Israel Corporation Limited : Zim – Formulation of a Term Sheet

This is an English convenience translation of the originai Hebrew version. In case of any

discrepancy, the binding version is the Hebrew originai

Israel Corporation Ltd.

Registrar Number: 5200280 l O

Securities of the Corporation are listed in the Tel A viv Stock Exchange

Sort name: lsrael Corporation

Address: P.O.B. 20456, Tel Aviv 61204

Tel:[phone], Fax: [phone]

Email: MA Y AAK@ I S RA ELCORP.CO M

Form 121

Public

Date ofTransmission: 23/01 /2014

Reference: 2014-0 I -022693

To:

The Secu ri ties Autho rit y www. i sa.gov.il

To:

The Tel Aviv Stock Exchange www.tase.co.il

Immediate Report

The Event: Formulation of a Terrn Sheet

Attached hereto: forrnulation of a Terrn Sheet- fina!.

The date when the event first became known to the corporation: January 22, 2014

Time: 22:50

The name of the authorized signatory to the report and the name of the authorized electronic signatory: Maya Alcheh-Kaplan

Position: Vice President, Generai Counsel and Com pany Secretary

Date ofsi gni ng: January 23,2014

This is an English convenience translation of the originai Hebrew version. In case of any discrepancy, the binding version is the Hebrew origina!

·Jt.

l Israel Corp. Ltd

lsrael Corp. Ltd

Millennium Tower. 23 Aranha Street P.O. Box 20456 Tel Aviv

61204 Israel

Tel.: [phone] l 7 Fax: [phone]

Advocate Maya Alcheh-Kaplan

Vice President

Generai Counscl and Company Sccretary

January 23, 2014

To:

The Israeli Securities Authority

Through the magna system

Dear Sirs,

The Tel Aviv Stock Exchange Ltd. Through The Magna System

Re: Formulating a Term Sheet which Includes Principles for the Reorganization of the Debts of ZIM Integrated Shipping Services Ltd.

Further to the actions taken by ZIM Integrated Shipping Services Ltd. (hereinafter: "ZIM") to reach understandings with its creditors, as set forth in the Company's Quarteriy Report for the third quatter of 2013, as pubiished on November 30, 2013, the Company wishes to hereby announce that on January 22, 2014, ZIM formuiated a Term Sheet pertaining to the outline of the arrangement for the restructuring of the capitai and the debt at ZIM with representatives on behalf of most of the groups of the creditors and other entities reievant to the arrangement (hereinafter: the "Term Sheet" and the "Arrangement"). It shall be emphasized that both the Term Sheet and the final Arrangement which shall be formulated (if any) are subject to the approvals of ali of the financiai creditors of ZIM and the other entities included in the Arrangement (including those who were a party to the formuiation of the Tenn Sheet), including the Audit Committee, the Board of Directors and the generai meeting ofthe sharehoiders ofthe Company, as set forth below.

The Term Sheet includes the principles for the pian for the reorganization of ZIM's debts to its creditors (including to corporations which are interested parties in the Company, either directly or indirectl y, and including such corporations which lease ships to ZIM - hereinafter: the "Interested Party Corporations") and its shareholders (hereinafter: the "Parties"). As a rule, the Term Sheet includes provisions regarding the conversion of ZIM's existing debts into shares of ZIM, and provisions regarding the rescheduling of existing debts and the postponement of the maturity date thereof. Beiow is a concise overview of the main points of the Term Sheet:

This is an English convenience translation of the originai .Hebrew version. In case of any discrepancy, the binding version is the Hebrew originai

l. Financial Debts Included in the Arrangement (not including financial leasing)

a. The balance of the financial debt included in the Arrangement on the eve of the Arrangement is estimated to be in an amount of approximately US$ l ,817 million. It has been agreed between the Parties that an amount of approximately US$ 907 million shall be deemed to be a secured debt, in respect of which ZIM shall sign new, detai l ed loan agreements with those creditors (hereinafter: "Debt A"), and the originai security shall continue to serve as the first lien, to secure the new loan (that is to say: LTV after the Arrangement of 1 00%). The said debt shall bear annua! interest at an interest rate of LIBOR + 2.8%, and it shall be paid on the earlier of: (l) seven years from the date of completion of the Arrangement; or (2) the

contractual date of repayment of the originai loan principal, in relation to each secured creditor, plus approximately 13 months (depending on the date of completion ofthe Arrangement).

b. To some of the entities financing the ships, whose stake in Debt A is estimated to be in a total amount of approximately US$ 633 million, an option was granted (as an alternative to their stake in Debt A) to purchase the ships secured in their favour, and to lease them back to ZIM upon such terms and conditions as agreed upon in the Term Sheet (VesselCo). Should they choose to exercise the above-mentioned option, the total of Debt A will equate to approximatel y US$ 274 million, instead of approximately US$ 907 million.

c. Ln addition, in respect of the balance of the debt to the financial creditors, ZIM shall sign a new loan agreement (hereinafter: "Series C"), which will not be secured by any securities whatsoever, and which will allocate shares of ZIM in their faver, as set forth below.

This is an English convenience translation of the originai Hebrew version. In case of any discrepancy, the bindi ng version is the Hebrew originai

2. The Owners of Ships with whom the Originai Engagement was a Long­ Term Engagement (including financial leasings) (hereinafter, collectively:the "Ship Owners")

a. Agreement was reached in the Term Sheet regarding new tariffs for the lease fees paid to the Ship Owners - including agreement by owners of ships which are Interested Party Corporations in ZIM - which constitute the reduction of the lease fees specified in the lease agreements by which ZIM is bound, in accordance with a mechanism which is based on the minimum tariffs, as shall be u pdated once a year, ali as set forth in the Tern1 Sheet. The daily tariff of the lease fees for the owners of ships which are Interested Party Corporations shall be, as a rule, lower by US$

l ,000 per day, as compared to an equivalent ship owned by a ship owner which is not an interested party.

b. In addition, in respect of the reduction of the lease fees, as stated above, ZIM shall sign new loan agreements of two kinds - Series C and Series D, and also, it shall allocate shares of ZIM in their favor, as set forth below, ali with the exception of the Interested Party Corporations which are leasi ng ships to ZIM, and which have waived their right, as set forth below.

3. The Tcrms and Conditions of Series C and Series D, and Shares of ZIM

a. The total principal of Series C and Series D (in this subsection, collectively: the "Loans") which shall be allocated pursuant to the A rrangement to the financial creditors and to the Ship Owners will amount to approximately US$ 489 million. The Loans shall bear annua! interest payable at a rate of 3%, and they shall be repaid in a lump-sum payment, at the expiration of nine years from the date of completion of the Arrangement. The Loans shall not be secured by any securities whatsoever. The said Loans shall be repaid by way of early payment in the event that the Company shall accumulate cash surpluses, in accordance with the mechanism as set forth in the Term Sheet ("Cash Sweep"). The main differences between the two Series are as follows: (l) the dates of payment - Series D shall be repaid one day after the date of repayment of Series C; (2) Series C shall have preference over Series D in early repayment as a consequence of the cash surpluses, as stated above;

This is an English convenience translation of the originai Hebrew version. In case of any discrepancy, the binding version is the Hebrew originai
(3) in terms of the interest rate- Series D shall be entitled to additional interest at a rate of 2% per annum, which shall be accrued and paid on the date of payment of the Series - PIK interest. The Loans shall have preference over Debt A in early repayment as a consequence of the cash surpluses.
b. In addition, the financial creditors and the Ship Owners will receive shares at a rate of approximately 68% of ZIM's issued share capitai (on a fully diluted basis, after the Company's investment in ZIM, as set forth below), in accordance with the distribution as agreed upon in the Term
Sheet, and ZIM shall act to procure the listing of the shares for trading,

immediately after completion of the Arrangement. The Board of Directors

of ZIM, after completion of the Arrangement, shall be composed of a
majority of independent directors, who shall be appointed by the new shareholders of ZIM, in accordance with their pro rata share of ZIM's capitai.

4. The Company's Undertakings

Pursuant to the Term Sheet, the Company has agreed to take upon itself the following undertakings: (a) an undertaking to make an investment in ZIM's capitai in an amount of US$ 200 million; (b) the waiver of a deferred debt of ZIM to the Company, in an amount of approximately US$ 225 million (which is composed of: ZIM's debts to the Company by virtue of the 2009 arrangement, debts which include amounts arising from the reduction of the lease fees pursuant to the 2009 arrangement, which were assigned to the Company by Interested Party Corporations which leased ships to ZIM at that point in ti me; the provision of the reserve amount; and the injection of amounts by the Company as part of the safety net); (c) an undertaking to cause the provision of a credit line to ZIM in an amount of US$ 50 million for two years from the date of completion of the Arrangement, in accordance with the principles of the Term Sheet upon commerciai terms against the pledging of customers' receipts with a coverage ratio of 2:1, and insofar as necessary, an undertaking to previde support and/or backup for the entity which will previde the aforesaid credit, in order to secure repayment thereof by ZIM. Upon completion ofthe Arrangement, ifmade, the Company is expected to hold 32% of ZIM's issued share capitai.

This is an English convenience translation ofthe originai Hebrew version. In case of any discrepancy, the binding version is the Hebrew originai

5. Forgiveness of the Interested Partv Corporations' Debt

Under the Arrangement, the Interested Party Corporations will forgive a debt in an amount of approximately US$ 50 million of ZIM, which arises from the injection of amounts into ZIM as part of the implementation of the safety net according to ZIM's arrangement of 2009. In addition, Interested Party Corporations, which bave leased ships to ZIM, will waive their right to receive the Series C and Series D Loans and the shares of ZIM which they were due to receive, which are primarily attributable to the reduction of the lease fees (in a total amount of approximateiy US$ 183 million), and most of the amount of the Loans and the shares of ZIM, as aforesaid, shall be distributed between the various groups of creditors in the Arrangement.

6. Exemption

The Term Sheet determines, in addition, a mutuai exemption for the Company, ZIM and its creditors, and aiso an exemption granted by some of the groups of creditors also to other parties in the Arrangement, and ali subject to the terms and provisions as set forth in the Term Sheet.

It is clari:fied that the taking of effect of the arrangements which are the subject of the Term Sheet, and the implementation thereof are subject, inter alia, to the execution of specific agreements, the approvai of the Audit Committee, the Board of Directors of the Company, and the generai meeting of the shareholders of the Company, with a speciai majority as required in respect of transactions between the Company and its controlling shareholders, and additional approvals, insofar as required.

Sincerely yours,

Israel Corporation Ltd.

The name ofthe authorized signat01y to the report and the name ofthe authorized electronic signatory: Maya .4/cheh-Kaplan.

Position: Vice Presidem, Genera/ Counsel & Company Secretary. Date ofsignature: Janumy 23, 2014.