Corporate Governance

David Federmann has served as chair of the Board since August 2023, after serving as vice chair of the Board since 2015. He has served in various management capacities at Federmann Enterprises Ltd. (FEL), a privately-owned Israeli company, since 2000. FEL, directly and through subsidiaries, holds a diversified portfolio of investments, including ownership of approximately 44.03% of the Company’s outstanding shares. FEL also has ownership interests in Dan Hotels Ltd. (Dan Hotels), an Israeli hotel chain, Freiberger Compound Materials GmbH (Freiberger), a German company engaged in the supply of materials for the semi-conductor industry, and several financial, real estate and venture capital investments. David Federmann currently serves as chair of the board of Freiberger and as a member of the boards of directors of Dan Hotels, BGN Technologies Ltd. (the technology transfer company of Ben-Gurion University), and several other private companies. David Federmann is the son of Michael Federmann, who may be considered our controlling shareholder. Mr. Federmann holds a bachelor’s degree in mathematics and philosophy from New York University.

Ehud (Udi) Adam has served as a strategic consultant to various public and private companies in the technology sector since June 2020. From 2016 until May 2020, Mr. Adam served as director general of the Israeli Ministry of Defense. Since 2020, Mr. Adam has served as a director of Arma Ferrea Ltd., a company that develops and manufactures reactive armor systems, and as a director of Arma Kinetica Ltd., a company in the field of kinetic energy solutions. Since 2020, he has also served as chair of the board of Armalux Ltd., a company that engages in the field of laser systems and, since 2022, as chair of the board of Ecology for Protected Community Ltd., a company that employs people with special needs to collect electronic waste. Since 2021, Mr. Adam has served as the chair of a public committee of the Geophysical Institute of Israel and, since 2011, as president of “Midor Ledor”, a non-profit community association. In 2016, Mr. Adam served as chair of the board of IMI Systems Ltd., formerly an Israeli government owned defense company later acquired by the Company. Mr. Adam served in the Israeli Defense Forces (IDF) for 31 years, where he holds the rank of major general (reserves), and served as head of the Technological and Logistics Directorate and as head of the Northern Command. Mr. Adam holds a bachelor of arts degree in political science and government from Bar-Ilan University in Ramat Gan, Israel and a master’s degrees in military and strategic leadership from Ecole de Guerre Paris. Mr. Adam serves as chair of the Company’s Corporate Governance and Nominating Committee and as a member of the Company’s Compensation Committee and the Audit and Financial Statements Review Committee.

Mr. Bar Nir has served as a business consultant for various private and public entities in the areas of medicine and tourism since 2019 and is a lecturer on health systems management in the Netanya Academic College.Noaz Bar Nir has served since 2022 as a director of Yad Ben-Zvi, a research institute established to promote Zionist educational and cultural activities. He also served as a director of Remedor Biomed Ltd., a company specializing in advanced treatment of wounds, from 2016 to 2017 and from 2018 to 2023, and of Radio Ashams FM Ltd., a regional radio station located in northern Israel, since 2019. From 2018 until the end of 2022, he served as a director of Genefron Ltd., a company in the field of genomic-based personal medicine. From 2017 to 2018, Mr. Bar Nir served as CEO of Clalit Health Services Ltd. (Clalit), Israel’s largest health organization, and as chair of the boards of Clalit’s subsidiaries S.L.H Medical Services Ltd., Mor – The Institution of Medical Information Ltd. and Clalit – Medical Engineering Ltd. From 2009 to 2017, he served in various senior executive positions and as chair of several companies in the fields of health and tourism, including as chief executive officer of the Israel Hotel Association from 2015 to 2017, as CEO of Harokeah Ltd., a network of pharmacies from 2014 to 2015, as chair of the board of Shfayim Hotel Ltd. and Shfayim Park Ltd. from 2013 to 2015 and as director general of the Israeli Ministry of Tourism from 2009 to 2013. Prior to that, Mr. Bar Nir held various financial positions, including as chief financial officer of Clalit from 2002 to 2008, and as head of the budgets, economics and cost accounting department of Clalit from 1996 to 2002. From 1991 to 1995, he held several positions in the Israeli Ministry of Finance. From 2005 to 2007 he served as a member of the investments committee of Clal Pension and Gemel Ltd. In addition, from 1993 to 2017, he served as a director in several entities, including among others Dikla Insurance Company Ltd. Mr. Bar Nir holds a bachelor’s degree in economics and an MBA, with proficiencies in financing, information systems and accounting, from the Hebrew University of Jerusalem, Israel.  Mr. Bar Nir serves as chair of the Company’s Audit and Financial Statements Review Committee and as a member of the Company’s Compensation Committee and the Corporate Governance and Nominating Committee. He is considered by the Board to have accounting and financial expertise under the Companies Law and is designated as an audit committee financial expert in accordance with SEC rules.

Rina Baum is vice president of FEL and has served as a director and CEO of Uni-bit Insurance Agency (1983) Ltd. since 1990.  She currently serves as a director of Dan Hotels and as chairman and director of Etanit Building Products Ltd. (Etanit).She also holds other managerial positions with investee companies of FEL. Mrs. Baum holds a law degree (LL.B) from the Hebrew University.

Michael Federmann served as chair of the Board between 2000 and August 2023. Since 2002 he has served as chair and CEO of FEL, where he held managerial positions since 1969. Mr. Federmann also serves as a director of Dan Hotels and of Freiberger. He serves as the president of the Germany – Israel Chamber of Industry and Commerce, was awarded the Order of Merit of the Federal Republic of Germany and is an Honorary Commander of the Order of the British Empire (CBE). Michael Federmann may be considered our controlling shareholder and is the father of David Federmann, the chair of the Board. Mr. Federmann holds a bachelor’s degree in economics and political science from the Hebrew University, which has also awarded him an honorary doctorate in philosophy.

Tzipi Livni has served as an external director of Bezeq the Israeli Telecommunication Corp. Ltd., the largest telecommunications company in Israel, and as a director of its subsidiaries – Bezeq International Ltd., Yes TV and Communications Services Ltd. and Pelephone Communications Ltd., each since April 2021. Mrs. Livni has also served as a director of the Institute for National Security Studies, a research institution affiliated with Tel Aviv University, since June 2021, and has been a member of the advisory board of Seevix Material Sciences Ltd., a biotechnology company, since October 2021. Since March 2023, Mrs. Livni has served as a member of the board of trustees of Nizami Ganjavi International Center, a non-profit organization that promotes collaboration among different cultures and civilizations and, since 2018, she has served as a member of the board of trustees of the International Crisis Group. Mrs. Livni is a member of the Aspen Cybersecurity Group and previously served as a member of the Multinational Cyber Action Committee. Mrs. Livni also serves as a member of the global steering committee of Campaign for Nature and the Aspen Ministers Forum. Mrs. Livni is also an international speaker and strategic advisor and was a fellow at the Kennedy School of Government at Harvard University in Boston in 2019. Between 1999 and 2019, Mrs. Livni held various political and ministerial positions in Israel, including the Minister of Foreign Affairs and Vice Prime Minister, Minister of Justice, Minister of Regional Cooperation, Minister of Immigrants Absorption, Minister of Housing and Construction and Minister of Agriculture, and was a member of the Security Cabinet and leader of the opposition in the Israeli Knesset. Prior to this time, she was Head of the Government Companies Authority and practiced law. Tzipi Livni holds a law degree (LL.B.) from Bar-Ilan University. Mrs. Livni serves as a member of the Company’s Audit and Financial Statements Review Committee.

Dov Ninveh served as chief financial officer and a manager of FEL from 1994 until 2020 and as the general manager of Heris Aktiengesellschaft from 2012 until 2021. He currently serves as a member of the board of directors of Freiberger. Mr. Ninveh served as a director of Dan Hotels from 2003 until 2022 and as a member of the board of directors of Etanit from 1994 until 2023. From 1996 until 2000 he served as director of Elop Electro-Optic Industries Ltd. (Elop) and from 1989 to 1994, he served as deputy general manager of Etanit. Mr. Ninveh holds a bachelor of science degree in economics and management from the Technion – Israel Institute of Technology (the Technion) in Haifa, Israel.

Prof. Ehood (Udi) Nisan is a professor in the School of Public Policy and Government of the Hebrew University. He is an External Director of Harel Insurance Finance Services Ltd. and Rekah Pharmaceutical Industry Ltd. He is also a member of the board of Bezalel Academy of Art and chair of its finance committee and a member of the audit committee of Azrieli College of Engineering Jerusalem. Since 2023, Prof. Nisan has served as the chairman of the Hebrew University Assets Company Ltd. From 2014 until 2021, he served as a member of the board of the Jerusalem Biblical Zoo. From 2013 to 2016, he was the chair of the board of directors of Delek, The Israel Fuel Corporation Ltd. From 2009 to 2011, Prof. Nisan was the director of the national budget department of the Israeli Ministry of Finance, and from 2007 to 2009, he served as the director of the Government Companies Authority. Prior to that, he served in various executive positions in the Israeli Ministry of Finance and served as a member and chair of several government and public committees, including as the CEO of the Jerusalem Development Authority. Prof. Nisan holds bachelor’s and master’s degrees in economics and business administration, and a PhD in public economics and policy from the Hebrew University. During 2006 – 2007, Prof. Nisan completed his post-doctoral studies at the Kennedy School of Government at Harvard University, where he was also a Senior Fellow in 2011 – 2012. Prof. Nisan serves as a member of the Company’s Audit and Financial Statements Review Committee. He is considered by the Board to have accounting and financial expertise under the Companies Law and is designated as an audit committee financial expert in accordance with SEC rules.

Mrs. Bilha (Billy) Shapira serves as a member of the board of governors and the audit committee of the Azrieli College of Engineering, the Jerusalem Transportation Master Plan Team, the boards of several non-profit organizations in Israel and the board of governors of the Hebrew University. She is also a consultant for TABI Learning Technologies Ltd., a start-up company in the field of pedagogical instruments for students with learning and sensory integration disorders. From 2018 until 2020, she was the head of the Israeli branch of Helmholtz Association of German Research Centers, a German association with centers worldwide that promotes research collaboration between German institutions and industries and foreign academic institutions, industrial entities and governmental research bodies. From 2009 until 2017, Mrs. Shapira served as vice president and CEO of the Hebrew University and as the CEO of VERA – the Association of Heads of Universities in Israel. Prior to that, she served for 36 years in various management capacities at the Hebrew University. Mrs. Shapira holds a bachelor’s degree in Russian studies and international relations and a master’s degree in administration and public policy from the Hebrew University. Mrs. Shapira serves as chair of the Company’s Compensation Committee and is a member of the Company’s Audit and Financial Statements Review Committee and the Corporate Governance and Nominating Committee. She is considered by the Board to have professional competence under the Companies Law.

Bezhalel Machlis has served as the Company’s President and CEO since 2013. From 2008 until 2012, he served as executive vice president – general manager land and C4I, after serving as corporate vice president – general manager land systems and C4I since 2004. In 2003, he served as corporate vice president – general manager ground, C4I and battlefield systems. From 2000 until 2002, he served as vice president – battlefield and information systems. Mr. Machlis joined Elbit Ltd. in 1991 and held various management positions in the battlefield and information systems area. Prior to that, he served as an artillery officer in the IDF, where he holds the rank of colonel (reserves). Mr. Machlis holds a bachelor of science degree in mechanical engineering and a bachelor of arts degree in computer science from the Technion and an MBA from Tel-Aviv University, Israel. He is a graduate of Harvard University Business School’s Advanced Management Program in Boston.

Jonathan Ariel has served as Executive Vice President – Chief Legal Officer since 2012, after serving as senior vice president – general counsel since 2008. He joined Elbit Systems in 1996 and has held several positions within the legal department, including vice president – general counsel of Elbit Systems Electro-Optics Elop Ltd. Prior to joining Elbit Systems, Mr. Ariel served as a legal advisor both in-house and in private law firms in Israel and the U.S. Mr. Ariel holds a law degree (LL.B.) from Tel-Aviv University. He is admitted to the Israeli Bar.

Boaz Cohen was appointed Executive Vice President – Marketing and Business Development North America, Australia and New Zealand in February 2021 and 2023, respectively.  Prior to that, since 2013 he served as senior vice president – land systems. After retiring from the IDF as a colonel in the Armored Corps in 2007, Mr. Cohen joined Elbit Systems and held various management positions in the land and C4I areas. Mr. Cohen holds a bachelor of arts degree in management and economics from Haifa University, Israel and is a graduate of Harvard University Business School’s Advanced Management Program.

Haim Delmar was appointed Executive Vice President – General Manager C4I and Cyber in 2018, after serving as senior vice president – C4ISR and HLS since 2009. Mr. Delmar joined Elbit Systems in 1993 and held various engineering and management positions in the battlefield and information systems area. From 2000 until 2004, he served in executive positions at Utopy Inc. and Mobilitec Inc. in the telecommunication and data mining fields, returning to Elbit Systems in 2004. Mr. Delmar holds a bachelor of science degree in computer engineering from the Technion and is a graduate of Harvard University Business School’s Advanced Management Program.

Michael (Miki) Edelstein was appointed Executive Vice President – Strategy and Business Development Israel in 2022. M. Edelstein joined Elbit Systems in 2021 as senior vice president – strategy and business development Israel. Prior to that, M. Edelstein served for 34 years in the IDF, where he holds the rank of Major General (reserves), in a variety of positions, including command of several combat units and as Defense Attaché to the U.S In 2020 he was awarded the Legion of Merit medal by the U.S. Secretary of Defense. Mr. Edelstein holds a bachelor degree in law and business management from Reichman University in Herzliya, Israel and a Master’s degree in national resources management from the National Defence University, in Washington, D.C. and is a graduate of the International Security Program at the Kennedy School of Government at Harvard University.

Dr. Shelly Gordon was appointed as Executive Vice President – Chief Human Resources Officer shortly after joining Elbit Systems in 2015. From 2012 until joining Elbit Systems, she headed executive education at the Interdisciplinary Center Herzilya. From 2005 until 2012, Dr. Gordon served as vice president – organizational development and talent management at Amdocs Limited and served as vice president – human resources at Elite Confectionary Ltd. from 2000 until 2005. Prior to that, she worked as an independent consultant with management teams and senior managers, leading major transformations in varied organizations and industries. Dr. Gordon received a bachelor’s degree in education and art from the Hebrew University, a bachelor’s degree in psychology from Tel-Aviv University and a doctorate in management studies from the University of Hertfordshire in the U.K.

Dr. Yaacov (Kobi) Kagan was appointed as Executive Vice President – Chief Financial Officer, in 2022. He was appointed in 2018 as deputy general manager and senior vice president – finance and control in Elbit Systems Land, and from 2010 to 2018 he served as Elbit Systems Land and C4I’s vice president – finance and control. Dr. Kagan joined Elbit Systems in 2008 as a sales director at Elbit Systems Land and C4I. Prior to that, Dr. Kagan served for 26 years in the Israeli Navy, where he holds the rank of a naval captain (reserves), and in the IMOD, in a variety of positions, including the Head of the Navy’s budget department. Dr. Kagan holds a bachelor of arts degree in economics and business administration, an MBA in business administration and a PhD in economics from Bar-Ilan University, and is a graduate of Harvard University Business  School’s Advanced Management Program.

Ran Kril was appointed as Executive Vice President – International Marketing and Business Development in 2015. From 2013 until his current appointment, he served as aerospace vice president – marketing and sales, after serving as aerospace vice president – sales and contracts since 2007. He joined Elbit Systems in 1997 and held various senior positions in aerospace’s marketing, sales and finance departments. Mr. Kril holds a bachelor of science degree in economics and management from the Technion and a master of science of management degree from the Polytechnic University of New York.

Yuval Ramon was appointed Executive Vice President – Chief Operating Officer in 2015. From 2014 until his current appointment, he served as vice president – corporate operations. From 1998 –to 2013, he served in a number of management positions in Elbit Systems of America, including as senior vice president of operations, site lead at the Merrimack operations and director of sales and contracts for the Fort Worth operations. He joined Elbit Systems in 1994 as a sales and contract manager. Mr. Ramon holds a bachelor of science degree in industrial engineering and economics from the Technion.

Oren Sabag was appointed Executive Vice President – General Manager ISTAR and EW in 2022. In February 2021, he was appointed executive vice president – co-general manager ISTAR and EW, after serving as C4I and Cyber senior vice president – radios and secure communications since 2014. From 2011 to 2013, he served as vice president for engineering – land and C4I. Mr. Sabag joined Elbit in 1998 and held various engineering and management positions. Mr. Sabag holds a bachelor of science degree in computer engineering from the Technion and an MBA in business management from Haifa University.

Yoram Shmuely has served as Executive Vice President – General Manager Aerospace since 2013, after serving as executive vice president – co-general manager aerospace since 2008. From 2003 to 2007, Mr. Shmuely served as corporate vice president – co-general manager airborne and helmet systems. He served as corporate vice president and general manager – helmet-mounted systems from 2000 until 2003. From 1998 until 2000, he was vice president – helmet-mounted systems. From 1996 until 1998, he served as president of a U.S. subsidiary of Elbit Systems. Mr. Shmuely joined Elbit Ltd. in 1990 and served as director of Elbit Ltd.’s helmet-mounted display business. He served as a fighter aircraft pilot in the Israeli Air Force (IAF).  Mr. Shmuely holds a bachelor of science degree in electronic engineering from the Technion.

Yehuda (Udi) Vered has served as Executive Vice President – General Manager Land since 2018, after serving as executive vice president – general manager land and C4I since 2013. From 2009 until 2013, Mr. Vered served as executive vice president – service solutions as well as vice president – marketing land and C4I. From 2004 to 2008, he served as land and C4I chief financial officer and vice president for contracts and sales. Mr. Vered joined Elbit Systems in 2003 as ground, C4I and battlefield systems vice president – contracts and sales and chief financial officer. Before that, he served as an aircrew officer in the IAF, where he holds the rank of colonel (reserves). Mr. Vered holds a bachelor of arts degree in management and economics from Tel-Aviv University, an M.B.A from Ben Gurion University and is a graduate of Harvard University Business School’s Advanced Management Program.

Yehoshua (Shuki) Yehuda was appointed as Executive Vice President – Strategy and Chief Technology Officer in 2020. From 2016 until his current appointment, he served as executive vice president – chief technology officer. From 2008 until his current appointment, he served as Elisra’s vice president and chief technology officer as well as general manager – radar solutions business unit. Prior to that he served in a number of management positions in Elisra, which he joined in 2000. Prior to joining Elisra, Mr. Yehuda served as an officer in the IDF, holding command positions in the Intelligence Corps. Mr. Yehuda holds a bachelor of science degree in electrical engineering from Tel-Aviv University and a master of science degree in neural computation from the Hebrew University. He is a graduate of Harvard University Business School’s Advanced Management Program.

I.           INTRODUCTION.

1. Elbit Systems Ltd. (“Elbit Systems” or the “Company”) is a corporation formed  under the Israeli Companies Law, 5759-1999 (the “Companies Law”), with its shares traded on the Nasdaq Global Select Market (“Nasdaq”), and on the Tel-Aviv Stock Exchange (the “TASE”).
2. Pursuant to Sections 114 and 171(e) of the Companies Law, the Companies Regulations (Provisions and Terms for the Approval Process of the Financial Statements) – 2010 (the “Financial Statements Regulations”), and Rule 5605(c)(1) of the Nasdaq Stock Market Inc. Market Place Rules (the “Nasdaq Rules”), the Company has established an audit and financial statements review committee (the “Committee”) as a standing committee of its board of directors (the “Board”). In accordance with the requirements of the Companies Law and Financial Statements Regulations, the Committee may act as either an “Audit Committee” or “Financial Statements Review Committee.” Together, these two committees perform the duties required under the Nasdaq Rules to be performed by an “audit committee.”
3. This charter sets out the guidelines under which the Committee will operate when acting as an Audit Committee under the Companies Law (this “Charter”). The Committee’s activities when acting as a Financial Statements Review Committee according to the Companies Law and Financial Statements Regulations, are governed by a separate charter.

II.         PURPOSES.

The purposes of the Committee acting as an Audit Committee are to:

1. oversee on behalf of the Board (a) the Company’s compliance with legal and regulatory requirements applicable to the internal controls and reporting (other than financial reports) of publicly traded companies;
2. oversee the performance of the Company’s Internal Auditor (as defined below) and internal control functions, including the determination whether the Internal Auditor has sufficient tools and resources required for the performance of his or her duties, taking into account, among other, the special requirements of the Company and its size;
3. evaluate potential or existing significant deficiencies in the administration of the Company’s business as such matters may be brought to the attention of the Committee including, inter alia, by (a) the Internal Auditor, (b) the Company’s independent auditors (the “Independent Auditors”), (c) other Company management officials or (d) the Whistleblower Process (as defined below), including, in each case, by consulting, if deemed necessary, with the Company’s management, Internal Auditor, Independent Auditors, and the Company’s legal advisors, and make proposals to the Board regarding ways of correcting such deficiencies;
4. review and resolve whether to approve acts and transactions requiring the Committee’s approval under applicable sections of the Companies Law, such as related party transactions;
5. review matters referred to them under the Whistleblower Process as provided under the Company’s Whistleblower and Investigations Procedure;
6. in consultation with Company management, review and approve the annual Internal Audit Plan (as defined below);
7. hold executive sessions as required of the Board by Rule 5605(b)(2) of the Nasdaq Rules; and
8. take any further actions as the Committee is required or allowed to take under or in accordance with the Applicable Laws and Regulations (as defined below).

III.       MEMBERSHIP AND COMPOSITION OF THE COMMITTEE.

1. Committee Composition. There will be at least three (3) and no more than five (5) members (individually a “Member” and collectively the “Members”) serving on the Committee, all of whom will be members of the Company’s Board (“Directors”).
2. Appointment and Removal. “External Directors”, as defined in the Companies Law (“External Directors”), will, upon their appointment in such capacity, automatically become Members and will cease to be Members upon the expiry of their terms of office as External Directors, or upon the occurrence of events or circumstances that will negate such Member’s status as an External Director. All other Members will be appointed to the Committee by the Board and may be removed by the Board.
3. Chair. The chair of the Committee will be an External Director (the “Chair”). The Chair will be appointed by the Board , however, in reference to Article 26(b) of the Company’s Restated Articles of Association, as may be amended from time to time (the “Articles”), if no Chair is appointed by the Board for the Committee, then the Members may elect a Chair.
4. Membership Qualification.

1. All of the Members will satisfy and comply with the membership and independence requirements of the Applicable Laws and Regulations, including the requirement to be an “independent director” as defined in Rule 5605(a)(2) of the Nasdaq Rules, and meet the criteria for independence as set forth in Rule 10A-3(b)(1) of the U.S. Securities Exchange Act of 1934 (the “Exchange Act”) (subject to the exemptions provided in Rule 10A-3(c) under the Exchange Act).
2. In accordance with the Companies Law, at least a majority of the Committee must also be “Independent Directors,” as defined therein (“Independent Directors”). When acting as an Audit Committee, all of the Company’s External Directors will serve as Members.

iii. The following persons may not serve on the Committee: (i) the chair of the Board; (ii) any Director employed by the Company or by the controlling shareholder of the Company or by a company under the control of such controlling shareholder; (iii) any Director who provides services, on an ongoing basis, to the Company, to the controlling shareholder of the Company or to a company under the control of such controlling shareholder; (iv) a Director whose main source of income comes from the controlling shareholder of the Company; and (v) the Company’s controlling shareholder or his or her “relative,” as such term is defined in the Companies Law.

1. Each Member must not have participated in the preparation of the financial statements of the Company or any current subsidiary of the Company (other than in his/her role as a Member, a Director or a member of any other Board committee) at any time during the past three years.
2. No Member may, other than in his or her capacity as a Member of the Committee, a Director or a member of any other Board committee, be an “affiliated person” (as defined in the Exchange Act) of the Company or any subsidiary thereof. As more fully set forth in the Applicable Laws and Regulations, the Company’s Board of Directors must find that Members do not have any current or past relationships with the Company, the Company’s affiliates and/or the Independent Auditors which would interfere with their exercise of independent judgment in carrying out their responsibilities as a director or otherwise fail to meet the applicable independence standards.

E. Members Compensation. Except as may be permitted under the Applicable Laws and Regulations, and the then current compensation policy for the Company’s Office Holders (as defined in the Companies Law) approved by the Company’s shareholders, no Member will (other than in his or her capacity as a Member, a Director, or a member of any other Board committee), accept any consulting, advisory or other direct or indirect compensation from the Company or any subsidiary thereof.

F. Financial Literacy. Each Member will have the ability to read and understand financial statements, including a Company’s balance sheet, income statement, and cash flow statement. Additionally, at least one of the Independent Directors must have “accounting and financial expertise” within its meaning in the Companies Law and regulations promulgated thereunder.

G. Financial Expert. At least one Member will have past employment experience in finance or accounting, requisite professional certification in accounting or any other comparable experience or background which results in the individual’s financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities. In this regard, a Director who qualifies as an “audit committee financial expert” (as defined under Item 407(d)(5)(ii) and (iii) of Regulation S-K under the Exchange Act) will be presumed to satisfy this financial sophistication requirement.

IV.       DUTIES AND RESPONSIBILITIES.

A.Specific Duties.  Without limiting any other powers, duties, responsibilities or authorities that may be assigned or delegated to the Committee under any applicable laws or regulations or by any other provision of this Charter or by the Board, the Committee will perform the duties and functions described below, all of which will be performed in accordance with, and subject to, the applicable provisions of Israeli law and the regulations promulgated thereunder (including without limitation, the Companies Law), the applicable provisions of United States securities laws and regulations and the applicable provisions of the rules and regulations of the TASE, Nasdaq and any other market or exchange on which Elbit Systems’ securities are traded (all such laws, regulations, rules and instructions as may be amended and in effect from time to time are hereinafter referred to as the “Applicable Laws and Regulations”):

i.         Periodic Committee Review Functions.

(a)   Periodic Review. The Committee, as it may find appropriate from time to time, will discuss and review with the Company management, internal or outside legal counsel, and/or with the Internal Auditor, in each case, to the extent determined by the Committee to be appropriate in its discretion, any financial, regulatory, reporting and oversight topics relating to the purposes of the Committee which may come to the Committee’s attention. The Committee may also update and/or discuss with the Board any issue that it deems appropriate from time to time.  

(b)   Deficiencies in Administration of the Company’s Business. If the Committee finds a deficiency during its evaluation of potential or existing deficiencies in the administration of the Company’s business, which is material as set forth in Section 117(a) of the Companies Law, the Committee will hold at least one meeting regarding such material deficiency, with the participation of the Company’s corporate secretary (the “Secretary”) and in the presence of the Internal Auditor or the Independent Auditors, as applicable, and in the absence of officers and directors who are not Members. Notwithstanding, an officer or non-Member Director can and, to the extent practicable, will participate in such meeting in order to present his or her position on a matter which is under his or her scope of responsibilities, if so requested by the Committee. 

(c)    Classification and Approval of Acts and Transactions. The Committee will decide on the approval of certain acts or related party transactions as set forth in Sections 255 and 268-275 of the Companies Law. 

(d)     Proceedings in Connection with Certain Acts and Transactions. The Committee will determine: (1) with respect to transactions described in Section 270(4) of the Companies Law, even if any such transaction is not extraordinary: (i) whether the Company will hold a competitive process under the supervision of the Committee or any other supervisor as it determines, in accordance with criteria that the Committee will set, or (ii) that other proceedings, as set by the Committee, will be conducted prior to engaging in such transaction, all taking into account the type of the transaction; (2) the manner of approval of certain transactions as set forth in Section 270(4) of the Companies Law that the Committee deems non-negligible and the type of non-negligible transactions that are subject to approval of the Committee; and (3) the classification, on the basis of detailed reasons, of certain acts, as set forth in Section 255 of the Companies Law, as “material,” or “non-material” and certain transactions as set forth in Section 270(1) or 270(4) of the Companies Law as “extraordinary” or “non-extraordinary” for purposes of determining the required approval process of such acts or transactions.
(e) Pre-determined Principles and Guidelines. The Committee may, from time to time, and in each case, if determined to do so, at least annually, pre-determine principles and guidelines for the proceedings listed above in Section IV.A.i.(d).
(f) Updates to the Applicable Laws and Regulations. The Company’s legal advisors or other appropriate Company officer will, as may be required from time to time, update the Committee on relevant developments and changes in the Applicable Laws and Regulations generally.

ii. Whistleblower Process.
(a) Nature of the Process. The Committee has approved a whistleblower process included in the Company’s Whistleblower and Investigation Procedure (the “Whistleblower Process”) as available on its website (www.elbitsystems.com) that enables employees of the Company to express their grievances regarding unethical, illegal or improper business or accounting matters including anti-corruption compliance-related matters, and/or report irregularities in the Company relating to these matters to the proper authorities without any fear of retaliation or prejudice for having so acted.
(b) Hearing Complaints. Upon receipt of a complaint by the Company under the Whistleblower Process of a nature that is to be brought to the attention of the Committee, the Committee will determine the manner in which the complaint will be reviewed.

iii. Internal Auditor Activities.
(a) Appointment and Budget of Internal Auditor. The Committee will recommend to the Board the appointment of an internal auditor (the “Internal Auditor”) proposed to the Committee by Company management and who meets the requirements established under the Applicable Laws and Regulations. The Committee will approve the annual budget proposed by Company management for the Internal Auditor function.
(b)Internal Audit Plan. Each year, the Internal Auditor will submit to the Committee, for approval by the Committee, an internal audit plan (the “Internal Audit Plan”). The Committee, in consultation with Company management, will review and approve the Internal Audit Plan, and, as it may find appropriate, any modifications to the Internal Audit Plan, that may be proposed by the Internal Auditor or the Committee. The Committee may also provide general guidance (subject to applicable law) to the internal audit activities conducted at the major subsidiaries of the Company.
(c) Internal Auditor Reports. The Internal Auditor will submit his or her audit reports to the Committee and to Company management. Following receipt of any requested comments from Company management, the Committee will discuss these reports at Committee meetings and propose comments to the Internal Auditor and to Company management. The Committee will report to the Board regarding Internal Auditor reports and activities. The Internal Auditor will also submit a yearly account of his or her findings to the chair of the Board, the president of the Company and the Chair.

iv. Financial and Accounting Matters. For the avoidance of doubt, to the extent the Committee is addressed with respect to any topic, matter, concern or deficiency pertaining to the Company’s accounting and/or financial reporting, such topic, mater, concern or deficiency will be addressed by the Committee acting as a Financial Statements Review Committee.
B. Oversight Function. Except as otherwise provided, the Committee’s function is one of oversight, and it relies, among other things, on the expertise and knowledge of Company management, the Internal Auditor and the Independent Auditors in carrying out its oversight responsibilities. This oversight function will not relieve the responsibilities of Company management for assuring compliance with laws, regulations and the Company’s policies, procedures and internal controls. The Committee’s function will not derogate from the powers of the Board or the powers of the shareholders under the Companies Law or other Applicable Laws and Regulations.
C. Working Relationships and Access. In performing its duties, the Committee will maintain effective working relationships with the Board and Company management. The Committee is authorized to have direct, independent access to the Independent Auditors, the Internal Auditor and Company’s management, finance and legal personnel. The Committee is authorized to communicate in confidence with any of these individuals.

V.          ENGAGEMENT OF ADVISORS.

In performing its responsibilities, the Committee will have the authority to conduct investigations and to engage, and obtain advice, reports or opinions from, independent counsel and other advisors (including internal or outside legal counsel, accounting and other expert advisors). The costs of any such advice will be borne by the Company. The Company must provide for appropriate funding, as determined by the Committee, for payment of: (i) compensation to any registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company; (ii) compensation to any advisers that the Committee may choose to engage; and (iii) ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.

VI.        MEETINGS OF THE COMMITTEE ACTING AS AN AUDIT COMMITTEE.

A. Meetings. The Committee will meet at least quarterly or more frequently as required by the Applicable Laws and Regulation or based on the Company’s needs. The Committee may also hold special meetings or act by unanimous written consent, and the Committee meetings will be governed by the procedures (other than quorum requirements) generally applicable to meetings of the Board under the Articles, unless otherwise stated by resolution of the Board or the Committee.
B. Additional Participants. A person that is not eligible to be a Member may not be present during Committee meetings or votes unless the Chair determines that such person is required for presentation of a matter on the agenda. If requested by the Committee, a Company employee, provided he or she is not the Company’s controlling shareholder or his or her “relative,” as such term is defined in the Companies Law, may, and to the extent practicable, will be present during Committee meetings (but not votes). Notwithstanding the above, if requested by the Committee, the Secretary and the Company’s legal advisors and/or chief compliance officer, provided that each is not the Company’s controlling shareholder or his or her “relative,” as such term is defined in the Companies Law, may be present during Committee meetings and votes.
The Internal Auditor will receive notice of the holding of Committee meetings and will be entitled to take part in the Committee meetings. The Internal Auditor may request that the Committee Chair convene the Committee to discuss such matters as the Internal Auditor may set out in his or her request, and, if the Committee Chair sees fit to do so, the Committee Chair will convene the Committee within a reasonable period following the request.
Subject to Applicable Laws and Regulations, the Chair will have the discretion to limit participation of non-Members if doing so is deemed required in certain circumstances.
C. Quorum. Quorum will be constituted when a majority of the Members will be present at the meeting, provided that: (a) the majority of the present Members are Independent Directors and (b) at least one of the Members present is an External Director.
D. Role of Corporate Secretary. The Secretary will administer the minutes, correspondence, distribution of materials and action items of the Committee under the direction of the Committee’s Chair.
E. Rules for Conduct of Business. Except to the extent otherwise provided by the Applicable Laws and Regulations or by the Board, and taking into account requirements with respect to potential conflicts of interest of Members regarding a particular matter, the Committee may make, alter and repeal rules for conducting its business. In the absence of such rules, the Committee will conduct its business in the same manner as the Board conducts its business pursuant to the Applicable Laws and Regulation and the Articles.

VII.      REPORTS AND MINUTES.

1. Reports. Consistent with the Applicable Laws and Regulations, the Committee will report to the Board on the matters approved and major items covered at each Committee meeting.
2. Minutes. The Committee will maintain minutes of each of its meetings. The minutes will be filed and kept in Elbit Systems’ offices, under the supervision of the Secretary.

VIII.    PERIODIC REVIEW OF THIS CHARTER.

The Committee will review and reassess, periodically as it deems appropriate, the adequacy of this Charter and will recommend to the Board to amend this Charter as it may deem to be necessary or appropriate. In case of a conflict between any of the Applicable Law and Regulations and this Charter, the Applicable Laws and Regulations will govern with respect to such matters.

1. INTRODUCTION.
   1.   Elbit Systems Ltd. (“Elbit Systems” or the “Company”) is a corporation formed under the Israeli Companies Law, 5759-1999 (the “Companies Law”), with its shares traded on the Nasdaq Global Select Market (“Nasdaq”), and on the Tel-Aviv Stock Exchange (the “TASE”).
   2. Pursuant to Sections 114 and 171(e) of the Companies Law, the Companies Regulations (Provisions and Terms for the Approval Process of the Financial Statements) – 5770 – 2010 (the “Financial Statements Regulations”), and Rule 5605(c)(2) of the Nasdaq Stock Market Inc. Market Place Rules (the “Nasdaq Rules”), the Company has established an audit and financial statements review committee (the “Committee”) as a standing committee of its board of directors (the “Board”). In accordance with the requirements of the Companies Law and Financial Statements Regulations, the Committee may act as either an “Audit Committee” or “Financial Statements Review Committee.” Together, these two committees perform the duties required under the Nasdaq Rules to be performed by an “audit committee.”
   3. This charter sets out the guidelines under which the Committee will operate when acting as a Financial Statements Review Committee under the Companies Law and the Financial Statements Regulations (this “Charter”). The Committee’s activities when acting as an Audit Committee according to the Companies Law, are governed by a separate charter (the “Audit Committee Charter”).
2. PURPOSES.
   The purposes of the Committee acting as a Financial Statements Review Committee are to:
   1. oversee on behalf of the Board (a) the accounting and financial reporting processes of the Company and the audits of the financial statements of the Company, including the internal control over such processes; (b) the integrity of the Company’s financial statements; and (c) the appointment, compensation, qualifications, independence, retention and work of the Company’s Independent Auditors (as defined below);
   2. discuss and provide recommendations to the Board (including a report of any deficiency found during review) with respect to the approval of the financial statements of the Company, within a reasonable time prior to the Board discussion of such recommendations and approval of the financial statements thereafter; and
   3. take any further actions as the Committee is required or allowed to take under or in accordance with the Applicable Laws and Regulations (as defined below).
3. MEMBERSHIP AND COMPOSITION OF THE COMMITTEE.
   1. Committee Composition. Please refer to Section III.A of the Audit Committee Charter.
   2. Appointment and Removal. Members will be appointed to the Committee by the Board and may be removed by the Board.
   3. Observer. When acting as a Financial Statements Review Committee, the Committee may have an observer who is a non-Independent Director (as defined below). Such an observer may participate in the Committee meetings and may receive materials distributed to the Members, but may not vote on any matters brought before the Committee for a vote.
   4. Chair. Please refer to Section III.C of the Audit Committee Charter.
   5. Membership Qualification.
      1. Please refer to Sections III.D(i), (iii), (iv) and (v) of the Audit Committee Charter.
      2. In accordance with the Financial Statements Regulations, at least a majority of the Members will be “Independent Directors,” as defined in the Companies Law (“Independent Directors”). In addition, when acting as a Financial Statements Review Committee, pursuant to Section 243 of the Companies Law and Article 26(a) of the Articles, at least one (1) “External Director,” as defined in the Companies Law must serve as a Member.
   6. Members Compensation. Please refer to Section III.E of the Audit Committee Charter.
   7. Financial Literacy. Each Member will have the ability to read and understand financial statements, including the ability to read and understand the Company’s balance sheet, income statement and cash flow statement. Additionally, at least one of the Independent Directors must have “accounting and financial expertise” within its meaning in the Companies Law and regulations promulgated thereunder. Each Member will declare, prior to their appointment, that he or she has the ability to read and understand financial statements or has “accounting and financial expertise,” as applicable.
   8. Financial Expert. Please refer to Section III.G of the Audit Committee Charter.
4. DUTIES AND RESPONSIBILITIES.
   1. Specific Duties. Without limiting any other powers, duties, responsibilities or authorities that may be assigned or delegated to the Committee under any applicable laws or regulations or by any other provision of this Charter or by the Board, the Committee will perform the duties and functions described below, all of which will be performed in accordance with, and subject to, the applicable provisions of Israeli law and the regulations promulgated thereunder (including without limitation, the Companies Law), the applicable provisions of United States securities laws and regulations and the applicable provisions of the rules and regulations of the TASE, Nasdaq and any other market or exchange on which Elbit Systems’ securities are traded (all such laws, regulations, rules and instructions as may be amended and in effect from time to time are hereinafter referred to as the “Applicable Laws and Regulations”):
      1. Selection and Review of Independent Auditors and their Services.
         1. Overall Authority of Committee to Select and Oversee Independent Auditors. Pursuant to the Applicable Laws and Regulations, the Committee in its capacity as a committee of the Board, in addition to and in no way derogating from any required approval of the Board and /or shareholders, will be directly responsible for the appointment, compensation, retention and oversight of the work of the independent auditors engaged by the Company for purposes of preparing or issuing audit report(s) or performing other audit, review or attest services with respect to the Company (the “Independent Auditors”). The Committee’s authority includes, without limitation, resolution of disagreements between management and the Independent Auditors regarding financial reporting.
         2. Terms of Audit and Non-Audit Engagements. The Committee will pre-approve all audit and permitted non-audit services to be received from the Independent Auditors. The Committee will also pre-approve the fees for all audit and permitted non-audit services and other terms of engagement of the Independent Auditors. The pre-approval may relate to a list of services or to a specific service, as the case may be, as well as pre-approved amounts to be paid by the Company for certain types of services. The foregoing approvals are required for any audit and permitted non-audit services, whether performed for the Company or for any of the Company’s wholly-owned or majority owned subsidiaries which are consolidated in the Company’s financial statements or for any “Affiliates” of the Company. “Affiliates” for this purpose will be as defined by the U.S. Public Company Accounting Oversight Board (“PCAOB”). The Committee may confer with Company management on these matters but may not delegate this approval responsibility to management, other than to authorize applicable Company management officials to approve specific tasks consistent with the lists of services and amounts pre-approved by the Committee.
         3. Prohibited Non-Audit Services. The Committee and the Company will not engage the Independent Auditors for the following services, except as may be exempted pursuant to the Applicable Laws and Regulations: bookkeeping or other services related to the accounting records or financial statements of the Company; financial information systems design and implementation; appraisal services, valuation services, fairness opinions or contribution-in-kind reports; actuarial services; internal audit outsourcing services; management or human resources functions; broker/dealer, investment adviser or investment banking services; legal services; non-permissible expert services unrelated to the audit; any service or product to the Company for a contingent fee or commission; any service or product other than audit, review or attest services for which any audit partner earns or receives compensation based on procuring such engagement; or any other service that the SEC (as defined below), PCAOB, or corresponding Israeli body, determines (by issuing regulations) is impermissible or incompatible with maintaining the Independent Auditors’ independence.
         4. Annual Quality Control Review.
            1.  As part of its annual process to review and approve the terms of engagement of the Independent Auditors, the Committee will obtain and review a report prepared by the Independent Auditors describing the Independent Auditor firm’s internal quality control procedures and any material issues raised by the most recent internal quality-control review or peer review of the Independent Auditors, or by any inquiry or investigation by governmental or professional authorities, within the preceding five (5) years, respecting one or more independent audits carried out by the Independent Auditors, and any steps taken to deal with any such issues.
         5. Independent Auditors’ Partner Rotation and Conflicts. As required by the Applicable Laws and Regulations, the Committee will:
            1. (a) receive confirmation from the Independent Auditors that the Independent Auditors are in compliance with the partner rotation requirements established by the U.S. Securities and Exchange Commission (“SEC”), and (b) monitor whether the Independent Auditors’ independence is maintained and will, if applicable, consider whether the Independent Auditors’ provision of any permitted non-audit services to the Company is compatible with maintaining such independence;
            2. receive confirmation that the chief executive officer (the “CEO”), controller, chief financial officer (“CFO”), chief accounting officer or any person serving in an equivalent position in the Company did not participate in any capacity in the audit of the Company, as an employee of the Independent Auditors, during the one (1)-year period preceding the date of the initiation of the audit.
         6. Policy on Hiring Employees of the Independent Auditors. The Committee will review and approve any hiring by the Company or its Affiliates of employees or former employees of the current or former Independent Auditors of the Company that either are or were partners at such Independent Auditors firm or have worked on behalf of such Independent Auditors on the audit of the Company’s or its Affiliates’ financial statements during the last two years. The Company and its Affiliates will not hire any such persons without such Committee approval. The hiring of other former employees of such Independent Auditors will be approved by Company management.
         7. Independent Auditors Reporting to the Committee. The Independent Auditors will report directly to the Committee.
      2. Annual Financial Reporting. In connection with the audit of each fiscal year’s financial statements of the Company, the Committee will:
         1. Discuss Financial Statements with Management. The review, discussion and recommendations to the Board regarding the financial statements, will be conducted with appropriate members of Company management and the Independent Auditors.
         2. Recommend Filing of Financial Statements. After due consideration as required under Applicable Laws and Regulations, recommend to the Board whether or not the audited financial statements should be approved and included in the Company’s Annual Report on Form 20-F or any other report, as required, for filing with the SEC
         3. Section 10A Report. Receive from the Independent Auditors the report, in writing, required under Section 10A of the Securities Exchange Act of 1934 in connection with the annual audit concerning:
            1. all critical accounting policies and practices used;
            2. all alternative treatments of financial information discussed with Company management, ramifications of the use of alternative disclosures and treatments, and the treatment preferred by the Independent Auditors; and
            3. other material written communications between the Independent Auditors and Company management, such as any management letter or schedule of unadjusted differences.
         4. AS 1301 Review. Discuss with the Independent Auditors the audited financial statements and the matters required to be discussed by Auditing Standard No. 1301 as in effect at that time.
         5. Review of Items 5 and 15 of Form 20-F. Review the Company’s intended disclosures under Item 5 – “Operating and Financial Review and Prospects”, and Item 15 – “Controls and Procedures”, to be included in the Company’s Annual Report on Form 20-F.
         6. Independence Disclosure and Dialogue. The Committee will receive formal written statements from the Independent Auditors confirming their independence as required by law, and delineating all relationships between the Independent Auditors and the Company and will discuss the statements withthe Independent Auditors, including any disclosed relationships or services that may impact the objectivity or independence of the Independent Auditors and recommend appropriate action to be taken as relevant.
         7. Review of Audit and Non-Audit Fees. Obtain from the Independent Auditors a statement of the audit fees and other categories of fees billed for the last fiscal year which are required to be disclosed in the Company’s Annual Report on Form 20-F, and consider whether the provision of any non-audit services is compatible with maintaining the Independent Auditors’ independence.
      3. Quarterly Financial Reporting.
         The Committee’s review of the quarterly financial results will include:
         1. Independent Auditors’ Review. A review of the results of the Independent Auditors’ review of the quarterly financial results.
         2. Quarterly Press Release. A review of the Company’s disclosures under the press release with respect to the Company’s quarterly financial results, if required.
      4. Periodic Committee Review Functions.
         1. Periodic Review. The Committee, as it may find appropriate from time to time, will discuss and review with the Company management, internal or outside legal counsel and/or the Independent Auditors any other financial, regulatory, reporting and oversight topics relating to the purposes of the Committee which may come to the Committee’s attention. The Committee may also update and/or discuss with the Board any issue that it deems appropriate from time to time.
         2. Periodic Reports. In connection with each annual report of the Company, the Committee will review and approve: (1) the contents of the CEO and the CFO certificates to be filed under Section 302 of the Sarbanes-Oxley Act of 2002 and (2) management’s disclosure to the Committee about all significant deficiencies in the design or operation of internal controls which could adversely affect the Company’s ability to record, process, summarize and report financial data; and, any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls as required under Section 302 of the Sarbanes-Oxley Act of 2002.
         3. Updates to the Applicable Accounting and Financial Control Rules. The CFO will, as required from time to time, update the Committee on developments relating to applicable accounting principles and financial control rules and regulations (and such updated may be supported by the Independent Auditors).
      5. Oversight of Treatment of Financial Related Complaints
         The Committee will oversee the process regarding receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by employees of concerns and other information relating to potentially questionable accounting or auditing matters.
   2. Oversight Function. Except as otherwise provided, the Committee’s function is one of oversight, and it relies, among other things, on the expertise and knowledge of the Company’s management, the Company’s internal auditor (the “Internal Auditor”) and the Independent Auditors in carrying out its oversight responsibilities. This oversight function will not relieve the responsibilities of: (1) Company management for preparing financial statements that accurately and fairly present the Company’s financial results and condition in accordance with generally acceptable accounting procedures, or (2) the Independent Auditors relating to the audit or review of the financial statements. The Committee’s function will not derogate from the powers of the Board or the powers of the shareholders under the Companies Law or other Applicable Laws and Regulations.
   3. Working Relationships and Access. In performing its duties, the Committee will maintain effective working relationships with the Board and Company management. The Committee is authorized to have direct, independent access to the Independent Auditors, the Internal Auditor and Company management, finance and legal personnel. The Committee is authorized to communicate in confidence with any of these individuals.

      At lease once a year, the Committee will conduct a discussion with the Independent Directors without the presence of Company members other than the Company’s Corporate Secretary (the “Secretary”), unless otherwise directed by the Chair.

5. ENGAGEMENT OF ADVISORS.
   Please refer to Section V of the Audit Committee Charter.
6. MEETINGS OF THE COMMITTEE ACTING AS A FINANCIAL STATEMENTS REVIEW COMMITTEE.
   1. Meetings. Please refer to Section VI.A of the Audit Committee Charter.
   2. Additional Participants. The Secretary will receive notice of, and may participate in, all meetings of the Committee. Unless otherwise determined by the Chair, the Company’s CEO, CFO, chief operating officer, legal advisors and/or chief compliance officer, corporate controller and senior vice president – finance and control will receive notice of, and may participate, in all meetings of the Committee. As may be approved by the Chair, other members of Company management may be invited from time to time to participate in relevant parts of Committee meetings.
      The Independent Auditors will be invited to attend, and the Internal Auditor will receive notice of, and may participate in, all meetings of the Committee.
      Subject to Applicable Laws and Regulations, the Chair will have the discretion to limit participation of non-Members in case deemed required in certain circumstances.
   3. Quorum. Please refer to Section VI.C of the Audit Committee Charter.
   4. Role of Corporate Secretary. Please refer to Section VI.D of the Audit Committee Charter.
   5. Rules for Conduct of Business. Please refer to Section VI.E of the Audit Committee Charter.
7. REPORTS AND MINUTES.
   1. Reports. Consistent with the Applicable Laws and Regulations, the Committee will report to the Board on the matters approved and major items covered at each Committee meeting. The Committee will also report to the Board annually the overall results of the annual review of the Independent Auditors and their independence.
   2. Minutes. Please refer to Section VII.B of the Audit Committee Charter.
8. PERIODIC REVIEW OF THIS CHARTER.

Please refer to Section VIII of the Audit Committee Charter.

 
I.        INTRODUCTION.

A.        Elbit Systems Ltd. (“Elbit Systems” or the “Company”) is a corporation formed under the Israeli Companies Law, 5759-1999 (the “Companies Law”), with its shares traded on the Nasdaq Global Select Market (“Nasdaq”), and on the Tel-Aviv Stock Exchange (the “TASE”).

B.        Pursuant to Rule 5605(e) of the Nasdaq Stock Market Inc. Market Place Rules (“Nasdaq Rules”), the Company has established a corporate governance and nominating committee (the “Committee”) as a standing committee of its board of directors (the “Board”).

C.        This charter sets out the guidelines under which the Committee will operate (this “Charter”).

II.          PURPOSES.

The purposes of the Committee are to:

A.        advise the Board periodically as it deems appropriate with regard Corporate Governance Requirements (as defined below) applicable to the Company that impact the administration and functioning of the Board and the composition of the Board and its committees;

B.        nominate and recommend members to be elected to the Board (“Directors”); and

C.        take any further actions as the Committee is required or allowed to take under or in accordance with the Applicable Laws and Regulations (as defined below).

For purposes of this Charter, “Corporate Governance Requirements” refers to legal and regulatory requirements, with respect to the composition, functions and performance of the Board and its committees, including Israeli and U.S. legal and regulatory requirements applicable to the Company as a dual listed company whose shares are publicly traded both on TASE and Nasdaq.

Among other factors the Corporate Governance Requirements include policies on director independence, diversity, meeting attendance and limitations on other directorships, as set forth in Annex A to the Charter.

III.        MEMBERSHIP AND COMPOSITION OF THE COMMITTEE.

A.        Committee Composition. There will be at least three (3) and no more than five (5) members (individually a “Member” and collectively the “Members”) serving on the Committee, all of whom will be Directors.

B.        Appointment and Removal. Members will be appointed to the Committee by the Board and may be removed by the Board.

C.        Chair. The chair of the Committee will be appointed by the Board (the “Chair”). However, in reference to Article 26(b) of the Company’s Restated Articles of Association, as may be amended from time to time (the “Articles”), if no Chair is appointed by the Board for the Committee, then the Committee Members may elect a Chair.

D.        Membership Qualification.

i.        All of the Committee Members will comply with the membership and independence requirements of the Applicable Laws and Regulations, including the requirement to be an “independent director” as such term is defined in Rule 5605(a)(2) of the Nasdaq Rules.

ii.       Pursuant to Section 243 of the Companies Law and Article 26(a) of the Articles at least one (1) “External Director,” as defined in the Companies Law must serve as a Member of the Committee.

iii.     As set forth more fully in the Applicable Laws and Regulations, the Company’s Board must find that Members do not have any current or past relationships with the Company or any of its subsidiaries that would interfere with their exercise of independent judgment in carrying out their responsibilities as a director or otherwise fail to meet the applicable independence standards.

E.        Members Compensation. Except as may be permitted under the Applicable Laws and Regulations, and the then current compensation policy for the Company’s Office Holders (as defined in the Companies Law) approved by the Company’s shareholders, no Member will (other than in his or her capacity as a Member of the Committee, or a member of the Board or other Board committees) accept any consulting, advisory or other direct or indirect compensation from the Company or any subsidiary thereof.

IV.        DUTIES AND RESPONSIBILITIES

A.        Without limiting any other powers, duties, responsibilities or authorities that may be assigned or delegated to the Committee under any applicable laws or regulations or by any other provision of this Charter or by the Board, the Committee will perform the duties and functions described below, all of which will be performed in accordance with, and subject to, the applicable provisions of Israeli law and the regulations promulgated thereunder (including without limitation, the Companies Law), the applicable provisions of United States securities laws and regulations and the applicable rules and regulations of the TASE, Nasdaq and any other market or exchange on which Elbit Systems’ securities are traded (all such laws, regulations, rules and instructions as may be amended and in effect from time to time are hereinafter referred to as the “Applicable Laws and Regulations”):

i.         Board Nominee Recommendations: recommend to the Board qualified candidates for election or appointment to the Board, in accordance with the nomination procedure set forth in Annex A hereto;

ii.       Committee Nominee Recommendations: in consultation with the Board Chair, and consistent with the Corporate Governance Requirements, evaluate and make recommendations to the Board concerning the appointment of Directors to Board committees and the selection of Board committee chairs;

iii.      Termination of Membership: in consultation with the Board chair, evaluate and recommend termination of membership of individual Directors for cause or for other reasons determined to be appropriate in the discretion of the Committee; and

iv.      Periodic Committee Review Functions.

(a)            Periodic Review:  as it may find appropriate from time to time, discuss and review with the Board, Company management, internal or outside legal counsel and/or the internal auditor, any regulatory or oversight topics relating to Corporate Governance Requirements which may come to the Committee’s attention;

(b)             Review of Board Composition: periodically as it deems appropriate evaluate the composition of the Board and its committees, with respect to Corporate Governance Requirements; and

(c)             Review of Corporate Governance Guidelines: periodically as it deems appropriate (i) review and recommend to the Board corporate governance guidelines, procedures and principles, taking into consideration applicable Corporate Governance Requirements, and (ii) review the Company’s compliance with such guidelines, procedures and principles.

(d)             Updates to the Corporate Governance Requirements:  Company management will, as may be required from time to time, update the Committee on relevant developments in the Applicable Laws and Regulations as they relate to Corporate Governance Requirements.

B.        Oversight Function. Other than in its role regarding Board and committee membership, the Committee’s function under this Section IV is one of oversight, and it relies, among other things, on the expertise and knowledge of Company management in carrying out its oversight responsibilities. In performing this oversight function, the Committee notes that Company management is responsible for the Company’s compliance with all applicable Corporate Governance Requirements.

C.        Working Relationships and Access. In performing its duties, the Committee will maintain effective working relationships with the Board and Company management. The Committee is authorized to have direct, independent access to Company management, finance and legal personnel. The Committee is authorized to communicate in confidence with any of these individuals.

V.          ENGAGMENT OF ADVISORS.

In performing its responsibilities, the Committee will have the authority to conduct investigations and obtain advice, reports or opinions from internal or outside legal counsel, accounting and other expert advisors. The costs of any such advice will be borne by the Company.
VI.        MEETINGS.

A.        Meetings. The Committee will meet at least annually or more frequently as required by the Applicable Laws and Regulation or based on the Company’s needs. The Committee may also hold special meetings or act by unanimous written consent and the Committee meetings will be governed by the procedures generally applicable to meetings of the Board under the Articles, unless otherwise stated by resolution of the Board or the Committee.

B.        Additional Participants. The Company’s corporate secretary (the “Secretary”) will receive notice of, and may participate in, all meetings of the Committee. Unless otherwise determined by the Chair, the Company’s chief compliance officer and/or chief legal officer will receive notice of, and may participate in, all meetings of the Committee. As may be approved by the Chair, other members of Company management may be invited from time to time to participate in relevant parts of Committee meetings.

C.        Quorum. Quorum will be constituted when a majority of the Members of the Committee will be present at the meeting.

D.        Role of Corporate Secretary. The Secretary will administer the minutes, correspondence, distribution of materials and action items of the Committee under the direction of the Chair.

E.        Rules for Conduct of Business. Except to the extent otherwise provided by the Applicable Laws or Regulations or by the Board, and taking into account requirements with respect to potential conflicts of interest of Committee members regarding a particular matter, the Committee may make, alter and repeal rules for conducting its business. In the absence of such rules, the Committee will conduct its business in the same manner as the Board conducts its business pursuant to the Applicable Laws and Regulations and the Articles.

VII.      REPORTS AND MINUTES.

A.        Reports. Consistent with the Applicable Laws and Regulations, the Committee will report to the Board on matters approved and major items covered at each Committee meeting.

B.        Minutes. The Committee will maintain minutes of each of its meetings. The minutes will be filed and kept in Elbit Systems’ offices, under the supervision of the Secretary.

VIII.    PERIODIC REVIEW OF THIS CHARTER.

The Committee will review and reassess, periodically as it deems appropriate, the adequacy of this Charter and will recommend to the Board to amend it as necessary. In case of a conflict between any of the Applicable Laws and Regulations and this Charter, the Applicable Laws and Regulations will govern with respect to such matters.

ANNEX A

CORPORATE GOVERNANCE AND NOMINATING COMMITTEE CHARTER

OF ELBIT SYSTEMS LTD.

BOARD OF DIRECTORS NOMINATION PROCEDURE

Elbit Systems Ltd.’s (the “Company”) procedure for nominating and recommending directors to be elected or appointed to its Board of Directors (“Board”), as enacted by the Corporate Governance and Nominating Committee of the Board (the (“Committee”), is set forth below.

BACKGROUND

1.              Subject to Israeli and U.S. Regulations: As a company whose shares are traded both on the Tel-Aviv Stock Exchange (“TASE”) in Israel and the Nasdaq Global Select Market (“Nasdaq”) in the United States, the Company is subject to various Israeli and U.S. laws and regulations applicable to the process for nominating directors to the Company’s Board.

2.              Election/Appointment: Other than External Directors (as defined below), members of the Board (“Directors”) are either elected by the Company’s shareholders at the annual general shareholders’ meeting (the “Annual General Meeting”) or appointed by the Board in between Annual General Meetings in accordance with the provisions of the Company’s Restated Articles of Association, as may be amended from time to time.

Nominees to be External Directors are elected at an Annual General Meeting for an initial three-year term, after which they can be elected for additional term(s) of three years.

Pursuant to Section 5A of the Israeli Companies Regulations (Concessions for Public Companies Traded on Stock Markets Outside of Israel) – 5760-2000, an External Director in a “dual listed” company (including the Company), may be elected for additional terms (beyond the first three terms) of up to three years each, if the board’s audit committee  and the company’s board find that due to the External Director’s expertise and unique contribution to the work of the company’s board and its committees, his/her nomination for an additional term is in the best interests of the company, and these considerations are presented at the Annual General Meeting prior to the shareholders approving the additional term. There is no general limitation on the number of terms a director (including an External Director in a “dual listed” company, subject however to the above requirements) may serve.

Pursuant to Section 5A(a) of the Israeli Companies Regulations (Concessions for Public Companies Traded on Stock Markets Outside of Israel) – 5760-2000, an Independent Director in a “dual listed” company (including the Company), may be classified as an Independent Director as long as he/she meets the eligibility requierments set in Sections 240(b)-(f) of the Companies Law (as defined below) and as long as his/her term of office does not exceed nine consecitive years (in this regard, a break in his/her term of office which does not exceed two years shall not be deemed as interrupting the sequence of his/her term). Notwithstanding the abovementioned, pursuant to Section 5A(b) of the Israeli Companies Regulations (Concessions for Public Companies Traded on Stock Markets Outside of Israel) – 5760-2000, Independent Directors may be elected for additional terms (beyond nine years) of up to three years each, if the board’s audit committee and the company’s Board find that due to the Independent Director’s expertise and unique contribution to the work of the Company’s Board and its committees, his/her nomination for an additional term is in the best interests of the company, and these considerations are presented at the Annual General Meeting prior to the shareholders approving the additional term. There is no general limitation on the number of terms a director (including an Independent Director in a “dual listed” company, subject however to the above requirements) may serve.

3.              Independence of Directors:

(a)            Independent Directors. The Company is subject to Director independence and related rules that impact the Director nomination process arising from the Nasdaq Stock Market Inc. Market Place Rules (“Nasdaq Rules”). The Nasdaq Rules require, inter alia, that a majority of the members of the Board meet certain director independence criteria. The Nasdaq director independence criteria are set forth in Nasdaq Rule 5605(a)(2) of the Nasdaq Rules. In addition, members of the audit committee must meet the additional independence criteria required by Rule 10A-3(b)(1) and members of the commpensation committee must meet the additional independence criteria required by Nasdaq Rule 5605(d)(2).   

(b)            External Directors. The Company is required under Israeli law to have two Directors who are “External Directors”, as defined in the Israeli Companies Law, 5759-1999 (the “Companies Law”). The Companies Law criteria for External Directors are similar but not identical to the independence director criteria under the Nasdaq Rules. The threshold requirements for an External Director are set forth in Section 240 of the Companies Law.

(c)            Independence Statement. The Board will consist of at least a
majority of independent directors. For this purpose, a director will be considered independent for as long as he or she meets the criteria for independence required by Nasdaq Rules.  

4.              Accounting and Financial Expertise:

(a)            Israeli Companies Law. The Companies Law requires that at least one External Director has “accounting and financial expertise” while the other(s) are required to have “professional expertise” or “accounting and financial expertise.” The Companies Law also requires the Board, after considering the company’s type and size and the scope and complexity of its activities, to determine the minimum number of directors on the board having “accounting and financial expertise.” Our Board has adopted a policy pursuant to which it will include a minimum of two Directors (including one External Director) having “accounting and financial expertise.”

(b)            Nasdaq. Under Nasdaq Rule 5605(c)(2), the Company must have, and certify that it has and will continue to have, an audit committee of at least three members, each of whom must: (i) be an “Independent Director” as defined under Nasdaq Rule 5605(a)(2); (ii) meet the criteria for independence set forth in Rule 10A-3(b)(1) under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”) (subject to the exemptions provided in Rule 10A-3(c) under the Exchange Act); (iii) not have participated in the preparation of the financial statements of the Company or any current subsidiary of the Company at any time during the past three years; and (iv) be able to read and understand fundamental financial statements, including a company’s balance sheet, income statement and cash flow statement. Additionally, the Company must certify that it has, and will continue to have, at least one member of the audit committee who has past employment experience in finance or accounting, requisite professional certification in accounting or any other comparable experience or background which results in the individual’s financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities.[1]

5.              Board Diversity: Under Nasdaq Rule 5605(F), the Company must (i) publicly disclose board-level diversity statistics using a standardized template and (ii) have, or explain why they do not have, at least two diverse directors, including one female and one underrepresented individual or two female directors. The Board recognizes the value of diversity among its members, with differences in background, experience, gender and other qualities of directors that will contribute to the ability of the Board to consider a broader range of perspectives. Board members are appointed based on merit and suitability. At the same time, the Committee will consider diversity factors, including gender, in order to maintain a balanced and effective Board and to enable wide-ranging discussions.  As a matter of policy, the Board strives that at least 25% of its members be gender diverse.

6.              Board Meeting Attendance: Board members are expected to commit substantial time and energy to their service as such. In this respect, Board members are expected to attend at least 90% of all meetings of the Board and the committees on which they serve (unless in cases of unavoidable circumstances). Attendance of members at Board and committee meetings will be disclosed as required by the Applicable Laws and Regulations.

7.              Limitation on Additional Board Memberships: The Board recognizes the benefits of its members’ service on the boards of other companies. However, the Board is of the opinion that the number of such memberships should be reasonably limited, in order to allow its members to devote sufficient time to fulfill their duties as directors of the Company. Therefore, it is expected that a director will not serve on the boards of more than four other publicly traded companies (academic institutions and non-profit organizations excluded).

Nomination Process

1.         Questionnaire and Resume: All new candidates for nomination to the Board will provide a resume to, and complete a director qualification criteria questionnaire and any other statements or forms distributed by, the Company’s Corporate Secretary (the “Secretary”). Directors who are re-nominated for continued serve on the Board should complete an updated questionnaire and any other statements or forms as required (a) prior to the filing of the Company’s Annual Report; (b) prior to the Company’s entering into a public offering; and (c) in other situations that may be deemed appropriate by the Secretary.

2.         Nominating Committee Meetings: The completed questionnaires for all nominees and Board members will be provided by the Secretary to the Committee, which will convene in a timely manner to review and approve nominees for appointment or election to the Board, whether by shareholders at an Annual General Meeting or by the Board for appointments between Annual General Meetings. If deemed appropriate by the Chair, the Committee may conduct interviews with nominees.

3.         Nominating Committee/Board Recommendations: The Committee will review all candidates for nomination and/or renomination to the Board. After the Committee completes its review and discussion of the candidates, the Committee will provide its recommendation to the Board as a whole within a reasonable time prior to the Board’s appointment of a nominee and/or the Board’s recommendation to the Company shareholders at a General Meeting for the election of directors, whether External Directors or otherwise.[2] With respect to nominees to be elected at a General Meeting, the Board will then consider the Committee’s recommendation and provide the Board’s recommendation to shareholders.

[1] Note that a director who qualifies as an audit committee financial expert under Item 407(d)(5)(ii) and (iii) of Regulation S-K, is presumed to qualify as a financially sophisticated audit committee member under Rule 5605(c)(2)(A).
[2] Notwithstanding this provision, note that (a) under the Companies Law, independency of directors should be determined by the audit committee (see definition of “Independent Director” under Section 1 of the Companies Law, and the provisions of Section 5A to the Concessions Regulations), and (b) under Nasdaq Rule 5605(a)(2), the body determining who is an “Independent Director” is the board.

I.        INTRODUCTION.

A.         Elbit Systems Ltd. (“Elbit Systems” or the “Company”) is a corporation formed under the Israeli Companies Law, 5759-1999 (the “Companies Law”), with its shares traded on the Nasdaq Global Select Market (“Nasdaq”), and on the Tel-Aviv Stock Exchange (the “TASE”).

B.         Pursuant to Section 118A of the Companies Law, and Rule 5605(d) of the Nasdaq Stock Market Inc. Market Place Rules (the “Nasdaq Rules”), the Company has established a compensation committee (the “Committee”) as a standing committee of its board of directors (the “Board”).

C.         This charter sets out the guidelines under which the Committee will operate (this “Charter”).

II.          PURPOSES.

The purposes of the Committee are to:

A.         approve, evaluate and oversee the implementation and management of the Company’s compensation plans and policies for “Office Holders” (as defined below). For the purposes of this Charter, each of the members of the Company’s Board (“Directors”) as well as the Company’s president and chief executive officer (the “CEO”) and the executive vice presidents (together with the CEO, “Executive Officers”) is an “Office Holder” of Elbit Systems;

B.         assist the Board in carrying out its responsibilities relating to the compensation of the Company’s Office Holders; and

C.         take any further actions as the Committee is required or allowed to take under or in accordance with the Applicable Laws and Regulations (as defined below).

All these purposes shall be performed within the parameters established in Elbit Systems’ then current compensation policy for Office Holders as approved by the Company’s shareholders from time to time, after approval by the Committee and the entire Board, all in compliance with and subject to the applicable rules and regulations of the Companies Law and Nasdaq (the “Approved Compensation Policy”).

III.        MEMBERSHIP AND COMPOSITION OF THE COMMITTEE.

A.         Committee Composition. There will be at least three (3) and no more than five (5) members (individually a “Member” and collectively the “Members”) serving on the Committee, all of whom will be Directors.

B.         Appointment and Removal. “External Directors”, as defined in the Companies Law (“External Directors”), upon their appointment in such capacity, will automatically become Members and will cease to be Members upon the expiry of their terms of office as External Directors or upon the occurrence of events or circumstances that will negate such Member’s status as an External Director. All other Members will be appointed to the Committee by the Board and may be removed by the Board.

C.         Chair. The chair of the Committee will be an External Director (the “Chair”). The Chair will be appointed by the Board, however, in reference to Article 26(b) of the Company’s Restated Articles of Association, as may be amended from time to time (the “Articles”), if no Chair is appointed by the Board for the Committee, then the Committee Members may elect a Chair.

D.         Membership Qualification.[1]

i.         All of the Committee Members will comply with the membership and independence requirements of the Applicable Laws and Regulations, including: (a) the criteria for remuneration applicable to External Directors in accordance with the Companies Law; and (b) the requirement to be “independent directors” as defined in Nasdaq Rule 5605(a)(2) of the Nasdaq Rules.[2]

ii.       All of the Company’s External Directors will serve as Members of the Committee, and they will constitute a majority of the Members of the Committee.

iii.     The following persons may not serve on the Committee: (i) the chair of the Board; (ii) any director employed by the Company or by the controlling shareholder of the Company or by a company under the control of such controlling shareholder; (iii) any director who provides services, on an ongoing basis, to the Company, to the controlling shareholder of the Company or to a company under the control of such controlling shareholder; (iv) a director whose main source of income comes from the controlling shareholder of the Company; and (v) the Company’s controlling shareholder or his or her “relative,” as such term is defined in the Companies Law.

iv.      As more fully set forth in the Applicable Laws and Regulations, the Company’s Board must find that Members do not have any current or past relationships with the Company or any of its subsidiaries that would interfere with their exercise of independent judgment in carrying out their responsibilities as a director or otherwise fail to meet the applicable independence standards.

E.          Members Compensation. Except as may be permitted under the Applicable Laws and Regulations, and the Approved Compensation Policy, no Member will (other than in his or her capacity as a Member, or as a member of the Board or other Board committees) accept any consulting, advisory or other direct or indirect compensation from the Company or any subsidiary thereof.

IV.        DUTIES AND RESPONSIBILITIES.

A.         Without limiting any other powers, duties, responsibilities or authorities that may be assigned or delegated to the Committee under any applicable laws or regulations or by any other provision of this Charter or by the Board, the Committee will perform the duties and functions described below, all of which will be performed in accordance with, and subject to, the applicable provisions of Israeli law and the regulations promulgated thereunder (including without limitation the Companies Law), the applicable provisions of United States securities laws and the regulations promulgated thereunder and the applicable rules and regulations of the TASE, Nasdaq and any other market or exchange on which Elbit Systems’ securities are traded (all such laws, regulations, rules and instructions as may be amended and in effect from time to time are hereinafter referred to as the “Applicable Laws and Regulations”):

i.         Compensation Policy. Recommend to the Board the general compensation policy to be applied in connection with the Employment Terms (as defined below) of the Company’s Office Holders. For these purposes, “Employment Terms” include salary and any other compensation, equity-based awards, releases from liability, indemnification and insurance, severance and all other employment benefits, payments or any undertaking to make such payments.

ii.       Modifications of Approved Compensation Policy. From time to time, but at least once every three years, or such other period as may be defined in the Applicable Law and Regulations, make recommendations to the Board regarding any extension or modifications of the Approved Compensation Policy, and from time to time as deemed necessary by the Committee or the Board, examine the implementation thereof.

iii.      Approval and Amendment of Employment Terms. Determine, on the basis of the principles of the Approved Compensation Policy or otherwise, or recommend to the Board for determination, the compensation of the Office Holders, and any amendment or other change to any of the other Employment Terms applicable to any of the Company’s Office Holders, including for example, with respect to bonuses.

iv.      CEO Exemption. In certain situations described in the Companies Law, determine whether to exempt (or whether to recommend to the Board to exempt) the approval of Employment Terms of a candidate for the position of CEO of the Company from the requirement to obtain shareholder approval based on reasons to be specified by the Committee.

v.        Approval of Transactions. Determine whether to approve transactions regarding the Employment Terms of Office Holders, if such transactions require the Committee’s approval in the circumstances referenced in Section 118B(3) of the Companies Law.

vi.      Incentive Plans. In accordance with and subject to the terms of the Approved Compensation Policy, approve and administer any Elbit Systems’ cash-based and equity-based incentive plans for Company employees that includes Executive Officers (the “Incentive Plans”); make any interpretations as may be necessary or appropriate from time to time with respect to such Incentive Plans and any related agreements; make recommendations to the Board for its determination regarding the adoption, termination or modification of such Incentive Plans and the appropriateness of the number of shares or the amounts reserved thereunder; and approve any grant, and recommend to the Board to approve the grant of, stock, stock options or stock purchase rights to each respective Executive Officer.

vii.     Review of Analyses. Periodically review analyses or recommendations provided to the committee by Elbit Systems’ management or outside consultants relating to the compensation to be paid or awarded to Office Holders, and make recommendations with respect to such matters to the Board.

viii.   Updates to the Applicable Laws and Regulations. Company management will, as may be required from time to time, update the Committee on relevant developments and changes in the Applicable Laws and Regulations generally.

B.       Meetings with the CEO. The Committee may meet with Elbit Systems’ CEO to discuss and hear the CEO’s recommendations before approving (i) any of the Terms of Employment for any Executive Officer (other than the CEO) and the goals and objectives to be pursued in establishing the compensation arrangements for such Executive Officer and (ii) the adoption of an Incentive Plan and/or approving or recommending to the Board to approve the granting of options to Executive Officers thereunder. The Committee will review the compliance of the Terms of Employment of Executive Officers brought for approval with the terms of any of the Applicable Laws and Regulations, the Approved Compensation Policy and the principles specified therein.

                        The CEO will not be present during any voting or deliberations of the Committee pertaining to the Terms of Employment of any Office Holder of the Company, including the CEO.

C.       Supplemental Duties. Committee may supplement such duties as it may deem to be appropriate and may establish policies and procedures from time to time that it deems advisable in fulfilling its responsibilities, subject to the terms of the Approved Compensation Policy and the Applicable Laws and Regulations.

D.       Working Relationships and Access. In performing its duties, the Committee will maintain effective working relationships with the Board and Company management. The Committee is authorized to have direct, independent access to Company management, finance and legal personnel. The Committee is authorized to communicate in confidence with any of these individuals.

V.          ENGAGEMENT OF ADVISORS.

A.           Subject to Paragraph C below, the Committee will have the right, in its sole discretion, to retain or obtain advice of compensation consultants, legal counsel and other advisors (each an “Advisor” and collectively the “Advisors”), to assist the Committee in connection with its functions. The Committee will be directly responsible for the appointment, compensation and oversight of the work of any and all such Advisors retained by the Committee, and will have the direct responsibility and authority to approve the fees and other terms of such Advisors, to oversee their work and to terminate them if it deems proper.

B.            Elbit Systems will provide for appropriate funding, as determined by the Committee, for payment of reasonable compensation to any such Advisors retained by the Committee pursuant to this Charter.

C.            The Committee may select, or receive advice from, an Advisor to the Committee, other than in-house legal counsel or other Company management personnel, only after taking into consideration the following six factors (the “Independence Assessment”)[3]:

i.               the provision of other services to the Company by the person that employs the Advisor;

ii.              the amount of fees received from the Company by the person that employs the Advisor, as a percentage of the total revenue of the person that employs the Advisor;

iii.            the policies and procedures of the person that employs the Advisor that are designed to prevent conflicts of interest;

iv.            any business or personal relationship of the Advisor with a member of the Committee;

v.              any stock of the Company owned by the Advisor; and

vi.            any business or personal relationship of the Advisor or the person employing the advisor with an Executive Officer of the Company.

D.           Nothing in this Section V will be construed: (i) to require the Committee to consult with an Advisor or obtain any external advice; (ii) to require the Committee to implement or act consistently with the advice or recommendations of the Advisor to the Committee; or (iii) to affect the ability or obligation of the Committee to exercise its own judgment in fulfillment of its duties.

VI.         MEETINGS.

A.           Meetings. The Committee will meet at least annually or more frequently as required by the Applicable Laws and Regulations or based on the Company’s needs. The Committee may also hold special meetings or act by unanimous written consent, and the Committee meetings will be governed by the procedures generally applicable to meetings of the Board under the Articles, unless otherwise stated by resolution of the Board or the Committee.

B.            Additional Participants. A person that is not eligible to be a Member may not be present during Committee meetings or votes unless the Chair determines that such person is required for presentation of a matter on the agenda. If requested by the Committee, a Company employee that is not the Company’s controlling shareholder or his or her “relative,” as such term is defined in the Companies Law, may be present during Committee meetings (but not votes). Notwithstanding the above, if requested by the Committee, the Secretary (as defined below), provided he or she is not the Company’s controlling shareholder or his or her “relative” as such term is defined in the Companies Law, may be present during Committee meetings and votes.

C.            Quorum. Quorum will be constituted when a majority of the Members of the Committee will be present at the meeting.

D.           Role of Corporate Secretary. The Company’s corporate secretary (the “Secretary”) will administer the minutes, correspondence, distribution of materials and action items of the Committee under the direction of the Chair.

E.            Rules for Conduct of Business. Except to the extent otherwise provided by the Applicable Laws and Regulations or by the Board, and taking into account requirements with respect to potential conflicts of interest of Committee members for a particular matter, the Committee may make, alter and repeal rules for conducting its business. In the absence of such rules, the Committee will conduct its business in the same manner as the Board conducts its business pursuant to the Applicable Laws and Regulations and the Articles.

VII.      REPORTS AND MINUTES.

A.           Reports. Consistent with the Applicable Laws and Regulations, the Committee will report to the Board on the matters approved and the major items covered at each Committee meeting.

B.            Minutes. The Committee will maintain minutes of each of its meetings. The minutes will be filed and kept in Elbit Systems’ offices.

VIII.     PERIODIC REVIEW OF THIS CHARTER.

The Committee will review and reassess, periodically as it deems appropriate, the adequacy of this Charter and will recommend to the Board to amend this Charter if and as necessary in light of such review. In case of a conflict between any of the Applicable Laws and Regulations and this Charter, the Applicable Laws and Regulations will govern with respect to such matters.

[1] According to the Companies Law, an audit committee that meets the conditions in Section 118A(b) of the Companies Law can also serve as a compensation committee.
[2] In addition, Nasdaq Rule 5605(d)(2)(A) requires that in affirmatively determining the independence of any Director who will serve on the Committee, the Board must consider all factors specifically relevant to determining whether a director has a relationship to the Company which is material to that Director’s ability to be independent from management in connection with the duties of a Committee member, including, but not limited to: (i) the source of compensation of such Director, including any consulting, advisory or other compensatory fee paid by the Company to such Director; and (ii) whether such Director is affiliated with the Company, a subsidiary of the Company or an affiliate of a subsidiary of the Company (an “Affiliate Relationship”). When considering the sources of a Director’s compensation for this purpose, the Board should consider whether the Director receives compensation from any person or entity that would impair the Director’s ability to make independent judgments about the Executive Officers compensation. Similarly, in determining independence for purposes of Committee service, when considering any Affiliate Relationship of a Director, the Board should consider whether the Affiliate Relationship places the Director under the direct or indirect control of the Company or its senior management, or creates a direct relationship between the Director and members of senior management, of a nature that would impair the Director’s ability to make independent judgments about Executive Officer compensation.
[3] Pursuant to Nasdaq Rules, the Committee may select, or receive advice from, any compensation adviser they prefer, including ones that are not independent, after considering the six independence factors outlined above. In addition, the Committee is not required to conduct an Independence Assessment for an Advisor that acts in a role limited to the following activities for which no disclosure is required under Item 407(e)(3)(iii) of Regulation S-K under the Securities Exchange Act  of 1934: (a) consulting on any broad-based plan that does not discriminate in scope, terms, or operation, in favor of Office Holders of the Company, and that is available generally to all salaried employees; and/or (b) providing information that either is not customized for a particular company or that is customized based on parameters that are not developed by the Advisor, and about which the Advisor does not provide advice.