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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Elron Ventures Ltd (CE) | USOTC:ELRNF | OTCMarkets | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 1.28 | 0.00 | 01:00:00 |
ELRON ELECTRONIC INDUSTRIES LTD.
(Registrant)
|
|||
|
By:
|
/s/ Yaron Elad | |
Yaron Elad | |||
VP & CFO | |||
The Israel Securities Authority
|
Tel Aviv Stock Exchange Ltd.
|
22 Kanfei Nesharim street
|
54 Ehad Ha'am street
|
Jerusalem 95464
|
Tel Aviv 65202
|
Via Magna
|
Via Magna
|
1. |
The issues on the agenda:
|
1.1. |
To approve the Company's officers compensation policy, attached as
Annex A
hereto (the "
Compensation Policy
"), according to Section 267A of the Companies Law.
|
1.2. |
To approve the following decisions as one decision:
|
1.2.1. |
To terminate the Company's engagement with Discount Investment Corporation Ltd. ("
DIC
"), a controlling shareholder of the Company, in a Services Agreement commencing from March 31, 2017 and to approve the agreements between the Company and DIC in respect thereof as described in Part C hereto.
|
1.2.2. |
To approve terms of office and employment of the serving CEO, Mr. Ari Bronshtein (the "
CEO
").
|
1.3. |
To appoint the accounting firm of Kesselman & Kesselman (PWC) as the joint auditors of the Company, such that the accounting firm of Kost Forer Gabbay & Kasierer (the Company's auditors as of the date of this Report) and the accounting firm of Kesselman & Kesselman (PWC) will serve as the Company's auditors, jointly, until the end of the next annual general meeting of the Company, and the authorization of the Company's Audit Committee and Board of Directors to determine their fees as the auditors.
|
1.4. |
To approve the grant of indemnification letters to directors and officers of the Company, who are serving or who will serve therein from time to time, who them and/or their relatives are controlling shareholders of the Company and/or in the grant of which the controlling shareholders of the Company could have a personal interest, for their actions in the capacity of their office at the Company and for their actions in the capacity of their office upon the Company's request, as the officers in another Company, in which the Company holds shares, directly or indirectly, or that the Company has any interest in, under the identical terms of the current indemnification letter existing in the Company and attached as
Annex C
hereto, as specified below. To the extent that this resolution is approved, the letters of indemnification that will be granted to directors and to officers who and/or whose relatives are controlling shareholders, shall remain in effect for three years commencing from the date of approval of the shareholders meeting convened hereby.
|
2. |
Record Date
|
3. |
Legal Quorum and Adjourned Meeting
|
4. |
Required Majority
|
4.1. |
The majority required for adoption of the proposed resolutions specified in Sections 1.1 and 1.2 of this Report is a simple majority of the shareholders entitled to vote and participating in the vote, in person or by an attorney (including by proxy or a voting card) provided that one of the following is fulfilled:
|
(1) |
The majority vote count at the general meeting will include a majority of all votes of shareholders who are neither the controlling shareholders at the Company nor have any personal interest in the approval of the resolutions, participating at the vote; the vote count of such shareholders shall exclude the abstaining votes;
|
(2) |
The total dissenting votes from among the shareholders specified in Section (1) above does not exceed two percent of the total voting rights in the Company.
|
4.2. |
The majority required for adoption of the resolution on the matter specified in Section 1.3 above is a simple majority of the shareholders entitled to vote and participating in the vote, in person or by proxy.
|
4.3. |
The majority required for adoption of the proposed resolution specified in Section 1.4 of this Report is a simple majority of the shareholders entitled to vote and participating in the vote, in person or by an attorney (including by proxy or a voting card) provided that one of the following is fulfilled:
|
(1) |
The majority vote count at the general meeting will include a majority of all votes of shareholders having no personal interest in the approval of the resolution, participating at the vote; the vote count of such shareholders shall exclude the abstaining votes;
|
(2) |
The total dissenting votes from among the shareholders specified in Section (1) above does not exceed two percent of the total voting rights in the Company.
|
4.4. |
The controlling shareholder does not hold the majority required for adoption of the resolutions specified in Sections 1.1, 1.2 and 1.4 above.
|
5. |
Manner of Voting
|
5.1. |
A shareholder of the Company may participate in and vote at the Meeting in person, or appoint a proxy who will be able to participate in the general meeting and vote on his behalf (in accordance with the provisions of the Company's articles of association) and he is entitled to vote by a voting card or by means of the electronic voting system.
|
5.2. |
A document appointing a proxy for voting (the "
Letter of Appointment
"), as well as an original power of attorney by virtue of which the Letter of Appointment was signed (if any), must be deposited at the Company's registered office at least 48 hours before the time scheduled for the meeting. The Letter of Appointment shall state both the full names of the principal and of his proxy, as appears at the Registrar of Companies or in the I.D. card (as the case may be), their number at the Registrar of Companies or their I.D. numbers (as the case may be), and the place of their incorporation or their passport country (as the case may be).
|
5.3. |
Pursuant to the Companies Regulations (Proof of Share Ownership for the Purpose of Voting at the General Meeting), 5760-2000, a shareholder in whose favor a share is registered with a TASE member, which share is included among the shares registered in the shareholders' register in the transfer agent's name, who wishes to vote at the Meeting, will provide
the Company with confirmation regarding his ownership of the share on the Record Date, which must be received from the TASE member with which his right to the share is registered, as required by the said regulations.
|
6. |
Confirmation of Ownership and Proxy Card
|
6.1. |
A shareholder whose shares are registered with a TASE member may receive confirmation of the ownership from the TASE member through which he holds his shares, at a branch of the TASE member or by mail to his address, if he shall have so requested, provided that a request in this regard shall be made in advance for a specific securities account. According the Voting Regulations (Written Vote and Position Statement), 5766-2005 (the "
Voting Regulations
"), an electronic message approved under Section 44K5 of the Securities Law, concerning the data of users of the electronic voting system – is deemed a confirmation of ownership for every shareholder included therein.
|
6.2. |
In addition, shareholders of the Company whose shares are registered with American Stock Transfer ("
AST
") only, whether they are registered in their name or they hold the same through a broker in the U.S., will be entitled to vote at the Meeting by delivering, to AST or to the broker through which the shares are held (as applicable), a proxy card whose language, in English, will be posted by the Company on the Company's website stated below, and which will be sent to the foregoing shareholders. Voting shall be made by such shareholders only in accordance with the instructions stated in the proxy card. The proxy card must be delivered to AST up to 48 hours before the time of the convening of the Meeting.
|
7. |
Voting by Voting Cards and Position Statements
|
7.1. |
A shareholder may vote at the Meeting on the proposed resolutions that are on the agenda by a voting card as specified below. The language of the voting card and position statements in respect of the Meeting may be found on the distribution website of the Israel Securities Authority at
https://www.magna.isa.gov.il
and on the website of the Tel Aviv Stock Exchange Ltd. at
http://maya.tase.co.il
. A shareholder may approach the Company directly and receive therefrom, free of charge, the language of the voting card and the position statements.
|
7.2. |
A TASE member will send, free of charge, via e-mail, a link to the language of the voting card and the position statements on the distribution website of the Israel Securities Authority to any shareholder who is not registered in the shareholders' register of the Company and whose shares are registered with the TASE member, unless the shareholder shall have notified such TASE member that he is not interested therein, provided that the notice shall have been given with respect to a specific securities account and on a date prior to the Record Date.
|
7.3. |
The vote shall be cast on the second part of the voting card, as posted on the distribution website of the Israel Securities Authority, which is stated above.
|
7.4. |
The (non-electronic) voting card of a non-registered shareholder will be provided to the Company together with the ownership confirmation, such that the voting card will reach the Company's registered office
no later than four hours before the time of convening the meeting
(i.e. – no later than February 27, 2017 at 11:30).
|
7.5. |
A shareholder who is registered in the shareholders' register, will deliver to the Company the voting card together with a photocopy of an identity card or a photocopy of the incorporation certificate, such that the voting card will reach the Company's registered office
up to six hours before the time of convening of the general meeting
(i.e. – until February 27, 2017, at 09:30.)
|
7.6. |
A shareholder participating in a vote with respect to a resolution on the agenda, will provide the details required as specified in Section 10 below, insofar as the provisions of the section are relevant to him.
|
8. |
Voting through the electronic voting system
|
8.1. |
A shareholder may vote on the resolutions that are on the agenda also via a voting card to be transmitted through the electronic voting system, as defined in the Voting Regulations (the "
E-Voting Card
").
|
8.2. |
A shareholder in whose favor a share is registered with a member of Tel Aviv Stock Exchange Ltd. (TASE) is entitled to receive from the TASE member an identifying number and an access code as well as additional information with respect to the meeting, and after a secure identification process, will be able to vote through the electronic voting system. A shareholder voting via the E-Voting Card is not required to furnish the Company with a confirmation of ownership in the manner specified above.
|
8.3. |
The E-Voting Card will be available for voting at the end of the Record Date. Voting by the electronic voting system will end
6 hours before the time of the meeting
(i.e., on February 27, 2017 at 09:30), at which time the electronic voting system will be locked.
|
8.4. |
The electronic voting may be modified or revoked until the electronic voting system is locked and may not be modified through the electronic voting system after such time. If a shareholder shall have voted by more than one way, his later vote shall be counted. For this purpose, the vote of a shareholder in person or by proxy shall be deemed later to a vote via an E-Voting Card.
|
9. |
Position statements and response of the Board
|
9.1. |
The last date for delivery of position statements to the Company is up to ten days before the date of the meeting.
|
9.2. |
The last date for delivery of the board response to position statements, if and to the extent position statements of shareholders shall be submitted and the board shall elect to submit its response to the said position statements, is no later than five days before the date of the meeting.
|
10. |
Notice of personal interest
|
10.1. |
According to Section 276 of the Companies Law, a shareholder participating in a vote regarding the proposed resolutions specified in Sections 1.1, 1.2 and 1.4, whether himself or by proxy, will notify the Company before the vote at the meeting, or if the vote is by a voting card – on the voting card by an indication on Part B of the voting card in the space designated therefor, if he is considered a controlling shareholder of the Company (regarding the resolutions stated in Sections 1.1 and 1.2) and/or has personal interest in the approval of the resolutions on the meeting's agenda or not, and the description of the relevant connection.
|
10.2. |
Furthermore, according to the Voting Regulations and according to the directive of the ISA from November 30, 2011, on the issue of disclosure regarding the manner of voting of interested parties, senior officers and institutional bodies in meetings ("
Directive
"), an interested party, a senior officer and an institutional investor (the "
Voters
") as defined in the Regulations and in the Directive, who are voting at the meeting on resolutions 1.1, 1.2 and 1.4 on the agenda, will provide to the Company, within their vote, the details required according to the Regulations and Section 2(b) of the Directive, and if they voted by proxy, then the voter or the proxy shall also provide the details regarding the proxy. In addition, specification shall be provided regarding any relationship between the voter or the proxy (who does not have a personal interest) and the Company or any of the controlling shareholders, including employment relations, business relations etc., while specifying their nature.
|
11. |
Inspection of documents
|
11.1. |
A copy of this Report, the documents as specified in Regulation 5 of the Transaction with a Controlling Shareholder Regulations and the language of the proposed resolutions are available for inspection at the Company's offices at Azrieli Center 3 (the Triangular Tower 42
nd
floor), Tel Aviv, by prior telephone coordination with the Company's secretariat, at 03-6075555, on Sundays – Thursdays (excluding holiday eves and holidays) between 9:00 and 16:00, until the date of convening of the Meeting, and on the Distribution Website of the ISA at https://www.magna.isa.gov.il and on the TASE Website at
http://.maya.tase.co.il.
|
11.2. |
In addition, the language of the English translation of this Report will also appear on the SEC's distribution website at:
http://www.sec.gov
.
|
11.3. |
The representatives of the Company for handling this Report are Adv. Ofer Hanoh and Adv. Ravid Aharoni of the firm of Gross, Kleinhendler, Hodak, Halevy, Greenberg & Co. whose address is Azrieli Center 1 (the Round Tower, 40
th
floor), Tel Aviv, Tel. 03-6074444, Fax. 03-6074566.
|
12. |
The Compensation Policy approval procedure
|
12.1. |
As of the date of this Report, other than the members of the Board of Directors and the internal auditor (who is employed through outsourcing) there are only three officers serving at the Company: the Company's CEO and two Vice-Presidents. As of this date, the Company does not employ workers itself and the fixed compensation of the officers and the other workers is not paid by the Company but by the controlling shareholder of the Company, Discount Investment Corporation Ltd. ("
DIC
"), with which the Company engaged in a services agreement (the "
Services Agreement
"). It is noted that the variable compensation (bonuses) is paid by the Company to the officers and employees. Subject to the receipt of the approval Company's shareholders meeting, as specified in Part C hereof, the Services Agreement will be terminated and the Company shall employ all of its workers directly.
|
12.2. |
The proposed Compensation Policy document is attached hereto as
Annex A
.
|
12.3. |
The changes in the Compensation Policy for the officers at the Company are marked on
Annex A
with respect to the previous Compensation Policy which was last approved by the Company's shareholders meeting on January 12, 2014. The main changes in the Compensation Policy are as follows:
|
12.3.1. |
The addition of the possibility of granting equity compensation to the officers, which insofar that it will be granted will be instead of the part of the annual bonus for the return on the Company's share indicator and at a similar financial scope.
|
12.3.2. |
Authorization of the CEO to approve a non-material change in the terms of office and employment of officers reporting to the CEO.
|
12.3.3. |
The possibility to grant an exemption to officers for any damage caused to the Company due to the violation of the officer's duty of care towards it in his actions in his capacity as an officer
with the
limitations set forth in the Compensation Policy
1
.
|
12.4. |
The Company's officers Compensation Policy, if approved, will remain in effect for 3 years commencing on January 12, 2017 (the date of expiration of the previous Compensation Policy).
|
12.5. |
Insofar as Proposal 1.1 to approve the Compensation Policy is approved, the provisions of the Compensation Policy regarding the bonus program and variable compensation (already paid by the Company) in accordance with the decision of the General Meeting of the Company dated 12 January 2014, to apply to the CEO, the provisions of the variable compensation in the Compensation Policy (see Section 12.3 above), shall continue to apply to the current CEO, Ari Bronshtein. The provisions of the variable compensation were also applied, as stated, to the other officers of the Company. Insofar as Proposal No. 1.2, to terminate the Company's engagement with DIC in the Services Agreement as of 31 March 2017 and to approve the terms of service and employment of the CEO, is approved, the CEO will become an employee of the Company (as other employees and officers), and the overall conditions of service and employment specified in part III of this report shall to the CEO.
|
12.6.
|
The Compensation Policy, including its various components, was discussed in several meetings of the Compensation Committee, and after the recommendations of the Compensation Committee were provided, at the Board of Directors as well. Representatives of the Company's management and external advisors appeared before the committee.
|
12.7. |
On November 3, 2016, the Compensation Committee resolved to recommend to the Company's Board of Directors to approve the Compensation Policy, and on January 22, 2017 the Company's Board of Directors approved and recommended to the general meeting to approve the Compensation Policy.
|
12.8. |
The members of the Compensation Committee who participated at the committee meeting in which the committee's recommendation for the Board of Directors regarding the Compensation Policy was approved, are: Ehud Rassabi (Chairman and External Director), Lee-Bath Nelson (External Director) and Yehuda Freidenberg (External Director).
|
12.9. |
The members of the Board of Directors who participated in the meeting of the Board of Directors in which the Compensation Policy was approved are: Eduardo Elsztain (Chairman), Saul Zang (vice-Chairman), Amiram Erel, Yael Andorn (Independent Director), Ehud Rassabi (External Director) and Yehuda Freidenberg (External Director).
|
12.10. |
Within the meetings as aforesaid, data and information as follows were reviewed and examined,
inter alia
:
|
12.10.1. |
The considerations required with respect to the formulation of a Compensation Policy according to the Companies Law, including the criteria specified in the First Schedule A to the Companies Law, parts A (matters which it is mandatory to address in
the Compensation Policy) and B (provisions which are mandatory to be determined in Compensation Policy);
|
12.10.2. |
Data and information regarding the terms of office and employment of the officers at the Company;
|
12.10.3. |
Terms of office and employment in other relevant companies.
|
12.10.4. |
The terms of employment of employees at the Company (including the data required to be addressed according to Amendment no. 20 of the Companies Law);
|
12.10.5. |
The previous compensation policy.
|
12.11. |
The Company is a public second-tier subsidiary.
|
12.12. |
Manner of implementation of the previous compensation policy
– For 2015, the cost of terms of office and employment of the Company's CEO were approximately 82% of the cap for terms of office and employment determined in the policy, with the compensation set for the CEO at approximately 82% of the cap of the fixed compensation determined in the policy (which was paid by DIC according to the Services Agreement) and the annual bonus was approximately 82% of the cap for the annual bonus determined in the policy.
|
13. |
Summary of the reasons of the Compensation Committee and the Board of Directors for the approval of the Compensation Policy
|
13.1. |
The Compensation Policy, regulating the terms of office and employment of the officers at the Company, is designated to allow the recruitment and
retention of high quality managerial manpower in senior executive positions for the long term, which the Company needs for its continued business development and success.
|
13.2. |
The considerations which guided the Company's Compensation Committee and the Board of Directors in determining the amended policy, are the promotion of the Company's objectives, work plan and policy; the creation of appropriate incentives for the officers of the Company, considering,
inter alia
, the Company's risk management policy; the Company's size (considering,
inter alia
, its equity, scope of assets and the average annual investment in companies); the nature of the Company as an operational holding company; the strengthening of the identity of interests between the Company's officers and its shareholders; and with respect to the terms of office and employment which include variable components – the contribution of the officer to the achievement of the Company's goals and the maximization of its profits over time, all according to the position of the officer.
|
13.3. |
As to terms of office and employment which include variable components – the contribution of the officer to the achievement of the Company's goals and maximization of profits were also considered within the Compensation Policy, all from a long term perspective and according to the position of the officer.
|
13.4. |
With respect to the fixed compensation
|
13.4.1. |
The fixed compensation constitutes a significant component out of the total compensation.
|
13.4.2. |
The Compensation Policy includes personal caps regarding the fixed compensation.
|
13.4.3. |
The fixed compensation, including its various components, promotes the retaining of stability and continuity on the Company's management level and thus helps to maintain professional, high quality, efficient management.
|
13.4.4. |
The authorities and responsibilities involved in the position, the education, qualifications, expertise, professional experience, achievements of the officer, previous agreements signed with the officer (if any) and agreements which were signed with the predecessor of the officer in the office and with other officers at the Company will be also taken into account in determining the fixed compensation for each of the officers.
|
13.5. |
With respect to the annual bonus component
|
13.5.1. |
The annual bonus will be based on several indicators, while creating a proper balance between indicators based on measurable criteria, indicators related to the Company's business as a whole, and personal indicators which are relevant to the assessment of the officer's performance.
|
13.5.2. |
The Compensation Policy includes proportional bonus caps for the Company's officers.
|
13.5.3. |
The annual bonus is based,
inter alia
, on a component of the return on the Company's share. The return on the Company's share component allows the compensation of the officers depending on the share's performance. When there is high correlation between the Company's performance and the share performance, this component of the bonus increases the identity of interests between the officers and the shareholders.
|
13.5.4. |
In addition, the annual bonus will be based on several measurable goals. The Compensation Policy allows the setting of the goals every year for their adaptation to the Company's changing needs and its work plan. The Company's performance and the performance of the held companies will both be reflected within the goals, in view of the Company's clear character as an operational holding company, whose management is involved in the activity of most of the held companies.
|
13.5.5. |
Another component of the annual bonus is the estimation of the performance of the officer by the Compensation Committee and the Board of Directors. This component provides the Compensation Committee and the Board of Directors a tool through which they can express their opinion regarding the performance of the officer during the bonus year.
|
13.5.6. |
The Compensation Policy includes personal bonus caps for each of the officers of the Company.
|
13.5.7. |
The ratio between the fixed component and the variable component in the terms of employment of the officers, as expressed in the caps set for the various compensation components, is proportionate and balanced.
|
13.5.8. |
The Compensation Policy includes provisions for the return of variable compensation paid based on data which transpired to be incorrect and are restated in the financial statements.
|
13.6. |
With respect to the equity compensation component
–
|
13.6.1. |
The Compensation Policy includes the possibility to grant equity compensation for increasing the identity of interests between the officers and the shareholders, and for strengthening the establishment of the compensation on a long-term component.
|
13.6.2. |
Equity compensation will be given to an officer only
in lieu
of the provisions of the Compensation Policy regarding the annual bonus component for the return on the share indicator, and provided that the officer waived the receipt of this component for the period for which the equity bonus had been granted to the officer, insofar as such waiver is required.
|
13.6.3. |
A cap has been set for the equity compensation on date of grant, which is designated to retain the maximal ratio between the fixed component and the variable component, which was determined in the Compensation Policy.
|
13.6.4. |
The total vesting period of the equity compensation will be spread over a period which will be no less than three years, and a maximum exercise period has also been determined.
|
13.7. |
With respect to components of compensation for termination of employment
|
13.7.1. |
The Compensation Policy sets caps for the payment components with respect to advance notice and the adjustment bonus. The setting of these components also considers the terms of office and employment of the officers and the period of their employment, position and responsibility.
|
13.7.2. |
The Compensation Committee and the Board of Directors did not find that there is room to subject such compensation to the performance of the Company, since the purposes underlying the grant thereof are different than the desire to compensate for the Company's results or the performance of the officer, and also due to the relatively narrow scope of the components of compensation for termination of employment included in the Compensation Policy. Moreover, proper expression of compensation depending on performance, is given within the provisions of the policy contemplating the components of the bonuses.
|
13.7.3. |
However, the period of employment of the officer, his terms of employment during that period, special non-competition undertaking and the circumstances of the retirement, could be considered,
inter alia
, within the considerations for the grant of an adjustment bonus.
|
13.8. |
The Compensation Policy includes provisions regarding insurance, indemnification and exemption, according to common practice in public companies.
|
13.9. |
The process of preparation of the Compensation Policy included review and reference to the difference between the compensation paid to the officers at the Company and the compensation paid to employees, and the review and discussion on the matter were reflected in the Compensation Policy.
|
13.10. |
The Compensation Policy includes a possibility to reduce the variable components according to the Board of Directors' discretion for special reasons.
|
13.11. |
The proposed Compensation Policy is very similar to the previous policy of the Company which was approved in the Company's shareholders meeting. The proposed Compensation Policy includes an addition for granting equity compensation, and amends, supplements and complements the Company's previous compensation policy on issues and subjects in respect of which it transpired, with the passing of time since the adoption of the previous compensation policy, that they require adaptation as aforesaid, including due to updates to the provisions of the law or to what is customary and accepted in the market.
|
13.12. |
The terms of the Compensation Policy are reasonable and standard in the circumstances of the matter and considering the responsibility imposed on the officers at the Company and the Company's scope of business.
|
13.13. |
In view of all of the aforesaid and in view of the data before the Compensation Committee and the Board of Directors, the Compensation Policy is appropriate and reasonable in the circumstances of the matter.
|
14. |
Applicability to executives in corporations controlled by the Company
|
14.1. |
The Compensation Policy shall apply directly to officers of the Company.
|
14.2. |
Accordingly, the Company's Compensation Policy will not apply to the terms of office and employment of officers in companies controlled by the Company. As a general rule, the private subsidiaries of the Company are startups in which the Compensation Policy is relevant to companies of that type.
|
15. |
Reference to the deviation between the Compensation Policy and the existing terms of office and employment
|
15.1. |
As a general rule, on the date of determining the Compensation Policy by the Company's Board of Directors, the terms of office and employment of the officers of the Company with respect of which the Compensation Policy applies, are consistent with the Compensation Policy and there is no deviation between the terms of office and employment of the officers as aforesaid and the Compensation Policy.
|
16. |
Identity of the controlling shareholder and the rights conferring control to him
|
16.1. |
DIC is deemed as a controlling shareholder of the Company by virtue of DIC's holding as of the date of this Report of 50.32% of the Company's issued share capital and the voting rights in the Company. DIC is a public company whose shares are traded on the Tel Aviv Stock Exchange.
|
16.2. |
The parent company of DIC is IDB Development Corporation Ltd. ("
IDB Development
"). To the best of the Company's knowledge, IDB Development is deemed as an indirect controlling shareholder of the Company by virtue of its control of DIC, which is deemed as the controlling shareholder of the Company as specified above. Therefore, IDB Development might be deemed, for the sake of caution, as having personal interest in the approval of the said resolution due to it having control of DIC and the Company.
|
16.3. |
As the Company has been informed, the controlling shareholder in IDB Development as of the date hereof is Mr. Eduardo Elsztain who holds the Company's shares through the following companies controlled by him: Dolphin Netherlands B.V., Dolphin Fund Ltd. and Inversiones Financieras Del Sur S.A. ("
IFISSA
") (jointly hereinafter: the "
Dolphin Companies
"). The Dolphin Companies hold directly approximately 100% of the issued share capital and the voting rights in IDB Development according to the following specification: Dolphin Fund – 0.02%; Dolphin Netherlands – 68.28%; IFISSA – 31.72%.
|
17. |
Names of the directors with personal interest and the nature of their personal interest
|
17.1. |
All of the board members might have personal interest deriving from the Compensation Policy determining the provisions regarding the terms of office and employment of directors of the Company.
|
a. |
Termination of the Company's engagement with Discount Investment Corporation Ltd. in a Services Agreement
|
18. |
It is proposed to terminate the Company's engagement with DIC in the Services Agreement as specified below.
|
19. |
In May 2009, the Company first engaged with DIC, a controlling shareholder of the Company in a Services Agreement, according to which the Company receives from DIC management and administration services which include services of a CEO, CFO, controller, general counsel, company secretary, junior employees and administrative workers (the "
Services Agreement
").
|
20. |
The term of the Services Agreement was extended twice, in 2012 and in 2015, each time for three years, until May 1, 2018.
|
21. |
According to the Services Agreement, all of the Company's employees are employed by DIC. The CEO of the Company and the CFO are proposed and appointed by the Company subject to the receipt of the approval of the Company's board and DIC. The controller, the general counsel and the Company's secretary are proposed and appointed by the Company subject to the receipt of DIC's approval. According to the Services Agreement, the Company may obligate DIC to terminate the activity in the Company's matters of any of DIC's employees employed regarding its business. The services do not include HQ services (such as offices, professional services of third parties etc.). According to the Services Agreement, DIC is obligated to provide the services through a sufficient number of people with appropriate experience and qualifications. In addition, DIC may designate staff members or other people to serve on the boards of companies in which the Company had invested, after receipt of the Company's CEO approval.
|
22. |
In consideration for the said services, the Company pays DIC an amount of NIS6 million per year, which was linked to the consumer price index commencing on May 1, 2016 with the basic index being the higher of the index known on May 1, 2015 or the index known on May 1, 2016. This amount is currently at NIS 6.00 million. In accordance with the Services Agreement, bonuses were paid to the officers by the Company in accordance with the Company's compensation policy.
|
23. |
For further details regarding the Services Agreement, see the report on convening a shareholders meeting as of April 1, 2015 (Reference 2015-01-072382).
|
24. |
It is proposed to terminate the Company's engagement with DIC in the Services Agreement, effective commencing on March 31, 2017, such that after the termination, Elron shall employ all of its employees directly, including the CEO and the Vice-Presidents. As of this date, except for the Company's CEO, who also serves as a Vice-President of DIC, all of DIC's employees employed at Elron, work for Elron for their entire time (100%). Therefore, their transition from being DIC employees to Elron employees is not likely to change the nature of their activity.
|
25. |
As of the date of the termination of the Services Agreement, the employees will end their employment at DIC and a "settlement of the accounts" will be done such that DIC will be responsible for their rights until the date of the end of their employment (on March 31, 2017) however Elron shall indemnify DIC for the actual current employer cost of the employees for the period from January 1, 2017 until March 31, 2017 (as at December 2016, the actual current monthly employer cost of the employees stood at approximately NIS0.8 million) including without limitation, the monthly social benefit contributions paid with respect to the employees during such period and employer cost of the employees during the employees' notice periods, but excluding any costs related to the termination of the employees' employment, all less the quarterly payment of Elron to DIC in accordance with the Services Agreement. On the date of termination of the Services Agreement, the employees will end their employment with DIC and will be hired as employees at Elron. On that date, DIC shall pay them all of their rights deriving from their employment until such date (including the leave pay, payment for advance notice, recuperation pay etc.). Commencing from that date, Elron will be exclusively responsible for all of their rights. The agreement terminating the Services Agreement includes a mutual indemnification arrangement between Elron and DIC with respect to the period preceding the termination of the agreement and the period thereafter with respect to the employees' rights.
|
26. |
Within the arrangement for termination of the Services Agreement, Elron and DIC agreed that after the termination of the Services Agreement, the CEO will become an employee of Elron and will receive his compensation and other benefits therefrom. However, DIC shall indemnify Elron for the cost in an amount reflecting the cost of the monthly salary of the Company's CEO as of today until April 30, 2018, the original expiration date of the Services Agreement, in the amount NIS1.75 million plus VAT (linked to the Consumer Price Index)
2
. Furthermore, DIC will pay Elron an additional annual amount of NIS0.3 million plus VAT (indexed to the Consumer Price Index) in light of the additional costs created for the Company as a result of the early termination of the Services Agreement. The total payment is in respect of the CEO compensation and other costs and will be paid in quarterly payments on the last day of each quarter. DIC will pay Elron, in the aggregate an annual sum of NIS2.059 million plus VAT, and a total of NIS2.745 million plus VAT for the period commencing from January 1, 2017 to April 30, 2018 (indexed to Consumer Price Index) ("
Base Index
") provided that there shall be no downward adjustment if the Consumer Price Index falls below the Base Index. As stated above, Elron shall indemnify DIC for the actual current employer cost of the employees for the period from January 1, 2017 until March 31, 2017 less the quarterly payment of Elron to DIC in accordance with the Services Agreement.
|
27. |
In accordance with the agreement, the termination date of the Services Agreement may be postponed until April 30, 2017, to the extent that this is required in order to obtain the approval of the shareholders meeting. In such event, to the extent that the termination agreement is approved, Elron will bear the employment cost of the employees until such date
less the quarterly payment of Elron to DIC in accordance with the Services Agreement
.
|
28. |
The total cost of services for the Company before termination of the engagement in the Services Agreement as proposed in this section, was approximately NIS 6.00 million per year. However, during 2016 and after the extension of the Services Agreement, a development occurred in the Company's business in view of its decision to invest also in cyber companies and the need to respond to the development of new reporting requirements, a decision which required the employment of additional manpower (professional and financial).The cost of employment of the Company's employees, which is paid by DIC and which the Company is expected to pay for employing the employees after the termination of the Services Agreement including the employment cost of the CEO, as of December 2016
3
is in an amount of approximately NIS 9.45 million per year.
|
29. |
Therefore, and in light of the payment which DIC undertook to pay Elron as detailed in Section 26 above, additional annual monetary cost of approximately NIS1.4 million is expected for Elron (and for the period until the timely expiration of the Services Agreement at its original term date at a total cost of approximately NIS1.8 million).
|
30. |
Names of the controlling shareholders who have personal interest in the resolution and the nature of their personal interest
|
30.1. |
To the best of the Company's knowledge, those who might be deemed as being controlling shareholders having a personal interest (in the meaning of such terms in the Companies Law) in the approval of the resolution stated in Section 1.2.1 above are:
|
30.1.1. |
DIC is deemed as a controlling shareholder of the Company by virtue of DIC's holdings as of the date of this Report of 50.32% of the issued share capital of the Company and the voting rights in the Company. DIC is a public company whose shares are traded on the Tel Aviv Stock Exchange and has personal interest in the termination of the Services Agreement being a direct party thereto.
|
30.1.2. |
IDB is deemed as an indirect controlling shareholder of the Company by virtue of IDB's control of DIC. Therefore, IDB might be deemed as having a personal interest in the approval of the said resolution due to it being a controlling shareholder of DIC and the Company.
|
31. |
Names of the directors who participated in the discussions at the Audit Committee and the Board of Directors
|
31.1. |
Messrs. Ehud Rassabi (External Director and Chairman of the committee), Lee-Bath Nelson (External Director), Yehuda Freidenberg (external) and Yael Andorn (Independent Director) participated in the resolution of the Audit Committee to terminate the engagement in the Services Agreement dated January 19, 2017.
|
31.2. |
Messrs. Yael Andorn (Independent Director), Ehud Rassabi (External Director) and Yehuda Freidenberg (External Director) participated in the resolution of the Board of Directors dated January 22, 2017.
|
32. |
Names of the directors with personal interest and the nature of their personal interest
|
33. |
Approvals required for execution of the resolution
|
33.1. |
The resolution to terminate the Services Agreement was approved by the Company's Audit Committee and the Company's Board of Directors on January 19, 2017 and January 22, 2017 respectively.
|
33.2. |
The said resolution requires the approval of the Company's general meeting (including a requirement for a majority out of the shareholders who are not controlling or have no personal interest) which was convened as specified below in this Report.
|
33.3. |
It is noted that the resolution to terminate the Services Agreement was approved by the Audit Committee of DIC, but still requires the approval of DIC's Board of Directors.
|
34. |
Similar transactions in the preceding two years
|
35. |
The reasons of the Audit Committee and Board of Directors for termination of the engagement in the Services Agreement
|
35.1. |
At this time, the Services Agreement has no operational and managerial advantage for Elron, compared to the termination of the agreement and transition to an independent form of management, which will allow Elron flexibility, independence and full discretion regarding the size of Elron's headquarters, the identity of the staff of employees and office holders and will make it easier to hire employees for the Company as necessary, all subject to the budget determined by the Board of Directors.
|
35.2. |
Upon the termination of the office of an active Chairman of the board at the Company commencing in 2015, the level of involvement and scope of activity of the Company's CEO at Elron increased at the expense of his activity and involvement in DIC (where he serves at the same time as a Vice-President). Thus, while on the date that the Services Agreement took effect, the Company's CEO served as a director in six companies of the DIC and IDB group (not including companies held by Elron), currently, the CEO only serves as a director in one company as aforesaid, not held by Elron.
|
35.3. |
In addition, Elron's CEO who served since the beginning of his office also as a Vice-President of DIC and fulfilled tasks and duties for DIC (
inter alia
, as supervisor of risk management at DIC and served as a business development manager thereof) is expected to complete his service as a Vice-President at DIC close in time to the Services Agreement termination date. The Audit Committee and the Board of Directors want him to invest all of his time in Elron and in the Elron group
4
companies.
|
35.4. |
It seems proper and appropriate that Elron will have more freedom in its conduct, including in decisions on issues of budget, hiring manpower etc. Moreover, Elron's independent conduct in these issues, will significantly increase the identification of its employees with the organization and their commitment thereto. Furthermore, the employment of the employees directly by Elron, will strengthen the control of the Company over its employees and will facilitate the navigation of the Company's business through its employees.
|
35.5. |
As of the date hereof, except for the CEO, all of DIC's employees who are employed at Elron work for Elron their entire time (100%) and therefore, the termination of their employment at DIC and commencement of employment in their capacity as Elron employees does not create a difference in the nature of their activity.
|
35.6. |
Even though the termination of the Services Agreement and the transition of the employees to become Elron employees is expected to involve certain additional cost for the Company, the Audit Committee and the Board of Directors are of the opinion that the advantages for the Company and its conduct, including the managerial flexibility are worthwhile for the Company.
|
35.7. |
Further to the recent VAT audit, the VAT authorities raised an argument, with which Elron does not agree, that Elron cannot deduct VAT in respect of invoices presented by DIC to Elron in accordance with the Services Agreement even though in the past they allowed the refund of the VAT in full. Direct employment of the employees will avoid the cost of the excess VAT in question
|
35.8. |
Following the date of extension of the Services Agreement, DIC was
requested to employ, for the benefit of Elron, additional personnel in the
field of cyber and other fields. The said cost was not known at the date of
extension of the Services Agreement, and thus was not taken into
consideration while determining the consideration thereof. Accordingly,
Elron's Audit Committee and Board of Directors are of the view that to
the extent that the Services Agreement is terminated, and in view of all the
considerations and the accounts settling described, it is fair that Elron will
bear the said additional cost from 2017, the meaning of the proposed
arrangement being that DIC bears the said cost until the end of 2016.
|
|
The termination of the engagement does not constitute a distribution in the meaning thereof in the Companies Law.
|
|
Considering all of the aforesaid, the Audit Committee and the Board of Directors are of the opinion that the termination of the engagement in the Services Agreement with DIC serves the benefit of the Company and is appropriate and reasonable.
|
b. |
Approval of terms of office and employment for the CEO in office, Mr. Ari Bronshtein
|
36. |
Mr. Ari Bronshtein, the Company's CEO (the "
CEO
") serves as an officer (Vice-President) of DIC which bears the entire payment of his fixed compensation as of this date, according to the Services Agreement.
The variable compensation (bonuses) is paid by the Company according to the Compensation Policy of the Company.
|
37. |
As specified above, subject to the receipt of the approval of the Company's shareholders meeting for the termination of the Services Agreement, the CEO will be directly employed by the Company.
|
38. |
In view of the aforesaid, the Compensation Committee and the Board of Directors resolved, upon the presentation of the Company's Compensation Policy for the approval of the shareholders meeting, to ask for the shareholders meeting's approval of the terms of office and employment of the CEO. The approval of the said resolution is consistent with the Company's Compensation Policy which is brought for the approval of the meeting in this Report.
|
39. |
Details of the education and experience of the CEO
|
39.1. |
The CEO holds a Bachelors' degree in Finance and Management and a Masters' degree in Finance and Accounting, both from Tel Aviv University.
|
39.2. |
The CEO has been serving since January 2006 as a Vice-President of Discount Investment Corporation. During the period since January 2004 until December 2005, he served as a Vice-President and head of the Economics and Business Development division at Bezeq Israeli Communication Corporation Ltd. ("
Bezeq
"), a director at Bezeq International, Chairman of the investment committee at Stage 1 Venture Capital, a member of the investment committee at EuroFund Venture Capital. From 2000 until December 2003, he served as the manager of the financing and investments wing at Bezeq and before that, he served in senior positions in other hi-tech companies. The CEO serves as a director for the following companies: Cellcom Israel Ltd; RDC Rafael Development Company Ltd.; Coramaze Technologies GmbH; Nitinotes Ltd.; Pocared Diagnostics Ltd.
|
39.3. |
See also Section 45.3 below for details regarding the qualifications, expertise and achievements of the CEO.
|
40. |
The CEO is not a family member of an interested party at the Company.
|
41. |
Description of the office and the issues handled therein
: The office is the office of a CEO and includes the fulfillment of all of the CEO's duties according to law and according to the board resolutions.
|
42. |
The terms of office and employment offered to the CEO are as follows
:
|
42.1. |
The CEO will be employed in a full-time position, and is expected to terminate his office as a Vice-President at DIC. It shall be stated according to DIC's request, the CEO is expected to serve as a director in two companies held by DIC: Cellcom Israel Ltd. and Epsilon Investment House Ltd.
|
42.2. |
Gross monthly salary in the amount of NIS 95,744, linked to the consumer price index.
|
42.3. |
Social and related benefits as customary, including a study fund and disability insurance.
|
42.4. |
Annual leave of 23 days, while accumulation and redemption exceeding two annual quotas shall not be permitted; 13 recuperation days per year, which will be updated from time to time according to the law; cellular device (including maintenance expenses) and payment for landline telephone expenses, including connection to the internet, including engrossment of the value of the recording of the benefit for tax purposes; Company car (including maintenance expenses) at a monthly leasing cost which will not exceed NIS12,000, including engrossment of the value of the recording of the benefit for tax purposes; Subscription for a daily newspaper and reimbursement of expenses related to the fulfillment of his office, with no cap, against the presentation of lawful tax invoices.
|
42.5. |
Severance pay – entitlement to severance pay according to law. Without derogating from the aforesaid, the CEO shall be entitled, in any event, to the release of the severance money in the managers' insurance or the pension fund (as applicable) in his name.
|
42.6. |
According to the Company's Compensation Policy, the CEO will be entitled to an annual bonus in an amount which will not exceed 12 times the cost of his monthly compensation, while the annual bonus shall comprise the components specified in the Company's Compensation Policy and will be subject to the terms thereof.
|
42.7. |
The terms of office and employment are for an unlimited period, and for as long as Mr. Bronshtein serves as the CEO of the Company. Each of the parties shall have the right to notify, at any time, of its will to terminate the employment of Mr. Bronshtein as a CEO, by a 3 months advance notice. The Company will be entitled to waive the services of the CEO during the advance notice period, in whole or in part, and in such case the CEO will be paid the monthly payment and the related benefits, during the advance notice period, to which he would have been entitled, had he continued to serve as the Company's CEO until the end of the advance notice period.
|
42.8. |
The CEO will be employed in a full-time position (100%).
|
43. |
See Section 7.5.3 of the Compensation Policy for details regarding the option of establishing a non-material part of the bonus according to non-measurable criteria.
|
44. |
Specification of terms of office and employment
|
44.1. |
Following is a summary of the maximum compensation expected for Mr. Bronshtein for 2017, subject to the approval of the terms of office and employment by the general meeting, and assuming that Mr. Bronshtein will serve for a full year (in terms of cost for the Company, NIS in thousands):
|
Details of the receiver of the compensation
|
Compensation for services
|
Total
|
|||||||||
Name
|
Position
|
Scope of office (1)(%)
|
Rate of holding in the corporation's capital (%)
|
Salary (2)
|
Bonus
|
Share based payment
|
Management fee
|
Consultation fee
|
Commission
|
Other
|
|
Ari Bronshtein
|
Company CEO
|
100%
|
-
|
*1,747
|
Approximately. 1,747 with the assumption of payment of the maximum bonus.
The amount of the actual annual bonus for 2016 will only transpire after the end of the year.
For details regarding the cap for the annual bonus for the CEO and the manner of calculation of the annual bonus for the CEO see Section 7 of the Compensation Policy.
|
-
|
-
|
-
|
-
|
-
|
3,494
|
*
|
As stated above, DIC will indemnify Elron for the full monthly salary cost of the CEO until 30 April 2018.
|
(1)
|
The CEO is expected to serve as a director in two companies held by DIC: Cellcom Israel Ltd. and Epsilon Investment House Ltd. (Chairman).
|
(2)
|
The amount includes all of the following components: 12 monthly salaries linked to the consumer price index (as of December 2016 – approximately NIS 95,744, social and related benefits as customary, car (including engrossment), cellular device, landline telephone and insurance for loss of work capacity.
|
44.2. |
For details regarding the ratio between the variable component and the fixed component of the compensation and regarding the ratio between the terms of office and employment of the CEO and the compensation of the Company's employees see Sections 12 and 16 of the Compensation Policy.
|
44.3. |
For details regarding the compensation to the CEO for 2015 see the details in "Regulation 21 – the compensation given to the three senior executives with the highest compensation at the Company" in Chapter D – Additional Details on the Corporation in the Company's annual report for 2015 as published on March 13, 2016 (reference no.: 2016-01-004599).
|
44.4. |
For details regarding the terms under which the CEO shall return to the Company amounts paid to him as part of the terms of office and employment in the event of an amendment to the Company's financial statements see Section 17 of the Compensation Policy.
|
45. |
The approval process of terms of office and employment of the CEO and the reasons of the Compensation Committee and the Board of Directors for the approval
|
45.1. |
On January 22, 2017, after the approval of the Compensation Committee dated November 3, 2016, the Company's Board of Directors approved the terms of office and employment of the CEO. For details regarding the members of the Compensation Committee who participated in the committee meeting, see Section 12.7 above. For details regarding the members of the Board of Directors who participated in the committee meeting, see Section 12.8 above.
|
45.2. |
Within the framework of the meetings of the Compensation Committee and the Board of Directors, data and information as follows were examined,
inter alia
:
|
45.2.1. |
The Company's Compensation Policy being presented for the approval of the shareholders meeting of the Company within this Report according to Section 267A of the Companies Law;
|
45.2.2. |
The current terms of office and employment of the CEO, as an employee of DIC and CEO of Elron;
|
45.2.3. |
The terms of employment of employees at the Company (including the data required to be addressed according to Amendment no. 20 of the Companies Law);
|
45.2.4. |
A comparative survey for the terms of office and employment of the CEO.
|
45.3. |
The Company's Compensation Committee and Board of Directors found that the approval of application of the provisions of the Compensation Policy to the CEO are for the benefit of the Company and are reasonable in the circumstances of the matter, and that they are consistent with the Company's Compensation Policy, for the following reasons:
|
45.3.1. |
The CEO served as a director at the Company since 2006 until his appointment as the Company's CEO in May 2009, and since then to date he serves as the CEO of the Company and is thoroughly familiar with the business and organizational culture thereof.
|
45.3.2. |
The CEO actively contributes to the Company's business within the fulfillment of his duties. Since the beginning of his office in 2009 to date, the CEO led the Company to accrued profitability of approximately $150 million and to a significant increase in the share price by hundreds of percentage points,
inter alia
, after the establishment of relations of trust with the Company's public shareholders. The CEO also helped with the stabilization of the Company's financial structure and led the implementation of business focus strategy mainly in the medical instruments companies, within which the Company carried out sale transactions at a total sum exceeding $1.5 billion (out of which the share of Elron and RDC Rafael Development Company Ltd.- a subsidiary of the Company- in the consideration is over $600 million). The CEO also led the Company to the development of business in cyber industry.
|
45.3.3. |
The CEO has many years of proven, varied senior managerial, business and financial experience. The Company's Compensation Committee and Board of Directors believe that the CEO will continue to contribute a lot to the Company in the actions required for the fulfillment of the tasks and challenges faced thereby.
|
45.3.4. |
The compensation offered to the CEO is consistent with the Company's Compensation Policy which is presented for the approval of the Company's shareholders meeting within this Report.
|
45.3.5. |
In determining the amount of the compensation, the Compensation Committee and the Board of Directors considered,
inter alia
, the following parameters: the CEO's education, qualifications, expertise, professional experience and achievements; the CEO's contribution to investments carried out by the Company and the liquidation of investments carried out; the Company's business performance; the size of the Company and the nature of its business; the CEO's contribution to the Company's business, profits, strength and stability; the Company's need to retain a CEO with unique qualifications, knowledge, experience and expertise; the scope of responsibility imposed on the CEO; the satisfaction of the CEO's performance; the CEO´s contribution to proper corporate governance and control and ethics environment.
|
45.3.6. |
Due to the scarcity of public companies with similar business to that of the Company, it is difficult to examine and learn from comparative information regarding the compensation customary in similar companies, however, the Compensation Committee and the Board of Directors found that the proposed bonuses are proportionate compared to what is customary in companies with a similar nature of business or a similar scope of business.
|
45.3.7. |
The maximum ratio between the fixed component and the variable component in the CEO's employment terms, as reflected in the caps which were determined, is proportionate and balanced.
|
45.3.8. |
The Compensation Committee and the Board of Directors examined whether the transaction contemplated in this Section includes distribution, as defined in the Companies Law, and determined that the transaction does not include distribution.
|
45.3.9. |
Therefore, the Compensation Committee and the Board of Directors believe that the terms of compensation offered to the CEO are reasonable and fair in the circumstances of the matter.
|
45.4. |
The Company is a public second-tier subsidiary.
|
46. |
Identity of the controlling shareholders at the Company
|
47. |
Names of the directors who participated in the resolutions of the Compensation Committee and the Board of Directors
|
48. |
The compensation component which was changed
|
49. |
As of the report date, the firm of Kost, Forer, Gabbay & Kasierer serve as the auditors of the Company.
|
50. |
Section 156 of the Companies Law, 5759-1999 prescribes that a company may appoint several auditors who will jointly carry out the audit.
|
51. |
Accordingly, it is proposed to appoint also the accounting firm of Kesselman & Kesselman (PWC) as the auditors of the Company, such that the accounting firm of Kost, Forer, Gabbay & Kasierer and the accounting firm of Kesselman & Kesselman (PWC) will jointly serve as the auditors of the Company, until the end of the next annual general meeting of the Company, and to appoint the Company's Audit Committee and the Board of Directors to set their fees as the auditors.
|
52. |
The total fees of the auditors for audit work are not expected to change compared to 2015 following the said appointment.
|
53. |
Principles of the resolution:
|
53.1. |
On February 1, 2012, the Company's general meeting approved the grant of indemnification letters in an amended version to the directors and officers as serving at the Company at the time and as shall serve at the Company from time to time and to officers at the Company (including directors) serving and/or who will serve therein from time to time who them and/or their relatives are controlling shareholders of the Company and/or that the controlling shareholders in the Company might have personal interest in the grant thereof, for their actions in the capacity of their office in the Company and for their actions in the capacity of their office upon the Company's request as officers in another company, in which the Company holds shares, directly or indirectly, or in which the Company has any interest. The validity of the decision about controlling shareholders and / or their relatives and / or for which they have a personal interest was limited to three years from the date of the decision.
|
53.2. |
Therefore, it is proposed to approve the grant of indemnification letters to directors and officers at the Company, who are serving or who will serve therein from time to time, who them and/or their relatives are controlling shareholders at the Company and/or which the controlling shareholders in the Company might have personal interest in the grant thereof, due to their actions in the capacity of their office at the Company and for their actions in the capacity of their office upon the Company's request as officers in another company, in which the Company holds shares, directly or indirectly, or that the Company has any interest in. Under the same terms of the current indemnification letter of the Company. To the extent that this resolution is approved, the letters of indemnification that will be granted to directors and to officers who and/or whose relatives are controlling shareholders, shall remain in effect for three years commencing from the date of the shareholders meeting convened hereby. As of the date of this Report, the directors with respect of whom the resolution is relevant are Messrs. Eduardo Elsztain (Chairman), Saul Zang (Vice-Chairman), Sholem (Saul) Lapidot (alternate director) and Gerardo Tyszberowicz (alternate director).
|
54. |
Names of the controlling shareholders who have personal interest in the resolution and the nature of their personal interest
|
54.1. |
DIC is deemed as a controlling shareholder in the Company by virtue of DIC's holdings as of the date of this Report of 50.32% of the Company's issued share capital and the voting rights in the Company. DIC is a public company whose shares are traded on the Tel Aviv Stock Exchange and has personal interest due to the fact that the indemnification letters will be given to directors in the Company who constitute controlling shareholders and/or officers at DIC.
|
54.2. |
IDB is deemed as an indirect controlling shareholder in the Company by virtue of IDB's control of DIC. Therefore, IDB might be deemed as having a personal interest in the approval of the said resolution due to it being a controlling shareholder in DIC and in the Company and due to the fact that the indemnification letters will be given to directors in the Company who constitute controlling shareholders and/or officers of the Company and/or DIC.
|
54.3. |
As the Company has been informed, the controlling shareholders in IDB Development as of the date of this Report are: Mr. Eduardo Elsztain who holds the Company's shares through the following companies controlled by him: Dolphin Netherlands B.V., Dolphin Fund Ltd. and Inversiones Financieras Del Sur S.A. ("
IFISSA
") (jointly hereinafter: the "
Dolphin Companies
"). The Dolphin Companies hold directly about 100% of the issued share capital and the voting rights in IDB Development according to the following specification: Dolphin Fund – 0.02%; Dolphin Netherlands –68.28%: IFISSA – 31.72%.
|
55. |
The manner in which the consideration was determined
|
56. |
The required approvals
|
57. |
Names of the directors who participated in the resolution at the Compensation Committee and the Board of Directors
|
(A)
|
Ehud Rassabi (Chairman and External Director), Yehuda Freidenberg (External Director) and Lee-Bath Nelson (External Director) participated in the resolution of the Compensation Committee which approved the grant of the indemnification letter.
|
(B)
|
Yael Andorn (Independent Director), Ehud Rassabi (External Director), Yehuda Freidenberg (External Director) participated in the resolution of the Board of Directors which approved the grant of the indemnification letter.
|
58. |
Names of the directors who have personal interest in the resolution and the nature of their personal interest:
|
59. |
Similar transactions in the last two years or which are still effective on the date of the board's approval
|
60. |
The reasons of the Compensation Committee and the Board of Directors for the resolution to grant the indemnification letters to the controlling shareholders
|
(A)
|
Considering the scope of the responsibility and duties imposed on the directors at the Company – including the controlling shareholders, their relatives and/or anyone that the controlling shareholders have personal interest in the granting indemnification letters to – and considering the exposure involved in their activities, it is appropriate that the Company shall grant them indemnification letters within a framework permitted by law.
|
(B)
|
The grant of an indemnification letter is common practice, consistent with the law and was intended to allow directors and officers to fulfill their duties with faith and while making business considerations for the benefit of the Company and promotion of its business.
|
(C)
|
The legislation amendments carried out in recent years extended the scope of responsibility and duties imposed on the officers at the Company and also the scope and severity of exposure and sanctions for violation of such duties. Considering the exposure involved in the activity of the directors and officers at the Company, it is appropriate that the Company shall grant them an indemnification letter suitable for the activity and exposure of the Company.
|
(D)
|
The language of the indemnification letter settles with the provisions of the applicable law including the limitations set forth therein.
|
(E)
|
The undertaking to indemnify for a monetary liability in favor of another person according to the indemnification letter, is with respect to events which in the opinion of the Board of Directors could have been expected in view of the Company's actual activity. Also, the terms of the indemnification letter and the maximum indemnification amount for such liability, as specified in the indemnification letter, are fair and reasonable in the circumstances of the matter, considering the size, type, scope, complexity and other characteristics of the Company's business sectors, and considering the extensive responsibility and the significant liabilities imposed on the officers and the directors.
|
(F)
|
This is an indemnification letter identical to the current indemnification letter which is granted to the other officers at the Company.
|
(G)
|
The indemnification letter is consistent with the Company's Compensation Policy.
|
(H)
|
The indemnification letter is in the best interests of the Company and does not constitute distribution in the meaning of such term in the Companies Law.
|
61. |
The powers of the Israel Securities Authority
|
|
Sincerely,
Elron Electronic Industries Ltd.
|
1. |
Definitions
|
"Company"
|
-
|
Elron Electronic Industries Ltd.;
|
"Board of Directors" or "Board"
|
-
|
the Company's board of directors;
|
"Committee" or "Compensation Committee"
|
-
|
the Company's compensation committee;
|
"Companies Law"
|
-
|
the Companies Law, 5759-1999;
|
"Compensation Policy"
|
-
|
a policy regarding Terms of Office and Employment of Officers;
|
"Officer"
|
-
|
a director, CEO, Deputy CEO, Vice
|
"Monthly Salary" or "Monthly Pay"
|
-
|
the monthly salary is the monthly salary for the purpose of social benefits (excluding social benefits
|
2. |
General
|
2.1 |
|
2.2 |
The principles of the Compensation Policy were formulated after deliberations that were conducted by the Compensation Committee and the Board of Directors of the Company. The Compensation Committee and the Board of
|
2.3 |
The principles of the policy were intended to determine rational, proper and fair compensation for the Company's Officers, which would ensure that the Officers' compensation is consistent with the best interests of the Company and its organization-wide strategy, and simultaneously leads to the enhancement of the Officers' sense of identification with the Company and its activity, enhances their satisfaction and motivation and leads to the preservation of the high-quality Officers in the Company over time.
|
2.4 |
The considerations guiding the Compensation Committee and the Board of Directors of the Company upon
|
2.5 |
Where the Compensation Committee and Board of Directors saw fit in the context of this policy document, specific reasons and explanations were also provided. The considerations stated in this
|
|
|
|
The provisions of this Compensation Policy apply solely to the Officers (as they are defined in the Companies Law) in the Company.
|
|
The Compensation Policy is worded in the masculine gender for the sake of convenience only, but its provisions shall apply in respect of women and men alike, without distinction or difference.
|
3. |
Background on the
|
3.1 |
The Company is an operational holding company, which focuses on the building of technology companies that are in various stages of development. Consequently, the Company’s financial results may significantly vary from one year to the next and are significantly dependent on its investments in the held companies and on the disposition of its holdings. In view of the fact that the Company’s investments are in companies which are generally in the research and development stage and consequently record current losses due to R&D expenses, Elron recognizes its share of the losses of the held companies, in many cases irrespective of the success in the development stages and the
business and
clinical
|
3.2 |
As of the date of approval of this plan, other than the members of the Board of Directors and the internal auditor (who is employed through outsourcing) only
|
3.3 |
Commencing from May 2009, the Company engaged in a service agreement with the controlling shareholder of the Company, Discount Investment Corporation Ltd. (below respectively, “
Services Agreement
” “
DIC
”), pursuant to which the Company receives management and administration services through a team that is employed by DIC. The Services Agreement as approved by the audit committee, the Board of Directors and the shareholders’ meeting, is
|
|
|
|
|
|
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3.4 |
Consequently, as of the date hereof, the Company does not itself employ employees. On November 3, 2106 and November 14, 2016, the Audit Committee and the Board of Directors of the Company, respectively, approved the termination of the Services Agreement. Insofar as the termination of the Services Agreement shall be approved by the Company's shareholders meeting, then as of the termination date, the Company shall directly employ the employees, including the Officers, which as of the date hereof are employed by DIC.
|
4. |
Appointment of Officers in the Company
|
4.1 |
The Officers who currently hold office in the Company are the ones whose education, skills, professional experience and achievements are in keeping and compatible with the
Company's
desired policy
|
4.2 |
Criteria such as managerial experience, expertise, academic education that is relevant to the position, including education and experience which instill financial expertise, shall serve as a threshold condition to the appointment for office as an Officer of the Company. Alongside the aforesaid, as specified below, in determining specific
|
5. |
Principles of
|
5.1 |
|
5.2 |
The determination of compensation or the overall consideration for a specific Officer shall take into account,
inter alia
, the nature of the position which he is due to fill as an Officer, the powers and responsibilities that are entailed by the position, his skills, experience, education, expertise, achievements and extent of suitability of the candidate to the position he is due to fill as an Officer, previous agreements that were executed with the Officer (if any), the terms of employment of the former Officer in the position, the terms of
employment that prevail in the Company for other Officers considering their rank and fields of responsibility, and the promotion of the Company’s objectives, its work plan and policy with long-term vision, creation of proper incentives for the Officer considering,
inter alia
, the Company’s risk management policy,
the
size
of the Company
and
the
nature of
its
operations, the Officer’s contribution to the meeting of its
|
6. |
The
|
|
|
6.1 |
Monthly Pay (Gross)
|
6.1.1 |
Chairman of the Board
|
6.1.1.1 |
The
|
6.1.2 |
CEO of the Company
|
6.1.2.1 |
The
|
6.1.3 |
Other Officer (who is not a director or CEO)
|
6.1.3.1 |
The
|
6.1.4 |
Linkage of the
|
6.1.5 |
Update of the Monthly Pay
|
6.2 |
Reimbursement of
|
6.3 |
Social and
|
6.3.1 |
Provisions for provident payments and severance pay;
|
6.3.2 |
Benefits that are ancillary to the salary as
|
7. |
Variable
|
7.1 |
The Company shall be entitled to grant variable compensation to the Officer, in accordance with the principles that are specified below.
|
7.2 |
The variable component shall reflect the Officer’s contribution to the
|
7.3 |
Threshold
|
7.3.1 |
The Company has met its financial liabilities in the
|
7.3.2 |
The Company's financial statements do not include a "going concern" note for the Company.
|
7.3.3 |
With regard to the component of the criteria of the return on the Company's share as specified in Section 7.5.2 below – the Company shall be entitled to grant this component of the annual bonus to the Officers for a specific Bonus Year, provided that the return on the Company's share is at least 5% in the Bonus Year.
|
7.4 |
Bonus
|
7.4.1 |
For the Chairman of the Board and the CEO of the Company
– the amount equal to 12 times the Monthly Cost of Salary, for each one.
|
7.4.2 |
For the
|
7.5 |
Components of the
|
7.5.1 |
Measurable
|
7.5.1.1 |
This component of the annual bonus for each Officer shall be calculated according to the Company’s, the held companies’ or the Officer’s meeting
of
at least two measurable
|
7.5.1.2 |
The goals for each Officer or for all of the Officers as a whole (other than with regard to the Chairman of the Board and the CEO) shall be recommended by the CEO and
|
7.5.1.3 |
Subject to the aforesaid, the Company’s Board ofDirectors shall
, after receiving the
recommendation of the Compensation
Committee,
determine in respect of each goal separately, its weight out of all of the goals, and the required date for the meeting of the various
goals. Insofar as no weight shall have been determined separately for each goal, the weight of each goal shall be equal. The Company’s Board of Directors shall
, after receiving the
recommendation of the Compensation
Committee,
be entitled to determine that the meeting of part of a specific goal shall entitle to part of the bonus for such goal, which
|
7.5.2 |
The
|
7.5.2.1 |
The rationale in using the test of return on the Company's share is that the Company's management has a major effect on the Company's results and performance and consequently on the capital market's faith in the Company. Hence, the increase in the Company's market value indicates that the capital market is expressing faith in the Company's management and its ability to lead and promote the Company's objectives. Hence, the bonus formula expresses the interpretation of the shareholders (the capital market) of the performance of the Company's management.
|
7.5.2.2 |
Such component of the annual bonus for each Officer shall be calculated based on the NIS return on the Company's share during the Bonus Year, while the minimum return for which a bonus will be granted for such component is 10% ("
Minimum Threshold
") and for a 20% return, the Officer shall be granted 100% of such component of the bonus (the "
Maximum Threshold
"). The bonus for such component for performance levels between the Minimum Threshold and the Maximum Threshold shall be calculated in a linear manner.
|
7.5.2.3 |
The return on the share shall be calculated as follows: in the beginning of each Bonus Year, the average price of the Company’s share
|
7.5.2.4 |
Meeting of more than 100% of the Maximum Threshold may entitle to more than 100% of this bonus component, such that upon excess return of 5% and more above the Maximum Threshold, an increment in the amount of the Officer’s
|
7.5.3 |
Component of
|
7.6 |
Division
|
Component
|
Weight out of the
|
Company's and held companies' performance goals
|
35%
|
Return on share
|
50%
|
|
15%
|
7.7 |
Timing of
|
7.7.1 |
The part of the annual bonus for the component of the measurable goals that are related to the
|
7.7.2 |
The part of the annual bonus due to the criterion of the return on the Company's share shall be paid to the Officer in the following manner:
|
7.8 |
Denial of
|
7.9 |
Publication in the
|
8. |
Annual
|
9. |
Calculation of
|
10. | Taxes and mandatory payments which apply to the Officer by law shall be deducted from any and all bonuses that are due to the Officers. Bonuses shall not be considered as part of the salary with regard to provisions and related payments, subject to any and all laws. |
11. |
Variable
|
|
Equity compensation shall be granted to an Officer only in lieu of the return on the share criterion component of the annual bonus, and provided that the Officer waived receiving this component for the period for which the equity bonus is granted to the Officer, insofar as such waiver is required. For the removal of doubt, insofar as the equity bonus has not yet been granted, the provisions of the Compensation Policy with respect to the component of the annual bonus due to the return on the share criterion shall continue to apply with respect to the Officer. |
11.2 |
|
|
Vesting Period – The total vesting period of the Equity
Compensation shall spread over a period which shall be no less than
three years from the date of the grant. It will be possible to determine
that the Equity Compensation shall vest in equal portions
in the
|
11.4 |
Cap for the Value of the Benefit – The economic value of the Equity Compensation that shall be granted, if and to the extent granted, at the date of grant, for the vesting year (on a linear basis and not on an accounting basis), shall not exceed an amount equal to 7 times the Monthly Cost of Salary for the Company's CEO and an amount of 6 times the Monthly Cost of Salary for any other Officer who is not a director or a CEO.
|
11.5 |
Exercise Price – The exercise price of each option shall be no less than the average price of the Company's share on the stock exchange in the 30 trading days preceding the date of grant or of the price of the Company's share on the date the options were granted, as shall be determined at the date of grant, all with the addition of a premium that shall be determined.
|
11.6 |
Any portion of the Equity Compensation shall be exercisable within a period which shall be determined on the date of grant and which shall not exceed 8 years from the date of grant.
|
11.7 |
The Equity Compensation shall be granted, if and to the extent relevant, in accordance with the provisions of Section 102 of the Income Tax Ordinance, in the capital gains tax track, or it may be in accordance with the optimal tax track for the Officers, as shall be determined from time to time.
|
11.8 |
The Equity Compensation shall be subject to customary adjustments, which include adjustments for dividend, bonus shares, changes in capital (consolidation, split, etc.), issuance of rights and restructuring of the Company (such as a split, merger, etc.) etc.
|
11.9 |
In light of the nature of the Equity Compensation, which is options that are not paid in cash by the Company, there is no obligation at the time of grant to determine a cap for the exercise value, and therefore the Compensation Committee and the Board of Directors have found that there is no room to determine such a cap.
|
11.10 |
Exercise in Accordance with the Value of the Benefit – The Compensation Committee and the Board of Directors of the Company shall be entitled to determine, in the framework of granting the securities, that the exercise thereof shall be made in accordance with the value of the benefit embedded therein ("Cashless").
|
11.11 |
If and to the extent an equity bonus was granted in the course of the year, the provisions of the Compensation Policy regarding the return on the share criterion component of the annual bonus, shall continue to apply with respect to the Officer in such calendar year; However the payment for such component in that calendar year shall be only for the part of the year that preceded the granting of the equity bonus.
|
|
Equity Compensation in Held Companies that are not in the
Company's Control -
The Company’s Officers occasionally serve as
|
12. |
Ratio
|
13. |
Compensation for
|
|
|
|
|
|
While noting the Company’s nature and size, as being from time to time, the functions and duties of a director of the Company, the Company is entitled to determine that the payments to the directors shall also be pursuant to the provisions that apply to proportionate compensation according to the Compensation Regulations
|
13.3 |
Annual compensation and compensation per meeting for directors in the Company who are themselves, and/or whose relatives are, controlling shareholders therein and/or in which the controlling shareholders have a personal interest, including when the compensation for their office is paid to a controlling shareholder in the Company, may be in amounts which shall not exceed that which is stated in Section 13.1 above.
|
13.4 |
Insofar as no active Chairman of the Board shall serve in the Company, the principles specified in this Section 13 shall apply to him, and Sections 6, 11 and 14 of this Policy shall not apply to him.
|
14. |
Term of
|
14.1 |
Terms of retirement or specific severance pay shall be determined, for all of the Officers and employees of the Company, which shall take into consideration the Officer’s terms of employment upon his retirement, the length of time the Officer has been with the Company, his contribution thereto, and the circumstances of his retirement. With regard to new employees and Officers, the terms shall be determined according to the
Company's
common practice
|
14.2 |
The
|
14.3 |
Severance
|
14.4 |
Payment in
|
14.5 |
Adjustment
|
14.5.1 |
|
14.5.2 |
The considerations for giving an adjustment grant may include,
inter alia
,
and insofar as they are known at the time the
decision is made,
the Officer’s employment period, his terms of employment in such period, the Company’s results in such period, the Officer’s contribution to meeting the Company’s
|
14.5.3 |
The Company shall be entitled to approve such an adjustment grant to an Officer during the term of his office or at the time of the termination of his office, which shall be paid at the time of the termination of the Officer's office.
|
15. |
Insurance and
|
15.1 |
D&O
|
15.2 |
Advance
|
15.3 |
Retroactive
|
15.4 |
The Company shall be entitled to grant the Officers, subject to the provisions of any law, an exemption from liability for any damage caused to it due to the breach of the Officer's duty of care towards it in his actions in his capacity as an Officer, subject to the provisions of the law and the Company's articles of association. This exemption will not apply in relation to any act or omission by the Officer in connection with a decision or a transaction in which a Controlling Shareholder or any Officer has a personal interest.
This exemption will not apply in relation to any act or omission by the Officer in connection with a decision or a transaction in which a Controlling Shareholder or any Officer has a personal interest. The aforementioned limitation will not apply to Officers who were first appointed prior to the approval of this Compensation Policy by the Company's shareholders (February 27, 2017) and who are entitled to said exemption based on past decisions made by the Company.
|
|
Nothing in this Compensation Policy derogates from the resolutions of the Company which were previously adopted with regard to the giving of advance indemnification and/or
an undertaking
to indemnify and/or
advance exemption from liability to Officers, as permitted under the Companies Law.
|
16. |
The
|
16.1 |
The Compensation Committee and the Board of Directors have deliberated the ratios between the maximum possible annual cost of the Terms of Office and Employment of the Officers and the annual and median cost of the terms of employment of all of
|
16.2 |
The Company does not employ contract workers on a regular basis but very occasionally and for limited and fixed periods of time. Accordingly, the Compensation Committee and the Board of Directors deemed that the examination of the ratio between the Terms of Office and Employment of the Officers of the Company and the terms of the employment of the contract workers is irrelevant.
|
16.3 |
For
|
|
|
|
|
|
After having examined the Terms of Office and Employment of the Officers as aforesaid and the salary which is paid to the Company’s
|
|
Upon determining the Terms of Office and Employment of the Officers
|
17. |
The
|
17.1 |
In the event that within 3 years from the date of approval of the Company’s consolidated and audited financial statements for the Bonus Year, its financial statements are amended such that, had the bonus amount that was due to the Officer for such year been calculated according to the amended figures, the Officer would have received a bonus that is lower than such which he received in practice, the Officer shall return the difference between the amount of the bonus which he received and that to which he would have been entitled pursuant to such amendment, to the Company. The aforesaid amounts shall be returned without linkage
|
17.2 |
In the event that the Company’s consolidated and audited financial statements for any year are amended such that, had the bonus amount which was due to the Officer for such year been calculated according to the amended figures, the Officer would have received a higher bonus, the Company shall pay the Officer the difference between the bonus amount to which he would have been entitled and
|
|
The provisions of this section shall not apply in the event that the amendment of the Company’s financial statements is performed due to changes in the accounting standards or in legislation, the application of which shall commence after the date on which the Company’s Board of Directors will approve, for the first time, the Company’s financial statements for such year.
|
18. |
Employment as a
|
19. |
An
|
19.1 |
Pursuant to the provisions of the law, the Compensation Committee
(with respect to the CEO) or the Compensation Committee and/or the
Company's CEO (with respect to Officers who are subordinated to the
Company's CEO), as applicable,
shall be entitled to approve an immaterial change in the terms of the employment that were approved pursuant
|
19.2 |
In this context the Compensation Committee
or the Company's CEO,
as applicable,
shall be entitled to approve, from time to time, in the course of the period of the Compensation Policy, changes
which are
immaterial
in an Officer’s compensation
|
19.3 |
To clarify, a change which is not considered an immaterial change shall be approved pursuant to the law.
|
20. |
Period of the Compensation Policy
|
|
|
|
|
|
|
|
Miscellaneous
|
|
Nothing in this document establishes any right (including a right to receive compensation of any kind and type whatsoever) of Officers to whom this Compensation Policy applies, and/or of any other third party.
|
|
|
|
From time to time, the Compensation Committee and the Board of Directors shall examine the Compensation Policy and the need to adjust the same and particularly if a material change shall have occurred in the circumstances which existed upon the determination hereof or for other reasons, and shall examine the need to determine a compensation plan for Officers of the Company while noting the Compensation Policy.
|
21.3 |
|
Please mark your vote in blue or black ink as shown here
|
☒
|
.
|
1.
|
Proposal No. 1
–
To approve the Company's officers compensation policy, attached as Annex A to the Proxy Statement (according to Section 267A of the Companies Law)
.
|
☐ FOR
|
☐ AGAINST
|
☐ ABSTAIN
|
2.
|
Proposal No. 2
- To approve the following as a single resolution :
|
2.1
|
To terminate the Company's engagement with Discount Investment Corporation Ltd. ("DIC"), a controlling shareholder of the Company, in a Services Agreement commencing from March 31, 2017 and to approve the agreements between the Company and DIC in respect thereof as described in Part C of the Proxy Statement; and
|
2.2
|
To approve terms of office and employment of the serving CEO, Mr. Ari Bronshtein.
|
☐ FOR
|
☐ AGAINST
|
☐ ABSTAIN
|
3.
|
To appoint the accounting firm of Kesselman & Kesselman (PWC) as the joint auditors of the Company, such that the accounting firm of Kost Forer Gabbay & Kasierer (the Company's auditors as of the date of this Proxy) and the accounting firm of Kesselman & Kesselman (PWC) will serve as the Company's auditors, jointly, until the end of the next annual general meeting of the Company, and the authorization of the Company's Audit Committee and Board of Directors to determine their fees as the auditors.
|
☐ FOR
|
☐ AGAINST
|
☐ ABSTAIN
|
4.
|
To approve the grant of indemnification letters to directors and officers of the Company, who are serving or who will serve therein from time to time, who them and/or their relatives are controlling shareholders of the Company and/or in the grant of which the controlling shareholders of the Company could have a personal interest, for their actions in the capacity of their office at the Company and for their actions in the capacity of their office upon the Company's request, as the officers in another Company, in which the Company holds shares, directly or indirectly, or that the Company has any interest in, under the identical terms of the current indemnification letter existing in the Company and attached as Annex C to the Proxy Statement. To the extent that this resolution is approved, the letters of indemnification that will be granted to directors and to officers who and/or whose relatives are controlling shareholders, shall remain in effect for three years commencing from the date of approval of the shareholders meeting convened hereby.
|
☐ FOR
|
☐ AGAINST
|
☐ ABSTAIN
|
☐ YES |
☐ NO
|
☐ YES |
☐ NO
|
|
Dated: ______________________, 2017
________________________________
IMPORTANT: Please sign exactly as name appears at the left. Each joint owner should sign. Executors, administrators, trustees, etc. should indicate the capacity in which they sign.
|
|
1. |
Indemnification Undertaking
|
1.1. |
To indemnify you for any liability or expense, as specified below, imposed upon you or expended by you as a result of acts carried out by you (including acts carried out prior to the date of this Letter) and/or to be carried out by you, in your capacity as an officer at the Company.
|
1.1.1. |
A monetary liability that shall be imposed upon you in favor of a third party pursuant to a judgment, including a judgment by way of compromise or a judgment of an arbitrator approved by a court, provided that such liability will be connected directly or indirectly, to one or more of the events specified in the Addendum hereto, or any part thereof or related thereto, directly or indirectly, provided that the maximum amount of the indemnification for such liability shall not exceed the amount specified in Section 2 below;
|
1.1.2. |
Reasonable expenses of the proceedings, including lawyers' fees, to be expended by you due to an investigation or proceeding that was conducted against you by an authority which is authorized to conduct an investigation or proceeding, and which has ended without the filing of an indictment against you and without a monetary liability being imposed upon you in lieu of criminal proceeding, or which has ended without the filing of an indictment against you but with the imposition of a monetary liability in lieu of a criminal proceeding in an offense which requires no proof of a criminal intention or in respect of a monetary sanction;
|
1.1.3. |
Reasonable expenses of the proceedings, including lawyers' fees, to be expended by you or imposed upon you by a court, in proceedingsissued against you by the Company or on its behalf or by a third party, or in criminal proceedings from which you shall be acquitted, or in criminal proceedings in which you shall be convicted of an offense which do not require proof of criminal intention;
|
1.1.4. |
Payment to a party injured by a breach, which will be imposed upon you in connection with an administrative proceeding;
|
1.1.5. |
Expenses that you shall incur in connection with an administrative proceeding that was conducted in your case, including reasonable expenses of the proceedings, including lawyers' fees.
|
2. |
The aggregate indemnification amount that the Company shall pay its officers, including officers serving or who will serve upon the Company’s request as officers in Other Companies, pursuant to all the letters of indemnification that shall be issued by the Company, pursuant to the indemnification decision, for liability as stated in Section 1.1.1 above, shall not exceed 25% (twenty five percent) of the shareholders equity (in U.S. dollars) of the Company according to the Company's last (annual or quarterly) financial statements known before the actual indemnification payment (the “
Maximum Indemnification Amount
”) in addition to sums that may be received, if any, from insurance companies in connection to insurance policies that the Company has purchased.
|
2.1. |
If and insofar as the sum of all of the indemnification amounts that the Company shall be required to pay to officers thereof, as stated in Section 1.1.1 above, shall exceed the Maximum Indemnification Amount or the balance of the Maximum Indemnification Amount (as being at that time) according to Section 2 above, the Maximum Indemnification Amount, or the balance thereof, as the case may be, shall be divided among the officers who shall be entitled to such indemnification,which they have requested but not yet received, such that the indemnification amount that each one of the officers shall receive, in practice, shall be calculated according to the ratio between the sum of the indemnifiable liability of each of the officers and the total sum of the indemnifiable liability of all of such officers, in the aggregate.
|
2.2. |
Upon the occurrence of an event for which you may be entitled to indemnification in accordance with the aforesaid, the Company shall make available to you, from time to time, such funds as are required to cover the expenses and other various payments involved in the handling of such legal and/or administrative proceeding, including in inquiry and investigation proceedings, such that you will not be required to pay or finance the same yourself, and all subject to the conditions and provisions of this letter of indemnification.
|
3. |
Without derogating from the aforesaid, the indemnification undertaking pursuant to this Letter is subject to the provisions of this Section:
|
3.1. |
You shall notify the Company of any legal and/or administrative proceeding (including inquiry/investigation proceedings) to be instituted against you in connection with any event for which the indemnification may apply and of any threat that shall be delivered to you in writing according to which such proceeding is to be instituted against you, with the appropriate promptness after first learning thereof, and you shall forward to the Company, or to whomever it shall instruct you, any document in connection with such proceeding. The aforesaid is subject to any bar to do so pertaining to any proceeding, applicable to you according to law.
|
3.2. |
Subject to the same not contradicting the terms and conditions of the officer liability insurance policy of the Company – the Company shall be entitled to assume the handling of your defense against such legal and/or administrative proceeding (including inquiry/investigation proceedings) and/or to entrust such handling to any attorney whom the Company shall choose for this purpose (other than an attorney who shall be unacceptable to you, on reasonable grounds), provided that all of the following cumulative conditions shall be fulfilled: (a) The Company shall have given notice, within 45 days from the date of receipt of the notice as stated in Section 3.1 above (or a shorter period if required for the purpose of filing your statement of defense or your response to the proceeding), that it shall indemnify you in accordance with the provisions of this Letter; (b) The legal and/or administrative proceeding (including inquiry/investigation proceedings) against you shall include only a claim for financial compensation. In handling the proceedings, the Company and/or such attorney will be entitled to act according to their sole discretion to conclude such proceeding; the attorney so appointed will act and will owe a duty of trust to the Company and to you. Where a conflict of interests between you and the Company and/or the Other Company shall arise, the attorney shall notify thereof, and you will be entitled to appoint an attorney on your behalf and the provisions of this Letter of Indemnification shall apply to the expenses that you shall incur in respect of such appointment.In case that the Company shall elect to settle in respect of a monetary charge or decide a dispute by way of arbitration in respect of a monetary charge, it may do so, insofar as the claim against you and/or the threatened claim against you as aforesaid in Section 3.1 above shall be fully removed. Upon the Company’s request, you shall sign any document which will authorize it and/or any such attorney, to handle in your name your defense in the same proceeding, and represent you in all matters related thereto, according to the aforesaid.
|
3.3. |
You shall cooperate with the Company and/or with any attorney as aforesaid in any reasonable manner as shall be required of you by any of them in handling such legal and/or administrative proceeding (including inquiry/investigation proceedings), provided that the Company shall arrange to cover all of the expenses entailed therein, in a manner that you shall not be required to pay or finance them yourself, all subject to the provisions of this Indemnification Letter.
|
3.4. |
Whether the Company shall act according to the provisions of Section 3.2 above or not, it shall ensure the coverage of all of theexpenses and various other payments stipulated in Section 1.1 above in a manner that you shall not be required to pay them or finance them yourself, without such derogating from the indemnification secured to you according to the provisions of this Letter, all subject to the provisions of Section 2 above.
|
3.5. |
Your indemnification in connection with any legal and/or administrativeproceeding (including inquiry/investigation proceedings) against you, as stated in this letter, will not apply with respect to any amount that shall be due from you following a settlement, arbitration or arrangement for abstention from institution of proceedings or cessation of proceedings in an administrative proceeding (“
Arrangement
”), unless the Company shall consent in writing to such settlementto such arbitration being conducted, or to engaging in such Arrangement, as the case may be. Notwithstanding the aforesaid, in an administrative proceeding, the Company’s consent as aforesaid shall only be required if the Arrangement imposes or is expected to impose on the Company financial liabilities (except for expenses of the proceedings). The Company shall not withhold its consent to such settlement, to such arbitration being conducted or to engaging in such Arrangement, as the case may be, for unreasonable grounds.
|
3.6. |
The Company will not be required to pay, pursuant to this Letter, funds actually paid to you, or in your name or in your stead in any manner, in connection with an insurance policy or indemnification commitmentof any partyother than the Company. For avoidance of doubt, it shall be clarified that the indemnification according to this Letter shall apply in respect of all other amounts that may be due to you beyond (and in addition to) an amount to be paid (if any) in connection with such insurance and/or indemnification.
|
3.7. |
Upon your request for a payment in respect of any case, pursuant to this letter, the Company shall employ all of the necessary actions according to law for payment thereof, and will act for the arrangement of any approval required therefor, if any, including a court approval, if and insofar as it shall be required.
|
4. |
The Company’s undertakings according to this Letter are subject to the provisions of any law, as shall exist from time to time, including the provisions of the Companies Law, especially the provisions of Chapter 5 of Part VI of the Companies Law, addressing transactions with interested parties.
|
5. |
The Company’s undertakings according to this letter shall be available to you and/or your estate, also after expiration of your term of office as an officer of the Company and/or Another Company, provided that the acts in respect of which the indemnification undertaking pursuant to this Letteris being granted were and/or shall be carried out during the period of your term of office as an officer of the Company and/or Another Company. It is further clarified that subject to the provisions of Section 12 of this Indemnification Letter, the Company’s undertakings according to this Indemnification Letter will apply also in respect of events which occurred prior to the signing of this Indemnification Letter.
|
6. |
In the event that the Company shall pay you or in your stead any amounts in the context of this Letter in connection with proceedings as aforesaid, and it shall subsequently transpire that you are not entitled to indemnification from the Company for such amounts, such amounts shall be deemed as a loan given to you by the Company, which shall bear interest at the minimal rate required from time to time according to law, to avoid causing a taxable benefit, and you shall be required to repay such amounts to the Company, when you shall be requested to do so thereby in writing and according to a payment schedule to be determined by the Company, of which final repayment date shall not exceed 24 months.
|
7. |
In this Indemnification Letter –
|
The “
Companies Law
” -
|
The Israel Companies Law, 5759-1999;
|
“
Securities Law
” -
|
The Israel Securities Law, 5728-1968;
|
The “
Joint Investments Law
”
|
The Israel Joint Investments in Trust Law, 5754-1994;
|
The “
Advice Law
” -
|
Israel Regulation of Investment Advice, Investment Marketing and Investment Portfolio Management Law, 5755-1995;
|
The “
Insurance Supervision Law
” -
|
The Israel Financial Services (Insurance) Supervision Law, 5741-1981;
|
The “
Pension Funds Law
” -
|
The Israel Financial Services (Pension Funds) Supervision Law, 5765-2005;
|
“
Officer
” -
|
In its meaning in the Companies Law and including an employee of the Company;
|
“
Act
”
or any derivative thereof
-
|
Including a resolution and/or omission (or any derivative thereof) implicitly, and including your acts prior to the date of this Indemnification Letter during the term of your office as an officer at the Company and/or Another Company;
|
“
Administrative Proceeding
” -
|
A proceeding pursuant to Chapter H3 (imposition of a monetary sanction by the authority), Chapter H4 (imposition of administrative enforcement measures by the administrative enforcement committee) or Chapter I1 (Arrangement for avoidance of institution of proceedings or cessation of proceedings, contingent upon conditions) of the Securities Law; Proceeding pursuant to Chapters J, J1 and K1 of the Joint Investments Law; Proceeding according to Chapters G1, G2 and H1 of the Advice Law; Proceeding according to Chapter I1 of the Insurance Supervision Law and according to Chapter H of the Pension Funds Law; Proceeding for imposition of a monetary sanction according to Article D of Chapter 4 of Part IX in the Companies Law, as shall be amended from time to time; and also any other administrative proceeding which according to law, indemnification may be granted for payments related thereto or expenses incurred in relation thereto;
|
“
Payment to a Party Injured by Breach
” -
|
Payment to a party injured by breach as stated in Section 52(54)(a)(1)(a) of the Securities Law (including as applied in the Joint Investments Law and in the Advice Law); as well as payment to a party injured by breach imposed by the Commissioner of the Capital Market according to Section 92L of the Insurance Supervision Law or Section 47 of the Pension Funds Law.
|
8. |
The Company’s undertakings pursuant to this Indemnification Letter shall be construed broadly and in a manner designed to fulfill the same, as far as is permissible by law, for the object for which they were intended. In any case of discrepancy between any provision of this Indemnification Letter and any provisions of mandatory law, which cannot be modified or supplemented, the said legal provision shall prevail, although this shall not prejudice or derogate from the validity of the remaining provisions in this Indemnification Letter.
|
9. |
The Addendum to this Indemnification Letter constitutes an integral part hereof.
|
10. |
The indemnification undertaking pursuant to this Indemnification Letter does not constitute a contract in favor of any third party, including any insurer, and no insurer shall have any right to demand the Company’s participation in a payment for which the insurer is liable according to the policy executed therewith (except for the deducible amount).
|
11. |
This Indemnification Letter shall be governed by Israeli law, and sole jurisdiction is conferred upon the court in Tel Aviv-Jaffa to hear disputes that shall derive from this Indemnification Letter. However, in case that a legal proceeding be instituted against you in another court by any third party, for which you are entitled to indemnification or any other right according to this Letter from the Company, the said court shall also be authorized to hear the disputes deriving from this Indemnification Letter, in respect of such proceeding.
|
12. |
The provisions of this Indemnification Letter prevail any prior undertaking or agreement (prior to the signing of this Indemnification Letter), whether written or oral, between the Company and the officer on the matters specified in the Indemnification Letter, also in respect of events that occurred prior to the signing of this Indemnification Letter and prior to any indemnification being requested from the Company in respect thereof. The aforesaid is contingent upon a prior indemnification letter provided to the officer, if any, continuing to apply and remaining in effect in respect of any event that had occurred prior to the signing of this Indemnification Letter (even if indemnification in respect thereof was requested from the Company after the signing of the amended indemnification letter), if the terms of this Indemnification Letter worsen the indemnification terms for the officer in respect of such event, subject to any law.
|
Elron Electronic Industries Ltd |
Date:
|
1. |
An offering, issue and self-purchase of securities by the Company or by a subsidiary, a corporation controlled by the Company or another company, in which the Company is a shareholder, directly or indirectly, or that the Company has any interest in whatsoever (the “
Company
”) or by a shareholder of the Company, including, but without derogating from the generality of the aforesaid, an offering of securities to the public pursuant to a prospectus or otherwise, a private placement or a securities offering in any other manner, or the issuance of bonus shares, or the performance of a tender offer or sale offer (including the offering of securities which was not ultimately executed), in or outside Israel, as well as other actions in respect of securities.
|
2. |
An event deriving from the Company being a public company or a reporting corporation, as such terms are defined in the Companies Law, or deriving from the fact that its shares or other securities shall have been offered to the public or deriving from the fact that its shares or securities are traded on a stock exchange in or outside of Israel or are held by the public in Israel or abroad.
|
3. |
Sale, purchase or holding of investments by or for or in the name of the Company.
|
4. |
Events associated with the execution of investments by the Company in any corporations, before, during and after the investment is executed, during the engagement, the signing, development and monitoring, including actions performed in the name of the Company as a director, officer, employee or observer on the board of directors of the corporation in which the investment is being executed.
|
5. |
Events related to consultation to the Company, performance and management of investments by the Company in any corporations.
|
6. |
Transactions and acts of the Company in their meaning in Section 1 of the Companies Law, including the execution, cancellation thereof and/or actions or transactions that the Company shall refrain from implementing, negotiations for engagement in a transaction, due diligence inquiry (including the non-performance thereof), transfer, sale, lease, renting, pledge or purchase of assets or liabilities, including securities, or rights or grant or receipt of a right in any of them including a tender offer of any type or merger of the Company with another entity, receipt of credit and grant of securities, cooperation agreements, ventures and management agreements, as well as another transaction in securities issued and/or to be issued by the Company, all whether the Company is a party thereto or not, and whether the transactions and/or act as aforesaid be concluded or not for any reason.
|
7. |
An act in respect of the issuance of licenses and permits, including, but without derogating from the generality of the aforesaid, approvals and/or exemptions related to antitrust, the Chief Scientist and the Commissioner of the Capital Market, Insurance and Savings at the Israel Ministry of Finance.
|
8. |
An act or decision as well as any claim or demand either directly or indirectly connected with employment relations at the Company or held companies, employees’ rights, including, without derogating from the generality of the aforesaid, negotiations, engagement and implementation of personal or collective employment agreements, employee benefits, allocation of options and other securities, loans to employees, employment and engagement terms, compensation, admission to work, employment and non-employment, promotion of employees, handling pension arrangements, insurance and saving funds and other benefits, hygiene and safety at work and injuries at work and so forth.
|
9. |
An act or omission related to information, representations, estimates, opinions, financial statements, reports or notices and applications for approval (as well as the actions underlying the same), filed with judicial and administrative authorities by the Company and/or in relation with the Company and its operations (even if not filed by the Company itself)(including the refraining from filing such report or notice) according to any law, including but without derogating from the generality of the aforesaid, the Companies Law or the Securities Law, including regulations promulgated thereunder, or according to rules or directives prevailing in the stock exchange in or outside Israel, or according to the directives of a qualified authority, including, without derogating from the generality of the aforesaid, the securities authority (in Israel and in the USA – SEC), the Antitrust Authority, Income Tax, the Databases Registrar, the Companies Registrar, the Trademarks Registrar, the Pledges Registrar, the Land Registrar, the Tel Aviv Stock Exchange Ltd., the Commissioner of the Capital Market, Insurance and Saving at the Ministry of Finance, the Supervisor of the Banks, local authorities, other qualified authorities in the field of communication, energy, planning and construction and so forth, whether in Israel or in other countries around the world, or according to the provisions of the tax laws applicable to the Company, as well as a claim or demand in respect of non-disclosure or failure to provide any type of information on the date required by law.
|
10. |
Transferring information required or permitted for transfer according to law to companies who are interested parties in the Company.
|
11. |
An act or omission in respect of voting rights in the Company or in held companies and the operation thereof.
|
12. |
Any proceeding (including a claim) or demand in respect of intellectual property rights of the Company or of held companies, the registration thereof, enforcement and protection thereof, and/or in respect of a violation carried out or claimed to have been carried out of an intellectual property right and/or in respect of abuse through an act and/or omission in third party intellectual property by the Company or anyone on its behalf.
|
13. |
An act or omission in respect of the taking out and/or activation and/or handling of insurance arrangements and/or risk management, as well as any matter in respect of negotiations in respect of insurance agreements, engagement in insurance agreements, terms of insurance policies and the activation of insurance policies.
|
14. |
Any claim or demand filed by a lender or creditor of the Company in respect of funds loaned thereto thereby, and/or debts and/or undertakings of the Company and/or of a company held by the Company thereto.
|
15. |
Any claim or demand filed by the purchasers, owners, lessors, tenants or other holders of assets or products of the Company, for damage or losses related to the use of the said assets or products.
|
16. |
An act or omission in respect of issues in the field of environmental quality and/or in the field of planning and building, including any legal or administrative proceeding, whether in or outside Israel, in matters related, directly or indirectly, to environmental quality or the provisions of law, procedures or standards, as applicable in or outside Israel, in respect of environmental quality, and related,
inter alia
, to contamination, protection of health, production proceedings, distribution, use, handling, storage and transportation of hazardous materials including for bodily, property and environmental damage.
|
17. |
Any act or omission related to the distribution, as defined in the Companies Law, including the purchase of the Company’s shares, provided that the indemnification for any such act or omission does not constitute breach of any law.
|
18. |
Claim or demand addressing any act or omission performed for the change of the Company’s structure and/or reorganization thereof or any decision pertaining thereto, as well as any act, omission, claim or demand in respect of: merger, split, arrangement pursuant to the Companies Law, allotment or distribution as defined in the Companies Law.
|
19. |
Expression, statement including a position or opinion expressed in good faith by the officer while in office and in his capacity as officer, including in negotiations and engagements with suppliers or customers, and including within the context of meetings of the management, board of directors or any committee thereof.
|
20. |
Any claim or demand filed in respect of an appointment or motion for the appointment of a receiver for the Company or in respect of a motion for dissolution against the Company or in respect of any proceeding for settlement or arrangement with creditors of the Company.
|
21. |
Class actions or derivative actions in connection with the Company and its operations.
|
22. |
Acts and/or omissions in respect of the application for and/or receipt and/or renewal of licenses and/or approvals and/or permits required for the operations and business of the Company or that led to the non-renewal or revocation and/or non-compliance of the Company therewith or with standards and/or directives and/or requirements and/or procedures of a qualified authority by virtue of laws and/or orders and/or regulations that are relevant to the operations and business of the Company.
|
23. |
Proceedings, in or outside Israel, on matters related directly or indirectly, to the Israel Antitrust Law, 5748-1988 and/or to orders and/or regulations and/or rules promulgated thereunder, and/or approvals and/or permits issued by virtue thereof, including binding arrangements, mergers and monopolies.
|
24. |
All matters related to the preparation and/or approval of financial statements including acts or omissions related to the adoption of financial reporting standards (including international financial reporting standards – IFRS), preparation and signature on the Company’s financial statements, consolidated or separate, as applicable as well as in connection with the preparation and/or approval of the Board of Directors report and/or business plans and projections and/or the provision of an estimate in respect of the effectiveness of the internal auditing in the Company and in respect of other issues included in the financial statements and the Board of Directors report, as well as provision of certifications referring to the financial statements – all, whether pursuant to the reporting requirements according to Israeli law or according to foreign law.
|
25. |
All matters related to the preparation and/or filing of any reporting and disclosure document pursuant to securities laws in or outside Israel, including periodic reports according to the securities laws in Israel and the filing of periodic reports according to securities laws in the USA.
|
26. |
An act or omission in respect of the formulation of a business plan, formulation of a work plan, including in respect of pricing, marketing, distribution, instructions to employees, customers, agents, marketers and suppliers and any cooperation, the Company’s policy and procedures thereof; execution of actions following or in accordance with the Company’s policy, procedures and proceedings prevailing therein, whether published or not.
|
27. |
All matters related, directly or indirectly to the management of the Company’s investment portfolio and/or the bank accounts, including foreign currency deposits, securities, loans and credit facilities, charge cards, bank guarantees, letters of credit, investment consulting agreements, including with portfolio managers, hedging transactions, options, future contracts and so forth.
|
28. |
Acts related to the filing of bids for tenders and/or franchises and/or licenses, of any type whatsoever.
|
29. |
An act contrary to the incorporation documents of the Company.
|
30. |
An act pertaining to a tax liability of the Company and/or of its shareholders.
|
31. |
Breach of the provisions of any agreement to which the Company is party, whether actually performed or is claimed to have been performed.
|
32. |
An act or decision, related directly or indirectly to the Company’s trade relations and/or the Company’s business, including with employees, external contractors, customers, suppliers, franchisers, consultants, tenants and service providers, or any third party conducting any type of business, directly or indirectly, with the Company, including negotiations, the execution and performance and/or non-performance of contracts with all of the aforesaid.
|
33. |
Any claim or demand that are filed, by a third party suffering a bodily injury or damage to an asset, resulting from an act or omission which are attributed to the Company and/or employees, managersand/orofficers thereof and/or anyone on behalf thereof.
|
34. |
Any action, act and/or omission which caused bodily harm, sickness, death and/or damage to property, including loss of use thereof.
|
35. |
Decisions and/or acts pertaining to the Israel Consumer Protection Law, 5741-1981 and/or orders and/or regulations by virtue thereof, as well as decisions and/or acts pertaining to laws and/or regulations and/or orders and/or rules and/or directives of qualified authorities in matters of product liability, including without derogating from the generality of the aforesaid, the Israel Liability for Defective Products Law, 5740-1980, as well as legislation and regulation in the field of consumer health, as well as decisions and/or actions pertaining to the Israel Law for Supervision of Commodities and Services, 5756-1996 and/or orders and/or regulations promulgated thereunder.
|
36. |
Decisions and/or acts related to the Israel Protection of Privacy Law, 5741-1981 and/or orders and/or regulations promulgated thereunder.
|
37. |
Acts within the context of a legal proceeding or an administrative proceeding by the Company and/or against it or against an officer.
|
38. |
Any of the events specified above, in connection with any Other Company (as defined in the beginning of this Indemnification Letter) as well as any of the events specified above, in connection with the capacity as a director or an officer on behalf of the Company or upon the request thereof in Another Company as stated above.
|
39. |
Events related to recruitment and representation of potential investors in the Company.
|
40. |
Involvement in a receivership or dissolution proceeding of held companies in which you served/are serving as a director.
|
41. |
Any provision in this Addendum pertaining to the execution of a certain act, will be construed as referring also to the non-execution or refraining from execution of such act, unless the context of matters in a certain provision requires otherwise.
|
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