Regulations
promulgated under the Israeli Companies Law provide that
these tender offer requirements do not apply to companies
whose shares are listed for trading outside of Israel
if, according to the law in the country in which the shares
are traded, including the rules and regulations of the
stock exchange on which the shares are traded, either:
- There is a limitation on
acquisition of any level of control of the company;
or
- The acquisition of any level
of control requires the purchaser to do so by means
of a tender offer to the public.
The Israeli
Companies Law provides specific rules and procedures for
the acquisition of shares held by minority shareholders,
if the majority shareholder holds 90% or more of the outstanding
shares. Israeli tax law treats specified acquisitions,
including a stock-for-stock swap between an Israeli company
and a foreign company, less favorably than does U.S. tax
law.
These
laws may have the effect of delaying or deterring a
change in control of the Company, thereby limiting the
opportunity for shareholders to receive a premium for
their shares and possibly affecting the price that some
investors are willing to pay for the Company's securities.
Provisions Affecting a Potential
Change of Control; Potential Rights of Unissued Preferred
Shares
The
Company's Board of Directors has the authority to issue
up to 5,000,000 preferred shares and to determine the
price, rights (including voting rights), preferences,
privileges and restrictions of such preferred shares,
without any vote or actions by the Company's shareholders.
The rights and preferences of such preferred shares
could include a preference over the ordinary shares
on the distribution of the Company's assets upon a liquidation
or sale of the Company, preferential dividends, redemption
rights, and the right to elect one or more directors
and other voting rights. The rights of the holders of
the ordinary shares will be subject to, and may be adversely
affected by, the rights of the holders of any preferred
shares that may be issued in the future. The Company
has no current plans to issue preferred shares. The
issuance of preferred shares, while providing desirable
flexibility in connection with possible acquisitions
and other corporate purposes, could have the effect
of making it more difficult for a third party to acquire
a majority of the outstanding voting shares of the Company.
Furthermore, certain provisions of the Company's Articles
of Association could delay or make more difficult a
merger, tender offer or proxy contest involving the
Company. These provisions stipulate that the Company
cannot engage in a business combination with an interested
shareholder (defined generally as the beneficial owner
of 15% of the outstanding shares and its affiliates)
for a period of three years following the date that
such shareholder became an interested shareholder, unless
certain conditions are met. These provisions may have
the effect of delaying or deterring a change in control
of the Company, thereby limiting the opportunity for
shareholders to receive a premium for their shares and
possibly affecting the price that some investors are
willing to pay for the Company's securities.
Concentration of Share Ownership
As
of February 28, 2002, the directors, executive officers
and principal shareholders of the Company and their
affiliates beneficially owned approximately 27% of the
outstanding ordinary shares. As a result, these shareholders
are able to exercise significant influence over all
matters requiring shareholder approval, including the
election of directors and approval of significant corporate
transactions. Such concentration of ownership may have
the effect of delaying or preventing a change in control
of the Company. See "Item
7 - Major Shareholders and Related Party Transactions."
The
Company has agreements with its directors and senior
officers which provide, subject to Israeli law, for
the Company to indemnify these directors and senior
officers for (a) any monetary obligation imposed upon
them for the benefit of a third party by a judgment,
including a settlement agreed to in writing by the Company,
or an arbitration decision certified by the court, as
a result of an act or omission of such person in his
capacity as a director or officer of the Company, and
(b) reasonable litigation expenses, including legal
fees, incurred by such a director or officer or which
he is obligated to pay by a court order, in a proceeding
brought against him by or on behalf of the Company or
by others, or in connection with a criminal proceeding
in which he was acquitted, in each case relating to
acts or omissions of such person in his capacity as
a director or officer of the Company.
Exchange Controls and Other Limitations
Affecting Security Holders
Until
May 1998, Israel imposed restrictions on transactions
in foreign currency. These restrictions affected the
Company's operations in various ways, and also affected
the right of non-residents of Israel to convert into
foreign currency amounts they received in Israeli currency,
such as the proceeds of a judgment enforced in Israel.
Despite these restrictions, foreign investors who purchased
shares with foreign currency were able to repatriate
in foreign currency both dividends (after deduction
of withholding tax) and the proceeds from the sale of
the shares. In 1998, the Israeli currency control regulations
were liberalized significantly, as a result of which
Israeli residents generally may freely deal in foreign
currency and non-residents of Israel generally may freely
purchase and sell Israeli currency and assets. There
are currently no Israeli currency control restrictions
on remittances of dividends on securities of Israeli
companies or the proceeds from the sale of Israeli securities;
however, legislation remains in effect pursuant to which
currency controls can be imposed by administrative action
at any time.
Neither
the Memorandum and Articles of Association of the Company
nor the laws of Israel restrict in any way the ownership
or voting of ordinary shares by non-residents of Israel,
except with respect to subjects of countries which are
in a state of war with Israel. |
