© 2005 Morrison & Foerster LLP All Rights Reserved How to Launch a Successful IPO Avoiding Disappointment and Unnecessary Costs Bruce Alan Mann Partner, Morrison Foerster March 28, 2005

2 The Questions You Should Ask Are you a real IPO candidate? Is an IPO better than a private sale? How can you make your IPO successful? Morrison & Foerster will help you answer these questions How to Launch a Successful IPO

3 Decide whether you are a real IPO candidate: Don’t rely on friends or brokers – seek professional advice Are you a company, or just a product? Do you have the earnings and growth potential the market is looking for? Is the management team up to the task? How to Launch a Successful IPO

4 Is an IPO better than a private sale? How to Launch a Successful IPO

5 Why you should go public: Raise the company’s profile and credibility with customers and suppliers Build an equity base for future financings and growth Create a currency for future tax free acquisitions Provide a vehicle for performance linked employee compensation Maintain founder and management control of the company’s future Is an IPO better than a private sale?

6 Why you should consider selling out: Possible higher valuation if technology is strong but earnings potential is weak More certain cash-out of existing investors Avoiding time and cost of the going public process Avoiding the burdens of living as a public company Ability to keep things confidential No need to fill out management team Is an IPO better than a private sale?

7 Six ways to make your IPO a success How to Launch a Successful IPO

8 1.Choose your legal and accounting advisors with care Are they experienced in handling IPOs in your industry? Who will actually be doing your work? Will they be there when you need them? Six ways to make your IPO a success

9 2.Be thorough and realistic in choosing your managing underwriters Do they know your industry? Who do they consider your comparables and how do they approach valuation? Can they handle an IPO for an Israeli company with your market cap? Who would you be working with, and can they deliver their firm’s support? What else is on their plate – is their timing your timing? How many managers make sense? Six ways to make your IPO a success

10 3.Get your corporate house in order before running up your costs Where to incorporate? Should you be a “foreign private issuer”? Does the market favor Delaware corporations? What structure is most tax efficient? Are the added burdens of Sarbanes-Oxley a factor? What changes in board and committee membership are necessary? Do you need more independent directors? Six ways to make your IPO a success

11 3.Get your corporate house in order (cont’d) Do you have the right D&O insurance? Are you prepared to deal with public stockholders? What do you need to do to satisfy listing and regulatory requirements? Are your internal controls adequate for Section 404? Are you prepared to be a publicly reporting company? Does your board and audit committee meet the test? Six ways to make your IPO a success

12 4.Get your business in order before you get distracted by the IPO process Make sure your IP is protected Make sure your balance sheet is strong enough to withstand delays and expenses Will your results be impacted by the focus of management on the IPO? Do your projections take into account the costs of being a public company? Deal with potential “cheap stock” issues Six ways to make your IPO a success

13 5.Get your personal affairs in order before the IPO Clean up loans prohibited by Sarbanes-Oxley before you file Eliminate related party transactions that are inappropriate for a public company Transfer shares to family members, charitable trusts, etc. before the stock ownership table is prepared Establish a personal wealth management plan and consider adopting a 10b5-1plan for orderly sales Six ways to make your IPO a success

14 6.Be prepared for anything – announcing an IPO can bring Suits by competitors, including bet the company IP litigation Proposals from potential acquirers Claims by former employees and stockholders Long lost relatives Six ways to make your IPO a success

15 THANK YOU The International Law Firm for Israeli Companies Visit us at Or (Hebrew) How to Launch a Successful IPO