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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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F O R M 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR
15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of July 2004
MAGAL SECURITY SYSTEMS LTD.
(Name of Registrant)
P.O. Box 70, Industrial Zone, Yahud 56100 Israel
(Address of Principal Executive Office)
Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.
Form 20-F X Form 40-F __
Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(1):__
Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(7):__
Indicate by check mark whether by furnishing the information contained
in this Form, the registrant is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes __ No X
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82- ____________
This Report on Form 6-K is incorporated by reference into the
Registrant's Form F-3 Registration Statement File No. 333-9050.
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Magal Security Systems Ltd.
6-K Items
1. Magal Security Systems Ltd. Proxy Statement for Annual General Meeting to
be held July 29, 2004.
2. Magal Security Systems Ltd. Proxy Card.
ITEM 1
MAGAL SECURITY SYSTEMS LTD.
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NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
To Be Held July 29, 2004
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To Our Shareholders:
You are cordially invited to attend the Annual General Meeting of the
Shareholders of Magal Security Systems Ltd., to be held at our registered
office, 17 Altalef Street, Industrial Zone, Yahud 56100, Israel, on July 29,
2004 at 10:00 A.M., local time, for the purpose of considering and acting upon
the following matters:
1. Election of Directors and External Directors;
2. Approval of the appointment of Kost Forer Gabbay & Kasierer, a Member
of Ernst & Young Global, and their affiliates, as independent auditors
of our company for the year ending December 31, 2004 and to authorize
the Audit Committee to fix the remuneration of the auditors in
accordance with the volume and nature of their services;
3. Approval of the terms of compensation and the terms of employment for
certain of our Directors and Officers;
4. Approval of the terms of compensation for our External Directors;
5. Approval of an interim cash dividend in the amount of $0.05 per
ordinary share, par value NIS 1.00 each, that was paid to shareholders
of record as of January 12, 2004, and declaration of an additional 5%
share dividend to shareholders of record as of July 29, 2004, as a
final dividend for the year ended December 31, 2003;
6. Approval of our new 2003 Israeli Share Option Plan;
7. Authorization of Mr. Jacob Even-Ezra, our Chairman of the Board of
Directors, to serve concurrently as our Chief Executive Officer;
8. Review and discussion of our Directors' Report, Consolidated Financial
Statements and Auditors' Report for the year ended December 31, 2003;
and
9. Such other business as may properly come before the meeting or any
adjournment thereof.
The Board of Directors has fixed the close of business on June 25, 2004 as
the record date for the determination of shareholders entitled to receive notice
of, and to vote at, the Annual General Meeting.
You are cordially invited to attend the Annual General Meeting. Whether or
not you plan to attend the Annual General Meeting, you are urged to promptly
complete, date and sign the enclosed proxy and to mail it in the enclosed
envelope, which requires no postage if mailed in the United States. Return of
your proxy does not deprive you of your right to attend the Annual General
Meeting and to vote your shares in person.
Pursuant to the our Articles of Association, a proxy will be effective only
if it is received by us at least 48 hours prior to the time of the Annual
General Meeting.
Joint holders of our company's ordinary shares should take note that,
pursuant to Article 57 of our Articles of Association, the vote of the senior of
the joint holders of any ordinary share who tenders a vote, whether in person or
by proxy, will be accepted to the exclusion of the vote(s) of the other joint
holder(s) of such ordinary share, and for this purpose seniority will be
determined by the order in which the names stand in the Register of Members or
the records of our transfer agent.
BY ORDER OF THE BOARD
OF DIRECTORS
/s/Jacob Even-Ezra
JACOB EVEN-EZRA
Chairman of the Board of Directors and
Chief Executive Officer
Yahud, Israel
June 29, 2004
Our annual financial statements for the year ended December 31, 2003 are
enclosed herewith, but are not part of the proxy solicitation material.
This Proxy Statement and the proxies solicited hereby are first being sent
or delivered to the shareholders on or about July 2, 2004.
MAGAL SECURITY SYSTEMS LTD.
17 Altalef Street
Industrial Zone
Yahud 56100, Israel
PROXY STATEMENT
ANNUAL GENERAL MEETING OF SHAREHOLDERS
This Proxy Statement is furnished to shareholders of Magal Security Systems
Ltd. in connection with the solicitation by our Board of Directors of proxies to
be voted at our Annual General Meeting of the Shareholders, or the Meeting, to
be held on July 29, 2004 at 10:00 A.M., local time, at our registered office, 17
Altalef Street, Industrial Zone, Yahud 56100, Israel, and at any adjournment or
postponement thereof.
Solicitation of Proxies
Shareholders will be asked to vote upon: (i) the election as Directors and
External Directors of the nominees named herein; (ii) the approval of the
appointment of Kost Forer Gabbay & Kasierer, a Member of Ernst & Young Global,
and their affiliates, as the company's independent auditors for the year ending
December 31, 2004 and the authorization of the Audit Committee to fix the
remuneration of the auditors in accordance with the volume and nature of their
services; (iii) the approval of the terms of compensation and the terms of
employment for certain of our Directors and Officers; (iv) the approval of the
terms of compensation for our External Directors; (v) the approval of the
interim cash dividend in the amount of $0.05 per ordinary share, that was paid
to the holders of the ordinary shares as of January 12, 2004 and declaration of
an additional 5% share dividend to shareholders of record as of July 29, 2004,
as a final dividend for the year ended December 31, 2003; (vi) the approval of
our new 2003 Israeli share option plan; (vii) the authorization of Mr. Jacob
Even-Ezra, our Chairman of the Board of Directors, to serve concurrently as our
Chief Executive Officer. Additionally, our Directors' Report, Consolidated
Financial Statements and Auditor's Report for the year ended December 31, 2003
will be presented and discussed.
If directions are not given or directions are not in accordance with the
options listed on a signed and returned proxy card, such shares will be voted
FOR the nominees for director and external director and each proposition for
which the Board of Directors recommends a vote FOR.
Unsigned or unreturned proxies, including those not returned by banks,
brokers, or other record holders, will not be counted for quorum or voting
purposes.
Any shareholder may revoke his proxy by delivering a subsequently dated
proxy or by giving written notice of revocation to the Secretary of the company
at any time before such proxy is voted or by voting in person at the Meeting.
Attendance at the Meeting will not in itself constitute a revocation of a
previously furnished proxy and shareholders who attend the Meeting in person
need not revoke their proxy (if previously furnished) and vote in person.
Pursuant to the provisions of the our Articles of Association, a proxy will
be effective only if it is received by us at least 48 hours prior to the time of
the Meeting.
The Board of Directors does not know of any matter, other than those set
forth herein, that is expected to be presented for consideration at the Meeting.
However, if other matters properly come before the Meeting, the persons named in
the accompanying proxy intend to vote thereon in accordance with their best
judgment.
Record Date, Outstanding Voting Securities, Voting Rights
Only shareholders of record at the close of business on June 25, 2004 will
be entitled to receive notice of, and vote at, the Meeting and any adjournments
or postponements thereof. As of June 24, 2004, there were 8,205,422 ordinary
shares outstanding and eligible to vote at the Meeting. At the Meeting, each
shareholder of record will be entitled to one vote for each ordinary share held
by him in respect of each matter to be voted upon. The ordinary shares have a
par value of NIS 1.00 per share
The presence, in person or by proxy, of two or more persons entitled to
vote upon the business to be transacted at the Meeting, each being a
shareholder, a proxy for a shareholder or a representative of a corporation,
holding together more than 33-1/3% of the outstanding ordinary shares, is
necessary to constitute a quorum at the Meeting. Pursuant to our Articles of
Association, if, within half an hour from the time appointed for the holding of
a general meeting, a quorum is not present, the meeting shall stand adjourned
until the same day in the next week at the same time and place or any time and
hour as the Directors shall designate and state in a notice to the members, and
if, at such adjourned meeting, a quorum is not present within half an hour from
the time appointed for holding the meeting any two shareholders present in
person or by proxy shall constitute a quorum. This proxy shall constitute notice
of such adjourned meeting and no additional notice shall be provided by us to
the shareholders.
An affirmative majority of the votes cast is required to approve each of
the items to be presented at the Meeting, other than Proposals 1(b), 1(c) and 7.
Under the Israeli Companies Law, Items 1(b) and 1(c) with respect to the
election of each of Anat Winner and Shaul Kobrinsky as external directors,
requires the affirmative vote of the holders of majority of the ordinary shares
represented at the Meeting, in person or by proxy and voting thereon, provided
that (i) at least one third of the non-controlling shareholders represented and
voting at the Meeting are included in the majority; or (ii) that the total
shareholdings of the non-controlling shareholders who vote against their
election do not represent more than 1% of the voting rights in our company. Item
7 with respect to the authorization of Mr. Jacob Even-Ezra, our Chairman of the
Board of Directors, to serve concurrently as our Chief Executive Officer,
requires the affirmative vote of the holders of a majority of the ordinary
shares represented at the Meeting, provided that such majority vote includes at
least two-thirds of the ordinary shares represented at the Meeting in person or
by proxy that are held by non-controlling shareholders.
Abstentions and broker "non-votes" are not counted in determining the
outcome of the matter being acted upon or for the purpose of determining the
special majority requirements detailed above. They are counted only for
determining a meeting quorum. A broker "non-vote" occurs when a nominee holding
ordinary shares of our company for a beneficial owner does not vote on a
particular proposal because the nominee does not have discretionary voting power
with respect to that proposal and has not received instructions from the
beneficial owner.
We will bear the cost of soliciting proxies. Solicitation of proxies will
be primarily by mail, but proxies may also be solicited by directors, officers,
and our employees (who will not be specifically compensated for such services),
by telephone or otherwise. Brokerage houses and other custodians, nominees, and
fiduciaries that forward proxies and proxy materials to beneficial owners of
ordinary shares will be reimbursed for their expenses by us.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information, as of June 24, 2004,
pertaining to the beneficial ownership of the company's ordinary shares by (i)
persons known to the company to own beneficially five percent or more of the
ordinary shares and (ii) all directors and executive officers of the company as
a group.
The information contained herein has been obtained from our records or from
information furnished directly by the individual or entity to us.
2
Number of Ordinary Percentage of
Name and Address Shares Beneficially Owned(1) Outstanding Ordinary Shares(2)
---------------- ---------------------------- ------------------------------
Mira Mag Inc.(3) 1,736,315 21.16%
c/o S.Friedman & Co.
2 Weizman Street
Tel Aviv, Israel
Jacob Even-Ezra(4) 529,701 6.41%
c/o Magal Security Systems Ltd.
17 Altalef Street, Industrial Zone
Yahud 56100 Israel
All Directors and Officers as a Group 1,944,798 23.5%
(consisting of 15 persons)(4)
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(1) Ordinary shares beneficially owned include ordinary shares issuable
upon the exercise of options exercisable within 60 days of June 24,
2004.
(2) The percentage of outstanding ordinary shares is based on 8,205,422
ordinary shares outstanding as of June 24, 2004. Ordinary shares
deemed beneficially owned by virtue of the right of any person to
acquire such shares within 60 days of June 24, 2004, are treated as
outstanding only for the purposes of determining the percent owned by
such person.
(3) Mira Mag is the holder of 1,736,315 ordinary shares. The beneficial
owners and their percentage interest in these shares are: the Eurona
Foundation (81.5% or 1,415,097 ordinary shares) and Jacob Even-Ezra's
three children (18.5% or 321,218 ordinary shares). Jacob Even-Ezra
beneficially owns all of the 321,218 ordinary shares held by Mira Mag
in which his children (Ornit Dekel, Guy and Asaf Even-Ezra) have an
interest. The purpose of the Eurona Foundation, the trustees of which
are Prinz Michael von Liechtenstein (address: Altenbach 8, P.O. Box
339, FL 9490 Vaduz, Liechtenstein) and Nathan Kirsh (address: Kapola
Estate, Ezulwini, Swaziland), is to provide for the education,
maintenance and support of the family of Nathan Kirsh and such other
persons as the foundation's board may determine.
(4) Includes Mr. Even-Ezra's beneficial ownership of 321,218 ordinary
shares held by Mira Mag (see footnote (3) above), Mr. Even-Ezra's
beneficial ownership of an additional 187,265 ordinary shares and
21,218 ordinary shares held by a trustee.
I. ELECTION OF DIRECTORS AND EXTERNAL DIRECTORS
(Item 1A, 1B and 1C on the Proxy Card)
Our Articles of Association provide for a Board of Directors consisting of
no less than three and no more than eleven members, as may be determined from
time to time at a general meeting of our shareholders. At this time, management
is recommending six nominees for election as directors and two nominees for
election as External Directors, as defined by the Israeli Companies Law,
5739-1999 (the "Companies Law"). It is intended that proxies (other than those
directing the proxy holders not to vote for the listed nominees or for certain
of them) will be voted for the election of the six nominees for election as
directors and the two nominees for election as External Directors named in the
following table. Messrs. Even-Ezra, Dekel, Kirsh, Nuss and Perry currently serve
as our directors.
Each director, other than the External Directors, will hold office until
the next Annual General Meeting and until such Director's successor shall have
duly taken office, unless such director's office is earlier vacated under any
relevant provisions of our Articles of Association or pursuant to the
requirements of applicable law. All the members of our Board of Directors
(except the external directors as detailed below) may be reelected upon
completion of their term of office. The initial term of each External Director
is three years and may be extended for an additional three years.
In the event any of such nominees should be unable to serve, the proxies
will be voted for the election of such other person or persons as shall be
determined by the persons named in the proxy in accordance with their best
judgment. We are not aware of any reason why any one of the nominees, if
elected, would be unable to serve as a director.
3
Under Companies Law, each external director is required to serve on the
company's audit committee. In addition, at least one external director must
serve on each of our company's other committees.
Under the Companies Law and our Articles of Association, the affirmative
vote of the holders of a majority of the ordinary shares represented at the
Meeting in person or by proxy and entitled to vote and voting thereon will be
necessary for the election as directors of Messrs. Even-Ezra, Dekel, Kirsh,
Nuss, Perry and Livne. The approval of the election as External Directors of
Mrs. Anat Winner and Mr. Shaul Kobrinsky will require the affirmative vote of
the holders of a majority of the ordinary shares represented at the Meeting in
person or by proxy and voting thereon, provided that (i) at least one third of
the non-controlling shareholders represented and voting at the Meeting are
included in the majority; or (ii) that the total shareholdings of the
non-controlling shareholders who vote against their election do not represent
more than 1% of the voting rights in our company.
The following information is supplied with respect to each person nominated
and recommended to be elected by our Board of Directors and is based upon our
records and information furnished to it by the nominees. Reference is made to
"Security Ownership of Certain Beneficial Owners and Management" for information
pertaining to share ownership by the nominees.
Nominees for Election Directors
Name Age Position with the Company
---- --- -------------------------
Jacob Even-Ezra.....................73 Chairman of the Board and
Chief Executive Officer
Izhar Dekel.........................52 President and Director
Nathan Kirsh........................72 Director
Jacob Nuss..........................56 Director
Jacob Perry ........................60 Director
Zeev Livne .........................59 Director
Shaul Kobrinsky.....................52 External Director
Anat Winner.........................45 External Director
Jacob Even-Ezra has served as our Chairman of the Board and Chief Executive
Officer since 1984, and from 1987 until 1990 he also served as President. He is
currently a member of the Executive Council and the Management Committee of
Tel-Aviv University. From 1985 to 1988, Mr. Even-Ezra was also Chairman of the
Israel Export Institute. Mr. Even-Ezra is a beneficial owner of 18.5% of the
total ordinary shares held by Mira Mag Inc. Mr. Even-Ezra is Mr. Dekel's
father-in-law.
Izhar Dekel has served as our President since 1990. He became a director in
1993 and served as our Finance Manager between 1984 and 1990. Mr. Dekel is Mr.
Even-Ezra's son-in-law.
Nathan Kirsh has served as our director since 1984. Mr. Kirsh is an
independent investor. Mr. Kirsh serves as one of the trustees of the Eurona
Foundation, which is the beneficial owner of approximately 81.5% of the total
ordinary shares held by Mira Mag Inc.
Jacob Nuss has served as a director since 1993. Mr. Nuss currently serves
as the vice president internal auditing of IAI, and served as IAI's deputy vice
president internal auditing from 1999 to 2003. From 1993 to 1999, Mr. Nuss
served as the director of finance of IAI's electronics group. From 1991 to 1993,
Mr. Nuss served as assistant to the chairman of the board of IAI. Since 1975,
Mr. Nuss has served in various financial management capacities at IAI.
Jacob Perry was appointed to serve as a director by our Board of Directors
on December 2002. From 1995 to December 2002, Mr. Perry was President and Chief
Executive Officer of Cellcom Israel Ltd., Israel's largest cellular phone
operator. Mr. Perry served 29 years at the Israeli General Security Service, and
served as its Chief from 1988 until 1995. Mr. Perry has also served as an
adviser to the Israeli Prime Minister on the subject of prisoners of war and
missing persons. He was a board member of El-Al Israel Airlines and a member of
the executive staff of many public organizations. Mr. Perry is also a Chairman
of the Board of Directors of various companies, including: Mizrahi Bank B.M.,
Lipman Electronic Engineering Ltd. and Aeronautics Defense Systems Ltd. and is
an advisor to Cellguide Ltd.
Zeev Livne has served as the chairman of Livne Strategic Consultants LTD.
since 2001. Mr. Livne served 39 years with the Israeli Defense Forces, or IDF,
until 2001. During his long military career with
4
the IDF, Mr. Livne served as the Defence Attache to the U.S. and Canada from
1997 to 2001, Military Secretary to the Prime minister of Israel from 1996 to
1997, Ground Force Cdr. from 1994 to 1996. From 1992 to 1994 Mr. Livne
established the IDF Home Front Commend and served as its first Cdr. Mr. Livne
serves on the Board of Directors of "PAZKAR" a private Israeli Company. Mr.
Livne received a B.A. in History from the Tel Aviv University and an M.A in
Geography from the University of Haifa.
Shaul Kobrinsky has served as the President and Chief Executive Officer of
Urdan Industries Ltd., an Investment and holding company since 1997. From 1989
to 1997, Mr. Kobrinsky served a Chief Executive Officer of Cargal Ltd., an
Israeli company that manufactures corrugates. Previously, and since 1984, Mr.
Kobrinsky served as deputy Managing Director of Call Industries Ltd., a holding
and investment company. Mr. Kobrinsky serves as a director of various public
companies, including: Mendelson Israel Technical and Engineering Supplies Ltd.
and Aloni Marble Ltd. Mr. Kobrinsky holds a B.A in Economics from Tel Aviv
University.
Anat Winner has served as Chief Executive Officer and Chief Financial
Officer of Israel News Ltd. since October 2001. From 1999 to October 2001, Mrs.
Winner served as Chief Financial Officer of DBS Satellite Services (1998) Ltd.
(YES), an Israeli company that is engaged in setting up and operating DBS
television systems. Previously, and since 1995, Mrs. Winner served as Chief
Financial Officer of Eurocom Cellular Communications Ltd., an Israeli company
that is engaged in the importing and marketing of cellular phones as well as
supplying cellular service. Since 1996, Mrs. Winner has also served as corporate
secretary of Eurocom Cellular Communications Ltd. Mrs. Winner holds a B.A.
degree in Accounting and Economics from Haifa University and has been a
certified public accountant for 15 years.
Other than the relationship between Mr. Dekel and Mr. Even-Ezra, there are
no family relationships among our directors.
The Board of Directors recommends a vote FOR the election of all the above
nominees.
Alternate Directors
Our Articles of Association provide that any director may, by written
notice to us, appoint another person to serve as an alternate director, subject
to the approval of the Board of Directors. Pursuant to the Companies Law, such
alternate director may not be a person who is a current director or an alternate
director of the company. The appointment of an alternate director is for one
meeting or for another specified period or until notice is given of the
cancellation of the appointment. To our knowledge, no director currently intends
to appoint any other person as an alternate director, except if the director is
unable to attend a meeting of the Board of Directors.
Board Meetings and Committees; Approval of Certain Transactions
During 2003, the Board of Directors held eight meetings. We are subject to
the provisions of the Companies Law, which became effective on February 1, 2000
superseding most of the provisions of the Israeli Companies Ordinance (New
Version), 5743-1983. The Companies Law authorizes the Minister of Justice to
adopt regulations exempting from the provisions described below companies, such
as us, whose shares are traded on Israeli as well as non-Israeli
exchanges/markets.
External Directors
Under the Companies Law, companies incorporated under the laws of Israel
whose shares have been offered to the public in Israel or outside of Israel are
required to appoint two external directors. The Companies Law requires that the
external directors be residents of Israel. However, the Minister of Justice of
the State of Israel has promulgated regulations exempting certain qualifying
foreign companies, such as us, from the applicability of certain provisions of
the Companies Law. The Companies Regulations (Concessions for Public Companies
Whose Shares are Registered in a Stock Exchange Outside Israel), 5760-2000, as
amended, defines "double foreign company" as a public company whose shares (i)
have been offered to the public outside of Israel or were registered on a stock
exchange outside of Israel prior to February 1, 2000 and (ii) were registered on
a stock exchange in Israel after such date. Pursuant to these regulations, an
external director of a double foreign company need not be an Israeli resident.
5
The Companies Law provides that a person may not be appointed as an
external director if the person or the person's relative, partner, employer or
any entity under the person's control, has, as of the date of the person's
appointment to serve as an external director, or had, during the two years
preceding that date, any affiliation with the company, any entity controlling
the company or any entity controlled by the company or by this controlling
entity. The term affiliation includes (i) an employment relationship, (ii) a
business or professional relationship maintained on a regular basis, (iii)
control and (iv) service as an officer holder. The Companies Law further
provides that if, at the time the external directors are appointed, a company's
board of directors is comprised solely of members of the same gender, then at
least one of the external directors must be of a different gender than the other
directors.
No person may serve as an external director if the person's position or
other business creates, or may create, a conflict of interest with the person's
responsibilities as an external director. Until the lapse of two years from
termination of office, a company may not engage an external director to serve as
an office holder and cannot employ or receive services from that person, either
directly or indirectly, including through a corporation controlled by that
person.
External directors are to be elected by a majority vote at a shareholders'
meeting, provided that either (i) the majority of shares voted at the meeting,
including at least one third of the shares of non-controlling shareholders voted
at the meeting, vote in favor of the election or (ii) the total number of shares
voted against the election of the external director does not exceed one percent
of the aggregate voting rights in the company.
The initial term of an external director is for three years and may be
extended for an additional three years. Each external director is required to
serve on the company's audit committee. Each other committee of a company's
board of directors is required to include at least one external director.
Audit Committee
Our Audit Committee, which was established in accordance with Section 114
of the Israeli Companies Law and Section 3(a)(58)(A) of the Securities Exchange
Act of 1934, assists our Board of Directors in overseeing the accounting and
financial reporting processes of our company and audits of our financial
statements, including the integrity of our financial statements, compliance with
legal and regulatory requirements, our independent public accountants'
qualifications and independence, the performance of our internal audit function
and independent public accountants, finding any defects in the business
management of our company for which purpose the Audit Committee may consult with
our independent auditors and internal auditor, proposing to the Board of
Directors ways to correct such defects, approving related-party transactions as
required by Israeli law, and such other duties as may be directed by our Board
of Directors.
Our Audit Committee consists of three board members who satisfy the
"independence" requirements of the Securities and Exchange Commission, Nasdaq
and Israeli Law for audit committee members. Our Audit Committee is currently
composed of Messrs. Menachem Meron, Itzhak Hoffi and Jacob Nuss. In the event
that Mr. Shaul Kobrinsky and Mrs. Anat Winner are elected to serve as our
external directors at this Meeting, they will replace Messrs Menachem Meron and
Itzhak Hoffi on our Audit Committee. The Audit Committee meets at least once
each quarter. Mr. Jacob Nuss is our Audit Committee's financial expert, as
defined in Item 401 of Regulation S-K.
Under Israeli law, an audit committee may not approve an action or a
transaction with a controlling shareholder, or with an office holder, unless at
the time of approval two external directors are serving as members of the audit
committee and at least one of the external directors was present at the meeting
in which an approval was granted.
The Audit Committee reviewed our audited financial statements for the year
ended December 31, 2003 and members of the Committee met with both management
and our independent auditors to discuss those financial statements. Management
and our independent auditors have represented to the Audit Committee that the
financial statements were prepared in accordance with the U.S. generally
accepted accounting principles. Members of the Audit Committee have received
from and discussed with our independent auditors their written disclosure and
letter regarding their independence from our company
6
as required by Independence Standards Board Standard No. 1. Members of the Audit
Committee also discussed with our independent auditors any matters required to
be discussed by Statement on Auditing Standards No. 61. Based upon these reviews
and discussions, the Audit Committee has recommended to the Board of Directors
that the audited financial statements be included in our Annual Report on Form
20-F for the year ended December 31, 2003.
Internal Auditor
Under the Companies Law, the board of directors must appoint an internal
auditor proposed by the audit committee. The role of the internal auditor is to
examine whether a company's actions comply with the law, integrity and orderly
business procedure. Under the Companies Law, the internal auditor may not be an
interested party, office holder, affiliate, or a relative of an interested
party, office holder or affiliate, nor may the internal auditor be the company's
independent accountant or its representative. Mr. Daniel Spira, CPA (Isr.) is
our internal auditor.
II. APPOINTMENT OF AUDITORS
(Item 2 on the Proxy Card)
Shareholders will be asked to approve the appointment of Kost Forer Gabbay
& Kasierer, a Member of Ernst & Young Global, and their affiliates, as our
independent auditors for the year ending December 31, 2004 and to authorize the
Audit Committee to fix the remuneration of the auditors in accordance with the
volume and nature of their services. A representative of Kost Forer Gabbay &
Kasierer is expected to be present at the Meeting and will be given an
opportunity to make a statement if he or she desires to do so and to respond to
appropriate questions from shareholders. Kost Forer Gabbay & Kasierer were our
auditors for the year ended December 31, 2003.
It is therefore proposed that at the Meeting our shareholders adopt the
following resolution:
"RESOLVED, that the appointment of Kost Forer Gabbay & Kasierer, a
Member of Ernst & Young Global, and their affiliates, by our Audit
Committee and the Board of Directors to conduct the annual audit of our
financial statements for the year ending December 31, 2004, and to
authorize the Audit Committee to fix their remuneration is ratified,
confirmed and approved."
The affirmative vote of the holders of a majority of the ordinary shares
represented at the Meeting in person or by proxy and entitled to vote and voting
thereon will be necessary for shareholder approval of the foregoing resolution.
The Board of Directors recommends a vote FOR the foregoing resolution.
Fees Paid to Independent Public Accountants
The following table sets forth, for each of the last two fiscal years, the
fees paid to our independent public accountants.
Year Ended December 31,
-----------------------------------
2003 2002
------------- --------------
Audit Fees (1).................. $191,345 $197,043
Audit-Related Fees (2) ......... 18,006 14,695
Tax Fees (3) ................... 106,799 64,738
All other Fees.................. - -
------------- --------------
Total........................... $316,150 $276,476
--------------------
(1) Audit fees consist of services that would normally be provided in
connection with statutory and regulatory filings or engagements.
7
(2) Audit-related fees relate to assurance and associated services that
traditionally are performed by the independent accountant, including:
attest services that are not required by statute or regulation;
accounting consultation and audits in connection with mergers,
acquisitions and divestitures; employee benefit plans audits; and
consultation concerning financial accounting and reporting standards.
(3) Tax fees relate to services performed by the tax division for tax
compliance, planning, and advice.
Audit Committee Pre-Approval Policies and Procedures
Our Audit Committee has adopted a policy and procedures for the
pre-approval of audit and non-audit services rendered by our independent public
accountants, Kost Forer Gabbay & Kasierer, a Member of Ernst & Young Global, and
their affiliates. Pre-approval of an audit or non-audit service may be given as
a general pre-approval, as part of the Audit Committee's approval of the scope
of the engagement of our independent auditor, or on an individual basis. Any
proposed services exceeding general pre-approved levels also requires specific
pre-approval by our Audit Committee. The policy prohibits retention of the
independent public accountants to perform the prohibited non-audit functions
defined in Section 201 of the Sarbanes-Oxley Act or the rules of the SEC, and
also requires the Audit Committee to consider whether proposed services are
compatible with the independence of the public accountants.
III. COMPENSATION AND TERMS OF EMPLOYMENT FOR CERTAIN OF OUR
DIRECTORS AND OFFICERS
(Item 3 on the Proxy Card)
The Companies Law requires that the compensation of directors, including
options grants, be approved by the audit committee, the board of directors, and
thereafter, the General Meeting of Shareholders. In addition, the Companies Law
requires that the terms of employment of any director by the company in any
other capacity be approved in the same manner.
Messrs. Nuss and Perry have served as our directors since 1993 and 2002,
respectively. Our Audit Committee and Board of Directors determined to
compensate Messrs. Nuss, Perry and Livne by paying them an annual fee of $5,600
and a per meeting attendance fee of $300, subject to shareholder approval.
Mr. Jacob Even-Ezra has served as our Chairman of the Board of Directors
and Chief Executive Officer since 1984. Mr. Dekel has served as our President
since 1990 and as our director since 1993.
Our Audit Committee and Board of Directors have determined to extend the
appointment of Mr. Jacob Even-Ezra as the Chairman of our Board until January
2006 and as our Chief Executive Officer for such a period until a new Chief
Executive Officer is appointed, subject to shareholder approval. In addition,
our Audit Committee and Board of Directors have resolved, subject to shareholder
approval, to change the terms of employment of Mr. Dekel by increasing his
salary, which has not been increased since January 2001, by 7% per annum, and by
granting him a one time bonus equal to 36% of his annual salary and to grant to
Mr. Jacob Even-Ezra and Mr. Dekel, in their capacity as officers, options to
purchase 50,000 and 40,000 ordinary shares of the company, respectively,
exercisable at the market price at the date of the grant. These options will
vest in January 2006. It is therefore proposed that at the Meeting our
shareholders adopt the following resolution:
"RESOLVED, that the decisions of the Audit Committee and our Board of
Directors to pay Messrs. Nuss, Perry and Livne annual remuneration of
$5,600 and a per meeting attendance fee of $300, to extend the appointment
of Mr. Jacob Even-Ezra as the Chairman of the Board until January 2006 and
as the Chief Executive Officer for such a period until a new Chief
Executive Officer is appointed, to increase Mr. Dekel's salary by 7% per
annum, to pay Mr. Dekel a one time bonus equal to 36% of his annual salary
and to grant to Mr. Jacob Even-Ezra and Mr. Dekel, in their capacity as
officers, options to purchase 50,000 and 40,000 ordinary shares of the
company, respectively, exercisable at the market price at the date of the
grant and vesting in January 2006, are hereby ratified."
Under the Companies Law the affirmative vote of the holders of a majority
of the ordinary shares represented at the Meeting in person or by proxy and
entitled to vote and voting thereon will be necessary for shareholder approval
of the foregoing resolution.
8
The Board of Directors recommends a vote FOR the foregoing resolution.
IV. COMPENSATION FOR OUR EXTERNAL DIRECTORS
(Item 4 on the Proxy Card)
Pursuant to the Companies Law, an external director is entitled to
compensation and to reimbursement of expenses as provided in the Companies
Regulations (Rules Regarding Compensation to an External Director), 5760-2000,
or the Companies Regulations, promulgated under the Companies Law. The Companies
Regulations provide that an external director is entitled to receive from the
company an annual fee and a per meeting attendance fee for his or her
participation at a meeting of the board of directors or any board committee
(including written resolutions, meetings of committees of the board of
directors, or convened by our chief executive officer), up to the amounts
specified in the Companies Regulations. An external director is otherwise
prohibited from receiving any other consideration, directly or indirectly, in
connection with his or her service as an external director. The Israeli
Companies Law requires that the terms of compensation to external directors be
approved by the audit committee, the board of directors, and thereafter, the
general meeting of shareholders, unless such payments are determined according
to the fixed amount specified in the Companies Regulations.
If Mrs. Anat Winner and Mr. Shaul Kobrinsky are elected at this Meeting as
our external directors they will serve as our external directors for a three
year term until the 2007 Annual General Meeting of Shareholders.
Our Audit Committee and our Board of Directors has resolved that the
external directors shall be paid an annual fee of $5,600 and a per meeting fee
of $300, which are within the limits set forth in the Companies Regulations. It
is therefore proposed that at the Meeting our shareholders adopt the following
resolution:
"RESOLVED that the payment of directors' fees to our external
directors for their first term of service as of July 29, 2004 as approved
by our Audit Committee and Board of Directors is hereby approved and
confirmed."
Under the Companies Law the affirmative vote of the holders of a majority
of the ordinary shares represented at the Annual General Meeting in person or by
proxy and entitled to vote and voting thereon will be necessary for shareholder
approval of the foregoing resolution.
The Board of Directors recommends a vote FOR the foregoing resolution
V. DECLARATION OF CASH AND SHARE DIVIDEND
(Item 5 on the Proxy Card)
Pursuant to our Articles of Association, distribution of dividends to our
shareholders must be approved by the General Meeting of Shareholders. At a
meeting held on December 28, 2003, our Board of Directors approved the payment
to our shareholders of an interim cash dividend in the amount of $0.05 per
ordinary share to holders of the record as of January 12, 2004.
At a meeting held on April 28, 2004, our Board of Directors declared a 5%
share dividend, payable to holders of our ordinary shares as of July 29, 2004,
as a final dividend for the year ended December 31, 2003.
Shareholders should note that pursuant to our Articles of Association, the
shareholders present at the Meeting may not declare a larger dividend than is
recommended by our Board of Directors, but may declare a smaller dividend than
is recommended by the Board of Directors.
It is therefore proposed that at the Meeting our shareholders adopt the
following resolution:
"RESOLVED that the payment, to holders of our ordinary shares as of
January 12, 2004, of an interim cash dividend in the amount of $0.05 per
ordinary share and the declaration of a 5% share dividend, to holders of
our ordinary shares as of June 29, 2004, as a final dividend for the year
ended December 31, 2003, are hereby approved and confirmed."
9
The affirmative vote of the holders of a majority of the ordinary shares
represented at the Meeting in person or by proxy and entitled to vote and voting
thereon will be necessary for shareholder approval of the foregoing resolution.
The Board recommends a vote FOR approval of the forgoing resolution.
VI. APPROVAL OF OUR NEW 2003 ISRAELI SHARE OPTION PLAN
(Item 6 on the Proxy Card)
In 1993, we adopted a Stock Option Plan. As amended, this Stock Option Plan
provides for the grant of options to purchase up to 1,269,212 of our ordinary
shares to our employees, management, officers and directors and of our
subsidiaries. In 2002, Section 102 of the Israeli Income Tax Ordinance [New
Version] 1961 was amended effective as of January 1, 2003 and our existing plan
does not comply with the newly amended provisions of Section 102. As of December
31, 2003, 223,216 options remain outstanding and 611,542 options remain
available for grant under the original plan. We do not intend to grant any more
options under our original plan, but rather intend to roll-over the remaining
options available for grant into a new plan that conforms with the newly amended
provisions of Section 102.
Our Audit Committee and Board of Directors have adopted, subject to
shareholder approval, a new plan, the 2003 Israeli Share Option Plan, or the
ISOP, which complies with the amended Section 102 and authorizes the grant of
options to purchase up to 611,542 ordinary shares. Employees, officers directors
and consultants of us or and our subsidiaries are eligible to participate in the
ISOP. The ISOP has a term of ten years and will terminate in October 2013.
The provisions of our ISOP are designated to allow for the tax benefits
promulgated under the Israeli Income Tax Ordinance [New Version]. Our Board of
Directors has resolved that all options that will be granted to Israeli
residents under the ISOP will be taxable under the "capital gains path."
Pursuant to this path, the profit realized by an employee is taxed as a capital
gain (25%) if the options or shares are held by a trustee for at least 24 months
from the end of the tax year in which such options were granted. If the shares
are sold before the elapse of such period, the profit is re-characterized as
ordinary income. Our company will not be allowed a corresponding salary expense,
even in the event the profit is taxed as ordinary income.
The Board of Directors or a committee of the Board of Directors, the
Committee, if appointed, will administer the ISOP. The Board of Directors or the
Committee will have the full power to and authority to, subject to limitation
under the terms and provisions of any applicable law and subject to changes
according to the Board's decisions:
o designate participants;
o determine the terms and provisions of the respective option agreements
(which need not be identical), including, but not limited to,
provisions concerning the time and the extent to which the options may
be exercised and the nature and duration of restrictions as to the
transferability or restrictions constituting substantial risk of
forfeiture and to cancel or suspend awards, as necessary;
o determine the purchase price of each share subject to an option;
o designate the type of options;
o make an election as to the type of Approved 102 option;
o alter any restrictions and conditions of any options or shares subject
to any options;
o interpret the provisions and supervise the administration of the ISOP;
o accelerate the right of an optionee to exercise in whole or in part,
any previously granted option;
o determine the purchase price of the option;
o prescribe, amend and rescind rules and regulations relating to the
ISOP; and
o make all other determinations deemed necessary or advisable for the
administration of the ISOP.
10
The Board of Directors or the Committee may not, without the consent of the
optionee, alter or in any way impair the rights of such optionee under any award
previously granted. The purchase price of each share subject to an option will
be determined by the Board of Directors or the Committee (if permissible under
the Israeli Companies Law) in its sole and absolute discretion.
Options are not assignable or transferable by the optionee. No option or
any right with respect thereto, purchasable hereunder, whether fully paid or
not, may be assignable, transferable or given as collateral or any right with
respect to it given to any third party whatsoever, except as specifically
allowed under the ISOP, and during the lifetime of the optionee each optionee's
rights to purchase shares may only be exercised by the optionee. Generally, an
option may be exercised as long as the optionee is employed by, or providing
services to, the company or any of its affiliates, to the extent the options
have vested.
The Board of Directors believes that the approval of the ISOP at this
Meeting will (i) provide us with the means to attract and retain talented
personnel; (ii) result in our saving cash, which would otherwise be required to
maintain our current employees, officers and directors and attract and
adequately reward additional employees, officers and directors; and (iii) enable
us to remain competitive in our industry.
It is therefore proposed that at the Meeting our shareholders adopt the
following resolution:
"RESOLVED, the 2003 Israeli Stock Option Plan authorizing the grant of
options to purchase up to 611,542 ordinary shares, par value NIS 1.00 per
share, be and is hereby adopted and approved."
Under the Companies Law the affirmative vote of the holders of a majority
of the ordinary shares represented at the Meeting in person or by proxy and
entitled to vote and voting thereon will be necessary for shareholder approval
of the foregoing resolution.
The Board of Directors recommends a vote FOR the foregoing resolution.
VII. AUTHORIZATION OF THE CHAIRMAN OF THE BOARD OF
DIRECTORS TO SERVE CONCURRENTLY AS CHIEF EXECUTIVE OFFICER
(Item 7 on the Proxy Card)
The Companies Law provides that the chairman of the board of directors of a
public company may not hold the office of chief executive officer or exercise
any of the powers of the chief executive officer (as determined by the Companies
Law). However, the Companies Law also provides that the general meeting of
shareholders may authorize the chairman of the board to serve as the chief
executive officer of such public company for a period of up to three years,
commencing on the date of such authorization. Mr. Jacob Even-Ezra was authorized
to serve as our Chief Executive Officer in addition to his position as Chairman
of the Board for three years, at a general meeting of shareholders held on May
16, 2001. The Audit Committee and our Board of Directors believes that it is in
the best interests of our company and its shareholders that it be granted
authority to re-appoint Mr. Even-Ezra as Chairman of the Board of Directors,
while he concurrently serves as our Chief Executive Officer. The authorization
will be for a term that will not exceed three years.
It is therefore proposed that at the Meeting our shareholders adopt the
following resolution:
"RESOLVED, that the Board of Directors is authorized to appoint Mr.
Jacob Even-Ezra to serve as both Chairman of the Board of Directors and our
Chief Executive Officer for a term not to exceed three years."
The affirmative vote of the holders of a majority of the ordinary shares
represented at the Meeting, provided that such majority vote includes at least
two-thirds of the ordinary shares represented at the Meeting in person or by
proxy that are held by non-controlling shareholders (excluding the votes of the
abstaining shareholders), will be necessary for shareholder approval of the
foregoing resolution.
11
The Board recommends a vote FOR approval of the forgoing resolution.
VIII. REVIEW OF THE DIRECTORS' REPORT,
CONSOLIDATED FINANCIAL STATEMENTS AND AUDITOR'S REPORT
At the Meeting, our Directors' Report, Consolidated Financial Statements
and Auditor's Report for the year ended December 31, 2003 will be presented. We
will hold a discussion with respect to the financial statements at the Meeting.
This Item 8 will not involve a vote of the shareholders.
OTHER BUSINESS
The Board of Directors knows of no business that is to be brought before
the meeting other than as set forth in the Notice of Annual General Meeting of
Shareholders. If any other matters properly come before the Meeting, the persons
named in the enclosed form of proxy will vote in accordance with their best
judgment on such matters.
OUR ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2003 ARE
ENCLOSED HEREWITH. ADDITIONAL COPIES OF THE ANNUAL FINANCIAL STATEMENTS WILL BE
MAILED WITHOUT CHARGE TO ANY SHAREHOLDER ENTITLED TO VOTE AT THE ANNUAL GENERAL
MEETING, UPON WRITTEN REQUEST TO: MAGAL SECURITY SYSTEMS LTD., 17 ALTALEF
STREET, INDUSTRIAL ZONE, YAHUD 56100, ISRAEL, ATTENTION: RAYA ASHER, SECRETARY.
By Order of the Board of Directors
/s/Jacob Even-Ezra
JACOB EVEN-EZRA
Chairman of the Board of Directors
and Chief Executive Officer
Dated: June 29, 2004
12
ITEM 2
MAGAL SECURITY SYSTEMS LTD.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) Jacob Even-Ezra and Raya Asher, or either
of them, attorneys or attorney of the undersigned, for and in the name(s) of the
undersigned, with power of substitution and revocation in each to vote any and
all ordinary shares, par value NIS 1.0 per share, of Magal Security Systems Ltd.
(the "Company"), which the undersigned would be entitled to vote as fully as the
undersigned could if personally present at the Annual General Meeting of
Shareholders of the Company to be held on July 29, 2004 at 10:00 a.m. at the
registered office of the Company, 17 Altalef Street, Industrial Zone, Yahud
56100, Israel and at any adjournment or adjournments thereof, and hereby
revoking any prior proxies to vote said shares, upon the following items of
business more fully described in the notice of and proxy statement for such
Annual General Meeting (receipt of which is hereby acknowledged):
THIS PROXY WILL BE VOTED AS SPECIFIED ON THE REVERSE. IN THE ABSENCE OF
SUCH SPECIFICATION, THE SHARES REPRESENTED BY THIS PROXY CARD WILL BE VOTED FOR
THE ELECTION OF ALL THE NOMINEES FOR DIRECTOR AND EXTERNAL DIRECTOR IN ITEMS 1A,
1B AND 1C AND FOR ITEMS 2 THROUGH 7. ON ANY OTHER BUSINESS THAT MAY PROPERLY
COME BEFORE THE MEETING, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
JUDGMENT OF THE PERSONS NAMED ABOVE AS PROXIES.
(Continued and to be signed on the reverse side)
ANNUAL GENERAL MEETING OF SHAREHOLDERS OF
MAGAL SECURITY SYSTEMS LTD.
July 29, 2004
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
Please detach along perforated line and mail in the envelope provided.
--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS AND
"FOR" PROPOSALS 2, 3,4,5,6 AND 7.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [X]
--------------------------------------------------------------------------------
1A. The election of six directors for terms expiring in 2005.
[ ] FOR ALL NOMINEES
[ ] WITHHOLD AUTHORITY FOR ALL NOMINEES
[ ] FOR ALL EXCEPT
(See instructions below)
NOMINEES:
( )JACOB EVEN-EZRA
( )IZHAR DEKEL
( )NATHAN KIRSH
( )JACOB NUSS
( )JACOB PERRY
( )ZEEV LIVNE
INSTRUCTION: To withhold authority to vote for any individual
------------ nominee(s), mark "FOR ALL EXCEPT" and fill in the circle
next to each nominee you wish to withhold, as shown here: (X)
1B. To elect Shaul Kobrinsky as an external director.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
1C. To elect Anat Winner as an external director.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Approval of the appointment of Kost Forer Gabbay & Kasierer, a Member
of Ernst & Young Global, and their affiliates, as independent auditors
of the Company for the year ending December 31, 2004 and to authorize
the audit committee to fix the remuneration of the auditors in
accordance with the volume and nature of their services.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of the terms of compensation and the terms of employment for
certain of the Company's Directors and Officers.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Approval of the terms of compensation for the Company's External
Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. Approval of an interim cash dividend in the amount of $0.05 per
ordinary share, par value NIS 1.00 each, that was paid to shareholders
of record as of January 12, 2004, and declaration of an additional 5%
share dividend to shareholders of record as of July 29, 2004, as a
final dividend for the year ended December 31, 2003.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. Approval of the Company's new 2003 Israeli Share Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
7. Authorization of Mr. Jacob Even-Ezra, the Company's Chairman of the
Board of Directors, to serve concurrently as its Chief Executive
Officer.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that changes
to the registered name(s) on the account may not be submitted via this method.
[ ]
Signature of Shareholder_________________ Date ______________
Signature of Shareholder_________________ Date ______________
Note: Please sign exactly as your name or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing as
executor, administrator, attorney, trustee or guardian, please give
full title as such. If the signer is a corporation, please sign full
corporate name by duly authorized officer, giving full title as such.
If signer is a partnership, please sign in partnership name by
authorized person.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MAGAL SECURITY SYSTEMS LTD.
(Registrant)
By: /s/Jacob Even-Ezra
Jacob Even-Ezra
Chairman of the Board and
Chief Executive Officer
Date: July 7, 2004