Bank Hapoalim B.M. - Offering Circular

RNS Number:2606M
Bank Hapoalim B.M.
22 January 2008

Head Office

63 Yehuda Halevi St., Bank Hapoalim Bldg., Tel Aviv 65781

Tel: 972-3-5673800; Fax: 972-3-5674576

Date: 20 January 2008

To: The London Stock Exchange

Dear Sir or Madam,

RE: Immediate Report

Pursuant to Regulation 11(b) of the Securities (Details of an Offering Circular
for the Offer of Securities to Employees) Regulations, 5760-2000, ("the Offering
Circular Particulars Regulations"), Bank Hapoalim B.M., ("the Bank")
respectfully gives notice that on 31 December 2007, the board of directors of
the Bank resolved to offer the bank's employees employed under a personal
employment contract the third portion of the options ("the Options") pursuant to
the options plan for the Bank's employees employed under a personal employment
contract which was adopted by the Board of Directors from it's resolution on 6
December 2005 ("the Plan").

Concurrent to the filing of this Immediate Report, the Bank is to deposit with
the Securities Authority a preliminary Offering Circular ("the Offering Circular
") pursuant to the provisions of Regulation 11(a) of the Offering Circular
Particulars Regulations, in connection with the grant of the third portion of up
to 150,000 options to the employees employed under a personal employment
contract, by virtue of the Plan and as set forth in the Offering Circular.

Yours faithfully,

Bank Hapoalim B.M.

( - ) ( - )

D. Klausner E. Eisdorfer

Member of the Board of Management Manager of Human Resources

Bank Hapoalim B.M. (the "Company")

Circular to Employees

Regarding an offer of options to the Company's employees who are employed under
a personal contract of employment pursuant to Section 15b of the Securities Law,
5728-1968 and the Securities (Details of a Circular of an Offer of Securities to
Employees) Regulations, 5760-2000

There are hereby offered

Up to 150,000 options (not-listed for trading) exercisable for up to 150,000
ordinary registered shares of NIS 1.00 nominal value of the Company, subject to
the adjustments, pursuant to a plan to issue options to the Company's employees
who are employed under a personal contract of employment (the "Options"). The
Options are offered without consideration, to employees of the Company who are
employed under a personal contract of employment, as determined by the Company,
being approximately 160 in number ("Employees"), as set out in the Circular,
provided they are not and will not be interested parties in the Company as that
term is defined in the Securities Law, 5728-1968 ("Interested Parties"). The
number of Options that will be granted to each Employee will be determined by
the Board of Directors according to criteria that take account of the Employee's
salary and position.

January 20th, 2008

Chapter 1 - General

1.1 The Options Offered

Up to 150,000 options, not listed for trading, are being offered
without consideration and exercisable for up to 150,000 ordinary registered
shares of NIS 1.00 nominal value each of the Company, subject to the adjustments
set out in the Plan. The Options under this Circular may be allotted no later
than the date on which the Periodic Report of the Company for the year 2007 is
published or the date prescribed by law for publishing such report, whichever
comes first.

The Options being offered, constitute approximately 0.012% of the
Company's issued and paid-up share capital on the date they are granted, and
approximately 0.012% of the Company's issued and paid-up share capital, assuming
full dilution (full dilution meaning on the assumption that all the Options that
will have been granted to the Company's employees, its officers, directors of
the Group, consultants and other service-providers of the Company, including the
Options being offered under this Circular, will be exercised into shares,
without taking into account the subordinated notes issued by the Company).

The Options are offered within the framework of an Options issue plan
to the Company's Employees who are employed under a personal contract of
employment (the "Plan") according to the capital gains track under Section 102
(b)(2) (the "Capital Gains Track") of the Income Tax (New Version) Ordinance,
5721-1961 (the "Ordinance") and the rules enacted thereunder, as modified from
time to time (the "Rules"). Allocation of the Options will be implemented in
accordance with the approval granted to the Company by the Taxes Authority on
15th February, 2006.

According to the Plan, Options will be allotted to Employees to
purchase ordinary registered shares of NIS 1.00 nominal value each of the
Company. The total number of Options to be granted under the Plan and in each
year of the Plan's existence, shall be determined by the Board of Directors of
the Company, in its sole discretion, and the Board of Directors is not obliged
to allot a certain or any number of Options under the Plan. In each year of the
Plan's existence, a circular or other report will be published, as required by
law, regarding the offer of the options allotable in such year, according to the
Plan, as aforesaid and to the approval of the Stock Exchange for the listing of
the shares arising from the unregistered Options.

The offer of Options under the Circular will be subject to the sole
discretion of the Board of Directors, as set forth in paragraph 1.2 hereof.

The Options are offered without consideration, in the third year of
the existence of the Plan, 2008, at the sole discretion of the Board of
Directors, to all the Entitled Employees (as defined in Clause 1.2 below). Each
Option will be exercisable into one ordinary registered share of NIS 1.00
nominal value of the Company, in exchange for payment of an exercise price equal
to NIS 1.00. The exercise price will not be linked to the CPI or to any other
index.

The vesting period of the Options will be such as to enable the
Options to be exercised during the 12 month period starting 48 months after the
1st day of January in the year in which the Options were allotted (the "Exercise
Period"). The vesting period will, unless otherwise directed by the Board of
Directors, only include those periods during which the Employee was employed by
the Company or is on unpaid leave for a period of one year or less.
Notwithstanding the foregoing, the Company's board of management (or a person
empowered by it) is authorized to determine, in individual cases, at its sole
discretion, that the vesting period will also include those periods during which
the Employee is on unpaid leave for a period exceeding one year. The Board of
Directors may, at any time, at its sole discretion, make provision for the
acceleration of the vesting period for all or any of the Options or for the
removal of the restrictions pertaining to the exercise of the Options, all
subject to law.

In the event of the expiry and/or cancellation of a right to exercise
an option into a share according to the Plan for any reason, the share in
question will revert to the pool of shares retained in the Company's registered
capital for purposes of the Plan (the "Retained Shares"), and the Company will,
subject to the remaining terms of the Plan, allot a new Option exercisable for
the same share at another time, subject to the provisions of any law and subject
to the approval of the Stock Exchange. The exercise mentioned above will only be
made on a Business Day (as defined in paragraph 2.3 hereof).

These Options are offered pursuant to the resolutions of the
Company's Board of Directors of 6th December, 2005, to adopt the Plan and its
resolution of 31st December, 2007 regarding the granting of the Options in
accordance with the Plan and this Circular on 17th February, 2008.

For further details regarding the Options offered and the exercise
shares - see Chapters 2 and 3 below.

For details concerning the exercise of voting rights and rights to
dividends attached to the Exercise Shares (as defined in paragraph 1.3 hereof),
so long as the Exercise Shares are deposited with the Trustee, as explained
below - see paragraphs 2.8.3, 2.8.4 and 2.8.5. For details concerning the
provisions of the Company's Articles of Association in connection with the
rights attaching to the Company's shares (and to the Exercise Shares) - see
Chapter 3 below.

1.2 Eligible employees and defining their entitlement

The offer of Options under this Circular is subject to the sole
discretion of the Board of Directors, and the Company may, but is not obliged,
to offer Options as provided in the Circular, to Employees up to the rank/job
title of Assistant Managing Director at the Head Office or the holder of a
corresponding job title, employed under a personal contract of employment in
Israel, who have completed at least one year's employment on December 31, 2007
(even if in the course of this year, in whole or in part, they worked at the
Company under the status of a tenured employee) and are Employees on the date of
the actual allotment, and whose salary is payable on a monthly basis by the
Company (or by a corporation that is controlled by the Company, to which they
are posted) except for an Employee who, on the allotment date, is on unpaid
leave for more than 12 months (for this purpose, an Employee who is on unpaid
leave for a period of a year or less will be deemed to be an Employee of the
Company), provided they are not and will not be Interested Parties of the
Company, as set forth in Chapter 2 hereof. The number of Options offered to each
Employee was determined by the Board of Directors on the basis of criteria that
take into account the Employee's salary and his position. The eligible Employees
hold positions at various levels within the Company. The group of Offerees shall
not include Employees who are included in the group of Offerees under any other
plan for granting options, or option warrants, which are exercisable into shares
of the Company or the equivalent of shares in the Company, whether realizable in
specie or in cash, or any similar benefit, howsoever called (hereinafter - a
"Corresponding Benefit"). Furthermore, the group of Offerees shall not include
employees who were or may be offered, on terms prescribed for them, to receive a
Corresponding Benefit by contract with the Company, or from any other source,
all irrespective of whether the offer to receive a Corresponding Benefit exists
at the time that this Plan is adopted by the Board of Directors of the Company,
or if it exists at some other time ("the Offerees" or "the Employees" or "the
Eligible Employees"). Notwithstanding the foregoing, according to the Plan, the
Board of Directors may determine at any time, at its sole discretion, additional
Offerees who may participate in the allotment of Options under the Plan.

Each Eligible Employee is offered to receive without consideration
the number of Options specified in the allotment document that will be submitted
to each Eligible Employee.

1.3 Permits obtained in connection with the Circular and the Listing for
Trading of the Exercise Shares

The Company has obtained all necessary approvals for offering the
Options to the Eligible Employees according to this Circular, except for the
approval of the Tel Aviv Stock Exchange Ltd., ("the Stock Exchange") to list for
trading the shares resulting from exercising the Options offered under this
Circular (the "Exercise Shares").

On 31st December, 2007, the Board of Directors of the Company adopted
a resolution for the submission of the Circular.

Shortly before the allotment of the Options the Company will apply to
the Stock Exchange to list for trading the Exercise Shares.

The Company's shares are listed for trading on the Tel Aviv Stock
Exchange Ltd.

The aforesaid approval of the Stock Exchange shall not be deemed to
be confirmation of the details set out in the Circular or their reliability or
completeness, nor as the expression of any opinion with respect to the Company
or the quality of the Options offered under the Circular and the Exercise Shares
or the price at which they are being offered.

The Options offered under this Circular will not be listed for
trading on any stock exchange.

Chapter 2 - Details of the Offer

2.1 General

Up to 150,000 Options, not listed for trading, are being offered to
the Company's Eligible Employees, without consideration, as set out in paragraph
1.2 above, subject to the adjustments set out in the Plan.

Each Option may be realized for one ordinary registered share of NIS
1.00 nominal value of the Company, against payment of the exercise price on the
dates and under the conditions detailed in this Chapter.

Without derogating from the generality of the foregoing, the Board of
Directors will be authorized, at any time, and without requiring the consent of
the Eligible Employee, to determine that Options that have been granted to the
Eligible Employee according to the Plan will be cancelled and replaced by other
compensation by way of the allotment of shares of the Company, subject to the
provisions of any law, payment in cash or by such other method as the Board of
Directors may determine ("Other Compensation"), provided that the value of the
benefit inherent in Other Compensation will not be less than the value of the
benefit inherent in the Options cancelled or which have been returned to the
Company, as measured on the date of the cancellation or return, as the case may
be. In such a case, the value of the benefit inherent in the Options and the
Other Compensation will be determined by the Company and approved by an
independent outside advisor to be selected by the Company prior to replacing the
Options with Other Compensation, as aforesaid.

2.2 Allotment of the Options

After fourteen days have passed from the delivery of the Offering
Circular, the Company will allot the Options to the Eligible Employees and will
deliver an allotment document, duly signed by the Company, to each Eligible
Employee. The Options will be deposited with a trustee (the "Trustee") pursuant
to the provisions of Section 102 of the Ordinance and the Rules.

The Company will publish, on the date of, or shortly after the
publication of this Circular, notice in the work places where the Eligible
Employees are employed regarding the publication of this Circular or employ such
other method as may be permitted by law.

2.3 Exercise of the Options

The Options offered under this Circular may be realized into ordinary
registered shares of NIS 1.00 nominal value each (for details regarding the
Exercise Shares - see Chapter Three hereof), in a manner whereby each existing
Option may be exchanged for a single registered ordinary share of NIS 1.00
nominal value, subject to the adjustments set out below, in exchange for an
exercise price equal to NIS 1.00. The exercise price will not be linked to the
CPI or any index.

The vesting period of the Options conferred upon each Eligible
Employee (as defined in Clause 1.2 hereof) will be such that the Options may be
realized during the 12-month period commencing 48 months after the first day of
January in the year in which the Options were allotted, unless otherwise
directed by the Board of Directors. The vesting period only includes those
periods during which the Eligible Employee was employed by the Company or was on
unpaid leave for a period of one year or less. Notwithstanding the foregoing,
the Company's board of management (or a person empowered by it for that purpose)
is authorized to determine, in individual cases, at its sole discretion, that
the vesting period will also include those periods during which the Eligible
Employee is on unpaid leave for a period exceeding one year. The Board of
Directors may, at any time, at its sole discretion, establish guidelines for the
acceleration of the vesting period for all or any of the Options that have been
granted according to the Plan, or regarding the lifting of restrictions
pertaining to the exercise of the Options, all subject to any law.

An Eligible Employee will be entitled to exercise all or any of the
Options allotted to him, on any Business Day, at his discretion, commencing from
the date on which the Options will be exercisable, as provided above, but in no
event after 31st December, 2012, provided that the Exercise Notice (as
hereinafter defined) has been submitted to the Company 10 Business Days prior to
such date.

In this paragraph "Business Day" means a day on which trading takes
place on the TASE.

2.4 Exercise procedure, release of the Options or shares from the Trustee
and sale of the Exercise Shares

An Eligible Employee wishing to exercise his right to exercise, in
whole or in part, the Options allotted to him, shall send the Company and the
Trustee written notice in the form to be prescribed by the Company from time to
time ("Exercise Notice") and which will include, inter alia, the number of
Options the Eligible Employee wishes to exercise, provided that such number will
not be less than 50% of the Options that have been allotted to such Employee
(notwithstanding the foregoing, the number of Options actually exercised may be
smaller than this figure due to the sale procedure of the Exercise Shares
subject to the Options), accompanied by a power of attorney in favor of the
Trustee and/or the Company, as explained below, and shall pay an amount equal to
the Exercise Price multiplied by the number of the Exercise Shares, in the
manner to be fixed by the Company. Shortly after receiving the Exercise Notice
and the full amount of the consideration for the Exercise from any Eligible
Employee and subject to review of the right of the Eligible Employee to exercise
the Options granted to him, the Company will allot to the party giving a due
Exercise Notice, the Exercise Shares due to him in respect thereof, which shares
will be deposited with the Trustee pursuant to the provisions of Section 102 of
the Ordinance.

Notwithstanding the foregoing, if no Exercise Notice reaches the
Company within10 Business Days prior to the expiration of the Exercise Period,
the Eligible Employee to whom the Option was granted will be regarded as having
submitted an Exercise Notice and sale of the Exercise Shares on the same date.
Accordingly, the Option will be automatically exercised for an Exercise Share,
which will be sold on the Eligible Employee's behalf by the Trustee and/or the
Company. The proceeds obtained from the sale of the Exercise Share will be
remitted to the Eligible Employee after deducting the Exercise Price of the
Option, which will be remitted to the Company, and after deducting the
commissions involved in such Exercise and sale, and deduction of tax at source
as required by law. For this purpose, in the allotment document to be issued by
the Company to the Eligible Employee, the Employee will declare that he agrees
to the mechanism set out in this paragraph, and empowers the Trustee and/or the
Company to act in accordance therewith.

An option which has been exercised and for which an Exercise Share
has been allotted, will cease to be valid. Until the date of exercise, holders
of the Options will not be regarded as shareholders of the Company (by virtue of
the Options), save that they will be granted the protection set out below, and
become shareholders of the Company only if the Options will have been exercised
pursuant to the conditions prescribed in this Circular. Commencing on the date
of exercise, the Exercise Shares will rank pari passu with all the ordinary
shares of the Company's capital.

Pursuant to a written request of the Eligible Employee, in a form
agreed to by the Company and the Trustee, and which will be delivered to the
Trustee, the Trustee will release the Options held in trust by him or the
Exercise Shares arising from the exercise thereof, provided that prior to the
release of such Options or Exercise Shares, the Eligible Employee has
transferred to the Trustee and/or the Company, to their satisfaction, the amount
of tax payable or a confirmation as to the payment of all taxes the payment of
which is required upon the release of the Options or the Exercise Shares as the
case may be.

In the alternative, the Company or the Trustee may sell on the
Eligible Employee's behalf, the Exercise Shares arising from the exercise of the
Options held in trust by the Trustee, pursuant to the Eligible Employee's
instructions and an appropriate arrangement between the employee, the Trustee
and the Company.

If the Trustee continues to hold any Exercise Shares after 24 months
have passed from the last date of exercise of the Options conferred according to
the Plan (namely 31st December, 2015) (the "Trust Termination Date"), the
Company and/or the Trustee will sell such shares, deduct tax at source, deduct
and pay the commissions involved in the sale and remit the balance to the
Eligible Employee. For this purpose, each Eligible Employee will sign a power of
attorney in favor of the Company and/or the Trustee, in such form as will be
decided by the Company and the Trustee, which power of attorney will enable the
Company and/or the Trustee to act on the Eligible Employee's behalf and sell the
Exercise Shares held by the Trustee on the Trust Termination Date.

2.5 Adjustment of rights

Until the issue of the Exercise Shares as aforesaid, the holder of
the Options will have no voting rights nor the right to receive dividends or any
other right of a shareholder (save for the right to exercise the Options).

No adjustments in respect of dividends or other rights will be made
during the period preceding the issue of the Exercise Shares, except for the
following:

2.5.1 If the Company distributes bonus shares and the determination date for
the distribution thereof (the "Bonus Date") falls after the date of allotment of
the Options but before the date of exercise, the exercise price for each option
will remain unchanged, but the number of shares which each Eligible Employee is
entitled to receive at the time of exercise will increase by the number of
shares that the Eligible Employee would have been entitled to as bonus shares
had he exercised the option immediately before the Bonus Date, and the number of
the Retained Shares will correspondingly increase, and the Company will make the
necessary adjustments to its capital as required by law. Similar adjustments to
those stated in this paragraph will be made in the event of a split (or
consolidation) of the Company's shares.

2.5.2 In the event of a rights offer by the Company to its shareholders
following the allotment date of the Options but before the date of exercise,
the number of shares which each Eligible Employee is entitled to receive at the
time of exercise will increase to reflect the element of benefit inherent in the
rights, and the number of Retained Shares will correspondingly increase. In such
a case, the value of the benefit inherent in such rights as well as the
necessary adjustment required according to the foregoing will be fixed by the
Company pursuant to the terms of Rule 91.C 4(b) of Schedule A of Part Two of the
Stock Exchange Rules, and will be approved by an independent outside advisor who
will be selected by the Company.

2.5.3 Notwithstanding the provisions of Clauses 2.5.1 and 2.5.2 above, an
employee will not be entitled to exercise an option for a fractional share, and
the number of shares to which the employee will be entitled at the time of
exercise of the Option according to the Plan will be rounded (up or down, as the
case may be) to the nearest whole number.

2.5.4 It is clarified that a distribution of a dividend by the Company (in cash
or in specie) will not affect in any way the number of Exercise Shares or the
Exercise Price, nor obligate the Company to make any adjustment in connection
with the Option and/or the Exercise Shares.

2.5.5 In the event of a structural change in the Company ("Structural Change"),
the merger of the Company with or into another company, either by way of a share
exchange, cash purchase or otherwise ("Merger") or sale of all or most of the
Company's assets or its issued capital to any third party ("Sale"), the Board of
Directors may, inter alia, at its election, and subject to any law:

2.5.5.1 Determine that each option will be replaced or converted into an option
of equal value in the New Company following the Merger or the Sale, and
implement for such purpose changes in the exercise price (if and to the extent
these will be required), all subject to the discretion of the Board of
Directors; or

2.5.5.2 Determine that each option will be adopted by the New Company in a
manner whereby it will be exchangeable for a share of the New Company, subject
to the adjustments and changes that will be determined by the Board of
Directors; or

2.5.5.3 Determine that each option will be cancelled or be returned to the
Company, and the Company shall pay the Eligible Employee financial compensation
for such cancellation or return of the Option, as the case may be, provided that
the value of the benefit inherent in the compensation will not be less than that
inherent in the Options which have been cancelled or returned to the Company, as
measured on the date of the cancellation or return, as the case may be; and

2.5.5.4 Perform any act and/or adjustment relating to the Options and the terms
thereof as may be required in its discretion.

For the purpose of the provisions of this Clause, the term "New Company" shall
refer to the company with whom a Merger or a transaction of Sale has been made
or which steps into the shoes of the Company after the Structural Change.

2.5.6 Unless otherwise prescribed by the Board of Directors, in the event of a
winding-up of the Company, all options that have been allotted to the Eligible
Employees will immediately expire prior to the winding-up of the Company. In
such event, the Board of Directors may declare that all or some of the Options
will expire on a certain pre-determined date, and enable all or part of the
Eligible Employees to have the right to exercise the Options conferred upon
them, and the Board of Directors may determine that the ability to exercise such
Options will similarly apply with respect to options which, according to the
terms thereof, were not exercisable on the date so fixed.

2.6 Exceptions to the Exercise of the Options - Termination of Employment

In the event an Eligible Employee ceases for any reason whatsoever to
be employed by the Company under a personal contract of employment ("Termination
of Employment"), (in this Clause 2.6 the term "Company" also includes a
subsidiary or an affiliate of the Company), the Options to which this Circular
relates will expire, as detailed below, unless otherwise determined by the Board
of Directors:

2.6.1 The date of the Termination of Employment will be the date on which the
employer-employee relationship between the Eligible Employee and the Company
will cease ("Termination of Employment Date").

2.6.2 On the Termination of Employment Date, all the Options that have been
allotted to the Eligible Employee under this Circular, for which the vesting
period is still pending, will expire. Upon the expiry of the Options, all the
Eligible Employee's rights and/or those of his heirs in connection with the
Options, including the right to purchase the Exercise Shares, will expire. The
Options that have been allotted to the Eligible Employee and for which the
vesting period has ended by the Termination of Employment Date, may be exercised
by the Eligible Employee during the 60-day period following the Termination of
Employment Date, unless otherwise provided by the Board of Directors.

If no Exercise Notice reaches the Company before 60 days have passed
following the Termination of Employment Date, the Eligible Employee will be
regarded as having submitted an exercise and sale notice of the Exercise Shares
on such date. Accordingly, the Options that were allotted to an Eligible
Employee where the vesting period ended on or prior to the Termination of
Employment Date will be exercised automatically, and the Exercise Shares will be
sold on behalf of the Eligible Employee by the Trustee and/or the Company. The
consideration obtained from the sale of the Exercise Shares will be remitted to
the Eligible Employee after deducting the exercise price of the Options, which
will be remitted to the Company, after deducting the commissions involved in
such exercise and sale, and deduction of tax at source as required by law. For
such purpose, in the allotment document to be issued by the Company to the
Eligible Employee, the Eligible Employee will declare that he agrees to the
mechanism set out above and empowers the Trustee and/or the Company to act in
accordance therewith.

2.6.3 Notwithstanding the foregoing, if the Termination of Employment of the
Eligible Employee by the Company results from God forbid, death or Loss of
Earning Capacity (as defined below), all the Options allotted to the Eligible
Employee until the Termination of Employment Date of the Employee will be
exercisable by the Employee or his legal heirs (as the case may be) at the end
of the vesting period, as if the employment of the Eligible Employee in the
Company had not ended.

"Loss of Earning Capacity" shall mean for purpose of this sub-clause
the inability of the Eligible Employee to carry out his job function as a result
of injury and/or sickness for a period of at least 6 consecutive months.

2.6.4 Notwithstanding the foregoing, if the Eligible Employee has been
dismissed in circumstances which do not entitle him to severance pay as provided
by the Severance Pay Law, 5723-1963, and subject to any law, all the Options
allotted to him will expire, including Options for which the vesting period has
ended.

2.6.5 An Eligible Employee who takes unpaid leave for a period of one year or
less, will continue to be regarded as an employee for purposes of the Plan,
while an Eligible Employee who takes unpaid leave for a period exceeding one
year will be regarded as having terminated his employment, and ceases to be an
employee for purposes of the Plan, as of the first day following one year on
unpaid leave.

2.6.6 Notwithstanding the foregoing, the board of management of the Company or
such person authorized on its behalf, shall be authorized to determine, in
individual cases, at its sole discretion, that an Eligible Employee taking
unpaid leave for a period exceeding one year will continue to be regarded as an
employee for purposes of the Plan.

2.6.7 Subject to the provisions of the Plan regarding an adverse change in the
conditions of allotted Options, the Board of Directors may prescribe, at any
time and in its sole discretion, time periods and conditions with respect to any
particular employee or generally which may be different from those set forth
herein.

2.6.8 It is clarified that in no event will it be possible to exercise an
Option after the expiration of the Exercise Period.

2.7 Transferability of the Options

Unless otherwise prescribed by the Board of Directors, the Options
will not, in any event, be transferable and/or assignable, save for transmission
to legal heirs. In the event of such transmission, the terms of the Option and
the provisions of the Plan will be binding upon the heirs.

2.8 Tax Implications on Allotment of Options, Their Exercise into Shares and
Sale of Shares Realized

2.8.1 General

On 15th February, 2006, the Taxes Authority approved the Plan as a
share allotment plan through a trustee, pursuant to the provisions of Section
102 of the Ordinance.

The Company's duty to allot Exercise Shares at the time the Options
are realized or to carry out any other act in connection with or in respect of
Options or Exercise Shares is subject to the full compliance with all duties to
pay income tax or other compulsory payments that apply (to the extent they
apply) including deduction of any tax or compulsory payment required by law.

In the event of any liability for tax or any other compulsory payment
(National Insurance, State Health Tax, etc.) in respect of and/or as a result of
the Plan (whether in Israel or abroad), including in respect of the allotment of
the Options to the Eligible Employees, the exercise thereof into shares, the
sale of the Exercise Shares, receipt of dividend or any other benefit in respect
of the Options or the Exercise Shares, it will be borne by the Eligible
Employees in accordance with law (to the extent it applies by law to such
Employee). The Eligible Employees will indemnify the Company and/or the Trustee
in respect of any payment or claim for payment of any tax payable as aforesaid,
if payable, and the Company may deduct from the sums becoming due to the
Employee any balance of the Eligible Employee's debt to the Company, to the
extent that such a debt exists in respect of such indemnity.

2.8.2 Taxes Applicable to Options Offered Within the Scope of Section 102 to
Israeli Employees

The grant of Options in accordance with this Circular is made subject
to the provisions contained in Section 102 of the Ordinance and is also subject
to the Rules. Accordingly, the Company has elected the capital gains track
prescribed by Section 102(b)(2) of the Ordinance for the purpose of taxing the
income of Eligible Employees from the Options. The Options will be exercised
subject to the provisions of paragraph 2.4 of the Circular. The Exercise Shares
(as defined below) obtained from exercising the Options will be deposited with
the Trustee.

In accordance with Section 102 and the Regulations, the following
provisions will apply:

(a) Date of liability for tax

The Eligible Employee's income from the allotment of the Options is
tax-exempt at the time of allotment, but will be liable for tax at the time the
shares resulting from the exercise of the Options are sold ("Exercise Shares")
or the Options or Exercise Shares are transferred from the Trustee into the name
of the Employee ("Transfer").

(b) Rate of tax

Pursuant to the capital gains track, if the Options or the Exercise
Shares are held by the Trustee until the expiration of the period required by
the Ordinance for the capital gains track, or until the expiration of such other
period as may be approved by the Tax Authority (the "Trust Period"), part of the
benefit inuring to the Eligible Employee from the sale of the Exercise Shares up
to no higher than the average value of the Company's shares on the Stock
Exchange at the end of the 30 day trading period preceding the allotment of the
Options, will be regarded as income from work under Section 2(2) of the Income
Tax Ordinance, such income to be adjusted to the Consumer Price Index up until
the date of sale of the Exercise Shares or the execution of a Transfer, and the
balance of the value of the benefit will be regarded as a capital gain liable to
tax at the rate of 25%.

The Eligible Employee will not be entitled to sell Exercise Shares or
execute a Transfer prior to the expiration of the Trust Period. Moreover, the
rights conferred by virtue of the Exercise Shares, including bonus shares, but
excluding dividends paid in cash ("Rights"), will be deposited with the Trustee
until the expiration of the Trust Period, and the capital gains track will apply
thereto.

2.8.3 The Trustee will not execute any transaction or act in connection with
the Options and/or the Exercise Shares held by him, and will not transfer,
assign, withdraw, attach or charge them voluntarily and will not grant with
respect thereto any power of attorney or instrument of transfer, of either
immediate effect or which will come into effect at a future date, except for a
transfer based on a will or by operation of law, until after the applicable tax
as aforesaid has been paid or until payment of the tax has been secured.

2.8.4 So long as the Exercise Shares are held by the Trustee in trust for an
Eligible Employee, the voting rights attaching to the Exercise Shares will be
vested solely in the Trustee. The Trustee will not vote in respect of Exercise
Shares that are held by him on behalf of the Eligible Employee, and such
Employee will be entitled to vote in respect of the Exercise Shares at meetings
of the Company's shareholders only in accordance with a power of attorney from
the Trustee.

2.8.5 So long as the Exercise Shares are held by the Trustee in trust for an
Eligible Employee, cash dividends which may be distributed in respect thereof
will be transferred directly to the Eligible Employee, all as determined by the
Company's Board of Directors, at its sole discretion and subject to any law,
prior to implementing the distribution of such dividend.

The terms of Clause 2.8 above reflect the law in force on the date of
the Circular. The legal provisions relating to the compulsory payments and tax
aspects in relation to the Options granted under this Circular are liable to
change from time to time. The foregoing does not purport to be an authoritative
interpretation of the tax provisions mentioned above, or an exhaustive
description of the general provisions of law pertaining to taxes which may apply
in connection with the Options being offered to the Eligible Employees, and does
not serve as a substitute for legal and professional advice on the subject. As
is usual when deciding on an investment, each Eligible Employee receiving
Options who decides to exercise them must consider the various tax aspects and
tax implications that his investment will have. The Eligible Employee must
consult his professional advisors, including legal and tax counsel, having
regard to his own particular circumstances.

2.9 Consideration for the Options Offered

The Options offered are offered for no consideration. Assuming all
the offered Options are exercised, the Company will receive proceeds amounting
to NIS 150,000, without linkage to the CPI. The amount to be received by the
Company was determined according to the exercise price determined by the Board
of Directors on the date it resolved to grant the Options, multiplied by the
number of Options offered at such exercise price, as set out in this Chapter.

2.10 The Economic Value of the Options

2.10.1 The Company applies Accounting Standard No. 24 "Share Based Payment".
The main provisions of the Standard are to require the recognition of expenses
in respect of the Options in the financial statements of the Company according
to their economic value at the time the Options are actually allotted. The
expense will be recorded in the financial statements of the Company over the
vesting period of the Options and according to the number of options to be
granted.

2.10.2 The calculation of the economic value of each Option reflected in the
financial statements of the Company will be made according to the Black and
Scholes model, according to the terms of the Plan and according to the
principles embodied in Accounting Standard No. 24, as aforesaid.

2.10.3 By way of illustration only, there follows a calculation of the
economic value of each Option were it to have been actually granted at about the
time of submission of this Circular:

(a) The price of the share for the purpose of the calculation is the
closing price of the share of the Company on the Stock Exchange at the close of
trading on 17th January, 2008 (NIS17.17).

(b) The exercise price is NIS 1.00, unlinked.

(c) Until the Exercise Shares are issued, the holder of the Option will
have no right to receive any dividend.

(d) The calculation is made subject to the following assumptions:

- the standard deviation is calculated according to the daily yield
according to the price of the share of the Company on the Stock Exchange over
the last four years; accordingly, the standard deviation is about 24.56%.

- the life expectancy of the Options is four years.

- the annual rate of capitalization is determined according to the yield to
maturity of unlinked bonds ("Shahar"), which corresponds to the life expectancy
of the Options, and accordingly, the calculation assumes a rate of interest for
capitalization of 5.47%.

- the yield on account of dividend which the shareholders of the Company
expect to receive is 6.47%.

(e) The calculation of the economic value does not take into account the
fact that the Options will not be listed for trading on the Stock Exchange, and
also does not take into account the vesting periods of the Options as provided
in the Plan and the tax likely to apply at the time of sale of the Exercise
Shares.

On the basis of the above assumptions, the value of each Option is

NIS 12.451.

It is emphasized that the calculations presented above were made as of 17
January, 2008. The determination date for calculating the value of the Options
for the purpose of the financial statements of the Company, according to
Accounting Standard No. 24, is the date on which the Options are granted (and
not the submission date of the Circular). Therefore, the value of the Option
which will serve for the recognition of the amounts of the expense to be
actually recorded and reflected in the financial statements of the Company will
be different from the data presented above, and will be subject to computation
by the Company on the basis of similar assumptions.

Chapter 3 - The Exercise Shares

The Exercise Shares will rank equally with all the ordinary shares of the
Company's capital. All the shares in the Company's capital are registered
shares, having a nominal value of NIS 1.00.

Details concerning the provisions contained in the Company's Articles of
Association, relating to the rights attaching to the Company's shares (and to
the Exercise Shares), are set out below:

3.1 Voting rights

Each ordinary registered share confers upon the holder thereof the
right to receive notices of and to attend general meetings of the shareholders
of the Company, and the right to one vote in respect of each ordinary share
whenever votes are cast at any general meeting of the Company attended by the
holder thereof.

3.2 Rights to dividend and distribution of bonus shares

All ordinary shares in the Company's capital rank equally among
themselves and confer upon the holders thereof the right to receive dividends
(if and when distributed), the right to receive bonus shares (if and when
distributed), and the right to participate in the distribution of surplus assets
of the Company after the winding-up thereof according to the proportionate share
thereof in the Company's issued share capital.

Shareholders entitled to dividends are the shareholders on the date
of the resolution regarding the dividends or on such later date as may be
determined by the resolution. The Company's resolution to distribute dividends
or bonus shares shall be adopted by the Board of Directors of the Company.

Subject to any special rights or restrictions attaching to any
shares, dividends in cash and bonus shares will be paid and distributed to the
shareholders in proportion to the capital amount paid on the nominal value of
the shares held by them, disregarding any premium paid thereon.

No dividend or monies or benefits in respect of a share will bear
interest.

The Board of Directors may deduct from any dividend or monies or
benefits in respect of a share, such sums as the holder of such share owes the
Company on account of calls at such time.

The Board of Directors may withhold any dividend or bonus shares or
monies or benefits in respect of a share over which the Company has a charge,
and apply such dividend or bonus shares or monies or benefits in discharge of
the debts or liabilities in respect of which the Company holds a charge.

In order to execute any resolution regarding a distribution as
defined in the Companies Law, 5759-1999 (the "Companies Law") the Board of
Directors may, as it deems fit, settle any difficulty arising in relation to the
distribution, and take such steps as are required for that purpose. Shares of a
value less than that resolved by the Board of Directors will not be taken into
account for the purpose of adjusting the rights of shareholders.

The Board of Directors may determine from time to time the manner of
paying the dividend or the distribution of the bonus shares and the arrangements
relating thereto to registered shareholders or with respect to those holding
share warrants. Without derogating from the generality of the foregoing, the
Board of Directors may pay any dividend or monies in respect of shares by
sending a cheque by post to the address of the shareholder as registered in the
register of shareholders of the Company. The dispatch of any such cheque will be
at the risk of the shareholder.

In the event of a declaration of dividend, distribution of shares or
debentures following a capitalization or grant of any rights to members, for
subscription to shares as yet unissued, the Board of Directors will publish a
notice thereof at least once in two daily newspapers in Israel.

A dividend, the payment of which has not been claimed within a period
of seven (7) years from the date of the resolution to distribute the same, will
be regarded as having been waived by the person entitled thereto and such
dividend will revert to the ownership of the Company.

3.3 Increase of Capital and Modification of the Rights Attaching to the
Company's Shares

A general meeting of the shareholders may decide upon the following
matters by a resolution passed by a simple majority:

1. To increase its registered share capital by such amount as will be
resolved, by creating new shares on such conditions and with such rights as the
resolution prescribes. Such resolution may be adopted whether or not all the
shares for the time being have been issued or a resolution exists for the issue
thereof and whether or not they have yet to be issued or resolved to be issued.

2. To cancel any registered capital which has not been allotted, provided
no undertaking, including a contingent undertaking, on the part of the Company
exists to allot such registered share capital.

3. To vary, cancel, convert, extend, add to or otherwise modify the
rights, privileges, advantages, restrictions and terms whether or not for the
time being related to the Company's shares.

4. To consolidate and redistribute its share capital into shares of
larger or smaller denominations than those of the existing shares.

5. To reduce its share capital in such manner and on such terms and
subject to obtaining such approvals as are required by law.

6. To make any other change in the Company's share capital or the rights
attaching to its shares, to the extent that such power is not vested in any
other organ of the Company.

The rights conferred upon the holders of any shares, including preference
shares (as defined in the Securities Law, 5728-1968), will not be deemed to have
been varied by the creation or issue of additional shares ranking pari passu
with them, unless otherwise stipulated by the terms of issue of such shares.

The Board of Directors of the Company may:

1. Issue shares and other securities, including convertible or realizable
securities, up to the amount of the Company's registered share capital, and may
similarly allot the same (or otherwise deal therewith) to such persons, in
exchange for cash or other non-cash consideration, on such exceptions and
conditions, at a premium or at par or at a discount, at such times as it deems
fit; and grant any person the right to demand the allotment of any shares during
such time period and against such consideration as the Board of Directors may
determine.

2. Issue redeemable securities and redeem the same in such manner and on
such conditions as it may resolve from time to time.

3. Resolve to issue a series of debentures within the scope of its
authority to borrow on the Company's behalf, and to the limit of such power.

Upon the issue of shares the Board of Directors may establish different
conditions for the shareholders in relation to the consideration, the amounts of
the calls and/or the dates of payment thereof.

3.4 Transfer of Shares

No transfer of shares of the Company will be registered without a
proper instrument of transfer being delivered to the Company. The instrument of
transfer of a share in the Company will be signed by the transferor and
transferee, and the transferor will be deemed to remain the shareholder until
the transferee's name is registered in the register of shareholders in respect
of the share transferred.

Any document (including the certificate of the share being
transferred) that the Board of Directors may require in connection with the
transfer must be submitted to the Company together with the instrument of
transfer.

The Board of Directors may decline to recognize the instrument of
transfer until the certificate of the share being transferred is attached
thereto, together with such other evidence as the Board of Directors may demand
to prove the transferor's right to transfer the share, and payment of a transfer
fee if prescribed by the Board of Directors.

3.5 Notices to Shareholders of General Meetings

A notice convening a general meeting will be published in at least
two Hebrew daily newspapers having a broad circulation, and will include the
agenda fixed for the meeting, the proposed resolutions and arrangements
regarding poll cards as the case may be.

The Company is not bound to personally serve notice of a general
meeting on a shareholder registered in the register of shareholders.

3.6 General Meetings of the Company's Shareholders

There will be a quorum for holding a general meeting when at least
two shareholders holding at least twenty-five per cent (25%) of the voting
rights are present, within half an hour of the time appointed for the meeting to
proceed to business.

If within half an hour of the time appointed for the meeting to
proceed to business a quorum is not present at the general meeting, the meeting
will stand adjourned to the same day in the next week at the same time and
place, or to such other time if specified in the invitation to the meeting or
the notice of the meeting. If no quorum is present at the adjourned meeting
within half an hour of the time appointed therefore, the meeting will take place
with such number of participants as are present. Notwithstanding the foregoing,
if the general meeting has been convened upon requisition by shareholders as
provided in Sections 63(b)(2) or 64(a) of the Companies Law, the adjourned
meeting will be held only if there are present at least that number of
shareholders required to convene a meeting as provided in those sections of the
Law.

A general meeting at which a quorum is present may resolve to adjourn
the meeting to such other time and place as it may determine. At the adjourned
meeting, only the business appearing on the agenda of the original meeting and
for which no resolution has been passed, will be transacted. If the general
meeting is adjourned for a period exceeding 21 days, notices of the adjourned
meeting will be given as stated in Clause 3.5 of this Circular.

3.7 Election of the Members of the Board of Directors

The number of members of the Board of Directors will be fixed from
time to time by a resolution of the general meeting of the Company. The number
of members of the Board of Directors will not be less than seven (7) nor greater
than fifteen (15).

The directors of the Company will be appointed by a resolution
adopted by a general meeting of the shareholders present at the meeting
personally or by proxy. Notwithstanding the foregoing, the Board of Directors
may resolve, from time to time, to appoint an additional director or directors
whether as an additional director, or in order to fill the position of a
director that has fallen vacant for any reason, provided that every such
appointment and any change in such appointment will be made in accordance with
the provisions of a voting agreement between the shareholders of the Company
entitled to appoint directors, a signed copy of which has been given to the
Board of Directors.

A director will take up office on the date of his appointment or at
such later date in the future, in accordance with the resolution of the general
meeting or of the Board of Directors, as the case may be, which appointed the
director. Such appointment will continue until it is terminated or discontinued.

A director may resign by written notice given to the Board of
Directors, the chairman of the Board of Directors or the Company, and such
resignation will enter into effect on the date the notice is given, unless a
later date is prescribed in the notice. The director's notice of resignation
will contain the reasons for his resignation.

Upon notice of a director's resignation being received, notice
thereof and the reasons given therefore shall be submitted to the Board of
Directors, and they shall be recorded in the minutes of the next meeting
convened after the resignation.

The general meeting may, at any time, remove a director from office.
In addition, the Board of Directors may remove from office a director that it
appointed, provided that such termination of service shall be made with the
consent of the shareholders. A director removed from office will be given a
reasonable opportunity to present his case to the general meeting or the Board
of Directors, as the case may be.

Without derogating from the causes enumerated in the Companies Law,
the office of a director will be vacated in any of the following cases: if he
has resigned his office, been removed from office, been convicted of an offence
under the law, by a decision of a court of law made according to the law, if
the director has been adjudicated bankrupt, and, if a corporate body, a
resolution has been passed for its voluntary liquidation or a winding-up order
is made against it, upon the date of adoption of a resolution by the Board of
Directors terminating his office, if he has become legally incompetent, upon the
expiration of the period for which he was elected and if the director was absent
from six consecutive meetings of the Board of Directors or from eight
non-consecutive meetings of the Board of Directors during one year, provided,
however, that the Board of Directors may allow a director's membership to
continue if the absences occurred during a period of time not exceeding six
months.

A director who has ceased to hold office may be re-appointed. If no
director is appointed or if the office of a director is vacated, the remaining
directors may act in all matters so long as their number has not fallen below
the minimum prescribed for the time being for meetings of the Board of
Directors.

Chapter 4 - Details Regarding the Company's Share Prices

The following sets out details of the highest and lowest prices at which the
Company's shares were traded in 2006 and 2007, and during the period between
January 1st, 2008 and January 17th, 2008 on the Stock Exchange (without taking
into account dividend distributed during the same period):

Stock Exchange Price In the Period Between January 2007 2006
1st 2008 and

January 17th 2008
Date NIS Price Date NIS Price Date NIS Price
High 02.01.2008 19.55 10.05.07 23.45 20.04.06 24.08
Low 16.01.2008 16.86 04.12.07 18.11 10.08.06 18.18

The share price on the Stock Exchange on January 17th, 2008 (the last trading
day before the date of this Circular) was NIS 17.17.

Chapter 5 - Reference to Financial Statements

Eligible employees are referred to the Company's financial statements as at
December 31, 2006, published on March 21, 2007, the Company's financial
statements as at March 31, 2007, published on May 29, 2007, the Company's
financial statements as at June 30, 2007, published on August 30, 2007, and the
Company's financial statements as at September 30, 2007, published on November
21, 2007.

The Company also refers the Eligible Employees to the Immediate Reports that
were published by it commencing 21st November, 2007 (excluding those reports
regarding changes in the holdings of institutional bodies), as follows:

Date of Publication of Subject Matter

Immediate Report
16/01/08 Increase of the ratio of the overall capital to 12% in 2009, dividend
policy, retirement plan
16/01/08 The Bank's Work Plans and Budget Approval for 2008
15/01/08 Holding(s) in Company
15/01/08 Holding(s) in Company
14/01/08 Arison Holdings purchased 1 million shares of the bank, will hold 20.84%
14/01/08 Change in holdings of Interested Party - Alliance LP
13/01/08 Holding(s) in Company
10/01/08 The effect the decline in the value of the structured and mortgage-backed
assets had on the 2007 Report
08/01/08 Holding(s) in company
08/01/08 Lazard Asset Management LLC has become an interested party
06/01/08 Holding(s) in company
02/01/08 Schedule Senior Office Holders - as of 01/01/08
01/01/08 Preliminary Circular
01/01/08 Preliminary Circular
31/12/07 Holdings of interested parties - amendment of report
31/12/07 Lazard Management holds 63,608,757 shares (5.045% of the shares of the Bank)
30/12/07 Holdings of interested parties
24/12/07 Holdings of interested parties
20/12/07 Agreement for acquisition of 75.8% OJSC Bank in the Ukraine for approx. $136m
19/12/07 Board of Management and office holders -schedule as at 14/12/07
17/12/07 Update of the percentages held by trusts in Arison Holdings (the controlling
party)
16/12/07 Changes and Schedule of Capital-Deposit/Withdrawal Certificate -Subordinated
Notes C Continuous Trading Institutional
13/12/07 Appointment of office holder -Member of the Board of Management, Head of
Risk Management - Koller Dan Alexander
13/12/07 Appointment of office holder - Member of the Board of Management, Head of
Human Resources - Klausner Doron
13/12/07 Appointment of office holder - Member of the Board of Management, Head of
Client Asset Management - Pri-Zan Hanna
10/12/07 Response - in negotiations to acquire control of the Russian bank SDM for
$140-160m
09/12/07 Holdings of interested parties
22/11/07 Changes and Schedule of Capital - private issue
22/11/07 Holdings of interested parties
22/11/07 Pozitif (57.55%) completes purchase of bank in Kazakhstan, capital to be
injected in Pozitif
21/11/07 Dividend of 32 agoroth per share, ex 28/11/07, payment 12/12/07
21/11/07 3rd quarter report for year 2007

Date: January 20th, 2008

Respectfully yours,

Bank Hapoalim B.M.

Name of signatory on behalf of the Corporation: Doron Klauzner

Title: Member of the Board of Management, Head of Human Resources, Logistics and
Procurement

Name of signatory on behalf of the Corporation: Eli Eisdorfer

Title: Manager of Human Resources Division

This information is provided by RNS
The company news service from the London Stock Exchange
END

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