Filed Pursuant to Rule 424(b)(3)
Registration No. 333-102259
PROSPECTUS
TEVA PHARMACEUTICAL FINANCE B.V.
$450,000,000
0.375% Convertible Senior Debentures due 2022
Payment of principal, interest and additional amounts, if any,
unconditionally guaranteed by and convertible into American Depositary
Receipts of
Teva Pharmaceutical Industries Limited
Teva Pharmaceutical Industries Limited
10,489,778 American Depository Receipts issuable upon conversion of the
Debentures
o Maturity
The debentures are due on November 15, 2022.
o Conversion
You may convert the debentures into Teva ADRs, at a conversion price of
$42.8989 per ADR, subject to adjustment, only during specified periods
following the occurrence of specified events.
o Interest
We will pay cash interest on the debentures on May 15 and November 15 of
each year, at the rate of 0.375 % per year, beginning on May 15, 2003.
o Redemption
We may redeem the debentures on or after November 18, 2007.
o Repurchase Rights
You may require us to repurchase the debentures on November 18, 2007,
November 15, 2012 and November 15, 2017 or if we experience a change of
control or if trading in our securities is terminated.
o Markets for our securities
The debentures are eligible for trading on the PORTAL Market. Teva's ADRs
are quoted on the Nasdaq National Market under the symbol "TEVA". The last
reported sale price of the ADRs on March 17, 2003 was $38.96 per ADR. Each
ADR currently represents one ordinary share of Teva.
o Selling securityholders
The selling securityholders listed on page 66 are offering the debentures
and the ADRs for resale.
Investing in the debentures or the ADRs involves risks. Risk Factors begin on
page 9.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is March 21, 2003.
TABLE OF CONTENTS
SUMMARY......................................................................1
RISK FACTORS................................................................10
FORWARD-LOOKING STATEMENTS..................................................17
USE OF PROCEEDS.............................................................18
RATIO OF EARNINGS TO FIXED CHARGES..........................................18
PRICE RANGE OF ADRS AND ORDINARY SHARES.....................................19
CAPITALIZATION OF TEVA......................................................21
DESCRIPTION OF DEBENTURES AND THE GUARANTEE.................................22
DESCRIPTION OF TEVA ORDINARY SHARES.........................................48
DESCRIPTION OF AMERICAN DEPOSITARY RECEIPTS.................................49
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS.............................56
ISRAELI TAX ISSUES..........................................................62
NETHERLANDS ANTILLES TAX ISSUES.............................................65
SELLING SECURITYHOLDERS.....................................................66
PLAN OF DISTRIBUTION........................................................79
LEGAL MATTERS...............................................................81
EXPERTS.....................................................................81
ADDITIONAL INFORMATION......................................................81
INCORPORATION BY REFERENCE..................................................82
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SUMMARY
This summary highlights information contained elsewhere or incorporated by
reference in this prospectus. It does not contain all the information you need
to consider in making your investment decision. You should read carefully this
entire prospectus and our reports filed with the SEC which are incorporated by
reference. All information in this prospectus reflects both the 2-for-1 stock
split effected in February 2000 and the two-for-one stock split paid to holders
of record as of December 10, 2002 (as well as the related splits of ADRs). In
this document, unless specified otherwise, "we", "us" and "our" refer to Teva
Pharmaceutical Industries Limited and its subsidiaries, and "you" refers to
prospective purchasers of the debentures.
Teva
We are a global pharmaceutical company producing drugs in all major
treatment categories, including both generic and proprietary pharmaceutical
products. We are one of the world's largest generic drug companies and have a
leading position in the U.S. generic market. Generic drugs are therapeutically
equivalent versions of brand-name drugs no longer protected by patents, and are
generally sold at prices significantly lower than branded products. We believe
that the large volume of branded products losing patent protection over the next
five years and the increased cost containment pressures facing health care
providers should lead to continued expansion of the generic pharmaceuticals
market. We have successfully used our production and research capabilities to
establish a global pharmaceutical business focused on the growing demand for
generic drugs and on the opportunities for proprietary branded products for
specific niche categories.
Teva Pharmaceuticals USA, Inc., our principal subsidiary, is one of the
leading generic drug companies in the United States. Teva USA markets
approximately 140 generic products representing more than 400 dosage strengths
and packaging sizes, which are distributed in the United States.
We have also implemented a strategy of participating in the growth and
development of the European market for generic products. Through our European
subsidiaries, we manufacture approximately 300 generic products representing
over 1,700 dosage strengths and packaging sizes, which are sold primarily in The
Netherlands, the United Kingdom, Hungary and France. In June 2002, we completed
the acquisition of the French generic operations of Bayer Pharma S.A. - Bayer
Classics S.A. We believe this acquisition will enhance our competitive position
in the emerging generic pharmaceutical market in France and our position among
the leaders in the European generic pharmaceutical market as a whole.
In order to take advantage of the growth in the generic drug market, we
also seek to enter into strategic alliances and joint ventures. We currently
have a marketing and product development agreement with Biovail Corporation
International which provides us with exclusive U.S. marketing rights to
Biovail's controlled-release abbreviated new drug application product pipeline
of eight generic versions of major branded pharmaceuticals. We also have entered
into a strategic alliance with IMPAX Laboratories, Inc. for the development and
marketing of 12 controlled-release generic products.
The potential for future sales growth of our generic products lies in our
pipeline of pending generic product registrations, as well as tentative
approvals already granted. We had:
o 61 product applications (including products developed by Biovail and IMPAX)
awaiting FDA approval, including ten tentative U.S. Food and Drug
Administration ("FDA") approvals and two approvables, as of February 21,
2003. Collectively, the brand name versions of these products had
corresponding U.S. annual sales exceeding $42 billion, as of December 31,
2002.
o Over 320 applications pending in Europe for 98 compounds in 199
formulations, as of December 31, 2002.
In the area of proprietary drugs, we use a combination of our own research
and development personnel and access to major research institutions in Israel to
develop innovative drug products for selected niche markets. Our efforts have
focused on products for central nervous system disorders and autoimmune
diseases, primarily the development of Copaxone(R) for the treatment of multiple
sclerosis. Other innovative products in advanced clinical and early stage
development include potential treatments for Parkinson's disease.
Copaxone(R) is the first non-steroidal, non-interferon agent used in the
treatment of relapsing-remitting multiple sclerosis. Multiple sclerosis, or MS,
is a debilitating autoimmune disease of the central nervous system. We launched
Copaxone(R) in Israel in December 1996 and in the United States in March 1997,
and in 1999, Copaxone(R) became our single largest product. In 2002, in-market
global sales of Copaxone(R) amounted to $539 million, an increase of 48% from
2001. Copaxone(R) is reported to have the second largest market share among MS
drugs in the United States. The pre-filled syringe, launched in the United
States in April 2002, has rapidly replaced the original vial presentation of
Copaxone(R) and as of the end of 2002 accounted for approximately 95% of total
U.S. Copaxone(R) prescriptions. The ongoing growth in sales of Copaxone(R) in
the United States has been enhanced by the continued penetration of Copaxone(R)
in most European countries, with the most significant being Germany. Copaxone(R)
has been approved for marketing in 42 countries, including the United States,
Israel, Germany, the United Kingdom, Australia and Canada.
In North America, we promote Copaxone(R)through Teva Neuroscience Inc., our
wholly owned subsidiary, and distribute the product through Aventis
Pharmaceuticals Inc. In Europe, we copromote Copaxone(R)with Aventis
Pharmaceuticals.
In November 1999, we entered into a strategic alliance with H. Lundbeck
A/S, a Denmark-based, publicly traded pharmaceutical company, for the global
co-development and registration and European marketing of two of our products
for the treatment of Parkinson's disease. Lundbeck provides a substantial
financial contribution to these projects, which has enabled us to continue our
development efforts on these projects while maintaining the resources allocated
to our generic drug development and the expansion of our generic pipeline.
We also possess significant manufacturing operations for the production of
active pharmaceutical ingredients. As both a supplier and end user of
pharmaceutical raw materials, we believe that our experience in complying with
the stringent requirements of the FDA and proven manufacturing expertise are
significant competitive advantages relative to many of our smaller competitors.
With a leading global market share in certain major chemicals for generic
pharmaceuticals, our active pharmaceutical ingredients business also facilitates
our entry into new drug markets and offers a cost effective source of raw
materials for our own pharmaceutical production.
We are the leading pharmaceutical manufacturer in Israel, where we are
incorporated and maintain our headquarters. During 2002, we generated
approximately 64% of our revenue in North America, 24% in Europe and 12% in the
rest of the world, predominately in Israel.
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Initial Sale of Debentures
The debentures were originally issued by Teva Finance and sold by Lehman
Brothers Inc. and Salomon Smith Barney, Inc., as the initial purchasers, in
transactions exempt from the registration requirements of the Securities Act
pursuant to Rule 144A and Regulation S of the Securities Act.
Teva Finance received net proceeds of approximately $440 million, after
deducting the initial purchasers' discounts and commissions and its estimated
expenses related to the initial offering. Teva Finance intends to use the
proceeds from the offering to fund the activities of Teva's European and/or
North American operating subsidiaries and for working capital and general
corporate purposes outside of Israel and to fund any acquisitions Teva may make.
Corporate Information
Teva
Our operations are conducted directly and through subsidiaries in Israel,
Europe, North America and several other countries. We were incorporated in
Israel on February 13, 1944 and are the successor to a number of Israeli
corporations, the oldest of which was established in 1901. Our executive offices
are located at 5 Basel Street, P.O. Box 3190, Petach Tikva 49131 Israel,
telephone number 972-3-926-7267.
Teva Finance
Teva Finance is a Netherlands Antilles limited liability company formed on
November 5, 2002. It is an indirect, wholly owned subsidiary of Teva and has no
assets or operations other than in connection with the initial offering of the
debentures. Teva Finance's address is Teva Pharmaceutical Finance B.V., c/o
MeesPierson Trust (Curacao) N.V., J.B. Gorsiraweg 14, Curacao, Netherlands
Antilles, telephone number 599-9-463-9113.
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The Offering
Issuer........................... Teva Pharmaceutical Finance B.V., an
indirect, wholly owned subsidiary of Teva
Pharmaceutical Industries Limited which has
no assets or operations other than in
connection with the initial offering of the
debentures.
Securities Offered............... $450,000,000 in aggregate principal amount
of 0.375% Convertible Senior Debentures due
2022. The debentures are convertible into
ADRs of Teva.
Guarantee........................ Teva guarantees the punctual payment when
due of the principal of and interest and
Additional Amounts as described in
"Description of the Debentures and the
Guarantee -- Registration Rights," if any,
on the debentures.
Maturity......................... November 15, 2022, unless earlier redeemed,
repurchased or converted.
Interest Payment Dates........... May 15 and November 15, beginning May 15,
2003, and at maturity.
Interest Rate.................... 0.375% per year, subject to adjustment. See
"Description of the Debentures and the
Guarantee-- Interest" and "--Interest Rate
Adjustments."
Optional Conversion by Holders... Holders may convert the debentures, unless
previously redeemed or repurchased, into
Teva's ADRs initially at a conversion price
of $42.8989 per ADR (equal to a conversion
rate of 23.3106 ADRs per $1,000 principal
amount of debentures), subject to
adjustment. The debentures may only be
converted prior to November 15, 2022, under
the following circumstances:
o during any conversion period, as
described below, if the trading price
of Teva's ADRs for at least 20 trading
days in the 30 trading day period
ending on the first day of the
conversion period was more than 120% of
the conversion price in effect per ADR
at that thirtieth trading day;
o during the five business-day period
following any 10 consecutive trading
day period in which the average of the
trading prices for the debentures for
that 10 trading-day period was less
than 105% of the average conversion
value (as described under "Description
of the Debentures and the Guarantee --
Conversion Rights -- Conversion upon
Satisfaction of Market Price
Conditions") for the debentures during
that period;
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o during any period in which the credit
rating assigned to the debentures by
Standard & Poor's is below BB+, or
during which Standard & Poor's is not
rating the debentures;
o if Teva Finance has called the
debentures for redemption; or
o upon the occurrence of the specified
corporate transactions.
See "Description of the Debentures and
the Guarantee-- Conversion Rights."
Optional Redemption by
Teva Finance..................... On or after November 18, 2007, Teva Finance
may redeem some or all of the debentures at
a price equal to 100% of the principal
amount of such debentures, plus accrued
and unpaid interest. See "Description of
the Debentures and the Guarantee --
Optional Redemption by Teva Finance."
Right of Holders to Require
Repurchase....................... Each holder of the debentures may require
Teva Finance to repurchase some or all of
the holder's debentures at 100% of their
principal amount, plus accrued and unpaid
interest
o on November 18, 2007, November 15,
2012 and November 15, 2017, and
o in certain circumstances involving a
change of control of Teva or upon a
termination of trading of its
securities.
With respect to a repurchase on November
18, 2007 or in certain circumstances
involving a change in control or
termination of trading, Teva Finance may
choose to pay the repurchase price in
cash or in Teva's ADRs or a combination
of cash and Teva's ADRs. See "Description
of the Debentures and the Guarantee --
Repurchase at Option of Holders."
If you choose to require Teva Finance to
repurchase your debentures and Teva
Finance chooses to pay the repurchase
price in ADRs, the number of ADRs will
equal the repurchase price divided by 97%
of the average trading price of the ADRs
for the five consecutive trading days
ending on and including the third day
prior to the repurchase date, subject to
adjustments.
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Ratio of Earnings to Fixed
Charges.......................... Year Ended December 31,
-----------------------
2002 2001 2000 1999 1998
---- ---- ---- ---- ----
9.43 7.58 4.70 5.30 4.09
Use of Proceeds.................. Neither Teva nor Teva Finance will receive
any proceeds from the sale by the selling
securityholders of the debentures and ADRs.
Trading.......................... The debentures are eligible for trading in
the Private Offerings, Resales and Trading
through Automated Linkages market, known as
PORTAL.
Nasdaq Symbol for Teva's ADRs.... Teva's ADRs are traded on the Nasdaq
National Market under the symbol "TEVA".
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SUMMARY FINANCIAL DATA
The summary financial data for each of the years in the three-year period
ended December 31, 2002 and at December 31, 2002 and 2001 are derived from our
audited consolidated financial statements and related notes incorporated by
reference into this prospectus, which have been prepared in accordance with
accounting principles generally accepted in the United States ("U.S. GAAP").
The summary financial data for each of the years in the two-year period
ended December 31, 1999 and at December 31, 2000 and 1999 are derived from other
audited consolidated financial statements, which have been prepared in
accordance with U.S. GAAP. The summary financial data at December 31, 1998 are
derived from other audited consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in Israel
("Israeli GAAP") and amended in accordance with U.S. GAAP.
During 2000, the Israeli Securities Law was amended to allow Israeli
companies, such as Teva, whose securities are listed both on the Tel Aviv Stock
Exchange and on certain stock exchanges in the United States (including NASDAQ),
to report exclusively under SEC rules and U.S. GAAP. Accordingly, on December
18, 2000, Teva's shareholders approved a resolution under which Teva's financial
statements would be prepared under SEC rules and U.S. GAAP, rather than under
Israeli securities regulations and Israeli GAAP. All financial statements and
other financial information included and incorporated by reference in this
prospectus and all financial information released in Israel are now presented
solely under U.S. GAAP.
You should read this summary historical data together with our consolidated
financial statements and "Operating and Financial Review and Prospects"
incorporated by reference in this prospectus.
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Teva Pharmaceutical Industries Limited
For the year ended December 31
----------------------------------------------
2002 2001 2000 1999 1998
------ ------ ------ ------ ------
U.S. dollars in millions (except per ADR amounts)
Operating Data
Sales................................ 2,518.6 2,077.4 1,749.9 1,282.4 1,115.9
Cost of sales........................ 1,423.2 1,230.1 1,058.0 767.6 694.8
------- ------- ------- ------- -------
Gross profit......................... 1,095.4 847.3 691.9 514.8 421.1
Research and development expenses:
Total expenses.................... 192.6 168.6 132.3 91.6 75.6
Less participations and grants 27.6 61.4 27.7 9.8 7.5
------- ------- ------- ------- -------
Research and development-net......... 165.0 107.2 104.6 81.8 68.1
Selling, general and
administrative expenses........... 406.4 358.1 301.0 223.2 199.1
Acquisition of research and
development in process............ 35.7 17.7 13.5
Restructuring expenses............... 15.7 15.0
------- ------- ------- ------- -------
Operating income..................... 524.0 366.3 250.6 192.1 125.4
Financial expenses-net............... 24.6 26.0 42.2 30.1 23.3
Losses from realization of assets
and discontinuation of
activities........................ 3.3
------- ------- ------- ------- -------
Income before income taxes........... 499.4 340.3 208.4 162.0 98.8
Income taxes......................... 84.8 63.6 59.6 45.4 28.9
------- ------- ------- ------- -------
414.6 276.7 148.8 116.6 69.9
Share in profits (losses) of
associated companies ............. (2.7) 0.8 0.4 (0.6) 0.9
Minority interests in (profits)
losses of subsidiaries .......... (1.6) 0.7 (0.8) 0.8
------- ------- ------- ------- -------
Net income........................... 410.3 278.2 148.4 116.8 70.8
======= ======= ======= ======= =======
Earnings per ADR* - Basic ($)....... 1.55 1.05 0.58 0.48 0.29
======= ======= ======= ======= =======
Earnings per ADR* - Diluted ($)...... 1.52 1.02 0.57 0.48 0.29
======= ======= ======= ======= =======
Weighted average number of ADRs**
(in millions):
Basic............................. 264.5 264.5 257.9 245.2 245.2
------- ------- ------- ------- -------
Diluted........................... 280.8 280.9 263.7 246.6 246.2
------- ------- ------- ------- -------
----------
* Historical figures have been adjusted to reflect the two for one stock splits
effected in December 2002 and February 2000.
** Each ADR represents one ordinary share.
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Teva Pharmaceutical Industries Limited
December 31
---------------------------------------------
2002 2001 2000 1999 1998
------ ------ ------ ------ ------
U.S. dollars in millions
Balance Sheet Data
Working capital...................... 1,377.2 1,439.8 825.1 373.5 241.0
Total assets......................... 4,626.8 3,460.2 2,855.6 1,755.3 1,475.3
Short-term credit, including
current maturities:
Convertible senior debentures
(short-term).................. 562.4 -- -- -- --
Other............................. 176.1 206.5 341.5 276.3 324.5
Total short-term debt.......... 738.5 206.5 341.5 276.3 324.5
Long-term debt, net of current
maturities:
Convertible senior debentures..... 810.0 912.0 550.0 -- --
Other............................. 351.4 334.9 263.9 391.4 201.7
Total long-term debt........... 1,161.4 1,246.9 813.9 391.4 201.7
Minority interests................... 4.9 2.2 1.6 -- 0.8
Shareholders' equity................. 1,829.4 1,380.7 1,151.3 747.2 664.8
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RISK FACTORS
Investing in our debentures or ADRs is risky. You should carefully consider
the following factors and other information in this prospectus or in the
documents incorporated by reference before deciding to purchase the debentures
or ADRs. See "Forward-Looking Statements."
Risks Associated with Teva and the Pharmaceutical Industry
Our success depends on our ability to successfully develop and commercialize
additional pharmaceutical products.
Our future results of operations depend, to a significant degree, upon our
ability to successfully commercialize additional generic and/or innovative
branded pharmaceutical products. We must develop, test and manufacture generic
products as well as prove that our generic products are the bio-equivalent of
their branded counterparts. All of our products must meet regulatory standards
and receive regulatory approvals. The development and commercialization process,
particularly with respect to innovative products, is both time consuming and
costly and involves a high degree of business risk. Our products currently under
development, if and when fully developed and tested, may not perform as we
expect, necessary regulatory approvals may not be obtained in a timely manner,
if at all, and such products may not be able to be successfully and profitably
produced and marketed. Delays in any part of the process or our inability to
obtain regulatory approval of our products (including the products filed by
IMPAX Laboratories Inc. and Biovail Corporation for which we have exclusive
marketing rights in the United States) could adversely affect our operating
results by restricting our introduction of new products. The continuous
introduction of new generic products is critical to our business.
Our revenues and profits from any particular generic pharmaceutical products
decline as our competitors introduce their own generic equivalents.
Selling prices of generic drugs typically decline, sometimes dramatically,
as additional companies receive approvals for a given product and competition
intensifies. To the extent that we succeed in being the first to market a
generic version of a significant product, our sales and profitability can be
substantially increased in the period following the introduction of such product
and prior to a competitor's introduction of the equivalent product. Our ability
to sustain our sales and profitability on any product over time is dependent on
both the number of new competitors for such product and the timing of their
approvals. Our overall profitability depends on our ability to continuously and
timely introduce new products.
Our generic pharmaceutical products face intense competition from brand-name
companies that sell their own generic products or successfully extend their
market exclusivity period.
Competition in the U.S. generic pharmaceutical market continues to
intensify as the pharmaceutical industry adjusts to increased pressures to
contain health care costs. Brand-name companies continue to sell their products
into the generic market directly by acquiring or forming strategic alliances
with generic pharmaceutical companies. No regulatory approvals are required for
a brand-name manufacturer to sell directly or through a third party to the
generic market. Brand-name manufacturers do not face any other significant
barriers to entry into such market. In addition, such companies continually seek
new ways to defeat generic competition, such as filing new patents on drugs
whose original patent protection is about to expire, developing patented
controlled-release products, changing product claims and product labeling or
developing and marketing as over-the-counter products those branded products
which are about to face generic competition.
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Recent changes in the regulatory environment may prevent us from exploiting the
exclusivity periods that are critical to the success of our generic products.
The FDA's policy regarding the award of 180-days market exclusivity to
generic manufacturers who challenge patents relating to specific products
continues to be the subject of much litigation in the United States. The FDA's
current interpretation of the Waxman-Hatch Act is to award 180 days of
exclusivity to the first generic manufacturer who files a Paragraph IV
certification under the Act challenging the patent of the branded product,
regardless of whether the manufacturer was sued for patent infringement.
Although the FDA's interpretation may benefit some of the products in our
pipeline, it may adversely affect others.
The Waxman-Hatch Act provides that the period of 180-day exclusivity is
triggered by the earlier of a court decision finding the patent at issue invalid
or not infringed or the commercial marketing of the product. Under certain
circumstances, we may not be able to exploit our 180-day exclusivity period
completely since it may be triggered prior to our being able to market the
product.
For example, recent court decisions have interpreted the 180-day
exclusivity period as starting from an initial ruling by a federal district
court (instead of a final, unappealable ruling) regarding the validity or
infringement of a patent. If we choose to bring a product to market prior to
receiving a final ruling and an appellate court overturns the initial ruling, we
could face significant infringement damages. These recent court decisions may
cause us to take on patent risks that we were not exposed to prior to those
decisions in order to benefit from the 180-day exclusivity period, or,
conversely, we may choose not to take advantage of the 180-day exclusivity
period rather than risk an adverse ruling in an appellate court. In addition to
these issues, our patent challenges may be unsuccessful, which may result in a
bar to the FDA granting market approval until the relevant patent expires.
Another recent FDA ruling allows for joint 180-day exclusivity under certain
circumstances. As a result, there may be certain circumstances in which we may
share our exclusivity with one or more companies.
If we elect to sell a generic product prior to the completion of all appellate
level patent litigation, we could be subject to liabilities for damages if a
lower court judgment upon which we are relying is reversed.
At times we seek approval to market generic products before the expiration
of patents for those products, based upon our belief that such patents are
invalid, unenforceable, or would not be infringed by Teva's products. As a
result, we often face significant patent litigation. Depending upon a complex
analysis of a variety of legal and commercial factors, if we win a lower court
decision in such patent litigation, we may, in certain circumstances, elect to
market a generic product even though an appeal of the lower court decision is
pending. Should we elect to proceed in this manner, we could face substantial
patent liability damages were a higher court to overturn the trial court's
decision.
Our sales of Copaxone could be adversely affected by competition.
Copaxone(R) is our leading innovative product, from which we derive
substantial revenues and profits. To date, we and our marketing partners have
been successful in our efforts to establish Copaxone(R) as a leading therapy for
multiple sclerosis and have increased our global market share among the four
currently available major therapies for multiple sclerosis. However Copaxone(R)
faces intense competition, including as a result of the recent entry of Serono
SA's beta-interferon product, Rebif(R), into the U.S. market and the role that
Pfizer Inc. has recently assumed as a co-marketer with Serono of this product in
the United States.
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We are subject to government regulation that increases our costs and could
prevent us from marketing or selling our products.
We are subject to extensive pharmaceutical industry regulations in Israel,
the United States, England, Hungary, the Netherlands, Canada, France, Italy and
other jurisdictions. We cannot predict the extent to which we may be affected by
legislative and other regulatory developments concerning our products.
We are dependent on obtaining timely approvals before marketing most of our
products. In the United States, any manufacturer failing to comply with FDA or
other applicable regulatory agency requirements may be unable to obtain
approvals for the introduction of new products and, even after approval, initial
product shipments may be delayed. The FDA also has the authority to revoke drug
approvals previously granted and remove from the market previously approved drug
products containing ingredients no longer approved by the FDA. Our major
facilities, both in the United States and outside the United States, and
products are periodically inspected by the FDA, which has extensive enforcement
powers over the activities of pharmaceutical manufacturers, including the power
to seize, force to recall and prohibit the sale or import of non-complying
products, and halt operations of and criminally prosecute non-complying
manufacturers.
In Europe and Israel, the manufacture and sale of pharmaceutical products
is regulated in a manner substantially similar to that in the United States.
Legal requirements generally prohibit the handling, manufacture, marketing and
importation of any pharmaceutical product unless it is properly registered in
accordance with applicable law. The registration file relating to any particular
product must contain medical data related to product efficacy and safety,
including results of clinical testing and references to medical publications as
well as detailed information regarding production methods and quality control.
Health ministries are authorized to cancel the registration of a product if it
is found to be harmful or ineffective or manufactured and marketed other than in
accordance with registration conditions.
We may not be able to successfully identify, consummate and integrate recent and
future acquisitions.
In the past, we have grown, in part, through a number of significant
acquisitions. We plan to remain frequently engaged in various stages of
evaluating or pursuing potential acquisitions and may in the future acquire
other pharmaceutical and active pharmaceutical ingredients businesses and seek
to integrate them into our own operations. The recent and future acquisitions of
additional companies involves risks that could adversely affect our future
revenues and operating results. For example:
o We may not be able to identify suitable acquisition candidates or to
acquire companies on favorable terms.
o We compete with others to acquire companies. We believe that this
competition will increase and may result in decreased availability or
increased prices for suitable acquisition candidates.
o We may not be able to obtain the necessary financing, on favorable terms or
at all, to finance any of our potential acquisitions.
o We may not be able to obtain the necessary regulatory approvals, including
the approval of anti-competition regulatory bodies, in any countries in
which we may seek to consummate potential acquisitions.
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o We may ultimately fail to close an acquisition even if we announce that we
plan to acquire a company.
o We may fail to integrate successfully our acquisitions in accordance with
our business strategy.
o We may choose to acquire a company that is not profitable.
o Potential acquisitions may divert management's attention away from our
primary product offerings, result in the loss of key customers and/or
personnel and expose us to unanticipated liabilities.
o We may not be able to retain the skilled employees and experienced
management that may be necessary to operate the businesses we may acquire
and, if we cannot retain such personnel, we may not be able to locate or
hire new skilled employees and experienced management to replace them.
o We may purchase a company that has contingent liabilities that include,
among others, known or unknown patent or product liability claims.
As a pharmaceutical company, we are susceptible to product liability claims that
may not be covered by insurance.
Our business inherently exposes us to potential product liability claims.
From time to time, the pharmaceutical industry has experienced difficulty in
obtaining product liability insurance coverage for certain products or coverage
in the desired amounts or with the desired deductibles. As a result, we sell,
and may continue to sell, generic products that are not covered by insurance and
may also be subject to product liability claims that are not covered by
insurance or that exceed our policy limits.
Additionally, changes in the insurance markets subsequent to the September
11, 2001 terrorist attacks have made it more difficult for us to obtain certain
types of coverage. We cannot assure you that we will be able to obtain the
levels or types of insurance we would otherwise have obtained prior to these
market changes or that the insurance coverage we do obtain will not contain
large deductibles or fail to cover certain liabilities or that it will otherwise
cover all potential losses.
Reforms in the health care industry and the uncertainty associated with
pharmaceutical pricing, reimbursement and related matters could adversely affect
the marketing, pricing and demand for our products.
Increasing expenditures for health care have been the subject of
considerable public attention in Israel, North America and many European
countries. Both private and governmental entities are seeking ways to reduce or
contain health care costs. In many countries in which we currently operate,
including Israel, pharmaceutical prices are subject to regulation. In the United
States, numerous proposals that would effect changes in the United States health
care system have been introduced or proposed in Congress and in some state
legislatures. Similar activities are taking place throughout Europe. We cannot
predict the nature of the measures that may be adopted or their impact on the
marketing, pricing and demand for our products.
As a result of governmental budgetary constraints, the Israel Ministry of
Health and the major Israeli health funds have sought to further reduce health
care costs by, among other things, applying continuous pressure to reduce
pharmaceutical prices and reducing inventory levels. The Israeli
-13-
government has adopted regulations that permit the parallel importation of
pharmaceutical products and set a maximum price on certain pharmaceutical
products. Although such legislation is predominantly aimed at reducing prices of
imported products, as opposed to locally manufactured products such as ours, it
could have a secondary effect on us by increasing price competition within the
Israeli pharmaceutical market.
The success of our innovative products depends on the effectiveness of our
patents and confidentiality agreements to defend our intellectual property
rights.
Our success with our innovative products depends, in part, on our ability
to protect our current and future innovative products and to defend our
intellectual property rights. If we fail to adequately protect our intellectual
property, competitors may manufacture and market products similar to ours. We
have been issued numerous patents covering our innovative products, and have
filed, and expect to continue to file, patent applications seeking to protect
newly developed technologies and products in various countries, including the
United States. Any existing or future patents issued to or licensed by us may
not provide us with any competitive advantages for our products or may even be
challenged, invalidated or circumvented by competitors. In addition, such patent
rights may not prevent our competitors from developing, using or commercializing
products that are similar or functionally equivalent to our products.
We also rely on trade secrets, unpatented proprietary know-how and
continuing technological innovation that we seek to protect, in part, by
confidentiality agreements with licensees, suppliers, employees and consultants.
It is possible that these agreements will be breached and we will not have
adequate remedies for any such breach. Disputes may arise concerning the
ownership of intellectual property or the applicability of confidentiality
agreements. Furthermore, our trade secrets and proprietary technology may
otherwise become known or be independently developed by our competitors or, if
patents are not issued with respect to products arising from research, we may
not be able to maintain the confidentiality of information relating to such
products.
We have significant operations outside of the United States, including in
Israel, that may be adversely affected by acts of terrorism or major
hostilities.
Significant portions of our operations are conducted outside of the United
States. We may, therefore, be directly affected by economic, political and
military conditions in the countries in which our businesses are located, as
well as by currency exchange rate fluctuations and the exchange control
regulations of such countries. Our executive offices and a substantial number of
our manufacturing facilities are located in the State of Israel. Teva's Israeli
operations are dependent upon materials imported from outside of Israel. We also
export significant amounts of products from Israel. Accordingly, our operations
could be materially and adversely affected by acts of terrorism or if major
hostilities should occur in the Middle East or trade between Israel and its
present trading partners should be curtailed, including as a result of acts of
terrorism in the United States. Any such effects may not be covered by
insurance.
Risks Associated with the Debentures
We may not be able to repurchase the debentures, if required, upon a change of
control, a termination of trading or upon your exercise of your rights to cause
Teva Finance to repurchase your debentures.
In certain circumstances involving a change of control of Teva, a
termination of trading of its securities or upon your exercise of your rights to
cause Teva Finance to repurchase your debentures, you
-14-
may require us to repurchase some or all of your debentures. Our ability to
repurchase the debentures in such event may be limited by law or by the terms of
agreements we may enter into. If we are restricted from issuing Teva ADRs to pay
the repurchase price, as permitted under the indenture governing the debentures,
we may not have sufficient financial resources or may not be able to arrange
financing to pay the repurchase price in cash.
Because there is no active trading market for the debentures, you may not be
able to sell your debentures.
The debentures are a new issue of securities for which there is currently
no active trading market. Although the debentures are eligible for trading in
the PORTAL market, we cannot predict whether an active trading market for the
debentures will develop or be sustained. If an active market for the debentures
fails to develop or be sustained, this may negatively affect the price you
obtain upon any sale of your debentures, and your ability to sell your
indentures at all.
Because Teva and Teva Finance are foreign corporations, you may have
difficulties enforcing your rights under the debentures.
Most of Teva's directors and officers reside outside of the United States.
Service of process on them may be difficult to effect in the United States.
Furthermore, because a substantial portion of Teva's assets are located in
Israel, any judgment obtained in the United States against us or any of our
directors and officers may not be collectible within the United States.
An Israeli court may declare a judgment rendered by a foreign court in a
civil matter, including judgments awarding monetary or other damages in non
civil matters, enforceable if it finds that:
(1) the judgment was rendered by a court which was, according to Israeli
law, competent to render it;
(2) the judgment is no longer appealable;
(3) the obligation in the judgment is enforceable according to the rules
relating to the enforceability of judgments in Israel and the
substance of the judgment is not contrary to public policy in Israel;
and
(4) the judgment can be executed in the state in which it was given.
A foreign judgment will not be declared enforceable by Israeli courts if it
was given in a state, the laws of which do not provide for the enforcement of
judgments of Israeli courts (subject to exceptional cases) or if its enforcement
is likely to prejudice the sovereignty or security of Israel. An Israeli court
also will not declare a foreign judgment enforceable if it is proven to the
Israeli court that:
(1) the judgment was obtained by fraud;
(2) there was no due process;
(3) the judgment was given by a court not competent to render it according
to the laws of private international law in Israel;
(4) the judgment conflicts with another judgment that was given in the
same matter between the same parties and which is still valid; or
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(5) at the time the action was brought to the foreign court a claim in the
same matter and between the same parties was pending before a court or
tribunal in Israel.
Similarly, the managing director of Teva Finance resides outside the United
States, and all or a significant portion of the assets of such person may be,
and substantially all of the assets of Teva Finance are, located outside the
United States. As a result, it may not be possible to effect service of process
within the United States upon such person or to enforce against Teva Finance or
such person judgments obtained in United States courts predicated upon the civil
liability provisions of the federal securities laws of the United States.
The United States and the Netherlands Antilles do not currently have a
treaty providing for reciprocal recognition and enforcement of judgments in
civil and commercial matters. Therefore, a final judgment for the payment of
money rendered by any federal or state court in the United States based on civil
liability, whether or not predicated solely upon the federal securities laws of
the United States, would not be directly enforceable in the Netherlands
Antilles.
If the party in whose favor such a final judgment is rendered brings a new
suit in a competent court in the Netherlands Antilles, that party may submit to
the Netherlands Antilles court the final judgment that has been rendered in the
United States. Since the laws of the State of New York have been chosen to
govern the debentures, Teva Finance has submitted to the jurisdiction of the
State or federal courts sitting in the State of New York in connection with
disputes relating to the debentures. The holders, by acquiring the debentures,
have voluntarily accepted such choice of law and choice of forum. A judgment
obtained in any such court will be considered and recognized by the competent
courts of the Netherlands Antilles to be part of the debentures, and such courts
would grant a judgment that would be enforceable in the Netherlands Antilles
generally, without any re-examination of the merits of the original judgment;
provided that:
(1) the judgment is final in the jurisdiction where rendered and was
issued by a competent court;
(2) the judgment is valid in the jurisdiction where rendered;
(3) the judgment was issued following personal service of the summons upon
the defendant or its agent and, in accordance with due process of law,
an opportunity for the defendant to defend against the foreign action;
(4) the judgment does not violate any compulsory provisions of Netherlands
Antilles law or principles of public policy;
(5) the terms and conditions governing the indentures do not violate any
compulsory provisions of Netherlands Antilles law or principles of
public policy; and
(6) the judgment is not contrary to a prior or simultaneous judgment of a
competent Netherlands Antilles court.
-16-
FORWARD-LOOKING STATEMENTS
Our disclosure and analysis in this prospectus contain or incorporate by
reference some forward-looking statements. Forward-looking statements describe
our current expectations or forecasts of future events. You can identify these
statements by the fact that they do not relate strictly to historical or current
facts. Such statements may include words such as "anticipate", "estimate",
"expect", "project", "intend", "plan", "believe" and other words and terms of
similar meaning in connection with any discussion of future operating or
financial performance. In particular, these statements include, among other
things, statements relating to:
o our business strategy;
o the development of our products;
o our projected capital expenditures; and
o our liquidity.
This prospectus contains or incorporates by reference forward-looking
statements which express the beliefs and expectations of management. Such
statements are based on current expectations and involve a number of known and
unknown risks and uncertainties that could cause our future results, performance
or achievements to differ significantly from the results, performance or
achievements expressed or implied by such forward-looking statements. Important
factors that could cause or contribute to such differences include the impact of
pharmaceutical industry regulation, the difficulty of predicting FDA and other
regulatory authority approvals, the regulatory environment and changes in the
health policies and structures of various countries, acceptance and demand for
new pharmaceutical products and new therapies, the impact of competitive
products and pricing, uncertainties regarding market acceptance of innovative
products newly launched, currently being sold or in development, the impact of
restructuring of clients, reliance on strategic alliances, reliance on a
strategy of acquiring companies, exposure to product liability claims,
dependence on patent and other protections for our innovative products, exposure
to potential patent liability damages for products sold "at risk', i.e., prior
to the final adjudication of patent issues, fluctuations in currency, exchange
and interest rates, operating results and other factors that are discussed in
this prospectus and in our other filings made with the SEC.
We undertake no obligation to publicly update any forward-looking
statements, whether as a result of new information, future events or otherwise.
You are advised, however, to consult any additional disclosures we make in our
6-K reports to the SEC. Also note that we provide a cautionary discussion of
risks and uncertainties under "Risk Factors" beginning on page 9 of this
prospectus. These are factors that we think could cause our actual results to
differ materially from expected results. Other factors besides those listed here
could also adversely affect us. This discussion is provided as permitted by the
Private Securities Litigation Reform Act of 1995.
-17-
USE OF PROCEEDS
The debentures and ADRs offered under this prospectus are being offered by
the selling securityholders. Teva and Teva Finance will therefore not receive
any of the proceeds from this offering.
RATIO OF EARNINGS TO FIXED CHARGES
The below table contains our consolidated ratio of earnings to fixed
charges for the periods indicated. The ratio of earnings to fixed charges has
been computed by dividing earnings available for fixed charges (income from
continuing operations before income taxes and fixed charges) by fixed charges;
fixed charges consist of interest (whether expensed or capitalized),
amortization of issuance costs relating to long-term debentures plus one third
of rental expense (the portion deemed representative of the interest factor).
Year Ended December 31,
------------------------------------------------
2002 2001 2000 1999 1998
------ ------ ------ ------ ------
Ratio of earnings
to fixed charges: 9.43 7.58 4.70 5.30 4.09
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PRICE RANGE OF ADRS AND ORDINARY SHARES
ADRs
In February 2000 and in December 2002, Teva effected a 2-for-1 stock split.
Each holder of an ordinary share, or an ADR, as the case may be, was issued
another share. All figures in this prospectus have been adjusted to reflect the
stock splits.
Teva's ADRs have been traded in the United States since 1982 and were
admitted to trading on the Nasdaq National Market in October 1987. The ADRs are
quoted under the symbol TEVA. The Bank of New York serves as Depositary for the
ADRs. In November 2002, Teva was added to the NASDAQ 100 Index. Each ADR
represents one ordinary share.
The following table sets forth information regarding the high and low
prices of the ADR on Nasdaq for the periods specified in U.S. dollars.
Period High Low
-------------------------------------------------- ------ -----
Last six months:
March 2003 (through March 17)..................... 39.27 35.50
February 2003..................................... 38.50 34.50
January 2003...................................... 39.28 37.06
December 2002..................................... 39.56 36.57
November 2002..................................... 39.53 36.01
October 2002...................................... 38.86 32.13
Last eight quarters:
Q4 2002........................................... 39.56 32.13
Q3 2002........................................... 34.97 28.58
Q2 2002........................................... 34.25 25.85
Q1 2002........................................... 32.58 26.77
Q4 2001........................................... 34.20 27.17
Q3 2001........................................... 37.18 26.75
Q2 2001........................................... 32.94 25.62
Q1 2001........................................... 34.97 25.44
Last five years:
2002.............................................. 39.56 25.85
2001.............................................. 37.18 25.44
2000.............................................. 39.00 16.06
1999.............................................. 17.92 9.97
1998.............................................. 12.50 8.03
On March 17, 2003, the last reported sale price for the ADRs on the Nasdaq
National Market was $38.96. As of January 31, 2003, there were 1,110 record
holders of ADRs, whose holdings in total represented approximately 79% of the
total outstanding ordinary shares, substantially all of whom were in the United
States. The American Stock Exchange, the Chicago Options Exchange and the
Pacific Stock Exchange quote options on Teva's ADRs under the symbol TEVA.
Teva's ADRs are also traded on SEAQ International in London and on the
exchanges in Frankfurt and Berlin.
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Ordinary Shares
Teva's ordinary shares have been listed on the Tel Aviv Stock Exchange
since 1951. The table below sets forth in U.S. dollars the high and low last
reported sale prices of the ordinary shares on the Tel Aviv Stock Exchange
during the periods as reported by such Exchange (restated to reflect the stock
splits). The translation into U.S. dollars is based on the daily representative
rate of exchange published by the Bank of Israel then in effect.
Period High Low
-------------------------------------------------- ------ -----
Last six months:
March 2003 (through March 17).......... 37.94 35.81
February 2003.......................... 38.30 35.09
January 2003........................... 38.04 37.34
December 2002.......................... 39.79 36.19
November 2002.......................... 39.61 35.48
October 2002........................... 36.85 32.53
Last eight quarters:
Q4 2002................................ 39.79 32.51
Q3 2002................................ 34.54 29.31
Q2 2002................................ 33.73 26.33
Q1 2002................................ 32.39 26.46
Q4 2001................................ 33.75 27.64
Q3 2001................................ 36.36 29.31
Q2 2001................................ 32.53 25.99
Q1 2001................................ 35.76 26.24
Last five years:
2002................................... 39.79 26.33
2001................................... 36.36 25.99
2000................................... 36.79 16.33
1999................................... 17.21 9.91
1998................................... 12.44 8.05
On March 17, 2003, the last reported sale price of the ordinary shares on
the Tel Aviv Stock Exchange was $37.81.
-20-
CAPITALIZATION OF TEVA
The following table sets forth Teva's capitalization as of December 31,
2002. You should read this table together with the audited consolidated
financial statements and the notes thereto and our supplemental financial data
incorporated by reference in this prospectus.
The number of outstanding ordinary shares includes ordinary shares held by
Teva's subsidiaries but excludes:
(1) approximately 0.8 million ordinary "A" shares, which do not confer
on their holder voting rights or rights to appoint directors, and
approximately 2.0 million non-voting ordinary shares held by a Teva
subsidiary;(1)
(2) an aggregate of approximately 16.9 million ordinary shares issuable
upon exercise of options under Teva's stock option plans;(1) and
(3) the shares issued by a Canadian subsidiary of Teva that are
exchangeable into 6.3 million of Teva's ordinary shares.(2)
December 31, 2002
-----------------
US Dollars in Millions
Short-term debt, including current maturities.... 176.1
1.50% Convertible Senior Debentures due 2005(3).. 562.4
-------
Total short-term debt...................... 738.5
-------
0.75% Convertible Senior Debentures due 2021(3).. 360.0
0.375% Convertible Senior Debentures due 2022.... 450.0
Other long-term debt, net of current maturities.. 351.4
-------
Total long-term debt....................... 1,161.4
Shareholders' equity:
Share capital and additional paid-in capital:
ordinary shares of NIS 0.10 par value:
authorized-- 999.6 million shares; issued
and outstanding-- 263.2 million shares........ 33.9
Additional paid-in capital....................... 481.5
Deferred compensation............................ (0.1)
Retained earnings................................ 1,345.7
Accumulated other comprehensive loss............. 17.3
Cost of Teva shares held by subsidiaries......... (48.9)
-------
Total shareholders' equity.................... 1,829.4
-------
Total capitalization....................... 3,729.3
=======
________________
(1) See Note 9 of the notes to Teva's consolidated financial statements for the
year ended December 31, 2002 incorporated by reference in this prospectus
for a discussion of these securities.
(2) See Note 2 of the notes to Teva's consolidated financial statements for the
year ended December 31, 2002 incorporated by reference in this prospectus
for a discussion of these securities. Through December 31, 2002, shares of
this subsidiary have been exchanged for an aggregate of approximately 6.5
million Teva ordinary shares, leaving shares exchangeable for approximately
6.3 million Teva ordinary shares outstanding.
(3) See Note 7 of the notes to Teva's consolidated financial statements for the
year ended December 31, 2002 incorporated by reference in this prospectus
for a discussion of these securities.
-21-
DESCRIPTION OF DEBENTURES AND THE GUARANTEE
Teva Finance issued the debentures under an indenture, dated as of November
18, 2002, among Teva Finance, Teva and The Bank of New York, as trustee. The
terms of the debentures include those provided in the indenture and the
registration rights agreement, which Teva Finance and Teva entered into with the
initial purchasers.
The following description is only a summary of the material provisions of
the debentures, the indenture, the guarantee and the registration rights
agreement. We urge you to read these documents in their entirety because they,
and not this description, define your rights as holders of these debentures.
These documents are included as exhibits to the registration statement of which
this prospectus is a part. You may also request copies of these documents at our
address set forth under the caption "Summary -- Corporate Information."
When we refer to Teva in this section, we refer only to Teva Pharmaceutical
Industries Limited. When we refer to Teva Finance in this section, we refer to
Teva Pharmaceutical Finance B.V., an indirect, wholly owned subsidiary of Teva
organized under the laws of the Netherlands Antilles.
Brief Description of the Debentures
The debentures are:
o limited to $450,000,000 aggregate principal amount, subject to reopening
at the discretion of Teva Finance;
o general unsecured obligations of Teva Finance;
o convertible into ADRs of Teva at a conversion price of $42.8989 per ADR
(which gives effect to the two-for-one stock split paid to holders of
record as of December 10, 2002), under the conditions and subject to
adjustment as described under "-- Conversion Rights" and "--
Distribution of Teva Ordinary Shares Instead of Teva ADRs";
o redeemable at Teva Finance's option on or after November 18, 2007 at the
principal amount, plus accrued and unpaid interest;
o subject to repurchase by Teva Finance at your option on November 18,
2007, November 15, 2012 and November 15, 2017 or if a change of control
or a termination of trading as defined in this prospectus occurs; and
o due on November 15, 2022, unless earlier redeemed by Teva Finance at its
option or converted or repurchased by Teva Finance at your option.
The indenture restricts Teva Finance from paying dividends, incurring
other indebtedness or repurchasing its or Teva's securities, except with respect
to the issuance of additional securities that have the same ranking, interest
rate and other terms as the debentures. The indenture does not, however, contain
any other financial covenants with respect to Teva Finance or any financial
covenants applicable to Teva. The indenture does not protect you in the event of
a highly leveraged transaction or change of control of Teva or Teva Finance
except to the extent described under "-- Repurchase at Option of Holders -- Upon
a Change of Control or a Termination of Trading" below.
-22-
You may present definitive debentures for conversion, registration of
transfer and exchange, without service charge, at our office or agency in New
York City, which shall initially be the office or agency of the trustee in New
York City. For information regarding conversion, registration of transfer and
exchange of global debentures, see "-- Form, Denomination and Registration."
Description of the Guarantee
Teva has unconditionally guaranteed the punctual payment when due, whether
at maturity, upon redemption or by acceleration or otherwise, of the principal
of and interest and Additional Amounts (as described in "-- Registration
Rights"), if any, on the debentures. The guarantee is enforceable by the
trustee, the holders and their successors, transferees and assigns.
The guarantee is an unsecured senior obligation of Teva. As indebtedness
of Teva, it will be effectively subordinated against all indebtedness and
liabilities of Teva's subsidiaries.
Interest
The debentures bear interest from November 18, 2002 at the rate of 0.375%
per year, subject to adjustment upon the occurrence of a Reset Transaction. See
"-- Interest Rate Adjustments" below. Teva Finance will pay interest
semiannually in arrears on May 15 and November 15 of each year to the holders of
record at the close of business on the preceding May 1 and November 1,
respectively, beginning May 15, 2003. In general, Teva Finance will not pay
interest accrued and unpaid on any debenture that is converted into Teva's ADRs.
See "-- Conversion Rights" below.
Except as provided below, Teva Finance will pay interest on:
o the global debentures to DTC in immediately available funds;
o any definitive debentures having an aggregate principal amount of
$5,000,000 or less by check mailed to the holders of these debentures;
and
o any definitive debentures having an aggregate principal amount of more
than $5,000,000 by wire transfer in immediately available funds at the
election of the holders of these debentures.
At maturity, Teva Finance will pay interest on the definitive debentures
at our office or agency in New York City, which initially is the office or
agency of the trustee in New York City.
Teva Finance will pay principal on:
o the global debentures to DTC in immediately available funds;
o any definitive debentures at our office or agency in New York City,
which initially is the office or agency of the trustee in New York
City.
Interest generally will be computed on the basis of a 360-day year
comprised of twelve 30-day months. References to payments of interest in this
section, unless the context otherwise requires, refer to the payment of interest
and Additional Amounts, if any.
-23-
Interest Rate Adjustments
If a Reset Transaction occurs, the interest rate will be adjusted to equal
the Adjusted Interest Rate from the effective date of such Reset Transaction to,
but not including, the effective date of any succeeding Reset Transaction.
A "Reset Transaction" means:
o a merger, consolidation or statutory share exchange to which the issuer
of the ordinary shares is a party;
o a sale of all or substantially all the assets of that issuer;
o a recapitalization of those ordinary shares; or
o a distribution described in clause (4) of the eighth paragraph under
"-- Conversion Procedures" below, after the effective date of which
transaction or distribution the debentures would be convertible into:
o ordinary shares or ADRs which had a dividend yield for the four
fiscal quarters of such entity immediately preceding the public
announcement of the transaction or distribution that was more than
2.5 percentage points higher than the dividend yield on Teva's ADRs
or ordinary shares for the four fiscal quarters preceding the public
announcement of the transaction or distribution; or
o ordinary shares or ADRs of an entity that announces a dividend
policy prior to the effective date of the transaction or
distribution which policy, if implemented, would result in a
dividend yield on that entity's ordinary shares for the next four
fiscal quarters that would result in such a 2.5 percentage point
increase.
The "Adjusted Interest Rate" with respect to any Reset Transaction will be
the rate per year that is the arithmetic average of the rates quoted by two
dealers engaged in the trading of convertible securities selected by Teva
Finance or its successor as the rate at which interest should accrue so that the
fair market value, expressed in dollars, of a debenture immediately after the
later of:
o the public announcement of the Reset Transaction; or
o the public announcement of a change in dividend policy in connection
with the Reset Transaction,
will most closely equal the average Trading Price (as defined below) of a
debenture for the 20 trading days preceding the date of such public
announcement. However, the Adjusted Interest Rate will not be less than 0.375%
per year.
For purposes of the definition of Reset Transaction, the dividend yield on
any security, including an ADR, for any period means the dividends paid or
proposed to be paid pursuant to an announced dividend policy on the security or,
in the case of an ADR, on the aggregate securities represented by that ADR for
that period, divided by, if with respect to dividends paid on that security, the
average Trading Price of the security during that period and, if with respect to
dividends proposed to be paid on the security, the Trading Price of such
security on the effective date of the related Reset Transaction.
-24-
The "Trading Price" of a security on any date of determination means:
o the closing sale price of that security on the New York Stock Exchange
("NYSE") on that date;
o if that security is not listed on the NYSE on that date, the closing
sale price as reported on that date by the Nasdaq National Market;
o if that security is not so listed on the NYSE and not quoted on the
Nasdaq National Market on that date, the closing sale price as reported
on that date in the composite transactions for the principal U.S.
securities exchange on which that security is listed;
o if that security is not so listed on a U.S. national or regional
securities exchange or quoted on the Nasdaq National Market on that
date, the dollar equivalent of the closing sale price of the security
on that date on the Tel Aviv Stock Exchange;
o if that security is not so reported, the last price quoted by
Interactive Data Corporation for that security on that date or, if
Interactive Data Corporation is not quoting such price, a similar
quotation service selected by us;
o if that security is not so quoted, the average of the mid-point of the
last bid and ask prices for that security on that date from at least
two dealers recognized as market-makers for that security selected by
us for this purpose;
o if such bid and ask prices are not available, the average of that last
bid and ask prices for that security on that date from a dealer engaged
in the trading of securities of the same type as such security selected
by us for this purpose; or
o if such bid and ask prices are not available, the conversion value of
the debentures, as described in "-- Conversion Rights -- Conversion
Upon Satisfaction of Market Price Conditions" below.
Conversion Rights
General
You may convert any outstanding debentures at the times described below
into Teva's ADRs, initially at the conversion price of $42.8989 per ADR, which
is equal to a conversion rate of 23.3106 ADRs per $1,000 principal amount of
debentures, which has been adjusted to reflect the two-for-one stock split paid
to holders of record as of December 10, 2002. The conversion price is, however,
subject to adjustment as described below. You will not receive fractional ADRs
upon conversion of debentures. Instead, Teva Finance will pay a cash adjustment
based upon the Trading Price of Teva's ADRs on the business day immediately
preceding the conversion date. You may convert debentures only in denominations
of $1,000 and whole multiples of $1,000.
Holders may surrender debentures for conversion into Teva's ADRs only
under the following circumstances:
o during any conversion period, as described below, if the Trading Price
of Teva's ADRs for at least 20 trading days in the 30 trading day
period ending on the first day of the conversion
-25-
period was more than 120% of the conversion price in effect per ADR at
that thirtieth trading day;
o during the five business-day period following any 10 consecutive
trading day period in which the average of the Trading Prices for the
debentures for that 10 trading-day period was less than 105% of the
average conversion value, as described below, for the debentures during
that period;
o during any period in which the credit rating assigned to the debentures
by Standard & Poor's is below BB+, or that Standard & Poor's is not
rating the debentures;
o if Teva Finance has called the debentures for redemption; or
o upon the occurrence of the specified corporate transactions discussed
below.
You may exercise conversion rights under the conditions described above
prior to, but not later than, the close of business on the business day
preceding the maturity date of the debentures. However, if you are a holder of
debentures that have been called for redemption, you must exercise your
conversion rights prior to the close of business on the second business day
preceding the redemption date, unless Teva Finance defaults in payment of the
redemption price. In addition, if you have exercised your right to require Teva
Finance to repurchase your debentures you may convert your debentures into
Teva's ADRs only if you withdraw your notice and convert your debentures prior
to the close of business on the business day immediately preceding the
repurchase date.
Conversion Upon Satisfaction of Market Price Conditions
You may surrender any of your debentures for conversion into Teva's ADRs
during any conversion period if the Trading Price, as described above, of Teva's
ADRs for at least 20 trading days in the 30 trading-day period ending on the
first day of the conversion period exceeds 120% of the conversion price per
share of Teva's ADRs on that thirtieth trading day. A conversion period will be
the period from and including the thirtieth trading day in a fiscal quarter to
but not including the thirtieth trading day in the immediately following fiscal
quarter.
You also may surrender any of your debentures for conversion into Teva's
ADRs during the five business-day period following any 10 consecutive
trading-day period in which the average of the Trading Prices for the debentures
for that 10 trading-day period was less than 105% of the average conversion
value for the debentures during that period. "Conversion value" is equal to the
product of the Trading Price for Teva's ADRs on a given day multiplied by the
then current conversion rate, which is the number of Teva's ADRs into which each
debenture is then convertible.
Conversion Upon Credit Rating Event
You may surrender any of your debentures for conversion during any period
in which the credit rating assigned to the debentures by Standard & Poor's
Ratings Group is below BB+, or in which the credit rating assigned to the
debentures is suspended or withdrawn by Standard & Poor's or in which Standard &
Poor's is not rating the debentures.
Conversion Upon Notice of Redemption
You may surrender for conversion any debentures we call for redemption at
any time prior to the close of business on the day that is two business days
prior to the redemption date, even if the debentures
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are not otherwise convertible at that time. If you already have exercised your
right to require Teva Finance to repurchase your debentures, you may not
surrender such debentures for conversion until you have withdrawn the notice in
accordance with the indenture.
Conversion Upon Specified Corporate Transactions
If Teva elects to:
o distribute to all holders of Teva's ordinary shares certain rights
entitling them to purchase, for a period expiring within 60 days,
Teva's ordinary shares (directly or indirectly through ADRs) at less
than the Trading Price of Teva's ordinary shares at that time; or
o distribute to all holders of Teva's ordinary shares assets, debt
securities or certain rights to purchase Teva's securities, which
distribution has a per share value exceeding 10% of the Trading Price
of Teva's ordinary shares on the day preceding the declaration date for
the distribution,
Teva Finance must notify the holders of debentures at least 20 days prior
to the ex-dividend date for the distribution. Once Teva Finance has given that
notice, holders may surrender their debentures for conversion at any time until
the earlier of close of business on the business day prior to the ex-dividend
date or its announcement that the distribution will not take place. No
adjustment to the ability of a holder of debentures to convert will be made if
the holder will otherwise participate in the distribution without conversion.
In addition, if Teva is party to a consolidation, merger or binding share
exchange pursuant to which Teva's ordinary shares would be converted into cash,
securities or other property, a holder may surrender debentures for conversion
at any time from and after the date which is 15 days prior to the anticipated
effective date of the transaction until 15 days after the actual date of the
transaction. If Teva is party to a consolidation, merger or binding share
exchange pursuant to which Teva's ordinary shares are converted into cash,
securities or other property, then at the effective time of the transaction, the
right to convert a debenture into Teva's ordinary shares will be changed into a
right to convert the debentures into the kind and amount of cash, securities or
other property which the holder would have received if the holder had converted
such debentures immediately prior to the transaction. If the transaction also
constitutes a "change of control," as defined below, the holder can require us
to repurchase all or a portion of its debentures as described under "--
Repurchase at Option of Holders -- Upon a Change of Control or a Termination of
Trading."
Conversion Procedures
Upon exercise of your conversion rights or if Teva Finance so elects
following exercise of your repurchase rights Teva Finance will be obligated to
deliver, or to cause to be delivered to you, the number of Teva ADRs to which
you are entitled. In the indenture Teva has agreed with Teva Finance and with
each holder to deliver its ADRs to holders to satisfy exercises of such rights.
Teva has reserved 10,489,778 of its ordinary shares for issuance which it has
agreed to deposit in exchange for its ADRs upon the conversion of the
debentures.
Except as provided below, if you convert your debentures into Teva's ADRs
on any day other than an interest payment date, you will not receive any
interest that has accrued on these debentures. By delivering to the holder the
number of ADRs issuable upon conversion, determined by dividing the principal
amount of the debentures being converted by the conversion price, together with
a cash payment, if any, in lieu of fractional ADRs, Teva Finance will satisfy
its obligation with respect to the
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debentures. However, for U.S. federal income tax purposes, accrued but unpaid
interest will be deemed to be paid in full rather than canceled, extinguished or
forfeited.
If you convert after a record date for an interest payment but prior to
the corresponding interest payment date, you will receive on the interest
payment date interest accrued and unpaid on such debentures, notwithstanding the
conversion of such debentures prior to such interest payment date, because you
will have been the holder of record on the corresponding record date. However,
at the time you surrender such debentures for conversion, you must pay Teva
Finance an amount equal to the interest that is scheduled to be paid on such
interest payment date in respect of the debentures being converted.
You are not required to make such payment if you convert your debentures
after they are called by Teva Finance for redemption. Accordingly, if Teva
Finance calls your debentures for redemption on a date that is after a record
date for an interest payment but prior to the corresponding interest payment
date, and prior to the redemption date you choose to convert your debentures,
you will not be required to pay Teva Finance at the time you surrender such
debentures for conversion the amount of interest on such debentures you will
receive on the date that has been fixed for redemption. Furthermore, if Teva
Finance calls your debentures for redemption on a date that is prior to a record
date for an interest payment date, and prior to the redemption date you choose
to convert your debentures, you will receive on the date that has been fixed for
redemption the amount of interest you would have received if you had not
converted your debentures.
You will not be required to pay any taxes (other than income taxes, if
any) or duties relating to the issuance or delivery of Teva's ADRs if you
exercise your conversion rights, but you will be required to pay any tax or duty
which may be payable relating to any transfer involved in the issuance or
delivery of the ADRs in a name other than yours. ADRs will be issued or
delivered only after all applicable taxes and duties, if any, payable by you
have been paid.
To convert interests in the global debentures, you must deliver to DTC,
Euroclear Bank S.A./N.V. as operator of the Euroclear System ("Euroclear") or
Clearstream Banking S.A. (formerly Cedelbank) ("Clearstream"), as applicable,
the appropriate instruction form for conversion pursuant to DTC's conversion
program or in accordance with the normal operating procedures of Euroclear or
Clearstream, as applicable, after application has been made to make the
underlying ADRs eligible for trading on Euroclear or Clearstream, as applicable.
To convert a definitive debenture, you must:
o complete the conversion notice on the back of the debenture or a copy
of the notice;
o deliver the completed conversion notice and the debentures to be
converted to the specified office of the conversion agent;
o pay all funds required, if any, relating to interest on the debentures
to be converted to which you are not entitled, as described in the
second and third preceding paragraphs; and
o pay all taxes or duties, if any, as described in the preceding
paragraph.
The conversion date will be the date on which all of the foregoing
requirements have been satisfied. The debentures will be deemed to have been
converted immediately prior to the close of business on the conversion date. An
ADR into which the debentures are converted, and cash in lieu of any fractional
ADRs, will be delivered as soon as practicable on or after the conversion date.
Teva Finance will adjust the initial conversion price upon:
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(1) the issuance of Teva ordinary shares as a dividend or a
distribution on Teva's ordinary shares;
(2) subdivisions, splits and combinations of Teva's ordinary shares;
(3) the issuance by Teva of rights or warrants to all holders of Teva
ordinary shares entitling holders to subscribe for or purchase Teva
ordinary shares for less than their current market price;
(4) the distribution by Teva of shares of its capital stock (other than
its ordinary shares), evidences of its indebtedness or cash or other
assets, including securities, but excluding:
(a) the rights and warrants referred to in clause (3) above,
(b) any dividends and distributions in connection with a
reclassification, change, consolidation, merger, combination,
sale or conveyance resulting in a change in the conversion
consideration pursuant to the fourth succeeding paragraph, or
(c) any dividends or distributions received from Teva on the
Teva ordinary shares and paid exclusively in cash;
(5) dividends or distributions by Teva exclusively in cash to all
holders of Teva ordinary shares to the extent that such
distributions, together with:
(a) all other such all-cash dividends or distributions made within
the preceding 12 months for which no adjustment has been made,
plus
(b) any cash and the fair market value of other consideration paid
for any tender offers by Teva or any of its subsidiaries,
including Teva Finance, for Teva's ordinary shares or ADRs
expiring within the preceding 12 months for which no
adjustment has been made,
exceeds 10% of Teva's market capitalization on the record date
for such distribution; and
(6) purchases of Teva's ordinary shares or ADRs pursuant to a tender
offer made by Teva or any of its subsidiaries to the extent that the
same involves an aggregate consideration that, together with:
(a) any cash and the fair market value of any other consideration
paid in any other tender offer by Teva or any of its
subsidiaries for Teva's ordinary shares or ADRs expiring
within the 12 months preceding such tender offer for which no
adjustment has been made, plus
(b) the aggregate amount of any all-cash distributions referred to
in clause (5) above to all holders of Teva's ordinary shares
within 12 months preceding the expiration of tender offer for
which no adjustments have been made,
exceeds 10% of Teva's market capitalization on the expiration of
such tender offer.
-29-
If rights or warrants for which an adjustment to the conversion price has
been made expire unexercised, the conversion price will be readjusted to take
into account the actual number of such rights or warrants which were exercised.
The above adjustments assume that each ADR continues to represent one Teva
ordinary share. If the number of Teva ordinary shares represented by each ADR
changes, the conversion price will be adjusted accordingly.
Teva Finance will not make an adjustment in the conversion price unless
such adjustment would require a change of at least 1% in the conversion price
then in effect at such time. Teva Finance will carry forward and take into
account in any subsequent adjustment any adjustment that would otherwise be
required to be made. Except as stated above, Teva Finance will not adjust the
conversion price for the issuance of Teva's ordinary shares or any securities
convertible into or exchangeable for Teva's ordinary shares or carrying the
right to purchase any of the foregoing.
If Teva:
o reclassifies or changes its ordinary shares (other than changes
resulting from a subdivision, split or combination); or
o consolidates or combines with or merges into any person, or sells or
conveys to another person all or substantially all of the property and
assets of Teva and its subsidiaries, or liquidates, dissolves or winds
up;
and the holders of Teva's ordinary shares receive ordinary shares, other
securities or other property or assets (including cash or any combination of
Teva's ordinary shares, other securities or other property or assets) with
respect to or in exchange for their ordinary shares, the debentures will become
convertible into the consideration they would have received if they had
converted their debentures immediately prior to such reclassification, change,
consolidation, combination, merger, sale or conveyance. Teva may not become a
party to any such transaction unless its terms are consistent with the
foregoing.
The conversion price at which, and the property or assets into which, the
debentures are convertible after an adjustment described in this section "--
Conversion Procedures" shall be subject to further adjustment in the same manner
when subsequent events of the type described in this section occur.
If a taxable distribution to holders of Teva's ADRs or ordinary shares or
other transaction occurs which results in any adjustment of the conversion
price, you may be deemed to have received a distribution subject to U.S. income
tax as a dividend. In other circumstances, the absence of an adjustment may
result in a taxable dividend to the holders of our ADRs. See "United States
Federal Income Tax Considerations."
Teva Finance may from time to time, to the extent permitted by law, reduce
the conversion price of the debentures by any amount for any period of at least
20 days. In that case, Teva Finance will give at least 15 days' notice of such
decrease.
Distribution of Teva Ordinary Shares Instead of Teva ADRs
Upon conversion of your debentures, you will receive ADRs representing
Teva ordinary shares. If you receive Teva ADRs and prefer to hold Teva ordinary
shares directly, you may withdraw the underlying Teva ordinary shares by
following the relevant procedures of the depositary for the Teva ordinary
shares. Such withdrawals are expected to be subject only to
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(1) any temporary delays caused by closing transfer books of the
depositary or Teva or the deposit of shares in connection with
voting at a shareholders' meeting, or the payment of dividends, if
applicable,
(2) the payment of any related fees, taxes, and similar charges
(which you will be responsible for), and
(3) compliance with any U.S. or foreign laws or governmental regulations
in force at that time relating to Teva ADRs or to the withdrawal
of deposited securities.
If, following conversion of your debentures into ADRs, you decide to
withdraw the underlying Teva ordinary shares in exchange for your ADRs, your
ability to sell the ordinary shares on the Tel Aviv Stock Exchange may be
restricted under Israeli law under one of the following restrictions:
(1) you may not sell the ordinary shares on the Tel Aviv Stock Exchange
for a period of 24 months following the initial issuance of the
debentures; or
(2) you may not sell the ordinary shares for a period of three to twelve
months following the initial issuance of the debentures, and in
addition, you may be subject to certain volume limitations on the
sale of such shares for an additional twelve to twenty-four month
period.
However, these restrictions will not affect your ability to sell the ADRs
or your ability to sell the ordinary shares other than on the Tel Aviv Stock
Exchange.
Each Teva ADR currently represents one Teva ordinary share. Teva ADRs may,
however, in the future represent other securities or property as well, as a
result of any non-cash distributions in respect of Teva ordinary shares that are
not distributed to Teva ADR holders but instead are held by the depositary on
behalf of Teva ADR holders. The terms of the deposit agreement defining the
rights of holders of Teva ADRs may be altered at any time, and the deposit
agreement may be replaced by another deposit agreement with differing terms.
Any Teva ADRs we deliver to you will be transferable by you to the same
extent as the debentures you held (assuming you are not affiliated with Teva or
Teva Finance and excepting any transfer restrictions you have yourself caused).
You will be responsible for paying any and all brokerage costs if you sell any
Teva ADRs you receive. Teva will not issue fractional Teva ADRs.
If Teva ordinary shares cease to be represented by ADRs issued under a
depositary receipt program sponsored by Teva, or Teva ADRs cease to be quoted on
the Nasdaq National Market (and are not at that time listed on the New York
Stock Exchange or another United States national securities exchange), all
references in this prospectus to the Teva ADRs will be deemed to have been
replaced by a reference to:
(1) the number of Teva ordinary shares corresponding to the Teva ADRs on
the last day on which the Teva ADRs were quoted on the Nasdaq
National Market;
(2) as adjusted, pursuant to the adjustment provisions above, for any
other property the Teva ADRs represented as if the other property
has been distributed to holders of the Teva ADRs on that day.
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Optional Redemption by Teva Finance
At any time on or after November 18, 2007, Teva Finance may redeem some or
all of the debentures at a redemption price equal to 100% of the principal
amount of the debentures, except for debentures that it is required to
repurchase as provided under "-- Repurchase at Option of Holders -- On Specified
Dates." Teva Finance must give at least 20 but not more than 60 days' notice of
any redemption.
In addition, Teva Finance will pay interest on the debentures being
redeemed, including those debentures which are converted into Teva's ADRs after
the date the notice of the redemption is mailed and prior to the redemption
date. This interest will include interest accrued and unpaid to, but excluding,
the redemption date. If the redemption date is an interest payment date, Teva
Finance will pay the interest to the holder of record on the corresponding
record date, which may or may not be the same person to whom Teva Finance will
pay the redemption price.
If Teva Finance does not redeem all of the debentures, the trustee will
select the debentures to be redeemed in principal amounts of $1,000 or whole
multiples of $1,000 by lot or on a pro rata basis. If any debentures are to be
redeemed in part only, Teva Finance will issue a new debenture or debentures in
principal amount equal to the unredeemed principal portion thereof. If a portion
of your debentures is selected for partial redemption and you convert or elect
repurchase of a portion of your debentures, the converted or repurchased portion
will be deemed to be taken from the portion selected for redemption.
If you have exercised your right to require Teva Finance to repurchase
your debentures, you may participate in a redemption by Teva Finance only if you
withdraw your notice prior to the close of business on the business day
preceding the repurchase date.
Repurchase at Option of Holders
On Specified Dates
On November 18, 2007, November 15, 2012 and November 15, 2017, you will
have the right to require Teva Finance to repurchase all of your debentures, or
any portion of those debentures that is equal to $1,000 or a whole multiple of
$1,000, for which a written purchase notice has been properly delivered and not
withdrawn. You may submit your debentures for repurchase to The Bank of New
York, as paying agent (the "paying agent"), at any time from the opening of
business on the date that is 20 business days prior to the repurchase date until
the close of business on the business day prior to the repurchase date.
The repurchase price of a debenture will be equal to 100% of its principal
amount plus accrued and unpaid interest.
With respect to a repurchase on November 18, 2007, instead of paying the
repurchase price in cash, Teva Finance may, at its option, pay the purchase
price in cash or Teva ADRs, or any combination of cash or ADRs. The number of
Teva's ADRs a holder will receive will equal the repurchase price divided by 97%
of the average Trading Price of Teva's ADRs for the five trading day period
ending on the third business day prior to the applicable repurchase date,
appropriately adjusted to take into account the occurrence of events that would
result in an adjustment of the conversion rate with respect to Teva's ADRs.
Teva Finance will be required to give notice on a date not less than 20
business days prior to the repurchase date to all holders of debentures, stating
among other things:
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o whether Teva Finance will pay the purchase price of debentures in cash
or Teva's ADRs or any combination of cash and ADRs, specifying the
percentages of each;
o if Teva Finance elects to pay in ADRs the method of calculating the
price of the ADRs; and
o the procedures that holders must follow to require Teva Finance to
purchase their debentures.
The repurchase notice given by each holder electing to require Teva
Finance to repurchase debentures shall state:
o the certificate numbers of the holder's debentures to be delivered for
repurchase;
o the portion of the principal amount of debentures to be repurchased,
which must be $1,000 or an integral multiple of $1,000;
o that the debentures are to be purchased by Teva Finance pursuant to the
applicable provisions of the debentures; and
o in the event Teva Finance elects, in the notice that it is required to
give, to pay the repurchase price in Teva's ADRs, in whole or in part,
but the repurchase price is ultimately to be paid to the holder
entirely in cash because any of the conditions to payment of the
repurchase price or portion of the repurchase price in ADRs is not
satisfied prior to the close of business on the repurchase date, as
described below, whether the holder elects:
(1) to withdraw the repurchase notice as to some or all of the
debentures to which it relates, or
(2) to receive cash in respect of the entire purchase price for all
debentures or portions of debentures subject to such repurchase
notice.
If the holder fails to indicate the holder's choice with respect to the
election described in the final bullet point above, the holder shall be deemed
to have elected to receive cash in respect of the entire purchase price for all
debentures subject to the purchase notice in these circumstances.
Any repurchase notice may be withdrawn by the holder by a written notice
of withdrawal delivered to the paying agent prior to the close of business on
the business day prior to the purchase date. In the event that Teva Finance
exercises its right to redeem the debentures, you may participate in a
redemption only if you provide such written notice of withdrawal on a timely
basis.
o The notice of withdrawal shall state:
o the principal amount at maturity being withdrawn;
o the certificate numbers of the debentures being withdrawn; and
o the principal amount at maturity, if any, of the debentures that
remains subject to the purchase notice.
Teva Finance will pay cash based on the average market price for all
fractional shares of ADRs in the event it elects to deliver ADRs in payment, in
whole or in part, of the purchase price.
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Because the average market price of the ADRs is determined prior to the
applicable purchase date, holders of debentures bear the market risk with
respect to the value of the ADRs to be received from the date such average
market price is determined to such purchase date. Teva Finance may pay the
purchase price or any portion of the purchase price in ADRs only if the
information necessary to calculate the average Trading Price is published in a
daily newspaper of national circulation within the United States.
Upon determination of the actual number of ADRs in accordance with the
foregoing provisions, Teva Finance will publish such information in The Wall
Street Journal and on Teva's Web site on the World Wide Web.
Teva Finance's right to purchase debentures, in whole or in part, with
Teva's ADRs is subject to our satisfying various conditions, including the
registration of the ADRs under the Securities Act and the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), if required.
If such conditions are not satisfied with respect to a holder prior to the
close of business on the purchase date, Teva Finance will pay the purchase price
of the debentures of the holder entirely in cash. Teva Finance may not change
the form or components or percentages of components of consideration to be paid
for the debentures once Teva Finance has given the notice that it is required to
give to holders of debentures, except as described in the first sentence of this
paragraph.
In connection with any purchase offer, Teva Finance will:
o comply with the provisions of Rule 13e-4, Rule 14e-1 and any other
tender offer rules under the Exchange Act which may then be applicable;
and
o file Schedule 13E-4 or any other required schedule under the Exchange
Act.
Payment of the purchase price for a debenture for which a purchase notice
has been delivered and not validly withdrawn is conditioned upon delivery of the
debenture, together with necessary endorsements, to the paying agent at any time
after delivery of the purchase notice. Payment of the purchase price for the
debenture will be made promptly following the later of the purchase date or the
time of delivery of the debenture.
Holders may surrender a debenture for purchase by Teva Finance by means of
book entry delivery in accordance with the provisions set forth in the indenture
and the regulations of DTC. A security will be considered to have been
surrendered to a paying agent upon receipt by such paying agent of a copy of an
irrevocable notice given by DTC to the holder of the certificate corresponding
to such security instructing it to deliver such certificate to the relevant
registrar for cancellation.
If the paying agent holds money or securities sufficient to pay the
purchase price of the debenture on the business day following the purchase date
in accordance with the terms of the indenture, then, immediately after the
purchase date, the debenture will cease to be outstanding and interest on such
debenture will cease to accrue, whether or not the debenture is delivered to the
paying agent. Thereafter, all other rights of the holder shall terminate, other
than the right to receive the purchase price upon delivery of the debenture.
No debentures may be purchased for cash at the option of holders if there
has occurred and is continuing an event of default with respect to the
debentures described under "-- Events of Default" other than a default in the
payment of the purchase price with respect to such debentures.
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Upon a Change of Control or a Termination of Trading
If a change of control (as defined below) or a termination of trading
occurs, you will have the right to require Teva Finance to repurchase all of
your debentures not previously called for redemption, or any portion of those
debentures that is equal to $1,000 or a whole multiple of $1,000. The repurchase
date is 45 days after the date Teva Finance gives notice of a change of control
or a termination of trading.
The repurchase price of a debenture will be equal to 100% of its principal
amount plus accrued and unpaid interest.
Instead of paying the repurchase price in cash, Teva Finance may, at its
option, pay the repurchase price in cash or Teva ADRs, or any combination of
cash and ADRs. The number of ADRs a holder will receive will equal the
repurchase price divided by 97% of the average Trading Price of Teva ADRs
calculated as described above under "-- Repurchase at Option of Holders -- On
Specified Dates."
Within 30 days after the occurrence of a change of control or a
termination of trading, Teva Finance is required to notify you of such
occurrence and your resulting repurchase right. The notice will be similar to
the notice described under "-- Repurchase at Option of Holders -- On Specified
Dates." To exercise the repurchase right, you must deliver prior to or on the
30th day after the date of Teva Finance's notice, written notice to the trustee
of your exercise of your repurchase right.
The repurchase notice given by each holder electing to require Teva
Finance to repurchase debentures shall contain the information described under
"-- Repurchase at Option of Holders -- On Specified Dates."
Teva Finance will pay cash based on the average market price for all
fractional shares of ADRs in the event Teva Finance elects to deliver ADRs in
payment of the repurchase price.
You may withdraw this notice by delivering to the paying agent a notice of
withdrawal prior to the close of business on the business day immediately
preceding the repurchase date, so long as you also convert these debentures
prior to the close of business on the business day immediately preceding the
repurchase date. Teva Finance will not pay interest accrued and unpaid on any of
the debentures you convert.
A "change of control" will be deemed to have occurred at such time after
the original issuance of the debentures when either of the following has
occurred:
o the acquisition by any person, including any syndicate or group deemed
to be a "person" under Section 13(d)(3) of the Exchange Act of
beneficial ownership, directly or indirectly, through a purchase,
merger or other acquisition transaction or series of transactions of
shares of Teva's capital stock entitling that person to exercise 50% or
more of the total voting power of all shares of Teva's capital stock
entitled to vote generally in elections of directors, other than any
acquisition by Teva, any of its subsidiaries, including Teva Finance,
or any employee benefit plans; or
o Teva's consolidation or merger with or into any other person, any
merger of another person into Teva, or any conveyance, transfer, sale,
lease or other disposition of all or substantially all of Teva's
properties and assets to another person, other than any transaction (A)
that does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of Teva's capital stock or (B)
pursuant to which holders of Teva's capital stock immediately prior to
the transaction have the entitlement to exercise, directly or
indirectly, 50% or more of
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the total voting power of all shares of Teva's capital stock entitled
to vote generally in the election of directors of the continuing or
surviving person immediately after the transaction.
However, a change of control will be deemed not to have occurred if
(1) at least 90% of the consideration in the transaction or transactions
constituting a change of control consists of securities traded or to
be traded immediately following such change of control on a U.S.
national securities exchange or the Nasdaq National Market and, as a
result of such transaction or transactions, the debentures become
convertible solely into such security; or
(2) the closing sale price per share of Teva's ADRs for any five trading
days within:
o the period of 10 consecutive trading days ending immediately
after the later of the change of control or the public
announcement of the change of control, in the case of a change of
control under the first clause of the definition of change of
control above, or
o the period of 10 consecutive trading days ending immediately
before the change of control, in the case of a change of control
under the second clause of the definition of change of control
above,
equals or exceeds 110% of the conversion price of the debentures in
effect on each such trading day.
The beneficial owner shall be determined in accordance with Rule 13d-3
promulgated by the SEC under the Exchange Act. The term "person" includes any
syndicate or group which would be deemed to be a "person" under Section 13(d)(3)
of the Exchange Act.
A "termination of trading" will be deemed to have occurred if neither our
ADRs nor our ordinary shares are listed for trading on a U.S. national
securities exchange, reported on a U.S. national securities system subject to
last sale reporting or quoted on the Nasdaq National Market.
Teva Finance's right to purchase debentures, in whole or in part, with
Teva's ADRs is subject to our satisfying various conditions, including the
registration of the ADRs under the Securities Act and the Exchange Act, if
required.
If such conditions are not satisfied with respect to a holder prior to the
close of business on the purchase date, Teva Finance will pay the purchase price
of the debentures of the holder entirely in cash. Teva Finance may not change
the form or components or percentages of components of consideration to be paid
for the debentures once Teva Finance has given the notice it is required to give
to holders of debentures, except as described in the first sentence of this
paragraph.
In connection with any purchase offer, Teva Finance will:
o comply with the provisions of Rule 13e-4, Rule 14e-1 and any other
tender offer rules under the Exchange Act which may then be applicable;
and
o file Schedule 13E-4 or any other required schedule under the Exchange
Act.
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Teva Finance may, to the extent permitted by applicable law, at any time
purchase the debentures in the open market or by tender at any price or by
private agreement. Any debenture so purchased may, to the extent permitted by
applicable law, be reissued or resold or may be surrendered to the trustee for
cancellation. Any debentures surrendered to the trustee may not be reissued or
resold and will be canceled promptly.
The change of control feature of the debentures may in certain
circumstances make more difficult or discourage a takeover of Teva and thus, the
removal of incumbent management. The repurchase right is not the result of Teva
or Teva Finance's knowledge of any effort of any party to accumulate any ADRs or
ordinary shares or to obtain control of Teva by means of a merger, tender offer,
solicitation, or otherwise, or part of a plan by us to adopt a series of
anti-takeover provisions. Instead, this right is the result of negotiations
between us and the initial purchasers.
The foregoing provisions would not necessarily protect holders of the
debentures if highly leveraged or other transactions involving us occur that may
adversely affect holders.
Teva Finance's ability to repurchase debentures on November 18, 2007,
November 15, 2012 and November 15, 2017, upon the occurrence of a change of
control or upon a termination of trading is subject to important limitations.
The occurrence of a change of control or a termination of trading could cause an
event of default under, or be prohibited or limited by, the terms of debt that
Teva may incur in the future. If Teva is restricted from issuing ADRs to pay the
repurchase price, as permitted under the indenture, it may not have sufficient
financial resources or may not be able to arrange financing to pay the
repurchase price in cash. Any failure by Teva to repurchase the debentures when
required would result in an event of default under the indenture. Any such
default may, in turn, cause a default under other debt that Teva may incur in
the future.
Events of Default
Each of the following constitutes an event of default under the indenture:
(1) Teva Finance's failure to pay when due the principal of any of the
debentures at maturity, upon redemption or exercise of a repurchase
right or otherwise;
(2) Teva Finance's failure to pay an installment of interest on any
of the debentures for 30 days after the date when due;
(3) Teva's failure to perform its obligations under the guarantee;
(4) Teva's or Teva Finance's failure to perform or observe any other
term, covenant or agreement contained in the debentures or the
indenture for a period of 60 days after written notice of such
failure, requiring Teva or Teva Finance, as the case may be, to
remedy the same, shall have been given to Teva Finance by the
trustee or to Teva Finance and the trustee by the holders of at
least 25% in aggregate principal amount of the debentures then
outstanding;
(5) Teva's or Teva Finance's default under any Indebtedness(as defined
below) for money borrowed by it, the aggregate outstanding principal
amount of which is in an amount in excess of $25 million, for a
period of 30 days after written notice to Teva Finance by the
trustee or to Teva Finance and the trustee by holders of at least
25% in aggregate principal amount of the debentures then
outstanding, which default:
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o is caused by Teva or Teva Finance's, as the case may be, failure
to pay when due principal or interest on such Indebtedness by
the end of the applicable grace period, if any, unless such
Indebtedness is discharged; or
o results in the acceleration of such Indebtedness, unless such
acceleration is waived, cured, rescinded or annulled; and
(6) Teva or Teva Finance's bankruptcy, insolvency or reorganization.
The indenture provides that the trustee shall (other than in the case of
(6) above, which shall result in the debentures becoming immediately due and
payable), within 90 days of the occurrence of a default, give to the registered
holders of the debentures notice of all uncured defaults known to it, but the
trustee shall be protected in withholding such notice if it, in good faith,
determines that the withholding of such notice is in the best interest of such
registered holders, except in the case of a default in the payment of the
principal or interest on, any of the debentures when due or in the payment of
any redemption or repurchase obligation.
If an event of default shall occur and be continuing, the trustee or the
holders of at least 25% in aggregate principal amount of the debentures then
outstanding may declare the principal amount of the debentures due and payable
together with accrued interest, and then the trustee may, at its discretion,
proceed to protect and enforce the rights of the holders of debentures by
appropriate judicial proceedings. Such declaration may be rescinded or annulled
either with the written consent of the holders of a majority in aggregate
principal amount of the debentures then outstanding or a majority in aggregate
principal amount of the debentures represented at a meeting at which a quorum is
present, in each case upon the conditions provided in the indenture.
The indenture contains a provision entitling the trustee, subject to the
duty of the trustee during default to act with the required standard of care, to
be indemnified by the holders of debentures before proceeding to exercise any
right or power under the indenture at the request of such holders. The indenture
provides that the holders of a majority in aggregate principal amount of the
debentures then outstanding through their written consent, or the holders of a
majority in aggregate principal amount of the debentures then outstanding
represented at a meeting at which a quorum is present by a written resolution,
may direct the time, method and place of conducting any proceeding for any
remedy available to the trustee or exercising any trust or power conferred upon
the trustee.
Teva Finance is required to furnish annually to the trustee a statement as
to the fulfillment of its obligations under the indenture.
"Indebtedness" means, with respect to any person:
(1) any liability for borrowed money, or evidenced by an instrument for
the payment of money, or incurred in connection with the acquisition
of any property, services or assets(including securities), or
relating to a capitalized lease obligation, other than accounts
payable or any other indebtedness to trade creditors created or
assumed such person in the ordinary course of business in connection
with the obtaining of materials or services;
(2) obligations under exchange rate contracts or interest rate
protection agreements;
(3) any obligations to reimburse the issuer of any letter of credit,
surety bond, performance bond or other guarantee of contractual
performance;
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(4) any liability of another person of the type referred to in
clause(1),(2) or(3) which has been assumed or guaranteed by such
person; and
(5) any obligations described in clauses(1) through(3) secured by any
mortgage, pledge, lien or other encumbrance existing on property
which is owned or held by such person, regardless of whether the
indebtedness or other obligation secured thereby shall have been
assumed by such person.
Additional Tax Amounts
Neither Teva Finance as the issuer nor Teva as the guarantor will withhold
or deduct from payments made with respect to the debentures on account of any
present or future taxes, duties, assessments or governmental charges imposed by
or on behalf of any Netherlands Antilles or Israeli taxing authority unless such
withholding or deduction is required by law. In the event that Teva Finance or
Teva is required to withhold or deduct on account of any such taxes from any
payment made under or with respect to the debentures, Teva Finance or Teva, as
the case may be, will pay such additional tax amounts so that the net amount
received by each holder of debentures, including those additional tax amounts,
will equal the amount that such holder would have received if such taxes had not
been required to be withheld or deducted.
Additional tax amounts will not be payable with respect to a payment made
to a holder of debentures to the extent:
(1) the holder is:
o able to avoid such withholding or deduction by making a
declaration of non-residence or other claim for exemption to the
tax authority, or
o liable for such taxes, duties, assessments or governmental
charges in respect of the debentures by reason of its having some
connection with the taxing jurisdiction other than merely by the
holding of the debentures;
(2) of any estate, inheritance, gift, sales, transfer or personal
property taxes imposed with respect to the debentures, except as
otherwise provided in the indenture; or
(3) that any such taxes would not have been imposed but for the
presentation of such debentures, where presentation is required, for
payment on a date more than 30 days after the date on which such
payment became due and payable or the date on which such payment is
duly provided for, whichever is later, except to the extent that the
holder would have been entitled to additional tax amounts had the
debentures been presented for payment on any date during such 30-day
period.
Consolidation, Merger or Assumption
Teva Finance may, without the consent of the holders of debentures,
consolidate with, merge into or transfer all or substantially all of its
respective assets to any other corporation organized under the laws of the
Netherlands Antilles provided that:
o the successor corporation assumes all of the obligations of Teva
Finance under the indenture and the debentures; and
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o at the time of such transaction, no event of default, and no event
which, after notice or lapse of time, would become an event of default,
shall have happened and be continuing.
Teva may, without the consent of the holders of debentures, consolidate
with, merge into or transfer all or substantially all of its respective assets
to any other corporation provided that:
o the successor corporation assumes all of the obligations of Teva under
the indenture and the debentures; and
o at the time of such transaction, no event of default, and no event
which, after notice or lapse of time, would become an event of default,
shall have happened and be continuing.
The indenture provides that so long as any debentures are outstanding, all
of Teva Finance's membership interests will be owned directly or indirectly by
Teva or its successor.
Modifications, Amendments and Meetings
Changes Requiring Approval of Each Affected Holder
The indenture cannot be modified or amended without the written consent or
the affirmative vote of the holder of each debenture affected by such change to:
o change the maturity of the principal of or any installment of interest
on that debenture;
o reduce the principal amount of or interest on that debenture;
o change the currency of payment of that debenture or interest thereon;
o impair the right to institute suit for the enforcement of any payment
on or with respect to that debenture;
o modify Teva Finance's obligations to maintain an office or agency in
New York City;
o except as otherwise permitted or contemplated by provisions concerning
corporate reorganizations, adversely affect the repurchase option of
holders upon a change of control or the conversion rights of holders of
the debentures;
o modify Teva's obligation to own, directly or indirectly, all of Teva
Finance's outstanding membership interests;
o modify the redemption provisions of the indenture in a manner adverse
to the holders of debentures;
o modify the guarantee;
o reduce the percentage in aggregate principal amount of debentures
outstanding necessary to modify or amend the indenture or to waive
any past default; or
o reduce the percentage in aggregate principal amount of debentures
outstanding required for the adoption of a resolution or the quorum
required at any meeting of holders of debentures at which a resolution
is adopted.
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Changes Requiring Majority Approval
Except as described above, the indenture may be modified or amended
either:
o with the written consent of the holders of at least a majority in
aggregate principal amount of the debentures at the time outstanding;
or
o by the adoption of a resolution at a meeting of holders by at least a
majority in aggregate principal amount of the debentures represented at
such meeting.
Changes Requiring No Approval
The indenture may be modified or amended by Teva Finance, Teva and the
trustee, without the consent of the holder of any debenture, for the purposes
of, among other things:
o adding to Teva or Teva Finance's covenants for the benefit of the
holders of debentures;
o surrendering any right or power conferred upon Teva or Teva Finance;
o providing for conversion rights of holders of debentures if any
reclassification or change of Teva's ADRs or ordinary shares or any
consolidation, merger or sale of all or substantially all of Teva's
assets occurs;
o providing for the assumption of Teva or Teva Finance's obligations to
the holders of debentures in the case of a merger, consolidation,
conveyance, transfer or lease;
o reducing the conversion price, provided that the reduction will not
adversely affect the interests of the holders of debentures;
o complying with the requirements of the SEC in order to effect or
maintain the qualification of the indenture under the Trust
Indenture Act;
o making any changes or modifications necessary in connection with the
registration of the debentures under the Securities Act as contemplated
in the registration rights agreement; provided that such change or
modification does not, in the good faith opinion of Teva Finance's
board of directors and the trustee, adversely affect the interests of
the holders of debentures in any material respect;
o curing any ambiguity or correcting or supplementing any defective
provision contained in the indenture; provided that such modification
or amendment does not, in the good faith opinion of Teva Finance's
board of directors and the trustee, adversely affect the interests of
the holders of debentures in any material respect; or
o adding or modifying any other provisions which Teva Finance and the
trustee may deem necessary or desirable and which will not adversely
affect the interests of the holders of debentures.
Meetings
The indenture contains provisions for convening meetings of the holders of
debentures to consider matters affecting their interests.
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Quorum
The quorum at any meeting called to adopt a resolution will be persons
holding or representing a majority in aggregate principal amount of the
debentures at the time outstanding and, at any reconvened meeting adjourned for
lack of a quorum, 25% of the aggregate principal amount.
Satisfaction and Discharge
Teva Finance and Teva may satisfy and discharge their obligations under
the indenture while debentures remain outstanding if:
o all outstanding debentures will become due and payable at their
scheduled maturity within one year; or
o all outstanding debentures are scheduled for redemption within one
year,
and, in either case, Teva Finance has deposited with the trustee an amount
sufficient to pay and discharge all outstanding debentures on the date of their
scheduled maturity or the scheduled date of redemption.
Governing Law
The indenture and the debentures are governed by, and construed in
accordance with, the law of the State of New York.
Information Concerning the Trustee, Paying Agent and Conversion Agent
The Bank of New York, as trustee under the indenture, has been appointed
by us as paying agent, conversion agent, registrar and custodian with regard to
the debentures. The Bank of New York, 101 Barclay Street, New York, New York,
10286, is the depositary for Teva's ADRs. The trustee or its affiliates may from
time to time in the future provide banking and other services to us in the
ordinary course of their business.
Registration Rights
When Teva Finance issued the debentures, Teva Finance and Teva entered
into a registration rights agreement with the initial purchasers for the benefit
of the holders of the debentures. Pursuant to the agreement, Teva Finance and
Teva have agreed to, at their expense:
o use reasonable efforts to keep the registration statement effective
until the earliest of:
o November 18, 2004;
o the date when the holders of the debentures and the ADRs issuable
upon conversion of the debentures are able to sell all such
securities immediately without restriction pursuant to the volume
limitation provisions of Rule 144 under the Securities Act; and
o the date when all of the debentures and the ADRs into which the
debentures are convertible that are owned by the holders who
complete and deliver in a timely manner the selling securityholder
election and questionnaire are registered under the shelf
registration statement and disposed of in accordance with the shelf
registration statement.
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Each holder must notify Teva Finance not later than three business days
prior to any proposed sale by that holder pursuant to the shelf registration
statement. This notice will be effective for five business days. Teva Finance
may suspend the holder's use of the prospectus for a reasonable period not to
exceed 45 days in any 90-day period, and not to exceed an aggregate of 90 days
in any 360-day period, if:
o the prospectus would, in our judgment, contain a material misstatement
or omission as a result of an event that has occurred and is
continuing; and
o Teva Finance or Teva reasonably determines that the disclosure of this
material non-public information would have a material adverse effect on
Teva and its subsidiaries taken as a whole.
However, if the disclosure relates to a previously undisclosed proposed or
pending material business transaction, the disclosure of which would impede Teva
Finance or Teva's ability to consummate such transaction, Teva Finance may
extend the suspension period from 45 days to 60 days. Each holder, by its
acceptance of a debenture, agrees to hold any communication by Teva or Teva
Finance in response to a notice of a proposed sale in confidence.
Upon the initial sale of debentures or ADRs issued upon conversion of the
debentures, each selling securityholder will be required to deliver a notice of
such sale to the trustee and Teva Finance. The notice will, among other things:
o identify the sale as a transfer pursuant to the shelf registration
statement;
o certify that the prospectus delivery requirements, if any, of the
Securities Act have been complied with; and
o certify that the selling holder and the aggregate principal amount of
debentures or number of shares, as the case may be, owned by such
holder are identified in the related prospectus in accordance with the
applicable rules and regulations under the Securities Act.
If, the registration statement ceases to be effective or fails to be
usable and
(1) Teva Finance does not cure the registration statement within five
business days by a post-effective amendment or a report filed
pursuant to the Exchange Act or
(2) if applicable, Teva Finance does not terminate the suspension
period, described in the preceding paragraph, by the 45th or 60th
day, as the case may be (each, a "registration default"),
additional interest (the "Additional Amounts") will accrue on the debentures,
from and including the day following the registration default to but excluding
the day on which the registration default has been cured. Additional Amounts
will be paid semiannually in arrears, with the first semiannual payment due on
the first interest payment date, as applicable, following the date on which such
Additional Amounts begin to accrue, and will accrue at a rate per year equal to:
o an additional 0.25% of the principal amount to and including the 90th
day following such registration default; and
o an additional 0.5% of the principal amount from and after the 91st day
following such registration default.
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In no event will Additional Amounts accrue at a rate per year exceeding
0.5%. If a holder has converted some or all of its debentures into ADRs, the
holder will be entitled to receive equivalent amounts based on the principal
amount of the debentures converted. A holder will not be entitled to Additional
Amounts unless it has provided all information requested by the questionnaire
prior to the twenty business day deadline.
Form, Denomination and Registration
Denomination and Registration. The debentures were issued in fully
registered form, without coupons, in denominations of $1,000 principal amount
and whole multiples of $1,000.
Global Debentures; Book-Entry Form. The debentures are represented by
permanent global debentures in definitive, fully registered form without
interest coupons. The global debentures were deposited with the trustee as
custodian for DTC and registered in the name of a nominee of DTC in New York,
New York for the accounts of participants in DTC.
Upon the initial sales of debentures by the selling securityholders, each
selling securityholder must deliver a notice of the sale to the trustee and to
us. The notice will, among other things:
o identify the sale as a transfer under the registration statement of
which this prospectus forms a part;
o certify that the selling securityholder has satisfied any prospectus
delivery requirements under the Securities Act, and
o certify that the selling securityholder and the aggregate principal
amount of debentures owned by such holder are identified in the
prospectus as required by the applicable rules and regulations under
the Securities Act.
Investors who purchase debentures in offshore transactions in reliance on
Regulation S under the Securities Act may hold their interests in the Regulation
S global debenture directly through Euroclear and Clearstream, if they are
participants in these systems, or indirectly through organizations that are
participants in these systems. Euroclear and/or Clearstream will hold interests
in the Regulation S global debenture on behalf of their participants through
their respective depositaries, which in turn will hold the interests in the
Regulation S global debenture in customers' securities accounts in the
depositaries' names on the books of DTC. Citibank, N.A., is acting initially as
depositary for Clearstream, and The Chase Manhattan Bank is acting initially as
depositary for Euroclear.
Except as set forth below, the global debentures may be transferred, in
whole or in part, only to another nominee of DTC or to a successor of DTC or its
nominee.
DTC has advised us that it is:
o a limited purpose trust company organized under the laws of the State
of New York;
o a member of the Federal Reserve System;
o a "clearing corporation" within the meaning of the New York Uniform
Commercial Code; and
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o a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act.
DTC was created to hold securities of institutions that have accounts with
DTC and to facilitate the clearance and settlement of securities transactions
among its participants in securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. DTC's participants include:
o securities brokers and dealers;
o banks;
o trust companies; and
o clearing corporations.
Access to DTC's book-entry system is also available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, whether directly or indirectly.
Upon the issuance of the global debentures, DTC credited, on its
book-entry registration and transfer system, the respective principal amounts of
the individual beneficial interests represented by the global debentures to the
accounts of participants. The accounts credited were designated by the initial
purchasers of the beneficial interests. Ownership of beneficial interests in the
global debentures is limited to participants or persons that may hold interests
through participants. Ownership of beneficial interests in the global debentures
is shown on, and the transfer of those ownership interests will be effected only
through, records maintained by DTC (with respect to participants' interests) and
the participants (with respect to the owners of beneficial interests in the
global debentures other than participants).
So long as DTC or its nominee is the registered holder and owner of the
global debentures, DTC or its nominee, as the case may be, will be considered
the sole legal owner of the debentures represented by the global debentures for
all purposes under the indenture and the debentures. Except as set forth below,
owners of beneficial interests in the global debentures will not be entitled to
receive definitive debentures and will not be considered to be the owners or
holders of any debentures under the global debentures. Teva Finance understands
that under existing industry practice, in the event an owner of a beneficial
interest in the global debentures desires to take any action that DTC, as the
holder of the global debentures, is entitled to take, DTC would authorize the
participants to take the action, and that participants would authorize
beneficial owners owning through the participants to take the action or would
otherwise act upon the instructions of beneficial owners owning through them. No
beneficial owner of an interest in the global debentures will be able to
transfer the interest except in accordance with DTC's applicable procedures, in
addition to those provided for under the indenture and, if applicable, those of
Euroclear and Clearstream.
Teva Finance will make payments of the principal and interest on the
debentures represented by the global debentures registered in the name of and
held by DTC or its nominee to DTC or its nominee, as the case may be, as the
registered owner and holder of the global debentures.
Teva Finance expects that DTC or its nominee, upon receipt of any payment
of principal or interest in respect of the global debentures, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the global debentures
as shown on the records of DTC or its nominee. Teva Finance also expects that
payments by participants and
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indirect participants to owners of beneficial interests in the global debentures
held through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for accounts of
customers registered in the names of nominees for these customers. The payments,
however, will be the responsibility of the participants and indirect
participants, and none of Teva Finance, Teva, the trustee or any paying agent or
conversion agent will have any responsibility or liability for:
o any aspect of the records relating to, or payments made on account of,
beneficial ownership interests in the global debentures;
o maintaining, supervising or reviewing any records relating to the
beneficial ownership interests;
o any other aspect of the relationship between DTC and its participants;
or
o the relationship between the participants and indirect participants
and the owners of beneficial interests in the global debentures.
Unless and until it is exchanged in whole or in part for definitive
debentures, the global debentures may not be transferred except as a whole by
DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC.
Participants in DTC will effect transfers with other participants in the
ordinary way in accordance with DTC rules and will settle transfers in same-day
funds. Participants in Euroclear and Clearstream will effect transfers with
other participants in the ordinary way in accordance with the rules and
operating procedures of Euroclear and Clearstream, as applicable. If a holder
requires physical delivery of a definitive debenture for any reason, including
to sell debentures to persons in jurisdictions which require physical delivery
or to pledge debentures, the holder must transfer its interest in the global
debentures in accordance with the normal procedures of DTC and the procedures
set forth in the indenture.
Cross-market transfers between DTC, on the one hand, and directly or
indirectly through Euroclear or Clearstream participants, on the other, will be
effected in DTC in accordance with DTC rules on behalf of Euroclear or
Clearstream, as the case may be, by its respective depositary; however, these
cross-market transactions will require delivery of instructions to Euroclear or
Clearstream, as the case may be, by the counterparty in the system in accordance
with its rules and procedures and within its established deadlines (Brussels
time). Euroclear or Clearstream, as the case may be, will, if the transaction
meets its settlement requirements, deliver instructions to its respective
depositary to take action to effect final settlement on its behalf by delivering
or receiving interests in the global debentures in DTC, and making or receiving
payment in accordance with normal procedures for same-day funds settlement
applicable to DTC. Euroclear participants and Clearstream participants may not
deliver instructions directly to the depositaries for Euroclear or Clearstream.
Because of time zone differences, the securities account of a Euroclear or
Clearstream participant purchasing an interest in the global debentures from a
DTC participant will be credited during the securities settlement processing day
immediately following the DTC settlement date, and the credit of any
transactions interests in the global debentures settled during the processing
day will be reported to the relevant Euroclear or Clearstream participant on
that day. Cash received in Euroclear or Clearstream as a result of sales of
interests in the global debentures by or through a Euroclear or Clearstream
participant to a DTC participant will be received with value on the DTC
settlement date, but will be available in the relevant Euroclear or Clearstream
cash account only as of the business day following settlement in DTC.
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Teva Finance expects that DTC will take any action permitted to be taken
by a holder of debentures only at the direction of one or more participants to
whose accounts at DTC interests in the global debentures are credited and only
in respect of the portion of the aggregate principal amount of the debentures as
to which the participant or participants has or have given direction. However,
if there is an event of default under the debentures, DTC will exchange the
global debentures for definitive debentures, which it will distribute to its
participants. These definitive debentures are subject to restrictions on
registration of transfers and will bear appropriate legends restricting their
transfer.
Although Teva Finance expects that DTC, Euroclear and Clearstream will
agree to the foregoing procedures in order to facilitate transfers of interests
in the global debentures among participants of DTC, Euroclear, and Clearstream,
DTC, Euroclear and Clearstream are under no obligation to perform or continue to
perform these procedures, and these procedures may be discontinued at any time.
None of Teva Finance, Teva, or the trustee have any responsibility for the
performance by DTC, Euroclear or Clearstream or their participants or indirect
participants of their obligations under the rules and procedures governing their
operations.
If DTC is at any time unwilling or unable to continue as a depositary for
the global debentures or ceases to be a clearing agency registered under the
Exchange Act and Teva Finance does not appoint a successor depositary within 90
days, Teva Finance will issue definitive debentures in exchange for the global
debentures. The definitive debentures will be subject to restrictions on
registration of transfers and will bear appropriate legends concerning these
restrictions.
Definitive Debentures. Definitive debentures may also be issued in
exchange for debentures represented by the global debentures if Teva Finance
does not appoint a successor depositary as set forth above under "-- Global
Debentures; Book-Entry Form" or in other circumstances set forth in the
indenture.
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DESCRIPTION OF TEVA ORDINARY SHARES
The par value of Teva's ordinary shares is NIS 0.10 and all issued and
outstanding ordinary shares are fully paid and non-assessable. Holders of
paid-up ordinary shares are entitled to participate equally in the payment of
dividends and other distributions and, in the event of liquidation, in all
distributions after the discharge of liabilities to creditors.
Teva's Board of Directors may declare interim dividends and propose the
final dividend with respect to any fiscal year out of profits available for
dividends after statutory appropriation to capital reserves. Declaration of a
final dividend (not exceeding the amount proposed by the Board) requires
shareholder approval through the adoption of an ordinary resolution. All
ordinary shares represented by the ADRs will be issued in registered form only.
Ordinary shares do not entitle their holders to preemptive rights.
The par value of Teva's ordinary shares is NIS 0.10 per share, and all
issued and outstanding ordinary shares are fully paid and non-assessable.
Holders of paid-up ordinary shares are entitled to participate equally in the
payment of dividends and other distributions and, in the event of liquidation,
in all distributions after the discharge of liabilities to creditors.
Voting is on the basis of one vote per share. An ordinary resolution (for
example, resolutions for the approval of final dividends and the appointment of
auditors) requires the affirmative vote of a majority of the shares voting in
person or by proxy. Certain resolutions (for example, resolutions amending the
Articles of Association and authorizing changes in the rights of shareholders)
require the affirmative vote of at least 75% of the shares voting in person or
by proxy, and certain amendments of the Articles of Association require the
affirmative vote of at least 85% of the shares voting in person by proxy.
Neither Teva's Memorandum or Articles of Association, nor the laws of the
State of Israel, restrict in any way the ownership or voting of Teva's ordinary
shares by nonresidents or persons who are not citizens of Israel, except with
respect to citizens or residents of countries that are in a state of war with
Israel.
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DESCRIPTION OF AMERICAN DEPOSITARY RECEIPTS
Set forth below is a summary of the Deposit Agreement, as amended, among
Teva, The Bank of New York as depositary (the "depositary"), and the holders
from time to time of ADRs. This summary is not complete and is qualified in its
entirety by the Deposit Agreement, a copy of which has been filed as an exhibit
to the registration statement filed on February 15, 2000. Additional copies of
the Deposit Agreement are available for inspection at the corporate trust office
of the depositary, 101 Barclay Street, New York, New York 10286, and at the
principal Tel Aviv office of Bank Leumi Le-Israel Ltd., 2-4 Lilienblum Street,
Tel Aviv, Israel, and the principal Tel Aviv office of Israel Discount Bank
Limited, 27-31 Yehuda Halevi Street, Tel Aviv, Israel (collectively, the
"Custodian").
American Depositary Receipts
ADRs evidencing a specified number of American Depositary Shares ("ADSs")
are issuable by the depositary pursuant to the Deposit Agreement. Each ADS
represents one ordinary share of Teva deposited with the Custodian.
Deposit and Withdrawal of Ordinary Shares
The depositary has agreed that, upon deposit with the Custodian of
ordinary shares of Teva accompanied by an appropriate instrument or instruments
of transfer or endorsement in form satisfactory to the Custodian and any
certificates as may be required by the depositary or the Custodian, the
depositary will execute and deliver at its corporate trust office, upon payment
of the fees, charges and taxes provided in the Deposit Agreement, to or upon the
written order of the person or persons entitled thereto, an ADR registered in
the name of such person or persons for the number of ADSs issuable in respect of
such deposit.
Every person depositing ordinary shares under the Deposit Agreement shall
be deemed to represent and warrant that such ordinary shares are validly issued,
fully paid, nonassessable ordinary shares and that such person is duly
authorized to make such deposit, and the deposit of such ordinary shares or sale
of ADRs by that person is not restricted under the Securities Act.
Upon surrender of ADRs at the corporate trust office of the depositary,
and upon payment of the fees provided in the Deposit Agreement, ADR holders are
entitled to delivery to them or upon their order at the principal office of the
Custodian or at the Corporate trust office of the depositary of certificates
representing the ordinary shares and any other securities, property or cash that
the surrendered ADRs evidence the right to receive. Delivery to the Corporate
trust office of the depositary shall be made at the risk and expense of the ADR
holder surrendering ADRs.
The depositary may execute and deliver ADRs prior to the receipt of
ordinary shares ("Pre-Release"). The depositary may deliver ordinary shares upon
the receipt and cancellation of ADRs that have been Pre-Released, whether or not
such cancellation is prior the termination of such Pre-Release or the depositary
knows that such ADR has been Pre-Released. Each Pre-Release will be
(1) accompanied by a written representation from the person to whom
ordinary shares or ADRs are to be delivered that such person, or its
customer, owns the ordinary shares or ADRs to be remitted, as the
case may be,
(2) at all times fully collateralized with cash or such other
collateral as the depositary deems appropriate,
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(3) terminable by the depositary on no more than five (5) business
days' notice and
(4) subject to such further indemnities and credit regulations as the
depositary deems appropriate.
The number of ADRs outstanding at any time as a result of Pre-Releases
will not normally exceed thirty percent (30%) of the ordinary shares deposited
with the depositary; provided, however, that the depositary reserves the right
to change or disregard such limit from time to time as it deems appropriate.
Dividends, Other Distributions and Rights
The depositary is required to convert or cause to be converted into U.S.
dollars, to the extent that in its judgment it can do so on a reasonable basis
and can transfer the resulting U.S. dollars to the United States, all cash
dividends and other cash distributions denominated in a currency other than U.S.
dollars that it receives in respect of the deposited ordinary shares, and to
distribute the amount received, net of any expenses incurred by the depositary
in connection with conversion, to the holders of ADRs. The amount distributed
will be reduced by any amounts to be withheld by Teva or the depositary for
applicable taxes net of expenses of conversion into U.S. dollars. See "United
States Federal Income Tax Considerations -- Dividends on the ADRs." If the
depositary determines that any foreign currency received by it cannot be so
converted on a reasonable basis and transferred, or if any required approval or
license of any government or agency is denied or not obtained within a
reasonable period of time, the depositary may distribute such foreign currency
received by it or hold such foreign currency uninvested and without liability
for interest thereon for the respective accounts of the ADR holders. If any
conversion of foreign currency, in whole or in part, cannot be effected for
distribution to some of the holders of ADRs entitled thereto, the depositary may
make such conversion and distribution in U.S. dollars to the extent permissible
to such holders of ADRs and may distribute the balance of the currency received
by the depositary to, or hold such balance uninvested and without liability for
interest thereon for the respective accounts of such holders of ADRs.
If any distribution upon any ordinary shares deposited or deemed deposited
under the Deposit Agreement consists of a dividend in, or free distribution of,
additional ordinary shares, the depositary shall, only if Teva so requests,
distribute to the holders of outstanding ADRs, on a pro rata basis, additional
ADRs that represent the number of additional ordinary shares received as such
dividend or free distribution subject to the terms and conditions of the Deposit
Agreement. In lieu of delivering fractional ADRs in the event of any such
distribution, the depositary will sell the amount of additional ordinary shares
represented by the aggregate of such fractions and will distribute the net
proceeds to holders of ADRs. If additional ADRs are not so distributed, each ADR
shall thereafter also represent the additional ordinary shares distributed
together with the ordinary shares represented by such ADR prior to such
distribution.
If Teva offers or causes to be offered to the holders of ordinary shares
any rights to subscribe for additional ordinary shares or any rights of any
other nature, the depositary, after consultation with Teva, shall have
discretion as to the procedure to be followed in making such rights available to
holders of ADRs or in disposing of such rights for the benefit of such holders
and making the net proceeds available to such holders or, if the depositary may
neither make such rights available to such holders nor dispose of such rights
and make the net proceeds available to such holders, the depositary shall allow
the rights to lapse; provided, however, that the depositary will, if requested
by Teva, take action as follows:
(1) if at the time of the offering of any rights the depositary
determines in its discretion that it is lawful and feasible to make
such rights available to all holders of ADRs or to certain holders
of ADRs but not other holders of ADRs, the depositary may distribute
to any
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holder of ADRs to whom it determines the distribution to be lawful
and feasible, on a pro rata basis, warrants or other instruments
therefor in such form as it deems appropriate or
(2) if the depositary determines in its discretion that it is not lawful
and feasible to make such rights available to certain holders of
ADRs, it may sell the rights, warrants or other instruments in
proportion to the number of ADRs held by the holder of ADRs to whom
it has determined it may not lawfully or feasibly make such rights
available, and allocate the net proceeds of such sales (net of the
fees of the depositary and all taxes and governmental charges) for
the account of such holders of ADRs otherwise entitled to such
rights, warrants or other instruments, upon an averaged or other
practical basis without regard to any distinctions among such
holders of ADRs because of exchange restrictions or the date of
delivery of any ADR or otherwise.
The depositary shall not be responsible for any failure to determine that
it may be lawful and feasible to make such rights available to holders of ADRs
in general or any holder in particular.
If a holder of ADRs requests the distribution of warrants or other
instruments in order to exercise the rights allocable to the ADSs of such
holder, the depositary will make such rights available to such holder upon
written notice from Teva to the depositary that Teva has elected in its sole
discretion to permit such rights to be exercised and such holder has executed
such documents as Teva has determined in its sole discretion are reasonably
required under applicable law. Upon instruction pursuant to such warrants or
other instruments to the depositary from such holder to exercise such rights,
upon payment by such holder to the depositary for the account of such holder of
an amount equal to the purchase price of the ordinary shares to be received upon
the exercise of the rights, and upon payment of the fees of the depositary as
set forth in such warrants or other instruments, the depositary shall, on behalf
of such holder, exercise the rights and purchase the ordinary shares, and Teva
shall cause the ordinary shares so purchased to be delivered to the depositary
on behalf of such holder. As agent for such holder, the depositary will cause
the ordinary shares so purchased to be deposited under the Deposit Agreement,
and shall issue and deliver to such holder legended ADRs, restricted as to
transfer under applicable securities laws.
The depositary will not offer to the holders of ADRs any rights to
subscribe for additional ordinary shares or rights of any other nature, unless
and until such a registration statement is in effect with respect to the rights
and the securities to which they relate, or unless the offering and sale of such
securities to the holders of such ADRs are exempt from registration under the
provisions of the Securities Act and an opinion of counsel satisfactory to the
depositary and Teva has been obtained.
If the depositary determines that any distribution of property is subject
to any tax or other governmental charge that the depositary is obligated to
withhold, the depositary may by public or private sale in Israel dispose of all
or a portion of such property in such amounts and in such manner as the
depositary deems necessary and practicable to pay any such taxes or charges, and
the depositary will distribute the net proceeds of any such sale and after
deduction of any taxes or charges to the ADR holders entitled thereto.
Upon any change in nominal value, change in par value, split-up,
consolidation or any other reclassification of ordinary shares, or upon any
recapitalization, reorganization, merger or consolidation or sale of assets
affecting Teva or to which it is a party, any securities that shall be received
by the depositary or the Custodian in exchange for or in conversion of or in
respect of ordinary shares shall be treated as newly deposited ordinary shares
under the Deposit Agreement, and ADRs shall thenceforth represent the new
ordinary shares so received in respect of ordinary shares, unless additional
ADRs are delivered or the depositary calls for the surrender of outstanding ADRs
to be exchanged for new ADRs.
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Record Dates
Whenever any cash dividend or other cash distribution shall become
payable, any distribution other than cash shall be made or rights shall be
issued with respect to the ordinary shares, or whenever for any reason the
depositary causes a change in the number of ordinary shares that are represented
by each ADR, or whenever the depositary shall receive notice of any meeting of
holders of ordinary shares, the depositary shall fix a record date
(1) for the determination of the holders of ADRs who shall be entitled
o to receive such dividend, distribution or rights, or the net
proceeds of the sale, or
o to give instructions for the exercise of voting rights at any
such meeting, or
(2) on or after which each ADS will represent the changed number of
ordinary shares.
Reports and Other Communications
Teva will furnish to the depositary and the Custodian all notices of
shareholders' meetings and other reports and communications that are made
generally available to the holders of ordinary shares and English translations
of the same. The depositary will make such notices, reports and communications
available for inspection by ADR holders at its corporate trust office when
furnished by Teva pursuant to the Deposit Agreement and, upon request by Teva,
will mail such notices, reports and communications to ADR holders at Teva's
expense.
Voting of the Underlying Ordinary Shares
Upon receipt of notice of any meeting or solicitation of consents or
proxies of holders of ordinary shares, if requested in writing, the depositary
shall, as soon as practicable thereafter, mail to the ADR holders a notice
containing
(1) such information as is contained in the notice received by the
depositary and
(2) a statement that the holders of ADRs as of the close of business on
a specified record date will be entitled, subject to applicable law
and the provisions of Teva's Memorandum and Articles of Association,
to instruct the depositary as to the exercise of voting rights, if
any, pertaining to the amount of ordinary shares represented by
their respective ADSs.
Upon the written request of an ADR holder on such record date, received on
of before the date established by the depositary for such purpose, the
depositary shall endeavor, insofar as is practicable and permitted under
applicable law and the provisions of Teva's Memorandum and Articles of
Association, to vote or cause to be voted the amount of ordinary shares
represented by the ADRs in accordance with the instructions set forth in such
request. If no instructions are received by the depositary from a holder of an
ADR, the depositary shall give a discretionary proxy for the ordinary shares
represented by such holder's ADR to a person designated by Teva.
Amendment and Termination of the Deposit Agreement
The form of the ADRs and the terms of the Deposit Agreement may at any
time be amended by written agreement between Teva and the depositary. Any
amendment that imposes or increases any fees or charges (other than taxes or
other governmental charges), or that otherwise prejudices any substantial
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existing right of holders of ADRs shall, however, not become effective until the
expiration of three months after notice of such amendment has been given to the
holders of outstanding ADRs. Every holder of an ADR at the time such amendment
becomes effective will be deemed, by continuing to hold such ADR, to consent and
agree to such amendment and to be bound by the Deposit Agreement as amended
thereby. In no event will any amendment impair the right of any ADR holder to
surrender the ADRs held by such holder and receive therefore the underlying
ordinary shares and any other property represented thereby, except in order to
comply with mandatory provisions of applicable law.
Whenever so directed by Teva, the depositary has agreed to terminate the
Deposit Agreement by mailing notice of such termination to the holders of all
ADRs then outstanding at least 30 days prior to the date fixed in such notice
for such termination. The depositary may likewise terminate the Deposit
Agreement if at any time 60 days shall have expired after the depositary shall
have delivered to the holders of all ADRs then outstanding and Teva a written
notice of its election to resign and a successor depositary shall not have been
appointed and accepted its appointment.
On and after the date of termination, an ADR holder, upon surrender of
such ADR at the Corporate trust office of the depositary, upon payment of the
fees of the depositary, and upon payment of any applicable tax or governmental
charges, will be entitled to delivery to him or upon his order of the amount of
ordinary shares and other property represented by such ADR. If any ADRs remain
outstanding after the date of termination, the depositary thereafter will
discontinue the registration of transfers of ADRs, will suspend the distribution
of dividends to the holders and will not give any further notices or perform any
further acts under the Deposit Agreement, except
(1) the collection of dividends and other distributions,
(2) the sale of rights and other property, and
(3) the delivery of ordinary shares, together with any dividends or
other distributions received with respect thereto and the net
proceeds of the sale of any rights or other property, in exchange
for surrendered ADRs, subject to the terms of the Deposit Agreement.
At any time after the expiration of one year from the date of termination,
the depositary may sell the underlying ordinary shares and hold uninvested the
net proceeds, together with any cash then held by it under the Deposit
Agreement, unsegregated and without liability for interest, for the pro rata
benefit of the holders of ADRs that have not theretofore surrendered their ADRs
and such holders shall become general creditors of the depositary with respect
to such net proceeds. After making such sale, the depositary shall be discharged
from all obligations under the Deposit Agreement, except to account for net
proceeds and other cash (after deducting fees of the depositary) and except for
obligations for indemnification set forth in the Deposit Agreement. Upon the
termination of the Deposit Agreement, Teva will also be discharged from all
obligations thereunder, except for certain obligations to the depositary.
Charges of Depositary
Teva will pay the fees, reasonable expenses and out-of-pocket charges of
the depositary and those of any registrar only in accordance with agreements in
writing entered into between the depositary and Teva from time to time. The
following charges shall be incurred by any party depositing or withdrawing
ordinary shares or by any party surrendering ADRs or to whom ADRs are issued
(including, without limitation, issuance pursuant to a stock
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dividend or stock split declared by Teva or an exchange of stock regarding the
ADRs or deposited ordinary shares or a distribution of ADRs pursuant to the
terms of the Deposit Agreement):
(1) the fees of the depositary for the execution and delivery, transfer,
or surrender of ADRs, or the making of any cash distribution,
pursuant to the Deposit Agreement,
(2) any applicable taxes and other governmental charges,
(3) any applicable transfer or registration fees,
(4) certain cable, telex and facsimile transmission charges as
provided in the Deposit Agreement,
(5) any expenses incurred in the conversion of foreign currency,
(6) a fee of $5.00 or less per 100 ADRs (or a portion of such amount of
ADRs) for the delivery of ADRs in connection with the deposit of
ordinary shares or distributions on ordinary shares on the surrender
of ADRs and
(7) a fee not in excess of $1.50 or less per certificate for an ADR or
ADRs for transfers made pursuant to the Deposit Agreement.
The depositary may own and deal in any class of securities of Teva and its
affiliates and in ADRs.
Liability of Holders for Taxes, Duties or Other Charges
Any tax or other governmental charge with respect to ADRs or any deposited
ordinary shares represented by any ADR shall be payable by the holder of such
ADR to the depositary. The depositary may refuse to effect transfer of such ADR
or any withdrawal of deposited ordinary shares represented by such ADR until
such payment is made, and may withhold any dividends or other distributions or
may sell for the account of the holder any part or all of the deposited ordinary
shares represented by such ADR and may apply such dividends or distributions or
the proceeds of any such sale in payment of any such tax or other governmental
charge and the holder of such ADR shall remain liable for any deficiency.
Transfer of American Depositary Receipts
The ADRs are transferable on the books of the depositary, except during
any period when the transfer books of the depositary are closed, or if any such
action is deemed necessary or advisable by the depositary or Teva at any time or
from time to time because of any requirement of law or of any government or
governmental body or commission or under any provision of the Deposit Agreement.
The surrender of outstanding ADRs and withdrawal of deposited ordinary shares
may not be suspended subject only to
(1) temporary delays caused by closing the transfer books of the
depositary or Teva, the deposit of ordinary shares in connection
with voting at a shareholders' meeting or the payment of dividends,
(2) the payment of fees, taxes and similar charges and
(3) compliance with the United States or foreign laws or governmental
regulations relating to the ADRs or to the withdrawal of the
deposited ordinary shares.
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The depositary shall not knowingly accept for deposit under the Deposit
Agreement any ordinary shares required to be registered under the provisions of
the Securities Act, unless a registration statement is in effect as to such
ordinary shares. As a condition to the execution and delivery, registration of
transfer, split-up, combination or surrender of any ADR or withdrawal of
ordinary shares, the depositary, the Custodian or the registrar may require
payment from the person presenting the ADR or the depositor of the ordinary
shares of a sum sufficient to reimburse it for any tax or other governmental
charge and any stock transfer or registration fee with respect thereto, payment
of any applicable fees payable by the holders of ADRs, may require the
production of proof satisfactory to the depositary as to the identity and
genuineness of any signature and may also require compliance with any
regulations the depositary may establish consistent with the provisions of the
Deposit Agreement. The depositary may refuse to execute and deliver ADRs,
register the transfer of any ADR or make any distribution on, or related to,
ordinary shares until it or the Custodian has received proof of citizenship or
residence, exchange control approval or other information as it may deem
necessary or proper. Holders of ADRs may inspect the transfer books of the
depositary at any reasonable time, provided, that such inspection shall not be
for the purpose of communicating with holders of ADRs in the interest of a
business or object other than Teva's business or a matter related to the Deposit
Agreement or ADRs.
General
Neither the depositary nor Teva nor any of their directors, officers,
employees, agents or affiliates will be liable to the holders of ADRs if by
reason of any present or future law or regulation of the United States or any
other country or of any government or regulatory authority or any stock
exchange, any provision, present or future, of Teva's Memorandum and Articles of
Incorporation or any circumstance beyond its control, the depositary or Teva or
any of their respective directors, officers, employees, agents or affiliates is
prevented or delayed in performing its obligations or exercising its discretion
under the Deposit Agreement or is subject to any civil or criminal penalty on
account of performing its obligations. The obligations of Teva and the
depositary under the Deposit Agreement are expressly limited to performing their
obligations specifically set forth in the Deposit Agreement without negligence
or bad faith.
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UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is the opinion of Willkie Farr & Gallagher, U.S. counsel to
Teva, as to the material United States federal income and estate tax
considerations relating to the purchase, ownership and disposition of the
debentures and ADRs. It is not, however, a complete analysis of all the
potential tax considerations. This opinion is based on the provisions of the
United States Internal Revenue Code (the "Code"), the applicable Treasury
Regulations, judicial authority and current administrative rulings and practice,
all of which are subject to change, possibly on a retroactive basis.
Unless otherwise stated, this opinion deals only with United States
Holders. The term "United States Holder" means a beneficial holder of a
debenture or ADR that is, for United States federal income tax purposes,
(1) a citizen or resident of the United States,
(2) a corporation or any other entity taxable as a corporation created
or organized under the laws of the United States or any of its
political subdivisions,
(3) an estate, the income of which is includable in gross income for
U.S. federal income tax purposes regardless of its source, or
(4) a trust, if a U.S. court is able to exercise primary supervision
over the administration of the trust and one or more U.S. persons
have the authority to control all substantial decisions of the
trust.
The term "Non-United States Holder" means a beneficial holder of a
debenture or ADR that is not a United States Holder.
This opinion deals only with holders that will hold debentures and ADRs
into which the debentures may be converted as "capital assets" (within the
meaning of Section 1221 of the Code). This opinion does not deal with all
aspects of United States federal income taxation that might be relevant to
particular holders in light of their personal investment circumstances or
status, nor does it address tax considerations applicable to investors that may
be subject to special tax rules, such as certain financial institutions, tax-
exempt organizations, S corporations, insurance companies, broker-dealers,
dealers or traders in securities or currencies, expatriates subject to Code
Section 877 and taxpayers subject to the alternative minimum tax. It also does
not discuss debentures held as part of a hedge, straddle, "synthetic security"
or other integrated investment composed of a debenture and one or more other
investments, or situations in which the functional currency of the holder is not
the United States dollar. Moreover, it does not discuss the effect of any
applicable state, local or foreign tax laws. Teva has not sought any ruling from
the Internal Revenue Service (the "IRS") with respect to the statements made in
this opinion, and cannot assure you that the IRS will agree with such
statements. The following discussion is for general information only. Investors
considering the purchase of debentures should consult their own tax advisors
with respect to the application of the United States federal income tax laws to
their particular situations as well as any tax consequences arising under the
laws of any state, local or foreign taxing jurisdiction or under any applicable
tax treaty.
Bond Premium
A United States Holder who purchases a debenture at a cost in excess of
its principal amount will be considered to have purchased the debenture at a
premium, commonly referred to as a "bond premium."
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In certain circumstances, a United States Holder who purchases a debenture
at a bond premium may be able to amortize such premium so as to offset interest
income payable in respect of the debenture. For this purpose, a holder must
bifurcate the amount it paid for the debenture into
(1) the amount paid for the underlying debt instrument and
(2) the amount paid for the right to convert the debenture into equity.
If the amount paid for the underlying debt instrument is in excess of the
debenture's principal amount, then such excess may be amortized if the United
States Holder who purchases the debenture makes an election, applicable to all
debentures held by such holder, to amortize such premium, using a constant yield
method, over
(1) the remaining term of the debenture or
(2) if a smaller amortization allowance would result, by computing such
allowance with reference to the amount payable on an earlier call
date, and by amortizing such allowance over the shorter period to
such call date.
If the bond premium is amortized, the amount of interest that must be
included in the United States Holder's income for each period ending on an
interest payment date or at the stated maturity, as the case may be, will be
reduced by the portion of the premium allocable to such period. If an election
to amortize bond premium is not made, a United States Holder must include the
full amount of each interest payment in income in accordance with its regular
method of accounting and will receive a tax benefit from the premium only in
computing such United States Holder's gain or loss upon the sale or other
disposition or payment of the principal amount of the debenture.
Market Discount
If a United States Holder purchases, subsequent to its original issuance,
a debenture for an amount that is less than its principal amount as of the
purchase date, the amount of the difference generally will be treated as "market
discount," unless such difference is less than a specified de minimis amount. A
United States Holder must treat any gain recognized on the sale, exchange,
redemption, retirement or other disposition of the debentures as ordinary income
to the extent of the accrued market discount that has not previously been
included in income. In addition, a United States Holder may be required to
defer, until the maturity date of the debenture or its earlier disposition in a
taxable transaction, the deduction of all or a portion of the interest expense
on any indebtedness incurred or continued to purchase or carry such debenture.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the debenture, unless the
United States Holder elects to accrue market discount on a constant interest
method. A United States Holder of a debenture may elect to include market
discount in income currently as it accrues (under either the ratable or constant
interest method). This election to include market discount currently, once made,
applies to all market discount obligations acquired by such holder in or after
the first taxable year to which the election applies and may not be revoked
without the consent of the IRS. If the United States Holder of debentures makes
such an election, the foregoing rules with respect to the recognition of
ordinary income on sales and other dispositions of such instruments, and with
respect to the deferral of interest deductions on debt incurred or maintained to
purchase or carry such debt instruments would not apply.
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Payment of Interest
A United States Holder must generally include interest on a debenture in
its ordinary income at the time such interest is received or accrued, in
accordance with such United States Holder's method of accounting for United
States federal income tax purposes.
Sale, Exchange or Redemption of the Debentures
Upon the sale, exchange or redemption of a debenture, a United States
Holder generally will recognize capital gain or loss equal to the difference
between
(1) the amount of cash proceeds and the fair market value of any other
property received on the sale, exchange or redemption (except to the
extent such amount is attributable to accrued and unpaid interest,
which is treated as interest subject to the rules discussed above
under "Payment of Interest") and
(2) such holder's adjusted tax basis in the debenture.
A United States Holder's adjusted tax basis in a debenture generally will
equal the cost of the debenture to such holder. Such capital gain or loss will
be long-term capital gain or loss if the United States Holder's holding period
in the debenture is more than one year at the time of sale, exchange or
redemption.
Conversion of the Debentures
Upon the conversion of a debenture into ADRs, a United States Holder
generally will recognize capital gain or loss equal to the difference between
(1) the sum of the fair market value of the ADRs received upon
conversion (except to the extent such amount is attributable to
accrued and unpaid interest, which is treated as interest subject to
the rules discussed above under "Payment of Interest") and any cash
received in lieu of fractional ADRs; and
(2) such holder's adjusted tax basis in the debenture.
A United States Holder's adjusted tax basis in a debenture generally will
equal the cost of the debenture to such holder. Such capital gain or loss will
be long-term capital gain or loss if the United States Holder's holding period
in the debenture is more than one year at the time of conversion.
Upon conversion of a debenture into ADRs, a United States Holder will
generally take a basis in such ADRs equal to their fair market value at the time
of conversion (less amounts attributable to accrued but unpaid interest). The
United States Holder's holding period in such ADR will generally start on the
day after the date of the conversion.
It is possible, however, that the conversion of a debenture into ADRs
would not be a taxable transaction for a United States holder, and such holder
(1) would have a basis in the ADRs equal to its basis in the debenture and (2)
would include its holding period in the debenture in its holding period in the
ADRs. You are encouraged to consult your own tax advisor concerning this
possible treatment.
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Additional Amounts
We intend to take the position that the possibility that holders of
debentures
(1) would have been paid Additional Amounts due to a failure to
register within the prescribed time periods, or
(2) ..will be paid Additional Amounts due to a registration default
was a remote or incidental contingency as of the issue date of the debentures,
within the meaning of the applicable Treasury Regulations. Accordingly, any
Additional Amount should be taxable to a United States Holder as ordinary income
at the time it accrues or is received in accordance with such United States
Holder's regular method of tax accounting. Our determination that the payment of
Additional Amounts is a remote or incidental contingency is binding upon all
holders of the debentures, unless a holder properly discloses to the IRS that it
is taking a contrary position.
Interest Rate Reset
We intend to take the position that the possibility of an interest rate
reset as described under "Description of the Debentures and the Guarantee --
Interest Rate Adjustments" is a remote contingency as of the issue date of the
debentures within the meaning of the applicable Treasury Regulations. Under this
approach, if an interest rate reset occurs, interest paid at the Adjusted
Interest Rate would be treated as interest on the debentures that is subject to
the same rules as described under "-- Payments of Interest." Our determination
that the possibility of an interest rate reset is a remote contingency is
binding upon all holders of the debentures, unless a holder properly discloses
to the IRS that it is taking a contrary position.
Dividends on the ADRs
The amount of any distribution paid to a United States. Holder in respect
of the ADRs, including any Israeli taxes withheld from the amount of such
distribution, will be subject to U.S. federal income taxation as ordinary income
to the extent paid out of current or accumulated earnings and profits,
determined for U.S. federal income tax purposes. The amount of any distribution
of property other than cash will be the property's fair market value on the date
of the distribution. To the extent that an amount received by a United States
Holder exceeds that United States Holder's allocable share of current and
accumulated earnings and profits, such excess will be applied first to reduce
that United States Holder's tax basis in the shares and then, to the extent the
distribution exceeds that United States Holder's tax basis, will be treated as
capital gain. Any dividend received will not be eligible for the
dividends-received deduction generally allowed to U.S. corporations in respect
of dividends received from U.S. corporations.
United States Holders may claim the amount of any Israeli income taxes
withheld as either a deduction from gross income or as a dollar-for-dollar
credit against their U.S. federal income tax liability. Individuals who do not
claim itemized deductions but instead utilize the standard deduction may not
claim the amount of the Israeli income taxes withheld as a deduction from their
gross income, but such amounts may be taken as a credit against the individual's
U.S. federal income tax liability. The Code sets forth complex limitations on
the amount of the credit, which varies in application from taxpayer to taxpayer.
These limitations include rules which limit foreign tax credits allowable for
specific classes of income to the amount of U.S. federal income taxes otherwise
payable on each class of income. The total amount of allowable foreign tax
credits in any year may not exceed the pre-credit U.S. tax liability for the
year attributable to foreign source taxable income. However, pursuant to a de
minimis exception certain
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individuals may claim a credit of up to $300 ($600 for joint filers) without
being subject to these limitations.
U.S. tax law provides that foreign tax credits are not allowed for
withholding taxes imposed in respect of short-term or hedged positions in
securities or in respect of arrangements in which a U.S. Holder's expected
economic benefit, after non-U.S. taxes, is insubstantial. U.S. Holders should
consult their tax advisors concerning the application of these rules in light of
their particular circumstances.
Adjustment of Conversion Price
If at any time (1) Teva distributes cash or property to its stockholders
or purchases ADRs and such distribution or purchase would be taxable to such
stockholders as a dividend for United States federal income tax purposes (e.g.,
distributions of evidences of indebtedness or assets of ours, but generally not
stock dividends or rights to subscribe for ADRs) and, pursuant to the
antidilution provisions of the indenture, the conversion price of the debentures
is decreased, or (2) the conversion price of the debentures is decreased at our
discretion, such decrease in conversion price may be deemed to be the payment of
a taxable dividend to United States Holders of debentures (pursuant to Section
305 of the Code) to the extent of our current or accumulated earnings and
profits as determined for United States federal income tax purposes. Such
holders of debentures could therefore have taxable income as a result of an
event pursuant to which they received no cash or other property.
Sale of ADRs
Upon the sale or exchange of ADRs, a United States Holder generally will
recognize capital gain or loss equal to the difference between (1) the amount of
cash and the fair market value of any property received upon the sale or
exchange and (2) such holder's adjusted tax basis in the ADRs. Such capital gain
or loss will be long-term if the United States Holder's holding period in an ADR
is more than one year at the time of the sale or exchange. A United States
Holder's basis and holding period in an ADR received upon conversion of a
debenture are determined as discussed above under "-- Conversion of the
Debentures."
The surrender of ADRs in exchange for ordinary shares, or vice versa, will
not be a taxable event for U.S. federal income tax purposes, and U.S. Holders
will not recognize any gain or loss upon such an exchange.
Information Reporting and Backup Withholding Tax
In general, certain information is required to be reported by a payor to
the IRS with respect to payments of principal and interest on a debenture
(including the payment of Additional Amounts), payments of dividends on ADRs,
payments of the proceeds of the sale of a debenture and payments of the proceeds
of the sale of ADRs to certain noncorporate United States Holders. The payor
will be required to withhold backup withholding tax at a rate of 31% if (a) the
payee fails to furnish a taxpayer identification number to the payor or
establish an exemption from backup withholding, (b) the IRS notifies the payor
that the taxpayer identification number furnished by the payee is incorrect, (c)
there has been a notified payee underreporting with respect to interest or
dividends described in Section 3406(c) of the Code or (d) there has been a
failure of the payee to certify under the penalty of perjury that the payee is
not subject to backup withholding under the Code. Any amounts withheld under the
backup withholding rules from a payment to a United States Holder will be
allowed as a credit against such holder's United States federal income tax
liability and may entitle the holder to a refund, provided that the required
information is furnished to the IRS.
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Non-United States Holders
Teva Finance intends to operate so that it will not be treated as engaged
in the conduct of a United States trade or business. Accordingly, a non-United
States Holder will not be subject to withholding of United States federal income
tax on payments in respect of the debentures.
A non-United States Holder will not be subject to United States federal
income or withholding tax on gain realized on the sale or exchange of the
debentures, unless (1) such gain is effectively connected with the conduct by
the non-United States Holder or a trade or business in the United States or (2)
in the case of gain realized by an individual non-United States Holder, the
non-United States Holder is present in the United States for 183 days or more in
the taxable year of the sale or certain other conditions are met.
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ISRAELI TAX ISSUES
The following is a summary of the tax structure applicable to corporations
in Israel and their shareholders, with special reference to its effect on Teva.
See Note 10 of the notes to Teva's consolidated financial statements for the
year ended December 31, 2002 incorporated by reference in this prospectus. The
following is not intended, and should not be construed, as legal or professional
tax advice and is not exhaustive of all possible tax considerations.
Corporate Tax Rate
The regular corporate tax rate in Israel is 36% for undistributed
earnings. However, Teva's effective consolidated tax rates (before deduction of
one-time charges) for the years ended December 31, 2000, 2001 and 2002 were
24.4%, 19.6%, and 17.0%, respectively, since part of Teva's income is derived
from Approved Enterprises (as discussed below) and operations outside of Israel.
Law for the Encouragement of Industry (Taxes), 1969 (the "Industry Encouragement
Law")
Teva and certain of its Israeli subsidiaries currently qualify as
Industrial Companies pursuant to the Industry Encouragement Law. As such, Teva
and these subsidiaries qualify for certain tax benefits, including a deduction
of 12.5% per annum of the purchase price of a good-faith acquisition of a patent
or of certain other intangible property rights and the right to file
consolidated tax returns. Currently, Teva files consolidated tax returns
together with certain Israeli subsidiaries. The tax laws and regulations dealing
with the adjustment of taxable income for local inflation provide that
industrial enterprises such as those of Teva and its subsidiaries which qualify
as Industrial Companies can claim special rates of depreciation such as up to
40% on a straight line basis for industrial equipment.
Eligibility for the benefits under the Industry Encouragement Law is not
subject to receipt of prior approval from any government authority. Teva cannot
assure you that Teva or any of its Israeli subsidiaries which presently qualify
as "Industrial Companies" will continue to qualify as such in the future, or
that the benefits will be granted in the future.
Law for the Encouragement of Capital Investments, 1959 (the "Investment Law")
Industrial projects of Teva and certain of its Israeli subsidiaries have
been granted the status of an "Approved Enterprise" under the Investment Law.
This law provides that capital investments in production facilities may, upon
application to the Israel Investment Center, be designated as an Approved
Enterprise. Each certificate of approval for an Approved Enterprise relates to a
specific investment program delineated both by its financial scope, including
its capital sources, and by its physical characteristics, i.e., the equipment to
be purchased and utilized pursuant to the program. The tax benefits derived from
any such certificate of approval relate only to taxable profits attributable to
the specific program, based upon criteria set in the certificate of approval. In
addition, certain financial benefits are available (as discussed below). In the
event that Teva and its subsidiaries which have been granted Approved Enterprise
status are operating under more than one approval or that their capital
investments are only partly approved (a "Mixed Enterprise"), their effective
corporate tax rate will be the result of a weighted combination of the various
applicable rates.
Income derived from an Approved Enterprise is subject to a tax rate of
25%, rather than the usual rate of 36%, for a period of seven years, commencing
with the year in which the Approved Enterprise first generates taxable income.
This period cannot extend beyond 12 years from the year of commencement of
operations or 14 years from the year in which approval was granted, whichever is
earlier.
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Teva is a "Foreign Investors Company" ("FIC"), as defined by the
Investment Law, and is entitled to further reductions in the tax rate normally
applicable to Approved Enterprises. Because its current level of foreign
ownership is more than 49%, its Approved Enterprise income is taxable at a 20%
rate. The period of such benefit is ten years, commencing with the year in which
the Approved Enterprise first generates taxable income. This ten-year period
cannot extend beyond 12 years from the year of commencement of operations or 14
years from the year in which approval was granted, whichever is earlier. Unless
extended, FIC benefits are granted to enterprises seeking approval not later
than December 31, 2002. We cannot assure you that Teva will continue to qualify
as an FIC in the future, or that the benefits will be granted in the future.
Most of the projects of Teva and certain of its subsidiaries were granted
Approved Enterprise status for which the companies elected to apply for
alternative tax benefits -- waiver of grants in return for tax exemptions on
undistributed income. Upon distribution of such exempt income, the distributing
company will be subject to corporate tax at the rate ordinarily applicable to
the Approved Enterprise's income. Such tax exemption on undistributed income is
for a period limited to two to ten years, depending upon the location of the
enterprises. During the remainder of the benefits period (until expiration of
ten years), a corporate tax rate of 20% as above will apply.
Dividends paid by companies owning Approved Enterprises, the source of
which is income derived from an Approved Enterprise during the benefits period,
are generally taxed at a rate of 15% (which is withheld and paid by the company
paying the dividend) if such dividends are paid during the benefits period or at
any time up to 12 years thereafter. The 12-year limitation does not apply to a
FIC.
Taxation of Non-Israeli Subsidiaries
Non-Israeli subsidiaries are generally taxed based upon tax laws
applicable in their countries of residence.
Income Taxes on Interest Payable by Teva to Non-Israeli Residents
An Israeli company paying interest on a debenture to a non-Israeli
resident is subject to a 25% withholding tax. Taxes to be withheld from
non-Israeli residents with respect to interest received from Teva may be reduced
under an applicable tax treaty. The aforementioned tax will only apply if Teva
as a guarantor pays interest on the debentures.
In the event that interest is paid by Teva as a guarantor to a United
States resident entitled to the reduced tax rate under the U.S.-Israel tax
treaty, then the tax rate on such gross interest amounts shall not exceed 17.5%.
Teva and Teva Finance have agreed to pay certain additional amounts in
connection with withholding taxes or deductions that may be imposed by Israeli
or Netherlands Antilles authorities. See "Description of the Debentures and the
Guarantees -- Additional Tax Amounts."
Income Taxes on Dividends Distributed by Teva to Non-Israeli Residents
Dividends distributed by an Israeli company to non-Israeli residents are
subject to a 25% tax to be withheld at source (15% in the case of dividends
distributed from the taxable income attributable to an Approved Enterprise),
unless a different rate is provided in a treaty between Israel and the
shareholder's country of residence.
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Under the U.S.-Israel Tax Treaty, the maximum Israeli tax and withholding
tax on dividends paid to a holder of ordinary shares who is a resident of the
U.S. is generally 25%, but is reduced to 12.5% if the dividends are paid to a
corporation that holds in excess of 10% of the voting rights of Teva during
Teva's taxable year preceding the distribution of the dividend and the portion
of Teva's taxable year in which the dividend was distributed. Dividends of an
Israeli company derived from the income of an Approved Enterprise will still be
subject to a 15% dividend withholding tax. The withheld tax is the final tax in
Israel on dividends paid to non-residents who do not conduct a business in
Israel.
A non-resident of Israel who has interest or dividend income derived from
or accrued in Israel, from which tax was withheld at the source, is generally
exempt from the duty to file tax returns in Israel in respect of such income,
provided such income was not derived from a business conducted in Israel by the
taxpayer.
Capital Gains and Income Taxes Applicable to Non-Israeli Shareholders
Israeli law generally imposes a capital gains tax on the sale of
securities and any other capital asset. The basic capital gains tax rate
applicable to corporations effective until December 31, 2002 had been 36%, and
the maximum tax rate for individuals had been 50%. Effective January 1, 2003,
the capital gains tax rate imposed upon sale of capital assets acquired after
that date has been reduced to 25%; capital gains accrued from assets acquired
before that date are subject to a blended tax rate based on the relative periods
of time before and after that date that the asset was held.
In addition, if the ordinary shares are traded on the Tel Aviv Stock
Exchange (or listed on a stock exchange recognized by the Israeli Ministry of
Finance), gains on the sale of ordinary shares held by non-Israeli tax resident
investors will generally be exempt from Israeli capital gains tax.
Notwithstanding the foregoing, dealers in securities in Israel are taxed at
regular tax rates applicable to business income.
The U.S.-Israeli Tax Treaty exempts U.S. residents who hold an interest of
less than 10% in an Israeli company, including Teva, and who held an interest of
less than 10% during the 12 months prior to a sale of their shares, from Israeli
capital gains tax in connection with such sale. Certain other tax treaties to
which Israel is a party also grant exemptions from Israeli capital gains taxes.
Recent Tax Reform Legislation
In July 2002, the Israeli Parliament approved a law enacting extensive
changes to Israel's tax law (the "Tax Reform Legislation") generally effective
January 1, 2003. Among the key provisions of the Tax Reform Legislation are (i)
changes which may result in the imposition of taxes on dividends received by an
Israeli company from its foreign subsidiaries; and (ii) the introduction of the
"controlled foreign corporation" concept according to which an Israeli company
may become subject to Israeli taxes on certain income of a non-Israeli
subsidiary if the subsidiary's primary source of income is passive income (such
as interest, dividends, royalties, rental income or capital gains). An Israeli
company that is subject to Israeli taxes on the income of its non-Israeli
subsidiaries will receive a credit for income taxes paid by the subsidiary in
its country of residence.
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NETHERLANDS ANTILLES TAX ISSUES
The following general summary is based upon the tax laws of the
Netherlands Antilles as in effect on the date of this prospectus and is subject
to any change that may come into effect after that date. You are advised to
consult your own tax advisers as to the tax consequences, under the tax laws of
the country of which you are resident, of a purchase of debentures, including,
without limitation, the consequences of receipt of interest and sale, redemption
or conversion of the debentures.
Payments of principal and interest by Teva Finance to a holder of the
debentures who is a non-resident of the Netherlands Antilles and who during the
fiscal year has not engaged in a trade or business through a permanent
establishment within the Netherlands Antilles will not be subject to Netherlands
Antilles income tax or withholding tax or deduction of, for or on account of any
taxes of whatsoever nature imposed, levied, withheld or assessed by the
Netherlands Antilles or any Netherlands Antilles political subdivision or taxing
authority.
A holder of the debentures who is a non-resident as to the Netherlands
Antilles and who during the fiscal year has not engaged in a trade or business
through a permanent establishment within the Netherlands Antilles will not be
subject to Netherlands Antilles income tax on gains realized during that year on
sale or redemption of the debentures.
The debentures will not be subject to inheritance taxes imposed by the
Netherlands Antilles, or by any Netherlands Antilles political subdivision or
taxing authority, if held by persons not domiciled in the Netherlands Antilles
at the time of death.
The debentures will not be subject to gift taxes imposed by the
Netherlands Antilles, or by any Netherlands Antilles political subdivision or
taxing authority, if such holder at the time of the gift is a non-resident of
the Netherlands Antilles.
Teva and Teva Finance have agreed to pay certain additional amounts in
connection with withholding taxes or deductions that may be imposed by
Netherlands Antilles or Israeli authorities. See "Description of the Debentures
and the Guarantees -- Additional Tax Amounts."
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SELLING SECURITYHOLDERS
The debentures were originally issued by Teva Finance and sold by Lehman
Brothers Inc. and Salomon Smith Barney Inc., as the initial purchasers, in
transactions exempt from the registration requirements of the Securities Act
pursuant to Rule 144A and Regulation S of the Securities Act. Selling
securityholders, including their transferees, pledges or donees or their
successors, may from time to time offer and sell any or all of the debentures
and ADRs into which the debentures are convertible.
The selling securityholders have represented to us that they purchased the
debentures and the ADRs issuable upon conversion of the debentures for their own
account for investment only and not with a view toward selling or distributing
them, except through sales registered under the Securities Act or in
transactions exempt from registration under the Securities Act. We agreed with
the selling securityholders to file this registration statement to register the
resale of the debentures and the ADRs. We agreed to prepare and file all
necessary amendments and supplements to the registration statement to keep it
effective until such time as described under "Description of Debentures and the
Guarantee - Registration Rights."
The following table shows information with respect to the selling
securityholders and the principal amounts of debentures and ADRs they
beneficially own that may be offered under this prospectus. The information is
based on information provided to us by or on behalf of the selling
securityholders.
The selling securityholders may offer all, some or none of the debentures
or ADRs into which the debentures are convertible. Thus, we cannot estimate the
amount of the debentures or the ADRs that will be held by the selling
securityholders upon termination of any sales. In addition, the selling
securityholders identified below may have sold, transferred or otherwise
disposed of all or a portion of their debentures since the date on which they
provided the information about their debentures in transactions exempt from the
registration requirements of the Securities Act. Lehman Brothers Inc. and its
affiliates have provided, and may continue to provide, investment banking
services to Teva for customary fees. Lehman Brothers was one of the initial
purchasers of the debentures from Teva. None of the other selling
securityholders has had any material relationship with us or our affiliates
within the past three years.
Unless otherwise noted, selling securityholders are not registered
broker-dealers, or affiliates thereof.
Unless otherwise noted, this table assumes that holders of debentures or
any future transferee from any holder do not beneficially own any ADRs other
than ADRs into which the debentures are convertible.
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Principal
Amount of
Debenture
ADRs Owned and
ADRs Beneficially Offered ADRs
Owned Before Hereby Offered Offered ADRs Beneficially Owned
Name and Address of Selling Securityholder Before Offering (1)(2) (in $1,000s) Hereby (1) Owned After offering (2)
========================================== ---------------------- -------------- --------- ------------------------
Amount Percentage Amount Percentage
(3) (3)
------ ---------- -------------- --------- ------- ----------
Advisory Convertible Fund (I) L.P. (5) 23,310 * 1,000 23,310 0 N/A
c/o General Counsel's
Office, American Express
Financial Advisors Inc.
50592 AXP Financial Center
Minneapolis, MN 55474
AIG/National Union Fire Insurance 13,054 * 560 13,054 0 N/A
c/o Froley, Revy
Investment Co., Inc.
10900 Wilshire Boulevard, Suite 900
Los Angeles, CA 90024
Allstate Insurance Company (5) 178,821 * 150 3,496 132,201 *
c/o Allstate Investments LLC
3075 Sanders Road, Suite G6B
Northbrook, IL 60062
Allstate Life Insurance Company (5) 178,821 * 1,850 43,124 132,201 *
c/o Allstate Investments LLC
3075 Sanders Road, Suite G6B
Northbrook, IL 60062
Aloha Airlines Non-Pilots Pension Trust 4,079 * 175 4,079 0 N/A
c/o Froley, Revy
Investment Co., Inc.
10900 Wilshire Boulevard, Suite 900
Los Angeles, CA 90024
Aloha Pilots Retirement Trust 2,097 * 90 2,097 0 N/A
c/o Froley, Revy Investment Company
10900 Wilshire Boulevard, Suite 900
Los Angeles, CA 90024
American Skandia Trust
c/o Lord Abbett & Co. 22,378 * 960 22,378 0 N/A
90 Hudson Street, 11th Floor
Jersey City, NJ 07302
Arbitex Master Fund, L.P. (5) 710,790 * 4,500 104,897 605,893 N/A
c/o Arbitex Asset
Management, L.P.
1601 Elm Street, Suite 4000
Dallas TX 75201
________________________________
* Less than 1%
(1) Assumes conversion of all of the selling securityholder's debentures at a
conversion rate of 23.3106 ADRs per each $1,000 principal amount of debentures
(rounded down to the nearest whole ADR).
(2) Includes, if applicable, conversion of all the selling securityholder's Teva
Pharmaceutical Finance, LLC 1.50% Convertible Senior Debentures due 2005 at a
conversion rate of 23.1934 ADRs per each $1,000 principal amount of debentures
(rounded down to the nearest whole ADR). Includes, if applicable, conversion of
all the selling securityholder's Teva Pharmaceutical Finance, LLC 0.75%
Convertible Senior Debentures due 2021 at a conversion rate of 23.3036 ADRs per
each $1,000 principal amount of debentures (rounded down to the nearest whole
ADR).
(3) Assumes that debentures held by other holders are not converted.
(4) The selling securityholder is a broker-dealer.
(5) The selling securityholder is an affiliate of a broker-dealer.
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Principal
Amount of
Debenture
ADRs Owned and
ADRs Beneficially Offered ADRs
Owned Before Hereby Offered Offered ADRs Beneficially Owned
Name and Address of Selling Securityholder Before Offering (1)(2) (in $1,000s) Hereby (1) Owned After offering (2)
------------------------------------------ ---------------------- -------------- --------- ------------------------
Amount Percentage Amount Percentage
(3) (3)
------ ---------- -------------- --------- ------- ----------
Argent Classic Convertible 23,310 * 1,000 23,310 0 N/A
Arbitrage Fund (Bermuda) Ltd.
c/o Argent Lowlev
Convertible Arbitrage Fund Ltd.
73 Front Street
Hamilton HM 12
Bermuda
Argent LowLev Convertible Arbitrage 55,945 * 2,400 55,945 0 N/A
Fund LLC
c/o Argent Financial Group
500 West Putnam Avenue
Greenwich CT 06830-6086
Argent Lowlev Convertible Arbitrage 9,324 * 400 9,324 0 N/A
Fund LLC
c/o Argent Financial Group
3100 Tower Boulevard, Suite 1104
Durham, NC 27707
Argent LowLev Convertible Arbitrage 81,587 * 3,500 81,587 0 N/A
Fund Ltd.
73 Front Street
Hamilton HM 12
Bermuda
Arkansas Pers 11,771 * 505 11,771 0 N/A
c/o Froley Revy Investment Co., Inc.
10900 Wilshire Blvd.
Suite 900
Los Angeles, CA 90024
Aristeia International Limited 145,458 * 6,240 145,458 0 N/A
c/o Aristeia Capital LLC
381 Fifth Avenue, 6th Floor
New York, NY 10016
Associated Electric & Gas Insurance 16,317 * 700 16,317 0 N/A
Services Limited
c/o Calamos Investments
1111 East Warrenville Road
Naperville, IL 60563-1493
ATSF Transamerica Convertible Securities 46,621 * 2,000 46,621 0 N/A
c/o Transamerica Life
Insurance and Annuities Co
1150 S. Olive Street, Suite 2700
Los Angeles, CA 90015
________________________________
* Less than 1%
(1) Assumes conversion of all of the selling securityholder's debentures at a
conversion rate of 23.3106 ADRs per each $1,000 principal amount of debentures
(rounded down to the nearest whole ADR).
(2) Includes, if applicable, conversion of all the selling securityholder's Teva
Pharmaceutical Finance, LLC 1.50% Convertible Senior Debentures due 2005 at a
conversion rate of 23.1934 ADRs per each $1,000 principal amount of debentures
(rounded down to the nearest whole ADR). Includes, if applicable, conversion of
all the selling securityholder's Teva Pharmaceutical Finance, LLC 0.75%
Convertible Senior Debentures due 2021 at a conversion rate of 23.3036 ADRs per
each $1,000 principal amount of debentures (rounded down to the nearest whole
ADR).
(3) Assumes that debentures held by other holders are not converted.
(4) The selling securityholder is a broker-dealer.
(5) The selling securityholder is an affiliate of a broker-dealer.
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Principal
Amount of
Debenture
ADRs Owned and
ADRs Beneficially Offered ADRs
Owned Before Hereby Offered Offered ADRs Beneficially Owned
Name and Address of Selling Securityholder Before Offering (1)(2) (in $1,000s) Hereby (1) Owned After offering (2)
------------------------------------------ ---------------------- -------------- --------- ------------------------
Amount Percentage Amount Percentage
(3) (3)
------ ---------- -------------- --------- ------- ----------
Attorneys Title Insurance Fund 3,146 * 135 3,146 0 N/A
c/o Froley Levy
Investment Co., Inc.
10900 Wilshire Blvd.
Suite 900
Los Angeles, CA 90024
Bag Counter Pers
c/o Froley Levy Investment Co., 1,515 * 65 1,515 0 N/A
10900 Wilshire Blvd.
Suite 900
Los Angeles, CA 90024
Bancroft Convertible Fund, Inc. 23,301 * 1,000 23,301 0 N/A
65 Madison Avenue
Morristown, NY 07960
Bank Austria Cayman Islands, Ltd. 31,469 * 1,350 31,469 0 N/A
c/o Ramius Capital Group, LLC
666 Third Avenue, 26th Floor
New York, NY 10017
Bear, Stearns & Co. Inc. 4,662 * 200 4,662 0 N/A
383 Madison Avenue
23 Floor-Global Fund Mgmt.
New York, NY 10019
BNP Paribas Equity Strategies, SNC. (5) 116,232 * 3,718 86,668 29,5640 *
c/o BNP Paribas Brokerage
Services, Inc.
555 Croton Road, 4th Floor
King of Prussia, PA 19406
Boilermakers Blacksmith Pension Trust 14,802 * 635 14,802 0 N/A
c/o Froley Revy
Investment Co., Inc.
10900 Wilshire Boulevard, Suite 900
Los Angeles, CA 90024
C&H Sugar Company
c/o Froley Revy 5,011 * 215 5,011 0 N/A
Investment Co., Inc.
10900 Wilshire Boulevard, Suite 900
Los Angeles, CA 90024
Cobra Fund U.S.A. L.P. 3,869 * 166 3,869 0 N/A
c/o Cobra Management L.L.C.
825 Third Avenue, 40th Floor
New York, NY 10022
Cobra Masterfund Ltd. 31,096 * 1,334 31,096 0 N/A
c/o Cobra Management L.L.C.
825 Third Avenue, 40th Floor
New York, NY 10022
________________________________
* Less than 1%
(1) Assumes conversion of all of the selling securityholder's debentures at a
conversion rate of 23.3106 ADRs per each $1,000 principal amount of debentures
(rounded down to the nearest whole ADR).
(2) Includes, if applicable, conversion of all the selling securityholder's Teva
Pharmaceutical Finance, LLC 1.50% Convertible Senior Debentures due 2005 at a
conversion rate of 23.1934 ADRs per each $1,000 principal amount of debentures
(rounded down to the nearest whole ADR). Includes, if applicable, conversion of
all the selling securityholder's Teva Pharmaceutical Finance, LLC 0.75%
Convertible Senior Debentures due 2021 at a conversion rate of 23.3036 ADRs per
each $1,000 principal amount of debentures (rounded down to the nearest whole
ADR).
(3) Assumes that debentures held by other holders are not converted.
(4) The selling securityholder is a broker-dealer.
(5) The selling securityholder is an affiliate of a broker-dealer.
-69-
Principal
Amount of
Debenture
ADRs Owned and
ADRs Beneficially Offered ADRs
Owned Before Hereby Offered Offered ADRs Beneficially Owned
Name and Address of Selling Securityholder Before Offering (1)(2) (in $1,000s) Hereby (1) Owned After offering (2)
------------------------------------------ ---------------------- -------------- --------- ------------------------
Amount Percentage Amount Percentage
(3) (3)
------ ---------- -------------- --------- ------- ----------
Convertible Securities Fund
c/o Banc of America 1,631 * 70 1,631 0 N/A
Capital Management LLC
601 W. Riverside Avenue, Suite 420
Spokane, WA 99201-0621
Context Convertible Arbitrage 22,145 * 950 22,145 0 N/A
Fund, L.P. (4)
c/o Context Capital
Management, L.L.C.
12626 High Bluff Drive, Suite 440
San Diego, CA 92130
Context Convertible Arbitrage Offshore
Fund Ltd. 12,820 * 550 12,820 0 N/A
c/o Fulcrum (Cayman) Limited
Suite 193, 48
Paa-La-Ville Road
Hamilton, HM 11
Bermuda
CooperNeff Convertible Strategies
(Cayman) Master 53,637 * 2,301 53,637 0 N/A
Fund, LP
c/o BNP Paribas Brokerage Services, Inc.
555 Croton Road, 4th Floor
King of Prussia, PA 19406
Credit Suisse First Boston Europe
Limited (5) 293,713 * 12,600 293,713 0 N/A
c/o Credit Suisse First Boston
One Madison Avenue
Reorganization
Department, 2nd Floor
New York, NY 10010
Daimler Chrysler Corp. Emp.
#1 Pension Plan 47,087 * 2,020 47,087 0 N/A
c/o Palisade Capital
Management, LLC
1 Bridge Plaza, 6th Floor
Fort Lee, NJ 07024
Deam Convertible Arbitrage FD (5) 163,174 * 7,000 163,174 0 N/A
c/o Palladin Group
195 Maplewood Avenue
Maplewood, NJ 07040
________________________________
* Less than 1%
(1) Assumes conversion of all of the selling securityholder's debentures at a
conversion rate of 23.3106 ADRs per each $1,000 principal amount of debentures
(rounded down to the nearest whole ADR).
(2) Includes, if applicable, conversion of all the selling securityholder's Teva
Pharmaceutical Finance, LLC 1.50% Convertible Senior Debentures due 2005 at a
conversion rate of 23.1934 ADRs per each $1,000 principal amount of debentures
(rounded down to the nearest whole ADR). Includes, if applicable, conversion of
all the selling securityholder's Teva Pharmaceutical Finance, LLC 0.75%
Convertible Senior Debentures due 2021 at a conversion rate of 23.3036 ADRs per
each $1,000 principal amount of debentures (rounded down to the nearest whole
ADR).
(3) Assumes that debentures held by other holders are not converted.
(4) The selling securityholder is a broker-dealer.
(5) The selling securityholder is an affiliate of a broker-dealer.
-70-
Principal
Amount of
Debenture
ADRs Owned and
ADRs Beneficially Offered ADRs
Owned Before Hereby Offered Offered ADRs Beneficially Owned
Name and Address of Selling Securityholder Before Offering (1)(2) (in $1,000s) Hereby (1) Owned After offering (2)
------------------------------------------ ---------------------- -------------- --------- ------------------------
Amount Percentage Amount Percentage
(3) (3)
------ ---------- -------------- --------- ------- ----------
Delta Airlines Master Trust
c/o Froley Revy Investment Co., Inc. 5,944 * 255 5,944 0 N/A
10900 Wilshire Boulevard, Suite 900
Los Angeles, CA 90024
Deutsche Bank Securities Inc. (4) 899,789 * 38,600 899,78 0 N/A
1251 Avenue of the Americas
New York, NY 10020
Drury University
c/o Froley Revy Investment Co., Inc. 932 * 40 932 0 N/A
10900 Wilshire Boulevard, Suite 900
Los Angeles, CA 90024
Duke Endowment
c/o Froley Revy Investment Co., Inc. 3,613 * 155 3,613 0 N/A
10900 Wilshire Blvd. Ste 900
Los Angeles, CA 90024
Fidelity Financial Trust:
Fidelity Convertible Securities Fund 163,174 * 7,000 163,174 0 N/A
c/o FMR Corp
82 Devonshire Street, E20E
Boston, MA 02109
Fore Convertible MasterFund Limited 58,276 * 2,500 58,276 0 N/A
c/o Fore Advisors
280 Park Avenue, 43rd Floor
New York, NY 10017
F.R. Convertible Securities Inc 1,864 * 80 1,864 0 N/A
c/o Froley Revy
Investment Co., Inc.
10900 Wilshire Blvd. Ste 900
Los Angeles, CA 90024
Franklin and Marshall College 2,680 * 115 2,680 0 N/A
c/o Palisade Capital Management LLC
1 Bridge Plaza, 6th Floor
Fort Lee, NJ 07024
Fuji U.S. Income Open . 23,310 * 1,000 23,310 0 N/A
c/o Lord Abbett & Co
90 Hudson Street, 11th Floor
Jersey City, NJ 07302
________________________________
* Less than 1%
(1) Assumes conversion of all of the selling securityholder's debentures at a
conversion rate of 23.3106 ADRs per each $1,000 principal amount of debentures
(rounded down to the nearest whole ADR).
(2) Includes, if applicable, conversion of all the selling securityholder's Teva
Pharmaceutical Finance, LLC 1.50% Convertible Senior Debentures due 2005 at a
conversion rate of 23.1934 ADRs per each $1,000 principal amount of debentures
(rounded down to the nearest whole ADR). Includes, if applicable, conversion of
all the selling securityholder's Teva Pharmaceutical Finance, LLC 0.75%
Convertible Senior Debentures due 2021 at a conversion rate of 23.3036 ADRs per
each $1,000 principal amount of debentures (rounded down to the nearest whole
ADR).
(3) Assumes that debentures held by other holders are not converted.
(4) The selling securityholder is a broker-dealer.
(5) The selling securityholder is an affiliate of a broker-dealer.
-71-
Principal
Amount of
Debenture
ADRs Owned and
ADRs Beneficially Offered ADRs
Owned Before Hereby Offered Offered ADRs Beneficially Owned
Name and Address of Selling Securityholder Before Offering (1)(2) (in $1,000s) Hereby (1) Owned After offering (2)
------------------------------------------ ---------------------- -------------- --------- ------------------------
Amount Percentage Amount Percentage
(3) (3)
------ ---------- -------------- --------- ------- ----------
Gaia Offshore Master Fund Ltd. 116,553 * 5,000 116,553 0 N/A
750 Lexington Avenue
New York, NY 10022
Guggenheim Portfolio Co. XV LLC 15,151 * 650 15,151 0 N/A
c/o Ramius Capital Group, LLC
666 Third Avenue, 26th Floor
New York, NY 10017
Hawaiian Airlines Employees Pension 1,631 * 70 1,631 0 N/A
Plan - IAM
c/o Froley Revy Investment Co., Ltd.
10900 Wilshire Boulevard, Suite 900
Los Angeles, CA 90024
Hawaiian Airlines Pension 2,331 * 100 2,331 0 N/A
Plan for Salaried Employees
c/o Froley Revy Investment Co., Ltd.
10900 Wilshire Boulevard, Suite 900
Los Angeles, CA 90024
Hawaiian Airlines Pilots Retirement Plan 3,613 * 155 3,613 0 N/A
c/o Froley Revy
Investment Co., Ltd.
10900 Wilshire Boulevard, Suite 900
Los Angeles, CA 90024
Highbridge International LLC (5) 641,041 * 27,500 641,041 0 N/A
c/o Highbridge International LLC
9 West 57th Street, 27th Floor
New York, NY 10019
Hillbloom Foundation 1,631 * 70 1,631 0 N/A
c/o Froley Revy
Investment Co., Inc.
10900 Wilshire Blvd. Ste 900
Los Angels, CA 90024
IDEX Transamerica Convertible Fund 11,655 * 500 11,655 0 N/A
c/o Transamerica Life
Insurance and Annuities Co.
1150 S. Olive Street, Suite 2700
Los Angeles, CA 90015
JP Morgan Securities Inc. (4) 11,655 * 500 11,655 0 N/A
c/o JP Morgan
500 Stanton Christiana Road, 3OP4
Newark, DE 19713
________________________________
* Less than 1%
(1) Assumes conversion of all of the selling securityholder's debentures at a
conversion rate of 23.3106 ADRs per each $1,000 principal amount of debentures
(rounded down to the nearest whole ADR).
(2) Includes, if applicable, conversion of all the selling securityholder's Teva
Pharmaceutical Finance, LLC 1.50% Convertible Senior Debentures due 2005 at a
conversion rate of 23.1934 ADRs per each $1,000 principal amount of debentures
(rounded down to the nearest whole ADR). Includes, if applicable, conversion of
all the selling securityholder's Teva Pharmaceutical Finance, LLC 0.75%
Convertible Senior Debentures due 2021 at a conversion rate of 23.3036 ADRs per
each $1,000 principal amount of debentures (rounded down to the nearest whole
ADR).
(3) Assumes that debentures held by other holders are not converted.
(4) The selling securityholder is a broker-dealer.
(5) The selling securityholder is an affiliate of a broker-dealer.
-72-
Principal
Amount of
Debenture
ADRs Owned and
ADRs Beneficially Offered ADRs
Owned Before Hereby Offered Offered ADRs Beneficially Owned
Name and Address of Selling Securityholder Before Offering (1)(2) (in $1,000s) Hereby (1) Owned After offering (2)
------------------------------------------ ---------------------- -------------- --------- ------------------------
Amount Percentage Amount Percentage
(3) (3)
------ ---------- -------------- --------- ------- ----------
J.W. McConnell Family Foundation 11,422 * 490 11,422 0 N/A
c/o Oaktree Capital Management, LLC
333 South Grand Avenue, 28th Floor
Los Angeles, CA 90071
Nations Convertible Securities Fund 208,396 * 8,940 208,396 0 N/A
c/o Banc of America Capital
Management LLC
601 W. Riverside Avenue, Suite 420
Spokane, WA 99201-0621
Lancer Securities Cayman Ltd. 11,655 * 500 11,655 0 N/A
c/o Palladin Group
195 Maplewood Avenue
Maplewood, NJ 10017-3144
Lehman Brothers, Inc.(4) 710,242 * 24,388 568,489 141,744 *
745 Seventh Avenue, 16th
Floor
New York, NY 10019-6801
Lehman Brothers International
(Europe) (5) 233,106 * 10,000 233,106 0 N/A
1 Broadgate
London EC2M 7HA
United Kingdom
Lord Abbett Bond Debenture Fund 349,659 * 15,000 349,659 0 N/A
c/o Lord Abbett & Co.
90 Hudson Street, 11th Floor
Jersey City, NJ 07302
Lord Abbett Series Fund, Inc. Bond 3,496 * 150 3,496 0 N/A
Debenture Fund
c/o Lord Abbett & Co.
90 Hudson Street, 11th Floor
Jersey City, NJ 07302
Louisiana CCRF 3,496 * 150 3,496 0 N/A
c/o Froley Revy
Investment Co., Inc.
10900 Wilshire Blvd. Ste 900
Los Angeles, CA 90024
Lyxor/Gaia II Fund Ltd. 58,276 * 2,500 58,276 0 N/A
750 Lexington Avenue
New York, NY 10022
Lyxor Master Fund (5) 139,863 * 6,000 139,863 0 N/A
c/o Arbitex Capital Limited
1601 Elm Street, Suite 4000
Dallas, TX 75201
________________________________
* Less than 1%
(1) Assumes conversion of all of the selling securityholder's debentures at a
conversion rate of 23.3106 ADRs per each $1,000 principal amount of debentures
(rounded down to the nearest whole ADR).
(2) Includes, if applicable, conversion of all the selling securityholder's Teva
Pharmaceutical Finance, LLC 1.50% Convertible Senior Debentures due 2005 at a
conversion rate of 23.1934 ADRs per each $1,000 principal amount of debentures
(rounded down to the nearest whole ADR). Includes, if applicable, conversion of
all the selling securityholder's Teva Pharmaceutical Finance, LLC 0.75%
Convertible Senior Debentures due 2021 at a conversion rate of 23.3036 ADRs per
each $1,000 principal amount of debentures (rounded down to the nearest whole
ADR).
(3) Assumes that debentures held by other holders are not converted.
(4) The selling securityholder is a broker-dealer.
(5) The selling securityholder is an affiliate of a broker-dealer.
-73-
Principal
Amount of
Debenture
ADRs Owned and
ADRs Beneficially Offered ADRs
Owned Before Hereby Offered Offered ADRs Beneficially Owned
Name and Address of Selling Securityholder Before Offering (1)(2) (in $1,000s) Hereby (1) Owned After offering (2)
------------------------------------------ ---------------------- -------------- --------- ------------------------
Amount Percentage Amount Percentage
(3) (3)
------ ---------- -------------- --------- ------- ----------
Lyxor Master Fund
c/o Argent Financial Group 16,317 * 700 16,317 0 N/A
3100 Tower Boulevard,
Suite 1104
Durham, NC 27707
McMahan Securities Co. L.P. (4) 23,310 * 1,000 23,310 0 N/A
c/o Argent
500 West Putnam Avenue
Greenwich, CT 06830-6086
Merrill Lynch Insurance Group
Board Debenture 349 * 15 349 0 N/A
c/o Lord Abbett & Co.
90 Hudson Street, 11th Floor
Jersey City, NJ 07302
Merrill Lynch, Pierce,
Fenner and Smith Inc. (4) 110,623 * 4,472 104,245 6,378 *
c/o Merrill Lynch,
Pierce, Fenner & Smith Inc.
101 Hudson Street-9th
Floor-Corporate Actions Dept.
Jersey City, NJ 07302-3997
Met Investors Bond Debenture
c/o Lord Abbett & Co. 65,269 * 2,800 65,269 0 N/A
90 Hudson Street, 11th
Floor
Jersey City, NJ 07302
MLQA Convertible Securities 174,829 * 7,500 174,829 0 N/A
Arbitrage, Limited (5)
c/o Merrill Lynch
Investment Managers
800 Scudders Mill Road
Section 2D
Plainsboro, NJ 08536
Morgan Stanley Dean Witter 466,621 * 2,000 466,621 0 N/A
Convertible Securities
Trust (5)
c/o Bank of New York
1221 Avenue of the
Americas, 35th Floor
New York, NY 10020
________________________________
* Less than 1%
(1) Assumes conversion of all of the selling securityholder's debentures at a
conversion rate of 23.3106 ADRs per each $1,000 principal amount of debentures
(rounded down to the nearest whole ADR).
(2) Includes, if applicable, conversion of all the selling securityholder's Teva
Pharmaceutical Finance, LLC 1.50% Convertible Senior Debentures due 2005 at a
conversion rate of 23.1934 ADRs per each $1,000 principal amount of debentures
(rounded down to the nearest whole ADR). Includes, if applicable, conversion of
all the selling securityholder's Teva Pharmaceutical Finance, LLC 0.75%
Convertible Senior Debentures due 2021 at a conversion rate of 23.3036 ADRs per
each $1,000 principal amount of debentures (rounded down to the nearest whole
ADR).
(3) Assumes that debentures held by other holders are not converted.
(4) The selling securityholder is a broker-dealer.
(5) The selling securityholder is an affiliate of a broker-dealer.
-74-
Principal
Amount of
Debenture
ADRs Owned and
ADRs Beneficially Offered ADRs
Owned Before Hereby Offered Offered ADRs Beneficially Owned
Name and Address of Selling Securityholder Before Offering (1)(2) (in $1,000s) Hereby (1) Owned After offering (2)
------------------------------------------ ---------------------- -------------- --------- ------------------------
Amount Percentage Amount Percentage
(3) (3)
------ ---------- -------------- --------- ------- ----------
Nabisco, Inc. Defined Benefit 125,601 * 4,280 99,769 25,8320 *
Master Trust
c/o Oaktree Capital Management, LLC
333 South Grand Avenue, 28th Floor
Los Angeles, CA 90071
OCM International Convertible Trust 15,509 * 60 1,398 14,111 *
c/o Oaktree Capital Management, LLC
333 South Grand Avenue, 28th Floor
Los Angeles, CA 90071
Pacific Life Insurance Company 11,655 * 500 11,655 0 N/A
700 Newport Center Drive
Newport Beach, CA 92660
Partner Reinsurance Company, Ltd. - 4,098 * 10 233 3,865 *
International
c/o Oaktree Capital Management, LLC
333 South Grand Avenue
28th Floor
Los Angeles, CA 90071
Phoenix Lord Abbett Debenture Fund 1,748 * 75 1,748 0 N/A
c/o Lord Abbett & Co.
90 Hudson Street, 11th Floor
Jersey City, NJ 07302
Prudential Insurance Company of America 1,981 * 85 1,981 0 N/A
c/o Froley Revy
Investment Co., Inc.
10900 Wilshire Blvd. Ste 900
Los Angeles, CA 90024
RC6 Halifax Master Fund, Ltd. 17,482 * 750 17,482 0 N/A
c/o Ramius Capital Group, LLC
666 Third Avenue, 26th Floor
New York, NY 10017
RC6 Latitude Master Fund, Ltd. 69,931 * 3,000 69,931 0 N/A
c/o Ramius Capital Group, LLC
666 Third Avenue, 26th Floor
New York, NY 10017
RC6 Multi Strategy A/C. LP 46,603 * 2,000 46,603 0 N/A
c/o Ramius Capital Group, LLC
666 Third Avenue, 26th Floor
New York, NY 10017
________________________________
* Less than 1%
(1) Assumes conversion of all of the selling securityholder's debentures at a
conversion rate of 23.3106 ADRs per each $1,000 principal amount of debentures
(rounded down to the nearest whole ADR).
(2) Includes, if applicable, conversion of all the selling securityholder's Teva
Pharmaceutical Finance, LLC 1.50% Convertible Senior Debentures due 2005 at a
conversion rate of 23.1934 ADRs per each $1,000 principal amount of debentures
(rounded down to the nearest whole ADR). Includes, if applicable, conversion of
all the selling securityholder's Teva Pharmaceutical Finance, LLC 0.75%
Convertible Senior Debentures due 2021 at a conversion rate of 23.3036 ADRs per
each $1,000 principal amount of debentures (rounded down to the nearest whole
ADR).
(3) Assumes that debentures held by other holders are not converted.
(4) The selling securityholder is a broker-dealer.
(5) The selling securityholder is an affiliate of a broker-dealer.
-75-
Principal
Amount of
Debenture
ADRs Owned and
ADRs Beneficially Offered ADRs
Owned Before Hereby Offered Offered ADRs Beneficially Owned
Name and Address of Selling Securityholder Before Offering (1)(2) (in $1,000s) Hereby (1) Owned After offering (2)
------------------------------------------ ---------------------- -------------- --------- ------------------------
Amount Percentage Amount Percentage
(3) (3)
------ ---------- -------------- --------- ------- ----------
Salomon Brothers Asset Management, Inc. 349,659 * 15,000 349,659 0 N/A
c/o Salomon Brothers
Asset Management Inc.
399 Park Avenue, 4th Floor
New York, NY 10022
Southern Farm Bureau Life Insurance 19,814 * 850 19,814 0 N/A
c/o Goldman Sachs & Co.
85 Broad Street
New York, NY 10004
Starvest Convertible Securities Fund 6,993 * 300 6,993 0 N/A
c/o Froley Levy
Investment Company Inc.
10900 Wilshire Boulevard, Suite 900
Los Angeles CA 90024
State Employees' Retirement Fund 35,048 * 90 2,097 32,951 *
of the State of Delaware-International
c/o Oaktree Capital
Management, LLC
333 South Grand Avenue, 28th Floor
Los Angeles, CA 90071
State of Oregon/Equity
c/o Froley Revy 52,448 * 2,250 52,448 0 N/A
Investment Co., Inc.
10900 Wilshire Blvd., Ste 900
Los Angeles, CA 90024
State of Oregon/S.A.I.F. Corporation 125,877 * 5,400 125,877 0 N/A
c/o Froley Revy
Investment Co., Inc.
10900 Wilshire Blvd. Ste 900
Los Angeles, CA 90024
State Street Bank, Custodian 22,261 * 955 22,261 0 N/A
for GE Pension Trust
c/o Palisade Capital Management LLC
1 Bridge Place, 6th Floor
Fort Lee, NJ 07024
Sturgeon Limited
c/o BNP Paribas Brokerage 11,212 * 481 11,212 0 N/A
Services, Inc.
555 Croton Road, 4th Floor
King of Prussia, PA 19406
Susquehanna Capital Group (4)(5) 431,246 * 18,500 431,246 0 N/A
401 City Line Avenue, Suite 220
Bala Cynwyd, PA 19004
________________________________
* Less than 1%
(1) Assumes conversion of all of the selling securityholder's debentures at a
conversion rate of 23.3106 ADRs per each $1,000 principal amount of debentures
(rounded down to the nearest whole ADR).
(2) Includes, if applicable, conversion of all the selling securityholder's Teva
Pharmaceutical Finance, LLC 1.50% Convertible Senior Debentures due 2005 at a
conversion rate of 23.1934 ADRs per each $1,000 principal amount of debentures
(rounded down to the nearest whole ADR). Includes, if applicable, conversion of
all the selling securityholder's Teva Pharmaceutical Finance, LLC 0.75%
Convertible Senior Debentures due 2021 at a conversion rate of 23.3036 ADRs per
each $1,000 principal amount of debentures (rounded down to the nearest whole
ADR).
(3) Assumes that debentures held by other holders are not converted.
(4) The selling securityholder is a broker-dealer.
(5) The selling securityholder is an affiliate of a broker-dealer.
-76-
Principal
Amount of
Debenture
ADRs Owned and
ADRs Beneficially Offered ADRs
Owned Before Hereby Offered Offered ADRs Beneficially Owned
Name and Address of Selling Securityholder Before Offering (1)(2) (in $1,000s) Hereby (1) Owned After offering (2)
------------------------------------------ ---------------------- -------------- --------- ------------------------
Amount Percentage Amount Percentage
(3) (3)
------ ---------- -------------- --------- ------- ----------
TCW Group, Inc.
c/o TCW Group Inc. 305,557 * 6,840 159,444 146,113 *
c/o Mellon Financial, 5th Floor
400 South Hope Street
Los Angeles, CA 90071
TD Securities (USA) Inc. (4)
31 West 52nd Street, 21st Floor 1,468,567 * 63,000 1,468,567 0 N/A
New York, NY 10019
Thrivent Financial for Lutherans, 174,815 * 5,500 128,208 46,607 *
as successor to Lutheran Brotherhood (5)
c/o Thirvent Financial
625 Fourth Avenue South
Minneapolis, MN 55415
Transamerica Life Insurance 198,140 * 8,500 198,140 0 N/A
and Annuities Co.
1150 S. Olive Street, Suite 2700
Los Angeles, CA 90015
UBS AG London Branch (5) 138,161 * 5,927 138,161 0 N/A
100 Liverpool Street
London EC2M 2RH
Victory Capital Management 135,346 * 4,075 94,990 40,356 *
127 Public Square, 20th Floor
Cleveland, OH 44114
White River Securities 4,662 * 200 4,662 0 N/A
383 Madison Avenue
23 Floor-Global Fund Management
New York, NYT 10179
Xavex Convertible Arbitrage #5 5,827 * 650 5,827 0 N/A
c/o Ramius Capital Group, LLC
666 Third Avenue, 26th Floor
New York, NY 10017
Zeneca Holdings Pension Trust 11,178 * 70 1,631 9,547 *
c/o Oaktree Capital Management, LLC
333 South Grand Avenue, 28th Floor
Los Angeles, CA 90071
________________________________
* Less than 1%
(1) Assumes conversion of all of the selling securityholder's debentures at a
conversion rate of 23.3106 ADRs per each $1,000 principal amount of debentures
(rounded down to the nearest whole ADR).
(2) Includes, if applicable, conversion of all the selling securityholder's Teva
Pharmaceutical Finance, LLC 1.50% Convertible Senior Debentures due 2005 at a
conversion rate of 23.1934 ADRs per each $1,000 principal amount of debentures
(rounded down to the nearest whole ADR). Includes, if applicable, conversion of
all the selling securityholder's Teva Pharmaceutical Finance, LLC 0.75%
Convertible Senior Debentures due 2021 at a conversion rate of 23.3036 ADRs per
each $1,000 principal amount of debentures (rounded down to the nearest whole
ADR).
(3) Assumes that debentures held by other holders are not converted.
(4) The selling securityholder is a broker-dealer.
(5) The selling securityholder is an affiliate of a broker-dealer.
-77-
Principal
Amount of
Debenture
ADRs Owned and
ADRs Beneficially Offered ADRs
Owned Before Hereby Offered Offered ADRs Beneficially Owned
Name and Address of Selling Securityholder Before Offering (1)(2) (in $1,000s) Hereby (1) Owned After offering (2)
------------------------------------------ ---------------------- -------------- --------- ------------------------
Amount Percentage Amount Percentage
(3) (3)
------ ---------- -------------- --------- ------- ----------
Zurich Institutional 6,993 * 300 6,993 0 N/A
Benchmark Master Fund
c/o Argent Financial Group
3100 Tower Boulevard, Suite 1104
Durham, NC 27707
Zurich Institutional Benchmark 9,324 * 400 9,324 0 N/A
Master Fund Ltd.
c/o Argent
500 West Putnam Avenue
Greenwich, CT 06830-6086
Zurich Institutional 11,655 * 500 11,655 0 N/A
Benchmark Master Fund Ltd.
c/o SSI Investment Management
357 N. Cannon Drive
Beverly Hills, CA 90210
Information concerning the selling securityholders may change from time to
time and any changed information will be set forth in supplements to this
prospectus if and when necessary. In addition, the per ADR conversion price, and
therefore the number of ADRs issuable upon conversion of the debentures, is
subject to adjustment. As a result, the aggregate principal amount of debentures
and the number of ADRs into which the debentures are convertible may increase or
decrease.
________________________________
* Less than 1%
(1) Assumes conversion of all of the selling securityholder's debentures at a
conversion rate of 23.3106 ADRs per each $1,000 principal amount of debentures
(rounded down to the nearest whole ADR).
(2) Includes, if applicable, conversion of all the selling securityholder's Teva
Pharmaceutical Finance, LLC 1.50% Convertible Senior Debentures due 2005 at a
conversion rate of 23.1934 ADRs per each $1,000 principal amount of debentures
(rounded down to the nearest whole ADR). Includes, if applicable, conversion of
all the selling securityholder's Teva Pharmaceutical Finance, LLC 0.75%
Convertible Senior Debentures due 2021 at a conversion rate of 23.3036 ADRs per
each $1,000 principal amount of debentures (rounded down to the nearest whole
ADR).
(3) Assumes that debentures held by other holders are not converted.
(4) The selling securityholder is a broker-dealer.
(5) The selling securityholder is an affiliate of a broker-dealer.
-78-
PLAN OF DISTRIBUTION
The selling securityholders and their successors, including their
transferees, pledgees or donees or their successors, may sell the debentures and
our ADRs into which the debentures are convertible directly to purchasers or
through underwriters, broker-dealers or agents, who may receive compensation in
the form of discounts, concessions or commissions from the selling
securityholders or the purchasers. These discounts, concessions or commissions
as to any particular underwriter, broker-dealer or agent may be in excess of
those customary in the types of transactions involved.
The debentures and ADRs may be sold in one or more transactions at fixed
prices, at prevailing market prices at the time of sale, at prices related to
the prevailing market prices, at varying prices determined at the time of sale,
or at negotiated prices. These sales may be effected in transactions, which may
involve crosses or block transactions:
o on any national securities exchange or U.S. inter-dealer system of a
registered national securities association on which the debentures
or our ADRs may be listed or quoted at the time of sale;
o in the over-the-counter market;
o in transactions otherwise than on these exchanges or systems or in
the over-the-counter market;
o through the writing of options, whether the options are listed on
an options exchange or otherwise; or
o through the settlement of short sales.
In connection with the sale of the debentures and ADRs, the selling
securityholder may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the
debentures or ADRs in the course of hedging the positions they assume. The
selling securityholders may also sell the debentures or ADRs short and deliver
these securities to close out their short positions, or loan or pledge the
debentures or ADRs to broker-dealers that in turn may sell these securities.
The aggregate proceeds to the selling securityholders from the sale of the
debentures or ADRs offered by them will be the purchase price of the debentures
or ADRs less discounts and commissions, if any. Each of the selling holders
reserves the right to accept and, together with their agents from time to time,
to reject, in whole or in part, any proposed purchase of debentures or ADRs to
be made directly or through agents. Neither we nor Teva Finance will receive any
of the proceeds from this offering.
Our ADRs are listed for trading on the Nasdaq National Market. The
debentures are currently eligible for trading on the PORTAL System of the Nasdaq
Stock Market.
In order to comply with the securities laws of some states, if applicable,
the debentures and ADRs may be sold in these jurisdictions only through
registered or licensed brokers or dealers. In addition, in some states the
debentures and ADRs may not be sold unless they have been registered or
qualified for sale or an exemption from registration or qualification
requirements is available and is complied with.
The selling securityholders and any underwriters, broker-dealers or agents
that participate in the sale of the debentures and ADRs may be "underwriters"
within the meaning of Section 2(11) of the
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Securities Act. Any discounts, commissions, concessions or profit they make on
any resale of the shares may be underwriting discounts and commissions under the
Securities Act. Selling securityholders who are "underwriters" within the
meaning of Section 2(11) of the Securities Act will be subject to the prospectus
delivery requirements of the Securities Act. The selling securityholders have
acknowledged that they understand their obligations to comply with the
provisions of the Exchange Act and the rules thereunder relating to stock
manipulation, particularly Regulation M.
In addition, any securities covered by this prospectus which qualify for
sale pursuant to Rule 144, Rule 144A or Regulation S of the Securities Act may
be sold under Rule 144, Rule 144A or Regulation S rather than pursuant to this
prospectus.
To the extent required, the specific debentures or ADRs to be sold, the
names of the selling securityholders, the respective purchase prices and public
offering prices, the names of any agent, dealer or underwriter, and any
applicable commissions or discounts with respect to a particular offer will be
set forth in an accompanying prospectus supplement or, if appropriate, a post
effective amendment to the registration statement of which this prospectus is a
part.
We entered into a registration rights agreement for the benefit of holders
of the debentures to register their debentures and our ADRs under applicable
federal and state securities laws under specific circumstances and at specific
times. The registration rights agreement prices for cross-indemnification of the
selling securityholders and us and our respective directors, officers and
controlling persons against specific liabilities in connection with the offer
and sale of the debentures and ADRs, including liabilities under the Securities
Act.
We will pay substantially all of the expenses incurred by the selling
securityholders of incident to the offering and sale of the debentures and our
ADRs. We estimate that our total expenses of the offering of the debentures and
ADRs will be approximately $200,000. The following table sets forth our
estimates (other than the SEC and Nasdaq registration fees) of the expenses in
connection with the issuance and distribution of the ADRs being registered. None
of the following expenses are being paid by the selling securityholders.
Item Amount
---- ------
SEC registration fee...................... $41,400
Nasdaq listing fee........................ 17,500
Legal fees and expenses................... 50,000
Accounting fees and expenses.............. 75,000
Printing fees............................. 5,000
Miscellaneous fees and expenses 11,100
Total................................ $200,000
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LEGAL MATTERS
The validity of the debentures offered by this prospectus and of the ADRs
issuable upon conversion of the debentures will be passed upon for us by Willkie
Farr & Gallagher, New York, New York, by Zeven & Associates, Curacao,
Netherlands Antilles, and by Tulchinsky-Stern & Co., Israel. In addition,
certain United States federal income tax consequences of these securities will
be passed upon for us by Willkie Farr & Gallagher, New York, New York.
EXPERTS
The consolidated financial statements of Teva as of December 31, 2002 and
2001 and for each of the three years in the period ended December 31, 2002,
incorporated in this prospectus by reference to Teva's Annual Report on Form
20-F for the year ended December 31, 2002, except as they relate to certain
consolidated subsidiaries, have been so incorporated in reliance on the audit
report of Kesselman & Kesselman, independent certified public accountants in
Israel and a member of PricewaterhouseCoopers International Limited, given on
the authority of said firm as experts in auditing and accounting. The financial
statements of the certain consolidated subsidiaries referred to above, not
separately presented in such Annual Report, whose sales constituted
approximately 16% of Teva's total consolidated sales for the year ended December
31, 2000, have been audited by other independent accountants whose reports have
also been incorporated in this prospectus by reference to Teva's Annual Report
on Form 20-F for the year ended December 31, 2002, given on the authority of
such firms as experts in auditing and accounting.
ADDITIONAL INFORMATION
We file annual and special reports and other information with the SEC. You
may read and copy such material at the public reference facilities maintained by
the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, as well as
at the SEC's regional offices. You may also obtain copies of such material from
the SEC at prescribed rates by wiring to the Public Reference Section of the
SEC, 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms.
The SEC maintains an Internet website at http://www.sec.gov that contains
reports, proxy, information statements and other material that are filed through
the SEC's Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system and
file electronically with the SEC. We began filing through the EDGAR system
beginning on October 31, 2002.
Our ADRs are quoted on the Nasdaq National Market. You may inspect certain
reports and other information concerning us at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
Information about us is also available on our website at
http://www.tevapharm.com. Such information on our website is not part of this
prospectus.
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INCORPORATION BY REFERENCE
The following documents filed with the SEC are incorporated in this
prospectus by reference:
(1) Our Annual Report on Form 20-F for the year ended December 31, 2002
(File No. 0-16174);
(2) All Reports of Foreign Issuer on Form 6-K filed by Teva with the SEC
since December 31, 2002, including its Reports on Form 6-K filed on
January 6, 2003, January 14, 2003, January 15, 2003, January 22,
2003, January 27, 2003 (two reports), February 19, 2003 and February
24, 2003; and
(3) The description of the Teva's Ordinary Shares, par value NIS 0.10
per share (the "Ordinary Shares"), and the American Depositary
Shares representing the Ordinary Shares, contained in the
registration statement on Form F-4 (Registration Statement No.
333-4216).
All reports and other documents filed by Teva pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof and prior
to the filing of a post-effective amendment which indicates that all the
securities offered hereby have been sold or which deregisters all securities
then remaining unsold, shall be deemed to be incorporated by reference in this
prospectus and to be part of this prospectus from the date of filing of such
reports and documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference shall be deemed to be modified or superseded for
purposes of this registration statement to the extent that a statement in this
prospectus or in any other subsequently filed document which is incorporated or
deemed to be incorporated by reference modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this registration statement.
You may request obtain of these documents free of charge by contacting us
at our address or telephone number set forth under the caption "Summary."
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