UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934

 

For the Month of October 2021

 

Commission File Number 001-38775

 

ITAMAR MEDICAL LTD.

(Translation of registrant’s name into English)

 

9 Halamish Street, Caesarea 3088900, Israel
(Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

 

Form 20-F x           Form 40-F ¨

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨

 

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨

 

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

 

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

 

Yes ¨            No ¨

 

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-

 

_

 

This Form 6-K, including the exhibits hereto, is being incorporated by reference into the Registrant’s Form F-3 Registration Statements File Nos. 333-252364 and 333-250155 and Form S-8 Registration Statements File Nos. 333-236883 and 333-230799.

 

 

 

 

 

 

EXPLANATORY NOTE

 

On October 12, 2021, Itamar Medical Ltd. (the “Company”) announced that it will hold its Special and 2021 Annual General Meeting of Shareholders (the “Meeting”) on Tuesday, November 16, 2021 at 1:00 PM (Israel time) (6:00 AM Eastern time), as set forth in the notice of the Meeting (the “Notice”) that was attached as Exhibit 99.1 to the Company’s Report of Foreign Private Issuer on Form 6-K, furnished to the Securities and Exchange Commission (the “SEC”) on the same day. As contemplated by the Notice, the Company hereby furnishes copies of the Company’s proxy statement, which includes the Notice (“Proxy Statement”) as well as proxy card for the Meeting. Copies of the Proxy Statement, form of proxy card and voting instructions form for use by holders of the Company’s American Depositary Shares are attached to this Form 6-K as exhibits 99.1, 99.2 and 99.3, respectively, and incorporated herein by reference.

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  ITAMAR MEDICAL LTD.
   
  By: /s/ Shy Basson
  Shy Basson
  Chief Financial Officer

 

Date: October 14, 2021

 

 

 

 

Exhibit Index

 

Exhibit 99.1 Proxy Statement for the Company’s Special and 2021 Annual General Meeting to be held on November 16, 2021.
   
Exhibit 99.2 Form of Proxy Card to be used in connection with the Company’s Special and 2021 Annual General Meeting to be held on November 16, 2021.
   
Exhibit 99.3 Form of Voting Instructions to be used by the holders of American Depositary Shares of the Company in connection with the Company’s Special and 2021 Annual General Meeting to be held on November 16, 2021.

 

 

 

 

Exhibit 99.1

 

 

ITAMAR MEDICAL LTD.

  

NOTICE OF SPECIAL AND 2021 ANNUAL GENERAL MEETING OF SHAREHOLDERS

 

TO BE HELD ON NOVEMBER 16, 2021

 

To the Shareholders of Itamar Medical Ltd.

 

Notice is hereby given that the Special and 2021 Annual General Meeting of Shareholders (the “Meeting”) of Itamar Medical Ltd. (“we,” “Itamar” or the “Company”) will be held on Tuesday, November 16, 2021, at 1:00 PM (Israel time) (6:00 AM Eastern time).

 

The Meeting will be held at the Company’s executive offices at 5 Tarshish Street, Caesarea 3079821, Israel. However, in light of the outbreak of the coronavirus (COVID-19) pandemic, the Company reserves the option to convert the Meeting from a physical meeting to a virtual meeting at a later date. In such event, the Company will issue a press release and/or furnish a Form 6-K or other document to the U.S. Securities and Exchange Commission (the “SEC”) and the Israel Securities Authority (the “ISA”) prior to the date of the Meeting outlining the manner in which shareholders may attend the virtual Meeting.

 

The Meeting will be held for the following purposes:

 

1.To approve the acquisition of Itamar by ZOLL Medical Corporation (“Parent”), including the approval of: (i) the Agreement and Plan of Merger, dated September 13, 2021 (as it may be amended from time to time, the “Merger Agreement”), by and among the Company, Parent, Zeus Merger Sub Ltd., an Israeli company and a wholly owned subsidiary of Parent (“Merger Sub”) and, solely for the limited purposes set forth therein, Asahi Kasei Corporation (“Guarantor”); (ii) the merger of Merger Sub with and into the Company in accordance with Sections 314-327 of the Israeli Companies Law, 5759-1999 (the “ICL”), following which Merger Sub will cease to exist as a separate legal entity and the Company will become a wholly owned subsidiary of Parent (the “Merger”); (iii) the consideration of $1.0333333 in cash, without interest and subject to applicable withholding taxes, to be received for each ordinary share, par value NIS 0.01 per share, of the Company (the “Ordinary Shares”), including with respect to the Ordinary Shares underlying the Company’s American Depositary Shares, each representing thirty (30) Ordinary Shares (“ADSs”), owned as of immediately prior to the effective time of the Merger; (iv) the cancellation of each outstanding option to purchase Ordinary Shares or ADSs (including those granted to the Company’s directors and officers) in exchange for the right to receive a cash payment, in accordance with the Merger Agreement; (v) the cancellation of each outstanding restricted share unit (including those granted to the Company’s directors and officers) in exchange for the right to receive a cash payment, in accordance with the Merger Agreement; and (vi) all other transactions and arrangements contemplated by the Merger Agreement (collectively, the “Merger Proposal”);

 

2.To approve the adjournment of the Meeting to a later date or dates, if necessary, to solicit additional proxies if there are insufficient votes to approve the Merger Proposal at the time of the Meeting (the “Adjournment Proposal”);

 

3.To elect Giora Yaron, Ilan Biran, Christopher M. Cleary, Scott P. Serota, Brad Fluegel and Marga Ortigas-Wedekind as directors of the Company (the “Director Proposal”);

 

 

 

 

4.To approve amendments to the Company’s compensation policy governing the compensation of the Company’s office holders (the “Compensation Policy Proposal”);

 

5.To approve a modification to the base compensation of the Company’s President and Chief Executive Officer (the “CEO Salary Proposal”);

 

6.To approve the reappointment of Somekh Chaikin, a member of KPMG International, as the Company’s independent auditor, and to authorize the Company’s Board of Directors to delegate to the Audit Committee the authority to fix the said independent auditors’ remuneration in accordance with the volume and nature of their services (the “Auditor Proposal”); and

 

7.To review and discuss the Company’s consolidated financial statements for the year ended December 31, 2020.

 

The foregoing proposals will be described more fully in the proxy statement for the Meeting, once available, as described below.

  

The Board of Directors of the Company unanimously recommends a vote FOR all of the proposals presented at the Meeting, including the Merger Proposal.

 

Provided that a quorum is present, the adoption and approval of each of the proposals set forth in Items 1 – 6 above will require the affirmative vote of a majority of the Ordinary Shares present, in person, by proxy or by electronic voting, at the Meeting (or any adjournment or postponement thereof), excluding abstentions; provided that:

 

·with respect to Item 1 (the Merger Proposal), such majority vote excludes any Ordinary Shares that are held by Merger Sub, Parent or by any person or entity holding at least 25% of the “means of control” (within the meaning of the ICL) of either Merger Sub or Parent, or any person or entity acting on behalf of either Merger Sub or Parent or any person or entity described in the previous clause, including any of their affiliates; and

  

·with respect to Item 4 (the Compensation Policy Proposal) and Item 5 (the CEO Salary Proposal), either (i) the shares voted in favor of such resolution include a majority of the Ordinary Shares voted by shareholders who are not “controlling shareholders” and do not have a “personal interest” in such matter (as such terms are defined in the ICL) or (ii) that the total number of shares voted by the shareholders described in clause (i) against such resolutions does not exceed two percent (2%) of the aggregate voting rights in the Company. As of the date hereof, the Company does not have a controlling shareholder within the meaning of the ICL.

 

Item 7 will not involve a vote of the shareholders.

 

Itamar cannot complete the Merger unless its shareholders approve the Merger Proposal (Proposal 1). However, the completion of the Merger is not contingent on the approval of Proposals 2, 3, 4, 5 or 6.

 

Shareholders of record at the close of business on October 17, 2021 are entitled to notice of and to vote at the Meeting.

 

 

 

 

If your shares are held via the Company’s Israeli registrar for trading on the Tel Aviv Stock Exchange Ltd., you should deliver (via registered mail or courier) your completed proxy to the offices of the Company at 9 Halamish Street, Caesarea 3088900, Israel, Attention: General Counsel and Company Secretary, together with a proof of ownership (‘Ishur Baalut’), as of the record date, issued by your broker, at least 48 hours prior to the time of the Meeting. Alternatively, you may vote Ordinary Shares electronically via MAGNA, the electronic voting system of the ISA, up to six hours before the time fixed for the Meeting. You should receive instructions about electronic voting from your broker.

 

Joint holders of shares should take note that all notices to be given to the shareholders shall, with respect to any share to which persons are jointly entitled, be given to whichever of such persons is named first in the Register of Shareholders of the Company, and any notice so given shall be sufficient notice to the holders of such share, and furthermore, pursuant to Article 37 of the Articles of Association of the Company, the vote of the senior holder of the joint shares who tenders a vote, in person or by proxy, will be accepted to the exclusion of the vote(s) of the other joint holder(s). For this purpose, seniority will be determined by the order in which the names stand in the Register of Shareholders of the Company.

 

In accordance with the ICL, (i) position statements with respect to any of the proposals at the Meeting must be delivered to Itamar no later than ten (10) days prior to the date of the Meeting and (ii) eligible shareholders, holding at least one percent (1%) of the outstanding Ordinary Shares, may present proper proposals for inclusion in the Meeting by submitting their proposals to us within seven (7) days following the date hereof and, if we determine that a shareholder proposal is appropriate to be added to the agenda of the Meeting, we will publish a revised agenda in the manner set forth below.

 

The Company intends to furnish copies of the proxy statement for the Meeting, describing the various matters to be voted on at the Meeting, along with the proxy card and other documents to the SEC and the ISA on Form 6-K on or about October 18, 2021. Once available, such proxy statement, proxy card and other documents may be obtained for free from the SEC’s website at www.sec.gov, the MAGNA distribution site of the ISA at www.magna.isa.gov.il, the Company’s website at www.itamar-medical.com, or by directing the request to the Company’s corporate secretary. If applicable, valid position statements and/or revised agenda will be published by way of issuing a press release and/or filing a Form 6-K with the SEC and the ISA.

  

  /s/ Dr. Giora Yaron  
  Dr. Giora Yaron  
  Chairman of the Board of Directors

 

Date: October 12, 2021

 

 

 

 

 

ITAMAR MEDICAL LTD.

 

9 Halamish Street, Caesarea 3088900, Israel

________________________

 

PROXY STATEMENT
________________________

 

SPECIAL AND 2021 ANNUAL GENERAL MEETING OF SHAREHOLDERS

 

TO BE HELD ON NOVEMBER 16, 2021

 

GENERAL MEETING
TABLE OF CONTENTS

 

SUMMARY 1
Parties Involved in the Merger 2
Structure of the Merger 2
Merger Consideration 3
Treatment of Company Warrant and Equity Awards 3
The Special and 2021 Annual General Meeting 4
Interests of the Company’s Directors and Executive Officers in the Merger 6
Recommendation of the Board 7
Fairness Opinion of Piper Sandler & Co. 7
Merger Agreement 8
Financing of the Merger 9
Material U.S. Federal and Israeli Income Tax Consequences of the Merger 9
Voting and Support Agreements 9
Regulatory Approvals Required for the Merger and Other Regulatory Filings 10
No Appraisal Rights 10
QUESTIONS AND ANSWERS ABOUT THE TRANSACTION AND THE MEETING 11
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS 19
RISK FACTORS 20
SPECIAL AND 2021 ANNUAL GENERAL MEETING OF SHAREHOLDERS 22
Date, Time and Place 22
Purpose of the Special and 2021 Annual General Meeting 22
Recommendation of the Board 22
Record Date; Shares Entitled to Vote; Quorum 22
Vote Required; Abstentions 23
Security Ownership by Certain Beneficial Owners and Management 24
Voting of Proxies; Revocability of Proxies 24
Solicitation of Proxies 25
Adjournments or Postponements 25
Questions and Additional Information 25
PROPOSAL 1 APPROVAL OF THE MERGER PROPOSAL 26
Background 26

 

 

 

 

The Proposed Resolution 26
Required Vote 26
PROPOSAL 2 ADJOURNMENT OF THE MEETING 27
Background 27
The Proposed Resolution 27
Required Vote 27
PROPOSAL 3 ELECTION OF DIRECTORS 28
Background 28
The Proposed Resolutions 30
Required Vote 30
External Directors Continuing in Office 30
Executive Compensation 31
PROPOSAL 4 AMENDMENTS TO COMPENSATION POLICY 33
Background 33
Proposed Amendments to the Compensation Policy 33
The Proposed Resolutions 34
Required Vote 34
PROPOSAL 5 MODIFICATION OF SALARY OF PRESIDENT AND CHIEF EXECUTIVE OFFICER 36
Background 36
Proposed Increase of Base Salary 37
The Proposed Resolutions 37
Required Vote 37
PROPOSAL 6 REAPPOINTMENT OF INDEPENDENT AUDITOR 38
Background 38
The Proposed Resolutions 38
Required Vote 38
THE MERGER 39
Parties Involved in the Merger 39
Effect of the Merger 39
Effect on the Company if the Merger is Not Completed 39
Merger Consideration 40
Background of the Merger 40
Reasons for the Merger and Recommendation of the Board 47
Management Internal Financial Projections 50
Fairness Opinion of Piper Sandler & Co. 52
Interests of the Company’s Directors and Executive Officers in the Merger 62
Financing of the Merger 64
Closing and Effective Time 64
No Appraisal Time 65
Material U.S. Federal and Israeli Income Tax Consequences of the Merger 65
Regulatory Approvals Required for the Merger and Other Regulatory Filings 70
THE MERGER AGREEMENT 73

 

 

 

 

Explanatory Note Regarding the Merger Agreement 73
Effects of the Merger; Directors and Officers; Articles of Association 73
Closing and Effective Time 74
Merger Consideration 74
Treatment of Company Warrant and Equity Awards 74
Exchange and Payment Procedures 75
Representations and Warranties 76
Conduct of Business Pending the Merger 80
Competing Proposals 82
The Board’s Recommendation; Company Board Recommendation Change 84
Employee Benefits 85
Efforts to Close the Merger 87
Indemnification and Insurance 87
Other Covenants 88
Conditions to the Closing of the Merger 89
Termination of the Merger Agreement 90
Termination Fees 92
Other Material Provisions of the Merger Agreement 93
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND DIRECTORS AND OFFICERS 94
FUTURE SHAREHOLDER PROPOSAL 98
WHERE YOU CAN FIND MORE INFORMATION 99
CONSIDERATION OF THE ANNUAL FINANCIAL STATEMENTS 100
OTHER MATTERS 101
ANNEX A: MERGER AGREEMENT A-1
ANNEX B: PIPER SANDLER OPINION B-1
ANNEX C: FORM OF SUPPORT AGREEMENT C-1
ANNEX D: AMENDMENTS TO COMPENSATION POLICY D-1

 

 

 

 

SUMMARY

 

This summary highlights selected information from this Proxy Statement related to the merger of Zeus Merger Sub Ltd., a wholly owned subsidiary of ZOLL Medical Corporation, with and into Itamar Medical Ltd., which we refer to as the “Merger,” and may not contain all of the information that is important to you. To understand the Merger more fully and for a more complete description of the legal terms of the Merger, you should carefully read this entire Proxy Statement, the annexes to this Proxy Statement and the documents that we refer to in this Proxy Statement. You may obtain the information incorporated by reference in this Proxy Statement without charge by following the instructions under the caption “Where You Can Find More Information.” The Merger Agreement (as defined below) is attached as Annex A to this Proxy Statement. We encourage you to read the Merger Agreement, which is the legal document that governs the Merger, carefully and in its entirety.

 

Except as otherwise specifically noted in this Proxy Statement, “Itamar,” the “Company,” “we,” “us” or “our” and similar words refer to Itamar Medical Ltd., including, in certain cases, the Company’s subsidiaries. Throughout this Proxy Statement, we refer to ZOLL Medical Corporation as “Parent,” Zeus Merger Sub Ltd. as “Merger Sub” and Asahi Kasei Corporation as “Guarantor.” In addition, throughout this Proxy Statement, we refer to the Agreement and Plan of Merger, dated September 13, 2021, by and among the Company, Parent, Merger Sub and, solely for the limited purposes set forth therein, Guarantor, as it may be amended from time to time, as the “Merger Agreement.”

 

Unless indicated otherwise by the context, all references in this Proxy Statement to:

 

·“ADSs” means the Company’s American Depositary Shares, each representing 30 Ordinary Shares;

 

·“Annual Report” means the Company’s Annual Report on Form 20-F for the year ended December 31, 2020, which was filed with the SEC on March 29, 2021. The Annual Report is available on the SEC’s website at www.sec.gov, the MAGNA distribution site of the ISA at www.magna.isa.gov.il, and the Company’s website at www.itamar-medical.com;

 

·“Board” means the Company’s Board of Directors;

 

·“Companies Law” or “ICL” means the Israeli Companies Law, 5759-1999, as amended (together with the rules and regulations promulgated thereunder);

 

·“Company Shares” means Ordinary Shares and ADSs;

 

·“dollars”, “U.S. dollars” or “$” mean United States dollars;

 

·“IFRS” means International Financial Reporting Standards, or IFRS, as adopted by the International Accounting Standards Board or IASB;

 

·“ISA” means the Israel Securities Authority;

 

·“Israeli CPI” means the Israeli consumer price index published by the Israeli Central Bureau of Statistics;

 

·“Merger Consideration” means the Per Share Merger Consideration (as defined below) or the Per ADS Merger Consideration (as defined below), as applicable;

 

·“Nasdaq” means the Nasdaq Stock Market LLC;

 

·“Notice of the Meeting” means the Notice of the Meeting published by the Company on October 12, 2021, a copy of which was furnished to the SEC on October 12, 2021. The Notice of the Meeting is available on the SEC’s website at www.sec.gov, the MAGNA distribution site of the ISA at www.magna.isa.gov.il, and the Company’s website at www.itamar-medical.com;

 

·“NIS” means New Israeli Shekels, the official currency of the State of Israel;

 

·“Ordinary Shares” means the Company’s ordinary shares, par value NIS 0.01 per share;

 

·“SEC” means the U.S. Securities and Exchange Commission; and

 

·“TASE” means the Tel Aviv Stock Exchange Ltd.

 

  1 

 

 

On October 6, 2021, the exchange rate between the NIS and the dollar, as quoted by the Bank of Israel, was NIS 3.245 to $1.00. Unless derived from our financial statements or indicated otherwise by the context, statements in this Proxy Statement that provide the dollar equivalent of NIS amounts or provide the NIS equivalent of dollar amounts are based on the exchange rate, as quoted by the Bank of Israel, as of such date.

 

Parties Involved in the Merger

 

Itamar Medical Ltd.

 

Itamar is a company organized under the laws of the State of Israel. We are a medical technology company focused on the development and commercialization of non-invasive medical devices and solutions to aid in the diagnosis of respiratory sleep disorders. We commercialize a digital healthcare platform to facilitate the continuum of care for effective sleep apnea management with a focus on the core sleep, cardiology and direct to consumer markets. We offer a Total Sleep Solution to help physicians provide comprehensive sleep apnea management in a variety of clinical environments to optimize patient care and reduce healthcare system costs.

 

The Ordinary Shares are listed on the TASE, and the ADSs are listed on the Nasdaq, in each case, under the symbol “ITMR.”

 

Asahi Kasei Corporation

 

Guarantor is a corporation organized under the laws of Japan. Guarantor is a diversified chemical manufacturer with businesses in the health care, chemicals & fibers, homes and construction materials and electronics sectors. With more than 25,000 employees around the world, Guarantor serves customers in more than 100 countries. Within the health care field, Guarantor is active in pharmaceuticals (including agents for dysuria, osteoporosis, disseminated intravascular coagulation, and herpes), medical devices (including artificial kidneys and therapeutic apheresis devices), and bioprocess products (including virus removal filters and bioprocess equipment).

 

ZOLL Medical Corporation

 

Parent is a corporation organized under the laws of Massachusetts. Parent is a wholly owned subsidiary of Guarantor. Parent develops and markets medical devices and software solutions that help advance emergency care and save lives while increasing clinical and operational efficiencies. With products for defibrillation and cardiac monitoring, circulation enhancement and CPR feedback, supersaturated oxygen therapy, data management, ventilation, and therapeutic temperature management, Parent provides a comprehensive set of technologies that help clinicians, emergency medical services, fire professionals, and lay rescuers improve patient outcomes in critical cardiopulmonary conditions.

 

Zeus Merger Sub Ltd.

 

Merger Sub is a company organized under the laws of the State of Israel. Merger Sub is a wholly owned subsidiary of Parent that was formed on September 1, 2021, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement. Merger Sub has not engaged in any business activities other than in connection with its formation and the transactions contemplated by the Merger Agreement.

 

Structure of the Merger

 

Upon the terms and subject to the conditions of the Merger Agreement and in accordance with the provisions of Sections 314-327 of the Companies Law, if the Merger is completed, Merger Sub will merge with and into the Company, and the Company will continue as the surviving company and as a wholly owned subsidiary of Parent (the “Surviving Company”). As a result of the Merger, the Company will cease to be a publicly traded company and you will no longer own any shares of, nor will you have any ownership interest in, the Surviving Company.

 

  2 

 

 

Merger Consideration

 

As a result of the Merger, all (i) outstanding Ordinary Shares immediately prior to the effective time of the Merger (the “Effective Time”) will be deemed to be transferred to Parent in exchange for the right to receive $1.0333333 in cash for each Ordinary Share (the “Per Share Merger Consideration”), without interest and subject to applicable withholding taxes and (ii) outstanding ADSs immediately prior to the Effective Time will be deemed to be cancelled in exchange for the right to receive $31.00 in cash for each ADS (the “Per ADS Merger Consideration”), without interest and subject to applicable withholding taxes and a cancellation fee of $0.05 per one (1) ADS (the “Cancellation Fee”).

 

After the Merger is completed, holders of outstanding Ordinary Shares and ADSs, immediately prior to the Effective Time, will have the right to receive the Per Share Merger Consideration or the Per ADS Merger Consideration, as applicable.

 

Treatment of Company Warrant and Equity Awards

 

Company Warrant

 

At the Effective Time, a warrant issued by the Company to Mizrahi Tefahot Bank Ltd., dated May 14, 2017, as amended, entitling the holder thereof to purchase Ordinary Shares in accordance with the terms and conditions of the applicable warrant agreement (the “Company Warrant”), assuming that it is outstanding and unexercised immediately prior to the Effective Time, shall be canceled and the holder thereof will be entitled to receive a cash payment equal to (i) the number of Ordinary Shares subject to such Company Warrant multiplied by (ii) (1) the Per Share Merger Consideration, minus (2) the exercise price of such Company Warrant, without interest and less any applicable withholding taxes.

 

Company Options and Restricted Share Units

 

At the Effective Time, (i) each option to purchase Company Shares (a “Company Option”) that is outstanding and unexercised, whether or not vested, will be cancelled and converted into the right to receive a cash amount equal to the product of the number of Company Shares subject to the Company Option, and the excess, if any, of the Merger Consideration over the per share exercise price of such Company Option (the “Option Consideration”), and (ii) each Company restricted share unit (a “Company RSU”) that is outstanding, whether or not vested, will be canceled and converted into the right to receive a cash amount equal to the product of the number of Company RSUs determined based on performance or time, as applicable, and the excess, if any, of the Merger Consideration over the applicable per share exercise price for such Company RSU (the “RSU Payment”), in each case, less any applicable withholding taxes.

 

With respect to each Company Option and each Company RSU that is vested as of immediately prior to the Effective Time (including each Company Option and each Company RSU that is accelerated in connection with the consummation of the Merger), the Option Consideration and RSU Payment, less any applicable withholding taxes, will be paid after the Closing (as defined in the Merger Agreement).

 

With respect to each Company Option and each Company RSU that is unvested as of immediately prior to the Effective Time (an “Unvested Company Option” or “Unvested Company RSU”, respectively), payment of the Option Consideration or RSU Payment, less any applicable withholding taxes, is conditioned upon the holder’s continued employment or service to the Company or any of its subsidiaries (or any successor or affiliate thereof) through the applicable vesting date, the end of the applicable performance period, or such earlier date specified in the terms of the Company Option or Company RSU, in each case as applicable, other than as provided in the Merger Agreement.

 

For a more complete description of the treatment of Company warrant and equity awards, including the timing of payment of the consideration therefor in the case of vested and unvested equity awards, see the section of this Proxy Statement entitled “The Merger Agreement—Treatment of Company Warrant and Equity Awards.”

 

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The Special and 2021 Annual General Meeting

 

Date, Time and Place

 

The Meeting will be held on November 16, 2021, at 1:00 PM (Israel time) (6:00 AM Eastern time), at the Company’s offices at 5 Tarshish Street, Caesarea 3079821, Israel. However, in light of the outbreak of the coronavirus (COVID-19) pandemic, the Company reserves the option to convert the Meeting from a physical meeting to a virtual meeting at a later date. In such event, the Company will issue a press release and/or furnish a Form 6-K or other document to the SEC and the ISA prior to the date of the Meeting outlining the manner in which shareholders may attend the virtual Meeting.

 

Record Date; Quorum; Voting Rights

 

You are entitled to notice of, and vote at, the Meeting if you own Ordinary Shares at the close of business on October 17, 2021 (the “Record Date”). You will have one (1) vote at the Meeting for each Ordinary Share that you owned at the close of business on the Record Date.

 

The quorum required at the Meeting consists of at least two (2) shareholders present in person or represented by proxy, within half an hour from the time appointed for holding the meeting, who hold or represent, in the aggregate, at least 33 and 1/3% of the total voting rights in the Company. If the Meeting is adjourned for lack of a quorum, it will be adjourned to the same day in the following week at the same time and place (i.e., it will be adjourned to November, 23, 2021, at 1:00 PM (Israel time) (6:00 AM Eastern time), unless another time or place is determined by the Board in a notice to our shareholders). If, at such adjourned meeting, a quorum is not present within half an hour from the time appointed for holding the adjourned meeting, any two (2) shareholders present in person or by proxy who hold or represent, in the aggregate, at least 10% of the outstanding share capital of the Company, shall constitute a quorum.

 

Purpose

 

At the Meeting, the Company will ask shareholders to vote on the following proposals:

 

1.To approve the acquisition of Itamar by Parent, including the approval of: (i) the Merger Agreement; (ii) the Merger; (iii) the consideration of $1.0333333 in cash, without interest and subject to applicable withholding taxes, to be received for each Ordinary Share, including with respect to the Ordinary Shares underlying the ADSs, owned as of immediately prior to the effective time of the Merger; (iv) the cancellation of each outstanding option to purchase Ordinary Shares or ADSs (including those granted to the Company’s directors and officers) in exchange for the right to receive a cash payment, in accordance with the Merger Agreement; (v) the cancellation of each outstanding Company RSU (including those granted to the Company’s directors and officers) in exchange for the right to receive a cash payment, in accordance with the Merger Agreement; and (vi) all other transactions and arrangements contemplated by the Merger Agreement (collectively, the “Merger Proposal”);

 

2.To approve the adjournment of the Meeting to a later date or dates if necessary to solicit additional proxies if there are insufficient votes to approve the Merger Proposal at the time of the Meeting (the “Adjournment Proposal”);

 

3.To elect Giora Yaron, Ilan Biran, Christopher M. Cleary, Scott P. Serota, Brad Fluegel and Marga Ortigas-Wedekind as directors of the Company (the “Director Proposal”);

 

4.To approve amendments to the Company’s compensation policy governing the compensation of the Company’s office holders (the “Compensation Policy Proposal”);

 

5.To approve a modification to the base compensation of the Company’s President and Chief Executive Officer (the “CEO Salary Proposal”); and

 

6.To approve the reappointment of Somekh Chaikin, a member of KPMG International, as the Company’s independent auditor, and to authorize the Board to delegate to the Audit Committee the authority to fix the said independent auditors’ remuneration in accordance with the volume and nature of their services (the “Auditor Proposal”).

 

  4 

 

 

In addition to the above resolutions, the Company’s consolidated financial statements for the year ended December 31, 2020 will be reviewed and considered at the Meeting. This item will not involve a vote of the shareholders.

 

We do not currently expect there to be any other matters on the agenda at the Meeting; however, if any other matter is properly presented at the Meeting, the persons named in the enclosed proxy card will vote upon such matters in accordance with their discretion.

 

Required Vote

 

Provided that a quorum is present, the adoption and approval of each of the proposals set forth in Items 1 – 6 above will require the affirmative vote of a majority of the Ordinary Shares present, in person, by proxy or by electronic voting, at the Meeting (or any adjournment or postponement thereof), excluding abstentions; provided that:

 

·with respect to Item 1 (the Merger Proposal), such majority vote excludes any Ordinary Shares that are held by Merger Sub, Parent or by any person or entity holding at least 25% of the “means of control” (within the meaning of the ICL) of either Merger Sub or Parent, or any person or entity acting on behalf of either Merger Sub or Parent or any person or entity described in the previous clause, including any of their affiliates; and

 

·with respect to Item 4 (the Compensation Policy Proposal) and Item 5 (the CEO Salary Proposal), either (i) the shares voted in favor of such resolution include a majority of the Ordinary Shares voted by shareholders who are not “controlling shareholders” and do not have a “personal interest” in such matter (as such terms are defined in the ICL) or (ii) that the total number of shares voted by the shareholders described in clause (i) against such resolutions does not exceed two percent (2%) of the aggregate voting rights in the Company. As of the date hereof, the Company does not have a controlling shareholder within the meaning of the ICL.

 

If the Adjournment Proposal is approved and a quorum is present, the chairman of the Meeting may recess and/or adjourn the Meeting to a later time or date pursuant to the articles of association of the Company. It should be noted that under the terms of the Merger Agreement, the Meeting cannot be adjourned, postponed, delayed or cancelled without the prior written consent of Parent, other than under certain specified circumstances.

 

Itamar cannot complete the Merger unless its shareholders approve the Merger Proposal (Proposal 1). However, the completion of the Merger is not contingent on the approval of Proposals 2, 3, 4, 5 or 6.

 

Share Ownership of the Company’s Directors and Executive Officers

 

As of October 6, 2021, the executive officers and directors of the Company beneficially owned (directly or via ADSs) an aggregate of 49,487,255 Ordinary Shares, or 9.7% of the outstanding Ordinary Shares. For beneficial ownership of Ordinary Shares by the Company’s directors and executive officers, including how beneficial ownership was calculated, see “Security Ownership by Certain Beneficial Owners and Management” beginning on page 94.

 

  5 

 

 

Voting and Proxies

 

A form of proxy for use at the Meeting and a return envelope for the proxy are enclosed. If a shareholder’s Ordinary Shares are held via the Company’s Israeli registrar for trading on the TASE, he or she should deliver (via registered mail or courier) his or her completed proxy (or voting instruction card) to the offices of the Company at 9 Halamish Street, Caesarea 3088900, Israel, Attention: General Counsel and Company Secretary together with a proof of ownership (‘Ishur Baalut’), as of the Record Date, issued by his or her broker, at least 48 hours prior to the time of the Meeting. Alternatively, such a shareholder may vote electronically via MAGNA, the electronic voting system of the ISA, up to six hours before the time fixed for the Meeting. You should receive instructions about electronic voting from your broker.

 

Shareholders may revoke the authority granted by their execution of proxies before the effective exercise thereof by filing with the Company, at least 48 hours prior to the time of the Meeting, a written notice of revocation or duly executed proxy bearing a later date, or by voting in person at the Meeting. However, if a shareholder attends the Meeting and does not elect to vote in person, his or her proxy will not be revoked. If a shareholder voted electronically via MAGNA, such shareholder may change or revoke its vote using the electronic voting system up to the time by which it may submit a vote using such system (i.e., up to six hours prior to the time fixed for Meeting).

 

Unless otherwise indicated on the form of proxy, if a proxy is properly executed and received by the Company prior to the Meeting, the Ordinary Shares represented by the proxy will be voted in favor of all the matters to be presented to the Meeting, as described above. If a shareholder on the form of proxy makes a specification, the Ordinary Shares represented thereby will be voted in accordance with such specification. On all matters considered at the Meeting, abstentions of a holder of Ordinary Shares will be treated as neither a vote “for” or “against” the matter, although they will be counted in determining if a quorum is present.

 

Under the terms of the Deposit Agreement (the “Deposit Agreement”) among the Company and The Bank of New York Mellon, as depositary (the “Depositary”), and the holders of the ADSs, the Depositary shall endeavor (insofar as is practicable and in accordance with the applicable law and the articles of association of the Company) to vote or cause to be voted the number of Ordinary Shares represented by ADSs in accordance with the instructions provided by the holders of ADSs to the Depositary. If no instructions are received by the Depositary from any holder of ADSs with respect to any of the Ordinary Shares represented by the ADSs evidenced by such holder’s receipts on or before the date established by the Depositary for such purpose, the Depositary will not exercise any discretion in voting the Ordinary Shares, except that, if a holder of our ADSs does not provide the Depositary with voting instructions for an agenda item in the Meeting in a timely manner, we may (but are not obligated) instruct the Depositary, if we reasonably do not know of any substantial opposition to such agenda item and the matter is not materially adverse to the interests of our shareholders, to treat the holder as giving a discretionary proxy to a person designated by us as to that matter. Holders of ADSs who wish to return voting instructions to the Depositary (or revoke or change such instructions if already provided) need to do so by communicating such voting instructions (or revocation or change thereto) to the Depositary in a timely manner and in accordance with the directions from the Depositary. For the sake of clarity, holders of ADSs will not be able to attend or vote directly at the Meeting.

 

Shareholder Proposals and Position Statements

 

In accordance with the Companies Law, (i) position statements with respect to any of the proposals at the Meeting must be delivered to Itamar no later than ten (10) days prior to the date of the Meeting; and (ii) eligible shareholders, holding at least one percent (1%) of our outstanding Ordinary Shares, may present proper proposals for inclusion in the Meeting by submitting their proposals to us within seven (7) days following the date of the Notice of the Meeting and, if we determine that a shareholder proposal is appropriate to be added to the agenda of the Meeting, we will publish a revised agenda in the manner set forth below. If applicable, valid position statements and/or revise agenda will be published by way of issuing a press release and/or filing a Form 6-K with the SEC and the ISA; however, the Record Date will not change.

 

Interests of the Company’s Directors and Executive Officers in the Merger

 

When considering the recommendation of the Board that you vote to approve the Merger Proposal, you should be aware that the Company’s directors and executive officers may have interests in the Merger that are different from, or in addition to, your interests as a shareholder. The Board was aware of these interests during its deliberations on the merits of the Merger and in deciding to recommend that shareholders vote in favor of the Merger Proposal. These interests generally include, among others, the rights to accelerated vesting of equity awards, the indemnification and insurance, and certain bonus payment provisions contained in or permitted by the Merger Agreement, as described in more detail under the caption “The Merger—Interests of the Company’s Directors and Executive Officers in the Merger.”

 

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Recommendation of the Board

 

The Board, after considering various factors described under the caption “The Merger—Reasons for the Merger and Recommendation of the Board,” has unanimously (i) determined that the Merger Agreement and the transactions contemplated thereby (the “Transactions”), including the Merger, are fair to, and in the best interests of, the Company and its shareholders and that, considering the financial position of the merging companies, no reasonable concern exists that the Surviving Company will be unable to fulfill the obligations of the Company to its creditors; and (ii) approved the Merger, the execution of the Merger Agreement and the consummation of the Transactions. The Board unanimously recommends that you vote (1) “FOR” the Merger Proposal; (2) “FOR” the Adjournment Proposal; (3) “FOR” the Director Proposal; (4) “FOR” the Compensation Policy Proposal; (5) “FOR” the CEO Salary Proposal; and (6) “FOR” the Auditor Proposal.

 

Fairness Opinion of Piper Sandler & Co.

 

The Company engaged Piper Sandler & Co. (“Piper Sandler”) to provide financial advice in connection with the proposed Merger based on Piper Sandler’s qualifications, expertise, reputation and knowledge of the Company’s business and the industry in which the Company operates. At a meeting of the Board on September 9, 2021, Piper Sandler issued its oral opinion to the Board, later confirmed in a written opinion dated September 9, 2021, that, based upon and subject to the assumptions, procedures, considerations and limitations set forth in the written opinion and based upon such other factors as Piper Sandler considered relevant: (i) the Per Share Merger Consideration is fair, from a financial point of view, to the holders of Ordinary Shares issued and outstanding prior to the Effective Time (other than Excluded Shares (as defined in the Merger Agreement)) and (ii) the Per ADS Merger Consideration is fair, from a financial point of view, to the holders of ADSs issued and outstanding prior to the Effective Time (other than Excluded Shares), in each case, as of the date of the opinion. On September 12, 2021, Piper Sandler delivered a letter addressed to the Board, as of 8:00 am U.S. CT, confirming that no facts or circumstances had come to its attention since September 9, 2021 that would cause Piper Sandler to change its opinion or assumptions set forth in its written opinion dated September 9, 2021.

 

The full text of the written opinion of Piper Sandler, dated as of September 9, 2021, and of its confirmation letter, dated September 12, 2021, are attached to this Proxy Statement as Annex B and are incorporated into this Proxy Statement by reference. The written opinion sets forth, among things, the assumptions made, procedures followed, matters considered and limitations on the scope of review undertaken by Piper Sandler in rendering its opinion. You should read each of the opinion, and the confirmation letter, carefully in its entirety.

 

Piper Sandler’s opinion was provided to the Board and addressed solely the fairness, from a financial point of view, of the Per Share Merger Consideration and the Per ADS Merger Consideration, to holders of the Ordinary Shares and ADSs, respectively, as set forth in the Merger Agreement, and did not address any other terms or agreement relating to the Merger or any other terms of the Merger Agreement. Piper Sandler was not requested to opine as to, and its opinion does not address, the basic business decision to proceed with the Merger, the merits of the Merger relative to any alternative transaction or business strategy that may be available to the Company, Parent’s ability to fund the Per Share Merger Consideration or the Per ADS Merger Consideration, or any other terms contemplated by the Merger Agreement or the fairness of the Merger to any other class of securities, creditor or other constituency of the Company. Furthermore, Piper Sandler expressed no opinion with respect to the amount or nature of the compensation to any officer, director or employee of any party to the Merger, or any class of such persons, relative to the compensation to be received by holders of Ordinary Shares or ADSs in the Merger or with respect to the fairness of any such compensation. Piper Sandler’s opinion was directed solely to the Board in connection with its consideration of the Merger Agreement and was not intended to be, and does not constitute, a recommendation to any holder of Ordinary Shares or ADSs as to how such holder should act with respect to the Merger or any other matter, and does not in any manner address the price at which the Ordinary Shares or ADSs may trade following announcement of the Merger or at any future time.

 

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For a description of the opinion, see “The Merger — Fairness Opinion of Piper Sandler & Co.,” which is qualified in its entirety by reference to the full text of Piper Sandler’s written opinion.

 

Merger Agreement

 

Conditions to the Closing of the Merger

 

The Closing (as defined in the Merger Agreement) is subject to certain conditions, including, among others, (a) approval of the Merger Agreement by the requisite majority of shareholders of the Company (the “Company Shareholder Approval”), (b) the absence of certain laws, orders, judgments and injunctions that restrain, enjoin or otherwise prohibit the consummation of the Merger, (c) obtaining requisite regulatory approvals, including expiration of the applicable Hart-Scott-Rodino Antitrust Improvement Acts of 1976 (the “HSR Act”) waiting period, and waiver, clearance or affirmative approval of the ICA under the Israeli Competition Law (as defined below), (d) at least fifty (50) days shall have elapsed after the filing of a merger proposal with the Israeli Companies Registrar (the “Companies Registrar”) and at least thirty (30) days shall have elapsed after the approval of the Merger by the shareholders of the Company, (e) the absence of certain pending governmental investigations, (f) subject to certain exceptions, the accuracy of representations and warranties with respect to the businesses of the Company and Parent and compliance in all material respects by the Company, Parent and Merger Sub with their respective covenants contained in the Merger Agreement and (g) the absence of a material adverse effect on the Company’s business from the date of the Merger Agreement. Consummation of the Merger is not subject to a financing condition.

 

For a more complete description of conditions to the Closing, see the section of this Proxy Statement entitled “The Merger Agreement—Conditions to the Closing of the Merger.

 

Non-Solicitation; Competing Proposals; Change of Recommendation

 

Pursuant to the terms of the Merger Agreement, the Company is subject to customary restrictions on its ability to solicit Competing Proposals (as defined in the section of this Proxy Statement entitled “The Merger Agreement—Competing Proposals”) from third parties and to provide information to, and enter into discussions or negotiations with, third parties regarding Competing Proposals.

 

However, prior to the approval of the Merger Agreement by the Company’s shareholders, the solicitation restrictions are subject to a customary “fiduciary-out” provision that allows the Company, in response to its receipt of an unsolicited bona fide Competing Proposal, which did not arise from the Company’s breach of its non-solicitation obligations under the Merger Agreement, to provide information to and participate in negotiations or discussions with third parties with respect to a Competing Proposal if the Board determines in good faith, after consultation with the Company’s outside legal counsel and financial advisor, that the Competing Proposal constitutes or would reasonably be likely to lead to a Superior Proposal (as defined in the section of this Proxy Statement entitled “The Merger Agreement—Competing Proposals”) and the Company receives or has already received an acceptable confidentiality agreement.

 

In addition, at any time prior to the approval of the Merger Agreement by the Company’s shareholders, in response to its receipt of an unsolicited bona fide Competing Proposal, (i) the Board may change its recommendation that the Company’s shareholders approve the Merger Agreement or (ii) the Company may terminate the Merger Agreement to enter into a definitive written agreement providing for such Competing Proposal, if the Board has determined in good faith after consultation with the Company’s outside legal counsel and financial advisor that such Competing Proposal constitutes a Superior Proposal and the failure to change its recommendation or to terminate the Merger Agreement would be reasonably likely to be inconsistent with the fiduciary duties of the members of the Board under applicable law. However, prior to taking these actions, the Company must provide Parent with written notice of such determination and a four (4) business day period for the purpose of engaging in discussions and negotiations with the Company, and is obligated to consider in good faith any proposals made by Parent, in order to amend the terms of the proposed transaction such that the Competing Proposal no longer constitutes a Superior Proposal.

 

Also, prior to the approval of the Merger by the Company’s shareholders, the Board may change its recommendation that the Company’s shareholders approve the Merger Agreement for a reason unrelated to a Competing Proposal if it determines in good faith (after consultation with its outside legal counsel and financial advisor) that, in light of the occurrence of a Company Intervening Event (as defined in the section of this Proxy Statement entitled “The Merger Agreement—The Board’s Recommendation; Company Board Recommendation Change”), the failure to take such action would be reasonably likely to be inconsistent with the Board’s fiduciary duties under applicable law, provided that the Company gives Parent written notice of such determination and a four (4) business day period for the purpose of engaging in discussions and negotiations with the Company so as to avoid such recommendation change.

 

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Parent may elect to terminate the Merger Agreement in the event of a change in the Board’s recommendation. The Company will be required to pay Parent a termination fee of $18,847,360 if the Merger Agreement is terminated under certain circumstances that are specified in the Merger Agreement, including in the event of a change in the Board’s recommendation. For more details, see the section of this Proxy Statement entitled “The Merger Agreement—Termination Fees.”

 

Financing of the Merger

 

The Company anticipates that the total amount of funds necessary to complete the Merger and the other Transactions will be approximately $539 million. Parent has access to sufficient cash to fund the acquisition, and has represented to the Company that it will have sufficient funds to pay all cash amounts required to be paid by Parent under the Merger Agreement on the closing date of the Merger (the “Closing Date”). This amount consists of funds needed to (i) pay the holders of Ordinary Shares and ADSs the amounts due under the Merger Agreement and (ii) make payments in respect of certain of the Company’s outstanding warrants and equity-based awards pursuant to the Merger Agreement.

 

For more information, see the section of this Proxy Statement entitled “The Merger—Financing of the Merger.”

 

Material U.S. Federal and Israeli Income Tax Consequences of the Merger

 

The receipt by a U.S. Holder (as defined in the section of this Proxy Statement entitled “The Merger—Material U.S. Federal Income Tax Consequences”) of cash in exchange for Company Shares in connection with the Merger will be a taxable transaction for U.S. federal income tax purposes. Generally, a U.S. Holder will recognize gain or loss equal to the difference between the amount of cash it receives in connection with the Merger and its aggregate adjusted tax basis in Company Shares that it exchanges therefor.

 

The receipt of cash in exchange for Company Shares in connection with the Merger is generally a taxable transaction for Israeli income tax purposes and requires the withholding of applicable Israeli tax at source. However, certain exemptions from Israeli tax withholding may be applicable to non-Israeli holders of Company Shares under certain provisions of the Israeli Income Tax Ordinance (New Version) 1961, as amended (the “ITO”) and we intend to apply to the Israel Tax Authority to obtain a tax ruling in that regard.

 

For more information, see the section of this Proxy Statement entitled “The Merger—Material U.S. Federal and Israeli Income Tax Consequences of the Merger.” Holders of Company Shares should consult their own tax advisors concerning the tax consequences relating to the Merger in light of their particular circumstances.

 

Voting and Support Agreements

 

Simultaneously with the execution and delivery of the Merger Agreement, several directors and officers of the Company who are also shareholders of the Company as well as certain other shareholders (collectively, the “Supporting Shareholders”), who collectively beneficially own approximately 18.8% of the outstanding Company Shares on the date of the Merger Agreement, entered into a Voting and Support Agreement with Parent (the “Support Agreement”), pursuant to which the Supporting Shareholders agreed, among other things, to vote their respective beneficially owned capital stock of the Company (or in the case of the holders of the ADSs, instruct the Depositary on how to vote the Ordinary Shares represented by their ADSs) in favor of the approval of the Merger Agreement, the Merger and the other Transactions and against any action, proposal, transaction or agreement that would prevent, impede or delay the consummation of the transactions contemplated by the Merger Agreement. The obligations of the Supporting Shareholders terminate under certain circumstances, including if the Merger Agreement is terminated.

 

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The form of Support Agreement is attached as Annex C to this Proxy Statement.

 

Regulatory Approvals Required for the Merger and Other Regulatory Filings

 

Under the Merger Agreement, the Merger cannot be completed until (i) the expiration or termination of the applicable waiting period under the HSR Act and (ii) the parties receive a waiver, clearance or affirmative approval of the Israeli Competition Authority under the Israeli Economic Competition Law-1988 (the “Israeli Competition Law”).

 

For further details regarding the regulatory approvals required for the Merger, please refer to the section of this Proxy Statement entitled “The Merger—Regulatory Approvals Required for the Merger and Other Regulatory Filings.

 

No Appraisal Rights

 

Under Israeli law, the Company’s shareholders are not entitled to statutory appraisal rights in connection with the Merger.

 

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QUESTIONS AND ANSWERS ABOUT THE TRANSACTION AND THE MEETING

 

The following questions and answers are intended to briefly address certain commonly asked questions regarding the Meeting, the Merger Proposal and the other matters on the agenda for the Meeting that you, as a shareholder of Itamar (or holder of ADSs), may have and the answers to those questions. These questions and answers may not address all the questions that may be important to you as a shareholder (or holder of ADSs) of Itamar. Please refer to the more detailed information contained elsewhere in this Proxy Statement, the appendices attached to this Proxy Statement and the documents referred to or incorporated by reference in this Proxy Statement, which you are urged to read carefully and in their entirety. See the section of this Proxy Statement entitled “Where You Can Find More Information” beginning on page 99.

 

Q: Why am I receiving this Proxy Statement?

 

A: On September 13, 2021, the Company entered into an Agreement and Plan of Merger (which we refer to as the Merger Agreement) with ZOLL Medical Corporation, a Massachusetts corporation (which we refer to as Parent) and a subsidiary of Asahi Kasei Corporation, a Japanese corporation (which we refer to as Guarantor), Zeus Merger Sub Ltd., an Israeli company and wholly owned subsidiary of Parent (which we refer to as Merger Sub) and, solely for the limited purposes set forth therein, Guarantor. We are holding the Meeting as a special meeting in order to obtain shareholder approval of (1) the Merger Proposal (i.e., approving the Merger Agreement, the transactions contemplated thereunder, including the Merger and the Merger Consideration); and (2) the Adjournment Proposal (i.e., the adjournment of the Meeting to a later date if necessary to solicit additional proxies if there are insufficient votes to approve the Merger Proposal). In addition, since we have not held our annual meeting of shareholders for 2021 as of yet, we are holding the Meeting also as an annual meeting in order to vote upon certain other items, including the Director Proposal, the Compensation Policy Proposal, and the CEO Salary Proposal.

 

We cannot complete the Merger unless our shareholders approve the Merger Proposal. However, the completion of the Merger is not contingent on the shareholder approval of the other proposals.

 

You are receiving this Proxy Statement because you owned Ordinary Shares or ADSs, which we collectively refer to as Company Shares, on October 17, 2021, the Record Date, and that entitles you to vote at the Meeting (or if you are an ADS holder, to instruct the Depositary how to vote the Ordinary Shares underlying your ADSs at the Meeting). By use of a proxy, you can vote on the proposals to be acted on at the Meeting whether or not you attend the Meeting. This Proxy Statement describes the matters on which we would like you to vote and provides information on those matters so that you can make an informed decision.

 

Q: What am I being asked to vote on?

 

A: You are being asked to vote on a resolution for the approval of the acquisition of Itamar by Parent, including the approval of: (i) the Merger Agreement; (ii) the Merger; (iii) the consideration of $1.0333333 in cash, without interest and subject to applicable withholding taxes, to be received for each Ordinary Share, including with respect to the Ordinary Shares underlying the ADSs, owned as of immediately prior to the effective time of the Merger; (iv) the cancellation of each outstanding option to purchase Ordinary Shares or ADSs (including those granted to the Company’s directors and officers) in exchange for the right to receive a cash payment, in accordance with the Merger Agreement; (v) the cancellation of each outstanding RSU (including those granted to the Company’s directors and officers) in exchange for the right to receive a cash payment, in accordance with the Merger Agreement; and (vi) all other transactions and arrangements contemplated by the Merger Agreement (we refer to the foregoing collectively as the Merger Proposal).

 

In addition, you are being asked to vote on the following proposals:

 

·the Adjournment Proposal;

 

·the Director Proposal;

 

·the Compensation Policy Proposal;

 

·the CEO Salary Proposal; and

 

·the Auditor Proposal.

 

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Each of the foregoing items is further described in this Proxy Statement.

 

Q:     When and where is the Meeting?

 

A:     The Meeting will take place on November 16, 2021, at 1:00 PM (Israel time) (6:00 AM Eastern time), at Company’s offices at 5 Tarshish Street, Caesarea 3079821, Israel. However, in light of the outbreak of the coronavirus (COVID-19) pandemic, the Company reserves the option to convert the Meeting from a physical meeting to a virtual meeting at a later date. In such event, the Company will issue a press release and/or furnish a Form 6-K or other document to the SEC and ISA prior to the date of the Meeting outlining the manner in which shareholders may attend the virtual Meeting.

 

Q:     Who is entitled to vote at the Meeting?

 

A:     Shareholders as of the Record Date of October 17, 2021 are entitled to notice of the Meeting and to vote at the Meeting.

 

Q:     What shares can I vote at the Meeting?

 

A:     You may vote all of the Company Shares you owned as of the Record Date (if you are an ADS holder, you may vote all ADSs you own as of the Record Date by instructing the Depositary how to vote the Ordinary Shares underlying such ADSs), including Company Shares held directly in your name as the shareholder of record and all Company Shares held for you as the beneficial owner through a broker, trustee or other nominee such as a bank. See the answers to the questions below entitled “How may I vote?” and “If my broker holds my Company Shares in “street name,” will my broker vote my shares for me? for further instructions on how to vote your Ordinary Shares or ADSs in the Meeting.

 

Q:     What is an “American Depositary Share” or “ADS”?

 

A:     An American Depositary Share, or ADS, is a security that allows persons in the United States to more easily hold and trade interests in companies incorporated or organized in a non-U.S. country. In the case of Itamar, each ADS represents thirty (30) Ordinary Shares. The Deposit Agreement sets out the rights of ADS holders as well as the rights and obligations of the Depositary, including with respect to voting at the Company’s shareholders meetings.

 

Q:     May I attend the Meeting and vote in person?

 

A:     Yes. All holders of Ordinary Shares as of the Record Date may attend the Meeting and vote in person.

 

Ordinary Shares. Even if you plan to attend the Meeting in person, to ensure that the Ordinary Shares will be represented at the Meeting, we encourage you to sign, date and return the enclosed proxy card in the accompanying prepaid reply envelope.

 

A form of proxy for use at the Meeting and a return envelope for the proxy are enclosed. If a shareholder’s Ordinary Shares are held via the Company’s Israeli registrar for trading on the TASE, he or she should deliver (via registered mail or courier) his or her completed proxy (or voting instruction card) to the offices of the Company at 9 Halamish Street, Caesarea 3088900, Israel, Attention: General Counsel and Company Secretary together with a proof of ownership (‘Ishur Baalut’), as of the Record Date, issued by his or her broker, at least 48 hours prior to the time of the Meeting. Alternatively, such a shareholder may vote electronically via MAGNA, the electronic voting system of the ISA, up to six hours before the time fixed for the Meeting. You should receive instructions about electronic voting from your broker.

 

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ADSs. Under the terms of the Deposit Agreement, the Depositary shall endeavor (insofar as is practicable and in accordance with the applicable law and the articles of association of the Company) to vote or cause to be voted the number of Ordinary Shares represented by ADSs in accordance with the instructions provided by the holders of ADSs to the Depositary. If no instructions are received by the Depositary from any holder of ADSs with respect to any of the Ordinary Shares represented by the ADSs evidenced by such holder’s receipts on or before the date established by the Depositary for such purpose, the Depositary will not exercise any discretion in voting the Ordinary Shares, except that, if a holder of our ADSs does not provide the Depositary with voting instructions for an agenda item in the Meeting in a timely manner, we may (but are not obligated) instruct the Depositary, if we reasonably do not know of any substantial opposition to such agenda item and the matter is not materially adverse to the interests of our shareholders, to treat the holder as giving a discretionary proxy to a person designated by us as to that matter. Holders of ADSs who wish to return voting instructions to the Depositary (or revoke or change such instructions if already provided) need to do so by communicating such voting instructions (or revocation or change thereto) to the Depositary in a timely manner and in accordance with the directions from the Depositary. For the sake of clarity, holders of ADSs will not be able to attend or vote directly at the Meeting.

 

Q:     What is the proposed Merger and what effects will it have on the Company?

 

A:     The proposed Merger will result in the acquisition of the Company by Parent. If the Merger Proposal is approved by the shareholders and the other closing conditions under the Merger Agreement have been satisfied or waived, Merger Sub will merge with and into the Company, with the Company continuing as the Surviving Company. As a result of the Merger, the Company will become a wholly owned subsidiary of Parent, and the Company Shares will no longer be publicly traded (the Ordinary Shares will be delisted from the TASE and the ADSs will be delisted from Nasdaq). In addition, the Company Shares will be deregistered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Israeli Securities Law, 1968, as amended (the “Israeli Securities Law”) and the Company will no longer file periodic reports with the SEC or ISA.

 

Q:     What will I receive if the Merger is completed?

 

A:     Upon completion of the Merger, you will be entitled to receive the Per Share Merger Consideration or the Per ADS Merger Consideration, as applicable, for each Company Share that you own in cash, without interest and less any applicable withholding taxes (and, with respect to ADSs, less the Cancellation Fees). For example, if you own 100 Ordinary Shares and 100 ADSs, you will receive $3,203.33333 in cash in exchange for the Company Shares, without interest and less any applicable withholding taxes and the Cancellation Fees.

 

Q:     How does the Per Share Merger Consideration or the Per ADS Merger Consideration, as applicable, compare to the unaffected market price of the Company Shares?

 

A:     The Per Share Merger Consideration of $1.0333333 per each Ordinary Share constitutes a premium of approximately 53.28% to the closing price of the Ordinary Shares on September 12, 2021 (using the exchange rate between the NIS and the dollar, as quoted by the Bank of Israel on September 10, 2021), the last trading day on the TASE prior to the announcement that the Company entered into the Merger Agreement. The Per ADS Merger Consideration of $31.00 per each ADS constitutes a premium of approximately 50.2% to the closing price of the Company Shares on September 10, 2021, the last trading day on the Nasdaq prior to the announcement that the Company entered into the Merger Agreement. On October 13, 2021, the closing price of the ADS and Ordinary Shares, respectively, on Nasdaq and TASE was $30.41 and NIS 3.267, respectively.

 

Q:     Will the Merger Consideration payable to me be subject to Israeli tax withholding?

 

A:     According to Israeli law, unless it is provided with an exemption certificate issued by the Israel Tax Authority, Parent is required to withhold Israeli taxes from the Merger Consideration even if you are not subject to Israeli capital gains tax. We intend to submit an application to the Israel Tax Authority in order to clarify the withholding mechanism. As part of the application, we intend to request that non-Israeli residents who purchased their Ordinary Shares or ADSs on or after March 13, 2007 (the date on which Itamar listed its shares on the TASE) and hold less than 5% of the outstanding Ordinary Shares will be exempt from withholding to the extent that such shareholders will provide the exchange agent with certain declarations regarding their residency and the date on which the shares were purchased. We cannot assure you that our application will be accepted.

 

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Q:     Will the Merger Consideration paid to U.S. Holders of the Company Shares be subject to U.S. federal income tax?

 

A:     The receipt of Merger Consideration by the U.S. Holders of the Company Shares will be a taxable event for U.S. federal income tax purposes. For more details, see “The Merger—Material U.S. Federal and Israeli Income Tax Consequences.”

 

Q:     What do I need to do now?

 

A:     We encourage you to read this Proxy Statement, the annexes to this Proxy Statement and the documents that we refer to in this Proxy Statement carefully and consider how the Merger and the other proposals included herein affect you. Then sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying reply envelope, so that the Ordinary Shares can be voted at the Meeting. If you hold Ordinary Shares in “street name,” please refer to the voting instruction forms provided by your bank, broker or other nominee to vote the Ordinary Shares. If you hold ADSs, please refer to the voting instruction forms provided by the Depositary to vote the Ordinary Shares represented by the ADSs.

 

Q:     Should I send in my share or ADS certificates now?

 

A:     No. After the Merger is completed, if your Ordinary Shares or ADSs are held in “street name” by your bank, broker or other nominee, you will receive instructions from your bank, broker or other nominee as to how to effect the surrender or transfer of your “street name” Ordinary Shares or ADSs in exchange for the Merger Consideration. If your Ordinary Shares are traded through the TASE, you will receive the Merger Consideration through the bank or financial institution through which you hold your Ordinary Shares. If you hold certificated shares, you will receive a letter of transmittal containing instructions for how to send your share certificates to the exchange agent in order to receive the Merger Consideration for the Ordinary Shares represented by your share certificates. Please do not send your Ordinary Share or ADS certificates with your proxy card.

 

Q:     What happens if I sell or otherwise transfer my Company Shares after the Record Date but before the Meeting?

 

A:     The Record Date for the Meeting is earlier than the date of the Meeting and the date the Merger is expected to be completed.

 

If you sell or transfer the Company Shares after the Record Date but before the Meeting, you will transfer the right to receive the Per Share Merger Consideration or the Per ADS Merger Consideration, as applicable, if the Merger is completed, to the person to whom you sell or transfer the Company Shares, but, unless special arrangements (such as provision of a proxy) are made between you and the person to whom you sell or otherwise transfer the Company Shares and each of you timely notifies the Company in writing of such special arrangements, you will retain your right to vote those shares at the Meeting. Even if you sell or otherwise transfer the Company Shares after the Record Date, if you hold Ordinary Shares, we encourage you to sign, date and return the enclosed proxy card in the accompanying reply envelope or grant your proxy electronically as described under question entitled “How may I vote?” below, or, if you hold ADSs, to return voting instructions to the Depositary.

 

Q:     How does the Board recommend that I vote?

 

A:     The Board, after considering the various factors described under the caption “The Merger—Reasons for the Merger and Recommendation of the Board,” has unanimously (1) determined that the Merger Agreement and the transactions contemplated thereunder, including the Merger, are fair to, and in the best interests of, the Company and its shareholders and that, considering the financial position of the merging companies, no reasonable concern exists that the Surviving Company will be unable to fulfill the obligations of the Company to its creditors; and (2) approved the Merger, the execution of the Merger Agreement and the consummation of the transactions contemplated thereunder.

 

The Board unanimously recommends that you vote (1) “FOR” the Merger Proposal; (2) “FOR” the Adjournment Proposal; (3) “FOR” the Director Proposal; (4) “FOR” the Compensation Policy Proposal; (5) “FOR” the CEO Salary Proposal; and (6) “FOR” the Auditor Proposal.

 

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Q:     What happens if the Merger is not completed?

 

A:     If the Merger Proposal is not approved by shareholders or if the Merger is not completed for any other reason, shareholders will not receive any payment for their Company Shares. Instead, the Company will remain an independent public company, the Ordinary Shares will continue to be listed and traded on TASE, the ADSs will continue to be listed and traded on Nasdaq, the Company Shares will continue to be registered under the Exchange Act, and the Company will continue to file periodic reports with the SEC and the ISA.

 

The Company will be required to pay Parent a termination fee of $18,847,360 if the Merger Agreement is terminated under certain circumstances that are specified in the Merger Agreement. For more details see the section of this Proxy Statement entitled “The Merger Agreement—Termination Fees.”

 

Q:     Are there risks I should consider in deciding how to vote on the Merger?

 

A:     Yes. You should read carefully this Proxy Statement in its entirety, including the factors discussed in the section of this Proxy Statement entitled “Risk Factors” beginning on page 20.

 

Q:     What vote is required to approve the Merger Agreement?

 

A:     Provided that a quorum is present, the approval of the Merger Proposal will require the affirmative vote of a majority of the Ordinary Shares present, in person, by proxy or by electronic voting, at the Meeting (or any adjournment or postponement thereof), excluding abstentions and any Ordinary Shares that are held by Merger Sub, Parent or by any person or entity holding at least 25% of the “means of control” (within the meaning of the ICL) of either Merger Sub or Parent, or any person or entity acting on behalf of either Merger Sub or Parent or any person or entity described in the previous clause, including any of their affiliates (each, a “Parent Affiliate”).

 

While it is unlikely that any of the Company’s public shareholders is a Parent Affiliate, in order for your vote to be counted towards or against the required majority for the approval of the Merger Proposal, you must indicate in the appropriate place on the enclosed proxy card whether or not you are a Parent Affiliate. If you do not mark a box, your vote in respect of the Merger Proposal will not be counted. If you are unable to make this confirmation, please contact the Company’s General Counsel and Company Secretary, at +972-4-617700 or FNoa@itamar-medical.com for instructions on how to vote your Ordinary Shares and indicate whether or not you are a Parent Affiliate or, if you hold your ADSs in “street name,” you may also contact the representative managing your account, who would then contact us on your behalf. Shareholders who hold their shares through banks, brokers or other nominees that are members of the TASE should indicate whether or not they are a Parent Affiliate on the form of voting card that we have filed via MAGNA (if voting manually) or on the electronic voting form (if voting electronically via MAGNA).

 

Q:     What vote is required to approve each of the remaining proposals? What if I have a personal interest in any proposal?

 

A:     The approval of each of the remaining proposals requires the affirmative vote of a majority of the Ordinary Shares present, in person, by proxy or by electronic voting, at the Meeting (or any adjournment or postponement thereof), excluding abstentions; provided that with respect to Item 4 (the Compensation Policy Proposal) and Item 5 (the CEO Salary Proposal), either (i) the shares voted in favor of such resolution include a majority of the Ordinary Shares voted by shareholders who are not “controlling shareholders” and do not have a “personal interest” in such matter (as such terms are defined in the ICL) or (ii) that the total number of shares voted by the shareholders described in clause (i) against such resolutions does not exceed two percent (2%) of the aggregate voting rights in the Company.

 

As of the date hereof, the Company does not have a controlling shareholder within the meaning of the Companies Law. However, (i) all of our directors and officers are deemed to have a personal interest in Item 4 (the Compensation Policy Proposal) and (ii) Mr. Glick is deemed to have a personal interest in Item 5 (the CEO Salary Proposal).

 

The Companies Law requires that each shareholder voting on Item 4 (the Compensation Policy Proposal) and Item 5 (the CEO Salary Proposal) indicate whether or not the shareholder is a controlling shareholder or has such a personal interest in the proposed resolution.

 

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While it is unlikely that any of the Company’s public shareholders has a personal interest in Item 4 (the Compensation Policy Proposal) or Item 5 (the CEO Salary Proposal), in order for your vote to be counted towards or against the required majority for the approval thereof, you must indicate in the appropriate place on the enclosed proxy card whether or not you are a controlling shareholder or have a personal interest in Item 4 or 5. If you do not mark this box, your vote will not be counted in respect of Item 4 (the Compensation Policy Proposal) and Item 5 (the CEO Salary Proposal). If you are unable to make this confirmation, please contact the Company’s General Counsel and Company Secretary at +972-4-617700 or FNoa@itamar-medical.com for instructions on how to vote your Ordinary Shares and indicate whether or not you are a controlling shareholder or have a personal interest or, if you hold your ADSs in “street name,” you may also contact the representative managing your account, who would then contact us on your behalf. Shareholders who hold their shares through banks, brokers or other nominees that are members of the TASE should indicate whether or not they are a controlling shareholder or have a personal interest in Item 4 (the Compensation Policy Proposal) or Item 5 (the CEO Salary Proposal) on the form of voting card that we have filed via MAGNA (if voting manually) or on the electronic voting form (if voting electronically via MAGNA).

 

Q:     How many shares must be present or represented to conduct business at the Meeting (that is, what constitutes a quorum)?

 

A:     The presence at the Meeting, in person or represented by proxy, of at least two (2) shareholders holding at least 33 1/3% of the voting rights in the Company as of the Record Date will constitute a quorum for the Meeting.

 

Q:     What happens if a quorum is not present?

 

A:     If within half an hour from the time appointed for the Meeting a quorum is not present, the Meeting will stand adjourned for one (1) week, to November 23, 2021, at the same hour and place, without any notification to shareholders, unless another time or place is determined by the Board in a notice to our shareholders. If, at such adjourned meeting, a quorum is not present within half an hour from the time appointed for holding the adjourned meeting, any two (2) shareholders present in person or by proxy who hold or represent, in the aggregate, at least 10% of the outstanding share capital of the Company, shall constitute a quorum.

 

Under the terms of the Merger Agreement, the Meeting cannot be adjourned, postponed, delayed or cancelled without the prior written consent of Parent, other than in the event (a) of failure to constitute a quorum at the Meeting, (b) that the Company has not received proxies representing a sufficient number of Company Shares to obtain the required approval of the Merger Proposal, (c) that such adjournment is required by applicable law or at the request of the SEC, ISA, Nasdaq or TASE or (d) that, in the good-faith judgement of the Board (after consultation with its outside legal advisors), the failure to adjourn would be reasonably likely to not allow sufficient time under applicable law for distribution or dissemination of any required supplement or amendment to this Proxy Statement.

 

Q:     Am I entitled to appraisal rights in connection with the Merger?

 

A:     No. Under Israeli law, the Company’s shareholders are not entitled to statutory appraisal rights in connection with the Merger.

 

Q:     Do any of the Company’s directors or officers have interests in the Merger that may differ from those of the Company’s shareholders generally?

 

A:     Yes. In considering the recommendation of the Board with respect to the Merger Proposal, you should be aware that our directors and executive officers may have interests in the Merger that are different from, or in addition to, your interests as a shareholder. The Board was aware of these interests during its deliberations on the merits of the Merger and in deciding to recommend that shareholders vote in favor of the Merger Proposal. These interests generally include, among others, the rights to accelerated vesting of equity awards, the indemnification and insurance and certain bonus payment provisions contained in or permitted by the Merger Agreement, as described in more detail under the caption “The Merger—Interests of the Company’s Directors and Executive Officers in the Merger.”

 

Our directors and executive officers have informed us that they currently intend to vote (1) “FOR” the Merger Proposal; (2) “FOR” the Adjournment Proposal; (3) “FOR” the Director Proposal; (4) “FOR” the Compensation Policy Proposal; (5) “FOR” the CEO Salary Proposal; and (6) “FOR” the Auditor Proposal.

 

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Q:     How may I vote?

 

A:     You can vote either in person at the Meeting (or via the virtual meeting website if the Meeting is held virtually) or by authorizing another person as your proxy, whether or not you attend the Meeting.

 

Ordinary Share Holders. A form of proxy for use at the Meeting and a return envelope for the proxy are enclosed. If a shareholder’s Ordinary Shares are held via the Company’s Israeli registrar for trading on the TASE, he or she should deliver (via registered mail or courier) his or her completed proxy (or voting instruction card) to the offices of the Company at 9 Halamish Street, Caesarea 3088900, Israel, Attention: General Counsel and Company Secretary together with a proof of ownership (‘Ishur Baalut’), as of the Record Date, issued by his or her broker, at least 48 hours prior to the time of the Meeting. Alternatively, such a shareholder may vote electronically via MAGNA, the electronic voting system of the ISA, up to six hours before the time fixed for the Meeting. You should receive instructions about electronic voting from your broker.

 

ADS Holders. Under the terms of the Deposit Agreement, the Depositary shall endeavor (insofar as is practicable and in accordance with the applicable law and the articles of association of the Company) to vote or cause to be voted the number of Ordinary Shares represented by ADSs in accordance with the instructions provided by the holders of ADSs to the Depositary. If no instructions are received by the Depositary from any holder of ADSs with respect to any of the Ordinary Shares represented by the ADSs evidenced by such holder’s receipts on or before the date established by the Depositary for such purpose, the Depositary will not exercise any discretion in voting the Ordinary Shares, except that, if a holder of our ADSs does not provide the Depositary with voting instructions for an agenda item in the Meeting in a timely manner, we may (but are not obligated) instruct the Depositary, if we reasonably do not know of any substantial opposition to such agenda item and the matter is not materially adverse to the interests of our shareholders, to treat the holder as giving a discretionary proxy to a person designated by us as to that matter. Holders of ADSs who wish to return voting instructions to the Depositary (or revoke or change such instructions if already provided) need to do so by communicating such voting instructions (or revocation or change thereto) to the Depositary in a timely manner and in accordance with the directions from the Depositary. For the sake of clarity, holders of ADSs will not be able to attend or vote directly at the Meeting. 

 

Holders through Banks, Brokers or other Nominees. If you hold your Ordinary Shares or ADSs in “street name” through a bank, broker or other nominee you should follow the instructions on the form you receive from your bank, broker or other nominee. If your Ordinary Shares are held in “street name” and you wish to vote such shares by attending the Meeting in person, you will need to obtain a proxy from your bank, broker or other nominee.

 

Q:     If my broker holds my Company Shares in “street name,” will my broker vote my shares for me?

 

A:     No. Your bank, broker or other nominee is permitted to vote the Company Shares on any proposal currently scheduled to be considered at the Meeting only if you instruct your bank, broker or other nominee how to vote. You should follow the procedures provided by your bank, broker or other nominee to vote the Company Shares. Without instructions, the Company Shares will not be voted on such proposals. However, under the terms of the Deposit Agreement, if no instructions are received by the Depositary from any holder of ADSs with respect to any of the Ordinary Shares represented by the ADSs evidenced by such holder’s receipts on or before the date established by the Depositary for such purpose, the Depositary will not exercise any discretion in voting the Ordinary Shares, except that, if a holder of our ADSs does not provide the Depositary with voting instructions for an agenda item in the Meeting in a timely manner, we may (but are not obligated) instruct the Depositary, if we reasonably do not know of any substantial opposition to such agenda item and the matter is not materially adverse to the interests of our shareholders, to treat the holder as giving a discretionary proxy to a person designated by us as to that matter.

 

Q:     Who will pay the costs of soliciting votes for the Meeting?

 

A:     We are making this solicitation and will pay the entire cost of preparing, printing, mailing and distributing the proxy materials and soliciting votes with respect to the Meeting. In addition to the mailing of the proxy materials, the solicitation of proxies may be made in person, by telephone or by electronic communication by certain of our directors, officers and other employees, who will not receive any additional compensation for such activities. We also reserve the right to engage a proxy solicitor.

 

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Q:     May I change my vote after I have mailed my signed proxy card?

 

A:     Yes. You may change your vote or revoke your proxy at any time prior to the vote at the Meeting. If you are a shareholder of record, you may change your vote or revoke your proxy by filing with the Company, at least forty-eight (48) hours prior to the time of the Meeting, a written notice of revocation or duly executed proxy bearing a later date, or by voting in person at the Meeting. If a shareholder voted electronically via MAGNA, such shareholder may change or revoke its vote using the electronic voting system up to the time by which it may submit a vote using such system (i.e., up to six (6) hours prior to the time fixed for Meeting). Holders of ADSs who wish to change or revoke their voting instructions need to do so by communicating such revocation or change to the Depositary in a timely manner and in accordance with the directions from the Depositary.

 

Q:     What should I do if I have questions about the Meeting, the Merger or this document?

 

A:     If you have any questions about the Meeting, the Merger or this document, or if you need additional copies of this document or the enclosed proxy card, you should contact:

 

Attention: General Counsel and Company Secretary

Phone: +972-4-617700

Email: FNoa@itamar-medical.com

 

If your bank, broker or other nominee holds your Ordinary Shares or ADSs, you may also call your bank, broker or other nominee for additional information.

 

  18 

 

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

This Proxy Statement, including information set forth or incorporated by reference in this document, contains forward-looking statements within the meaning of the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995 and other applicable securities laws. These forward-looking statements include, but are not limited to, statements about the expected completion of the proposed transaction and the timing thereof, the satisfaction or waiver of any conditions to the proposed transaction, anticipated benefits, growth opportunities and other events relating to the proposed transaction, projections about the Company’s business and its future revenues, expenses and profitability. Forward-looking statements may be, but are not necessarily, identified by the use of forward-looking terminology such as “may,” “anticipates,” “estimates,” “expects,” “intends,” “plans,” “believes,” and words and terms of similar substance. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual events, results, performance, circumstances or achievements to be materially different from those expressed or implied by such forward-looking statements. Factors that could cause actual events, results, performance, circumstances or achievements to differ from such forward-looking statements include, but are not limited to, the following:

 

·we may be unable to obtain the Company Shareholder Approval;

 

·we may be unable to obtain required regulatory approvals or satisfy other conditions to the closing of the Merger;

 

·the Merger may involve unexpected costs, liabilities or delays;

 

·the Company’s business may suffer as a result of uncertainty surrounding the proposed Merger, diversion of management attention on Merger-related matters, disruption of current plans and operations, the potential difficulties in employee retention, and impact of the Merger on relationships with customers, distributors and suppliers;

 

·the outcome of any legal proceedings related to the Merger;

 

·the Company may be adversely affected by other economic, business, and/or competitive factors;

 

·the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement;

 

·the ability to recognize benefits of the proposed Merger; and

 

·other risks to consummation of the proposed Merger, including the risk that the proposed Merger will not be consummated within the expected time period or at all, and the other risks appearing in the section of this Proxy Statement entitled “Risk Factors” below.

 

Factors that may affect the future events, results, performance, circumstances or achievements of the Company also include, but are not limited to, the risks and factors disclosed in the Company’s filings with the U.S. Securities and Exchange Commission, including, but not limited to, risks and factors identified under such headings as “Risk Factors,” “Introduction” and “Operating and Financial Review and Prospects” in the Annual Report.

 

These forward-looking statements speak only as of the date on which the statements were made and we expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statement included in this Proxy Statement or elsewhere, except as required by applicable law.

 

In light of the significant uncertainties inherent in the forward-looking statements contained herein, readers should not place undue reliance on forward-looking statements. We cannot guarantee any future results, including with respect to the Merger. The statements made in this Proxy Statement represent the Company’s views as of the date of this Proxy Statement, and it should not be assumed that the statements made herein remain accurate as of any future date. Moreover, we assume no obligation to update forward-looking statements or update the reasons that actual results could differ materially from those anticipated in forward-looking statements, except as required by applicable law.

 

  19 

 

 

RISK FACTORS

 

In addition to the other information included in this Proxy Statement, including the matters addressed under the caption entitled “Cautionary Statement Regarding Forward-Looking Statements” on page 19, you should consider carefully the following risk factors in determining how to vote at the Meeting. The following is not intended to be an exhaustive list of the risks related to the Merger and you should read and consider the risk factors described under “Risk Factors,” in the Annual Report, as well as the other risk factors discussed from time to time by the Company in reports filed with, or furnished to, the SEC or the ISA, and which are incorporated by reference into this Proxy Statement.

 

Failure to complete the Merger could negatively impact our share price, business, financial condition, results of operations or prospects.

 

The Merger is subject to the satisfaction or waiver of certain closing conditions, including those described in the section of this Proxy Statement entitled “The Merger Agreement—Conditions to the Closing of the Merger” beginning on page 89, including, among others, that:

 

·the Company’s shareholders have approved the Merger Agreement;

 

·the authorizations, consents, orders or approvals of, or declarations or filings with, governmental authorities specified in the Merger Agreement have been filed, have occurred or have been obtained and are in full force and effect, and the expiration or earlier termination of any waiting period under applicable antitrust laws have occurred or been granted;

 

·at least fifty (50) days have elapsed after the filing of the Merger Proposal with the Companies Registrar and at least thirty (30) days have elapsed after the approval of the Merger by the Company shareholders has been obtained;

 

·no governmental entity of competent jurisdiction has issued any Adverse Law or Order (i.e., (i) any law shall have been enacted or promulgated which prohibits or makes illegal the consummation of the Merger or (ii) there shall be in effect any order preventing the consummation of the Merger) restraining, enjoining or otherwise prohibiting the consummation of the Merger that remains in effect; and

 

·there shall not be any pending governmental investigations as specified in the Merger Agreement.

 

No assurance can be given that each of the conditions will be satisfied. In addition, the Merger Agreement may be terminated under the circumstances described in the section entitled “The Merger Agreement—Termination of the Merger Agreement” beginning on page 90. If the conditions are not satisfied or waived in a timely manner and the Merger is delayed, payment of the Merger Consideration will also be delayed. If the Merger is not completed (including in the case the Merger Agreement is terminated), our ongoing business may be materially adversely affected.

 

 We also could be subject to litigation related to any failure to complete the Merger. If the Merger is not completed, these risks may materialize and may materially adversely affect the price of the Company Shares, our business, financial condition, results of operations or prospects.

 

Some of our directors and officers have interests that may differ from the interests of our shareholders, and these persons may have conflicts of interest in recommending to our shareholders to approve the Merger.

 

Some of the members of management and of the Board may have interests that differ from, or are in addition to, their interests as shareholders, which are described in the section of this Proxy Statement entitled “The Merger—Interests of the Company’s Directors and Executive Officers in the Merger” beginning on page 62. These interests could cause members of the Board or our management to have, or perceived to have, a conflict of interest in approving the Merger Proposal.

 

  20 

 

 

The fact that there is a Merger pending could harm our business and results of operations.

 

While the Merger is pending, we are subject to a number of risks that may harm our business and results of operations, including:

 

·the diversion of management and employee attention from our business may detract from our ability to operate efficiently, capitalize on new opportunities and commence new initiatives;

 

·we have and will continue to incur expenses related to the Merger prior to the Closing;

 

·we may be unable to respond effectively to competitive pressures, industry developments and future opportunities;

 

·we could be subject to costly litigation associated with the Merger; and

 

·our current and prospective employees may be uncertain about their future roles and relationships with the Company following completion of the Merger. This uncertainty may adversely affect our ability to attract and retain key personnel.

 

Our obligation to pay a termination fee under certain circumstances and the restrictions on our ability to solicit or engage in negotiations with respect to other acquisition proposals may discourage other transactions that may be favorable to our shareholders.

 

Until the Merger is completed or the Merger Agreement is terminated, with limited exceptions, the Merger Agreement prohibits us from entering into, soliciting or engaging in negotiations with respect to acquisition proposals or other business combinations. If the Company terminates the Merger Agreement prior to the receipt of the approval of the Merger by the Company’s shareholders and the Company enters into an alternative transaction agreement with respect to an alternative acquisition proposal, the Company is required to pay to Parent a termination fee of $18,847,360 in cash. This could discourage other companies from proposing alternative transactions that may be more favorable to our shareholders than the Merger.

 

If the Merger is not consummated by the Outside Date, either we or Parent may, under certain circumstances that may be beyond our control, choose not to proceed with the Merger.

 

The Merger is subject to the satisfaction or waiver of certain closing conditions described in the section entitled “The Merger Agreement—Conditions to the Closing of the Merger” beginning on page 89 and set forth in the Merger Agreement. The fulfillment of certain of these conditions is beyond our control, such as the receipt of our shareholders’ approval of the Merger, and the expiration or termination of the waiting period under the HSR Act. If the Merger has not been completed by the Outside Date, either the Company or Parent may terminate the Merger Agreement, except that the right to terminate the Merger Agreement in this circumstance will not available to a party whose failure to perform fully its obligations under the Merger Agreement materially contributed to or caused the failure of the Merger to occur on or before such date and such action or failure constitutes a breach of the Merger Agreement. For more information about the Outside Date, please see the section entitled “The Merger Agreement—Termination of the Merger Agreement.”

 

 

Shareholders could file lawsuits in the future challenging the Merger, which may delay or prevent the Closing, incur substantial defense or settlement costs, or otherwise adversely affect the Company.

 

As of the date of this Proxy Statement, there are no pending lawsuits challenging the Merger. However, potential plaintiffs may file lawsuits challenging the Merger. The outcome of any future litigation is uncertain. Such litigation, if not resolved, could prevent or delay completion of the Merger and result in substantial costs to the Company, including any costs associated with the indemnification of directors and officers. One of the conditions to the Closing of the Merger is the absence of any provision of applicable law or grant by any governmental entity that has the effect of restraining, enjoining, prohibiting or otherwise making illegal the consummation of the Merger or any of the other Transactions. Therefore, if a plaintiff were successful in obtaining an injunction prohibiting the consummation of the Merger on the agreed-upon terms, then such injunction may prevent the Merger from being completed, or from being completed within the expected timeframe. The defense or settlement of any lawsuit or claim that remains unresolved at the time the Merger is completed may adversely affect the Company’s business, financial condition, results of operations and cash flows.

 

  21 

 

 

SPECIAL AND 2021 ANNUAL GENERAL MEETING OF SHAREHOLDERS

 

Date, Time and Place

 

The Company will hold the Meeting on November 16, 2021 at 1:00 PM (Israel time) (6:00 AM Eastern time), at the Company’s offices at 5 Tarshish Street, Caesarea 3079821, Israel. However, in light of the outbreak of the coronavirus (COVID-19) pandemic, the Company reserves the option to convert the Meeting from a physical meeting to a virtual meeting at a later date. In such event, the Company will issue a press release and/or furnish a Form 6-K or other document to the SEC and ISA prior to the date of the Meeting outlining the manner in which shareholders may attend the virtual Meeting.

 

Purpose of the Special and 2021 Annual General Meeting

 

At the Meeting, the Company will ask shareholders to vote on:

 

(1) the Merger Proposal;

 

(2) the Adjournment Proposal;

 

(3) the Director Proposal;

 

(4) the Compensation Policy Proposal;

 

(5) the CEO Salary Proposal; and

 

(6) the Auditor Proposal.

 

In addition to the above resolutions, at the Meeting the Company will present and discuss the Company’s consolidated financial statements for the year ended December 31, 2020.

 

Recommendation of the Board

 

The Board, after considering various factors described under the caption “The Merger—Reasons for the Merger and Recommendation of the Board,” has unanimously (i) determined that the Merger Agreement and the Transactions, including the Merger, are fair to, and in the best interests of, the Company and its shareholders and that, considering the financial position of the merging companies, no reasonable concern exists that the Surviving Company will be unable to fulfill the obligations of the Company to its creditors; and (ii) approved the Merger, the execution of the Merger Agreement and the consummation of the Transactions.

 

The Board unanimously recommends that you vote (1) “FOR” the Merger Proposal; (2) “FOR” the Adjournment Proposal; (3) “FOR” the Director Proposal; (4) “FOR” the Compensation Policy Proposal; (5) “FOR” the CEO Salary Proposal; and (6) “FOR” the Auditor Proposal.

 

Record Date; Shares Entitled to Vote; Quorum

 

Only shareholders of record as of the Record Date are entitled to notice of the Meeting and to vote at the Meeting.

 

As of October 6, 2021, there were 492,628,273 Ordinary Shares outstanding.

 

 

The presence at the Meeting, in person or represented by proxy or by voting instruction form, of at least two (2) shareholders holding at least 33 1/3% of the total voting rights in the Company as of the Record Date will constitute a quorum for the transaction of business at the Meeting.

 

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If at an adjourned Meeting (if any) a quorum is not present within half an hour from the time appointed for holding the adjourned Meeting, any two (2) shareholders present in person or by proxy who hold or represent, in the aggregate, at least 10% of Ordinary Shares issued and outstanding as of the Record Date, shall constitute a quorum.

 

Vote Required; Abstentions

 

The Merger Proposal

 

Provided that a quorum is present, the approval of the Merger Proposal will require the affirmative vote of a majority of the Ordinary Shares present, in person, by proxy or by electronic voting, at the Meeting (or any adjournment or postponement thereof), excluding abstentions and any Ordinary Shares that are held by Merger Sub, Parent or any other Parent Affiliate.

 

The Companies Law requires that each shareholder voting on Item 1 (the Merger Proposal) indicate whether or not the shareholder is a Parent Affiliate. While it is unlikely that any of the Company’s public shareholders is a Parent Affiliate, the enclosed proxy card includes a box you must mark to confirm whether or not you are a Parent Affiliate. If you do not mark a box, your vote in respect of Item 1 (the Merger Proposal) will not be counted. If you are unable to make this confirmation, please contact the Company’s General Counsel and Company Secretary at +972-4-617700 or FNoa@itamar-medical.com for instructions on how to vote your Ordinary Shares and indicate whether or not you are a Parent Affiliate or, if you hold your ADSs in “street name,” you may also contact the representative managing your account, who would then contact us on your behalf. Shareholders who hold their shares through banks, brokers or other nominees that are members of the TASE should indicate whether or not they are a Parent Affiliate on the form of voting card that we have filed via MAGNA (if voting manually) or on the electronic voting form (if voting electronically via MAGNA).

 

The Other Proposals on the Agenda of the Meeting

 

The approval of each of the remaining proposals on the agenda of the Meeting, i.e., Items 2-6, requires the affirmative vote of a majority of the Ordinary Shares present, in person, by proxy or by electronic voting, at the Meeting (or any adjournment or postponement thereof), excluding abstentions; provided that with respect to Item 4 (the Compensation Policy Proposal) and Item 5 (the CEO Salary Proposal), either (i) the shares voted in favor of such resolution include a majority of the Ordinary Shares voted by shareholders who are not “controlling shareholders” and do not have a “personal interest” in such matter (as such terms are defined in the ICL) or (ii) that the total number of shares voted by the shareholders described in clause (i) against such resolutions do not exceed two percent (2%) of the aggregate voting rights in the Company.

 

Under the Companies Law, a “personal interest” of a shareholder (i) includes a personal interest of any members of the shareholder’s family (i.e., a shareholder’s spouse, sibling, parent, grandparent or descendant and the spouse’s sibling, parent or descendant, and the spouse of each of the foregoing persons) or a personal interest of an entity with respect to which the shareholder (or such family member) serves as a director or chief executive officer, owns at least 5% of its outstanding share capital or voting power or has the right to appoint a director or chief executive officer and (ii) excludes an interest arising solely from the ownership of the Company Shares.

 

As of the date hereof, the Company does not have a controlling shareholder within the meaning of the Companies Law. However, (i) all of our directors and officers are deemed to have a personal interest in Item 4 (the Compensation Policy Proposal) and (ii) Mr. Glick is deemed to have a personal interest in Item 5 (the CEO Salary Proposal).

 

The Companies Law requires that each shareholder voting on Item 4 (the Compensation Policy Proposal) and Item 5 (the CEO Salary Proposal) indicate whether or not the shareholder is a controlling shareholder or has such a personal interest in the proposed resolution. While it is unlikely that any of the Company’s public shareholders has a personal interest in Item 4 (the Compensation Policy Proposal) or Item 5 (the CEO Salary Proposal), the enclosed proxy card includes a box you must mark to confirm whether or not you are a controlling shareholder or have a personal interest in Item 4 or 5. If you do not mark a box, your vote will not be counted in respect of Item 4 (the Compensation Policy Proposal) and Item 5 (the CEO Salary Proposal). If you are unable to make this confirmation, please contact the Company’s General Counsel and Company Secretary at +972-4-617700 or FNoa@itamar-medical.com for instructions on how to vote your Ordinary Shares and indicate whether or not you are a controlling shareholder or have a personal interest or, if you hold your ADSs in “street name,” you may also contact the representative managing your account, who would then contact us on your behalf. Shareholders who hold their shares through banks, brokers or other nominees that are members of the TASE should indicate whether or not they are a controlling shareholder or have a personal interest in Proposal 4 (the Compensation Policy Proposal) or Proposal 5 (the CEO Salary Proposal) on the form of voting card that we have filed via MAGNA (if voting manually) or on the electronic voting form (if voting electronically via MAGNA).

 

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The Merger Proposal is Not Contingent on the Approval of the Other Proposals

 

Itamar cannot complete the Merger unless its shareholders approve the Merger Proposal (Proposal 1). However, the completion of the Merger is not contingent on the approval of Proposals 2, 3, 4, 5 or 6.

 

Security Ownership by Certain Beneficial Owners and Management

 

As of October 6, 2021, the executive officers and directors of the Company beneficially owned (directly or via ADSs) an aggregate of 49,487,255 Ordinary Shares, or 9.7% of the outstanding Ordinary Shares. For beneficial ownership of Ordinary Shares by the Company’s directors and executive officers, including how beneficial ownership was calculated, see “Security Ownership by Certain Beneficial Owners and Management” beginning on page 94.

 

Voting of Proxies; Revocability of Proxies

 

A form of proxy for use at the Meeting and a return envelope for the proxy are enclosed. If a shareholder’s Ordinary Shares are held via the Company’s Israeli registrar for trading on the TASE, he or she should deliver (via registered mail or courier) his or her completed proxy (or voting instruction card) to the offices of the Company at 9 Halamish Street, Caesarea 3088900, Israel, Attention: General Counsel and Company Secretary together with a proof of ownership (‘Ishur Baalut’), as of the Record Date, issued by his or her broker, at least 48 hours prior to the time of the Meeting. Alternatively, such a shareholder may vote electronically via MAGNA, the electronic voting system of the ISA, up to six (6) hours before the time fixed for the Meeting. You should receive instructions about electronic voting from your broker.

 

Shareholders may revoke the authority granted by their execution of proxies before the effective exercise thereof by filing with the Company, at least forty-eight (48) hours prior to the time of the Meeting, a written notice of revocation or duly executed proxy bearing a later date, or by voting in person at the Meeting. However, if a shareholder attends the Meeting and does not elect to vote in person, his or her proxy will not be revoked. If a shareholder voted electronically via MAGNA, such shareholder may change or revoke its vote using the electronic voting system up to the time by which it may submit a vote using such system (i.e., up to six hours prior to the time fixed for Meeting).

 

Unless otherwise indicated on the form of proxy, if a proxy is properly executed and received by the Company prior to the Meeting, the Ordinary Shares represented by the proxy will be voted in favor of all the matters to be presented to the Meeting, as described above. If a shareholder on the form of proxy makes a specification, the Ordinary Shares represented thereby will be voted in accordance with such specification. On all matters considered at the Meeting, abstentions of a holder of Ordinary Shares will be treated as neither a vote “for” or “against” the matter, although they will be counted in determining if a quorum is present.

 

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Under the terms of the Deposit Agreement, the Depositary shall endeavor (insofar as is practicable and in accordance with the applicable law and the Articles of Association of the Company) to vote or cause to be voted the number of Ordinary Shares represented by ADSs in accordance with the instructions provided by the holders of ADSs to the Depositary. If no instructions are received by the Depositary from any holder of ADSs with respect to any of the Ordinary Shares represented by the ADSs evidenced by such holder’s receipts on or before the date established by the Depositary for such purpose, the Depositary will not exercise any discretion in voting the Company Shares, except that, if a holder of the ADSs does not provide the Depositary with voting instructions for an agenda item in the Meeting in a timely manner, we may (but are not obligated) instruct the Depositary, if we reasonably do not know of any substantial opposition to such agenda item and the matter is not materially adverse to the interests of the Company’s shareholders, to treat the holder as giving a discretionary proxy to a person designated by us as to that matter. Holders of ADSs who wish to return voting instructions to the Depositary (or revoke or change such instructions if already provided) need to do so by communicating such voting instructions (or revocation or change thereto) to the Depositary in a timely manner and in accordance with the directions from the Depositary. For the sake of clarity, holders of ADSs will not be able to attend or vote directly at the Meeting.

 

Solicitation of Proxies

 

The expense of soliciting proxies will be borne by the Company. In addition, the Company may reimburse banks, brokers and other nominees representing beneficial owners of Company Shares for their expenses in forwarding soliciting materials to such beneficial owners. Proxies may also be solicited by the Company’s directors, officers and employees, personally or by telephone, email, fax, over the Internet or other means of communication. The Company also reserves the right to engage a proxy solicitor. No additional compensation will be paid for such services.

 

Adjournments or Postponements

 

If within half an hour from the time scheduled for the Meeting a quorum is not present, the Meeting will stand adjourned for one (1) week, to November 23, 2021, at the same hour and place, without any notification to shareholders, unless another time or place is determined by the Board in a notice to our shareholders. At the adjourned Meeting, we may transact any items of business that might have been transacted at the Meeting.

 

Under the terms of the Merger Agreement, the Meeting cannot be adjourned, postponed, delayed or cancelled without the prior written consent of Parent, other than in the event (a) of failure to constitute a quorum at the Meeting, (b) that the Company has not received proxies representing a sufficient number of Company Shares to obtain the required approval of the Merger Proposal, (c) that such adjournment is required by applicable law or at the request of the SEC, ISA, Nasdaq or TASE or (d) that, in the good-faith judgement of the Board (after consultation with its outside legal advisors), the failure to adjourn would be reasonably likely to not allow sufficient time under applicable law for distribution or dissemination of any required supplement or amendment to this Proxy Statement.

 

Questions and Additional Information

 

If you have any questions concerning the Merger, the Meeting or the accompanying Proxy Statement, would like additional copies of the accompanying Proxy Statement or need help voting the Company Shares, please contact the Company’s General Counsel and Company Secretary at +972-4-617700 or FNoa@itamar-medical.com.

 

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PROPOSAL 1
APPROVAL OF THE MERGER PROPOSAL

(Item 1 on the Proxy Card)

 

Background

 

We are asking you to approve the acquisition of the Company by Parent, including the approval of: (i) the Merger Agreement; (ii) the Merger; (iii) the consideration of $1.0333333 in cash, without interest and subject to applicable withholding taxes, to be received for each Ordinary Share, including with respect to the Ordinary Shares underlying the ADSs, owned as of immediately prior to the Effective Time; (iv) the cancellation of each outstanding option to purchase Ordinary Shares or ADSs (including those granted to the Company’s directors and officers) in exchange for the right to receive a cash payment, in accordance with the Merger Agreement; (v) the cancellation of each outstanding RSU (including those granted to the Company’s directors and officers) in exchange for the right to receive a cash payment, in accordance with the Merger Agreement; and (vi) all other transactions and arrangements contemplated by the Merger Agreement.

 

For a summary of and detailed information regarding this proposal, see the information about the Merger Proposal, the Merger Agreement and the Merger throughout this Proxy Statement, including the information set forth in the sections entitled “The Merger” beginning on page 39 of this Proxy Statement and “The Merger Agreement” beginning on page 73 of this Proxy Statement. A copy of the Merger Agreement is attached to this Proxy Statement as Annex A. You are urged to read the Merger Agreement carefully in its entirety.

 

The Proposed Resolution

 

It is proposed that at the Meeting, the following resolution be adopted:

 

“RESOLVED, to approve the acquisition of Itamar by ZOLL Medical Corporation (“Parent”), including the approval of: (i) the Agreement and Plan of Merger, dated September 13, 2021 (as it may be amended from time to time, the “Merger Agreement”), by and among the Company, Parent, Zeus Merger Sub Ltd., an Israeli company and a wholly owned subsidiary of Parent (“Merger Sub”) and, solely for the limited purposes set forth therein, Asahi Kasei Corporation (“Guarantor”); (ii) the merger of Merger Sub with and into the Company in accordance with Sections 314-327 of the Israeli Companies Law, 5759-1999 (the “ICL”), following which Merger Sub will cease to exist as a separate legal entity and the Company will become a wholly owned subsidiary of Parent (the “Merger”); (iii) the consideration of $1.0333333 in cash, without interest and subject to applicable withholding taxes, to be received for each ordinary share, par value NIS 0.01 per share, of the Company (the “Ordinary Shares”), including with respect to the Ordinary Shares underlying the Company’s American Depositary Shares, each representing thirty (30) Ordinary Shares (“ADSs”), owned as of immediately prior to the effective time of the Merger; (iv) the cancellation of each outstanding option to purchase Ordinary Shares or ADSs (including those granted to the Company’s directors and officers) in exchange for the right to receive a cash payment, in accordance with the Merger Agreement; (v) the cancellation of each outstanding restricted share unit (including those granted to the Company’s directors and officers) in exchange for the right to receive a cash payment, in accordance with the Merger Agreement; and (vi) all other transactions and arrangements contemplated by the Merger Agreement.”

 

Required Vote

 

The approval of this matter will require the affirmative vote of a majority of the Ordinary Shares present, in person, by proxy or by electronic voting, at the Meeting (or any adjournment or postponement thereof), excluding abstentions and any Ordinary Shares that are held by Merger Sub, Parent or any other Parent Affiliate.

 

The Companies Law requires that each shareholder voting on this matter indicate whether or not the shareholder is a Parent Affiliate. While it is unlikely that any of the Company’s public shareholders is a Parent Affiliate, the enclosed proxy card includes a box you must mark to confirm whether or not you are a Parent Affiliate. If you do not mark a box in respect of Item 1 (the Merger Proposal), your vote will not be counted towards or against either the ordinary majority or the special tally required for approval of the Merger Proposal. If you are unable to make this confirmation, please contact the Company’s General Counsel and Company Secretary at +972-4-617700 or FNoa@itamar-medical.com for instructions on how to vote your Ordinary Shares and indicate whether or not you are a Parent Affiliate or, if you hold your ADSs in “street name,” you may also contact the representative managing your account, who would then contact us on your behalf. Shareholders who hold their shares through banks, brokers or other nominees that are members of the TASE should indicate whether or not they are a Parent Affiliate on the form of voting card that we have filed via MAGNA (if voting manually) or on the electronic voting form (if voting electronically via MAGNA).

 

The Board unanimously recommends that you vote “FOR” this proposal.

 

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PROPOSAL 2
ADJOURNMENT OF THE MEETING

(Item 2 on the Proxy Card)

 

Background

 

We are asking you to approve a proposal to adjourn the Meeting to a later date or dates if necessary or appropriate, including to solicit additional proxies if there are insufficient votes to approve the Merger Proposal at the time of the Meeting (to which we also refer as the Adjournment Proposal). If shareholders approve the Adjournment Proposal, we could decide to adjourn the Meeting and any adjourned session of the Meeting and use the additional time to solicit additional proxies, including proxies from shareholders that have previously returned properly executed proxies voting against approval of the Merger Proposal. Among other things, approval of the Adjournment Proposal could mean that, even if we had received proxies representing a sufficient number of votes against approval of the Merger Proposal such that the Merger Proposal would be defeated and a quorum is present, we could adjourn the Meeting without a vote on the approval of the Merger Proposal and seek to convince the holders of those shares to change their votes to votes in favor of approval of the Merger Proposal. If the Adjournment Proposal is approved and a quorum is present, the chairman of the Meeting may recess and/or adjourn the Meeting to a later time or date pursuant to the articles of association or the Company.

 

Notwithstanding the foregoing, under the Merger Agreement, the Company may not adjourn, postpone or delay the Meeting without the prior consent of Parent, except that it may do so if and to the extent that: (i) there are holders of an insufficient number of Company Shares present or represented by a proxy at the Meeting to constitute a quorum; (ii) the Company has not received proxies representing a sufficient number of Company Shares to obtain the Company’s shareholder approval; (iii) such adjournment, postponement or delay is required by applicable law or a request from the SEC, the ISA, Nasdaq or the TASE; or (iv) in the good-faith judgment of the Board (after consultation with its outside legal advisors), the failure to adjourn, postpone or delay the Meeting would be reasonably likely to not allow sufficient time under applicable laws for the distribution or dissemination of any required or appropriate supplement or amendment to the Proxy Statement.

 

The Proposed Resolution

 

It is proposed that at the Meeting, the following resolution be adopted:

 

“RESOLVED, to approve to adjourn the Meeting to a later date or dates if the Board of Directors of the Company deems necessary or appropriate, including to solicit additional proxies if there are insufficient votes to approve the Merger Proposal at the time of the Meeting, as detailed in Item 2 of the Company’s Proxy Statement for the Special and 2021 Annual General Meeting.”

 

Required Vote

 

The approval of this matter will require the affirmative vote of a majority of the Ordinary Shares present, in person, by proxy or by electronic voting, at the Meeting (or any adjournment or postponement thereof), excluding abstentions.

 

The Board unanimously recommends that you vote “FOR” this proposal.

 

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PROPOSAL 3
ELECTION OF DIRECTORS

(Item 3 on the Proxy Card)

 

Background

 

Our directors, other than the external directors (see below), are elected at each annual meeting of shareholders. We are presenting six nominees for election as directors at the Meeting, all such nominees being current members of the Board. If elected, each of the nominees will hold office until the next annual general meeting, unless his or her office is vacated earlier pursuant to the provisions of the Company’s Articles of Association or applicable law.

 

Subject to the election of the proposed nominees in this Proposal 3, the size of the Board will be eight (8) directors (including the two (2) external directors).

 

Consistent with Nasdaq Marketplace Rules, or the Nasdaq rules, these nominees were approved by a majority of the independent directors, within the meaning of applicable Nasdaq rules. The Board has determined that each of the nominees is independent within the meaning of applicable Nasdaq rules. The Board has also determined, following confirmation of the Audit Committee of the Board (the “Audit Committee”), to classify Mr. Ilan Biran as an “independent director” within the meaning of the Companies Law.

 

The nominees, their present principal occupation or employment, the year in which each first became a director of Itamar and a brief biography are set forth below. For details about beneficial ownership of Company Shares held by any of these nominees, see the section of this Proxy Statement below entitled “Security Ownership of Certain Beneficial Owners and Directors and Officers.” Such information is based upon the records of the Company and information furnished to it by the nominees.

 

If elected, the nominees shall be eligible for the compensation (including indemnity and insurance) described below under the caption “Executive Compensation.”

 

Name  Age   Director
Since
   Position with the Company
Giora Yaron, PhD   73    1997   Chairman of the Board
              
Ilan Biran (1) (2)   74    2013   Director
              
Christopher M. Cleary   60    2017   Director
              
Scott P. Serota   64    2021   Director
              
Brad Fluegel   60    2021   Director
              
Marga Ortigas-Wedekind   59    2021   Director

 

(1) Member of the Compensation Committee.

 

(2) Member of the Audit Committee.

 

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Giora Yaron, PhD, is a co-founder of our Company and has served as Chairman of the Board since 2016. Between 1997 and 2016, Dr. Yaron served as Co-Chairman of the Board. Dr. Yaron also serves as a member of the board of directors of Amdocs Limited (NASDAQ:DOX), a board member of Excelero (ExpressIO), a provider of ultra-fast block storage solutions and serves as a member on the board of directors of Equalum, a provider of a real-time Data Beaming for Big Data Analytics. Dr. Yaron co-founded several privately-held technology companies, sold to multinational corporations, including, P-cube, Pentacom, Qumranet, Exanet, Comsys and Hyperwise Security. Dr. Yaron is an active seed investor in Great People, SpeedDB, Salto, Vulcan Security, CyberPion and AgronSec. From 2010 until December 2018, Dr. Yaron served as Chairman of the Executive Council of Tel Aviv University. He also served as Chairman of Ramot, the Tel Aviv University technology transfer company from 2010 until 2015. In 2009, Dr. Yaron also co-founded Qwilt, Inc., a privately held video technology provider and serves on its board of directors. Between 1996 and 2006, Dr. Yaron served as a member of the board of directors of Mercury Interactive, a publicly traded IT optimization software provider, acquired by Hewlett-Packard, including as its Chairman of the board of directors between 2004 and 2006. Between 1992 and 1995, Dr. Yaron served as President of Indigo NV. Prior to joining Indigo, Dr. Yaron served as Corporate Vice President of National Semiconductor. Dr. Yaron has previously served on the advisory board of Rafael Advanced Defense Systems, Ltd., a developer of high-tech defense systems, and on the advisory board of the Israeli Ministry of Defense. Dr. Yaron holds a PhD in device physics, and a Bachelor’s degree in physics and mathematics from the Hebrew University of Jerusalem.

 

Ilan Biran has served as a director on the Board since 2013. Mr. Biran serves as the chairman of the board of Melodia Ltd, Mr. Biran serves as a director of CAL - Israel Credit Cards Ltd. Mr. Biran has previously served as the chairman of the board of Rafael - Advanced Defense Systems Ltd. and D.B.S. Satellite Services (1998) Ltd., and as an external director on the board of directors of Israel Discount Bank Ltd and as a director of Bezeq - The Israel Communications Company Ltd. Mr. Biran served in the Israel Defense Forces for thirty-five (35) years, most notably as the former General Director of the Ministry of Defense, and in various staff and command positions, including commanding general, central command, head of the technology and logistics branch, and head of the operations division at the general staff. Mr. Biran received an honorary degree from the Technion Israel Institute of Technology in 2013. Mr. Biran holds an Associate Diploma in Strategy and Political Economic Research from Georgetown University and the U.S. Marine Corps Command and Staff College. Mr. Biran also holds a B.A. in Economics and Business Administration from Bar Ilan University and an honorary doctorate from the Technion Israel Institute of Technology.

 

Christopher M. Cleary has served as a director on the Board since 2017. Since 2014, Mr. Cleary has served as the Senior Vice President of Corporate Development for Medtronic plc. Prior to 2014, Mr. Cleary was the CEO for Alesia Capital Services LLC, providing advisory and financial analysis services to Fortune 500 companies, including Medtronic. Prior to that, Mr. Cleary served in a multitude of managerial roles at GE Capital. Mr. Cleary holds a B.A. from Colorado College.

 

Scott P. Serota has served has served a director on the Board since January 2021. Prior to that, Mr. Serota served for two (2) decades as president and CEO of the Blue Cross Blue Shield Association (BCBSA). Prior to being named president and CEO of BCBSA in 2000, he served four (4) years as a senior executive including two (2) years as Chief Operating Officer and earlier as vice president for system development responsible for new business strategy and the BCBS Technology Evaluation Center. Prior to joining BCBSA, Mr. Serota was president and CEO of Chicago-based Rush Prudential Health Plans. Mr. Serota is a founding member of the National Business Group on Health’s Institute on Healthcare Costs and Solutions, a board member of Brain Research Foundation, and an advisory board member of Paragon Biosciences. Notably, Mr. Serota was appointed by President George W. Bush to the Policy Committee of the White House Conference on Aging, where he advised the Administration and Congress on policies, programs and services affecting the nation’s older citizens. During the George W. Bush administration, Mr. Serota also served as chairman of the Subcommittee on Health. Mr. Serota holds an M.A. in health administration and planning from the Washington University School of Medicine and a B.A. in Biology from Purdue University. He also holds an honorary Doctorate of Science from Purdue University.

 

Brad Fluegel has served as a director on the Board since May 2021. Between 2012 and 2018, Mr. Fluegel served in various positions at Walgreen Co., including as Senior Vice President, Chief Healthcare Commercial Market Development Officer and as Chief Strategy and Business Development Officer. Prior to joining Walgreen, he has served as executive in residence at Health Evolution Partners between 2011 and 2012, as Executive Vice President and Chief Strategy and External Affairs Officer of Wellpoint (now Anthem) between 2007 and 2010, as Senior Vice President of National Accounts and Vice President, Enterprise Strategy at Aetna, Inc. between 2005 and 2007, as Chief Executive Officer of Reden & Anders (Optum Consulting), and as health sector leader at Tillinghast-Towers Perrin between 1995 and 2005. Mr. Fluegel currently serves on the board of directors of Metropolitan Jewish Health System in New York City, Performant Financial Corporation, Premera Blue Cross, DTOC and AdhereHealth. He served on the boards of Fitbit and Alight Solutions until their sales in 2021. He also advises several health care companies and private equity firms and serves as a lecturer at the University of Pennsylvania’s Wharton School of Business. Mr. Fluegel holds an M.A. in public policy from Harvard University and a B.A. in business administration from the University of Washington.

 

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Marga Ortigas-Wedekind has served as a director on the Board since August 2021. Since 2019, Ms. Ortigas-Wedekind has served as the Chief Commercial Strategy Officer of Fogarty Innovation, a nonprofit incubator in the medical technology space. Between 2015 and 2019, she served as EVP, Marketing and Payer Relations of iRhythm Technologies, Inc., a publicly traded digital health care solutions company focused on the advancement of cardiac care. Prior thereto, Ms. Ortigas-Wedekind served in various leadership roles in commercial and strategic marketing, including as EVP, Global Marketing and Product Development for Omnicell Inc. between 2009 and 2015, SVP, Marketing, Development, and Clinical Affairs for Xoft, Inc. (now iCAD) between 2002 and 2008, and VP, Sales and Marketing for Pro-Duct Health, Inc. (now Hologic) between 2000 and 2001. She also currently serves on the board of directors of Heartbeam Inc, an early-stage digital health company and for Total Flow Cannula, a seed-stage medical device company. She is on the Advisory Committee of Launchpad Digital Health, a venture capital firm, and is a member of HealthTech Capital, an angel investment group. Ms. Ortigas-Wedekind holds an M.A. in international business and marketing from the Stanford Graduate School of Business and a B.A. in political economy from Wellesley College.

 

We are not aware of any reason why any of the nominees, if elected, would be unable or unwilling to serve as a director. In the event such nominees should be unable to serve, the proxies will be voted for the election of such other person or persons as shall be determined by the persons named in the proxy in accordance with their best judgment. Except to the extent described herein, we do not have any understanding or agreement with respect to the future election of any of the nominees named.

 

The Proposed Resolutions

 

It is proposed that at the Meeting, the following resolutions be adopted (separately with respect to each nominee):

 

“RESOLVED, that Dr. Giora Yaron be elected to serve as a member of the Board of the Company until the next annual general meeting of the Company, effective immediately.”

 

“RESOLVED, that Mr. Ilan Biran be elected to serve as a member of the Board of the Company until the next annual general meeting of the Company, effective immediately.”

 

“RESOLVED, that Mr. Christopher M. Cleary be elected to serve as a member of the Board of the Company until the next annual general meeting of the Company, effective immediately.”

 

“RESOLVED, that Mr. Scott P. Serota be elected to serve as a member of the Board of the Company until the next annual general meeting of the Company, effective immediately.”

 

“RESOLVED, that Mr. Brad Fluegel be elected to serve as a member of the Board of the Company until the next annual general meeting of the Company, effective immediately.”

 

“RESOLVED, that Ms. Marga Ortigas-Wedekind be elected to serve as a member of the Board of the Company until the next annual general meeting of the Company, effective immediately.”

 

Required Vote

 

The affirmative vote of the holders of a majority of the Ordinary Shares present, in person, by proxy or by electronic voting, at the Meeting (or any adjournment or postponement thereof), excluding abstentions, is required for the approval of the election of each nominee.

 

The Board recommends a vote FOR the approval of each of the proposed nominees.

 

External Directors Continuing in Office

 

Ms. Yaffa Krindel Sieradzki and Ms. Zipora (Tzipi) Ozer-Armon, who were reelected as external directors in May 2019 for a three (3)-year term, continue to serve the Company as external directors. A brief biography of each of these directors follows.

 

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Yaffa Krindel Sieradzki, 67, has served as an external director on the Board since 2016. Ms. Krindel also serves as a director of Sol-Gel Technologies Ltd. (Nasdaq: SLGL), a pharmaceutical company, BGN Technologies Ltd., the technology transfer company of Ben Gurion University, and two (2) medical device start-up companies and has served on the boards of directors of numerous companies publicly traded on Nasdaq. Between 1997 and 2007, Ms. Krindel served as Partner and Managing Partner of Star Ventures, a private venture capital fund headquartered in Munich, Germany. Between 1993 and 1997, Ms. Krindel served as CFO and later as director of BreezeCOM Ltd., an Israeli telecommunications company, which was traded on Nasdaq and the TASE. Between 1992 and 1996, Ms. Krindel served as CFO and VP Finance of Lannet Data Communications Ltd., an Israeli telecommunications company, publicly traded on Nasdaq which is now part of Avaya Inc. Ms. Krindel also served on the board of directors of Fundtech Ltd., which was traded on Nasdaq until its acquisition by GTCR, Voltaire Ltd. until its acquisition by Mellanox Technologies Ltd. and Syneron Medical until its acquisition by Apax. Ms. Krindel holds an M.B.A. degree from Tel Aviv University and a B.A. in Economics and Japanese Studies from the Hebrew University of Jerusalem.

 

Zipora (Tzipi) Ozer-Armon, 55, has served as an external director on the Board since 2016. She currently serves as the Chief Executive Officer of Lumenis, a position she has held since joining Lumenis in May 2012. During her tenure, Ms. Ozer-Armon led Lumenis through a comprehensive growth and profitability turnaround, as well as an IPO on the NASDAQ (2014) and a successful acquisition process (2015). Before joining Lumenis, Ms. Ozer- Armon headed the Japanese market activities of Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA), a business with a turnover of more than $800M. Prior to that, Ms. Ozer-Armon served as Senior Vice President of Sales and Marketing at SanDisk (Nasdaq: SNDK), holding multi-billion dollars sales responsibility. She also served as VP & General Manager of MSystems (Nasdaq: FLSH), and as VP of Corporate Development at Comverse (Nasdaq: CMVT). Ms. Ozer-Armon’s career also includes four (4) years at ATKearney, a global management consulting company based in London, UK. Ms. Ozer-Armon holds a B.A. magna cum laude in Economics and an MBA in Finance and Marketing from Tel Aviv University, and is an AMP graduate of the Harvard Business School.

 

Executive Compensation

 

Aggregate Executive Compensation

 

Our objective is to attract, motivate and retain highly skilled personnel who will assist the Company in reaching its business objectives, performance and the creation of shareholder value and otherwise contribute to its long-term success. In March 2020, the Company’s shareholders approved the Company’s amended policy governing the compensation of office holders as required under the Companies Law, or the Company’s compensation policy (the “Compensation Policy”). The Compensation Policy was designed to correlate executive compensation with the Company’s objectives and goals and otherwise embrace a performance culture that is based on merit, and differentiates and rewards excellent performance in the long term.

 

For additional information about the aggregate compensation payable to the Company’s directors and executive officers, see Item 6B of our Annual Report under “Aggregate Executive Compensation”, which is incorporated herein by reference.

 

Individual Compensation of Covered Executives

 

For information about the compensation payable to the five (5) most highly compensated “office holders” during or with respect to the year ended December 31, 2020, see Item 6B of our Annual Report under “Individual Compensation of Covered Executives” and “Executive Officer Employment and Consultancy Agreements,” which are incorporated herein by reference, as well as Proposal 5 below.

 

Directors Remuneration

 

All of the Company’s directors are entitled to reimbursement of expenses. In addition, other than Mr. Cleary (who is entitled only to reimbursement of expenses), the Company’s directors, including external directors, receive the following compensation:

 

·Dr. Yaron, the chairman of the Board, is entitled, pursuant to the consultancy agreement we entered into with a company wholly owned by Dr. Yaron in May 2001, as amended, and which was assigned to Dr. Yaron during 2021, to a monthly payment of $6,250, plus VAT. Under the agreement, Dr. Yaron is required to provide us with consulting services, including service as a chairman of the Board, on a part-time basis of 40% of the work week.

 

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·Mr. Biran, Ms. Krindel Sieradzki and Ms. Ozer-Armon are each entitled to an annual fee of NIS 82,645 (equivalent to approximately $25,468) and attendance fees of NIS 4,380 (equivalent to approximately $1,350) per meeting attended, linked to the Israeli CPI.

 

·Messrs. Serota and Fluegel and Ms. Ortigas-Wedekind are each entitled to an annual fee of NIS 62,450 (equivalent to approximately $19,245) and attendance fees of NIS 3,295 (equivalent to approximately $1,015) per meeting attended, linked to the Israeli CPI.

 

It should be noted that Mr. Serota is also eligible for annual consulting fees, payable in four equal instalments, in the amount of $25,000 annually, under a consulting agreement entered into prior to his appointment as a member of the Board. Pursuant to this consulting agreement, Mr. Serota was also granted 281,778 Company RSUs.

 

Consistent with the Compensation Policy and as further approved by our shareholders, we also grant 110,000 service options to each of our non-employee directors for each year of service (or, in the case of external directors, 330,000 service options to each of our two (2) external directors which are divided into three (3) equal portions). For additional details regarding the stock options granted to non-employee directors, including acceleration of vesting upon certain change of control events, see (i) Item 6B of our Annual Report under “Directors Remuneration” and Note 15 to our audited consolidated financial statements included in our Annual Report and (ii) the section entitled “Interests of the Company’s Directors and Executive Officers in the Merger” elsewhere in this Proxy Statement.

 

Other than the foregoing fees, reimbursement for expenses and the award of equity-based compensation, we do not compensate our directors for serving on the Board.

 

Indemnification and Insurance

 

We have entered into agreements with each of our current directors and executive officers to indemnify them to the fullest extent permitted by law, subject to limited exceptions. The maximum aggregate amount of indemnification that we may pay to our directors and executive officers based on such indemnification agreements is, generally, NIS 15.0 million (equivalent to approximately $4.6 million) (linked to the Israeli CPI) for all office holders.

 

We also currently maintain directors’ and officers’ liability insurance with an aggregate coverage limit of $25 million, with a Side A coverage of an additional $5 million, for an annual premium of approximately $1.7 million.

 

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PROPOSAL 4
AMENDMENTS TO COMPENSATION POLICY

(Item 4 on the Proxy Card)

 

Background

 

Under the Companies Law, companies incorporated under the laws of Israel whose shares are listed for trading on a stock exchange or have been offered to the public in or outside of Israel, such as Itamar, are required to adopt a policy governing the compensation of “office holders”. The Companies Law defines the term “office holder” of a company to include a director as well as the chief executive officer (referred to in the Companies Law as the “general manger”), the chief business manager, deputy general manager, vice general manager, any other person assuming the responsibilities of any of these positions regardless of such person’s title and any other manager directly subordinate to the chief executive officer. In general, all office holders’ terms of compensation—including fixed remuneration, bonuses, equity compensation, retirement or termination payments, indemnification, liability insurance and the grant of an exemption from liability—must comply with the Company’s compensation policy, once adopted by the shareholders.

 

Pursuant to the Companies Law, the compensation policy must comply with specified criteria and guidelines and, in general, be adopted following consideration of, among others, the following factors: (i) promoting the Company’s objectives, business plan and long-term policy; (ii) creating appropriate incentives for the Company’s office holders, considering, among others, the Company’s risk management policy; (iii) the Company’s size and nature of operations; and (iv) with respect to variable elements of compensation (such as bonuses), the office holder’s contribution to achieving corporate objectives and increasing profits, with a long-term view and in accordance with his or her role.

 

Such compensation policy is required to be approved by the Board, following the recommendation of the Compensation Committee of the Board (the “Compensation Committee”), and the shareholders, in that order, and if the term of the compensation policy is for more than three (3) years, it must be re-approved in such manner every three (3) years. In March 2020, our shareholders approved several amendments to the Compensation Policy.

 

Our Compensation Committee is currently composed of Ms. Ozer-Armon, the chairperson, Ms. Krindel Sieradzki and Mr. Biran, all of whom satisfy the respective “independence” requirements of the Companies Law, SEC and Nasdaq rules for compensation committee members.

 

Proposed Amendments to the Compensation Policy 

 

The Board approved, following the recommendation of the Compensation Committee, several modifications to the Compensation Policy, as set forth in Annex D hereto, which relate primarily to:

 

·The terms under which we may purchase directors and officers liability insurance, or as further defined below, “D&O Insurance”. In particular, the Compensation Policy currently provides that we may purchase D&O Insurance with (i) aggregate coverage that will not exceed $50 million per claim, and cumulatively, for the coverage period or $100 million per claim, and cumulatively, for the coverage period, in the event that the Company’s valuation is between $150 million and $500 million (the “Maximum Coverage Condition”) and (ii) annual premium that will not exceed the higher of (A) $150,000 and (B) if and as long as the Company is subject to reporting requirements of the SEC, $2 million, which annual premium cap may be updated every year in up to ten percent (10%) compared to the annual premium of the preceding year (the “Maximum Premium Condition”). The primary reason we included the Maximum Premium Condition is that, until last year, the guidance of the ISA regarding “best practices” of compensation policies was to include a limit on the premium payable for D&O Insurance. However, in July 2020, the ISA has issued additional guidance, which generally provides that such limit on premium is no longer necessary and that the purchase of D&O Insurance will not require shareholder approval if (i) the compensation policy includes a limit on the scope of insurance coverage (which is satisfied by the Maximum Coverage Condition) and (ii) the purchase of D&O Insurance (including the premium payable) is made on market terms. As such, and in light of the continued increase in premiums of D&O Insurance, we propose to cancel the Maximum Premium Condition and make certain related clarifications in the D&O Insurance provisions of the Compensation Policy.

 

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·The annual salary (gross) of each of the officers in the Company. In particular, we propose to modify the Compensation Policy to increase the cap on annual salaries (gross) payable to (i) our chief executive officer from $360,000 to $610,000 and (ii) our other officers from NIS 846,000 (equivalent to approximately $261,000) to $428,000.

 

·The bonuses payable to our executive officers. In particular, we propose to modify the Compensation Policy to clarify that the targets and the weight of each of the different measurement categories for the achievement and payment of bonuses to our executive officers may be adjusted.

 

In approving the modifications to the Compensation Policy, our Compensation Committee and Board considered various factors, including, among others, the Company’s objectives, business plan and its policy with a long-term view; our business-risks management; our size and nature of operations; the prevailing market conditions with respect to D&O liability insurance in general, and in particular, those related to dual listed companies (i.e., companies listed both on the TASE as well as other stock exchanges, such as the Nasdaq); and effective transitioning and succession of executive officers.

 

The foregoing description of the proposed amendments to the Compensation Policy is only a summary of the amendments and is qualified by reference to the full text thereof, a copy of which is attached as Annex D hereto.

 

Other than the proposed changes set forth on Annex D, our Compensation Committee and Board did not identify any other necessary modifications to our Compensation Policy. If the changes are approved at the Meeting, our modified Compensation Policy will be valid for three (3) years following the Meeting (or, if not approved, our current Compensation Policy will be valid until March 18, 2023).

 

The Proposed Resolutions

 

It is proposed that at the Meeting, the following resolution be adopted:

 

RESOLVED, to approve the amendments to the Compensation Policy for Executive Officers and Directors set forth in Annex D to the Company’s Proxy Statement for the Special and 2021 Annual General Meeting.”

 

Required Vote

 

The affirmative vote of the holders of a majority of the Ordinary Shares present, in person, by proxy or by electronic voting, at the Meeting (or any adjournment or postponement thereof), excluding abstentions, is required for the approval of this matter; provided that either (i) the shares voted in favor of the matter include at least a majority of the Ordinary Shares voted by shareholders who are not “controlling shareholders” and do not have a “personal interest” in the matter, as defined under the Companies Law or (ii) that the total number of shares voted by the shareholders described in clause (i) against such resolution does not exceed two percent (2%) of the aggregate voting rights in the Company.

 

Under the Companies Law, a “personal interest” of a shareholder (i) includes a personal interest of any members of the shareholder’s family (i.e., a shareholder’s spouse, sibling, parent, grandparent or descendant and the spouse’s sibling, parent or descendant; and the spouse of each of the foregoing persons) or a personal interest of an entity with respect to which the shareholder (or such family member) serves as a director or chief executive officer, owns at least 5% of its outstanding share capital or voting power or has the right to appoint a director or chief executive officer and (ii) excludes an interest arising solely from the ownership of the Company Shares.

 

The Companies Law requires that each shareholder voting on the proposed resolution indicate whether or not the shareholder is a controlling shareholder or has such a personal interest in the proposed resolution.

 

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As of the date hereof, the Company does not have a controlling shareholder within the meaning of the Companies Law. However, our office holders are deemed to have a personal interest in this matter.

 

While it is unlikely that any of the Company’s public shareholders has a personal interest on this matter, the enclosed proxy card includes a box you must mark to confirm whether or not you are a controlling shareholder or have a personal interest in this matter. If you do not mark a box, your vote will not be counted. If you are unable to make this confirmation, please contact the Company’s General Counsel and Company Secretary at +972-4-617700 or FNoa@itamar-medical.com for instructions on how to vote your shares represented by your ADSs and indicate whether or not you are a controlling shareholder or have a personal interest or, if you hold your ADSs in “street name,” you may also contact the representative managing your account, who would then contact the Company’s General Counsel and Company Secretary on your behalf. Shareholders who hold their shares through banks, brokers or other nominees that are members of the TASE should indicate whether or not they are a controlling shareholder or have a personal interest on the form of voting card that we have filed via MAGNA (if voting manually) or on the electronic voting form (if voting electronically via MAGNA).

 

The Board unanimously recommends that you vote “FOR” this proposal.

 

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PROPOSAL 5
MODIFICATION OF SALARY OF PRESIDENT AND CHIEF EXECUTIVE OFFICER

(Item 5 on the Proxy Card)

 

Background

 

Under the Companies Law, the terms of compensation, including the grant of equity-based compensation, of a president and chief executive officer of a company incorporated under the laws of Israel whose shares are listed for trade on a stock exchange or have been offered to the public in or outside of Israel, such as Itamar, require the approval of the compensation committee, the board of directors and, subject to certain exceptions, the shareholders.

 

Mr. Gilad Glick has served as our President and Chief Executive Officer since July 2013. Mr. Glick also serves as a director of our U.S. subsidiary, Itamar Medical, Inc. As more fully described under “Compensation of Executive Officers” in our Annual Report, the compensation granted to Mr. Glick in 2020 in terms of cost to the Company (as recognized in our financial statements for the year ended December 31, 2020), was as follows:

 

Name and Principal Position   Annual
Base
Salary
    Bonus     Equity-Based
Compensation
    All Other
Compensation
    Total  
                               
    (dollars in thousands)  
Gilad Glick, President and Chief Executive Officer     357 (1)     295 (2)     238 (3)     21       911  

 

* The cost reflected in this table is calculated in accordance with IFRS and is as recognized in our financial statements for the year ended December 31, 2020. It is noted that, in accordance with IFRS, cash compensation amounts denominated in currencies other than the U.S. dollar were converted into U.S. dollars at the exchange rate between the NIS and the U.S. dollar as of the end of each month during 2020, the period covered by the table (which, on average for 2020, was approximately NIS 3.44 per $1.00).

 

(1)Reflects Mr. Glick’s annual fixed compensation, including social benefits, since he is engaged through consultancy agreement.

 

(2)This amount represents annual bonuses granted to Mr. Glick. Consistent with our Compensation Policy, and as approved by our shareholders in May 2018 and in August 2020, Mr. Glick is entitled to an annual bonus, subject to Mr. Glick’s achieving certain criteria and milestones set by our Compensation Committee and Board. The milestones for the annual bonus for the years 2018 through 2022 are based upon our annual revenue in such years, which is tied to our annual budget for the applicable year as well as on personal targets to be determined annually by our Compensation Committee and the Board. The annual bonus payable (not including any discretionary bonus, which may not exceed an amount equal to three (3) monthly base salaries) to Mr. Glick for each year may, generally, not exceed an amount equal to 12 monthly base salaries of Mr. Glick in such year, which is currently (and before applying the proposed salary increase in Proposal 5) equal to a maximum annual bonus of approximately NIS 1,035,000 (equivalent to approximately $319,000).

 

(3)This amount represents the accounting expense recognized by the Company associated with stock-based compensation in accordance with accounting guidance for stock-based compensation. For a discussion of the assumptions used in reaching this valuation, see Note 15 to our audited consolidated financial statements included in our Annual Report. All of the awards were in the form of stock options or Company RSUs, and were made pursuant to one of our equity incentive plans. Vesting of the options and Company RSUs will accelerate upon certain change of control events.

 

(4)This amount includes car allowance and other benefits and perquisites consistent with our guidelines.

 

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Proposed Increase of Base Salary

 

Our Compensation Committee and Board determined to approve an increase of the base salary of Mr. Glick from NIS 86,254 per month (equivalent to approximately $26,580) (excluding social benefits), or total annual base salary of NIS 1,035,000 (equivalent to approximately $319,000) (excluding social benefits), to NIS 106,254 per month (equivalent to approximately $32,740) (excluding social benefits), or total annual base salary of NIS 1,275,000 (equivalent to approximately $393,000) (excluding social benefits), effective retroactively from December 1, 2020. In approving this proposed matter, our Compensation Committee and Board considered the prevailing market price of the Company Shares, and the alignment of the interests of the Company’s President and Chief Executive Officer with those of Company’s shareholders in order to incentivize him to continue in his position and drive the Company’s growth in the long-term, along with additional factors, including the following:

 

The Importance of Mr. Glick’s Services to the Company. This element is demonstrated by Mr. Glick playing a key role in most aspects of our operations, starting from formulating our strategic vision, building a strong management and sales teams, and leading our financing and strategic activities.

 

The Contribution of Mr. Glick to Our Business and Success. Mr. Glick has contributed to our success, including by promoting various business development and research and development initiatives and otherwise driving the Company’s growth.

 

The Compensation Levels of other Senior Managers in our Industry. In evaluating Mr. Glick’s compensation, our Compensation Committee and Board reviewed information relating to the compensation of chief executive officers of other comparable companies.

 

Our Compensation Policy. Our Compensation Committee and Board considered our Compensation Policy (including the proposed modifications thereto as described in Proposal 4 of this Proxy Statement) and other elements of compensation payable to Mr. Glick as well as factors set forth in the Companies Law.

 

The Proposed Resolutions

 

It is proposed that at the Meeting, the following resolutions be adopted:

 

RESOLVED, to approve the increase of the base salary of the Company’s President and Chief Executive, as detailed in Proposal 5 of the Company’s Proxy Statement for the Special and 2021 Annual General Meeting.”

 

Required Vote

 

The affirmative vote of the holders of a majority of the Ordinary Shares present, in person, by proxy or by electronic voting, at the Meeting (or any adjournment or postponement thereof), excluding abstentions, is required for the approval of this matter; provided that either (i) the shares voted in favor of the matter include at least a majority of the Ordinary Shares voted by shareholders who are not “controlling shareholders” and do not have a “personal interest” in the matter, as defined under the Companies Law (see Proposal 4 above) or (ii) that the total number of shares voted by the shareholders described in clause (i) against such resolution does not exceed two percent (2%) of the aggregate voting rights in the Company.

 

As of the date hereof, the Company does not have a controlling shareholder within the meaning of the Companies Law. However, Mr. Glick is deemed to have a personal interest in this matter.

 

The Companies Law requires that each shareholder voting on the proposed resolution indicate whether or not the shareholder is a controlling shareholder or has such a personal interest in the proposed resolution.

 

While it is unlikely that any of the Company’s public shareholders has a personal interest on this matter, the enclosed proxy card includes a box you must mark to confirm whether or not you are a controlling shareholder or have a personal interest in this matter. If you do not mark a box, your vote will not be counted. If you are unable to make this confirmation, please contact please contact the Company’s General Counsel and Company Secretary at +972-4-617700 or FNoa@itamar-medical.com for instructions on how to vote your shares represented by your ADSs and indicate whether or not you are a controlling shareholder or have a personal interest or, if you hold your ADSs in “street name,” you may also contact the representative managing your account, who would then contact the Company’s General Counsel and Company Secretary on your behalf. Shareholders who hold their shares through banks, brokers or other nominees that are members of the TASE should indicate whether or not they are a controlling shareholder or have a personal interest on the form of voting card that we have filed via MAGNA (if voting manually) or on the electronic voting form (if voting electronically via MAGNA).

 

The Board unanimously recommends that you vote “FOR” this proposal.

 

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PROPOSAL 6
REAPPOINTMENT OF INDEPENDENT AUDITOR

(Item 6 on the Proxy Card)

 

Background

 

Somekh Chaikin, Certified Public Accountants (Israel), a member of KPMG, has served as our auditor since 1997.

 

At the Meeting, our shareholders will be asked to approve the re-appointment of KPMG as our independent auditors for the year ending December 31, 2021 and until immediately following the next annual general meeting of shareholders, pursuant to the recommendation of our Audit Committee and Board.

 

KPMG has no relationship with us or with any of our affiliates except as auditors and, to a limited extent, as tax consultants and providers of some other audit related services. Our Audit Committee and Board believe that the independence of KPMG is not affected by such limited non-audit function and that, as a result of their familiarity with our operations and their reputation in the auditing field, they have the necessary personnel and professional qualifications to act as our auditors. At the Meeting, our shareholders will also be asked to authorize the Board to delegate to our Audit Committee the authority to fix the compensation of our independent auditors.

 

For information with respect to the aggregate fees for professional audit services and other services rendered by KPMG in 2020, see Item 16C of our Annual Report. 

 

The Proposed Resolutions

 

It is proposed that at the Meeting, the following resolutions be adopted:

 

RESOLVED, that the reappointment of KPMG as independent auditors of the Company for the year ending December 31, 2021 and until immediately following the next annual general meeting of shareholders be, and it hereby is, approved, and that the Board be, and it hereby is, authorized to delegate to the Audit Committee of the Board the authority to fix the remuneration of said independent auditors in accordance with the volume and nature of their services.”

 

Required Vote

 

The affirmative vote of the holders of a majority of the Ordinary Shares present, in person, by proxy or by electronic voting, at the Meeting (or any adjournment or postponement thereof), excluding abstentions, is required for the approval of this matter.

 

The Board unanimously recommends that you vote “FOR” this proposal.

 

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THE MERGER

 

This discussion of the Merger is qualified in its entirety by reference to the Merger Agreement, which is attached to this Proxy Statement as Annex A and incorporated into this Proxy Statement by reference. You should read the entire Merger Agreement carefully as it is the legal document that governs the Merger.

 

Parties Involved in the Merger

 

Itamar Medical Ltd.
9 Halamish Street
Caesarea 3088900, Israel

 

The Company is a company organized under the laws of the State of Israel. The Company is a medical device and digital health company focused on the integration of sleep apnea diagnosis into the cardiac patient care pathway. The Ordinary Shares are listed on TASE, and the ADSs are listed on Nasdaq, in each case, under the symbol “ITMR”.

 

ZOLL Medical Corporation
269 Medical Corporation
Chelmsford, MA 01824

 

Parent is a Massachusetts corporation that manufactures medical devices and related software solutions.

 

Asahi Kasei Corporation
Hibiya Mitsui Tower
1-1-2 Yurakucho, Chiyoda-ku, Tokyo 100-0006, Japan

 

Guarantor is a Japanese company that manufactures and produces products in the chemicals, construction, pharmaceutical and medical devises industries. Parent is a subsidiary of Guarantor. Guarantor’s ordinary shares are listed on the Tokyo Stock Exchange under the symbol “KASEI”.

 

Zeus Merger Sub Ltd.
c/o ZOLL Medical Corporation
269 Medical Corporation
Chelmsford, MA 01824

 

Merger Sub is a company organized under the laws of the State of Israel. Merger Sub is a wholly owned subsidiary of Parent that was formed on September 1, 2021, solely for the purpose of engaging in the Transactions. Merger Sub has not engaged in any business activities other than in connection with its formation and the Transactions.

 

Effect of the Merger

 

Upon the terms and subject to the conditions of the Merger Agreement and in accordance with the Companies Law, if the Merger is completed, Merger Sub will merge with and into the Company, and the Company will continue as the Surviving Company and as a wholly owned subsidiary of Parent. As a result of the Merger, the ADSs and the Ordinary Shares will no longer be publicly traded and will be delisted from Nasdaq and the TASE, respectively. In addition, the Company Shares will be deregistered under the Exchange Act and the Israeli Securities Law, and the Company will no longer file periodic reports with the SEC and ISA. If the Merger is completed, you will not own any share capital of the Surviving Company.

 

The Effective Time will occur upon the issuance by the Companies Registrar of a certificate evidencing the Merger in accordance with Section 323(5) of the Companies Law (the “Certificate of Merger”).

 

Effect on the Company if the Merger is Not Completed

 

If the Merger Agreement is not approved by the Company’s shareholders or if the Merger is not completed for any other reason, the holders of Company Shares will not receive any payment for their Company Shares. Instead, the Company will remain an independent public company, the Ordinary Shares and ADSs will continue to be listed and traded on Nasdaq and TASE, respectively and registered under the Exchange Act and the Israeli Securities Law and the Company will continue to file periodic reports with the SEC and the ISA.

 

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Furthermore, if the Merger is not completed, and depending on the circumstances that caused the Merger not to be completed, the price of the Company Shares may decline significantly. If that were to occur, it is uncertain when, if ever, the price of the Company Shares would return to the price at which the Company Shares trade as of the date of this Proxy Statement.

 

Accordingly, if the Merger is not completed, there can be no assurance as to the effect of these risks and opportunities or the future value of the Company Shares. If the Merger is not completed, the Board will continue to evaluate and review the Company’s business operations, strategic direction and capitalization, among other things, and will make such changes as are deemed appropriate. If the Merger Agreement is not approved by the Company’s shareholders or if the Merger is not completed for any other reason, there can be no assurance that any other transaction acceptable to the Board will be offered or that the Company’s business, prospects or results of operations will not be adversely impacted.

 

In addition, the Company will be required to pay to Parent a termination fee of $18,847,360 if the Merger Agreement is terminated under certain circumstances, including termination by the Company to enter into a superior proposal, termination by Parent following an adverse recommendation change of the Company’s board of directors or termination by Parent as a result of a material and willful breach of the Company’s obligations under its non-solicit obligations or compliance with specified process and notice requirements contained in the Merger Agreement. For more information, please see the section entitled “The Merger Agreement—Termination Fees.”

 

Merger Consideration

 

In the Merger, each outstanding Ordinary Share immediately prior to the Effective Time shall be deemed to have been transferred to Parent in exchange for the right to receive the Per Share Merger Consideration, and each outstanding ADS immediately prior to the Effective Time shall be deemed to be cancelled in exchange for the right to receive the Per ADS Merger Consideration, in each case, without interest and subject to applicable withholding taxes (and a Cancellation Fee in the case of the ADSs).

 

After the Merger is completed, holders of outstanding Ordinary Shares and ADSs, immediately prior to the Effective Time, will have the right to receive the Per Share Merger Consideration or the Per ADS Merger Consideration, as applicable, but you will no longer have any rights as a shareholder.

 

Background of the Merger

 

The following chronology summarizes the key meetings and events that led to the signing of the Merger Agreement. The following chronology does not purport to catalogue every conversation among, or meetings of, the Board, any of the Board’s committees, members of Company management or the Company’s representatives and other parties.

 

As part of Itamar’s ongoing evaluation of its long-term strategic goals and plans, the Board, together with Itamar’s management, has periodically reviewed and considered various strategic and other opportunities available to Itamar in an effort to enhance shareholder value, taking into consideration Itamar’s performance, competitive dynamics, macroeconomic developments, industry trends and other conditions affecting its business. During these discussions, the Board and management have also noted certain challenges of continuing to execute Itamar’s strategy as a standalone medical device company, such as its limited sales and marketing resources and market expansion challenges.

 

In order to address some of these challenges, members of Itamar management (with periodic assistance and participation of Piper Sandler, who had previously been engaged by the Company as its lead underwriter in connection with a registered public offering in January 2020 (and was later engaged as its lead underwriter in connection with a follow on registered public offering in February 2021)) had multiple conversations with a number of sleep apnea industry participants (including Parent, as described in the paragraph immediately below) regarding the benefits of potential commercial collaborations in the sleep apnea space. Certain conversations naturally evolved into a discussion of a potential acquisition of Itamar in May 2020 by one (1) of those industry participants, a U.S.-based, publicly traded company in the medical device industry (“Party A”). Those discussions reached a stage at which the Company retained Piper Sandler in May of 2020 (as was later formalized by an engagement letter, dated June 1, 2020) to act as its financial advisor with respect to such discussions because of Piper Sandler’s reputation as an independent financial advisor and its familiarity with and experience as a financial advisor to companies in the healthcare industry in general, and with the Company in particular. Piper Sandler regularly updated the Board, the 2020 Transaction Committee and the management of the Company throughout the process described in this “Background of the Merger” section.

 

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Between January and June of 2020, members of Itamar’s management, including Mr. Gilad Glick, the Company’s President and Chief Executive Officer, and members of Parent management, including Mr. Eric L. Knudsen, Vice President, Corporate Development, of Parent, also held several in-person and virtual meetings to discuss a potential commercial collaboration between the parties in the sleep apnea space.

 

During the period from June 11, 2020 through July 30, 2020, at the direction of the Board and the 2020 Transaction Committee (as defined below), Piper Sandler contacted six (6) and had discussions with five (5) parties potentially interested in a transaction with the Company (including Party A and excluding Parent).

 

On June 24, 2020, the Board held a meeting to discuss the establishment and appointment of a transaction committee (the “2020 Transaction Committee”) and the exploration of a potential transaction with other potential buyers. Members of Company management and representatives of the Company’s U.S. outside legal counsel, Latham & Watkins LLP (“Latham”), were in attendance. The Board determined that it would be advisable to establish the 2020 Transaction Committee comprised of a subset of the members of the Board for the purpose of providing guidance and oversight over decisions that might be needed between formal Board meetings. The Board appointed Dr. Giora Yaron (the Chairman of the Board), Mr. Jonathan Kolber (who served as a member of the Board until March 25, 2021) and Ms. Yaffa Krindel as members of the 2020 Transaction Committee.

 

On June 25, 2020, the 2020 Transaction Committee held its first meeting and discussed progress that had been made with potentially interested parties with whom the Company might pursue a transaction, including Party A. Thereafter, between June 25 and September 12, 2020, the 2020 Transaction Committee held multiple meetings, as needed, to monitor the transaction process to guide members of management the Company and Piper Sandler with respect thereto.

 

By the end of July 2020, with the exception of Party A, all of the parties approached by Piper Sandler after June 11, 2020 failed to show sufficient interest in pursuing an acquisition of the Company at such time or did not timely provide substantive feedback regarding their interest.

 

On August 5, 2020, Party A sent a non-binding indication of interest letter indicating that it would be interested in acquiring the Company for cash at a purchase price of $27.75 per ADS. The letter also indicated that Party A could complete its confirmatory diligence and execute a definitive merger agreement within four (4) weeks and requested that the Company engage with Party A on an exclusive basis during such period. On August 4, 2020, the closing price of the ADSs was $25.03 per ADS.

 

On August 10, 2020, the Board held a meeting to discuss and evaluate Party A’s indication of interest. Members of Company management and representatives of Piper Sandler, Latham, Goldfarb Seligman & Co., the Company’s Israeli outside legal counsel (“Goldfarb”), and Somekh Chaikin, a member firm of KPMG International, the Company’s auditor (“KPMG”) were in attendance. Representatives of Latham and Goldfarb discussed with the Board their fiduciary duties in the context of evaluating Party A’s indication of interest and the Board’s discretion in determining whether and how to pursue any transaction and provided an overview of the process timeline if the Board were to determine to pursue such transaction. Representatives of Piper Sandler discussed with the Board their preliminary financial analyses with respect to the Company relative to the price offered by Party A based upon the Company’s management projections. The Board discussed the benefits and risks associated with continuing the discussions and engaging in exclusive negotiations with Party A. The Board then (1) determined to reject Party A’s initial offer and (2) instructed Piper Sandler to convey to Party A, with the guidance of the 2020 Transaction Committee, that the Company was willing to continue the discussions with Party A, with an expectation that Party A would improve the proposed purchase price offered in its August 5, 2020 indication of interest.

 

On August 18, 2020, the Board held a meeting to receive an update on the status of discussions with Party A. Members of Company management and representatives of Piper Sandler, Latham and Goldfarb were in attendance. Representatives of Piper Sandler provided an update on the process, including that (1) with the guidance of the 2020 Transaction Committee, Piper Sandler conveyed to Party A’s financial advisor that the Company was willing to continue the discussions with Party A, with an expectation that Party A would improve the proposed purchase price to $30.00 per ADS and (2) Party A’s financial advisor conveyed that Party A planned to submit a revised non-binding indication of interest letter that would include its best and final offer of $28.50 per ADS. The Board discussed the benefits and risks associated with continuing the discussions and engaging in exclusive negotiations with Party A. The Board then concluded to authorize Company management and its advisors, with the guidance of the 2020 Transaction Committee, to finalize and execute Party A’s non-binding indication of interest letter based on Party A’s best and final offer of $28.50 per ADS and thereafter to move forward with negotiating the definitive agreements.

 

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On August 21, 2020, Party A sent a revised non-binding indication of interest letter indicating that it would be interested in acquiring the Company for cash at a purchase price of $28.50 per ADS. The letter also indicated that Party A could complete its confirmatory due diligence and execute a definitive merger agreement within forty-five (45) days, and requested that the Company engage with Party A on an exclusive basis during such period. On August 20, 2020, the closing price of the ADSs was $19.38 per ADS.

 

On August 25, 2020, the Company countersigned the August 21, 2020 non-binding indication of interest letter (with several mutually agreed technical clarifications). Such indication of interest letter contained a provision stipulating a forty-five (45) day exclusivity period, which the Company agreed to.

 

From that day and during the course of the ensuing weeks, the Company and Party A, along with its and their respective advisors, negotiated the terms of the proposed definitive merger agreement pertaining to the transaction and participated in due diligence sessions with Party A and its advisors. However, on September 12, 2020, Party A called Mr. Glick and informed him that Party A was no longer able to pursue an acquisition of the Company and terminated the negotiations with the Company. After the termination of the negotiations with Party A, the 2020 Transaction Committee ceased its activity, and the Company continued to operate its standalone business.

 

On February 24, 2021, in consultation with, and at the direction of management of the Company, a representative of Piper Sandler called Mr. Richard A. Packer, the Chairman of the board of directors of Parent, to discuss whether Parent would be interested in a business collaboration between Respicardia, Inc. (“Respicardia”), a provider of implantable neurostimulators for the treatment of moderate to severe Central Sleep Apnea, and the Company. Piper Sandler acted as financial advisor to Respicardia in connection with a December 2017 financing transaction, but had not been engaged by Respicardia since that transaction. At the time of the February 24, 2021 call, Parent was a significant investor in, and had an option to acquire the remaining equity of, Respicardia.

 

On March 5, 2021, after consultation with members of management of the Company, representatives of Piper Sandler and Mr. Knudsen had a call to discuss further whether Parent would be interested in a business collaboration between Respicardia and the Company.

 

On March 18, 2021, after consultation with members of management of the Company, representatives of Piper Sandler sent Mr. Knudsen materials prepared by Piper Sandler at the Company’s request and with the Company’s input, outlining the strategy behind a possible business collaboration of the Company and Respicardia.

 

On April 1, 2021, Mr. Knudsen communicated with a representative of Piper Sandler to confirm Parent’s interest in exploring a possible business collaboration of the Company and Respicardia and requested to schedule a call to further discuss the matter.

 

On April 26, 2021, after consultation with and at the direction of management of the Company, representatives of Piper Sandler had a call with Mr. Jonathan A. Rennert, chief executive officer of Parent, Mr. Knudsen and several other members of Parent’s management to discuss a possible business collaboration between the Company and Respicardia. Representatives of Piper Sandler provided an overview of the potential transaction consistent with the materials sent on March 18, 2021. During such call, Parent’s participants also discussed Parent’s interest in the possibility of an outright acquisition of the Company by Parent. Piper Sandler representatives then updated management of the Company with respect to the call.

 

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On May 12, 2021, Mr. Knudsen called a representative of Piper Sandler and indicated that Parent would not be interested in a business collaboration between Respicardia and the Company, but could be interested in a possible acquisition of the Company by Parent. Piper Sandler representatives then updated management of the Company with respect to this call and were instructed to confirm the Company’s interest in having discussions to explore such potential transaction.

 

On May 13, 2021, at the direction of management of the Company, a representative of Piper Sandler contacted Mr. Knudsen to confirm the Company’s interest in conducting a virtual meeting to discuss a possible sale of the Company to Parent.

 

Following that contact, on May 17, 2021, at the direction of management of the Company, representatives of Piper Sandler and Mr. Knudsen had a call to discuss the possible agenda items for the upcoming virtual meeting between members of management of Parent and the Company.

 

On May 18, 2021, the Board held a regularly scheduled meeting to consider and approve Itamar’s unaudited financial results for the first quarter of 2021, among other things. Members of Company management, Mr. Brad Fluegel (a director candidate at that time) and representatives of KPMG were in attendance. As part of the Board meeting, members of Company management reported that the Company had previously been in discussions with Parent in order to explore a potential commercial collaboration between Company and Respicardia and that since Parent had acquired 100% control of Respicardia as of April 12, 2021, the dialog between the parties had resumed to explore a business collaboration.

 

On May 24, 2021, Mr. Glick and Mr. Shy Basson, Itamar’s Chief Financial Officer, gave a high-level management presentation to Mr. Rennert, Mr. Knudsen and other members of Parent management and Mr. Seiji Nakano, Vice President, Strategy and Business Development, of Guarantor, at a virtual meeting that was also attended by representatives of Piper Sandler.

 

On June 9, 2021, a representative of Piper Sandler and a representative of Goldman Sachs & Co. LLC (“Goldman Sachs”), Parent’s financial advisor, had a call to discuss possible next steps following the May 24, 2021 management presentation. During the call, the representative of Goldman Sachs conveyed that Parent was interested in further exploring the potential transaction. The representative of Piper Sandler noted that if Parent intended to submit an offer to acquire the Company, such offer should reflect an attractive enough valuation to cause the Board to commit to moving forward in light of the extensive process conducted by the Company in 2020.

 

On June 22, 2021, members of Company management, representatives of Piper Sandler, Mr. Knudsen and other members of Parent management and Mr. Nakano had a call to discuss various topics related to the Company’s business.

 

On June 24, 2021, members of Company management, Mr. Packer, Mr. Rennert, Mr. Knudsen and other members of Parent management, representatives of Piper Sandler and a representative of Goldman Sachs held a meeting, both virtually and in-person, to present and discuss key information about each organization in detail and to have preliminary discussions of the potential strategic fit and synergies between the companies.

 

Between July 5 and July 22, 2021, members of Parent management and Company management held calls to discuss Company strategy and business, potential strategic fit and synergies.

 

On July 22, 2021, Parent sent a non-binding indication of interest letter indicating that it would be interested in acquiring the Company for cash at a purchase price of $30.00 per ADS (the “July 22 IOI”). The July 22 IOI also indicated that Parent could complete its confirmatory diligence and execute a definitive merger agreement in an expeditious manner, and requested that the Company engage with Parent on an exclusive basis during a sixty (60)-day period starting after execution of the July 22 IOI. On July 22, 2021, the closing price of the ADSs was $18.83 per ADS.

 

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On July 22, 2021, the Board held a meeting to discuss and evaluate Parent’s July 22 IOI. Members of Company management and representatives of Piper Sandler, Latham and Goldfarb were in attendance. Dr. Yaron, members of Company management and representatives of Piper Sandler provided an overview of the background and meetings with Parent that led to the submission of Parent’s July 22 IOI. Representatives of Latham and Goldfarb discussed with the Board their fiduciary duties in the context of evaluating Parent’s July 22 IOI and the Board’s discretion in determining whether and how to pursue any transaction and provided an overview of the process timeline if the Board were to determine to pursue such transaction. Representatives of Piper Sandler discussed with the Board their preliminary financial analyses with respect to the Company relative to the price offered by Parent based upon the Company’s management projections (see “The Merger—Management Internal Financial Projections”). The Board discussed the benefits and risks associated with continuing the discussions and engaging in exclusive negotiations with Parent. The Board further discussed the potential risks and benefits of commencing a sale process, including potential disruptions to the Company’s business resulting from a protracted sale process, the risk of leaks that might arise from contacting other parties and the potential impact of such leaks on the Company’s business. The Board concluded that these factors supported approaching only those parties that Company management and the Board, with the assistance of Piper Sandler, believed could be interested in pursuing a business combination transaction involving the Company and had the ability and willingness to pay a purchase price for the Company in excess of Parent’s offer. The Board then (1) determined to further evaluate Parent’s initial offer of $30.00 per ADS, and (2) instructed Piper Sandler to approach a select group of potentially interested parties identified by the Board and management of the Company.

 

On July 23, 2021, a representative of Goldman Sachs called a representative of Piper Sandler to discuss the July 22 IOI. During the course of that call, the Goldman Sachs representative reiterated Parent’s interest in pursuing a transaction.

 

On July 26, 2021, the Board held a meeting to discuss and evaluate further the July 22 IOI and the potential Company sale process. Members of Company management and representatives of Piper Sandler, Latham and Goldfarb were in attendance. Representatives of Piper Sandler further discussed with the Board their preliminary financial analyses with respect to the Company relative to the price offered by Parent based upon the Company’s management projections (see “The Merger—Management Internal Financial Projections”) and also provided an update since the prior Board meeting of the discussions held with representatives of Parent and with the potentially interested parties identified by the Board in its July 22, 2021 meeting. The Board also discussed the benefits and risks associated with continuing the discussions and engaging in exclusive negotiations with Parent. The Board determined that it would be advisable to establish a transaction committee comprised of a subset of the members of the Board for the purpose of providing guidance and oversight with decisions that might be needed between formal Board meetings (such committee, the “2021 Transaction Committee”). The Board then determined to appoint Dr. Yaron, Mr. Christopher M. Cleary, Mr. Scott Serota and Ms. Zipora (Tzipi) Ozer-Armon as members of the 2021 Transaction Committee. The Board then also (1) determined to reject Parent’s initial offer, (2) instructed Piper Sandler to convey to Parent that the Company was willing to continue the discussions with Parent, with an expectation that Parent will improve the purchase price offered in its July 22 IOI and shorten the exclusivity period before proceeding with due diligence and negotiations of definitive agreements, and (3) authorized Company management, with the guidance of the 2021 Transaction Committee, to finalize negotiations of and execute Parent’s indication of interest letter. As part of the meeting, the Board also discussed renewing the retention of Piper Sandler as a financial advisor to the Company in connection with the potential transaction, noting its reputation as an independent financial advisor, familiarity with and experience as a financial advisor to companies in the healthcare industry in general, and with the Company in particular, and the terms of the Company’s prior engagement letter with Piper Sandler, dated June 1, 2020. The Board thereafter authorized the engagement of Piper Sandler as the Company’s financial advisor, subject to execution of an engagement letter approved by the 2021 Transaction Committee to replace the 2020 engagement letter.

 

During the period from July 26 through July 29, 2021, at the direction of the Board, Piper Sandler contacted and had discussions with four (4) potentially interested parties identified by the Board during its July 22, 2021 meeting, including Party A and Parent. All of such potentially interested parties were companies with a potentially strategic interest in acquiring the Company.

 

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On July 26, 2021, a representative of Goldman Sachs called a representative of Piper Sandler seeking an update on the Board’s perspective on the July 22 IOI. Piper Sandler communicated that the Board was considering it very seriously, but would need a higher valuation and a shorter exclusivity period from Parent in order to move forward.

 

On July 27, 2021, Messrs. Rennert and Knudsen contacted a representative of Piper Sandler, seeking additional clarity with respect to the Board’s position regarding Parent’s July 22 IOI. During this call, they stated Parent’s belief that its offer of $30.00 per ADS was very attractive. The representative of Piper Sandler reiterated the Board’s position that it would expect that Parent would improve the purchase price and shorten the exclusivity period before the Board would approve of proceeding with due diligence and negotiation of definitive agreements.

 

On July 28, 2021, the 2021 Transaction Committee held a meeting to further discuss and evaluate Parent’s July 22 IOI and the potential process. Members of Company management and representatives of Piper Sandler, Latham and Goldfarb were in attendance. Representatives of Piper Sandler provided an update since the prior Board meeting on the discussions held with representatives of Parent and with the potentially interested parties identified by the Board in its July 22, 2021 meeting. In particular, representatives of Piper Sandler explained that a representative of Goldman Sachs conveyed that they believed that Parent’s proposal of $30.00 per ADS was very attractive and that if the Board were seeking a higher price, they would expect the Board to indicate such price. The 2021 Transaction Committee instructed Piper Sandler to convey to Parent that the Company expects that Parent will improve the purchase price offered in its July 22 IOI to $33.00 per ADS.

 

Later that day, Piper Sandler communicated to a representative of Goldman Sachs the request for a $33.00 per ADS price, per the 2021 Transaction Committee’s instructions.

 

On July 29, 2021, representatives of Piper Sandler and representatives of Goldman Sachs had multiple calls to discuss further the Company’s position with respect to Parent’s July 22 IOI. During such calls, the representatives of Piper Sandler reiterated the 2021 Transaction Committee’s request for a $33.00 per ADS price. A representative from Goldman Sachs conveyed that they did not believe that Parent would be willing to meet that request. The representative of Goldman Sachs did state, however, that Parent may be willing to increase Parent’s offer to $30.50 per ADS, and to shorten the exclusivity period to expire on September 5, 2021 with a possible extension to September 20, 2021. In response, a representative from Piper Sandler reiterated the 2021 Transaction Committee’s request for a $33.00 per ADS price. Later that day, a representative of Goldman Sachs contacted Piper Sandler to communicate Parent’s “best and final offer” of $31.00 per ADS.

 

On July 30, 2021, the 2021 Transaction Committee held a meeting to discuss and evaluate further Parent’s orally updated (by Goldman Sachs) indication of interest and the process. Members of Company management and representatives of Piper Sandler, Latham and Goldfarb were in attendance. Representatives of Piper Sandler provided an update regarding discussions, since the prior 2021 Transaction Committee meeting, with representatives of Parent and with the potentially interested parties identified by the Board in its July 22, 2021 meeting. The 2021 Transaction Committee authorized Company management, with the assistance of Piper Sandler, Latham and Goldfarb, to finalize and execute Parent’s non-binding indication of interest letter with the increased Parent’s offer of $31.00 per ADS and the shortened exclusivity period described above.

 

By July 30, 2021, each of the parties approached by Piper Sandler since July 26, 2021 had declined interest in pursuing an acquisition of the Company at that time or did not timely provide substantive feedback regarding its interest.

 

On July 30, 2021, Parent sent a revised non-binding indication of interest letter indicating that it would be interested in acquiring the Company for cash at a purchase price of $31.00 per ADS. The letter also indicated that Parent could complete its confirmatory due diligence and execute a definitive merger agreement in an expeditious manner, and requested that the Company engage with Parent on an exclusive basis through September 10, 2021 with a possible extension to September 24, 2021 if Parent re-confirmed the price and other transaction terms contemplated by the letter. As noted in the revised non-binding indication of interest letter, on July 28, 2021 the closing price of the ADSs was $19.12 per ADS.

 

On July 30, 2021, the Company countersigned the July 30, 2021 non-binding indication of interest letter, with several revisions thereto that were mutually agreed with Parent.

 

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On August 4, 2021, the Company provided access to Parent’s legal counsel and advisors to an online data room containing due diligence materials regarding the Company. Thereafter, and through September 12, 2021, representatives of Parent as well as representatives of Cooley LLP, Parent’s U.S. counsel (“Cooley”), Gornitzky & Co., Parent’s Israeli counsel, as well as representatives of PricewaterhouseCoopers, financial and tax advisors to Parent in connection with the transaction, conducted due diligence sessions with Company management and its advisors, including an onsite visit in Caesarea, Israel.

 

On August 9, 2021, the 2021 Transaction Committee held a meeting to discuss the process with Parent. Members of Company management and representatives of Latham and Goldfarb were in attendance. Representatives of Latham and Goldfarb provided an overview of the key provisions of the draft Merger Agreement that the Company would be submitting to Parent. The 2021 Transaction Committee then authorized Company management, with the help of its outside counsel, to finalize the draft Merger Agreement and submit it to Parent.

 

Later that day, the Board held a regularly scheduled meeting to consider and approve the unaudited financial results for the second quarter of 2021. Members of Company management and representatives of Piper Sandler, Latham and KPMG were in attendance. As part of the Board meeting, members of Company management and representatives of Piper Sandler and Latham provided an update on the process, including expected timelines, to the Board. In addition as part of the regular quarterly updates from the Chief Financial Officer of the Company, an update to the Final Five Years Plan, which was provided to the Board in advance of the meeting, was presented.

 

On August 10, 2021, Latham provided to Cooley a first draft of the Merger Agreement, which contained proposed terms of the potential acquisition. On September 2, 2021, Latham also provided a first draft of the form of the Support Agreement that Parent was requiring to be executed by certain principal shareholders of the Company and each of the Company’s directors and executive officers.

 

During the course of the ensuing weeks, the Company and Parent, along with its and their respective advisors, negotiated the terms of the Merger Agreement and the form of the Support Agreement. These negotiations continued through the evening (Israel time) of September 12, 2021. During this process, the Company negotiated, among other terms the Company and the Board considered important, Itamar’s ability to maintain appropriate flexibility to respond to alternative transaction proposals should any such proposal be superior to Parent’s proposal and the right of the Board to terminate the Merger Agreement in certain circumstances after receipt of such a “superior proposal”; the fees payable by us in that and other circumstances; allocation of regulatory risks; and treatment of equity-based awards and employee retention terms.

 

On September 9, 2021, the 2021 Transaction Committee held a meeting to discuss the transaction negotiations and process. Members of Company management and representatives of Piper Sandler, Latham and Goldfarb were in attendance. Members of Company management reported on the status of the due diligence conducted by Parent and its representatives. Members of Company management and representatives of Latham and Goldfarb provided an overview of the key outstanding issues remaining in the draft Merger Agreement, including provisions regarding the allocation of regulatory risks and treatment of equity-based awards and employee retention terms, and the proposed path to resolve them. The 2021 Transaction Committee then authorized Company management, with the help of its outside counsels, to finalize the draft Merger Agreement along the lines of the terms presented at the meeting.

 

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Later that day, the Board held a meeting. Members of Company management and representatives of Piper Sandler, Latham and Goldfarb were in attendance. During this meeting, representatives of Latham and Goldfarb provided an overview to the Board members of their fiduciary duties in connection with their consideration of Parent’s offer and the transactions contemplated by the Merger Agreement and discussed with the Board the key terms and conditions of the Merger Agreement and the Support Agreement. During the meeting, management of the Company confirmed to the Board the Five Years Plan, updated to reflect changes in operating expenses, was substantially consistent with the Final Five Years Plan previously presented to and approved by the Board (See “The Merger—Management Internal Financial Projection”). Representatives of Piper Sandler reviewed with the Board their financial analysis of the Company. Representatives of Piper Sandler rendered to the Board Piper Sandler’s oral opinion, later confirmed in a written opinion dated September 9, 2021, that, based upon and subject to the assumptions, procedures, considerations and limitations set forth in the written opinion and based upon such other factors as Piper Sandler considered relevant, as of September 9, 2021, (i) the Per Share Merger Consideration is fair, from a financial point of view, to the holders of Ordinary Shares issued and outstanding prior to the Effective Time (other than Excluded Shares (as defined in the Merger Agreement)) and (ii) the Per ADS Merger Consideration is fair, from a financial point of view, to the holders of ADSs issued and outstanding prior to the Effective Time (other than Excluded Shares), in each case, as of the date of the opinion. At the Board’s request, Piper Sandler confirmed that it would update its analyses between September 9, 2021 and September 12, 2021, and, if such analyses supported doing so, it would provide a written confirmation to the Board on the morning (U.S. time) of September 12, 2021, that no facts or circumstances had come to its attention since September 9, 2021 that would cause Piper Sandler to change its opinion or assumptions set forth in its written opinion delivered to the Board and dated September 9, 2021. For a detailed discussion of Piper Sandler’s opinion, please see below under the caption “Fairness Opinion of Piper Sandler & Co.” After further discussions with its financial and legal advisors and members of Company management, including discussing the advantages and risks of the proposed transaction (which are more fully described below under the caption “Reasons for the Merger and Recommendation of the Board”), the Board unanimously adopted resolutions approving the Merger, the execution of the Merger Agreement and the consummation of the Transactions and recommending that the Company shareholders approve the Merger, the Merger Agreement and the consummation of the Transactions.

 

Following the Board meeting on September 9, 2021, the parties and their respective advisors proceeded to finalize the Merger Agreement and the form of Support Agreement.

 

On September 10, 2021, in light of several revisions to provisions related to regulatory filings and processes in the draft Merger Agreement presented to the Board at the September 9, 2021 meeting, the Board adopted written resolutions confirming and ratifying that its prior September 9, 2021 resolutions remained valid and in effect.

 

On September 12, 2021, Piper Sandler delivered a letter addressed to the Board, as of 8:00 am U.S. CT, confirming that no facts or circumstances had come to its attention since September 9, 2021 that would cause Piper Sandler to change to its opinion or assumptions set forth in its written opinion dated September 9, 2021.

 

In the early morning (Israel time) of September 13, 2021, the parties executed the Merger Agreement and exchanged executed final copies of the Support Agreements.

 

Later on the morning of September 13, 2021, prior to the opening of trading of the Ordinary Shares on the TASE, Parent and the Company issued a joint press release announcing the execution of the Merger Agreement.

 

Reasons for the Merger and Recommendation of the Board

 

In its evaluation of the Merger Agreement and the Transactions, including the Merger, the Board consulted with members of its senior management team, Piper Sandler, its financial advisor, and Latham and Goldfarb, its outside legal counsels, and assessed various matters relevant to its decision. In reaching its decision to approve the Merger Agreement and the Transactions, including the Merger, and to recommend that the Company shareholders approve the Merger, the Merger Agreement and the consummation of the Transactions, the Board considered a variety of factors, including those described below:

 

·the Board’s familiarity with, and information provided by the Company’s management as to, the business, financial condition, results of operations, current business strategy and future prospects of the Company, as well as the risks involved in achieving those prospects and objectives under current industry and market conditions, the nature of the markets in which the Company operates and the Company’s position in such markets;

 

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·the Company’s extended consideration of strategic alternatives for the Company, including prior advanced negotiations with Party A that Party A terminated last year and other discussions with, and inquiries of, a number of other potential buyers and the fact that the Company actively sought proposals from several other parties that it believed were logical potential buyers, and the fact that, to date, no alternative proposal to acquire the Company has been made;

 

·the then current and recent historical market prices and trading information for the Ordinary Shares and ADSs and the fact that the consideration payable in the Merger represents a meaningful premium to those historical prices and the enterprise value of the Company;

 

·the possible alternatives to the Merger, including the prospects of continuing to operate the Company as an independent entity and the risks and uncertainties associated with such alternatives, including the risks associated with the Company’s ability to meet its projections for future results of operations, risks associated with the medical device industry and the Company’s business and regulatory environment (in particular, as it relates to the U.S. market, which is the Company’s main market), and the costs and challenges associated with being a publicly traded company, as compared to the certainty of realizing, in cash, a fair value for the Company’s shareholders by consummating the Merger;

 

·the financial and other terms and conditions of the Merger Agreement as reviewed by the Board and the fact that such terms and conditions were the product of arm’s-length negotiations between the parties, including the fact that the Company was able to increase Parent’s proposed purchase price from an initial proposal of $30.00 per ADS on July 22, 2021 to a final price of $31.00 per ADS, which the Company, after consultation with its financial advisors, believes represents the highest price that Parent would be willing to pay and the highest price reasonably obtainable by the Company;

 

·in light of the financial position of the Company and Merger Sub, no reasonable concern exists that as a result of the Merger the Surviving Company will not be able to fulfill the obligations of the Company to its creditors;

 

·certain terms of the Merger Agreement and related agreements, including:

 

the limited number and nature of the conditions to Parent’s obligation to consummate the Merger;

 

the right of the Board under certain circumstances to change its recommendation or to terminate the Merger Agreement in order to accept a superior proposal, subject to the terms and conditions of the Merger Agreement, including paying a fixed termination fee;

 

the Board’s ability to change its recommendation in response to a Company Intervening Event, subject to the terms and conditions of the Merger Agreement, including paying a fixed termination fee;

 

the Company’s right to specific performance to cause Parent to consummate the Merger, and other remedies available under the Merger Agreement, subject to certain conditions;

 

the fact that Parent is a subsidiary of Guarantor and Guarantor is guarantying Parent’s payment obligations under the Merger Agreement;

 

the willingness of certain shareholder(s) of the Company to support and to vote in favor of the Merger;

 

·the fact that the Merger Consideration is all in cash, allowing the Company’s shareholders and ADS holders to immediately realize value for their investment, while also providing such holders certainty of value for their Company Shares, while eliminating the effect of long-term business and execution risk to the holders;

 

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·the risks and contingencies related to the Merger, including (i) risks related to the announcement and pendency of the Merger, such as the impact of the Merger on employees, customers, and relationships with other third parties, which could impair the Company’s prospects as an independent company if the Merger is not consummated; (ii) risks and costs to the Company if the Merger is not consummated; (iii) the fact that the shareholders and ADS holders will not participate in future appreciation of the Company; (iv) the restrictions on the Company’s ability to solicit other alternative acquisition proposals; (v) the termination fee, which may dissuade other potential acquirors; and (vi) certain tax effects associated with the Merger;

 

·Piper Sandler rendered its oral opinion to the Board on September 9, 2021, and later confirmed in a written opinion dated September 9, 2021, that, based upon and subject to the assumptions, procedures, considerations and limitations set forth in the written opinion and based upon such other factors as Piper Sandler considered relevant, as of September 9, 2021: (i) the Per Share Merger Consideration is fair, from a financial point of view, to the holders of Ordinary Shares issued and outstanding prior to the Effective Time (other than Excluded Shares (as defined in the Merger Agreement)) and (ii) the Per ADS Merger Consideration is fair, from a financial point of view, to the holders of ADSs issued and outstanding prior to the Effective Time (other than Excluded Shares), in each case, as of the date of the opinion. On September 12, 2021, Piper Sandler delivered a letter addressed to the Board, as of 8:00 am US CT, confirming that no facts or circumstances had come to its attention since September 9, 2021 that would cause Piper Sandler to change its opinion or assumptions set forth in its written opinion dated September 9, 2021. September 12, 2021 was the last trading day for Ordinary Shares on the TASE prior to the execution of the Merger Agreement and announcement of the transaction. All of the foregoing is more fully described below in the section of this Proxy Statement entitled “Fairness Opinion of Piper Sandler & Co.”;

 

·the relative likelihood of obtaining required regulatory approvals;

 

·developments in the industry in which the Company operates and the potential impact of such developments on the business and prospects of the Company, including the continuously developing challenges of the business environment of medical device companies, which are difficult to fully predict, such as enhancement of regulatory requirements and potentially increasing compliance costs and burden, changes in the commercial landscape, including changes in prevailing pricing levels, potential mergers and consolidations within the industry, the challenges of expanding the Company’s penetration into additional markets beyond the traditional sleep physicians’ market and the potential introduction or expansion of sales of competitive products and technologies to the market;

 

·the financial resources and industry experience of Parent and its affiliates; and

 

·the fact that the Merger Agreement is required to be submitted to the Company’s shareholders for approval, which allows for an informed vote by the Company’s shareholders on the merits of the Merger.

 

The foregoing discussion of the information and factors considered by the Board is intended to be illustrative and not exhaustive, but includes the material reasons and factors considered by the Board in reaching its conclusions and recommendation in relation to the Merger Agreement and the Transactions, including the Merger. In view of the wide variety of reasons and factors considered and the complexity of these matters, the Board did not find it practical to, and did not, quantify or otherwise assign relative weights to the specified factors considered in reaching its determinations or the reasons for such determinations. Individual directors may have given differing weights to different factors or may have had different reasons for their ultimate determination. In addition, the Board did not reach any specific conclusion with respect to any of the factors or reasons considered. Instead, the Board conducted an overall analysis of the factors and reasons described above and unanimously determined in its business judgment that, in the aggregate, the potential benefits of the Merger to our shareholders outweighed the risks or potential negative consequences thereof.

 

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Recommendation of the Board

 

The Board, after considering various factors described above, has unanimously (i) determined that the Merger Agreement and the Transactions, including the Merger, are fair to, and in the best interests of, the Company and its shareholders and that, considering the financial position of the merging companies, no reasonable concern exists that the Surviving Company will be unable to fulfill the obligations of the Company to its creditors; and (ii) approved the Merger, the execution of the Merger Agreement and the consummation of the Transactions. The Board unanimously recommends that you vote “FOR” the Merger Proposal.

 

Management Internal Financial Projections

 

The Company has historically prepared and provided public guidance as to revenues and Non-IFRS gross margins. Other than the publicly disclosed guidance discussed above, the Company has not, in the ordinary course, made public disclosures regarding prospective financial projections for periods beyond the Company’s calendar year of 2021 due to the inherent unpredictability of the underlying assumptions and estimates.

 

During the normal course of business planning, the Company’s management prepares for internal use certain unaudited Non-IFRS prospective financial information for the current year and the immediately following four (4)-year period (the “Five Years Plan”). Consistent with past practice, the Company’s management reviewed and updated the Five Years Plan with prospective financial information for the years 2021 through 2025 on an ongoing basis and reviewed such updated version of the Five Years Plan with the Board during a Board meeting on August 9, 2021, and further updated such plan to reflect changes in operating expenses, which plan was substantially consistent with the Five Years Plan, and provided to the Board on September 9, 2021 (such updated Five Years Plan referred to as “Final Five Years Plan” and, together with the Five Years Plan, collectively referred to as the “Company Projections”).

 

The Company also maintains and monitors an annual budget target plan for each fiscal year, which plan is approved by the Board in the beginning of each year and is reviewed, updated and approved by the Board as needed during the course of each year.

 

Cautionary Statements

 

The Company Projections contain certain statements that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The Company Projections, while presented with numerical specificity, are necessarily based on a variety of estimates and assumptions and thus are subjective in many respects and subject to interpretation. Those estimates and assumptions concern future events and conditions that may not be realized and are inherently subject to significant business, economic, competitive, industry, regulatory, market and financial uncertainties, contingencies and risks (including those described in the section of this Proxy Statement entitled “CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS”), all of which are difficult to predict and many of which are beyond the Company’s control. Because the Company Projections cover multiple years, such information by its nature becomes less predictive with each successive year. Moreover, events and circumstances occurring subsequent to the date on which the Company Projections were prepared may be different from those assumed, or, alternatively, may have been unanticipated, and thus the occurrence of these events may affect financial results in a materially adverse or materially beneficial manner. Accordingly, no assurance can be given concerning the accuracy of the Company Projections or the Company’s ability to achieve the projected results, inasmuch as some assumptions inevitably will be incorrect. Actual financial results may differ materially from the expectations expressed or implied by the Company Projections.

 

Other than providing revenue guidance and updates of such guidance when appropriate for the current fiscal year, the Company generally does not make public disclosures, or include in its reports filed with, or furnished to, the SEC or the ISA, information about its anticipated financial position, results of operations or other prospective financial statement information, or assumptions or estimates about prospective financial statement information, such as the Company Projections described below, and does not plan to do that unless otherwise required by applicable law. The Company Projections were not prepared with a view towards public disclosure or compliance with any guidelines for prospective financial statements, whether published by the American Institute of Certified Public Accountants or otherwise, or the rules and regulations of the SEC or the ISA, and by their nature are not financial statements prepared in accordance with IFRS or U.S. Generally Accepted Accounting Principles (U.S. GAAP). The Company’s independent accountants have neither examined nor compiled the Company Projections and accordingly do not express an opinion or any other form of assurance with respect to the Company Projections, assume no responsibility for the Company Projections and disclaim any association with the Company Projections.

 

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The Company has not updated and does not intend to update, or otherwise revise, the Company Projections or underlying assumptions to reflect circumstances existing since their preparation or to reflect the occurrence of future events, even if any or all of the assumptions on which the Company Projections are based on or are shown to be in error. Furthermore, the Company does not intend to update or revise the Company Projections to reflect changes in general economic or industry conditions. Accordingly, no undue reliance should be placed on any such assumptions, and actual financial results may differ materially from the expectations expressed or implied by the Company Projections. In addition, the Company is including in this Proxy Statement a summary of the Company Projections for the Company on a standalone basis, without giving effect to the Merger or the effect of any business or strategic decisions or actions that would likely have been taken if the Merger Agreement had not been executed, but that were instead altered, accelerated, postponed or not taken in anticipation of the Merger, in order to give the Company’s shareholders access to certain nonpublic information provided to the Board, to the Company’s financial advisors and to Parent for purposes of considering and evaluating a potential acquisition of the Company. Furthermore, the Company Projections do not take into account the effect on the Company of the possible failure of the Merger to be consummated. The inclusion of the Company Projections should not be regarded as an indication that the Company, the Board or any other recipient of this information considered, or now considers, it to be an assurance of the achievement of future results or an accurate prediction of future results, and it should not be relied on as such.

 

Summary of Company Projections

 

Subject to the foregoing qualifications, the following tables present a summary of the Company Projections. The summary of the Final Five Years Plan described below was the most recent financial information made available to Piper Sandler in connection with its financial analyses summarized above under “The MergerFairness Opinion of Piper Sandler” reviewed with, and issued verbally to, the Board at a meeting held on September 9, 2021 in connection with its evaluation of the Merger, and later confirmed in a written opinion dated September 9, 2021 and a letter dated September 12, 2021.

 

Non-IFRS Five Years Plan (U.S. dollars in millions)

 

   2018A   2019A   2020A   2021E   2022E   2023E   2024E   2025E 
Revenues   $24.2   $31.3   $41.0   $55.3   $79.0   $111.5   $153.2   $207.8 
                                         
% Growth   17%   29%   31%   35%   43%   41%   37%   36%
                                         
Cost of revenues   $5.5   $6.6   $11.6   $14.7   $18.9   $25.6   $34.5   $45.7 
Gross profit   $18.7   $24.7   $29.4   $40.6   $60.1   $85.9   $118.7   $162.1 
Gross Margin %   77%   79%   72%   74%   76%   77%   78%   78%
                                         
Operating expenses:                                        
Selling and marketing   $12.3   $17.8   $23.8   $29.3   $40.3   $55.8   $73.5   $93.5 
Research and development   $3.5   $4.2   $5.6   $10.8   $14.2   $17.8   $23.0   $20.8 
General and administrative   $4.4   $5.3   $7.5   $10.0   $13.5   $16.8   $19.9   $22.9 
Total operating expenses   $20.2   $27.3   $36.9   $50.1   $68.0   $90.4   $116.4   $137.2 
Operating income (loss)   $(1.5)   (2.6)  $(7.5)  $(9.5)  $(7.9)  $(4.5)  $2.3   $24.9 
                                         
Operating Income (loss) %   (6)%   (8)%   (18)%   (17)%   (10)%   (4)%   2%   12%

 

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For purposes of the Five Years Plan the above, Non-IFRS financial measures for operating loss exclude: (i) share-based payments; (ii) depreciation and amortization of property and equipment and intangible assets; (iii) change in provision for doubtful and bad debt; (iv) non-recurring expenses related to relocating production facilities to a new location; and (v) other non-recurring expenses.

 

Non-IFRs Final Five Years Plan (U.S. dollars in millions)

 

   2018A   2019A   2020A   2021E   2022E   2023E   2024E   2025E 
Revenues   $24.2   $31.3   $41.0   $55.3   $79.0   $111.5   $153.2   $207.8 
                                         
% Growth   17%   29%   31%   35%   43%   41%   37%   36%
                                         
Cost of revenues   $5.5   $6.6   $11.6   $14.5   $18.9   $25.6   $34.5   $45.7 
Gross profit   $18.7   $24.7   $29.4   $40.8   $60.1   $85.9   $118.7   $162.1 
Gross Margin %   77%   79%   72%   74%   76%   77%   78%   78%
                                         
Operating expenses:                                        
Selling and marketing   $12.3   $17.8   $23.8   $30.1   $41.9   $55.8   $73.5   $93.5 
Research and development   $3.5   $4.2   $5.6   $10.7   $13.8   $17.4   $21.5   $26.1 
General and administrative   $4.4   $5.3   $7.5   $10.8   $13.4   $16.7   $19.9   $22.9 
Total operating expenses   $20.2   $27.3   $36.9   $51.6   $69.1   $89.9   $114.9   $142.5 
Operating income (loss)   $(1.5)   (2.6)  $(7.5)  $(10.8)  $(9.0)  $(4.0)  $3.8   $19.6 
                                         
Operating Income (loss) %   (6)%   (8)%   (18)%   (19)%   (11)%   (4)%   2%   9%

 

For purposes of the Final Five Years Plan, the above Non-IFRS financial measures for operating loss exclude: (i) share-based payments; (ii) depreciation and amortization of property and equipment and intangible assets; (iii) change in provision for doubtful and bad debt; (iv) non-recurring expenses related to relocating production facilities to a new location; and (v) other non-recurring expenses.

 

Use of Non-IFRS Measures

 

The summary of the Company Projections above include forecasts of Non-IFRS operating income (loss) among other things. Reconciliations of the summary of Company Projections to IFRS are not provided because there is inherent difficulty and uncertainty in estimating or predicting the various components of each corresponding IFRS measure, which components could significantly impact such financial measure. In addition, when planning, forecasting and analyzing future periods, Company does so primarily on a Non-IFRS basis without preparing an IFRS analysis since preparing such an analysis would require estimates for various reconciling items that would be difficult to predict with reasonable accuracy.

 

Fairness Opinion of Piper Sandler & Co.

 

Pursuant to an engagement letter dated August 16, 2021 (which superseded an engagement letter dated June 1, 2020, with respect to the abandoned transaction with Party A described in “The Merger- Background of the Merger”), the Company retained Piper Sandler as its exclusive financial advisor with respect to the potential sale of control of the Company (whether through one or a series of related transactions) and, if requested, to deliver its opinion as to the fairness, from a financial point of view, to the holders of Ordinary Shares (including those represented by ADSs) of the consideration to be received pursuant to such a transaction. At a meeting of the Board held on September 9, 2021, Piper Sandler issued its oral opinion to the Board, later confirmed in a written opinion dated September 9, 2021, that, based upon and subject to the assumptions, procedures, considerations and limitations set forth in the written opinion and based upon such other factors as Piper Sandler considered relevant: (i) the Per Share Merger Consideration is fair, from a financial point of view, to the holders of Ordinary Shares issued and outstanding prior to the Effective Time (other than Excluded Shares) and (ii) the Per ADS Merger Consideration is fair, from a financial point of view, to the holders of ADSs issued and outstanding prior to the Effective Time (other than Excluded Shares), in each case, as of the date of the opinion. On September 12, 2021, Piper Sandler delivered a letter addressed to the Board, as of 8:00 am U.S. CT, confirming that no facts or circumstances had come to its attention since September 9, 2021 that would cause Piper Sandler to change its opinion or assumptions set forth in its written opinion dated September 9, 2021.

 

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The full text of the written opinion of Piper Sandler, dated September 9, 2021, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the scope of the review undertaken by Piper Sandler in rendering its opinion, as well as the September 12, 2021 letter, are attached as Annex B. The Piper Sandler opinion addresses only the fairness, from a financial point of view and only as of the date of the opinion, of the Per Share Merger Consideration and the Per ADS Merger Consideration, to holders of the Ordinary Shares and ADSs, respectively, as set forth in the Merger Agreement. Piper Sandler’s opinion was directed solely to the Board in connection with its consideration of the Merger Agreement and was not intended to be, and does not constitute, a recommendation to any holder of Ordinary Shares or ADSs as to how such holder should act with respect to the Merger or any other matter. Piper Sandler’s opinion was approved for issuance by the Piper Sandler Opinion Committee, and Piper Sandler has consented to the disclosure of its opinion in this Proxy Statement.

 

In connection with rendering the opinion described above and performing its financial analyses, Piper Sandler, among other things:

 

  reviewed and analyzed the financial terms of the Merger Agreement;

 

  reviewed and analyzed certain financial and other data with respect to the Company which was publicly available;

 

  reviewed and analyzed certain information, including financial forecasts, relating to the business, earnings, cash flow, assets, liabilities and prospects of the Company that were publicly available, as well as those that were furnished or confirmed to us by the Company;

 

  conducted discussions with members of senior management and representatives of the Company concerning the two immediately preceding matters described above, as well as its business and prospects before and after giving effect to the Merger;

 

  reviewed the current and historical reported prices and trading activity of the Ordinary Shares and ADSs and similar information for certain other companies deemed by Piper Sandler to be comparable to the Company;

 

  compared the financial performance of the Company with that of certain other publicly traded companies that Piper Sandler deemed relevant;

 

  reviewed the financial terms, to the extent publicly available, of certain business combination transactions that Piper Sandler deemed relevant; and

 

  conducted such other analyses, examinations and inquiries and considered such other financial, economic and market criteria as Piper Sandler deemed necessary in arriving at its opinion.

 

The following is a summary of the material financial analyses performed by Piper Sandler in connection with the preparation of its fairness opinion, which was reviewed with, and issued verbally to the Board at a meeting held on September 9, 2021, and later confirmed in a written opinion dated September 9, 2021. The preparation of analyses and a fairness opinion is a complex analytic process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. Therefore, this summary does not purport to be a complete description of the analyses performed by Piper Sandler or of its presentation to the Board on September 9, 2021. You are urged to, and should, read the Piper Sandler opinion in its entirety, as well as its September 12, 2021 letter, and this summary is qualified in its entirety by the written opinion of Piper Sandler, attached with the September 12, 2021 letter as Annex B hereto, which are incorporated herein.

 

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This summary includes information presented in tabular format, which tables must be read together with the text of each analysis summary and considered as a whole in order to fully understand the financial analyses presented by Piper Sandler. The tables alone do not constitute a complete summary of the financial analyses. The order in which these analyses are presented below, and the results of those analyses, should not be taken as any indication of the relative importance or weight given to these analyses by Piper Sandler or the Board. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before September 7, 2021, and is not necessarily indicative of current market conditions.

 

For purposes of its analyses, Piper Sandler calculated (i) the Company’s equity value implied by the aggregate Merger Consideration to be approximately $539 million,1 based on approximately 521 million Ordinary Shares (including Ordinary Shares underlying outstanding ADSs) and Ordinary Share equivalents estimated to be outstanding as of August 31, 2021, consisting of in-the-money options and warrants (calculated using the treasury stock method), and restricted and performance share awards, and (ii) the Company’s enterprise value (for the purposes of this analysis, implied enterprise value equates to implied equity value less cash and cash equivalents of $73 million plus total debt of $11 million as of June 30, 2021, referred to as “EV”) to be approximately $476 million. The foregoing calculations assume an exchange rate of 3.202 NIS per U.S. $1.00 (as of September 7, 2021). The EV implies a 9.9x multiple relative to the last twelve (12) month standalone revenue of the Company, measured from July 1, 2020 through June 30, 2021.

 

Financial Analyses

 

Historical Company Trading Analysis. Piper Sandler analyzed the aggregate Merger Consideration to be paid to the holders of Ordinary Shares and ADSs pursuant to the Merger Agreement in relation to (1) the closing price per ADS on September 7, 2021, the last full trading day included in Piper Sandler’s presentation to the Board on September 9, 2021, (2) the closing price per ADS for the one (1)-day, one (1)-week, and four (4)-week trading days prior to September 7, 2021, (3) the high and low prices for the 52-week period ended on September 7, 2021 and (4) the volume weighted average price (“VWAP”) for the preceding thirty (30)-trading day period ended September 7, 2021 For purposes of the analysis, the VWAP is calculated based off of each trading day’s closing share price and trading volume. The analysis indicated that the aggregate Merger Consideration to be paid to the holders of Ordinary Shares and ADSs pursuant to the Merger Agreement represented:

 

  a premium of 49% based on the closing price per ADS of $20.85 on September 7, 2021, the last full trading day included in Piper Sandler’s presentation to the Board on September 9, 2021;

  

  a premium of 49% based on the closing price per ADS of $20.75 on September 3, 2021, the trading day immediately prior to September 7, 2021;

 

  a premium of 45% based on the closing price per ADS of $21.34 on August 31, 2021, the one (1)-week date prior to such trading day;

 

  a premium of 70% based on the closing price per ADS of $18.19 on August 10, 2021, the four (4)-week date prior to such trading day;

 

  a premium of 16% based on the intraday high price per ADS of $26.83 on February 9, 2021, constituting the high price during the fifty-two (52)-week period ended September 7, 2021;

 

  a premium of 89% based on the intraday low price per ADS of $16.36 on August 17, 2021, constituting the low price during the 52-week period ended September 7, 2021; and

 

  a premium of 65% based on the VWAP of $18.82 for the thirty (30) trading-day period ended September 7, 2021.

 

 

1 Subsequent to the delivery of its oral opinion on September 9, 2021, Company management provided updated warrant exercise information to Piper Sandler. Using that information, and a more current exchange rate between the NIS and the USD. Piper Sandler recalculated the aggregate Merger Consideration to be approximately $538 million. Piper Sandler deemed this difference to be immaterial to its analysis and opinion, and, as described above, subsequently delivered its confirmation letter to the Board of the Company on September 12, 2021.

 

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Selected Public Companies Analysis

 

Medical Technology – Financial Profile

 

Piper Sandler reviewed certain publicly available financial and stock market information of the Company and the following selected companies in the medical technology industry that are listed and publicly traded on the U.S. stock markets and that Piper Sandler deemed relevant. Piper Sandler selected companies based on information obtained by searching SEC filings, publicly available disclosures and company presentations, press releases, and other sources and by applying the following criteria:

 

  companies that operate in the medical technology industry;

 

  companies that have calendar year 2020 and 2021 revenues between $25 million and $100 million;

 

  companies that have 2022 revenue growth between twenty percent (20%) and fifty percent (50%); and

 

  companies that have last twelve (12)-month (“LTM”) gross margins greater than seventy percent (70%).

 

Based on these criteria, Piper Sandler identified and analyzed the following eight (8) selected companies:

 

  Cytosorbents Corporation
     
  Eargo, Inc.
     
  iCAD, Inc.
     
  Neuronetics, Inc.
     
  NeuroPace, Inc.
     
  OrthoPediatrics Corporation
     
  SI-BONE, Inc.

 

For the selected public companies analysis, Piper Sandler calculated the following valuation multiples for the Company, including as implied by the aggregate Merger Consideration, and the selected companies:

 

  Enterprise value (which is defined as equity value, calculated using the treasury stock method and based on closing prices per share on September 7, 2021, plus total debt, preferred equity and noncontrolling interests (as applicable) less total cash and cash equivalents) as a multiple of (i) revenue and (ii) gross profit, in each case, for the 2020 calendar year and as estimated for calendar years 2021 and 2022.

 

Financial data of the selected companies were based on publicly available research analysts’ estimates, public filings, press releases and other publicly available information. Financial data of the Company was based on publicly available information and the Company projections furnished to Piper Sandler by Company management.

 

 

The results of this analysis are summarized as follows:

 

      Select Med Tech Financial Profile Public Companies2
   Itamar  High  75th%  Mean  Median  25th%  Low
EV to 2020 revenue  11.6x  19.5x  14.0  11.0x  10.2x  9.3x  2.8x
EV to projected 2021 revenue  8.6x  17.6x  13.5x  9.7x  8.4x  7.4x  2.3x
EV to projected 2022 revenue  6.0x  13.2x  11.1x  7.7x  6.6x  5.6x  1.8x
EV to 2020 gross profit  16.2x  25.0x  19.1x  14.6x  13.0x  11.6x  3.6x
EV to projected 2021 gross profit  11.7x  21.7x  17.7x  12.8x  11.9x  9.4x  3.0x
EV to projected 2022 gross profit  7.9x  16.6x  14.6x  10.1x  9.3x  7.3x  2.4x

 

 

2 Multiples are based on EV.

 

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No company utilized in the selected public companies analysis is identical to the Company. In evaluating the selected companies, Piper Sandler made professional judgments and assumptions with regard to industry performance, general business, macroeconomic, market and financial conditions and other matters.

 

iRhythm Technologies, Inc. – Financial Profile

 

In addition to the foregoing analysis, Piper Sandler also applied the same analysis to an additional U.S. publicly traded medical technology company, iRhythm Technologies, Inc. (“iRhythm”), using financial data that was based on publicly available research analysts’ estimates, public filings, press releases and other publicly available information.

 

The results of this analysis are summarized as follows:

 

   Itamar  iRhythm
Technologies,
Inc.3
EV to 2020 revenue  11.6x  5.0x
EV to projected 2021 revenue  8.6x  4.1x
EV to projected 2022 revenue  6.0x  3.8x
EV to 2020 gross profit  16.2x  6.8x
EV to projected 2021 gross profit  11.7x  5.6x
EV to projected 2022 gross profit  7.9x  5.1x

 

Similar to the other selected public companies, iRhythm is not identical to the Company. In evaluating iRhythm, Piper Sandler made professional judgments and assumptions with regard to industry performance, general business, macroeconomic, market and financial conditions and other matters.

 

Selected Precedent Transactions Analysis. 

 

Medical Technology – Financial Profile

 

Piper Sandler reviewed precedent transactions involving privately owned or publicly traded target companies in the medical technology industry that Piper Sandler deemed relevant. Piper Sandler selected these transactions based on information obtained by searching SEC filings, publicly available disclosures and company presentations, press releases, and other sources and by applying the following criteria:

 

  transactions in which the acquiring company purchased a controlling interest of the target;
     
  transactions that were announced or completed between January 1, 2012 and the date of Piper Sandler’s opinion and subsequently closed or were in process of closing;
     
  targets with forward twelve (12) month (“FTM”) revenue growth estimated to be between twenty percent (20%) and fifty percent (50%);
     
  targets with LTM gross margin greater than 70%; and
     
  targets with LTM and FTM revenue between $25 million and $100 million.

 

 

3 Multiples are based on EV.

 

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Based on these criteria, Piper Sandler identified and analyzed the following six (6) selected transactions ordered by reverse chronological order:

 

Target Acquirer
Solmetex, LLC Avista Capital Partners, L.P.
       
Paradigm Spine, LLC RTI Surgical, Inc.
       
Cianna Medical, Inc. Merit Medical Systems, Inc.
       
Ellipse Technologies, Inc. NuVasive, Inc.
       
China Kanghui Holdings Medtronic, Inc.
       
Freedom Innovations, LLC Health Evolution Partners

 

Piper Sandler reviewed transaction enterprise values of the selected transactions for the target involved in such transactions plus total debt, preferred equity and noncontrolling interests (as applicable) less total cash and cash equivalents. Piper Sandler then calculated each of those transaction enterprise values as a multiple of: (i) LTM revenue, (ii) FTM revenue, (iii) LTM gross profit and (iv) FTM gross profit, in each case, where LTM and FTM were determined as of the applicable announcement dates of such transactions.

 

Financial data of the selected transactions were based on publicly available research analysts’ estimates, public filings, press releases, other publicly available information and other sources. Financial data of the Company were based on publicly available information and the Company projections furnished to Piper Sandler by Company management. LTM revenues and LTM gross profit for the Company were based on historical financial data for the twelve (12) months ended June 30, 2021. Projected FTM revenues and FTM gross profit for the Company were for the twelve (12) months beginning June 30, 2021, and were based on estimates provided by the Company’s management team.

 

The results of this analysis are summarized as follows:

 

        Selected Med Tech Financial Profile M&A Transactions4 
    Itamar   High   75th%   Mean   Median   25th%   Low
EV to LTM revenue   9.9x   12.9x   10.2x   7.4x   6.6x   4.7x   3.8x
EV to FTM revenue   6.8x   9.8x   7.1x   5.5x   5.1x   3.5x   3.0x
EV to LTM gross profit   13.8x   18.2x   13.6x   9.7x   7.9x   6.4x   5.3x
EV to FTM gross profit   9.0x   14.0x   9.6x   7.2x   6.0x   4.5x   4.3x

 

Remote Cardiac Monitoring – Financial Profile

 

In addition, Piper Sandler also selected three (3) recent precedent transactions involving target companies in the remote cardiac monitoring industry that Piper Sandler deemed relevant. All three (3) transactions were announced between December 18, 2020 and January 21, 2021.

 

The transactions selected are as follows, in reverse chronological order:

 

Target Acquirer
Preventice Solutions, Inc. Boston Scientific Corporation
       
Bardy Diagnostics, Inc. Hill-Rom Holdings, Inc.
       
BioTelemetry, Inc. Koninklijke Philips N.V.

 

 

4 Multiples are based on EV.

 

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Piper Sandler applied the same analysis to these transactions as was used in the preceding six (6) transactions described above. The results of this analysis are summarized as follows:

 

        Selected Remote Cardiac Monitoring M&A Transactions5 
    Itamar   High   75th%   Mean   Median   25th%   Low
EV to LTM revenue   9.9x   12.2x   12.2x   8.8x   7.9x   6.3x   6.3x
EV to FTM revenue   6.8x   9.8x   9.8x   7.1x   6.1x   5.3x   5.3x
EV to LTM gross profit   13.8x   20.4x   20.4x   15.3x   15.4x   10.1x   10.1x
EV to FTM gross profit   9.0x   16.3x   16.3x   12.0x   11.0x   8.6x   8.6x

 

No transaction utilized in the selected precedent transactions analysis is identical to the Company. In evaluating the selected transactions, Piper Sandler made judgments and assumptions with regard to industry performance, general business, macroeconomic, market and financial conditions and other matters.

 

Discounted Cash Flow Analysis. Using a discounted cash flow analysis, Piper Sandler calculated an estimated range of theoretical values for the Company based on the net present value of (i) projected unlevered free cash flows from the second (2nd) half of fiscal 2021, consisting of the third and fourth (4th) fiscal quarters 2021, to fiscal year 2030 (the fiscal years 2026 to 2030 projections being referred to herein as the “Longer Range Projections”), discounted back to June 2021, based on the Company Projections furnished to Piper Sandler by the Company management (see “The Merger— Management Internal Financial Projections” above) or, with respect to the Longer Range Projections, prepared by Piper Sandler, discussed with the Company’s management, reviewed by the Company’s management at a high level and confirmed by the Company’s management thereafter for Piper Sandler’s use solely for the purpose of performing a discounted cash flow, plus (ii) a terminal value at fiscal year 2030, based upon perpetuity growth rates, discounted back to June 2021. The unlevered free cash flows for each year were calculated from the Company projections as: adjusted EBITDA less depreciation and amortization, less income tax expense, plus depreciation and amortization, plus stock-based compensation, less capital expenditures and less the change in net working capital. Piper Sandler assumed a 23% income tax rate (i.e., the Israeli corporate tax rate), which was partially offset (through 2027) in Piper Sandler’s analysis by the Company’s net operating loss benefit at June 30, 2021. Such Longer Range Projections were prepared by Piper Sandler, discussed with the Company’s management, reviewed by the Company’s management at a high level and confirmed by the Company’s management thereafter for Piper Sandler’s use solely for the purpose of performing a discounted cash flow. In addition, Piper Sandler used assumption that the annual change in working capital was equal to 10.0% of the annual change in revenue for purposes of its discounted cash flow analysis. The Longer Range Projections are as follows:

 

   Actual  Management Projections  Longer-Range Projections 
($ in millions)  2019  2020  LTM  FTM  2021  2022  2023  2024  2025  2026  2027  2028  2029  2030 
                                            
Revenue   $31   $41   $48   $70   $55   $79   $112   $153   $208   $268   $334   $403   $472   $537 
                                                          
COGS   7   12   14   17   14   19   26   34   46   58   72   87   101   113 
Gross Profit   $25   $29   $34   $53   $41   $60   $86   $119   $162   $210   $262   $316   $371   $424 
                                                          
Sales & Marketing   18   24   27   36   30   42   56   74   94   118   144   169   193   215 
Research & Development   4   6   8   12   11   14   17   21   26   33   40   47   53   59 
General & Administrative   5   7   9   12   11   13   17   20   23   29   35   42   48   54 
Operating Expenses   $27   $37   $44   $60   $52   $69   $90   $115   $142   $180   $219   $258   $295   $327 
                                                          
Non-IFRS Operating Income / (Loss)   $(3)  $(8)  $(10)  $(7)  $(11)  $(9)  $(4)  $4   $20   $30   $43   $58   $76   $97 
                                                          
Adjusted EBITDA Calculation                                                         
                                                          
Operating Income / (Loss)   (3)  (8)  (10)  (7)  (11)  (9)  (4)  4   20   30   43   58   76   97 
Depreciation & Amortization   1   2   2   3   2   3   4   5   7   9   12   14   15   17 
Stock-based Compensation   1   2   3   3   3   4   4   5   6   8   10   12   14   16 
Adj. EBITDA   $0   $(4)  $(5)  $(1)  $(6)  $(2)  $4   $14   $33   $47   $65   $84   $105   $130 

 

The terminal values of the Company were calculated by applying the Company’s fiscal year 2030 unlevered free cash flows to a selected range of perpetuity growth rates of 2.5% to 3.5%, with a mid-point of 3.0% based on Piper Sandler’s professional judgment.

 

Piper Sandler performed a discounted cash flow analysis by calculating the range of net present values for the period from the second half of 2021 to fiscal year 2030 based on a discount rate ranging from 10.3% to 12.3%, with a mid-point of 11.3%, reflecting estimates of the Company’s weighted average cost of capital. Piper Sandler derived these discount rates by application of the capital asset pricing model, which requires certain Company-specific inputs, including a market capitalization size risk premium, as well as certain financial metrics for the United States financial markets generally.

 

This analysis indicated the following approximate implied equity value per ADS reference ranges for the Company, as compared to the aggregate Merger Consideration:

 

Merger Consideration  Implied Equity Value per ADS Reference Ranges:
$31.00 per ADS   $28.14 – $40.94

 

 

5 Multiples are based on EV.

 

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Other Information

 

Piper Sandler observed certain additional information that was not considered part of its financial analysis for its fairness opinion but was noted for reference only, including the following:

 

Premiums Paid Analysis. Piper Sandler reviewed publicly available information for selected completed or pending precedent transactions to determine the premiums paid in the transactions over recent trading prices of the target companies prior to announcement of the transaction (which represent undisturbed trading prices to the extent publicly available and applicable). Piper Sandler selected these transactions from the SEC database and applied, among others, the following criteria:

 

companies operating in the broader medical technology industry having an enterprise value between $250 million and $750 million; and

 

transactions that were announced between January 1, 2012 and the date of Piper Sandler’s opinion and that subsequently closed or were in process of closing.

 

Piper Sandler performed premiums paid analyses on 15 transactions that satisfied these criteria. Piper Sandler calculated, for this period, the premium represented by the prices per share paid in these transactions relative to the target companies’ trading price per share at one (1)-day, one (1)-week and four (4)-weeks prior to the undisturbed date (to the extent publicly available and applicable) or prior to announcement (to the extent there was no undisturbed date). The following were the resulting approximate implied equity value per ADS reference ranges for the Company, as compared to the aggregate Merger Consideration:

 

       Selected Transactions 
   Itamar   High   75th%   Mean   Median   25th%   Low 
Premium 1 week prior (to announcement of Merger)   45%   68%   45%   31%   35%   11%   5%
Premium 4 weeks prior (to announcement of Merger)   70%   87%   49%   36%   33%   18%   6%

 

Company Analyst Price Targets. Piper Sandler also noted for the Board the following additional information that was not relied upon in rendering its opinion, but was provided for informational purposes. Piper Sandler reviewed selected Wall Street research equity analyst per ADS target prices for the ADSs as of September 7, 2021. The range of these target prices was $29.00 to $36.00, with an average target price of $31.48.

 

Miscellaneous

 

The summary set forth above does not contain a complete description of the analyses performed by Piper Sandler, but does summarize the material analyses performed by Piper Sandler in rendering its opinion. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Piper Sandler believes that its analyses and the summary set forth above must be considered as a whole and that selecting portions of its analyses or of the summary, without considering the analyses as a whole or all of the factors included in its analyses, would create an incomplete view of the processes underlying the analyses set forth in the Piper Sandler opinion. In arriving at its opinion, Piper Sandler considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis. Instead, Piper Sandler made its determination as to fairness on the basis of its experience and financial judgment after considering the results of all of its analyses. The fact that any specific analysis has been referred to in the summary above is not meant to indicate that this analysis was given greater weight than any other analysis. In addition, the ranges of valuations resulting from any particular analysis described above should not be taken to be Piper Sandler’s view of the actual value of the Ordinary Shares or ADSs.

 

None of the selected companies or transactions used in the analyses above is directly comparable to the Company or the transactions contemplated by the Merger Agreement, including the Merger. Accordingly, an analysis of the results of the comparisons is not purely mathematical; rather, it involves complex considerations and judgments concerning differences in historical and projected financial and operating characteristics of the selected companies and target companies in the selected transactions and other factors that could affect the public trading value or transaction value of the companies involved.

 

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Piper Sandler performed its analyses solely for purposes of providing its opinion to the Board. In performing its analyses, Piper Sandler made numerous assumptions with respect to the capital markets, industry performance, general business and economic conditions and other matters. Certain of the analyses performed by Piper Sandler are based upon forecasts of future results furnished to Piper Sandler, or otherwise approved, or confirmed by the Company’s management, which are not necessarily indicative of actual future results and may be significantly more or less favorable than actual future results. These forecasts are inherently subject to uncertainty because, among other things, they are based upon numerous factors or events beyond the control of the parties or their respective advisors. Piper Sandler does not assume responsibility if future results are materially different from forecasted results.

 

Piper Sandler’s opinion was one of many factors taken into consideration by the Board in making the determination to approve the Merger Agreement and recommend that the holders of Ordinary Shares vote in favor of the Merger. The above summary does not purport to be a complete description of the analyses performed by Piper Sandler in connection with the opinion or of its presentation to the Board on September 9, 2021, and is qualified in its entirety by reference to the written opinion of Piper Sandler attached as Annex B hereto.

 

Piper Sandler relied upon and assumed, without assuming liability or responsibility for independent verification, the accuracy and completeness of all information that was publicly available or was furnished, or otherwise made available, to Piper Sandler or discussed with or reviewed by Piper Sandler. Piper Sandler further relied upon the assurances of the management of the Company that the financial information provided to Piper Sandler was prepared on a reasonable basis in accordance with industry practice, and that they were not aware of any information or facts that would make any information provided to Piper Sandler incomplete or misleading. Without limiting the generality of the foregoing, for the purpose of Piper Sandler’s opinion, Piper Sandler assumed that, with respect to the Company projections and other forward-looking information prepared by management and reviewed by Piper Sandler, such information was reasonably prepared based on assumptions reflecting the best currently available estimates and judgments of the management of the Company as to the expected future results of operations and financial condition of the Company. Piper Sandler expressed no opinion as to any such Company projections or forward-looking information or the assumptions on which they were based. Piper Sandler relied, with the Company’s consent, on advice of the outside counsel and the independent accountants to the Company, and on the assumptions of the management of the Company, as to all accounting, legal, tax and financial reporting matters with respect to the Company and the transactions contemplated by the Merger Agreement.

 

Piper Sandler relied upon and assumed, without independent verification, that (i) the representations and warranties of all parties to the Merger Agreement and all other documents and instruments that are referred to therein are true and correct in all respects material to our analysis, (ii) each party to such agreements will fully and timely perform all of the covenants and agreements required to be performed by such party in all respects material to our analysis, (iii) the Merger will be consummated pursuant to the terms of the Merger Agreement without amendments thereto and (iv) all conditions to the consummation of the Merger will be satisfied without waiver by any party of any conditions or obligations thereunder. Additionally, Piper Sandler assumed that all the necessary regulatory approvals and consents required for the Merger will be obtained in a manner that will not adversely affect the Company or the contemplated benefits of the Merger.

 

In arriving at its opinion, Piper Sandler did not perform any appraisals or valuations of any specific assets or liabilities of the Company (fixed, contingent or other) and was not furnished or provided with any such appraisals or valuations, nor did Piper Sandler evaluate the solvency of the Company under any state or federal law relating to bankruptcy, insolvency or similar matters. The analyses performed by Piper Sandler in connection with its opinion were going concern analyses. Piper Sandler expressed no opinion regarding the liquidation value of the Company or any other entity. Without limiting the generality of the foregoing, Piper Sandler undertook no independent analysis of any pending or threatened litigation, regulatory action, possible unasserted claims or other contingent liabilities, to which the Company or any of its affiliates is a party or may be subject, and, at the direction of the Company and with its consent, its opinion made no assumption concerning, and therefore did not consider, the possible assertion of claims, outcomes or damages arising out of any such matters. Piper Sandler also assumed that neither the Company nor Parent is party to any material pending transaction, including without limitation any financing, recapitalization, acquisition or merger, divestiture or spin-off, other than the Merger.

 

Piper Sandler’s opinion was necessarily based upon the information available to it and facts and circumstances as they existed and were subject to evaluation on the date of its opinion. Events occurring after the date of its opinion could materially affect the assumptions used in preparing its opinion. Piper Sandler expressed no opinion as to the price at which the Ordinary Shares or the ADSs may trade following announcement of the Merger or at any future time. Other than with respect to the confirmation contained in the September 12, 2021 letter, Piper Sandler did not undertake to reaffirm or revise its opinion or otherwise comment upon any events occurring after the date of its opinion and does not have any obligation to update, revise or reaffirm its opinion.

 

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Piper Sandler’s opinion addressed solely the fairness, from a financial point of view, to holders of Ordinary Shares, including the Ordinary Shares represented by ADSs, issued and outstanding prior to the Effective Time (other than Excluded Shares), of the Per Share Merger Consideration and Per ADS Merger Consideration, as applicable, as set forth in the Merger Agreement, and did not address any other terms or agreement relating to the Merger or any other terms of the Merger Agreement. Piper Sandler was not requested to opine as to, and its opinion does not address, the basic business decision to proceed with the Merger, the merits of the Merger relative to any alternative transaction or business strategy that may be available to the Company, Parent’s ability to fund the aggregate Merger Consideration, any other terms contemplated by the Merger Agreement or the fairness of the Merger to any other class of securities, creditor or other constituency of the Company. Furthermore, Piper Sandler expressed no opinion with respect to the amount or nature of the compensation to any officer, director or employee of any party to the Merger, or any class of such persons, relative to the compensation to be received by the holders of Ordinary Shares or ADSs in the Merger or with respect to the fairness of any such compensation.

 

Information About Piper Sandler

 

As a part of its investment banking business, Piper Sandler is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, underwritings, secondary distributions of listed and unlisted securities, private placements, and valuations for corporate and other purposes. The Board selected Piper Sandler to be its financial advisor and render its fairness opinion in connection with the transactions contemplated by the Merger Agreement on the basis of such experience and its familiarity with the Company.

 

Piper Sandler acted as a financial advisor to the Company in connection with the Merger and will receive a fee, currently estimated to be approximately $10.5 million, from the Company. A significant portion of Piper Sandler’s fee is contingent upon consummation of the Merger. $500,000 of such fee has been earned by Piper Sandler for rendering its fairness opinion, has been paid by the Company to Piper Sandler, and is creditable against the total fee. The opinion fee was not contingent upon the consummation of the Merger or the conclusions reached in Piper Sandler’s opinion. The Company has also agreed to indemnify Piper Sandler against certain liabilities and reimburse Piper Sandler for certain expenses in connection with its services.

 

Within the past three (3) years, Piper Sandler has acted as lead underwriter for the Company’s January 2020 and February 2021 public offerings of ADSs, for which it received underwriting fees in the total amount of $4.2 million. In addition, Piper Sandler acted as financial advisor to Respicardia, Inc. in connection with a December 2017 financing transaction, as a result of which it received, in April 2021, $2.6 million in fees from Parent in connection with the closing of a long-standing option that Parent had to acquire the remaining equity of Respicardia, Inc. In addition, in the ordinary course of its business, Piper Sandler and its affiliates may actively trade securities of the Company and Guarantor for its own account or the account of its customers and, accordingly, may at any time hold a long or short position in such securities. Piper Sandler may also, in the future, provide investment banking and financial advisory services to the Company or Parent or entities that are affiliated with the Company or Parent, for which Piper Sandler would expect to receive compensation.

 

Consistent with applicable legal and regulatory requirements, Piper Sandler has adopted policies and procedures to establish and maintain the independence of Piper Sandler’s research department and personnel. As a result, Piper Sandler’s research analysts may hold opinions, make statements or recommendations and/or publish research reports with respect to the Company and the Merger and other participants in the Merger that differ from the opinions of Piper Sandler’s investment banking personnel.

 

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Interests of the Company’s Directors and Executive Officers in the Merger

 

When considering the recommendation of the Board that you vote to approve the Merger Proposal, you should be aware that the Company’s directors and executive officers may have interests in the Merger that are different from, or in addition to, those of the Company’s shareholders in general. The Board was aware of these interests during its deliberations on the merits of the Merger and in deciding to recommend that Company’s shareholders vote to approve the Merger Agreement.

 

Company Shares

 

As of October 6, 2021, the executive officers and directors of the Company (sixteen (16) persons) beneficially owned (directly or via ADSs) an aggregate of 49,487,255 Ordinary Shares, or 9.7% of the outstanding Ordinary Shares. For beneficial ownership of Ordinary Shares by our directors and executive officers, including how beneficial ownership was calculated, see “Security Ownership of Certain Beneficial Owners and Management” beginning on page 94. Outstanding Company Shares held by executive officers and directors of the Company will be treated in the Merger in the same manner as Company Shares held by all other holders of the Company Shares (i.e., they will be canceled and entitle the holders thereof to receive the Per Share Merger Consideration or the Per ADS Merger Consideration, as applicable).

 

Company Options and Company RSUs

 

The equity awards held by the Company’s non-employee directors and executive officers will be treated as described under the section of this Proxy Statement entitled “The Merger Agreement—Treatment of Company Warrant and Equity Awards.

 

As of October 6, 2021 our directors and executive officers held, in the aggregate, a total of 28,455,962 Company Options and 2,415,314 Company RSUs, of which (i) our directors hold, in the aggregate, 3,410,000 Company Options (with exercise prices ranging from $0.35 to $0.9 per Ordinary Share) and 70,445 Company RSUs (with an exercise price of $0 per Ordinary Share), (ii) Mr. Glick holds 13,289,612 Company Options (with exercise prices ranging from $0.38 to $0.53 per Ordinary Share) and 1,633,954 Company RSUs (with an exercise price of $0.09 per Ordinary Share), and (iii) our other executive officers hold, in the aggregate, 11,756,350 Company Options (with exercise prices ranging from $0.31 to $0.73 per Ordinary Share) and 710,915 Company RSUs (with an exercise price of $0 per Ordinary Share). Pursuant to the terms of the equity awards held as of October 6, 2021 by our directors and executive officers, and assuming that the Merger is completed as of December 15, 2021, a total of 8,627,439 Company Options that are unvested and 1,102,243 Company RSUs that are unvested held, in the aggregate, by our directors and executive officers will accelerate in connection with the consummation of the Merger, of which (i) our directors hold, in the aggregate, 1,320,000 unvested Company Options (with exercise prices ranging from $0.45 to $0.9 per share) that will accelerate in connection with the consummation of the Merger, (ii) Mr. Glick holds 3,962,853 unvested Company Options (with exercise prices ranging from $0.38 to $0.39 per share) and 609,232 unvested Company RSUs (with an exercise price of $0.09 per share) that will accelerate in connection with the consummation of the Merger, and (iii) our other executive officers hold, in the aggregate, 3,344,585 unvested Company Options (with exercise prices ranging from $0.34 to $0.53 per share) and 493,011 unvested Company RSUs (with exercise price of $0 per share) that will accelerate in connection with the consummation of the Merger.

 

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Change in Control Provisions of Employment Arrangements.

 

There are no change in control provisions in our employment agreements that would be triggered in connection with the Merger and other Transactions. However, all of our executive officers are entitled to accelerated vesting of some or all of their outstanding Company Options and Company RSUs granted to them, in connection with a change in control of the Company (as described under the heading “Company Options and Company RSUs” above), in each case, pursuant to such executive officers’ individual equity-based award agreements that were in place prior to the execution of the Merger Agreement.

 

Indemnification and Insurance

 

From and after the Effective Time and ending on the seventh (7th) anniversary of the Effective Time, the Company, the Surviving Company and Parent will indemnify and hold harmless all of our and our subsidiaries’ past and present directors and officers (collectively, together with such persons’ heirs, executors, administrators and assigns, the “Covered Persons”) to the fullest extent permitted by law (i) against any costs and expenses, judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any actual or threatened action or investigation, whether civil, criminal, administrative or investigative, arising out of acts or omissions occurring at or prior to the Effective Time and (ii) for acts or omissions occurring in connection with the process resulting in and the approval of the Merger Agreement and the consummation of the Transactions.

 

In addition, from and after the Effective Time and ending on the seventh (7th) anniversary of the Effective Time, the Company, the Surviving Company and Parent will advance expenses (including reasonable legal fees and expenses) incurred in the defense of any action or investigation with respect to the matters subject to indemnification described in the immediately preceding paragraph in accordance with the procedures (if any) set forth (a) in the Company’s or any of its subsidiaries’ articles of association (or, to the extent applicable, other organizational or governance documents) and (b) in indemnification agreements, if any, in existence on the date of the Merger Agreement.

 

For not less than seven (7) years from and after the Effective Time, the articles of association of the Surviving Company will contain provisions no less favorable with respect to exculpation, indemnification of and advancement of expenses to Covered Persons for periods at or prior to the Effective Time than are currently set forth in the articles of association and other organizational documents of the Company and its subsidiaries. If any action or investigation (whether arising before, at or after the Effective Time) is made against any Covered Person with respect to matters subject to indemnification under the Merger Agreement on or prior to the seventh (7th) anniversary of the Effective Time, the obligations described above will continue in effect until the final disposition of such action or investigation. Following the Effective Time, the indemnification agreements, if any, in existence on the date of the Merger Agreement with any of the directors, officers or employees of the Company or any of its subsidiaries will be assumed by the Surviving Company, and will continue in full force and effect in accordance with their terms.

 

The Merger Agreement also provides that for not less than seven (7) years from and after the Effective Time, the Surviving Company will, and Parent will cause the Surviving Company to, maintain for the benefit of the Covered Persons, an insurance and indemnification policy that provides coverage for events occurring prior to the Effective Time (the “D&O Insurance”) that is substantially equivalent to and in any event not less favorable in the aggregate than our and our subsidiaries’ existing policies relating to errors and omissions of directors and officers or, if substantially equivalent insurance coverage is unavailable, the best available coverage, provided that the Surviving Company shall not be required to pay an annual premium for the D&O Insurance in excess of 300% of the last annual premium paid prior to the Closing, but in such case shall purchase as much coverage as is available for such amount.

 

Under the Merger Agreement, prior to the Effective Time, the Company will purchase (in consultation with Parent) prepaid “tail” policies which provide the Covered Persons with coverage for an aggregate period of at least seven (7) years from and after the Effective Time with respect to claims arising from facts or events that occurred on or before the Effective Time, including the Transactions. If the Company obtains these prepaid policies, the Surviving Company will maintain such policies in full force and effect and will continue to honor the obligations thereunder.

 

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Employee Benefits Following the Effective Time

 

The Merger Agreement provides that Parent will, or will cause the Surviving Company or a subsidiary or affiliate of Parent to, provide each employee of the Company or its subsidiaries who continues to be employed by Parent, the Surviving Company or a subsidiary or affiliate of Parent following the Effective Time with certain compensation and benefits during the period commencing at the Effective Time and ending December 31, 2022, as described below in the section of this Proxy Statement entitled “The Merger Agreement—Employee Benefits.”

 

Arrangements with Parent

 

As of the date of this Proxy Statement, none of our executive officers has entered into any agreement with Parent or any of its affiliates regarding employment with, or the right to purchase or participate in the equity of, the Surviving Company or one (1) or more of its affiliates. Prior to or following the Closing Date, subject to the approval of the Board, certain of our executive officers may have discussions, or may enter into agreements with, Parent or Merger Sub or their respective affiliates regarding employment with, or the right to purchase or participate in the equity of, the Surviving Company or one or more of its affiliates.

 

Support Agreements

 

On September 13, 2021, the Supporting Shareholders entered into the Support Agreement. The Supporting Shareholders beneficially own approximately 18.8% of the voting power of the Company’s outstanding capital stock. Pursuant to the Support Agreement, the Supporting Shareholders have agreed, among other things, to vote their respective beneficially owned capital stock of the Company in favor of the approval of the Merger, and against any action, proposal, transaction or agreement that would prevent, impede or delay the consummation of the transactions contemplated by the Merger Agreement. The obligations of the Supporting Shareholders terminate under certain circumstances, including if the Merger Agreement is terminated.

 

Certain Bonus and Other Payments.

 

In connection with the Transactions, the Company may adopt a (i) cash transaction bonus program for certain employees (including executive officers) and (ii) a cash retention bonus program, in each case, to be paid immediately prior to Closing, and subject to such recipient’s continued service through the Closing of the Merger, in an aggregate amount for both programs of up to $4.2 million, approximately $600,000 of which will be payable, in the aggregate, to the executive officers of the Company (excluding the Chief Executive Officer of the Company, who will not receive any payments under such programs) as described below in the section of this Proxy Statement entitled “The Merger Agreement—Employee Benefits.”

 

Financing of the Merger

 

The Merger is not conditioned on Parent obtaining the proceeds of any financing. The Company anticipates that the total funds necessary to complete the transactions contemplated under the Merger Agreement, including the Merger, will be approximately $539 million. Parent has access to sufficient cash to fund the acquisition and has represented to the Company that it will have sufficient funds to pay all cash amounts required to be paid by Parent under the Merger Agreement at the Closing Date. These funds include the funds needed to:

 

    pay the Company’s shareholders and warrant holders the amounts due under the Merger Agreement; and
    make payments in respect of certain of the Company’s outstanding equity-based awards pursuant to the Merger Agreement.

 

In addition, Guarantor absolutely, irrevocably and unconditionally guarantees to the Company the full and punctual payment of Parent’s and Merger Sub’s obligations under the Merger Agreement, including any liabilities arising out of a breach of or non-compliance with the Merger Agreement.

 

Closing and Effective Time

 

The Closing Date will be no later than the third (3rd) business day following the satisfaction or waiver in accordance with the Merger Agreement of all of the conditions to closing of the Merger (as described under the caption “The Merger Agreement—Conditions to the Closing of the Merger”), other than conditions that by their terms are to be satisfied at the closing, but subject to the satisfaction or waiver of such conditions, or such other date agreed upon by the Company and Parent. As soon as practicable after the determination of the date on which the Closing is to take place, each of the Company and Merger Sub will deliver to the Companies Registrar a notice of the contemplated Merger and the proposed date on which the Companies Registrar is requested to issue a Certificate of Merger. The Merger will become effective upon the issuance by the Companies Registrar of the Certificate of Merger, which shall be deemed to be the Effective Time.

 

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No Appraisal Time

 

Under Israeli law, the Company’s shareholders are not entitled to statutory appraisal rights in connection with the Merger.

 

Material U.S. Federal and Israeli Income Tax Consequences of the Merger

 

Material U.S. Federal Income Tax Consequences

 

The receipt by a U.S. Holder (as defined in “The Merger— Material U.S. Federal and Israeli Income Tax Consequences of the Merger—Material U.S. Federal Income Tax Consequences”) of cash in exchange for Company Shares in connection with the Merger will be a taxable transaction for U.S. federal income tax purposes. Generally, a U.S. Holder will recognize gain or loss equal to the difference between the amount of cash it receives in connection with the Merger and its aggregate adjusted tax basis in Company Shares that it exchanges therefor.

 

The following discussion is a summary of material U.S. federal income tax consequences of the Merger to U.S. Holders (as defined below) but does not purport to be a complete analysis of all potential tax effects. This discussion also does not address any considerations under the U.S. federal tax laws other than those pertaining to the income tax, nor does it address any state, local or non-U.S. tax considerations. This discussion is based on and subject to the Code, the Treasury Regulations promulgated thereunder (“Treasury Regulations”), published guidance of the U.S. Internal Revenue Service (the “IRS”) and court decisions, in each case, as currently in effect as of the date hereof and all of which are subject to change, possibly with retroactive effect, and to differing interpretations. We do not intend to seek any rulings from the IRS with respect to the Merger, and there can be no assurance that the IRS will not take a position contrary to the tax consequences described herein or that such a contrary position would not be sustained by a court.

 

The following discussion assumes that the Merger will be consummated as described in this Proxy Statement and applies only to U.S. Holders that hold their Company Shares as “capital assets” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not constitute tax advice and does not address all aspects of U.S. federal income taxation that may be relevant to any particular U.S. Holders in light of any U.S. Holder’s personal circumstances, including any tax consequences arising under the Medicare contribution tax on net investment income or the alternative minimum tax, or to any U.S. Holders subject to special treatment under the Code, including:

 

·banks, thrifts, mutual funds and other financial institutions;

 

·real estate investment trusts and regulated investment companies;

 

·traders in securities who elect to apply a mark-to-market method of accounting;

 

·brokers or dealers in securities;

 

·tax-exempt organizations or governmental organizations;

 

·insurance companies;

 

·dealers or brokers in securities or foreign currency;

 

·individual retirement and other deferred accounts;

 

·persons whose functional currency is not the U.S. dollar;

 

·U.S. expatriates and former citizens or long-term residents of the United States;

 

·persons who hold their Company Shares as part of a straddle, hedging, conversion, constructive sale or other risk reduction transaction;

 

·persons who purchase or sell their Company Shares as part of a wash sale for tax purposes;

 

·“S corporations,” partnerships or other entities or arrangements classified as partnerships for U.S. federal income tax purposes, or other pass-through entities (and investors therein);

 

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·persons who hold their Company Shares through a bank, financial institution or other entity, or a branch thereof, located, organized or resident outside of the United States;

 

·persons who own or have owned (directly, indirectly or through attribution) more than 5% of the voting power or value of Company Shares;

 

·persons who are not exchanging Company Shares for cash pursuant to the Merger; and

 

·persons who received their Company Shares pursuant to the exercise of employee stock options or other compensation arrangements.

 

If a partnership, including for this purpose any arrangement or entity that is treated as a partnership for U.S. federal income tax purposes, holds Company Shares, the tax treatment of a partner (including for this purpose an investor treated as a partner) in the partnership will generally depend upon the status of the partner and the activities of the partner and the partnership. A holder that is a partnership for U.S. federal income tax purposes and the partners in such partnership are urged to consult their tax advisors about the U.S. federal income tax consequences of the Merger and of the ownership and disposition of Company Shares.

 

For purposes of this discussion, a “U.S. Holder” means a beneficial owner of Company Shares that for U.S. federal income tax purposes is or is treated as any of the following:

 

·an individual who is a citizen or resident of the United States as determined under U.S. federal income tax rules;

 

·a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United States, any state thereof or the District of Columbia;

 

·an estate, the income of which is subject to U.S. federal income tax regardless of its source; or

 

·a trust that (1) is subject to the primary supervision of a court within the United States and all substantial decisions of which are subject to the control of one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code), or (2) has a valid election in effect to be treated as a United States person for U.S. federal income tax purposes.

 

THIS DISCUSSION IS NOT TAX ADVICE. HOLDERS OF COMPANY SHARES SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER U.S. FEDERAL TAX LAWS OTHER THAN THOSE PERTAINING TO INCOME TAX, INCLUDING ESTATE OR GIFT TAX LAWS, OR UNDER ANY STATE, LOCAL OR NON-U.S. TAX LAWS HOLDERS OF COMPANY SHARES WHO ARE NOT U.S. HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE U.S. FEDERAL INCOME AND WITHHOLDING TAX CONSEQUENCES AND ANY APPLICABLE NON-U.S. TAX CONSEQUENCES OF THE MERGER.

 

Exchange of the Shares for Cash Pursuant to the Merger Agreement

 

The receipt by a U.S. Holder of cash in exchange for Company Shares as a result of the Merger will be a taxable transaction for U.S. federal income tax purposes. Generally, for U.S. federal income tax purposes, a U.S. Holder will recognize gain or loss equal to the difference between the amount of cash it receives as a result of the Merger and its aggregate adjusted tax basis in the Company Shares that it exchanges therefor.

 

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Any gain or loss recognized by a U.S. Holder generally would be long-term capital gain or loss if the Company Shares surrendered were held for more than one (1) year as of the effective date of the Merger and would be short-term capital gain or loss if the Company Shares surrendered were held for one (1) year or less as of the effective date of the Merger. A reduced tax rate generally will apply to long-term capital gain of a non-corporate U.S. Holder (including individuals). The deductibility of capital losses is subject to limitations. If a U.S. Holder acquired different blocks of Company Shares at different times or at different prices, such U.S. Holder must determine its adjusted tax basis and holding period separately with respect to each block of Company Shares. Any gain or loss recognized by a U.S. Holder will generally be U.S.-source gain or loss for foreign tax credit purposes.

 

The foregoing discussion regarding gain recognized by a U.S. Holder as a result of the Merger assumes that the Company is not currently, and has not been, a “passive foreign investment company” (“PFIC”) for U.S. federal income tax purposes during such U.S. Holder’s holding period for the Company Shares exchanged in the Merger.

 

A non-U.S. corporation is treated as a PFIC for any taxable year if either: (a) at least 75% of its gross income for such year is passive income or (b) at least 50% of the value of its assets (based on a quarterly average) is attributable to assets that produce or are held for the production of passive income. Passive income for this purpose generally includes, among other things, dividends, interest, royalties, rents, and gains from commodities and securities transactions. In determining whether a non-U.S. corporation is a PFIC, a proportionate share of the assets and income of each corporation in which it owns, directly or indirectly, at least 25% interest (by value) is taken into account. Under the PFIC rules, if a non-U.S. corporation were considered a PFIC at any time during which a holder held shares in such non-U.S. corporation, then the non-U.S. corporation would (absent certain elections) generally continue to be treated as a PFIC for all subsequent years with respect to such holder’s shares regardless of whether such non-U.S. corporation continues to meet the tests noted above in any subsequent taxable year.

 

Based on the historical composition of the Company’s income, assets, and operations, the Company believes that it was not a PFIC for any completed taxable year ending on or after December 31, 2018 (the taxable year in which the Company listed its Ordinary Shares and American Depositary Shares on Nasdaq) through and including the taxable year ended December 31, 2020 and the Company does not expect to be treated as a PFIC for the current taxable year. However, given that the annual PFIC determination is fundamentally factual in nature and is based on the application of complex U.S. federal income tax rules, which are subject to different interpretations, there can be no assurance that the Company was not or will not be classified as a PFIC for one (1) or more of such taxable years. The Company has not made any determination regarding its PFIC status for any taxable year ending on or before December 31, 2017 and cannot provide any assurance that the Company was not a PFIC for one (1) or more such taxable years. The Company also cannot provide any assurances that the Company will assist holders in determining whether the Company was a PFIC during such period.

 

If the Company were a PFIC in the current taxable year or in any prior taxable year in which a U.S. Holder has held Company Shares, then such U.S. Holder generally would be subject to adverse U.S. federal income tax consequences with respect to gain recognized on any sale or exchange of such shares, including an exchange of such shares pursuant to the Merger, unless such U.S. Holder has in effect certain elections, such as the mark-to-market election.

 

The U.S. federal income tax rules relating to PFICs are complex. U.S. Holders should consult their own tax advisors concerning whether the Company is or has been a PFIC for any taxable year during which such U.S. Holder has owned Company Shares, the availability of any applicable elections to such U.S. Holder and the tax consequences of exchanging Company Shares pursuant to the Merger.

 

Information Reporting and Backup Withholding

 

A U.S. Holder may be subject to information reporting and backup withholding in respect of the payment of cash in exchange for Company Shares in the Merger. Backup withholding will not apply if such U.S. Holder furnishes a properly completed and executed IRS Form W-9, or otherwise establishes an exemption.

 

Generally, backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a U.S. Holder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS. Each holder should consult such holder’s tax advisor regarding the information reporting and backup withholding tax rules.

 

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Material Israeli Tax Consequences

 

Following is a discussion of certain tax consequences of the Merger under Israeli tax laws to holders of Company Shares. As contemplated in the Merger Agreement, we intend to request tax rulings from the Israel Tax Authority with respect to, among other things, (i) exemption of Company shareholders (including holders of ADSs) who are non-Israeli residents and who meet certain conditions from withholding of Israeli tax on payments of the Merger Consideration payable to them, and (ii) the application of Israeli tax withholding and other Israeli tax treatment applicable to holders of Company Options and Company RSUs issued to certain directors and employees under Section 102 of the ITO and to certain directors and others under Section 3(i) of the ITO. If and when these tax rulings are finalized, we will issue a press release or furnish a Form 6-K or other document with the SEC and ISA describing the scope of the exemptions provided by the tax rulings. There can be no assurance that such rulings will be granted before the Closing or at all, or that if obtained, such rulings will be granted under the conditions requested by us.

 

Israeli Capital Gains Tax

 

As a consequence of the Merger, holders of Company Shares will be treated under Israeli tax laws as having sold their Company Shares in the Merger.

 

When an Israeli company is sold its shareholders are generally subject to Israeli taxation. The ITO distinguishes between ‘Real Capital Gain’ and ‘Inflationary Surplus’. The Inflationary Surplus is the portion of the total capital gain which is equivalent to the increase of the relevant asset’s purchase price which is attributable to the increase in the Israeli CPI or, in certain circumstances, a foreign currency exchange rate, between the date of purchase and the date of sale. The Real Capital Gain is the excess of the total capital gain over the Inflationary Surplus.

 

The capital gains tax rate applicable to the Real Capital Gain is 25% for individuals, and if such individual is holding or is entitled to purchase, directly or indirectly, alone or together with such person’s relative or another person who collaborates with such person on a permanent basis, one of the following: (i) at least ten percent (10%) of our issued and outstanding Ordinary Shares, (ii) at least ten percent (10%) of the voting rights of Itamar, (iii) the right to receive at least ten percent (10%) of our profits or assets upon liquidation, (iv) the right to appoint a manager/director, or (v) the right to instruct any other person to do any of the foregoing (a “Significant Shareholder”) on the date of sale or on any date falling within the 12 month period preceding that date of sale, the Real Capital Gain of such Significant Shareholder would be subject to Israeli taxation at a rate of 30%. The capital gains tax rate applicable to the Real Capital Gain is 23% for corporations. An additional tax at a rate of three percent (3%) (“Surtax”) on the Real Capital Gain may be imposed upon individual shareholders (Israeli and non-Israeli residents), whose annual income from all sources that is taxable in Israel exceeds a certain amount (NIS 647,640 in 2021). The Inflationary Surplus is generally exempt from tax.

 

Shareholders of a company, such as Itamar, whose shares are traded on the TASE or on a regulated market outside of Israel, such as Nasdaq, who are non-Israeli residents and purchased their shares after the listing of our Ordinary Shares on the TASE or said regulated market outside of Israel, whichever is earlier (which means, in the case of Itamar, non-Israeli residents who purchased Company Shares after March 13, 2007), would generally be exempt from Israeli capital gains tax, provided that certain conditions (which may vary depending on the date the Company Shares were purchased) are met (including that the capital gain is not realized through a permanent establishment that the non-Israeli resident shareholder maintains in Israel).

 

However, non-Israeli corporations will not be entitled to the foregoing exemption if Israeli residents: (i) have a controlling interest of more than 25% in such non-Israeli corporation or (ii) are the beneficiaries of, or are entitled to, twenty-five percent (25%) or more of the revenues or profits of such non-Israeli corporation, whether directly or indirectly.

 

In addition, the sale of Company Shares by a non-Israeli resident may be exempt from Israeli capital gains tax (or subject to tax at a reduced rate) under the provisions of an applicable tax treaty between Israel and the seller’s country of residence (subject to the receipt of a valid certificate or ruling from the Israel Tax Authority allowing for an exemption or a reduced tax rate). Under the Convention between the Government of the State of Israel and the Government of the United States of America with Respect to Taxes on Income (the “U.S.-Israel Tax Treaty”), Israeli capital gains tax generally will not apply to the disposition of securities by a “resident of the United States” (as defined in the U.S.-Israel Tax Treaty) (a “U.S. Treaty Resident”) who holds the securities as a capital asset and is entitled to claim the benefits afforded to such person by the U.S.-Israel Tax Treaty. However, such exemption will not apply if (i) the capital gains arising from such disposition are attributed to real estate located in Israel; (ii) the capital gains arising from such disposition are attributed to royalties; (iii) the capital gains from such disposition may be attributed to a permanent establishment of such U.S. Treaty Resident that is maintained in Israel, under certain terms, (iv) the U.S. Treaty Resident holds, directly or indirectly, securities representing ten percent (10%) or more of the voting rights during any part of the twelve (12)-month period preceding the effective time of the sale, subject to certain conditions; or (v) the U.S. Treaty Resident, if an individual, was physically present in Israel for a period or periods aggregating to 183 days or more during the relevant taxable year.

 

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Other countries are party to tax treaties with Israel that, subject to the provisions of those treaties, may exempt a non-Israeli resident shareholder from Israeli tax. You are urged to consult with your own tax advisor regarding the applicability of these tax treaties to you and your receipt of Merger Consideration.

 

You are urged to consult with your own tax advisor for a full understanding of the Israeli tax consequences of the Merger to you, including the consequences under any applicable, state, local, foreign or other tax laws or tax treaties.

 

Israeli Tax Withholding

 

Whether or not a particular shareholder is actually subject to Israeli capital gains tax in connection with the Merger, absent receipt by Itamar of a tax ruling from the Israel Tax Authority prior to closing of the Merger, all of our shareholders (including holders of ADSs) will be subject to Israeli tax withholding at the rate of twenty-five percent (25%) (for individuals) and twenty-three percent (23%) (for corporations) on the gross Merger Consideration (unless the shareholder, or holder of ADSs, requests and obtains an individual certificate of exemption or a reduced tax rate from the Israel Tax Authority, as described below), and Parent or the exchange agent will withhold and deduct from the Merger Consideration an amount equal to twenty-five percent (25%) (for individuals), and twenty-three percent (23%) (for corporations) or such other reduced tax rate as stipulated in the certificate obtained, as applicable, of the gross Merger Consideration received by such shareholder or holder of ADSs.

 

As contemplated in the Merger Agreement, we intend to file requests for tax rulings from the Israel Tax Authority with respect to, among other matters, (i) exemption from withholding of Israeli tax on payments of Merger Consideration paid to Company shareholders (including holders of ADSs) who are non-Israeli residents and who meet certain conditions (to which we sometime refer to herein as the “Withholding Tax Ruling”), and (ii) the application of Israeli tax withholding and other Israeli tax treatment to holders of Company Options and Company RSUs issued to certain directors and employees under Section 102 of the ITO and to certain directors and others under Section 3(i) of the ITO (to which we refer to herein as the “Options Tax Ruling”).

 

There can be no assurance that such rulings will be granted before the Closing or at all or that, if obtained, such rulings will be granted under the conditions requested by us.

 

Exemptions from Israeli tax withholding (or a reduced tax rate) may also be available to certain holders of Company Shares under relevant tax treaties with Israel or under certain provisions of the ITO.

 

Regardless of whether we obtain the Withholding Tax Ruling from the Israel Tax Authority, any holder of Company Shares who believes that it is entitled to such an exemption (or a reduced tax rate) may separately apply to the Israel Tax Authority to obtain a certificate of exemption from withholding or an individual tax ruling providing an exemption from withholding or withholding at a reduced rate, and submit such certificate of exemption or ruling to the exchange agent at least three (3) business days prior to the date that is 180 days following the Closing Date (or such longer period as may be provided by Parent or the Surviving Company). If Parent or the exchange agent receive a valid exemption certificate or tax ruling (in form and substance reasonably satisfactory to Parent and the Exchange Agent) at least three (3) business days prior to the date that is 180 days following the Closing Date (or such longer reasonable period as may be provided by Parent), then the withholding (if any) of any amounts under the ITO, from the consideration payable shall be made only in accordance with the provisions of such Israeli tax certificate or tax ruling.

 

The Israeli tax withholding consequences of the Merger to Company shareholders and holders of Company Options and Company RSUs issued subject to Section 102 of the ITO may vary depending upon the particular circumstances of each shareholder or holder of Company Options and Company RSUs, as applicable, and the final tax rulings issued by the Israel Tax Authority (if obtained). To the extent that tax is withheld on payments to U.S. taxpayers, it is possible that such withheld taxes may not be able to be credited against such taxpayers’ U.S. income tax liability.

 

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Subject to the specific terms of the Withholding Tax Ruling (if obtained), the determination of whether a person is deemed a “resident of Israel” for Israeli tax purposes may be based on a Declaration of Status form (which may require shareholders and holders of ADSs to provide certain supporting documentation) to be completed by each shareholder or holder of ADSs. If so required by the Withholding Tax Ruling, a form of such Declaration of Status shall be made available to shareholders and holders of ADSs.

 

Shareholders who received or acquired their Company Shares or were granted Company Options or Company RSUs under one or more of our equity-based incentive plans, or otherwise as compensation for employment or services provided to us, may be subject to different tax rates.

 

As noted, we also intend to file a request for the Options Tax Ruling. The Options Tax Ruling, if obtained, would confirm, among other things that: (i) the cancellation and exchange of the equity-based awards granted under Section 102 of the ITO and conversion of the shares issued to holders of Section 102 awards shall not be regarded as a violation of the “requisite holding period” (as such term is defined in Section 102 of the ITO) so long as the applicable Merger Consideration is deposited with the 102 Trustee until the end of the respective holding period and (ii) the deposit of the applicable Merger Consideration with the 102 Trustee shall not be subject to any Israeli withholding tax obligation (which ruling may be subject to customary conditions regularly associated with such a ruling). If no Options Tax Ruling is obtained for holders of Company Options, Company RSUs and shares subject to Section 102 of the ITO, such holders will be subject to Israeli tax withholding on the gross Merger Consideration at the fixed rate of 25% or at such holders’ marginal tax rates under Israeli law for ordinary income, and may be also subject to withholding for national insurance contributions and Surtax, depending on the specific circumstances of such holders and the terms and the timing of the grants of Company Options, Company RSUs or shares to such holders. In such event, Parent, the exchange agent or the 102 Trustee will withhold and deduct from the Merger Consideration at such rates on the gross Merger Consideration received as explained above.

 

The Israeli tax rulings described above may not be obtained or may contain such provisions, terms and conditions as the Israel Tax Authority may prescribe, which may be different from those detailed above. Certain categories of shareholders and holders of ADSs, such as holders of 5% or more of the outstanding Ordinary Shares of the Company, are expected to be excluded from the scope of any eventual ruling granted by the Israel Tax Authority, and the final determination of the type of holders of Company Shares who will be included in such categories will be based on the outcome of the discussions with the Israel Tax Authority. If Parent or the exchange agent deducts any amount from the Merger Consideration payable to you in respect of Israeli withholding tax obligations, you should consult your tax advisor concerning the possibility of obtaining a refund from the Israel Tax Authority of any such withheld amounts.

 

Regulatory Approvals Required for the Merger and Other Regulatory Filings

 

The Company, Parent and Merger Sub have each agreed to use their respective reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws to consummate the Transactions, including the Merger, as soon as practicable after the date of the Merger Agreement.

 

In considering the various conditions that must be satisfied prior to the completion of the Merger, the Board specifically considered the various regulatory filings and approvals that would be necessary to complete the Merger, including receipt of the regulatory approvals described below.

 

Antitrust Filing under the HSR Act.

 

Under the HSR Act and the rules promulgated thereunder, certain transactions exceeding the applicable thresholds require notification to the Federal Trade Commission (the “FTC”) and the Antitrust Division of the Department of Justice (the “DOJ”) and expiration or termination of the applicable waiting period before the transaction can be consummated, unless an exemption applies. The Company and Parent have determined that notification of the Merger to the FTC and DOJ under the HSR Act is required because the Merger exceeds the applicable thresholds and no exemption applies.

 

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At any time before or after consummation of the Merger, even in the event of termination of the waiting period under the HSR Act, the FTC or the DOJ could take such action under the antitrust laws as it deems necessary under the applicable statutes, including seeking to enjoin the completion of the Merger, seeking divestiture of substantial assets of the parties, or requiring the parties to license, or hold separate, assets or terminate existing relationships and contractual rights. At any time before or after the completion of the Merger, even in the event of termination of the waiting period under the HSR Act, any state could take such action under the antitrust laws as it deems necessary. Such action could include seeking to enjoin the completion of the Merger or seeking divestiture of substantial assets of the parties, or requiring the parties to license, or hold separate, assets or terminate existing relationships and contractual rights. Private parties may also seek to take legal action under the antitrust laws under certain circumstances. The expiration or early termination of the waiting period under the HSR Act is a condition to the parties’ obligation to effect the closing of the Merger. The waiting period will expire at 11:59 PM ET on Wednesday, October 27, 2021, unless extended by the FTC or the DOJ following the date of this Proxy Statement.

 

Israeli Competition Authority

 

Under the Israeli Competition Law and the rules promulgated thereunder, certain transactions exceeding the applicable thresholds require notification to the Israeli Competition Authority and expiration or termination of the applicable waiting period before the transaction can be consummated, unless an exemption applies. To that end, we and Parent have filed the required notification with the Israeli Competition Authority. Receipt of approval from the Israeli Competition Authority, or the expiration of the statutory review period under the Israeli Competition Law, is a condition to the Closing.

 

Israeli Tax Rulings

 

Parent and the Company have agreed to request certain rulings from the Israel Tax Authority (as defined in the Merger Agreement). See “—Material Israeli Tax Consequences.”

 

Israeli Innovation Authority

 

Due to the funding the Company received from the Israeli Innovation Authority (“IIA”) (formerly, the Office of the Chief Scientist of the Ministry of Economy and Industry) pursuant to the provisions of the Israeli Encouragement of Research, Development and Technological Innovation in the Industry Law, 1984 (the “Innovation Law”), the Company has to file a notice with the IIA, to inform the IIA of the change of ownership of the Company to be effected by the Merger. In addition, Parent has to provide a signed undertaking towards the IIA in a standard form required by the IIA in which Parent agrees to be bound by and to comply with the provisions of the Innovation Law. The Company will file the notice to the IIA prior to the Closing Date.

 

Israeli Companies’ Registrar

 

Under the Companies Law, each of the Company and Merger Sub is required to file with the Companies Registrar a merger proposal setting forth specified details with respect to the Merger within three (3) days of convening the Meeting to approve the Merger.

 

After the shareholders’ vote, each of the Company and Merger Sub must file a notice with the Companies Registrar regarding the approval of the Merger by the Company’s shareholders no later than three (3) days after the date on which such approval is received.

 

Assuming that the shareholders of the Company approve the Merger Proposal (and all the other conditions set forth in the Merger Agreement have been satisfied or waived) and that all of the statutory procedures and requirements have been complied with, and so long as least thirty (30) days have elapsed after the approval of the Merger by the Company’s shareholders and at least fifty (50) days have passed from the date of the filing of the Merger proposals with the Companies Registrar, the Merger will become effective upon the issuance of a certificate of merger following a request by the Company and Merger Sub.

 

Pursuant to the Companies Law, a notification of the Merger must be sent to the secured creditors of each merging company within three (3) days after the applicable merging company’s merger proposal was filed with the Companies Registrar and, within four (4) business days of such filing, known substantial creditors must be informed individually by registered mail of such filing and where the Merger proposal can be reviewed. Non-secured creditors must be informed of the Merger by publication in two (2) daily newspapers in Israel on the day that the applicable merger proposal is submitted to the Companies Registrar and, with respect to the Company, in one (1) daily newspaper in New York within three (3) business days of the date that the Company’s merger proposal is filed with the Companies Registrar. Both merging companies will notify their respective creditors of the Merger in accordance with these requirements, to the extent applicable. Both merging companies will notify the Israeli Companies’ Registrar of the notices given to their respective creditors.

 

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In addition, pursuant to the Companies Law, because we employ more than 50 employees, we must provide to the workers’ council a copy of the publication placed in the newspapers or post a copy of the publication placed in the newspapers in a prominent location in the workplace within three (3) business days after the Merger proposal was filed with the Companies Registrar. We intend to satisfy such requirement by posting a copy of the publication in a prominent location in our offices.

 

Other Regulatory Approvals

 

One or more governmental agencies may impose a condition, restriction, qualification, requirement or limitation when it grants the necessary approvals and consents to the consummation of the Merger. Third parties may also seek to intervene in the regulatory process or litigate to enjoin or overturn regulatory approvals, any of which actions could significantly impede or even preclude obtaining required regulatory approvals. There is currently no way to predict how long it will take to obtain all of the required regulatory approvals or whether such approvals will ultimately be obtained and there may be a substantial period of time between the approval by shareholders and the completion of the Merger.

 

Although we expect that all required regulatory clearances and approvals will be obtained, we cannot assure you that these regulatory clearances and approvals will be timely obtained, obtained at all or that the granting of these regulatory clearances and approvals will not involve the imposition of additional conditions on the completion of the Merger, including the requirement to divest assets, or require changes to the terms of the Merger Agreement. These conditions or changes could result in the conditions to the Merger not being satisfied.

 

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THE MERGER AGREEMENT

Explanatory Note Regarding the Merger Agreement

 

The following summary describes the material provisions of the Merger Agreement. The descriptions of the Merger Agreement in this summary and elsewhere in this Proxy Statement are not complete and are qualified in their entirety by reference to the Merger Agreement, a copy of which is attached to this Proxy Statement as Annex A and incorporated into this Proxy Statement by reference. We encourage you to read the Merger Agreement carefully and in its entirety because this summary may not contain all the information about the Merger Agreement that is important to you. The rights and obligations of the parties are governed by the express terms of the Merger Agreement and not by this summary or any other information contained in this Proxy Statement. Capitalized terms used in this section but not defined in this Proxy Statement have the meaning ascribed to them in the Merger Agreement.

 

The representations, warranties, covenants and agreements described below and included in the Merger Agreement (1) were made only for purposes of the Merger Agreement and as of specific dates; (2) were made solely for the benefit of the parties to the Merger Agreement; and (3) may be subject to important qualifications, limitations and supplemental information agreed to by the parties in connection with negotiating the terms of the Merger Agreement. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to reports and documents filed with the SEC and the ISA (or furnished by the Company to the SEC) and in some cases were qualified by confidential matters disclosed to Parent, Merger Sub and Guarantor by the Company in connection with the Merger Agreement. In addition, the representations and warranties may have been included in the Merger Agreement for the purpose of allocating contractual risk between the Company, Parent, Merger Sub and Guarantor rather than to establish matters as facts, and may be subject to standards of materiality applicable to such parties that differ from those applicable to investors. Shareholders should not rely on the representations, warranties, covenants and agreements or any descriptions thereof as characterizations of the actual state of facts or condition of the Company, Parent, Merger Sub or Guarantor or any of their respective affiliates or businesses. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement. In addition, you should not rely on the covenants in the Merger Agreement as actual limitations on the respective businesses of the Company, Parent, Merger Sub and Guarantor because the parties may take certain actions that are either expressly permitted in the confidential Company Disclosure Letter to the Merger Agreement or as otherwise consented to by the appropriate party, which consent may be given without prior notice to the public. The summary of the Merger Agreement is only to provide you with information regarding its terms and conditions, and not to provide any other factual information regarding the Company, Parent, Merger Sub, Guarantor or their respective businesses. Accordingly, the representations, warranties, covenants and other agreements in the Merger Agreement should not be read alone, and you should read the information provided elsewhere in this document and in the Company’s filings with the SEC and the ISA regarding the Company and the Company’s business, including the Annual Report, which is incorporated herein by reference.

 

Effects of the Merger; Directors and Officers; Articles of Association

 

The Merger Agreement provides that, subject to the terms and conditions of the Merger Agreement, and in accordance with the provisions of the Companies Law, at the Effective Time, Merger Sub, a wholly owned subsidiary of Parent, will be merged with and into the Company and, as a result of the Merger, the separate corporate existence of Merger Sub will cease and the Company will continue as the Surviving Company and will (a) become a wholly owned subsidiary of Parent, (b) continue to be governed by the laws of the State of Israel, (c) maintain a registered office in the State of Israel and (d) succeed to and assume all of the rights, properties and obligations of Merger Sub and the Company in accordance with the Companies Law.

 

The parties will take all necessary action to ensure that, effective as of, and immediately following, the Effective Time, the directors of Merger Sub immediately before the Effective Time shall become the directors of the Surviving Company, and the officers of the Company immediately before the Effective Time shall be the officers of the Surviving Company, to hold office in accordance with the articles of association of the Surviving Company until their successors are duly elected, designated or qualified, or until their earlier death, resignation or removal.

 

At the Effective Time, the articles of association of Merger Sub, as in effect immediately prior to the Effective Time, shall be the articles of association of the Surviving Company, until such articles of association are thereafter duly changed or amended, and the memorandum of association of the Company, as in effect immediately prior to the Effective Time, shall be the memorandum of association of the Surviving Company, until such memorandum of association is thereafter duly changed or amended.

 

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Closing and Effective Time

 

The Closing Date will be no later than the third (3rd) business day following the satisfaction or, to the extent permitted, waiver of all conditions to closing of the Merger (described below under the caption “The Merger Agreement—Conditions to the Closing of the Merger”) (other than those conditions to be satisfied at the closing of the Merger, but subject to satisfaction or waiver, to the extent permitted, of those conditions) or such other time agreed to in writing by the Company and Parent.

 

As soon as practicable after the determination of the date on which the Closing is to take place, each of the Company and Merger Sub will deliver to the Companies Registrar a notice of the contemplated Merger and the proposed date on which the Companies Registrar is requested to issue a Certificate of Merger. The Merger will become effective upon the issuance by the Companies Registrar of the Certificate of Merger in accordance with Section 323(5) of the Companies Law.

 

Merger Consideration

 

At the Effective Time, each Ordinary Share issued and outstanding immediately prior to the Effective Time shall be deemed to have been transferred to Parent in exchange for the right to receive the Per Share Merger Consideration, and each ADS issued and outstanding immediately prior to the Effective Time, together with the underlying Ordinary Shares represented by such ADSs, shall be deemed to have been cancelled in exchange for the right to receive the Per ADS Merger Consideration, as applicable, in each case without interest and less any applicable withholding taxes and, in the case of ADSs, less the Cancellation Fee.

 

From and after the Effective Time, (a) except as provided for in the Merger Agreement, the holders of all Company Shares issued and outstanding immediately prior to the Effective Time (including all uncertificated shares of Company Shares represented by book-entry form and each certificate that, immediately prior to the Effective Time, represented any such Company Shares) will cease to have any rights except the right to receive the Per Share Merger Consideration or the Per ADS Merger Consideration applicable to such Company Shares and (b) the share transfer books of the Company will be closed with respect to all Company Shares outstanding and no further transfer of any such Company Shares will be made on such share transfer books after the Effective Time.

 

Treatment of Company Warrant and Equity Awards

 

Treatment of Company Warrant

 

At the Effective Time, the holder of the outstanding and unexercised Company Warrant will be entitled to receive a cash payment equal to (i) the number of Company Shares subject to such Company Warrant multiplied by (ii) (1) the Per Share Merger Consideration, minus (2) the exercise price of such Company Warrant, without interest and less any applicable withholding taxes.

 

Treatment of Company Options

 

At the Effective Time, each Company Option that is outstanding and unexercised, whether or not vested, will be canceled and converted into the right to receive the Option Consideration. The Option Consideration, less any applicable withholding taxes, for each Company Option that is vested as of immediately prior to the Effective Time (including each Company Option that is accelerated at or prior to the Effective Time in connection with the consummation of the Merger) will be paid after the Closing. The Option Consideration, less any applicable withholding taxes, for each Unvested Company Option will be paid to the holder of such Unvested Company Option, subject to such holder remaining continuously employed by or in the service of the Company or its subsidiaries or affiliates through (i) each applicable vesting date, if such Company Option is subject to time-based vesting, (ii) the end of the applicable performance period if such Company Option is subject to performance-based vesting, or (iii) such earlier date as required under the terms of the Company Option, provided that if the employment or service of the holder of any Unvested Company Option is terminated within six (6) months after the Closing (or such later date as required pursuant to the terms of such Company Option) by the Company or any of its subsidiaries or affiliates without cause or due to such holder’s death or disability, any unpaid portion of the Option Consideration will vest and be paid as soon as reasonably practicable following such termination. Notwithstanding the foregoing, to the extent that the terms of a Company Option entitle the holder thereof to earlier payment, the Option Consideration will be paid at such earlier time as required under the terms of such Company Option.

 

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Treatment of Company RSUs

 

At the Effective Time, each Company RSU that is outstanding, whether or not vested, will be canceled and converted into the right to receive the RSU Payment. The RSU Payment, less any applicable withholding taxes, for each Company RSU that is vested as of immediately prior to the Effective Time (including each Company RSU that is accelerated at or prior to the Effective Time in connection with the consummation of the Merger) will be paid after the Closing. The RSU Payment, less any applicable withholding taxes, for each Unvested Company RSU will be paid to each holder of such Unvested Company RSU, subject to such holder remaining continuously employed by or in the service of the Company or its subsidiaries or affiliates through the end of the applicable performance period (or such earlier date as required under the terms of the Company RSU), provided that if the employment or service of the holder of any Unvested Company RSU is terminated within six (6) months after the Closing by the Company or any of its subsidiaries or affiliates without cause or due to such holder’s death or disability, any unpaid portion of the RSU Payment will vest and be paid as soon as reasonably practicable following such termination. Notwithstanding the foregoing, to the extent that the terms of a Company RSU entitle the holder thereof to earlier payment, the RSU Payment will be paid at such earlier time as required under the terms of such Company RSU.

 

Exchange and Payment Procedures 

 

Prior to the Effective Time (but in no event than five (5) business days prior to the Closing Date), Parent will (i) designate a bank or trust company reasonably acceptable to the Company, which we refer to as the “Exchange Agent,” to make payments of the Per Share Merger Consideration and the Per ADS Merger Consideration to holders of Company Shares (other than consideration to be paid with respect to Section 102 Shares, which payment will be substantially concurrently transferred directly to the 102 Trustee) and (ii) to the extent necessary in connection with the Withholding Tax Ruling, designate an information agent reasonably acceptable to the Company (the “Information Agent”) to assist in obtaining any requisite residency certificate and/or other declaration for tax purposes. Prior to the Effective Time, Parent or Merger Sub will initiate, or cause to be initiated, a wire transfer to deposit with the Exchange Agent cash in immediately available funds in an amount sufficient to pay the aggregate amount of Per Share Merger Consideration and the Per ADS Merger Consideration, to shareholders (other than consideration to be paid with respect to Section 102 Shares), for the sole benefit of the holders of Company Shares (other than the holders of Section 102 Shares). On or prior to the Effective Time, Parent or Merger Sub will initiate, or cause to be initiated, a wire transfer to deposit the aggregate Per Share Merger Consideration and the Per ADS Merger Consideration, payable with respect to the Section 102 Shares to the 102 Trustee, on behalf of holders of Section 102 Shares.

 

As soon as reasonably practicable after the Effective Time, the Exchange Agent will mail to each holder of record of a share certificate or book-entry share and whose Company Shares were exchanged into the right to receive the Per Share Merger Consideration and the Per ADS Merger Consideration, (i) a letter of transmittal, (ii) instructions advising shareholders how to surrender share certificates and book-entry shares in exchange for their portion of the aggregate amount of Per Share Merger Consideration and the Per ADS Merger Consideration and (iii) a declaration, or such other forms as are required under applicable tax laws, in which the beneficial owner of a Company Share provides certain information necessary for Parent or the Exchange Agent or Information Agent, as applicable, to determine whether any amounts need to be withheld from the consideration payable to such beneficial owner under the Ordinance. Upon receipt of (1) surrendered certificates (or affidavits of loss in lieu thereof) or book-entry shares representing the Company Shares, as applicable, (2) a signed letter of transmittal and such other documents as may be required pursuant to such instructions and (3) a completed and executed declaration for tax withholding purposes or a Valid Tax Certificate (or such other forms as are required under any applicable tax law), the holder of such Company Shares will be entitled to receive the Per Share Merger Consideration or the Per ADS Merger Consideration, as applicable, in exchange therefor. The amount of any Per Share Merger Consideration and the Per ADS Merger Consideration paid to the Company’s shareholders may be reduced by any applicable withholding taxes.

 

Unless otherwise determined in the Withholding Tax Ruling, if any cash deposited with the Exchange Agent is not claimed within twelve (12) months following the Effective Time, such cash will be returned to the Surviving Company and Parent, upon demand, and any holders of Company Shares who have not complied with the exchange procedures in the Merger Agreement will thereafter look only to the Surviving Company and Parent as general creditors for payment of the Per Share Merger Consideration and the Per ADS Merger Consideration.

 

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The letter of transmittal will include instructions if a shareholder has lost a share certificate or if such certificate has been stolen or destroyed. In the event any certificates have been lost, stolen or destroyed, then before such shareholder will be entitled to receive the Per Share Merger Consideration or the Per ADS Merger Consideration, as applicable, such shareholder will have to provide an affidavit of the loss, theft or destruction, and if required by Parent or the Exchange Agent, deliver a bond in such amount as Parent or the Exchange Agent may direct as indemnity against any claim that may be made against Parent, Merger Sub, or the Exchange Agent with respect to such certificate.

 

In addition, according to the Merger Agreement, if the parties mutually determine in good faith, based on discussions with the Exchange Agent, Information Agent, Depositary and/or the TASE, or based on the Withholding Tax Ruling, Interim Options Tax Ruling or the Options Tax Ruling (in each case, if obtained), that the parties are required to act in a manner other than as provided for above with respect to the Tax withholding and payment procedures set forth in the Merger Agreement, the parties agreed to take all action necessary or advisable to act in accordance with such required Tax withholding and payment procedures.

 

Representations and Warranties

 

The Merger Agreement contains representations and warranties of the Company, Parent, Merger Sub and Guarantor.

 

Some of the representations and warranties in the Merger Agreement made by the Company are qualified as to “materiality” or “Company Material Adverse Effect.” For purposes of the Merger Agreement, “Company Material Adverse Effect” means any change, effect, development, circumstance, condition, state of facts, event or occurrence (each an “Effect,” and collectively, “Effects”) that, individually or in the aggregate, is, or would reasonably be expected to be, materially adverse to the business, assets, properties, financial condition or results of operations of the Company and the Company subsidiaries, taken as a whole; provided, however, that no Effects relating to the following will be deemed, either alone or in combination, to be or constitute a “Company Material Adverse Effect” or be taken into account when determining whether a “Company Material Adverse Effect” has occurred or may, would or could occur:

 

  (i)

conditions (or changes in such conditions) in the industry in which the Company and the Company subsidiaries operate; 

 

  (ii) general economic conditions (or changes in such conditions);

 

  (iii) conditions or changes in securities markets, credit markets, currency markets or other financial markets;

 

  (iv) political conditions or changes in such conditions or acts of war, sabotage or terrorism (including any escalation or general worsening of any such acts of war, sabotage or terrorism);

 

  (v) earthquakes, hurricanes, tsunamis, tornadoes, floods, mudslides, wild fires or other natural disasters, weather conditions, global health conditions (including any epidemic, pandemic or disease outbreak, including the coronavirus (COVID-19)) and other force majeure events;

 

  (vi) changes in law or other legal or regulatory conditions (or the interpretation thereof) or changes in IFRS or other accounting standards (or the interpretation thereof);

 

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  (vii) the negotiation, announcement (whether or not authorized by the parties, including any pre-signing reports in the press or otherwise, reporting on a potential transaction among the parties or otherwise relating to the acquisition of the Company), pendency or consummation of the Merger Agreement or the Transactions, including the identity of, or Effects relating to, Parent or any of its affiliates or any communication by Parent or any of its affiliates regarding plans, proposals or projections with respect to the Company, the Company subsidiaries or their employees (including any impact on the relationship of the Company or any the Company subsidiaries, contractual or otherwise, with its customers, suppliers, distributors, vendors, licensors, licensees, lenders, employees or partners), provided that such exceptions will not apply with respect to any representation or warranty set forth in Section 3.5 of the Merger Agreement that by its terms addresses the consequences of the announcement or pendency of the Merger Agreement or the Transactions contemplated thereunder;

 

  (viii) changes in the price of any Company Shares or the trading volume (including suspension of trading) of the Company Shares, or any failure by the Company to meet any public estimates or expectations of the Company’s revenue, earnings or other financial performance or results of operations for any period, or any failure by the Company to meet any internal budgets, plans or forecasts of its revenues, earnings or other financial performance or results of operations (but not, in each case, the underlying cause of such changes or failures, unless such changes or failures would otherwise be excepted from this definition);

 

  (ix) any breach, violation or non-performance of any provision of the Merger Agreement by Parent or any of its affiliates;

 

  (x) actions or omissions required of the Company under the Merger Agreement or taken or not taken at the request of, or with the consent of, Parent;

 

  (xi)

any claims or actions against the Company or any of its directors or officers arising from allegations of breach of fiduciary duty or violation of Law relating to the Merger Agreement or the Transactions; and 

 

  (xii) any matter disclosed in the Company Disclosure Letter or in the Company Reports (as defined in the Merger Agreement) filed prior to the date of the Merger Agreement.

 

Notwithstanding the foregoing, to the extent the Effects described in any of the first six (6) items described in clauses (i)-(vi) above disproportionately affect the Company and the Company subsidiaries, taken as a whole, in any material respect relative to comparable companies operating in the same industry in which the Company and the Company subsidiaries operate, the incremental disproportionate impact will be taken into account in determining whether there has been a Company Material Adverse Effect.

 

In addition, “Company Material Adverse Effect” includes any Effects that, individually or in the aggregate would prevent or materially impair or delay the Company from consummating the Merger contemplated under the Merger Agreement.

 

The Company has made customary representations and warranties to Parent and Merger Sub that are subject, in some cases, to specified exceptions and qualifications contained in the Merger Agreement. These representations and warranties relate to, among other things:

 

    due organization, valid existence, good standing (to the extent applicable) and authority and qualification to conduct business with respect to the Company and its subsidiaries;

 

    the Company’s corporate power and authority to enter into and perform the Merger Agreement, and the enforceability of the Merger Agreement;

 

    the absence of any conflict, violation or material alteration of any organizational documents, existing contracts, applicable laws to the Company or its subsidiaries or the resulting creation of any lien upon the Company’s assets due to the performance of the Merger Agreement;

 

    the capital structure of the Company and its subsidiaries;

 

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    the absence of any contract relating to the voting of any of the Company’s or its subsidiaries’ securities and of any contractual obligations of the Company and its subsidiaries to acquire any of the Company’s or its subsidiaries’ securities;

 

    required consents, approvals and regulatory filings in connection with the Merger Agreement and performance thereof;

 

    the Company’s and its subsidiaries’ compliance with laws and possession of necessary permits;

 

    compliance with the anti-bribery laws;

 

    Committee on Foreign Investment in the United States;

 

    the accuracy and required filings of the Company’s and its subsidiaries’ SEC filings and financial statements;

 

    the Company’s internal accounting controls and procedures;

 

    the Company’s disclosure controls and procedures;

 

    the conduct of the business of the Company and its subsidiaries in the ordinary course consistent with past practice and the absence of a Company Material Adverse Effect, in each case since June 30, 2021;

 

    the absence of litigation;

 

    employee benefit plans;

 

    labor and employment matters;

 

    the accuracy of information to be provided in the Proxy Statement;

 

    tangible assets of the Company and its subsidiaries and the absence of certain liens thereon;

 

    real property owned or leased by the Company and its subsidiaries;

 

    trademarks, patents, copyrights and other intellectual property matters;

 

    tax matters;

 

    environmental matters;

 

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health care regulatory matters; 

 

   

data protection matters; 

 

    the existence and enforceability of specified categories of the Company’s and its subsidiaries’ material contracts and the violation or breach of or default thereunder;

 

    compliance with Nasdaq and TASE listing criteria and the absence of listing on any stock exchange other than Nasdaq and TASE;

 

    insurance matters;

 

    payment of fees to brokers in connection with the Merger Agreement;

 

    the inapplicability of anti-takeover statutes to the Merger;

 

    absence of any transactions, relations or understandings between the Company or any of its subsidiaries and any affiliate or related person;

 

    the necessary vote of shareholders in connection with the Merger Agreement; and

 

    the rendering of Piper Sandler & Co.’s fairness opinions to the Board.

 

Each of Parent and Merger Sub has made customary representations and warranties to the Company that are subject, in some cases, to specified exceptions and qualifications contained in the Merger Agreement. These representations and warranties relate to, among other things:

 

    due organization, good standing and authority and qualification to conduct business with respect to Parent and Merger Sub;

 

   

Parent’s and Merger Sub’s corporate authority to enter into and perform the Merger Agreement and the enforceability of the Merger Agreement;

 

    the absence of any conflict, violation or material alteration of any organizational documents, or applicable laws due to the performance of the Merger Agreement;

 

    required consents and regulatory filings in connection with the Merger Agreement;

 

    the absence of litigation;

 

    accuracy of information supplied by Parent and Merger Sub for inclusion in this Proxy Statement;

 

    no ownership of the Company’s share capital by Parent and Merger Sub;

 

    matters with respect to Parent’s and Merger Sub’s sufficiency of funds;

 

    payment of fees to brokers in connection with the Merger Agreement; and

 

    intended operation of the Surviving Company.

 

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Some of the representations and warranties in the Merger Agreement made by Parent and Merger Sub are qualified as to “materiality” or “Parent Material Adverse Effect.” For purposes of the Merger Agreement, “Parent Material Adverse Effect” means any Effect on Parent or any of their subsidiaries that, individually or in the aggregate, (i) materially impairs the ability of Parent or Merger Sub to perform its obligations under the Merger Agreement or (ii) would prevent Parent or Merger Sub from consummating the Merger.

 

The representations and warranties contained in the Merger Agreement will not survive the consummation of the Merger.

 

Conduct of Business Pending the Merger

 

The Merger Agreement provides that during the period of time between September 13, 2021 (which is the date of the signing of the Merger Agreement) and the earlier to occur of the termination of the Merger Agreement or the Effective Time, except as (1) set forth in the confidential Company Disclosure Letter to the Merger Agreement; (2) as specifically permitted by the Merger Agreement; (3) required by law or governmental order; or (4) consented to in writing by Parent (which consent will not be unreasonably withheld, delayed or conditioned), the Company:

 

(a)       will, and will cause each of its subsidiaries to, subject to the restrictions and exceptions in the Merger Agreement, conduct its and their respective businesses in the ordinary course of business consistent with past practice and to preserve its and their present business organizations, its and their assets and properties in good repair and condition and its and their present relationships with customers, distributors, licensors, licensees, lessors suppliers and other Persons (as defined in the Merger Agreement) with whom it and they have material business relations and use commercially best efforts to keep available the services of its and their current officers and employees; and

 

(b)        will not, and will not permit any of its subsidiaries to, among other things (subject to certain exceptions set forth in the Merger Agreement and Company Disclosure Letter to the Merger Agreement):

 

·declare or pay any dividends on or make any distribution with respect to its outstanding shares or ADSs, except dividends and distributions by a wholly owned subsidiary of the Company to the Company or another wholly owned subsidiary of the Company;

 

·split, combine, reduce or reclassify any of its share capital, except for any such transaction by a wholly owned subsidiary of the Company that remains a wholly owned subsidiary of the Company after consummation of such transaction;

 

·except as required by the terms of any Company benefit plan in effect on September 13, 2021: (i) grant, provide, amend or increase any retention or change in control payments to any employee, director or independent contractor; (ii) grant, provide, amend or increase any severance payments or benefits to any employee or independent contractor; (iii) increase the compensation of any employee or independent contractor; (iv) establish, adopt, materially amend or terminate any collective bargaining agreement; (v) establish, adopt, amend or terminate any material Company benefit plan, other than ordinary course annual renewals of or changes to Company health and welfare plans consistent with past practice that do not materially increase the cost to the Company of maintaining such Company benefit plan; (vi) accelerate the vesting, exercisability or payment date or waive any performance or vesting criteria of any Company equity awards or any payment or benefit, or the funding of any payment or benefit under any Company benefit plan; (vii) hire any employee or independent contractor to perform the job duties of a sales representative or at the level of vice president or above; (viii) announce, implement or effect any facility closing, mass lay-off programs, broad-based early retirement or severance programs, or material reductions in force affecting employees; or (ix) forgive any loans or advances to employees, independent contractors, or any directors or any of their respective affiliates, or change its existing borrowing or lending arrangements for or on behalf of any of such person, except in the ordinary course of business consistent with past practice, provided that the Company may engage in compensation reviews and make adjustments to employee salary or wage rates, bonus, equity compensation and employee benefits in the ordinary course of business consistent with past practice, subject to shareholder approval of bonus and equity compensation targets for executive officers;

 

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·make any material change in its financial accounting policies or procedures or any of its methods of reporting income, deductions or other material items for financial accounting purposes, except as required by law, IFRS, SEC policy or ISA policy;

 

·enter into a contract providing for the acquisition, directly or indirectly (including by merger, consolidation, or acquisition of shares or assets or any other business combination) of any material corporation, partnership, other business organization or any division thereof;

 

·amend the Company’s or any of the Company’s subsidiaries governing documents;

 

·adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, recapitalization, restructuring or other reorganization of the Company or any of the Company’s subsidiaries or alter through merger, liquidation, reorganization or restructuring the corporate structure of the Company and the Company’s subsidiaries;

 

·except as permitted by the Merger Agreement, issue, deliver, grant, sell, pledge, dispose of or encumber, or subject to any Lien (as defined in the Merger Agreement), other than Permitted Liens (as defined in the Merger Agreement), any shares or voting securities of the Company or any of its subsidiaries or any securities convertible into or exchangeable for any such shares or voting securities, or any rights, warrants or options to acquire any such shares or voting securities or any “phantom” stock, “phantom” stock rights, stock appreciation rights or stock-based performance units, other than (i) issuances of Company Shares upon exercise of Company Options, or the vesting and settlement of Company RSUs in accordance with their respective terms and the terms of the Merger Agreement and (ii) transactions between the Company and a wholly owned subsidiary of the Company or between wholly owned subsidiaries of the Company;

 

·directly or indirectly, purchase, redeem or otherwise acquire any shares in its capital or any rights, warrants or options to acquire any such shares in its capital, except for (i) acquisitions of Company Shares tendered by holders of the equity awards of the Company in order to satisfy obligations to pay the exercise price and/or tax withholding obligations with respect thereto, (ii) the acquisition by the Company of the equity awards of the Company in connection with the forfeiture or cancellation of such awards and (iii) transaction between the Company and a wholly owned subsidiary of the Company or between wholly owned subsidiaries of the Company;

 

·redeem, repurchase, prepay (other than prepayments of revolving loans), defease, incur, assume, endorse, guarantee or otherwise become liable for or modify in any material respects the terms of any Indebtedness (as defined in the Merger Agreement) for borrowed money or issue or sell any debt securities or calls, options, warrants or other rights to acquire any debt securities, except for (i) any Indebtedness among the Company and the Company’s subsidiaries or among the Company’s subsidiaries, (ii) guarantees by the Company of the Indebtedness of the Company’s subsidiaries or guarantees by the Company’s subsidiaries of Indebtedness of the Company or a Company subsidiary, which Indebtedness is incurred in the ordinary course of business consistent with past practice and (iii) in connection with the refinancing of any outstanding Indebtedness at or in anticipation of its maturity on the same or similar terms;

 

·sell, lease, license, transfer, exchange, swap or otherwise dispose of, or subject to any Lien (other than Permitted Liens), any of its properties, rights or assets, except for (i) sales of inventory or Company Products (as defined in the Merger Agreement) in the ordinary course of business, or dispositions of obsolete or worthless equipment, in the ordinary course of business, (ii) non-exclusive licenses of Intellectual Property (as defined in the Merger Agreement) in the ordinary course of business consistent with past practice and (iii) transactions among the Company and its wholly owned subsidiaries of the Company or among wholly owned subsidiaries of the Company;

 

·settle, pay, discharge or satisfy any material actions other than (i) the payment, discharge or satisfaction, in the ordinary course of business and consistent with past practice, of liabilities reflected or reserved against in June 30, 2021 up to the amount so reflected or reserved, or (ii) those that do not (A) impose any material injunctive relief on the Company or any subsidiary of the Company and (B) involve the payment of money greater than the applicable amount set forth in the Company Disclosure Letter in excess of existing insurance coverage;

 

·institute any action by the Company or any subsidiary of the Company, other than for collections in the ordinary course of business consistent with past practice;

 

·make or change any material tax election; change any tax accounting period with respect to a material tax or material method of tax accounting, or settle or compromise any material tax liability, file any amendment to a federal, state, or non-U.S. income tax return or any other material tax return, in each case, except in the ordinary course of business or as required by applicable law;

 

·enter into any Contract (as defined in the Merger Agreement) that if entered into prior to September 13, 2021 would have been a Company Material Contract (as defined in the Merger Agreement), or modify, amend, waive, release or assign any material rights or claims under any other Company Material Contract or any Contract that if entered into prior to September 13, 2021 would have been a Company Material Contract;