Item 6. Indemnification of Directors and Officers
Pursuant to the Israeli Companies Law, 5759-1999 (the “Companies Law”) and the Israeli Securities Law, 5728-1968 (the “Securities Law”), the Israeli Securities Authority is authorized to impose administrative sanctions, including monetary fines, against companies like ours and their officers and directors, for certain violations of
the Securities Law or the Companies Law. The Company’s Law provides that companies like the Registrant may indemnify their officers and directors and purchase an insurance policy to cover certain liabilities, if provisions for that purpose are
included in their articles of association.
Registrant’s Articles of Association (the “Articles”) allows it to indemnify and insure its Office Holders (as such term is defined in the
Companies Law) to the fullest extent permitted by law.
Office Holders’ Exemption
Under the Companies Law, and provided that the company’s articles of association allow it to do so, an Israeli company may exempt in advance an Office Holder from his or her
liability to the company, in whole or in part, for a breach of his or her duty of care (except in connection with distributions). Exemption from liability for a breach of duty of loyalty is not allowed. The Articles allows the Registrant to exempt
its Office Holders to the fullest extent permitted by law.
Office Holders’ Insurance
The Articles provide that, subject to the provisions of the Companies Law, Registrant may enter into a contract for the insurance of all or part of the liability imposed on Office
Holders in respect of an act performed by him or her in his or her capacity as an Office Holder, concerning the following:
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a breach of his or her duty of care to us or to another person;
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a breach of his or her duty of loyalty to the Registrant provided that the Office Holder acted in good faith and had reasonable cause to assume that his or her act would not prejudice our interests; and
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a financial liability imposed upon him or her in favor of another person.
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Without derogating from the aforementioned, subject to the provisions of the Companies Law and Israel’s Securities Law, 5728-1968 (the “Israeli
Securities Law”), the Registrant may also enter into a contract to insure an Office Holder for expenses, including reasonable litigation expenses and legal fees, incurred by him or her in relation to an administrative proceeding instituted
against such Office Holder or payment required to be made to an injured party pursuant to certain provisions of the Israeli Securities Law.
Office Holder’s Indemnification
The Articles provide that, subject to the provisions of the Companies Law and the Israeli Securities Law, the Registrant may indemnify any of its Office Holders in respect of an
obligation or expense specified below, imposed on or incurred by the Office Holder in respect of an act performed in his capacity as an Office Holder, as follows:
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a financial liability imposed on him or her in favor of another person by any judgment, including a settlement or an arbitration award approved by a court;
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reasonable litigation expenses, including attorney’s fees, incurred by the Office Holder as a result of an investigation or proceeding instituted against him by a competent authority which concluded without the filing of an indictment
against him and without the imposition of any financial liability in lieu of criminal proceedings, or which concluded without the filing of an indictment against him but with the imposition of a financial liability in lieu of criminal
proceedings concerning a criminal offense that does not require proof of criminal intent or in connection with a financial sanction (the phrases “proceeding concluded without the filing of an indictment” and “financial liability in lieu
of criminal proceeding” shall have the meaning ascribed to such phrases in section 260(a)(1a) of the Companies Law);
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reasonable litigation expenses, including attorneys’ fees, expended by an Office Holder or charged to the Office Holder by a court, in a proceeding instituted against the Office Holder by the Company or on its behalf or by another
person, or in a criminal charge from which the Office Holder was acquitted, or in a criminal proceeding in which the Office Holder was convicted of an offense that does not require proof of criminal intent; and
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expenses, including reasonable litigation expenses and legal fees, incurred by an Office Holder in relation to an administrative proceeding instituted against such Office Holder, or payment required to be made to an injured party,
pursuant to certain provisions of the Israeli Securities Law.
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Registrant may undertake to indemnify an Office Holder as aforesaid, (a) prospectively, provided that, in respect of the first act (financial liability) the undertaking is limited
to events which in the opinion of the board of directors are foreseeable in light of the Registrant’s actual operations when the undertaking to indemnify is given, and to an amount or criteria set by the board of directors as reasonable under the
circumstances, and further provided that such events and amount or criteria are set forth in the undertaking to indemnify, and (b) retroactively; provided, however, that the total aggregate indemnification amount that the Registrant shall be
obligated to pay to all of its Office Holders, for all matters and circumstances described above, shall not exceed an amount equal to twenty five percent (25%) of the shareholders’ equity at the time of the indemnification.
Limitations on Insurance and Indemnification
The Companies Law provides that a company may not insure, exempt or indemnify an Office Holder for any breach of his or her liability arising from any of the following:
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a breach by the Office Holder of his or her duty of loyalty, except that the company may enter into an insurance contract or indemnify an Office Holder if the Office Holder acted in good faith and had a reasonable basis to believe that
the act would not prejudice the company;
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a breach by the Office Holder of his or her duty of care if such breach was intentional or reckless, but unless such breach was solely negligent;
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any act or omission done with the intent to derive an illegal personal benefit; or
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any fine, civil fine, financial sanction or monetary settlement in lieu of criminal proceedings imposed on such Office Holder.
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Under the Companies Law, exemption and indemnification of, and procurement of insurance coverage for, Office Holders, must be approved by the company’s compensation committee and
board of directors and, with respect to the CEO and to an Office Holder who is a director also by company’s shareholders. However, according to regulations promulgated under the Companies Law with respect to relief in approval of certain related
party transactions (the “Relief Regulations”), shareholders’ approval for the procurement of directors’ insurance is not required if the insurance policy is approved by the compensation committee and (i) the
terms of such policy are within the framework for insurance coverage as approved by our shareholders and set forth in our compensation policy; (ii) the premium paid under the insurance policy is at fair market value; and (iii) the insurance policy
does not and may not have a substantial effect on the Company’s profitability, assets or obligations. Further, as the Registrant’s insurance coverage includes Office Holders who are controlling shareholders, in accordance with the Relief Regulations,
shareholders’ approval may be waived, if, in addition to the approval of the compensation committee as set forth above, the board of directors approves all such matters approved by the compensation committee, and both organs approve that the terms of
the insurance policy are identical with respect to all Office Holders, including the controlling shareholders.
Indemnification letters, covering exemption from, indemnification and insurance of those liabilities imposed under the Companies Law and the Israeli Securities Law discussed above,
were granted to each of the Registrant’s present Office Holders and were approved for future Office Holders. Hence, the Registrant indemnifies its Office Holders to the fullest extent permitted under the Companies Law.
The Registrant currently holds directors’ and officers’ liability insurance policy for the benefit of its Office Holders, including its directors. This policy was approved by the
Registrant’s compensation committee on January 1, 2020 and by its board of directors on January 2, 2020, and is effective until November 30, 2020.
Insofar as indemnification for liabilities arising under the United States Securities Act of 1933, as amended, may be permitted to the Registrant’s directors, officers and
controlling persons, the Registrant have been advised that, in the opinion of the Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.