Recent amendments to the Companies Regulations (Rules regarding Compensation and Expense Reimbursement of External Directors) 2000 (the "Regulations") substantially increase the minimum and maximum allowed compensation for “external directors”. In addition, the updated Regulations changed the criteria for "expert external directors", for whom the maximum compensation can be higher by as much as 33% than the compensation for other external directors. Israeli publicly traded companies are required under the Israeli Companies Law to appoint at least two external directors to serve on its Board of Directors.

The increase in the maximum compensation for external directors also allows the company to simultaneously raise the compensation to directors that are not external directors, without the need for authorization by the shareholders, provided that the audit committee and board of directors certify that the compensation is not higher than the maximum sum set in the Regulations and in accordance with the Companies Regulations (Relief for Transactions with Interested Parties) 2000.

The updated Regulations do not change the eligibility requirements for external directors. Although most of the instructions in the Updated Regulations will apply only to external directors nominated after their publication, the increase in compensation can be applied to serving external directors, so long as (i) the decision is authorized by August 6, 2008 and (ii) the increase will be in effect no earlier than March 6, 2008. By June 5, 2008, the compensation of external directors eligible for relative compensation and that were appointed before March 6, 2008 must be modified so that their compensation will not be less than the minimum amounts set in the updated Regulations.

It should be noted that according to the Companies Regulations (Relief for Public Companies whose Securities are Registered in Markets Outside of Israel) 2000, an external director of a company traded outside of Israel that satisfies certain conditions may be paid an even higher compensation. The updated Regulations do not amend this regulation.