May 4, 2010 ‫בס"ד‬

Mr. and Mrs. Shimon Deutcsh

Mr. Yechezkel Goldfield, Adv.
c/o Goldfield – Ben Menachem
12 Beit Hadfus Jerusalem 95438, Israel

CC: Mrs. Merav Jaeger, Adv.

Re: Sale of property at Katzenelenbogen 10/18 Har Nof, Jerusalem

To whom it may concern,

With regard to the sale of the property at Katzelenbogen 10/18, it is mutually

acknowledged that both parties have carried out the obligations of the contract in
good faith and according to schedule. To date, the contract price has been remitted in
full and the only actions outstanding are the physical transfer of the property to the
buyers and the official registration of new ownership in Tabau.

Notwithstanding, a serious issue has just now been disclosed that requires immediate
attention.

It goes without saying that the buyers were and remain pleased to pay the agreed upon
price for the property with the understanding that the property is legally sound and
that its legal appraised value is in the general vicinity of the contract price and that it
is free of any and all impediments for being resold and/or mortgaged. To this end, the
buyers relied upon the sellers’ declaration that there are no concealed defects to the
property as well as taking the standard steps of checking the Nesech Tabau including
the property layout that is appended to it. Despite these assurances it has only now
been revealed that legal issues and severe impediments do indeed exist.

Toward the later stages of the transaction, the buyers exercised the option to secure a
mortgage as part of the final payment. As part of this process, a licensed appraiser,
Mr. Aharon Vindish, was retained to assess the legal market value of the property.
Mr. Vindish insisted on verifying not only the legal status of the property in the Tabau
registry but the initial building rights for the property as well. In the course of the
investigation, Mr. Vindish was unable to verify that the property had at any time
obtained legal approval to be fashioned as a dwelling. Thus, Mr. Vindish could only
conclude that the legal certification for the property is lacking.

Based on this, Mr. Vindish’s assessment was that the property has no legal value as a
formal dwelling but merely that of an uninhabited storage area. He provided for a
legal value of not more than NIS 1,500,000. (Note – he did allow a minor portion of
the property to be assessed as a dwelling despite the lack of certification.)

The ramifications of this development are as follows:

• The property is not legally recognized as a dwelling

• The legal value of the apartment does not nearly reflect the market value
assumed by the buyers or represented by the sellers
• The property cannot be mortgaged for any substantial sum of money

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 May 4, 2010 ‫בס"ד‬

• The property is unsalable to any buyer who requires a mortgage and is

severely impaired in its salability in general

This situation was concealed from the buyers by virtue of the fact that:

• The Nesech tabau documentation was found to be completely in order. Note

that it is not possible for an illegal property to be listed in Tabau under normal
circumstances.
• The sellers had themselves taken a mortgage on the property
• The sellers declared in the contract that there are no hidden defects

The position of the buyers is that, once they paid in the area of NIS 4,500,000 for a
property, they are entitled to nothing less than a property that is legally certified in
every aspect, that has a legal value in the area of NIS 4,500,000, and that can be sold
and mortgaged based on that value.

Thus, the buyers assert as follows:

If the sellers can furnish proof of full legal certification that is satisfactory to all
licensed appraisers, we beseech them to do so immediately.

If such proof is not forthcoming, we must conclude that the property is lacking proper
legal certification and its legal value does not exceed NIS 1,500,000 (as appraised)
which is far below the contract price.

The buyers have been in consultation with Halachic consultants (dayanim) and were
advised that their only unilateral recourse is to petition the sellers in Beit Din for a full
annulment of the contract and refund based on the laws of mekach taut and ona'ah.
With heavy hearts, we are prepared to take this step if necessary.

The only avenue to avoid this extreme measure is for the sellers to voluntary make a
secured commitment to update the legal status of the apartment (Shinui Tabau) at
their expense including improvement taxes (Heitel hashvacha) if applicable. The
security must be no less than 1/3 of the contract price of the property (US $410,000).

To deal with this situation in a responsible and congenial manner, the buyers propose
arranging a conference to be attended by both the buyers, both the sellers, and their
respective attorneys at the earliest opportunity. If the sellers wish to propose other
options or solutions to this regrettable situation, they are invited to do so at the
conference.

We would appreciate an immediate reply to this correspondence and not more than
seven calendar days from the day of receipt. If no reply is received by that time, the
buyers will be forced to resort to the unilateral steps that are available to them.

Very sincerely yours,

Hersh Starck and Bina Starck - Buyers

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