, 16.11.2011, Ver

No. 1.02 4 Notice No. 2, 25.10.2011, Ver 1.01 5 Notice No. 7, 2.1.2012, Ver 1.03 6 Notice No. 2, 25.10.2011, Ver 1.01 7 Notice No. 7, 2.1.2012, Ver 1.03 8 Notice No. 7, 2.1.2012, Ver 1.03


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2.5.6. The Election Committee shall, if at all, subject to and in accordance with the provisions of Section 8 hereof, respond to questions, requests for clarifications and comments pertaining to the Procedure Documents, that were submitted to it in accordance with the provisions of Section 2.5.5 hereof, by not later than – 8pm on February 13th, 2012.

2.5.7. The final date and time for submission of the Basic

Proposal Form (Annex "C") fully filled in accordance with the provisions of Section 12 hereof – 2pm on March 12th, 2012;

2.5.8. The completion of the Election Process is estimated to

be consummated by May, 2012. The specific timetable for completion of the Election Process shall be published and communicated to the Applicants by the Election Committee in advance and shall include, without limitation, the following stages:

2.5.8.1. The conducting by the Election Committee

of the Basic Proposal Examination, including the Applicants appearance and presentation before the Election Committee, during March and April 2012, and the Basic Proposal Screening;

2.5.8.2. The announcement of the Eligible Applicants

who shall be invited to participate in the Financial Competition Stage;

2.5.8.3. The conducting of the Financial Competition

Stage during April 2012;

2.5.8.4. The announcement of the Winning Bidder;

2.5.8.5. The Closing of the contemplated transaction forming the subject matter of this Procedure.

2.6. The provisions of Section 2.5 hereof are intended as an aid only,

and not as a tool for the interpretation of this Procedure. Nothing in Section 2.5 hereof shall derogate from, or in the event of contradiction or discrepancy, prevail over, anything stated elsewhere in this Procedure.

2.7. The Election Committee may, at its discretion, make changes in the stages, timetable and milestones described in Section 2 hereof, including, without limitation, cancelling, splitting, or merging any of the stages specified and described in Section 2 hereof, as well as adding additional stages;


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all – without any liability whatsoever towards any and all Registrants, Applicants and/or any Person connected in any way therewith, and none of whom shall have any claim demand or cause of action against the Election Committee and/or the State and/or the Authority and/or IEC and/or against any Person acting on their respective behalf, in connection with any decision to that effect by the Election Committee.

2.8. Upon completion of the Election Process and consummation of

the Closing subject to and in accordance with the provisions of this Procedure, if at all, the Telecommunication Company shall be incorporated by the Controlling Shareholder and IEC in accordance with the provisions of the Founders Agreement (Schedule 3 hereof) and the Constitutive Documents (Schedule 4 hereof). Immediately following its incorporation, the Telecommunication Company shall enter into the Right of Use and Services Agreement and shall prepare and submit to the MoC its application for the Telecommunication Licence.

3. The Procedure Documents 3.1. The Procedure Documents comprise and consist of this

Procedure document and all of the following documents, including any and all annexes, schedules and appendices attached to and forming part of each of which: 3.1.1. Annex "A" – The Registration Form (including the

Non-Disclosure and Restrictive Use Undertaking attached as Appendix 1 thereof);

3.1.2. Annex "B" – The Preliminary Project Business Model

Form;

3.1.3. Annex "C" – The Basic Proposal Form;

3.1.4. Annex "D" – The Bank Guarantee/Standby Letter of Credit9 Form;

3.1.5. Annex "E" – The Deferred Equity Bid Bank

Guarantee/Standby Letter of Credit10 Form;

3.1.6. Annex "F" – Unconditional, irrevocable undertaking for Ensuring submission of the Telecommunication Licence application to the MoC;

9 Notice No. 2, 25.10.2011, Ver 1.01 10 Notice No. 2, 25.10.2011, Ver 1.01


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3.1.7. Annex "G" – Unconditional irrevocable undertaking for ensuring the signature of the Telecommunication Company on the Right of Use and Services Agreement;

3.1.8. Annex "H" – An unconditional, irrevocable undertaking

to sign and enter into the Escrow Agreement, in the form of the Draft Escrow Agreement attached as Schedule 11 hereof, after the Election Committee has filled all details and blanks therein pertaining to the Winning Bidder; all - in accordance with the provisions of Section 20.3 hereof;

3.1.9. Annex "I" – Unconditional irrevocable undertaking for

ensuring the signature of the Telecommunication Company on the Founders Agreement;11

3.1.10. Schedule 1 – The Government Resolutions;

3.1.11. Schedule 2 – The permit dated [DATE], granted by the Minister of National Infrastructures and the Minister of Finance to IEC pursuant to section 6(d) of the Electricity Sector Law, to engage in other activities, namely – in the telecommunication sector12;

3.1.12. Schedule 3 – The Founders Agreement including all

schedules and annexes thereof;

3.1.13. Schedule 4 – The Constitutive Documents;

3.1.14. Schedule 5 – The approval of the Authority of the Constitutive Documents;

3.1.15. Schedule 6 – The Communication Regulations

(telecommunication and Broadcasting) (Procedures and Conditions for Receipt of a General Licence for the Provision of Fixed Domestic Telecommunication Services) (Amendment), 2011;13

3.1.16. Schedule 7 – The Draft Telecommunication Licence;

3.1.17. Schedule 8 – The MoC framework in principle for

provision of Telecommunication Service by the Telecommunication Company, directly to large businesses;

11 Notice No. 3, 16.11.2011, Ver 1.02 12 Shall be added upon signature thereof by the Minister of National Infrastructures and the

Minister of Finance. 13 Notice No. 2, 25.10.2011, Ver 1.01


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3.1.18. Schedule 9 – The draft Building and Planning Regulations (Regulation of Transmission, Delivery and Supply of Electricity) (Amendment), 201114;

3.1.19. Schedule 10 – The Right of Use and Services

Agreement;

3.1.20. Schedule 11 – The Draft Escrow Agreement;

3.1.21. Schedule 12 – The Election Committee's and IEC's list of former and current Consultants.15

3.2. This Procedure, all Annexes of this Procedure and Schedules 3,

10, 11 and 1216 of this Procedure, are in the English language which shall be the binding language version thereof for all intents and purposes.

3.3. Schedules 1, 2, 4, 5, 6, 7, 8 and 9 of this Procedure are in the Hebrew Language which shall be the binding language version thereof for all intents and purposes.

3.4. This Procedure constitutes a separate document from any of the

Schedules thereof. The Procedure is in no way a part of any of the Schedules thereof, and shall not serve as a substitute, supplement or as a mean of interpretation of any of the Schedules thereof. In any event of conflict or discrepancy between the provisions of this Procedure and the provisions of any of the Schedules thereof, the order of prevalence shall be as stipulated in Section 5.1.9 hereof.

3.5. The Election Committee has the right to modify this Procedure and any of its terms and conditions, from time to time, by means of publication to that effect on the Procedure Web Page, or by means of a press publication in a daily newspaper or by means of written notice to the Representatives, and no claim, demand or cause of action against the Election Committee and/or the State and/or the Authority and/or IEC and/or against any Person acting on their respective behalf, shall be made by any Registrant or Applicant (as the case may be), or by any Person connected in any way therewith, in connection with any such modification.

14 Shall be added upon signature or enactment thereof, if at all, as shall be determined by the

Election Committee. 15 Notice No. 8, 17.1.2012, Ver 1.03 16 Notice No. 8, 17.1.2012, Ver 1.03


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4. Definitions

In this Procedure and in its Annexes and Schedules, the following terms shall have the meaning hereby respectively ascribed, unless expressly stated otherwise: "Affiliated Company" - Shall have the meaning ascribed to it in the Communication Regulations17; any term referred to in said definition shall also have the meaning ascribed to in the Communication Regulations; "Announcement" – Shall have the meaning ascribed to it in Section 2.5.1 hereof. "Applicant" – Any Person who has duly submitted a Basic Proposal in accordance and full compliance with the provisions of this Procedure under a Reference Number received by it as a Registrant, or under a Reference Number of a Registrant who is, directly or indirectly, an Affiliated Company thereof, or otherwise forming a member thereof. "Applicant's Details and Data" – The details and data of an Applicant filled and submitted in the form of Chapter B of the Basic Proposal Form.

"Articles of Association" – The articles of association of the Telecommunication Company. "Authority" – The Government Companies Authority. "Authority’s Offices" – The Privatization Unit at the Government Companies Authority, Building 23, "Hamigdal" (8th floor), "Hagan Hatechnologi", Malha 96951, Jerusalem, Israel; telephone: +972-2-6707153/4/5, facsimile +972-2-5665814, unless the Authority gives notice of a change of address. "Authorized User" – Shall have the meaning ascribed to it in Section 18.2 hereof. "Bank Guarantee" – Shall have the meaning ascribed to it in Section 11.6.1.118 hereof. "Bank Guarantee/Standby Letter of Credit19 Form" – The form attached as Annex "D" hereof. "Basic Index" – Shall have the Meaning ascribed to it in Section 10.2 hereof.

17 The definition referred to is that of "Hevra Baalat Zika", as clarified under Notice No. 4, 22.11.2011,

Ver. 1.03 18 Notice No. 2, 25.10.2011, Ver 1.01 19 Notice No. 2, 25.10.2011, Ver 1.01


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"Basic Proposal" – The Basic Proposal Form fully filled, signed and submitted by an Applicant to the Election Committee in accordance with the provisions of the Procedure, including, without limitation, any and all documents, whether or not referred to in the Procedure, demonstrating and proving the Applicant's compliance with all of the Threshold Conditions. "Basic Proposal Examination" – The examination of the Basic Proposals to be conducted by the Election Committee in accordance with the provisions of Section 13 hereof. "Basic proposal Form" – The form attached as Annex "C" hereof, including all annexes thereof. "Basic Proposal Stage" – Shall have the meaning ascribed to it in Section 2.4.2 hereof. "Basic Proposal Stage Screening" – Shall have the meaning ascribed to it in Section 17.1 hereof. "Bid" – The amount of the Equity Investment of a Bidder duly offered and submitted within the framework of the Bidding Process subject to and in accordance with the provisions of the Procedure in general and Sections 18 and 19 thereof, in particular. "Bid Increment" – Shall have the meaning ascribed to it in Section 19.4 hereof. "Bidder" – An Eligible Applicant on whose behalf, at least one Bid has been submitted in the Financial Competition Stage by any Authorized User appointed by such Eligible Applicant. "Bidding Process" – Shall have the meaning ascribed to it in Section 18 hereof. "Bidding Site" – The internet website referred to in Section 18.6 hereof, where the Bidding Process shall be held. "Blackened Copies" – Copies of the Basic Proposal in which Confidential Parts are omitted or otherwise blackened so as to avoid the disclosure thereof, in accordance with the provisions of Section 25 hereof. "Business Day" – Any day falling Sunday through Thursday on which commercial banks in Israel are generally open for business, save for Jewish holidays' eves and holidays. "Business Plan" – the business and commercial plan prepared and submitted by an Applicant in the form prescribed in Chapter C of the Basic Proposal Form, demonstrating the ability of the Telecommunication Company to consummate the Project and abide by and comply with the provisions of the Draft Telecommunication Licence.


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"Closing" – shall have the meaning ascribed to it in Section 20.3 hereof. "Closing Date" – shall have the meaning ascribed to it in Section 20.3 hereof. "Closing Equity Bid" – An amount equal to, or higher than the Minimum Closing Equity Bid, forming part of a Bid, or the entirety thereof (if a Deferred Equity Bid was not submitted within the framework of any such Bid), as the case may be, duly submitted and registered as such within the framework of the Bidding Process and which shall be linked to the Consumer Prices Index in accordance with the provisions of section 10 hereof. "Communication Law" – The Israeli Communication (Telecommunication and Broadcasts) Law, 1982, including any and all applicable rules and regulations promulgated there under, all as amended from time to time. "Communication Regulations" – The Communication Regulations (telecommunication and Broadcasting) (Procedures and Conditions for Receipt of a General Licence for the Provision of Fixed Domestic Telecommunication Services), 2000, enacted by virtue of the Communication Law, as amended from time to time. "Companies Law" – The Israeli Companies Law, 1999 including any and all applicable rules and regulations promulgated there under, all as amended from time to time. "Confidential Parts" – Shall have the meaning ascribed to it in Section 25.3 hereof. "Consortium Group" – An Applicant comprised of more than one Person. "Consortium Group Entity" – Any Person who is a member of a Consortium Group. "Consortium Members Agreement" – shall have the meaning ascribed to it in Section 11.2 hereof. "Constitutive Documents" – The Articles of Association and all ancillary forms required for incorporation and registration of the Telecommunication Company by the Israeli Companies Registrar. "Consumer Prices Index" – The Israeli consumer prices index published on a monthly basis by the Israeli Central Statistics Bureau, and calculated, for purposes of this Procedure, in accordance with the provisions of Section 10 hereof.


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"Control" – Shall have the meaning ascribed to it in the Companies Law for purposes of control over the Telecommunication Company, within the framework of the Founders Agreement and the Articles of Association only; and shall have the meaning ascribed to it in the Communication Law for purposes of the Threshold Conditions and the Basic Proposal Form (Annex "C" hereof); and the terms "Controlling" and "Controlled" shall be interpreted, accordingly, respectively. "Controlling Shares" – Shall mean such number of the Ordinary Shares constituting 51% (fifty one percent) of the issued and outstanding share capital of the Telecommunication Company immediately upon its incorporation designated to be Held by the Controlling Shareholder upon the incorporation of the Telecommunication Company, by virtue of which, the Controlling Shareholder shall Hold 51% (fifty one percent) of the Means of Control in the Telecommunication Company, subject to and in accordance with the provisions of the Founders Agreement. "Controlling Shareholder" – The Bidder announced by the Election Committee, if at all, as the Winning Bidder and who has duly consummated the Closing in accordance with the provisions of Section 21 hereof, and who shall consequently Hold the Controlling Shares and Control the Telecommunication Company. "Conviction" – Including the imposing of a penalty or other monetary sanction; and "Convicted" shall be interpreted accordingly; "CPA" – Any charted public accountant duly licensed to practice accountancy in Israel; "Customer" – Any Person to whom the Telecommunication Company shall be entitled to render the Telecommunication Company's Services, in accordance with the provisions of the Telecommunication License; "Deferred Equity Bid" – An amount that may optionally form part of a Bid duly offered and submitted within the framework of the Bidding Process, which if so duly submitted, shall be linked to the Consumer Prices Index in accordance with the provisions of section 10 hereof and paid in full (irrespective of its value calculation formula as set in Section 19.6 hereof), in immediately available cash by not later than 18 (eighteen) months from the Closing Date and which shall be secured by the Deferred Equity Bid Bank Guarantee/Standby Letter of Credit20.

20 Notice No. 2, 25.10.2011, Ver 1.01


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"Deferred Equity Bid Bank Guarantee/standby letter of Credit21" – An autonomous, unconditional and irrevocable bank guarantee or Standby letter of Credit22, issued in accordance with the provisions of Annex "E" hereof and delivered by the Winning Bidder in accordance with the provisions of Section 20.3 hereof, in the amount of the highest Deferred Equity Bid (if such has been offered by the Winning Bidder) of the Winning Bidder, duly registered as such in the system during the Bidding Process, linked to the Consumer Prices Index in accordance with the provisions of section 10 hereof and Annex "E" hereof.23 "Deferred Equity Bid Bank Guarantee/Stand by Letter of Credit24 Form" – The form attached as Annex "E" hereof. "Draft Escrow Agreement" – The form attached as Schedule 11 hereof, which shall, after the Election Committee has filled all details and blanks therein pertaining to the Winning Bidder, constitute the Escrow Agreement that shall be signed and entered into by the Winning Bidder and the Escrow Agent in accordance with the provisions of Section 20.3 hereof. "Draft Telecommunication Licence" – The draft General Licence for the Provision of Fixed, Domestic Telecommunication Services forming Schedule 7 hereof. "Effective Index" – Shall have the Meaning ascribed to it in Section 10.2 hereof. "Effective Rate" – Shall have the meaning ascribed to it in section

.מקור ההפניה לא נמצא! שגיאה hereof. "Election Committee" – Shall have the Meaning ascribed to it in Section 1.3 hereof. "Election Process" – Shall have the Meaning ascribed to it in Section 1.3 hereof. "Election Process' Dedicated Bank Account" – The bank account opened by and managed by IEC for the Election Process, on behalf of the Election Committee, with Mizrahi Tefahot Ltd., Haifa Business Centre Branch, City Wing Brosh Building, 2 Pal-Yam Street, Haifa Israel, account number 213115, swift code MIZBILIT. "Electricity Law – The Israeli Electricity Law, 1954 including any and all rules, regulations and governmental resolutions promulgated there under, all as amended from time to time. "Electricity Sector Law" – The Israeli Electricity Sector Law, 1996 including any and all rules, regulations and governmental resolutions promulgated there under, all as amended from time to time.

21 Notice No. 2, 25.10.2011, Ver 1.01 22 Notice No. 2, 25.10.2011, Ver 1.01 23 Notice No. 2, 25.10.2011, Ver 1.01 24 Notice No. 2, 25.10.2011, Ver 1.01


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"Eligible Applicant" – Shall have the Meaning ascribed to it in Section 2.4.2 hereof. "Equity Investment" – The cumulative amount of the Closing Equity Bid and the Deferred Equity Bid, offered by a Bidder within the framework of the Bidding Process in the Financial Competition Stage, subject to and in accordance with the provisions of Sections 18 and 19 hereof, as consideration for issuance of the Controlling Shares linked to the Consumer Prices Index in accordance with the provisions of section 10 hereof and payable in accordance with the provisions of Section 20.3 hereof. "Escrow Account" – The bank account managed and owned by the Escrow Agent, the number and details of which are specified in the Draft Escrow Agreement. "Escrow Agent" – H.F.N. Trust Company 2010 Ltd. "Escrow Agreement" – The escrow agreement in the form of the Draft Escrow Agreement (Schedule 11 hereof) after the Election Committee has filled all details and blanks therein pertaining to the Winning Bidder, to be entered into by and between the Winning Bidder and the Escrow Agent, in accordance with the provisions of Section 20.3 hereof, and which shall, inter alia,25 govern and regulate the relationship, rights and obligations of the Winning Bidder and the Escrow Agent in connection with the deposit by the Winning Bidder and the transfer by the Escrow Agent of the Winning Bidder's highest Closing Equity Bid to the Telecommunication Company or back to the Winning Bidder, as the case may be26 and the extension, if necessary of the Deferred Equity Bank Guarantee/Standby Letter of Credit (if applicable) and/or the exercise and transfer by the Escrow Agent of the proceeds of27 Deferred Equity Bank Guarantee/Standby Letter of Credit28 (if applicable) to the Telecommunication Company or the transfer of Deferred Equity Bank Guarantee/Standby Letter of Credit (if applicable)29 back to the Winning Bidder, as the case may be. "Executive Summary and Overview" – The executive summary and Project overview prepared and submitted by an Applicant in the form of Chapter A of the Basic Proposal Form. "Financial Competition Stage" – Shall have the meaning ascribed to it in Section 2.4.3 hereof and as described in more detail in Sections 18 and 19 hereof. "Foreign Bank" – Any reputable non-Israeli first ranking bank duly licensed in a country whose credit rate is at least "A" in accordance with the credits rate published by IBCA, Moody's or S&P.

25 Notice No. 2, 25.10.2011, Ver 1.01 26 Notice No. 2, 25.10.2011, Ver 1.01 27 Notice No. 2, 25.10.2011, Ver 1.01 28 Notice No. 2, 25.10.2011, Ver 1.01 29 Notice No. 2, 25.10.2011, Ver 1.01


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"Founders Agreement" – The founders agreement to be signed and entered into between the Controlling Shareholder and IEC, forming Schedule 3 hereof. "Freeze State" – Shall have the meaning ascribed to it in Section 19.17 hereof. "FTTH Network" – Shall have the Meaning ascribed to this term in the Right of Use and Services Agreement forming Schedule 10 hereof. "General Licence" – Shall have the meaning ascribed to it in the Communication Law. "Government" – The Government of the state of Israel. "Government Companies Law" The Israeli Government Companies Law, 1975, including any and all rules, regulations and governmental resolutions promulgated there under, all as amended from time to time. "Government Resolutions" – Shall have the meaning ascribed to it in Section 1.2 hereof. "Holding" – For purposes of the Threshold Conditions and the Basic Proposal Form (Annex "C" hereof), shall have the meaning ascribed to it in the Communication Law; and the terms "Held", "Hold", or "Holder" shall be interpreted accordingly. Calculation of the Holdings in an Applicant, required anywhere in this Procedure shall be made in accordance with the provisions of Regulation 10 of the Communication Regulations; "IEC" – the Israel Electric Corporation Ltd. "IEC's Offices" – The IEC Information Systems & Communication Division - Finance & Economics Department, 1 Netiv Ha-Or Street (21 floor, Room 2116, Haifa, Israel; telephone: +972-4-8184113, facsimile +972-4-8184809, [email protected], unless IEC gives notice of a change of address "Institutional Investor" – Shall have the meaning ascribed to it in section 1 of the Communication Decree (Telecommunication and Broadcasting) (Determination of a Vital Service Provided by "Bezeq" the Israeli Telecommunication Company Ltd.), 1997. "Insurer" – Shall have the meaning ascribed to it in the Israeli Supervision over Financial services (Insurance) Law, 1981. "Interested Party" – shall have the meaning ascribed to it in the Communication Law.

30 Notice No. 3, 16.11.2011, Ver 1.02


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"Israeli Citizen" – shall have the meaning ascribed to it in the Israeli Citizenship Law, 1952. "Israeli Lawyer" – Any person duly licensed to practice law in Israel; "Israeli Resident" – shall have the meaning ascribed to it in the Israeli Population Registry Law, 1965. "Licensee" – Shall have the meaning ascribed to it in Section 11.3.1.1 hereof. "Mandatory Tenders Law" – The Israeli Mandatory Tenders Law, 1992, including any and all rules, regulations and governmental resolutions promulgated there under, all as amended from time to time. Mandatory Tenders Regulations" – The Israeli Mandatory Tenders Regulations, 1993, enacted by virtue of the Mandatory Tenders Law, as amended from time to time. "Means of Control" – shall have the meaning ascribed to it in the Communication Law. "Minimum Closing Equity Bid" – The amount specified in Section 19.1 hereof as the threshold minimum amount for a Closing Equity Bid. "Minister" – the Israeli Minister of Communication. "MoC" – the Israeli Ministry of Communication, or its successor ministry, or any other governmental or autonomous entity entrusted with responsibility for regulation of telecommunication operators. "Non-Disclosure and Restrictive Use Undertaking" – The non-disclosure and restrictive use undertaking attached as Appendix 1 to the Registration Form (Annex "A" hereof) and forming an integral part of the Registration Form. "Opening Committee" – Shall have the meaning ascribed to it in Section 13.1 hereof. "Ordinary Shares" – The ordinary shares of the Telecommunication Company of par value NIS 1 (one) each. "Participation Approval" – Shall have the meaning ascribed to it in Section 11.3.2 hereof.


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"Participation Fee" – The amount of NIS 25,000 (twenty five thousand) plus Vat, or US$ 6,710 (six thousand seven hundred and ten US Dollars) plus VAT, if applicable, or € 5,060 (five thousand and sixty Euro) plus VAT, if applicable, to be deposited in the Election Process' Dedicated Bank Account as a condition precedent for completion of registration for participation in the Election Process, net and excluding any and all commissions, or other payments in connection with the issuance and/or currency conversion thereof, etc', which shall be borne solely by the pertinent Registrant. "Permits and Consents" - Means an approval or an exemption from the duty to obtain approval for a merger and for a restrictive trade practice from the Commissioner of Restrictive Trade Practices, to the extent required, and any other license, permit, approval or consent of any regulatory or other competent authority, that are required for the consummation of the Closing hereunder, excluding, for the avoidance of doubt, any such permit, approval or consent required from the MoC within the framework of the Telecommunication Company's application for the Telecommunication Licence. "Person" – shall mean a natural individual, corporation, company, association, partnership, joint venture, Consortium Group, trust, or any other form of a legal entity. "Planning and Building Law" – The Israeli Planning and Building Law, 1965, including any and all rules, regulations and governmental resolutions promulgated there under, all as amended from time to time. "Preliminary Project Business Model" – The non-binding preliminary Project business model filled, signed by duly authorized signatory of the Registrant and submitted to the Election Committee in accordance with the provisions of Annex "B" hereof. "Preliminary Project Business Model Form" – The form attached as Annex "B" hereof, including all annexes thereof. "Preliminary Project Business Model Stage" – Shall have the meaning ascribed to it in Section 2.4.1 hereof. "Procedure" – Shall have the Meaning ascribed to it in Section 2.1 hereof, and including all of the Procedure Documents. "Procedure Documents" – Any and all documents specified as such in Section 3.1 hereof. "Procedure Web Page" – The Procedure dedicated web page can be reached via links at the Authority's and IEC's respective website at the following, respective, addresses: www.gca.gov.il; and www.iec.co.il . "Project" – The establishing and operation of the FTTH Network subject to and in accordance with the provisions of all applicable Procedure Documents.


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"Reference Number" – Shall have the meaning ascribed to it in Section 6.3 hereof. "Registrant" – Any Person who has duly registered for participation in the Election Process by submitting a duly signed Registration Form, Non-Disclosure and Restrictive Use Undertaking and a receipt for payment of the Participation Fee in accordance and full compliance with the provisions of Annex "A" hereof and who has received a Reference Number. "Registration Form" – The form attached as Annex "A" hereof. "Representative" – Shall have the meaning ascribed to it in the Registration Form (Annex "A" hereof). "Representative Exchange Rate" – The exchange rate of foreign currencies published by the central bank of Israel as the representative exchange rate of such foreign currency. "Right of Use and Services Agreement" – The right of use and services agreement to be signed and entered into between the Telecommunication Company and IEC, forming Schedule 10 hereof. "Second Bidder" – Shall have the meaning ascribed to it in Section 20.5 hereof. "Significant Influence" – Shall have the meaning ascribed to it in the Communication Regulations. "Special Resolution" - For an Applicant that was incorporated in Israel before 1.2.2000 - shall have the meaning ascribed to it in the Companies Ordinance [New Version], 1983; for any other Applicant - shall mean a resolution to amend the articles of association or any other resolution that requires a special majority according to the articles of association, the Companies Law or any other law applicable to the Applicant; "Standby Letter of Credit" – Shall have the meaning ascribed to it in Section 11.6.1.2 hereof.31 "State" – The state of Israel. "Smart Card Application" – Shall have the meaning ascribed to it in Section 18.2 hereof. "Telecommunication Company" – Shall have the meaning ascribed to it in Section 1.2 hereof. "Telecommunication Company's Services" – The Telecommunication Services which the Telecommunication Company is allowed to provide in accordance with the provisions of the Draft Telecommunication Licence.

31 Notice No. 2, 25.10.2011, Ver. 1.01


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"Telecommunication Licence" – The actual signed, binding and valid General Licence for the Provision of Fixed, Domestic Telecommunication Services, granted by the MoC to the Telecommunication Company. "Telecommunication Licence Bank Guarantee" – The bank guarantee submitted by the Telecommunication Company to the MoC, in accordance with the provisions of the Telecommunication Licence. "Telecommunication Services" – Shall have the meaning ascribed to it in the Communication Law. "Third Bidder" – Shall have the meaning ascribed to it in Section 20.5 hereof. "Threshold Conditions" – The mandatory threshold conditions for participation in the Election Process specified in Section 11 hereof. "Traffic Ordinance" – The Israeli Traffic Ordinance (New Version), 1961; "Trust Agreement" – Shall have the meaning ascribed to it in Section 11.2 hereof. Trustee" – Shall have the meaning ascribed to it in Section 11.2 hereof. "Winning Bidder" – Shall have the meaning ascribed to it in Section 20.1 hereof, or alternatively, shall mean the Second Bidder, or the Third Bidder or any other Bidder, subject to and in accordance with the provisions of sections 20.6, 20.7, or 20.8 hereof respectively.

5. Interpretation and Binding Provisions

5.1. The following rules of interpretation apply to this Procedure unless the context requires otherwise:

5.1.1. The headings and sequence of Sections in this

Procedure are solely for the sake of convenience and shall not serve as a tool for the interpretation of this Procedure.

5.1.2. Any use in this Procedure of the singular form shall include the plural form and conversely, unless the context clearly requires otherwise.

5.1.3. Any reference in this Procedure to a certain hour of a

date shall mean such hour according to official local time in the State of Israel on the relevant date.


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5.1.4. Any reference in this Procedure to a length measurement shall be to such measurement in the metric system.

5.1.5. Any reference to this Procedure, an Annex or Schedule

thereof shall mean this Procedure, such Annex or Schedule thereof, as amended from time to time in accordance with the provisions of this Procedure.

5.1.6. Any reference to a law, regulation, or any other legislative or regulatory instrument, or to a provision of any of the aforesaid, is a reference to that law, regulation, or any other legislative or regulatory instrument, or to a provision of any of the aforesaid, as amended from time to time.

5.1.7. Terms that are not defined in Section 4 hereof, or in any of the Procedure Documents, shall have the meaning ascribed to them in the following legislative instruments, in the following order of prevalence, unless the context clearly requires otherwise:

5.1.7.1. The Communication Law;

5.1.7.2. The Communication Regulations 32

(including, for the avoidance of doubt, the amendment forming Schedule 6 hereof);33

34

5.1.7.3. The Electricity Sector Law;

5.1.7.4. The Companies Law;

5.1.7.5. The Government Companies Law;

5.1.7.6. The Interpretation Ordinance [New Version];

5.1.7.7. The Interpretation Law, 1981.

5.1.8. Cancellation or a decision to cancel any condition or provision of this Procedure shall not, in and of itself, derogate from the validity or force of this Procedure or any other condition or provision of this Procedure.

5.1.9. In any conflict or disparity between any of the provisions of the main body of this Procedure and a provision of any of the Schedules of this Procedure, the

32 Added under Notice No. 2, 25.10.2011, Ver. 1.01 and deleted under Notice No. 3, 16.11.201, Ver

1.02 33 Notice No. 3, 16.11.2011, Ver 1.02 34 Added under Notice No. 2, 25.10.2011, Ver. 1.01 and deleted under Notice No. 3, 16.11.201, Ver

1.02


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provision contained in the following documents shall prevail in the following order of prevalence, unless the context clearly requires otherwise:

5.1.9.1. The Draft Telecommunication Licence;

5.1.9.2. The Government Resolutions;

5.1.9.3. The Founders Agreement;

5.1.9.4. The Articles of Association;

5.1.9.5. The Right of Use and Services Agreement;

5.1.9.6. The Procedure.

5.2. For purposes of participation in the Election Process, the

Applicant shall in addition to all of the Procedure Documents, be deemed to have taken into account all of the Israeli laws, regulations, rules and conditions pertaining to the subject matter of the Election Process, including, without limitation the following Israeli legislative instruments: 5.2.1. The Communication Law;

5.2.2. The Communication Regulations 35 (including, for the

avoidance of doubt, the amendment forming Schedule 6 hereof);36

5.2.3. The Communication Regulations (Telecommunication

and Broadcasting) (Licence Fee for a Licence for the Provision of Fixed, Domestic Telecommunication Services), 2000;


and Broadcasting) (Royalties), 2001;

5.2.5. The Communication Regulations (the Supervision over the Activities of a Licensee), 1986;


and Broadcasting) (Advisory Committee) (Temporary Order), 2011;

5.2.7. General Licences granted under the Communication

Law;

35 Added under Notice No. 2, 25.10.2011, Ver. 1.01 and deleted under Notice No. 3, 16.11.201, Ver

1.02 36 Notice No. 3, 16.11.2011, Ver 1.02


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5.2.8. The Wireless Telegraphy Ordinance [New Version], 1972, including regulations and decrees promulgated by virtue thereof;

5.2.9. The Planning and Building Law, including regulations

and decrees promulgated by virtue thereof;

5.2.10. The Electricity Law, including regulations and decrees promulgated by virtue thereof;

5.2.11. The Electricity Sector Law, including regulations and decrees promulgated by virtue thereof;

5.2.12. The Work and Rest Hours Law, 1951;

5.2.13. The Emergency Work Service Law, 1967;

5.2.14. The Emergency Regulations (Essential Work Services

in the Public Service), 1999;

5.2.15. The Regulating of Security in Public Bodies Law, 1998;

5.2.16. The Work Safety Regulations (Work at Height), 2007; 6. Participation in the Election Process

6.1. As Stated in the Announcement, the Election Committee has announced its intention to conduct the Election Process, and has invited those wishing to participate in the Election Process to register with the Election Committee for participation in the Election Process in accordance with the provisions of the Announcement.

6.2. All members of the public shall be entitled to gain access and download the Announcement, the Registration Form and this Procedure, from the Procedure Web Page, but only a Person duly qualified as a Registrant shall be entitled to gain access to the full set of the Procedure Documents on the Procedure Web Page, subject to the level of authorization (i.e., review, print and/or download, as the case may be) applicable to any of the Procedure Document, as shall be specified in the Procedure Web Page.

6.3. The reference number issued by the Election Committee to any

Registrant in accordance with the provisions of the Press Announcement (the "Reference Number") shall, as stated in the Press Announcement, serve and be used as the access code which will enable any Registrant to gain the applicable access to the Procedure Documents on the Procedure Web Page, and must be used by any Registrant and by any Applicant (as applicable) throughout the Election Process as means of identification of the Registrant and the Applicant (as applicable),


23

in any and all forms of communication with the Election Committee.

6.4. The Election Committee reserves the right to approach any

Person, on its own initiative, in any way it shall deem fit, to notify any such Person of the Election Process and to invite any such Person to register and participate in the Election Process subject to and in accordance with the provisions of this Procedure.

6.5. An Applicant, an Eligible Applicant or a Bidder, as the case may

be, shall not, directly or indirectly, coordinate its positions in connection with the Election Process with another Applicant, Eligible Applicant or a Bidder, or otherwise act in cooperation in any way whatsoever with another Applicant, Eligible Applicant or Bidder.

7. Status of Draft Regulatory Procedure Documents

7.1. For the avoidance of doubt, it is clarified that –

7.1.1. Unless and until duly enacted in accordance with the applicable provisions of Israeli law, the 37 3839 40 draft Building and Planning Regulations (Regulation of Transmission, Delivery and Supply of Electricity) (Amendment), 2011 forming Schedule 9 hereof, is41 merely a non-binding draft that is subject to amendments and devoid of any legal force and effect; and

7.1.2. The Draft Telecommunication Licence forming

Schedule 7 hereof, is merely a non-binding draft made in accordance with the provisions of the 42Communication Regulations as amended by the Communication Regulations (telecommunication and Broadcasting) (Procedures and Conditions for Receipt of a General Licence for the Provision of Fixed Domestic Telecommunication Services) (Amendment), 2011 forming Schedule 6 hereof43 and is thus, subject to changes and devoid of any legal force and effect unless and until it is signed by the Minister and effectively becomes the Telecommunication Licence; and

37 Notice No. 2, 25.10.2011, Ver. 1.01 38 deleted under Notice No. 3, 16.11.201, Ver 1.02 39 Added under Notice No. 2, 25.10.2011, Ver. 1.01 and deleted under Notice No. 3, 16.11.201, Ver

1.02 40 Notice No. 3, 16.11.2011, Ver 1.02 41 Notice No. 3, 16.11.2011, Ver 1.02 42 Notice No. 2, 25.10.2011, Ver 1.01 43 Notice No. 2, 25.10.2011, Ver 1.01


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7.2. In light of the provisions of Section 7.1 hereof, it is further clarified that the State, the Election Committee, IEC and any Person acting on their respective behalf shall not be liable in any way, manner, or extent whatsoever, and no claim shall be made, or action initiated by any Registrant, Applicant, or any Affiliated Company or member thereof or any Person otherwise connected with any of whom, against the State, the Election Committee, IEC or any Person acting on their respective behalf if – 7.2.1. The 4445 4647 draft Building and Planning Regulations

(Regulation of Transmission, Delivery and Supply of Electricity) (Amendment), 2011 forming Schedule 9 hereof is not enacted or is otherwise amended in any way, manner, or extent whatsoever; and/or

7.2.2. The Draft Telecommunication Licence forming Schedule 7 hereof, does not become the Telecommunication Licence, and is amended in any way, manner, or extent whatsoever; and/or

44 Notice No. 2, 25.10.2011, Ver 1.01 45 deleted under Notice No. 3, 16.11.201, Ver 1.02 46 Added under Notice No. 2, 25.10.2011, Ver. 1.01 and deleted under Notice No. 3, 16.11.201, Ver

1.02 47 Notice No. 3, 16.11.2011, Ver 1.02


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8. Questions, Requests for Clarifications and Comments

8.1. From the date of receipt of the Reference Number and until the final date and time for submission of questions, requests for clarifications and comments pertaining to the Procedure Documents, as specified in Section 2.5.5 hereof, any Registrant may apply to the Election Committee in writing, by an e-mail sent to the IEC's Offices e-mail address, and raise any question, request for clarification and/or comment pertaining to any of the Procedure Documents. Any document attached to any such e-mail shall be in Microsoft "Word" format only.

8.2. Any Registrant applying to the Election Committee with questions, requests for clarifications and comments pertaining to the Procedure Documents must clearly specify its Reference Number in any such application.

8.3. The Election Committee shall not be obliged to respond to any

or all of the questions, requests for clarifications and comments pertaining to the Procedure Documents that were raised by any Registrant and submitted to the Election Committee in accordance with the provisions of Sections 8.1 and 8.2 hereof.

8.4. The Election Committee shall not be obliged to respond to any

or all of the questions, requests for clarifications and comments pertaining to the Procedure Documents that were submitted to the Election Committee after the final date and time for submission of the same as specified in Section 2.5.5 hereof.

8.5. If and to the extent that the Election Committee shall respond to

any question, request for clarification and/or comment pertaining to any of the Procedure Documents, it shall do so in a manner that shall not expose the identity of the applying Registrant. All such responses of the Election Committee shall be communicated by publication of the same on the Procedure Web Page, or by communicating the same to at least one of the Representatives of each Registrant in any manner as the Election Committee shall deem fit.

8.6. If and to the extent that the Election Committee shall, within the

framework of its response to any question, request for clarification and/or comment pertaining to any of the Procedure Documents, decide to cancel, add, supplement, or otherwise amend any provision, term, or condition in this Procedure or in any of the Procedure Documents, the Election Committee shall issue a revised and amended version of the pertinent document, marked to show changes against the previous version(s) of any such pertinent document, and shall either publish the same on the Procedure Web Page, or otherwise communicate the same to at least one of the Representatives of each Registrant in any manner, as the Election Committee shall deem fit.


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Such revised version shall upon publication, or otherwise communication thereof, supersede and prevail over any previous version and shall be effective and binding for all intents and purposes as if it has been the original version of the pertinent document.

8.7. For the avoidance of doubt, it is clarified that any question, request for clarification and/or comment pertaining to any of the Procedure Documents, that was submitted to the Election Committee in accordance with the provisions of Sections 8.1 and 8.2 hereof and has not received a response shall be deemed to have been considered and determined by the Election Committee to be rejected.

8.8. The responsibility and obligation for getting updated with respect

of the Election Committee's responses to the Registrants questions, requests for clarification and/or comments pertaining to any of the Procedure Documents shall be borne solely by each of the Registrants. By publishing its responses and/or updated revised versions of any of the Procedure Documents on the Procedure Web Page, or by otherwise communicating the same to at least one of the Representatives of each Registrant in any manner it shall deem fit, the Election Committee shall be deemed to have fully and exhaustively complied with its response and publication obligations.

9. Participation Expenses

9.1. Any and all expenses incurred in, or associated with, the

participation of a Registrant and/or an Applicant, as applicable, in the Election Process shall be borne solely by the Registrant and/or the Applicant, as applicable, irrespective of the results of the Election Process.

9.2. Without derogating from the generality of the provisions of Section 9.1 hereof, it is clarified that a Registrant and/or an Applicant, as applicable, shall not be entitled to any reimbursement of its expenses or to indemnity for damages incurred for any reason or cause whatsoever, from the State, IEC, the Election Committee, or from any Person acting on behalf of any of them, including any of their respective employees, agents, consultants, or representatives, in respect of or in connection with the Election Process, including, without limitation, its existence, any change of its conditions, or its cancellation.


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10. Currency and Index Linkage

10.1. Any amount of money or the value of an asset which an

Applicant should specify in accordance with this Procedure shall be denominated in NIS and written in both numbers and words. In any event of discrepancy between the numbers and the words, the words shall prevail.

10.2. Any amount with respect of which, additional index linkage is to be paid in accordance with the provisions hereof, shall be linked to the Consumer Prices Index, where the basic index shall be the last one published and known at the date of creation of the pertinent payment liability (the "Basic Index"), and the effective index shall be the last one published and known at the date of actual payment of the pertinent amount (the "Effective Index") provided that such linkage shall only be made if the Effective Index shall be higher than the Base Index48.

49

50 10.3. the date of creation of the pertinent payment liability for

purposes of -

10.3.1. the Equity Investment, shall be the date of announcement by the Election Committee of the identity of the Winning Bidder;

10.3.2. the Bank Guarantee or the Standby Letter of Credit, as the case may be51 and the forfeiture thereof, shall be the final date and time for submission of the Basic Proposal Form as specified in Section 2.5.7 hereof.

10.3.3. the Deferred Equity Bid Bank Guarantee/standby letter

of Credit, as the case may be, and the forfeiture thereof, shall be the date and time for submission thereof in accordance with the provisions of section 20.3 hereof.52

48 Notice No. 2, 25.10.2011, Ver. 1.01 49 Notice No. 2, 25.10.2011, Ver. 1.01 50 Notice No. 2, 25.10.2011, Ver. 1.01 51 Notice No. 2, 25.10.2011, Ver. 1.01 52 Notice No. 2, 25.10.2011, Ver. 1.01


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Chapter B - The Basic Proposal Stage

11. Threshold Conditions

11.1. Participation - Only a Person who qualifies as an Applicant shall be entitled to submit a Basic Proposal.

11.2. Form of Incorporation – If the Applicant is a Consortium Group, then, all of the Consortium Group Entities shall enter into and sign a members agreement (the "Consortium Members Agreement") that shall, inter alia, provide that all of the Consortium Group Entities shall enter into and sign a trust agreement with a trustee (the "Trust Agreement" and the "Trustee" respectively), according to which:

11.2.1. all of the Controlling Shares will be Held by the Trustee

and registered in the name of Trustee as the Holder thereof for the benefit of any and all of the Consortium Group Entities (each of which, as the ultimate beneficial owner of its respective portion of the Controlling Shares); and

11.2.2. all rights and in particular, all voting rights attached to

the Controlling Shares will be exercised by the Trustee only, as one block and in a single and identical manner; and

11.2.3. None of the Consortium Group Entities shall be entitled

to exercise any right attached to any of the Controlling Shares and in particular, vote any of the Controlling Shares severally, or independently; and

11.2.4. The Trustee will be entitled to issue only one proxy on

behalf of all of the Controlling Shares which are registered in its name, subject to the obligation of such authorized person to vote all of the Controlling Shares as one block and in a single and identical manner, in accordance with the provisions of Section 11.2.2 hereof; and

11.2.5. Any members agreement among the Consortium

Group Entities comprising the Applicant and the Trust Agreement shall provide that any Person Holding or acquiring any Controlling Shares will be required, as a condition precedent to the completion of such acquisition, and without derogating from any other relevant provision of the Founders Agreement and of the Articles of Association, to enter into the Trust Agreement and be bound by it.


29

In addition and without derogating from all of the aforesaid, the Consortium Members Agreement shall provide that any Person wishing to acquire beneficial ownership over any of the Controlling Shares shall be required, as a condition precedent for the completion of such acquisition, and without derogating from any other relevant provision of the Articles of Association, the Founders Agreement, the Telecommunication Licence and any other relevant legislative and regulatory instrument, to become a party to the Trust Agreement and be bound by it.

11.3. Cross Ownership and Conflict of Interests Restrictions: 11.3.1. As stipulated in the Government Resolutions -

11.3.1.1. Any holder of a licence issued under the

Communication Law ("Licensee"); or

11.3.1.2. any Person Holding any Mean of Control in a Licensee save for an Institutional Investor who Holds less than 5% (five percent) of any Mean of Control in a Licensee and save for a corporation wholly owned by such Institutional Investor; or

11.3.1.3. any corporation Held by a Licensee or by

any Person Holding any Mean of Control in a Licensee, save for an Institutional Investor who Holds less than 5% (five percent) of any Mean of Control in any such corporation Held by a Licensee and save for a corporation wholly owned by such Institutional Investor;

shall not be entitled to Hold Means of Control in the Telecommunication Company, unless the Minister has approved such Holding after having been satisfied that such Holding does not harm competition in the telecommunication market.

11.3.2. An Applicant who in not entitled to Hold Means of

Control in the Telecommunication Company according to the provisions of Section 11.3.1 hereof, or the Communication Regulations as amended by the Communication Regulations (telecommunication and Broadcasting) (Procedures and Conditions for Receipt of a General Licence for the Provision of Fixed Domestic Telecommunication Services) (Amendment), 2011 forming Schedule 6 hereof53, shall apply to the Minister in writing (which application shall, inter alia and without limitation, detail its ultimate ownership

53 Notice No. 2, 25.10.2011, Ver 1.01


30

structure) requesting the Minister's approval in principle for its participation in the Election Process (the "Participation Approval"). A copy of the Applicant's application to the Minister for the Participation Approval shall be submitted to the Election Committee. For the avoidance of doubt, it is clarified that the Participation Approval, if given, shall not obviate the necessity that the Applicant (as a shareholder in the Telecommunication Company) shall comply with the Communication Regulations as amended by the Communication Regulations (telecommunication and Broadcasting) (Procedures and Conditions for Receipt of a General Licence for the Provision of Fixed Domestic Telecommunication Services) (Amendment), 2011 forming Schedule 6 hereof54, and the Participation Approval will not be considered an approval of such compliance for purposes of the Telecommunication Company's application for the grant of the Teleclommunication Licence.

11.3.3. The Applicant shall be responsible to obtain the

Participation Approval and to submit the same to the Election Committee within the framework of the Basic Proposal. In addition, should the Participation Approval granted by the Minister stipulate any conditions for the Holding of the Applicant of Means of Control in the Telecommunication Company, then the Applicant shall also submit to the Election Committee, within the framework of the Basic Proposal an affidavit undertaking under which the Applicant declares that it shall, unconditionally, fully and timely, comply with any and all such conditions immediately upon its election as the Winning Bidder, if so elected.

11.3.4. No Person, other than an Institutional Investor, shall be

entitled to participate in the Election Process as an Applicant if any Person Controlling it, Controlled by it, or under common Control with it, shall participate in the Election Process within the framework of another Applicant.

54 Notice No. 2, 25.10.2011, Ver 1.01


31

For the avoidance of doubt, it is clarified that compliance of an Applicant with the aforesaid, shall not derogate from the Election Committee's authority under Section 14.1 hereof, to disqualify the Basic Proposal of such Applicant, or set conditions for the continued participation of such Applicant in the Election Process, as the Election Committee may deem fit at its discretion, if the Election Committee shall have reasonable concern of collusion, transfer of information between different Applicants, or otherwise breach or circumvention of the provisions of Section 6.5 hereof, including without limitation, due to the tenure of any Office Holder in more than one Applicant or in any Person Controlling more than one Applicant.

11.4. The Applicant's Financial Stability

11.4.1. The equity of the Applicant or the aggregate equity of

all Interested Parties in the Applicant (calculated on a pro-rata basis of the Holding percentage interest of each Interested Party in the Applicant), shall be at least NIS 400,000,000 (four hundred million), calculated in accordance with and evidenced by the latest available (at least 2010) audited, annual, financial statements of the Applicant, or each Interested Party in the Applicant, or in the absence of such audited financial statements, evidenced by the 2010 reviewed, annual, financial statements of the Applicant, or each Interested Party in the Applicant, as the case may be, subject to a CPA's written confirmation attesting that under the applicable law of the Applicant or of such relevant Interested Party in the Applicant, the Applicant, or the relevant Interested Party in the Applicant is not obliged to prepare and in fact does not prepare such audited financial reports and attesting further to the Applicant's compliance with the aforesaid equity threshold requirement; or Only with respect of an Applicant who is a fund managers corporation that (i) manage a fund of committed capitals (e.g. infrastructure fund, private equity fund, etc.), on an exclusive basis and (ii) have the ability to invest in the telecommunication sector and in Israel - the total non invested committed funds under management of such Applicant, readily available for investment by such Applicant in the telecommunication sector and in Israel, are at least NIS 600,000,000 (six hundred million), calculated in accordance with and evidenced by the latest available (at least 2010) audited (if applicable), reviewed (if audited are


32

inapplicable) or otherwise annual financial documents of the Applicant, applicable under the Applicant's applicable law, confirmed by a CPA's written confirmation attesting that the Applicant is not obliged to prepare and in fact does not prepare audited and/or or reviewed financial reports, as the case may be, and attesting further to the Applicant's compliance with the aforesaid committed funds threshold requirement. The said CPA confirmation may be based on a written confirmation prepared and submitted by a non-Israeli charted public accountant, which shall be attached to the CPA confirmation, provided that the following conditions apply: 11.4.1.1. With respect of an Applicant, a Controlling

shareholder of an Applicant, or an Interested Party in an Applicant who is a natural individual – only if such natural individual is not an Israeli Citizen;

11.4.1.2. With respect of an Applicant, a Controlling shareholder of an Applicant, or Interested Party in an Applicant who is a corporation – only if such corporation is not registered and incorporated in Israel and said non-Israeli charted public accountant is the auditor of said corporation's financial statements.

11.4.2. Notwithstanding the provisions of Section 11.4.1

hereof, with respect of an Applicant who has a Controlling member, the equity of such Controlling member evidenced in accordance with the provisions of Section 11.4.1 hereof, shall be deemed as the Applicant's equity, if the Applicant chooses so.

11.4.3. If a partnership is an Interested Party in the Applicant,

its portion in the aggregate equity of all Interested Parties in the Applicant shall be calculated in accordance with its own equity, or in accordance with the liability of all of the partners in such partnership.

11.4.4. The equity of an Interested Party who is a natural

individual shall be authenticated by a CPA, or otherwise in accordance with the provisions of Section 11.4.1.1.


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11.5. Facility Agreement – The Applicant shall procure and submit within the framework of chapter C of the Basic Proposal, a binding commitment to lend, facility agreement, setting all of the conditions under which, one of the 5 (five) largest commercial banks in Israel, or a Foreign Bank, or a consortium of such banks (the "Facility Financier"), is fully committed to provide and facilitate the Telecommunication Company with Project financing loan facility for financing the business activities of the Telecommunication Company, in the aggregate amount that will together with the Minimum Closing Equity Bid (i.e., NIS 300,000,000 (three hundred million) cover, at least, the maximum negative cash flow of the Telecommunication Company in accordance with the Business Plan submitted by the Applicant within the framework of its Basic Proposal and which has served as the basis for obtaining the facility agreement (the "Facility Agreement"). The Facility Agreement shall be made on a non-recourse basis towards IEC and shall not be made on an exclusive basis, or otherwise contain provisions restricting in any way whatsoever, the ability and possibility of any other Applicant from entering into a Facility Agreement with the same Facility Financier or any bank or financial institution forming part thereof, as the case may be.

11.6. Bank Guarantee/Standby Letter of Credit55

11.6.1. The Applicant shall submit: 11.6.1.1. an autonomous 56unconditional and

irrevocable57 bank guarantee, issued by any Israeli commercial bank or Insurer in the form and text of Annex "D",58 payable upon demand, and valid as from the date of issuance thereof and until the later of (i)12 (twelve) months from the final date for submission of the Basic Proposal as stipulated in Section 2.5.7 hereof; or (ii) 14 (fourteen) calendar days after the Telecommunication Licence has been granted; or (iii) any later date determined by the Election Committee pursuant to Section 12.4.2, in the amount of NIS 14,000,000 (fourteen millions) (the "Bank Guarantee"); or59

55 Notice No. 2, 25.10.2011, Ver 1.01 56 Notice No. 2, 25.10.2011, Ver 1.01 57 Notice No. 2, 25.10.2011, Ver 1.01 58 Notice No. 2, 25.10.2011, Ver 1.01 59 Notice No. 2, 25.10.2011, Ver 1.01


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11.6.1.2. an autonomous unconditional and irrevocable standby letter of credit issued by a Foreign Bank, and made in a form and text substantially identical to that of Annex "D" hereof, accompanied by an official legally binding confirmation of authorities of the signatory on behalf of such Foreign Bank60 on an equivalent amount in US Dollars or Euro only to NIS 14,000,000 (fourteen millions)61, calculated in accordance with the Representative Exchange Rate of the pertinent currency as of the date of issuance thereof (the "Standby Letter of Credit").62

The63 Bank Guarantee or the Standby Letter of Credit, as the case may be,64 shall be linked to the Consumer Prices Index65 in accordance with the provisions of section 10 hereof and Annex "D" hereof66. In addition, it is clarified, for the avoidance of doubt that the amount of the Bank Guarantee or the Standby Letter of Credit, as the case may be,67 shall be a net amount and any and all commissions, or other payments in connection with the issuance, currency conversion and/or exercise thereof, shall be borne solely by the pertinent Applicant.

60 Notice No. 2, 25.10.2011, Ver 1.01 61 Notice No. 2, 25.10.2011, Ver 1.01 62 Notice No. 2, 25.10.2011, Ver 1.01 63 Notice No. 2, 25.10.2011, Ver 1.01 64 Notice No. 2, 25.10.2011, Ver 1.01 65 Notice No. 2, 25.10.2011, Ver 1.01 66 Notice No. 2, 25.10.2011, Ver 1.01 67 Notice No. 2, 25.10.2011, Ver 1.01


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11.6.2. The Bank Guarantee or the Standby Letter of Credit, as the case may be,68 shall be made at the order of the Applicant for the benefit of IEC who shall hold the same and act in connection with the same on behalf of and in accordance with the resolutions and instructions of the Election Committee.

Notwithstanding the aforesaid, an Applicant may submit up to 3 (three) separate Bank Guaranties or the Standby Letters of Credit, as the case may be,69 aggregating to the amount specified in Section 11.6.1 hereof, made at the order of up to 3 (three) Interested Parties in the Applicant, each of which, for the benefit of IEC who shall hold the same and act in connection with the same on behalf of and in accordance with the resolutions and instructions of the Election Committee.

11.6.3. The originally signed Bank Guarantee or the Standby

Letter of Credit, as the case may be,70 shall be attached to the originally signed Executive Summary and Overview and photocopies of the Bank Guarantee or the Standby Letter of Credit, as the case may be,71 shall be attached to the Executive Summary and Overview of all other copies of the Applicant's Basic Proposal.

11.6.4. If the Election Process shall be delayed or postponed,

for any reason whatsoever, the Election Committee may demand from the Applicants to extend the validity period of the Bank Guarantee or the Standby Letter of Credit, as the case may be,72 correspondingly. Failure of an Applicant to comply with any such demand shall be deemed retraction from such Applicant's Basic Proposal and may result in disqualification of the Applicant and its Basic Proposal.

11.6.5. The Election Committee may disqualify an Applicant

and/or foreclose on such Applicant's Bank Guarantee or the Standby Letter of Credit, as the case may be73, in whole or in part, after allowing the pertinent Applicant a right of audience, in any of the following circumstances:

11.6.5.1. The Applicant has unilaterally withdrawn

from participation in the Election Process after having submitted its Basic Proposal;

68 Notice No. 2, 25.10.2011, Ver 1.01 69 Notice No. 2, 25.10.2011, Ver 1.01 70 Notice No. 2, 25.10.2011, Ver 1.01 71 Notice No. 2, 25.10.2011, Ver 1.01 72 Notice No. 2, 25.10.2011, Ver 1.01 73 Notice No. 2, 25.10.2011, Ver 1.01


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11.6.5.2. The Election Committee has determined that the Applicant has acted in a devious, conniving, or lack of good faith manner, in connection with the Election Process;

11.6.5.3. The Election Committee has determined that

the Applicant has submitted to the Election Committee misleading information, or inaccurate material information;

11.6.5.4. The Applicant did not furnish the Election

Committee with relevant information, has failed to provide the Election Committee with answers or materials sought under Sections 14.2, 15, or 16 hereof, or has failed to comply with its obligations under Section 12.4.4 hereof;

11.6.5.5. The Applicant has failed to extend the

validity of the Bank Guarantee or the Standby Letter of Credit, as the case may be74, if and to the extent necessary in accordance with the provisions of Sections 11.6.1, 12.4.1, or 12.4.2 hereof;

11.6.5.6. After having been declared as the Winning

Bidder, the Winning Bidder did not act in accordance and full compliance with the provisions of Section 21 hereof.

It is clarified that the list of circumstances specified in this Section 11.6.5 is not a final or an exhaustive list.

11.6.6. Unless the Election Committee has determined, or is considering, the foreclosure on an Applicant's Bank Guarantee or the Standby Letter of Credit, as the case may be75, in accordance with the provisions of Section 11.6.5 hereof, the Bank Guarantee or the Standby Letter of Credit, as the case may be,76 shall be returned:

11.6.6.1. To an Applicant who has been disqualified

due to reasons other than those stipulated in Sections 11.6.5 and/or 14 hereof – within 14 (fourteen) calendar days from the date on which the Applicant has been informed of such disqualification;

74 Notice No. 2, 25.10.2011, Ver 1.01 75 Notice No. 2, 25.10.2011, Ver 1.01 76 Notice No. 2, 25.10.2011, Ver 1.01


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11.6.6.2. To an Applicant who has participated in the Financial Competition Stage but has not been declared as the Winning Bidder, the Second Bidder or the Third Bidder – within the earlier of: (i) 14 (fourteen) calendar days from the date on which the Telecommunication Company has been granted the Telecommunication Licence; or (ii) the lapse of 6 (six) months from the date of announcement of the Winning Bidder;

11.6.6.3. To the Applicant who has been declared as

the Winning Bidder - within 14 (fourteen) calendar days from the date on which the Telecommunication Company has duly submitted the Telecommunication Licence Bank Guarantee to the MOC;

11.6.6.4. If the Election Process or the Financial

Competition Stage has been terminated by the Election Committee - within 14 (fourteen) calendar days from the date on which the Election Committee has published the announcement of such termination.

11.7. Ancillary Signed Documents – The Applicant shall together with

and as an integral part of its Executive Summary and Overview, submit original signed copies of the following documents, in the form appended as Annexes or Schedules hereto (at the form of the last revised version thereof, as published or otherwise communicated by the Election Committee in accordance with the provisions of this Procedure, if at all, prior to the last date for submission of the Basic Proposals), without any modifications, comments or stipulations whatsoever: 11.7.1. The Founders Agreement, including all annexes and

schedules thereof in the form of Schedule 3 hereof;

11.7.2. The Constitutive Documents in the form of Schedule 4 hereof;

11.7.3. An unconditional, irrevocable undertaking to ensure the

submission by the Telecommunication Company of the application for the grant of the Telecommunication Licence, in the form of Annex "F" hereof;


signature by the Telecommunication Company of the Right of Use and Services Agreement (Schedule 10 hereof), in the form of Annex "G" hereof;


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11.7.5. An unconditional, irrevocable undertaking to sign and enter into the Escrow Agreement, in the form of the Draft Escrow Agreement attached hereto as Schedule 11 hereof, after the Election Committee has filled all details and blanks therein pertaining to the Winning Bidder; all - in accordance with the provisions of Section 20.3 hereof.


signature by the Telecommunication Company of the Founders Agreement (Schedule 3 hereof), in the form of Annex "I" hereof;77

11.8. The Applicant shall submit the Preliminary Project Business

Model in accordance and full compliance with the provisions of Annex "B" hereof by not later than the date set in Section 2.5.4 hereof, for submission thereof;

11.9. The Applicant shall submit a Basic Proposal in accordance and full compliance with the provisions of Section 12 hereof.

12. Submission of the Preliminary Project Business Model and the

Basic Proposal

12.1. General Obligation 12.1.1. The Applicant shall submit the Preliminary Project

Business Model by not later than the final date for submission thereof as set in Section 2.5.4 hereof, in the form of Annex "B" hereof.

12.1.2. The Applicant shall submit its Basic Proposal by not later than the final date for submission thereof as set in Sections 2.5.7 hereof, and further stipulated in Sections 12.3.1 hereof, in the form of Annex "C" hereof, together with all such materials and documents stipulated in this Procedure (all - at the form of the last revised version thereof, as published or otherwise communicated by Election Committee prior to the last date for submission of the Basic Proposals, if at all), without any modifications, comments, reservations, or conditions whatsoever and including all other materials and documents evidencing the Applicant's compliance with all of the Threshold Conditions.

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12.1.3. For the avoidance of doubt, it is clarified that an Applicant may not reserve its Basic Proposal or render the same conditional in a manner that does not coincide with the requirements or provisions of this Procedure.

12.2. Structure of the Basic Proposal

12.2.1. The Basic Proposal including all ancillary documents,

annexes and schedules thereof, shall be submitted when edited in accordance and strict compliance with the provisions of this Procedure and the chapters, table of content, sections and filling instructions of the Basic Proposal Form attached as Annex "C" hereof.

12.2.2. The Basic Proposal Form in its entirety and including all chapters thereof supplements the provisions of this Procedure and constitutes an integral part of this Procedure. Nevertheless, in any event of conflict or discrepancy between the provisions of the main body of this Procedure and the provisions or content of the Basic Proposal Form, the provisions of the main body of this Procedure shall prevail.

12.3. Manner and Time for Submission of the Basic Proposal

12.3.1. The Basic Proposal together with all ancillary

documents and materials (whether or not specified or referred to in this Procedure), evidencing the Applicant's compliance with all of the Threshold Conditions, shall be submitted at the IEC's Offices in persona and confirmed by a certificate of delivery, by not later than the date and time specified in Section 2.5.7 hereof, subject to prior coordination of the actual date and time of submission.

12.3.2. The Basic Proposal or any part thereof may not, under

no matter which circumstances, be submitted by e-mail, fax, or any manner other than as specified in Sections 12.3.1 hereof.

12.3.3. The submission of a Basic Proposal, shall constitute a

conclusive, unconditional and exhaustive evidence and an irrevocable declaration that the Applicant has read and understood all of the provisions included and/or referred to, in any and all of the Procedure Documents and that the Applicant fully, unconditionally, unreservedly and irrevocably consents thereto.


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12.3.4. Without derogating from and in addition to the provisions of Section 12.3.3 hereof, the submission of the Basic Proposal in accordance and full compliance with the provisions and instructions specified in the Basic Proposal Form (Annex "C" hereof), shall constitute an unconditional and irrevocable waiver by the Applicant of confidentiality and the Applicant's consent that the Election Committee may seek and receive from any of the State authorities or any other official entity in Israel or outside of Israel, information about it or any member thereof.

Where an Applicant is a Consortium Group, the aforesaid shall apply mutatis mutandis to each Consortium Group Entity comprising such Consortium Group.

12.4. Validity of the Basic Proposal 12.4.1. The Basic Proposal shall be valid and binding as from

the date and time of actual submission thereof and until the lapse of the later of: 12.4.1.1. 12 (twelve) months from the final date for

submission of the Basic Proposal as stipulated in Section 2.5.7 hereof; or

12.4.1.2. 14 (fourteen) calendar days after the Telecommunication Licence has been granted; or

12.4.1.3. any later date determined by the Election Committee in accordance with the provisions of Section 12.4.2 hereof.

12.4.2. The Election Committee may, at its discretion, extend

the validity period of the Basic Proposal and/or the Bank Guarantee or the Standby Letter of Credit, as the case may be78.

12.4.3. An Applicant shall not be entitled to amend or revise its

Basic Proposal or any part thereof after the final date for submission thereof as specified in Sections 12.3.1 hereof, respectively, unless it has received the Election Committee's written request or approval for doing so.

78 Notice No. 2, 25.10.2011, Ver 1.01


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12.4.4. Should any change occur in the information provided by an Applicant in its Basic Proposal or in any document submitted by the Applicant within the framework of its Basic Proposal, the Applicant shall immediately, and in any event by not later than 2 (two) business days from the occurrence of any such change, report the nature and full details of any such change to the Election Committee, in writing. For the avoidance of doubt, it is clarified that the duty to report to the Election Committee on any such change applies also in relation to any such change which is in the public domain.

12.4.5. An Applicant wishing to withdraw from its participation

in the Election Process after the final date for submission of the Basic Proposal as specified in Section 2.5.7 hereof, shall do so by written notice to the Election Committee. Such written notice shall be irrevocable and non-retractable and the Election Committee may in such circumstances resolve to foreclose on such Applicant's Bank Guarantee or the Standby Letter of Credit, as the case may be79, subject to and in accordance with the provisions of Section 11.6.5 hereof.

13. Examination of the Basic Proposal

The examination of the Basic Proposals submitted by the Applicants (the "Basic Proposal Examination") shall be conducted as follows: 13.1. After the final date and time for submission of the Basic

Proposal, as specified in Section 12.3.1hereof, the Applicants' Basic Proposals as were submitted to the Election Committee shall be opened by an opening committee comprised of two individuals, appointed by the Election Committee ("Opening Committee").

13.2. Upon opening the Applicants' Basic Proposal, the Opening Committee shall draw a protocol specifying, inter alia, the following: 13.2.1. The date and time of opening the Applicants' Basic

Proposal;

13.2.2. The names of all those present at the opening the Applicants' Basic Proposal;

79 Notice No. 2, 25.10.2011, Ver 1.01


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13.2.3. The names and Applicant Reference Numbers of the Applicants who have submitted a Basic Proposal;

13.2.4. The number of binders and subject matter of each

binder holding the Applicants' Basic Proposal as submitted to the Election Committee.

13.3. After having received the protocol referred to in section 13.2

hereof, the Election Committee shall examine each and every Basic Proposal submitted to it in order to ascertain that: 13.3.1. the Basic Proposal is submitted in accordance and full

compliance with the provisions and requirements of the Procedure in general and the Basic Proposal Form (Annex "C" hereof), in Particular;

13.3.2. The pertinent Applicant is in full compliance with all of the Threshold Conditions;

13.3.3. There are no, prima facie, grounds for disqualification

of an Applicant or its Basic Proposal in accordance with the provisions of this Procedure.

14. Disqualification of a Basic Proposal

14.1. The Election Committee may disqualify a Basic Proposal and the Applicant who has submitted it, in any of the following circumstances after allowing the pertinent Applicant a right of audience: 14.1.1. The Basic Proposal or any part thereof does not

conform or adhere to the provisions, requirements, or conditions of the Procedure;

14.1.2. The Basic Proposal or any part thereof, is unreasonable, untrue, incomplete, or based on erroneous or unreasonable premises, or on flawed understanding of the subject matter of the Procedure;

14.1.3. The Basic Proposal or any part thereof, contains

conditions or reservations pertaining to the provisions of the Procedure or any of the Procedure Documents;

14.1.4. The Applicant or any Person Holding, directly or

indirectly 10% (ten percent) or more of the Means of Control in the Applicant, has initiated voluntary liquidation proceedings, or if a court of law has appointed a receiver thereto, or has ordered the dissolution thereof;


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14.1.5. The Applicant has acted in breach or violation of the provisions of this procedure or otherwise in lack of good faith or conniving manner;

14.1.6. The Election Committee is of the opinion that the

business activities of the Applicant or of the Person Controlling the Applicant manifest a conflict of interests with the State or with IEC;

14.1.7. The Election Committee is of the opinion that in

accordance with the provisions of the Draft Telecommunication Licence (Schedule 7 hereof), the Applicant displays a cause for non-compliance with, or revocation of, the Telecommunication Licence if the same would have been granted to it.

14.1.8. The Election Committee is of the opinion that any

change reported to it in accordance with the provisions of Section 12.4.4 hereof, or any new information about an Applicant which has reached the Election Committee in any way whatsoever, warrants the disqualification of the Applicant.

It is clarified that the list of circumstances specified in this Section 14.1 is not an exhaustive list and it is further clarified that the Election Committee may, at its discretion, consult with any relevant Government agency or any other consultant of the Election Committee, in connection with its contemplation to disqualify a Basic Proposal and the Applicant who has submitted it and to furnish any such relevant Government agency or any other consultant, with any document or information in its possession, within the framework of such consultation.

14.2. The Election Committee may allow an Applicant who has failed

to submit with its Basic Proposal any approval, permit, licence or any other document, to supplement and amend its Basic Proposal by producing the same within a specific time frame and in a manner set by the Election Committee. For the avoidance of doubt, it is clarified that such authority and discretion of the Election committee does not confer on an Applicant the right to supplement or amend its Basic Proposal and no claim shall be made by an Applicant to the effect that the Election Committee was under an obligation to allow an Applicant to supplement or amend its Basic Proposal, or refrain from disqualifying its Basic Proposal.

14.3. It is further clarified that the Election Committee's authority and discretion in general and that referred to in Section 14.2 hereof, in particular, shall exist throughout the Election Process.


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15. Demand for Additional Information and Clarifications

15.1. The Election Committee may request from any Applicant to provide it with oral or written clarifications pertaining to the Applicant's Basic Proposal, and may, within the framework of such request, allow an Applicant to supplement and amend its Basic Proposal. Clarifications, supplements or amendments submitted by an Applicant pursuant to the Election Committee's decision to allow the same, shall constitute an integral part of such Applicant's Basic Proposal. For the avoidance of doubt it is clarified that the authority and discretion of the Election Committee under this Section 15.1 does not confer on an Applicant the right to provide clarifications or to supplement or amend its Basic Proposal if the Election Committee has not decided to ask for or allow any of the same.

15.2. The Election Committee may invite an Applicant to appear before it in order to clarify details pertaining to such Applicant's Basic Proposal, or other details required by the Election Committee in order to formulate or arrive at a decision concerning the Applicant's Basic Proposal.

15.3. The Election Committee may, at its discretion, conduct any inquiry, examination, or investigation it shall deem fit, in connection with the Applicant's Basic Proposal and/or the compliance of the Applicant with any of the terms and conditions of this Procedure.

For purposes of conducting any such inquiry, examination, or investigation, the Election Committee may, inter alia, require the Applicant to provide it with any approval, document or information that it shall deem necessary, as well as to use the services of consultants and experts in any relevant field in order to examine any detail or formulate any necessary assessment.

16. Conducting Negotiations with the Applicants

16.1. The Election Committee reserves the right to conduct

negotiations with the Applicants during the Basic Proposal Stage. It is clarified that the Election Committee is not obliged to conduct any such negotiations and the decision whether to do so or not shall be made by the Election Committee at its discretion.

16.2. Within the framework of conducting any negotiations, the Election Committee, or whoever empowered by it, may but is not obliged to, hold meetings with the Applicants, or communicate to them, orally or in writing, its reservations concerning any part or element of their Basic Proposal.


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16.3. Within the framework of conducting any negotiations, the Election Committee may, but is not obliged to, allow the Applicants to supplement and amend their Basic Proposal in accordance with the provisions of Section 15.1 hereof.

17. Screening of the Applicants

17.1. After having completed the basic Proposal Examination, including, if at all, exercise of its discretionary authority under Sections 14, 15 and/or 16 hereof the Election Committee shall in accordance with the provisions of Section 13.3 hereof, screen the Applicants who qualified as Eligible Applicants and are invited as such to participate in the Financial Competition Stage and shall accordingly publish and announce the names of such Applicants (the "Basic Proposal Stage Screening").

17.2. If after the completion of the Basic Proposal Stage Screening, there shall be only one Applicant who has qualified as an Eligible Applicant, the Financial Competition Stage shall be cancelled, and such single Eligible Applicant shall be a candidate for election as the Controlling Shareholder subject to submission of an irrevocable unconditional offer for an equity investment in the Telecommunication Company in an amount equal to or higher than the amount of the Minimum Closing Equity Bid, within not later than 7 (seven) calendar days from the date on which the Election Committee has published and announced its name as an Eligible Applicant. Subject to such single Eligible Applicant's compliance with the provisions of this Section 17.2 above, the provisions of Section 20 hereof shall apply to such single Eligible Applicant mutatis mutandis.

17.3. Notwithstanding any other provision of this Procedure, if after the completion of the Basic Proposal Stage Screening, there shall be only one Applicant who has qualified as an Eligible Applicant, and irrespective of whether or not such single Eligible Applicant has submitted to the Election Committee with an irrevocable unconditional offer for an equity investment in the Telecommunication Company in accordance with the provisions of Section 17.2 hereof, the Election Committee may, at its discretion, enter into negotiations with such single Eligible Applicant, or cancel the Election Process, or make the continuation of such single Eligible Applicant's participation in the Election Process contingent upon making changes in the terms and conditions stipulated in the Procedure or any of the Procedure Documents, or upon other conditions, or may approach other Persons, and invite them to take part in the Election Process and may hold competition between such single Eligible Applicant and such other Persons.


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The Election Committee may further, at its discretion, prescribe the arrangements, dates and conditions, as may be required under the provisions of this Section 17.3, including, inter alia, resolving that it will be possible for such single Eligible Applicant to become the Controlling Shareholder subject to an equity investment offer at a higher price than that offered by any of the other Persons under the competition held between it and such other Persons as aforesaid, any financial arrangements that may apply, if any, concerning such single Eligible Applicant, if it will not be elected as the Controlling Shareholder, a determination that the price offered by any of the other Persons as set out in this Section shall be higher at least by the rate prescribed by the Election Committee than the equity investment offer made by such single Eligible Applicant or any other arrangement, date or condition, without being required to give grounds for such decision and without such act conferring any right whatsoever such single Eligible Applicant or upon any of other Person.


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Chapter C - The Financial Competition Stage

18. General Provisions As stated in Section 2.4.3 hereof, the Financial Competition Stage shall be conducted as a dynamic, on-line, competitive bidding process during which, the Eligible Applicants may submit their Bids for their offered Equity Investment in the Telecommunication Company in accordance with the cumulative provisions of this Section 18 and Section 19 hereof (the "Bidding Process"), as follows:

18.1. Only Eligible Applicants, announced as such and invited by the

Election Committee to participate in the Financial Competition Stage, shall be entitled to take part and submit Bids in the Financial Competition Stage.

18.2. Eligible Applicants invited and wishing to participate in the

Financial Competition Stage shall, within 7 (seven) calendar days from the date of announcement by the Election Committee of the names of the Eligible Applicants, submit to the Election Committee a written application for the issuance of 2 (two) smart cards specifying the names, official identification and contact details (including physical addresses, telephone numbers and e-mail addresses) of 2 (two) individuals, unto whose names, said smart cards are to be issued, respectively, and who shall serve as the authorized users, duly appointed and empowered by an Eligible Applicant to use the smart card for purposes of submission of Bids on behalf of the Eligible Applicant who has appointed them during and in the process of the Financial Competition Stage ("Smart Card Application" and "Authorized User", respectively).

18.3. Following receipt by the Election Committee of a Smart Card

Application, the Election Committee shall issue the smart cards on the names of the relevant Authorized Users and invite such Authorized Users to receive the smart cards in person.

18.4. The smart cards are personal and shall be handed to the

Authorized Users subject to their identification by producing 2 (two) separate official identification documents and subject further to their signature on an approval document confirming the receipt of the smart card and the accuracy of their personal details as appearing on the smart card.

18.5. The submission of Bids in the Financial Competition Stage may

only be made by the Authorized Users, through use of a smart card.


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18.6. After identification of an Eligible Applicant through the smart card issued to its Authorized Users and the insertion of the PIN (Personal Identification Number) code of the Authorized User, the Authorized User shall gain access to the dynamic on-line bidding internet website at: [WEBSITE ADRESS will be published later on] where the Bidding Process shall be held (the "Bidding Site").

18.7. In order to submit a Bid after having gained access to the

Bidding Site, the Authorized User shall be required to type his Closing Equity Bid and the Deferred Equity Bid, if and to the extent opted for. Thereafter, the Closing Equity Bid amount and the Deferred Equity Bid amount, as typed by the Authorized User shall be presented and the Authorized User shall be required to confirm the same and sign an electronic confirmation. Accordingly, after having confirmed the Bid and signed it electronically, the Authorized User and the Eligible Applicant who has appointed him as such, shall be barred and estopped from raising any claim whatsoever concerning the Bid, including, without limitation, claims for typing errors or otherwise.

18.8. Any Bid submitted by any Authorized User within the framework

of the Bidding Process shall be deemed, for all intents and purposes, to have been submitted by the Eligible Applicant/Bidder who has appointed the Authorized User who has submitted a Bid.

19. Rules of Conduct of the Bidding Process

19.1. The Minimum Closing Equity Bid is NIS 300,000,000 (three hundred millions).

19.2. The submission of a Deferred Equity Bid is an option that may be exercised by an Authorized User at his discretion, without any minimum amount requirement.

19.3. Bids may only be submitted in NIS denomination.

19.4. The first Bid to be duly submitted and registered in the system must be in an amount equal to, or higher than, the amount of the Minimum Closing Equity Bid as specified in Section 19.1 hereof. Any subsequent Bid may only be submitted in an amount that is higher, by at least an increment of NIS [AMOUNT IN NUMBERS] [(AMOUNT IN WORDS)]80, than the highest and leading Bid submitted and duly registered as such by the system at the time of submission of any such subsequent Bid, during the active duration of the Bidding Process (the "Bid Increment").

80 The Bid Increment amount shall be published by the Election Committee at a later point in

time, before the Financial Competition Stage.


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19.5. The Election committee may, at its discretion, at any point in time, including during the active duration of the Bidding Process, increase, reduce or cancel the amount of the Bid Increment specified in Sections 19.4 hereof. If the Election Committee shall exercise such discretion, during the active duration of the Bidding Process, the Bidding Process shall be temporarily frozen and a notice of the pertinent change in the Bid Increment shall be electronically communicated on the main screen of the Bidding Site following which, the Bidding Process shall be resumed. The Election Committee may, but is not obliged to, communicate any such change to all Authorized Users in any other manner it shall deem fit.

19.6. The calculation formula for determining the ranking of the Bids

and the highest and leading Bid at any point in time during and at the end of the Bidding Process shall be the result of adding the sum of the amount of any Bidder's last and highest Closing Equity Bid duly submitted and registered in the system and 9/10 (nine tenths) of the amount of such Bidder's last and highest Deferred Equity Bid duly submitted and registered in the system, if at all;

19.7. During the entire Bidding Process the highest and leading Bid

duly submitted and registered in the system, calculated in accordance with the formula described in Section 19.6 hereof, shall be presented on the main screen of the Bidding Site. In addition, any Authorized User shall be afforded an access to a screen on the Bidding Site that will present the then current highest and leading Bid registered as such in the system, calculated in accordance with the formula described in Section 19.6 hereof and the time on which said highest and leading Bid was confirmed and registered in the system.

19.8. For the avoidance of doubt it is clarified that while the Election

Committee shall, at all times during the Bidding Process, have access to the number of Bidders participating in the Bidding Process through their respective Authorized Users, the details and breakdown of any Bid duly submitted and registered in the system, the ranking of any such Bid and the identity of any Authorized User who has submitted any such Bid, the Authorized Users shall not have access to said information and shall only be afforded the information described in Section 19.7 hereof.

Notwithstanding the aforesaid, the Election Committee may, at any point in time during the Bidding Process, but is not obliged to, afford all Authorized Users access to all or part of the information available to the Election Committee as detailed in this Section 19.8.


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19.9. The Bidding Process shall be held on such date and commence at such time as shall be announced and communicated by the Election Committee.

19.10. The duration of the Bidding Process shall be 30 (thirty) minutes

as from the time of its commencement as shall be announced and communicated by the Election Committee in accordance with the provisions of Section 19.9 hereof, and may be extended in accordance with the provisions of Section 19.13 hereof.

19.11. Any Authorized User may, during the active duration of the

Bidding Process, submit an unlimited number of Bids as he shall deem fit at his discretion, provided that any Bid submitted by any Authorized User shall be of an amount higher by the then applicable Bid Increment, than the highest and leading Bid submitted and duly registered as such in the system, at that time.

19.12. The highest and leading Bid submitted and duly registered in the

system by any Authorized User on behalf of a Bidder, shall replace any lower Bid previously submitted on behalf of such Bidder, if at all, and shall be irrevocable and binding on such Bidder for all intents and purposes.

19.13. The system of the Bidding Process contains a mechanism which

will automatically postpone the closing of the Bidding Process and allow for its extension as follows: if during the last 5 (five) minutes of the active duration of the Bidding Process, a Bid which is duly higher by the then applicable Bid Increment, than the highest and leading Bid registered in the system as such in that point in time, has been duly submitted and registered in the system, the Bidding Process shall be automatically extended by an additional 5 (five) minutes from the time when such new highest and leading Bid has been registered in the System and so forth.

For the avoidance of doubt, it is clarified that submission of a Bid that is not higher by the then applicable Bid Increment than the highest and leading Bid presented on the system's screen as such at that time, shall not extend the active duration of the Bidding Process as described in this Section 19.13. For example: Given that the active duration of the Bidding Process is due to expire at 10:30am and a Bid has been duly registered in the system at 10:28am, which Bid is higher by the then applicable Bid Increment than the highest and leading Bid registered as such in the system at said time - the active duration of the Bidding Process shall be extended until 10:33am;


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if an additional Bid has been duly registered in the system at 10:31am, which Bid is higher by the then applicable Bid Increment than the highest and leading Bid registered as such in the system at said time - the active duration of the Bidding Process shall be further extended until 10:36am; if an additional Bid has been duly registered in the system at 10:34am, which Bid is higher by the then applicable Bid Increment than the highest and leading Bid registered as such in the system at said time - the active duration of the Bidding Process shall be further extended until 10:39am, and so forth. The Election Committee shall, at its discretion, be entitled (but not obliged), at any stage of the Bidding Process, to change (lengthen or shorten), the 5 (five) minutes extension increments of the active duration of the Bidding Process. In such case a notice of such change shall be electronically communicated to all Authorized Users on the main screen of the Bidding Site. The Election Committee shall, at its discretion, be entitled (but not obliged), to provide such notice to all Authorized Users by any other mean it shall deem fit.

19.14. An Authorized User may submit a Bid at any point in time

throughout the active duration of the Bidding Process, including, for the avoidance of doubt, during any extension of such active duration, if and to the extent extended in accordance with the provisions of Section 19.13 hereof, even if such Authorized User did not submit any Bid during the original 30 (thirty) minutes duration of the Bidding Process as set in Section 19.10 hereof, or during any previous extension thereof, as the case may be.

19.15. If two or more separate Bids amounting to an identical Bid amount (irrespective of any differentiation in the breakdown of any of which, if at all) were duly submitted during the active duration of the Bidding Process, only the first and earliest of which shall be registered in the system and an online notice shall be sent to the Authorized User(s) which have sent any and all other and later such identical Bids, to the effect that their said Bids were not registered in the system.

19.16. If during the last 5 (five) minutes of the active duration of the Bidding Process (as and if extended in accordance with the provisions of Section 19.13 hereof), no additional Bid has been duly submitted and registered, the Bidding Process shall be suspended and enter into a freeze state ("Freeze State").

19.17. After the Bidding Process has entered into the Freeze State, all

Authorized Users shall be required (by a pop up screen) to confirm and digitally sign an approval stating that their last duly submitted and registered Bid is indeed their final Bid and that they are not interested in submitting an additional new and higher Bid ("Final Bid Confirmation").


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The signing of the Final Bid Confirmation shall end the participation of the Pertinent Bidder in the Bidding Process. Alternatively, an Authorized User may request to resume the Bidding Process and to be afforded the opportunity to submit a new and higher Bid. In such circumstances, the Election Committee shall, at its discretion, be entitled (but not obliged) to resume the Bidding Process for additional Bids to be submitted during any active duration period as shall be determined and communicated by the Election Committee.

19.18. In Addition, the Election Committee shall, at its discretion, be entitled (but not obliged), to make telephone contact with the Bidders/Authorized Users, in order to confirm that they have not been prevented from submitting a Bid or in order to ascertain any other issue as the Election Committee may deem fit. It is hereby clarified that if the Election Committee does not initiate such contact as aforesaid, no Bidder/Authorized User shall have any claim as a result or in connection therewith and it shall not exempt any Bidder/Authorized User from acting in accordance with the provisions of Section 19.24 hereof. If it shall become evident to the Election Committee that any of the Bidders/Authorized Users have been prevented from submitting a Bid, the Election Committee may, at its discretion, decide to resume the Bidding Process from the point at which it has entered into a Freeze State and to allow new and additional Bids to be submitted by all Authorized Users for a period of 5 (five) minutes, or for any other active duration period as shall be determined and communicated by the Election Committee, following which, the Bidding Process shall be duly resumed as described in Section 19.13 hereof.

19.19. Should the Election Committee decide not to resume the Bidding Process, or should the Authorized Users confirm that they have not been prevented from submitting a Bid, the Bidding Process shall end and a notice to that effect shall be communicated by the Election Committee.

19.20. The Election Committee reserves the right, at any point in time

throughout the Bidding Process, at its discretion, to suspend and freeze the Bidding Process and/or to resume the Bidding Process after it has been so suspended, whether it has been suspended at the initiative of the Election Committee or has entered into Freeze State in accordance with the provisions of Section 19.16 hereof.

Renewal of the Bidding Process after it has been suspended or frozen, for any reason, shall be for a period of 5 (five) minutes, or for any other active duration period as shall be determined and communicated by the Election Committee.


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19.21. The Election Committee reminds the Bidders and refers them to the provisions of Section 6.5 hereof, under which, no Applicant, Eligible Applicant or a Bidder, as the case may be, may coordinate its positions in the Election Process with another Applicant, Eligible Applicant or a Bidder, or otherwise act in cooperation in any way whatsoever with another Applicant, Eligible Applicant or Bidder, whether directly or indirectly.

19.22. It is clarified that for as long as the Bank Guarantee or the

Standby Letter of Credit, as the case may be,81 has not been returned to a Bidder in accordance with the provisions of Section 11.6.6 hereof, the last and final Bid of any such Bidder shall be in full force and effect and binding on such Bidder, whether such Bid has been the highest and leading Bid or not, at any point in time during the Bidding Process or at the end thereof.

19.23. Submission of information and notices via the Bidding Process'

on-line system shall be deemed as delivery of information to all Eligible Applicants/Bidders for all intents and purposes. Notwithstanding the aforesaid, the Election Committee reserves the right to provide notices at any stage of the Bidding Process, through any other means whatsoever, including by fax and/or telephone and/or mobile phone to the Representative of the Eligible Applicants/Bidder and/or to the Authorized Users appointed by the Bidders.

19.24. During the Bidding Process, no Eligible Applicant, Bidder,

Authorized User or any Person acting on the respective behalf of any of them, shall be entitled to submit any questions or queries whatsoever to the Election Committee or to any Person acting on its behalf, save for technical questions or queries in the case of technical malfunction only. Such questions and queries only may be submitted to the representative of the technical team of the Election Committee in the following telephone numbers: 972-4-8184007 or 972-52-3997789, e-Mail: [email protected] .

19.25. Without derogating from any other authority vested in the

Election Committee, the Election Committee may, at its discretion:

19.25.1. Cancel the Bidding Process if it shall be of the opinion

that it is necessary to do so due to an error or flaw in the Bidding Process;

19.25.2. Cancel a Bid that has been registered in the system and which is erroneous or flawed, or renders the Bidding Process erroneous or flawed;

81 Notice No. 2, 25.10.2011, Ver 1.01


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19.25.3. Suspend the Bidding Process in order to examine whether or not an error or flaw has occurred in the Bidding Process or in any certain Bid, until the Election Committee has decided how to handle the discoveries of such examination;

19.25.4. Decide that the Financial Competition Stage, and/or the

Bidding Process shall be held in a different manner and not necessarily as a dynamic on-line competitive bidding, provided that the Election Committee shall publish and communicate a notice to that effect to all Eligible Applicants, at least 10 (ten) calendar days in advance, in which the rules of any such different manner of holding and conducting the Financial Competition Stage, and/or the Bidding Process shall be specified.


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Chapter D - Election of a Winning Bidder and Closing 20. Election of the Winning Bidder

20.1. After final completion of the Bidding Process and the Financial Competition Stage in accordance with the provisions of Sections 18 and 19 hereof, or in the circumstances described in Sections 17.2 and 17.3 hereof, as the case may be, the Election Committee, shall, if at all, at its discretion, publish and announce the name of the Bidder whose Bid was the highest Bid duly submitted and registered in the system during the active duration of the Bidding Process, and who itself, or whose Basic Proposal, should not otherwise be disqualified in accordance with the provisions of this Procedure, or the single Eligible Applicant referred to in Sections 17.2 and 17.3 hereof, as the case may be, as the winning bidder, elected as such to be the Controlling Shareholder (the "Winning Bidder").

20.2. For the avoidance of doubt, it is reminded and clarified that the Election Committee may, at its discretion, decide to cancel the Election Process and not to declare and announce any Bidder or, if applicable, the single Eligible Applicant referred to in Section 17.2 hereof, as the Winning Bidder, or to announce a Winning Bidder even if the same was the only Bidder who participated in the Bidding Process and the Financial Competition Stage.

It is further clarified that the Election Committee may, at its discretion, conduct further negotiations with the Bidder whose Bid was the highest Bid duly submitted and registered in the system during the active duration of the Bidding Process with a view to receive from such Bidder a higher or otherwise better offer.

20.3. If the Election Committee has elected a Winning Bidder and has

published an announcement to that effect, then, the Election Committee shall, within 3 (three) Business Days from the dated of its announcement of election of the Winning Bidder, serve the fully filled Draft Escrow Agreement on the elected Winning Bidder and the elected Winning Bidder shall, within 10 (ten) calendar days from the date of said service by the Election Committee of the fully filled Escrow Agreement - 20.3.1. sign and enter into the Escrow Agreement with the

Escrow Agent; and

20.3.2. deposit his highest Closing Equity Bid amount in the Escrow Account; and


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20.3.3. Deposit his Deferred Equity Bid Bank Guarantee/Standby letter of Credit82 (if applicable), with the Escrow Agent.

20.4. Subject to the Winning Bidder full and timely compliance with all

of the provisions of Section 20.3 hereof, the Election Committee shall convene a closing meeting with IEC and the Winning Bidder at such place and on a date and time as shall be specified in a separate notice that will be issued by the Election Committee to that effect (the "Closing Date"), for the consummation of the transaction forming the subject matter of the Election Process and this Procedure (the "Closing").

It is clarified however, that convocation and consummation of the Closing shall be subject to the obtaining of all Permits and Consents at or prior to the Closing Date. For the avoidance of doubt, it is further clarified that convocation of the Closing, in and of itself, shall not create any contractual or other relationship between the Winning Bidder and IEC, which relationship shall be created only upon full completion of the Closing and consummation of all of the actions required to take place at the Closing as stipulated in Section 21.1 hereof.

20.5. Concurrently with the election and announcement of the Winning Bidder, the Election Committee may, at its discretion, publish and announce the names of the Bidders whose Bids were the second and third highest Bids duly submitted and registered in the system during the active duration of the Bidding Process, and who themselves, or whose Basic Proposals, should not otherwise be disqualified in accordance with the provisions of this Procedure, as the second bidder and third bidder (the "Second Bidder" and the "Third Bidder", respectively).

20.6. Should the Winning Bidder fail to duly comply with all of its obligations under Section 20.3 hereof, or fail to duly consummate the Closing in accordance with the provisions of Section 21 hereof, for any reason whatsoever, the Election Committee may, but is not obliged to, disqualify the elected Winning Bidder and announce the Second Bidder as the newly elected Winning Bidder, and the provisions of this Procedure shall apply to it as such mutatis mutandis.

20.7. Should the Second Bidder after having been announced as the newly elected Winning Bidder, fail to duly comply with all of its obligations under Section 20.3 hereof, or fail to duly consummate the Closing in accordance with the provisions of Section 21 hereof for any reason whatsoever, the Election Committee may, but is not obliged to, disqualify the Second Bidder and announce the Third Bidder as the newly elected

82 Notice No. 2, 25.10.2011, Ver 1.01


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Winning Bidder, and the provisions of this Procedure shall apply to it as such, mutatis mutandis.

20.8. Should the Third Bidder after having been announced as the

newly elected Winning Bidder, fail to duly comply with all of its obligations under Section 20.3 hereof, or fail to duly consummate the Closing in accordance with the provisions of Section 21 hereof for any reason whatsoever, the Election Committee may, but is not obliged to disqualify the Third Bidder and announce one of the other Bidders with its consent, as the newly elected Winning Bidder, provided that such Bidder submits the Bank Guarantee or the Standby Letter of Credit, as the case may be83, if it was returned to it in accordance with Section 11.6.6.2 hereof, and complies with any additional conditions as may be prescribed by the Election Committee, at its discretion, and the provisions of this Procedure shall apply to it as such, mutatis mutandis.

21. Closing

21.1. At the Closing all of the following actions shall take place: 21.1.1. IEC shall sign the Constitutive Documents, the

Founders Agreement including all schedule and annexes thereof, which and as were already signed by the winning Bidder in accordance with the provisions of Section 11.7 hereof;

21.1.2. The Winning Bidder and IEC shall sign and execute any other document required to be signed and executed in order to consummate and give a binding effect to the transactions contemplated herein.

21.2. Unless expressly provided otherwise, the transactions or actions

specified in Section 21.1 hereof, as well as all other actions to be performed upon the Closing, shall be deemed to take place simultaneously and no transaction or action shall be deemed to have been completed or any document delivered until all such transactions or actions have been completed and all required documents were duly signed and delivered.

83 Notice No. 2, 25.10.2011, Ver 1.01


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Chapter E – Miscellaneous

22. Rules and Instructions

22.1. The Election Committee may set rules and/or provide instructions as it may deem required for the orderly administration of the Election Process and this Procedure.

23. The Procedure Web Page

23.1. All information, documents and work products related to the Election Process and the Procedure as well as any notice regarding the Procedure may be published by the Election Committee on the Procedure Web Page, or by any other mean as the Election Committee shall deem fit, including without limitation, by direct communication, via e-mail or otherwise, with the Representatives.

23.2. Registrants, Applicants, Eligible Applicants and Bidders, as

applicable, shall be responsible for updating themselves on a continuous basis concerning information regarding the Election Process and the Procedure published on the Procedure Web Page.

24. Delivery of Notices

24.1. The Election Committee may deliver notices to the Representatives, in any of the following ways:

24.1.1. By publication on the Procedure Web Page, which

notice shall be deemed to have been delivered and received on the date on which it has been sent, provided that such date is a Business Day, and if not, on the next Business Day;

24.1.2. By delivery of a notice to the e-mail address of a

Representative, as specified in the Registration Form, which notice shall be deemed to have been delivered and received on the date on which it has been sent, provided that such date is a Business Day, and if not, on the next Business Day;


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24.1.3. By registered mail, to the post address of a Representative, as specified in the Registration Form, which notice shall be deemed to have been delivered and received 3 (three) Business Days after it has been sent;

24.1.4. By any other mean which the Election Committee has

decided upon.

24.2. If the Election Committee has delivered a notice to the Representatives by any mean specified in Section 24.1 hereof, the Registrants, Applicants, Eligible Applicants or Bidders, as applicable, shall be deemed to have the content of any such notice brought to their attention.

24.3. A notice of a Registrant, an Applicant, an Eligible Applicant, a

Bidder, or a Representative, as the case may be, to the Election Committee shall be delivered by one of the following ways only:

24.3.1. In writing, by registered mail, to the post address of

IEC's Offices, addressed to the chairman of the Election Committee;

24.3.2. By e-mail message, to the e-mail address of IEC's

Offices, addressed to the chairman of the Election Committee. Any notice sent by e-mail shall be deemed to have been received only when a notice confirming receipt of the same has been sent to the sender on behalf of the Election Committee.

25. Perusal of the Election Process Documents and the Basic

Proposal of the Winning Bidder

25.1. Every Bidder shall be entitled, within 30 days of the announcement of the Winning Bidder, to peruse the decisions and protocols of the Election Committee, the professional opinions delivered to the Election Committee and the Basic Proposal and Bid of the Winning Bidder; save for documents and parts of documents perusal of which might, in the Election Committee's opinion, reveal a commercial or professional secret, or that the Election Committee may decide not to allow their perusal for reasons of the public's interest and subject to any applicable law.

25.2. It is a presumption of law that the Business Plan submitted as

part of the Basic Proposal is a commercial secret.


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In addition, it is clarified that any and all materials and information submitted within the framework of the Preliminary Project Business Model shall be deemed confidential information with respect of which, perusal shall not be afforded.

25.3. An Applicant which is of the opinion that parts of his Basic Proposal include commercial or business confidential information ("Confidential Parts"), in addition to those mentioned in Section 25.2 hereof, and is of the opinion that such Confidential Parts should not be disclosed to other Applicants after the announcement of the Winning Bidder, shall explicitly indicate and mark those Confidential Parts as such in its Blackened Copies of the Basic Proposal, in a clear and unambiguous manner.

25.3.1. An Applicant who did not mark parts of his Basic

Proposal as Confidential Parts shall be deemed to have agreed to its Basic Proposal (save for those parts mentioned in Section 25.2 hereof) being handed over for the perusal of other Applicants, if it were to be declared as the Winning Bidder.

25.3.2. The parts of a Basic Proposal marked by an Applicant

as Confidential Parts shall constitute an admission that the same parts of a Basic Proposal of other Applicants shall also be deemed as Confidential Parts and the Applicant waives, in advance, its right to peruse such parts of the other Applicants' Basic Proposals.

25.4. It is emphasized that the discretion regarding the breadth of the

Applicants' right of perusal shall reside solely with the Election Committee, which shall act in this regard in accordance with applicable law and the standards which apply to administrative authorities.

25.4.1. If the Election Committee decides to allow perusal of

parts of the Winning Bidder's Basic Proposal which the Winning Bidder has marked as Confidential Parts, it shall notify the Winning Bidder of such decision and grant the Winning Bidder a right of audience before the Election Committee on that issue within a reasonable and suitable time under the circumstances.

25.4.2. If the Election Committee, after hearing the Applicant's

objection or reservation concerning its decision shall decide to reject the Winning Bidders' objection or reservation, the Election Committee shall notify the Winning Bidder of such decision before handing over such materials for perusal by other Applicants.


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26. Cancellation and Postponement Without derogating from and in addition to any other provision of this procedure, it is clarified that the Election Committee shall be entitled, at any stage of the Election Process, to postpone or cancel the Election Process, or any part or stage thereof, to order the re-execution of any stage and specifically the Financial Competition Stage, or for reason that will be given in writing, to reject any Basic Proposal or Bid, as the case may be.

27. Additional Applicants or Changes in Applicant's Composition The Election Committee may approve, at any time during the Election Process, the co-option of a new Registrant or the joining of (one or more) existing or new Persons with another Registrant and/or Applicant, and upon granting such approval any such additional Person shall be considered as if it were a party to the pertinent Applicant and to such Applicant's Basic Proposal as submitted, in all respects. Such approval can be made contingent upon certain conditions as the Election Committee shall deem fit at its discretion.

28. No Representation For the avoidance of doubt, it is clarified that this Procedure, its Annexes, Schedules and any other document or information delivered as part of the Election Process, does not and shall not constitute a representation on the part of the Election Committee, the State and/or IEC and any Person acting on their respective behalf with respect of the Telecommunication Company and/or the business venture forming the subject matter hereof. There will be no allegation, reliance, claim, cause of action etc. to that effect by any Registrant, Applicant, Eligible Applicant, Bidder, or otherwise any participant in the Election Process, and every such Registrant, Applicant, Eligible Applicant, Bidder, or otherwise any participant must make its own investigations and decisions independently, as it sees fit. Without derogating from the generality of the aforesaid, any and all undertakings of the Election Committee, the State and/or IEC and any Person acting on their respective behalf shall only be such as expressly stipulated in an agreement or otherwise in a binding document duly signed by any of the aforesaid, respectively.


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29. Jurisdiction This Procedure shall be exclusively governed by the provisions of Israeli Law without giving effect to its choice of laws rules. The exclusive local jurisdiction regarding this Procedure shall be vested in the competent courts of the State of Israel in Tel-Aviv or Haifa only.