F-4/A
As filed with the Securities and Exchange Commission on
September 22, 2005
Registration No. 333-128042
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
to
Form F-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ELBIT MEDICAL IMAGING LTD.
(Exact name of Registrant as specified in its charter)
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Israel |
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3841 |
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Not Applicable |
(State or other jurisdiction of
incorporation or organization) |
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(Primary Standard Industrial
Classification Code Number) |
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(I.R.S. Employer
Identification No.) |
13 Mozes Street
Tel Aviv 67442, Israel
Tel + 972-3-608-6010
(Address, including zip code, and telephone number, of
Registrants principal executive offices)
Kramer Levin Naftalis & Frankel LLP
1177 Avenue of the Americas
New York, NY 10036
212-715-9100
Attention: Ernest S. Wechsler, Esq.
(Name, address and telephone number of agent for service)
Copies of Communications to:
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Ernest S. Wechsler, Esq.
Kramer Levin Naftalis &
Frankel LLP
1177 Avenue of the
Americas
New York, NY 10036
Tel: 212-715-9100 |
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Marc Lavine, Esq., Adv
Elbit Medical Imaging Ltd.
13 Mozes Street
Tel Aviv 67442 Israel
Tel: 972-3-608-6010 |
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David Hodak, Adv.
Gross, Kleinhendler,
Hodak, Halevy,
Greenberg & Co.,
Law Offices
1 Azrieli Center
Round Building
Tel Aviv 67021, Israel
Tel: 972-3-607-4444 |
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Steven J. Glusband, Esq.
Carter Ledyard &
Milburn LLP
2 Wall Street
New York, NY 10005
Tel: 212-732-3200 |
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Amir Tzafrir, Adv.
Adam M. Klein, Adv.
Goldfarb, Levy, Eran & Co.
2 Weizmann Street
Tel Aviv 64239, Israel
Tel: 972-3-608-9999 |
Approximate date of commencement of proposed sale to the
public: As promptly as practicable after this registration
statement becomes effective and all conditions to the
consummation of the merger have been satisfied or waived.
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Commission,
acting pursuant to Section 8(a), may determine.
This
preliminary joint proxy statement/ prospectus is not complete
and may be changed. We may not sell these securities until the
registration statement filed with the Securities and Exchange
Commission is effective. This preliminary joint proxy statement/
prospectus is not an offer to sell, nor is it seeking an offer
to buy the shares in any jurisdiction where the offer or sale is
not
permitted.
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SUBJECT TO COMPLETION DATED
SEPTEMBER 22, 2005
PROSPECTUS
ELBIT MEDICAL IMAGING LTD.
and
ELSCINT LTD.
JOINT PROXY STATEMENT
ELBIT MEDICAL IMAGING LTD.
MERGER PROPOSED YOUR VOTE IS VERY IMPORTANT
Elbit Medical Imaging Ltd., or EMI, and Elscint Ltd., or
Elscint, have entered into a merger agreement that provides for
the merger of Elscint with EMI by way of an exchange of shares.
As a result of the merger, Elscint will become a wholly-owned
subsidiary of EMI. If the merger is completed:
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each outstanding share of Elscint will be exchanged for 0.53
ordinary shares of EMI; and |
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current EMI shareholders will continue to own their existing
shares after the merger. |
We estimate that EMI will issue approximately 3,479,681 ordinary
shares to Elscint shareholders other than EMI and Elscint in the
merger. These numbers exclude approximately 26,500 ordinary
shares of EMI that will become issuable upon exercise of options
to purchase Elscint shares, which EMI will assume in connection
with the merger.
We cannot complete the merger unless the shareholders of both
EMI and Elscint approve it. The audit committees and the boards
of directors of EMI and Elscint have approved the merger and the
merger agreement and the boards of directors of EMI and Elscint
recommend that you vote FOR approval of the merger
and the merger agreement. We have scheduled shareholder meetings
for you to vote on the merger. The dates, times and places of
the meetings are as follows:
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For EMI Shareholders:
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For Elscint Shareholders: |
October 27, 2005
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October 27, 2005 |
at 10:00 a.m. Israel time
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at 11:00 a.m. Israel time |
at Elbit Medical Imaging Ltd.
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at Elscint Ltd. |
13 Mozes Street
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13 Mozes Street |
Tel Aviv 67442, Israel
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Tel Aviv 67442, Israel |
EMI ordinary shares trade on the NASDAQ National Market, or
NASDAQ, under the symbol EMITF and on the Tel Aviv
Stock Exchange, or TASE. On
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2005, the trading day in the United States immediately preceding
the date of this joint proxy statement/ prospectus, the closing
price for EMI ordinary shares on NASDAQ was
$
and on the TASE was
NIS .
On June 7, 2005 and on June 8, the trading days in the
United States and Israel, respectively, immediately preceding
the first announcement in connection with the proposed merger,
the closing price for EMI ordinary shares on NASDAQ was $19.37
and on the TASE was NIS 85.07.
Elscint ordinary shares trade on the New York Stock Exchange, or
NYSE, under the symbol ELT. On
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2005, the trading day in the United States immediately preceding
the date of this prospectus, the closing price for Elscint
ordinary shares on the NYSE was
$ .
On June 7, 2005, the trading day in the United States
immediately preceding the first announcement in connection with
the proposed merger, the closing price for Elscint ordinary
shares on the NYSE was $6.74.
This joint proxy statement/ prospectus gives you detailed
information about EMI, Elscint, the proposed merger and the
proposal to be voted on at the special meetings. We encourage
you to read the entire document carefully before deciding how to
vote, particularly the section entitled Risk Factors
beginning on page 20.
Your vote is very important. To approve the merger and the
merger agreement, you must vote FOR the proposal by
following the instructions stated on the enclosed proxy card. If
you are the record holder of the shares and attend a special
meeting, you may vote your shares in person, even if you
previously submitted a proxy. IF YOU CHOOSE TO VOTE BY PROXY,
WE MUST RECEIVE YOUR PROXY AT LEAST 24 HOURS PRIOR TO THE
SPECIAL MEETING. Whether or not you plan to attend a special
meeting, please take the time to vote by completing, signing and
mailing the enclosed proxy card to us in the enclosed
postage-paid envelope.
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Mordechay Zisser
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Abraham (Rami) Goren
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Executive Chairman of the Board of
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Executive Chairman of the Board of |
Directors of Elbit Medical Imaging Ltd.
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Directors of Elscint Ltd. |
The Israel Securities Authority, or ISA, has notified EMI
that the contemplated transaction does not require the
publication of a prospectus by EMI in Israel for the offer of
EMI shares in the merger.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved the EMI
ordinary shares to be issued in connection with the merger or
determined if this joint proxy statement/ prospectus is truthful
or complete. Any representation to the contrary is a criminal
offense.
This joint proxy statement/ prospectus is dated
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2005 and is first being mailed to shareholders of EMI and
Elscint on or about September 27, 2005.
PRESENTATION AND CERTAIN CONVENTIONS
References to NIS in this joint proxy statement/
prospectus mean New Israeli Shekels, the legal currency of
Israel. References to $ mean United States dollars,
the legal currency of the Unites States. For your convenience,
unless otherwise indicated, certain amounts have been translated
into U.S. dollar amounts, using the representative exchange
rate as published by the Bank of Israel as of December 31,
2004 ($1.00 = NIS 4.308). The dollar amounts reflected in these
convenience translations should not be construed as representing
amounts that actually can be received or paid in dollars or
convertible into dollars (unless otherwise indicated), nor do
such convenience translations mean that the NIS amounts
(i) actually represent the corresponding dollar amounts
stated, or (ii) could be converted into dollars at the
assumed rate.
ADDITIONAL INFORMATION
This joint proxy statement/ prospectus incorporates important
business and financial information about EMI and Elscint from
other documents that are not included in or delivered with this
joint proxy statement/ prospectus, You can obtain copies of the
documents incorporated by reference in this joint proxy
statement/ prospectus at the Securities and Exchange
Commissions Public Reference Room at 450 Fifth
Street, N.W., Washington, DC 20549, at the SECs prescribed
rates. Please call the SEC at 202-942-8090 for further
information on the Public Reference Room. In addition, the SEC
maintains a web site that contains reports and other information
regarding registrants, such as EMI and Elscint, that file
electronically with the SEC. The address of this web site is
http://www.sec.gov. Alternatively, you may obtain
documents incorporated by reference into this joint proxy
statement/ prospectus, without charge, by requesting them in
writing or by telephone, from the appropriate company at the
following addresses and telephone numbers:
if you are an EMI shareholder:
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Elbit Medical Imaging Ltd. |
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13 Mozes Street |
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Tel Aviv 67442, Israel |
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Telephone: 972-3-608-6000 |
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Facsimile: 972-3-695-3080 |
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Attention: |
Shimon Yitzhaki, President and Chief Financial Officer |
if you are an Elscint shareholder:
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Elscint Ltd. |
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13 Mozes Street |
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Tel Aviv 67442, Israel |
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Telephone: 972-3-608-6020 |
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Facsimile: 972-3-696-2022 |
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Attention: |
Abraham (Rami) Goren, Executive Chairman of the Board of
Directors |
To receive timely delivery of the documents before the special
meeting, you must request them no later than
to receive them before the EMI special meeting and by
to receive them before the Elscint special meeting.
ELBIT MEDICAL IMAGING LTD.
13 Mozes Street
Tel Aviv 67442, Israel
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 27, 2005
To the Shareholders of Elbit Medical Imaging Ltd.:
Elbit Medical Imaging Ltd., or EMI, will hold a special meeting
of shareholders on October 27, 2005, at 10:00 a.m., Israel
time, at the corporate offices of EMI at 13 Mozes Street, Tel
Aviv 67442, Israel for the following purpose:
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To consider and vote upon a proposal to: |
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adopt the terms and conditions of the Agreement and Plan of
Merger, dated as of August 21, 2005, by and between EMI and
Elscint Ltd., and |
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approve the merger of EMI and Elscint by way of share exchange,
in accordance with the merger agreement. |
A copy of the merger agreement is attached to the accompanying
joint proxy statement/ prospectus as Annex A.
At least two shareholders, present in person or by proxy, and
holding or representing, in the aggregate, at least thirty-three
and one-third percent (33.33%) of the issued and outstanding
voting shares, will constitute a quorum, at the special meeting.
If no quorum is present within a half hour after the time
appointed for the holding of the special meeting, the special
meeting shall stand adjourned to the same day in the following
week at the same time and place, or to such other day, time and
place as will be determined by notice to shareholders. If a
quorum is not present within a half hour after the appointed
time at the adjourned meeting, the presence of two shareholders
in person or by proxy will constitute a quorum.
Approval of the merger and the merger agreement requires the
affirmative vote of a majority in number of the shareholders
participating, in person or by proxy, at the special meeting,
excluding abstentions, who collectively hold seventy-five
percent (75%) of the shares represented at the voting.
THE EMI BOARD OF DIRECTORS UNANIMOUSLY (WITHOUT THE
PARTICIPATION OF DIRECTORS WHO HAVE PERSONAL INTERESTS IN THE
APPROVAL OF THE MERGER) RECOMMENDS THAT YOU VOTE FOR
APPROVAL OF THE MERGER AND THE MERGER AGREEMENT.
Only shareholders of record at the close of business on
September 26, 2005 are entitled to receive notice of, and
to vote at, the special meeting or any adjournment or
postponement of the special meeting.
Shareholders who are unable to attend the special meeting in
person are requested to complete, date and sign the enclosed
form of proxy and return it promptly in the pre-addressed
envelope provided. Your proxy may be revoked at any time before
it is voted by voting your shares in person at the special
meeting, or until 24 hours before the special meeting by
returning a later-dated proxy card. Shareholders who hold their
shares in street name, meaning in the name of a
bank, broker or other record holder, must either direct the
record holder of their shares on how to vote their shares or
obtain a legal proxy from the record holder to vote the shares
at the special meeting on behalf of the record holder as well as
a statement from such record holder that it did not vote such
shares. You should follow the directions provided by your broker
or nominee regarding how to instruct them to vote your shares.
On all matters considered at the special meeting, abstentions
will be treated as neither a vote for nor
against the proposal considered at the special
meeting, although they will be counted in determining whether a
quorum is present.
Shareholders who hold their shares through the nominee company
of Bank Discount LeIsrael Ltd. and intend to vote their
shares by person or by proxy must deliver EMI an ownership
certificate confirming their ownership of EMIs shares on
the record date approved by a recognized financial institution,
as required by the Israeli Companies Regulation (Proof of
Ownership of Shares for Voting at General Meeting) of 2000.
Joint holders of shares should note that, pursuant to the
articles of association of EMI, the vote of the senior of joint
holders of any share who votes such share, whether in person or
by proxy, will be accepted to the exclusion of the vote(s) of
the other registered holder(s) of such share, with seniority
determined by the order in which the names of the joint holders
appear in EMIs Register of Shareholders. The appointment
of a proxy to vote shares held by joint holders must be executed
by the signature of the senior of the joint holders on the proxy
card.
You are cordially invited to attend the special meeting. Whether
or not you plan to attend, please act promptly to vote your
shares on the proposal described above. You may vote your shares
by completing, signing and dating the enclosed proxy card and
returning it as promptly as possible in the enclosed
postage-paid envelope. Any shareholder attending the special
meeting may vote in person even if that shareholder has
previously returned a proxy. IF YOU CHOOSE TO VOTE BY PROXY,
WE MUST RECEIVE YOUR PROXY AT LEAST 24 HOURS PRIOR TO THE
SPECIAL MEETING.
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By Order of the Board of Directors, |
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Mordechay Zisser
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Executive Chairman of the |
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Board of Directors |
Dated:
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2005
ELSCINT LTD.
13 Mozes Street
Tel Aviv 67442, Israel
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON October 27, 2005
To the Shareholders of Elscint Ltd.:
Elscint Ltd., or Elscint, will hold a special meeting of
shareholders on October 27, 2005, at 11:00 a.m., Israel
time, at the corporate offices of Elscint at 13 Mozes Street,
Tel Aviv 67442, Israel, for the following purpose:
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To consider and vote upon a proposal to: |
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adopt the terms and conditions of the Agreement and Plan of
Merger, dated as of August 21, 2005, by and between Elbit
Medical Imaging Ltd. (EMI) and Elscint, and |
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approve the merger of EMI and Elscint, under which the Elscint
shareholders, other than EMI and Elscint, will receive 0.53 EMI
ordinary shares in exchange for each of their Elscint ordinary
shares, in accordance with the merger agreement. |
A copy of the merger agreement is attached to the accompanying
joint proxy statement/ prospectus as Annex A.
At least two (2) shareholders, present in person or by
proxy, and holding or representing, in the aggregate, not less
than fifty-one percent (51%) of the issued and outstanding
shares, will constitute a quorum at the special meeting. If
within a half hour after the time appointed for the holding of
the special meeting no quorum is present, the special meeting
will stand adjourned to the same day in the following week, at
the same time and place, or to such other day, time and place as
shall be determined by Elscints board of directors by
notice to the shareholders. At the adjourned meeting, the
business for which the special meeting was called will be
transacted if at least two (2) shareholders present in
person or by proxy, and representing, in the aggregate, not less
than twenty-six percent (26%) of the issued and outstanding
shares, are present or represented.
Approval of the merger and the merger agreement requires the
affirmative vote of a majority in number of the shareholders
participating, in person or by proxy, at the special meeting,
excluding abstentions, who collectively hold seventy-five
percent (75%) of the shares represented at the voting. In
addition, because EMI owns, directly and through its
wholly-owned subsidiary, Elbit Medical Holdings Ltd.,
approximately sixty-one percent (61%) of Elscints
outstanding shares, the merger and the merger agreement will be
approved only if either:
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(i) the majority vote at the special meeting includes at
least one-third of the total votes of shareholders having no
personal interest in the proposal, participating at the special
meeting in person or by proxy (votes abstaining shall not be
taken into account in counting the above-referenced
shareholders votes); or |
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(ii) the total number of shares of the shareholders
mentioned in clause (i) above that are voted against such
proposal does not exceed one percent (1%) of the total voting
rights in Elscint. |
Under the Israeli Companies Law of 1999, or the Israeli
Companies Law, each shareholder that attends the special meeting
in person shall, prior to exercising such shareholders
voting rights at the special meeting advise Elscint whether or
not that shareholder has a personal interest in the approval of
the merger and the merger agreement. Each shareholder that
delivers a signed proxy card to Elscint must indicate on the
proxy card whether or not that shareholder has a personal
interest in the approval of the merger and the merger agreement.
Shareholders who do not indicate whether or not they have a
personal interest in the approval of the merger and the merger
agreement will not be eligible to vote their shares as to such
proposal.
Under the Israeli Companies Law, a personal interest means a
personal interest of a person in an act or transaction of a
company, including:
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(i) a personal interest of that persons relative
(i.e. spouse, brother or sister, parent, grandparent,
child, child of such persons spouse or the spouse of any
of the above); or |
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(ii) a personal interest of another entity in which that
person or his or her relative (as defined above) holds five
percent (5%) or more of such entitys issued shares or
voting rights, has the right to appoint a director or the chief
executive officer of such entity, or serves as director or chief
executive officer of such entity. |
A personal interest resulting merely from holding Elscints
shares will not be deemed a personal interest.
EMI and Elbit Medical Holdings Ltd. are deemed to have a
personal interest in the above proposal.
THE ELSCINT BOARD OF DIRECTORS UNANIMOUSLY (WITHOUT THE
PARTICIPATION OF THE DIRECTORS WHO HAVE PERSONAL INTERESTS IN
THE APPROVAL OF THE MERGER) RECOMMENDS THAT YOU VOTE
FOR APPROVAL OF THE MERGER AND THE MERGER
AGREEMENT.
Only shareholders of record at the close of business on
September 26, 2005 are entitled to receive notice of, and
to vote, at the special meeting or any adjournment or
postponement of the meeting. Shareholders who are unable to
attend the special meeting in person are requested to complete,
date and sign the enclosed form of proxy and return it promptly
in the pre-addressed envelope provided. Your proxy may be
revoked at any time before it is voted by voting your shares in
person at the special meeting, or until 48 hours before the
special meeting by returning a later-dated proxy card.
Shareholders who hold their shares in street name,
meaning in the name of a bank, broker or other record holder,
must either direct the record holder of their shares on how to
vote their shares or obtain a legal proxy from the record holder
to vote the shares at the special meeting on behalf of the
record holder as well as a statement from the record holder that
it did not vote the shares. You should follow the directions
provided by your broker or nominee regarding how to instruct
them to vote your shares. On all matters considered at the
special meeting, abstentions will be treated as neither a vote
for nor against the proposal considered
at the special meeting, although they will be counted in
determining whether a quorum is present.
Joint holders of shares should note that, pursuant to the
articles of association of Elscint, the vote of the senior of
joint holders of any share who tenders a vote, whether in person
or by proxy, will be accepted to the exclusion of the vote(s) of
the other registered holder(s) of the shares, with seniority
determined by the order in which the names appear in
Elscints Register of Shareholders.
You are cordially invited to attend the special meeting. Whether
or not you plan to attend, please act promptly to vote your
shares on the proposal described above. You may vote your shares
by completing, signing and dating the enclosed proxy card and
returning it as promptly as possible in the enclosed
postage-paid envelope. Any shareholder attending the special
meeting may vote in person even if that shareholder has
previously returned a proxy. IF YOU CHOOSE TO VOTE BY PROXY,
WE MUST RECEIVE YOUR PROXY AT LEAST 48 HOURS PRIOR TO THE
SPECIAL MEETING.
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By Order of the Board of Directors, |
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Abraham (Rami) Goren
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Executive Chairman of the |
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Board of Directors |
Dated:
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2005
TABLE OF CONTENTS
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SELECTED UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
INFORMATION OF EMI AND ELSCINT
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ii
iii
QUESTIONS AND ANSWERS ABOUT THE EMI/ ELSCINT MERGER
The following questions and answers are intended to provide
brief answers to commonly asked questions. These questions and
answers do not, and are not intended to, address all questions
that may be pertinent to EMI and Elscint shareholders. For a
more complete description of the legal terms of the merger, you
should read this entire document carefully, as well as the
additional documents we refer you to.
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Q: |
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What is the proposed transaction? |
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A: |
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The merger agreement provides for the merger of EMI, an Israeli
company whose shares are traded on the NASDAQ and TASE, and
Elscint, an Israeli company whose shares are traded on the NYSE,
by way of a share exchange. As a result of the merger, Elscint
will become a wholly-owned subsidiary of EMI. |
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Q: |
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Will Elscint survive the proposed merger? |
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A: |
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Yes, except that it will become a private company that is wholly
owned by EMI. |
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Q: |
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Why are EMI and Elscint proposing the merger? |
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A: |
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The merger is intended to allow the merging companies to exploit
opportunities which may have been unavailable to either EMI or
Elscint separately and is anticipated to result in increased
organizational and business efficiency and reduce operational
costs. The reasons why each of EMI and Elscint are proposing the
merger are discussed in more detail later in this document. See
The Merger Our Reasons for the Merger
beginning on page 41. |
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Q: |
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Are there risks I should consider in deciding whether to vote
for the merger? |
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A: |
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Yes. You should review the risks as discussed in the section
Risk Factors beginning on page 20. These risks
include, among others, possible difficulties in integrating two
companies that have previously operated independently and in
achieving the mergers objectives. |
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Q: |
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What will Elscint shareholders receive for their shares? |
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A: |
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If the merger is completed, Elscint shareholders, other than EMI
and Elscint, will receive 0.53 ordinary shares of EMI in
exchange for each outstanding ordinary share of Elscint that
they hold. This ratio is called the exchange ratio. We expect
that, immediately after completion of the merger, the current
shareholders of Elscint, other than EMI and Elscint, will own
approximately 13.71% of the outstanding ordinary shares of EMI
and approximately 13.88% of the voting rights in EMI. |
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Q: |
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When do you expect the merger to be completed? |
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A: |
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We are working towards completing the merger as quickly as
possible and are currently targeting the end of the fourth
quarter of 2005 for a closing. We anticipate completing the
merger soon after the satisfaction of the conditions to the
merger, including the receipt of the approval of the
shareholders of EMI and Elscint and the receipt of the final
court order approving the merger. |
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Q: |
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Should I send in my Elscint share certificates now? |
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A: |
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No. After the merger is completed, EMI will send Elscint
shareholders written instructions explaining how to exchange
their share certificates for one or more certificates
representing the appropriate number of EMI shares. EMI
shareholders will keep their share certificates. |
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Q: |
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Will I have to pay brokerage commissions when I exchange my
shares? |
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A: |
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If you are the record owner of your Elscint shares and you
exchange your Elscint shares for EMI shares in the merger, you
will not have to pay brokerage fees or similar expenses. If you
own your Elscint shares through a broker or other nominee and
your broker exchanges your Elscint shares on your behalf, your
broker or nominee may charge you a fee for doing so. You should
consult your broker or nominee to determine whether any charges
will apply. Neither EMI nor Elscint will be obligated to pay for
or reimburse you for any broker or nominee charges. |
iv
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Q: |
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What periodic reports can I expect to receive as an EMI
shareholder? |
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A: |
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After the merger, former Elscint shareholders will be entitled
to receive the same periodic reports that are currently
available to EMI shareholders under Israeli law, U.S. law
and NASDAQ rules. These reports include annual reports with
audited annual consolidated financial statements and proxy
statements and related materials for annual and special meetings
of shareholders. |
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Q: |
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What shareholder approval is needed to approve the merger? |
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A: |
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EMI The affirmative vote of a majority
in number of the shareholders participating, in person or by
proxy, at the special meeting, excluding abstentions, who
collectively hold seventy-five (75%) of the shares represented
at the voting is required to approve the merger and the merger
agreement. |
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Elscint The affirmative vote of a
majority in number of the shareholders participating, in person
or by proxy, at the special meeting, excluding abstentions, who
collectively hold seventy-five (75%) of the shares represented
at the voting, is required to approve the merger and the merger
agreement. In addition, either: |
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(i) the majority vote at the special meeting must
include at least one-third of the total votes of shareholders
having no personal interest in the proposal, participating at
the special meeting in person or by proxy (votes abstaining
shall not be taken into account in counting the above-referenced
shareholders votes); or |
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(ii) the total number of shares of the shareholders
mentioned in clause (i) above that are voted against the
proposal does not exceed one percent (1%) of the total voting
rights in Elscint. |
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Under the Israeli Companies Laws of 1999, or the Israeli
Companies Law, each shareholder that attends the special meeting
in person shall, prior to exercising such shareholders
voting rights at the special meeting advise Elscint whether or
not that shareholder has a personal interest in the approval of
the merger and the merger agreement. Each shareholder that
delivers a signed proxy card to Elscint must indicate on the
proxy card whether or not that shareholder has a personal
interest in the approval of the merger and the merger agreement.
Shareholders who do not indicate whether or not they have a
personal interest in the approval of the merger and the merger
agreement will not be eligible to vote their shares as to such
proposal. |
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Under the Israeli Companies Law, a personal interest means a
personal interest of a person in an act or transaction of a
company, including: |
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(i) a personal interest of that persons
relative (i.e. spouse, brother or sister, parent,
grandparent, child, child of such persons spouse or the
spouse of any of the above); or |
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(ii) a personal interest of another entity in which that
person or his or her relative (as defined above) holds five
percent (5%) or more of such entitys issued shares or
voting rights, has the right to appoint a director or the chief
executive officer of such entity, or serves as director or chief
executive officer of such entity. |
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A personal interest resulting merely from holding Elscints
shares will not be deemed a personal interest.
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EMI, which owns directly and through its wholly-owned
subsidiary, Elbit Medical Holdings Ltd., approximately sixty-one
percent (61%) of Elscints outstanding shares, has agreed
to vote in favor of the merger. |
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Q: |
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What if I dont vote? |
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A: |
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EMI shareholders If you fail to vote
by proxy or in person, your shares that are represented by your
proxy or owned by you will be deemed not to have been cast for
the purpose of the approval of the merger and the merger
agreement and, accordingly, such shares shall not be counted in
calculating the percentage of affirmative votes required for
approval of the merger and the merger agreement. |
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Elscint shareholders If you fail to
vote by proxy or in person, or fail to indicate whether you have
a personal interest in the proposed merger and merger agreement
in Elscints special meeting, the shares represented by
your proxy or owned by you will be deemed not to have been cast
for the purpose of the approval of the merger |
v
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and the merger agreement and, accordingly, such shares shall not
be counted in calculating the percentage of affirmative votes
required for approval of the merger and the merger agreement. |
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Q: |
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What do I need to do now? |
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A: |
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After you have carefully read this joint proxy statement/
prospectus, please fill out and sign the enclosed proxy card,
and then mail it in the enclosed return envelope as soon as
possible, so that your shares may be voted at the appropriate
shareholders meeting. In order for your shares to be voted at
each special meeting if you choose to vote by proxy, your proxy
card must be received by EMI at least 24 hours prior to the
special meeting and your proxy card must be received by Elscint
at least 48 hours prior to the special meeting. The
chairman of each special meeting may, at his or her discretion,
accept a proxy after such time. If a proxy is not received in
the manner described above, it will not be valid at the special
meeting. You can also attend the appropriate special meeting and
vote in person if you are the record holder of the shares. If
your shares are held in street name in order to vote
your shares in person you should obtain a legal proxy from the
record holder to vote the shares at the special meeting on
behalf of the record holder as well as a statement from such
record holder that it did not vote such shares. |
If you hold EMI ordinary shares through the nominee company of
Bank Discount LeIsrael Ltd. you must deliver EMI an
ownership certificate confirming your ownership of EMIs
shares on the record date approved by a recognized financial
institution.
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Q: |
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What does my board of directors recommend? |
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A: |
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EMI: The EMI board of directors unanimously (without the
participation of directors who have personal interests in the
approval of the merger) recommends that you vote FOR
approval of the merger and the merger agreement. |
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Elscint Elscint: The Elscint board of directors
unanimously (without the participation of directors who have
personal interests in the approval of the merger) recommends
that you vote FOR approval of the merger and the
merger agreement. |
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Q: |
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Am I entitled to appraisal rights? |
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A: |
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Under Israeli Law, which governs the merger, you are not
entitled to formal appraisal rights. However, since the merger
will be effected pursuant to sections 350 and 351 of the Israeli
Companies Law, it is subject to approval of an Israeli District
Court, and the District Court (in our case, the Tel Aviv-Jaffa
District Court) may provide you a remedy if you object to the
merger within the timeframe and in the manner prescribed by the
Israeli Companies Law, the regulations promulgated thereunder
and the District Court. |
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Pursuant to regulations promulgated under the Israeli Companies
Law, unless the District Court determines otherwise, you may
raise your objections to the merger by filing an application
with the Court no later than 10 days following the filing
by EMI and Elscint of the second motion with the District Court,
which is expected to occur promptly following the approval of
the merger by EMIs and Elcints shareholders at the
special meetings to be convened on October 27, 2005 and the
fulfillment of all of the conditions precedent set forth in the
merger agreement. |
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The application would typically be filed as a written
application supported by an affidavit. |
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You should be aware that neither the Israeli Companies Law nor
the regulations promulgated under that law specify the remedies
available to you in connection with the merger. |
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Q: |
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If my shares are held in street name by my
broker, will my broker vote my shares for me? |
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A: |
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Your broker will vote your shares only if you provide
instructions to him or her on how to vote. You should follow the
directions provided by your broker regarding how to instruct
your broker to vote your shares. Your broker will not be able to
vote your shares without instructions from you, including, if
you are a shareholder of Elscint, as to whether or not you have
a personal interest in the approval of the merger and the merger
agreement. |
vi
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Q: |
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How will abstentions be treated in calculating a quorum and
in tallying the votes at the special meetings? |
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A: |
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Abstentions are taken into account for purposes of determining
whether the shareholders present at each special meeting
constitute a quorum. Abstentions will not be considered as
either a vote for or against the
proposal considered at either special meeting. |
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Q: |
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Who is the exchange agent for the merger? |
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A: |
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American Stock Transfer & Trust Company will act as the
exchange agent. |
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Q: |
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Where can I find more information about the companies? |
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A: |
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You can find more information about EMI and Elscint from various
sources described under Where You Can Find More
Information beginning on page 83 and the description
of the businesses beginning on page 73. |
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Q: |
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Whom can I contact with questions about the merger or on how
to submit a proxy or if I need additional copies of the joint
proxy statement/ prospectus or accompanying documents? |
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A: |
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If you are an EMI shareholder, you should contact: |
Elbit Medical Imaging
13 Mozes Street
Tel Aviv 67442, Israel
Attention: Shimon Yitzhaki, President and Chief Financial
Officer
Telephone: 972-3-608-6010
Facsimile: 972-3-695-3080
If you are an Elscint shareholder, you should contact:
Elscint Ltd.
13 Mozes Street
Tel Aviv 67442, Israel
Attention: Abraham (Rami) Goren, Executive Chairman of the
Board of Directors
Telephone: 972-3-608-6020
Facsimile: 972-3-696-2022
vii
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This joint proxy statement/ prospectus contains forward-looking
statements that are based on the current expectations,
assumptions, estimates and projections of each of EMI and
Elscint about its business, its industry and markets. These
forward-looking statements can be identified by the use of
forward-looking terminology such as may,
will, expect, anticipate,
estimate, plan or similar words. These
statements discuss future expectations, identify strategies,
contain projections of results of operations or of each
pre-transaction companys financial condition, or state
other forward-looking information. Known and unknown risks,
uncertainties and other factors could cause the actual results
to differ materially from those contained in any forward-looking
statement. EMI and Elscint cannot promise that their
expectations expressed in these forward-looking statements will
turn out to be correct. The actual results of each of EMI and
Elscint could be materially different from and worse than those
expectations. Important risks and factors that could cause the
actual results of each of EMI and Elscint to be materially
different from their expectations are set forth in Risk
Factors and elsewhere in this joint proxy statement/
prospectus. Neither EMI nor Elscint undertakes any obligation to
update or release any revisions to these forward-looking
statements to reflect events or circumstances after the date of
this joint proxy statement/ prospectus or to reflect the
occurrence of unanticipated events, except as required by law.
viii
SUMMARY
This summary highlights selected information from this joint
proxy statement/ prospectus and may not contain all of the
information that is important to you. To understand the merger
fully and for a more complete description of the legal terms of
the merger, you should read carefully this entire joint proxy
statement/ prospectus, including the Annexes, and the documents
we refer to in this joint proxy statement/ prospectus. Please
see Where You Can Find More Information on
page 83. Certain items in this summary include a page
reference directing you to a more complete description of that
item.
The Companies (See Pages 73 and 74)
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Elbit Medical Imaging Ltd. |
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13 Mozes Street |
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Tel Aviv 67442, Israel |
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Telephone: 972-3-608-6010 |
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Facsimile: 972-3-695-3080 |
Elbit Medical Imaging Ltd., or EMI, is an Israeli company that
operates through subsidiaries and affiliated companies.
EMIs activities are divided into three principal fields:
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ownership, operation, management, acquisition, expansion and
development through a wholly-owned subsidiary of commercial and
entertainment malls in Europe, primarily in Eastern and Central
Europe; |
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the activities of its subsidiary, Elscint, described below; and |
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research and development in the image guided focused ultrasound
activities through its subsidiary, InSightec Image Guided
Treatment Ltd. |
EMI ordinary shares trade on the NASDAQ National Market, or
NASDAQ, under the symbol EMITF and on the Tel Aviv
Stock Exchange, or the TASE.
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Elscint Ltd. |
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13 Mozes Street |
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Tel Aviv 67442, Israel |
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Telephone: 972-3-608-6020 |
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Facsimile: 972-3-696-2022 |
Elscint Ltd., or Elscint, is an Israeli company whose activities
are divided into five principal fields:
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ownership and operation of hotels in Europe and elsewhere and
construction of hotel projects through wholly owned and jointly
controlled subsidiary companies; |
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leasing of a real estate asset; |
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the ownership, operation and development of a commercial and
entertainment center in Israel; |
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a biotechnology investment; and |
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the ownership and operation of an apparel company, Mango Israel
Clothing & Footwear Ltd. |
Elscint ordinary shares trade on the New York Stock Exchange, or
NYSE, under the symbol ELT.
The Merger
EMI and Elscint have entered into a merger agreement that
provides for the merger of EMI and Elscint by way of share
exchange. Under the merger agreement, each outstanding ordinary
share of Elscint, other than shares held by EMI and Elscint,
will be exchanged for 0.53 ordinary shares of EMI. As a result
of the merger, Elscint will become a wholly-owned subsidiary of
EMI and its shares will no longer trade on the NYSE.
EMI will not issue fractional shares. Instead, each Elscint
shareholder, other than EMI and Elscint, will receive a check in
payment for any fractional shares equal to the value of such
fractional shares, based upon
1
the closing price of EMI ordinary shares on the NASDAQ on the
trading day immediately preceding the closing date of the merger.
We encourage you to read the merger agreement which is
attached to this joint proxy statement/ prospectus as
Annex A since it is the legal document that governs the
merger.
Elscint shareholders should not send in their share
certificates until instructed to do so after the merger is
completed.
Current EMI shareholders will continue to own their existing
shares after the merger. EMI shareholders should not send in
their share certificates because they will not exchange their
share certificates in connection with the merger.
Our Recommendations to Shareholders (See Page 41)
Following the recommendation of an independent committee of
EMIs board of directors formed for the purpose of
considering the proposed merger:
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the EMI audit committee and board of directors have determined
that the merger is advisable and fair to you and is to the
benefit of EMI, |
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each of the EMI audit committee and the board of directors has
approved the terms of the merger agreement, including the merger
and the other transactions contemplated therein, and |
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the EMI board of directors unanimously (excluding directors who
have a personal interest in the approval of the merger)
recommend that you vote FOR the proposal to approve
the merger and the merger agreement. |
Following the recommendation of an independent committee of
Elscints board of directors formed for the purpose of
considering the proposed merger:
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the Elscint audit committee and board of directors have
determined that the merger is advisable and fair to you and is
to the benefit of Elscint, |
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each of the Elscint audit committee and the board of directors
has approved the terms of the merger agreement, including the
merger and the other transactions contemplated therein, and |
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the Elscint board of directors unanimously (excluding directors
who have a personal interest in the approval of the merger)
recommend that you vote FOR the proposal to approve
the merger and the merger agreement. |
Opinions of Financial Advisors (See Pages 43 through
54)
In connection with the merger:
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EMI received a written opinion dated August 21, 2005 from
C.E. Unterberg, Towbin, EMIs financial advisor, addressed
to EMIs board of directors, that, as of the date of that
opinion and based on and subject to the matters noted in the
opinion, the exchange ratio provided for in the merger was fair
to the shareholders of EMI from a financial point of
view; and |
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Elscint received a written opinion dated August 18, 2005
from Oppenheimer & Co. Inc., Elscints financial
advisor, addressed to Elscints board of directors, that,
as of the date of that opinion and based on and subject to the
matters noted in the opinion, the exchange ratio provided for in
the merger was fair from a financial point of view to the
shareholders of Elscint, other than EMI, its controlling
shareholder and any affiliates of EMI and/or its controlling
shareholder. |
2
The full texts of these opinions are attached as Annex B
and Annex C to this joint proxy statement/ prospectus. We
encourage you to read these opinions in their entirety to
understand the procedures followed, assumptions made, matters
considered and limitations on the review undertaken by each of
C.E. Unterberg, Towbin and Oppenheimer & Co. Inc. in
providing its opinion. These opinions are addressed to the
boards of directors and do not constitute recommendations to any
shareholder as to any matter relating to the merger.
The EMI Special Meeting and Vote Required (See
Page 32)
Place and Time: The EMI special meeting will be
held at 10:00 a.m., Israel time, on October 27, 2005 at the
corporate offices of EMI at 13 Mozes Street, Tel Aviv 67442,
Israel.
Quorum: At least two shareholders, present in
person or by proxy, and holding or representing, in the
aggregate, at least thirty-three and one-third percent (33.33%)
of the issued and outstanding voting shares, will constitute a
quorum, at the special meeting. If no quorum is present within a
half hour after the time appointed for the holding of the
special meeting, the special meeting will stand adjourned to the
same day in the following week at the same time and place, or to
such other day, time and place as shall be determined by notice
to shareholders. If a quorum is not present within a half hour
after the appointed time at such adjourned meeting, the presence
of two shareholders in person or by proxy will constitute a
quorum.
Proposal: At the EMI special meeting, EMI
shareholders will be asked to approve the merger and the merger
agreement.
Vote Required: Approval of the merger and the
merger agreement requires the affirmative vote of a majority in
number of the shareholders participating, in person or by proxy,
at the special meeting, excluding abstentions, who collectively
hold seventy-five percent (75%) of the shares represented at the
voting.
Record Date: You are entitled to vote at the EMI
special meeting if you were a holder of record of ordinary
shares of EMI as of the close of business on September 26,
2005, the record date for the EMI special meeting. On that date,
there were 21,585,926 ordinary shares of EMI entitled to vote at
the EMI special meeting.
Intended Vote: As of the record date for the EMI
special meeting, directors and executive officers of EMI and
their affiliates, including Europe-Israel (M.M.S.) Ltd., or
Europe-Israel, and other than Elscint, beneficially owned an
aggregate of approximately 56.11% of the outstanding ordinary
shares of EMI and approximately 56.94% of the voting rights in
EMI. As of the record date for the EMI special meeting, Elscint
owned an aggregate of approximately 2.39% of the issued and
outstanding ordinary shares of EMI and approximately 0.95% of
the voting rights in EMI. The directors and executive officers
of EMI and their affiliates have indicated that they intend to
vote the EMI ordinary shares owned by them FOR
approval of the merger and the merger agreement.
The Elscint Special Meeting and Vote Required (See
Page 35)
Place and Time: The Elscint special meeting will
be held at 11:00 a.m., Israel time, on October 27, 2005 at
the corporate offices of Elscint at 13 Mozes Street Tel Aviv
67442, Israel.
Quorum: At least two (2) shareholders,
present in person or by proxy, and holding or representing, in
the aggregate, not less than fifty-one percent (51%) of the
issued and outstanding shares, will constitute a quorum at the
special meeting. If within a half hour after the time appointed
for the holding of the special meeting no quorum is present, the
special meeting will stand adjourned to the same day in the
following week, at the same time and place, or to such other
day, time and place as shall be determined by Elscints
board of directors by notice to the shareholders, at the
adjourned meeting, the business for which the special meeting
was called will be transacted if at least two
(2) shareholders present in person or by proxy, and
representing, in the aggregate, not less than twenty-six percent
(26%) of the issued and outstanding shares, are present or
represented.
The Proposal: At the Elscint special meeting,
Elscint shareholders will be asked to approve the merger and the
merger agreement.
3
Vote Required: Approval of the merger and the
merger agreement requires the affirmative vote of a majority in
number of the shareholders participating, in person or by proxy,
at the special meeting, excluding abstentions, who collectively
hold seventy-five percent (75%) of the shares represented at the
voting. In addition, because EMI owns, directly and through its
wholly-owned subsidiary, Elbit Medical Holdings Ltd.,
approximately sixty-one percent (61%) of Elscints
outstanding shares, the merger and the merger agreement will be
approved only if either:
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(i) the majority vote at the special meeting includes at
least one-third of the total votes of shareholders having no
personal interest in the proposal, participating at the special
meeting in person or by proxy (votes abstaining shall not be
taken into account in counting the above-referenced
shareholders votes); or |
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(ii) the total number of shares of the shareholders
mentioned in clause (i) above that are voted against such
proposal does not exceed one percent (1%) of the total voting
rights in Elscint. |
Under the Israeli Companies Law, each shareholder that attends
the special meeting in person shall, prior to exercising such
shareholders voting rights at the special meeting advise
Elscint whether or not that shareholder has a personal interest
in the approval of the merger and the merger agreement. Each
shareholder that delivers a signed proxy card to Elscint must
indicate on the proxy card whether or not that shareholder has a
personal interest in the approval of the merger and the merger
agreement. Shareholders who do not indicate whether or not they
have a personal interest in the approval of the merger and the
merger agreement will not be eligible to vote their shares as to
such proposal.
Under the Israeli Companies Law, a personal interest means a
personal interest of a person in an act or transaction of a
company, including:
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(i) a personal interest of that persons relative
(i.e. spouse, brother or sister, parent, grandparent,
child, child of such persons spouse or the spouse of any
of the above); or |
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(ii) a personal interest of another entity in which that
person or his or her relative (as defined above) holds 5% or
more of such entitys issued shares or voting rights, has
the right to appoint a director or the chief executive officer
of such entity, or serves as director or chief executive officer
of such entity. |
A personal interest resulting merely from holding Elscints
shares will not be deemed a personal interest.
EMI and Elbit Medical Holdings Ltd. are deemed to have a
personal interest in the proposal to approve the merger and the
merger agreement.
Record Date: You are entitled to vote at the
Elscint special meeting if you owned ordinary shares of Elscint
as of the close of business on September 26, 2005, the
record date for the Elscint special meeting. On that date, there
were 16,835,220 ordinary shares of Elscint entitled to vote at
the Elscint special meeting.
Intended Vote: As of the record date for the
Elscint special meeting, EMI, directly and through its
wholly-owned subsidiary, Elbit Medical Holdings Ltd., was the
beneficial owner of approximately sixty-one percent (61%) of the
outstanding ordinary shares of Elscint. EMI and Elbit Medical
Holdings Ltd. intend to vote their shares in Elscint in favor of
the merger and the merger agreement. As of the record date for
the Elscint special meeting, certain directors and executive
officers of Elscint beneficially owned approximately 2.17% of
the outstanding ordinary shares of Elscint as of that date.
These directors and executive officers of Elscint have indicated
that they intend to vote the Elscint shares owned by them
FOR approval of the merger and the merger agreement.
What Shareholders Will Receive in the Merger (See
Page 66)
EMI shareholders. After the merger, you will continue to
hold your EMI ordinary shares.
Elscint shareholders. If the merger is completed, you
will receive 0.53 EMI ordinary shares in exchange for each
ordinary share of Elscint that you own at the time of the
closing of the merger.
4
EMI will issue approximately 3,479,681 EMI ordinary shares in
the merger. Immediately after the merger, Elscint shareholders,
other than EMI and Elscint, will own approximately 13.71% of
outstanding EMI ordinary shares and 13.88% of the voting rights
in EMI, and current EMI shareholders will own approximately
86.29% of outstanding EMI ordinary shares and 86.12% of the
voting rights in EMI.
Treatment of Elscint Options (See Page 56)
Elscint has outstanding options to purchase up to 50,000
ordinary shares of Elscint that were issued to two directors of
Elscint pursuant to an incentive plan adopted by Elscint
shareholders in December 2003. Under the terms of the merger
agreement, upon the closing of the merger, each outstanding
option to purchase ordinary shares of Elscint will be assumed by
EMI and will be deemed to be an option to purchase ordinary
shares of EMI. Each assumed option will, after the merger,
entitle the holder to acquire, on substantially the same terms
and conditions applicable under the original Elscint incentive
plan, the number of ordinary shares of EMI equal to the number
of Elscint ordinary shares that the holder of the option was
entitled to acquire, multiplied by the exchange ratio of 0.53,
rounded to the nearest whole number of shares of EMI ordinary
shares. The exercise price per EMI share of each outstanding
option will be the same exercise price per share specified in
the original Elscint incentive plan, divided by the exchange
ratio of 0.53 (rounded to the nearest hundredth). The conversion
of Elscint options to EMI options as tax exempt for Israeli tax
purposes will be included as part of the pre-ruling for the
merger to be received by the Israeli tax authority.
For United States securities law purposes, the assumption of
these options by EMI is deemed to be an offer to sell the
options to the two Elscint optionholders voting on the merger
and the merger agreement, and therefore this transaction is
being registered on the Registration Statement on Form F-4,
of which this joint proxy/statement prospectus is a part.
Following the consummation of the merger, EMI will register the
ordinary shares underlying the assumed options on a Registration
Statement on Form S-8.
Elscint has received, from each of the two directors that were
granted options to purchase Elscints ordinary shares, an
approval in writing for the merger and the merger agreement. The
consent of option holders to the merger may be required under
Israeli law in order for Elscint to complete the merger.
Our Reasons for the Merger (See Page 41)
The merger is intended to allow the merging companies to exploit
opportunities which may have been unavailable to either EMI or
Elscint separately and is anticipated to result in increased
organizational and business efficiency and reduced operational
costs.
To review the reasons for the merger in greater detail, see
page 41.
Conditions to the Merger (See Page 71)
The completion of the merger is subject to the prior
satisfaction or waiver of a number of conditions, in addition to
the approval of the merger agreement and the merger by the
shareholders of EMI and Elscint. These additional conditions
include:
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the other constituencies of EMI and Elscint must have approved
the merger and the consummation of the transactions contemplated
by the merger agreement by the requisite votes required under
Israeli law, if such approval is required; |
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the final court order approving the merger pursuant to
section 351 of the Companies Law must have been obtained; |
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the Registration Statement on Form F-4 of which this joint
proxy statement/ prospectus is a part must have been declared
effective by the Securities and Exchange Commission; |
5
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a tax ruling from the Israeli tax authority that the merger is a
tax exempted transaction and an additional tax ruling from the
Israeli tax authority that securities granted under
Elscints incentive plans as a result of the conversion to
EMI securities did not change their tax status must have been
obtained; |
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the TASE must have approved for listing all of the EMI shares to
be issued pursuant to the merger agreement and EMI must have
sent an official notice of issuance to NASDAQ for listing of
such shares; |
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each of EMI, Elbit Medical Holdings Ltd. and Elscint must have
received all required approvals from financing institutions for
the consummation of the merger in accordance with financing
agreements entered into between the financing institutions and
each of EMI, Elbit Medical Holdings Ltd. and Elscint, as
applicable; |
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no judicial decision shall have been issued against EMI, Elscint
or their respective material subsidiaries, which has the effect
of making the merger illegal or otherwise prohibited or
substantially restrains consummation of the merger and the
transactions contemplated under the merger agreement; |
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each party must have taken all corporate and other material
proceedings required to be taken, including the final court
order, to carry out the merger and the transactions contemplated
by the merger agreement; |
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there must have been no change, event or development with
respect to either party or any of their material subsidiaries
which, individually or together, would result in a material
adverse effect on such party; |
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the representations and warranties in the merger agreement must
be true and correct in all material respects at the closing of
the merger, except to the extent that they relate to a
particular date; |
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each party must have performed and complied in all material
respects with all the material covenants, agreements and
conditions required by the merger agreement to be performed or
complied with on or prior to the closing of the merger; and |
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each party must have delivered a certificate certifying that the
two conditions immediately above have been satisfied. |
Certain of the conditions to the merger may be waived by the
party entitled to assert the condition, except where the
fulfillment of such condition is required by law.
Termination of the Merger Agreement (See Page 72)
EMI and Elscint can agree by mutual written consent to terminate
the merger agreement at any time without completing the merger,
even after the shareholders of both companies have approved it.
In addition, either EMI or Elscint can terminate the merger
agreement if:
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if any court of competent jurisdiction or other governmental
body issues a final and non-appealable order, decree or ruling
or takes any action permanently restraining, enjoining or
otherwise prohibiting the merger; |
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if the shareholders or, if required by a binding court order,
other constituencies, of either party do not approve the merger
by the requisite majority; |
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if the merger is not consummated by March 31, 2006,
provided that the party seeking the termination under the
termination clause has not been the cause of the failure to
consummate the merger by such date; or |
6
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if any representation or warranty of the other party becomes
untrue or the other party breaches any covenant or agreement set
forth in the merger agreement and such breach or
misrepresentation, not capable of being cured within
21 days, causes the closing conditions not to be satisfied. |
Ownership of EMI Following the Merger
We estimate that EMI will issue approximately 3,479,681 ordinary
shares to Elscint shareholders, other than EMI and Elscint, in
the merger. Following the merger, former Elscint shareholders,
other than EMI and Elscint, will own approximately 13.71% of the
outstanding ordinary shares of EMI and approximately 13.88% of
the voting rights in EMI. Existing EMI shareholders, other than
Europe-Israel and Mr. Mordechay Zisser, the indirect
controlling shareholder of Europe-Israel who serves as Executive
Chairman of EMIs board of directors, own approximately
44.86% of the outstanding ordinary shares of EMI and
approximately 44.04% of the voting rights in EMI. After the
merger, holders of EMI shares, other than Europe-Israel and
Mordechay Zisser, will own approximately 52.42% of the
outstanding ordinary shares of EMI and approximately 51.81% of
the voting rights in EMI. Europe-Israel and Mr. Zisser, who
beneficially own approximately 55.14% of the outstanding
ordinary shares of EMI and approximately 55.96% of the voting
rights in EMI, will beneficially own approximately 47.58% of the
outstanding ordinary shares of EMI and approximately 48.19% of
the voting rights in EMI immediately following the merger.
Elscint, which currently owns approximately 2.39% of the
outstanding ordinary shares of EMI and approximately 0.95% of
the voting rights in EMI, will own approximately 2.06% of the
outstanding ordinary shares of EMI and approximately 0.82% of
the voting rights in EMI immediately following the merger. The
percentages were calculated excluding options to
purchase 26,500 EMI ordinary shares to be assumed by EMI
upon completion of the merger.
Interests of Officers, Directors and Affiliates of EMI in the
Merger (See Page 54)
In considering the EMI board of directors recommendation
that you vote in favor of the merger and the merger agreement,
you should be aware that some of the officers and directors of
EMI have interests in the merger that are different from, or in
addition to, those of EMI shareholders generally. As a result,
EMIs directors, officers and affiliates may be more likely
to vote to approve the merger and the merger agreement than
EMIs shareholders generally.
Interests of Officers, Directors and Affiliates of Elscint in
the Merger (See Page 54)
In considering the Elscint board of directors
recommendation that you vote in favor of the merger agreement
and the merger, you should be aware that some of Elscints
officers and directors have interests in the merger that are
different from, or in addition to, those of Elscint shareholders
generally. As a result, Elscints directors, officers and
affiliates may be more likely to vote to approve the merger and
the merger agreement than Elscint shareholders generally.
Required Approvals (See Page 68)
Since the merger is governed by sections 350 and 351 of the
Companies Law, EMI and Elscint are required to apply to the
Israeli Tel Aviv-Jaffa District Court for approval to hold their
special meetings relating to the merger. On August 23,
2005, EMI and Elscint applied to the Israeli Tel Aviv-Jaffa
District Court for the issuance of an order to convene the
special meetings of the EMI and Elscint shareholders. The court
issued such order on August 25, 2005. Following approval of
the merger by EMIs and Elscints shareholders and the
satisfaction (or waiver) of the other conditions to the merger,
EMI and Elscint must apply to such court to approve the merger
itself.
In addition, the consummation of the merger is also subject to
the satisfaction of other approvals, see the section entitled
Conditions to the Merger above.
7
As of the date of this document, EMI and Elscint have not yet
received all required approvals. While we do not know of any
reason why we would not be able to obtain the necessary
approvals in a timely manner, we cannot be certain when or if we
will receive them.
Accounting Treatment (See Page 56)
The merger will be treated as a purchase for
accounting purposes, which means that the purchase price
(calculated based on EMIs number of shares issued in
consideration for Elscints minority shares and on
EMIs average share market price close to the date of the
announcement of the exchange ratio of the merger) will be
allocated by EMI to Elscints assets and liabilities based
on the fair value of the assets acquired and the liabilities
assumed. Any excess of the fair value of Elscints net
identified assets acquired over the purchase price, at
acquisition or Negative Initial Difference, will be
set off in the consolidated financial statements of EMI, first
against any intangible asset of Elscint, with the balance set
off against non-monetary tangible assets pro rata to their fair
value.
Material Tax Considerations (See Page 57)
Israeli Tax Considerations (See Page 57). In
general, under the Israeli Income Tax Ordinance [New Version] of
1961 (the Ordinance), the exchange of Elscint
ordinary shares for EMI ordinary shares is deemed to be a sale
of shares. However, the Ordinance provides that the sale of
shares of a listed Israeli resident company by a non-Israeli
resident will be exempt for Israeli tax purposes, provided that
such shareholder did not hold these shares prior to their
listing on the stock exchange. The sale of shares by a
non-Israeli resident might also be exempt from tax for Israeli
tax purposes under an applicable tax treaty.
EMI and Elscint have jointly approached the Israeli tax
authorities to receive a pre-ruling that the merger, as
structured, would be treated as a tax-free transaction for
Israeli tax purposes under section 104(c) combined with
section 103(k) of the Ordinance (or alternatively solely by
section 103(k) of the Ordinance). Nevertheless, any cash,
received in lieu of fractional share interests in EMI ordinary
shares will not be exempt as such for Israeli tax purposes and
may be subject to tax according to the Ordinance provisions.
Pursuant to sections 103(k) and 104(c) of the Ordinance which
govern the merger (or alternatively solely by
section 103(k) of the Ordinance), EMI, Elscint and their
controlling shareholders are subject to certain conditions. As
part of the final pre-ruling to be issued by the Israeli tax
authorities, additional conditions and/or restrictions may be
imposed on EMI, Elscint and their controlling shareholders by
the Israeli tax authorities. EMI expects that it, Elscint and
their controlling shareholder will be prepared to comply with
such conditions and restrictions. Nevertheless, in the event the
Israeli tax authority imposes conditions and/or restrictions
that are unacceptable to either EMI or Elscint or if they are
not able to obtain the consent of EMIs controlling
shareholder to such conditions or restrictions, then EMI and
Elscint will decline the receipt of such pre-ruling and the
merger agreement will be terminated.
United States Tax Considerations (See Page 58). EMI
and Elscint have received opinions that the merger of Elscint
and EMI by way of exchange of shares will qualify as a
reorganization for U.S. federal income tax purposes,
provided that the merger is completed under the current terms of
the merger agreement.
Provided that the merger qualifies as a reorganization, the
receipt by U.S. shareholders of Elscint of EMI ordinary
shares in the merger will be tax-free for U.S. federal
income tax purposes, except for taxes resulting from the receipt
of cash, if any, in lieu of fractional shares. Notwithstanding
the foregoing, if Elscint has been in a prior taxable year in
which a U.S. shareholder owned his or her Elscint ordinary
shares or will be in the taxable year in which the merger occurs
a passive foreign investment company (PFIC), and in
the taxable year in which the merger occurs EMI will not be a
PFIC, Elscint shareholders may be required to recognize any gain
realized in the merger.
Elscint believes it has not been a PFIC for any prior taxable
year and that it will not be a PFIC for the current taxable
year, except that it may have been a PFIC in 1999 and 2000, as a
result of the sale of its former business at the end of 1998.
The tests for determining PFIC status are fact-intensive and
subject to
8
legal interpretation for which definitive authority is lacking.
Although Elscint believes that there are reasonable
interpretations of the PFIC rules under which it would not be
classified as a PFIC in 1999 and 2000, there can be no assurance
that such view would prevail.
This summary does not discuss all aspects of U.S. or Israeli tax
consequences that may apply in connection with the merger.
Holders of Elscint ordinary shares should consult their own tax
advisors as to the tax consequences of the merger applicable to
them. In addition, please note that other tax consequences may
arise under any other applicable law in any other country.
Objection and Appraisal Rights (See Page 65)
Under Israeli law, which governs the merger, you are not
entitled to formal appraisal rights. However, since the merger
will be effected pursuant to sections 350 and 351 of the Israeli
Companies Law, it is subject to approval of an Israeli District
Court and the District Court (in our case, the Tel Aviv-Jaffa
District Court) may provide you a remedy if you object to the
merger within the timeframe and in the manner prescribed by the
Israeli Companies Law, the regulations promulgated thereunder
and the District Court.
Pursuant to regulations promulgated under the Israeli Companies
Law, unless the District Court determines otherwise, you may
raise your objections to the merger by filing an application
with the Court no later than 10 days following the filing
by EMI and Elscint of the second motion with the District Court,
which is expected to occur promptly following the approval of
the merger by EMIs and Elscints shareholders at the
special meetings to be convened on October 27, 2005 and
fulfillment of all of the conditions precedent set forth in the
merger agreement.
The application would typically be filed as a written
application supported by an affidavit.
You should be aware that neither the Israeli Companies Law nor
the regulations promulgated under that law specify the remedies
available to you in connection with the merger.
Comparative Per Share Market Price Information
EMI ordinary shares trade on NASDAQ under the symbol
EMITF and on the TASE. Elscint ordinary shares trade
on the NYSE under the symbol ELT.
Set forth below are the closing prices for EMI and Elscint
ordinary shares, on NASDAQ and the NYSE, respectively, and the
equivalent price of Elscint ordinary shares, on
(1) June 7, 2005, the trading day in the United States
immediately preceding the first public announcement in
connection with the proposed merger, (2) August 19,
2005, the trading day in the United States immediately preceding
the public announcement of the exchange ratio and the signing of
the definitive merger agreement, and (3) September 26,
2005, the most recent practicable trading day preceding the
mailing of this joint proxy statement/ prospectus. The
equivalent price per Elscint ordinary share as of a given date
equals the closing price on such date per EMI ordinary share
multiplied by 0.53, the exchange ratio.
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EMI | |
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Elscint | |
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Ordinary | |
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Ordinary | |
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Elscint | |
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Shares | |
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Shares | |
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Equivalent | |
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June 7, 2005
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$ |
19.37 |
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$ |
6.74 |
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$ |
10.27 |
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August 19, 2005
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19.32 |
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8.77 |
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10.24 |
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September 26, 2005
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Set forth below are the closing prices, in NIS, for EMI ordinary
shares, on the TASE, and the equivalent price of Elscint
ordinary shares, on (1) June 7, 2005 and June 8,
2005, the trading days in the United States and Israel,
respectively, immediately preceding the first public
announcement in connection with the proposed merger,
(2) August 19, 2005 and August 21, 2005, the
trading days in the United States and Israel, respectively
immediately preceding the public announcement of the exchange
ratio and the signing of the
9
definitive merger agreement, and (3) September 26, 2005,
the most recent practicable trading day preceding the mailing of
this joint proxy statement/ prospectus. The equivalent price per
Elscint ordinary share as of a given date equals the closing
price on such date per EMI ordinary share multiplied by 0.53,
the exchange ratio.
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Closing Price | |
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(TASE) (NIS) | |
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EMI | |
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Ordinary | |
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Elscint | |
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Shares | |
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Equivalent | |
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June 8 and June 7, 2005
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85.07 |
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45.08 |
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August 21 and August 19, 2005
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86.12 |
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45.64 |
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September 26, 2005
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While the number of EMI ordinary shares each Elscint shareholder
will receive in the merger is fixed, the market value of these
EMI ordinary shares may fluctuate. Shareholders are encouraged
to obtain current market quotations for EMI ordinary shares and
Elscint ordinary shares. No assurance can be given as to the
future prices or markets for EMI ordinary shares and Elscint
ordinary shares.
Listing of EMI Ordinary Shares
We expect that the EMI ordinary shares to be issued in
connection with the merger will be listed on NASDAQ, subject to
official notice of issuance, and on the TASE, subject to the
receipt of the TASE approval for such listing.
10
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF EMI
AND ELSCINT
The following selected financial data for EMI and Elscint should
be read in conjunction with the historical financial statements
and related notes contained in the Annual Reports on
Form 20-F that each company has filed with the Securities
and Exchange Commission. See and Where You Can Find More
Information on page 83.
The consolidated statement of operations data for the years
ended December 31, 2002, 2003 and 2004, and the selected
balance sheet data as of December 31, 2003 and 2004, have
been derived from our audited consolidated financial statements
incorporated by reference to this joint proxy statement/
prospectus. The consolidated financial statements were prepared
in accordance with Israeli GAAP, and were audited by Brightman
Almagor & Co., an independent registered public
accounting firm in Israel, and a Member Firm of Deloitte Touche
Tohmatsu, except for certain subsidiaries and an associate which
were audited by other auditors. The consolidated statements of
operations data for the years ended December 21, 2000 and
2001, and the selected balance sheet data as of
December 31, 2000, 2001 and 2002, have been derived from
our audited consolidated financial statements not included in
this joint proxy statement/ prospectus and have also been
prepared in accordance with Israeli GAAP.
The selected financial data for the year ended December 31,
2000, 2001, 2002 and 2003 are stated in values adjusted for the
change in the general purchasing power of the Israeli currency
(NIS adjusted to the Israeli Consumer Price Index as of December
2003). The 2004 selected consolidated financial information are
presented in reported value (as this term is defined in
Note 2A(1) to the financial statements included in
Item 18 in EMIs Annual Report on Form 20-F for
the fiscal year ended December 31, 2004 filed with the
Securities and Exchange Commission on June 30, 2005 and
incorporated into this joint proxy statement/ prospectus). The
2004 information is presented in NIS as well as a convenience
translation to U.S. dollars.
For the readers convenience only, some financial
information has been translated from NIS to the
U.S. dollar, using the representative exchange rate as
published by the Bank of Israel at December 31, 2004
(U.S.$1.00 = NIS 4.308). The Federal Reserve Bank of New York
does not certify for customs purposes a noon buying rate for
wire transfers in NIS. Therefore, all information about exchange
rates is based on the Bank of Israel rates.
The historical results presented below are not necessarily
indicative of future results.
11
EMI-SELECTED HISTORICAL FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF OPERATIONS
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For the Year Ended December 31, | |
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2000(1) | |
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2001(2) | |
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2002(2) | |
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2003(2) | |
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2004(2) | |
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2004 | |
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Reported | |
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Convenience | |
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NIS | |
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translation | |
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Adjusted NIS (thousands) | |
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U.S. $ | |
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(In thousands, except per share amounts) | |
REVENUES
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|
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|
|
|
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Commercial-centers operations
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|
|
27,586 |
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|
|
132,212 |
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|
|
279,776 |
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|
|
347,056 |
|
|
|
311,893 |
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|
|
72,398 |
|
Hotel operations and management
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|
|
106,051 |
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|
|
139,226 |
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|
|
206,679 |
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|
|
189,205 |
|
|
|
218,365 |
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|
|
50,688 |
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Sale of medical systems
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|
|
|
|
|
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|
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|
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44,049 |
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|
|
10,225 |
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Lease of assets
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|
|
|
|
|
|
|
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|
|
|
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|
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13,495 |
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|
|
13,238 |
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|
|
3,073 |
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Long-term projects
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|
|
19,984 |
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|
|
10,030 |
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|
|
1,509 |
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|
|
|
|
|
|
|
|
153,621 |
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|
|
281,468 |
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|
|
487,964 |
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|
|
549,756 |
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|
|
587,545 |
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|
|
136,384 |
|
COST OF REVENUES
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|
|
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Commercial-centers operations
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|
|
12,673 |
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|
|
66,646 |
|
|
|
150,005 |
|
|
|
192,916 |
|
|
|
199,780 |
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|
|
46,374 |
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Hotel operations and management
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|
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91,296 |
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|
|
126,228 |
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|
|
193,686 |
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|
|
177,690 |
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|
|
201,094 |
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|
|
46,679 |
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Sale of medical systems
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|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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9,834 |
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|
|
2,283 |
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Lease of assets
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|
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3,510 |
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|
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3,175 |
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|
737 |
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Long-term projects
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|
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17,901 |
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|
|
7,311 |
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|
|
1,392 |
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|
|
|
|
|
|
|
|
121,870 |
|
|
|
200,185 |
|
|
|
345,083 |
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|
|
374,116 |
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|
|
413,883 |
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|
|
96,073 |
|
GROSS INCOME
|
|
|
31,751 |
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|
|
81,283 |
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|
|
142,881 |
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|
|
175,640 |
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|
|
173,662 |
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|
|
40,311 |
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Project initiation expenses
|
|
|
2,766 |
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|
|
5,856 |
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|
|
16,630 |
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|
|
8,839 |
|
|
|
2,371 |
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|
|
550 |
|
Research and development expenses, net
|
|
|
26,065 |
|
|
|
24,198 |
|
|
|
28,454 |
|
|
|
43,719 |
|
|
|
38,158 |
|
|
|
8,857 |
|
Marketing and selling expenses
|
|
|
2,214 |
|
|
|
8,309 |
|
|
|
28,052 |
|
|
|
30,969 |
|
|
|
43,075 |
|
|
|
9,999 |
|
General and administrative expenses
|
|
|
53,988 |
|
|
|
62,260 |
|
|
|
88,020 |
|
|
|
87,035 |
|
|
|
92,536 |
|
|
|
21,480 |
|
|
|
|
85,034 |
|
|
|
100,623 |
|
|
|
161,156 |
|
|
|
170,562 |
|
|
|
176,140 |
|
|
|
40,886 |
|
OPERATING PROFIT (LOSS) BEFORE FINANCIAL EXPENSES, NET
|
|
|
(53,283 |
) |
|
|
(19,340 |
) |
|
|
(18,275 |
) |
|
|
5,078 |
|
|
|
(2,478 |
) |
|
|
(575 |
) |
Financial income (expenses), net
|
|
|
32,563 |
|
|
|
101,559 |
|
|
|
(5,440 |
) |
|
|
(211,821 |
) |
|
|
(53,569 |
) |
|
|
(12,435 |
) |
OPERATING PROFIT (LOSS) AFTER FINANCIAL INCOME (EXPENSES),
NET
|
|
|
(20,720 |
) |
|
|
82,219 |
|
|
|
(23,715 |
) |
|
|
(206,743 |
) |
|
|
(56,047 |
) |
|
|
(13,010 |
) |
Other income (expenses), net
|
|
|
(15,599 |
) |
|
|
34,076 |
|
|
|
9,504 |
|
|
|
34,652 |
|
|
|
96,908 |
|
|
|
22,495 |
|
PROFIT (LOSS) BEFORE INCOME TAXES
|
|
|
(36,319 |
) |
|
|
116,295 |
|
|
|
(14,211 |
) |
|
|
(172,091 |
) |
|
|
40,861 |
|
|
|
9,485 |
|
Income taxes (tax benefits)
|
|
|
18,550 |
|
|
|
13,596 |
|
|
|
21,711 |
|
|
|
(20,217 |
) |
|
|
15,804 |
|
|
|
3,669 |
|
PROFIT (LOSS) AFTER INCOME TAXES
|
|
|
(54,869 |
) |
|
|
102,699 |
|
|
|
(35,922 |
) |
|
|
(151,874 |
) |
|
|
25,057 |
|
|
|
5,816 |
|
Share in results of associated companies, net
|
|
|
(3,240 |
) |
|
|
(9,712 |
) |
|
|
(2,906 |
) |
|
|
(20,951 |
) |
|
|
(15,968 |
) |
|
|
(3,707 |
) |
Minority-interest in results of subsidiaries, net
|
|
|
14,875 |
|
|
|
(5,915 |
) |
|
|
24,490 |
|
|
|
48,671 |
|
|
|
27,448 |
|
|
|
6,372 |
|
INCOME (LOSS) FROM CONTINUING OPERATIONS
|
|
|
(43,234 |
) |
|
|
87,072 |
|
|
|
(14,338 |
) |
|
|
(124,154 |
) |
|
|
36,537 |
|
|
|
8,481 |
|
Profit from discontinued operations, net
|
|
|
27,806 |
|
|
|
18,759 |
|
|
|
54,752 |
|
|
|
12,073 |
|
|
|
6,810 |
|
|
|
1,581 |
|
NET INCOME (LOSS)
|
|
|
(15,428 |
) |
|
|
105,831 |
|
|
|
40,414 |
|
|
|
(112,081 |
) |
|
|
43,347 |
|
|
|
10,062 |
|
EARNINGS (LOSS) PER SHARE (IN NIS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From continuing operations
|
|
|
(1.95 |
) |
|
|
3.92 |
|
|
|
(0.64 |
) |
|
|
(5.56 |
) |
|
|
1.59 |
|
|
|
0.37 |
|
From discontinued operations
|
|
|
1.25 |
|
|
|
0.84 |
|
|
|
2.45 |
|
|
|
0.54 |
|
|
|
0.30 |
|
|
|
0.07 |
|
Basic earnings (loss) per share
|
|
|
(0.70 |
) |
|
|
4.76 |
|
|
|
1.81 |
|
|
|
(5.02 |
) |
|
|
1.89 |
|
|
|
0.44 |
|
Diluted EPS
|
|
|
|
|
|
|
4.00 |
|
|
|
1.71 |
|
|
|
(5.02 |
) |
|
|
1.84 |
|
|
|
0.43 |
|
Book value per share
|
|
|
34.47 |
|
|
|
41.25 |
|
|
|
47.52 |
|
|
|
42.69 |
|
|
|
34.92 |
|
|
|
8.11 |
|
Cash dividends declared(*)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Audited by Brightman Almagor and Somech Chaikin a
firm of certified public accountants in Israel and a member of
KPMG International, who were joint auditing accountants with
Brightman Almagor during these years. |
|
(2) |
Audited by Brightman Almagor. |
|
|
(*) |
On March 17, 2005, EMI paid approximately $37 million
($1.689 per share) as a dividend to its holders of record on
March 2, 2005. |
12
INCOME STATEMENT DATA
AS PER U.S. GAAP(*):
DATA IN NIS AS AT DECEMBER 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convenience | |
|
|
For the Year Ended December 31, | |
|
Translation | |
|
|
| |
|
December 31, | |
|
|
2002 | |
|
2003 | |
|
2004 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
|
Adjusted | |
|
Adjusted | |
|
Reported | |
|
U.S.$ | |
|
|
NIS | |
|
NIS | |
|
NIS | |
|
|
NET INCOME (LOSS) AND COMPREHENSIVE INCOME:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) according to U.S. GAAP (in thousands)
|
|
|
(27,745 |
) |
|
|
(19,251 |
) |
|
|
(92,446 |
) |
|
|
(21,459 |
) |
Total comprehensive income (loss) (in thousands) according to
U.S. GAAP
|
|
|
143,362 |
|
|
|
35,545 |
|
|
|
(149,915 |
) |
|
|
(34,799 |
) |
Basic (loss) per ordinary share as per U.S. GAAP
|
|
|
(1.24 |
) |
|
|
(0.86 |
) |
|
|
(4.02 |
) |
|
|
(0.93 |
) |
Diluted loss per ordinary share as per U.S. GAAP
|
|
|
(1.35 |
) |
|
|
(0.86 |
) |
|
|
(4.02 |
) |
|
|
(0.93 |
) |
Weighted average of number of shares and share equivalents under
U.S. GAAP (thousands)
|
|
|
22,337 |
|
|
|
22,337 |
|
|
|
23,025 |
|
|
|
23,025 |
|
|
|
(*) |
For further information as to the differences between Israeli
and U.S. GAAP, as applicable to EMIs financial
statements, see Note 24 to the financial statements
included in EMIs Annual Report on Form 20-F for the
fiscal year ended December 31, 2004, filed with the
Securities and Exchange Commission on June 30, 2005 and
incorporated into this joint proxy statement/ prospectus. |
SELECTED BALANCE SHEET DATA
(Including as per U.S. GAAP)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convenience | |
|
|
As at December 31, | |
|
Translation | |
|
|
| |
|
December 31, | |
|
|
2000 | |
|
2001 | |
|
2002 | |
|
2003 | |
|
2004 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
Reported | |
|
U.S.$ | |
|
|
Adjusted NIS | |
|
NIS | |
|
|
|
|
(In Thousands) | |
Current Assets
|
|
|
853,911 |
|
|
|
1,132,194 |
|
|
|
1,006,237 |
|
|
|
577,687 |
|
|
|
736,339 |
|
|
|
170,924 |
|
Long term investments and receivables
|
|
|
570,778 |
|
|
|
477,052 |
|
|
|
453,839 |
|
|
|
218,407 |
|
|
|
185,393 |
|
|
|
43,034 |
|
Hotels, commercial centers and other fixed assets
|
|
|
1,845,990 |
|
|
|
2,858,129 |
|
|
|
4,090,936 |
|
|
|
4,629,675 |
|
|
|
3,527,988 |
|
|
|
818,938 |
|
Other assets and deferred expenses
|
|
|
39,717 |
|
|
|
60,596 |
|
|
|
73,024 |
|
|
|
85,798 |
|
|
|
55,859 |
|
|
|
12,966 |
|
Assets related to discontinued operations
|
|
|
304,155 |
|
|
|
199,360 |
|
|
|
111,984 |
|
|
|
16,228 |
|
|
|
14,700 |
|
|
|
3,412 |
|
Total Assets
|
|
|
3,614,551 |
|
|
|
4,727,331 |
|
|
|
5,736,020 |
|
|
|
5,527,795 |
|
|
|
4,520,279 |
|
|
|
1,049,274 |
|
Current Liabilities
|
|
|
1,019,706 |
|
|
|
1,612,532 |
|
|
|
1,901,506 |
|
|
|
1,178,415 |
|
|
|
794,741 |
|
|
|
184,479 |
|
Long-term liabilities
|
|
|
1,098,936 |
|
|
|
1,446,923 |
|
|
|
2,176,301 |
|
|
|
2,841,326 |
|
|
|
2,418,897 |
|
|
|
561,489 |
|
Liabilities related to discontinued operations
|
|
|
266,565 |
|
|
|
253,854 |
|
|
|
110,007 |
|
|
|
82,802 |
|
|
|
71,986 |
|
|
|
16,710 |
|
Minority interest
|
|
|
467,950 |
|
|
|
497,257 |
|
|
|
486,670 |
|
|
|
471,606 |
|
|
|
430,687 |
|
|
|
99,974 |
|
Shareholders equity
|
|
|
761,394 |
|
|
|
916,765 |
|
|
|
1,061,536 |
|
|
|
953,646 |
|
|
|
803,968 |
|
|
|
186,622 |
|
Total Liabilities
|
|
|
3,614,551 |
|
|
|
4,727,331 |
|
|
|
5,736,020 |
|
|
|
5,527,795 |
|
|
|
4,520,279 |
|
|
|
1,049,274 |
|
Total assets according to U.S. GAAP
|
|
|
3,634,470 |
|
|
|
4,772,914 |
|
|
|
6,007,937 |
|
|
|
5,917,917 |
|
|
|
4,676,008 |
|
|
|
1,085,424 |
|
Total liabilities according to U.S. GAAP
|
|
|
2,874,793 |
|
|
|
3,955,945 |
|
|
|
5,040,903 |
|
|
|
4,891,985 |
|
|
|
3,905,673 |
|
|
|
906,608 |
|
Total shareholders equity according to U.S. GAAP
|
|
|
759,677 |
|
|
|
816,969 |
|
|
|
967,034 |
|
|
|
1,025,932 |
|
|
|
770,335 |
|
|
|
178,816 |
|
13
ELSCINT-SELECTED HISTORICAL FINANCIAL INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convenience | |
|
|
Year Ended December 31, | |
|
Translation | |
|
|
| |
|
December 31, | |
|
|
2000 | |
|
2001 | |
|
2002 | |
|
2003 | |
|
2004 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
Reported NIS | |
|
U.S. $ | |
|
|
Adjusted NIS | |
|
|
(In thousands, except per share amounts) | |
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel operations and management
|
|
|
106,051 |
|
|
|
139,223 |
|
|
|
206,679 |
|
|
|
189,205 |
|
|
|
218,365 |
|
|
|
50,688 |
|
Commercial center operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,106 |
|
|
|
55,263 |
|
|
|
12,828 |
|
Asset leasing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,495 |
|
|
|
13,238 |
|
|
|
3,073 |
|
Long-term contracts
|
|
|
19,983 |
|
|
|
10,028 |
|
|
|
1,509 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
126,034 |
|
|
|
149,251 |
|
|
|
208,188 |
|
|
|
222,806 |
|
|
|
286,866 |
|
|
|
66,589 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel operations and management
|
|
|
68,606 |
|
|
|
95,851 |
|
|
|
133,207 |
|
|
|
128,301 |
|
|
|
137,622 |
|
|
|
31,946 |
|
Commercial center operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,975 |
|
|
|
59,885 |
|
|
|
13,901 |
|
Asset leasing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,510 |
|
|
|
3,175 |
|
|
|
737 |
|
Long-term contracts
|
|
|
17,900 |
|
|
|
7,311 |
|
|
|
1,392 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86,506 |
|
|
|
103,162 |
|
|
|
134,599 |
|
|
|
153,786 |
|
|
|
200,682 |
|
|
|
46,584 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
39,528 |
|
|
|
46,089 |
|
|
|
73,589 |
|
|
|
69,020 |
|
|
|
86,184 |
|
|
|
20,005 |
|
Hotel depreciation, amortization and operating expenses
|
|
|
22,688 |
|
|
|
31,550 |
|
|
|
61,503 |
|
|
|
50,432 |
|
|
|
64,513 |
|
|
|
14,975 |
|
Initiation expenses
|
|
|
1,813 |
|
|
|
3,960 |
|
|
|
1,773 |
|
|
|
4,303 |
|
|
|
1,611 |
|
|
|
374 |
|
Selling and marketing expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,948 |
|
|
|
14,046 |
|
|
|
3,260 |
|
General and administrative expenses
|
|
|
23,262 |
|
|
|
25,790 |
|
|
|
31,574 |
|
|
|
29,355 |
|
|
|
27,608 |
|
|
|
6,409 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,763 |
|
|
|
61,300 |
|
|
|
94,850 |
|
|
|
93,038 |
|
|
|
107,778 |
|
|
|
25,018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss before finance income (expenses), net
|
|
|
(8,235 |
) |
|
|
(15,211 |
) |
|
|
(21,261 |
) |
|
|
(24,018 |
) |
|
|
(21,594 |
) |
|
|
(5,013 |
) |
Finance income (expenses), net
|
|
|
(20,211 |
) |
|
|
65,093 |
|
|
|
12,805 |
|
|
|
(41,262 |
) |
|
|
(34,805 |
) |
|
|
(8,079 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss after finance income (expenses), net
|
|
|
(28,446 |
) |
|
|
49,882 |
|
|
|
(8,456 |
) |
|
|
(65,280 |
) |
|
|
(56,399 |
) |
|
|
(13,092 |
) |
Other expenses, net
|
|
|
2,617 |
|
|
|
(13,114 |
) |
|
|
(21,502 |
) |
|
|
(16,176 |
) |
|
|
(9,361 |
) |
|
|
(2,173 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(25,829 |
) |
|
|
36,768 |
|
|
|
(29,958 |
) |
|
|
(81,456 |
) |
|
|
(65,760 |
) |
|
|
(15,265 |
) |
Tax benefits
|
|
|
4,634 |
|
|
|
5,383 |
|
|
|
(5,221 |
) |
|
|
(8,384 |
) |
|
|
(647 |
) |
|
|
(151 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss after income taxes
|
|
|
(30,463 |
) |
|
|
31,385 |
|
|
|
(24,737 |
) |
|
|
(73,072 |
) |
|
|
(65,113 |
) |
|
|
(15,114 |
) |
Share in loss of an associated company
|
|
|
(3,240 |
) |
|
|
(9,712 |
) |
|
|
(2,847 |
) |
|
|
(7,019 |
) |
|
|
(6,611 |
) |
|
|
(1,535 |
) |
Minority interest in loss (profit) of a subsidiary
|
|
|
|
|
|
|
1,288 |
|
|
|
879 |
|
|
|
746 |
|
|
|
(724 |
) |
|
|
(168 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
(33,703 |
) |
|
|
22,961 |
|
|
|
(26,705 |
) |
|
|
(79,345 |
) |
|
|
(72,448 |
) |
|
|
(16,817 |
) |
Net profit from discontinuing operation
|
|
|
76,471 |
|
|
|
33,935 |
|
|
|
88,983 |
|
|
|
12,972 |
|
|
|
11,067 |
|
|
|
2,569 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit (loss)
|
|
|
42,768 |
|
|
|
56,896 |
|
|
|
62,278 |
|
|
|
(66,373 |
) |
|
|
(61,381 |
) |
|
|
(14,248 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per ordinary share
(NIS 0.05 par value) from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
(2.02 |
) |
|
|
1.37 |
|
|
|
(1.60 |
) |
|
|
(4.75 |
) |
|
|
(4.37 |
) |
|
|
(1.01 |
) |
|
Discontinuing operation
|
|
|
4.58 |
|
|
|
2.03 |
|
|
|
5.33 |
|
|
|
0.78 |
|
|
|
0.67 |
|
|
|
0.16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.56 |
|
|
|
3.40 |
|
|
|
3.73 |
|
|
|
(3.97 |
) |
|
|
(3.70 |
) |
|
|
(0.85 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares (NIS 0.05 par
value) used in the computation of basic earnings (loss) per share
|
|
|
16,690,643 |
|
|
|
16,690,643 |
|
|
|
16,690,643 |
|
|
|
16,690,643 |
|
|
|
16,597,181 |
|
|
|
16,597,181 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per ordinary share (NIS 0.05 par
value) from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
|
(*) |
|
|
|
(*) |
|
|
(1.66 |
) |
|
|
|
(*) |
|
|
|
(*) |
|
|
|
(*) |
|
Discontinuing operation
|
|
|
|
(*) |
|
|
|
(*) |
|
|
5.10 |
|
|
|
|
(*) |
|
|
|
(*) |
|
|
|
(*) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares (NIS 0.05 par
value) used in the computation of diluted earnings per share
|
|
|
|
|
|
|
|
|
|
|
17,424,643 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value per share
|
|
|
55.04 |
|
|
|
59.39 |
|
|
|
60.05 |
|
|
|
56.69 |
|
|
|
53.19 |
|
|
|
12.34 |
|
Cash dividends declared
|
|
|
|
|
|
|
|
|
|
|
1.10(** |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) |
anti dilutive. |
|
(**) |
On October 10, 2002, Elscint paid approximately
$19.3 million ($1.10 per share) as a dividend to its
holders of record on September 30, 2002. |
14
Income statement data as per U.S. GAAP(*):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convenience | |
|
|
Year Ended December 31, | |
|
Translation | |
|
|
| |
|
December 31, | |
|
|
2000 | |
|
2001 | |
|
2002 | |
|
2003 | |
|
2004 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
Reported NIS | |
|
U.S. $ | |
|
|
Adjusted NIS | |
|
|
(In Thousands, except per share data) | |
a) Net income and comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
(26,221 |
) |
|
|
(8,969 |
) |
|
|
(19,340 |
) |
|
|
(30,334 |
) |
|
|
(63,960 |
) |
|
|
(14,847 |
) |
Net profit from discontinuing operation
|
|
|
76,471 |
|
|
|
33,935 |
|
|
|
51,834 |
|
|
|
50,121 |
|
|
|
11,067 |
|
|
|
2,569 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit (loss)
|
|
|
50,250 |
|
|
|
24,966 |
|
|
|
32,494 |
|
|
|
19,787 |
|
|
|
(52,893 |
) |
|
|
(12,278 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
|
41,900 |
|
|
|
42,362 |
|
|
|
76,656 |
|
|
|
40,156 |
|
|
|
(35,529 |
) |
|
|
(8,247 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
b) Earnings per ordinary share (NIS 0.05 par
value)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings (loss) per ordinary share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
(1.57 |
) |
|
|
(0.54 |
) |
|
|
(1.16 |
) |
|
|
(1.81 |
) |
|
|
(3.85 |
) |
|
|
(0.89 |
) |
Discontinuing operation
|
|
|
4.58 |
|
|
|
2.03 |
|
|
|
3.10 |
|
|
|
2.98 |
|
|
|
0.67 |
|
|
|
0.15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.01 |
|
|
|
1.49 |
|
|
|
1.94 |
|
|
|
1.18 |
|
|
|
3.18 |
|
|
|
0.74 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares (NIS 0.05 per value)
used in the computation of basic and diluted earning (loss) per
share (thousands)
|
|
|
16,689 |
|
|
|
16,691 |
|
|
|
16,691 |
|
|
|
16,691 |
|
|
|
16,597 |
|
|
|
16,597 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) |
For further information as to the main differences between
Israeli and U.S. GAAP, as applicable to Elscints
financial statements, see Note 24 to the financial
statements included in Elscints Annual Report on
Form 20-F for the fiscal year ended December 31, 2004,
as amended, filed with the Securities and Exchange Commission on
July 14, 2005 and incorporated into this joint proxy
statement/ prospectus. |
Selected balance sheet data as per Israeli GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convenience | |
|
|
As at December 31, | |
|
Translation | |
|
|
| |
|
December 31, | |
|
|
2000 | |
|
2001 | |
|
2002 | |
|
2003 | |
|
2004 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
Reported NIS | |
|
U.S. $ | |
|
|
Adjusted NIS | |
|
|
(In Thousands) | |
Current assets
|
|
|
490,126 |
|
|
|
478,961 |
|
|
|
288,779 |
|
|
|
313,747 |
|
|
|
256,854 |
|
|
|
59,623 |
|
Deposits, loans, long-term receivable and investments
|
|
|
538,301 |
|
|
|
380,204 |
|
|
|
377,733 |
|
|
|
104,131 |
|
|
|
81,428 |
|
|
|
18,902 |
|
Fixed assets
|
|
|
911,132 |
|
|
|
1,334,237 |
|
|
|
1,606,786 |
|
|
|
2,003,427 |
|
|
|
2,185,325 |
|
|
|
507,271 |
|
Assets related to discontinuing operation
|
|
|
304,155 |
|
|
|
186,930 |
|
|
|
111,983 |
|
|
|
16,228 |
|
|
|
14,700 |
|
|
|
3,412 |
|
Total assets
|
|
|
2,248,093 |
|
|
|
2,392,033 |
|
|
|
2,397,284 |
|
|
|
2,448,449 |
|
|
|
2,550,956 |
|
|
|
592,144 |
|
Short-term credits
|
|
|
369,063 |
|
|
|
438,513 |
|
|
|
522,242 |
|
|
|
407,599 |
|
|
|
135,429 |
|
|
|
31,436 |
|
Long-term liabilities
|
|
|
598,544 |
|
|
|
608,303 |
|
|
|
627,268 |
|
|
|
850,470 |
|
|
|
1,325,803 |
|
|
|
307,754 |
|
Liabilities related to discontinuing operation
|
|
|
266,744 |
|
|
|
250,623 |
|
|
|
108,469 |
|
|
|
82,217 |
|
|
|
71,410 |
|
|
|
16,576 |
|
Shareholders equity
|
|
|
918,577 |
|
|
|
991,287 |
|
|
|
1,002,154 |
|
|
|
946,198 |
|
|
|
882,880 |
|
|
|
204,940 |
|
15
Selected balance sheet data as per U.S. GAAP(*):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convenience | |
|
|
As at December 31, | |
|
Translation | |
|
|
| |
|
December 31, | |
|
|
2000 | |
|
2001 | |
|
2002 | |
|
2003 | |
|
2004 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
Reported NIS | |
|
U.S. $ | |
|
|
Adjusted NIS | |
|
|
(In Thousands) | |
Current assets
|
|
|
490,126 |
|
|
|
478,961 |
|
|
|
288,779 |
|
|
|
313,747 |
|
|
|
256,854 |
|
|
|
59,623 |
|
Deposits, loans, long-term receivable and investments
|
|
|
496,995 |
|
|
|
335,720 |
|
|
|
327,849 |
|
|
|
61,207 |
|
|
|
53,662 |
|
|
|
12,456 |
|
Fixed assets
|
|
|
925,431 |
|
|
|
1,327,588 |
|
|
|
1,620,657 |
|
|
|
2,071,334 |
|
|
|
2,295,918 |
|
|
|
532,943 |
|
Assets related to discontinuing operation
|
|
|
304,155 |
|
|
|
186,930 |
|
|
|
153,413 |
|
|
|
16,228 |
|
|
|
14,700 |
|
|
|
3,412 |
|
Total assets
|
|
|
2,219,520 |
|
|
|
2,363,510 |
|
|
|
2,431,655 |
|
|
|
2,506,973 |
|
|
|
2,672,673 |
|
|
|
620,389 |
|
Short-term credits
|
|
|
369,063 |
|
|
|
438,513 |
|
|
|
522,242 |
|
|
|
407,599 |
|
|
|
135,429 |
|
|
|
31,436 |
|
Long-term liabilities
|
|
|
600,155 |
|
|
|
652,246 |
|
|
|
676,531 |
|
|
|
902,302 |
|
|
|
1,411,817 |
|
|
|
327,720 |
|
Liabilities related to discontinuing operation
|
|
|
266,744 |
|
|
|
250,623 |
|
|
|
187,048 |
|
|
|
82,217 |
|
|
|
71,410 |
|
|
|
16,576 |
|
Shareholders equity
|
|
|
882,508 |
|
|
|
923,867 |
|
|
|
914,369 |
|
|
|
946,198 |
|
|
|
921,675 |
|
|
|
213,945 |
|
|
|
(*) |
For further information as to the main differences between
Israeli and U.S. GAAP, as applicable to Elscints
financial statements, see Note 24 to the financial
statements included in Elscints Annual Report on
Form 20-F, as amended, for the fiscal year ended
December 31, 2004, filed with the Securities and Exchange
Commission on July 14, 2005 and incorporated into this
joint proxy statement/ prospectus. |
16
SELECTED UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL INFORMATION OF EMI AND ELSCINT
(In thousands, except per share amounts)
The following selected unaudited pro forma financial information
has been prepared to give effect to the merger, which
constitutes a transaction between EMI and the minority
shareholders of Elscint,based on the purchase method of
accounting and on pro forma assumptions and estimates that
EMI believes are reasonable and that are set forth below. The
purchase method of accounting means that the
purchase price (calculated based on EMIs number of shares
issued in consideration for Elscints minority shares and
on EMIs average share market price close to the date of
the announcement of the exchange ratio of the merger) will be
allocated by EMI to Elscints assets and liabilities based
on the fair value of the assets acquired and the liabilities
assumed. Any excess of the fair value of Elscints net
identified assets acquired over the purchase price at
acquisition, or Negative Initial Difference, will be
set off in the consolidated financial statements of EMI, first
against any intangible asset of Elscint, with the balance set
off against non-monetary tangible assets pro rata to their fair
value. This selected unaudited pro forma combined condensed
financial information has been prepared based on, and should be
read in conjunction with, the historical consolidated financial
statements and the accompanying notes thereto, contained in each
of EMIs and Elscints Annual Report on Form 20-F
for the year ended December 31, 2004 which are incorporated
herein by reference. See also the Selected Unaudited Pro
Forma Combined Condensed Financial Information.
The following selected unaudited pro forma combined condensed
balance sheet information as of December 31, 2004 gives
effect to the merger, as if it had occurred on that date (that
means, based on Elscints shareholders equity as of that
date). The following selected unaudited pro forma combined
condensed statement of operations information and per share
information for the year ended December 31, 2004 give
effect to the merger as if it had occurred on January 1,
2004.
The pro forma data are presented for illustrative purposes only.
You should not rely on this information as being indicative of
the combined operating results or combined financial position
that would have occurred had the merger been consummated at the
dates indicated in the preceding paragraph, nor are they
necessarily indicative of future operating results, future
financial position or future shareholders equity.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Consolidated Balance Sheet Information | |
|
|
In Accordance with | |
|
|
| |
|
|
Israeli GAAP (unaudited) | |
|
U.S. GAAP (unaudited) | |
|
|
| |
|
| |
|
|
December 31, 2004 | |
|
December 31, 2004 | |
|
|
| |
|
| |
|
|
Pro Forma | |
|
Convenience | |
|
Pro Forma | |
|
Convenience | |
|
|
Combined | |
|
Translation(*) | |
|
Combined | |
|
Translation(*) | |
|
|
| |
|
| |
|
| |
|
| |
|
|
NIS | |
|
U.S.$ | |
|
NIS | |
|
U.S.$ | |
|
|
(In Thousands) |
|
Fixed Assets
|
|
|
3,418,202 |
|
|
|
793,455 |
|
|
|
3,232,239 |
|
|
|
750,288 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Assets and Deferred Expenses
|
|
|
54,584 |
|
|
|
12,670 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
4,409,218 |
|
|
|
1,023,495 |
|
|
|
4,539,135 |
|
|
|
1,053,652 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payables and Other Credit Balances
|
|
|
187,923 |
|
|
|
43,622 |
|
|
|
187,923 |
|
|
|
43,622 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long Term Liabilities Deferred Taxes on Income
|
|
|
35,279 |
|
|
|
8,189 |
|
|
|
143,930 |
|
|
|
33,410 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority Interest
|
|
|
32,453 |
|
|
|
7,533 |
|
|
|
29,425 |
|
|
|
6,830 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders Equity
|
|
|
1,082,907 |
|
|
|
251,371 |
|
|
|
1,049,274 |
|
|
|
243,564 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) Using the representative exchange rate as of
December 31, 2004 ($1.00 = NIS 4.308).
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Consolidated Statement of Operations Information | |
|
|
In Accordance with | |
|
|
| |
|
|
Israeli GAAP (unaudited) | |
|
U.S. GAAP (unaudited) | |
|
|
| |
|
| |
|
|
Year Ended | |
|
Year Ended | |
|
|
December 31, 2004 | |
|
December 31, 2004 | |
|
|
| |
|
| |
|
|
Pro Forma | |
|
Convenience | |
|
Pro Forma | |
|
Convenience | |
|
|
Combined | |
|
Translation(*) | |
|
Combined | |
|
Translation(*) | |
|
|
| |
|
| |
|
| |
|
| |
|
|
NIS | |
|
U.S.$ | |
|
NIS | |
|
U.S.$ | |
|
|
(In Thousands) |
|
Cost of revenues
|
|
|
410,995 |
|
|
|
95,403 |
|
|
|
358,575 |
|
|
|
83,235 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss) before financial expenses, net
|
|
|
410 |
|
|
|
95 |
|
|
|
(114,745 |
) |
|
|
(26,635 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest in results of subsidiaries, net
|
|
|
(724 |
) |
|
|
(168 |
) |
|
|
(724 |
) |
|
|
(168 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit from continuing operations
|
|
|
11,253 |
|
|
|
2,612 |
|
|
|
(209,480 |
) |
|
|
(48,626 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) Using the representative exchange rate as of
December 31, 2004 ($1.00 = NIS 4.308).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Data in Accordance with | |
|
|
| |
|
|
Israeli GAAP (unaudited) | |
|
U.S. GAAP (unaudited) | |
|
|
| |
|
| |
|
|
Year Ended | |
|
|
|
Year Ended | |
|
|
|
|
December 31, | |
|
Convenience | |
|
December 31, | |
|
Convenience | |
|
|
2004 | |
|
Translation(*) | |
|
2004 | |
|
Translation (*) | |
|
|
| |
|
| |
|
| |
|
| |
|
|
NIS | |
|
U.S.$ | |
|
NIS | |
|
U.S.$ | |
EMI Historical per ordinary share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) from continuing operations per share
|
|
|
1.59 |
|
|
|
0.37 |
|
|
|
(8.07 |
) |
|
|
(1.87 |
) |
Diluted net income (loss) from continuing operations per share
|
|
|
1.56 |
|
|
|
0.36 |
|
|
|
(** |
) |
|
|
(** |
) |
Book value per share
|
|
|
34.91 |
|
|
|
8.10 |
|
|
|
33.46 |
|
|
|
7.77 |
|
Elscint Historical per ordinary share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss from continuing operations per share
|
|
|
(4.37 |
) |
|
|
(1.01 |
) |
|
|
(3.85 |
) |
|
|
(0.89 |
) |
Diluted net income (loss) from continuing operations per share
|
|
|
(** |
) |
|
|
(** |
) |
|
|
(** |
) |
|
|
(** |
) |
Book value per share
|
|
|
53.19 |
|
|
|
12.34 |
|
|
|
55.53 |
|
|
|
12.89 |
|
Unaudited Pro Forma Combined Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) from continuing operations per share
|
|
|
0.46 |
|
|
|
0.11 |
|
|
|
(8.02 |
) |
|
|
(1.86 |
) |
Diluted net income (loss) from continuing operations per share
|
|
|
(** |
) |
|
|
(** |
) |
|
|
(** |
) |
|
|
(** |
) |
Book value per share
|
|
|
40.82 |
|
|
|
9.47 |
|
|
|
40.17 |
|
|
|
9.32 |
|
(*) Using the representative exchange rate as of
December 31, 2004 ($1.00 = NIS 4.308).
(**) Anti-dilutive.
18
Exchange Rates
The exchange rate for NIS to U.S. dollars on
August 31, 2005, as reported by the Bank of Israel, was
$1.00 equals NIS 4.545. The following table sets forth the high,
low and average exchange rates of one U.S. dollar to NIS,
as reported by the Bank of Israel, for each period presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High | |
|
Low | |
|
Average | |
|
|
| |
|
| |
|
| |
Year ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2000
|
|
N |
IS4.198 |
|
|
N |
IS3.967 |
|
|
|
NIS |
|
|
|
4.078 |
|
|
2001
|
|
|
4.416 |
|
|
|
4.067 |
|
|
|
|
|
|
|
4.203 |
|
|
2002
|
|
|
4.494 |
|
|
|
4.437 |
|
|
|
|
|
|
|
4.738 |
|
|
2003
|
|
|
4.924 |
|
|
|
4.283 |
|
|
|
|
|
|
|
4.544 |
|
|
2004
|
|
|
4.634 |
|
|
|
4.308 |
|
|
|
|
|
|
|
4.478 |
|
Month
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 2005
|
|
N |
IS4.392 |
|
|
N |
IS4.357 |
|
|
|
NIS |
|
|
|
4.374 |
|
|
|
March 2005
|
|
|
4.379 |
|
|
|
4.299 |
|
|
|
|
|
|
|
4.339 |
|
|
|
April 2005
|
|
|
4.395 |
|
|
|
4.360 |
|
|
|
|
|
|
|
4.377 |
|
|
|
May 2005
|
|
|
4.416 |
|
|
|
4.348 |
|
|
|
|
|
|
|
4.382 |
|
|
|
June 2005
|
|
|
4.574 |
|
|
|
4.440 |
|
|
|
|
|
|
|
4.448 |
|
|
|
July 2005
|
|
|
4.610 |
|
|
|
4.525 |
|
|
|
|
|
|
|
4.560 |
|
|
|
August 2005
|
|
|
4.559 |
|
|
|
4.475 |
|
|
|
|
|
|
|
4.509 |
|
19
RISK FACTORS
In addition to the other information included or incorporated
by reference in this joint proxy statement/ prospectus, the
following risk factors should be considered carefully by Elscint
shareholders and EMI shareholders in determining whether to vote
to approve the merger and the merger agreement and by EMI
shareholders in determining whether to vote to approve the share
purchase agreement.
Risks Relating to the Merger
|
|
|
Elscint shareholders, other than EMI and Elscint, will
receive 0.53 EMI ordinary shares for each share of Elscint they
own regardless of changes in the market price of EMI ordinary
shares or Elscint ordinary shares. |
Upon completion of the merger, Elscint shareholders, other than
EMI and Elscint, will receive 0.53 ordinary shares of EMI
for each ordinary share of Elscint that they own. This ratio is
a fixed number and will not be adjusted in the event of any
increase or decrease in the price of either Elscint ordinary
shares or EMI ordinary shares.
The prices of Elscint ordinary shares and EMI ordinary shares
when the merger takes place may vary from their prices at the
date of this joint proxy statement/ prospectus and at the dates
of the special meeting of shareholders of each of EMI and
Elscint. These variations may occur for a number of reasons,
including but not limited to the following:
|
|
|
|
|
the business, operations or prospects of EMI or Elscint may
change; |
|
|
|
market assessments of the likelihood that EMI and Elscint will
complete the merger and the timing of the completion; |
|
|
|
the prospects of EMI and Elscint following the merger; |
|
|
|
regulatory considerations; and |
|
|
|
general market, political and economic conditions. |
If EMI and Elscint complete the merger, it will be on a date
after the special meetings of each of EMI and Elscint. As a
result, the prices of the EMI and Elscint ordinary shares may be
different on the date the merger is completed than on the date
these meetings were held. There can be no assurance that
following consummation of the merger, the EMI ordinary shares
will not trade below their historical trading price range or the
price of the EMI ordinary shares at the time of consummation of
the merger.
We encourage you to obtain current market quotations for EMI
ordinary shares and Elscint ordinary shares.
|
|
|
The merger may not result in the benefits that EMI and
Elscint currently anticipate. |
Achieving the expected benefits of the merger depends, among
other things, on the timely, efficient and successful
integration of the operations and personnel of EMI and Elscint.
In addition, EMI and Elscint expect that the integration will
require substantial attention from EMIs and Elscints
management teams, which may result in the diversion of limited
management resources from regular business concerns to
integration considerations. The integration process also may
result in the need to invest unanticipated additional cash
resources, which may divert funds that EMI expects to use for
pursuing new opportunities and other purposes. If EMI is unable
effectively to integrate the businesses of EMI and Elscint, the
benefits of the merger will not be realized and, as a result,
EMIs operating results may be adversely affected and its
share price may decline.
20
|
|
|
Shareholders of EMI will experience an immediate dilution
of their relative holdings upon completion of the merger. |
The merger will cause an approximate 15.88% increase in the
number of EMI ordinary shares outstanding following the merger
(calculated excluding 2,842,400 ordinary shares held by EMI
which have no voting or equity rights). After the merger,
Elscint shareholders, other than EMI and Elscint, will own
approximately 13.71% of EMIs outstanding ordinary shares
and approximately 13.88% of the voting rights in EMI.
Accordingly, current shareholders of EMI will experience an
immediate dilution in the aggregate of approximately 13.71% of
their capital rights and approximately 13.88% of their voting
power after the merger, which represents a 13.71% and a 13.88%
decrease from their relative capital and voting power,
respectively, prior to the merger. Europe-Israel and
Mr. Mordechay Zisser, the indirect controlling shareholder
of Europe-Israel, who beneficially own approximately 55.14% of
the outstanding ordinary shares of EMI and approximately 55.96%
of the voting rights in EMI, will beneficially own approximately
47.58% of the outstanding ordinary shares of EMI and
approximately 48.19% of the voting power in EMI immediately
following the merger. Elscint, which currently owns
approximately 2.39% of the outstanding ordinary shares of EMI
and approximately 0.95% of the voting rights in EMI, will own
approximately 2.06% of the outstanding ordinary shares of EMI
and approximately 0.82% of the voting rights in EMI immediately
following the merger.
The percentages were calculated excluding options to
purchase 26,500 EMI ordinary shares to be assumed by EMI
upon completion of the merger which would constitute all the
securities convertible or exercisable into ordinary shares of
EMI.
|
|
|
The merger is subject to the receipt of consents and
approvals from various entities, which may impose conditions on,
jeopardize or delay completion of the merger or reduce the
anticipated benefits of the merger. |
Completion of the merger is conditioned upon filings with, and
the receipt of required consents, orders, approvals or
clearances from, various governmental agencies, including, among
others, the receipt of tax rulings from the Israeli tax
authorities for the merger, the receipt of approvals by certain
financing institutions and the receipt of the final court order
approving the merger. There is no assurance that these consents,
orders, approvals and clearances will be obtained, and if they
are obtained, they may impose conditions on the merger. These
conditions may jeopardize or delay completion of the merger or
reduce the anticipated benefits of the merger.
|
|
|
If Elscint is a passive foreign investment company, the
merger may be a taxable transaction for U.S. Holders of
Elscint ordinary shares. |
Even if the merger qualifies as a reorganization for U.S.
federal income tax purposes, due to the application of special
tax rules applicable to passive foreign investment companies
(PFICs), U.S. holders of Elscint ordinary
shares generally will be required to recognize and include in
their taxable income for U.S. federal income tax purposes any
gain realized as a result of the merger (even if the merger is
otherwise a tax-free reorganization) if Elscint has been a PFIC
in a prior taxable year in which the U.S. holder has owned
Elscint ordinary shares or will be a PFIC for the taxable year
in which the merger occurs, and EMI is not a PFIC. See
Material United States Federal Income Tax Considerations
with Respect to the Merger and the Ownership of EMI Ordinary
Shares Consequences of the Merger
Special Rules Applicable to PFICs. Elscint believes
it has not been a PFIC for any prior taxable year and that it
will not be a PFIC for the current taxable year, except that it
may have been a PFIC in 1999 and 2000, as a result of the sale
of its former business at the end of 1998. The tests for
determining PFIC status are fact-intensive and subject to legal
interpretation for which definitive authority is lacking.
Although Elscint believes that there are reasonable
interpretations of the PFIC rules under which it would not be
classified as a PFIC in 1999 and 2000, there can be no assurance
that such view would prevail. The tax liability resulting from
any gain recognized pursuant to the application of such special
tax rules, together with any interest due in connection with
such tax liability, will be required to be paid even though the
U.S. holder will receive no cash pursuant to the merger,
other than cash in lieu of fractional shares of EMI ordinary
shares.
21
|
|
|
The ultimate tax consequences of the merger will not be
known at the time of the shareholder vote. |
The ultimate U.S. federal income tax treatment of the
merger for U.S. holders of Elscint ordinary shares is
dependent in part on whether EMI or Elscint will be a PFIC for
the year of the merger, neither of which will be known at the
time Elscint shareholders will be voting on the merger.
Therefore, U.S. holders of Elscint ordinary shares will be
required to vote for or against the merger without definitive
knowledge of the ultimate U.S. federal income tax treatment
of the transaction for U.S. federal income tax purposes.
In addition, certain tax consequences and/or restrictions
applicable to EMI, Elscint and their controlling shareholders
may not be known at the time of the convening of the special
meeting of shareholders of EMI and Elscint relating to the
merger, since at the time of the calling for such special
meetings, the pre-ruling from the Israeli tax authorities with
respect to the merger had not yet been received.
|
|
|
The violation of certain conditions determined by the
Ordinance and/or the pre-ruling to be issued by the Israeli tax
authorities may result in the merger not being treated as tax
exempt by the Israeli tax authorities and the imposition of
capital gains tax on the exchange of shares. |
If any requirement or condition of the merger under the
Ordinance, the regulations promulgated thereunder and the
pre-ruling to be issued by the Israeli tax authorities is
breached and/or is not met, the merger will not be treated as
tax exempt for Israeli tax purposes. In that event, the Israeli
tax authorities may impose, in accordance with the Ordinance,
Israeli capital gains tax on Elscint shareholders in respect of
the exchange of the Elscint and EMI ordinary shares under the
merger. Nevertheless, the Ordinance provides that the sale of
shares of a listed Israeli resident company by a non-Israeli
resident will be exempt, provided that such shareholder did not
hold these shares prior to their listing on the stock exchange.
The sale of shares by a non-Israeli resident might also be
exempt from tax for Israeli tax purposes under an applicable tax
treaty. In addition, EMI and Elscint have jointly approached the
Israeli tax authorities to receive a pre-ruling that the merger,
as structured, would be treated as a tax-free transaction for
Israeli tax purposes under certain sections of the Ordinance. As
part of the final pre-ruling to be issued by the Israeli tax
authorities, EMI, Elscint and their controlling shareholder may
be subject to certain restrictions and conditions. EMI expects
that it, Elscint and their controlling shareholder will be
prepared to comply with such conditions and restrictions.
Nevertheless, in the event the Israeli tax authority imposes
conditions and/or restrictions that are unacceptable to either
EMI or Elscint or if they are not able to obtain the consent of
EMIs controlling shareholder to such conditions or
restrictions, then EMI and Elscint will decline the receipt of
such pre-ruling and the merger agreement will be terminated.
Risks Relating to EMI Following the Merger
|
|
|
The market prices of EMI ordinary shares have been and may
continue to be volatile. |
The market price of EMI ordinary shares is subject to
fluctuations. The following factors, among others, may
significantly impact the market price of EMI ordinary shares:
|
|
|
|
|
a significant number of shareholders who receive EMI ordinary
shares in the merger may sell those shares on the open market
after the merger is completed; |
|
|
|
factors that generally affect the market for stocks of companies
engaged in the fields in which EMI operates; |
|
|
|
political, economic or other developments affecting Israel and
other countries; |
|
|
|
economic and other external factors; |
|
|
|
quarter-to-quarter fluctuations in EMIs financial
results; and |
|
|
|
changes in financial estimates by securities analysts following
the merger. |
|
|
|
EMI and Elscint have significant capital needs and
additional financing may not be available. |
The sectors in which EMI and Elscint compete are capital
intensive. EMI and Elscint require substantial up-front
expenditures for land acquisition, development and construction
costs as well as certain investments in research and
development. In EMIs and Elscints businesses,
following construction, capital expenditures are necessary to
maintain the malls in good condition. As part of Elscints
strategy, Elscint continuously
22
explores possibilities to acquire, renovate and redevelop
additional hotels and to develop new hotels. In addition, in
order for Elscints hotels to remain competitive, they must
be maintained and refurbished on an ongoing basis. Accordingly,
EMI and Elscint both require substantial amounts of cash and
construction financing from banks to run their businesses. EMI
and Elscint cannot be certain that such external financing would
be available on favorable terms or on a timely basis or at all.
In addition, construction loan agreements generally permit the
draw down of the loan funds against the achievement of
pre-determined construction and space leasing milestones. If EMI
and Elscint fail to achieve these milestones, the availability
of the loan funds may be delayed, thereby causing a further
delay in the construction schedule. If EMI and Elscint are not
successful in obtaining financing to fund their planned projects
and other expenditures, their ability to undertake additional
development projects may be limited and their future profits and
results of operations could be materially adversely affected.
The inability of Elscint to obtain financing may affect its
ability to acquire additional hotels, and it may experience
delays in planned renovation or maintenance of its hotels which
could have a material adverse affect on Elscints results
of operations.
|
|
|
EMIs and Elscints high leverage could
adversely affect EMIs and Elscints ability to
operate their businesses. |
EMI and Elscint are highly leveraged and have significant debt
service obligations. As of June 30, 2005, EMI, on a
consolidated basis, had total debt to banks and other financial
institutions in the amount of NIS 2.88 billion
(approximately $630.0 million) and Elscint had total debt
to banks and other financial institutions in the amount of NIS
1.49 billion (approximately $327.7 million). In
addition, EMI, Elscint and their subsidiaries may incur
additional debt from time to time to finance acquisitions or
capital expenditures or for other purposes. EMI and Elscint will
have substantial debt service obligations, consisting of
required cash payments of principal and interest, for the
foreseeable future.
EMIs and Elscints lenders require EMI and Elscint to
maintain and comply with certain financial and operational
covenants. EMIs and Elscints ability to comply with
these covenants may be affected by events beyond their control.
A breach of any of the covenants in EMIs and
Elscints debt instruments or their inability to comply
with the required covenants could result in an event of default,
which, if not cured or waived, could have a material adverse
effect on EMI and Elscint. In the event of any default under the
loan agreements, the lenders thereunder could elect to declare
all borrowings outstanding immediately due together with accrued
and unpaid interest and other fees.
As of June 30, 2005, Elscint was not in compliance with
certain covenants of certain long-term credit agreements, in
which Elscints share of the debt was NIS
406.9 million. The bank has informed Elscint in writing
that it does not intend to demand repayment of loans in the
amount of NIS 200.7 million prior to July 1, 2006 and
of loans in the amount of NIS 206.2 million, prior to
December 31, 2006. We cannot assure you that the banks will
not call for immediate repayment of these debts, or that the
banks will continue to extend the repayment schedule on these
debts beyond July 2006 and January 2007, respectively. If
Elscint fails to reach agreement with the banks in the future,
this debt may become immediately repayable and we may be unable
to make the necessary payments or obtain additional or
replacement financing on favorable terms.
As a result of EMI and Elscints substantial indebtedness:
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EMI and Elscint could be more vulnerable to general adverse
economic and industry conditions; |
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EMI and Elscint may find it more difficult to obtain additional
financing to fund future working capital, capital expenditures
and other general corporate requirements; |
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EMI and Elscint will be required to dedicate a substantial
portion of their cash flow from operations to the payment of
principal and interest on our debt, reducing the available cash
flow to fund other projects; |
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EMI and Elscint may have limited flexibility in planning for, or
reacting to, changes in their businesses and in their
industries; and |
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EMI and Elscint may have a competitive disadvantage relative to
other companies in their business segments with less debt. |
EMI and Elscint cannot guarantee that they will be able to
generate enough cash flow from operations or that they will be
able to obtain enough capital to service their debt or fund
their planned capital expenditures. In addition, EMI and Elscint
may need to refinance some or all of their indebtedness on or
before maturity. There is no guarantee that EMI and Elscint will
be able to refinance their indebtedness on commercially
reasonable terms or at all. EMI and Elscint have the ability
under their debt instruments to incur substantial additional
indebtedness and any additional indebtedness they incur could
exacerbate the risks described above.
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One of EMIs shareholders beneficially owns a
substantial amount of EMI ordinary shares and therefore,
effectively controls EMIs affairs. |
As of August 22, 2005, Europe-Israel beneficially owned an
aggregate of approximately 54.34% of the voting rights in EMI
and, therefore, has the ability, in effect, to elect the members
of EMIs board of directors. In addition,
Mr. Mordechay Zisser, the Executive Chairman of the board
of directors of EMI who is also the President and Chairman of
the Board of Directors of Europe-Israel, EMIs controlling
shareholder, and of Control Centers Ltd., a privately held
company, which is the parent company of Europe-Israel holds
directly 1.60% of the issued and outstanding shares of EMI and
approximately 1.62% of the voting rights in EMI. Following the
merger with Elscint, Europe-Israel and Mr. Zisser are
expected to beneficially own approximately 47.58% of EMIs
ordinary shares and approximately 48.19% of EMI voting rights
and will, therefore, be able to continue to effectively control
EMIs business.
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EMI and Elscint are subject to various risks related to
EMIs and Elscints operations in Eastern Europe,
including economic and political instability, political and
criminal corruption and the lack of experience and
unpredictability of the civil justice system. |
Many of the Eastern European countries in which EMI or Elscint
operate are countries that until the last decade were allied
with the former Soviet Union under a communist economic system,
and they are still subject to various risks. For example,
Romania, which is still economically and politically unstable,
suffers from rapid devaluation of the Romanian Lei (local
currency) against the U.S. dollar, political and criminal
corruption and lack of experience and unpredictability of the
civil justice system. Romania also continues to suffer from high
unemployment, low wages and low literacy rates. These risks
could be harmful to EMI and Elscint and are very difficult to
quantify or predict. Although many governments of the European
countries have liberalized policies on international trade,
foreign ownership and development, investment and currency
repatriation to increase both international trade and
investment, such policies might change unexpectedly. EMI and
Elscint will be affected by the rules and regulations regarding
foreign ownership of real and personal property. Such rules may
change quickly and dramatically and thus may have an adverse
impact on ownership and may result in a loss without recourse of
EMIs or Elscints property or assets. Domestic and
international laws and regulations, whether existing today or in
the future, could adversely affect EMIs and Elscints
ability to market and sell EMIs or Elscints products
and could impair EMIs and Elscints profitability.
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Security and economic conditions in Israel may affect
EMIs and its subsidiaries operations. |
EMI and many of its subsidiaries are incorporated under Israeli
law and our principal offices are located in Israel. Political,
economic and security conditions in Israel directly affect
EMIs operations. Since the establishment of the State of
Israel in 1948, various armed conflicts have taken place between
Israel and its Arab neighbors and a state of hostility, varying
in degree and intensity, has led to security and economic
problems for Israel. Israel signed a peace treaty with Egypt in
1979 and a peace treaty with Jordan in 1994. As of the date of
this joint proxy statement/ prospectus, Israel has not entered
into any peace agreement with Syria or Lebanon. Since 1993,
several agreements have been signed between Israel and the
Palestinians, but a final agreement has not been achieved. Since
October 2000, there has been a marked increase in hostilities
between Israel and the Palestinians, characterized by terrorist
attacks on civilian targets, suicide bombings and military
incursions into areas under the control of the Palestinian
Authority. These developments have adversely affected the peace
process, placed the Israeli economy under significant stress,
and have negatively
24
influenced Israels relationship with several Arab
countries. On June 6, 2004, the Government of Israel
approved a disengagement plan, stating that it is Israels
intention to relocate all Israeli settlements in the Gaza Strip
and four settlements in the West Bank by the end of 2005. In
August 2005, Israel evacuated all Israeli settlements in the
Gaza Strip and four settlements in the West Bank. The
implications of this action cannot at this time be foreseen.
In addition, some neighboring countries, as well as certain
companies and organizations, continue to participate in a
boycott of Israeli firms and others doing business with Israel
or with Israeli companies. Restrictive laws, policies or
practices directed towards Israel or Israeli businesses could
have an adverse impact on the expansion of our business. In
addition, we could be adversely affected by the interruption or
curtailment of trade between Israel and its trading partners, a
significant increase in the rate of inflation, or a significant
downturn in the economic or financial condition of Israel.
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Many of EMIs and Elscints directors, officers
and employees are obligated to perform annual military reserve
duty in Israel. EMI and Elscint cannot assess the potential
impact of these obligations on their businesses. |
The directors, officers and employees of EMI and Elscint who are
male adult citizens and permanent residents of Israel under the
age of 40 are, unless exempt, obligated to perform annual
military reserve duty and are subject to being called to active
duty at any time under emergency circumstances. The
deteriorating security situation in the Middle East has caused,
and will continue to cause, a sharp increase in the army reserve
obligations of those of our directors, officers and employees
who are subject to such reserve duty obligations. Although EMI
and Elscint have operated effectively under these requirements
in the past, including during recent hostilities with the
Palestinians and the war in Iraq, EMI and Elscint cannot assess
the full impact of these requirements on their respective
workforce or business if conditions should change, and EMI and
Elscint cannot predict the effect of any increase or reduction
of these requirements on them, respectively.
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It may be difficult to enforce a U.S. judgment
against EMI, Elscint and their officers and directors or to
assert U.S. securities laws claims in Israel or serve
process on EMI and substantially all of its officers and
directors. |
All of EMIs and Elscints executive officers and
directors are non-residents of the United States, and the
majority of EMIs and Elscints assets and the assets
of their executive officers and directors are located outside
the United States. Therefore, it may be difficult for an
investor, or any other person or entity, to enforce a
U.S. court judgment based upon the civil liability
provisions of the U.S. federal securities laws in an
Israeli court against any of those persons or to affect service
of process upon our executive officers and directors in the
United States. Additionally, it may be difficult for an
investor, or any other person or entity, to enforce civil
liabilities under U.S. federal securities laws in original
actions instituted in Israel.
Israeli courts may enforce a non-appealable judgment from
U.S. courts for liquidated damages in civil matters,
obtained after due process before a court of competent
jurisdiction (according to the rules of private international
law currently prevailing in Israel) which recognizes and
enforces similar Israeli judgments, provided that:
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(i) adequate service of process has been effected and the
defendant has had a reasonable opportunity to be heard; |
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(ii) such judgment and the enforcement thereof are not
contrary to the law, public policy, security or sovereignty of
the State of Israel; |
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(iii) such judgment was not obtained by fraud and does not
conflict with any other valid judgment in the same matter
between the same parties; |
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(iv) an action between the same parties in the same matter
is not pending in any Israeli court at the time the lawsuit is
instituted in the foreign court; and |
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(v) the judgment is no longer subject to a right of appeal. |
Foreign judgments enforced by Israeli courts generally will be
payable in Israeli currency. The usual practice in Israel in an
action to recover an amount in a non-Israeli currency is for the
Israeli court to render judgment for the equivalent amount in
Israeli currency at the rate of exchange in effect on the date
thereof. Under existing Israeli law, a foreign judgment payable
in foreign currency may be paid in Israeli currency at the rate
of exchange of such foreign currency on the date of payment or
in foreign currency. Pending collection, the amount of the
judgment of an Israeli court stated in Israeli currency will
ordinarily be linked to the Israeli Consumer Price Index plus
interest at the annual rate (set by Israeli regulations)
prevailing at such time. Judgment creditors must bear the risk
of unfavorable exchange rates.
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If EMI is characterized as a passive foreign investment
company for U.S. federal income tax purposes, EMIs
U.S. shareholders may suffer adverse tax
consequences. |
Generally, if for any taxable year 75% or more of EMIs
gross income is passive income, or at least 50% of EMIs
assets are held for the production of, or produce, passive
income, EMI will be characterized as a passive foreign
investment company, or PFIC, for U.S. federal income tax
purposes. A determination that EMI is a PFIC could cause its
U.S. shareholders to suffer adverse tax consequences,
including having gains realized on the sale of EMIs shares
taxed at ordinary income rates, rather than the capital gains
rate, and could have an adverse effect on the price and
marketability of EMIs shares. See Certain Material
United States Federal Income Tax Consequences With Respect to
the Merger and Ownership of EMI Ordinary Shares
Ownership of EMI Ordinary Shares Passive Foreign
Investment Company Status.
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Pending litigation could harm EMIs and
Elscints businesses. |
Certain legal proceedings have been initiated against EMI and
Elscint, including litigation in connection with the change of
control of both companies in May 1999 and the acquisition of
Elscints hotel businesses in September 1999, and motions
to certify such claims as class actions pending. Neither EMI nor
Elscint can estimate the results of these proceedings. A
determination against EMI or Elscint in some or all of these
proceedings may materially adversely affect EMIs and
Elscints operating results.
Risks Relating to EMIs Commercial and Entertainment
Malls Business
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EMI is dependent on engaging third parties to enter into
lease agreements, and on obtaining and retaining attractive,
high customer traffic locations. |
EMI is dependent on its ability to engage third parties to enter
into new leases and renew existing leases on favorable terms.
EMI may find it more difficult to engage third parties to enter
into leases during periods when market rents are increasing, or
when general consumer activity is decreasing. If a significant
portion of EMIs existing leases were to expire during such
a period, EMI may experience a decline in rental income. EMI
seeks agreements in principle with anchor tenants (such as the
operators of movie theaters, supermarkets, department stores,
electrical appliances stores and video and gaming arcades),
either generally or on a property-by property basis, prior to
entering into a formal lease. The termination of a lease by any
anchor tenant may adversely affect the relevant specific mall.
The failure of an anchor tenant to abide by these agreements may
cause delays, or result in a decline in rental income (temporary
or long term), the effect of which EMI may not be able to offset
due to difficulties in finding a suitable replacement tenant.
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Suitable locations are critical to the success of a
commercial and entertainment mall. |
The choice of suitable locations for the development of
commercial and entertainment mall projects is an important
factor in the success of the individual projects. Ideally, these
sites should be located:
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within the city center, with well-developed transportation
infrastructures (road and rail) in close proximity to facilitate
customer access; and |
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within local areas with sufficient population to support the
malls. EMI cannot be certain that it will be able to find sites
in the target cities which meet these criteria, either at all or
at viable prices. |
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Competition is increasing rapidly in Eastern
Europe. |
The retail and entertainment industry in Eastern Europe is
rapidly becoming more competitive, with a number of developers
(particularly from Germany and France) becoming active in
EMIs target areas. Developers compete not only for
patrons, but also for desirable properties, financing, raw
materials, qualified contractors, experienced system
consultants, expert marketing agents and skilled labor. The
public bidding process (the process through which EMI often
acquires new properties) is subject to intense competition and
some of EMIs competitors have longer operating histories
and greater resources than it does, all of which may limit
EMIs ability to obtain such projects. There can be no
assurance that EMI will be successful in winning projects that
EMI bids for or which are awarded pursuant to fixed price
tenders or that EMI will otherwise continue to be successful in
competing in Eastern Europe.
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Delays in the completion of construction projects could
affect EMIs success. |
An important element in the success of EMIs commercial and
entertainment mall projects is the short construction time
(generally 8 to 12 months from the receipt of building
permits, depending on the size of the project), and EMIs
ability to open the malls ahead of competition, particularly in
cities which do not have commercial and entertainment malls of
the type constructed by EMI.
This makes EMI subject to a number of risks relating to these
activities, including:
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delays in obtaining zoning and other approvals; |
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the unavailability of materials and labor; |
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the abilities of sub-contractors to complete work competently
and on schedule; |
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the surface and subsurface condition of the land underlying the
project; |
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environmental uncertainties; |
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extraordinary circumstances or acts of god; and |
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ordinary risks of construction that may hinder or delay the
successful completion of a particular project. |
In addition, under EMIs development contracts with local
municipalities, EMI has deadlines for most of its projects
(subject to limited exceptions). If construction of a project
does not proceed in accordance with its schedule, EMI may in
some instances be required to pay penalties to the vendor
(usually local municipalities) based on the extent and time of
the delay and in isolated instances to forfeit rights in the
land. The failure to complete a particular project on schedule
or on budget may have a material adverse effect on EMIs
business prospects, results of operations or financial condition.
Risks Relating to EMIs Image Guided Treatment
Business
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InSightec is currently dependent on sales of the ExAblate
2000 for the treatment of uterine fibroids for virtually all of
its revenue. |
The ExAblate 2000 is in an early stage of commercialization.
InSightec received approval of the United States Food and
Drug Administration (FDA) in October 2004 to market the
ExAblate 2000 in the United States only for the treatment of
uterine fibroids. InSightec expects sales of the ExAblate 2000
for this application to account for virtually all of its
revenues for the foreseeable future, depending upon regulatory
approval of additional applications for the ExAblate 2000. As a
result, factors adversely affecting InSightecs ability to
sell, or pricing of or demand for, InSightecs product for
this application would have a material adverse effect on its
financial condition and results of operations.
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If the ExAblate 2000 does not achieve broad market
acceptance for the treatment of uterine fibroids, InSightec will
not be able to generate sufficient sales to support
InSightecs business. |
InSightec must achieve broad market acceptance of the ExAblate
2000 for the treatment of uterine fibroids among physicians,
patients and third party payors in order to generate a
sufficient amount of sales to support InSightecs business.
Physicians will not recommend the use of the ExAblate 2000
unless InSightec can demonstrate that it produces results
comparable or superior to existing treatments for uterine
fibroids. If long-term patient studies do not support
InSightecs existing clinical results, or if they indicate
that the use of the ExAblate 2000 has negative side effects on
patients, physicians may not adopt or continue to use the
ExAblate 2000. Even if InSightec demonstrates the effectiveness
of the ExAblate 2000, physicians may still not use the system
for a number of other reasons. Physicians may continue to
recommend traditional uterine fibroid treatment options simply
because those methods are already widely accepted and are based
on established technologies. Patients may also be reluctant to
undergo new, less established treatments for uterine fibroids.
If, due to any of these factors, the ExAblate 2000 does not
receive broad market acceptance among physicians or patients,
InSightec will not generate significant sales. In this event,
InSightecs business, financial condition and results of
operations would be seriously harmed, and its ability to develop
additional treatment applications for the ExAblate 2000 would be
adversely affected.
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If physicians, hospitals and other healthcare providers
are unable to obtain coverage and sufficient reimbursement from
third party healthcare payors for treatment procedures using the
ExAblate 2000, InSightec may be unable to generate sufficient
sales to support its business. |
Demand for the ExAblate 2000 is likely to depend substantially
on the extent to which sufficient reimbursement for treatment
procedures using InSightecs system will be available from
third party payors such as private health insurance plans and
health maintenance organizations and, to a lesser degree,
government payor programs such as Medicare and Medicaid.
InSightec believes that third party payors will not provide
reimbursement on a national basis for treatments using the
ExAblate 2000 unless InSightec can generate a sufficient amount
of data through long-term patient studies to demonstrate that
such treatments produce favorable results in a cost-effective
manner relative to other treatments. Furthermore, InSightec
could be adversely affected by changes in reimbursement policies
of private healthcare or governmental payors to the extent any
such changes affect reimbursement for treatment procedures using
the ExAblate 2000. If physicians, hospitals and other healthcare
providers are unable to obtain sufficient coverage and
reimbursement from third-party payors for treatment procedures
using the ExAblate 2000, InSightec may be unable to generate
sufficient sales to support InSightecs business.
InSightecs success in non-U.S. markets also depends
on treatment procedures using the ExAblate 2000 being eligible
for reimbursement through government-sponsored healthcare
payment systems, private third-party payors and labor unions.
Reimbursement practices vary significantly from country to
country and within some countries, by region. Many
non-U.S. markets have government-managed healthcare systems
that control reimbursement for new products and procedures.
Other non-U.S. markets have private insurance systems,
labor union-sponsored programs and government-managed systems
that control reimbursement for new products and procedures. To
date, one-third party payor, a health maintenance organization
in Israel, has approved reimbursement coverage for treatments
using the ExAblate 2000. InSightec cannot assure that coverage
will be approved by additional payors in other markets in a
timely manner, if at all. In the event that InSightec is unable
to timely obtain acceptable levels of reimbursement coverage in
its targeted markets outside of the United States,
InSightecs ability to generate sales may be adversely
affected.
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InSightecs future growth substantially depends on
its ability to develop and obtain regulatory clearance for
additional treatment applications for the ExAblate 2000. |
Currently, InSightec has received regulatory approvals to market
the ExAblate 2000 in the United States, Israel, Russia and the
European Union Economic Area, or EEA, which is comprised of the
member nations of the European Union and certain additional
European nations, solely for the treatment of uterine fibroids.
InSightecs objective is to expand the use of the ExAblate
2000 by developing and introducing new treatment applications.
InSightec is currently in various stages of product development
and clinical studies for a number
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of new treatment applications for the ExAblate 2000. InSightec
will be required to obtain FDA approval in the United States and
other regulatory approvals outside of the United States before
marketing the ExAblate 2000 for these additional treatment
applications. Furthermore, InSightec cannot guarantee that its
product development activities for any of these new applications
will be successful. In addition, assuming product development is
successful, the regulatory processes can be lengthy, lasting
many years in some cases, and expensive. InSightec cannot assure
that FDA approval or other regulatory approvals will be granted.
In order to obtain FDA clearance and other regulatory approvals,
and to obtain reimbursement coverage for use of the ExAblate
2000 treatment for additional applications, InSightec is
required to conduct clinical studies to demonstrate the
therapeutic benefits and cost-effectiveness of these new
treatment applications and products. Clinical trials are
expensive and may take several years to complete. If future
clinical trials indicate that the ExAblate 2000 is not as
beneficial or cost-effective as existing treatment methods, or
that such products cause unexpected complications or other
unforeseen adverse events, InSightec may not obtain regulatory
clearance to market and sell the ExAblate 2000 for these
additional treatment applications or obtain reimbursement
coverage, and InSightecs long-term growth would be
seriously harmed.
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The ExAblate 2000 is compatible only with certain of GE
Healthcares Magnetic Resonance Imaging (MRI) systems,
which may limit InSightecs potential market. |
The ExAblate 2000 is compatible only with certain magnetic
resonance imaging, or MRI, systems sold by GE Healthcare, a
division of the General Electric Company, or GE. A significant
portion of the MRI systems in use in the United States and
elsewhere are not GE MRI systems.
InSightec has no current plans to develop a system that would be
compatible with MRI systems manufactured by companies other than
GE. InSightec is, therefore, limited in its target market to
potential customers who already own or otherwise have access to
a compatible GE MRI system, or are willing to purchase such a
system in order to use the ExAblate 2000. In addition, in the
event that GE is unable to effectively market its MRI systems,
InSightecs ability to generate additional sales of the
ExAblate 2000 may be adversely affected.
Risks Affecting Elscints Businesses
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The value of Elscints investment in its hotel
properties is subject to various risks related to ownership and
operation of real property. |
Elscints investment in the hotel properties is subject to
varying degrees of risk related to the ownership and operation
of real property. The intrinsic value of Elscints hotels
and income from the hotels may be materially adversely affected
by:
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changes in global and national economic conditions, including
global or national recession; |
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a general or local slowdown in the real property market which
would make it difficult to sell a property; |
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political events that may have a material adverse effect on the
hotel industry; |
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competition from other lodging facilities, and over-supply of
hotel rooms in a specific location; |
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material changes in operating expenses, including real property
tax systems or rates; |
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changes in the availability, cost and terms of financing; |
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the effect of present or future environmental laws; |
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the ongoing need for capital improvements and
refurbishments; and |
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material changes in governmental rules and policies. |
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The failure to comply with government regulation may
adversely affect Elscints business and results of
operations. |
The hotel industry is subject to numerous national and local
government regulations, including those relating to building and
zoning requirements and fire safety control. In addition,
Elscint is subject to laws governing its relationships with
employees, including minimum wage requirements, overtime,
working conditions and work permit requirements, and in some
localities to collective labor agreements. A determination that
Elscint is not in compliance with these regulations could result
in the imposition of fines, an award of damages to private
litigants and significant expenses in bringing Elscints
hotels into compliance with the regulations. In addition,
Elscints ability to dismiss unneeded staff may be hampered
by local labor laws and courts which traditionally favor
employees in disputes with former employers, particularly in
countries with strong socialist histories such as Romania.
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The hotels and leisure industry may be affected by
economic conditions, oversupply, travel patterns, weather and
other conditions beyond Elscints control which may
adversely affect Elscints business and results of
operations. |
The hotels and leisure industry may be adversely affected by
changes in national or local economic conditions and other local
market conditions. Elscints hotels may be subject to the
risk of oversupply of hotel rooms. Elscint is subject to various
risks related to its operations in Eastern Europe, including
economic and political instability, political and criminal
corruption and the lack of experience and unpredictability of
the civil justice system. Other general risks that may affect
Elscints hotels and leisure business are changes in travel
patterns, extreme weather conditions, changes in governmental
regulations which influence or determine wages, workers
union activities, increases in land acquisition prices or
construction costs, changes in interest rates, the availability
of financing for operating or capital needs and changes in real
estate tax rates and other current operating expenses.
Unforeseen events, such as terrorist attacks, outbreaks of
epidemics and economic recessions have had and may continue to
have an adverse effect on local and international travel
patterns and, as a result, on occupancy rates and prices in
Elscints hotels. Downturns or prolonged adverse conditions
in the real estate or capital markets or in national or local
economies and difficulties in securing financing for the
development of hotels, could have a material adverse effect on
Elscints business, its results of operations, its ability
to develop new projects and the attainment of its strategic
goals.
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Competition in the hotels and leisure industry could have
a material adverse effect on Elscints business and results
of operations. |
The hotels and leisure business is highly competitive. This is
particularly the case in those areas where there is an
over-supply of rooms, such as in London, Amsterdam and Budapest.
Competitive factors within the industry include:
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convenience of location and accessibility to business centers; |
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room rates; |
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quality of accommodations; |
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name recognition; |
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quality and nature of service and guest facilities provided; |
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reputation; |
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convenience and ease of reservation systems; and |
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the supply and availability of alternative lodging. |
Elscint operates, and intends to develop or acquire, most of its
hotels in geographic locations where other hotels are or may be
located. Elscint expects to compete for guests and development
sites with national chains, large franchisees and independent
operators. Many of these competitors have greater financial
resources and better brand name recognition than Elscint does,
and may have more established relationships with prospective
franchisors, representatives in the construction industry and
other parties engaged in the lodging
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industry. The number of competitive lodging facilities in a
particular area could have a material adverse effect on
Elscints occupancy and rates and, therefore, revenues of
Elscints hotels. Elscint believes that competition within
the lodging market may increase in the foreseeable future.
Elscint cannot be sure that new or existing competitors will not
significantly reduce their rates or offer greater convenience,
services or amenities or significantly expand or improve hotels
in the markets in which Elscint currently or may subsequently
compete, thereby materially adversely affecting its business and
results of operations.
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Elscint is dependent on engaging third parties to enter
into lease agreements, and on obtaining and retaining high
customer traffic for its entertainment and commercial center in
Herzliya, Israel, known as the Arena. |
Elscint is dependent on its ability to induce food, clothing and
other commercial retailers and entertainment service providers
to enter into leases for units in the Arena, or to renew
existing leases on favorable terms. There is active competition
to attract tenants to other locations suitable for entertainment
and commercial centers. A general economic recession in Israel
may also deter businesses from entering into new lease
agreements or renewing existing lease agreements, or from
incurring the costs required to fit out their rented units in an
acceptable manner. If a significant portion of Elscints
existing leases expire, Elscint may find it more expensive or
less profitable to continue to operate the Arena.
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Elscint is dependent on the presence of anchor tenants in
the Arena. |
Elscint relies on the presence of anchor tenants in
the Arena. Anchor stores in entertainment and commercial centers
play an important part in generating customer traffic and making
a center a desirable location for other tenants. The failure of
an anchor store to renew its lease, the termination of an anchor
stores lease, or the bankruptcy or economic decline of an
anchor tenant can have a material adverse effect on the economic
performance of the Arena. There can be no assurance that if the
anchor stores at the Arena were to close or fail to renew their
leases, Elscint would be able to replace such anchors in a
timely manner or without incurring material additional costs and
adverse economic effects. The expiration of an anchor lease at
the Arena may make refinancing of the Arena difficult.
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Elscints investment in Gamida Cell Ltd. is
speculative in nature and Elscint may never realize any revenues
or profits from this investment. |
Elscint cannot be certain that its investment in Gamida will
result in revenues or profits. As of the date of this joint
proxy statement/ prospectus, Gamida has not generated operating
revenue. Economic, governmental, regulatory and industry factors
outside Elscints control affect Gamida. If Gamida does not
successfully implement its business plan, Elscint will not be
able to realize any profits from it. Elscints ability to
realize profits from this investment will be dependent upon the
management of Gamida, the success of its research and
development activities, the timing of the marketing of its
products and numerous other factors beyond Elscints
control.
In addition, Elscints investment in Gamida involves the
following risks:
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The period of time which may elapse between the initial stage
and the stage of development of marketable biotechnology
products or services may be protracted. |
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Products in the biotechnology field are required to undergo
clinical tests, either in compliance with the requirements of
the FDA or the requirements of competent regulatory authorities
in other countries where target markets are identified. Failure
to obtain regulatory approvals for the marketing of such
products could have a material adverse effect on Gamidas
business and on Elscints investment in Gamida. |
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The products and services of Gamida may face competition from
alternative sources, many of which have greater financial
resources than it, and have well developed marketing networks
which Gamida currently lack. |
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The ability to receive financial resources for the further
development of Gamidas products. |
31
THE EMI SPECIAL MEETING
General
This joint proxy statement/ prospectus is being furnished to the
shareholders of EMI in connection with the solicitation of
proxies by the EMI board for use at the EMI special meeting to
be held on October 27, 2005, and any and all adjournments
or postponements thereof.
Purpose of the EMI Special Meeting
At the EMI special meeting, EMI shareholders will consider and
vote upon the approval of the merger agreement, dated as of
August 21, 2005, between EMI and Elscint, and the approval
of the merger of Elscint with EMI. Under the merger agreement,
Elscint shareholders, other than EMI and Elscint, will receive
0.53 ordinary shares of EMI for each Elscint ordinary share
held by them.
Since the merger is governed by sections 350 and 351 of the
Israeli Companies Law, EMI and Elscint must apply to an Israeli
court for approval to hold their special meetings relating to
the merger. EMI and Elscint applied to the Israeli court on
August 23, 2005 to receive an order to convene the special
meetings of their shareholders. The court issued the order on
August 25, 2005. Following approval of the merger by
EMIs and Elscints shareholders and the satisfaction
(or waiver) of the other conditions to closing, EMI and Elscint
must apply to the court to approve the merger.
Date, Place and Time
The special meeting will be held on October 27, 2005, at
the corporate offices of EMI at 13 Mozes Street, Tel Aviv 67442,
Israel, commencing at 10:00 a.m., Israel time.
Record Date
The close of business on September 26, 2005, has been fixed
as the record date for the EMI special meeting for determining
shareholders entitled to vote at the special meeting and any and
all adjournments thereof.
Voting Rights; Quorum; Objection and Appraisal Rights
On the record date, EMI had outstanding 21,585,926 ordinary
shares that are entitled to vote on approval of the merger and
the merger agreement, nominal value NIS 1.0 per share. Each
holder of record of EMI ordinary shares on the record date is
entitled to one vote for each share held of record. Joint
holders of shares should note that, pursuant to the articles of
association of EMI, the vote of the senior of joint holders of
any share who votes such share, whether in person or by proxy,
will be accepted to the exclusion of the vote(s) of the other
registered holder(s) of such share, with seniority determined by
the order in which the names of the joint holders appear in
EMIs Register of Shareholders. The appointment of a proxy
to vote shares held by joint holders shall be executed by the
signature of the senior of the joint holders on the proxy card.
Shareholders may vote their shares by attending the special
meeting and voting their shares in person, or by completing the
enclosed proxy card, signing and dating it and mailing it in the
enclosed postage-prepaid envelope. A form of proxy for use at
the special meeting and a return envelope are enclosed. Shares
represented by executed and unrevoked proxies will be voted at
the special meeting. Shareholders who hold their shares through
the nominee company of Bank Discount LeIsrael Ltd. and
intend to vote their shares by person or by proxy must deliver
EMI an ownership certificate confirming their ownership of
EMIs shares on the record date approved by a recognized
financial institution, as required by the Israeli Companies
Regulations (Proof of Ownership of Shares for Voting at General
Meeting) of 2000. If a shareholder fails to vote by proxy or in
person, the shares represented by such proxy or owned by such
shareholder will be deemed not to have been cast for the purpose
of the approval of the merger and the merger agreement and,
accordingly, such shares shall not be counted in calculating the
percentage of affirmative votes required for approval of the
merger and the merger agreement. If a shareholder instructs in a
proxy that it wishes to abstain from voting its shares on a
specific proposal, the shares represented by such proxy will be
deemed as neither a vote for nor against
the proposal considered at the special meeting, although they
will be counted in determining whether a quorum is present.
Shareholders may revoke their proxies at any time before the
32
special meeting by voting their shares in person at the special
meeting if the shareholders are the record holder of the shares
and can provide evidence of such (i.e., a copy of
certificate(s) evidencing their Shares) or until 24 hours
before the special meeting by returning a later-dated proxy
card. If the shareholder holds its shares in street name, he or
she may revoke their proxies by following the instructions of
their brokers and the section titled Note for shareholders
in street name below. The chairman of the special meeting
may, at his or her discretion, accept a proxy after such time.
At least two shareholders, present in person or by proxy, and
holding or representing, in the aggregate, at least thirty-three
and one-third percent (33.33%) of the issued and outstanding
voting shares, will constitute a quorum, at the special meeting.
If no quorum is present within a half hour after the time
appointed for the holding of the special meeting, the special
meeting will stand adjourned to the same day in the following
week at the same time and place, or to such other day, time and
place as shall be determined by notice to shareholders. If a
quorum is not present within a half hour after the appointed
time at the adjourned meeting, the presence of two shareholders
in person or by proxy will constitute a quorum.
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Note to shareholders in street name |
Shareholders who hold their shares in street name,
meaning in the name of a bank, broker or other record holder,
must either direct the record holder of their shares on how to
vote their shares or obtain a legal proxy from the record holder
to vote the shares at the special meeting on behalf of the
record holder as well as a statement from such record holder
that it did not vote such shares.
Under Israeli law, which governs the merger, you are not
entitled to formal appraisal rights. However, since the merger
will be effected pursuant to sections 350 and 351 of the Israeli
Companies Law, it is subject to approval of an Israeli District
Court and the District Court (in our case, the Tel Aviv-Jaffa
District Court) may provide you a remedy if you object to the
merger within the timeframe and in the manner prescribed by the
Israeli Companies Law, the regulations promulgated thereunder
and the District Court.
Pursuant to regulations promulgated under the Israeli Companies
Law, unless the District Court determines otherwise, you may
raise your objections to the merger by filing an application
with the Court no later than 10 days following the filing
by EMI and Elscint of the second motion with the District Court,
which is expected to occur promptly following the approval of
the merger by EMIs and Elscints shareholders at the
special meetings to be convened on October 27, 2005 and the
fulfillment of all of the conditions precedent set forth in the
merger agreement.
The application would typically be filed as a written
application supported by an affidavit.
You should be aware that neither the Israeli Companies Law nor
the regulations promulgated under that law specify the remedies
available to you in connection with the merger.
Recommendation of EMIs Board of Directors
The EMI board of directors believes that the merger is advisable
and fair to you and is to the benefit of EMI and unanimously
(without the participation of the directors who have personal
interests in the approval of the merger) recommends that you
vote FOR the proposal to approve the merger and the
merger agreement.
Vote Required
Approval of the merger and the merger agreement requires the
affirmative vote of a majority in number of the shareholders
participating, in person or by proxy, at the special meeting,
excluding abstentions, who collectively hold seventy-five
percent (75%) of the shares represented at the voting.
EMI does not know of any other matters other than as described
in the Notice of Special Meeting of Shareholders that are to
come before the EMI special meeting.
33
As of the EMI record date, directors and executive officers of
EMI and their affiliates, including Europe-Israel, and other
than Elscint were beneficial owners of approximately 56.11% of
the EMI ordinary shares that were issued and outstanding as of
such date and approximately 56.94% of the voting rights in EMI
as of said date. In addition, as of the EMI record date, Elscint
owned approximately 2.39% of the EMI ordinary shares that were
issued and outstanding as of such date and approximately 0.95%
of the voting rights in EMI as of that date. The directors and
executive officers of EMI and Europe-Israel have indicated that
they intend to vote the EMI ordinary shares owned by them
FOR approval of the merger and the merger agreement.
Voting by Proxy
Proxy cards for use at the special meeting accompany this joint
proxy statement/ prospectus. A shareholder may use the proxy
card if the shareholder is unable to attend the special meeting
or wishes to have the shareholders shares voted by proxy
even if the shareholder attends the special meeting. A
shareholder may change the shareholders vote at any time
before the special meeting by voting its shares in person, or
until 24 hours before the special meeting by voting through
proxy, as described below. Shareholders can do this in any one
of the following ways:
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complete and submit a properly executed new proxy card bearing a
later date, no later than 24 hours prior to the special
meeting; or |
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revoke the proxy, by providing written notice of such revocation
to EMI no later than 24 hours prior to the special meeting,
or by appearing and voting at the special meeting. If the
shareholder holds the shares in street name he or she must
follow the Note for shareholders in street name
above. Merely attending the special meeting will not revoke the
proxy. |
Any proxy validly submitted and not revoked will be voted in the
manner specified therein by the shareholder. If a shareholder
has instructed a broker to vote the shareholders shares,
such shareholder must follow directions received from the broker
to change the vote.
A proxy appointment will also be valid for an adjourned meeting
to which the proxy appointment relates, unless otherwise
provided in the proxy appointment, or unless the adjournment
exceeds 21 days, in which case a new notice and proxy
appointment must be given.
If no indication of a vote is made on the proxy, EMI ordinary
shares represented by the proxy will not be voted.
IF A SHAREHOLDER CHOOSES TO VOTE BY PROXY, EMI MUST RECEIVE
THE PROXY AT LEAST 24 HOURS PRIOR TO THE SPECIAL MEETING.
Solicitation of Proxies
EMI will bear the cost of the solicitation of proxies from its
shareholders. Arrangements may also be made with brokerage
houses and other custodians, nominees and fiduciaries for the
forwarding of solicitation materials to the beneficial owners of
shares held of record by such persons, and EMI will reimburse
such custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses in connection therewith. Directors,
officers and employees of EMI may solicit proxies from EMI
shareholders personally or by telephone, telecopy or telegram or
other forms of communication. Such directors, officers and
employees will not be additionally compensated for such
solicitation but may be reimbursed for out-of-pocket expenses in
connection therewith.
The matter to be considered at the EMI special meeting is of
great importance to the shareholders of EMI. Accordingly, EMI
shareholders are urged to read and carefully consider the
information presented in this joint proxy statement/ prospectus,
and to complete, date, sign and promptly return the enclosed
proxy in the enclosed pre-addressed envelope.
34
THE ELSCINT SPECIAL MEETING
General
This joint proxy statement/ prospectus is being furnished to the
shareholders of Elscint in connection with the solicitation of
proxies by the Elscint board for use at the special meeting to
be held on October 27, 2005 and any and all adjournments or
postponements thereof.
Purpose of the Elscint Special Meeting
At the Elscint special meeting, Elscint shareholders will
consider and vote upon the approval of the merger agreement,
dated as of August 21, 2005, between EMI and Elscint, and
the approval of the merger. Under the merger agreement, Elscint
shareholders, other than EMI and Elscint, will receive 0.53
ordinary shares of EMI for each EMI ordinary share held by them.
Since the merger is governed by sections 350 and 351 of the
Israeli Companies Law, EMI and Elscint must apply to an Israeli
court for approval to hold their special meetings relating to
the merger. EMI and Elscint applied to the Israeli court on
August 23, 2005 to receive an order to convene the special
meetings of their shareholders. The court issued the order on
August 25, 2005. Following approval of the merger by
EMIs and Elscints shareholders and the satisfaction
(or waiver) of the other conditions to closing, EMI and Elscint
must apply to the court to approve the merger itself.
Date, Place and Time
The Elscint special meeting will be held on October 27, 2005, at
the corporate offices of Elscint at 13 Mozes Street, Tel
Aviv 67442, Israel, commencing at 11:00 a.m., Israel time.
Record Date
The close of business on September 26, 2005 has been fixed
as the record date for the special meeting for determining
shareholders entitled to vote at the special meeting and any and
all adjournments thereof.
Voting Rights; Quorum; Objection and Appraisal Rights
On the record date, Elscint had outstanding and entitled to
vote 16,835,220 ordinary shares, nominal value NIS
0.05 per share. Each holder of record of Elscint ordinary
shares on the record date is entitled to one vote per share.
Joint holders of shares should note that, pursuant to the
articles of association of Elscint, the vote of the senior of
joint holders of any share who tenders a vote, whether in person
or by proxy, will be accepted to the exclusion of the vote(s) of
the other registered holder(s) of the shares, with seniority
determined by the order in which the names appear in
Elscints Register of Shareholders.
Shareholders may vote their shares by attending the special
meeting and voting their shares in person, or by completing the
enclosed proxy card, signing and dating it and mailing it in the
enclosed postage-prepaid envelope. A form of proxy for use at
the special meeting and a return envelope are enclosed. Shares
represented by executed and unrevoked proxies will be voted at
the special meeting. If a shareholder fails to vote by proxy or
in person, or fails to indicate whether he or she has a personal
interest in the proposed merger and merger agreement, the shares
represented by such proxy or owned by such shareholder will be
deemed not to have been cast for the purpose of the approval of
the merger and the merger agreement and, accordingly, such
shares shall not be counted in calculating the percentage of
affirmative votes required for approval of the merger and the
merger agreement. If a shareholder instructs in a proxy that it
wishes to abstain from voting its shares on a specific proposal,
the shares represented by such proxy will be deemed as neither a
vote for nor against the proposal
considered at the special meeting, although they will be counted
in determining whether a quorum is present. Shareholders may
revoke their proxies until 48 hours before the special
meeting by returning a later-dated proxy card or at any time
before the special meeting by voting their shares in person at
the special meeting, if the shareholders are the record holder
of the shares and can provide evidence of such (i.e., a
copy of certificate(s) evidencing their Shares). If the
shareholder holds its shares in street name, he or
35
she may revoke their proxies by following the instructions of
their brokers and the section titled Note for shareholders
in street name below. The chairman of the special meeting
may, at his or her discretion, accept a proxy after such time.
At least two (2) shareholders, present in person or by
proxy, and holding or representing, in the aggregate, not less
than fifty-one percent (51%) of the issued and outstanding
shares, will constitute a quorum at the special meeting. If
within a half hour after the time appointed for the holding of
the special meeting no quorum is present, the special meeting
will stand adjourned to the same day in the following week, at
the same time and place, or to such other day, time and place as
shall be determined by Elscints board of directors by
notice to the shareholders. At the adjourned meeting, the
business for which the special meeting was called will be
transacted if at least two (2) shareholders present in
person or by proxy, and representing, in the aggregate, not less
than twenty-six percent (26%) of the issued and outstanding
shares, are present or represented.
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Note to shareholders in street name |
Shareholders who hold their shares in street name,
meaning in the name of a bank, broker or other record holder,
must either direct the record holder of their shares on how to
vote their shares or obtain a legal proxy from the record holder
to vote the shares at the special meeting on behalf of the
record holder as well as a statement from such record holder
that it did not vote such shares.
Under Israeli law, which governs the merger, you are not
entitled to formal appraisal rights. However, since the merger
will be effected pursuant to sections 350 and 351 of the Israeli
Companies Law, it is subject to approval of an Israeli District
Court and the District Court (in our case, the Tel Aviv-Jaffa
District Court) may provide you a remedy if you object to the
merger within the timeframe and in the manner prescribed by the
Israeli Companies Law, the regulations promulgated thereunder
and the District Court.
Pursuant to regulations promulgated under the Israeli Companies
Law, unless the District Court determines otherwise, you may
raise your objections to the merger by filing an application
with the Court no later than 10 days following the filing
by EMI and Elscint of the second motion with the District Court,
which is expected to occur promptly following the approval of
the merger by EMIs and Elscints shareholders at the
special meetings to be convened on October 27, 2005 and the
fulfillment of all of the conditions precedent set forth in the
merger agreement.
The application would typically be filed as a written
application supported by an affidavit.
You should be aware that neither the Israeli Companies Law nor
the regulations promulgated under that law specify the remedies
available to you in connection with the merger.
Recommendation of Elscints Board of Directors
The Elscint board of directors believes that the merger is
advisable and fair to you and is to the benefit of Elscint and
unanimously (without the participation of directors who have
personal interests in the approval of the merger) recommends
that you vote FOR approval of the merger and the
merger agreement.
Vote Required
Approval of the merger and the merger agreement requires the
affirmative vote of a majority in number of the shareholders
participating, in person or by proxy, at the special meeting,
excluding abstentions, who collectively hold seventy-five
percent (75%) of the shares represented at the voting. In
addition, because EMI owns, directly and through its
wholly-owned subsidiary, Elbit Medical Holdings Ltd.,
approximately sixty-one
36
percent (61%) of Elscints outstanding shares, the merger
and the merger agreement will be approved only if either:
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(i) the majority vote at the special meeting includes at
least one-third of the total votes of shareholders having no
personal interest in the proposal, participating at the special
meeting in person or by proxy (votes abstaining shall not be
taken into account in counting the above-referenced
shareholders votes); or |
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(ii) the total number of shares of the shareholders
mentioned in clause (i) above that are voted against such
proposal does not exceed one percent (1%) of the total voting
rights in Elscint. |
Under the Israeli Companies Law, each shareholder that attends
the special meeting in person shall, prior to exercising such
shareholders voting rights at the special meeting advise
Elscint whether or not that shareholder has a personal interest
in the approval of the merger and the merger agreement. Each
shareholder that delivers a signed proxy card to Elscint must
indicate on the proxy card whether or not that shareholder has a
personal interest in the approval of the merger and the merger
agreement. Shareholders who do not indicate whether or not they
have a personal interest in the approval of the merger and the
merger agreement will not be eligible to vote their shares as to
such proposal.
Under the Israeli Companies Law, a personal interest means a
personal interest of a person in an act or transaction of a
company, including:
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a personal interest of that persons relative (i.e.
spouse, brother or sister, parent, grandparent, child, child of
such persons spouse or the spouse of any of the
above); or |
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a personal interest of another entity in which that person or
his or her relative (as defined above) holds 5% or more of such
entitys issued shares or voting rights, has the right to
appoint a director or the chief executive officer of such
entity, or serves as director or chief executive officer of such
entity. |
A personal interest resulting merely from holding Elscints
shares will not be deemed a personal interest.
EMI and Elbit Medical Holdings Ltd. are deemed to have a
personal interest in the proposal to approve the merger and the
merger agreement.
As of the record date, directors and executive officers of
Elscint were beneficial owners of approximately 2.17% of the
Elscint ordinary shares that were issued and outstanding as of
such date. In addition, as of the record date, EMI owned,
directly and through its wholly-owned subsidiary, Elbit Medical
Holdings Ltd., approximately sixty-one percent (61%) of the
issued and outstanding ordinary shares of Elscint. Elbit Medical
Holdings Ltd. will transfer its shares of Elscint to EMI prior
to the completion of the merger. The directors and executive
officers of Elscint, as well as EMI and Elbit Medical Holdings
Ltd., have indicated that they intend to vote the Elscint
ordinary shares owned by them FOR approval of the
merger and the merger agreement.
Voting by Proxy
Proxy cards for use at the special meeting accompany this joint
proxy statement/ prospectus. A shareholder may use the proxy
card if the shareholder is unable to attend the special meeting
or wishes to have the shareholders shares voted by proxy
even if the shareholder attends the special meeting. A
shareholder that is the record holder of the shares may change
the shareholders vote at any time before the special
meeting by voting its shares in person, or until 48 hours
before the special meeting by voting by means of a proxy, as
described below. Shareholders can do this in any one of the
following ways:
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complete and submit a properly executed new proxy card bearing a
later date, no later than 48 hours prior to the special
meeting; or |
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revoke the proxy, by providing written notice of such revocation
to Elscint no later than 48 hours prior to the special
meeting, or by appearing and voting at the special meeting. If
the shareholder holds the shares in street name, he or she must
follow the Note for shareholders in street name
above. Merely attending the special meeting will not revoke the
proxy. |
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Any proxy validly submitted and not revoked will be voted in the
manner specified therein by the shareholder. If a shareholder
has instructed a broker to vote the shareholders shares,
such shareholder must follow directions received from the broker
to change the vote.
A proxy appointment shall also be valid for an adjourned meeting
to which the proxy appointment relates, unless otherwise
provided in the proxy appointment, or unless the adjournment
exceeds 21 days, in which case a new notice and proxy
appointment must be given.
If no indication of a vote is made on the proxy, or if there
is no indication of whether the shareholder whose Elscint
ordinary shares are represented by the proxy has a personal
interest on the proxy, the Elscint ordinary shares represented
by the proxy will not be voted.
IF A SHAREHOLDER CHOOSES TO VOTE BY PROXY, ELSCINT MUST
RECEIVE THE PROXY AT LEAST 48 HOURS PRIOR TO THE SPECIAL
MEETING.
Solicitation of Proxies
Elscint will bear the cost of the solicitation of proxies from
its shareholders. Arrangements may also be made with brokerage
houses and other custodians, nominees and fiduciaries for the
forwarding of solicitation materials to the beneficial owners of
shares held of record by such persons, and Elscint will
reimburse such custodians, nominees and fiduciaries for their
reasonable out-of-pocket expenses in connection therewith.
Directors, officers and employees of Elscint may solicit proxies
from shareholders personally or by telephone, telecopy or
telegram or other forms of communication. Such directors,
officers and employees will not be additionally compensated for
such solicitation but may be reimbursed for out-of-pocket
expenses in connection therewith.
Elscint shareholders should not send any Elscint share
certificates with their proxy card. Following the completion of
the merger, Elscint shareholders will receive instructions for
the surrender and exchange of their Elscint share certificates.
The matter to be considered at the Elscint special meeting is of
great importance to the shareholders of Elscint. Accordingly,
Elscint shareholders are urged to read and carefully consider
the information presented in this joint proxy statement/
prospectus, and to complete, date, sign and promptly return the
enclosed proxy in the enclosed pre-addressed envelope.
38
THE MERGER
Background of the Merger
When Europe-Israel, EMIs current majority shareholder,
acquired control of EMI in 1999, EMI was the owner of a majority
of Elscints ordinary shares.
On February 27, 2005, at an unrelated meeting between
Messrs. Mordechay Zisser, EMIs Executive Chairman,
Shimon Yitzhaki, EMIs President and Chief Financial
Officer, Abraham (Rami) Goren, Elscints Executive
Chairman, Ms. Rachel Lavine, Elscints President and
Gross, Kleinhendler, Hodak, Halevy, Greenberg & Co.,
who serve as EMIs and Elscints outside Israeli
counsel, Mr. Zisser expressed his desire to explore the
possibility of a business combination between EMI and Elscint. A
preliminary discussion ensued relating to the possibility of
such a transaction.
During the months of April and May 2005, several discussions
were held between senior management of both companies regarding
various aspects of a possible combination and the feasibility of
any such transaction.
On May 29, 2005, a meeting of the board of directors of EMI
was convened to discuss the possibility of a business
combination of EMI and Elscint by way of a share-for-share
transaction and the procedures and approvals required for such
transaction. Also in attendance was Gross, Kleinhendler, Hodak,
Halevy, Greenberg & Co., EMIs outside Israeli
counsel. After discussion, EMIs board of directors
resolved to form an independent committee, consisting of
Messrs. Zvi Tropp, as chairman, and David Rubner and Joseph
Apter, as members, to pursue the proposed business combination
with Elscint on behalf of EMI. The members of the independent
committee of EMI were chosen because they were not affiliated
with EMIs majority shareholder.
On May 30, 2005, Mr. Zisser, EMIs Chairman,
contacted Mr. Goren and Ms. Lavine, Elscints
Chairman and President, respectively, to inform them that
EMIs independent committee would formally approach Elscint
regarding a proposed business combination.
During the first week of June, senior management of EMI and
Elscint had further discussions about the potential transaction,
including the timing of the transaction in the event that a
transaction was to move forward.
On June 8, 2005, Mr. Tropp, the Chairman of EMIs
independent committee on behalf of EMIs independent
committee, contacted Rami Goren, Elscints Chairman and
proposed a combination between EMI and Elscint in a
share-for-share transaction, whereby EMI would acquire the
shares of Elscint it does not already own, subject to the
receipt of all required approvals. Mr. Tropp did not
specify the terms of the offer.
On the same day, a meeting of the board of directors of Elscint
was convened to discuss EMIs independent committees
proposal. Also in attendance were members of Elscints
management and Elscints outside Israeli counsel, Gross,
Kleinhendler, Hodak, Halevy, Greenberg & Co. The
participants discussed different aspects of the proposed merger
and its implications on Elscints operations, including
procedural issues and required approvals. After discussion,
Elscints board of directors resolved to appoint an
independent committee consisting of Messrs. Shmuel Perets,
as chairman, and Moshe Leon and Benny Gal, as members, and
authorized the committee to enter into discussions regarding the
proposed merger with EMIs independent committee. These
members were chosen because they were not affiliated with
EMIs majority shareholder. It was also decided that the
independent committee of Elscint would retain its own legal
counsel, in Israel and the United States, separate from
EMIs and Elscints outside counsel.
Also on the same day, each of EMI and Elscint publicly announced
EMIs approach to Elscint to discuss the merger and the
appointment of independent committees by each of EMI and Elscint
to hold the discussions relating to a potential transaction.
On June 15, 2005, Elscints independent committee
retained Oppenheimer & Co. Inc. to provide it with
financial advice and assistance in connection with the merger
and to render a fairness opinion in connection with the proposed
merger. On the same day, Elscints independent committee
also retained Goldfarb, Levy, Eran & Co. and Carter
Ledyard & Milburn LLP to act as their Israeli and
U.S. outside counsel, respectively.
39
On June 19, 2005, at the request of Mr. Tropp (on
behalf of EMIs independent committee), Mr. Shimon
Yitzhaki sent a letter to Mr. Perets, the chairman of
Elscints independent committee stating that EMIs
independent committee proposed an exchange ratio of
0.40 shares of EMI for each share of Elscint, subject to
the receipt of all required approvals. On June 19, 2005,
EMI publicly announced the initial offer made by EMIs
independent committee to Elscints independent committee.
The same was publicly announced by each of EMI and Elscint on
June 20, 2005 in the United States, which was the next
business day in the United States.
Between June 2005 and the signing of the merger agreement,
Elscints independent committee met on several occasions to
discuss the proposed transaction and consulted on a number of
occasions with its legal and financial advisors. During the same
period, EMIs independent committee also met on several
occasions regarding the proposed transaction and consulted with
its legal and financial advisors.
On June 30, 2005, EMIs independent committee retained
C.E. Unterberg, Towbin, LLC to provide financial advisory
services and to render a fairness opinion in connection with the
proposed merger transaction.
On July 27, 2005, Mr. Zvi Tropp met with
Mr. Shmuel Perets to discuss the exchange ratios proposed
by each committee. Mr. Tropp repeated the EMI independent
committees offer of June 19, 2005 of an exchange
ratio of 0.40 shares of EMI for each share of Elscint.
Mr. Perets proposed that the exchange ratio be set at 0.60,
provided the closing price of EMI ordinary shares on NASDAQ at
the closing of the merger was between $16.00 and $20.00 per
share. Mr. Perets proposed that in the event the closing
price of EMI ordinary shares on NASDAQ at the closing of the
merger deviated from that range, the exchange ratio would be
adjusted in accordance with a pre-agreed formula. Mr. Tropp
declined Mr. Perets proposal and the parties agreed
to further discuss the exchange ratio with the respective
members of the independent committees and their financial
advisors.
During early August 2005 the committees continued their
negotiations concerning the exchange ratio with no results. On
August 5, 2005, at a meeting between Mr. Tropp and
Mr. Perets, Mr. Tropp agreed to set the exchange ratio
at 0.48 shares of EMI for each share of Elscint.
Mr. Perets proposed an exchange ratio of 0.55.
Mr. Tropp suggested reaching an agreed exchange ratio of
0.51, but Mr. Perets declined.
Simultaneously with these discussions, legal counsel of EMI and
Elscint analyzed the legal issues related to the merger, and
began preparation of the documentation for the merger, including
the merger agreement.
On August 12, 2005, at a meeting between Mr. Tropp and
Mr. Perets, they reached an agreed exchange ratio of
0.53 shares of EMI for each share of Elscint, subject to
the approval of their respective independent committees, the
receipt of a fairness opinion from each partys financial
advisor and the receipt of approvals by EMIs and
Elscints audit committees and board of directors and all
other required approvals. Approval by each companys audit
committee is required by Israeli law.
On August 17, 2005, at a meeting among Mr. Tropp and
Mr. Rubner of EMIs independent committee and
Mr. Perets and Mr. Leon of Elscints independent
committee (who participated by conference call), the
participants formally resolved to recommend to EMIs and
Elscints respective audit committees and boards of
directors to approve the merger, at an exchange ratio of
0.53 shares of EMI for each share of Elscint, subject to
the receipt of fairness opinions from the respective financial
advisors. Also present at the meetings were Gross, Kleinhendler,
Hodak, Halevy, Greenberg & Co., the Israeli outside
counsel of EMI and Goldfarb, Levy, Eran & Co., the
Israeli outside counsel of Elscints independent committee.
On August 18, 2005, Elscints financial advisor made a
presentation on a conference call at which Shmuel Perets, Moshe
Leon and Goldfarb, Levy, Eran & Co., the Israeli
outside counsel of Elscints independent committee
participated. At this call, Oppenheimer & Co. Inc.
reviewed the financial aspects of the proposed transaction,
including the exchange ratio and delivered its oral opinion to
the effect that, as of that date and based on the subject to the
matters described in the opinion, the exchange ratio is fair,
from a financial point of view, to the shareholders of Elscint
other than EMI, its controlling shareholder and any affiliates
of EMI and/or its controlling shareholder.
40
Between August 17, 2005 and August 21, 2005, EMI,
Elscint and their respective legal counsel completed the
preparation and negotiation of the merger agreement.
On August 21, 2005, the audit committee and board of
directors of Elscint together with members of Elscints
management, Elscints Israeli outside counsel, Gross,
Kleinhendler, Hodak, Halevy, Greenberg & Co. and
Elscints independent committees Israeli counsel
Goldfarb, Levy, Eran & Co. met to discuss the merger
and the merger agreement. At the meeting, Mr. Perets
reviewed the financial aspects of the proposed transaction as
presented by Oppenheimer & Co. Inc. at the conference
call of August 18, 2005 and Goldfarb, Levy, Eran &
Co., the outside Israeli counsel of Elscints independent
committee, reviewed the legal aspects of the merger, including
the terms of the merger agreement. After discussion, the audit
committee and board of directors of Elscint resolved to approve
the merger and the merger agreement. The executed fairness
opinion from Oppenheimer & Co. Inc. to the effect that,
as of the date of the opinion (August 18, 2005) and based
on the subject to the matters described in the opinion, the
exchange ratio is fair, from a financial point of view, to the
shareholders of Elscint other than EMI, its controlling
shareholder and any affiliates of EMI and/or its controlling
shareholder was received later that evening.
On the same day the audit committee and board of directors of
EMI were convened. Also in attendance were members of EMIs
management and EMIs outside Israeli counsel, Gross,
Kleinhendler, Hodak, Halevy, Greenberg & Co. and
financial advisor, C.E. Unterberg, Towbin, LLC, in order to
discuss the merger and the merger agreement. C.E. Unterberg,
Towbin, LLC reviewed the financial aspects of the proposed
transaction, including the exchange ratio, and delivered its
oral opinion, subsequently followed by delivery of a written
opinion, to the effect that, as of the date of the opinion
(August 21, 2005) and based on and subject to the matters
described in the opinion, the exchange ratio is fair, from a
financial point of view, to the shareholders of EMI. In
addition, Gross, Kleinhendler, Hodak, Halevy,
Greenberg & Co. reviewed the legal aspects of the
merger, including the terms of the merger agreement. After
discussion, the audit committee and board of directors of EMI
resolved to approve the merger and the merger agreement.
On the evening of August 21, 2005, the parties signed the
merger agreement and publicly announced the signing on
August 22, 2005.
Recommendations of the Board of Directors
Each of EMIs and Elscints board of directors
believes that the merger is advisable and fair to their
respective shareholders and is to the benefit of EMI and
Elscint, respectively, and has, by unanimous vote (without the
participation of directors who have personal interests in the
approval of the merger) of all directors present, approved the
merger and the merger agreement and recommend that their
respective shareholders vote FOR the merger and the
merger agreement.
Our Reasons for the Merger
In reaching their conclusion that the merger is advisable, fair
to EMIs and Elscints shareholders and is to the
benefit of EMI and Elscint, respectively, the audit committees
and boards of directors of EMI and Elscint consulted with their
senior management and legal and financial advisors and
considered a number of factors, including the following material
factors:
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The view that the merger is intended to allow the merging
companies to exploit opportunities which may have been
unavailable to either EMI or Elscint separately due to the
increased resources and use of their relative advantages and
accumulated experience and knowledge of the two companies; |
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The view that the merger is expected to result in increased
organizational and business efficiency of the merged company by
joining management headquarters and the common use of their
joint financial resources and business capabilities; |
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The anticipated reduction in operational costs, including by
reason of the joining of the management headquarters of EMI and
Elscint and by reason of the elimination of costs resulting from
holding and operating a separate public company whose shares are
traded on a stock exchange in the United States |
41
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(as the merger will result in the de-listing and deregistration
of the shares of Elscint from the NYSE and will result in
Elscint becoming a wholly-owned subsidiary of EMI); |
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The belief that a combination of EMI and Elscint will result in
greater resources and scope of operations than either EMI or
Elscint separately enjoys; |
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The prospect of gaining additional financial leverage; |
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The contribution of the merger to higher liquidity and
tradability of EMI ordinary shares; |
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The risks associated with the merger of EMI and Elscint as
described above under the section entitled Risk
Factors beginning on page 20; |
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The information concerning the financial performance and
condition, business operations, capital levels, asset quality
and prospects of EMI and Elscint, and each companys future
financial performance as a separate entity and on a combined
basis; |
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The various regulatory filings and approvals required to
complete the merger and the likelihood of obtaining these
approvals; |
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The terms of the merger agreement; |
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The current and historical market prices of the EMI ordinary
shares and the Elscint ordinary shares; |
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The challenges and costs of combining the businesses of two
companies of this size and the related risk of diverting
management resources from other strategic opportunities and from
operational matters; |
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The expected tax treatment of the merger for Israel and United
States federal income tax purposes; |
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The continuance of substantially the same reporting requirements
by EMI which will be available to current Elscint
shareholders; and |
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The recommendation of the respective managements of EMI and
Elscint. |
In addition to the factors described above, EMIs board of
directors also considered the written opinion dated
August 21, 2005 of C.E. Unterberg, Towbin, that, as of the
date of the opinion and based on and subject to the matters
noted in the opinion, the exchange ratio provided for in the
merger was fair to the shareholders of EMI from a financial
point of view, as more fully described below under the caption
Opinion of EMI Financial Advisor. The fairness
opinion was addressed to the board of directors of EMI.
In addition to the reasons described above, Elscints board
of directors also considered the written opinion dated
August 18, 2005 of Oppenheimer & Co. Inc., that,
as of the date of the opinion and based on and subject to the
matters noted in the opinion, the exchange ratio provided for in
the merger was fair from a financial point of view to the
shareholders of Elscint, other than EMI, its controlling
shareholder and any affiliates of EMI and/or its controlling
shareholder, as more fully described below under the caption
Opinion of Elscint Financial Advisor. The fairness
opinion was addressed to the board of directors of Elscint.
While the independent committees of EMIs and
Elscints board of directors formed for the purpose of
considering the proposed merger, audit committees and boards of
directors of EMI and Elscint considered each of the foregoing
factors in reaching their determinations, individual members of
each board of directors may have attached different importance
to each of the factors. In view of the number and wide variety
of factors considered in connection with their evaluation of the
merger, the board of directors of EMI and Elscint did not
consider it practicable, nor did they attempt, to assign
relative weight to the factors considered in reaching their
determinations. In addition, the boards of directors of EMI and
Elscint did not assign any particular weight to any factor, but
rather conducted an overall analysis of the reasons described
above and the additional factors described below. EMIs and
Elscints respective boards of directors considered all
these factors as a whole, and considered the factors as a whole
to be favorable to and to support their determinations.
42
Opinion of EMI Financial Advisor
C.E. Unterberg, Towbin acted as financial advisor to EMI in
connection with the merger and provided an opinion to EMIs
board of directors as to the fairness, from a financial point of
view, to EMIs shareholders, of the exchange ratio of 0.53
to exchange Elscint ordinary shares (except for Elscint shares
held by EMI and any Elscint shares held by or for the benefit of
Elscint) for EMI ordinary shares that will result in the Elscint
shareholders owning approximately 14% of the combined
companys fully-converted shares at closing, assuming each
companys capital structure remains constant.
In a meeting of EMIs board of directors on August 21,
2005 held to evaluate the proposed transaction, C.E. Unterberg,
Towbin delivered to EMIs board of directors its oral
opinion, subsequently followed by delivery of a written opinion,
that, as of that date and based on the assumptions made, the
matters considered and the limitations on the review undertaken
and described orally to the board and in the written opinion,
the exchange ratio was fair, from a financial point of view, to
the holders of the outstanding EMI ordinary shares. The exchange
ratio was determined through negotiations between the respective
independent committees of EMI and Elscint. C.E. Unterberg,
Towbin advised EMIs independent committee with respect to
the principal structural terms of the merger.
The summary of the C.E. Unterberg, Towbin opinion set forth in
this joint proxy statement/ prospectus is qualified in its
entirety by reference to the full text of the C.E. Unterberg,
Towbin opinion attached as Annex B hereto. The C.E.
Unterberg, Towbin opinion was prepared for the benefit and use
of EMIs board of directors in connection with its
evaluation of the merger and is not intended to be and does not
constitute a recommendation to any shareholder of EMI or Elscint
as to how such shareholder should vote, or take any other
action, with respect to the merger.
The C.E. Unterberg, Towbin opinion does not address:
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the relative merits of the merger and the other business
strategies that EMIs board of directors has considered or
may be considering; or |
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the decision of EMIs board of directors to proceed with
the merger, or any alternative transaction. |
C.E. Unterberg, Towbin did not express any opinion as to:
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the value of any employee agreement or other arrangement, if
any, entered into in connection with the merger, |
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any tax or other consequences that might result from the
merger; or |
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the value of EMI shares when issued to Elscint shareholders
pursuant to the merger or the price at which shares of EMI may
trade in the future. |
The trading price of EMI shares may be affected by a number of
factors, including but not limited to:
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dispositions of EMI shares by shareholders within a short period
of time after the effective time of the merger; |
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changes in prevailing interest rates and other factors which
generally influence the price of securities; |
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adverse changes in the current capital markets, generally and/or
in the sectors of which either EMI or Elscint are a part; |
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the occurrence of adverse changes in the financial condition,
business, assets, results of operations or prospects of EMI or
Elscint or in their respective product markets; |
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any necessary actions by or restrictions of federal, state or
other governmental agencies or regulatory authorities; and |
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timely completion of the merger on terms and conditions that are
acceptable to all parties involved. |
Furthermore, C.E. Unterberg, Towbins opinion does not
account for political factors that may affect the countries in
which the companies have offices or operations.
43
In connection with the preparation of its opinion, C.E.
Unterberg, Towbin, among other things:
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reviewed and analyzed the terms and structure of the transaction; |
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for each of EMI and Elscint, reviewed and analyzed: |
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publicly available financial statements and other information |
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price and trading activity of ordinary shares; |
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compared valuation multiples of comparable public companies and
financial terms of other business combinations in the hotel
industry, majority owner privatization, relative deal size and
other Israeli M&A transactions; |
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met with management of EMI to discuss the strategic rationale
for and potential benefits of the transaction; and |
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visited primary EMI and Elscint offices in Tel Aviv, Israel. |
C.E. Unterberg, Towbin did not review projected or pro forma
financial information for EMI.
In its review and analysis, and in arriving at its opinion, C.E.
Unterberg, Towbin assumed and relied upon the accuracy and
completeness of all of the financial and other information
provided to it (including information furnished to it verbally
or otherwise discussed with it by the managements of EMI and
Elscint) or publicly available and have neither attempted to
verify, nor assumed responsibility for verifying, any of such
information. C.E. Unterberg, Towbin relied upon the assurances
of the management of EMI and Elscint that they are not aware of
any facts that would make such information inaccurate or
misleading.
Furthermore, C.E. Unterberg, Towbin did not obtain or make, or
assume any responsibility for obtaining or making, any
independent evaluation or appraisal of the properties, assets or
liabilities (contingent or otherwise) of EMI or Elscint, nor was
C.E. Unterberg, Towbin furnished with any such evaluation or
current appraisal. C.E. Unterberg, Towbin has assumed that all
material assets and liabilities (contingent or otherwise) of EMI
and Elscint are as set forth in their respective financial
statements or other information made available to C.E.
Unterberg, Towbin.
C.E. Unterberg, Towbin assumed that the merger will be
consummated upon the terms set forth in the last draft of the
merger agreement reviewed by it without material alteration
thereof or waiver of any material terms thereof, including,
among other things, that the merger will be effected in
accordance with sections 104C and 103K of the Israeli Income Tax
Ordinance [New Version], 1961, as shall be in effect from time
to time and treated as a tax-free reorganization pursuant to the
U.S. Internal Revenue Code of 1986, as amended. C.E.
Unterberg, Towbin expressed no opinion regarding whether the
necessary approvals or other conditions to the merger will be
obtained or satisfied and assumed that obtaining any necessary
regulatory approvals or third party consents will not have an
adverse effect on the merger or any parties thereto. In
addition, C.E. Unterberg, Towbin assumed that the historical
financial statements of each of EMI and Elscint reviewed by C.E.
Unterberg, Towbin have been prepared and fairly presented in
accordance with accounting principles generally accepted in
Israel consistently applied and that there has been no material
change in the assets, financial condition, results of
operations, business or prospects of EMI or Elscint since the
date of the most recent historical financial statements made
available to C.E. Unterberg, Towbin. C.E. Unterberg, Towbin also
assumed that all of the representations and warranties contained
in the merger agreement and all related agreements are true and
correct, that each party to the agreements will perform all of
the covenants required to be performed by such party under the
agreements, that the conditions precedent in the agreements are
not waived. Finally, with EMIs consent, C.E. Unterberg,
Towbin relied upon the advice EMI has received from its legal,
accounting and tax advisors as to all legal, accounting and tax
matters relating to the merger and the other transactions
contemplated by the merger agreement.
This opinion was necessarily based upon market, economic and
other conditions as in effect on, and information made available
to C.E. Unterberg, Towbin as of the date thereof. It should be
understood that subsequent developments may affect the
conclusion expressed in the opinion and that C.E. Unterberg,
Towbin disclaimed any undertaking or obligation to advise any
person of any change in any matter affecting its opinion
44
which may come or be brought to C.E. Unterberg, Towbins
attention after the date of the opinion. C.E. Unterberg,
Towbins opinion is limited to the fairness, from a
financial point of view and as of the date thereof, to the
shareholders of EMI of the exchange ratio.
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Summary of C.E. Unterberg, Towbins Financial
Analyses |
The following is a summary of the material financial analyses
performed by C.E. Unterberg, Towbin in connection with rendering
its opinion. The summary of the financial analyses is not a
complete description of all the analyses performed by C.E.
Unterberg, Towbin. Certain of the information in this section is
presented in a tabular form. In order to understand the
financial analyses performed by C.E. Unterberg, Towbin better,
these tables must be read together with the text of each
summary. The C.E. Unterberg, Towbin opinion is based upon the
totality of the various analyses performed by C.E. Unterberg,
Towbin and no particular portion of the analyses has any merit
standing alone.
Comparable Companies Analysis. Using publicly available
information, C.E, Unterberg, Towbin compared certain financial
measures and metrics of Elscint to those of the following
publicly traded companies in a similar sector to Elscint. The
financial measures and metrics included market value, enterprise
value, enterprise value as a multiple of revenue and earnings
before interest, taxes, depreciation and amortization
(EBITDA), price as a multiple of funds from
operations (FFO) per share and market value as a
multiple of tangible book value.
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Sunstone Hotel Investors, Inc. |
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Equity Inns, Inc. |
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Innkeepers USA Trust |
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Strategic Hotel Capital, Inc. |
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Ashford Hospitality Trust, Inc. |
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Eagle Hospitality Properties Trust, Inc. |
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MeriStar Hospitality Corporation |
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Highland Hospitality Corporation |
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Winston Hotels, Inc. |
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Boykin Lodging Company |
45
The following table reflects the means, medians and range of
ratios of enterprise values as a multiple of revenue and EBITDA,
price as a multiple of FFO per share and market value as a
multiple of tangible book value for the above companies versus
Elscint:
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Elscint | |
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Purchase Price of | |
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Current Price of | |
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$9.58(a) | |
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$8.77(b) | |
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Mean | |
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Median | |
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High | |
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Low | |
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Enterprise Value/ Revenue:
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Calendar Year 2004 Actual
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6.9x |
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6.7x |
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5.0x |
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4.6x |
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11.9x |
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1.6x |
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Last Twelve Months Actual
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6.8x |
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6.6x |
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4.1x |
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4.2x |
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6.9x |
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1.6x |
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Calendar Year 2005 Estimates
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NA |
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NA |
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3.5x |
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3.3x |
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4.5x |
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2.8x |
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Calendar Year 2006 Estimates
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NA |
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NA |
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3.0x |
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2.7x |
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4.0x |
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2.6x |
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Enterprise Value/ EBITDA:
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Calendar Year 2004 Actual
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46.3x |
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44.9x |
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25.5x |
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18.1x |
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58.4x |
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10.8x |
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Last Twelve Months Actual
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47.3x |
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45.9x |
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18.9x |
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16.9x |
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29.4x |
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12.1x |
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Calendar Year 2005 Estimates
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NA |
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NA |
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13.0x |
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12.3x |
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14.5x |
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12.0x |
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Calendar Year 2006 Estimates
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NA |
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NA |
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10.4x |
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10.5x |
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11.2x |
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9.1x |
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Price/ FFO Per Share:
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Calendar Year 2004 Actual
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NM |
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NM |
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24.2x |
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21.3x |
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60.9x |
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11.0x |
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Last Twelve Months Actual
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NM |
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NM |
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14.8x |
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15.1x |
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19.5x |
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10.2x |
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Calendar Year 2005 Estimates
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NA |
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NA |
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13.2x |
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11.8x |
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22.6x |
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9.9x |
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Calendar Year 2006 Estimates
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NA |
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NA |
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9.8x |
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9.7x |
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11.8x |
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7.9x |
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Market Value/ Tangible Book Value
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0.8x |
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0.7x |
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1.8x |
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1.3x |
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4.6x |
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|
|
0.9x |
|
|
|
(a) |
Assumes equity value of Elscint based on an assumed exchange
ratio of 0.53 and a purchase price of $9.58 |
|
|
|
|
(b) |
|
Assumes equity value of Elscint based on a closing price of
$8.77 on August 19, 2005. |
|
C.E. Unterberg, Towbin then compared the range of comparable
companies multiples to that of Elscints as of
August 19, 2005. C.E. Unterberg, Towbin observed that
Elscints purchase price multiples were within the range of
the comparable companies multiples.
No company compared in the comparable companies analysis is
identical to Elscint. Accordingly, an analysis of the results of
the foregoing is not entirely mathematical and involves complex
considerations and judgments concerning differences in financial
and operating characteristics and other factors that could
affect the acquisition, public trading and other values of the
comparable companies or Elscint.
Comparable Company Transaction Analysis. Using publicly
available information, C.E. Unterberg, Towbin analyzed the
consideration offered and the implied transaction value premiums
or discounts paid or proposed to be paid in 19 hotel industry
M&A transactions, 25 majority owner privatization M&A
transactions, 51 relative deal size M&A transactions and 17
Israeli M&A transactions.
In analyzing these comparable company transactions,
C.E. Unterberg, Towbin compared, among other things, the
premiums paid to the one-day, five-day and thirty-day prior
closing prices. All premiums for the comparable company
transactions were based on public information available at the
time of the announcements of the respective transactions.
C.E. Unterberg, Towbin reviewed the premiums for Elscint pre-
the June 8, 2005 announcement (the first announcement made
in connection with the merger) and during a period ending on
August 19, 2005
46
leading up to the signing of the merger agreement for the
periods indicated below. The following table represents the
premium of EMIs offer price to Elscints price
assuming an exchange ratio of 0.53:
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums Paid |
|
1-Day | |
|
5-Day | |
|
30-Day | |
|
|
| |
|
| |
|
| |
Pre-Announcement(1)
|
|
|
8.4 |
% |
|
|
54.5 |
% |
|
|
67.4 |
% |
Post-Announcement(2)
|
|
|
16.8 |
% |
|
|
16.8 |
% |
|
|
19.9 |
% |
|
|
(1) |
Average prices are as of the close on 6/7/2005 |
|
(2) |
Average prices are as of the close on 8/19/2005 |
The following table represents the premiums for the comparable
company transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums Paid |
|
Mean | |
|
Median | |
|
High | |
|
Low | |
|
|
| |
|
| |
|
| |
|
| |
Premium 1 day Prior to Announcement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel Transactions
|
|
|
10.4 |
% |
|
|
2.0 |
% |
|
|
81.0 |
% |
|
|
(9.0 |
)% |
|
Majority Buy-In
|
|
|
41.4 |
% |
|
|
30.0 |
% |
|
|
114.0 |
% |
|
|
(17.0 |
)% |
|
Comparably Sized M&A
|
|
|
36.6 |
% |
|
|
30.0 |
% |
|
|
230.0 |
% |
|
|
0.0 |
% |
|
Israeli M&A
|
|
|
33.6 |
% |
|
|
19.0 |
% |
|
|
186.0 |
% |
|
|
1.0 |
% |
|
Blended
|
|
|
38.3 |
% |
|
|
30.0 |
% |
|
|
230.0 |
% |
|
|
(17.0 |
)% |
Premium 5 day Prior to Announcement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel Transactions
|
|
|
9.8 |
% |
|
|
1.0 |
% |
|
|
63.0 |
% |
|
|
(7.0 |
)% |
|
Majority Buy-In
|
|
|
50.1 |
% |
|
|
36.0 |
% |
|
|
150.0 |
% |
|
|
(9.0 |
)% |
|
Comparably Sized M&A
|
|
|
41.6 |
% |
|
|
33.0 |
% |
|
|
202.0 |
% |
|
|
3.0 |
% |
|
Israeli M&A
|
|
|
36.4 |
% |
|
|
24.0 |
% |
|
|
150.0 |
% |
|
|
5.0 |
% |
|
Blended
|
|
|
42.1 |
% |
|
|
31.0 |
% |
|
|
202.0 |
% |
|
|
(9.0 |
)% |
Premium 30 day Prior to Announcement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel Transactions
|
|
|
10.9 |
% |
|
|
8.0 |
% |
|
|
73.0 |
% |
|
|
(13.0 |
)% |
|
Majority Buy-In
|
|
|
48.3 |
% |
|
|
36.0 |
% |
|
|
144.0 |
% |
|
|
(6.0 |
)% |
|
Comparably Sized M&A
|
|
|
43.8 |
% |
|
|
35.0 |
% |
|
|
361.0 |
% |
|
|
(42.0 |
)% |
|
Israeli M&A
|
|
|
41.5 |
% |
|
|
33.0 |
% |
|
|
163.0 |
% |
|
|
(13.0 |
)% |
|
Blended
|
|
|
41.6 |
% |
|
|
33.0 |
% |
|
|
361.0 |
% |
|
|
(42.0 |
)% |
C.E. Unterberg, Towbin observed that the premium paid to
Elscints post-announcement one-day prior share price of
$8.77 was 16.8% as of August 19, 2005, based on the implied
price of $10.24, and that this premium was within the range of
comparable premiums paid to the one-day prior stock prices in
the selected transactions. C.E. Unterberg, Towbin observed that
the premium paid to Elscints post-announcement five-day
prior stock price of $8.50 was 16.8% as of August 19, 2005,
based on the implied price of $9.93, and that this premium was
within the range of comparable premiums paid to the five-day
prior stock prices in the selected transactions. C.E. Unterberg,
Towbin observed that the premium paid to Elscints
post-announcement thirty-day prior stock price of $7.99 was
19.9% as of August 19, 2005, based on the implied price of
$9.58, and that this premium was within the range of comparable
premiums paid to the thirty-day prior stock prices in the
selected transactions.
No transaction compared in the comparable company transaction
analysis is identical to the merger of EMI and Elscint.
Accordingly, an analysis of the results of the foregoing is not
based entirely on the premium of any one transaction or all the
transactions to which they are being compared.
C.E. Unterberg, Towbin reviewed the following multiples paid in
the Comparable Company Transactions
|
|
|
|
|
Enterprise Value/ LTM Revenue |
|
|
|
Enterprise Value/ LTM EBITDA |
|
|
|
Enterprise Value/ LTM EBIT |
|
|
|
Equity Value/ LTM Net Income |
|
|
|
Equity Value/ Tangible Book Value |
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elscint Transaction Price Based Upon | |
|
|
|
|
|
|
|
|
|
|
Assumed Conversion Ratio of 0.53 | |
|
Mean | |
|
Median | |
|
High | |
|
Low | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Enterprise Value/ LTM Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel Transactions
|
|
|
|
|
|
|
3.1x |
|
|
|
3.0x |
|
|
|
5.2x |
|
|
|
1.5x |
|
|
Majority Buy-in
|
|
|
|
|
|
|
1.5x |
|
|
|
0.8x |
|
|
|
8.7x |
|
|
|
0.1x |
|
|
Comparably Sized M&A
|
|
|
|
|
|
|
2.3x |
|
|
|
1.8x |
|
|
|
6.8x |
|
|
|
0.1x |
|
|
Israeli M&A
|
|
|
|
|
|
|
4.8x |
|
|
|
2.5x |
|
|
|
22.4x |
|
|
|
0.7x |
|
|
Blended
|
|
|
6.8 |
x |
|
|
2.6x |
|
|
|
1.8x |
|
|
|
22.4x |
|
|
|
0.1x |
|
Enterprise Value/ LTM EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel Transactions
|
|
|
|
|
|
|
47.6x |
|
|
|
11.6x |
|
|
|
305.3x |
|
|
|
4.7x |
|
|
Majority Buy-in
|
|
|
|
|
|
|
43.0x |
|
|
|
7.7x |
|
|
|
495.1x |
|
|
|
1.7x |
|
|
Comparably Sized M&A
|
|
|
|
|
|
|
11.5x |
|
|
|
8.7x |
|
|
|
111.0x |
|
|
|
1.0x |
|
|
Israeli M&A
|
|
|
|
|
|
|
28.0x |
|
|
|
17.5x |
|
|
|
129.0x |
|
|
|
4.1x |
|
|
Blended
|
|
|
47.3 |
x |
|
|
26.4x |
|
|
|
9.4x |
|
|
|
495.1x |
|
|
|
1.0x |
|
Enterprise Value/ LTM EBIT:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel Transactions
|
|
|
|
|
|
|
46.9x |
|
|
|
19.4x |
|
|
|
312.6x |
|
|
|
5.6x |
|
|
Majority Buy-in
|
|
|
|
|
|
|
18.2x |
|
|
|
12.0x |
|
|
|
84.0x |
|
|
|
1.8x |
|
|
Comparably Sized M&A
|
|
|
|
|
|
|
15.8x |
|
|
|
10.8x |
|
|
|
116.5x |
|
|
|
1.5x |
|
|
Israeli M&A
|
|
|
|
|
|
|
22.4x |
|
|
|
17.1x |
|
|
|
53.5x |
|
|
|
4.2x |
|
|
Blended
|
|
|
NM |
|
|
|
22.0x |
|
|
|
12.1x |
|
|
|
312.6x |
|
|
|
1.5x |
|
Equity Value/ LTM Net Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel Transactions
|
|
|
|
|
|
|
22.3x |
|
|
|
14.6x |
|
|
|
59.3x |
|
|
|
1.6x |
|
|
Majority Buy-in
|
|
|
|
|
|
|
7.1x |
|
|
|
4.3x |
|
|
|
17.2x |
|
|
|
0.9x |
|
|
Comparably Sized M&A
|
|
|
|
|
|
|
43.2x |
|
|
|
20.9x |
|
|
|
691.7x |
|
|
|
3.6x |
|
|
Israeli M&A
|
|
|
|
|
|
|
26.1x |
|
|
|
21.2x |
|
|
|
63.2x |
|
|
|
2.7x |
|
|
Blended
|
|
|
NM |
|
|
|
31.2x |
|
|
|
18.3x |
|
|
|
691.7x |
|
|
|
0.9x |
|
Equity Value/ Tangible Book Value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel Transactions
|
|
|
|
|
|
|
2.0 |
x |
|
|
1.1 |
x |
|
|
7.6 |
x |
|
|
0.1x |
|
|
Majority Buy-in
|
|
|
|
|
|
|
1.0 |
x |
|
|
0.5 |
x |
|
|
9.3 |
x |
|
|
0.1x |
|
|
Comparably Sized M&A
|
|
|
|
|
|
|
4.9 |
x |
|
|
2.6 |
x |
|
|
67.7 |
x |
|
|
1.1x |
|
|
Israeli M&A
|
|
|
|
|
|
|
4.8 |
x |
|
|
3.2 |
x |
|
|
16.1 |
x |
|
|
0.5x |
|
|
Blended
|
|
|
0.8 |
x |
|
|
3.6 |
x |
|
|
2.1 |
x |
|
|
67.7 |
x |
|
|
0.1x |
|
C.E. Unterberg, Towbin then compared the range of comparable
company transaction multiples to that of Elscints as of
August 19, 2005. C.E. Unterberg, Towbin observed that each
of Elscints purchase price multiples were within the range
of the comparable company transaction multiples.
|
|
|
Other Factors and Comparative Analysis. |
In rendering its opinion, C.E. Unterberg, Towbin considered
certain other factors and conducted certain other comparative
analyses, including, among other things a review of:
|
|
|
|
|
the history of trading prices and volume for EMI ordinary shares
for the period from July 1, 2004, to August 19,
2005; and |
|
|
|
the history of trading prices and volume for Elscint ordinary
shares for the period from July 1, 2004, to August 19,
2005. |
The preparation of a fairness opinion is a complex process that
involves various determinations as to the most appropriate and
relevant methods of financial analysis and the application of
these methods to the
48
particular circumstances. Several analytical methodologies were
employed and no one method of analysis should be regarded as
critical to the overall conclusion reached by C.E. Unterberg,
Towbin. Each analytical technique has inherent strengths and
weaknesses, and the nature of the available information may
further affect the value of particular techniques. The
conclusions reached by C.E. Unterberg, Towbin are based on all
analyses and factors taken as a whole and also on the
application of C.E. Unterberg, Towbins experience and
judgment. Such conclusions may involve significant elements of
subjective judgment and qualitative analysis. C.E. Unterberg,
Towbin therefore gives no opinion as to the value or merit of
any one or more parts of the analysis that it performed standing
alone. In performing its analyses, C.E. Unterberg, Towbin
considered general economic, market and financial conditions and
other matters, many of which are beyond the control of EMI or
Elscint. The analyses performed by C.E. Unterberg, Towbin are
not necessarily indicative of actual values or future results,
which may be significantly more or less favorable than those
suggested by such analyses.
C.E. Unterberg, Towbin was retained based on its experience as a
financial advisor in connection with mergers and acquisitions
and in securities valuations generally. C.E. Unterberg, Towbin
is a nationally recognized investment banking firm. As part of
its investment banking business, C.E. Unterberg, Towbin is
frequently engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions,
negotiated underwritings, secondary distributions of securities,
private placements and other purposes.
The engagement letter between C.E. Unterberg, Towbin and EMI
provides that, for its services, C.E. Unterberg, Towbin
received an engagement fee of $50,000 upon execution of the
engagement letter and $200,000 payable upon delivery of its
opinion regardless of the conclusion expressed. EMI has also
agreed to reimburse C.E. Unterberg, Towbin for certain of its
out-of-pocket expenses, including legal fees, and to indemnify
and hold harmless C.E. Unterberg, Towbin and its affiliates and
any director, employee or agent of C.E. Unterberg, Towbin or any
of its affiliates, or any person controlling C.E. Unterberg,
Towbin or its affiliates for certain losses, claims, damages,
expenses and liabilities relating to or arising out of services
provided by C.E. Unterberg, Towbin as financial advisor to EMI.
The terms of the engagement letter were negotiated at arms
length between EMI and C.E. Unterberg, Towbin, and the EMI board
was aware of the fee arrangements at the time of the approval of
the merger transaction. In the ordinary course of its business,
C.E. Unterberg, Towbin may trade in EMIs securities and
Elscints securities for its own account and the account of
its customers and, accordingly, may at any time hold a long or
short position in EMIs securities and Elscints
securities.
Opinion of Elscint Financial Advisor
Elscints independent committee engaged
Oppenheimer & Co. Inc. to act as its exclusive
financial advisor in connection with the merger. In connection
with this engagement, Elscints independent committee
requested that Oppenheimer evaluate the fairness, from a
financial point of view, of the exchange ratio provided for in
the merger to Elscints shareholders, other than EMI, its
controlling shareholder and any affiliates of EMI and/or its
controlling shareholder.
On August 18, 2005, at a meeting of the Elscint independent
committee held to evaluate the merger, Oppenheimer rendered an
oral opinion, which opinion was confirmed by delivery of a
written opinion dated August 18, 2005, to the effect that,
as of that date and based on and subject to the matters
described in the opinion, the exchange ratio was fair, from a
financial point of view, to Elscints shareholders, other
than EMI, its controlling shareholder and any affiliates of EMI
and/or its controlling shareholder.
The full text of the written opinion of Oppenheimer, dated
August 18, 2005, is attached as Annex C. The opinion
sets forth, among other things, the assumptions made, procedures
followed, matters considered and limitations on the scope of the
review undertaken by Oppenheimer in rendering its opinion.
Oppenheimers opinion is directed to Elscints board
of directors and addresses only the fairness, as of the date of
the opinion, from a financial point of view of the exchange
ratio to holders of ordinary shares of Elscint, other than EMI,
its controlling shareholder and any affiliates of EMI and/or its
controlling shareholder. It does not address any other aspects
of the proposed merger and does not constitute a recommendation
to any holder of ordinary
49
shares of Elscint as to how to vote at the Elscint special
meeting. The summary of the opinion of Oppenheimer set forth in
this document is qualified in its entirety by reference to the
full text of the opinion. We urge you to read the opinion
carefully in its entirety.
In arriving at its opinion, Oppenheimer, among other things:
|
|
|
|
|
reviewed the draft dated August 18, 2005 of the merger
agreement between Elscint and EMI; |
|
|
|
reviewed certain publicly available financial statements and
other information relating to Elscint and EMI; |
|
|
|
reviewed estimates, independent appraisals and projections
prepared by the management of Elscint; |
|
|
|
compared implied historical exchange ratios between
Elscints ordinary shares and EMIs ordinary shares; |
|
|
|
discussed with the management of each of EMI and Elscint the
past and current operations and financial condition and
prospects of Elscint and EMI, including, but not limited to, a
review of Elscints and EMIs recent operating
history, financial performance and prospects and, with respect
to Elscint, certain financial forecasts; |
|
|
|
participated in certain discussions (but not all discussions and
negotiations) regarding the negotiation of the exchange ratio
with representatives of Elscints independent committee; |
|
|
|
reviewed the historical prices, trading multiples and trading
volume of the ordinary shares of Elscint and EMI; |
|
|
|
reviewed publicly available financial data, stock market
performance data and trading multiples of companies that
Oppenheimer deemed generally comparable to Elscint and EMI; |
|
|
|
reviewed and analyzed publicly available information with
respect to the terms of recent transactions that Oppenheimer
deemed generally comparable to the merger or involving companies
that it deemed comparable to Elscint; and |
|
|
|
conducted such other studies, analyses, inquiries and
investigations, and reviewed such other information, as
Oppenheimer deemed appropriate. |
In arriving at its opinion, Oppenheimer has relied upon and
assumed, without independent verification, the accuracy and
completeness of all the financial and other information that was
reviewed by it, whether obtained from public sources, provided
to it by either Elscint or EMI, or that was otherwise reviewed
by it. Furthermore, Oppenheimer has not undertaken any
independent verification of such information or any independent
valuation or appraisal of any of the assets or liabilities of
Elscint or EMI. Oppenheimer relied on the representation that
the unaudited financial statements for the three months ended
March 31, 2005 of Elscint and EMI were prepared according
to generally accepted accounting principles and that no
financial statements for any period subsequent to March 31,
2005 were available.
With respect to the financial projections of Elscint,
Oppenheimer relied on representations by Elscints
management that the projections were reasonably prepared on
bases reflecting the best currently available estimates and
judgments as to the expected future performance of Elscint.
Oppenheimer has further relied upon the assurances of the
management of Elscint that they are unaware of any facts that
would make such information provided to Oppenheimer incomplete,
inaccurate or misleading as of the date of Oppenheimers
opinion.
In arriving at its opinion, Oppenheimer was not authorized to
solicit, and did not solicit, interest from any other party with
respect to the acquisition of Elscint or any of its assets.
Oppenheimer expresses no view as to, and its opinion does not
address, the underlying business decision of Elscint to effect
the merger nor was Oppenheimer requested to consider the
relative merits of the merger as compared to any other
transaction in which Elscint might engage.
50
In arriving at its opinion, Oppenheimer assumed that:
|
|
|
|
|
all of the EMI shares to be received by Elscints
shareholders would be registered under the Securities Act and
the shareholders would receive the EMI shares on a tax free
basis; and |
|
|
|
the merger would be consummated in a timely manner and in all
material respects in accordance with the terms of the merger
agreement, without any waiver, modification or amendment of any
material term, condition or agreement and that, in the course of
obtaining any regulatory or third-party consents, approvals or
agreements in connection with the merger, no limitations,
restrictions or conditions would be imposed that would have an
adverse effect on Elscint, EMI or the contemplated benefits of
the merger. |
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Summary of reviews and analyses. |
In preparing its opinion, Oppenheimer performed a variety of
financial and comparative analyses, including those described
below. The summary of Oppenheimers analyses described
below is not a complete description of the analyses underlying
the opinion. The preparation of a fairness opinion is a complex
process involving various judgments and determinations as to the
most appropriate and relevant methods of financial analysis and
the application of those methods to the particular circumstances
and, therefore, a fairness opinion is not readily susceptible to
partial analysis or summary description. In arriving at its
opinion, Oppenheimer made qualitative judgments as to the
significance and relevance of each analysis and factor that it
considered. Accordingly, Oppenheimer believes that its analyses
must be considered as a whole and that selecting portions of its
analyses and factors or focusing on information presented in
tabular format, without considering all analyses and factors or
the narrative description of the analyses, could create a
misleading or incomplete view of the processes underlying its
analyses and opinion.
Oppenheimers opinion is necessarily based on economic,
market and other conditions and the information made available
to Oppenheimer as of the date of the opinion. In performing its
analyses, Oppenheimer, with Elscints direction, made
numerous assumptions with respect to industry performance,
general business, economic, market and financial conditions and
other matters, many of which are beyond the control of Elscint
and EMI. No company, transaction or business used in
Oppenheimers analyses as a comparison is identical to
Elscint, EMI or the proposed merger, and an evaluation of the
results of those analyses is not entirely mathematical. Rather,
the analyses involve complex considerations and judgments
concerning financial and operating characteristics and other
factors that could affect the acquisition, public trading or
other values of the companies, business segments or transactions
analyzed. Any estimates contained in the analyses performed by
Oppenheimer or relied upon by Oppenheimer in rendering its
opinion and the ranges of valuations resulting from any
particular analysis are not necessarily indicative of actual
values or predictive of future results or values, which may be
significantly more or less favorable than suggested by such
analyses. Additionally, estimates of the value of businesses or
securities do not purport to be appraisals or to reflect the
prices at which such businesses or securities might actually be
sold. Accordingly, such analyses and estimates are inherently
subject to substantial uncertainty.
In arriving at its opinion, Oppenheimer did not rely on any one
particular analysis or methodology, but formulated its opinion
on the whole of such analyses. Oppenheimer did not form an
opinion as to whether any individual analysis or factor, whether
positive or negative, considered in isolation, supported or
failed to support its opinion. In arriving at its opinion,
Oppenheimer did not assign any particular weight to any analysis
or factor considered by it, but rather made qualitative
judgments based upon its experience in providing such opinions
and on then-existing economic, monetary, market and other
conditions as to the significance of each analysis and factor.
Oppenheimers opinion and financial analyses were only one
of many factors considered by Elscints independent
committee, audit committee and board of directors in their
evaluation of the proposed merger and should not be viewed as
determinative of the views of the independent committee, audit
committee and board of directors or of Elscints management
with respect to the merger or the merger consideration.
51
The following is a summary of the material reviews and financial
and valuation analyses presented by Oppenheimer to
Elscints independent committee at its telephonic meeting
held on August 18, 2005. In order to understand fully the
reviews and financial valuation analyses used by Oppenheimer,
any information presented in tabular format must be read
together with the text of each summary. The tables alone do not
represent a complete description of any such reviews or
financial and valuation analyses. This summary does not purport
to be a complete description of the analyses underlying the
Oppenheimer opinion. All such reviews and financial valuation
analyses were based on information available to Oppenheimer on
August 17, 2005, and Oppenheimer has not undertaken, and is
under no duty, to update any such reviews or financial valuation
analyses upon the availability of new information. Based on
information provided by Elscint and EMIs management,
Oppenheimer based its analyses on fully diluted shares
outstanding of approximately 17.5 million shares for Elscint and
20.3 million shares for EMI.
Comparative Stock Price Performance. Oppenheimer
conducted historical analyses of closing prices of the ordinary
shares of Elscint and EMI. Oppenheimer observed that from
June 8, 2004 to June 7, 2005, the closing price of the
Elscint ordinary shares increased by 43.4% and the closing price
of the EMI ordinary shares increased by 134.5%. Oppenheimer also
noted that from June 8, 2004 to June 7, 2005,
Elscints average daily trading volume was
7,820 shares and EMIs average daily trading volume on
the NASDAQ National Market was 17,223 shares and on the Tel
Aviv Stock Exchange was 63,428 shares. Oppenheimer further
observed that the average daily trading volume on the Tel Aviv
Stock Exchange from February 1, 2005 to June 7, 2005
was 96,896 shares.
Premiums Paid Analysis. Oppenheimer conducted an
analysis of stock price premiums paid to targets by acquirers
for three different groups of mergers and acquisitions,
excluding share repurchases, from January 1, 2003 through
August 12, 2005, which Oppenheimer considered reasonably
comparable in size, industry or structure to the Elscint/ EMI
transaction, from available data from Thomson Financial. The
first group of transactions analyzed by Oppenheimer were
transactions having transaction values ranging from
$100 million to $500 million where the consideration
to the target was all stock; the second group of transactions
analyzed by Oppenheimer were real estate and hotel transactions
having transaction values ranging from $100 million to
$1 billion; and the third group of transactions analyzed by
Oppenheimer were transactions where a controlling shareholder
acquired the remaining interest in its subsidiary, having
transaction values ranging from $100 million to
$1 billion. Oppenheimer noted that the premiums analysis
necessarily involves complex considerations and judgments
concerning many factors that would affect the acquisition value
and the premium paid in the transaction including, financial and
operating characteristics, form of consideration, acquisition
terms and other factors specific to a particular transaction.
Oppenheimer compared the proposed common stock per share
consideration of these transactions to the one-day prior,
one-week prior, one-month prior and one-year average share price
prior, of Elscint to the public announcement of the formation of
the independent committees of Elscint and EMI to evaluate the
proposed merger. Oppenheimer noted that the 0.53 exchange ratio
on August 17, 2005 represented a 48.8%, 60.7%, 82.4%, and
97.1% premium to Elscints closing share price one-day
prior, one-week prior, one-month prior and the average of
one-year prior to the public announcement of the formation of
the special committees to evaluate the transaction,
respectively. By comparison, the table below provides the range
of premiums paid with respect to the comparable transactions
analyzed:
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Premium Paid | |
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One-Day | |
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One-Week | |
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One-Month | |
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Prior | |
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Prior | |
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Prior | |
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All Stock Consideration Transactions
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Average
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31.1% |
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35.5% |
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44.2% |
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Median
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23.1% |
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24.2% |
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28.7% |
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Real Estate/ Hotel Transactions
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Average
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15.3% |
|
|
|
16.5% |
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|
17.5% |
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Median
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11.1% |
|
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14.2% |
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13.8% |
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Acquisition of Remaining Interest
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Average
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27.9% |
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29.4% |
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37.6% |
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Median
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24.0% |
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23.8% |
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31.4% |
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52
Relative Contribution Analysis. Oppenheimer
calculated the relative financial contribution of each of
Elscint and EMI to the pro forma combined company, utilizing
independent real property appraisals, fair market value or book
value (as of March 31, 2005) to determine the current
appraised net asset value of each company. Oppenheimer then
compared the appraised net asset value of Elscint to the
appraised net asset value of EMI. Based on this analysis, the
ratio of Elscints assets to EMIs assets was 0.486
compared to the exchange ratio in the proposed merger of 0.53.
Selected Comparable Company Analysis. Using
recently published publicly available estimates, Oppenheimer
compared certain trading and valuation statistics in a selected
group of publicly traded (non-Real Estate Investment Trust)
companies in the hotel and leisure sector, which in
Oppenheimers judgment, were generally comparable to
Elscint for the purposes of this analysis from both a financial
and operational perspective. Oppenheimer utilized the earnings
forecasts for these companies from FirstCall consensus
estimates. Oppenheimers analysis was based on closing
stock prices as of August 15, 2005. The projected multiple
of enterprise value (market equity value less cash, plus debt,
minority interests and preferred stock) calculated as of
August 15, 2005, to estimated 2006 EBITDA ranged from 11.7x
to 12.9x which implied a per share reference range of $3.76 to
$5.93, which, in turn, implied a share exchange ratio of 0.20 to
0.31, compared to the exchange ratio in the proposed merger of
0.53.
Oppenheimer noted that no company utilized in the comparable
company analysis was identical to Elscint. In evaluating the
peer group, Oppenheimer made judgments and assumptions with
regard to industry performance, general business, economic,
market and financial conditions and many other matters,
including the impact of competition.
Discounted Cash Flow Analysis. Oppenheimer
performed a discounted cash flow analysis on the projected cash
flows of Elscint for the period ending June 30, 2005
through December 31, 2010 using projections and assumptions
provided by the management of Elscint as guidance. In
determining the theoretical or intrinsic value of Elscint,
Oppenheimer calculated the estimated present value of the
stand-alone, unleveraged, after-tax free cash flows that Elscint
could generate for the period from July 1, 2005 through
December 31, 2005 and calendar years 2006 through 2010 as
derived from discussions with the management of Elscint. For the
purpose of this analysis, Oppenheimer calculated a range of
estimated terminal values for Elscint by applying multiples
ranging from 10.1x to 11.1x to Elscints 2010 estimated
EBITDA. The estimated free cash flows and terminal values were
then discounted to present value using a range of discount rates
of 7.7% to 9.4%. Elscints net debt (debt less excess cash)
as of March 31, 2005 (pro forma for the cash acquisition of
Mango Israel on May 5, 2005), was subtracted from the sum
of the present value of Elscints cash flows and the
present value of Elscints terminal value to determine the
theoretical equity value of Elscint and that result was divided
by fully-diluted Elscint shares outstanding on a treasury method
basis. Based on the above assumptions, this analysis indicated
an implied per share equity reference range of $9.18 to
$10.88 per share, based on an 8.5% discount rate, which
implied a share exchange ratio of 0.48 to 0.57, compared to the
exchange ratio in the proposed merger of 0.53.
Selected Precedent Mergers and Acquisitions
Transactions. Oppenheimer compared certain publicly
available statistics from SEC filings, company press releases
and publicly available research of selected precedent mergers
and acquisitions from January 1, 2003 to August 12,
2005 involving companies that operate in the hotel industry or
in a similar industry, which Oppenheimer deemed comparable to
the transaction between Elscint and EMI. Oppenheimer compared
transaction enterprise value to EBITDA multiples relating to the
proposed acquisition of Elscint by EMI.
Oppenheimer noted that none of the precedent merger and
acquisition transactions was identical to the merger between
Elscint and EMI. Oppenheimer further noted that the analysis of
precedent transactions necessarily involves complex
considerations and judgments concerning differences in financial
and operating characteristics, form of consideration,
acquisition terms and other factors that would necessarily
affect the acquisition value of Elscint versus the acquisition
value of any other comparable company in general and the
transactions above in particular. Oppenheimer noted that the
median enterprise value/upcoming fiscal year EBITDA for the
precedent merger and acquisition transactions was 11.8x which
implied a per share reference
53
range of $2.92 to $5.00, or a share exchange ratio of 0.15 to
0.26, compared to the exchange ratio in the proposed merger of
0.53.
In the ordinary course of its business, Oppenheimer may actively
trade securities of Elscint or EMI for its own account and for
the accounts of customers and, accordingly, may at any time hold
a long or short position in such securities.
Elscints independent committee retained Oppenheimer based
upon Oppenheimers qualifications, experience and
expertise. Oppenheimer is an internationally recognized
investment banking and advisory firm. Oppenheimer, as part of
its investment banking and financial advisory business, is
regularly engaged in the valuation of businesses and securities
in connection with mergers, acquisitions, underwritings, sales
and dispositions of listed and unlisted securities, private
placements and valuations for estate, corporate and other
purposes.
Elscint agreed to pay Oppenheimer an aggregate engagement fee of
$50,000 upon execution of the engagement letter and $200,000
payable upon delivery of its opinion regardless of the
conclusion expressed. Elscint has also agreed to reimburse
Oppenheimer for its out-of-pocket expenses incurred in
performing its services, including reasonable fees and expenses
of its legal counsel. In addition, Elscint has agreed to
indemnify Oppenheimer and its affiliates, their respective
directors, officers, agents and employees and each person, if
any, controlling Oppenheimer or any of its affiliates against
certain liabilities and expenses, including certain liabilities
under the federal securities laws, related to or arising out of
Oppenheimers engagement.
The terms of the engagement letter were negotiated at
arms-length between Elscint and Oppenheimer and the
Elscint board of directors was aware of the fee arrangements at
the time of its approval of the merger agreement.
Interests of Certain Persons in the Merger
In considering the recommendation of the EMI and Elscint boards
of directors, EMI and Elscint shareholders should be aware that,
as described below, some of the members of EMIs and
Elscints management and boards of directors may have
interests in the merger that are different from, or in addition
to, the interests of EMI or Elscint shareholders generally. The
EMI and Elscint boards of directors were aware of these
interests of their directors and officers and considered these
interests of their directors and officers, among other matters,
in approving the merger and the merger agreement.
Mr. Mordechay Zisser is the Executive Chairman of the Board
of Directors of EMI and is President and Chairman of the Board
of Directors of Europe-Israel and Control Centers, a privately
held company, which is the parent company of Europe-Israel.
Europe-Israel beneficially owns approximately 54.34% of the
voting rights in EMI. In addition, Mr. Zisser also owns
350,000 ordinary shares of EMI.
Mr. Shimon Yitzhaki, President, Chief Financial Officer and
a member of the board of directors of EMI, is also a member of
the board of directors of Elscint, and owns 87,265 ordinary
shares of EMI and 50,000 ordinary shares of Elscint.
Ms. Rachel Lavine, Elscints President and a member of
the board of directors of Elscint, is also a director of EMI and
acting Chief Executive Officer of Plaza Centers (Europe) B.V., a
wholly owned subsidiary of EMI, and owns 70,939 ordinary shares
of EMI and 100,000 ordinary shares of Elscint.
Mr. Yehoshua (Shuki) Forer, a director of EMI, owns 10,000
ordinary shares of EMI.
Mr. Marc Lavine, the Corporate Secretary and General
Counsel of both EMI and Elscint, owns ordinary shares 46,632
ordinary shares of EMI and 50,000 ordinary shares of Elscint.
Mr. Abraham (Rami) Goren, the Executive Chairman of the
Board of Directors of Elscint, owns 90,000 ordinary shares of
Elscint. Mr. Goren also assists with the high-tech
investments of EMI.
54
Mr. Moshe Leon, an external director of Elscint, owns
25,000 ordinary shares of Elscint.
Mr. Benny Gal, an external director of Elscint, owns 25,000
ordinary shares of Elscint.
Mr. Shlomo Ben Eliyahu, a director of Elscint, owns options
to purchase up to 25,000 ordinary shares of Elscint.
Mr. Shmuel Perets, a director of Elscint, owns options to
purchase up to 25,000 ordinary shares of Elscint.
Mr. Uri Levin, the Chief Financial Officer of Elscint, owns
25,000 ordinary shares of Elscint and 290 ordinary shares
of EMI.
Personal interest under the Israeli Companies Law
Under Israeli law, members of a companys board of
directors having a personal interest in the approval of a
transaction may not be present during discussions or vote on the
proposed transaction at meetings of the board of directors or
audit committee in which the proposed transaction is discussed,
unless the majority of the members of the board of directors or
the members of the audit committee, as the case may be, have
personal interest in the proposed transaction. If a majority of
the board has personal interests in a proposed transaction, then
the interested directors may be present during discussions and
vote on the transaction at the meeting of the board of directors
approving the transaction, but the shareholders of the company
must also approve the transaction. Under the Israeli Companies
Law, a personal interest means a personal interest of a person
in an act or transaction of a company, including: (i) a
personal interest of that persons relative (i.e.
spouse, brother or sister, parent, grandparent, child, child
of such persons spouse or the spouse of any of the above);
or (ii) a personal interest of another entity in which that
person or his or her relative (as defined above) holds five
percent (5%) or more of such entitys issued shares or
voting rights, has the right to appoint a director or the chief
executive officer of such entity, or serves as director or chief
executive officer of such entity.
In light of the foregoing, to avoid any doubt concerning the
existence of a personal interest of EMIs directors, Shimon
Yitzhaki and Rachel Lavine, constituting two out of the seven
members of EMIs board of directors, did not participate in
the vote to approve the transaction. In addition, as described
under the section Background of the Merger above,
the negotiations that led to the merger were handled by, and the
decision of the audit committee and board of directors to
approve the transaction relied in part upon the recommendation
of, EMIs independent committee formed by EMIs board
of directors for the purpose of considering the transaction. The
independent committee consisted of two members of EMIs
audit committee and one member of EMIs board of directors.
In light of the foregoing, to avoid any doubt concerning the
existence of a personal interest of Elscints directors,
Abraham (Rami) Goren, Rachel Lavine and Shimon Yitzhaki,
constituting three out of the seven members of Elscints
board of directors, did not participate in the vote to approve
the transaction. In addition, as described under the section
Background of the Merger above, the negotiations
that led to the merger were handled by, and the decision of the
audit committee and board of directors to approve the
transaction relied in part upon the recommendation of,
Elscints independent committee formed by Elscints
board of directors for the purpose of considering the
transaction. The independent committee consisted of all members
of the audit committee.
Under the merger agreement, EMI will continue to purchase or
cause Elscint to purchase a directors and officers
liability insurance policy, within an umbrella policy covering
EMI, Elscint and/or any of their respective affiliates,
including Europe-Israel, for Elscints directors and
officers for the seven (7) years following the closing of
the merger, on substantially similar terms to the
directors and officers liability insurance policy
maintained by Elscint prior to the closing and which coverage
amount shall not be less than $40 million, provided that
the annual premium for such policy shall not exceed an agreed
upon maximum premium amount. In the event such maximum premium
amount is exceeded, EMI shall purchase or cause Elscint to
purchase the highest coverage amount available for the maximum
premium amount. Any successor entity to Elbit or Elscint would
be required to assume the foregoing obligations with respect to
the purchase and maintenance of such a directors and
officers liability insurance policy on such terms.
55
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Treatment of Elscint Options |
Elscint has outstanding options exercisable into 50,000 ordinary
shares of Elscint at an exercise price of NIS 20.49 per
share, which options have been issued to two directors of
Elscint pursuant to an incentive plan adopted by Elscint
shareholders in December 2003. Under the terms of the merger
agreement, upon the closing of the merger, each outstanding
option to purchase ordinary shares of Elscint will be assumed by
EMI and will be deemed to be an option to purchase ordinary
shares of EMI. Each assumed option will, after the merger,
entitle the holder to acquire, on substantially the same terms
and conditions applicable under the original Elscint incentive
plan, the number of ordinary shares of EMI equal to the number
of Elscint ordinary shares that the holder of the option was
entitled to acquire, multiplied by the exchange ratio of 0.53
rounded to the nearest whole number of shares of EMI ordinary
shares. The exercise price per EMI share of each outstanding
option will be the same exercise price per share specified in
the original Elscint incentive plan, divided by the exchange
ratio of 0.53 (rounded to the nearest hundredth).
For United States securities law purposes, the assumption of
these options by EMI is deemed to be an offer to sell the
options to the two Elscint optionholders voting on the merger
agreement and the merger. Accordingly, this transaction is being
registered on the Registration Statement on Form F-4, of
which this joint proxy/statement prospectus is a part. Following
the consummation of the merger, EMI will register the ordinary
shares underlying the assumed options on a Registration
Statement on Form S-8.
Elscint has received, from each of the two directors who were
granted options to purchase Elscints ordinary shares, an
approval in writing for the merger and the merger agreement.
The treatment of the assumption by EMI of Elscint options as tax
exempt for Israeli tax purposes will be included as part of the
pre-ruling for the merger to be received by the Israeli tax
authority.
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Personal Interests of Certain Shareholders in the
Merger |
Under Israeli law, each of EMI and Elbit Medical Holdings Ltd.
has a personal interest (within the meaning of such definition
under the Israeli Companies Law, see The
Merger Interests of Certain Persons in the
Merger above) in the merger due to their ownership of a
controlling interest in Elscint prior to completion of the
merger. This personal interest does not affect either EMIs
or Elbit Medical Holdings Ltd.s ability to vote for the
merger and the merger agreement as an Elscint shareholder, but
the Israeli Companies Law requires that in addition to the
special majority required under sections 350-351 of the Israeli
Companies Law which governs the merger, the approval of the
merger agreement and the merger either:
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(i) the majority vote at the special meeting includes at
least one-third of the total votes of shareholders having no
personal interest in the proposal, participating at the special
meeting in person or by proxy (abstentions shall not be taken
into account in counting the above-referenced shareholders
votes); or |
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(ii) the total number of shares of the shareholders
mentioned in clause (i) above that are voted against such
proposal does not exceed one percent (1%) of the total voting
rights in Elscint. |
Accounting Treatment
The merger will be treated as a purchase for
accounting purposes, which means that the purchase price
(calculated based on EMIs number of shares issued in
consideration for Elscints minority shares and on
EMIs average share market price close to the date of the
announcement of the exchange ratio of the merger) will be
allocated by EMI to Elscints assets and liabilities based
on the fair value of the assets acquired and the liabilities
assumed. Any excess of the fair value of Elscints net
identified assets acquired over the purchase price at
acquisition, or Negative Initial Difference, will be
set-off in the consolidated financial statements of EMI, first
against any intangible asset of Elscint, with the balance
set-off against non-monetary tangible assets pro rata to their
fair value.
56
Tax Considerations
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Israeli Tax Considerations with Respect to the
Merger |
The following discussion sets forth the material Israeli income
tax consequences to Elscint, EMI and their shareholders in
respect of the exchange of Elscint ordinary shares for EMI
ordinary shares pursuant to the merger and the ownership of EMI
ordinary shares. This discussion is based on the Ordinance,
regulations promulgated thereunder, circulars and judicial
decisions as of the date of this joint proxy statement/
prospectus, all of which are subject to change, possibly with
retroactive effect, and open to differing interpretations.
The discussion below is for general information only and, except
where specifically noted, does not address all aspects of
Israeli income taxation that may be relevant to EMI, Elscint and
their shareholders. The tax treatment of an Elscint shareholder
may vary depending upon such shareholders particular
situation, and certain shareholders may be subject to special
rules not discussed below.
In general, under the Ordinance, the exchange of Elscint
ordinary shares for EMI ordinary shares is deemed to be a sale
of shares. However, the Ordinance provides that the sale of
shares of a listed Israeli resident company by a non-Israeli
resident will be exempt for Israeli tax purposes, provided that
such shareholder did not hold these shares prior to their
listing at the stock exchange. The sale of shares by a
non-Israeli resident might also be exempt from tax for Israeli
tax purposes under an applicable tax treaty.
EMI and Elscint have jointly approached the Israeli tax
authorities to receive both a pre-ruling and the Israeli income
tax commissioners consent that the merger, as structured,
would be treated as a tax-free transaction for Israeli tax
purposes under section 104(c) combined with
section 103(k) of the Ordinance (or solely by
section 103(k) of the Ordinance). However, any cash,
received in lieu of fractional share interests in EMI ordinary
shares will not be exempt for Israeli tax purposes and may be
subject to tax according to the Ordinance provisions.
Pursuant to sections 103(k) and 104(c) of the Ordinance, which
govern the merger (or alternatively solely by
section 103(k) of the Ordinance), EMI, Elscint and their
controlling shareholders are subject to certain conditions. The
following is a short summary of the material conditions imposed
on either EMI, Elscint or their controlling shareholders:
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The controlling shareholders (i.e. a
shareholder who either (i) owns 5% or more of the share
capital; (ii) has 5% or more of the voting rights;
(iii) has the right to receive at least 5% of the company
profits or 5% of its assets upon liquidation; (iv) has the
power to nominate a director) of either EMI or Elscint
(excluding provident funds as defined in section 47 of the
Ordinance and mutual funds as defined in the Joint Investment
Trust Law) will not sell or transfer EMI shares held or
received upon the merger for a successive duration of two years
from the end of the tax year in which the merger was completed
(or a shorter period under certain conditions). |
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Most of the assets held by Elscint and EMI prior the merger and
most of the assets transferred upon the merger will not be sold
and will be used in a manner that, under the circumstances, is
customary in the conduct of Elscints business for a period
of two years from the end of the tax year at which the merger
was completed. |
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The main economic activity of EMI and Elscint before the merger
will continue for a period of two years from the end of the tax
year at which the merger was completed. |
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EMI will issue shares with equal rights to all Elscint
shareholders, other than EMI and Elscint, in proportion to their
holdings in Elscint, and no additional direct or indirect
consideration (except with respect to cash, if any, received in
lieu of fractional share interests in EMI ordinary shares), will
be given in the course of the merger by EMI or any other person. |
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A withholding tax at a rate which will be set forth in the
pre-ruling will be withheld from any cash payment received in
lieu of fractional share interests in EMI ordinary shares,
unless the shareholder |
57
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(including non-Israeli shareholder) will provide EMI in advance
with an approval from the Israeli tax authorities for an
exemption from, or reduced rate of, withholding tax. |
As part of the final pre-ruling to be issued by the Israeli tax
authorities, additional conditions and/or restrictions may be
imposed on EMI, Elscint and their controlling shareholders by
the Israeli tax authorities. In the event any of the conditions
specified above or any other conditions and/or restrictions to
be specified in the aforementioned pre-ruling are breached
and/or are not met, the merger will not be treated as tax exempt
for Israeli tax purposes. In such event, the Israeli tax
authorities may impose, in accordance with the Ordinance,
capital gains tax on Elscint shareholders in respect of the
exchange of the Elscint and EMI ordinary shares under the
merger. EMI expects that it, Elscint and their controlling
shareholder will be prepared to comply with such additional
conditions and restrictions. Nevertheless, in the event the
Israeli tax authority imposes additional conditions and/ or
restrictions that are unacceptable to either EMI or Elscint or
if they are not able to obtain the consent of EMIs
controlling shareholder to such additional conditions or
restrictions, then EMI and Elscint will decline the receipt of
such pre-ruling and the merger agreement will be terminated.
Based on those conclusions and subject to the fulfillment of the
all the conditions and requirements in respect of the
aforementioned reorganization under the Ordinance, the
regulations promulgated thereunder and the pre-ruling
provisions, the following material Israeli income tax
consequences will result from the merger:
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No income, gain or loss will be recognized by EMI or Elscint as
a result of the issuance of EMI ordinary shares to Elscint
shareholders (other than EMI and Elscint) pursuant to the merger; |
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Neither EMIs nor Elscints shareholders will
recognize any income, gain or loss as a result of the receipt of
EMI ordinary shares in exchange for Elscint ordinary shares
pursuant to the merger, except with respect to cash received in
lieu of fractional shares; |
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The aggregate tax basis to Elscint shareholders in the EMI
ordinary shares received in exchange for Elscint ordinary shares
pursuant to the merger, will equal any such Elscint
shareholders aggregate tax basis in the Elscint ordinary
shares surrendered in exchange therefor; |
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The holding period of Elscint shareholders with respect to the
EMI ordinary shares received pursuant to the merger will include
the holding period of the Elscint ordinary shares surrendered in
exchange therefor; and |
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An Elscint shareholder that receives cash in lieu of fractional
shares pursuant to the merger will be treated as having received
such cash in exchange for such fractional shares and generally
will recognize capital gain or loss on such deemed exchange in
an amount equal to the difference between the amount of cash
received and the tax basis of Elscint ordinary shares allocable
to such fractional shares. A withholding tax at a rate which
will be set forth in the pre-ruling will be withheld from any
cash payment received in lieu of fractional share interests in
EMI ordinary shares, unless the shareholder (including any
non-Israeli resident shareholder) will provide to EMI in advance
an approval from the Israeli tax authorities for an exemption
from, or reduced rate of, withholding tax. |
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Material United States Federal Income Tax Considerations
with Respect to the Merger and Ownership of EMI Ordinary
Shares |
The following discussion sets forth the material
U.S. federal income tax consequences to
U.S. holders (defined below) of the exchange of
Elscint ordinary shares for EMI ordinary shares pursuant to the
merger and the ownership of EMI ordinary shares. This discussion
is based on the Internal Revenue Code of 1986, as amended (the
Code), Treasury Regulations, administrative rulings
and pronouncements and judicial decisions as of the date of this
joint proxy statement/ prospectus, all of which are subject to
change, possibly with retroactive effect, and open to differing
interpretations.
The discussion below is for general information only and, except
where specifically noted, does not address all aspects of
U.S. federal income taxation that may be relevant to a
U.S. holder of Elscint ordinary
58
shares, the effects of state, local or non-U.S. tax laws or
the potential applicability of U.S. federal and state gift
or estate taxation. In addition, the discussion below relates to
persons who hold Elscint ordinary shares and will hold EMI
ordinary shares as capital assets (that is, generally for
investment).
The tax treatment of an Elscint shareholder may vary depending
upon such shareholders particular situation, and certain
shareholders may be subject to special rules not discussed
below. Such shareholders would include, for example:
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insurance companies, banks or other financial institutions; |
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tax-exempt organizations; |
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broker-dealers; |
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persons who hold Elscint ordinary shares as part of a hedge,
straddle, constructive sale or conversion transaction; |
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persons who received Elscint ordinary shares pursuant to the
exercise of employee stock options or otherwise as compensation; |
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persons who hold directly, indirectly or constructively 10% or
more of the voting power of Elscint ordinary shares; |
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persons who will hold directly, indirectly or constructively at
least 5% of the total value and total voting power of EMI
ordinary shares immediately after the merger; |
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persons who have a functional currency other than the
U.S. dollar; |
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persons subject to the alternative minimum tax; |
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real estate investment trusts and regulated investment companies; |
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individual retirement and other deferred tax accounts; |
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expatriates or other former long-term residents of the
U.S.; and |
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partnerships and persons who own their Elscint ordinary shares
through a partnership or other pass-through entity. |
As used in this section, the term U.S. holder
means a beneficial owner of an Elscint ordinary share who is for
U.S. federal income tax purposes:
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a citizen or individual resident of the U.S.; |
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a corporation (or other entity treated as a corporation for
U.S. federal income tax purposes) created or organized in
or under the laws of the U.S. or any political subdivision
thereof; |
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an estate, the income of which is subject to U.S. federal
income taxation regardless of its source; or |
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a trust (i) if the trust has elected validly to be treated
as a U.S. person for U.S. federal income tax purposes
or (ii) if a U.S. court is able to exercise primary
supervision over the trusts administration and one or more
U.S. persons have the authority to control all of the
trusts substantial decisions. |
If a partnership (or other entity treated as a partnership for
U.S. federal income tax purposes) holds Elscint ordinary
shares, the tax treatment of the partnership and a partner in
such partnership will generally depend on the status of that
partner and the activities of the partnership. Such a partner or
partnership should consult its own tax advisor as to the tax
consequences to it of the merger and ownership of EMI ordinary
shares.
Each U.S. holder is urged to consult its own tax advisor to
determine the U.S. federal, state, local and
non-U.S. tax consequences of the merger and the ownership
of EMI ordinary shares, in light of the U.S. holders
particular facts and circumstances. For a discussion of the
Israeli tax consequences of the merger to U.S. holders, see
Tax Considerations Israeli Tax Considerations
with Respect to the Merger.
59
Consequences of the Merger
In the opinions of Kramer Levin Naftalis & Frankel LLP,
counsel to EMI, and Carter Ledyard & Milburn LLP,
special counsel to Elscints independent committee in
connection with the merger:
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The merger will be treated for U.S. federal income tax
purposes as a reorganization within the meaning of
section 368(a) of the Code; and |
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Each of EMI and Elscint will be a party to the reorganization
within the meaning of section 368(b) of the Code. |
Based on those conclusions and subject to the special rules
described in the next section, the following additional material
U.S. federal income tax consequences will result from the
merger:
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A U.S. holder will not recognize any income, gain or loss
as a result of the receipt of EMI ordinary shares in exchange
for Elscint ordinary shares pursuant to the merger, except with
respect to cash received in lieu of fractional shares; |
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The aggregate tax basis to a U.S. holder in the EMI
ordinary shares received in exchange for Elscint ordinary shares
pursuant to the merger, including any fractional share interest
in EMI ordinary shares for which cash is received, will equal
such U.S. holders aggregate tax basis in the Elscint
ordinary shares surrendered in exchange therefor; |
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The holding period of a U.S. holder for the EMI ordinary
shares received pursuant to the merger will include the holding
period of the Elscint ordinary shares surrendered in exchange
therefor; |
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A U.S. holder who receives cash in lieu of fractional
shares pursuant to the merger will be treated as having received
such cash in exchange for such fractional shares and generally
will recognize capital gain or loss on such deemed exchange in
an amount equal to the difference between the amount of cash
received and the tax basis of Elscint ordinary shares allocable
to such fractional shares; and |
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No income, gain or loss will be recognized by EMI or Elscint as
a result of the transfer to Elscint shareholders of EMI ordinary
shares by EMI pursuant to the merger. |
The above opinions, which are not binding on the
U.S. Internal Revenue Service or the courts, are
conditioned upon the assumption, which we refer to as the
supporting condition, that the merger will be completed under
the current terms of the merger agreement. The ability to
satisfy the supporting condition, and therefore the
U.S. federal income tax consequences of the merger, depend
in part on facts that will not be available until the completion
of the merger. There can be no assurance that the merger will be
completed or that the supporting condition will be satisfied,
although we expect that it will be. In addition to the
supporting condition, the above opinions are based on, among
other things, facts existing as of the date hereof, on certain
representations as to factual matters made by EMI and Elscint
and on the assumption as to the absence of material changes in
facts or in law between the date hereof and the effective time
of the merger.
If the supporting condition is not satisfied or if such
representations or assumptions are incorrect in certain material
respects, the conclusions reached in the opinions could be
jeopardized, and the tax consequences of the merger could differ
materially from those set forth above. In particular, in such
event, the exchange by U.S. holders of their Elscint
ordinary shares for EMI ordinary shares in the merger could be
taxable depending on the particular facts surrounding the
merger, some of which may not be known until completion of the
merger. If the merger is taxable, then U.S. holders
generally would recognize gain or loss on the exchange of
Elscint ordinary shares for EMI ordinary shares measured by the
difference between the fair market value of EMI ordinary shares
(together with any cash received in lieu of a fractional
interest in EMI ordinary shares) received by such
U.S. holders and such U.S. holders bases in the
Elscint ordinary shares surrendered.
60
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Special Rules Applicable to PFICs |
Notwithstanding the foregoing, if Elscint was in a prior taxable
year in which a U.S. holder owned Elscint ordinary shares
or will be for the taxable year in which the merger occurs a
PFIC and EMI is not a PFIC for the taxable year in which the
merger occurs, a U.S. holder, unless the holder is a
qualified U.S. holder, will be subject to the
following special tax rules.
For purposes of this discussion, a qualified
U.S. holder means a U.S. holder who either:
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(i) made for the first year in which such U.S. holder
owned Elscint ordinary shares or in which Elscint was a PFIC,
whichever is later, a qualifying electing fund
election; or |
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(ii) has during the period the U.S. holder owned
Elscint ordinary shares and in which Elscint was a PFIC made a
mark-to-market election (such elections are
discussed below under Material United States Federal
Income Tax Considerations with Respect to the Merger and
Ownership of EMI Ordinary Shares Ownership of EMI
Ordinary Shares Passive Foreign Investment Company
Status). |
If a U.S. holder has made either of these elections,
special rules may apply with respect to the merger and such
U.S. holder is urged to consult its own tax advisor.
If a U.S. holder (other than a qualified U.S. holder)
realizes gain with respect to his or her Elscint ordinary
shares, the following material U.S. federal income tax
consequences will result:
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The U.S. holder will be required to treat the entire amount
of gain realized in the merger as an excess
distribution, which is subject to special tax rules
discussed in greater detail below under Material United
States Federal Income Tax Considerations with Respect to the
Merger and Ownership of EMI Ordinary Shares
Ownership of EMI Ordinary Shares Passive Foreign
Investment Company Status; |
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The EMI ordinary shares acquired by the U.S. holder
pursuant to the merger will not be treated as shares of a PFIC,
unless EMI subsequently becomes a PFIC; |
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The U.S. holders basis in the EMI ordinary shares
received pursuant to the merger will equal such U.S.
holders aggregate tax basis in the Elscint ordinary shares
surrendered in the exchange therefor, plus the amount of gain
recognized in the exchange; and |
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The holding period of EMI ordinary shares will commence the day
after the merger. |
If Elscint is or has been, during a U.S. holders holding
period, and EMI is not, a PFIC and a U.S. holder (other
than a qualified U.S. holder) realizes a loss with respect
to his or her Elscint ordinary shares, the tax consequences will
be similar to those discussed above under the heading
Material United States Federal Income Tax Considerations
with Respect to the Merger and Ownership of EMI Ordinary
Shares Consequences of the Merger In
General. However, if in that event, and if the merger
qualifies as a reorganization, special rules may apply with
respect to the PFIC status and the holding period of the EMI
ordinary shares received by the U.S. holder in the merger
and, accordingly, U.S. holders should consult their own tax
advisors.
EMI does not believe that it has ever been, or will be for the
current taxable year, a PFIC. Elscint believes that it has not
been a PFIC for any prior taxable year and that it will not be a
PFIC for the current taxable year, except that it may have been
a PFIC in 1999 and 2000, as a result of the sale of its former
business at the end of 1998. The test for determining PFIC
status are fact-intensive and subject to legal interpretation
for which definitive authority is lacking. Although Elscint
believes that there are reasonable interpretations of the PFIC
rules under which it would not be classified as a PFIC in 1999
and 2000, there can be no assurance that such view would prevail.
If EMI and Elscint are both PFICs for the taxable year in which
the merger is completed, the foregoing special tax rules
applicable to the exchange of the Elscint ordinary shares in the
merger would not apply. In such case, the U.S. federal
income tax consequences to U.S. holders of the exchange of
their Elscint ordinary shares in the merger would be governed by
the tax rules discussed above under the heading Material
United States Federal Income Tax Considerations with
Respect to the Merger and Ownership of EMI Ordinary
Shares Consequences of the Merger In
General. Additionally, the U.S. holders would have
61
received shares of a PFIC in the merger, the ownership and
disposition of which are subject to special rules discussed
below under the heading Material United States Federal
Income Tax Considerations with Respect to the Merger and
Ownership of EMI Ordinary Shares Ownership of EMI
Ordinary Shares Passive Foreign Investment Company
Status.
Ownership of EMI Ordinary Shares
Subject to the discussion below under Passive Foreign
Investment Company Status, a U.S. holder of EMI
ordinary shares will be required to include in gross income as
ordinary income the amount of any distribution paid on such
ordinary shares, including any Israeli taxes withheld from the
amount paid, on the date the distribution is received to the
extent the distribution is paid out of EMIs current or
accumulated earnings and profits as determined for
U.S. federal income tax purposes. Distributions in excess
of such earnings and profits will be applied against and will
reduce the U.S. holders tax basis in its EMI ordinary
shares and, to the extent in excess of such tax basis, will be
treated as gain from the sale or exchange of EMI ordinary
shares. Such dividends generally will not qualify for the
dividends received deduction generally available to
corporations. The amount of any cash distribution in respect of
EMI ordinary shares paid in NIS will equal the U.S. dollar
value of the distribution, calculated by reference to the
spot exchange rate in effect on the date of receipt
or deemed receipt of the distribution. Any gain or loss
resulting from currency exchange fluctuations during the period
from the date the dividend is includible in the income of the
U.S. holder to the date that payment is converted into
U.S. dollars generally will be treated as ordinary income
or loss.
The maximum U.S. federal income tax rate on certain
qualified dividends paid to non-corporate
U.S. holders through 2008 is 15% and is subject to
U.S. ordinary tax rates thereafter. For this purpose,
qualified dividends generally include dividends paid by a
foreign corporation if certain holding period and other
requirements are met and either (i) stock of the foreign
corporation with respect to which the dividends are paid is
readily tradable on an established securities market in the
U.S. or (ii) the foreign corporation is eligible for
benefits of a comprehensive income tax treaty with the
U.S. that includes an information exchange program and that
is determined to be satisfactory by the U.S. Secretary of
the Treasury. The Internal Revenue Service has determined that
the U.S.-Israel Tax Treaty is satisfactory for this purpose and
EMIs ordinary shares currently trade on the NASDAQ
National Market. The reduced tax rate generally will not apply,
however, to dividends paid by EMI if EMI is treated as a PFIC in
the taxable year the dividend is paid or in the prior taxable
year. Currently, EMI does not believe that it was a PFIC in 2004
or will be in 2005. See discussion below under
Passive Foreign Investment Company
Status.
Subject to certain complex conditions and limitations set forth
in the Code, including certain holding period requirements,
U.S. holders generally will be able to elect to deduct or
claim as a credit against their U.S. federal income tax
liability any Israeli withholding tax deducted from dividends
received on EMI ordinary shares. For purposes of calculating the
foreign tax credit, dividends paid on EMI ordinary shares
generally will be treated as foreign source income and will
constitute passive income, or in the case of certain
U.S. holders with respect to taxable years beginning on or
before December 31, 2006, financial services
income. U.S. holders should note that recently
enacted legislation eliminates the financial services
income category with respect to taxable years beginning
December 31, 2006. Under this legislation, the foreign tax
credit limitation categories will also be limited to
passive category income and general category
income.
The sale or exchange of EMI ordinary shares generally will
result in the recognition of capital gain or loss in an amount
equal to the difference between the U.S. dollar value of
the amount realized on the sale or exchange and the
U.S. holders tax basis in its EMI ordinary shares.
Subject to the application of the PFIC rules discussed below,
see Passive Foreign Investment Company
Status, such gain or loss generally will be long-term
capital gain or loss if the U.S. holders holding
period of the EMI ordinary shares exceeds one
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year at the time of the disposition. Individual
U.S. holders currently are subject to a maximum tax rate of
15% on long-term capital gains for taxable years beginning on or
before December 31, 2008 and generally subject to a maximum
rate of 20% on such gains thereafter. The deductibility of
capital losses is subject to limitations. Gain or loss
recognized by a U.S. holder on a sale or exchange of EMI
ordinary shares generally will be treated as U.S. source
income or loss for U.S. foreign tax credit purposes. A
U.S. holder that receives foreign currency upon a
disposition of EMI ordinary shares and converts that foreign
currency to U.S. dollars subsequent to that receipt may
have foreign currency exchange gain or loss that generally will
be treated as ordinary income or loss.
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Passive Foreign Investment Company Status |
In general, a foreign corporation will be classified as a PFIC
in any taxable year for U.S. federal income tax purposes if
75% or more of its gross income in such taxable year, including
its pro rata share of the gross income of any company treated as
a corporation for U.S. federal income tax purposes
(U.S. or foreign) in which it is considered to own,
directly or indirectly, 25% or more of the shares by value, is
passive income. Alternatively, a foreign corporation will also
be considered to be a PFIC if at least 50% of its assets in a
taxable year, averaged quarterly over the taxable year and
ordinarily determined based on fair market value and including
its pro rata share of the assets of any company treated as a
corporation for U.S. federal income tax purposes
(U.S. or foreign) in which it is considered to own,
directly or indirectly, 25% or more of the shares by value, are
held for the production of, or produce, passive income. Passive
income includes interests, dividends, royalties, rents and
annuities.
EMI does not believe it is a PFIC nor does it anticipate
becoming a PFIC in future taxable years. However, the tests for
determining PFIC status are applied annually and are
fact-intensive and based on several factors. It is difficult to
make accurate predictions of EMIs future income and
assets, which are relevant to this determination. Accordingly,
there can be no assurance that EMI has not been or will not be
treated as a PFIC.
If a foreign corporation is a PFIC, and a U.S. holder does
not make either an election to treat the foreign corporation as
a qualified electing fund, or QEF, or a
mark-to-market election (as described below), then the
following rules apply:
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Excess distributions made by the foreign corporation to the
U.S. holder are taxed in a special way. Excess
distributions are amounts received by a U.S. holder
in any taxable year that exceeds 125% of the average
distributions received by such U.S. holder from the foreign
corporation in the shorter of either the three previous years or
such U.S. holders holding period before the present
taxable year. Excess distributions must be allocated ratably to
each day that a U.S. holder has held its shares in the
foreign corporation. A U.S. holder must include amounts
allocated to the current taxable year and any taxable period in
the U.S. holders holding period before the foreign
corporation was a PFIC, but after 1986, in its gross income as
ordinary income for the year realized. A U.S. holder must
pay tax on amounts allocated to other prior taxable years at the
highest rate in effect for that year on ordinary income and the
tax is subject to an interest charge at the rate applicable to
deficiencies for income tax. |
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The entire amount of gain realized by a U.S. holder upon
the sale or other disposition of stock in the foreign
corporation will generally also be treated as an excess
distribution and will be subject to tax as described above. |
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A U.S. holders tax basis in its stock in the foreign
corporation that was acquired from a decedent would not receive
a step-up to fair market value as of the date of the
decedents death but would instead be equal to the
decedents basis, if lower. |
The special PFIC rules described above will not apply to a
U.S. holder that makes an election to treat the foreign
corporation as a QEF in the first taxable year in which the
U.S. holder owns stock in the foreign corporation or in
which the foreign corporation was a PFIC, whichever is later.
Instead, a U.S. holder of a QEF is required for each
taxable year to include in income a pro rata share of the
ordinary earnings of the QEF as ordinary income and a pro rata
share of the net capital gain of the QEF as long-term capital
gain,
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subject to a separate election to defer payment of taxes, which
deferral is subject to an interest charge. The QEF election is
made on a shareholder-by-shareholder basis and can be revoked
only with the consent of the IRS. A U.S. holder makes a QEF
election by attaching a completed IRS Form 8621, including
the PFIC annual information statement, to a timely filed
U.S. federal income tax return or, if no federal income tax
return is required to be filed, by filing such form with the IRS
Service Center in Philadelphia, Pennsylvania. Even if a QEF
election is not made, a U.S. holder in a PFIC must file a
completed IRS Form 8621 every year. Generally, a QEF
election allows an electing U.S. holder to treat any gain
realized on the disposition of its stock in the PFIC as capital
gain and without imposition of an interest charge.
U.S. holders will not be eligible to make a QEF election
unless EMI complies with certain applicable reporting
requirements.
A U.S. holder of PFIC stock which is marketable
stock (e.g., regularly traded on NASDAQ) could elect to
mark the stock to market annually, recognizing as ordinary
income or loss each year an amount equal to the difference as of
the close of the taxable year between the fair market value of
the U.S. holders PFIC stock and the
U.S. holders adjusted basis in the PFIC stock. Losses
would be allowed only to the extent of net mark-to-market gain
previously included by the U.S. holder under the election
for prior taxable years. An electing U.S. holders
adjusted basis in PFIC stock is increased by income recognized
under the mark-to market election and decreased by losses
allowed under the election. Under the mark-to-market election,
gain on the sale of PFIC stock is treated as ordinary income,
and loss on the sale of PFIC stock, to the extent the amount of
loss does not exceed the net mark-to-market gain previously
included, is treated as ordinary loss. If the mark-to-market
election were made, then the rules set forth above would not
apply for periods covered by the election.
U.S. holders are urged to consult their tax advisors about
the PFIC rules, including the consequences to them of making a
mark-to-market or QEF election with respect to EMI ordinary
shares in the event that EMI becomes a PFIC.
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Information Reporting and Backup Withholding |
Certain U.S. holders may be subject to information
reporting with respect to payments of dividends and the proceeds
of the disposition of EMI ordinary shares as well as on the
receipt of cash in lieu of fractional shares in the merger.
U.S. holders who are subject to information reporting and
who do not provide appropriate information when requested may
also be subject to backup withholding at a current rate of 28%.
Amounts withheld under the backup withholding rules may be
credited against a U.S. holders U.S. tax
liability, and a U.S. holder may obtain a refund of any
excess amount withheld under the backup withholding rules by
filing the appropriate claim for refund with the IRS.
U.S. holders should consult their tax advisors regarding
the imposition of backup withholding and information reporting
with respect to the distributions on and dispositions of EMI
ordinary shares.
Regulatory Filings and Approvals
The merger is governed by sections 350 and 351 of the Israeli
Companies Law. In accordance with these provisions and the
regulations promulgated thereunder, EMI and Elscint filed a
motion on August 23, 2005 with the Israeli Tel Aviv-Jaffa
District Court requesting the court to issue an order allowing
EMI and Elscint to hold the special meetings. The court issued
such order on August 25, 2005. Following approval of the
merger by EMIs and Elscints shareholders at the
special meetings and the satisfaction (or waiver) of the other
conditions to closing, EMI and Elscint must file with the court
a second motion requesting the court to issue an order approving
the merger itself. The court will confirm that the appropriate
majority in each special meeting approved the merger and the
merger agreement. In addition, the court will consider the
specific circumstances of the merger and will grant any order
that it deems appropriate under the circumstances, including an
order regarding any matter necessary to assure that the merger
be carried out completely and efficiently.
The Israel Securities Authority has notified EMI that the
contemplated transaction does not require the publication of a
prospectus by EMI in Israel for the offer of EMI shares in the
merger. The merger is not subject to the provisions of the
United States Hart-Scott Rodino Antitrust Improvements Act
of 1976. The
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merger is not subject to the approval of the Israeli
Anti-Trust Authority pursuant to the Israeli Restricted
Trade Practices Law, 5748-1988.
The consummation of the merger is also subject to the
satisfaction (or waiver) of other approvals, see The
Merger Agreement Conditions to the Merger
below.
Listing of EMI Ordinary Shares
EMI will list the EMI ordinary shares to be issued in connection
with the merger on NASDAQ (Symbol: EMITF) and the
TASE.
Resale of EMI Ordinary Shares
The EMI ordinary shares to be issued to Elscint shareholders in
connection with the merger have been registered under the
Securities Act of 1933, as amended. EMI ordinary shares received
by Elscint shareholders upon consummation of the merger may be
freely traded in the United States without restriction by those
Elscint shareholders who are not affiliates of EMI
as defined under the Securities Act. An affiliate is
a person who controls, is controlled by, or is under common
control with EMI or Elscint. Any subsequent transfer of these
shares in the United States by a person who is an affiliate of
EMI or Elscint at the time the merger is voted on by the EMI and
Elscint shareholders will require one of the following:
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further registration under the Securities Act; |
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compliance with Rule 145 under the Securities Act or, in
the case of those persons who become affiliates of EMI or
Elscint, Rule 144 under the Securities Act; or |
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the availability of another exemption from registration under
the Securities Act. |
These restrictions are expected to apply to EMIs and
Elscints directors and executive officers and others who
may be deemed affiliates for purposes of the
Securities Act.
The EMI shares received by Elscint shareholders upon completion
of the merger may be freely traded on the TASE.
Objection and Appraisal Rights
Under Israeli law, which governs the merger, you are not
entitled to formal appraisal rights. However, since the merger
will be effected pursuant to sections 350 and 351 of the Israeli
Companies Law, it is subject to approval of an Israeli District
Court and the District Court (in our case, the Tel Aviv-Jaffa
District Court) may provide you a remedy if you object to the
merger within the timeframe and in the manner prescribed by the
Israeli Companies Law, the regulations promulgated thereunder
and the District Court.
Pursuant to regulations promulgated under the Israeli Companies
Law, unless the District Court determines otherwise, you may
raise your objections to the merger by filing an application
with the Court no later than 10 days following the filing
by EMI and Elscint of the second motion with the District Court,
which is expected to occur promptly following the approval of
the merger by EMIs and Elscints shareholders at the
special meeting to be convened on October 27, 2005 and the
fulfillment of all of the conditions precedent set forth in the
merger agreement.
The application would typically be filed as a written
application supported by an affidavit.
You should be aware that neither the Israeli Companies Law nor
the regulations promulgated under that law specify the remedies
available to you in connection with the merger.
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THE MERGER AGREEMENT
The following is a brief summary of certain provisions of the
merger agreement, a copy of which is attached as Annex A to
this joint proxy statement/ prospectus and is incorporated
herein by reference. Such summary is qualified in its entirety
by reference to the merger agreement. Shareholders of EMI and
Elscint are urged to read the merger agreement in its entirety
for a more complete description of the terms and conditions of
the merger.
Structure of the Merger
As of the date of the merger agreement, EMI owns, directly and
through its wholly-owned subsidiary, Elbit Medical Holdings
Ltd., or Elbit Medical Holdings, approximately sixty-one percent
(61%) of Elscints outstanding shares.
Prior to the completion of the merger, Elbit Medical Holdings
will distribute as a dividend in kind to EMI its shares of
Elscint for no direct or indirect consideration. Alternatively,
instead of the distribution in kind of Elscint shares held by
Elbit Medical Holdings to EMI, EMI may elect, in its sole
discretion, to cause Elbit Medical Holdings to purchase all of
the Elscint shares (other than Elscint shares held by EMI, Elbit
Medical Holdings and Elscint) in consideration for the issuance
of EMI shares as detailed in the merger agreement. In such
event, the provisions of the merger agreement shall apply with
necessary modifications.
The merger agreement provides that, following receipt of the
requisite approvals by the shareholders of each of EMI and
Elscint and the satisfaction (or waiver) of the other conditions
to the merger, EMI will own the entire issued and outstanding
share capital of Elscint. As a consequence of the merger,
Elscint will become a wholly-owned subsidiary of EMI and its
shares will no longer trade on the New York Stock Exchange. The
merger will be effected under sections 350 and 351 of the
Israeli Companies Law and its regulations.
What Shareholders Will Receive in the Merger
The merger agreement provides that at the closing of the merger,
each Elscint ordinary share outstanding immediately prior to the
closing of the merger, other than Elscint ordinary shares held
by EMI and Elscint, will be exchanged for 0.53 ordinary shares
of EMI.
Assets and Liabilities; Business
Immediately following the consummation of the merger, the
corporate identity and the existence of Elscint with all its
purposes, powers and objects shall remain unaffected and
unimpaired by the merger and Elscint shall continue its
corporate existence under the laws of the State of Israel. This
means, among other things, that the merger and the other
transactions contemplated hereunder shall not in and of
themselves change: (i) Elscints business as presently
conducted; or (ii) the right of Elscints creditors,
if any.
Fractional Shares
No certificates representing fractional shares of EMI will be
issued in connection with the merger. Instead, each Elscint
shareholder, other than EMI and Elscint, will receive a check in
payment for any fractional shares equal to the value of such
fractional shares, based upon the closing price of EMI ordinary
shares on the NASDAQ on the trading day immediately preceding
the closing date of the merger.
Surrender and Exchange Procedure
The merger agreement provides that within 5 business days
following the closing of the merger, the exchange agent selected
by EMI will mail to each holder of record of ordinary shares of
Elscint immediately prior to the closing a notice and letter of
transmittal with respect to the surrender of such holders
certificates. Elscint shareholders should not send their
share certificates with the enclosed proxy. Upon surrender
by Elscint shareholders of their certificates representing
Elscint ordinary shares in accordance with the instructions,
Elscint shareholders will receive certificates representing EMI
ordinary shares for which their Elscint shares have been
exchanged.
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Further details regarding the procedure for surrender and
exchange of certificates representing Elscint ordinary shares
for certificates representing EMI ordinary shares will be set
forth in exchange agent agreements, the terms of which are not
set forth in the merger agreement. In general, the exchange
agent agreements will provide the following:
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At or promptly following the closing of the merger, EMI will
deliver to the exchange agent the appropriate number of ordinary
shares of EMI and cash paid in lieu of fractional shares of EMI
to be issued in exchange for Elscint shares. The notice and
letter of transmittal to be sent by the exchange agent to the
holders of Elscint ordinary shares will specify the
circumstances under which the risk of loss and title to
certificates evidencing Elscint shares will pass and having such
form and provisions as EMI may reasonably specify, and will
include instructions for use in surrendering Elscint share
certificates in exchange for certificates representing EMI
ordinary shares and cash in lieu of fractional EMI ordinary
shares. |
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Upon surrender of Elscint share certificates to the exchange
agent, together with a properly executed letter of transmittal,
the holder of the surrendered certificates will be entitled to
receive, following the closing of the merger, a certificate
representing that number of whole ordinary shares of EMI as
determined according to the provisions of the merger agreement
and, if applicable, a check representing the cash amount for
fractional shares that he or she has a right to receive in
accordance with the merger agreement. |
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Until a holder of Elscint shares surrenders his or her
certificates representing those shares together with a properly
executed letter of transmittal, the holder will not receive any
EMI shares the holder is entitled to receive in the merger or
any dividends or other distributions with respect to those
shares that are declared or made after the closing of the
merger. In addition, no cash payment in lieu of fractional EMI
shares will be paid to any such holder until he or she
surrenders his or her certificate representing the Elscint
shares together with the properly executed letter of transmittal. |
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Former Elscint shareholders will be entitled to receive EMI
dividends after the closing of the merger. The payment of
dividends to the former Elscint shareholders will occur only
after the former Elscint shareholders have surrendered and
exchanged their share certificates representing Elscint shares.
No interest will be paid on the dividends. Payments of cash in
lieu of fractional EMI ordinary shares will occur after the
closing of the merger. |
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All cash paid in lieu of fractional shares and EMI
ordinary shares issued in exchange for Elscint shares in
connection with the merger will have been paid and issued in
full satisfaction of all rights pertaining to Elscint shares. |
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The exchange agent will deliver EMI ordinary shares in exchange
for lost, stolen or destroyed certificates representing Elscint
shares if the owner of such certificates signs an affidavit of
loss, theft or destruction, as appropriate. The exchange agent
or EMI also may, in their discretion, require the holder of such
lost, stolen or destroyed certificates to deliver a bond in such
a reasonable sum as indemnity against any claim that might be
made against EMI and the exchange agent with respect to the
lost, stolen or destroyed certificates. |
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EMI will be entitled to deduct and withhold from the merger
consideration (i.e. the respective EMI ordinary shares
and cash payment in lieu of fractional shares) any amounts
required to be so deducted and withheld with respect to the
making of any payment under any applicable tax law; however, EMI
does not believe that any such taxes will be required to be
withheld, except for with respect to payments of cash in lieu of
fractional shares. Such amounts will be treated as if paid to
the Elscint shareholder in accordance with the merger agreement. |
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The rights of Elscint shareholders, other than EMI and Elscint,
will cease, and their rights as EMI shareholders will commence,
at the closing of the merger. |
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Transfers of Shares
EMI will not record any further transfers of shares of Elscint
after the closing of the merger.
Options
At the closing of the merger, each outstanding option to
purchase ordinary shares of Elscint will be assumed by EMI and
will be deemed to be an option to purchase ordinary shares of
EMI. Each assumed option will, after the merger, entitle the
holder to acquire, on substantially the same terms and
conditions applicable under the original Elscint incentive plan,
the number of ordinary shares of EMI equal to the number of
Elscint ordinary shares that the holder of the option was
entitled to acquire, multiplied by the exchange ratio of 0.53
rounded to the nearest whole number of shares of EMI ordinary
shares. The exercise price per EMI share of each outstanding
option will be the same exercise price per share specified in
the original Elscint incentive plan, divided by the exchange
ratio of 0.53 (rounded to the nearest hundredth).
EMI has agreed to take all corporate actions necessary to
reserve a sufficient number of its ordinary shares for issuance
upon exercise of the Elscint options assumed by EMI and to file
with the SEC a Registration Statement on Form S-8 covering
the EMI ordinary shares issuable pursuant to the covered options.
Representations and Warranties
The merger agreement contains customary representations and
warranties made by each of EMI and Elscint to the other,
including among others:
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due organization and qualification of each party; |
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capitalization; |
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those relating to material subsidiaries; |
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financial statements and undisclosed liabilities; |
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required filings with the SEC and under the Israeli Securities
Law (with respect to EMI); |
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tax matters; |
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material litigation and governmental proceedings; |
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opinion of each partys financial advisor; and |
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compliance with laws. |
The representations and warranties will not survive the closing
of the merger.
Required Approvals
The merger must be approved by the shareholders of EMI and
Elscint and other constituencies of EMI or Elscint, if required
by the court. Subsequent to these approvals, EMI and Elscint
will file with the Tel Aviv-Jaffa District Court, or other
competent court in Israel, a motion requesting that the court
issue a final order approving the merger. As soon as possible
following the final order, but no later than three days
thereafter, EMI and Elscint will file the final order with the
Registrar of Companies in Israel notifying the Registrar of the
approval of the merger.
In addition, the obligations of the parties to effect the merger
are subject to the receipt of the following approvals, orders,
permits, exemptions and instructions:
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the final court order from the Tel Aviv-Jaffa District Court or
other competent court in Israel; and |
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the receipt of tax rulings from the Israeli Tax Authority and
the compliance of the merger with the relevant provisions of the
Israeli Tax Ordinance [New Version] of 1961. |
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Also, the consummation of the merger is also subject to the
satisfaction (or waiver) of other approvals, see section
Conditions to the Merger below.
Closing
The closing of the merger will take place at 3:00 p.m.,
Israel time, not later than the second Israeli business day
following satisfaction (or waiver, as the case may be) of all of
the closing conditions set forth in the merger agreement at the
offices of Gross, Kleinhendler, Hodak, Halevy,
Greenberg & Co., Law Offices in Tel Aviv, Israel, or
such other time or place as EMI and Elscint agree.
Covenants
The following is a summary of the covenants undertaken by EMI
and Elscint under the merger agreement in the period between the
date of the merger agreement and the closing of the merger:
EMI and Elscint have agreed to provide to the officers,
attorneys, accountants and other authorized representatives of
each other reasonable access during regular business hours to
their books, records, personnel and properties. In connection
with this access, each of EMI and Elscint has agreed to notify
in writing the other party of any event reasonably likely to
result in any representation or warranty of such party becoming
false, incorrect or misleading. Each party has also agreed to
avoid undue disruption of normal business operations and
maintain the confidentiality of any information acquired as a
result of such access.
Except as contemplated under the merger agreement or with the
prior consent of EMI:
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Elscint and its material subsidiaries will not make any change
to their authorized, issued and outstanding share capital, other
than upon exercise of options granted prior to the date hereof; |
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Elscint will not make any change with respect to the period or
acceleration of exercisability of any options or other
securities; or |
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Elscint and its material subsidiaries will not repurchase,
redeem or otherwise acquire any Elscint shares. |
Except as contemplated under the merger agreement or with the
prior consent of Elscint, EMI and its material subsidiaries will
not:
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make any change to its authorized, issued and outstanding share
capital; or |
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repurchase, redeem or otherwise acquire any EMI shares. |
Without the prior consent of the other party, neither EMI nor
Elscint will declare or pay any dividends or other distribution
with respect to its shares.
EMI and Elscint have agreed to file all applications required by
any governmental authority in connection with the merger and to
use their best commercial efforts to comply with all
requirements of any governmental
authority and take all actions required for consummation of the
merger and the transactions contemplated by the merger agreement.
Each of EMI and Elscint will inform the other party in writing
of any lawsuits, claims or investigations relating to it, any of
its material subsidiaries or any of its and their respective
employees, officers, directors, consultants or other agents.
Neither EMI nor Elscint will settle or compromise any suit,
investigation or other litigation or arbitration matter which
would have a material adverse effect on itself without the prior
written consent of the other party.
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EMI and Elscint will provide each other with reviewed
(unaudited) consolidated quarterly financial statements for
each fiscal quarter ending prior to the closing, prepared in a
manner consistent with Israeli GAAP and including a
reconciliation note to U.S. GAAP.
EMI and Elscint have agreed jointly to prepare, file and
distribute this joint proxy statement/ prospectus and to use
their reasonable commercial efforts to have the Registration
Statement on Form F-4, of which this joint proxy statement/
prospectus is a part, declared effective by the SEC. EMI has
also agreed to vote all of its Elscint shares in favor of the
merger in the Elscint shareholder meeting.
EMI and Elscint have agreed to provide each other with all
information and documents required to consummate the merger, the
Registration Statement on Form F-4, and the TASE or NASDAQ
listing application.
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Listing of EMI Shares on the NASDAQ and the TASE |
EMI will use its best commercial efforts to cause the EMI shares
issued in the merger to be listed on the NASDAQ and the TASE
prior to the Closing.
Elscint will deliver to EMI a list of all persons who may be
deemed affiliates of Elscint for purposes of
Rule 145 under the Securities Act of 1933. Elscint will
cause each person who is an affiliate to deliver to EMI prior to
the closing of the merger a written agreement that the person
will not sell, pledge, transfer or otherwise dispose of any EMI
shares received pursuant to the merger except in compliance with
Rule 145.
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S-8 Registration Statement |
EMI will prepare and file a Registration Statement on
Form S-8 with respect to the EMI shares to be issued upon
exercise of the options being assumed under the merger agreement.
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Satisfaction of Conditions to Closing |
EMI and Elscint have agreed to use their reasonable efforts to
satisfy all of the conditions precedent to the closing of the
merger.
EMI and Elscint have agreed to notify each other in writing of:
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any notice or other communication from any person or entity
alleging that the consent of such person or entity is required
in connection with the merger; |
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any notice or other communication from any governmental or
regulatory agency or authority in connection with the
merger; and |
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any material adverse effect on EMI or on Elscint, as the case
may be. |
EMI and Elscint have agreed to execute and file any application
or other document that may be necessary in order to obtain the
approval or consent of any government authority, or that the
other party may reasonably request, in connection with the
consummation of the merger, and to use reasonable efforts to
obtain all such approvals or consents.
EMI and Elscint will use reasonable commercial efforts with each
other in seeking any actions, consents, approvals or waivers
required from any governmental body, and in making any filings
or furnishing any
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information required, in connection with the consummation of the
transactions contemplated by the merger agreement.
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Officers and Directors Insurance |
EMI will continue to maintain a liability insurance policy for
its officers and directors within a policy covering EMI, Elscint
and/or any of their respective affiliates, including
Europe-Israel (M.M.S.) Ltd., the controlling shareholder of EMI,
for seven years following the closing of the merger, the
aggregate coverage amount shall not be less than
$40 million provided that the aggregate annual premium for
this policy shall not exceed an agreed upon maximum premium
amount. In the event the maximum premium amount is exceeded, EMI
will purchase or cause Elscint to purchase the highest coverage
amount available for the maximum premium amount. Any successor
entity to Elbit or Elscint would be required to assume the
foregoing obligations with respect to the purchase and
maintenance of such a directors and officers
liability insurance policy on such terms.
Each of EMI and Elscint will use its reasonable efforts to cause
the merger to qualify as a reorganization under the Code.
Conditions to the Merger
The obligations of EMI and Elscint to complete the merger depend
upon the fulfillment of the conditions summarized below at or
prior to the closing of the merger, subject to the receipt of
approval by such partys audit committee and board of
directors:
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the representations and warranties in the merger agreement must
be true and correct in all material respects at the closing of
the merger, except to the extent that they relate to a
particular date; |
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each party must have performed and complied in all material
respects with all the material covenants, agreements and
conditions required by the merger agreement to be performed or
complied with on or prior to the closing of the merger; |
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each party must have delivered a certificate certifying that the
above conditions have been satisfied; |
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the shareholders and, if required, other constituencies of EMI
and Elscint must have approved the merger and the consummation
of the transactions contemplated by the merger agreement by the
requisite votes required under Israeli law; |
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the final court order approving the merger pursuant to
section 351 to the Companies Law must have been obtained; |
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the Registration Statement on Form F-4 must have been
declared effective by the Securities and Exchange Commission; |
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a tax ruling from the Israeli tax authority that the merger is a
tax exempted transaction and an additional tax ruling from the
Israeli tax authority that securities granted under
Elscints incentive plans as a result of the conversion to
EMI securities did not change their tax status must have been
obtained; |
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the TASE must have approved for listing of the EMI shares to be
issued pursuant to the merger agreement and EMI must have sent
an official notice of issuance to NASDAQ for listing of such
shares; |
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each of EMI, Elbit Medical Holdings and Elscint must have
received all required approvals from financing institutions for
the consummation of the merger in accordance with financing
agreements entered into between the financing institutions and
each of EMI, Elbit Medical Holdings and Elscint; |
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no judicial decision shall have been issued against EMI, Elscint
or their respective material subsidiaries, which has the effect
of making the merger illegal or otherwise prohibited or
substantially restrains consummation of the merger and the
transactions contemplated by the merger agreement; |
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each party must have taken all corporate and other material
proceedings required to be taken, including the final court
order, to carry out the merger and the transactions contemplated
by the merger agreement; and |
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there must have been no change, event or development with
respect to either party or any of their subsidiaries which,
individually or together, would result in a material adverse
effect on such party. |
Actions After the Closing of the Merger
Following the closing of the merger, EMI and Elscint will
perform any further acts and execute any additional documents as
may be reasonably required to effectuate the merger and the
transactions contemplated by the merger agreement and to carry
into effect the intents and purposes of the merger agreement.
Expenses
Whether or not the merger is completed, EMI and Elscint each
will pay its own costs and expenses, including fees of
attorneys, accountants and investment advisors, incurred in
connection with the negotiation and preparation of the merger
agreement and the transactions contemplated by the merger
agreement.
Modification or Termination of the Merger Agreement
The merger agreement may be amended or modified at any time in
writing by Elscint and EMI, subject to approval of
Elscints and EMIs audit committees and boards of
directors. Any term (including, without limitation, the exchange
ratio), covenants, representations, warranties or conditions of
the merger agreement may be so amended or modified and/or
waived, as long as the waiving party provides a written waiver
of the relevant provision.
The merger agreement may be terminated at any time before the
closing of the merger, even after the shareholders of both
companies have approved it:
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by mutual written consent of EMI and Elscint; or |
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by either EMI or Elscint: |
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if any court of competent jurisdiction or other governmental
body issues a final and non-appealable order, decree or ruling
or takes any action permanently restraining, enjoining or
otherwise prohibiting the merger; |
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if the shareholders or, if required by a binding court order,
other constituencies, of either party do not approve the merger
by the requisite majority; or |
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if the merger is not consummated by March 31, 2006,
provided that the party seeking the termination under the
termination clause has not been the cause of the failure to
consummate the merger by such date; or |
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if any representation or warranty of the other party becomes
untrue or the other party breaches any covenant or agreement set
forth in the merger agreement and such breach or
misrepresentation, not capable of being cured within
21 days, causes the closing conditions not to be satisfied. |
The merger agreement may not be terminated on the ground of the
pricing of the Elscint shares in the merger, the pricing of the
exchanged EMI shares, or the market prices of the EMI or Elscint
shares.
Any termination of the merger agreement must be approved by the
audit committee and the board of directors of the party seeking
termination.
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INFORMATION ABOUT EMI
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Elbit Medical Imaging Ltd. |
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13 Mozes Street |
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Tel Aviv 67442 Israel |
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Telephone: 972-3-608-6010 |
Elbit Medical Imaging Ltd. was incorporated in Israel in 1996.
EMIs activities are divided into three principal fields:
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ownership, operation, management, acquisition, expansion and
development, through a wholly-owned subsidiary of commercial and
entertainment malls in Europe, primarily in Eastern and Central
Europe; |
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the activities of its subsidiary, Elscint, described below under
the heading Information About Elscint; and |
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research and development in the image guided focused ultrasound
activities through its subsidiary, InSightec Image Guided
Treatment Ltd. |
If the merger is consummated, EMI will own 100% of Elscint.
Europe-Israel and Mr. Zisser, who beneficially own
approximately 55.14% of the outstanding ordinary shares of EMI
and approximately 55.96% of the voting rights in EMI, will
beneficially own approximately 47.58% of the outstanding
ordinary shares of EMI and approximately 48.19% of the voting
rights in EMI immediately following the merger. Elscint, which
currently owns approximately 2.39% of the outstanding ordinary
shares of EMI and approximately 0.95% of the voting rights in
EMI, will own approximately 2.06% of the outstanding ordinary
shares of EMI and approximately 0.82% of the voting rights in
EMI immediately following the merger. The percentages were
calculated excluding options to purchase 26,500 EMI
ordinary shares to be assumed by EMI upon completion of the
merger which would constitute all of the securities convertible
or exercisable into ordinary shares of EMI.
For more information EMI, see Where You Can Find More
Information beginning on page 83.
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INFORMATION ABOUT ELSCINT
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Elscint Ltd. |
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13 Mozes Street |
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Tel Aviv 67442 Israel |
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Telephone: 972-3-608-6020 |
Elscint Ltd. was incorporated in Israel in 1969. Elscints
activities are divided into five principal fields:
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ownership and operation of hotels in Europe and elsewhere and
construction of hotel projects through wholly owned and jointly
controlled subsidiary companies; |
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leasing of a real estate asset; |
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the ownership, operation and development of a commercial and
entertainment center in Israel; |
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an investment in Gamida Cell Ltd., a biotechnology company that
engages in the expansion of hematopoietic (blood) stem cell
therapeutics in clinical development for cancer and autoimmune
diseases, as well as future regenerative cell-based medicines
including cardiac and pancreatic repair; and |
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the ownership and operation of an apparel company, Mango Israel
Clothing & Footwear Ltd. |
For more information on Elscint, see Where You Can Find
More Information beginning on page 83.
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DESCRIPTION OF EMI SHARE CAPITAL FOLLOWING THE MERGER
EMI has the authority to issue 50,000,000 EMI ordinary shares.
As of the record date, there were 21,904,682 EMI ordinary shares
issued and outstanding (excluding 2,842,400 ordinary shares held
by EMI with respect to which EMI does not have any voting or
equity rights). Based upon the number of Elscint ordinary shares
issued and outstanding on the Elscint record date, there would
be approximately 25,384,363 EMI ordinary shares outstanding
immediately following the merger if the merger was consummated
on the EMI record date (calculated excluding 2,842,400 ordinary
shares held by EMI with respect to which EMI does not have any
voting or equity rights).
All issued and outstanding EMI ordinary shares are fully-paid
and non-assessable. The EMI Memorandum and Articles of
Association do not restrict in any way the ownership of EMI
shares by non-residents of Israel and neither the Memorandum or
Articles of Association nor Israeli law restricts the voting
rights of non-residents of Israel, except that under Israeli
law, any transfer or issue of shares of EMI to a resident of an
enemy state of Israel is prohibited and shall have no effect,
unless authorized by the Israeli Minister of Finance.
Subject to applicable law and the rights of holders of shares
with special rights (which may be issued in the future), any
dividend paid by EMI and the assets of EMI available for
distribution among shareholders in case of EMIs
liquidation shall be allocated among the shareholders entitled
thereto in proportion to the nominal value of their respective
holdings of the shares in respect of which such dividend is
being paid or such distribution is being made. Each EMI ordinary
share is entitled to vote on all matters to be voted on by
shareholders.
American Stock Transfer & Trust Company is the transfer
agent and registrar for EMI ordinary shares in the United
States. The Nominee Company of Bank Discount LeIsrael Ltd.
is the nominee company for EMI ordinary shares in Israel.
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COMPARISON OF SHAREHOLDER RIGHTS
The authorized share capital of EMI consists of NIS 50,000,000,
divided into 50,000,000 ordinary shares, nominal value NIS
1.0 per share. As of the EMI record date, 21,904,682 EMI
ordinary shares were issued and outstanding (excluding 2,842,400
ordinary shares held by EMI with respect to which EMI does not
have any voting or equity rights).
The authorized share capital of Elscint currently consists of
NIS 1,200,000, divided into 24,000,000 ordinary shares, nominal
value NIS 0.05 per share. As of the Elscint record date,
16,835,220 Elscint ordinary shares were issued and outstanding
(excluding 657,923 ordinary shares held by or for the benefit of
Elscint with respect to which Elscint does not have any voting
or equity rights).
EMI and Elscint are both organized under the laws of the State
of Israel. EMIs Articles of Association and Elscints
Articles of Association are substantially similar and there are
no material differences between the rights of EMI shareholders
and the rights of Elscint shareholders arising from differences
between their Articles of Association, other than the following:
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Quorum requirements the quorum required at
EMIs general meeting is at least two shareholders, present
in person or by proxy, and holding or representing, in the
aggregate, at least thirty-three and one-third percent (33.33%)
of the issued and outstanding voting shares and at EMIs
adjourned meeting the quorum requirement is two shareholders.
However, at Elscints general meetings the quorum
requirement is two shareholders who hold or represent, in the
aggregate, not less than fifty-one percent (51%) of the issued
and outstanding shares and at Elscints adjourned meeting
the quorum required is two shareholders who represent, in the
aggregate, not less than twenty-six percent (26%) of the issued
and outstanding shares. |
|
|
|
Quorum at class meetings the quorum required at a
meeting of EMIs class of securities for the adoption of a
resolution to change the rights of that class of securities is
two persons holding or representing by proxy at least two-thirds
of the issued shares of that class. However, the quorum
requirement for the adoption of a resolution to change rights of
Elscints class of securities is two person holding or
representing by proxy at least one-third of the issued shares of
that class. |
|
|
|
Required majority at general meetings Unless
required by law, resolutions at EMIs general meetings
concerning the share capital of EMI (such as the increase of
authorized share capital and alterations of share capital) are
required to be approved by an ordinary majority, whereas
resolutions at Elscints general meetings concerning share
capital of Elscint are required to be approved by a special
majority of seventy-five percent (75%) of the shareholders
present and voting. |
|
|
|
Amendments to Articles of Association while
amendments to EMIs articles of association require the
approval of shareholders by an ordinary majority, amendments to
Elscints articles of association require the approval of
shareholders by a special majority of seventy-five percent (75%)
of the shareholders present and voting. |
76
SELECTED UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL INFORMATION
General
The following selected unaudited pro forma financial information
has been prepared to give effect to the merger, which
constitutes a transaction between EMI and the minority
shareholders of Elscint (approximately 39%), based on the
purchase method of accounting and on pro forma
assumptions and estimates that EMI believes are reasonable and
that are set forth below. The purchase method of
accounting means that the purchase price (calculated based
on EMIs number of shares issued in consideration for
Elscints minority shares and on EMIs average share
market price close to the date of the announcement of the
exchange ratio of the merger) will be allocated by EMI to
Elscints assets and liabilities based on the fair value of
the assets acquired and the liabilities assumed. Any excess of
the fair value of Elscints net identified assets acquired
over the purchase price, at acquisition or Negative
Initial Difference, will be set off in the consolidated
financial statements of EMI, first against any intangible asset
of Elscint, with the balance set off against non-monetary
tangible assets pro rata to their fair value. This selected
unaudited pro forma combined condensed financial information has
been prepared based on, and should be read in conjunction with,
the historical consolidated financial statements and the
accompanying notes thereto, contained in each of EMIs and
Elscints Annual Report on Form 20-F for the year
ended December 31, 2004, which are incorporated herein by
reference.
The following selected unaudited pro forma combined condensed
balance sheet information as of December 31, 2004 gives
effect to the merger, as if it had occurred on that date (that
means, based on Elscints shareholders equity as of that
date). The following selected unaudited pro forma combined
condensed statement of operations information for the year ended
December 31, 2004 gives effect to the merger as if it had
occurred on January 1, 2004.
The pro forma data are presented for illustrative purposes only.
You should not rely on this information as being indicative of
the combined operating results or combined financial position
that would have occurred had the merger been consummated at the
dates indicated in the preceding paragraph, nor are they
necessarily indicative of future operating results, future
financial position or future shareholders equity.
Balance Sheet
Under the merger, EMI will (x) issue approximately
3,479,681 ordinary shares in exchange for the outstanding
ordinary shares of Elscint, other than those held by EMI and
Elscint and (y) assume Elscints options, which will
represent options to purchase 26,500 of EMIs ordinary
shares.
The purchase price of Elscints shares at acquisition is
estimated to be approximately NIS 296.3 million
($65.8 million), including NIS 2.8 million
($0.6 million) of estimated transaction costs incurred by
EMI.
EMIs ordinary shares have been valued using the average
closing price of EMIs ordinary shares at the date of the
announcement of the exchange ratio and the three days preceding
and following the announcement (1 ordinary share NIS
1.0 par value each NIS 83.70 or $18.60).
The purchase price (calculated based on EMIs number of
shares issued in consideration for Elscints minority
shares and on EMIs average market price close to the date
of the announcement of the exchange ratio of the merger) for pro
forma purposes has been allocated by EMI to Elscints
tangible assets acquired and liabilities assumed, based on their
fair value, according to operating and financial projections
prepared by Elscints management. Any excess of the fair
value of Elscints net identified assets acquired over the
purchase price at acquisition, or Negative Initial
Difference, will be set off in the consolidated financial
statements of EMI, first against any intangible asset of
Elscint, with the balance set off against non-monetary tangible
assets pro rata to their fair value. The allocation of the
purchase price and/or the Negative Initial Difference to
Elscints identified non-monetary tangible assets will be
finalized following completion of the merger. The allocation
reflected in the following selected pro forma financial
information may differ from the amounts ultimately determined.
77
The following adjustments were applied to the historical
consolidated balance sheets of EMI and Elscint as of
December 31, 2004, to arrive at the selected unaudited pro
forma combined condensed balance sheet information:
|
|
|
(a) To record (i) the ordinary shares of EMI issued
having a value of NIS 293.5 million ($68.1 million)
against purchase price; (ii) the allocation of the Negative
Initial Difference to Elscints intangible assets and
non-monetary tangible assets (mainly real estate);
(iii) deferred tax arising from the merger, in respect of
the Negative Initial Difference when applicable according to
generally acceptable accounting principles; and (iv) the
elimination of the historical minority interest in
Elscints equity; |
|
|
(b) To record estimated transaction costs, which include
all costs of EMI and Elscint to be incurred directly as a result
of the merger, including, but not limited to, fees for the
financial advisors, accountants, attorneys and other related
costs; |
|
|
(c) To classify the loans granted by Elscint to its
employees, in the amount of NIS 13.5 million
($3.1 million) for the purchase of its own shares, as a
reduction of EMIs shareholders equity. |
The effect of pro forma adjustments related to the selected pro
forma balance sheet financial information, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Consolidated Balance Sheet Information | |
|
|
in Accordance with Israeli GAAP | |
|
|
| |
|
|
As | |
|
|
|
|
Reported | |
|
Pro Forma | |
|
Pro Forma | |
|
Convenience | |
|
|
(Historical) | |
|
AdjustmentDecember 31, 20 | |
|
04ombined | |
|
Translation(*) | |
|
|
| |
|
| |
|
| |
|
| |
|
|
| |
|
| |
|
| |
|
| |
|
|
|
|
U.S.$ | |
|
|
In thousand NIS | |
|
(In thousands) | |
|
|
(Unaudited) | |
Fixed Assets
|
|
|
3,527,988 |
|
|
|
(109,786 |
)(a)(ii) |
|
|
3,418,202 |
|
|
|
793,455 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Assets and Deferred Expenses
|
|
|
55,859 |
|
|
|
(1,275 |
)(a)(ii) |
|
|
54,584 |
|
|
|
12,670 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
4,520,279 |
|
|
|
(111,061 |
)(a)(ii) |
|
|
4,409,218 |
|
|
|
1,023,495 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payables and Other Credit Balances
|
|
|
183,446 |
|
|
|
4,477 |
(b) |
|
|
187,923 |
|
|
|
43,622 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long Term Liabilities Deferred Taxes on Income
|
|
|
31,522 |
|
|
|
3,757 |
(a)(iii) |
|
|
35,279 |
|
|
|
8,189 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority Interest
|
|
|
430,687 |
|
|
|
(398,234 |
)(a)(iv) |
|
|
32,453 |
|
|
|
7,533 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders Equity
|
|
|
803,968 |
|
|
|
278,939 |
(a)(i);(b);(c) |
|
|
1,082,907 |
|
|
|
251,371 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) |
Using the representative exchange rate as of December 31,
2004 ($1.00 = NIS 4.308). |
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Consolidated Balance Sheet Information | |
|
|
in Accordance with U.S. GAAP | |
|
|
| |
|
|
December 31, 2004 | |
|
|
| |
|
|
As | |
|
Pro Forma | |
|
Pro Forma | |
|
Convenience | |
|
|
Reported(**) | |
|
Adjustments | |
|
Combined | |
|
Translation(*) | |
|
|
| |
|
| |
|
| |
|
| |
|
|
|
|
U.S.$ | |
|
|
In thousand NIS | |
|
(In thousands) | |
|
|
(Unaudited) | |
Fixed Assets
|
|
|
3,369,112 |
|
|
|
(136,873 |
)(a)(ii) |
|
|
3,232,239 |
|
|
|
750,288 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
4,676,008 |
|
|
|
(136,873 |
)(a)(ii) |
|
|
4,539,135 |
|
|
|
1,053,652 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payables and Other Credit Balances
|
|
|
183,446 |
|
|
|
4,477 |
(b) |
|
|
187,923 |
|
|
|
43,622 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long Term Liabilities Deferred Taxes on Income
|
|
|
141,925 |
|
|
|
2,005 |
(a)(iii) |
|
|
143,930 |
|
|
|
33,410 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority Interest
|
|
|
451,719 |
|
|
|
(422,294 |
)(a)(iv) |
|
|
29,425 |
|
|
|
6,830 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders Equity
|
|
|
770,335 |
|
|
|
278,939 |
(a)(i);(b);(c) |
|
|
1,049,274 |
|
|
|
243,564 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) |
Using the representative exchange rate as of December 31,
2004 ($1.00 = NIS 4.308). |
|
|
(**) |
In Note 25 to the consolidated financial statements of EMI
for the year ended December 31, 2004. |
Statement of Operations
The selected unaudited pro forma combined condensed financial
information is based upon the historical consolidated financial
statements of EMI and Elscint and does not incorporate, nor does
it assume, any benefits from cost savings and/or synergies of
the combined company.
It is assumed that the merger is tax exempt based on a specific
tax ruling expected to be received from the tax authorities in
Israel, in respect of the merger.
The following adjustments were applied to the historical
consolidated statement of operations of EMI for the year ended
December 31, 2004, to arrive at the selected unaudited pro
forma combined condensed statement of operations information, as
though the merger had occurred on January 1, 2004:
|
|
|
(a) To recognize a decrease in periodic amortization as a
result of the allocation of the Negative Initial Difference to
Elscints intangible assets and identified non-monetary
tangible assets, throughout their estimated economic useful
lives; |
|
|
(b) To reflect the elimination of the minority interest in
Elscints continuing results of operations. |
79
The effect of pro forma adjustments related to the selected pro
forma statement of operations financial information, is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Consolidated Statement of Operations Information | |
|
|
in Accordance with Israeli GAAP | |
|
|
| |
|
|
Year Ended December 31, 2004 | |
|
|
| |
|
|
As Reported | |
|
Pro Forma | |
|
Pro Forma | |
|
Convenience | |
|
|
(Historical) | |
|
Adjustments | |
|
Combined | |
|
Translation(*) | |
|
|
| |
|
| |
|
| |
|
| |
|
|
|
|
U.S. $ | |
|
|
In thousand NIS | |
|
(In thousands) | |
|
|
(Unaudited) | |
Cost of revenues
|
|
|
413,883 |
|
|
|
(2,888 |
)(a) |
|
|
410,995 |
|
|
|
95,403 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss) before financial expenses, net
|
|
|
(2,478 |
) |
|
|
2,888 |
(a) |
|
|
410 |
|
|
|
95 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest in results of subsidiaries, net
|
|
|
27,448 |
|
|
|
(28,172 |
)(b) |
|
|
(724 |
) |
|
|
(168 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit from continuing operations
|
|
|
36,537 |
|
|
|
(25,284 |
) |
|
|
11,253 |
|
|
|
2,612 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) Using the representative exchange rate as of
December 31, 2004 ($1.00 = NIS 4.308).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Consolidated Statement of Operations Information | |
|
|
in Accordance with U.S. GAAP | |
|
|
| |
|
|
Year Ended December 31, 2004 | |
|
|
| |
|
|
As Reported | |
|
Pro Forma | |
|
Pro Forma | |
|
Convenience | |
|
|
(Historical) | |
|
Adjustments | |
|
Combined | |
|
Translation(*) | |
|
|
| |
|
| |
|
| |
|
| |
|
|
|
|
U.S. $ | |
|
|
In thousand NIS | |
|
(In thousands) | |
|
|
(Unaudited) | |
Cost of revenues
|
|
|
360,715 |
|
|
|
(2,140 |
)(a) |
|
|
358,575 |
|
|
|
83,235 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss before financial expenses, net
|
|
|
(116,885 |
) |
|
|
2,140 |
(a) |
|
|
(114,745 |
) |
|
|
(26,635 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest in results of subsidiaries, net
|
|
|
25,098 |
|
|
|
(25,822 |
)(b) |
|
|
(724 |
) |
|
|
(168 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
(185,798 |
) |
|
|
(23,682 |
) |
|
|
(209,480 |
) |
|
|
(48,626 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) Using the representative exchange rate as of
December 31, 2004 ($1.00 = NIS 4.308).
80
Earnings Per Share
Shares used in the pro forma net income from continuing
operations per share calculation reflect the addition of
approximately 3,506,181 ordinary shares of EMI estimated to be
issued to Elscints shareholders, other than EMI and
Elscint (including shares that may be issued upon the exercise
of options to purchase 26,500 EMI shares assumed by EMI in
the merger), in connection with the merger, as if they were
outstanding from January 1, 2004. The effect of the pro
forma adjustments related to the selected pro forma earnings per
share information, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Consolidated Statement of Operations Information | |
|
|
in Accordance with Israeli GAAP | |
|
|
| |
|
|
Year Ended December 31, 2004 | |
|
|
| |
|
|
As Reported | |
|
Pro Forma | |
|
Pro Forma | |
|
Convenience | |
|
|
(Historical) | |
|
Adjustments | |
|
Combined | |
|
Translation | |
|
|
| |
|
| |
|
| |
|
| |
|
|
|
|
U.S.$ | |
|
|
In NIS | |
|
|
|
|
Except for number of shares data | |
|
|
(Unaudited) | |
Basic data per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share from continuing operations
|
|
|
1.59 |
|
|
|
|
|
|
|
0.46 |
|
|
|
0.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares
(in thousands)
|
|
|
23,025 |
|
|
|
|
|
|
|
26,531 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted data per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share from continuing operations
|
|
|
1.56 |
|
|
|
|
|
|
|
0.46 |
(**) |
|
|
0.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares
(in thousands)
|
|
|
23,925 |
|
|
|
|
|
|
|
27,431 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) Using the representative exchange rate as of
December 31, 2004 ($1.00 = NIS 4.308).
(**) Anti dilutive.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Consolidated Statement of Operations Information | |
|
|
in Accordance with U.S. GAAP | |
|
|
| |
|
|
Year Ended December 31, 2004 | |
|
|
| |
|
|
As Reported | |
|
Pro Forma | |
|
Pro Forma | |
|
Convenience | |
|
|
(Historical) | |
|
Adjustments | |
|
Combined | |
|
Translation | |
|
|
| |
|
| |
|
| |
|
| |
|
|
|
|
U.S.$ | |
|
|
In NIS | |
|
|
|
|
Except for number of shares data | |
|
|
(Unaudited) | |
Basic data per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss Per Share from continuing operations
|
|
|
(8.07 |
) |
|
|
|
|
|
|
(8.02 |
) |
|
|
(1.86 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted data per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss Per Share from continuing operations
|
|
|
(8.07 |
)(**) |
|
|
|
|
|
|
(8.02 |
)(**) |
|
|
(1.86 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) Using the representative exchange rate as of
December 31, 2004 ($1.00 = NIS 4.308).
(**) Anti dilutive.
81
OTHER MATTERS
Neither EMI nor Elscint presently knows of any matters that will
be presented for action at the EMI special meeting or the
Elscint special meeting other than those set forth herein. If
other matters properly come before the EMI special meeting
and/or the Elscint special meeting, proxies submitted for such
special meetings will be voted by the persons named therein in
accordance with their best judgment.
LEGAL MATTERS
The validity of the EMI ordinary shares to be issued in
connection with the merger will be passed upon by Gross,
Kleinhendler, Hodak, Halevy, Greenberg & Co., Law
Offices, Tel Aviv, Israel, Israeli counsel to EMI. Certain legal
matters in connection with the merger will be passed upon for
EMI by Kramer Levin Naftalis & Frankel LLP, New York,
New York, U.S. counsel to EMI, and for Elscint by Carter
Ledyard & Milburn LLP, New York, New York, special
counsel to Elscints independent committee in connection
with the merger.
EXPERTS
The consolidated financial statements of EMI incorporated by
reference in this joint proxy statement/ prospectus have been
audited by Brightman Almagor & Co., a member firm of
Deloitte Touche Tohmatsu independent auditors and have been
incorporated herein in reliance upon their reports with respect
thereto, given upon the authority of such firm as experts in
accounting and auditing. In its report, that firm states that
with respect to certain subsidiaries, its opinion is based on
the reports of other independent accountants, namely
(i) Kost, Forer, Gabbay and Kasierer, A Member of
Ernst & Young Global (as it relates to the consolidated
financial statements of Gamida Cell Ltd. included in the Annual
Report on Form 20-F for the year ended December 31, 2004);
(ii) Mazars Paardekooper Hoofman (as it relates to the
financial statements of BEA Hotels N.V. included in the Annual
Report on Form 20-F for the year ended December 31, 2004)
and (iii) KPMG Hungaria Kft. (as it relates to the
consolidated balance sheets of Plaza Centers (Europe) B.V. and
its subsidiaries as of December 31, 2004 and 2003, and the
related consolidated statements of income, shareholders
equity, and cash flows for each of the years in the three-year
period ended December 31, 2004, in each case, included in
the Annual Report on Form 20-F for the year ended
December 31, 2004).
The consolidated financial statements of Elscint incorporated by
reference in this joint proxy statement/ prospectus have been
audited by Brightman Almagor & Co., a member firm of
Deloitte Touche Tohmatsu independent auditors, and have been
incorporated herein. in reliance upon their reports with respect
thereto, given upon the authority of such firm as experts in
accounting and auditing. In its report, that firm states that
with respect to certain subsidiaries, its opinion is based on
the reports of other independent accountants, namely
(i) Kost, Forer, Gabbay and Kasierer, A Member of
Ernst & Young Global (as it relates to the consolidated
financial statements of Gamida Cell Ltd. included in the
Annual Report on Form 20-F for the year ended
December 31, 2004) and (ii) Mazars Paardekooper
Hoofman (as it relates to the financial statements of BEA Hotels
N.V. included in the Annual Report on Form 20-F for the
year ended December 31, 2004).
82
WHERE YOU CAN FIND MORE INFORMATION
EMI and Elscint file annual and special reports with, and
furnish other information to, the SEC. You may read and copy any
reports, statements or other information we file or furnish at
the Securities and Exchange Commissions Public Reference
Room at 450 Fifth Street, N.W., Washington, D.C.
20549, at the SECs prescribed rates. Please call the SEC
at 202-942-8090 for further information on the Public Reference
Room. In addition, the SEC maintains a website that contains
reports and other information regarding registrants, such as EMI
and Elscint, that file electronically with the SEC. The address
of this website is http://www.sec.gov.
83
EMI and Elscint are incorporated in Israel and are foreign
private issuers as defined in Rule 3b-4 under the
Securities Exchange Act of 1934 and in Rule 405 under the
Securities Act. As a result, they file annual reports pursuant
to section 13 of the Securities Exchange Act on
Form 20-F and reports on Form 6-K.
Pursuant to Rule 3a12-3 under the Securities Exchange Act
regarding foreign private issuers, the annual proxy
solicitations of EMI and Elscint are not subject to the
disclosure and procedural requirements of Regulation 14A
under the Securities Exchange Act, and transactions in their
equity securities by their officers and directors are exempt
from section 16 of the Securities Exchange Act.
EMI filed a Registration Statement on Form F-4 to register
with the SEC the EMI ordinary shares to be issued to Elscint
shareholders (other than EMI and Elscint) in the merger. This
joint proxy statement/ prospectus is a part of that Registration
Statement and constitutes a prospectus of EMI in addition to
being a joint proxy statement of EMI and Elscint for the special
meetings of our shareholders. As allowed by SEC rules, this
joint proxy statement/ prospectus does not contain all the
information you can find in the Registration Statement or the
exhibits to the Registration Statement.
The SEC allows us to incorporate by reference
information into this joint proxy statement/ prospectus, which
means that we can disclose important business and financial
information about EMI and Elscint to you by referring you to
another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this joint
proxy statement/ prospectus, except for any information
superseded by information in this joint proxy statement/
prospectus, This joint proxy statement/ prospectus incorporates
by reference the documents set forth below that we have
previously filed with the SEC. These documents contain important
information about our companies and their finances.
|
|
|
EMI Filings (File No. 000-28996) |
|
Filing Date |
|
|
|
Annual Report on Form 20-F
|
|
June 30, 2005 |
Reports on Form 6-K
|
|
February 22, 2005; February 22, 2005;
February 28, 2005; March 8, 2005; April 5, 2005;
April 14, 2005; May 9, 2005; May 24, 2005;
June 6, 2005; June 15, 2005; June 20, 2005;
August 3, 2005; August 22, 2005; September 12, 2005 |
Report on Form 8-K
|
|
August 24, 2005 |
Description of the Ordinary Shares of EMI contained
in Item 14 of the Annual Report on Form 20-F
|
|
November 22, 1996 |
|
|
|
Elscint Filings (File No. 001-08781) |
|
Filing Date |
|
|
|
Annual Report on Form 20-F/ A
|
|
July 14, 2005 |
Reports on Form 6-K
|
|
February 22, 2005; February 24, 2005; April 4,
2005; April 14, 2005; April 28, 2005; May 9,
2005; June 6, 2005; June 15, 2005; June 20, 2005;
June 28, 2005; August 15, 2005; August 22, 2005;
September 20, 2005 |
Description of the Ordinary Shares of Elscint
contained in the Registration Statement on Form 8-A
|
|
August 28, 1984 |
In addition, all annual reports on Form 20-F and any
Form 6-K (to the extent so specified in such Form 6-K)
filed with or submitted to the SEC by EMI or Elscint under
sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934, as amended, after the date of this joint proxy
statement/ prospectus and until the date of the special meetings
shall be deemed to be incorporated by reference into this joint
proxy statement/ prospectus.
EMI has supplied all information contained or incorporated by
reference in this joint proxy statement/ prospectus relating to
EMI, and Elscint has supplied all such information relating to
Elscint.
84
If you are a shareholder, we may have sent you some of the
documents incorporated by reference, but you can obtain any of
them through us or the SEC. Documents incorporated by reference
are available from us without charge, excluding all exhibits
unless we have specifically incorporated by reference an exhibit
in this joint proxy statement/ prospectus. Shareholders may
obtain documents incorporated by reference in this joint proxy
statement/ prospectus by requesting them in writing or by
telephone from the appropriate party at the following addresses:
|
|
|
Elbit Medical Imaging Ltd.
|
|
Elscint Ltd. |
13 Mozes Street
|
|
13 Mozes Street |
Tel Aviv 67442, Israel
|
|
Tel Aviv 67442, Israel |
Attention: Mr. Shimon Yitzhaki, President and
|
|
Attention: Mr. Abraham (Rami) |
Chief Financial Officer
|
|
Goren, Executive Chairman of the |
Telephone: 972-3-608-6010
|
|
Board of Directors |
Facsimile: 972-3-695-3080
|
|
Telephone: 972-3-608-6020 |
|
|
Facsimile: 972-3-696-2022 |
If you would like to request documents from us, please do so by
,
2005, if you are an EMI shareholder, and by
,
2005, if you are an Elscint shareholder, to receive them before
the special meetings.
You should rely only on the information contained or
incorporated by reference in this joint proxy statement/
prospectus to vote on the merger agreement. We have not
authorized anyone to provide you with information that is
different from that contained in this joint proxy statement/
prospectus. This joint proxy statement/ prospectus is
dated ,
2005. You should not assume that the information contained in
the joint proxy statement/ prospectus is accurate as of any date
other than such date, and neither the mailing of the joint proxy
statement/ prospectus to shareholders nor the issuance of EMI
ordinary shares in the merger shall create any implication to
the contrary.
85
Annex A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
ELBIT MEDICAL IMAGING LTD.
AND
ELSCINT LIMITED.
DATED AS OF
AUGUST 21, 2005
TABLE OF CONTENTS
|
|
|
|
|
|
|
|
|
|
|
1.
|
|
THE MERGER |
|
|
A-8 |
|
|
|
|
1.1 |
|
|
The Merger |
|
|
A-8 |
|
|
|
|
1.2 |
|
|
Closing |
|
|
A-8 |
|
|
|
|
1.3 |
|
|
Effects of Merger |
|
|
A-8 |
|
|
|
|
1.4 |
|
|
Assumption of Options |
|
|
A-8 |
|
2.
|
|
MANNER AND BASIS FOR THE EXCHANGE OF SHARES |
|
|
A-9 |
|
|
|
|
2.1 |
|
|
The Exchange of ELSCINT Shares |
|
|
A-9 |
|
|
|
|
2.2 |
|
|
Fractional Shares |
|
|
A-9 |
|
|
|
|
2.3 |
|
|
Exchange Procedure |
|
|
A-9 |
|
|
|
|
2.4 |
|
|
Lost, Stolen or Destroyed Certificates |
|
|
A-11 |
|
|
|
|
2.5 |
|
|
Termination of Exchange Fund |
|
|
A-11 |
|
|
|
|
2.6 |
|
|
Taking of Necessary Action, Further Action |
|
|
A-11 |
|
3.
|
|
PUBLICITY; CONFIDENTIAL INFORMATION |
|
|
A-11 |
|
4.
|
|
REPRESENTATIONS AND WARRANTIES OF ELSCINT |
|
|
A-12 |
|
|
|
|
4.1 |
|
|
Organization of ELSCINT |
|
|
A-12 |
|
|
|
|
4.2 |
|
|
Capitalization |
|
|
A-12 |
|
|
|
|
4.3 |
|
|
Options, Warrants, Etc. |
|
|
A-13 |
|
|
|
|
4.4 |
|
|
Holding of ELBIT Shares |
|
|
A-13 |
|
|
|
|
4.5 |
|
|
Subsidiaries |
|
|
A-13 |
|
|
|
|
4.6 |
|
|
Financial Statements; No Undisclosed Liabilities |
|
|
A-13 |
|
|
|
|
4.7 |
|
|
SEC Filings; Sarbanes-Oxley Matters |
|
|
A-14 |
|
|
|
|
4.8 |
|
|
Proxy Statement Disclosures |
|
|
A-14 |
|
|
|
|
4.9 |
|
|
Taxes |
|
|
A-15 |
|
|
|
|
4.10 |
|
|
Ownership of Assets |
|
|
A-15 |
|
|
|
|
4.11 |
|
|
Permits |
|
|
A-16 |
|
|
|
|
4.12 |
|
|
Environmental Matters |
|
|
A-16 |
|
|
|
|
4.13 |
|
|
Listings |
|
|
A-16 |
|
|
|
|
4.14 |
|
|
Litigation |
|
|
A-16 |
|
|
|
|
4.15 |
|
|
Opinion of Financial Advisor |
|
|
A-16 |
|
|
|
|
4.16 |
|
|
Absence of Changes |
|
|
A-16 |
|
|
|
|
4.17 |
|
|
Authority for Merger Agreement |
|
|
A-17 |
|
|
|
|
4.18 |
|
|
Compliance with Laws |
|
|
A-18 |
|
|
|
|
4.19 |
|
|
Certain Corporate Resolutions and Board Recommendation |
|
|
A-18 |
|
|
|
|
4.20 |
|
|
No Breach |
|
|
A-18 |
|
|
|
|
4.21 |
|
|
Disclosure |
|
|
A-18 |
|
5.
|
|
REPRESENTATIONS AND WARRANTIES OF ELBIT |
|
|
A-19 |
|
|
|
|
5.1 |
|
|
Organization of ELBIT |
|
|
A-19 |
|
|
|
|
5.2 |
|
|
Capitalization |
|
|
A-19 |
|
|
|
|
5.3 |
|
|
Options, Warrants, Etc. |
|
|
A-19 |
|
|
|
|
5.4 |
|
|
Holding of ELSCINT Shares |
|
|
A-20 |
|
|
|
|
5.5 |
|
|
Subsidiaries |
|
|
A-20 |
|
|
|
|
5.6 |
|
|
Financial Statements; No Undisclosed Liabilities |
|
|
A-20 |
|
|
|
|
5.7 |
|
|
SEC Filings, ISA Filings; Sarbanes-Oxley Matters |
|
|
A-21 |
|
|
|
|
5.8 |
|
|
Proxy Statement Disclosures |
|
|
A-21 |
|
|
|
|
5.9 |
|
|
Taxes |
|
|
A-21 |
|
|
|
|
5.10 |
|
|
Ownership of Assets |
|
|
A-22 |
|
|
|
|
5.11 |
|
|
Permits |
|
|
A-22 |
|
A-2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.12 |
|
|
Environmental Matters |
|
|
A-23 |
|
|
|
|
5.13 |
|
|
Listing |
|
|
A-23 |
|
|
|
|
5.14 |
|
|
Litigation |
|
|
A-23 |
|
|
|
|
5.15 |
|
|
Opinion of Financial Advisor |
|
|
A-23 |
|
|
|
|
5.16 |
|
|
Absence of Changes |
|
|
A-23 |
|
|
|
|
5.17 |
|
|
Authority for Merger Agreement |
|
|
A-24 |
|
|
|
|
5.18 |
|
|
Compliance with Laws |
|
|
A-25 |
|
|
|
|
5.19 |
|
|
Certain Corporate Resolutions and Board Recommendation |
|
|
A-25 |
|
|
|
|
5.20 |
|
|
No Breach |
|
|
A-25 |
|
|
|
|
5.21 |
|
|
Disclosure |
|
|
A-25 |
|
6.
|
|
COURT APPROVAL |
|
|
A-25 |
|
7.
|
|
COVENANTS |
|
|
A-26 |
|
|
|
|
7.1 |
|
|
Access |
|
|
A-26 |
|
|
|
|
7.2 |
|
|
Share Capital |
|
|
A-27 |
|
|
|
|
7.3 |
|
|
Other Actions |
|
|
A-27 |
|
|
|
|
7.4 |
|
|
Litigation |
|
|
A-27 |
|
|
|
|
7.5 |
|
|
Quarterly Statements |
|
|
A-27 |
|
|
|
|
7.6 |
|
|
Proxy Statements |
|
|
A-27 |
|
|
|
|
7.7 |
|
|
Information for Filings |
|
|
A-28 |
|
|
|
|
7.8 |
|
|
Listing of ELBIT Shares on NASDAQ and the TASE |
|
|
A-29 |
|
|
|
|
7.9 |
|
|
Affiliates |
|
|
A-29 |
|
|
|
|
7.10 |
|
|
S-8 Registration Statement |
|
|
A-29 |
|
|
|
|
7.11 |
|
|
Satisfaction of Conditions to Closing |
|
|
A-29 |
|
|
|
|
7.12 |
|
|
Advice of Changes |
|
|
A-29 |
|
|
|
|
7.13 |
|
|
Regulatory Approvals |
|
|
A-29 |
|
|
|
|
7.14 |
|
|
Certain Filings |
|
|
A-29 |
|
|
|
|
7.15 |
|
|
Officers and Directors Insurance |
|
|
A-30 |
|
|
|
|
7.16 |
|
|
U.S. Tax Treatment |
|
|
A-30 |
|
8.
|
|
CONDITIONS TO CLOSING |
|
|
A-30 |
|
9.
|
|
ACTIONS AFTER THE CLOSING DATE |
|
|
A-31 |
|
|
|
|
9.1 |
|
|
Survival of Representations and Warranties |
|
|
A-31 |
|
|
|
|
9.2 |
|
|
Further Acts |
|
|
A-32 |
|
10.
|
|
EXPENSES; TAXES |
|
|
A-32 |
|
11.
|
|
MODIFICATION OR TERMINATION; WAIVERS |
|
|
A-32 |
|
|
|
|
11.1 |
|
|
Modifications and Waivers |
|
|
A-32 |
|
|
|
|
11.2 |
|
|
Termination |
|
|
A-32 |
|
12.
|
|
NOTICES |
|
|
A-33 |
|
13.
|
|
GOVERNING LAW & JURISDICTION |
|
|
A-34 |
|
14.
|
|
ENTIRE AGREEMENT |
|
|
A-34 |
|
15.
|
|
SCHEDULES AND EXHIBITS |
|
|
A-34 |
|
16.
|
|
COUNTERPARTS |
|
|
A-34 |
|
17.
|
|
RULES OF CONSTRUCTION |
|
|
A-34 |
|
18.
|
|
OTHER REMEDIES |
|
|
A-34 |
|
19.
|
|
NO THIRD PARTY BENEFICIARIES |
|
|
A-35 |
|
20.
|
|
NO WAIVER |
|
|
A-35 |
|
A-3
LIST OF EXHIBITS AND SCHEDULES
Exhibits:
Exhibit 7.5 Quarterly Statements
Exhibit 7.9 Affiliates Form of
written agreement
Exhibit 8(g) Tax Rulings
Exhibit 8.2 Consent of ELSCINTs option
holders
Disclosure Schedule:
Section 4.3 Options, Warrants, Etc
Options, warrants, rights to ELSCINT share capital
Section 4.4 Holdings of ELBIT
Shares holdings of ELBIT Shares by ELSCINT or
Material ELSCINT Subsidiary
Section 4.5(a) Subsidiaries list of
Material ELSCINT subsidiaries
Section 4.5(c) Subsidiaries
Encumbrances on share capital of Material ELSCINT subsidiaries
Section 4.6(a) Financial Statements
ELSCINTs financial statements
Section 4.10(a) Ownership of Assets
list of ELSCINTs or Material ELSCINT Subsidiaries
real assets and list of encumbrances on ELSCINTs or
Material ELSCINT Subsidiaries assets
Section 4.10(b) Ownership of Assets
list of ELSCINT or Material ELSCINT Subsidiaries which are
not in good and sufficient operating condition or which are in
violation of laws
Section 4.14 Litigation actions,
suits, proceedings or investigations, pending before any court
Section 4.15 Opinion of Financial
Advisor fairness opinion of Oppenheimer &
Co. Inc.
Section 4.16 Actions Since March 31,
2005 ELSCINTs and Material ELSCINT
Subsidiaries actions not in the ordinary course of
business.
Section 4.20 No Breach rights to
violate documents as a result of the Merger.
Section 5.5(b) Subsidiaries list of
Material ELBIT subsidiaries
Section 5.5(d) Subsidiaries
Encumbrances on share capital of Material ELBIT subsidiaries
Section 5.6(a) Financial Statements
ELBITs financial statements
Section 5.9(a) Taxes ELBITs
tax liabilities not in the ordinary course of business after
March 31, 2005.
Section 5.10(a) Ownership of Assets
list of ELBITs or Material ELBIT Subsidiaries real
assets and list of encumbrances on ELBITs or Material
ELBIT Subsidiaries assets
Section 5.10(b) Ownership of Assets
list of ELBIT or Material ELBIT Subsidiaries which are not
in good and sufficient operating condition or which are in
violation of laws
Section 5.14 Litigation actions,
suits, proceedings or investigations, pending before any court
Section 5.15 Opinion of Financial
Advisor fairness opinion of C.E. Unterberg, Towbin,
LLC
Section 5.20 No Breach rights to
violate documents as a result of the Merger.
A-4
INDEX OF DEFINED TERMS
|
|
|
|
|
Definition |
|
Section | |
|
|
| |
Affiliated Shareholders
|
|
|
7.9 |
|
Agreement
|
|
|
Whereas clauses |
|
Certificate
|
|
|
2.3(c) |
|
Closing
|
|
|
1.2 |
|
Closing Date
|
|
|
1.2 |
|
Code
|
|
|
Whereas clauses |
|
Companies Law
|
|
|
1.1 |
|
Court
|
|
|
6(a) |
|
ELBIT
|
|
|
Whereas clauses |
|
ELBIT 2004 20F
|
|
|
5.6(a) |
|
ELBIT Audited Financial Statements
|
|
|
5.6(a) |
|
ELBIT Financial Statements
|
|
|
5.6(a) |
|
ELBIT Condensed Interim Financial Statements
|
|
|
5.6(a) |
|
ELBIT SEC AND ISA Reports
|
|
|
5.7 |
|
ELBIT Shareholders Meeting
|
|
|
6(a) |
|
ELBIT Shares
|
|
|
Whereas clauses |
|
ELBIT Taxes
|
|
|
5.9(a) |
|
ELSCINT
|
|
|
Whereas clauses |
|
ELSCINT 2004 20F
|
|
|
4.6(a) |
|
ELSCINT Audited Financial Statements
|
|
|
4.6(a) |
|
ELSCINT Disclosure Schedule
|
|
|
4 |
|
ELSCINT Financial Statements
|
|
|
4.6(a) |
|
ELSCINT Condensed Interim Financial Statements
|
|
|
4.6(a) |
|
ELSCINT SEC Reports
|
|
|
4.7 |
|
ELSCINT Shareholder Meeting
|
|
|
6(a) |
|
ELSCINT Shares
|
|
|
Whereas clauses |
|
ELSCINT Taxes
|
|
|
4.9(a) |
|
Encumbrances
|
|
|
4.5(c) |
|
Exchange
|
|
|
1.1(b) |
|
Exchange Act
|
|
|
4.6(a) |
|
Exchange Agent
|
|
|
2.3(a) |
|
Exchange Fund
|
|
|
2.3(b) |
|
Exchange Ratio
|
|
|
2.1 |
|
F-4 Registration Statement
|
|
|
7.6(a) |
|
Final Court Order
|
|
|
6(c) |
|
First Motion
|
|
|
6(a) |
|
ISA
|
|
|
3(a) |
|
Israeli GAAP
|
|
|
4.6(a) |
|
Material Adverse Effect on ELBIT
|
|
|
5.1(b) |
|
Material Adverse Effect on ELSCINT
|
|
|
4.1(b) |
|
A-5
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Definition |
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Section | |
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Material ELBIT Subsidiaries
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5.5(b) |
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Material ELSCINT Subsidiaries
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4.5(a) |
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Merger
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Whereas clauses |
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Merger Agreement
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Whereas clauses |
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NASDAQ
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3(a) |
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NYSE
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3(a) |
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Option
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1.1(b) |
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Option Documents
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1.4(a) |
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Pre-Closing Period
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7.1(a) |
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Proxy Statement/ Prospectus
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7.6(a) |
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SEC
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3(a) |
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Second Motion
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6(c) |
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TASE
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3(a) |
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Taxes
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4.9(a) |
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Tax Ordinance
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Whereas clauses |
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Tax Ruling
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8(g) |
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U.S. GAAP
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4.6(a) |
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A-6
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this Merger
Agreement), dated as of August 21, 2005, by and
between ELBIT MEDICAL IMAGING LTD. (ELBIT)
and ELSCINT LIMITED. (ELSCINT).
WHEREAS, ELBIT is a public company organized under the laws of
the State of Israel, having a registered (authorized) share
capital of NIS 50,000,000 divided into 50,000,000 Ordinary
Shares, nominal value NIS 1.0 per share (the ELBIT
Shares); and
WHEREAS, ELSCINT is a public company organized under the laws of
the State of Israel, having a registered (authorized) share
capital of NIS 1,200,000 divided into 24,000,000 Ordinary
Shares, nominal value NIS 0.05 per share (the
ELSCINT Shares); and
WHEREAS, ELBIT beneficially owns, directly and through Elbit
Medical Holdings Ltd. (EMH), a wholly owned
subsidiary of Elbit, 10,269,784 of the issued and outstanding
ELSCINT Shares, representing approximately 61% of the issued and
outstanding ELSCINT Shares on the date hereof; and
WHEREAS, the parties have decided to enter into an arrangement
for merger by way of exchange of shares pursuant to
Sections 350 and 351 of the Companies Law (as defined
below), as more fully described in Section 1.1 herein (the
Merger); and
WHEREAS, immediately following the consummation of the Merger
the corporate identity and existence of ELSCINT shall continue
unaffected and unimpaired by the Merger and ELSCINT shall
continue its corporate existence; and
WHEREAS, each of the Audit Committee and the Board of Directors
of ELSCINT, following the recommendation of an independent
committee of ELSCINTs board of directors formed for the
purpose of considering the transactions contemplated by this
Merger Agreement has deemed the Merger to be advisable and fair
to ELSCINTs shareholders other than ELBIT, its controlling
shareholder and any affiliates of ELBIT and/or its controlling
shareholder and is to the benefit of ELSCINT and each of the
Audit Committee and Board of Directors has approved this Merger
Agreement, including the Merger, and the other transactions
provided for herein, and the Board of Directors of ELSCINT
resolved to recommend that the shareholders of ELSCINT approve
and adopt this Merger Agreement, including the Merger and the
other transactions contemplated by this Agreement;
WHEREAS, each of the Audit Committee and the Board of Directors
of ELBIT, following the recommendation of an independent
committee of ELBITs board of directors formed for the
purpose of considering the transactions contemplated by this
Merger Agreement has deemed the Merger to be advisable and fair
to ELBITs shareholders and is to the benefit of ELBIT and
each of the Audit Committee and Board of Directors has approved
this Merger Agreement, including the Merger, and the other
transactions provided for herein, and the Board of Directors of
ELBIT resolved to recommend that the shareholders of ELBIT
approve and adopt this Merger Agreement, including the Merger,
the other transactions contemplated by this Merger Agreement and
the issuance of ELBIT Shares pursuant to Section 2 hereof;
WHEREAS, the parties intend to effect the Merger in accordance
with Sections 104C and 103K of the Israeli Income Tax
Ordinance [New Version], 1961, as shall be in effect from time
to time (the Tax Ordinance); and
WHEREAS, the parties intend, by approving resolutions
authorizing this Merger Agreement, to adopt this Merger
Agreement as a plan of reorganization within the meaning of
section 368(a) of the Internal Revenue Code of 1986, as
amended (the Code), and the Treasury
Regulations thereunder, and that the Merger and the other
transactions contemplated by this Merger Agreement be undertaken
pursuant to such plan;
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NOW, THEREFORE, the parties hereto, in consideration of the
premises and of the mutual representations, warranties,
covenants and agreements contained herein, hereby agree as
follows:
1. THE MERGER.
1.1 The Merger.
ELSCINT and ELBIT hereby enter into an arrangement for merger by
way of exchange of shares pursuant to Sections 350 and 351
of the Israeli Companies Law, 1999, as amended (the
Companies Law), whereby subject to the
fulfillment of the conditions to Closing specified in
Section 8 below, and on the Closing Date (as defined below):
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(a) EMH shall distribute as a dividend in kind to ELBIT for
no direct and/or indirect consideration all of the ELSCINT
Shares held by it at that time, which shall constitute
EMHs entire holdings in ELSCINT at the Closing Date; |
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(b) All issued and outstanding ELSCINT Shares (except for
ELSCINT Shares held by ELBIT and any ELSCINT Shares held by or
for the benefit of ELSCINT) will be converted into the right to
receive fully paid, validly issued and non-assessable ELBIT
Shares in the aggregate amount and in the manner set forth in
Section 2.1 below (the Exchange), which
Exchange shall be effected in the manner set forth in
Section 2, and (2) each outstanding option to purchase
ELSCINT Shares (each, an Option) shall be
assumed by ELBIT and shall be deemed to constitute an option to
acquire fully paid, validly issued and non-assessable ELBIT
Shares in the amount and in the manner set forth in
Section 1.4 below; |
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(c) At the Closing, ELSCINT shall become a wholly-owned
subsidiary of ELBIT and cease to be a public company and shall
become a private company (as that term is defined in
the Companies Law), held only by ELBIT, all upon the terms and
subject to the conditions to Closing set forth herein. |
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(d) Alternatively, instead of the distribution in kind of
Elscint Shares held by EMH to EMI, as detailed in
Section 1.1(a) above, EMI may elect, at its sole
discretion, to execute the merger by causing EMH to purchase all
of Elscint Shares (other than Elscint Shares held by EMI, EMH
and Elscint) in consideration for the issuance of EMI Shares as
detailed in this Merger Agreement. In such event, the provisions
of this Merger Agreement shall apply, mutatis mustandis. |
The actions and transactions described above shall be deemed to
take place and executed simultaneously and no transactions shall
be deemed to have been completed until all such transactions
have been completed.
1.2 Closing. The
closing of the Merger, including the Exchange (the
Closing) shall take place within two
(2) Israeli business days after the full satisfaction (or
waiver by the applicable party, as the case may be) of all of
the conditions to Closing specified in Section 8 below, at
the offices of Gross, Kleinhendler, Hodak, Halevy,
Greenberg & Co., Law Office, 1 Azrieli Center, the
Round Building, 39-40 Floors, Tel Aviv at 3:00 p.m. or at
such other time or place as may be agreed between the parties
(the Closing Date).
1.3 Effects of the
Merger. Immediately following the consummation of the
Merger, the corporate identity and existence of ELSCINT, with
all its purposes, powers and objects, shall remain unaffected
and unimpaired by the Merger and ELSCINT shall continue its
corporate existence under the laws of the State of Israel. For
the avoidance of doubt, this means, among other things, that the
Merger and the other transactions contemplated hereunder shall
not, in and of themselves, change (i) ELSCINTs
business, as presently conducted, or (ii) the rights of
ELSCINTs creditors, if any.
1.4 Assumption of
Options.
(a) At the Closing, each Option then outstanding, whether
or not then exercisable, shall be assumed by ELBIT and shall be
deemed to constitute an option to acquire ELBIT Shares, on
substantially the same terms and conditions, including without
limitation, vesting periods, as set forth in the existing
ELSCINT Employees and Officers Incentive Plan
Capital Gains Track and grant instruments thereunder
(collectively the Option Documents), except
that (i) each assumed Option will be exercisable (or will
become exercisable
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in accordance with its terms) for that number of whole shares of
ELBIT Shares equal to the number of ELSCINT Shares underlying
such Option immediately prior to the Closing multiplied by the
Exchange Ratio, rounded to the nearest whole number of shares of
ELBIT Shares, and (ii) the exercise price per ELBIT share
of the assumed Options shall be equal to the quotient (rounded
to the nearest whole Agora) determined by dividing the exercise
price per share at which such assumed Option was exercisable
immediately prior to the Closing by the Exchange Ratio and such
exercise price shall be paid to ELBIT upon the exercise of any
Option. For example, an Option to acquire 100 ELSCINT Shares, at
an exercise price of NIS 20.49 per share, shall be deemed
to constitute, when assumed by ELBIT at the Closing, an Option
to acquire 53 ELBIT shares, at an exercise price of NIS
38.67 per share.
(b) ELBIT shall take, prior to the Closing, all corporate
action necessary to reserve for issuance a sufficient number of
ELBIT Shares for delivery upon exercise of the Options assumed
in accordance with this Section 1.4.
(c) As soon as practicable after the Closing, and in any
event within ten (10) days following the Closing, ELBIT
shall file and cause to become effective a registration
statement on Form S-8 (or any successor form) or any other
appropriate form, with respect to the ELBIT Shares underlying
the Options assumed in accordance with this Section 1.4 and
shall use its best commercial efforts to maintain the
effectiveness of such registration statement for so long as any
such Options remain outstanding.
2. MANNER AND BASIS FOR THE
EXCHANGE OF SHARES.
2.1 The Exchange of ELSCINT
Shares.
Effective as of the Closing, by virtue of the Final Court Order
(as defined in Section 6 herein), each ELSCINT Share issued
and outstanding immediately prior to the Closing (except for
ELSCINT Shares held by ELBIT and any ELSCINT Shares held by or
for the benefit of ELSCINT) shall be automatically converted
into the right to receive 0.53 (zero point fifty three) validly
issued, fully paid and non assessable ELBIT Shares (the
Exchange Ratio). If, prior to the Closing,
ELBIT should split or combine the ELBIT Shares, or pay a stock
dividend or other stock distribution in ELBIT Shares, then the
Exchange Ratio will be appropriately adjusted to reflect such
split, combination, dividend or other distribution.
2.2 Fractional Shares.
No certificates or scrip representing fractional shares of ELBIT
Shares shall be issued upon the Exchange, and such fractional
share interests will not entitle the owner thereof to vote or to
any rights of a shareholder of ELBIT. Instead, each holder who
otherwise would have been entitled to a fraction of a share of
ELBIT Shares shall receive in lieu thereof cash (rounded to the
nearest whole cent), without interest, in an amount determined
by multiplying the fractional share interest to which such
holder would otherwise be entitled by the closing price of ELBIT
ordinary shares on the Nasdaq National Market on the trading day
immediately preceding the Closing Date. The parties hereto
acknowledge that payment of the cash consideration in lieu of
issuing fractional shares is not separately bargained for
consideration, but merely represents a mechanical rounding off
for purposes of simplifying the corporate and accounting
complexities that would otherwise be caused by the issuance of
fractional shares.
2.3 Exchange
Procedure.
(a) Prior to the Closing, ELBIT shall designate, at its
cost and expense, American Stock Transfer & Trust
Company, or another bank or trust company designated by ELBIT
and reasonably satisfactory to ELSCINT (the Exchange
Agent), to act as agent for ELBIT for purposes of,
among other things, mailing and receiving letters of
transmittal, and distributing cash (for payment for fractional
shares as detailed in Section 2.2 above) and certificates
for ELBIT Shares to all other ELSCINT shareholders other than
ELBIT.
(b) At or promptly following the Closing Date, ELBIT shall
deposit with the Exchange Agent, for exchange in accordance with
Section 2.1 above, the ELBIT Shares to be issued in
exchange for the ELSCINT Shares and cash in an amount sufficient
to make required cash payments under Section 2.2 above
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in lieu of fractional shares of ELBIT ordinary (collectively,
the Exchange Fund). In the event the cash in
the Exchange Fund shall be insufficient to fully satisfy all of
the payment obligations to be made by the Exchange Agent
pursuant to Section 2.2 above, ELBIT shall promptly make
available to the Exchange Agent the amounts so required to
satisfy such payment obligations in full. The Exchange Agent
shall deliver the ELBIT Shares issued in exchange for ELSCINT
Shares and the cash in lieu of any fractional shares in
accordance with Sections 2.1 and 2.2 above, out of the
Exchange Fund.
(c) As soon as reasonably practicable after the Closing
Date (but no later than five business days thereafter), ELBIT
shall cause the Exchange Agent to mail to each holder of record
as of the Closing Date of a certificate representing ELSCINT
Shares (a Certificate), other than to ELBIT
and ELSCINT: (i) a letter of transmittal in customary form
(which shall specify that delivery shall be effected, and risk
of loss and title to the Certificate shall pass, only upon
proper delivery of the Certificate to the Exchange Agent), that
shall also be in such a form and have such other provisions as
ELBIT may reasonably specify, and (ii) instructions for use
in effecting the surrender of the Certificate in exchange for
ELBIT Shares and cash in lieu of fractional shares, as specified
in Section 2.3.
Upon surrender of Certificates for cancellation to the Exchange
Agent, together with such letter of transmittal, duly completed
and validly executed in accordance with the instructions
thereto, the holders of such Certificates shall be entitled to
receive in exchange for such Certificate, a certificate
representing the number of fully paid, validly issued and
non-assessable ELBIT Shares into which the ELSCINT Shares
represented by such Certificate so surrendered were exchanged
and, if applicable, cash payments in lieu of fractional shares
of ELBIT Shares pursuant to Section 2.2 above, and the
Certificate so surrendered shall forthwith be cancelled. Until
so surrendered, outstanding Certificates will be deemed from and
after the Closing Date to evidence only the right to receive,
upon surrender and without interest, the ELBIT Shares into which
the ELSCINT Shares represented by such Certificate are to be
exchanged and, if applicable, cash payments in lieu of
fractional shares of ELBIT Shares pursuant to Section 2.2
above.
(d) No dividends or other distributions declared or made
after the date hereof with respect to ELBIT Shares with a record
date at or after the Closing Date will be paid to the holders of
any un-surrendered Certificate with respect to the ELBIT Shares
such holder is entitled to receive until the surrender of such
Certificate in accordance with this Section 2.3. Subject to
applicable law, following surrender of any such Certificate, the
Exchange Agent shall promptly deliver to the record holder
thereof, without interest, certificates representing whole ELBIT
shares issued in exchange therefor, into which the aggregate
number of ELSCINT Shares previously represented by such
certificate surrendered shall have been converted pursuant to
this Merger Agreement, cash payable in lieu of fractional shares
pursuant to Section 2.2 above and the amount of any such
dividends or other distributions with a record date at or after
the Closing Date theretofore paid with respect to such whole
ELBIT Shares.
(e) If certificates representing ELBIT Shares are to be
issued in a name other than that in which the Certificates
surrendered in exchange thereof are registered, it will be a
condition of the issuance thereof that the Certificates so
surrendered shall be properly endorsed and otherwise in proper
form for transfer and that the persons requesting such exchange
shall have paid to ELBIT or any agent designated by it any
transfer or other taxes required by reason of the issuance of
certificates representing ELBIT Shares in any name other than
that of holder of record of the Certificates surrendered, or
establish to the satisfaction of ELBIT or any agent designated
by it that such taxes have been paid or are not payable.
(f) Each of the Exchange Agent and ELBIT shall be entitled
to deduct and withhold from any consideration payable or
otherwise, and from any cash dividends or distributions that the
holder is entitled to receive under Section 2.3(d) above,
payable pursuant to this Merger Agreement to any holder or
former holder of ELSCINT Shares such amounts as may be required
to be deducted or withheld therefrom (i) under the Israeli
Tax Ordinance and the regulations promulgated thereunder, the
Tax Ruling (as defined in Section 8 below), or any other
provision of Israeli law, statute, regulation, administrative
ruling, pronouncement or other authority or judicial opinion or
(ii) under the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder or any other
provision of United States federal, state or local or
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foreign law, statute, regulation, administrative ruling,
pronouncement or other authority or judicial opinion. To the
extent such amounts are so deducted or withheld, such amounts
shall be treated for all purposes under this Merger Agreement as
having been paid to the person to whom such amounts would
otherwise have been paid.
(g) Notwithstanding anything to the contrary in this Merger
Agreement, neither the Exchange Agent, ELBIT, ELSCINT nor any of
their respective affiliates shall be liable to any holder of
ELBIT Shares or ELSCINT Shares for any amount properly paid to a
public official pursuant to any applicable abandoned property,
escheat or similar law.
2.4 Lost, Stolen or Destroyed
Certificates.
If any Certificate shall have been lost, stolen or destroyed
upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and,
if required by ELBIT or the Exchange Agent, the posting by such
person of a bond in such reasonable amount as ELBIT or the
Exchange Agent may direct as indemnity against any claim that
may be made against them with respect to such Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the ELBIT Shares into which the ELSCINT
Shares represented by such Certificate immediately prior to the
Closing Date shall have been converted pursuant to
Section 2.3 above, and any cash in lieu of fractional
shares of ELBIT Shares to the holder thereof pursuant to
Section 2.2 above.
2.5 Termination of Exchange
Fund.
At any time following the date that is 180 days after the
Closing Date, ELBIT shall be entitled to require the Exchange
Agent to deliver to ELBIT any portion of the Exchange Fund which
has not been disbursed to holders of ELSCINT Shares (including
all interest and other income received by the Exchange Agent in
respect of the Exchange Fund), and thereafter each holder of a
Certificate may be entitled to surrender such Certificate only
to ELBIT and (subject to abandoned property, escheat and other
similar laws) receive in consideration therefore the ELBIT
Shares exchangeable for the ELSCINT Shares represented by such
Certificate so surrendered and, if applicable, cash payments in
lieu of fractional shares of ELBIT Shares pursuant to
Section 2.2 above; provided however, that such holders
shall have no greater rights against ELBIT than may be accorded
to general creditors of ELBIT under applicable law.
2.6 Taking of Necessary
Action; Further Action.
If, at any time after the Closing Date, any further action is
necessary or desirable to carry out the purposes of this Merger
Agreement and the transactions contemplated hereby, each of
ELBIT and ELSCINT will take any and all such lawful and
necessary action.
3. PUBLICITY; CONFIDENTIAL
INFORMATION.
(a) Except as otherwise required by applicable law, ELBIT
and ELSCINT agree that no publicity, release or announcement and
no other notices or other communications to third parties
concerning this Merger Agreement, the Merger and the other
transactions contemplated hereby shall be issued without the
advance approval of the form and substance of the same by the
parties hereto. Notwithstanding the foregoing, each party shall
be permitted, with prior coordination with the other party, to
make such disclosures to the public or to any governmental
agencies, the National Association of Securities Dealers, Inc.
Automated Quotation System/ National Market System
(NASDAQ), the New York Stock Exchange
(NYSE), the Tel-Aviv Stock Exchange Ltd.
(TASE), the U.S. Securities and Exchange
Commission (SEC) or the Israel Securities
Authority (ISA), to maintain compliance with
applicable law or stock exchanges and regulatory market rules
and requirements.
(b) Each of ELBIT and ELSCINT agrees that it and its
representatives will hold in strict confidence, and will not
disclose or reveal to any other person any information or
documents previously received or to be received from the other
party hereto in connection with the transactions contemplated
hereby, and shall use such information and documents only for
the purpose of evaluating the other party in connection with,
and performing its obligations under, the transactions
contemplated hereunder. If the transactions contemplated
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hereby shall not be consummated, each party will continue to
hold such information and documents in strict confidence and,
upon request, will promptly return to the other party all such
documents and information in written form (including the
documents annexed to this Merger Agreement) then in such
receiving partys possession without retaining copies
thereof and will make no further use of such information;
provided, however, that each partys
obligations under this Section 3(b) to maintain
confidentiality shall not apply to any information or documents
that (i) are in the public domain at the time furnished by
the other party or that come into the public domain thereafter
through any means other than as a result of any act of the
receiving party or of its agents, officers, directors or
shareholders which constitutes a breach of this Merger Agreement
or of any other confidentiality agreement between the parties to
this Merger Agreement, (ii) the receiving party
independently develops without reference to information or
documents received from the other party hereto in connection
with the transactions contemplated hereby, (iii) is
disclosed by a receiving party with the disclosing partys
permission, or (iv) are required to be disclosed by a
binding court order (except where the applicable court or
court(s) refuse to stay the order after the party so required to
disclose has used its reasonable efforts to prevent such
disclosure) or pursuant to applicable law; provided,
however, that the party against which the order is sought
provided the other party hereto with a notice of the proceedings
seeking such order as soon as possible after the commencement of
such proceedings.
4. REPRESENTATIONS AND
WARRANTIES OF ELSCINT.
Except as disclosed in the Disclosure Schedule delivered by
ELSCINT to ELBIT concurrently herewith (the ELSCINT
Disclosure Schedule) or as set forth in the ELSCINT
SEC Reports (as defined below), ELSCINT represents and warrants
to ELBIT as follows:
4.1 Organization of
ELSCINT.
(a) ELSCINT is a public company, duly organized and validly
existing under the laws of the State of Israel and has full
power and authority to carry on its business as presently
conducted, and to own, lease and operate its assets currently
owned, leased or operated.
(b) ELSCINT is duly qualified to do business in the
jurisdictions in which it operates and is duly authorized, and
licensed under all applicable laws, regulations or orders of
public authorities, or otherwise, to conduct its business in the
places and in the manner presently conducted, except for
qualifications, authorizations or licenses the failure of which
to obtain would not have a Material Adverse Effect on the
business or financial condition, assets or operations of ELSCINT
or of any Material ELSCINT Subsidiary (as hereinafter defined);
provided, however, that in no event shall any of the
following, alone or in combination, be deemed to constitute, nor
shall any of the following be taken into account in determining
whether there has been or will be, a Material Adverse Effect on
ELSCINT: (i) any change in ELSCINTs stock price or
trading volume in and of itself (but not excluding the
underlying cause of any such change pursuant to this
clause (i)); (ii)any change, event, violation, inaccuracy,
circumstance or effect that results from changes, events or
circumstances affecting (A) any of the industries in which
ELSCINT operates generally, or (B) general economic
conditions (which changes, events or circumstances in the case
of (A) and (B) do not disproportionately affect such
entity); (iii) any change, event, violation, inaccuracy,
circumstance or effect resulting from public announcement or
pendency of this Merger Agreement and the Merger; (iv) any
change, event, violation, inaccuracy, circumstance or effect
resulting from acts of war or terrorism or any escalation
thereof in and of itself (but excluding any changes or effect
uniquely on or uniquely with respect to ELSCINT resulting from
any such act pursuant to this clause (iv)); (v) any
change, event, violation, inaccuracy, circumstance or effect
that results from any action or inaction taken by ELBIT; or
(vi) the institution of litigation against ELSCINT or any
of its officers or directors alleging breach of their fiduciary
duties in connection with the entry into this Merger Agreement.
Such material adverse effect on ELSCINT on a consolidated basis
shall be referred to herein as a Material Adverse
Effect on ELSCINT.
(c) ELSCINT has heretofore made available to ELBIT true and
complete copies of its Memorandum of Association and its
Articles of Association certified by the Corporate Secretary of
ELSCINT, as in effect on the date hereof. The minute books of
ELSCINT contain substantially accurate records of all meetings
of its Board of Directors, all committees of its Board of
Directors and of its shareholders in the past two years.
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4.2 Capitalization.
(a) The registered (authorized) share capital of
ELSCINT consists of NIS 1,200,000 divided into 24,000,000
Ordinary Shares, NIS 0.05 nominal value per share, all of which
are duly authorized, of which 17,493,143 shares are
outstanding as of the date hereof (including 657,923 shares
held by or for the benefit of ELSCINT). All outstanding ELSCINT
Shares are validly issued, fully paid and non-assessable, and
are not subject to any pre-emptive or similar rights in respect
thereto.
4.3 Options, Warrants,
Etc.
As of the date hereof and except as set forth in
Section 4.3 of the ELSCINT Disclosure Schedule, there are
no outstanding options, warrants, rights, calls, subscriptions
or other rights, or other commitments or agreements of any
nature calling for or relating to the issuance or transfer, sale
or other disposition by ELSCINT or any Material ELSCINT
Subsidiary of any share capital of ELSCINT or any Material
ELSCINT Subsidiary, or of any securities convertible into or
exchangeable for any share capital of ELSCINT or any Material
ELSCINT Subsidiary. Section 4.3 of the ELSCINT Disclosure
Schedule also sets forth the name of each holder of an Option,
the number of shares subject to each Option, the date of grant,
expiration date, vesting schedules and the exercise price of
each Option.
Neither ELSCINT nor any Material ELSCINT Subsidiary has any
outstanding bonds, debentures, notes or other indebtedness
granting any voting rights in such companies board of
directors meeting or shareholder meetings (or convertible into
securities granting such rights). There are no outstanding
contractual obligations of ELSCINT or of any Material ELSCINT
Subsidiary to repurchase, redeem or otherwise acquire, any share
capital or other securities of ELSCINT or of any Material
ELSCINT Subsidiary.
4.4 Holding of ELBIT
Shares.
Except as set forth in Section 4.4 of the ELSCINT
Disclosure Schedule, neither ELSCINT nor any Material ELSCINT
Subsidiary beneficially owns any ELBIT Shares.
4.5 Subsidiaries.
(a) Section 4.5(a) of the ELSCINT Disclosure Schedule
provides a complete list of all material ELSCINT subsidiaries
(collectively, the Material ELSCINT
Subsidiaries) and the percentage of holdings and
voting rights of ELSCINT and any Material ELSCINT Subsidiary on
a fully diluted and on a non-fully diluted basis.
(b) Each of the Material ELSCINT Subsidiaries is duly
organized and validly existing under the laws of the
jurisdiction of its organization and has the full power and
authority to carry on its business as presently conducted and to
own, lease and operate its assets. Each of the Material ELSCINT
Subsidiaries is qualified to do business in the jurisdictions in
which it operates, and is duly authorized, and licensed under
all laws, regulations, laws or orders of public authorities, or
otherwise, to carry on its business in the places and in the
manner presently conducted, except for authorizations,
qualifications or licenses the failure of which to obtain, would
not have a Material Adverse Effect on ELSCINT.
(c) The outstanding shares of capital stock of each of the
Material ELSCINT Subsidiaries are validly issued, fully paid and
non-assessable, and the shares of each Material ELSCINT
Subsidiary, to the extent owned by ELSCINT or another Material
ELSCINT Subsidiary, are owned by ELSCINT or such Material
ELSCINT Subsidiary free and clear of any and all claims, leases,
restrictions on transfer, pledges, security interests, liens,
charges or other encumbrances of any nature whatsoever
(collectively, Encumbrances) except as set
forth in Section 4.5(c) of the ELSCINT Disclosure Schedule.
(d) None of the shares of any Material ELSCINT Subsidiary
are held by nominees of ELSCINT or any Material ELSCINT
Subsidiary for the benefit of ELSCINT or any Material ELSCINT
Subsidiary.
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4.6 Financial Statements; No
Undisclosed Liabilities.
(a) The audited consolidated financial statement of ELSCINT
as of and for the year ended December 31, 2004 together
with the opinion thereon of Brightman Almagor & Co.
(the ELSCINT Audited Financial Statements),
included as part of ELSCINTs annual report on
Form 20-F/ A for the year ended December 31, 2004 (the
ELSCINT 2004 20F), and the condensed
unaudited consolidated balance sheet and statement of operations
of ELSCINT for the three months ended March 31, 2005 (the
ELSCINT Condensed Interim Financial
Statements, and collectively with the ELSCINT Audited
Financial Statements, the ELSCINT Financial
Statements) are attached hereto as Section 4.6(a)
of the ELSCINT Disclosure Schedule. The ELSCINT Audited
Financial Statements complied, at the time of the filing thereof
with the SEC, as to form and substance in all material respects
with applicable accounting requirements under the
U.S. Securities Exchange Act of 1934, as amended (the
Exchange Act), and with the published rules
and regulations of the SEC (as applicable to foreign private
issuers).
The ELSCINT Financial Statements fairly present, in all material
respects the consolidated financial position of ELSCINT as of
their respective dates and the consolidated results of its
operations for the periods presented (subject, in the case of
the condensed unaudited interim financial statements, to normal
year-end adjustments).
The ELSCINT Financial Statements were prepared in conformity
with generally accepted accounting principles in Israel
(Israeli GAAP) and in the case of ELSCINT
Audited Financial Statements, including a reconciliation note to
generally accepted accounting principles in the United States
(U.S. GAAP) applied on a consistent
basis.
(b) Except as set forth in the ELSCINT Financial
Statements, there are no liabilities or obligations of ELSCINT
and/or its consolidated, or partially consolidated subsidiaries,
whether accrued, absolute, contingent or otherwise, and whether
due or to become due, which would be required to be reflected or
reserved against on a balance sheet prepared in accordance with
Israeli GAAP or U.S. GAAP, except for liabilities or
obligations of ELSCINT or its consolidated or partially
consolidated subsidiaries (i) under this Merger Agreement
or the transactions contemplated hereby or (ii) incurred in
the ordinary course of business since March 31, 2005 that
would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on ELSCINT.
(c) The trade receivables shown on the balance sheet of the
ELSCINT Financial Statements arose in the ordinary course of
business consistent with past practice and have been collected
or, to ELSCINTs belief, are collectible, in the book
amounts thereof, less any amounts not in excess of the allowance
for doubtful accounts provided for in each respective balance
sheet of ELSCINT included in ELSCINT Financial Statements. The
trade receivables of ELSCINT and the Material ELSCINT
Subsidiaries arising since March 31, 2005 arose in the
ordinary course of business and represent valid obligations of
customers from bona fide transactions entered into in the
ordinary course of business.
4.7 SEC Filings;
Sarbanes-Oxley Matters.
ELSCINT has made all filings required under the Exchange Act to
be filed with the SEC since January 1, 2002. The ELSCINT
2004 20-F and other statements and reports filed with the SEC
pursuant to the Exchange Act, if any, since January 1, 2002
(the ELSCINT SEC Reports), complied, when
filed, in all material respects with applicable SEC
requirements, and no such statement or report contained, at the
time it was filed (or declared effective, with respect to
registration statements) an untrue statement of a material fact
or omitted to state any material fact necessary to make the
statements made therein, in light of the circumstances under
which they were made, not misleading. ELSCINT is in compliance
with all provisions of the Sarbanes-Oxley Act of 2002 and the
regulations promulgated thereunder which are applicable to it,
as of the date hereof, in all material respects.
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4.8 Proxy Statement
Disclosures.
No information supplied or to be supplied by ELSCINT to ELBIT
for inclusion or incorporation by reference in the F-4
Registration Statement and the Proxy Statement/ Prospectus will,
in the case of the Proxy Statement/ Prospectus, at the time of
mailing thereof and at the respective times of the
shareholders meetings of ELBIT and ELSCINT to be held in
accordance with Section 6 herein, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they are made, not misleading or will, in the case of the F-4
Registration Statement, at the time the F-4 Registration
Statement is filed with the SEC and at the time it becomes
effective under United States Securities Act of 1933, as amended
(the Act), contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are
made, not misleading. The Proxy Statement/ Prospectus will
comply as to form and substance in all material respects with
the provisions of the Exchange Act and the rules and regulations
thereunder, except that no representation is made by ELSCINT
with respect to information supplied by ELBIT for inclusion
therein.
4.9 Taxes.
(a) All taxes, including for the purposes of this Merger
Agreement (if any), without limitation, income, property,
franchise, excise, value added, transfer, capital, social
security, withholding, and employees withholding taxes,
whether direct or indirect (collectively,
Taxes) imposed by the State of Israel, by any
foreign country or by any competent authority of the State of
Israel or of any foreign country, which have become due and
payable by ELSCINT or any Material ELSCINT Subsidiary, together
with any interest or penalties thereon (ELSCINT
Taxes), whether disputed or not, have been paid in
full or adequately provided for by reserves shown on the books
of account of ELSCINT and/or any Material ELSCINT Subsidiary, in
accordance with Israeli GAAP and/or U.S. GAAP, consistently
applied. All income material returns and reports required to be
filed for any period ending on or before the Closing Date with
respect to ELSCINT Taxes have been or will be properly prepared
and filed with the appropriate governmental agencies, and all
such returns and reports are or will fairly present, in all
material respects, ELSCINTs results of operation for tax
purposes. As of March 31, 2005, neither ELSCINT nor any
Material ELSCINT Subsidiary is liable for the payment of ELSCINT
Taxes due until March 31, 2005, and for which no adequate
provision, in accordance with generally accepted accounting
principles, was made in ELSCINT Financial Statements, in any
jurisdiction. All ELSCINT Taxes arising since March 31,
2005 arose in the ordinary course of business from bona fide
transactions and would not be reasonably expected to have a
Material Adverse Effect on ELSCINT.
(b) No deficiency or adjustment in respect of any ELSCINT
Taxes in excess, individually or in the aggregate, of $100,000,
has been assessed against ELSCINT or any Material ELSCINT
Subsidiary and remains unpaid or provided, other than such
ELSCINT Taxes which are being contested in good faith, and
ELSCINT has no knowledge of any proposed or threatened
assessment of additional liability for ELSCINT Taxes against
ELSCINT or any Material ELSCINT Subsidiary in excess,
individually or in the aggregate, of $100,000, for any period
ending prior to the date hereof.
(c) There is no claim, audit, action, suit, proceeding or
investigation now pending or, to the best of ELSCINTs
knowledge, threatened against ELSCINT or any of the Material
ELSCINT Subsidiaries in respect of any tax or assessment, except
for returns which are currently under review of the relevant tax
authorities, or returns which were submitted to the relevant tax
authority for which review has not yet commenced.
4.10 Ownership of
Assets.
(a) Except as set forth in Section 4.10(a) of the
ELSCINT Disclosure Schedule, ELSCINT and the Material ELSCINT
Subsidiaries have good and valid title to, all of their
respective owned assets and real and personal properties, both
tangible and intangible (including, without limitation, all
assets reflected in the ELSCINT Condensed Interim Financial
Statements, except those disposed of since March 31, 2005),
and
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good title to their leasehold estates with respect to real and
personal property, in each case free and clear of all
Encumbrances, except, in each case:
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(i) encumbrances for current taxes not delinquent, or taxes
being protested in good faith, and |
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(ii) such imperfections in the title thereto and
Encumbrances, if any, as do not materially detract from the
value, or materially interfere with the present or continued use
or occupancy, of the property of ELSCINT and the Material
ELSCINT Subsidiaries; and |
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(iii) with respect to real property, Encumbrances which
would not result in a Material Adverse Effect on ELSCINT. |
(b) Other than as set forth in Section 4.10(b) of the
ELSCINT Disclosure Schedule, each of ELSCINT and the Material
ELSCINT Subsidiaries owns or has a valid leasehold interest in
all the buildings, structures, leasehold improvements, equipment
and other tangible property material to its businesses as
presently conducted, all of which are in good and sufficient
operating condition and repair, ordinary wear and tear excepted,
and neither ELSCINT nor any Material ELSCINT Subsidiary has
received notice that any of such property (A) is in
violation in any material respect of any existing law or any
building, zoning, health, safety or other law or regulation or
(B) requires any substantial work, repairs, construction,
alterations or installation which has not been complied with.
4.11 Permits.
ELSCINT and the Material ELSCINT Subsidiaries have all permits,
licenses, orders, approvals, franchises and the rights and
privileges necessary in order for them to carry on their
business as presently conducted, except such permits, licenses,
orders, approvals, franchises, and other rights and privileges
the failure of which to obtain would not have a Material Adverse
Effect on ELSCINT. Each such permit, license, order and approval
is in full force and effect, and no proceeding is pending, or to
the best knowledge of ELSCINT, threatened, to revoke or
materially modify it. ELSCINT and the Material ELSCINT
Subsidiaries have been and are in compliance with the terms of
each such permit, license, order and approval and any conditions
placed thereon and neither ELSCINT nor any of the Material
ELSCINT Subsidiaries is aware of any potential violation or
breach of the terms and conditions of any such permit, license,
order, approval, franchise and any right and privilege resulting
from the consummation of the Merger (except to the extent that
the failure to be in compliance or such violation or breach
could not reasonably be expected to have a Material Adverse
Effect on ELSCINT).
4.12 Environmental
Matters.
ELSCINT and, to the best knowledge of ELSCINT, each Material
ELSCINT Subsidiary, are in substantial compliance with all
applicable environmental regulations and standards relating to
the conduct of the business of ELSCINT and the Material ELSCINT
Subsidiaries, respectively, as presently conducted and there
exists no toxic waste or other environmental hazard that has not
previously been publicly disclosed by ELSCINT or otherwise
disclosed in writing to ELBIT which would have a Material
Adverse Effect on ELSCINT.
4.13 Listing.
The listing of ELSCINT shares for trade on the NYSE is in
complete force and effect as of the date of this Merger
Agreement. ELSCINT did not receive any notice regarding a
potential delisting of its shares from trade on the NYSE and
ELSCINT is not aware of any non-compliance on its part with any
listing or maintenance requirement of the NYSE applicable to it,
including all NYSE corporate governance standards.
4.14 Litigation.
Except as set forth in Section 4.14 of the ELSCINT
Disclosure Schedule, there are no actions, suits, proceedings or
investigations, pending before any court or governmental agency
or before any arbitrator of any kind, or any order, injunction
or decree outstanding or an application therefor, or, to the
best knowledge of
A-16
ELSCINT, threatened, against ELSCINT or any Material ELSCINT
Subsidiary or relating to their property, assets or business as
presently conducted which, if sustained, would have a Material
Adverse Effect on ELSCINT, or (in respect of those actions,
suits, proceedings or investigations each of which by itself
would not have a Material Adverse Effect on ELSCINT or on any
Material ELSCINT Subsidiary) would, taken together, have a
Material Adverse Effect on ELSCINT.
4.15 Opinion of Financial
Advisor.
The Board of Directors of ELSCINT has received the opinion of
Oppenheimer & Co. Inc., which shall be attached hereto
as Section 4.15 of the ELSCINT Disclosure Schedule
immediately following the signing of this Merger Agreement, to
the effect that, as of the date of entering into this Merger
Agreement, the Exchange Ratio is fair, from a financial point of
view, to the shareholders of ELSCINT other than ELBIT, its
controlling shareholder and any affiliates of ELBIT and/or its
controlling shareholder.
4.16 Absence of
Changes.
Since March 31, 2005, except (a) as reflected in, or
contemplated by, the ELSCINT SEC Reports, including the ELSCINT
Condensed Interim Financial Statements or (b) as otherwise
expressly set forth in Section 4.16 of the ELSCINT
Disclosure Schedule, each of ELSCINT and, to the best knowledge
of ELSCINT, each of the Material ELSCINT Subsidiaries has
conducted its business only in the ordinary course thereof and
has not:
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(i) issued or sold, or agreed to issue or sell, or
purchased, or agreed to purchase, any of its share capital or
securities convertible into or exchangeable for such share
capital, or any options, warrants, rights or calls to purchase
such share capital, or other corporate securities; |
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(ii) incurred any material obligation or liability,
absolute or contingent, except in the ordinary course of
business consistent with past practice; |
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(iii) made any wage or salary increase or granted any
bonuses, except those made in the normal employee or executive
review process carried on in the ordinary course of business
consistent with past practice; |
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(iv) mortgaged, pledged or subjected to Encumbrance any of
its material properties or assets, other than in the ordinary
course of business; |
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(v) sold, assigned or transferred any of its material
properties or assets, other than in the ordinary course of
business; |
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(vi) entered into any material transaction not in the
ordinary course of business consistent with past practice; |
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(vii) suffered any change, event or set of circumstances
which has had, or is reasonably likely to have, a Material
Adverse Effect on ELSCINT; |
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(viii) waived any rights of substantial value, or
cancelled, modified or waived any debts held by ELSCINT or any
Material ELSCINT Subsidiary, other than rights or debts
(A) in the ordinary course of business which are not in
excess of U.S.$1,000,000 in the aggregate; and (B) other
than in the ordinary course of business which are not in excess
of U.S.$250,000 in the aggregate (ELSCINT and any Material
ELSCINT Subsidiary, taken together, for the purposes of the
amounts referenced in clauses (A) and (B)); |
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(ix) made or incurred capital expenditures in excess of an
aggregate of U.S.$1,000,000 (ELSCINT and any Material ELSCINT
Subsidiary, taken together), other than in the ordinary course
of business; |
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(x) declared, paid or set aside any dividends or other
distributions or payments on its share capital or repurchased,
redeemed or otherwise acquired any outstanding shares or other
securities of, or other ownership interests in, ELSCINT or any
Material ELSCINT Subsidiary; |
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(xi) made any loans or advances to any Person or assumed,
guaranteed, endorsed or otherwise became responsible for the
obligations of any Person, other than in the ordinary course of
business; |
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(xii) effected any merger, consolidation, recapitalization,
share split, share dividend, reorganization or other transaction
affecting the share capital of ELSCINT; |
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(xiii) suffered any damage, destruction or other casualty
or loss (whether or not covered by insurance) materially
affecting the assets or business of ELSCINT and any Material
ELSCINT Subsidiary as presently conducted; |
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(xiv) materially changed any method or principle of
accounting or accounting practice of ELSCINT, except for any
such change required by reason of a concurrent change in the
applicable generally accepted accounting principles and
disclosed in the ELSCINT Financial Statements; or |
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(xv) entered into any agreement or commitment relating to
any of the foregoing. |
4.17 Authority for Merger
Agreement.
(a) Subject to the fulfillment of all the conditions to
Closing specified in Section 8 below (or the waiver of any
of which by the applicable party in accordance with the terms of
Section 8 below), all corporate and other proceedings
required to be taken by or on behalf of ELSCINT in order to
authorize ELSCINT to execute this Merger Agreement and
consummate the Merger, have been duly and properly taken. This
Merger Agreement has been duly signed and delivered by ELSCINT
and is valid and binding upon ELSCINT and enforceable against it
in accordance with its terms.
(b) No filing or registration with or notification to and
no permit, authorization, consent or approval of any
governmental entity (including, without limitation, regulatory
authority or agency of Israel, federal, state or local of the
United States, or any other applicable jurisdiction) is required
to be obtained, made or given by ELSCINT or any Material ELSCINT
Subsidiary in connection with the execution of this Merger
Agreement or the consummation by ELSCINT of the Merger or the
other transactions contemplated hereby, except:
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(i) the filing of the Final Court Order with the Registrar
of Companies in Israel; |
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(ii) the filing with the SEC of, and a declaration of
effectiveness by the SEC of the F-4 Registration Statement,
as defined in Section 7.6 herein; |
4.18 Compliance with
Laws.
Neither ELSCINT nor, to the best knowledge of ELSCINT, any
Material ELSCINT Subsidiary, is in violation of or is in default
under Israeli or foreign law, any regulation, order, judgment,
injunction, decree, award or other requirement of any court,
arbitrator or governmental or regulatory body, including without
limitation labor and employment practices, environment, health
and safety, zoning, or otherwise relating to its property,
assets or business as presently conducted, except for violations
of or liabilities under any of the foregoing which would not,
individually or in the aggregate, have a Material Adverse Effect
on ELSCINT.
4.19 Certain Corporate
Resolutions and Board Recommendation.
The Audit Committee and Board of Directors of ELSCINT, following
the recommendation of an independent committee of ELSCINTs
Board of Directors formed for the purpose of considering the
transactions contemplated by this Merger Agreement, have duly
approved and adopted this Merger Agreement, the Merger and the
other transactions contemplated hereby, determined that the
Merger is advisable and fair to the shareholders of ELSCINT
other than ELBIT, its controlling shareholder and any affiliates
of ELBIT and/or its controlling shareholder, and is to the
benefit of ELSCINT, and the Board of
A-18
Directors recommended that the shareholders of ELSCINT approve
and adopt this Merger Agreement, the Merger and the other
transactions contemplated hereby.
4.20 No Breach.
The Merger and the other transactions contemplated by this
Merger Agreement will not give rise to a right to terminate or
result in a breach of the terms or conditions of or constitute a
default under or violate (i) the Memorandum of Association
or Articles of Association (or similar instrument) of ELSCINT or
any Material ELSCINT Subsidiary, or (ii) any agreement or
other document or undertaking to which ELSCINT or any Material
ELSCINT Subsidiary is a party or by which any of them is bound,
except (A) as set forth in Section 4.20 of the ELSCINT
Disclosure Schedule and (B) solely with respect to
clause (ii) above, violations or breaches which would not,
in the aggregate, have a Material Adverse Effect on ELSCINT, or
materially adversely affect the ability of ELSCINT to consummate
the transactions contemplated hereby.
4.21 Disclosure.
The representations, warranties and statements made by ELSCINT
in this Merger Agreement and in the documents delivered by
ELSCINT pursuant hereto do not contain any untrue statement of a
material fact, and, when taken together, do not omit to state
any material fact necessary to make such representations,
warranties and statements, in light of the circumstances under
which they are made, not misleading. To the best knowledge of
ELSCINT, there is no material fact or information relating to
the operations and financial condition of ELSCINT or of any of
the Material ELSCINT Subsidiaries, as presently conducted, that
has not been fully disclosed to ELBIT in writing by ELSCINT.
5. REPRESENTATIONS AND
WARRANTIES OF ELBIT.
Except as disclosed in the Disclosure Schedule delivered by
ELBIT to ELSCINT concurrently herewith (the ELBIT
Disclosure Schedule) or as set forth in the ELBIT SEC
Reports (as defined below), ELBIT represents and warrants to
ELSCINT:
5.1 Organization of
ELBIT.
(a) ELBIT is a public company, duly organized and validly
existing under the laws of the State of Israel and has full
power and authority to carry on its business, and to own, lease
and operate its assets, currently owned, leased or operated.
(b) ELBIT is duly qualified to do business in the
jurisdictions in which it operates and is duly authorized, and
licensed under all applicable laws, regulations, or orders of
public authorities, or otherwise, to conduct its business in the
places and in the manner presently conducted, except for
qualifications, authorizations or licenses the failure of which
to obtain would not have a Material Adverse Effect on the
business or financial condition, assets or operations of ELBIT
or on any Material ELBIT Subsidiary (as hereinafter defined)
provided, however, that in no event shall any of the
following, alone or in combination, be deemed to constitute, nor
shall any of the following be taken into account in determining
whether there has been or will be, a material adverse effect on
ELBIT: (i) any change in ELBITs stock price or
trading volume in and of itself (but not excluding the
underlying cause of any such change pursuant to this
clause (i)); (ii) any change, event, violation,
inaccuracy, circumstance or effect that results from changes,
events or circumstances affecting (A) any of the industries
in which ELBIT operates generally, or (B) general economic
conditions (which changes, events or circumstances in the case
of (A) and (B) do not disproportionately affect such
entity); (iii) any change, event, violation, inaccuracy,
circumstance or effect resulting from public announcement or
pendency of this Merger Agreement and the Merger; (iv) any
change, event, violation, inaccuracy, circumstance or effect
resulting from acts of war or terrorism or any escalation
thereof in and of itself (but excluding any changes or effect
uniquely on or uniquely with respect to ELBIT resulting from any
such act pursuant to this clause (iv)); (v) any
change, event, violation, inaccuracy, circumstance or effect
that results from any action or inaction taken by ELSCINT; or
(vi) the institution of litigation against ELBIT or any of
its officers or directors alleging breach of their fiduciary
duties in
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connection with the entry into this Merger Agreement. Such
material adverse effect on ELBIT on a consolidated basis shall
be referred to herein as a Material Adverse Effect on
ELBIT.
(c) ELBIT has heretofore made available to ELSCINT true and
complete copies of its Memorandum of Association and its
Articles of Association certified by the Corporate Secretary of
ELBIT, as in effect on the date hereof. The minute books of
ELBIT contain substantially accurate records of all meetings of
its Board of Directors, all committees of its Board of Directors
and of its shareholders in the past two years.
5.2 Capitalization.
(a) The registered (authorized) share capital of ELBIT
consists of NIS 50,000,000 divided into 50,000,000 Ordinary
Shares, NIS 1 nominal value per share, all of which are duly
authorized, of which 24,747,082 shares are outstanding as
of the date hereof (including 2,842,400 shares held by
ELBIT). All outstanding ELBIT Shares are validly issued, fully
paid and non-assessable, and are not subject to any pre-emptive
or similar rights in respect thereto.
(b) All of the ELBIT shares to be issued in the Exchange
have been duly and validly authorized and, when issued in
accordance with this Merger Agreement, will be validly issued,
fully paid and non-assessable, and free and clear of any and all
Encumbrances.
5.3 Options, Warrants,
Etc.
As of the date hereof, there are no outstanding options,
warrants, rights, calls, subscriptions or other rights, or other
commitments or agreements of any nature calling for or relating
to the issuance or transfer, sale or other disposition by ELBIT
or any Material ELBIT Subsidiary of any share capital of ELBIT
or any Material ELBIT Subsidiary, or of any securities
convertible into or exchangeable for any share capital of ELBIT
or any Material ELBIT Subsidiary.
Neither ELBIT nor any Material ELBIT Subsidiary has any
outstanding bonds, debentures, notes or other indebtedness
granting any voting rights in such companies board of
directors meetings or shareholders meetings (or convertible into
securities granting such rights). There are no outstanding
contractual obligations of ELBIT to repurchase, redeem or
otherwise acquire, or of any Material ELBIT Subsidiary to
acquire any share capital or other securities of ELBIT or any
Material ELBIT Subsidiary.
5.4 Holding of ELSCINT
Shares.
ELBIT owns directly and through EMH approximately 61% of the
issued and outstanding share capital of ELSCINT.
5.5 Subsidiaries.
(a) It is hereby clarified that all representations and
warranties of ELBIT provided in this Merger Agreement do not
relate to (1) ELSCINT, or to any corporate entity in which
ELSCINT has any ownership interests, directly or indirectly, in
any manner whatsoever; (2) any information, event, legal
status or legal action, document or facts in relation to or in
connection with ELSCINT, or any corporate entity in which
ELSCINT might have any ownership interests, directly or
indirectly, in any manner whatsoever; or to (3) the
existence or non existence of the above; or to (4) any
events or uncertainties involving ELSCINT or any corporate
entity in which ELSCINT might have any ownership interests
directly or indirectly, in any manner whatsoever which may have
a Material Adverse Effect on ELBIT.
(b) Section 5.5(b) of the ELBIT Disclosure Schedule
provides a complete list of all the material ELBIT subsidiaries
(collectively, the Material ELBIT
Subsidiaries) and the percentage of holdings and
voting rights of ELBIT or any Material ELBIT Subsidiary on a
fully diluted and on a non-fully diluted basis.
(c) Each of the Material ELBIT Subsidiaries is duly
organized and validly existing under the laws of the
jurisdiction of its organization and has the full power and
authority to carry on its business as presently conducted and to
own, lease and operate its assets. Each of the Material ELBIT
Subsidiaries is qualified to do
A-20
business in the jurisdictions in which it operates and is duly
authorized, and licensed under all laws, regulations or orders
of public authorities, or otherwise, to carry on its business in
the places and in the manner presently conducted, except for
authorizations, qualifications or licenses the failure of which
to obtain, would not have a Material Adverse Effect on ELBIT.
(d) The outstanding shares of capital stock of each of the
Material ELBIT Subsidiaries are validly issued, fully paid and
non-assessable, and the shares of each Material ELBIT
Subsidiary, to the extent owned by ELBIT or another Material
ELBIT Subsidiary, are owned by ELBIT or such Material ELBIT
Subsidiary free of any Encumbrances, except as set forth in
Section 5.5(d) of the ELBIT Disclosure Schedule.
(e) None of the shares of any Material ELBIT Subsidiary are
held by nominees of ELBIT or any Material ELBIT Subsidiary for
the benefit of ELBIT or any Material ELBIT Subsidiary.
5.6 Financial Statements; No
undisclosed Liabilities.
(a) The audited consolidated financial statements of ELBIT
as of and for the year ended December 31, 2004 together
with the opinion of Brightman Almagor & Co. (the
ELBIT Audited Financial Statements) included
as part of ELBITs annual report on Form 20-F for the
year ended December 31, 2004 (the ELBIT 2004
20F), and the condensed unaudited consolidated balance
sheet and statement of operations of ELBIT for the three months
ended March 31, 2005 (the ELBIT Condensed Interim
Financial Statements, and collectively with the ELBIT
Audited Financial Statements, the ELBIT Financial
Statements) are attached hereto as Section 5.6(a)
of the ELBIT Disclosure Schedule. The ELBIT Audited Financial
Statements complied, at the time of the filing thereof with the
SEC, as to form and substance in all material respects with
applicable accounting requirements under the Exchange Act, and
with the published rules and regulations of the SEC (as
applicable to foreign private issuers).
The ELBIT Financial Statements fairly present, in all material
respects, the consolidated financial position of ELBIT as of
their respective dates and the consolidated results of its
operations for the periods presented (subject, in the case of
the condensed unaudited interim financial statements, to normal
year-end adjustments).
The ELBIT Financial Statements were prepared in conformity with
Israeli GAAP and in the case of ELBIT Audited Financial
Statement, including a reconciliation note to U.S. GAAP
applied on a consistent basis.
(b) Except as set forth in the ELBIT Financial Statements,
there are no liabilities or obligations of ELBIT or its
consolidated subsidiaries whether accrued, absolute, contingent
or otherwise, and whether due or to become due, which would be
required to be reflected or reserved against on a balance sheet
prepared in accordance with Israeli GAAP or U.S. GAAP,
except for liabilities or obligations of ELBIT or its
consolidated subsidiaries (i) under this Agreement or the
transactions contemplated hereby or (ii) incurred in the
ordinary course of business since March 31, 2005 that would
not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on ELBIT.
(c) The trade receivables shown on the balance sheet of the
ELBIT Financial Statements arose in the ordinary course of
business consistent with past practice and have been collected
or, to ELBITs belief, are collectible, in the book amounts
thereof, less any amounts not in excess of the allowance for
doubtful accounts provided for in each respective balance sheet
of ELBIT included in ELBIT Financial Statements. The trade
receivables of ELBIT and the Material ELBIT Subsidiaries arising
since March 31, 2005 are in the ordinary course of business
and represent valid obligations of customers arising from bona
fide transactions entered into in the ordinary course of
business.
5.7 SEC Filings; ISA Filings;
Sarbanes-Oxley Matters.
ELBIT has made all filings required under the Exchange Act to be
filed with the SEC and all filings required under the Securities
Law to be filed with the ISA, since January 1, 2002. The
ELBIT 2004 20-F and other statements and reports filed with the
SEC pursuant to the Exchange Act, if any, and the notices and
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reports filed with the ISA since January 1, 2002 (the
ELBIT SEC AND ISA Reports), complied when
filed in all material respects with applicable SEC and ISA
requirements, as the case may be, and no such statement or
report contained at the time it was filed (or declared effective
with respect to registration statements) an untrue statement of
a material fact or omitted to state any material fact necessary
to make the statements made therein, in light of the
circumstances under which they were made, not misleading. ELBIT
is in compliance with all provisions of the Sarbanes-Oxley Act
of 2002 and the regulations promulgated thereunder which are
applicable to it, as of the date hereof, in all material
respects.
5.8 Proxy Statement
Disclosures.
No information supplied or to be supplied by ELBIT to ELSCINT
for inclusion or incorporation by reference in the F-4
Registration Statement and the Proxy Statement/ Prospectus will,
in the case of the Proxy Statement/ Prospectus, at the time of
mailing thereof and at the respective times of the shareholders
meetings of ELBIT and ELSCINT to be held in accordance with
Section 6 herein, contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are
made, not misleading or will, in the case of the F-4
Registration Statement, at the time the F-4 Registration
Statement is filed with the SEC and at the time it becomes
effective under the Act, contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are
made, not misleading. The Proxy Statement/ Prospectus will
comply as to form and substance in all material respects with
the provisions of the Exchange Act and the rules and regulations
thereunder, except that no representation is made by ELBIT with
respect to information supplied by ELSCINT for inclusion therein.
5.9 Taxes.
(a) All Taxes (as defined in Section 4.9(a) above)
imposed by the State of Israel, by any foreign country or by any
competent authority of the State of Israel or of any foreign
country, which have become due and payable by ELBIT or any
Material ELBIT Subsidiary, together with any interest or
penalties thereon (ELBIT Taxes), whether
disputed or not, have been paid in full or adequately provided
for by reserves shown on the books of account of ELBIT and/or
any Material ELBIT Subsidiary in accordance with Israeli GAAP
and/or U.S. GAAP, consistently applied. All franchise and
income material returns and reports required to be filed for any
period ending on or before the Closing Date with respect to
ELBIT Taxes have been or will be properly prepared and filed
with the appropriate governmental agencies, and all such returns
and reports are or will fairly present, in all material
respects, ELBITs results of operation for tax purposes. As
of March 31, 2005, neither ELBIT nor any Material ELBIT
Subsidiary is liable for the payment of ELBIT Taxes due until
March 31, 2005, and for which no adequate provision, in
accordance with generally accepted accounting principles, was
made in ELBIT Financial Statements, in any jurisdiction. Other
than as disclosed on Section 5.9(a) of the ELBIT Disclosure
Schedule, all ELBIT Taxes arising since March 31, 2005
arose in the ordinary course of business from bona fide
transactions and would not be reasonably expected to have a
Material Adverse Effect on ELSCINT.
(b) No deficiency or adjustment in respect of any ELBIT
Taxes in excess, individually or in the aggregate, of $100,000,
has been assessed against ELBIT or any Material ELBIT Subsidiary
and remains unpaid or provided, other than such ELBIT Taxes
which are being contested in good faith, and ELBIT has no
knowledge of any proposed or threatened assessment of additional
liability for ELBIT Taxes against ELBIT or any Material ELBIT
Subsidiary in excess, individually or in the aggregate, of
$100,000, for any period ending prior to the date hereof.
(c) There is no claim, audit, action, suit, proceeding or
investigation now pending or, to the best of ELBITs
knowledge threatened against ELBIT or any of the Material ELBIT
Subsidiaries in respect of any tax or assessment, except for
returns which are currently under review of the relevant tax
authorities, or returns which were submitted to the relevant tax
authority for which review has not yet commenced.
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5.10 Ownership of
Assets.
(a) Except as set forth in Section 5.10(a) of the
ELBIT Disclosure Schedule, ELBIT and the Material ELBIT
Subsidiaries have good and valid title to all of their
respective owned assets and real and personal properties, both
tangible and intangible (including, without limitation, all
assets reflected in the ELBIT Condensed Interim Financial
Statements, except those disposed of since March 31, 2005),
and good title to their leasehold estates with respect to real
and personal property, in each case free and clear of all
Encumbrances except, in each case:
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(i) Encumbrances for current taxes not delinquent or taxes
being protested in good faith; |
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(ii) such imperfections in the title thereto and
Encumbrances, if any, as do not materially detract from the
value, or materially interfere with the present or continued use
or occupancy, of the property of ELBIT and the Material ELBIT
Subsidiaries; and |
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(iii) with respect to real property, Encumbrances which
would not result in a Material Adverse Effect on ELBIT. |
(b) Other than as set forth in Section 5.10(b) of the
ELBIT Disclosure Schedule, each of ELBIT and the Material ELBIT
Subsidiaries owns or has a valid leasehold interest in all the
buildings, structures, leasehold improvements, equipment and
other tangible property material to its business as presently
conducted, all of which are in good and sufficient operating
condition and repair, ordinary wear and tear excepted, and
neither ELBIT nor any Material ELBIT Subsidiary has received
notice that any of such property (A) is in violation in any
material respect of any existing law or any building, zoning,
health, safety or other law or regulation; or (B) requires
any substantial work, repairs, construction, alterations or
installation which has not been complied with.
5.11 Permits.
ELBIT and the Material ELBIT Subsidiaries have all permits,
licenses, orders, approvals, franchises and the rights and
privileges necessary in order for them to carry on their
business as presently conducted, except such permits, licenses,
orders, approvals, franchises, and other rights and privileges
the failure of which to obtain would not have a Material Adverse
Effect on ELBIT. Each such permit, license, order and approval
is in full force and effect, and no proceeding is pending, or to
the best knowledge of ELBIT, threatened, to revoke or materially
modify it. ELBIT and the Material ELBIT Subsidiaries have been
and are in compliance with the terms of each such permit,
license, order and approval and any conditions placed thereon
and neither ELBIT nor any of the Material ELBIT Subsidiaries is
aware of any potential violation or breach of the terms and
conditions of any such permit, license, order, approval,
franchise and any right and privilege resulting from the
consummation of the Merger (except to the extent that the
failure to be in compliance or such violation or breach could
not reasonably be expected to have a Material Adverse Effect on
ELBIT).
5.12 Environmental
Matters.
ELBIT and, to the best knowledge of ELBIT, each Material ELBIT
Subsidiary are in substantial compliance with all applicable
environmental regulations and standards relating to the conduct
of the business of ELBIT and the Material ELBIT Subsidiaries,
respectively, as presently conducted and there exists no toxic
waste or other environmental hazard that has not previously been
publicly disclosed by ELBIT or otherwise disclosed in writing to
ELSCINT which would have a Material Adverse Effect on ELBIT.
5.13 Listing.
The listing of ELBIT shares for trade on the Nasdaq National
Market and on the TASE is in complete force and effect as of the
date of this Merger Agreement. ELBIT did not receive any notice
regarding a potential delisting of its shares from trade on
either the Nasdaq National Market or the TASE and ELBIT is not
aware of any non-compliance on its part with any listing or
maintenance requirement of the either the Nasdaq National Market
or the TASE applicable to it, including all Nasdaq corporate
governance standards.
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5.14 Litigation.
Except as set forth in Section 5.14 of the ELBIT Disclosure
Schedule, there are no actions, suits, proceedings or
investigations, pending before any court or governmental agency
or before any arbitrator of any kind, or any order, injunction
or decree outstanding or an application therefor, or, to the
best knowledge of ELBIT threatened, against ELBIT or any
Material ELBIT Subsidiary or relating to their property, assets
or business as presently conducted which, if sustained, would
have a Material Adverse Effect on ELBIT, or (in respect of those
actions, suits, proceedings or investigations each of which by
itself would not have a Material Adverse Effect on ELBIT or on
any Material ELBIT Subsidiary) would, taken together, have a
Material Adverse Effect on ELBIT.
5.15 Opinion of Financial
Advisor.
The Board of Directors of ELBIT has received the opinion of C.E.
Unterberg, Towbin, LLC, which shall be attached hereto as
Section 5.15 of the ELBIT Disclosure Schedule immediately
following the signing of this Merger Agreement, to the effect
that, as of the date of entering into this Merger Agreement, the
Exchange Ratio is fair, from a financial point of view, to the
shareholders of ELBIT.
5.16 Absence of
Changes.
Since March 31, 2005, except as reflected in, or
contemplated by, the ELBIT SEC Reports including the ELBIT
Condensed Interim Financial Statements, each of ELBIT and to the
best of knowledge of ELBIT, each of the Material ELBIT
Subsidiaries has conducted its business only in the ordinary
course thereof and has not:
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(i) issued or sold, or agreed to issue or sell, or
purchased, or agreed to purchase, any of its share capital or
securities convertible into or exchangeable for such share
capital, or any options, warrants, rights or calls to purchase
such share capital, or other corporate securities; |
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(ii) incurred any material obligation or liability,
absolute or contingent, except in the ordinary course of
business consistent with past practice; |
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(iii) made any wage or salary increase or granted any
bonuses, except those made in the normal employee or executive
review process carried on in the ordinary course of business
consistent with past practice; |
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(iv) mortgaged, pledged or subjected to Encumbrance any of
its material properties or assets, other than in the ordinary
course of business; |
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(v) sold, assigned or transferred any of its material
properties or assets, other than in the ordinary course of
business; |
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(vi) entered into any material transaction not in the
ordinary course of business consistent with past practice; |
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(vii) suffered any change, event or set of circumstances
which has had, or is reasonably likely to have, a Material
Adverse Effect on ELBIT; |
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(viii) waived any rights of substantial value, or
cancelled, modified or waived any debts held by ELBIT or any
Material ELBIT Subsidiary, other than rights or debts
(A) in the ordinary course of business which are not in
excess of U.S. $2,000,000. in the aggregate; and
(B) other than in the ordinary course of business which are
not in excess of U.S. $500,000 in the aggregate (ELBIT and
the Material ELBIT Subsidiaries, taken together, for the
purposes of the amounts referenced in clauses (A) and
(B)); |
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(ix) made or incurred capital expenditures in excess of an
aggregate of U.S. $2,000,000 (ELBIT and any Material ELBIT
Subsidiary, taken together), other than in the ordinary course
of business; |
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(x) declared, paid or set aside any dividends or other
distributions or payments on its share capital or repurchased,
redeemed or otherwise acquired any outstanding shares or other
securities of, or other ownership interests in, ELBIT or any
Material ELBIT Subsidiary; |
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(xi) made any loans or advances to any person or assumed,
guaranteed, endorsed or otherwise became responsible for the
obligations of any person, other than in the ordinary course of
business; |
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(xii) effected any merger, consolidation, recapitalization,
share split, share dividend, reorganization or other transaction
affecting the share capital of ELBIT; |
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(xiii) suffered any damage, destruction or other casualty
or loss (whether or not covered by insurance) materially
affecting the business or assets of ELBIT and of any Material
ELBIT Subsidiary as presently conducted; |
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(xiv) materially changed any method or principle of
accounting or accounting practice by ELBIT, except for any such
change required by reason of a concurrent change in the
applicable generally accepted accounting principles and
disclosed in the ELBIT Financial Statements; or |
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(xv) entered into any agreement or commitment relating to
any of the foregoing. |
5.17 Authority for Merger
Agreement.
(a) Subject to the fulfillment of all the conditions to
Closing specified in Section 8 below (or the waiver of any
of which by the applicable party in accordance with the terms of
Section 8 below), all corporate and other proceedings
required to be taken by or on behalf of ELBIT in order to
authorize ELBIT to execute this Merger Agreement and consummate
the Merger, have been duly and properly taken. This Merger
Agreement has been duly signed and delivered by ELBIT and is
valid and binding upon ELBIT and enforceable against it in
accordance with its terms.
(b) No filing or registration with or notification to and
no permit, authorization, consent or approval of any
governmental entity (including, without limitation, regulatory
authority or agency of Israel, federal, state or local of the
United States, or any other applicable jurisdiction) is required
to be obtained, made or given by ELBIT or any Material ELBIT
Subsidiary in connection with the execution of this Merger
Agreement or the consummation by ELBIT of the Merger or the
other transactions contemplated hereby, except:
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(i) the filing of the Final Court Order with the Registrar
of Companies in Israel; |
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(ii) the filing with the SEC of, and a declaration of
effectiveness by the SEC of the F-4 Registration Statement, as
defined in Section 7.6 herein; and |
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(iii) the approval of the TASE for the registration of
trading of the ELBIT Shares on the TASE. |
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(iv) the receipt of the Israel Securities Authoritys
position in writing that the offer of ELBIT Shares to ELSCINT
Shareholders does not require the publication of a prospectus in
Israel. |
5.18 Compliance with
Laws.
Neither ELBIT nor, to the best knowledge of ELBIT, any Material
ELBIT Subsidiary is in violation of or is in default, under
Israeli or foreign law, any regulation, order, judgment,
injunction, decree, award or other requirement of any court,
arbitrator or governmental or regulatory body, including without
limitation labor and employment practices, environment, health
and safety, zoning, or otherwise relating to its property,
assets or business as presently conducted, except for violations
of or liabilities under any of the foregoing which would not,
individually or in the aggregate, have a Material Adverse Effect
on ELBIT.
5.19 Certain Corporate
Resolutions and Board Recommendation.
The Audit Committee and Board of Directors of ELBIT, following
the recommendation of an independent committee of ELBITs
Board of Directors formed for the purpose of considering the
transactions
A-25
contemplated by this Merger Agreement, have duly approved and
adopted this Merger Agreement, the Merger and the other
transactions contemplated hereby, determined that the Merger is
advisable and fair to the shareholders of ELBIT and is to the
benefit of ELBIT, and the Board of Directors recommended that
the shareholders of ELBIT approve and adopt this Merger
Agreement, the Merger and the other transactions contemplated
hereby.
5.20 No Breach.
The Merger and the other transactions contemplated by this
Merger Agreement will not give rise to a right to terminate or
result in a breach of the terms or conditions of or constitute a
default under or violate the (i) Memorandum of Association
or Articles of Association (or similar instrument) of ELBIT or
any Material ELBIT Subsidiary, or (ii) any agreement or
other document or undertaking to which ELBIT or any Material
ELBIT Subsidiary is a party or by which any of them is bound,
except (A) as set forth in Section 5.20 of the ELBIT
Disclosure Schedule and (B) solely with respect to
clause (ii) above, violations or breaches which would not,
in the aggregate, have a Material Adverse Effect on ELBIT, or
materially adversely affect the ability of ELBIT to consummate
the transactions contemplated hereby.
5.21 Disclosure.
The representations, warranties and statements made by ELBIT in
this Merger Agreement and in the documents delivered by ELBIT
pursuant hereto do not contain any untrue statement of a
material fact, and, when taken together, do not omit to state
any material fact necessary to make such representations,
warranties and statements, in light of the circumstances under
which they are made, not misleading. To the best knowledge of
ELBIT, there is no material fact or information relating to the
operations and financial condition of ELBIT or any of the
Material ELBIT Subsidiaries, as presently conducted that has not
been fully disclosed to ELSCINT in writing by ELBIT.
6. COURT APPROVAL.
(a) ELBIT and ELSCINT undertake to take appropriate action
to file, as soon as practicable after the date hereof, but in
any case, no later than within thirty (30) days following the
date hereof, a motion (the First Motion) with
the Tel Aviv-Jaffa District Court or any other competent court
in Israel (the Court) in accordance with
Sections 350 and 351 of the Companies Law to order that
(1) special meetings of each of ELSCINTs shareholders
(the ELSCINT Shareholders Meeting) and,
to the extent required, other constituencies of ELSCINT, shall
be convened at the earliest practicable date; and
(2) special meetings of ELBITs shareholders (the
ELBIT Shareholders Meeting), and, to
the extent required, other constituencies of ELBIT, shall be
convened at the earliest practicable date; all for the purpose
of considering and approving the Merger, including the Exchange
and the other transactions contemplated by this Merger
Agreement, which shall have been recommended for approval by
each of ELBITs and ELSCINTs respective Audit
Committees and Boards of Directors, which First Motion shall be
in form and substance mutually acceptable to the parties.
(b) As soon as practicable following the approval of the
First Motion by the Court, ELSCINT and ELBIT shall make joint
efforts and take appropriate action to convene the ELSCINT
Shareholders Meeting, ELBIT Shareholders Meeting and
any of ELSCINTs or ELBITs other meetings in
accordance with the Courts instructions, for the purpose
of considering and approving the Merger, the Merger Agreement,
the consummation of the Merger and the other transactions
contemplated hereby.
ELBIT and ELSCINT undertake to take appropriate action to
convene all the above-mentioned meetings as near in time as
possible to the day and the time as the other above-mentioned
meetings.
(c) Promptly after the approval by the requisite majority
of the Merger Agreement, the Merger and the other transactions
contemplated hereby at each of the ELSCINT Shareholders
Meeting and ELBIT Shareholders Meeting, ELBIT and ELSCINT
shall file with the Court a motion, in form and substance
mutually acceptable to the parties (the Second
Motion), requesting that the Court issue a final order
approving the Merger pursuant to Section 351 Companies Law
(the Final Court Order). The Second
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Motion shall include, inter alia, a request that the
Merger shall have the consequences set forth in Section 1
hereof. As soon as practicable following the issuance of the
Final Court Order, but subject to the full satisfaction (or
waiver by the applicable party, as the case may be) of all of
the conditions to Closing specified in Section 8 below,
ELSCINT and ELBIT shall file the Final Court Order with the
Registrar of Companies in Israel.
(d) In connection with ELSCINT Shareholders Meeting,
ELBIT Shareholders Meeting and other constituencies of
ELSCINT or ELBIT to the extent required, ELSCINT and ELBIT will
duly solicit the vote of the shareholders, and, if required,
other constituencies of ELSCINT or ELBIT, respectively, for
their approval of the Merger Agreement, the Merger and the other
transactions contemplated hereby. Each shareholder of ELSCINT
and ELBIT shall be provided with, by mail or other form of
delivery, the Proxy Statements/ Prospectus in the form included
in the F-4 Registration Statement, as soon as practicable after
the date that the F-4 Registration Statement is declared
effective by the SEC.
7. COVENANTS.
7.1 Access.
(a) Provided this Merger Agreement has not been terminated
in accordance with Section 11.2 below, during the period
from the date hereof until the Closing Date (the
Pre-Closing Period), upon reasonable notice,
ELSCINT and ELBIT shall each afford to the officers, attorneys,
accountants and other authorized representatives of the other,
reasonable access, during regular business hours, to their
books, records, personnel and properties (including, without
limiting the generality of the foregoing, the work papers with
respect to the preparation of the financial statements for the
three fiscal years ended December 31, 2004 and for the
three month period ended on March 31, 2005 or on such later
date prior to Closing for which financial statements are
available and including files on each material claim or suit
brought or asserted against it during the past three years).
(b) Each party will promptly notify the other party in
writing of any event which results, or with the passage of time
is reasonably likely to result, in any representation or
warranty of such party contained herein being or becoming false,
incorrect or misleading.
(c) The access afforded pursuant to this Section 7.1
shall be conducted in such a manner as to (i) avoid any
undue disruption of normal business operations and
(ii) maintain the confidentiality of any information
acquired as a result of such access in accordance with this
Merger Agreement and any confidentiality agreements between
parties hereto.
(d) No investigation made pursuant to this Merger Agreement
or in connection therewith shall affect any representation or
warranty given under this Merger Agreement.
7.2 Share Capital.
(a) During the Pre-Closing Period, except as contemplated
under this Merger Agreement or with the prior consent of ELBIT:
(i) no change shall be made in ELSCINTs registered
(authorized), issued and outstanding share capital or that of
any of the Material ELSCINT Subsidiaries (other than upon
exercise of options for the ELSCINT Shares and/or shares of any
Material ELSCINT Subsidiary, granted prior to the date hereof);
(ii) no change shall be made with respect to the period of
exercisability or acceleration of the exercisability of any
Option or any other security of ELSCINT; and (iii) neither
ELSCINT nor any of the Material ELSCINT Subsidiaries shall
repurchase, redeem or otherwise acquire any ELSCINT Shares.
(b) During the Pre-Closing Period, except as contemplated
under this Merger Agreement or with the prior consent of
ELSCINT: (i) no change shall be made in ELBITs
registered (authorized), issued and outstanding share capital or
that of any of the Material ELBIT Subsidiaries; and
(ii) neither ELBIT nor any of the Material ELBIT
Subsidiaries shall repurchase, redeem or otherwise acquire any
ELBIT Shares.
A-27
(c) During the Pre-Closing Period and unless the prior
consent of the other party to this Merger Agreement is received,
neither ELBIT nor ELSCINT shall declare or pay any dividends or
other distributions or payments on their share capital.
7.3 Other Actions.
ELSCINT and ELBIT shall each file with any governmental
authority all applications required in connection with the
transactions contemplated by this Merger Agreement and will use
their respective best commercial efforts to (a) comply with
all requirements of any such authority, and (b) do all
things and take all actions required for the consummation of the
Merger and the other transactions contemplated hereby.
7.4 Litigation.
During the Pre-Closing Period, each of ELSCINT and ELBIT will
(i) promptly notify the other party hereto in writing of
any lawsuits, claims, proceedings or investigations which are
commenced against or, to the best knowledge of ELSCINT or ELBIT,
as applicable, threatened against the notifying party or any
Material ELSCINT Subsidiary or Material ELBIT Subsidiary, as the
case may be, or any employee, officer, director, consultant or
other agent of the notifying party or any Material ELSCINT
Subsidiary or Material ELBIT Subsidiary, as the case may be, in
their capacity as such; and (ii) not settle or compromise,
or agree to settle or compromise, any suit, investigation or
other litigation matter or matter in an arbitration or
administrative proceeding which would have a Material Adverse
Effect on ELSCINT or on ELBIT, as the case may be, without the
prior written consent of ELBIT or ELSCINT, respectively, which
shall not be unreasonably withheld or delayed.
7.5 Quarterly
Statements.
ELSCINT and ELBIT will promptly provide each other with reviewed
(unaudited) consolidated quarterly financial statements
prepared in a manner consistent with Israeli GAAP and including
a reconciliation note to U.S. GAAP for each fiscal quarter
ending during the Pre-Closing Period which will be attached
hereto as Exhibit 7.5. Such reviewed consolidated
quarterly financial statements to be prepared by ELSCINT and
ELBIT will fairly present in all material respects, the
consolidated financial positions of ELSCINT and ELBIT as of
their respective dates and the consolidated results of its
operations for the periods presented.
7.6 Proxy Statements.
(a) ELSCINT and ELBIT will, as promptly as practicable,
jointly prepare and file with the SEC, a joint proxy statement/
prospectus and forms of proxy, in connection with the vote of
ELSCINTs shareholders with respect to the Merger, and in
connection with the vote of ELBITs shareholders with
respect to the Merger, and the issuance of ELBIT Shares pursuant
to this Merger Agreement (such joint proxy statement/
prospectus, together with any amendments thereof or supplements
thereto, in each case in the form or forms mailed to
ELSCINTs and ELBITs shareholders, is herein called
the Proxy Statement/ Prospectus). ELSCINT and
ELBIT will, as promptly as practicable, jointly prepare and
ELBIT will file, at its own cost and expense, with the SEC, a
registration statement on Form F-4 (the F-4
Registration Statement), containing the Proxy
Statement/ Prospectus, in connection with the registration under
the Act of the ELBIT Shares issuable in connection with the
Merger.
(b) ELSCINT and ELBIT will use their respective best
commercial efforts to cause the F-4 Registration Statement
to be declared effective as promptly as practicable, including,
without limitation, causing their accountants and legal counsel
to deliver necessary or required instruments such as opinions,
consents and certificates, and will take any other action
required or necessary to be taken under United States federal or
state securities laws or otherwise in connection with the
registration process in order to cause the F-4 Registration
Statement to be declared effective as soon as possible. ELSCINT
and ELBIT will use their respective best commercial efforts to
cause the Proxy Statement/ Prospectus to be mailed to
shareholders of ELSCINT and ELBIT at the earliest practicable
date after the F-4 Registration Statement is declared effective
and approval is obtained from the Court of the First Motion,
will coordinate and cooperate with respect to the timing of the
ELBIT Shareholders Meeting and the ELSCINT Shareholders Meeting,
and
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shall use their best commercial efforts to hold such meetings as
near in time as possible to one another and as soon as
practicable after the aforesaid declaration and approval.
(c) Each of ELSCINT and ELBIT will use all reasonable
efforts to obtain the necessary approvals by their shareholders,
and, if required by a binding court order, also other
constituencies thereof, respectively, for the Merger and the
transactions contemplated hereby. ELBIT further agrees and
undertakes to vote all of its ELSCINT shares in favor of the
Merger in the ELSCINT Shareholder Meeting.
(d) If at any time prior to the Closing Date any
information relating to ELSCINT or ELBIT, or any of their
respective affiliates, officers or directors, should be
discovered by any of them which should be set forth in an
amendment or supplement to any of the F-4 Registration Statement
or the Proxy Statement/ Prospectus, so that any of such
documents would not include any misstatement of a material fact
or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading, the party which discovers such
information shall promptly notify the other party hereto and an
appropriate amendment or supplement describing such information
shall be promptly filed with the SEC and to the extent required
by law, disseminated to the shareholders of ELSCINT and ELBIT.
(e) ELBIT will provide ELSCINT with a reasonable
opportunity to review and provide comments on (which comments
shall be considered by ELBIT) any filing of ELBIT with the SEC
in connection with the Merger. ELBIT will promptly advise
ELSCINT when it receives any comments on such filings by the SEC
and when the F-4 Registration Statement has become effective,
and ELBIT will furnish ELSCINT with a reasonable number of
copies of all such documents.
7.7 Information for
Filings.
(a) ELSCINT will furnish ELBIT with all information
concerning ELSCINT, required for inclusion in (i) the F-4
Registration Statement, (ii) TASE or NASDAQ listing
application to be filed with respect to the ELBIT Shares to be
issued hereunder or (iii) any statements or applications
made by ELBIT to any governmental body in connection with the
transactions contemplated by this Merger Agreement; and all
information furnished to ELBIT for such applications and
statements shall be true and correct in all material respects
without omission of any material fact required to be stated to
make such information, in light of the circumstances under which
they are made, not misleading.
(b) ELBIT will furnish ELSCINT with all information
concerning ELBIT required for inclusion in any statements or
applications made by ELSCINT to any governmental body in
connection with the transactions contemplated by this Merger
Agreement, and all information furnished to ELSCINT for such
applications and statements shall be true and correct in all
material respects without omission of any material fact required
to be stated to make such information, in light of the
circumstances under which they are made, not misleading.
(c) ELBIT and ELSCINT shall furnish each other with all
information or documents required under any applicable law, in
connection with the transactions contemplated by this Merger
Agreement.
7.8 Listing of ELBIT Shares
on NASDAQ and the TASE.
ELBIT shall use its best commercial efforts to cause the ELBIT
Shares to be issued pursuant to this Merger Agreement to be
listed on NASDAQ and the TASE prior to the Closing.
7.9 Affiliates.
ELSCINT shall deliver to ELBIT, at least 20 days before the
convening of ELSCINT shareholders meeting for the approval of
this Merger, a letter identifying all persons, if any, who, at
the time of the ELSCINT Shareholder Meeting are expected to be
deemed affiliates of ELSCINT for purposes of
Rule 145 under the Act (the Affiliated
Shareholders). ELSCINT shall use its best efforts to
cause each Affiliated Shareholder to deliver to ELBIT, on or
prior to the Closing, a written agreement, in the form of
Exhibit 7.9 hereto, that such Affiliated Shareholder
will not sell, pledge, transfer or otherwise dispose of any
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ELBIT Shares issued to such Affiliated Shareholder pursuant to
the Merger, except in compliance with Rule 145 promulgated
under the Act. ELSCINT shall promptly advise ELBIT if any Person
becomes or ceases to be such an Affiliated Shareholder.
7.10 S-8 Registration
Statement.
ELBIT shall prepare and file as soon as practicable after the
Closing Date, and no later than 10 days thereafter, and use
its best commercial efforts to maintain the effectiveness of, a
Registration Statement on Form S-8 with respect to the
ELBIT Shares to be issued, pursuant to Section 1.4 above,
upon exercise of the Options being assumed hereunder.
7.11 Satisfaction of
Conditions to Closing.
ELSCINT and ELBIT will use their reasonable efforts to satisfy
or cause to be satisfied all the conditions set forth in
Section 8 (which shall not be interpreted as derogating
from the discretion or judgment given to any party hereto in
such Sections, subject to any applicable law), as applicable to
each of them, and to cause the transactions contemplated by this
Merger Agreement to be consummated, and, without limiting the
generality of the foregoing, to obtain all consents and
authorizations of third parties and to make all filings with,
and give all notices to, third parties that may be necessary or
reasonably required on its part in order to effect the
transactions contemplated hereby, to defend all lawsuits or
other legal proceedings challenging this Merger Agreement or the
consummation of the Merger or the other transactions
contemplated hereby, to lift or rescind any injunction or
restraining order or other order adversely affecting the ability
of the parties to consummate the transactions contemplated
hereby, and to provide all necessary information for the Proxy
Statement/ Prospectus and the F-4 Registration Statement.
7.12 Advice of
Changes.
Each party will promptly advise the other party in writing of
(i) any notice or other communication from any Person
alleging that the consent of such person or entity is or may be
required in connection with the Merger; (ii) any notice or
other communication from any governmental or regulatory agency
or authority in connection with the Merger; and (iii) any
Material Adverse Effect on ELBIT or on ELSCINT, as the case may
be.
7.13 Regulatory
Approvals.
Prior to the Closing Date, each party shall execute and file, or
join in the execution and filing of, any application or other
document that may be necessary in order to obtain the
authorization, approval or consent of any governmental body,
Israeli or foreign, which may be reasonably required, or that
the other company may reasonably request, in connection with the
consummation of the Merger. Each party shall use its
commercially reasonable efforts to obtain all such
authorizations, approvals and consents.
7.14 Certain Filings.
Without derogating from any other provision in this Merger
Agreement, ELSCINT and ELBIT shall use reasonable commercial
efforts: (i) in determining whether any action by or in
respect of, or filing with, any governmental body, agency or
official, or authority is required, or any actions, consents,
approvals or waivers are required to be obtained from parties to
any ELSCINT Agreement or ELBIT Agreement, respectively, in
connection with the consummation of the transactions
contemplated by this Merger Agreement; and (ii) in seeking,
in a timely manner, any such actions, consents, approvals or
waivers or making any such filings or furnishing information
required in connection with the Proxy Statement/ Prospectus
and/or the F-4 Registration Statement.
7.15 Officers and
Directors Insurance.
(a) ELBIT shall continue to purchase and/or cause ELSCINT
to purchase for the next seven (7) years following the
Closing a directors and officers liability insurance
policy within a policy covering ELBIT, ELSCINT and/or any of
their respective affiliates, including Europe-Israel (M.M.S.)
Ltd., the controlling
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shareholder of ELBIT, on substantially similar terms to the
existing directors and officers liability insurance
policy maintained by ELSCINT and which aggregate coverage amount
shall not be less than USD $40 million, provided that the
aggregate annual premium for such policy shall not exceed
$900,000. In the event such annual premium exceeds $900,000,
ELBIT shall purchase or cause ELSCINT to purchase the highest
coverage amount affordable for such annual premium.
(b) In the event ELBIT or ELSCINT (i) consolidates
with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any person,
then, and in each such case, proper provision shall be made so
that such continuing or surviving corporation or entity or
transferee of such assets, as the case may be, shall assume the
obligations set forth in Section 7.14(a) above.
7.16 U.S. Tax
Treatment.
Notwithstanding herein to the contrary, each of ELBIT and
ELSCINT shall use its reasonable efforts to cause the Merger to
qualify and will not (either before or after the Merger) take
any actions, or fail to take any action, which could reasonably
be expected to prevent the Merger from qualifying as a
reorganization under the Code.
8. CONDITIONS TO
CLOSING.
8.1 The obligations of ELBIT and ELSCINT to consummate the
Merger are subject to the fulfillment of each of the following
conditions, unless waived in writing by the relevant party,
subject to the receipt of approval by such partys audit
committee and board of directors (except where the fulfillment
of such condition is a requirement of law):
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(a) Representations and Warranties. Each of
the representations and warranties of each of ELBIT and ELSCINT
contained in this Agreement shall be true and correct in all
material respects (except for those heretofore qualified by
materiality, in which case, no additional standard of
materiality shall be applied) as of the date hereof and as of
the Closing Date as though made on and as of the Closing Date
(except that those representations and warranties which address
matters only as of a particular date need only be true and
correct as of such date). |
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(b) Covenants. Each of ELBIT and ELSCINT
shall have performed and complied, in all material respects,
with all the material covenants, agreements and conditions
required by this Merger Agreement to be performed or complied
with by ELBIT and ELSCINT, respectively, prior to or at the
Closing Date. |
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(c) Certification. Each of ELBIT and ELSCINT
shall have delivered to ELSCINT and ELBIT, respectively a
certificate certifying that the conditions relating to ELBIT and
ELSCINT set forth in sub-sections (a) and (b) above,
respectively, have been duly satisfied. |
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(d) Shareholders and Other Authorization. The
shareholders of each of ELSCINT and ELBIT, and, if required,
other constituencies of ELSCINT and ELBIT, shall have approved
the Merger and the Merger Agreement and the consummation of the
transactions contemplated hereby by the requisite votes required
under Israeli law. |
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(e) Final Court Order. The Final Court Order
approving the Merger pursuant to Section 351 to the
Companies Law shall have been obtained. |
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(f) Effective Registration. The F-4
Registration Statement filed by ELBIT pursuant to Section 7
hereof shall have been declared effective under the Act and
shall not be subject to a stop order and no
proceedings shall have been instituted or threatened by the SEC
to suspend the effectiveness thereof. |
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(g) Tax Ruling. A tax ruling from the Israeli
Tax Authority that the Merger is a tax exempted transaction
subject to the compliance with the provisions of
Sections 104C and 103K of the Tax Ordinance and an
additional tax ruing from the Israeli Tax Authority to maintain
continuity of securities |
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granted under Elscints incentive plans (collectively, the
Tax Rulings) shall have been obtained. The
Tax Rulings shall be attached hereto as
Exhibit 8(g). It is hereby expressly agreed and
understood that in the event the Israel Tax Authority conditions
the grant of the Tax Rulings upon any condition whatsoever,
other than a technical condition, the party to this Merger
Agreement with respect to which such condition was imposed shall
have sole discretion to either fulfill the said condition, or
alternatively, to elect to terminate this Merger Agreement and
in such event the other parties to this Merger Agreement shall
have no claim or demand in connection with such termination. |
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(h) Listing. The TASE shall have approved for
listing of the ELBIT Shares to be issued pursuant to this Merger
Agreement and ELBIT shall have sent an official notice of
issuance to NASDAQ for the listing of such ELBIT Shares. |
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(i) Financing Institutions Approvals.
Each of ELBIT, EMH and ELSCINT shall have received any and all
required approvals from financing institutions for the
consummation of this Merger Agreement and the Merger in
accordance with financing agreements entered into between such
institutions and each of ELBIT, EMH and ELSCINT or any of their
respective affiliates. |
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(j) No Actions. No judicial decision shall
have been issued against ELSCINT and/or any Material ELSCINT
Subsidiary and/or against ELBIT and/or any Material ELBIT
Subsidiary, which has the effect of making the Merger illegal or
otherwise prohibited or otherwise substantially restrains
consummation of the Merger and the transactions contemplated
under this Merger Agreement. |
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(k) Authority for Action. All corporate and
other material proceedings required to be taken by or on behalf
of or with respect to each of ELSCINT and ELBIT to authorize
each of ELSCINT and ELBIT to enter into this Merger Agreement
and to consummate the Merger and the other transactions
contemplated hereby, including the issuance of the Final Court
Order, shall have been duly and properly taken or obtained. |
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(l) No Material Adverse Effect. As a
condition to Closing for ELSCINT there shall not
have occurred any change, event or development in ELBIT and/or
in any of the Material ELBIT Subsidiaries which individually or
together would result in a Material Adverse Effect on ELBIT and
as a condition to Closing for ELBIT there shall not
have occurred any change, event or development in ELSCINT and/or
in any of the Material ELSCINT Subsidiaries which individually
or together would result in a Material Adverse Effect on ELSCINT. |
8.2 The consent of the two directors of ELSCINT, each
holding as of the date hereof, Options to acquire 25,000 ELSCINT
Shares, who are the sole holders of ELSCINT convertible
securities or otherwise exercisable into ELSCINT Shares, for the
Merger, including this Merger Agreement, is attached hereto as
an Exhibit 8.2 of this Merger Agreement.
9. ACTIONS AFTER THE CLOSING
DATE.
9.1 Survival of
Representations and Warranties.
The representations and warranties of each of ELBIT and ELSCINT
contained in this Merger Agreement shall not survive the Closing
Date. The term representations and warranties in
this Section 9.1 includes any Exhibit, Schedule or document
delivered pursuant to the relevant sections of this Merger
Agreement. This Section 9.1 shall not limit any covenant or
agreement of the parties which by its terms contemplates
performance after the Closing Date.
9.2 Further Acts.
Each of the parties hereto shall use all reasonable commercial
efforts to perform such further acts and to execute such
additional documents as may be reasonably required to effectuate
the transactions contemplated hereby and to carry into effect
the intents and purposes of this Merger Agreement.
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10. EXPENSES; TAXES.
Each of the parties hereto shall pay its own expenses
(including, without limitation, the fees, disbursements and
expenses of its attorneys, accountants and investment advisors),
in connection with the negotiation and preparation of this
Merger Agreement and the transactions contemplated hereby.
11. MODIFICATION OR
TERMINATION; WAIVERS.
11.1 Modifications and
Waivers.
This Merger Agreement may be amended or modified by a written
instrument executed by ELSCINT and ELBIT, following the receipt
of the approval of ELSCINTs and ELBITs audit
committees and board of directors, including with respect to any
of the terms (including, without limitations, the exchange
ratio), covenants, representations, warranties or conditions
hereof and/or the waiver thereof by a written instrument
executed by the party waiving compliance. The failure of any
party at any time or times to require performance of any
provision hereof shall in no manner affect the right of such
party at a later time to enforce the same.
No waiver by any party of the breach by the other party of any
term, covenant, representation or warranty contained in this
Merger Agreement as a condition to the waiving partys
obligations hereunder shall release or affect any liability
resulting from such breach, and no waiver of any nature, whether
by conduct or otherwise, in any one or more instances, shall be
deemed to be or construed as a further or continuing waiver of
any such condition or of any breach of any other term, covenant,
representation or warranty of this Merger Agreement.
11.2 Termination.
11.2.1 This Merger Agreement may be terminated at any time
prior to the Closing Date (notwithstanding that approval by the
shareholders and, if required under law, other constituencies,
of ELSCINT or ELBIT may have been obtained) under any of the
following circumstances:
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(i) By mutual consent of ELSCINT and ELBIT; |
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(ii) By ELSCINT or ELBIT, if any court of competent
jurisdiction or other governmental body shall have issued an
order, decree, or ruling, or taken any other action permanently
restraining, enjoining, or otherwise prohibiting the Merger
and/or the Merger Agreement, and such order, license, ruling or
other action shall have become final and non-appealable; |
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(iii) By ELSCINT or ELBIT, if the Merger is not approved by
the requisite majority by the shareholders of ELSCINT or ELBIT
and, if required by a binding court order, by other
constituencies of ELSCINT or ELBIT, at meetings duly convened
therefore; |
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(iv) By ELSCINT or ELBIT if the Merger is not consummated
by March 31, 2006, provided that the right to terminate the
Merger Agreement pursuant to this clause (iv) shall not be
available to any party whose failure to fulfill any obligation
under this Merger Agreement has been the cause of, or resulted
in, the failure of the Merger to be consummated on or prior to
such date; |
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(v) By ELBIT, if (A) any representation or warranty of
ELSCINT set forth in this Merger Agreement shall have become
untrue or ELSCINT has breached any covenant or agreement of
ELSCINT set forth in this Merger Agreement, (B) such breach
or misrepresentation is not capable of being cured within 21
calendar days, and (C) such breach or misrepresentation would
cause the conditions set forth in Section 8 not to be
satisfied; or |
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(vi) By ELSCINT, if (A) any representation or warranty
of ELBIT set forth in this Merger Agreement shall have become
untrue or ELBIT has breached any covenant or agreement of ELBIT
set forth in this Merger Agreement, (B) such breach or
misrepresentation is not capable of being cured within 21
calendar days, and (C) such breach or misrepresentation
would cause the conditions set forth in Section 8 not to be
satisfied. |
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11.2.2 Notwithstanding anything in this Merger Agreement to
the contrary, the following shall not be deemed to be grounds
for terminating this Merger Agreement and/or not consummating
the Merger Agreement: the pricing of the ELSCINT Shares in the
Merger and the pricing of the exchanged ELBIT Shares, and the
market prices of the ELBIT Shares or any changes therein or of
the ELSCINT Shares or any changes therein.
11.2.3 In the event of the termination of this Merger
Agreement as provided in this Section 11.2, this Merger
Agreement shall be of no further force of effect; provided,
however, that (a) nothing in this Section 11.2 shall
relieve any party to this Merger Agreement of liability for any
willful or intentional breach of this Merger Agreement, and
(b) nothing contained in this Section 11.2 shall
relieve any party to this Merger Agreement of its undertakings
under Section 3 (Publicity; Confidential Information) or
Section 10 (Expenses) hereof.
11.2.4 Any termination of this Merger Agreement shall first
be approved by the Audit Committee and Board of Directors of the
party seeking termination.
12. NOTICES.
Any notice or other communication required or which may be given
hereunder shall be in writing and either delivered personally to
an officer of the addressee or mailed, certified or registered
mail, postage prepaid, or by facsimile transmission (with a
confirming copy sent by overnight courier) and shall be deemed
given when so delivered personally or, if mailed, seven
(7) days after the time of mailing, as follows:
If to ELBIT, to:
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Elbit Medical Imaging Ltd. |
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13 Mozes St. |
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Tel Aviv 67442, Israel |
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Fax: +972-3-695-3080 |
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Attn.: Shimon Yitzhaki, President and Chief Financial Officer |
With copies (which shall not constitute notice) to:
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Gross, Kleinhendler, Hodak, Halevy, Greenberg & Co.,
Law Office |
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1 Azrieli Center |
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Round Building 39-40 Floors |
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Tel Aviv 67021, Israel |
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Fax: +972-3-607-4422 |
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Attn.: David Hodak, Adv. |
If to ELSCINT, to:
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Elscint Limited |
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13 Mozes St. |
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Tel Aviv 67442, Israel |
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Fax: +972-3-6086049 |
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Attn.: Abraham (Rami) Goren, Executive Chairman of the Board of
Directors |
With copies (which shall not constitute notice) to:
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Goldfarb, Levy, Eran & Co. |
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Europe-Israel Tower, 2 Weizmann Street |
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Tel Aviv 64239, Israel |
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Fax: +972-3-608-9909 |
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Attn.: Adam M. Klein, Adv. |
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After the Closing, notices should be sent to ELSCINT or ELBIT at
the addresses set forth above, with copies to:
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Gross, Kleinhendler, Hodak, Halevy, Greenberg & Co.,
Law Office |
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1 Azrieli Center |
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Round Building 39-40 Floors |
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Tel Aviv 67021, Israel |
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Fax: +972-3-607-4422 |
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Attn.: David Hodak, Adv. |
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13. |
GOVERNING LAW & JURISDICTION. |
This Merger Agreement shall be construed and governed by the
laws of the State of Israel applicable to agreements made and to
be performed entirely in that jurisdiction. The parties hereby
consent to the exclusive jurisdiction of the Tel Aviv-Jaffa
District Court for the hearing of all disputes arising from or
in connection with this Merger Agreement.
This Merger Agreement contains the entire agreement between the
parties hereto with respect to the subject matter hereof, and
there are no representations, warranties, understandings or
agreements other than those expressly set forth herein.
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15. |
SCHEDULES AND EXHIBITS. |
All Schedules and Exhibits annexed hereto and the documents and
instruments delivered at or prior to the Closing to which
reference has been expressly made herein, are expressly made a
part of this Merger Agreement as fully as though completely set
forth herein, and all references to this Merger Agreement herein
or in any of such documents (whether or not such references
include a specific reference to such documents) shall be deemed
to refer to and include all such documents.
All Schedules and Exhibits provided herein by ELSCINT to ELBIT
or by ELBIT to ELSCINT shall be in the English or the Hebrew
language.
This Merger Agreement may be executed in counterparts, each of
which shall be deemed an original but all of which together
shall constitute one and the same instrument.
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17. |
RULES OF CONSTRUCTION. |
(a) The section headings contained in this Merger Agreement
are inserted for purposes of convenience of reference only and
shall not affect the meaning or the interpretation of this
Merger Agreement.
(b) For the purpose of this Merger Agreement,
Person shall mean an individual, corporation,
partnership, limited liability company, association, trust or
other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
A-35
18. OTHER REMEDIES.
Except as otherwise provided herein, any and all remedies herein
expressly conferred upon a party shall be deemed cumulative with
and not exclusive of any other remedy conferred hereby or by law
on such party, and the exercise of any one remedy shall not
preclude the exercise of any other.
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19. |
NO THIRD PARTY BENEFICIARIES. |
Except for the provisions of Section 7.14 (Officers and
Directors Insurance), which are intended to be for the benefit
of directors and officers of ELSCINT and may be enforced by such
persons, nothing in this Merger Agreement shall confer any
rights upon any Person or entity which is not a party or
permitted assignee of a party to this Merger Agreement.
The failure of any party to enforce any of the provisions hereof
will not be construed to be a waiver of the right of such party
thereafter to enforce such provisions. The waiver by any party
of the right to enforce any of the provisions hereof on any
occasion will not be construed to be a waiver of the right of
such party to enforce such provision on any other occasion.
[Remainder of Page Left Intentionally Blank]
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Merger Agreement as of the date first above written.
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ELBIT MEDICAL IMAGING LTD. |
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By: |
/s/ Mordechay Zisser
/s/ Shimon
Yitzhaki
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Name: Mordechay Zisser and Shimon Yitzhaki |
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print |
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Title: Chairman |
President |
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By: |
/s/ Rami
Goren /s/ Uri
Levin
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Name: Rami Goren |
Uri Levin |
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Title: Chairman |
Chief Financial Officer |
Elbit Medical Holdings Ltd, by signature of its authorized
representative below, undertakes to comply with the provisions
of this Agreement and Plan of Merger to the extent applicable to
it.
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ELBIT MEDICAL HOLDINGS LTD. |
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By: |
/s/ Shimon
Yitzhaki /s/ Mordechay
Zisser
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Name: Shimon Yitzhaki |
Mordechay Zisser |
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Title: President Chairman |
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A-37
Annex B
C.E. UNTERBERG, TOWBIN
350 Madison Avenue
New York, New York 10017
(212) 389-8000 FAX (212) 389-8880
August 21, 2005
The Board of Directors of Elbit Medical Imaging Ltd.
Elbit Medical Imaging Ltd.
13 Mozes St.
Tel Aviv 67442, Israel
Members of the Board:
We understand that Elbit Medical Imaging Ltd.
(Elbit) and Elscint Limited (Elscint)
propose to enter into an Agreement and Plan of Merger, to be
dated the date hereof (the Agreement), which will
provide for an arrangement for merger (the Merger)
by way of exchange of shares pursuant to Sections 350 and
351 of the Israeli Companies Law, 1999. Subject to the terms and
conditions of the Agreement, upon the effectiveness of the
Merger, each Ordinary Share, nominal value NIS 0.05 per
share of Elscint (the Elscint Shares) issued and
outstanding immediately prior to the Closing (except for Elscint
Shares held by Elbit and any Elscint Shares held by or for the
benefit of Elscint) shall be converted into the right to receive
0.53 (zero point five three) validly issued, fully paid and non
assessable Ordinary Shares, nominal value NIS 1.0 per share
of Elbit (the Elbit Shares) (the Exchange
Ratio). The other terms and conditions of the Merger are
more fully set forth in the Agreement. You have requested our
opinion as to the fairness, from a financial point of view, of
the Exchange Ratio to the shareholders of Elbit.
C.E. Unterberg, Towbin, as part of its investment banking
business, is regularly engaged in the valuation of businesses
and their securities in connection with mergers and acquisitions
and other corporate transactions. In connection with this
opinion, we have, among other things:
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(i) reviewed the financial terms and conditions set forth
in the last draft of the Agreement reviewed by us; |
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(ii) reviewed certain publicly available financial
statements and other business and financial information of Elbit
and Elscint; |
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(iii) reviewed the stock prices and trading activity of the
Elbit Shares and the Elscint Shares; |
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(iv) compared the financial terms of the Merger with the
financial terms, to the extent publicly available, of other
transactions that we deemed relevant; |
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(v) held discussions with the respective managements of
Elbit and Elscint concerning their views regarding the strategic
rationale for the Merger and the potential benefits that are
expected to result from the Merger as well as the businesses,
past and current operations, financial conditions and future
prospects of both Elbit and Elscint, independently and combined; |
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(vi) visited the primary offices of Elbit and Elscint in
Tel Aviv, Israel; and |
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(vii) made such other studies and inquiries, and reviewed
such other data, as we deemed relevant. |
In our review and analysis, and in arriving at our opinion, we
have assumed and relied upon the accuracy and completeness of
all of the financial and other information provided to us
(including information furnished
to us verbally or otherwise discussed with us by the managements
of Elbit and Elscint) or publicly available and have neither
attempted to verify, nor assumed responsibility for verifying,
any of such information. We have relied upon the assurances of
the management of Elbit and Elscint that they are not aware of
any facts that would make such information inaccurate or
misleading.
Furthermore, we did not obtain or make, or assume any
responsibility for obtaining or making, any independent
evaluation or appraisal of the properties, assets or liabilities
(contingent or otherwise) of Elbit or Elscint, nor were we
furnished with any such evaluation or current appraisal. We have
assumed that all material assets and liabilities (contingent or
otherwise) of Elbit and Elscint are as set forth in their
respective financial statements or other information made
available to us.
We have assumed that the Merger will be consummated upon the
terms set forth in the last draft of the Agreement reviewed by
us without material alteration thereof or waiver of any material
terms thereof, including, among other things, that the Merger
will be effected in accordance with Sections 104C and 103K
of the Israeli Income Tax Ordinance [New Version], 1961, as
shall be in effect from time to time and treated as a tax-free
reorganization pursuant to the U.S. Internal Revenue Code
of 1986, as amended. We express no opinion regarding whether the
necessary approvals or other conditions to the Merger will be
obtained or satisfied and assume that obtaining any necessary
regulatory approvals or third party consents will not have an
adverse effect on the Merger or any parties thereto. In
addition, we have assumed that the historical financial
statements of each of Elbit and Elscint reviewed by us have been
prepared and fairly presented in accordance with accounting
principles generally accepted in Israel consistently applied and
that there has been no material change in the assets, financial
condition, results of operations, business or prospects of Elbit
or Elscint since the date of the most recent historical
financial statements made available to us. We have also assumed
that all of the representations and warranties contained in the
Agreement and all related agreements are true and correct, that
each party to the agreements will perform all of the covenants
required to be performed by such party under the agreements,
that the conditions precedent in the agreements are not waived.
Finally, with your consent, we have relied upon the advice Elbit
has received from its legal, accounting and tax advisors as to
all legal, accounting and tax matters relating to the Merger and
the other transactions contemplated by the Agreement.
This opinion is necessarily based upon market, economic and
other conditions as in effect on, and information made available
to us as of, the date hereof. It should be understood that
subsequent developments may affect the conclusion expressed in
this opinion and that we disclaim any undertaking or obligation
to advise any person of any change in any matter affecting this
opinion which may come or be brought to our attention after the
date of this opinion. Our opinion is limited to the fairness,
from a financial point of view and as of the date hereof, to the
shareholders of Elbit of the Exchange Ratio. We do not express
any opinion as to (i) the value of any employee agreement
or other arrangement, if any, entered into in connection with
the Merger, (ii) any tax or other consequences that might
result from the Merger or (iii) the value of Elbit Shares
when issued to Elscint stockholders pursuant to the Merger or
the price at which shares of Elbit Shares may trade in the
future. The trading price of Elbit Shares may be affected by a
number of factors, including but not limited to:
(i) dispositions of Elbit Shares by shareholders within a
short period of time after the effective time of the Merger;
(ii) changes in prevailing interest rates and other factors
which generally influence the price of securities;
(iii) adverse changes in the current capital market,
generally and/or in the sectors of which either Elbit or Elscint
are a part; (iv) the occurrence of adverse changes in the
financial condition, business, assets, results of operations or
prospects of Elbit or Elscint or in their respective product
markets; (v) any necessary actions by or restrictions of
federal, state or other governmental agencies or regulatory
authorities; and (vi) timely completion of the Merger on
terms and conditions that are acceptable to all parties at
interest. Furthermore, our opinion does not account for
political factors that may affect the countries in which the
companies have offices or operations.
We are acting as financial advisor to Elbit in connection with
the Merger through providing this opinion, have received an
engagement fee and will receive a fee contingent upon the
delivery of this opinion. We have in the past and may in the
future provide investment banking and financial services to
Elbit and its affiliates, for which we would expect to receive
compensation. In addition, Elbit has agreed to indemnify us for
certain
B-2
liabilities that may arise out of our engagement. In the
ordinary course of business, we may trade in Elbits
securities for our own account and the account of our customers
and, accordingly, may at any time hold a long or short position
in Elbits securities.
Our opinion is directed to the Board of Directors of Elbit in
connection with its consideration of the Merger and is not
intended to be, and does not constitute, a recommendation to any
shareholder of Elbit or Elscint as to how such shareholder
should vote, or take any other action, with respect to the
Merger. Our opinion is directed only to the fairness, from a
financial point of view, of the Exchange Ratio to the
shareholders of Elbit and does not address the relative merits
of the Merger and the other business strategies that
Elbits Board of Directors has considered or may be
considering, nor does it address the decision of Elbits
Board of Directors to proceed with the Merger, or any
alternative transaction. This opinion may not be reproduced,
summarized, described or referred to or furnished to any party
except with our express prior written consent. However, this
opinion may be included in its entirety in any filing with
respect to the Merger made by Elbit with the
U.S. Securities and Exchange Commission, provided this
opinion is reproduced in full and any description of or
reference to us or summary of this opinion and the related
analysis is in a form and substance acceptable to us and our
counsel.
Based upon and subject to the foregoing considerations, and
based upon such other factors as we consider relevant, including
the various assumptions and limitations set forth herein, it is
our opinion that, as of the date hereof, the Exchange Ratio is
fair to the shareholders of Elbit from a financial point of view.
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Very truly yours, |
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/s/ C.E. Unterberg, Towbin |
B-3
Annex C
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Oppenheimer & Co. Inc. |
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125 Broad Street |
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New York, NY 10004 |
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Member of All Principal Exchanges |
August 18, 2005
Confidential
The Board of Directors
Elscint Limited
13 Noah Mozes Street
Tel Aviv 67442, Israel
Attention: Shmuel Peretz
Members of the Board of Directors:
You have requested our opinion as to the fairness, from a
financial point of view, to the holders (excluding Elbit Medical
Imaging Ltd., a public company organized under the laws of the
State of Israel (Elbit), its controlling shareholder
and any affiliates of Elbit and/or its controlling shareholder
(collectively, the Controlling Shareholders)) of the
outstanding ordinary shares of Elscint Limited, a public company
organized under the laws of the State of Israel
(Elscint), of the Merger Consideration (as defined
below) to be paid pursuant to the Agreement and Plan of Merger
(the Merger Agreement) in execution draft format
(draft dated August 18, 2005) that is proposed to be
entered into by and between Elbit and Elscint with respect to
the merger by way of exchange of shares pursuant to which
Elscint will become a wholly-owned subsidiary of Elbit (the
Merger).
Pursuant to the Merger Agreement, each Ordinary Share of
Elscint, nominal value NIS 0.05 per share, outstanding
immediately prior to the Merger will be exchanged into 0.53
registered Ordinary Shares of Elbit, nominal value NIS
1.0 per share (the Merger Consideration).
Outstanding options of Elscint will be assumed by Elbit and
adjusted to become options to acquire Ordinary Shares of Elbit
based on the aforementioned exchange ratio, if not exercised
prior to the Merger. The terms and conditions of the Merger are
more fully set forth in the Merger Agreement.
In arriving at our opinion, we have visited Elscints
offices in Israel and had numerous discussions with management
of Elscint about Elscints operations, financial condition
and prospects. We have reviewed the draft Merger Agreement
including the schedules and exhibits thereto, and analyzed
financial and other information that was publicly available or
furnished to us by Elscint or Elbit, including information
provided to us during discussions with the management of
Elscint. Included in the information provided during such
discussions were historical unaudited financial data of Elscint
for the three months ended March 31, 2005 and certain
financial projections of Elscint prepared by its management. In
addition, we have compared certain financial data of Elscint
with various other companies in generally similar industries
with generally similar business and financial characteristics
whose securities are traded in public markets and conducted such
other financial studies and analyses as we deemed appropriate
for purposes of this opinion. We did not rely on any one
particular financial analysis or methodology, but formulated our
opinion on the whole of such analyses. As to Elbit, we have
reviewed its recent public filings, including its Form 20-F
for the fiscal year ended December 31, 2004, and
interviewed certain representatives of Elbit regarding the
nature of its operations, financial condition and prospects. In
addition, we considered historical prices and trading activity
of the ordinary shares of both Elscint and Elbit.
In rendering our opinion, we have assumed that the Merger will
be consummated on all material terms described in the draft
dated August 18, 2005 of the Merger Agreement. We have
relied upon and assumed,
without independent verification, the accuracy and completeness
of all the financial and other information that was reviewed by
us, whether obtained from public sources, provided to us by
either Elscint or Elbit, or that was otherwise reviewed by us.
We have relied on the representation that the unaudited three
months ending March 31, 2005 financial statements of
Elscint and Elbit were prepared according to generally accepted
accounting principles and that no financial statements for any
period subsequent to March 31, 2005 were available. In
particular, we have relied upon the estimates and projections of
the management of Elscint and Elbit. With respect to the
financial projections supplied to us, we have assumed that the
forecasts presented to us by the management team of Elscint were
reasonably prepared in good faith and reasonably reflect the
best currently available estimates and judgments of the
management of Elscint regarding the future operating and
financial performance of the Company. In addition, we have not
assumed any responsibility for making any independent evaluation
or appraisal of the assets or liabilities of Elscint or Elbit.
We have not engaged in any legal analysis or review of the
Merger Agreement itself nor had any such analysis or review
conducted on our behalf. We have assumed that all legal
requirements for consummation of the Merger have or will be
complied with. We express no view to the Companys
shareholders as to the foreign, federal, state or local tax
consequences of such Merger Consideration.
In arriving at our opinion, we were not authorized to solicit,
and did not solicit, interest from any other party with respect
to the acquisition of Elscint or any of its assets. We express
no view as to, and our opinion does not address, the underlying
business decision of Elscint to effect the Merger nor were we
requested to consider the relative merits of the Merger as
compared to any other transaction in which Elscint might engage.
Our opinion is based on economic, market, financial and other
conditions as they currently exist, and on the information made
available to us as of the date of this letter, and is limited to
the fairness, as of the date hereof, from a financial point of
view, of the Merger Consideration. It should be understood that,
although subsequent developments may affect this opinion, we do
not have any obligation to update, revise or reaffirm this
opinion. Our opinion does not constitute a recommendation to any
member of the Board of Directors or shareholder of Elscint as to
how such member or shareholder should vote on the proposed
transaction. We make no representation as to trading price or
activity of any publicly-traded securities of Elscint or Elbit
from the date of announcement to closing of the Merger or
thereafter.
As part of our investment banking services, we regularly engaged
in the valuation of businesses and securities in connection with
mergers, acquisitions, underwritings, sales and distributions of
listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. As the
financial advisor to Elscint in connection with the Merger, we
will receive from Elscint a fee for rendering this opinion.
Elscint has agreed to indemnify us under certain circumstances.
In the ordinary course of our business, we may actively trade
securities of Elscint or Elbit for our own account and for the
accounts of customers and, accordingly, may at any time hold a
long or short position in such securities.
It is understood that this opinion has been prepared solely for
the use of the Board of Directors of Elscint and may not be
disclosed, summarized, excerpted from or otherwise publicly
referred to, or used for any other purposes without our prior
written consent, except that Elscint may provide a copy of this
opinion to Elbit, as required by the Merger Agreement. In
addition, Oppenheimer will, if requested by Elscint, provide
additional disclosure to such public filings regarding its
engagements with Elscint, the basis of its opinion and related
Merger Consideration.
Based upon and subject to the foregoing, we are of the opinion
that, on the date hereof, the Merger Consideration is fair from
a financial point of view to the shareholders of Elscint
(excluding the Controlling Shareholders).
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Sincerely, |
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/s/ Oppenheimer & Co. Inc. |
C-2
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20. Indemnification of Directors and
Officers.
General. EMIs Articles of Association set forth the
following provisions regarding the grant of exemption, insurance
and indemnification to any director and/or officer of EMI, all
subject to the provisions of the Israeli Companies Law:
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Exemption EMI may prospectively exempt
any director and officer of EMI from liability, in whole or in
part, for damages sustained due to a breach by the director
and/or officer of such directors and/or officers
duty of care to the EMI. A recent amendment to the Israeli
Companies Law prohibits a company to exempt any of its directors
and officers in advance from its liability towards such company
for the breach of its duty of care in distribution as defined in
the Israeli Companies Law (including distribution of dividend
and purchase of such companys shares). |
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Insurance EMI may subscribe for
insurance of liability of any director and officer of EMI
imposed on such director and/or officer due to an act performed
by such director and/or officer in such directors and/or
officers capacity as a director and/or officer of EMI, in
any of the following: |
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(i) Breach by the director and/or officer of such
directors and/or officers duty of care to EMI or to
any other person; |
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(ii) Breach of the directors and/or officers
fiduciary duty to EMI, provided that the director and/or officer
acted in good faith and had reasonable grounds to believe that
the act would not prejudice the interest of EMI; |
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(iii) Monetary liability imposed upon a director and/or
officer in favor of a third party; |
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(iv) Any other event in respect of which an insurance of a
director and/or officer is and/or may be permitted. |
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Indemnification EMI may prospectively
undertake to indemnify a director and/or officer of EMI, with
respect to liability or expense set forth hereunder, incurred by
such director and/or officer for an act performed by such
director and/or officer in such directors and/or
officers capacity as a director and/or officer of EMI,
provided that the prospective indemnification undertaking shall
be limited to certain events that in the opinion of the EMI
board of directors are foreseeable at the time of issuance of
the prospective indemnification undertaking and to an amount
that the EMI board of directors has determined that is a
reasonable amount under the circumstances. |
EMI may retroactively indemnify a director and/or officer of EMI
with respect to liability or expense set forth hereunder,
imposed on such director and/or officer for an act performed by
such director and/or officer in such directors and/or
officers capacity as an director and/or officer of EMI.
EMIs Articles of Association also provide that, subject to
the Israeli Companies Law, EMI can give a prospective
indemnification undertaking or a retroactive indemnification, as
referred to above, may be issued or granted, as the case may be,
with respect to the following matters:
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(i) Monetary liability imposed upon an officer in favor of
a third party by a judgment, including a settlement judgment
approved by court or an arbitrators award approved by
court; |
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(ii) Reasonable litigation expenses, including
attorneys fees, incurred by or charged to a director
and/or officer by court, in proceedings brought against the
director and/or officer by EMI or on its behalf or by a third
party, or a criminal charge from which the director and/or
officer was acquitted or for a criminal charge in which such
officer was convicted of an offense not requiring proof of
criminal intent; |
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(iii) Other liability or expense for which it is or may be
permissible to indemnify a director and/or officer. |
II-1
The aggregate indemnification amount paid to directors and
officers of EMI pursuant to prospective undertake to indemnify a
director and an officer of EMI as described above, or a Director
of the Other Company, as described below, shall not exceed the
lower of (i) 25% of the shareholders equity of EMI as
of the date of actual payment by EMI of the indemnification
amount (as set forth in EMIs most recent consolidated
financial statements prior to such payment); and
(ii) US$40 million, in excess of any amounts paid (if
paid) by insurance companies pursuant to insurance policies
maintained by EMI, with respect to matters covered by such
indemnification.
EMI is also authorized to grant indemnification, either
prospectively or retroactively, to any person, including a
director and an officer of EMI who officiates or officiated on
behalf of or at the request of EMI as a director of another
company of which EMI is either directly or indirectly a
shareholder or in which it has any other interest whatsoever
(Director of the Other Company), subject to
certain limitations.
Prohibition on the grant of exemption, insurance and
indemnification The Israeli Companies Law
provides that a company may not give insurance, indemnification
nor exempt its directors and/or officers from their liability in
the following events:
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(i) a breach of the fiduciary duty vis-a-vis the company; |
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(ii) an intentional or reckless breach of the duty of care,
except if such breach of duty of care was made in negligence; |
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(iii) an act done with the intention of unduly deriving a
personal profit; or |
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(iv) a fine imposed on the officer. |
Insurance of directors and officers. EMI purchased an
insurance policy for the coverage of liability of its directors
and officers, including as directors or officers of our
subsidiaries, for a one-year period beginning on
October 31, 2004 and ending on October 31, 2005. Such
policy covers a total liability of $40 million per
occurrence and during the duration of the policy, which
represents the overall directors and officers liability
policy covering the directors and officers of Europe-Israel and
companies controlled thereby. The premium paid by EMI with
respect to this insurance policy was approximately $196,000,
representing its share of the total premium of $589,000 paid for
the overall policy for Europe-Israel. The coverage of such
policy also includes acts and/or omissions performed by previous
directors and officers of EMI for a one-year period beginning on
October 31, 2004 and ending on October 31, 2005
without any retroactive limitation and subject to the terms of
the policy.
Exemption of directors and officers. EMI shareholders
approved on February 21, 2001 to prospectively exempt
directors and officers of EMI (other than the controlling
shareholder of EMI at that time) from their liability for
damages sustained due to a breach by them of their duty of care
to EMI, all in accordance with the Israeli Companies Law.
Indemnification of directors and officers. In accordance
with EMI shareholders resolution adopted on February 21,
2001, EMI has undertaken to indemnify its directors and officers
to the fullest extent permitted by the Israeli Companies Law and
EMI Articles of Association. The following principles shall
apply to the prospective indemnification undertaking with
respect to EMI directors and officers:
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1. The aggregate indemnification amount, paid to directors
and officers of EMI pursuant to prospective undertake to
indemnify a director and an officer of EMI, or a Director of the
Other Company, shall not exceed the lower of (i) 25% of the
shareholders equity of EMI as of the date of actual
payment by EMI of the indemnification amount (as set forth in
EMIs most recent consolidated financial statements prior
to such payment); and (ii) US$40 million, in excess of
any amounts paid (if paid) by insurance companies pursuant to
insurance policies maintained by EMI, with respect to matters
covered by such indemnification. |
II-2
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2. The undertaking to prospectively indemnify shall apply
(subject to any limitations or restrictions under law) to the
following events that, in the opinion of EMI board of directors,
are foreseeable at the date of the board of directors
resolution on the grant of prospective undertaking to indemnify: |
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(i) Any issuance of securities, including without
limitation, a public offering pursuant to a prospectus, a
private offering, the issuance of bonus shares or any offer of
securities in any other manner; |
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(ii) A Transaction within the meaning of
Section 1 of the Companies Law, including without
limitation a transfer, sale or purchase of assets or
liabilities, including securities, or the grant or receipt of a
right to any of the foregoing, and any act directly or
indirectly involved in such Transaction; |
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(iii) Report or notice filed in accordance with the
Companies Law or the Israeli Securities Law of 1968, including
regulations promulgated thereunder, or in accordance with rules
or instructions prevailing on an Israeli stock exchange or a
stock exchange outside of Israel, or any law of another country
regulating similar matters and/or the omission to act
accordingly; |
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(iv) Amendment to EMIs structure or its
reorganization or any resolution with respect to such matters,
including without limitation, a merger, split, change in
EMIs capital structure, incorporation of subsidiaries,
dissolution or sale thereof, issuance or distribution; |
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(v) The making of any statement, including a bona fide
statement or opinion made by an officer of EMI in such capacity,
including during meetings of the Board of Directors or any
committee thereof; |
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(vi) An act in contradiction to the articles or memorandum
of association of EMI; and |
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(vii) Any of the foregoing events relating to the capacity
of such officer as an officer of a corporation controlled by EMI
or otherwise affiliated therewith. |
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Item 21. |
Exhibits and Financial Statement Schedules. |
(a) Exhibits
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Exhibit No. |
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Description |
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2 |
.1 |
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Agreement and Plan of Merger dated as of August 21, 2005,
by and between Elbit Medical Imaging Ltd. and Elscint Ltd.
(included as Annex A to the joint proxy statement/
prospectus, which is part of this registration statement). |
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3 |
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Memorandum of Association of Elbit Medical Imaging Ltd.
(incorporated herein by reference to the registrants
Annual Report on Form 20-F, filed with the Securities and
Exchange Commission on November 22, 1996). |
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3 |
.2 |
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Articles of Association (English translation) of Elbit Medical
Imaging Ltd. (incorporated herein by reference to the
registrants Annual Report on Form 20-F, filed with
the Securities and Exchange Commission on November 22,
1996). |
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4 |
.l |
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Form of Ordinary Share Certificate of Elbit Medical Imaging Ltd. |
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5 |
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Opinion of Gross, Kleinhendler, Hodak, Halevy,
Greenberg & Co., Law Offices regarding the legality of
the securities being registered (including consent). |
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8 |
.1 |
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Opinion of Kramer Levin Naftalis & Frankel regarding
the tax consequences of the merger (including consent). |
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8 |
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Opinion of Carter Ledyard & Milburn LLP regarding the
tax consequences of the merger (including consent). |
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21 |
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Subsidiaries of the registrant (incorporated herein by reference
to the registrants Annual Report on Form 20-F for the
year ended December 31, 2004, filed with the Securities and
Exchange Commission on June 30, 2005). |
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23 |
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Consent of Brightman, Almagor & Co., for registrant. |
II-3
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Exhibit No. |
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Description |
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23 |
.2 |
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Consent of KPMG Hungaria Kft., for registrant. |
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23 |
.3 |
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Consent of Kost, Forer Gabbay & Kasierer, for
registrant. |
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23 |
.4 |
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Consent of Mazars Paardekooper Hoofman, for registrant. |
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23 |
.5 |
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Consent of Brightman, Almagor & Co., for Elscint Ltd. |
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23 |
.6 |
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Consent of Mazars Paardekooper Hoofman, for Elscint Ltd. |
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23 |
.7 |
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Consent of Kost, Forer Gabbay & Kasierer, for Elscint
Ltd. |
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23 |
.8 |
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Consent of Gross, Kleinhendler, Hodak, Halevy,
Greenberg & Co., Law Offices (included in
Exhibit 5.1). |
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23 |
.9 |
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Consent of Kramer Levin Naftalis & Frankel LLP
(included in Exhibit 8.1). |
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23 |
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Consent of Carter Ledyard & Milburn LLP (included in
Exhibit 8.2). |
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99 |
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Form of Elbit Medical Imaging Ltd. proxy card. |
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99 |
.2* |
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Consent of C.E. Unterberg, Towbin. |
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99 |
.3 |
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Consent of Oppenheimer & Co. Inc. |
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99 |
.4 |
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Form of Elscint Ltd. proxy card. |
The undersigned registrant hereby undertakes:
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(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement: |
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(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933; |
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(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Securities and Exchange Commission
pursuant to Rule 424(b) if, in the aggregate, the changes
in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the
Calculation of Registration Fee table in the
effective registration statement; |
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(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement; |
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(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof; |
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(3) To remove from registration by means of a
post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering; |
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(4) To file a post-effective amendment to the registration
statement to include any financial statements required by
Item 8.A. of Form 20-F at the start of any delayed
offering or throughout a continuous offering. Financial
statements and information otherwise required by
Section 10(a)(3) of the |
II-4
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Act need not be furnished, provided, that the registrant
includes in the prospectus, by means of a post-effective
amendment, financial statements required pursuant to this
paragraph (4) and other information necessary to
ensure that all other information in the prospectus is at least
as current as the date of those financial statements. |
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(5) That, for purposes of determining any liability under
the Securities Act of 1933, each filing of the registrants
annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plans
annual report pursuant to section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof; |
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(6) That, prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a part
of this registration statement, by any person or party who is
deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the
applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form; |
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(7) That every prospectus (i) that is filed pursuant
to paragraph (6) immediately preceding, or
(ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the registration statement
and will not be used until such amendment is effective, and
that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide
offering thereof; |
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(8) The undersigned registrant hereby undertakes:
(i) to respond to requests for information that is
incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one
business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally
prompt means, and (ii) to arrange or provide for a facility
in the United States for the purpose of responding to such
requests. The undertaking in subparagraph (i) above
include information contained in documents filed subsequent to
the effective date of the registration statement through the
date of responding to the request. |
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(9) The undersigned registrant hereby undertakes to supply
by means of a post-effective amendment all information
concerning a transaction and the company being acquired involved
therein, that was not the subject of and included in the
registration statement when it became effective. |
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Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue. |
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Amendment No. 1 to the
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Tel Aviv,
Israel, on September 22, 2005.
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ELBIT MEDICAL IMAGING LTD. |
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Title: |
President and Chief Financial Officer |
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been
signed below by the following persons in the capacities and on
the dates indicated.
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Name |
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Title |
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Date |
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*
Mordechay
Zisser |
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Executive Chairman of the Board of Directors |
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September 22, 2005 |
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*
Shimon
Yitzhaki |
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President, Chief Financial Officer and Director (Principal
Executive, Financial and Accounting Officer) |
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September 22, 2005 |
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*
Rachel
Lavine |
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Director |
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September 22, 2005 |
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*
Yehoshua
(Shuki) Forer |
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Director |
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September 22, 2005 |
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*
David
Rubner |
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Director |
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September 22, 2005 |
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*
Yosef
Apter |
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External Director |
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September 22, 2005 |
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*
Zvi
Tropp |
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External Director |
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September 22, 2005 |
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*By:
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/s/ Shimon Yitzhaki |
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Name: Shimon Yitzhaki |
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for himself and as Attorney-in-Fact |
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Authorized United States Representative: |
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Elscint Inc. |
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By: |
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/s/ Marc Lavine |
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Name: Marc Lavine |
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Title: Clerk |
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Date: September 22, 2005
II-6
EXHIBIT INDEX
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Exhibit No. |
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Description |
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2 |
.1 |
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Agreement and Plan of Merger dated as of August 21, 2005,
by and between Elbit Medical Imaging Ltd. and Elscint Ltd.
(included as Annex A to the joint proxy statement/
prospectus, which is part of this registration statement). |
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3 |
.1 |
|
Memorandum of Association of Elbit Medical Imaging Ltd.
(incorporated herein by reference to the registrants
Annual Report on Form 20-F, filed with the Securities and
Exchange Commission on November 22, 1996). |
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3 |
.2 |
|
Articles of Association (English translation) of Elbit Medical
Imaging Ltd. (incorporated herein by reference to the
registrants Annual Report on Form 20-F, filed with
the Securities and Exchange Commission on November 22,
1996). |
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4 |
.l |
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Form of Ordinary Share Certificate of Elbit Medical Imaging Ltd. |
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5 |
.1 |
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Opinion of Gross, Kleinhendler, Hodak, Halevy,
Greenberg & Co., Law Offices regarding the legality of
the securities being registered (including consent). |
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8 |
.1 |
|
Opinion of Kramer Levin Naftalis & Frankel regarding
the tax consequences of the merger (including consent). |
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8 |
.2 |
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Opinion of Carter Ledyard & Milburn LLP regarding the
tax consequences of the merger (including consent). |
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21 |
.1 |
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Subsidiaries of the registrant (incorporated herein by reference
to the registrants Annual Report on Form 20-F for the
year ended December 31, 2004, filed with the Securities and
Exchange Commission on June 30, 2005). |
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23 |
.1 |
|
Consent of Brightman, Almagor & Co., for registrant. |
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23 |
.2 |
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Consent of KPMG Hungaria Kft., for registrant. |
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23 |
.3 |
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Consent of Kost, Forer Gabbay & Kasierer, for
registrant. |
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23 |
.4 |
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Consent of Mazars Paardekooper Hoofman, for registrant. |
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23 |
.5 |
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Consent of Brightman, Almagor & Co., for Elscint Ltd. |
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23 |
.6 |
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Consent of Mazars Paardekooper Hoofman, for Elscint Ltd. |
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23 |
.7 |
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Consent of Kost, Forer Gabbay & Kasierer, for Elscint
Ltd. |
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23 |
.8 |
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Consent of Gross, Kleinhendler, Hodak, Halevy,
Greenberg & Co., Law Offices (included in
Exhibit 5.1). |
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23 |
.9 |
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Consent of Kramer Levin Naftalis & Frankel LLP
(included in Exhibit 8.1). |
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23 |
.10 |
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Consent of Carter Ledyard & Milburn LLP (included in
Exhibit 8.2). |
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99 |
.1 |
|
Form of Elbit Medical Imaging Ltd. proxy card. |
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|
99 |
.2* |
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Consent of C.E. Unterberg, Towbin. |
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99 |
.3 |
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Consent of Oppenheimer & Co. Inc. |
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99 |
.4 |
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Form of Elscint Ltd. proxy card. |
II-7