At-the-Market Offering – A Guide for US-Listed Israeli Companies

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Tuesday, March 23, 2010
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Introduction
CURRENTLY SPEAKING

Introduction of Panelists

Dean Colucci
Partner
DLA Piper Jeff Lumby Joshua Feldman Daniel Goldberg James Seery Nir Weissberger Guy Hadar
Sr. Managing Director Director Partner Partner Partner Attorney
Cantor Fitzgerald Cantor Fitzgerald DLA Piper DLA Piper Eitan-Mehulal Eitan-Mehulal

Overview of At-the-Market Offerings
Mechanics of ATM Execution
US Law and the Legal Mechanics of Structuring a Deal
Israeli Law Issues Related to ATM Issuance in US
Questions and Answers

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

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)


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


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


Cantor Fitzgerald and ATMs

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
90 83
$10,053
80 $10,000
70
60
Number of Transactions $8,000 Value of Transactions
50 $6,000 $5,235
$5,005
40 30
28 $3,675
30 20
$4,000 $3,256 $3,063
19 17
20 14 $2,136
11 11 $1,351 $1,335
$2,000
10
0 $0
Cantor BofA / UBS BoNY / Brinson Morgan JP Goldman Citi Cantor Morgan BofA / UBS Goldman BoNY / JP Credit Citi
Fitzgerald Merrill Mellon Patrick Stanley Morgan Sachs Fitzgerald Stanley Merrill Sachs Mellon Morgan Suisse
Lynch Lynch*

Source: Dealogic as of December 31, 2009 and CF&Co. Internal *Does not include ATM done to raise its own capital
Data Note: Value of transactions determined by value at filing / ATM
Value Limit


Benefits of ATM Offerings

Event Driven

Continuous Capital
Need

Balance Sheet
Strength

Increased Liquidity

Cost of Capital

Flexibility & Control

Anonymity


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


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


Lower “All-in-Cost”

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

For PIPEs/registered
directs announced YTD,
the all-in cost of capital
is near 20% when
taking into account the
20%+
underwriter fee, market
discount and warrant 15%+
coverage 15%
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 IQ
Note: Financings include deals with transactions over $10m and under $150m. Market discount based on the closing price one day prior to announcement.


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 greater
than $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


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


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


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



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

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



OCS / Investment Center
Approvals 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


Israeli Documentation Considerations

Israeli issues in offering documents
Updated 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’


Compugen Case Study

Price/Volume Chart 30,000,000
Historical Trading Analysis
5.00 At Conclusion of
ANNOUNCES COMPLETION OF CEO
PROGRAM 25,000,000 At Filing ATM Program
DISCOVERS DRUG TARGET FOR TREATMENT OF
4.00 EPITHELIAL TUMORS
Oct. 30, 2009 Dec. 29, 2009
“DISCOVERY ON DEMAND” THERAPEUTIC PEPTIDE 20,000,000
Stock Price 2.56 4.62
COLLABORATION WITH PFIZER
3.00
52-Week High 3.37 5.86
15 , 0 0 0 , 0 0 0
52-Week Low 0.34 0.34
2.00
Shares Outstanding (mm) 29.1m 33.2m
10 , 0 0 0 , 0 0 0
Market Capitalization ($mm) 73 132
1
Daily Share Volume 85,000 1,635,000
1. 0 0
5,000,000
1
Volume Price Average Price 2.87 3.01
1
$Volume/Day (mm) 0.24 4.93
0.00 0 1
Trailing 60-days
Mar-09Mar-09 Apr-09 Jun-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09Dec-09 Jan-10
Source: CapitalIQ


Compugen Case Study – Lessons Learned

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


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


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


Select ATM Transactions
$105,000,000 $72,000,000 $15,000,000 $175,000,000 $125,000,000 $175,000,000 $20,000,000 $75,000,000 $142,500,000 $155,000,000

Nationwide FAMCO/Claymore Nationwide
Health Props. Opportunity Fund Health Props.
Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering Continuous Offering
February 2010 February 2010 January 2010 January 2010 November 2009 November 2009 October 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
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 Nationwide
Dynex Capital Gershenson Health Props. DryShips
March 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

Nationwide
Ocean Freight Anworth DryShips Health Props. DryShips Anworth Education Realty
June 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 Nationwide
Health Props. HRPT Props. Centers Health Props.
May 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

Nationwide
DryShips Valence Health Props.
July 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 Anworth
August 2004 August 2004 July 2004 May 2004 April 2004 November 2003 July 2003 April 2003 January 2003 August 2002


Contact Us

Dean Colucci Jeff Lumby Joshua Feldman Nir Weissberger
Partner, DLA Piper Sr.Managing Director, Cantor Fitzgerald Director, Cantor Fitzgerald Partner, Eitan-Mehulal
+1 212 335 4794 +1 212 829 4717 +1 212 829 4846 +972 9 9726090
dean.colucci@dlapiper.com jlumby@cantor.com jfeldman@cantor.com nirw@em-lg.com

Guy Hadar James Seery
Daniel Goldberg
Attorney, Eitan-Mehulal Partner, DLA Piper
Partner, DLA Piper
+972 9 9726059 +1 212 335 4830
+1 212 335 4966
guyh@em-lg.com james.seery@dlapiper.com
daniel.i.goldberg@dlapiper.com


About Cantor Fitzgerald

COMMERCIAL BULGE BRACKET
REAL ESTATE CAPABILITIES

Commercial Real Estate
Major global player
Lending, Investment,
Advisory, Asset One of the largest sales
Management and DEBT CAPITAL EQUITY forces in the industry:
INVESTMENT
Investment Banking MARKETS & CAPITAL over 280 global
BANKING institutional sales and
Experienced team of FOREX MARKETS trading professionals
senior managers with 80
years of combined Credit Securities Equity & Debt Daily coverage of over
In 2008, traded over
experience (IG, HY Corp., Hybrids) Origination 5,000 institutional clients
108bn shares with
around the globe
The team has facilitated Mortgage Securities approximately $1 trillion Financial Advisory
over $160 billion debt (CMOs, ABS, CMBS) in value (including M&A and Focus on smaller cap
transactions and over restructurings) stocks
Repos/Securities Lending Top ranked execution in
$40 billion public and Market Leader in
both illiquid and difficult Merchant Banking
private REIT Interest Rate Products Controlled Equity
trades
transactions IPO, Follow-On & Offerings
Agencies (FNMA, FHLB,
Known for cross-trading Controlled Equity
FFCB, TVA, SLMA, SBAs)
and block trading Offerings
abilities

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 Bank
Headquartered in: New York City; worldwide presence, including Europe, India & China/APAC
Private Partnership; over 3,700 employees worldwide—rapid and profitable recovery after 9/11
Industry-recognized execution capabilities - Traded 100 billion equity shares in 2008 – over $1.1 trillion in value
Trade 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


About DLA Piper

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 Eitan - Mehulal

Combining a distinctive interdisciplinary approach
the Eitan-Mehulal Law Group’s expertise spans
across 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 law
Taxation Litigation Bankruptcy Labor law
Real 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


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