Elbit Systems (ESLT)

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

of the Securities Exchange Act of 1934

For the Month of December 2006

ELBIT SYSTEMS LTD.

(Translation of Registrant’s Name into English)

Advanced Technology Center, P.O.B. 539, Haifa 31053, Israel

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

þ  Form 20-F        ¨  Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ¨

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ¨

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:

¨  Yes        þ  No

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-            

Attached hereto as Exhibit 1 and incorporated by reference herein is the Registrant’s Proxy Statement, mailed to the Registrant’s shareholders on or about December 7, 2006.

Attached hereto as Exhibit 2 and incorporated by reference herein is the Registrant’s proxy card, mailed to the Registrant’s shareholders on or about December 7, 2006.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: December 7, 2006

Exhibit 1

December 7, 2006            

Dear Fellow Shareholder,

You are cordially invited to attend the Elbit Systems Ltd. Extraordinary General Meeting of Shareholders to be held at 11 a.m. local time on Thursday, January 11, 2007, at our offices at Advanced Technology Center, Haifa, Israel.

The agenda of the meeting and the proposal to be voted on are described in the accompanying proxy statement. For the reasons described in the proxy statement, the Board of Directors recommends that you vote “FOR” the matter as specified on the enclosed proxy card.

We look forward to greeting all the shareholders who will be present at the meeting. However, whether or not you are able to attend, it is important that your shares be represented. Therefore, at your earliest convenience, please sign, date and mail the enclosed proxy card in the envelope provided so that it is received not later than 24 hours before the meeting.

Thank you for your cooperation.

Very truly yours,

MICHAEL FEDERMANN

Chairman of the Board of Directors

JOSEPH ACKERMAN

President and Chief Executive Officer

ELBIT SYSTEMS LTD.

                                Haifa, Israel

                                December 7, 2006

This is notice that an Extraordinary General Meeting of Shareholders of Elbit Systems Ltd. (the “Company”) will be held at the Company’s offices at the Advanced Technology Center, Haifa, Israel, on Thursday, January 11, 2007, at 11 a.m. local time, for the purpose of approving the Company’s 2007 Stock Option Plan.

Shareholders of record at the close of business on December 6, 2006, are entitled to receive notice of, and to vote at, the meeting. All shareholders are cordially invited to attend the meeting in person.

Shareholders who are unable to attend the meeting in person are requested to complete, date and sign the enclosed proxy card and return it promptly in the pre-addressed envelope provided so that it is received by the Company at least 24 hours before the meeting. No postage is required if mailed in the United States. Shareholders who attend the meeting may revoke their proxies and vote their shares in person.

By Order of the Board of Directors,

MICHAEL FEDERMANN

Chairman of the Board of Directors

JOSEPH ACKERMAN

President and Chief Executive Officer

QUESTIONS AND ANSWERS ABOUT THE EXTRAORDINARY

GENERAL MEETING

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ELBIT SYSTEMS LTD.

Advanced Technology Center

P.O. Box 539

Haifa 31053, Israel

This Proxy Statement is provided to the shareholders of ordinary shares, NIS 1.00 nominal value, of Elbit Systems Ltd. (the “Company” or “Elbit Systems”) in connection with the Board of Directors’ solicitation of proxies for votes to be cast at the Shareholders’ Extraordinary General Meeting to be held on Thursday, January 11, 2007 (the “Meeting”), or at any adjournment of the Meeting, as specified in the accompanying Notice of Extraordinary General Meeting of Shareholders.

It is proposed that at the Meeting the shareholders adopt a resolution concerning the approval of the Company’s 2007 Stock Option Plan.

Shares represented by properly signed and unrevoked proxies will be voted in the manner directed by the persons designated as proxies.

Only shareholders of record at the close of business on December 6, 2006, have the right to receive notice and to vote at the Meeting.

The Company had outstanding on November 30, 2006, 42,038,065 ordinary shares, each giving a right of one vote for the matter to be presented at the Meeting. (This amount includes 23,021 ordinary shares held by a subsidiary of the Company but does not include 385,900 ordinary shares held by the Company as treasury shares.) No less than two shareholders present in person or by proxy, and holding or representing between them one-third of the outstanding ordinary shares, will constitute a quorum at the Meeting.

If a quorum is not present within one-half hour after the time set for the Meeting, the Meeting will be adjourned and will be reconvened one week later at the same time and place unless other notice is given by the Board of Directors. If there is not a quorum within one-half hour of the time for the reconvened meeting, a quorum will be considered present as long as at least two shareholders participate in person or by proxy.

Joint holders of shares should note that according to the Company’s Articles of Association the vote, whether in person or by proxy, of the more senior of joint holders of any voted share will be accepted over vote(s) of the other joint holders of that share. For this purpose seniority will be determined by the order the joint holders’ names appear in the Company’s Register of Shareholders.

A majority of votes cast at the Meeting either in person or by proxy is required to approve the matter to be voted upon at the Meeting (approval of the Company’s 2007 Stock Option Plan).

A proxy form for use at the Meeting and a return envelope for the proxy form are enclosed. Shareholders may revoke any proxy form prior to its exercise by filing with the Company a written notice of revocation or a properly signed proxy form of a later date, or by voting in person at the Meeting. In order to be counted for purposes of voting at the Meeting, a properly signed proxy form must be received by the Company at least 24 hours before the Meeting.

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Unless otherwise indicated on the proxy form, shares represented by a properly signed and received proxy in the enclosed form will be voted in favor of the above described matter to be presented for voting at the Meeting. Abstentions will not be treated as either a vote “for” or “against” the matter, although they will be counted to determine if a quorum is present.

Proxy forms are being mailed to shareholders on or about December 7, 2006, and will be solicited mostly by mail. However, in some cases proxies may be solicited by telephone, telegram or other personal contact. The Company will pay for the cost of the solicitation of proxies, including the cost of preparing, assembling and mailing the proxy material, and will reimburse the reasonable expenses of brokerage firms and others for forwarding material to shareholders.

Shareholders are permitted to express their position on the proposal on the agenda of this Meeting by submitting a written statement (the “Position Statement”), through the Company, to the other shareholders. Position Statements should be submitted to the Company at its registered offices, at Elbit Systems Ltd., Advanced Technology Center, Haifa, 31053 Israel, to the attention of Mr. Ilan Pacholder, Corporate Secretary, no later than December 16, 2006. Reasonable costs incurred by the Company in dealing with a Position Statement will be borne by the submitting shareholder.

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BENEFICIAL OWNERSHIP OF SECURITIES BY

The following table shows, as of November 30, 2006, to the best of the Company’s knowledge, the number of ordinary shares⁽¹⁾ owned by (i) all shareholders known by the Company to own 5% or more of the Company’s ordinary shares and (ii) all directors and officers of the Company as a group.

On November 27, 2006, FEL purchased 2,350,000 of the Company’s shares from Koor Industries Ltd. (“Koor”), and the shareholders agreement entered into in April 2005 between FEL and Koor was terminated. A portion of these shares purchased by FEL from Koor are held by a trustee for the benefit of FEL until completion of installment payments to Koor over a 13-month period.

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APPROVAL OF THE COMPANY’S 2007 STOCK OPTION PLAN

On November 13, 2006, the Audit Committee and the Board of Directors of Elbit Systems, respectively, approved the Elbit Systems Ltd. 2007 Stock Option Plan (the “Plan”), subject to shareholder approval. The Plan authorizes the issuance of up to a maximum of 2,500,000 of Elbit Systems’ ordinary shares, par value New Israeli Shekel (“NIS”) 1.0 per share (“Ordinary Shares”) as a result of the exercise of options under the Plan. Pursuant to the Plan, Elbit Systems may grant to key employees of Elbit Systems and its wholly-owned subsidiaries (“Eligible Employees”) up to 1,250,000 regular options (the “Regular Options”) and up to 1,250,000 options with a “cashless” exercise mechanism (the “Cashless Options”) (collectively, the “Options”), to purchase Elbit Systems’ Ordinary Shares.

The following summary of certain material features of the Plan does not purport to be complete and is qualified in its entirety by reference to the text of the Plan, a copy of which is set forth in the Exhibit to this Proxy Statement.

The Plan will be administered by the Board of Directors or a committee of the Board of Directors (the “Administrator”) consisting of at least two (2) members of the Board, which Administrator will meet the requirements of Elbit Systems’ Articles of Association and applicable legal requirements. The Board of Directors has appointed the Compensation Committee of the Board to serve as the Administrator of the Plan.

Among other things, the Administrator is empowered to determine within the framework of the Plan:

The Options covered by the Plan are equally divided between Regular Options and Cashless Options.

One-half of the Options granted to each Eligible Employee will be Regular Options and one-half will be Cashless Options.

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Options granted to an Eligible Employee pursuant to the Plan will not be registered for trading on the TASE and will not be quoted on the Nasdaq National Market (“Nasdaq”). Furthermore, an Eligible Employee’s right to receive Options may not be transferred to any other person, including another Eligible Employee or any other employee of Elbit Systems or its subsidiaries.

Subject to the provisions set forth below under the caption “Termination of Employment,” a holder of an Option (a “Holder”) may exercise:

Once an Option granted under the Plan becomes exercisable, it may be exercised until the earlier of five (5) years after the Grant Date or ninety (90) days after the employee’s termination of employment with Elbit Systems or a subsidiary of Elbit Systems (or immediately upon termination for cause), as the case may be (the “Exercise Period”).

The exercise price (the “Exercise Price”) per Ordinary Share for Options granted to Holders who are subject to Israeli income tax will be the average price of the Ordinary Shares on the TASE for the thirty (30) trading days prior to the Grant Date. The Grant Date for the initial grant of Options under the Plan will be the date of approval of the Plan by the Company’s shareholders at a General Meeting.

For Holders who are subject to U.S. income tax, generally the Exercise Price per Ordinary Share for Options granted to Holders subject to Section 409A of the U.S. Internal Revenue Code (the “Code”), or regular Options granted as incentive stock options, is an amount equal to 100% of the fair market value of Ordinary Shares on the Grant Date. If the Exercise Price per Ordinary Share for Options granted to Holders subject to Section 409A of the Code is less than the fair market value of the Ordinary Shares on the Grant Date, such Options will be granted subject to terms and conditions that satisfy the requirements for the deferral of compensation under Section 409A of the Code.

The Exercise Price per Ordinary Share for Options granted to Holders not subject to Israeli or U.S. income tax will be determined by the Administrator and may be different from the Exercise Price applicable to Holders who are subject to Israeli or U.S. income tax.

To exercise an Option during the Exercise Period, a Holder must send a written notice thereof (an “Exercise Notice”) to Elbit Systems or to the designated Trustee (as defined below) on a form provided by Elbit Systems or the Trustee that states the number of Options to be exercised (Regular and Cashless) accompanied by payment of the Exercise Price for Regular Options and an amount equal to one (1) NIS for each Ordinary Share resulting from the exercise of the Cashless Options that such Holder desires to exercise.

To exercise an Option, a Holder may also be required to submit any additional documents requested by Elbit Systems or the Trustee. Once an Exercise Notice is given by a Holder, it may not thereafter be cancelled, changed or exercised in part.

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The number of Ordinary Shares which a Holder is entitled to acquire pursuant to the exercise of his or her Options may be adjusted under certain circumstances as described in the Plan (e.g., in the event of a change in the capital of Elbit Systems).

Once exercised, Options expire on the date Ordinary Shares are issued in respect of such exercise. Otherwise, an Option that is not exercised will expire at the end of the Exercise Period.

If a Holder’s employment with Elbit Systems or an applicable subsidiary is terminated for any reason other than cause, death, retirement or disability, before the Option is fully exercisable, such Holder will not thereafter be entitled to exercise the unvested portion of such Option, and exercise of Options that have vested by such time must be made within ninety (90) days of termination of employment. If a Holder’s employment with Elbit Systems or a subsidiary is terminated for cause, the right to exercise the Option, whether vested or unvested, ceases immediately.

If a Holder’s employment with Elbit Systems or a subsidiary is terminated because of the Holder’s retirement, death or disability, the vested portion of the Option will be exercisable for the earlier of twelve (12) months thereafter or the end of the Exercise Period.

The foregoing will not apply if such termination is the result of a transfer of such Holder from Elbit Systems to a subsidiary or from a subsidiary to Elbit Systems or another subsidiary, in which case the Holder may retain the Options until the end of the Exercise Period.

The following is a brief summary of certain Israeli tax implications of the grant of Options. This discussion is based on relatively new legislation that may be subject to further judicial or administrative interpretation, and there can be no assurance that the information expressed below will comply with any such applicable future interpretation. This discussion is not intended to, and does not, cover all possible tax consequences.

The Israeli Tax Ordinance [New Version] of 1961 (the “Tax Ordinance”) allows for the grant of options to a company’s employees and officers (other than controlling shareholders) through one of two tax tracks with a trustee: the capital gains track through a trustee and the income tax track through a trustee. In each case the options granted to employees are deposited in trust for employees in the name of a designated trustee (the “Trustee”). Once a company has selected a tax track it is prohibited from selecting a different track for a period of twelve (12) months following the end of the tax year in which the first options were granted under the originally selected tax track.

The Income Tax Track Through A Trustee (the “Income Tax Track”)—Under this track the Holder pays income tax (according to the marginal tax rate of the Holder of up to a 49% tax rate, (which includes payments to the National Insurance Institute and the Health Tax) on the profit gained upon the earlier to occur of the transfer of the underlying shares from the Trustee or the sale of the underlying shares. A company may recognize expenses pertaining to the options for tax purposes. The options (or upon their exercise, the underlying shares) must be held by a Trustee for a period of twelve (12) months commencing on the Grant Date of the options.

The Capital Gains Tax Track Through A Trustee (the “Capital Gains Track”)—Under this track the Holder pays capital gains tax at a rate of 25% on the profit gained upon the earlier to occur of the transfer of the

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underlying shares from the Trustee or the sale of the underlying shares. In this track the Holder is not required to make payments to the National Insurance Institute or the Health Tax. In the event the exercise price of the options is lower than the average price of the company’s shares on the TASE during the thirty (30) trading days preceding the allocation date of the options to the Trustee (which will be the same day as the Grant Date) (the “TASE Market Price”), the Holder will be required to pay income tax on the difference between the exercise price and the TASE Market Price (at the marginal tax rate of the Holder of up to a 49% tax rate, which includes payments to the National Insurance Institute and the Health Tax), and at a 25% rate on profits above the TASE Market Price.

Under the Capital Gains Track a company may not recognize expenses pertaining to the options for tax purposes, except with respect to the amounts paid if the exercise price is less than the TASE Market Price. The options (or upon their exercise, the underlying shares) must be held by a Trustee for a period of twenty-four (24) months from the Grant Date (the “Lock-up Period” ). A violation of the Lock-up Period results in payment by the Holder of income tax according to the marginal tax rate of the Holder of up to a 49% tax rate, which includes payments to the National Insurance Institute and the Health Tax, on all profits gained upon the earlier to occur of the transfer of the underlying shares from the Trustee or the sale of the underlying shares. In such a case the company will be obligated to make the employer’s payments to the National Insurance Institute.

Tax Track Without A Trustee—The Tax Ordinance also enables a company to issue options without using a Trustee. In such event, the Holder pays income tax (according to the marginal tax rate of the Holder of up to a 49% tax rate, which includes payments to the National Insurance Institute and the Health Tax, on the profit upon the sale of the underlying shares. In such case the company may not recognize expenses pertaining to the options for tax purposes.

The Board of Directors of the Company has selected the Capital Gains Track described above for the grant of the Options under the Plan. A Trustee has been designated by the Company for purposes of the Plan. Since the Plan provides that half of the Options are Cashless Options, which are exercised through a virtually cashless exercise mechanism as detailed above, the Company has applied to the Israeli tax authority and received a pre-ruling, subject to certain terms and subject to final approval and signature by the Israeli tax authority, with respect to the calculation of the capital gain of the Cashless Options. If the Holder breaches such terms, he or she may be liable to a higher tax rate.

Any tax implications pursuant to any applicable law in connection with the grant of Options, their exercise, their holding or the sale of the Ordinary Shares will be borne by the Holder. In the event the Company and/or any subsidiary and/or the Trustee will be required to withhold or pay any tax in connection with the Options or the Ordinary Shares, such entity or Trustee will be entitled to demand payment of such tax from the Holder.

The provisions referred to above will also apply with respect to Ordinary Shares received upon exercise (together with all required adjustments) of Options, to bonus shares and to any other share distribution, including in the context of an issuance of rights, to which the employee is entitled during the period in which the Options or Ordinary Shares are held in trust.

The following is a general summary of the U.S. federal income tax consequences of the grant of the Options under the Plan to Eligible Employees who are U.S. citizens or residents. This discussion does not cover all of the

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tax rules applicable to the grant and exercise of the Options and the ownership of the Ordinary Shares issuable upon exercise thereof, including the application of the “passive foreign investment company” rules, the exercise of an Option with previously acquired shares, the treatment of a person owning 10% or more of the Ordinary Shares or a dealer in the Ordinary Shares, the state or local income or other tax consequences inherent in the ownership and exercise of the Options and the ownership and disposition of the underlying shares. In addition, the tax rules outlined below are subject to change, possibly with retroactive effect.

An Eligible Employee will not recognize income upon the grant of a Regular Option or at any time prior to the exercise of the Regular Option or a portion thereof. At the time the Eligible Employee exercises a non-qualified Regular Option or portion thereof with an Exercise Price equal to the fair market value of the Ordinary Shares on the Grant Date, he or she will recognize compensation taxable as ordinary income in an amount equal to the amount the fair market value of the Ordinary Shares on the date the Regular Option is exercised exceeds the Exercise Price. Elbit Systems will then be entitled to a corresponding deduction.

To the extent that the aggregate fair market value (on the Grant Date) of the Ordinary Shares subject to a Regular Option designated as an incentive stock option are exercisable for the first time during a calendar year is more than $100,000, the Eligible Employee will recognize compensation taxable as ordinary income on the Ordinary Shares exceeding such limitation in an amount equal to the amount the fair market value of the Ordinary Shares (on the date the Regular Option is exercised) exceeds the Exercise Price. Elbit Systems will then be entitled to a corresponding deduction.

At the time the Eligible Employee receives a distribution of Ordinary Shares subsequent to the exercise of a non-qualified Regular Option or portion thereof with an Exercise Price less than the fair market value of the Ordinary Shares on the Grant Date, he or she will recognize compensation taxable as ordinary income in an amount equal to the amount the fair market value of the Ordinary Shares (on the date the Ordinary Shares are distributed) exceeds the Exercise Price. Elbit Systems will then be entitled to a corresponding deduction.

Depending upon the period Ordinary Shares are held after exercise, the sale or other taxable disposition of such Ordinary Shares acquired through the exercise of a non-qualified Regular Option generally will result in a short or long-term capital gain or loss equal to the difference between the amount realized on such disposition and the fair market value of such Ordinary Shares when the non-qualified Regular Option was exercised.

All or any portion of the Regular Options may be issued to Eligible Employees who are subject to United States income tax as incentive stock options within the meaning of Section 422(b) of the Code.

To the extent that the aggregate fair market value (on the Grant Date) of the Ordinary Shares subject to a Regular Option are exercisable for the first time during a calendar year is $100,000 or less, an Eligible Employee who exercises Regular Options designated as incentive stock options will not be taxed at the time he or she exercises the Regular Options or a portion thereof. Instead, he or she will be taxed at the time he or she sells the Ordinary Shares purchased pursuant to the exercise of the Regular Options. The Eligible Employee will be taxed on the difference between the price he or she paid for the Ordinary Shares and the amount for which he or she sells the Ordinary Shares.

If the Eligible Employee does not sell the Ordinary Shares prior to two (2) years from the Grant Date of the Option and one (1) year from the date the Ordinary Shares are transferred to him or her, the Eligible Employee will be entitled to capital gain or loss treatment based upon the difference between the amount realized on the disposition and the aggregate Exercise Price, and Elbit Systems will not receive a corresponding deduction. If the

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Eligible Employee sells the Ordinary Shares at a gain prior to that time, the difference between the amount the Eligible Employee paid for the Ordinary Shares and the lesser of (1) the fair market value on the date of exercise or (2) the amount for which the Ordinary Shares are sold, will be taxed as ordinary income, and Elbit Systems will be entitled to a corresponding deduction. If the Ordinary Shares are sold for an amount in excess of the fair market value on the date of exercise, the excess amount will be taxed as capital gain.

If the Eligible Employee sells the Ordinary Shares for less than the amount he or she paid for the Ordinary Shares prior to the one (1) or two (2)-year periods indicated above, no amount will be taxed as ordinary income and the loss will be taxed as a capital loss.

Exercise of an incentive stock option may subject an Eligible Employee to, or increase an Eligible Employee’s liability for, the alternative minimum tax.

An Eligible Employee will not recognize income upon the grant of a Cashless Option or at any time prior to the exercise of the Cashless Option or a portion thereof. At the time the Eligible Employee exercises Cashless Options or a portion thereof, he or she will recognize compensation taxable as ordinary income in an amount equal to the amount the fair market value of the Ordinary Shares on the date the Cashless Options are exercised exceeds the Exercise Price minus one (1) NIS. Elbit Systems will then be entitled to a corresponding deduction.

Non-Qualification under Section 401(a) of the Code

The Plan is not qualified under Section 401(a) of the Code.

It is proposed that at the Meeting, the following resolution be adopted:

“RESOLVED”, that the Company’s 2007 Stock Option Plan as described in the Company’s Proxy Statement dated December 7, 2006 be, and hereby is, approved.”

The Board of Directors recommends a vote FOR approval of this proposed resolution.

By Order of the Board of Directors

MICHAEL FEDERMANN

Chairman of the Board of Directors

JOSEPH ACKERMAN

President and Chief Executive Officer

Date: December 7, 2006

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EXHIBIT

2007 ELBIT SYSTEMS LTD. STOCK OPTION PLAN

The purpose of this 2007 Stock Option Plan is to provide the benefits arising from ownership of share capital by Employees of Elbit Systems Ltd. and its Participating Affiliates (each as defined below), who are expected to contribute to the Elbit Systems Group’s future growth and success.

Initially capitalized terms, as used in this Plan, will have the following meaning:

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Without derogating from the meanings ascribed to the capitalized terms above, all singular references in this Plan will include the plural and vice versa, and reference to one gender will include the other, unless otherwise required by the context.

In the event that the Company distributes bonus Shares and the record date for such distribution is subsequent to the Grant Date of the Options but prior to their exercise or expiration, the number of Underlying Shares will be increased by the number of Shares each Participant would have been entitled to had such Participant exercised the Options prior to the record date set for such distribution. The Exercise Price of the Options will not be increased due to the increase in the number of Underlying Shares the Participant is entitled to following a distribution of bonus Shares. For the avoidance of doubt, a Participant will not be entitled to exercise any rights arising out of the distribution of bonus Shares prior to the Exercise Date of the applicable Options. Notwithstanding the foregoing, in the event that the Company distributes bonus Shares to a Non-Israeli Participant residing in the United States, such bonus Shares shall be granted in the form of a new Option grant to such Participant in accordance with the provisions of the Plan.

In the event of a split or a consolidation of Shares, or any other change in capital of a materially similar nature, the Company will make the changes or the adjustments necessary in order to prevent the dilution or

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increase of the rights of the Participants within the framework of the Plan with respect to the number and class of the Underlying Shares and/or the Exercise Price of each Option.

In any event in which the Company will be required to issue to a Participant a fraction of a Share pursuant to an adjustment described in this Section 4, the Company will not issue such a fraction of a Share, and the number of Shares will be rounded down to the closest whole number of Shares.

Subject to the Law, the Company’s Articles of Association and any applicable resolution of the Company’s Board of Directors, the Administrator is authorized, in its sole and absolute discretion, to exercise all powers and authorities either specifically delegated to it under the Plan or necessary or advisable in the administration of the Plan; including, without limitation, to determine:

Notwithstanding the provisions of Section 5.1 above, no interpretation, determination or action of the Administrator will contradict any applicable Law. No waiver or amendment with respect to the Plan will have a material adverse affect on any Participant’s rights in connection with any Option Granted under the Plan without receiving the consent of such Participant.

Options may be Allocated at any time after:

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The Administrator may Grant Options to any Employee of the Company and/or the Participating Affiliates.

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Unless otherwise determined by the Administrator, all Options Granted on a certain date will, subject to the Participant’s Continuous Employment with Company, an Affiliate or a Subsidiary, become vested and exercisable in accordance with the following vesting schedule:

A Participant who requests to exercise Options, will deliver to the Company and/or the Trustee, in accordance with instructions to be provided to the Participant, an exercise notice in a form as will be prescribed by the Company (the “Exercise Notice”) which includes: (i) the name of the Participant and his or her identity number for Israeli Participants and social security or similar number for Non-Israeli Participants; (ii) the number of Options to be exercised; (iii) the type (Regular/Cashless) of Options to be exercised and (iv) the amount of the Exercise Price.

The Participant will transfer to the Company in cash the amount equal to the aggregate Exercise Price for the Regular Options (the Exercise Price multiplied by the number of Regular Options exercised) as well as the aggregate amount of the par value of the Underlying Shares resulting from the exercise of the Cashless Options. The payment by the Participant to the Company will be in such manner as will be determined by the Company.

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(1) Regular Options—if the Exercise Notice was duly executed and delivered by the Participant, and upon the payment to the Company of the aggregate Exercise Price, each Regular Option will entitle its holder to the right to purchase one Share (subject to the adjustments described in Section 4 above), in exchange for the Exercise Price paid by the Participant on the Exercise Date for each Regular Option.

(2) Cashless Options—if the Exercise Notice was duly executed and delivered by the Participant, and upon the payment to the Company of the aggregate amount of the par value of the corresponding Underlying Shares, each Cashless Option will entitle its holder with the right to purchase Shares (subject to the adjustments described in Section 4 above), in accordance with the following formula (the “Benefit Factor”):

    (A x B) - (A x C)    

B

A = the number of Cashless Options the Participant requests to exercise as written in the Exercise Notice;

B = the opening price in NIS of the Shares on the TASE on the Exercise Date; and

C= the Exercise Price of each Option in NIS.

(3) The calculations for Non-Israeli Participants will be made in accordance with the NIS—U.S. dollar exchange rate in effect on the Exercise Date.

(4) The Company and/or the Trustee will make all applicable calculations with respect to the Exercise Price and the amount of Underlying Shares on the Exercise Date and such calculation will be binding on the Participants. Fractional Shares will be rounded down to the nearest whole number of Shares.

Upon the delivery of a duly signed Exercise Notice and the payment to the Company of the aggregate Exercise Price for the Regular Options and the aggregate amount of the par value of the Underlying Shares with respect to the Cashless Options specified therein, the Company will issue the Underlying Shares to the Trustee (according to the applicable Holding Period) or to the Participant, as the case may be. The Participant will execute any documents as may be reasonably required by the Company or the Trustee at any time in order to complete the Allocation process.

All costs and expenses, including broker fees and bank commissions, deriving from the exercise of Options or Underlying Shares, will be borne solely by the Participant.

Unless earlier terminated pursuant to the provisions of this Plan, all Granted but unexercised Options will expire and cease to be exercisable as of 5:00 p.m. Israel time on the fifth (5^th) anniversary of the Commencement Date of such Options. If such date is not a business day in Israel, then the right will expire on the last business day before such date, at 5:00 p.m. Israel time.

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In the event of Termination of Employment of a Participant for Cause, the Participant’s right to exercise any unexercised Options Granted to such Participant, whether vested or not on the date of Termination of Employment, will cease as of such date of Termination of Employment, and the Options will thereupon expire. The determination by the Administrator as to the occurrence of Cause will be final and conclusive for all purposes of this Plan.

In the event of Termination of Employment of a Participant by reason of death, Retirement or Disability, any vested but unexercised Options will be exercisable, in the case of death, by the Participants’ personal

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representative or beneficiary, or in the case of Retirement or Disability, by the Participant or his or her personal representative (as the case may be) until the earlier of: (i) twelve (12) months after the date of Termination of Employment or termination of Continuous Employment, as the case may be; or (ii) until the end of the Term of the Options. Moreover, in such cases the right of the Participant to exercise all other (non-vested) Options will expire upon the date of Termination of Employment or upon termination of Continuous Employment, as applicable.

Notwithstanding the provisions in this Section 11 above, the Company President, may, in exceptional circumstances, permit a Participant or his or her heirs to exercise an amount of Options greater than those allowed under Sections 11.2-11.4 above, but in any event not more then the total amount of Options Allocated to the Participant.

No transfer of any right to an Option or Underlying Share issued upon the exercise thereof by will or by the laws of descent will be effective to bind the Company unless and until the Company is furnished with the following signed and notarized documents by an Israeli notary or, if exercised outside of Israel, a qualified lawyer:

All Options under this Plan will be Granted in accordance with one of the following Tax Provisions:

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The Company, at its sole discretion, will elect under which Tax Provision each Option will be Granted in accordance with applicable Law. Accordingly, the Company will elect whether to Grant Options to one or more Participants under the Capital Gains Tax Track, under the provisions of Section 3i, under the provisions of the Code or other applicable laws in other relevant jurisdictions outside Israel and the United States. The Company will notify each Participant in the Grant Letter under which Tax Provision the Options for that Participant are Granted. If the Company does not specify in the Grant Letter the Tax Provision relating to an Option Granted to a Non-Israeli Participant, such Option will be deemed to be a Non-Qualified Option.

The Holding Period and vesting period may run concurrently, but neither is a substitute for the other, and each are independent conditions for Options Granted.

The terms and conditions applicable to the trust on behalf of Israeli Participants relating to the Capital Gains Tax Track will be set forth in an agreement signed by the Company and the Trustee.

20

21

Options may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of except by will or the laws of descent.

Shares issued under this Plan will be subject to all limitations imposed by the Company’s Articles of Association.

The Administrator, in its sole discretion, may determine with respect to a specific Participant (or certain specific Participants) that all or some of the unvested Options of such participant(s) will be accelerated.

Notwithstanding the Holding Period and the Code Holding Period, in the event of any registration of the Company’s Shares on any stock exchange, at the request of the underwriters or if required under applicable law and/or by any governmental authority and/or by a decision of the Company’s Board of Directors, the Administrator may determine that the Underlying Shares issued pursuant to the exercise of Options may be subject to a lock-up period of up to 180 days, or such other period of time as may be recommended by the Company’s Board of Directors, during which time some or all of the Participants will not be permitted to sell Shares or exercise Options.

In the event of a Merger Transaction, then subject to Section 5.2 above, the Administrator in its sole discretion will decide:

Options that have not yet been exercised will not have any voting rights. Following the exercise of Options, the Underlying Shares will have voting rights as specified in this Section 19. Each of the Underlying Shares

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will entitle the holder thereof to one (1) vote at shareholders meetings of the Company. With respect to Underlying Shares held by the Trustee of a Participant, the Trustee will forward any notice regarding shareholders meetings to the last address of the Participant provided to the Trustee by the Company. A Participant who wishes to exercise his/her right to vote at such meeting will send a letter to the Trustee at least ten (10) working days before the meeting. The Trustee will issue a power of attorney to such Participant, enabling the Participant to vote the number of Underlying Shares held for him/her in trust, in accordance with the Company’s Articles of Association.

In an event of a material breach by a Participant of the terms of this Plan or the Grant Letter provided to him or her, and without derogating any from the remedies available to the Company under any applicable Law, the Company may, at its sole discretion, after sending a written notice to such Participant, forfeit the right of the Participant to some or all the Options Granted to such Participant.

Subject to the provisions of the Plan, no person other than the Participant will have any right with respect to Options Granted to the Participant under the Plan.

The expenses incurred in connection with the administration and implementation of the Plan will be borne by the Company. Any proceeds received by the Company in connection with the exercise of any Option may be used for general corporate purposes.

The Plan is subject to the receipt of all approvals required under the Ordinance, the Code and the Law, to the extent required.

There is no obligation for uniformity of treatment of Participants.

In the event of any conflict between the terms of the Plan and the Grant Letter, the Plan will prevail, unless the Grant Letter states specifically that the conflicting provision in the Grant Letter will prevail.

By accepting Options under this Plan, the Participant (1) agrees and acknowledges that he or she has received and read the Plan and the Grant Letter; (2) undertakes to comply with all relevant provisions set forth in the Code, Section 3i or Section 102 (including provisions regarding the Capital Gains Tax Track) as applicable, the Plan, the Grant Letter and any applicable agreements between the Company and the Trustee; and (3) if the Options are Granted under Section 102, an Israeli Participant undertakes that subject to the provisions of Section 102 and the Rules, he or she will not sell or release the Underlying Shares from the trust before the end of the Holding Period (if any).

* * * *

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Exhibit 2

ELBIT SYSTEMS LTD.

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS

FOR THE EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned hereby appoints MICHAEL FEDERMANN, JOSEPH ACKERMAN and ILAN PACHOLDER, and each of them, the true and lawful proxies of the undersigned, with full power of substitution, to vote with respect to all of the undersigned’s ordinary shares of ELBIT SYSTEMS LTD. (the “Company”), at the Extraordinary General Meeting of Shareholders of the Company to be held at the Company’s offices at the Advanced Technology Center, Haifa, Israel on Thursday, January 11, 2007, at 11 a.m. local time, and at any adjournments, with all power that the undersigned would have if personally present and especially (but without limitation) to vote as follows:

CONTINUED AND TO BE SIGNED ON REVERSE SIDE

APPROVAL OF THE COMPANY’S 2007 STOCK OPTION PLAN.

¨  FOR            ¨  AGAINST            ¨  ABSTAIN

* * * * *

Any proxies previously given are hereby revoked.

The above-signed hereby acknowledge(s) receipt of the Notice of Extraordinary General Meeting of Shareholders and the accompanying Proxy Statement.