at-the-market offering – a guide for us-listed israeli companies

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Tuesday, March 23, 2010

4:00 p.m. Israel Time / 2:00 p.m. GMT / 10:00 a.m. ET

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March 9, 2010At-the-Market Offering – A Guide for US-Listed Israeli Companies 2

CURRENTLY SPEAKING

Introduction of Panelists

Overview of At-the-Market OfferingsMechanics of ATM ExecutionUS Law and the Legal Mechanics of Structuring a DealIsraeli Law Issues Related to ATM Issuance in USQuestions and Answers

Nir WeissbergerPartnerEitan-Mehulal

Jeff LumbySr. Managing DirectorCantor Fitzgerald

Introduction

Dean ColucciPartnerDLA Piper Daniel Goldberg

PartnerDLA Piper

James SeeryPartnerDLA Piper

Joshua FeldmanDirectorCantor Fitzgerald

Guy HadarAttorneyEitan-Mehulal

March 23, 2010At-the-Market Offering – A Guide for US-Listed Israeli Companies 3

What Is An ATM Offering?

ATMs enable public companies listed on a U.S. Exchange (NYSE, AMEX, NASDAQ) to sell to the public periodically during the term of the offering, through a broker-dealer, registered common or preferred shares in amounts and at times of the issuer’s choosing

The shares are sold at the then prevailing “market price” to “natural interest”in the market – thus the name “At-the-Market” offering

Employed by public companies eligible to issue securities using either Form S-3 under Rule 415 of the Securities Act of 1933 (“Securities Act”) or Form F-3 (as employed by Foreign Private Issuers)

March 23, 2010At-the-Market Offering – A Guide for US-Listed Israeli Companies 4

At-the-Market Offerings (ATMs)

ATM programs with a value in excess of $40 billion have been implemented since 2001 with programs put in place in 2009 exceeding $22 billion in value (value calculated at time of filing)

Issuers from a wide variety of industries including:Airlines

Banking and financial services

Biotech and life sciences

Energy and utilities

Natural resources

Real estate and real estate investment trusts

Technology

March 23, 2010At-the-Market Offering – A Guide for US-Listed Israeli Companies 5

Overview of the Controlled Equity OfferingSM

Cantor’s ATM product, the Controlled Equity OfferingSM (CEOSM) Program, is a flexible equity offering vehicle that gives its clients the ability to sell shares from time-to-time by discreetly feeding demand in market neutral transactions

Cost efficient, low-profile financing option for companies to raise capital over time

Enables issuers to raise equity when needed and to match the sources and uses of funds

Minimizes underwriting costs – transaction costs range from 2 to 5% depending on market cap of issuer and size of transaction, but if Cantor exceeds the volume weighted average price of the security being issued (VWAP) over the execution period authorized by client, the all-in-cost of issuance is significantly reduced and dilution minimized

Leverages Cantor’s position and trading expertise as the dominant third market trading firm

March 23, 2010At-the-Market Offering – A Guide for US-Listed Israeli Companies 6

$10,053

$5,235

$3,675 $3,256 $3,063$2,136

$1,351 $1,335

$5,005

$0

$2,000

$4,000

$6,000

$8,000

$10,000

CantorFitzgerald

MorganStanley

BofA /MerrillLynch*

UBS GoldmanSachs

BoNY /Mellon

JPMorgan

CreditSuisse

Citi

83

30

20 19 17 14 11 11

28

0102030405060708090

CantorFitzgerald

BofA /MerrillLynch

UBS BoNY /Mellon

BrinsonPatrick

MorganStanley

JPMorgan

GoldmanSachs

Citi

Cantor Fitzgerald created one of the first ATM programs available to public companies and Cantor remains the leader in ATM offerings

Cantor has executed far more ATM offerings than any other broker-dealer since 2001 (including 20 programs in 2009)

Senior-level “dedicated” execution team has been active in ATM transactions since 2001 – skilled in accessing all liquidity pools and executing both anonymously and efficiently

Cantor Fitzgerald and ATMs

Source: Dealogic as of December 31, 2009 and CF&Co. Internal Data

Number of Transactions Value of Transactions

*Does not include ATM done to raise its own capital

Note: Value of transactions determined by value at filing / ATM Value Limit

March 23, 2010At-the-Market Offering – A Guide for US-Listed Israeli Companies 7

Benefits of ATM Offerings

Event Driven

Continuous Capital Need

Balance Sheet Strength

Increased Liquidity

Cost of Capital

Flexibility & Control

Anonymity

March 23, 2010At-the-Market Offering – A Guide for US-Listed Israeli Companies 8

Benefits of ATMs and the Cantor CEOSM

Flexibility & Control: Ability to execute on natural demand when there is a need, number of shares and minimum price. Can change instruction as often as desired.

Sales are only made per the company’s specific instructions

Client parameters include size, price, and type of execution

Sales can be initiated, halted, or changed at any time

Efficiency: Able to match uses and sources better than traditional offerings

Superior Distribution: Traded over 108 billion shares globally last year. Highest crossing ratio. Ability to trade anonymously away from the primary exchange.

Lower Cost of Capital: No market discount, no warrant coverage, lower underwriter compensation

Ability to Monitor Progress: Sales price versus VWAP over time period in which Cantor is authorized to execute

Anonymity: Sales are made completely anonymously and execution anonymity ensures that the market will not be aware when or if sales are made through the ATM structure

March 23, 2010At-the-Market Offering – A Guide for US-Listed Israeli Companies 9

Cantor Advantage

At Cantor Fitzgerald, orders are executed by dedicated ATM capital markets traders who are entirely focused on issuers

Information flows only one way from Cantor’s 15 trading floors to the ATM capital markets traders. Even internally at Cantor, the ATM capital markets trader’s execution remains anonymous.

While a majority of all sales are made anonymously at-the-market, the ATM structure provides the flexibility to execute negotiated block transactions

March 23, 2010At-the-Market Offering – A Guide for US-Listed Israeli Companies 10

ATMs and Cantor’s CEOSM product allows companies to raise money without sacrificing price-stability, and at less of a cost than follow-on offerings, registered directs or PIPEs

Lower “All-in-Cost”

For PIPEs/registered directs announced YTD, the all-in cost of capital is near 20% when taking into account the underwriter fee, market discount and warrant coverage

Non-CEO deals traditionally observe a negative impact on their stock price going into the transaction as well as post-announcement

Cantor’s underwriting fee is typically 2-5%, and historically Cantor has beat the VWAP when placing shares. CEO deals traditionally do not experience any significant price impact.

Source: Capital IQNote: Financings include deals with transactions over $10m and under $150m. Market discount based on the closing price one day prior to announcement.

15%15%+

20%+

March 23, 2010At-the-Market Offering – A Guide for US-Listed Israeli Companies 11

Who Is Eligible for ATMs?

Companies listed on a US Exchange (NASDAQ, AMEX, NYSE) that are eligible to file either Form F-3 or Form S-3 Shelf Registration Statements under Rule 415 of the Securities Act

This includes Israeli companies whether or not dually listed on the Tel-Aviv Stock Exchange

Form F-3/S-3 eligibility requirements for issuers with a public float of greaterthan $75 million:

Securities registered under Section 12 of Securities Exchange Act of 1934 (“Exchange Act”) are required to file reports under Section 15(d) of Exchange Act

Timely file all Exchange Act reports during the 12 months preceding the later of the filing of the F-3/S-3 or the 10-K/20-F

March 23, 2010At-the-Market Offering – A Guide for US-Listed Israeli Companies 12

Who Is Eligible for ATMs?

Form F-3/S-3 eligibility requirements for issuers with a public float of less than $75 million:

The requirement for issuers with a public float of greater than $75 million and

The issuer must have a class of common equity securities listed and registered on a US national securities exchange

The issuer must not have been a shell company for a minimum of 12 months prior to the filing of the F-3/S-3

Issuers with a public float of less than $75 million may not sell more than 1/3 of its public float under an F-3/S-3 over a period of 12 months including the ATM and any other shelf takedowns

March 23, 2010At-the-Market Offering – A Guide for US-Listed Israeli Companies 13

US Legal Documentation for ATMs

Effective form F-3/S-3

Prospectus supplement – filed pursuant to Rule 424(b)(2) or 424(b)(5) of the Securities Act

Sales agreement or equity distribution agreement – similar in form and substance to typical underwriting agreement

Filed with SEC on Form 6-K or Form 8-K at execution

Stays in place for as long as there is unsold stock

The issuer has ongoing obligations throughout the term of the agreement including:

Quarterly negative assurance letters from the issuer’s counsel

Quarterly comfort letters from the issuer’s auditors

March 23, 2010At-the-Market Offering – A Guide for US-Listed Israeli Companies 14

Israeli Legal and Regulatory Considerations

Israeli Securities Law – 1968; Securities regulations

Israeli securities laws and regulations will apply to ATM offerings of Israeli companies

ATM offerings can be structured to be exempt from the prospectus requirements under Israeli law including the need for a permit from the Israeli Securities Authority

Similarly, ATM offerings of non-dually listed companies can be structured to minimize applicability of on-going reporting requirements under Israeli Securities laws and regulations while dually listed companies will remain subject to certain reporting requirements under Israeli Securities laws and regulations

March 23, 2010At-the-Market Offering – A Guide for US-Listed Israeli Companies 15

Israeli Legal and Regulatory Considerations

Israeli Companies Law–1999; Companies regulationsCorporate issues will also be governed by Israeli corporate laws and regulationsIncluding procedures for approval of the ATM, issuance of the offered securities and related matters

Tel-Aviv Stock Exchange Rules and RegulationsWill apply to dually listed companies (traded on a US Exchange as well as on the Tel-Aviv Stock Exchange)

March 23, 2010At-the-Market Offering – A Guide for US-Listed Israeli Companies 16

Israeli Legal and Regulatory Considerations

OCS / Investment CenterApprovals of / notices to the Office of the Chief Scientist of the Israeli Ministry of Industry and Trade, Israeli Investment Center may be applicable

Other specific requirements may be applicable

March 23, 2010At-the-Market Offering – A Guide for US-Listed Israeli Companies 17

Israeli Documentation Considerations

Israeli issues in offering documentsUpdated Israeli matters addressed in F-3 / 20-F / Prospectus Supplement

Including ‘Risk Factors – Risks Related to Operations in Israel’, ‘Information on the Company’, ‘Directors, Senior Management and Employees’, ‘Major Shareholders and Related Party Transactions’, ‘Description of securities’, ‘Taxation – Israeli Taxation’

March 23, 2010At-the-Market Offering – A Guide for US-Listed Israeli Companies 18

Price/Volume Chart Historical Trading Analysis

At FilingAt Conclusion of ATM Program

Oct. 30, 2009 Dec. 29, 2009Stock Price 2.56 4.62 52-Week High 3.37 5.86 52-Week Low 0.34 0.34Shares Outstanding (mm) 29.1m 33.2mMarket Capitalization ($mm) 73 132Daily Share Volume 1 85,000 1,635,000Average Price 1 2.87 3.01$Volume/Day (mm)1 0.24 4.931 Trailing 60-days

Source: CapitalIQ

0 . 0 0

1. 0 0

2 . 0 0

3 . 0 0

4 . 0 0

5 . 0 0

Mar-09Mar-09 Apr-09 Jun-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09Dec-09 Jan-100

5 , 0 0 0 , 0 0 0

10 , 0 0 0 , 0 0 0

15 , 0 0 0 , 0 0 0

2 0 , 0 0 0 , 0 0 0

2 5 , 0 0 0 , 0 0 0

3 0 , 0 0 0 , 0 0 0

Volume Price

ANNOUNCES COMPLETION OF CEO PROGRAM

DISCOVERS DRUG TARGET FOR TREATMENT OF EPITHELIAL TUMORS

“DISCOVERY ON DEMAND” THERAPEUTIC PEPTIDE COLLABORATION WITH PFIZER

Compugen Case Study

March 23, 2010At-the-Market Offering – A Guide for US-Listed Israeli Companies 19

Compugen filed a CEO at a time when they needed to raise a small amount of capital to continue to have 12+ months or more of cash

Their stock price was not at an attractive price, their volume was down and most traditional deals would have required warrants and a significant discount

As of a result of Compugen’s low volume there was pent up demand for their shares. When Compugen began utilizing the CEO program, we witnessed a meaningful increase in aggregate volume.

As a result of a number of key catalysts including a deal with Pfizer, Compugen’s share price and volume skyrocketed and they were able to take advantage of this through the CEO

Compugen was selected as one of the Top 5 best performing biotech stocks in 2009 by TheStreet.com

BOTTOM LINE: Compugen raised money at very attractive prices with zero warrant coverage, minimal management time, and they significantly increased the liquidity in their stock

Compugen Case Study – Lessons Learned

March 23, 2010At-the-Market Offering – A Guide for US-Listed Israeli Companies 20

Distinctions Between ATM and Other Equity Offerings

Equity lines of credit, registered directs, and PIPEs are more dilutive, typically require warrant coverage, and incur much higher all-in transaction costs than ATMs

There is generally no lock-up period under US law during the term of the agreement and the issuer is free to pursue a traditional follow-on if business or market conditions merit

Equity issuances are disclosed at the end of each quarter in the issuer’s periodic reports under the Exchange Act

For NASDAQ Issuers, ATM programs (unlike PIPES, equity lines and certain registered direct offerings) are considered “Public Offerings” under NASDAQ Rule 5635 – shareholder approval is NOT required under US laws if the issuer desires to issue more than 20% of its common stock or voting securities through an ATM offering

March 23, 2010At-the-Market Offering – A Guide for US-Listed Israeli Companies 21

What the Research Analysts Are Saying...

The [Cantor] continuous offering allows companies to raise very low cost capital, while also having control over the timing and size of the offering, as well as selectively expand their institutional ownership. We believe this is a very intelligent source of capital with minimum disruption.

Wachovia

From an issuer’s perspective, this program [CEOSM] has several advantages in our view. First, management of the issuer does not need to conduct time consuming road shows. Second, the issuer does not face the risk of seeing its stock price drop in the market between the time of announcement and pricing. Thus, the cost of issuing equity in this manner is meaningfully more affordable than the traditional bulk sale method.

Bank of America

The company entered into agreement with Cantor Fitzgerald to sell up to two million shares of beneficial interest...We believe that this is an efficient way to raise capital and fits the company's matching funds strategy. We do not expect the company to utilize this capital until later in the year.

Stifel, Nicolaus & Company

We remind investors that the controlled equity offering (CEO) program allows companies to issue equity in small, periodic increments. CEOs are usually done to manage capital needs and raise capital in an optimal fashion, with periodic increments that may not cause as much pressure on a stock as a single large equity offering might. Further, CEOs have lower underwriting fees. The prospectus indicates that [The Company] will be paying a 2% gross fee -materially lower than the 4.5% underwriter's fee paid by [other companies] in recent secondary offerings.

Macquarie

March 23, 2010At-the-Market Offering – A Guide for US-Listed Israeli Companies 22

Select ATM Transactions$105,000,000 $72,000,000 $15,000,000 $175,000,000 $125,000,000 $175,000,000 $75,000,000 $142,500,000 $155,000,000

Nationwide FAMCO/Claymore NationwideHealth Props. Opportunity Fund Health Props.

Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous OfferingFebruary 2010 February 2010 January 2010 January 2010 November 2009 November 2009 October 2009 October 2009 August 2009

$35,000,000 $30,000,000 $75,000,000 $45,000,000 $30,000,000 $54,600,000 $31,800,000 $475,000,000 $37,400,000 $23,500,000

Tortoise Energy Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering

July 2009 July 2009 July 2009 June 2009 June 2009 June 2009 May 2009 May 2009 April 2009 April 2009

$21,000,000 $24,000,000 $130,000,000 $60,000,000 $20,000,000 $226,000,000 $24,000,000 $500,000,000 $80,000,000 $13,000,000

Ramco NationwideDynex Capital Gershenson Health Props. DryShips

Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous OfferingMarch 2009 January 2009 January 2009 January 2009 December 2008 December 2008 November 2008 November 2008 July 2008 July 2008

$100,000,000 $170,000,000 $425,000,000 $114,000,000 $20,000,000 $155,000,000 $720,000,000 $150,000,000 $21,000,000 $42,000,000

NationwideOcean Freight Anworth DryShips Health Props. DryShips Anworth Education Realty

Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous OfferingJune 2008 May 2008 March 2008 January 2008 January 2008 December 2007 October 2007 July 2007 May 2007 May 2007

$160,000,000 $24,000,000 $260,000,000 $975,000,000 $250,000,000 $25,000,000 $125,000,000 $25,000,000 $80,000,000 $140,000,000

Nationwide Cedar Shopping NationwideHealth Props. HRPT Props. Centers Health Props.

Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous OfferingMay 2007 April 2007 March 2007 March 2007 December 2006 December 2006 November 2006 October 2006 September 2006 September 2006

$95,000,000 $30,000,000 $200,000,000 $50,000,000 $305,000,000 $26,500,000 $110,000,000 $425,000,000 $25,000,000 $230,000,000

NationwideDryShips Valence Health Props.

Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous OfferingJuly 2006 June 2006 May 2006 May 2006 April 2006 April 2006 January 2006 July 2005 May 2005 November 2004

$146,000,000 $70,000,000 $260,000,000 $50,000,000 $210,000,000 $60,000,000 $80,000,000 $75,000,000 $50,000,000 $80,000,000

Anworth AnworthContinuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering

August 2004 August 2004 July 2004 May 2004 April 2004 November 2003 July 2003 April 2003 January 2003 August 2002

$20,000,000

Continuous OfferingOctober 2009

March 23, 2010At-the-Market Offering – A Guide for US-Listed Israeli Companies 23

Jeff LumbySr.Managing Director, Cantor Fitzgerald+1 212 829 4717jlumby@cantor.com

Contact Us

Dean ColucciPartner, DLA Piper+1 212 335 4794dean.colucci@dlapiper.com

Daniel GoldbergPartner, DLA Piper+1 212 335 4966daniel.i.goldberg@dlapiper.com

Joshua FeldmanDirector, Cantor Fitzgerald+1 212 829 4846jfeldman@cantor.com

James SeeryPartner, DLA Piper+1 212 335 4830

james.seery@dlapiper.com

Nir WeissbergerPartner, Eitan-Mehulal+972 9 9726090nirw@em-lg.com

Guy HadarAttorney, Eitan-Mehulal+972 9 9726059guyh@em-lg.com

March 23, 2010At-the-Market Offering – A Guide for US-Listed Israeli Companies 24

FIRM OVERVIEW

Founded in 1945 Cantor Fitzgerald, L.P. is a global financial services firm with a leading position in the fixed income and institutional equity markets One of only 18 primary dealers permitted to trade U.S. Government securities directly with the Federal Reserve BankHeadquartered in: New York City; worldwide presence, including Europe, India & China/APACPrivate Partnership; over 3,700 employees worldwide—rapid and profitable recovery after 9/11Industry-recognized execution capabilities - Traded 100 billion equity shares in 2008 – over $1.1 trillion in valueTrade over 7,700 Listed NYSE, NASDAQ & AMEX securities as well as OTCBB and Pink Sheet securities Market Maker in over 4,600 securities , ensuring 3rd market liquidity, a vital part to the success of thinly traded middle market companies

EQUITY CAPITAL

MARKETS

BULGE BRACKETCAPABILITIES

Major global player

One of the largest sales forces in the industry: over 280 global institutional sales and trading professionals

Daily coverage of over 5,000 institutional clients around the globe

Focus on smaller cap stocks

Market Leader in Controlled Equity Offerings

INVESTMENTBANKING

Equity & Debt Origination

Financial Advisory (including M&A and restructurings)

Merchant Banking

IPO, Follow-On & Controlled Equity Offerings

In 2008, traded over 108bn shares with approximately $1 trillion in value

Top ranked execution in both illiquid and difficult trades

Known for cross-trading and block trading abilities

DEBT CAPITAL MARKETS &

FOREXCredit Securities (IG, HY Corp., Hybrids)

Mortgage Securities (CMOs, ABS, CMBS)

Repos/Securities Lending

Interest Rate Products

Agencies (FNMA, FHLB, FFCB, TVA, SLMA, SBAs)

COMMERCIAL REAL ESTATE

Commercial Real Estate Lending, Investment, Advisory, Asset Management and Investment Banking

Experienced team of senior managers with 80 years of combined experience

The team has facilitated over $160 billion debt transactions and over $40 billion public and private REIT transactions

About Cantor Fitzgerald

March 23, 2010At-the-Market Offering – A Guide for US-Listed Israeli Companies 25

THE FIRM

More than 3,500 lawyers in 67offices and 29 countries

The US practice includes approximately 1,300 lawyers

In Europe and Asia, the firm has approximately 2,200 lawyers

The largest law firm in the world by number of lawyers and the only firm in the world with more than 1,000 lawyers on each side of the Atlantic

OUR CLIENTS

We represent half of the FTSE 250 or their subsidiaries and more than 140 of the top 250 companies in the Fortune 500

About DLA Piper

March 23, 2010At-the-Market Offering – A Guide for US-Listed Israeli Companies 26

About Eitan - Mehulal

Combining a distinctive interdisciplinary approachthe Eitan-Mehulal Law Group’s expertise spansacross multiple industries and jurisdictions, supporting the global legal interests and worldwide needs of our Israeli clients as well as those of our foreign clients in Israel.

Corporate Securities Financing Technology lawTaxation Litigation Bankruptcy Labor lawReal Estate Intellectual Property

Representative Clients

Microsoft, Merck, Nike, Seiko, Iscar, Blades Technologies, Shamir Optical, Keter Plastic, CaesarStone, Oil Refineries, Klil Industries, Saifun, Marvel, HP, Agilent, Apple, Google, Bank Hapoalim, Union Bank, Nikon, Albemarle, Vertex, Walden, Giza, Medica, Formula, Castro, Bird & Bird