Further to the resolution to approve Amendment No. 3 to the deed of trust of the Debentures (Series I) of Koor Industries Ltd. ("the Company") ("the Debentures (Series I)" or "the Debentures"), adopted at the meeting of the holders of Debentures (Series I) on September 1, 2o13 ("Amendment to the Deed of trust"), the results of which were published on September 9, 2013, and to the Company's notice on February 27, 2014 concerning the planned date for closing the Merger Transaction (as defined in the Amendment to the Deed of Trust), the Company hereby gives notice full early redemption of Debentures (Series I), subject to closing the Merger Transaction by the date noted in section 9 below, which is a precondition for the early redemption ("Early Redemption"), as follows:

1. The Early Redemption will be made in one payment on March 17, 2014 ("the Early Redemption Date"). Upon making the Early Redemption, the Debentures (Series I) will be delisted from the stock exchange and the stock exchange clearing house and will be invalid.

2. As coordinated with the Tel Aviv Stock Exchange Ltd. ("TASE"), the last date for trading in the Debentures (Series I) will be March 2, 2014.

3. All holders of Debentures (Series I) of the Company on the Early Redemption Date will be entitled to payment of the Early Redemption.

4. In accordance with section 2 of the Amendment to the Deed of Trust, the amount payable to the holders of Debentures (Series I) in the event of Early Redemption will be the higher of the following alternatives:

4.1 The balance of the cash flow of the Debentures, capitalized at the higher of (i) the yield on government bonds (as defined in the Amendment to the Deed of Trust) plus 0.45% interest, or (ii) a capitalization rate of 0%. Such capitalization of the Debentures will be calculated from the Early Redemption Date to the last payment date set for the Debentures; or

4.2 The liability value of the Debentures on the Early Redemption Date, i.e. the unpaid balance of the par value of the Debentures and of the interest and linkage (if any) accrued by the actual Early Redemption Date, as defined in the terms of the Debentures and which have not yet been repaid.

Accordingly, the alternative by which the Early Redemption will be made is as stated in section 4.1 above.

5. The total amount of the Early Redemption of Debentures (Series I) is NIS 323,678,046 ("the Early Redemption Amount"), and accordingly, the Early Redemption Amount for each NIS 1 par value at which the Company will redeem the Debentures (Series I) is approximately NIS 1.0596 (including interest). The total value of the Debentures that will be redeemed in the Early Redemption is NIS 305,458,561 par value, which is the total par value of the Debentures (Series I) in circulation.

6. It is noted that the sum out of the Early Redemption Amount noted in section 5 above, that exceeds the unpaid balance of the principal (NIS 18,219,485), accounts for approximately 5.96% of the unpaid balance of the Debentures and will be seen as interest.

7. Tax will be lawfully withheld from the Early Redemption payments by the members of the TASE.

8. It is clarified that in view of the full Early Redemption of the Debentures, no additional payment will be made other than the payment on the Early Redemption Date and accordingly, no payment schedule is attached to this report.

9. For the removal of doubt, it is emphasized that the Early Redemption of Debentures (Series I) as described above in this report, will be made only if the certificate of merger is received in respect of the Merger Transaction no later than at 14:00 on March 2, 2014, which is a precondition for making such Early Redemption, and if the certificate of merger is not received by that date for any reason whatsoever, this notice shall be seen as cancelled and the Early Redemption as described above will not be made, and for the removal of doubt in such case the date of record for determining eligibility for the payment to be made on March 17, 2014 on account of principal and interest per the terms of the Debentures (Series I) will remain in accordance with the TASE bylaws at March 3, 2014, and if the certificate of merger is received on a later date, the Company will report accordingly in a separate notice ("the Additional Report") and the Early Redemption will be made in accordance with the Additional Report. The Company will publish an immediate report on March 2, 2014, stating whether the precondition for making the Early Redemption was met.


"The Merger Transaction" - A transaction of the Company pursuant to a merger agreement dated August 8, 2013, to which the parties are the Company (as acquiring company), Discount Investments Ltd. (the controlling shareholder in the Company) and DIC Merger 2013 Ltd. (s target company).

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