Letter of Undertaking to Indemnify. In this undertaking the following terms shall mean as set forth at their side:

Transcription

1 Attn: Mr./ Mrs. Letter of Undertaking to Indemnify In this undertaking the following terms shall mean as set forth at their side: The Company The Companies Law The Securities Law The Officers Officers Liability The Israel Electric Corporation Ltd. The Companies Law, and any law that shall amend it or that shall replace it, as in force from time to time. The Securities Law, , and any law that shall amend it or that shall replace it, as in force from time to time. Officers, within its meaning in the Companies Law, that serves or that serves as such in the Company. Officers and directors liability insurance policy that was purchased or that shall be purchased by the Company, whether it is in one policy or in more than one policy. Or Policy Action or Actions The Effective Date Administrative Including an action and/or decision and/or omission including any action before the date of this letter of undertaking. The date of publishing the Company s Prospectus, as defined hereafter, that was prepared by the Company. A proceeding according to chapters H3 (Imposing Pecuniary Penalty by the Securities Authority) H4 (Imposing Administrative Enforcement Means by an Administrative Enforcement Committee) or I1 (Arrangement for Refraining from Instituting Proceedings or Cessation of Proceedings which is Conditional upon Conditions) of the Securities Law or according to Article D (Imposing Pecuniary Penalty by the Securities Authority) of the fourth chapter in the ninth part of the Companies Law

2 and/or any other proceeding that is similar to those for which indemnification may be paid. Proceeding Action with respect to a Prospectus or Information Fulfilling an obligation and/or performing an action for the purpose of one of the following: a. Issuing securities and listing them for trade in the framework of the public offering including with respect to, directly or indirectly, public offering proceedings, and providing information for the public offering proceedings including the preparation, approval of the public offering and submitting a Prospectus of the Company, signing and submitting the Prospectus and the disclosure in the framework of the Prospectus (including, for the sake of avoiding doubt, chapter A of the periodical statement of the Company for 2014, and the statement of the board of directors of the Company for 2014 and financial statements of the Company for 2014 that shall be enclosed with the Prospectus by way of reference), including the preparation, approval, submitting and signing drafts of the Prospectus and the disclosure within their framework. b. Preparation, approval, signing and publishing financial statements within their meaning in section 9 of Securities Regulations (Periodical and Immediate Statements, (the Reporting Regulations ), and a separate financial statement of the Company within its meaning in section 9C of the Reporting Regulations and the interim financial statements within its meaning in section 40 of the Reporting Regulations, respectively, after the securities have been issued according to the Prospectus and listed for trade in the framework of the public offering and as long as they are listed for trade as mentioned. Any information that is included in the Company s Prospectus pertaining to the public offering or drafts of the Prospectus, and any information that was given by the Company to any party in the framework and for public offering proceedings. Whereas the Company holds an officers liability insurance policy;

3 And whereas And whereas And whereas And whereas And whereas the coverage, the financial scope and the terms of the officers liability insurance policy might not fully insure the officers for any claim that shall be filed against them; the Company is preparing a Prospectus, according to its meaning in the Securities Law, , to submit to the Securities Authority based on the Company s annual financial statements for the period that ended on the 31 st of December 2014 (hereinabove and hereinafter the Company Prospectus ) and to receive an approval to publish the Prospectus, and for this purpose the Company has submitted Prospectus drafts to the Securities Authority and to the Tel Aviv Stock Exchange Ltd. the Company wishes to give to the officers an independent indemnification undertaking for claims as set forth hereafter, insofar as these are not fully covered in the insurance; this undertaking applies to the cases set forth in section 263 of the Companies Law; you serve as an officer in the Company. 1. Therefore, by approval and by virtue of the decision of the Remuneration Committee of the Company of the 20 th April 2015 and the board of directors of the Company of the 20 th April 2015 and by approval and by virtue of the decision of the general meeting of the Company of the, the Company hereby undertakes according to the provisions of the Companies Law, section 133 of the articles of association of the Company, to grant you the indemnification undertaking, that shall come into force upon and subject to publishing the Company s Prospectus, all as set forth in this letter of undertaking. Subject to the terms set forth in this letter of undertaking and the provisions of the Companies Law and the Securities Law The Company hereby irrevocably undertakes to indemnify any officer for any liability, payment of expense as set forth in section 1.2 hereafter, due to an action with respect to the Prospectus or financial statement that he committed or that he shall commit by virtue of him being an officer in the Company, for which he did not receive indemnification from another, provided that the maximum sum of the indemnification shall not exceed the maximum indemnification sum, all in accordance with the provisions in section 3.1 hereafter. With respect to this letter of undertaking the actions with respect to a Prospectus or financial statement as defined in this letter of undertaking shall be regarded as anticipated according to the board of directors of the Company in light of submitting the Company s Prospectus to the Securities Authority and its publication and the publication of financial statements by the Company The undertaking to indemnify an officer as mentioned in section 1.1 above shall apply to each of the following only:

4 A pecuniary liability imposed on you in favor of another person and/or other entity according to a judgment, including a judgment that was given in a settlement or in an arbitration judgment which was approved by the court, including payment to a party harmed by a violation as mentioned in section (a) (1) (a) of the Securities Law; Reasonable litigation costs, including legal fees, that an officer has spent or was found liable to pay by the court in a proceeding conducted against you by the Company or on its behalf or by a person and/or other body or in a criminal indictment from which you were acquitted, or in a criminal indictment in which you were convicted for an offense that does not require proof of criminal intent; Reasonable litigation costs, including legal fees that an officer has spent as a result of an investigation or proceeding conducted against him by an authority authorized to conduct an investigation or a proceeding, in Israel or abroad, (including any administrative enforcement proceeding), and which was concluded without an indictment against you and without any pecuniary liability imposed on you in lieu of a criminal proceeding, or that ended without an indictment against you but with a pecuniary obligation imposed on you in lieu of a criminal proceeding in an offense that does not require proving criminal intent or with respect to a penalty. In this sub- section 1.2: A proceeding which ended without and indictment against you in a matter in which a criminal investigation was commenced means the case has been closed according to section 62 of the Criminal Procedure Law [Consolidated Version], (hereinafter: the Criminal Procedure Law ) or a stay of proceedings by the Attorney General according to section 231 of the Criminal Procedure Law; Pecuniary liability as an alternative to a criminal proceeding a pecuniary liability that was imposed according to law as an alternative to a criminal proceeding, including an administrative penalty according to the Administrative Offenses Law, , a penalty for an offense that was determined as a penalty offense according to the provisions of the Criminal Procedure Law, fine or penalty Paying any payment according to this letter of undertaking is conditioned upon the approval of a board of directors committee, that consists of at least two members, provided that none of its members has a direct or indirect personal interest, in paying the payment, and that most of its members are independent directors or external directors, that the terms stipulated in this letter of undertaking have been fulfilled for paying the payment, provided that a representative of the Governmental Companies Authority (hereinafter the Authority ) has been legally invited to the discussion If the Company has no such board of directors committee as set forth in sub- section 1.3, the payment according to this letter of undertaking shall be conditioned upon the

5 approval of the general meeting, that the terms stipulated in this letter of undertaking for making the payment have been fulfilled Notwithstanding the statements in sections 1.3 and 1.4 above, it is hereby agreed that if the Authority shall publish a policy document with respect to the indemnification of officers which benefits officers regarding the manner of making the payment regulated in sections 1.3 and 1.4 above with respect to the provisions in this letter of undertaking, this policy shall apply to the officers with respect to the manner of making the payment, and this is in lieu of the provisions of sections 1.3 and 1.4 of this letter of undertaking. 2. Exceptions The indemnification shall not apply in the following cases: 2.1. A breach of fiduciary duty towards the Company, unless the officer has acted in good faith and it was reasonable for him to assume that the action would not harm the Company's interests; 2.2. A breach of the duty of caution committed intentionally or recklessly, unless it was committed only negligently; 2.3. Any action taken with the intention of unlawfully gaining personal profit; 2.4. Indemnification for a fine or civil fine, administrative pecuniary punishment imposed on the officer An administrative enforcement proceeding that was conducted with respect to the affairs of the officer, and this is without derogating from the provisions of sections and above. 3. The Indemnification Sum 3.1. The indemnification sum which the Company undertakes to pay in accordance with this letter of indemnification to all the officers in the aggregate and according to any undertaking and any other letter of indemnity for officers (as meant according to the Companies Law, ) that was given or insofar as given by it in the future, shall not exceed the amount of 10 billion NIS (the estimated sum of the maximum risk with respect to the Prospectus) or a sum that equal 25% of the equity of the Company as of the date of the actual indemnification according to the Company's last annual financial statements, whichever is the lower sum of them (the "Maximum Indemnification Sum"). It is hereby clarified that the board of directors of the Company has determined that the Maximum Indemnification Sum is reasonable, appropriate and suitable in the circumstances of the matter and in light of the scope and nature of the Company s business.

6 3.2. If and insofar as the total indemnification sums that the Company shall be required to pay to its officers in the Company shall exceed the Maximum Indemnification Sum or the balance of the Maximum Indemnification Sum (as this shall exist at that time, after deducting the sums given according to this letter of indemnification or any other letter of indemnity to officers, that was given or shall be given in the future) according to section 3.1 above, the Maximum Indemnification Sum or its balance shall be divided, respectively, pro- rata between the officers that shall be entitled to such indemnification, so that the indemnification amount that each of the officers shall receive in actual fact, shall be calculated according to the ratio between the indemnification sum which shall be due to each of the officers for the liabilities or the expenses or the payments which he must bear as mentioned in section 1.2 above and the indemnification sum that shall be due to all of these said officers for the liabilities or expenses or payments which they must bear as mentioned according to section 1.2, in the aggregate for that same event The Company's indemnification undertaking shall not apply in respect to an event that an insurer recognized liability for according to an insurance policy and he paid the officer the amount on time that allows him to fulfill the liability that was imposed on him. However, if an officer shall be found liable due to an indemnifiable event, for an amount that exceeds the amount that the insured paid him, the Company shall indemnify the officer for the difference between the sum of the financial liability that was imposed on the officer and/or the legal expenses that the officer spent or was found liable to pay, as mentioned in section 1 above, and the sum that was received from the insurer for that same matter, provided that the indemnification sum that the Company shall be required to pay according to this letter of undertaking shall not exceed the Maximum Indemnification Sum. Furthermore, the Company shall indemnify the officer for the deductible that he shall be required to pay according to the insurance policy. If the insurer did not recognize liability for such event mentioned, the indemnification of an officer shall not constitute a waiver of the Company of a claim towards the insurer, that the event was insurable. It is expressly emphasized that the Company shall not indemnity an officer for liability or expense that he received indemnification for from another and that the payments of the Company according to this letter shall constitute an additional layer beyond the total sum of all insurance compensation that shall be paid by the insurer, insofar as these shall be paid. Furthermore it is emphasized that this undertaking for indemnification is not a contract in favor of any third party, including any insurer, and it cannot be assigned, and no insurer shall have the right to demand participation of the Company in a payment that the insurer is required to pay according to the insurance agreement that was executed with the insurer except for the deductible stipulated in the agreement as mentioned (insofar as it was stipulated). 4. Handling the Claim In any event for which the officer could be entitled to indemnification as mentioned above, the officer and the Company shall act as set forth hereafter:

7 4.1. The officer shall notify the Company in writing of any legal proceeding that was instituted against him and of any objective concern or threat that a legal proceeding shall be instituted against him and the circumstances that were brought to his attention that could reasonably lead to a legal proceeding being instituted against him (hereinafter: the Proceeding ) and this is as soon as possible after he was first informed of this, and he shall transfer to the Company without delay or to anyone that shall be determined by the Company a copy of any document that shall be delivered to him in respect to this proceeding The officer shall fully cooperate with the Company and with anyone that shall be determined by the Company, including with the insurer of the officers liability insurance policy and he shall deliver any information that shall be required in respect to the lawsuit and he shall fulfill the other provisions of the policy in respect to defending himself against the lawsuit Except in cases in which proceedings were instituted against the officer by the Company the Company shall be entitled to take upon himself the handling of the legal defense of the officer against the proceeding and to deliver the handling of the defense to an attorney whose identity shall be determined by the Company according to his discretion and in consideration of the Company s obligations according to the officers liability insurance policy and the possibility to appoint an attorney on behalf of the insurer (hereinafter: the Company s Attorney) Notwithstanding the provisions in paragraph 4.3 above, the officer shall be entitled to object to the representation of the Company s Attorney for reasonable reasons or in circumstances that according to the officer or according to the Company s Attorney there is a conflict of interests between his defense and the Company s defense If within twenty one days after receipt of such notice as mentioned in section 4.1 above, or a shorter period- if necessary for filing a statement of defense or his response to the proceeding, the Company (or the insurer) did not take upon themselves to handle the officer s defense against the proceedings or if the officer and/or the Company s Attorney objected to his representation by the Company s Attorney in the said circumstances in section 4.4. above, the officer shall be entitled to deliver the handling of the defense to an attorney that he chose himself (hereinafter: the Other Attorney ) provided that the amount of legal fees that shall be paid to the Other Attorney shall require the approval of the Company s board of directors that shall examine its reasonableness. The officer shall be given the opportunity to appear and argue before the board of directors and the board of directors shall explain its decision. If the full amount of legal fees was not approved as requested, and the officer decided not to waive the services of the Other Attorney, the officer shall be entitled if he shall wish to receive, from the Company, the reasonable amount of legal fees that was approved for him, and the balance shall be paid by the officer at his expense Notwithstanding the aforesaid in paragraphs above if the officers liability insurance policy applies to the matter, the Company shall act in accordance with the provisions of the policy in respect to disputes with the insurer regarding the identity of

8 the representing attorney according to the provisions of the policy, if delivery of the matter to the Other Attorney in the circumstances of the matter shall allow the insurer to be released from its liability or to reduce it, and the provisions of the policy shall prevail in this matter over the provisions in this letter of indemnification, however the Company shall make every reasonable effort in the framework of its possibilities according to the policy to honor the will of the officer If the Company decides to take the handling of the defense in the proceeding upon itself and the officer does not object to this in the circumstances mentioned in paragraph 4.4 above, the officer shall sign, at the request of the Company, an authorization that shall authorize the Company as well as the Company s Attorney, to handle the defense in the proceeding in his name and to represent him in an matter that is connected to this defense, and the Company and the Company s Attorney shall be entitled to handle this exclusively (however they must routinely report to the officer and consult with him and with his legal consultants) and they shall be entitled to finish the proceeding as they shall see fit subject to the aforesaid in paragraph 4.15 hereafter. The attorney that was appointed by the Company to handle the claims against the officer shall be have a duty of trust towards the Company and the officer, and in the event of a conflict of interest the provisions of sections 4.4 and 4.5 above shall apply The officer shall cooperate with the Company and with the Company s Attorney in any reasonable manner that shall be required by any of them in the framework of them handling any proceeding, including signing motions, affidavits, and any other document provided that the Company shall bear the costs involved in this in a manner that shall not require the officer to pay them or finance them If the Company has decided to take upon itself the handling of the defense in the proceeding and the officer has not objected to this in the circumstances mentioned in section 4.4 above, the Company shall bear all the costs and the payments that shall be involved in this, in a manner that the officer shall not be required to pay them or to finance them himself, and subject to the aforesaid, the Company shall not be required to pay according to this undertaking any legal costs including legal fees that the officer shall spend in respect to his defense against the proceeding According to the officer s request the Company shall pay him as an advance payment any amount (or amounts) that are required at the Company s estimate to cover reasonable costs which the officer is expected to pay, including the legal fees of the attorney and for which the officer is entitled to indemnification according to this letter of undertaking all subject to him meeting his undertakings according to this letter of indemnification and subject to the provisions of section 263 of the Companies Law. As part of the aforesaid, the Company shall provide collateral for the officer that shall be required or guarantees that the officer shall be required to provide in accordance with any interim decision that was given by a competent court or arbitrator, including for replacing liens that shall be imposed on his assets provided that the total sum of collateral (including collateral which was forfeited) in addition to the

9 sums that they received/ shall receive according to the letter/s of indemnification shall not exceed the Maximum Indemnification Sum. The advance payments and payments that shall be transferred to the officer to cover expenses, or collateral or guarantees that shall be provided shall be returned by him to the Company, in the circumstances mentioned in section 4.11 hereafter If the Company paid any amount to an officer by virtue of the indemnification undertaking, whether as an advance payment or in any other manner and afterwards it became clear that the officer must repay it, all or in part, due to the fact that he was not entitled to indemnification due to the provisions of section 263 of the Companies Law or due to any other provision of the law or due to the fact that he received indemnification from the insurer as mentioned in section 3.3 of this letter of undertaking or from any other party, these sums shall be considered as a loan that was given to the officer by the Company that the officer must return to the Company with interest and linkage differences to the consumer price index at a minimal rate, as determined from time to time according to law so that the loan recipient shall not have a benefit that is liable to tax, starting from the day on which the sum was paid and until the day of its return, with additional lawful VAT, and this is immediately when he shall be required by it to do so and according to the order of payments that the Company shall determine, but in any event no later than 180 days after the time when it became clear that he was not entitled to such indemnification as mentioned above If the Company paid to an officer or third party any amount by virtue of the indemnification undertaking, and afterwards the charge for which the sum was paid was canceled or the sum was reduced for any reason, or due to the fact that he received indemnification from the insurer as mentioned in section 3.3 of this letter of undertaking or from any other party, the officer shall assign to the Company all of his rights to the restitution of the sum and he shall do everything necessary so that this assignment shall be valid and the Company will be able to realize it, and once he did so he shall be exempt from returning the sum in respect to which the restitution right was assigned. If he did not do so the officer shall be required to return the sum, or part of it, respectively, with additional linkage difference and interest at the rates and for the period according to which he is entitled to a refund of the sum from the plaintiff If the Company s Attorney represented the Company and the officer in a proceeding and afterwards it became clear that the officer is not entitled to indemnification due to the provisions of section 263 of the Companies Law or due to the provisions of any other law and a dispute was raised in respect to the obligation of the officer to refund legal costs or regarding the amount of the refund, the dispute shall be transferred to an arbitrator whose identity shall be agreed between the parties. At the request of the officer the Company shall provide him as a loan a sum (or sums) required at the Company s estimation to cover reasonable costs which the officer is expected to pay with respect to the arbitration proceeding (including the attorneys fees). The officer shall not be required to repay the loan to the Company if

10 the arbitrator shall dismiss the Company s claim, and it shall be considered as a refund of his expenses An officer shall not agree to a settlement or to transfer the proceeding to an arbitrator, without the prior written consent of the Company, and if the consent of the insurer shall be necessary then the consent of the insurer of the officers liability insurance policy shall also be obtained. The Company shall not agree to a settlement unless the settlement agreement will not expose the Company and/or the officers to additional claims by the plaintiff or plaintiffs and the agreement shall not include an admission or recognition of the officers liability to the causes of action pertaining to the proceeding. The Company shall inform the officers of the details of the settlement agreement. If a dispute shall arise between the Company and an officer or officers in the question if the settlement fulfills the terms of this section, the dispute shall be brought before an arbitrator that will be appointed according to the Company s or officer s demand, for a quick decision. The arbitrator shall be appointed by the parties agreement within 7 days after the demand of one of the parties to transfer the dispute to the arbitrator for decision and if there is no agreement between the parties in respect to the identity of the arbitrator the arbitrator s identity shall be determined by the Chairman of the Bar Association in Israel. The Company shall bear the costs of the arbitration including the fees of the attorneys. At the request of the officer the Company shall provide him as a loan a sum (or sums) required at the Company s estimation to cover reasonable costs which the officer is expected to pay with respect to the arbitration proceeding (including the attorneys fees). The officer shall not be required to repay the loan to the Company if the arbitrator shall dismiss the Company s claim, and it shall be considered as a refund of his expenses The Company as well as the Company s Attorney shall not agree to a settlement the amount of which exceeds the indemnification amount to which the officer shall be entitled to, and/or a settlement that does not remove the entire claim against the officer, unless by prior written consent of the officer, and if the insurer s consent shall be necessary then also by the prior consent of the insurer. In addition, the Company as well as the Company s Attorney shall not be entitled in a criminal proceeding or in a proceeding that is conducted before an authority authorized to conduct an investigation or proceeding as mentioned in section above or an administrative enforcement proceeding, to end the proceeding as he shall see fit, including an admission to any of the charges on behalf of the officer or consent to a plea bargain, without the prior written consent of the officer, and if the insurer s consent shall be necessary then also with the prior consent of the insurer Without derogating from the provisions of section 4.15 above, the Company shall be entitled according to its sole discretion but it is not required, to indemnify the officer, subject to receipt of the approval as required according to law and according to the articles of association of the Company, according to this letter of indemnification for sums that were paid by him in settling any claim, lawsuit or other proceeding that were obtained without the Company s written consent.

11 5. The Validity of the Undertaking The Company s undertaking according to this letter of indemnification shall be in force from the effective date, and it shall apply after it has come into force, to an action with respect to a Prospectus that was performed before and/or after the effective date or action with respect to a financial statement that was performed after issuing the securities and registering them for trade in the framework of the public offering and as long as the securities are listed for trade as mentioned, but no later than the end of the indemnification period. For the sake of avoiding doubt it is clarified that the undertaking to indemnification shall also apply after the end of the indemnification period, as defined hereafter, as long as the action with respect to the Prospectus or the financial statement were performed before the end of the indemnification period, and this is even if the claim or the proceeding against the officer were filed or began after the end of the indemnification period. With respect to this letter of indemnification, the end of the indemnification period whichever is the earlier of the following: (1) Two years after the effective date. (2) The last date that was determined by the authority in accordance with the policy document that shall be published by it, insofar as published, for the approval of the authority of the internal enforcement plan that constitutes a condition for the recommendation of the authority to the ministers regarding voting in the general meeting with respect to giving an indemnification undertaking, and this is in the event that the authority did not approve according to law up to this time the internal enforcement plan that was submitted to it by the Company The indemnification undertaking shall be valid also with respect to proceedings instituted against the officer during his employment or his term in the Company and with respect to proceedings that shall be instituted against him, after the date of termination of his employment or term in the Company provided that they refer to actions that were made by him from the date of his appointment as officer while or as a result of him being an officer in the Company or as a result of this, up to the end of the indemnification period. The indemnification period shall also stand in favor of the officer s estate, his heirs and his other substitutes according to law Indemnification according to this letter of indemnification shall also apply to payments of Value Added Tax according to law, insofar as these shall apply This letter of undertaking does not cancel or derogate or wave any other indemnification that the officer is entitled to from any other source according to the provisions of any law or according to any other undertaking, and subject to the fact that the Company shall not be required to indemnify the officer for those sums which he received indemnification for according to the other undertaking.

12 5.4. This letter of undertaking does not limit the Company or prevent it from giving the officer additional or special indemnification or indemnifications provided that this does not derogate or harm the indemnification undertaking pertaining to this letter of undertaking and that the other or special indemnification or indemnifications shall be approved as required according to the law and according to the Company s articles of association In order to avoid doubt it is hereby stipulated that subject to the provisions in section 5.3 of this letter of undertaking, this letter of undertaking does not constitute an agreement in favor of a third party and it cannot be assigned No waiver, delay, refraining from action or giving an extension by the Company or officer shall not be construed in any circumstances as a waiver of rights according to this document and according to any law, and it shall not prevent from the party as mentioned from taking all legal steps and others that are required for exercising his rights as mentioned The law that applies to this documents is the Israeli law and the competent court in Tel Aviv has exclusive jurisdiction to hear the disputes that shall arise from implementing this letter of indemnification, and this is without derogating from the provisions with respect to transferring disputes to the decision of the arbitrator in accordance with the provisions of sections 4.13 and 4.14 above. And in witness whereof the Company has signed by its authorized signatories, that were authorized according to law. Today the in year The Israel Electric Corporation Ltd. I confirm receipt of this letter of undertaking to indemnify and I hereby agree to the terms stated in it and undertake to act according to them. Name of the officer: Signature: Date: