This excerpt taken from the ESLT 6-K filed Nov 2, 2005.
Indemnification and Exemption of Directors and Officers
The Companys Articles currently provide for insurance, indemnification and exemption of officers and directors based upon the provisions of the Companies Law. Similarly, in 2001 the Companys shareholders approved the issuance of letters of indemnity based upon such provisions to the then current directors of the Company as well as to subsequent directors. It should be noted that the Articles limit the amount of any indemnification provided by the Company to its directors and officers to not more than twenty-five percent (25%) of the consolidated equity of the Company as reflected in the Companys last consolidated annual financial statements published prior to the payment of such indemnification.
In March 2005, the Companies Law was amended (Amendment No. 3), including certain provisions relating to the indemnification and exemption from liability of directors and officers. Amendment No. 3 contains three primary provisions relating to indemnification and exemption of directors and officers. First, instances for which directors and officers may be indemnified are limited to events that are anticipated in the opinion of the board of directors in light of the actual activities of the Company at the time of granting the indemnity. This is a change from the prior standard under the Companies Law that permitted indemnity for types of events that in the opinion of the board of directors could be anticipated at the time of granting the indemnity.
The second change in Amendment No. 3 enables indemnification of officers and directors for investigations that end without formal legal proceedings as well as for imposition on directors and officers of monetary payments in lieu of criminal proceedings, provided the criminal offense in question does not require proof of criminal intent. The third change in Amendment No. 3 permits reimbursement of litigation expenses irrespective of the maximum amount available for indemnification that may be provided in a companys articles of association.
It is proposed to revise the Articles to be consistent with the above-mentioned provisions of Amendment No. 3 and common corporate practice in Israel with respect to indemnification and exemption of liability of directors and officers. No change is being proposed to the current limitation on the amount of such indemnity.