Document:

20-F

Exhibit 4.24  

AGREEMENT  

	
Between  

	 	
BLUE
SQUARE ISRAEL LTD.  

	 	
Publ.
Co. 520042847  

	 	
of
2 Amal Street, Afeq Industrial Zone, Rosh Ha’ayin

	 	
(hereinafter:
“the Seller”)  

of the one part;  

And 

	 	
BLUE
SQUARE REAL ESTATE LTD.  

	 	
Pvte.
Co. 513765859  

	 	
of
2 Amal Street, Afeq Industrial Zone, Rosh Ha’ayin

	 	
(hereinafter:
“the Buyer”)  

of the other part;  

	WHEREAS:  	The
Seller  engages in the  operating of a chain of retail  stores and is also the owner
                  of activities in the field of letting,  management,  development and
improvement of real                   estate properties owned by it; and

	WHEREAS: 	
Pursuant to a resolution of the Seller’s board of directors, the Seller wishes to
split its activities, in a manner whereby properties, rights and obligations connected
with and/or relating to the Seller’s activities in the field of letting, management,
development and improvement of real estate properties owned by it (hereinafter:
“the  Real Estate Activities being Transferred”) will be
transferred to the Buyer in consideration for the allotment of shares of the Buyer to the
Seller (hereinafter: “the  Spin-Off”) ; and 

	WHEREAS: 	
The Buyer is a wholly-owned subsidiary of the Seller, which was established with the
objective of constituting a real estate development, initiation and management company,
inter alia by way of the acquisition of the properties, rights and obligations
connected with and/or relating to the Real Estate Activities being Transferred; and 

	WHEREAS: 	
The parties declare that the Spin-Off is being effected for a commercial and economic
purpose, which includes enabling concentration on the development of real estate owned and
managed by the Seller, coupled with creating a sub-specialization in the fields of
activity being transferred; and 

	WHEREAS: 	
The Spin-Off is being implemented in accordance with [Section] 105A(2) of Income Tax
Ordinance, including all the conditions and sub-sections thereof, and is contingent upon
an approval from the tax authorities and confirmation of the applicability of the tax
benefits under Section 105B of the Income Tax Ordinance; and 

1

	WHEREAS: 	
For purposes of implementing the aforesaid Spin-Off, the Seller wishes to sell to the
Buyer, and the Buyer wishes to purchase from the Seller, the Property Sold as defined
below, all in accordance with the conditions set forth in this Agreement; and 

	WHEREAS: 	
The parties have applied to the tax authorities with a request to receive a pre-ruling
pursuant to which the Property Sold will be transferred from the Seller to the Buyer in
accordance with Section 105A(2) of the Income Tax Ordinance (New Version), 5721-1961 and
on such conditions as will be specified in the pre-ruling by the tax authorities; and 

	WHEREAS: 	
The parties wish, in the scope of the provisions of this Agreement, to stipulate and
define the legal relationship between them regarding the acquisition of the Property Sold
and the transfer thereof, subject to a framework that will be prescribed in the pre-ruling
by the tax authorities, all in accordance with the terms and conditions set forth below in
this Agreement; 

Now therefore it is agreed,
declared and stipulated by the parties as follows: 

	1.  	Preamble
and interpretation  

	 	1.1	
The preamble to the Agreement, the appendices hereto and the declarations by the parties
constitute an integral part hereof.

	 	1.2	
The division of this Agreement into clauses and sub-clauses and the headings appearing in
it has been done solely for the sake of convenience, and no use shall be made thereof for
purposes of the interpretation hereof.

	2.  	Definitions  

	 	
In
this Agreement the following terms will have the meanings set opposite them:  

	 	2.1	
“The Property Sold” – the properties being transferred, the rights
being transferred and the liabilities being transferred, as same are defined below.

	 	2.2	
“The properties being transferred” – the real estate properties
mentioned in Appendix A, which will be attached to this Agreement at
the date of closing. For the removal of doubt it is clarified that the properties being
transferred do not include all the real estate properties under the Seller’s
ownership/leasehold, and this includes the fact that the properties being transferred do
not include certain additional real estate properties which will be transferred to the
Buyer by the Seller in the scope of a separate agreement.

2

	 	2.3	
“The rights being transferred” – all the Seller’s rights in
connection with the properties being transferred, including rights pursuant to leasehold
agreements and/or lease agreements and/or co-ownership agreements and/or purchase
agreements and/or any other agreement between the Seller and any third party in connection
with the properties being transferred, and including the Seller’s rights
vis-à-vis Coop Blue Square Services Society Ltd. in respect of the
properties being transferred.

	 	2.4	
“The liabilities being transferred” – all the Seller’s
liabilities in connection with the properties being transferred and/or in connection with
the financing of the Real Estate Activities being Transferred, including, but without
derogating from the generality of the foregoing, obligations pursuant to leasehold
agreements and/or lease agreements and/or co-ownership agreements and/or any other
agreement between the Seller and any third party in connection with the properties being
transferred. Included in the foregoing the liabilities being transferred include the
financial obligations set forth in Appendix B, which will be attached
to this Agreement on the date of closing, as will be approved in the pre-ruling of the tax
authorities.

	 	2.5	
“The effective date” – December 31, 2005, or any other date on which
the parties may agree, in accordance with the pre-ruling of the tax authorities.

	3.  	Representations
and warranties by the Seller

	 	
The
Seller hereby represents and warrants to the Buyer that:  

	 	3.1	
Subject to the fulfillment of the suspensive conditions, there is no legal, contractual or
other bar to its entering into this Agreement and to performing its obligations under this
Agreement in full and punctually on due date.

	 	3.2	
It accepts the consideration shares as hereinafter defined, in the state in which they are
“as is” without any representation and/or declaration on the part of the Buyer,
including, but without limitation, the condition of the Buyer, its liabilities, assets and
its business, and any other matter and thing likely to be of interest to a reasonable
purchaser of the consideration shares. The Seller waives any allegation of defect or flaw
in connection with the consideration shares.

	4.  	Representations
and warranties by the Buyer

	 	
The
Buyer hereby represents and warrants to the Seller that:  

	 	4.1	
It is purchasing the Property Sold in its present condition “as is” at the date
of signing of this Contract, without any representation and/or declaration on the part of
the Seller, including, but without limitation, in regard to the state of the Real Estate
Properties from the physical and/or zoning and/or legal aspect and/or any other aspect
and/or any other matter and thing likely to be of interest to a reasonable purchaser of
rights in land. The Buyer waives any allegation of defect or flaw in connection with the
Property Sold.

3

	 	4.2	
Subject to the fulfillment of the suspensive conditions, there is no legal, contractual or
other bar to its entering into this Agreement and to the performance of its obligations
under this Agreement in full and punctually on due date.

	5.  	Suspensive
conditions  

	 	       5.1 	This
Agreement and its implementation is contingent upon the fulfillment and compliance
with the following cumulative conditions (hereinafter: “the Suspensive
Conditions”): 

	 	5.1.1 	Obtaining
of all the resolutions and approvals required for implementing the transactions covered
by this Agreement from the competent organs of the Seller.  

	 	5.1.2 	Obtaining
of all the resolutions and approvals required for implementing the transactions covered
by this Agreement from the competent organs of the Buyer.  

	 	5.1.3 	Receipt
of a pre-ruling from the Income Tax Commission to the implementation of the Spin-Off
(hereinbefore and hereinafter: “the Tax Authorities Pre-Ruling”).  

	 	5.1.4 	Obtaining
the consent of third parties to the transfer of the Property Sold from the Seller to the
Buyer (including the consent of the creditors to the transfer of these liabilities as set
forth in Appendix C), to the extent that such consents are required.  

	 	5.2	
If the Suspensive Conditions or any of them is not fulfilled within 6 months from the date
of signing of this Agreement, and the parties have not agreed to an extension of the time
as stated in Clause 5.3 below, this Agreement will be null and void, without this being
deemed to be a breach hereof and without any party having a right to any remedy as a
consequence thereof.

	 	5.3	
Notwithstanding the contents of Clause 5.2 above, each of the parties will be entitled, by
way of written notice to the other party, to extend the date for fulfillment of the
Suspensive Conditions, each time for a period of an additional 60 days over and above the
last date that was specified for the fulfillment of the Suspensive Conditions prior to the
giving of the notice, but it is agreed that under no circumstances shall the period for
fulfillment of the Suspensive Conditions be extended beyond a period of 24 months from the
date of signing of this Agreement.

	 	5.4	
Notwithstanding the contents of Clause 5.1 above, it is agreed that the parties will be
entitled to waive the fulfillment of any of the Suspensive Conditions and/or to postpone
the date for the fulfillment of any of the Suspensive Conditions.

4

	6.  	The
transaction and the effective date

	 	6.1	
On the date of closing, as defined below, the Seller will transfer the Property Sold to
the Buyer and the Buyer will accept the Property Sold from the Seller, commencing from the
effective date, including on the basis whereby, commencing from the effective date, the
Buyer will have the rights and obligations in respect of the properties being transferred,
and will be entitled as against third parties and liable to third parties on all aspects
connected with the rights being transferred and the liabilities being transferred,
including on a basis whereby all the income and expenses in respect of the properties
being transferred and/or the rights being transferred and/or the liabilities being
transferred shall apply, commencing from the effective date, to the Buyer and shall be
paid by it. To the extent that either of the parties should bear any payment and/or
receive any income in connection with the properties being transferred and/or the rights
being transferred and/or the liabilities being transferred, in excess of its entitlement
or its obligations, as the case may be, in accordance with the provisions of this Clause
6.1 above, the parties will do an accounting between them, in a manner whereby each party
will bear the expenses and will receive the income in accordance with the provisions of
this Clause 6.1 above.

	 	6.2. 	Included
in what is stated in Clause 6.1 above, it is agreed between the parties                in
relation to the properties being transferred as follows: 

	 	6.2.1 	In
relation to properties forming part of the Real Estate Properties that are leased to
third parties (including properties leased to Blue Square Chain Properties and
Investments Ltd. or to Blue Square Chain Hyper-Hyper Ltd.) – it is agreed that all
the Seller’s rights and obligations pursuant to the lease agreements will be
assigned to the Buyer, commencing from the Effective Date, on a basis that the Buyer will
be entitled and liable to third parties as aforesaid, commencing from the Effective Date
onwards, for everything connected with the lease agreements.  

	 	6.2.2 	In
relation to properties forming part of the Real Estate Properties of which the Seller
itself makes use – it is agreed that these properties will be leased to the Seller
by the Buyer, commencing from the Effective Date onwards, in accordance with the
conditions of lease as set forth in a lease agreement that will be signed between the
Seller and the Buyer, as stated in Clause 8.2 below.  

	 	6.3	
To the extent that consent is required from third parties to the transfer of the Property
Sold and/or to any part thereof, the Seller undertakes to act diligently and persistently,
in order to obtain the consent of such third parties. Where consent of any third party is
required as aforesaid and such consent has not been received (hereinafter:
“Transfers  Requiring Consent”), the Seller will continue with the
implementation of the contractual arrangement, in trust for the Buyer until the transfer
is completed. All receipts which the Seller may receive in respect of Transfers Requiring
Consent of the transfer which has not been completed, will be accepted by the Seller in
trust for the Buyer and will be transferred to the Buyer immediately upon the receipt
thereof. The Seller will not have a proprietary and/or other right in and to a receipt
that may be received by it as aforesaid. The Seller will be entitled to indemnity from the
Buyer in respect of its expenses, and in respect of any damage that may be sustained by it
in connection with such Transfers Requiring Approval.

5

	 	
It
is agreed that consent fees to the Israel Lands Administration in respect of the transfer
of the rights in any of the Real Estate Properties to the Buyer, to the extent that same
apply, shall be borne by the Buyer and shall be paid by it. 

	 	6.4	
The parties shall act in cooperation until completion of registration of the transfer of
rights in the Real Estate Properties from the Seller to the Buyer, and included in this
the parties will sign any deed and/or application and/or any other document that may be
necessary for purposes of completing the registration as aforesaid. It is agreed that the
Buyer will bear all the costs and/or fees connected with completion of registration as
aforesaid.

	 	
It
is agreed that to the extent that there are and/or may be attachments and/or encumbrances
imposed on any of the Real Estate Properties, the Seller undertakes to act for the removal
of such attachments and/or encumbrances, including in a manner that will facilitate
completion of registration of the transfer of rights from the Seller to the Buyer. 

	7.  	The
consideration  

	 	
As
consideration in respect of the Property Sold, the Buyer undertakes to allot to the
Seller, on the date of closing, 20,000 ordinary shares of NIS 1 par value each in the
Buyer (hereinbefore and hereinafter: “the Consideration Shares”). 

	 	
The
parties declare and represent that no consideration has been transferred and/or will be
transferred between them in respect of the Property Sold, apart from the allotment of the
Consideration Shares and as set forth in the approval from the tax authorities. 

	8.  	The
closing  

	 	8.1	
Within 7 days from the date of fulfillment of the Suspensive Conditions (hereinbefore and
hereinafter: “the Date of Closing”), after the parties have verified that
all the Suspensive Conditions have been fulfilled to their satisfaction, the parties will
perform all the following acts and operations at one and the same time:

	 	8.1.1 	Possession
of the Real Estate Properties will be transferred from the Seller to the Buyer.  

	 	8.1.2 	The
Buyer will allot the Consideration Shares to the Seller and will deliver to the Seller an
allotment of shares report for the Registrar of Companies which relates to the allotment
of the Consideration Shares to the Seller. The parties will sign a document for effecting
an allotment in the form of Appendix C, which will be attached to
this Agreement on the Date of Closing.  

6

	 	8.1.3 	The
Seller will deposit with the Buyer a notarial irrevocable power of attorney in 2 copies
in favor of the Buyer, enabling the Buyer to perform any act in connection with the
Properties being transferred, including the transfer of rights in the Properties being
transferred into the name of the Buyer.  

	 	8.1.4 	The
parties will sign any document and will perform any act which may be required for
purposes of consummating the transaction that is the subject of this Agreement.  

	 	8.2	
Within 30 days from the Date of Closing the parties will enter into a lease agreement in
relation to the properties which will be let to the Seller by the Buyer, and also a
services agreement in relation to the services which the parties will render to one
another commencing from the date of closing onwards.

	 	8.3	
It is agreed that in a case in which the parties decide on transferring certain employees
of the Seller to the Buyer, the parties will, within 30 days from the Date of Closing,
enter into an agreement for the transfer of such employees.

	9.  	Liability
and indemnity  

	 	
Any
responsibility and/or liability to any person and/or body, including to the various
administrative authorities, in connection with the Property Sold, the origin and/or
grounds for which and/or the facts on which same are based relate to any period, whether
before the Date of Closing or after the Date of Closing, except only current payments in
relation to which Clause 10.2 below will apply, shall be borne by the Buyer alone. The
Buyer will indemnify the Seller in respect of any damage or expense that may be caused to
the Seller as a result of a claim or demand in connection with the Property Sold the
responsibility for which is imposed on the Buyer in accordance with the foregoing. 

	10.  	Taxes  

	 	10.1	
The parties are aware that implementation of the transaction that is the subject of this
Agreement does not involve the payment of any taxes, including taxes pursuant to the
Income Tax Ordinance and/or under the Land Taxation Law and/or according to the Income Tax
Law (Adjustments for Inflation). Notwithstanding the foregoing, if any tax should apply in
connection with the implementation of the transaction as aforesaid, then the following
provisions will apply:

	 	10.1.1 	The
Seller will bear payment of any tax or levy, if and to the extent that same applies to
it, in its capacity as seller of the rights in the properties being transferred, by
virtue of the provisions of any law in respect of any transfer of a right in real estate
that is the subject of this Agreement, apart from a betterment levy in relation to which
the provisions of Clause 10.3 below will apply, and apart from consent fees and costs of
registration, to which the contents of Clauses 6.3 and 6.4 above will apply.  

7

	 	10.1.2 	The
Buyer will bear payment of any tax or levy, to the extent that same applies to it, in its
capacity as purchaser of the rights in the properties being transferred, by virtue of the
provisions of any law in respect of any acquisition of a right in real estate that is the
subject of this Agreement, and included in this the purchaser shall bear the Land
Acquisition Tax at a rate of 0.5% in accordance with the tax authorities’ pre-ruling.
For the avoidance of doubt, it is clarified that in addition the Buyer shall bear the
consent fees and the costs of registration as referred to in Clauses 6.3 and 6.4 above,
and a betterment levy as mentioned in Clause 10.3 below.  

	 	10.2	
All the taxes, municipal rates, fees and current payments which applied and/or which apply
and exist and/or which may apply in the future in connection with the real estate, whether
or not payment thereof has been demanded, including debts to property tax, if same exist,
in relation to a period which is up to the Effective Date, will be borne by the Seller,
and from the Effective Date onwards the payments mentioned in this clause will be borne by
the Buyer.

	 	10.3	
A betterment levy which applies and/or which may in the future apply in respect of any of
the Real Estate Properties, shall apply to the Buyer and shall be paid by it. It is
clarified in this regard that to the extent that the Seller has a right against any third
party for reimbursement and/or contribution and/or indemnity in respect of such betterment
levies, such right is hereby endorsed over to the Buyer in the scope of this Agreement.

	11.  	Arbitration  

	 	11.1	
Any disputes that may arise between the parties, inter alia, in connection with
and/or in relation to this Agreement and/or in connection with any of the provisions
hereof and/or in connection with the implementation and/or breach hereof, if any, shall be
referred for the decision of an arbitrator who shall be appointed by the parties by
consensus agreement and in the absence of agreement the arbitrator will be appointed by
the senior partner, for the time being, in the firm of the Seller’s auditors.

	 	11.2	
The arbitrator shall adjudicate on the aforesaid disputes or on any of them after having
been requested to do so by notice in writing signed by any of the parties to this
Agreement.

	 	11.3	
The arbitrator will be bound by the substantive law, but shall not be bound by the rules
of evidence and of procedure.

8

	 	11.4	
This clause constitutes a valid arbitration agreement within the meaning thereof under the
Arbitration Law, 5728-1968.

	12.  	Miscellaneous  

	 	12.1 	This
Agreement does not constitute an agreement in favor of a third party.

	 	12.2	
The parties hereby ratify that the validity of this Agreement, in accordance with the
conditions hereof, is commencing from December 31, 2005.

	 	12.3	
The expenses of the transaction covered by this Agreement (including attorneys’ fees,
payments to consultants, etc.) shall be borne by the Buyer and shall be paid by it.

	 	12.4	
No modification, amendment and/or addition to this Agreement will be of any force and
shall be deemed not to have been made, unless drawn up in writing and signed by all the
parties to this Agreement.

	 	12.5	
The parties mutually undertake to sign any deed and document and to furnish any approval
and document required for the actual implementation of the transaction pursuant to this
Agreement. For the removal of doubt it is clarified that the parties will be entitled to
extend the validity of any date fixed in this Agreement.

	 	12.6	
The parties shall render reports according to law to the competent authorities in
connection with this transaction and the implementation hereof, to whatever extent is
required according to law.

In Witness Whereof the
Parties have Hereunto Signed: 

	By: /s/ David Weissman

/s/ Gil Unger
——————————————

Blue Square Israel Ltd. 		By: /s/ David Weissman

/s/ Uri Bogomilsky
——————————————

Blue Square Real Estate Ltd. 

9

List of
properties being transferred in the framework of the split according to Section
105A(2) of the Income Tax Ordinance 

	Serial No. 	Serial

number in

list of all

Blue Square

assets only 	Town or city 	Name of Property 	Address of Property 	Block 	Parcel (including.

portions of parcels) 
	1	1 	Even Yehuda 	Even Yehuda Mall 	Hameyasdim	8019	3,70,71
	2	2 	Ofakim 	Ofakim 	20 Herzl	39577	1,2 
	3	3 	Eilat 	Maaleh Eilat D 	Derech Hayotam	40048	1 
	4	4 	Eilat 	Eilat-City Center Industrial Zone 	23 Hativat Golani	40029	17, 18, 19 
	5	5 	Eilat 	Pharm Maaleh Eilat 	Derech Hayotam	40048	1 
	6	6 	Eilat 	Shachmon 	290-294 Sheshet Hayamim	40096	1 
	7	8 	Elad 	Elad 	32 Ben Zakai	4060	44-51, 58
	8	9 	Ariel 	Ariel B 	78 Tzionut	None	None
	9	11 	Ashdod 	Ashdod C 	Hapalmach/Ad Halom	2462	45 
	10	12 	Ashdod 	Ashdod H 	Sderot Menachem Begin/Merkaz Kalanit	2074	151 
	11	13 	Ashdod 	Ashdod Lido 	Lido Beach	2061	111 
	12	14 	Ashkelon 	Kanyon Lev Ashkelon 	Hahistadrut 40	Block 1929 Parcels 207, 208, 211	Block 1945, Parcel 33
	13	15 	Beer Sheva 	Metzada 	2 Mivtsa Ovda	38094	32/2
	14	16 	Beer-Sheva 	Avia Mall 	49 Mivtsa Yoav	38100	59 
	15	17 	Beitar Elite 	Beitar Illit 	22/24 Baba Sali	None	None
	16	18 	Bat-Yam 	Ramat Yosef 	20 Mivtza Sinai	7131	39/15
	17	19 	Bat Yam 	Mega Bat Yam 	20 a Amal	7122	47 
	18	21 	Givatayim 	Givatayim Offices 	13 Tfutsot Israel	8156	535 
	19	22 	Givatayim 	Givatayim Weizmann, Parking 	20 Weizman	6154	435/2,3
	20	23 	Gedera 	Gedera Plot 	Weizman /Pines	3876	72, 140 
	21	24 	Herzliya 	Nof Yam 	10 Shaar Hayam	5670	268 
	22	25 	Herzliya 	Neveh Amal 	19 Katzenelson	6558	151 
	23	26 	Zickron Yaakov 	Shmurat Zichron 	Hahalutzim/Hakovshim	11319	88 
	24	27 	Hadera 	Neot Chen 	19 Smilansky/ Hillel Yaffe	10036	438 
	25	28 	Hadera 	Beit Eliezer 	21 Haatzmaut	7731	126/1
	26	29 	Holon 	Neot Shoshanim 	104 Hahistadrut	6021	1012/1

1

List of
properties being transferred in the framework of the split according to Section
105A(2) of the Income Tax Ordinance 

	Serial No. 	Serial

number in

list of all

Blue Square

assets only 	Town or city 	Name of Property 	Address of Property 	Block 	Parcel (including.

portions of parcels) 
	27	30 	Haifa 	Bat Galim 	37 Haaliya Hashniya	10817	29, 30, 31
	28	31 	Haifa 	Mega Haifa (Castra) 	8 Friman 	Blocks 10735, 12064, 12065	24, 50, 58
	29	32 	Haifa 	Mega Admirality (Store) 	Yigal Yadin/ 71 Halutzei Taasia	11636	3
	30	33 	Haifa 	Auditorium 	Sderot Hanasi Carmel Center	Block 10307 Parcel 124	Parcel 10809 Block 494
	31	34 	Haifa 	Migdalei Carmel 	20 Hanah Senesh	10870	Present Block - 59 Old Blocks - 25, 26
	32	36 	Yokneam 	Yokneam Mall 	Derachim Mall	Block 11098 Parcels 58, 204, 206, 208, 210	Block 11495 Parcels 23, 58, 66, 68, 71
	33	37 	Jerusalem 	Allenby Jerusalem 	Beitar/Yenovsky	30113	7
	34	38 	Jerusalem 	Talpiot Mall 	Pierre Koenig 8 / Harekavim	30141	137
	35	39 	Kfar-Yona 	Kfar-Yona 	6 Sharet	8150	4,5,6,7,8
	36	40 	Kfar-Saba 	Ron Kfar-Saba 	2 Yehuda Cohen	6431	184
	37	41 	Kfar Saba 	Mega Yachin 	1 Atir Yeda	Block 7613 Parcel 96	Block 7615, Parcels 13, 17
	38	42 	Carmiel 	Mega Carmiel 	3 Maaleh Camun	19160	9
	39	43 	Lod 	Ganei Aviv 	14 Arba Onot	Block 3958 Parcel 41	Block 3970 Parcel 102
	40	44 	Migdal Haemek 	Migdal Haemek 	39 Nitzanim/Atsmaut	17455	45,47,57,110, 117
	41	45 	Modiin 	Malibu 	24 Emek Dotan	5690	Parcel 19 Sub -parcel 1
	42	46 	Modiin 	Modiin Hashimshoni 	Emek Bayit Shean/Yehezkel Hanavi	5669	21
	43	47 	Modiin Elite 	Kiriat Sefer 	2 Sderot Yehezkel	None	None
	44	48 	Mazkeret Batia 	Mazkeret Batia 	Sderot Eliahu/Lilach	3898	38
	45	49 	Maccabim/Reut 	Maccabim 	Commercial Center Rananim	5313	78
	46	50 	Nahariya 	Northern Mall Nahariya - closed 	2 Irit	18133	19
	47	51 	Neveh Monoson 	Neveh Monoson 	30 Hashaked/Pninim	6502	300/2
	48	52 	Nes Ziona 	Mega Nes-Ziona 	Ha'irusim	3845	269/1

2

List of
properties being transferred in the framework of the split according to Section
105A(2) of the Income Tax Ordinance 

	Serial No. 	Serial

number in

list of all

Blue Square

assets only	Town or city	Name of Property	Address of Property	Block	Parcel (including.

portions of parcels)
	49	53 	Nazareth 	Har Yona 	Yekinton/Atara	17531	64,65
	50	54 	Nazareth 	Arbel 	1 Amal	17742	6
	51	55 	Netivot 	Shefa Shuk Netivot 	123 Joseph Smilo	39583	3, 30
	52	56 	Netanya 	Jerusalem 	29 Jerusalem	8260	286/1
	53	57 	Netanya 	Center - Stampfer 	14 Stampfer	8264	113/3
	54	58 	Netanya 	HaRav Kook 	32 Harav Kook	8271	180
	55	59 	Afula 	Mega Afula Store 	Kehilat Zion	16699	14-16
	56	60 	Petach Tikva 	Amishav 	96 Derech Menachem Begin	4044	22-34, 36, 37
	57	61 	Petach Tikva 	Maccabim 	73 Stampfer/ Avniel	6361	444
	58	63 	Kiriat Ata 	Bayit Vegan 	10 Haatzmaut	11022	34
	59	64 	Kiriat Ata 	Zevulun 	Zevulun/Haatzmaut	11051	71, 103, 112
	60	65 	Rishon LeZion 	Neveh Carmit 	65 Jabotinsky	3945	Block 718 Sub-parcel 12
	61	66 	Rishon LeZion 	Rishon LeZion D 	33 Shimon Peres	3946	221
	62	67 	Rechovot 	Shaarei Ir- Rechovot 	15 Derech Yerushalayim	3699	248/2
	63	68 	Rechovot 	Sharona Center 	2 Jerusalem /Mader	3698	2, 15, 16
	64	69 	Rechovot 	Mega Rechovot 	26 Derech HaYam	3654	28, 30
	65	71 	Ramle 	Ramle Maccabi Esh Store 	Sderot Jerusalem/Nofei Hamed	4341	25, 26
	66	72 	Ramat Gan 	Haroe Ramat Gan 	2 Haroe	6126	8, 26-28
	67	73 	Ramat Hasharon 	Mega Morasha 	Hacharoshet	Block 6547 Parcel 138	Block 6550 Parcel 92
	68	75 	Raanana 	Raanana Center 	114 Ahuza	6580	Parcel 23 Sub-parcel 4
	69	76 	Raanana 	Vatikim 	11 Hahistadrut	7655	122
	70	77 	Raanana 	Bikel 	2 Weizman	7657	4
	71	78 	Shoham 	Shoham 	161 Emek Ayalon	6847	10
	72	79 	Tel Aviv 	Weizman 	20 Weizmann	6111	608, 609
	73	80 	Tel Aviv 	Dizengoff Square - Shefa Chen 	7 Dizengoff Square, Beilinson	7091	Parcel 65 Sub- parcel 2
	74	82 	Tel Aviv 	La Guardia 	76 La Guardia	6134	561/2

3

List of
properties being transferred in the framework of the split according to Section
105A(2) of the Income Tax Ordinance 

	Serial No.	Serial

number in

list of all

Blue Square

assets only	Town or city	Name of Property	Address of Property	Block	Parcel (including.

-portions of parcels)
	75	83 	Tel Aviv 	Ibn Gvirol 	30 Ibn Gvirol	6111	Parcel 744 Sub parcel 64
	76	84 	Tel Aviv 	Yehuda Hamacabbi 	46-48 Yehuda Hamacabbi	6212	865, 866, 867
	77	85 	Tel Aviv 	Neot Afeka 	15 Leah	6625	Parcel 954 Sub -parcels 1, 2
	78	86 	Tel Aviv 	Kiriat Shalom 	44 Israel Guri	6982	19
	79	87 	Tel Aviv 	Ramat Hahayal 	7 David Marcus	6336	450, 451
	80	88 	Tel Aviv 	Neveh Avivim 	13 Oppenheimer	6630	Parcel 561 Sub-parcel 8
	81	89 	Tel Aviv 	Giborei-Israel 	57 Yigal Alon	7108	54
	82	90 	Tel Aviv 	Migdalei David 	12 Uri	6111	838, 841, 848
	83	91 	Tel Aviv 	Maoz Aviv 	209 Bnei Efrayim	6636	Parcel 654 Sub-parcel 1
	84	92 	Tel Aviv 	Kfar Shalem 	Maapilei Haegoz/ Snapir	7244	81
	85	93 	Tel Aviv 	Central Station Tel Aviv 	108 Levinsky	7060	57, 58
	86	94 	Tel Aviv 	Ramot Zahala 	2 Grofit	6624	367, 368
	87	95 	Tel Aviv 	Tel Baruch 	8 Beker	6626	19-24
	88	96 	Tel Aviv 	Neveh Tsahal 	14 Aluf	6892	41
	89	97 	Tel Aviv 	Shuk Sitonayi 	94 Hashmonaim	7104	93
	90	98 	Tel-Mond 	Tel-Mond 	4 Hashaked	7800	262

4

	Appendix A  	As
per statements - adjusted to December 31, 2005 in thousand NIS

						
						
						
						
						
	 		
		
		
					
	
Para. 4	 	 	 	000s NIS	 	 	000s NIS	 	 	000s NIS	 	 	 	 	 	 	 

	 		Total

Immediately prior to

split after deduction

of properties

transferred pursuant to

Section 104 of the

Ordinance

 
	Remaining

in the

splitting

continuing

company 
	Transferred pursuant

to Section 105

to new company 
	Transferred

pursuant to

Section 104 
	Total real

estate company

Dec. 31, 05 

	 	 					
	 						
	 						
	 						
	 	Current assets	 	 	 	619,909	 	 	519,173	 	 	736	 	 	 	 	 	736	 
	 	Long-term accounts receivable	 	 	 	524,358	 	 	502,264	 	 	22,094	 	 	 	 	 	22,094	 
	 	Investee companies	 	 	 	540,248	 	 	507,975	 	 	22,554	 	 	 	 	 	22,554	 
	 	 	 	 	 	 	 	 	 	 	 	9,719	 	 	 	 	 	9,719	 
	 	 	 	 	 	 	 	 	226	 	 	266	 	 	 	 	 	266	 
	 	Fixed assets, net	 	 	 	1,180,513	 	 	186,129	 	 	994,384	 	 	36,288	 	 	1,032,672	 
	 	Other assets and deferred

expenses, net	 	 	 	1,737	 	 	1,737	 	 	 	 	 	 	 	 	 	 
	 		
		
		
		
		
	
	 	 	 	 	 	2,766,765	 	 	1,717,644	 	 	1,049,221	 	 	38,288	 	 	1,087,509	 
	 		
		
		
		
		
	
	 	 	 	 
	 	 	 	 	 	100	%	 	62.1	%	 	37.9	%	 	 	 	 	 	 
	 	 	 	 	 			 			 	Ÿ		 	Ÿ	 	 	 	 
	 	 	 	 	 			 			Appendix C	Appendix B	 	 	 

	Para. 7  		As per statements adjusted to December

31, 2005 in thousands NIS 
		
	Transfer of liabilities to new companies  
	Total

Split company

immediately

prior to split 
	Remaining

in the

splitting

continuing

company 
	Transferred to

new company 
		
	  						
	 						
	 						
	 	Value of assets as per adjusted statements	 	 	 	2,766,765	 	 	1,717,544	 	 	1,048,221	 	 	38,288	 	 	1,087,509	 
	 	 	 	 
	 	Liabilities  for  attribution up to the extent of	 	 
	 	the value of the property	 	 
	 	 	 	 
	 	Suppliers and service providers	 	 	 	442,242	 	 	442,242	 	 	 	 	 	 	 	 	-	 
	 	Accounts payable	 	 	 	289,613	 	 	280,997	 	 	8,616	 	 	 	 	 	8,616	 
	 	Accrued severance pay	 	 	 	27,939	 	 	27,879	 	 	60	 	 	 	 	 	60	 
	 	Deferred taxes, net	 	 	 	1,232	 	 	11,531	 	 	12,763	 	 	 	 	 	12,763	 
	 	Loan associated with real estate transferred	 	 	 	500,000	 	 	 	 	 	500,000	 	 	 	 	 	500,000	 
	 		
		
		
				
	
	 	Total associated liabilities	 	 	 	1,261,026	 	 	739,587	 	 	521,439	 	 	 	 	 	521,439	 
	 		
		
		
				
	
	 	Total assets less attributed liabilities	 	 	 	1,505,739	 	 	977,957	 	 	527,782	 	 	38,288	 	 	566,070	 
	 		
		
		
		
		
	
	 	Ratio to distribution of non-attributed liabilities	 	 	 	100	%	 	65	%	 	35.1	%	 	 	 	 	 	 
	 	 	 	 
	Non-attributed liabilities for distribution 
	 	Interest rate, date of receipt and due date of	 	 
	 	maturity	 	 
	Bonds 	 	389,764	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Loan from banks	 	 	 	288,957	 	 	 	 	 	 	 	 	 	 	 	 	 
	 		
		
		
		
			
	Total non-attributed liabilities 	 	678,721	 	 	440,820	 	 	237,901	 	 	-	 	 	237,901	 
	 		
		
		
		
			
	 	100%	 	 	 	64.9	%	 	35.1	%	 	 	 	 	 	 	 	 	 

520-F

Exhibit 4.25  

LEASE AGREEMENT  

Made
and entered into at Rosh Ha’ayin on August 13, 2006 

		
		
		
		
		
	Between:	BLUE SQUARE REAL ESTATE LTD. 
	 	2 Ha'amal Street, Afeq Park, Rosh Ha'ayin
	 	Pvte. Co. 513765859
	 	(hereinafter: "the Lessor" or "the Company")

of the one part;  

		
		
		
		
		
	And:	BLUE SQUARE ISRAEL LTD. 
	 	2 Ha'amal Street, Afeq Park, Rosh Ha'ayin
	 	Publ. Co. 520042847
	 	(hereinafter: "the Lessee" or "Blue Square")

of the other part;  

	WHEREAS  	The
Lessee is the controlling shareholder in the Lessor; and 

	WHEREAS  	In
the scope of a reorganization the Lessee transferred to the Lessor its rights in real
estate properties which were owned by it, including the properties mentioned in the
schedule attached to this Agreement as Appendix A, pursuant to a
split agreement dated April 2, 2006 and a transfer agreement dated June 21, 2006
(hereinafter respectively: “the Properties”; “the Spin-off
Agreement”; “the Transfer Agreement”); and  

	WHEREAS  	The
Lessee wishes to hire the Properties from the Lessor and the Lessor has agreed to let the
Properties to the Lessee, under an unprotected lease in accordance with the provisions of
this Agreement (hereinafter: “the Agreement”); and  

	WHEREAS  	The
parties wish to specify arrangements on the subjects set forth in this Agreement below.  

Now therefore this
Agreement witnesses as follows: 

	1.  	The
preamble to this Agreement and the  appendices  attached  hereto  constitute an integral
part        hereof.

	2.  	Interpretation  

	 	2.1	
The preamble to this Agreement and the appendices attached hereto constitute an integral
part hereof.

	 	       2.2 	Headings
 to  the  clauses  shall  not be  used  for  purposes  of  interpretation  of the
              Agreement.  

1

	3.  	Definitions  

	 	       3.1 	"The
Leased Premises": all the properties set forth in Appendix A to the Agreement.  

	 	
“The
proceeds” – means consideration, receipts and income of whatsoever nature,
excluding Value Added Tax, received by the Lessee and arising from its sales in the Leased
Premises, including receipts received from a sale on credit and/or by credit cards, gift
vouchers, buying coupons and electronic buying cards, and so forth. Sales on credit or
sales the consideration for which is received via credit cards or post-dated checks, shall
be recorded by the Lessee as part of the proceeds on the date of sale or the providing of
the service. In addition, the proceeds include proceeds from franchisees, if any, but to
the extent that the proceeds in respect of the activities of the franchisees is not
recorded via the Lessee’s cash registers, an annual report will be given in respect
thereof, at the end of the year, in accordance with the reports of the franchisees. 

	 	
It
is hereby clarified that the proceeds do not include returns from customers, delivery
charges in respect of customers’ purchases, credit card commissions and amounts of
discounts given by the Lessee and which are not included as “income” for
purposes of reporting to V.A.T., including, without limitation, discounts to the
Lessee’s employees and to other customers. 

	 	3.2	
“The index” – the Consumer Price Index published by the Central
Bureau of Statistics, or any official index that may come in its stead.

	 	       3.3 	"The
Basic Index" - the index in respect of December 2005.

	 	3.4	
“The new index” – the last index known on the date of effecting of
any payment pursuant to the provisions of this Agreement.

	4.  	Purpose
of the lease  

	 	
The
purpose of the lease is to conduct and run a supermarket as is customary from time to time
in any of the chains operated by the Lessee and/or for any other legal purpose, subject to
any law and permit. 

	5.  	The
lease  

	 	5.1	
The Lessor hereby undertakes to let the Leased Premises to the Lessee, and the Lessee
hereby undertakes to take the Leased Premises on hire from the Lessor, in accordance with
the conditions set forth below.

	 	5.2	
The Leased Premises will be leased in their current condition (“as is”). The
Lessee declares that it has seen and examined the Leased Premises, the physical, zoning
and legal condition thereof and every other detail in regard thereto, and has found same
to be fit for the Lessee’s use and suitable for the purposes of the lease, and that
it takes the Leased Premises on hire in their current condition (as is), and hereby waives
any allegation of non-conformity, fault or defect in the Leased Premises.

2

	6.  	Non-applicability
of Tenants Protection Law  

	 	6.1	
It is agreed between the parties that the lease, the Lessee and the Leased Premises are
not protected under the Tenants Protection Law (Consolidated Version), 5732-1972 and/or
any other law that may be enacted in the future, which protects a lessee or tenant,
inter alia, by virtue of the fact that what is involved is a new building the
construction of which was completed after 5731 (1971), and because on August 20, 1968
there was no tenant entitled to occupy the Leased Premises and/or by virtue of the Lessee
not having paid and not having been requested to pay key money or any other payment likely
to be construed as key money.

	 	6.2	
It is hereby clarified that any renovation and/or improvement and/or investment in the
Leased Premises, or outside the Leased Premises, shall not be deemed under any
circumstances and/or in any form, to be payment in respect of use, key money, and so
forth, and shall not confer on the Lessee any right in or to such improvements,
alterations or renovation.

	7.  	Period
of lease  

	 	7.1	
The period of the lease is 10 (ten) years, commencing on January 1, 2006 and terminating
on December 31, 2015 (hereinafter: “the Lease Period”), save and except
for property no. 41 to Appendix A (Even Yehuda), in respect of which the Lease Period will
commence on the date of opening of the branch to the general public, but in any event not
later than March 31, 2007 (whether or not the branch has been opened to the general
public), and shall terminate on the date of termination of the Lease Period as aforesaid.

	 	7.2	
At the end of the Lease Period the lease agreement shall be extended for an additional
period of lease of 5 years, commencing from the date of termination of the Lease Period as
aforesaid (hereinafter: “the Period of Extension”), unless the Lessee
should elect not to extend the Lease Agreement and gives prior written notice to that
effect to the Lessor, not later than 24 months before the end of the Lease Period
(hereinafter: “Notice of Termination”).

	 	7.3	
It is agreed that in the Period of Extension, the Lessee will be entitled to reduce the
number of Properties that are included in the Leased Premises in a manner that entire
Properties will be excluded from the Leased Premises, in respect of which the total
rentals payable (according to the average of the rentals in the two years preceding the
date of extension), does not exceed 15% of the total overall rentals payable in respect of
the Leased Premises as a whole.

	 	
The
Lessee’s right to reduce the area of the Leased Premises as aforesaid, is subject to
the condition that such notice, accompanied by a list of the Properties which the Lessee
intends to remove from the scope of the Leased Premises, shall be given in writing to the
Lessor not later than 12 months before the end of the Lease Period. 

3

	 	7.4	
During the Period of Extension, to the extent that it is exercised, all the provisions of
this Agreement shall apply, mutatis mutandis, also to the Period of Extension.

	 	7.5	
It is clarified, for the avoidance of doubt, that if the Lessee vacates the Leased
Premises before the end of the Lease Period other than in accordance with the provisions
of this Clause 7, then without derogating from any remedy and/or relief available to the
Lessor pursuant to this Agreement and according to law, the Lessee will be liable for all
the payments imposed on it under this Agreement until the end of the Lease Period.

	8.  	Rentals  

	 	8.1	
The rentals for a period of one year shall be 9% of the amount of the investment as
defined below, where same is linked and adjusted to the Consumer Price Index, on the basis
of the known index on the date of each investment in the Property (“basic
rentals”) or 2% of the proceeds of each of the Properties that constitute the Leased
Premises in the relevant year (hereinafter: “Rentals as a Percentage of
Proceeds”), whichever is the higher.

	 	8.2	
“Amount of the investment” for purposes of this Agreement means the total
cost of the Lessor’s investments in the Leased Premises, prior to depreciation and
amortization. Notwithstanding the foregoing the Amount of the Investment shall not
include:

	 	8.2.1 	Ancillary
costs the Lessor has borne in respect of the actual acquisition of the Properties from
the Lessee, such as Land Acquisition Tax, registration expenses, fees of consultants and
advisors.  

	 	8.2.2 	Costs
that are imposed on the Lessor in accordance with the provisions of Clauses 9.2 and 14.2
of this Agreement.  

	 	8.2.3 	Costs
which the Lessor may incur for purposes of developing the Properties that comprise the
Leased Premises other than for purposes of the lease.  

	 	
As
at December 31, 2005 the Amount of the Investment by the Lessor in each of the Properties
that comprise the Leased Premises is as set forth in Appendix A.  

	 	8.3	
The basic rentals shall be paid in advance once every calendar quarter, on the
17th of the first month of each quarter – namely on January 17, April 17,
July 17 and October 17.

4

	 	8.4	
For purposes of calculating the rentals, the Lessee shall deliver to the Lessor, within 60
days from the end of each calendar year, a statement regarding the volume of proceeds in
the preceding year, in respect of each and every one of the Properties that constitute the
Leased Premises (hereinafter: “the Annual Statements”), where the Annual
Statements are adjusted for inflation (in a manner that the proceeds for each and every
month are adjusted to the end of the calendar year) and certified by an accountant. In the
period from the date of commencement of the Lease Period and up to the end of the first
calendar year, partial statements shall be drawn up, correspondingly.

	 	8.5	
If it should become apparent from the Annual Statements that the amount of “the
Rentals  as a Percentage of Proceeds”, that are due to the Lessor for the
year of lease to which such Annual Statements relate, exceeds the “basic
rentals” which were paid in respect of each of the Properties that comprise the
Leased Premises (where same are adjusted from the date specified for payment pursuant to
this Agreement and up to the end of the calendar year), the Lessee shall pay the Lessor,
concurrent with submission of the Annual Statements, the amount of the difference, where
such difference is linked to the index from the date of drawing up of the Annual
Statements and up to the date of actual payment.

	 	
It
is clarified that calculation of the differences between the basic rentals and the Rentals
as a Percentage of Proceeds shall be made in respect of each and every one of the
Properties that comprise the Leased Premises separately, and not on an omnibus basis with
respect to the Leased Premises as a whole. In other words, if in any Property the Rentals
as a Percentage of Proceeds exceed the basic rentals, Rentals as a Percentage of Proceeds
shall be paid in respect of that Property, even if on a cumulative basis the total Rentals
as a Percentage of Proceeds with respect to the Leased Premises as a whole have not
exceeded the basic rentals in respect of the Leased Premises as a whole. 

	 	8.6	
The Lessee shall add Value Added Tax to each payment of rentals, according to the rate in
force at the time of payment. The Lessee shall pay the Lessor the amounts of V.A.T. as
aforesaid not later than two days before the date on which the Lessor is obliged to make
payment thereof to the tax authorities in accordance with the law, against it receiving a
valid tax invoice.

	 	8.7	
The rentals and every other payment the Lessee is obliged to pay to the Lessor shall be
paid by way of a standing instruction or by way of a bank transfer or by way of checks,
all in accordance with the Lessor’s instructions, and the Lessee shall comply with
every such request according to the details thereof, within 15 days from receipt thereof.

	 	
The
giving of the standing instruction and/or delivery of checks shall be deemed to be payment
only upon actual collection of the moneys pursuant thereto in the Lessor’s account or
to its order, and every payment that is effected in accordance therewith shall be deemed
to be payment “on account” of what is due to it only. 

5

	 	8.8	
The Lessee will be liable for payment of the full rentals and the remaining payments
imposed on the Lessee according to law and/or agreement, for the entire Lease Period, even
if it does not make use of the Leased Premises or portion thereof for any reason.

	 	8.9	
In respect of any default of more than 10 business days in any payment for which the
Lessee is liable in accordance with this clause, the Lessee shall pay the Lessor arrear
interest at such rate and on such conditions as are equivalent to the interest charged by
Bank Hapoalim B.M. in respect of an unauthorized overdraft in current business accounts in
shekels during the relevant period, plus linkage differentials.

	9.  	Additional
payments  

	 	9.1	
It is agreed between the parties that the lease which is the subject of this Agreement is
a net lease type, and accordingly the Lessee will bear and/or make payment during the
Lease Period (including the Period of Extension) of the following taxes and payments:

	 	9.1.1 	All
the taxes, fees, levies and other payments of any sort that are imposed and/or may in the
future be imposed on the Leased Premises and/or on the business conducted therein,
including municipal rates, business tax, signboard tax and/or fee, etc., as well as any
tax and/or levy and/or fee that may be imposed in the future and which are imposed and/or
will in the future be imposed according to law and/or custom on a occupier and/or tenant.
The Lessee undertakes to make payment on due date of any amount that may be imposed on it
by the authorities in respect of the business licenses and any tax or fines that may be
imposed, if imposed, that are connected with operating the Leased Premises.  

	 	9.1.2 	Payments
in respect of the consumption of water and electricity in the Leased Premises, the
telephone accounts therein, and payments of management charges and/or house committee
charges therein, and also any similar and/or identical payment, as well as any other
expense relating to the use of the Leased Premises and/or the operation thereof.  

	 	9.1.3 	All
the payments in respect of approved divergent use for purposes of operating the Lessee’s
business in the Leased Premises in accordance with the purpose of the lease (including
expenses for attending to an application for a permit for approved divergent use, and
also in respect of a betterment levy and payments to the Israel Lands Administration,
etc., that are connected with the issue of the permit for approved divergent use), to the
extent that same may be demanded in the Lease Period and/or the Period of Extension.  

6

	 	9.2	
The Lessor shall bear and/or make payment in the Lease Period (including the Period of
Extension) of development fees and development levies to the local authority that may be
charged according to any law against property owners.

	10. 	Licensing,
licenses and permits

	 	10.1	
The Lessee declares that it is conversant with its business and with the conditions
required for obtaining every license and/or approval and/or permit for the purposes of
this Agreement, and that prior to the signing of this Agreement, it actually examined the
suitability of the Leased Premises for its needs and for the objective of the Leased
Premises and the possibility of obtaining all the licenses, the permits and the approvals
required according to law for operating the Leased Premises in accordance with the
objective of the Leased Premises, and has found the Leased Premises to be suitable for the
purpose of the lease.

	 	10.2	
The Lessee is obliged to comply with and to adhere to all the laws, the by-laws,
regulations etc., of every competent authority and to conform with all the standards that
apply and/or which may in the future apply to the Lessee’s uses of the Leased
Premises, and the business conducted by the Lessee.

	 	10.3	
The Lessor is not responsible to the Lessee for obtaining licenses and/or approvals and/or
permits from the competent authorities, that are required for operating and maintaining
the Lessee’s business in the Leased Premises.

	 	10.4	
The foregoing is intended only to add to and in no way to derogate from the Company’s
right to any additional and/or other remedy in accordance with the Agreement and according
to law.

	11. 	Removal
of Properties and adding of new Properties

	 	11.1	
The letting of new Properties by the Lessor to the Lessee shall be effected under the
conditions stipulated in this Agreement, provided that such contractual arrangement was
approved by the audit committee and the board of directors of both the parties, and
provided that the contractual arrangement is during the Lease Period and for a period of
up to 10 years, which will be counted commencing from the date of opening of each of the
new Properties to the general public and where all the Properties leased by the Lessor to
the Lessee shall not exceed an aggregate area of 60,000 sq.m. (an increase of
approximately 20% as against the Properties leased to the Lessee as at the date of
commencement of the Lease Period under this Agreement (January 1, 2006). It is clarified
that also with respect to the new Properties, the Lease Period will be extended as
provided in sub-clause 7.2 above, but the provisions of Clause 7.3 above will not apply
thereto.

	 	
The
validity of this sub-clause requires the ratification of the Company’s general
meeting after completion of an issue of the Company’s securities to the public, in
accordance with Section 275 of the Companies Law. 

7

	 	11.2	
If the Lessee wishes to terminate a lease in respect of portion of the Properties that
comprise the Leased Premises before the elapse of the Lease Period, the Lessee will be
entitled to do so by way of prior notice of 12 months.

	 	
Early
termination of the lease in accordance with this possibility is limited to a number of
Properties forming part of the Leased Premises the total cumulative area of which does not
exceed 5% of the aggregate area of the Leased Premises as at the date of commencement of
the Lease Period (January 1, 2006). For the avoidance of doubt it is clarified that the
contents of this sub-clause are in addition to what is stated in Clause 7.3 above. 

	 	11.3	
The Lessor hereby is granted the right to shorten or temporarily to cease the Lease Period
of Properties No. 22, 28, 7 in Appendix A to this Agreement, which
form part of the Leased Premises (Ramat Hahayal, Raanana center, Ramat Hatayasim), in the
event that this is required by it for purposes of development and/or building construction
on the land on which the Properties stand (hereinafter: “the Development
Works”), subject to giving the Lessee advance notice of 12 months, and subject to
the condition that on the date of vacation a building permit has been granted for the
Development Works.

	 	11.4	
In addition to the contents of Clause 11.3 above, the Lessor is granted the right to
shorten or temporarily to cease the Lease Period in respect of any 7 branches (5 in the
Lease Period and another 2 in the Period of Extension), in the event that this is required
by it for Development Works. This shall be subject to giving the Lessee prior notice of 12
months and subject to the condition that on the date of vacation a building permit has
been granted for the Development Works, and, subject to the condition that the Lessor
shall bear the costs of vacating the branch and shall provide the Lessee, not later than
24 months from the date of vacation, with an alternative branch in the same location
having similar attributes (area, standard of finish, etc.), at its expense.

	 	11.5	
The Lessor is planning to erect and operate small fuel stations on some of the Properties
that form part of the Leased Premises. It is agreed between the parties, that in relation
to every such station that may be erected with the Lessor’s consent, the Lessor shall
bear the costs of establishing the station, apart from equipment, as shall be agreed. The
costs of establishment will be added to the Amount of the Investment. The revenues from
the sale of fuels will not be taken into account for purposes of determining the rentals
as a percentage of proceeds.

	12.  	Liability
and insurance  

	 	
The
liability of the parties and the insurances imposed on each of them are as set forth in
Appendix B to this Agreement, which will be signed within 30 days, if
it is not signed at the time of signing of this Agreement. 

8

	13.  	Transfer
of rights  

	 	13.1	
The Lessee undertakes not to transfer, directly or indirectly, its obligations and its
rights under this Agreement to another/others, and not to grant any third party rights of
use of any sort in the Leased Premises, except with the Lessor’s prior written
approval.

	 	13.2	
Notwithstanding the foregoing, the Lessee will be entitled to let any of the Properties
that form part of the Leased Premises, under a sub-lease, subject to fulfillment of all
the following conditions:

	 	              13.2.1 	The
giving of prior written notice of 30 days to the Lessor. 

	 	13.2.2 	The
substitute tenant shall sign an undertaking directly to the Lessor to fulfill all the
provisions of this Agreement.  

	 	13.2.3 	The
Lessee will remain liable for the fulfillment of all the provisions of this Agreement,
jointly and severally with the substitute tenant.  

	 	13.3	
In addition, the Lessee will be entitled to give a right of use as a licensee to
franchisees who operate in the chain of stores operated by the Lessee, as is customary
from time to time at the Lessee, provided that the Lessee shall continue to be fully
liable for all its obligations pursuant to this Agreement.

	 	13.4	
The Lessor will be entitled to transfer its rights and/or obligations pursuant to this
Agreement, in whole or in part, at its sole discretion, subject to the condition that the
Lessee’s rights under this Agreement shall not be adversely affected, and the Lessee
undertakes to fulfill its obligations under this Agreement to any such transferee.

	14.  	Maintenance
and repairs

	 	14.1	
The Lessee will be solely responsible to repair any defect, fault or damage of whatsoever
nature that may come about in the Leased Premises, in the accessories, facilities and the
equipment therein, including mechanical breakdown and damage resulting from normal and
reasonable wear and tear (hereinafter: “the Damage”) and shall do so
immediately after the occurrence of the Damage and at its expense.

	 	14.2	
Notwithstanding the contents of Clause 14.1 above, the Lessor will be responsible for the
repair of a defect and/or fault and/or Damage that occurs in the construction frame of the
building of the Leased Premises and/or in the water proofing sealing thereof, provided
that these are not caused as a result of an act and/or omission on the part of the Lessee
and/or someone acting on its behalf.

9

	15.  	Alterations
to the Leased Premises and building additions

	 	15.1	
The Lessor will be entitled, in its sole discretion, to add an addition of building areas
in each of the Properties that comprise the Leased Premises, to the extent that the town
planning schemes which apply and/or may in the future apply allow this, without it being
obliged to give prior notice to that effect to the Lessee or to obtain the Lessee’s
consent thereto, subject to this not adversely affecting the Lessee’s rights pursuant
to this Agreement, and without this leading to an increase in the rentals.

	 	15.2	
The Lessee shall be entitled to make any alteration to the Leased Premises which is in the
nature of being “an internal alteration”, as defined below in this
sub-clause, without the necessity for obtaining the Lessor’s consent thereto, subject
to the condition that execution of the alteration is for the continued running and
operation of a supermarket in the Leased Premises, and not for any other purpose. The
Lessee shall notify the Lessor about the alterations and the execution thereof in writing
and in advance.

	 	
“Internal
alteration” – means any alteration and/or addition, provided that such
alteration shall not adversely affect the systems that are common to the Leased Premises
and other units in the building in which the Leased Premises are located and/or of
creating external alterations to the Leased Premises and/or to the building in which the
Leased Premises are located and/or provided that same shall not constitute an exploitation
of building rights in the Leased Premises in excess of those that exist at the time of
commencement of the Lease Period. 

	 	15.3	
Should the Lessee wish to effect any alteration which does not constitute an internal
alteration, as defined above, it will only be entitled to do so subject to obtaining the
Lessor’s prior written approval thereto. The Lessor shall not unreasonably withhold
consent to the Lessee’s request. It is agreed that in the scope of reasonable and
pertinent reasons as aforesaid, the Lessor will be entitled to demand that at the end of
the lease the condition thereof be restored to its former state. If the Lessor has agreed
to bear costs of any alterations to the Leased Premises, the Lessor’s costs will be
added to the Amount of the Investment as referred to in Clause 8.2 above.

	 	15.4	
The Lessee will be solely responsible for obtaining from all the entities and the
authorities any permit and/or license and/or approval that is required according to any
law for executing the alterations, prior to performing any alteration.

	16.  	Vacation  

	 	16.1	
The Lessee shall vacate the Leased Premises at the end of the Lease Period, and shall
return sole possession of the Leased Premises to the Company, with the Leased Premises
being in good order and condition and fit for use and free and vacant of any person and
article not being the property of the Company.

10

	 	16.2	
All the works and/or alterations and/or additions and/or renovations that have been made
by the Lessee and which are affixed to the Leased Premises will, at the end of the Leased
Premises, pass into the possession and ownership of the Lessor, and the Lessee waives in
advance any allegation and/or any monetary demand in connection therewith. Notwithstanding
the foregoing it is clarified that the Lessor will be entitled to demand that the Lessee
restore any alteration that has been made in the Leased Premises without the Lessor’s
approval as required under the provisions of this Agreement to its former condition, and
in such case the Lessee will do this at its expense.

	 	16.3	
In addition the Lessee shall, as soon as possible after the end of the Lease Period or the
actual vacation of the Leased Premises, deliver confirmations from the Electric
Corporation and the local authority to the effect that the Lessee has no debt in respect
of the consumption of electricity and/or water and/or for taxes and/or fees to the local
authority in respect of the Leased Premises up to the end of the Lease Period or up to the
date of actual vacation, whichever is the later.

	 	16.4	
Should the Lessee fail to vacate the Leased Premises on due date, then without derogating
from the Lessor’s rights against the Lessee pursuant to the Agreement and according
to law, after a default of 7 days, the Lessee shall pay the Lessor agreed pre-estimated
liquidated damages in an amount of double the rental in respect of each day of default in
vacation.

	17. 	Breaches
– remedies:

	 	17.1	
The provisions of the Contracts Law (Remedies for Breach of Contract), 5731-1970 shall
apply to a breach of this Agreement.

	 	17.2	
Without derogating from the provisions of Clause 17.1 above, in each of the cases
mentioned below the Lessor will be entitled to cancel the Agreement and to demand
immediate vacation of the Leased Premises:

	 	17.2.1 	Bankruptcy
or liquidation proceedings are taken against the Lessee and have not been withdrawn
within 60 (sixty) days.  

	 	17.2.2 	A
receiver is appointed for the Lessee and/or in respect of a material portion of its
assets, and the appointment has not been set aside within 60 (sixty) days.  

	 	17.2.3 	The
Lessee has applied to the court with an application to stay proceedings against it, or
with an application to reach an arrangement with creditors.  

	18.  	Set-off  

	 	
It
is hereby agreed that the amounts for which the parties to this Agreement are indebted
will not be capable of being set off. 

11

	19.  	Arbitration  

	 	19.1	
Any disputes that may arise between the parties, inter alia in connection with
and/or relating to this Agreement and/or in connection with any of the provisions hereof
and/or in connection with the implementation and/or breach of this Agreement, if any,
shall be brought first for resolution in the framework of a forum that will include the
CEO of the chain, a representative of the Lessor and a representative of the Lessee, on a
basis that the representatives will be the chairman of the audit committee of the Lessee
and the Lessor or another director of the companies who will be appointed by the audit
committee, provided that he does not have a personal interest in the dispute. If the
aforesaid forum does not reach a resolution of the dispute by agreement, the Agreement
will be referred for the decision of an arbitrator who will be appointed by the parties by
mutual consent and in the absence of consent between them the arbitrator will be appointed
by the legal advisor of Blue Square.

	 	19.2	
The arbitrator shall adjudicate on the aforesaid disputes or on any of them after having
been requested to do so by notice in writing signed by any of the parties to this
Agreement.

	 	19.3	
The arbitrator will be bound by the substantive law, but will not be bound by the rules of
evidence and of procedure and he will be obliged to give reasons for the arbitration
award.

	 	19.4	
This clause constitutes a valid arbitration agreement within the meaning thereof under the
Arbitration Law, 5728-1968.

	20.  	Condition
precedent  

	 	
The
coming into force of this Agreement is contingent upon obtaining approval of the competent
organs of each of the parties. 

	21.  	Sending
of notices  

	 	
The
addresses of the parties are as set forth at the head of the Agreement and any notice that
may be sent by one party to other shall be deemed to have been delivered to its
destination at the end of 72 hours from the time of delivery for dispatch by registered
mail in Israel or within one business day if delivered by hand or by facsimile. 

In Witness Whereof the Parties have Hereunto Signed: 

	
By: /s/ David Weissman
/s/ Ilan Kliger
——————————————

Blue Square-Israel Ltd.	
By: /s/ David Weissman
/s/ Zeev Stein
——————————————

Blue Square Real Estate Ltd.

12

List of Properties - Appendix A to Notarial/Irrevocable Power of Attorney dated  

		Block
	Parcel
	Street
	Town/City

	 				
					
					
					
	  1	8019	3, 70, 71	Hameyasdim	Even Yehuda
	  2	39577	1, 2	20 Herzl	Ofakim
	  3	40048	1	Derech Yotam	Eilat
	  4	40029	17, 18, 19	23 Hativat Golani	Eilat
	  5	40048	1	Derech Yotam	Eilat
	  6	40096	1	290 - 294 Sheshet Hayamim	Eilat
	  7	4060	44-51, 58	32 Ben Zakai	Elad
	  8	None	None	78 Tzionit	Ariel
	  9	2462	45	Hapalmach/Ad Halom	Ashdod
	 10	2074	151	Sderot Menachem Begin/Kalanit Center	Ashdod
	 11	2061	111	Hof Lido	Ashdod
	 12	1929	211, 208, 207	40 Hahistadrut	Ashkelon
	 	1945	33	 	 
	 13	38094	32/2	2 Mivtsa Ovda	Beer Sheva
	 14	38100	59	49 Mivtza Yoav	Beer Sheva
	 15	None	None	22/24 Baba Sali	Beitar Elite
	 16	7131	39/15	20 Mivtsa Sinai	Bat Yam
	 17	7122	47	20a' Amal	Bat Yam
	 18	6156	535	13 Tfutzot Israel	Givatayim
	 19	6154	435/2, 3	20 Weizmann	Givatayim
	 20	3876	72, 140	Weizmann/Pines	Gadera
	 21	6670	268	10 Shaar Hayam	Herzliya
	 22	6558	151	19 Katznelson	Herzliya
	 23	11319	88	Hahalutzim/Hakovshim	Zichron Ya'akov
	 24	10036	438	19 Smilanski /Hillel Yaffe	Hadera
	 25	7731	126/1	21 Ha'atzmaut	Hadera
	 26	6021	1012/1	104 Hahistradrut	Holon
	 27	10817	29, 30, 31	37 Ha'aliya Hashniya	Haifa
	 28	10735, 12064, 12065	24, 50, 58	8 Friman	Haifa
	 29	11636	3	71 Yigal Yadin/ Halutzei Ta'asiya	Haifa
	 30	Block 10307	Parcel 124	Sderot Hanassi, Merkaz Carmel	Haifa
	 	Block 10809	Parcel 494	 	 
	 31	10870	Present parcel - 59	20 Hanna Senesh	Haifa
	 	 	Old parcel - 25, 26	 	 
	 32	Block 11098	Parcels 58, 204, 206, 208, 210	Canyon Drachim	Yokneam
	 	Block 11495	Parcels 23, 58, 66, 68, 71	 	 
	 33	30113	7	Beitar / Yonovsky	Jerusalem
	 34	30141	137	Pierre Kenig/8 Harekavim	Jerusalem
	 35	8150	4, 5, 6, 7, 8	6 Sharet	Kfar Yona
	 36	6431	184	2 Y. Cohen	Kfar Saba
	 37	Block 7613	Parcel 96	1 Atir Yeda	Kfar Saba
	 	Block 7615	Parcels 13, 17	 	 
	 38	19160	9	3 Maaleh Kamun	Carmiel
	 39	Block 3968	Parcel 41	14 Arba'a Onot	Lod
	 	Block 3970	Parcel 102	 	 
	 40	17455	45, 47, 57, 110, 117	39 Nitzanim / Atzmaut	Migdal Emek
	 41	5690	Parcel 19 sub-parcel 1	24 Emek Dotan	Modi'in
	 42	5569	21	Emek Beit Shean/Yehezkel Hanavi	Modi'in

13

	 43	None	None	2 Sderot Yehezkel	Modi'in Elite
	 44	3898	38	Sderot Eliyahu/Lilach	Mazkeret Batia
	 45	5313	78	Rananim Commercial Center	Maccabim /Reut
	 46	18133	19	2 Irit	Nahariya
	 47	6502	300/2	30 Hashaked /Pninim	Naveh Monoson
	 48	3845	269/1	Hairusim	Ness Ziona
	 49	17531	64, 65	Yakinton/Atara	Natzeret
	 50	17742	6	1 Amal	Natzeret
	 51	39583	3, 30	123Yosef Smilo	Netivot
	 52	8260	286/1	29 Jerusalem	Netanya
	 53	8264	113/3	14 Shtempepper	Netanya
	 54	8271	180	32 Harav Kook	Netanya
	 55	16699	14-16	Kehilat Zion	Afula
	 56	4044	22-34, 36, 37	96 Derech Menachem Begin	Petach Tikva
	 57	6361	444	73 Shtempepper / Avniel	Petach Tikva
	 58	11022	34	10 Haatzmaut	Kiryiat Ata
	 59	11051	71, 103, 112	Zevulun/Ha'atzmaut	Kiryiat Ata
	 60	3945	Parcel 718 sub-parcel 12	65 Jabotinsky	Rishon Le-Zion
	 61	3946	221	33 Shimon Peres	Rishon Le-Zion
	 62	3699	248/2	15 Derech Yerushalayim	Rehovot
	 63	3698	2, 15, 16	2 Yerushalayim / Medar	Rehovot
	 64	3654	28, 30	26 Derech Hayam	Rehovot
	 65	4341	25, 26	Sderot Yerushalayim/Nofei hamad	Ramle
	 66	6126	8, 26-28	2 Haroeh	Ramat Gan
	 67	Block 6547	Parcel 138	Haharoshet	Ramat Hasharon
	 	Block 6550	Parcel 92	 	 
	 68	6580	Parcel 23 sub parcel 4	114 Ahuza	Raanana
	 69	7655	122	11 Hahistadrut	Raanana
	 70	6847	10	161 Emek Ayalon	Shoham
	 71	6111	608, 609	20 Weizmann	Tel Aviv
	 72	7091	Parcel 65 sub parcel 2	7 Kfar Dizengoff /Beilinson	Tel Aviv
	 73	6134	561/2	76 La Guardia	Tel Aviv
	 74	6111	Parcel 744 sub parcel 64	30 Ibn Gvirol	Tel Aviv
	 75	6212	865, 866, 867	46-48 Yehuda Macabbi	Tel Aviv
	 76	6625	Parcel 954 sub parcel 1, 2	15 Lea	Tel Aviv
	 77	6982	19	44 Yisrael Guri	Tel Aviv
	 78	6336	450, 451	7 David Marcus	Tel Aviv
	 79	6630	Parcel 561 sub parcel 8	13 Oppenheimer	Tel Aviv
	 80	7108	54	57 Yigal Alon	Tel Aviv
	 81	6111	838, 841, 848	12 Uri	Tel Aviv
	 82	6636	Parcel 654 sub parcel 1	209 Bnei Ephraim	Tel Aviv
	 83	7244	81	Maapilei Haegoz/Snapir	Tel Aviv
	 84	7060	57, 58	108 Levinsky	Tel Aviv
	 85	6624	367, 368	2 Grofit	Tel Aviv
	 86	6626	19-24	8 Becker	Tel Aviv
	 87	6892	41	14 Aluf	Tel Aviv
	 88	7800	262	4 Hashaked	Tel Mond
	 89	6495	Parcel 24 sub-parcels 3+4	53 Herzl	Kiryiat Ono
	 90	7655	291	88 Borochov /Kinneret	Raanana
	 91	7657	4	2 Weizmann	Raanana
	 92	6163	Parcels 24 and 46,	4 Oded	Tel Aviv
	 	 	Sub-parcel 10	 	 
	 93	7104	93	94 Heshmonaim	Tel Aviv
	 94	8977	48	Hatamar / Hataana / Harimon	Elyachin
	 95	2192	109	Yarmuch/Kinneret	Ashdod

14

	 96	12105	59	Harimon	Givat Ada
	 97	11636	3	71 Yigal Yadin / Halutzei Taasiya	Haifa
	 98	11578	58 - 59	Shenkar / Haitztadion	Haifa
	 99	16699	17-19	Kehilat Zion	Afula
	100	Block 10393	Parcels 17, 19	Haruv / Savyon	Rechasim
	 	Block 11145	Parcel 103	 	 
	101	4341	25, 26	Hatamar / Hataana / Harimon	Elyachin

15

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