Not applicable.
Item 6. |
Indemnification of Directors and Officers.
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Exculpation of Office Holders
The Israeli Companies Law provides that an Israeli company cannot exculpate an office holder from liability with respect to a breach of his or her duty of loyalty. If permitted by its articles of association, a company may exculpate in advance an
office holder from his or her liability to the company, in whole or in part, with respect to a breach of his or her duty of care. However, a company may not exculpate in advance a director from his or her liability to the company with respect to a
breach of his duty of care in connection with distributions.
Insurance of Office Holders
Israeli law provides that a company may, if permitted by its articles of association, enter into a contract to insure its office holders for liabilities incurred by the office holder with respect to an act or omission performed in his or her
capacity as an office holder, as a result of: (i) a breach of the office holders duty of care to the company or another person; (ii) a breach of the office holders duty of loyalty to the company, provided that the office holder acted in good faith and
had reasonable cause to assume that the act would not prejudice the company’s interests; and (iii) a financial liability imposed upon the office holder in favor of another person.
Indemnification of Office Holders
Under Israeli law a company may, if permitted by its articles of association, indemnify an office holder for acts or omissions performed by the office holder in such capacity for (a) monetary liability imposed upon the office holder in favor of
another person pursuant to a court judgment, including a settlement or an arbitration award approved by a court; (b) reasonable litigation expenses, including attorney’s fees, actually incurred by the office holder as a result of an investigation or
proceeding instituted against him or her by a competent authority, provided that such investigation or proceeding concluded without the filing of an indictment against the office holder or the imposition of any monetary liability in lieu of criminal
proceedings, or concluded without the filing of an indictment against the office holder and a monetary liability was imposed on him or her in lieu of criminal proceedings with respect to a criminal offense that does not require proof of criminal
intent; and (c) reasonable litigation expenses, including attorneys’ fees, actually incurred by the office holder or imposed upon the office holder by a court: (i) in an action, suit or proceeding brought against the office holder by or on behalf of
the company or another person, (ii) in connection with a criminal action in which the office holder was acquitted, or (iii) in connection with a criminal action in which the office holder was convicted of a crime that does not require proof of criminal
intent.
Israeli law provides that a company’s articles of association may permit the company to (a) indemnify an office holder retroactively, following a determination to this effect made by the company after the occurrence of the event in respect of which
the office holder will be indemnified; and (b) undertake in advance to indemnify an office holder, except that with respect to a monetary liability imposed on the office holder by any judgment, settlement or court-approved arbitration award, the
undertaking must be limited to types of occurrences, which, in the opinion of the company’s board of directors, are, at the time of the undertaking, foreseeable due to the company’s activities and to an amount or standard that the board of directors
has determined is reasonable under the circumstances.
Limitations on Exculpation, Insurance and Indemnification
The Israeli Companies Law provides that a company may not exempt or indemnify an office holder nor enter into an insurance contract which would provide coverage for liability incurred as a result of any of the following: (a) a breach by the office
holder of his or her duty of loyalty (however, a company may insure and indemnify against such breach if the office acted in good faith and had reasonable cause to assume that his act would not prejudice the company’s interests); (b) a breach by the
office holder of his or her duty of care if the breach was done intentionally or recklessly, unless made in negligence only; (c) any act of omission done with the intent to derive an illegal personal benefit; or (d) any fine, civil fine, monetary
sanction or penalty levied against the office holder.
Pursuant to the Israeli Companies Law, exculpation of, procurement of insurance coverage for, and an undertaking to indemnify or indemnification of, the Registrant’s office holders must be approved by the Registrant’s compensation committee and the
Registrant’s board of directors and, if the office holder is a controlling shareholder, director or a chief executive officer, also by the Registrant’s shareholders.
The Registrant’s Articles of Association allow the Registrant to insure, indemnify and exempt the Registrant’s office holders, to the fullest extent permitted by the provisions of the Israeli Companies Law. The Registrant has provided several of the
Registrant’s directors and officers a letter of indemnification for liabilities or expenses incurred as a result of their acts in their capacity as directors and officers of the Registrant, in an aggregate amount not to exceed $3 million.
At a shareholders meeting held on September 24, 2020, the Registrant’s shareholders previously approved the terms and conditions for the purchase, renewal, extension and/or replacement, from time to time, of the Registrant’s directors’ and officers’
liability insurance policy for all directors and officers of the Registrant and its subsidiaries, who may serve from time to time (including the Registrant’s Chief Executive Officer) (the “New Policy”), as follows: (i) the coverage limit per claim and
in the aggregate under the New Policy may not exceed an amount representing an increase of 25% in any year, as compared to the previous year’s aggregate coverage limit; (ii) the Registrant’s Compensation Committee determines that the New Policy is on
market terms; and (iii) any New Policy may not be entered into after 2023. No further approval of the Registrant’s shareholders will be required in connection with any renewal and/or extension and/or purchase of the New Policy entered into in
compliance with the foregoing terms and conditions.
At the Extraordinary General Meeting in July 2021, the Registrant’s shareholders also approved the Registrant’s Updated Compensation Policy, which authorizes the Registrant to purchase insurance policies (including run-off policies) to cover the
liability of directors and officers that are currently in office and that shall be in office from time to time, including directors and officers that may be controlling shareholders or affiliated therewith, within the following limits: the maximum
aggregate coverage of liability pursuant to the policies shall be not more than US$15 million for each year, including coverage for both the Company and officers and directors directly (e.g., so called “Side A” coverage). The Updated Compensation
Policy further provides that the Registrant’s Compensation Committee shall be authorized to increase the coverage purchased, by up to 20% in any year, as compared to the previous year, or cumulatively for a number of years, without an additional
shareholders’ approval to the extent permitted under the Companies Law and that the authority to approve the purchase of such insurance policies shall be vested by the Registrant’s Compensation Committee, provided that the premium for each policy, the
maximum deductible and the terms of the contract are consistent with market conditions and will not materially affect the Registrant’s profits, property or liabilities. Following the expiration of the Registrant’s previous policy, the Registrant
acquired a new directors’ and officers’ policy with liability coverage of $5.0 million, and additional side A (only) coverage of $5.0 million, commencing July 26, 2021.
Administrative Sanctions
The Israeli Securities Authority is authorized to impose administrative sanctions against companies like the Registrant’s and their office holders for certain violations of the Israeli Securities Law or the Israeli Companies Law. These sanctions
include monetary sanctions and certain restrictions on serving as a director or senior officer of a public company for certain periods of time. The maximum amount of the monetary sanctions that could be imposed upon individuals is a fine of NIS 1.0
million (currently equivalent to approximately $293,000), plus the greater of the following amounts payable to persons who suffered damages as a result of the violation: (i) the amount of profits earned or losses avoided by the violator as a result of
the violation, up to the amount of the applicable fine, or (ii) compensation for damages suffered by the injured persons, up to 20% of the fine imposed on the violator.
Only certain types of liabilities may be reimbursed by indemnification and insurance. Specifically, legal expenses (including attorneys’ fees) incurred by an individual in the applicable administrative enforcement proceeding and any compensation
payable to injured parties for damages suffered by them (as described in clause (ii) of the immediately preceding paragraph) are permitted to be reimbursed via indemnification or insurance, provided that such indemnification and insurance are
authorized by the company’s articles of association.