SecProbe.io

CORRESP
1
filename1.htm

      Correspondence

    KRAMER LEVIN NAFTALIS
      & FRANKEL LLP

                September
      13,
      2006

    VIA
      EDGAR AND BY FEDERAL EXPRESS

    Mr.
      Gary
      R. Todd

    Division
      of Corporation Finance

    United
      States Securities and Exchange Commission

    Division
      of Corporation Finance

    100
      F
      Street, N.E.

    Washington,
      D.C. 20549

            Re:
 Camtek
      Ltd.

      Form 20-F for the fiscal year ended

      December 31, 2005

      Filed June 29, 2006

      File No. 0-30664

    Dear
      Mr.
      Todd:

    Reference
      is made to the letter dated August 18, 2006 (the “Comment
      Letter”)
      to Mr.
      Rafi Amit, Chairman of the Board and Chief Executive Officer of Camtek Ltd.
      (the
“Company”),
      setting forth the comments of the staff of the Division of Corporation Finance
      of the Securities and Exchange Commission (the “Staff”)
      regarding the above-referenced Form 20-F filed by the Company on June 29, 2006
      (the “Form
      20-F”)
      with
      the Securities and Exchange Commission (the “Commission”).

    This
      letter sets forth the Company’s responses to the Staff’s comments. For your
      convenience, the Staff’s comments contained in the Comment Letter have been
      restated below in their entirety, with the responses to each comment set forth
      immediately under the applicable comment. The numbered paragraphs in this letter
      correspond to the numbered paragraphs of the Comment Letter. We are also sending
      courtesy copies of this letter to you by Federal Express.

    Form
      20-F as of December 31, 2005

    Item
      5.   Operating
      and Financial Review and Prospects, page 22

    Liquidity
      and Capital Resources, page 26

            1.

              We
                see that you sold ordinary shares and warrants in April 2006. Tell
                us
                about the terms and conditions of those warrants, including but not
                limited to, registration provisions, liquidated damages clauses,
                non-cash
                exercise provisions and any circumstances
                that

            KRAMER
              LEVIN NAFTALIS & FRANKEL LLP

          Mr.
            Gary
            R. Todd

          September
            13, 2006

          Page
            2

      may
        lead to changes in the exercise price. Also describe how you have accounted
        for
        those warrants. In that regard, fully describe how you considered and applied
        the requirements of SFAS 133 and EITF 00-19 in evaluating whether those warrants
        are derivatives that should be accounted as assets or liabilities at fair
        value.

    On
      April
      26, 2006, the Company raised $15 million by issuing 2,525,252 ordinary shares
      at
      a price of $5.94 per share in a private placement to Israeli institutional
      investors. The private placement also included warrants that are exercisable
      into 1,262,626 ordinary shares at a price of $6.83 per share during a period
      of
      four years. The private placement was exempt from registration in the United
      States pursuant to the exemption from registration provided by Regulation S
      as a
      Category 1 transaction within the meaning of section 903(b)(ii)(a) of the SEC
      rules under the Securities Act of 1933. The warrants issued in April 2006 have
      been classified in equity for the following reasons:

    a.  There
      are
      no registration rights attached to the warrants or the underlying ordinary
      shares since the shares were not subject to resale limitations under Regulation
      S and could be resold in Israel on the Tel Aviv Stock Exchange under Rule 904.
      If the Israeli institutional investors exercise the warrants, the shares
      underlying these warrants would be exempt from registration under Regulation
      S,
      and in Israel the shares are automatically registered upon issuance of the
      warrants. Accordingly, there are no liquidated damages clauses attached to
      the
      shares or warrants since no registration was required.

    b.  There
      are
      no adjustments to be made to the exercise price of the warrants except for
      those
      which would fall within the category of equity restructuring as defined in
      the
      glossary of FASB 123R.

    c.  The
      warrants contain only customary terms and there are no provisions in the warrant
      certificate that violate any of the provisions prescribed in EITF 00-19
      paragraphs 12-32 that would preclude equity classification.

    Based
      on
      the above the Company believes that equity classification of the warrants is
      appropriate.

    Item
      8.   Financial
      Statements, page 42

            2.

              We
                see that the audited financial statements are incorporated by reference
                to
                a Form 6-K. The audited financial statements should also be included
                in
                the annual report on Form 20-F. Refer to Item 8A to Form 20-F. Please
                apply in future filings.

    In
      future
      filings, the Company will comply with the Staff’s request.

          KRAMER
            LEVIN NAFTALIS & FRANKEL LLP

        Mr.
          Gary
          R. Todd

        September
          13, 2006

        Page
          3

    Form
      6-K dated April 6, 2006

    Note
      9   Convertible
      Loan, page F-13

            3.

              We
                see that in August, 2005 you issued a convertible note. Please tell
                us how
                you evaluated and applied the provisions of SFAS 133 and EITF 00-19
                in
                concluding that the conversion feature was not a derivative that should be
                bifurcated and accounted for separately at fair value. Your response
                should fully describe the terms and provisions of the financing and
                explain how you considered those terms and provisions in reaching
                your
                conclusions about the requirements of
                literature.

    As
      described in Note 9 to the Company’s consolidated financial statements, on
      August 23, 2005, the Company raised $5 million pursuant to the issuance of
      notes
      evidencing a convertible loan from FIMI Opportunity Fund L.P and FIMI Israel
      Opportunity Fund, Limited Partnership (collectively, “FIMI”).
      The
      loan is payable in three equal annual payments starting at the third anniversary
      of the closing date. The loan bears annual interest of Libor + 2.1%. The
      interest is payable every three months. Conversion of the notes, in whole or
      in
      part, is optional at any given business day after the closing date. The
      conversion price is $5.50 per share, however, in the event that the average
      closing price of the Company's shares as reported on NASDAQ for the 60
      consecutive trading days immediately preceding the first and second anniversary
      of the loan agreement closing date is lower than the conversion price in effect
      on such date, the conversion price in effect on such date shall be reduced
      to
      the higher of the average closing price and $2.00.

    In
      addition, in the event that the Company (a) is acquired in its entirety or
      (b)
      is consolidated or merges with or into any third party in a transaction pursuant
      to which the Company’s shareholders immediately prior to such transaction do not
      hold at least 51% of the shares of the surviving entity immediately following
      such transaction, then if any such transaction is consummated prior to the
      third
      anniversary of the closing date, at an effective price per share, which, when
      multiplied by 70% (the "Exit Discounted PPS"), is lower than the conversion
      price in effect on such date, then the conversion price shall automatically
      be
      adjusted to equal the Exit Discounted PPS; provided, however, that if such
      Exit
      Discounted PPS is lower then $2.00, the Company may issue shares upon conversion
      of the notes on the basis of a conversion price of $2.00 and pay FIMI, upon
      such
      conversion, an additional amount equal to the difference between (i) the value
      of the shares that would have been issued had the conversion price been equal
      to
      the Exit Discounted PPS and (ii) the value of the shares that were issued on
      the
      basis of the $2.00 conversion price. If such exit transaction is consummated
      following the third anniversary of the closing date, the same mechanism would
      apply; provided, however, that the "70%" number set forth above would be
      replaced by "65%".

    In
      addition, at any time after the first anniversary of the closing date, the
      holders of the notes shall, subject to the provisions of a registration rights
      agreement, be entitled to request that

          KRAMER
            LEVIN NAFTALIS & FRANKEL LLP

        Mr.
          Gary
          R. Todd

        September
          13, 2006

        Page
          4

    the
      Company use its best efforts to effect a registration of the holders' securities
      under the Securities Act of 1933.

    The
      Company evaluated the provisions of SFAS 133 and EITF 00-19 as follows:

    a.  The
      Company examined the provisions of EITF 05-02. Based on the terms of the notes
      described above, the Company determined that the notes should not be considered
      a conventional convertible debt instrument. Based on the provisions of the
      notes, the Company identified two embedded derivatives to be evaluated for
      bifurcation.

            1.

              Conversion
                option (the "conversion
                option")
                that entitles the holders to convert the debt to equity. Settlement
                is
                only by physical delivery of the notes for shares and there is no
                event
                that could require the Company to pay cash to settle the conversion
                option. The conversion price of such option may be adjusted after
                the
                first and second anniversary to the higher of $2.00 or the average
                per
                share price over 60 consecutive trading immediately preceding the
                respective anniversaries. In no event will the exercise price be
                lower
                than $2.00.

            2.

              A
                merger or change in control ("exit")
                derivative for the conversion to shares at an exercise price that
                is 70%
                (or 65% if exit is consummated after the third anniversary) of the
                exit
                per share price. If 70% of the exit price is lower than $2.00, the
                Company
                can settle the derivative in shares based on $2.00 per share and
                a cash
                amount equal to the difference between the value of the shares issued
                using the conversion price of $2.00 and the number of shares that
                would
                have been issued had the conversion price been 70% of the exit price.

    The
      Company concluded that (1) the embedded derivative meets the conditions in
      paragraph 12 of FASB 133 and (2) that the embedded derivative meets the
      definition of a derivative in paragraph 6 of FASB 133.

    b.  As
      a next
      step the Company considered the scope exception in paragraph 11(a) of FASB
      133.
      The Company examined the terms of the embedded derivatives in accordance with
      EITF 00-19 including the provisions of paragraph 14-32 of that EITF (consistent
      with its conclusion that the convertible debt is not conventional), to determine
      whether the conversion option and the exit derivative were derivatives that
      require bifurcation as follows:

            KRAMER
              LEVIN NAFTALIS & FRANKEL LLP

          Mr.
            Gary
            R. Todd

          September
            13, 2006

          Page
            5

    Analysis
      for the conversion option

            1.

              "The
                contract permits the company to settle in unregistered shares.” (Par.
                14-18).

    Since
      the
      Company will register the shares only on the basis of "best efforts" without
      any
      specific time period or any penalties for failure to register the shares within
      a defined period, settlement is considered within the Company's control and
      equity classification is not precluded.

            2.

              “The
                company has sufficient authorized and unissued shares available to
                settle
                the contract after considering all other commitments that may require
                the
                issuance of stock during the maximum period the derivative contract
                could
                remain outstanding.” (Par.
                19).

    There
      are
      100,000,000 authorized shares and 28,000,000 issued and outstanding shares.
      The
      maximum amount of shares issuable under the conversion option is 2,500,000
      shares due to the $2.00 floor on the conversion price.

            3.

              “The
                contract contains an explicit limit on the number of shares to be
                delivered in a share settlement.” (Par.
                20-24).

    The
      total
      number of shares to be issued pursuant to the agreement is limited due to the
      minimum conversion price of $2.00.

            4.

              “There
                are no required cash payments to the counterparty in the event the
                company
                fails to make timely filings with the SEC.” (Par.
                25).

    As
      was
      described above, no such payments are required.

          KRAMER
            LEVIN NAFTALIS & FRANKEL LLP

        Mr.
          Gary
          R. Todd

        September
          13, 2006

        Page
          6

            5.

                “There
                  are no required cash payments to the counterparty if the shares
                  initially
                  delivered upon settlement are subsequently sold by the counterparty
                  and
                  the sales proceeds are insufficient to provide the counterparty
                  with full
                  return of the amount due (that is, there are no cash settled "top-off"
                  or
                  "make-whole" provisions).” (Par.
                  26).

    There
      are
      no such rights granted to the investors in the loan agreement.

            6.

              “The
                contract requires net-cash settlement only in specific circumstances
                in
                which holders of shares underlying the contract also would receive
                cash in
                exchange for their shares.” (Par. 27-
                28).

    There
      are
      no such provisions in the loan agreement.

            7.

              “There
                are no provisions in the contract that indicate that the counterparty
                has
                rights that rank higher than those of a shareholder of the stock
                underlying the contract.” (Par.
                29-31).

    There
      are
      no such provisions in the loan agreement.

            8.

              “There
                is no requirement in the contrac