As filed with the Securities and Exchange Commission on April 4, 2005
Registration No. 333- 123265
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM F-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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MAGAL SECURITY SYSTEMS LTD.
(Exact name of Registrant as specified in its charter)
Israel Not Applicable
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 70
Industrial Zone, Yahud 56100, Israel
Tel: (972)(3) 539-1444
Fax: (972)(3) 536-6245
(Address and telephone number of Registrant's principal executive offices)
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Perimeter Products, Inc.
Attn: Martha Lee, President
43180 Osgood Road
Fremont, California 54539
(510) 249-1450
(Name, address and telephone number of agent for service)
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Copies of all communications, including communications sent to agent
for service, should be sent to:
Steven J. Glusband, Esq. Sarit Molcho, Adv.
Carter, Ledyard & Milburn S. Friedman & Co., Advocates
2 Wall Street The Trade Tower
New York, NY 10005 Tel Aviv, Israel 68125
Tel: 212-238-8605 Tel: (972)(3) 796-1500
Fax: 212-732-3232 Fax: (972)(3) 796-1501
Approximate date of commencement of proposed sale to the public: From time to
time after this registration statement becomes effective as determined by market
conditions and other factors.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 436,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
=================================================================================================================================
Title of each class of securities Amount to be Proposed maximum offering Proposed maximum aggregate Amount of
to be registered registered price per ordinary share offering price registration fee
=================================================================================================================================
Ordinary shares, par value NIS 1.0 (1) (1) (1) N/A
per share.........................
Warrants.......................... (1) (1) (1) N/A
Total............................. (1) (1) $25,000,000 $2,942.5 (2)
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(1) There are being registered hereunder by the registrant such
indeterminate number of ordinary shares and such indeterminate number
of warrants to purchase ordinary shares as shall have an aggregate
initial offering price not to exceed $25,000,000. Any securities
registered hereunder may be sold separately or as units with other
securities registered hereunder. The proposed maximum initial offering
price per unit will be determined, from time to time, by the registrant
in connection with the issuance by the registrant of the securities
registered hereunder. There also are being registered hereunder by the
registrant an indeterminate number of ordinary shares as shall be
issuable upon exercise of any securities that provide for that
issuance.
(2) Estimated pursuant to Rule 457 (o) solely for the purpose of computing
the amount of the registration fee.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment that specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities, and it is not soliciting an offer to buy these
securities, in any state where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS
Subject to Completion, dated April 4, 2005
Magal Security Systems Ltd.
$25,000,000
of
Ordinary Shares and Warrants
Magal Security Systems Ltd. ("Magal") intends to sell from time to time
ordinary shares, par value NIS 1.0 each, and warrants to purchase ordinary
shares. These securities may be offered and sold from time to time for an
aggregate offering price of up to $25,000,000.
When we offer securities, we will provide you with a prospectus
supplement describing the terms of the specific issue of securities, including
the offering price of the securities. The prospectus supplements also may add,
update, or change information contained in this prospectus. You should read this
prospectus and any supplements carefully before you invest.
Magal's ordinary shares are quoted on the Nasdaq National Market and
trade on the Tel Aviv Stock Exchange under the symbol "MAGS." On April 1, 2005,
the last sale price of Magal's ordinary shares as reported on the Nasdaq
National Market was $11.33.
You should consider carefully the risk factors beginning on page 6 of
this prospectus before you invest in the securities offered herby.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the ordinary shares and warrants being
offered by this prospectus or passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is
Important Notice about the Information Presented in this Prospectus
This prospectus is part of a registration statement on Form F-3 that we
filed with the Securities and Exchange Commission utilizing a shelf registration
process. Under this process, we may from time to time sell any combination of
securities described in this prospectus in one or more offerings. This
prospectus provides you with a general description of the securities we may
offer.
Each time we sell securities, we will provide a prospectus supplement
that will contain specific information about the terms of the securities being
offered. That prospectus supplement may include a discussion of any risk factors
or other special considerations that apply to those securities. The prospectus
supplement also may add, update or change information contained in this
prospectus. If there is any inconsistency between the information in this
prospectus and a prospectus supplement, you should rely on the information in
that prospectus supplement. Before making an investment decision, you should
read both this prospectus and any applicable prospectus supplement together with
additional information described below under the heading "Where You Can Find
Additional Information."
When acquiring any securities discussed in this prospectus, you should
rely only on the information provided in this prospectus and the prospectus
supplement, including the information incorporated by reference. Please see
"Where You Can Find More Information." We have not authorized any other person
to provide you with different information. If anyone provides you with different
or inconsistent information, you should not rely on it. We are not making an
offer to sell these securities in any state where such an offer is prohibited.
You should not assume that the information in this prospectus, any prospectus
supplement, or any document incorporated by reference, is accurate as of any
date other than the date mentioned on the cover page of those documents. Our
business, financial condition, results of operations, and prospects may have
changed since that date.
2
Table of Contents
Page
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Notice Regarding Forward-Looking Statements..................................4
Summary......................................................................5
Risk Factors.................................................................6
Risks Related to Our Business.............................................6
Risks Relating to Our Ordinary Shares....................................12
Risks Relating to Our Location in Israel.................................13
Use of Proceeds.............................................................16
Description of Ordinary Shares..............................................16
Description of Warrants.....................................................18
Plan of Distribution........................................................20
Experts.....................................................................22
Legal Matters...............................................................22
Where You Can Find More Information.........................................22
Enforceability of Civil Liabilities.........................................23
Ordinary Shares and Warrants................................................25
3
________________________
Notice Regarding Forward-Looking Statements
This prospectus and the documents incorporated in it by reference
contain forward-looking statements that involve known and unknown risks and
uncertainties. We include this notice for the express purpose of permitting us
to obtain the protections of the safe harbor provided by the Private Securities
Litigation Reform Act of 1995 with respect to all such forward-looking
statements. Examples of forward-looking statements include: projections of
capital expenditures, competitive pressures, revenues, growth prospects, product
development, financial resources and other financial matters. You can identify
these and other forward-looking statements by the use of words such as "may,"
"will," "should," "plans," "anticipates," "believes," "estimates," "predicts,"
"intends," "potential" or the negative of such terms, or other comparable
terminology.
Our ability to predict the results of our operations or the effects of
various events on our operating results is inherently uncertain. Therefore, we
caution you to consider carefully the matters described under the caption "Risk
Factors" and certain other matters discussed in this prospectus, the documents
incorporated by reference in this prospectus, and other publicly available
sources. These factors and many other factors beyond the control of our
management could cause our actual results, performance or achievements to be
materially different from any future results, performance or achievements that
may be expressed or implied by the forward-looking statements.
4
Summary
You should read the following summary together with the more detailed
information about us, the securities that may be sold from time to time, and our
financial statements and the notes to them, all of which appear elsewhere in
this prospectus or in the documents incorporated by reference in this
prospectus. In this prospectus, "we," "us," "our," the "Company" and "Magal"
refer to Magal Security Systems Ltd., an Israeli company, and our subsidiaries.
Magal Security Systems Ltd.
We develop, manufacture, market and sell complex computerized security
systems. Our systems are used in more than 75 countries to protect aircraft,
national borders and sensitive facilities, including military bases, power plant
installations, airports, postal facilities, prisons and industrial locations
from terrorism, theft and other security threats. Our revenues are principally
derived from:
o a line of perimeter security systems and a video motion detection
system, which automatically detect and locate intruders, identify
the nature of intrusions and provide emergency notification;
o turnkey projects based on security management, command and
control systems, which integrate the management, control and
display of various security systems into a single, real-time
database and support real-time decision making and wide area
command and control; and
o video monitoring services.
We recently began to market two new products: DreamBox(TM) and
PipeGuard(TM). DreamBox(TM) is a state-of-the-art embedded hardware and software
product, which integrates a number of Closed Circuit - TV related applications,
into one box. The system is designed to be economical, as well as compact to
save space, while avoiding the use of complicated cable installation and network
protocols integration. PipeGuard(TM) utilizes an innovative technology to guard
buried pipelines, regardless of pipeline length, with the ability to detect
potential attack and alert authorities before potential harm or damage occurs.
PipeGuard(TM) provides a solution for securing buried assets, gas and oil
pipelines and infrastructure of buried communication lines such as fiber optic
cables. The target market for PipeGuard(TM) includes oil and gas companies,
owners and operators of pipelines or communication cables and governmental
agencies dealing with security and environment.
We were incorporated in Israel in 1984 and have subsidiaries in Israel,
United States, Canada, United Kingdom, Germany, The Netherlands, Romania and
Mexico. Our principal executive offices and primary manufacturing and research
and development facilities are located near Tel Aviv, Israel, in the Yahud
Industrial Zone. Our mailing address is P.O. Box 70, Industrial Zone, Yahud
56100, Israel and our telephone number is (972) (3) 539-1444. Our agent for
service of process in the U.S. is our subsidiary, Perimeter Products, Inc.,
43180 Osgood Road, Fremont, California 54539.
5
Risk Factors
Our business, results of operations and financial condition could be
seriously harmed due to any of the following risks, among others. If we do not
successfully address the risks to which we are subject, our business, results of
operations and financial condition may be materially and adversely affected and
our share price may decline.
Risks Related to Our Business
Our revenues depend on government procurement procedures and practices. A
substantial decrease in our customers' budgets would affect adversely our
results of operations.
Our products are primarily sold to governmental agencies, governmental
authorities and government-owned companies, many of which have complex and
time-consuming procurement procedures. A substantial period of time often
elapses from the time we begin marketing a product until we actually sell that
product to a particular customer. In addition, our sales to governmental
agencies, authorities and companies are directly affected by these customers'
budgetary constraints and the priority given in their budgets to the procurement
of our products. A substantial decrease in our governmental customers' budgets
would adversely affect our results of operations.
We depend on large orders from a relatively small number of customers for
substantial portions of our revenues. As a result, our revenues and operations
results may vary from quarter to quarter.
As we receive large orders from a relatively small number of customers,
our revenues and operating results are subject to substantial periodic
variations. Individual orders from customers can represent a substantial portion
of our revenues in any one period and significant orders by any customer during
one period may not be followed by further orders from the same customer in
subsequent periods. Our revenues and operating results for a specific quarter
may not be indicative of our future performance, making it difficult for
investors to evaluate our future prospects based on the results of any quarter.
In addition, we have a limited order backlog, which makes revenues in any
quarter substantially dependent upon orders we deliver in that quarter.
Our revenues and operating results are subject to very substantial variations,
including, among other things, because the loss of one or more of our key
customers, in particular the Israeli Ministry of Defense would result in a loss
of a significant amount of our revenues.
Relatively few customers account for a large percentage of our
revenues. For the years ended December 31, 2002, 2003 and 2004, revenues
generated from sales to the Israeli Ministry of Defense, or MOD, accounted for
15.9%, 27.2% and 7.7% respectively, of our revenues.
The loss of MOD without replacement by a customer or customers of
similar volume would have a material adverse effect on our financial results.
Our quarterly performance may vary significantly. Consequently, the
results of our operations for any quarter are not necessarily indicative of the
results that we might achieve for any subsequent period. Consequently,
quarter-to-quarter comparisons of our operating results may not be meaningful.
6
In the future, the level of our contracts may be reduced due to changes in
governmental priorities and audits.
Governmental purchases of our systems, products and services may
decline in the future as the governmental purchasing agencies may terminate,
reduce or modify contracts or subcontracts if:
o their requirements or budgetary constraints change;
o they cancel multi-year contracts and related orders if funds
become unavailable;
o they shift spending priorities into other areas or for other
products; and
o they adjust contract costs and fees on the basis of audits
Any such event may have a material adverse affect on us.
If we do not receive MOD approvals necessary for us to export the products we
produce in Israel, our revenues may decrease.
Under Israeli law, the export of products that we manufacture in Israel
and the export of certain of our know-how are subject to approval by the MOD. We
must obtain permits from the MOD to initiate sales proposals with regard to
these exports, as well as for actual export transactions. We cannot assure you
that we will receive all the required permits for which we may apply in the
future. If we do not receive the required permits for which we apply, our
revenues may decrease.
We can give no assurance that our wholly-owned subsidiary, Smart Interactive
Systems, Inc., will be successful in the future. If Smart is unsuccessful, our
future results of operations may be adversely affected.
In 2001, we established Smart Interactive Systems, Inc., or Smart, to
meet the growing demand for real-time video monitoring services for use in
industrial sites, commercial businesses and VIP residences. We have invested
$12.5 million in Smart through December 31, 2004. Its operations to date have
not been profitable and it has an accumulated deficit of $6.1 million as of
December 31, 2004. Smart's success will depend upon its ability to penetrate the
market for these services. If Smart is unable to market its services or if its
services fails to penetrate the market we may lose our investment in this
company and our future results of operations may be adversely affected.
The market for our products is characterized by changing technology,
requirements, standards and products, and we may be adversely affected if we do
not respond promptly and effectively to these changes.
The market for our products is characterized by evolving technologies,
changing industry standards, changing regulatory environments, frequent new
product introductions and rapid changes in customer requirements. The
introduction of products embodying new technologies and the emergence of new
industry standards and practices can render existing products obsolete and
unmarketable. Our future success will depend on our ability to enhance our
existing products and to develop and introduce, on a timely and cost-effective
basis, new products and product features that keep pace with technological
developments and emerging industry standards and address the increasingly
sophisticated needs of our customers.
We cannot assure you that:
7
o we will be successful in developing and marketing new products or
product features that respond to technological change or evolving
industry standards;
o we will not experience difficulties that could delay or prevent
the successful development, introduction and marketing of these
new products and features; or
o our new products and product features will adequately meet the
requirements of the marketplace and achieve market acceptance.
If we are unable to respond promptly and effectively to changing
technology we will be unable to compete effectively in the future.
We face risks associated with doing business in international markets.
We make a large portion of our sales in markets outside of Israel ( 83%
in 2004 and 65% in 2003), and a key component of our strategy is to continue to
expand in such markets, the most significant of which currently are North
America, Europe, and Asia. Our international sales efforts are affected by costs
associated with the shipping of our products and risks inherent in doing
business in international markets, including:
o unexpected changes in regulatory requirements;
o currency fluctuations;
o export restrictions, tariffs and other trade barriers;
o unexpected difficulties in staffing and managing foreign
operations;
o longer payment cycles;
o difficulties in collecting accounts receivable;
o political instability; and
o seasonal reductions in business activities.
One or more of such factors may have a material adverse effect on us.
We are engaged in a highly competitive business. If we are unable to compete
effectively, our revenues and income will be materially and adversely affected.
The business in which we are engaged is highly competitive. Some of our
competitors and potential competitors have greater research and development,
financial and personnel resources, including governmental support, or more
extensive business experience than we do. If we are unable to compete
effectively in the market for our products, our revenues and income will be
materially and adversely affected.
We may be adversely affected by long sales cycles.
We have in the past and expect in the future to experience long time
periods between initial sales contacts and the execution of formal contracts for
our products and completion of product installations.
8
The cycle from first contact to revenue generation in our business involves,
among other things, selling the concept of our technology and products,
developing and implementing a pilot program to demonstrate the capabilities and
accuracy of our products, negotiating prices and other contract terms; and,
finally, installing and implementing our products on a full-scale basis. This
cycle entails a substantial period of time, sometimes as much as one or more
years, and the lack of revenues during this cycle and the expenses involved in
bringing new sales to the point of revenue generation may put a substantial
strain on our resources.
We may not be able to implement our growth strategy.
As part of our growth strategy, we seek to acquire or invest in
complementary, including competitive, businesses, products and technologies.
Although we have identified potential acquisition candidates, we currently have
no commitments or agreements with respect to any such acquisitions or
investments and we cannot assure you that we will eventually be able to
consummate any acquisition or investment. Even if we do acquire or invest in
these businesses, products or technology, the process of integrating acquired
assets into our operations may result in unforeseen operating difficulties and
expenditures and may absorb significant management attention that would
otherwise be available for the ongoing development of our business.
In addition, we have limited experience in making acquisitions and
managing growth. We cannot assure you that we will realize the anticipated
benefits of any acquisition. In addition, future acquisitions by us could result
in potentially dilutive issuances of our equity securities, the incurrence of
debt and contingent liabilities and amortization expenses related to
identifiable intangible assets, any of which could materially adversely affect
our operating results and financial position. Acquisitions also involve other
risks, including risks inherent in entering markets in which we have no or
limited prior experience and the potential loss of key employees and the risk
that we may experience difficulty or delays in obtaining necessary permits.
We may not be successful in marketing and developing markets for our new
products.
As part of our growth strategy, we developed three new products,
DreamBox(TM), Fortis(TM) and PipeGuard(TM), for which no revenues were
recognized in 2004. We intend to invest substantial funds in the marketing and
sales of those products. We cannot assure you that our marketing and sale
efforts will be successful, in which case our growth strategy will be harmed.
We may not be able to protect our proprietary technology and unauthorized use of
our proprietary technology by third parties may impair our ability to compete
effectively.
Our success and ability to compete depend in large part upon protecting
our proprietary technology. We have approximately 45 patents and have patent
applications pending. We also rely on a combination of trade secret and
copyright law and confidentiality, non-disclosure and assignment-of-inventions
agreements to protect our proprietary technology. It is our policy to protect
our proprietary rights in our products and operations through contractual
obligations, including confidentiality and non-disclosure agreements with
certain employees, distributors and agents, suppliers and subcontractors. These
measures may not be adequate to protect our technology from third-party
infringement, and our competitors may independently develop technologies that
are substantially equivalent or superior to ours. Additionally, our products may
be sold in foreign countries that provide less protection to intellectual
property than that provided under U.S. or Israeli laws.
9
We could become subject to litigation regarding intellectual property rights,
which could seriously harm our business.
Third parties may in the future assert against us infringement claims
or claims asserting that we have violated a patent or infringed upon a
copyright, trademark or other proprietary right belonging to them.
In addition, we purchase components for our turnkey products from
independent suppliers. Certain of these components contain proprietary
intellectual property of these independent suppliers. Third parties may in the
future assert claims against our suppliers that such suppliers have violated a
patent or infringed upon a copyright, trademark or other proprietary right
belonging to them. If such infringement by our suppliers or us were found to
exist, a party could seek an injunction preventing the use of their intellectual
property. In addition, if an infringement by us were found to exist, we may
attempt to acquire a license or right to use such technology or intellectual
property. Any infringement claim, even if not meritorious, could result in the
expenditure of significant financial and managerial resources.
We depend on limited sources for components and if we are unable to obtain these
components when needed, we will experience delays in manufacturing our products
and our financial results may be adversely affected.
We acquire most of the components utilized in our products, including,
but not limited to, our turnkey products and certain services from a limited
number of suppliers and subcontractors. We cannot assure you that we will
continue to be able to obtain such items from these suppliers and subcontractors
on satisfactory terms. Temporary disruptions of our manufacturing operations
would result if we were required to obtain materials from alternative sources,
which may have an adverse effect on our financial results. For example, our
subsidiary Senstar-Stellar Corporation, or Senstar, obtains triboelectric sensor
cable for its Intelli-FLEX product from a sole supplier. If this sole supplier
were to discontinue production of the triboelectric sensor cable, it would
adversely affect Senstar's revenues of its Intelli-FLEX product.
Undetected defects in our products may increase our costs and impair the market
acceptance of our products.
The development, enhancement and implementation of our complex systems
entail substantial risks of product defects or failures. We cannot assure you
that, despite testing by us and our customers, errors will not be found in
existing or new products, resulting in delay or loss of revenues, warranty
expense, loss of market share or failure to achieve market acceptance, or
otherwise adversely affecting our business, financial condition and results of
operations. Moreover, the complexities involved in implementing our systems
entail additional risks of performance failures. We cannot assure you that we
will not encounter substantial delays or other difficulties due to such
complexities. Any such occurrence could have a material adverse effect upon our
business, financial condition and results of operations. In addition, the
potential harm to our reputation that may result from product defects or
implementation errors could be damaging to us.
10
We depend on our senior management and key personnel, particularly Jacob
Even-Ezra, our chairman and chief executive officer, and Izhar Dekel, our
president, the loss of whom would negatively affect our business.
Our future success depends in large part on the continued services of
our senior management and key personnel. In particular, we depend on the
services of Jacob Even-Ezra, our chairman and chief executive officer, and Izhar
Dekel, our president. We carry key person life insurance for Jacob Even-Ezra and
for Izhar Dekel. Any loss of the services of Jacob Even-Ezra, Izhar Dekel, other
members of senior management or other key personnel would negatively affect our
business.
Our failure to retain and attract personnel could harm our business, operations
and product development efforts.
Our products require sophisticated research and development, marketing
and sales and technical customer support. Our success depends on our ability to
attract, train and retain qualified research and development, marketing and
sales and technical customer support personnel. Competition for personnel in all
of these areas is intense and we may not be able to hire sufficient personnel to
achieve our goals or support the anticipated growth in our business. If we fail
to attract and retain qualified personnel, our business, operations and product
development efforts would suffer.
Our non-competition agreements with our key employees may not be enforceable. If
any of these employees leaves us and joins a competitor, our competitor could
benefit from the expertise that our former employee gained while working for us.
We currently have non-competition agreements with all of our key
employees in Israel. These agreements prohibit these key employees from directly
competing with us or working with our competitors in the event such key
employees cease to work for us. Under current Israeli law, we may not be able to
enforce these non-competition agreements. If we are unable to enforce any of
these agreements, our competitors that employ these former employees could
benefit from the expertise these former employees gained while working for us.
In addition, we do not have non-competition agreements with our U.S. and
Canadian employees.
The implementation of SFAS No. 123R, which will require us to record
compensation expense in connection with equity share based compensation as of
the third quarter of 2005, may reduce our profitability.
On December 16, 2004, the Financial Accounting Standards Board (FASB)
issued Statement No. 123 (revised 2004), Share-Based Payment ("SFAS No. 123R"),
which is a revision of SFAS No. 123. Generally, the approach in SFAS 123(R) is
similar to the approach described in Statement 123. However, SFAS No. 123
permitted, but did not require, share-based payments to employees to be
recognized on the basis of their fair values while SFAS No. 123(R) requires, as
of the third quarter of 2005, all share-based payments to employees to be
recognized on the basis of their fair values. SFAS No. 123R also revises,
clarifies and expands guidance in several areas, including measuring fair value,
classifying an award as equity or as a liability and attributing compensation
cost to reporting periods. The adoption of SFAS No. 123R may have a significant
effect on our results of operations in the future. In addition, such adoption
could limit our ability to use stock options as an incentive and retention tool,
which could, in turn, negatively impact our ability to recruit employees and
retain existing employees.
11
Compliance with changing regulation of corporate governance and public
disclosure may result in additional expenses.
Changing laws, regulations and standards relating to corporate
governance and public disclosure, including the Sarbanes-Oxley Act of 2002, new
Securities and Exchange Commission regulations and Nasdaq Stock Market rules,
are creating uncertainty for companies such as ours. We are committed to
maintaining high standards of corporate governance and public disclosure. As a
result, we intend to invest reasonably necessary resources to comply with
evolving standards, and this investment may result in increased general and
administrative expenses and a diversion of management time and attention from
revenue-generating activities to compliance activities, which could harm our
operating results and business prospects.
Risks Relating to Our Ordinary Shares
Volatility of the market price of our ordinary shares could adversely affect our
shareholders and us.
The market price of our ordinary shares has been, and is likely to be,
highly volatile and could be subject to wide fluctuations in response to
numerous factors, including the following:
o political, economic and other developments in the State of
Israel;
o terrorist attacks and other acts of war, and any response to
them;
o actual or anticipated variations in our quarterly operating
results or those of our competitors;
o announcements by us or our competitors of technological
innovations or new and enhanced products;
o developments or disputes concerning proprietary rights;
o introduction and adoption of new industry standards;
o changes in financial estimates by securities analysts;
o market conditions or trends in our industry;
o changes in the market valuations of our competitors;
o announcements by us or our competitors of significant
acquisitions;
o entry into strategic partnerships or joint ventures by us or our
competitors; and
o additions or departures of key personnel.
In addition, the stock market in general, and the market for Israeli
companies and home defense companies in particular, has been highly volatile.
Many of these factors are beyond our control and may materially adversely affect
the market price of our ordinary shares, regardless of our performance.
12
Risks Relating to Our Location in Israel
Conducting business in Israel entails special risks.
We are incorporated under Israeli law and our principal offices and
manufacturing and research and development facilities are located in the State
of Israel. Accordingly, we are directly influenced by the political, economic
and military conditions affecting Israel. Specifically, we could be adversely
affected by any major hostilities involving Israel, a full or partial
mobilization of the reserve forces of the Israeli army, the interruption or
curtailment of trade between Israel and its present trading partners, and a
significant downturn in the economic or financial condition of Israel.
Since the establishment of the State of Israel in 1948, a number of
armed conflicts have taken place between Israel and its Arab neighbors, and a
state of hostility, varying from time to time in intensity and degree, has led
to security and economic problems for Israel. Since September 2000, there has
been a marked increase in violence, civil unrest and hostility, including armed
clashes, between the State of Israel and the Palestinians, and acts of terror
has been committed inside Israel and against Israeli targets in the West Bank
and Gaza. There is no indication as to how long the current hostilities will
last or whether there will be any further escalation. Any further escalation in
these hostilities or any future armed conflict, political instability or
violence in the region may have a negative effect on our business condition,
harm our results of operations and adversely affect our share price.
Furthermore, there are a number of countries that restrict business with Israel
or Israeli companies. Restrictive laws or policies of those countries directed
towards Israel or Israeli businesses had, and may in the future continue to
have, an adverse impact on our operations, our financial results or the
expansion of our business. No predictions can be made as to whether or when a
final resolution of the area's problems will be achieved or the nature thereof
and to what extent the situation will impact Israel's economic development or
our operations.
Political trade relations could limit our ability to sell or buy
internationally.
We could be affected adversely by the interruption or reduction of
trade between Israel and its trading partners. Some countries, companies and
organizations continue to participate in a boycott of Israeli firms and others
doing business with Israel or with Israeli companies. To date, these measures
have not had a material adverse affect on our business. However, there can be no
assurance that restrictive laws, policies or practices towards Israel or Israeli
businesses will not have an adverse impact on our business.
Our results of operations may be negatively affected by the obligation of our
personnel to perform military service.
Many of our executive officers and employees in Israel are obligated to
perform annual reserve duty in the Israeli Defense Forces and are subject to
being called for active duty under emergency circumstances at any time. If a
military conflict or war arises, these individuals could be required to serve in
the military for extended periods of time. Our operations could be disrupted by
the absence for a significant period of one or more of our executive officers or
key employees or a significant number of other employees due to military
service. Any disruption in our operations could adversely affect our business.
The economic conditions in Israel have not been stable in recent years.
In recent years Israel has been going through a period of recession in
economic activity, resulting in low growth rates and growing unemployment. Our
operations could be adversely affected if the
13
economic conditions in Israel continue to deteriorate. In addition, due to
significant economic measures proposed by the Israeli government, there have
been several general strikes and work stoppages in 2003 and 2004, affecting all
banks, airports and ports. These strikes have had an adverse effect on the
Israeli economy and on business, including our ability to deliver products to
our customers.
We may be adversely affected by a change in the exchange rate of the New Israeli
Shekel against the dollar.
Because exchange rates between the NIS and the dollar fluctuate
continuously, exchange rate fluctuations, particularly larger periodic
devaluations, may have an impact on our profitability and period-to-period
comparisons of our results. In 2001 and 2002, the rate of devaluation of the NIS
against the dollar was 9.3% and 7.3%, respectively, while in 2003 and 2004 the
NIS appreciated in value in relation to the dollar by 7.6% and 1.6%,
respectively. A portion of our expenses, primarily labor expenses, is incurred
in NIS and a part of our revenues are quoted in NIS. Additionally, certain
assets, as well as a portion of our liabilities, are denominated in NIS. Our
results may be adversely affected by the devaluation of the NIS in relation to
the dollar (or if such devaluation is on lagging basis), if our revenues in NIS
are higher than our expenses in NIS and/or the amount of our assets in NIS are
higher than our liabilities in NIS. Alternatively, our results may be adversely
affected by an appreciation of the NIS in relation to the dollar (or if such
appreciation is on a lagging basis), if the amount of our expenses in NIS are
higher than the amount of our revenues in NIS and/or the amount of our
liabilities in NIS are higher than our assets in NIS.
We currently benefit from government programs and tax benefits that may be
discontinued or reduced.
We currently receive grants and tax benefits under Israeli government
programs, we must continue to meet specified conditions, including, but not
limited to, making specified investments from our equity in fixed assets and
paying royalties with respect to grants received. In addition, some of these
programs restrict our ability to manufacture particular products or transfer
particular technology outside of Israel. If we fail to comply with these
conditions in the future, the benefits we receive could be canceled and we could
be required to refund any payments previously received under these programs,
including any accrued interest, or pay increased taxes or royalties. Israeli
government has reduced the benefits available under these programs in recent
years and these programs and benefits may be discontinued or curtailed in the
future. If Israel government ends these programs and benefits, our business,
financial condition, results of operations and net income could be materially
adversely affected.
The tax benefits that we currently receive from our approved enterprise programs
require us to satisfy specified conditions. If we fail to satisfy these
conditions, we may be required to pay additional taxes and would likely be
denied these benefits in the future.
The Investment Center of the Ministry of Industry, Trade and Labor of
the State of Israel has granted approved enterprise status to certain of our
manufacturing facilities. Starting from when we begin to generate income from
these approved enterprise programs, any portion of our income derived from these
approved enterprise programs will be exempt from tax for a period of two to four
years and will be subject to a reduced tax for an additional three to eight
years, depending on the percentage of our share capital held by non-Israeli
citizens. The benefits available to our approved enterprise programs depend upon
the fulfillment of conditions stipulated in applicable law and in each program's
certificate of approval. If we fail to comply with these conditions, in whole or
in part, we may be required to pay additional taxes and interest for the period
in which we benefited from the tax exemption or reduced tax rates and would
likely be denied these benefits in the future.
14
Provisions of Israeli law may delay, prevent or make difficult an acquisition of
us, which could prevent a change of control and therefore depress the price of
our shares.
Provisions of Israeli corporate and tax law may have the effect of
delaying, preventing or making more difficult a merger with, or other
acquisition of, us. This could cause our ordinary shares to trade at prices
below the price for which third parties might be willing to pay to gain control
of us. Third parties who are otherwise willing to pay a premium over prevailing
market prices to gain control of us may be unable or unwilling to do so because
of these provisions of Israeli law.
Your rights and responsibilities as a shareholder will be governed by Israeli
law and differ in some respects from the rights and responsibilities of
shareholders under U.S. law.
We are incorporated under Israeli law. The rights and responsibilities
of holders of our ordinary shares are governed by our memorandum of association,
our articles of association and by Israeli law. These rights and
responsibilities differ in some respects from the rights and responsibilities of
shareholders in typical U.S. corporations. In particular, a shareholder of an
Israeli company has a duty to act in good faith toward the company and other
shareholders and to refrain from abusing his power in the company, including,
among other things, in voting at the general meeting of shareholders on certain
matters. Israeli law provides that these duties are applicable in shareholder
votes on, among other things, amendments to a company's articles of association,
increases in a company's authorized share capital, mergers and interested party
transactions requiring shareholder approval. In addition, a shareholder who
knows that it possesses the power to determine the outcome of a shareholder vote
or to appoint or prevent the appointment of a director or executive officer in
the company has a duty of fairness toward the company. However, Israeli law does
not define the substance of this duty of fairness. Because Israeli corporate law
has undergone extensive revision in recent years, there is little case law
available to assist in understanding the implications of these provisions that
govern shareholder behavior.
It may be difficult to enforce a non-Israeli judgment against us, our officers
and directors.
All of our executive officers and directors are nonresidents of the
United States, and a substantial portion of our assets and the assets of these
persons are located outside the United States. Therefore, it may be difficult
for an investor, or any other person or entity, to enforce against us or any of
those persons in an Israeli court a U.S. court judgment based on the civil
liability provisions of the U.S. federal securities laws. It may also be
difficult to effect service of process on these persons in the United States.
Additionally, it may be difficult for an investor, or any other person or
entity, to enforce civil liabilities under U.S. federal securities laws in
original actions filed in Israel.
15
Use of Proceeds
We intend to use the net proceeds from the sale of ordinary shares and
warrants in this offering for general corporate purposes, which may include
reduction of debt, capital expenditures, possible acquisitions, marketing
expenditures for new products, and working capital.
Description of Ordinary Shares
Share Capital
Our authorized share capital consists of NIS 19,748,000 divided into
19,748,000 ordinary shares, par value NIS 1.00 each. All our ordinary shares
have the same rights, preferences and restrictions, some of which are detailed
below. At a general meeting of shareholders, our shareholders may, subject to
certain provisions detailed below, create different classes of preferred shares,
each class bearing different dividends rights, preferences and restrictions,
provided such preferred shares shall not have any voting rights.
Dividends
Holders of ordinary shares are entitled to participate in the payment
of dividends. Declaration of a final dividend requires the approval by ordinary
resolution of our shareholders at a general meeting of shareholders. Such
resolution may reduce but not increase the dividend amount recommended by the
board of directors. Dividends may be paid, in whole or in part, by way of
distribution of dividends in kind.
Dividends may be paid only out of our distributable earnings, as
defined in the Companies Law. Prior to any distribution of dividends, our board
of directors has to determine that there is no reasonable concern that such
distribution will prevent us from executing our existing and foreseeable
obligations as they become due. We have determined that we will not distribute
dividends out of tax-exempt profits.
Voting Rights
Holders of ordinary shares are entitled to one vote for each share of
record on all matters submitted to a vote of shareholders. Voting is done by a
show of hands, unless a poll is demanded prior to a vote by a show of hands.
Generally, resolutions are adopted at the general meeting of shareholders by an
ordinary resolution, unless the Companies Law or the articles of association
require an extraordinary resolution.
An ordinary resolution, such as a resolution approving the declaration
of dividends or the appointment of auditors, requires approval by the holders of
a simple majority of the shares represented at the meeting, in person or by
proxy, and voting thereon. An extraordinary resolution requires approval by the
holders of at least 75% of the shares represented at a meeting of our
shareholders, in person or by proxy, and voting thereon.
The primary resolutions required to be adopted by an extraordinary
resolution of the general meeting of shareholders are resolutions to:
o amend our memorandum of association or the articles of
association;
16
o change the share capital, for example, increasing or canceling
the authorized share capital or modifying the rights attached to
shares; and
o approve mergers, consolidations or winding up of our company.
Our articles of association do not contain any provisions regarding a classified
board of directors or cumulative voting for the election of directors.
Rights in the Company's Profits
Our shareholders have the right to share in our profits distributed as
a dividend or any other permitted distributions.
Liquidation
Our articles of association provide that upon our liquidation,
dissolution or winding-up, our remaining assets shall be distributed pro-rata to
our ordinary shareholders.
Capital Calls
Under our memorandum of association and the Companies Law, the
liability of our shareholders is limited to the par value of the shares held by
them.
Modifications of Share Rights
Shares, which confer preferential or subordinate rights relating to,
among other things, dividends, voting, and payment of capital may be created
only by an extraordinary resolution of the general meeting of shareholders. The
rights attached to a class of shares may be altered by an extraordinary
resolution of the general meeting of shareholders, provided the holders of 75%
of the issued shares of that class approve such change by the adoption of an
extraordinary resolution at a separate meeting of such class, subject to the
terms of such class. The provisions of the articles of association pertaining to
general meetings of shareholders also apply to a separate meeting of a class of
shareholders.
17
Description of Warrants
We may issue warrants to purchase ordinary shares. The warrants may be
issued independently or together with any other securities and may be attached
to or separate from the other securities. Each series of warrants may be issued
under a separate warrant agreement to be entered into between us and a bank or
trust company, as warrant agent.
The warrants will be evidenced by warrant certificates. Unless
otherwise specified in the prospectus supplement, the warrant certificates may
be traded separately from the ordinary shares with which the warrant
certificates were issued. Warrant certificates may be exchanged for new warrant
certificates of different denominations at the office of an agent that we will
appoint. Until a warrant is exercised, the holder of a warrant does not have any
of the rights of a holder of our ordinary shares and is not entitled to any
payments on any ordinary shares issuable upon exercise of the warrants.
The prospectus supplement relating to a series of warrants will
describe the specific terms of the warrants including the following:
o the title of the warrants;
o the aggregate number of warrants;
o the price or prices at which the warrants will be issued and the
currency in which the price for the warrants may be paid;
o the price at which and the currency in which, the ordinary shares
purchasable upon exercise of the warrants may be purchased and
the various factors considered in determining that exercise
price;
o the dates on which the right to exercise the warrants will
commence and expire and whether the exercise of warrants will be
at the option of holders, at our option, or automatic;
o whether the warrants are exercisable by payment of cash,
surrender of other securities, or both;
o provisions for changes to, or adjustments in, the exercise price
of the warrants;
o if applicable, the minimum or maximum amount of the warrants that
may be exercised at any one time;
o if applicable, the designation and terms of the other securities
with which the warrants are issued and the number of the warrants
issued with each such other security;
o if applicable, the date on and after which the warrants and the
related other securities will be separately transferable;
o whether the warrants will be issued in registered form or bearer
form;
18
o information with respect to book-entry procedures, if any;
o if applicable, a discussion of material U.S. federal income tax
considerations; and
o any other terms of the warrants, including terms, procedures, and
limitations relating to the exchange or exercise of the warrants.
You may exercise warrants by payment to our warrant agent of the
exercise price, in each case in such currency or currencies as are specified in
the warrant, and giving your identity and the number of warrants to be
exercised. Once you pay our warrant agent and deliver the properly completed and
executed warrant certificate to our warrant agent at the specified office, our
warrant agent will, as soon as practicable, forward securities to you in
authorized denominations or share amounts. If you exercise less than all of the
warrants evidenced by your warrant certificate, you will be issued a new warrant
certificate for the remaining amount of warrants.
19
Plan of Distribution
We may sell the securities being offered pursuant to this prospectus
directly to purchasers, to or through underwriters, through dealers or agents,
or through a combination of these methods. The prospectus supplement with
respect to the securities being offered will set forth the terms of the
offering, including the names of the underwriters, dealers or agents, if any,
the purchase price, the net proceeds to us, any underwriting discounts and other
items constituting underwriters' compensation, and the offering price and any
discounts or concessions allowed or reallowed or paid to dealers and any
securities exchanges on which such securities may be listed.
If underwriters are used in an offering, we will execute an
underwriting agreement with such underwriters and will specify the name of each
underwriter and the terms of the transaction (including any underwriting
discounts and other terms constituting compensation of the underwriters and any
dealers) in a prospectus supplement. If an underwriting syndicate is used, the
managing underwriter(s) will be specified on the cover of the prospectus
supplement. If underwriters are used in the sale, the offered securities will be
acquired by the underwriters for their own accounts and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
Any public offering price and any discounts or concessions allowed or reallowed
or paid to dealers may be changed from time to time. Unless otherwise set forth
in the prospectus supplement, the obligations of the underwriters to purchase
the offered securities will be subject to conditions precedent and the
underwriters will be obligated to purchase all of the offered securities if any
are purchased.
If dealers are used in an offering, we will sell the securities to the
dealers as principals. The dealers then may resell the securities to the public
at varying prices which they determine at the time of resale. The names of the
dealers and the terms of the transaction will be specified in a prospectus
supplement.
The securities may be sold directly by us or through agents we
designate. If agents are used in an offering, the names of the agents and the
terms of the agency will be specified in a prospectus supplement. Unless
otherwise indicated in a prospectus supplement, the agents will act on a
best-efforts basis for the period of their appointment.
The maximum commission or discount to be received by any member of the
National Association of Securities Dealers, Inc. or independent broker-dealer
will not be greater than eight percent of the initial gross proceeds from the
sale of any security being sold.
Dealers and agents named in a prospectus supplement may be deemed to be
underwriters (within the meaning of the Securities Act of 1933) of the
securities described therein. In addition, we may sell the securities directly
to institutional investors or others who may be deemed to be underwriters within
the meaning of the Securities Act of 1933 with respect to any resales thereof.
Underwriters, dealers and agents, may be entitled to indemnification by
us against specific civil liabilities, including liabilities under the
Securities Act of 1933, or to contribution with respect to payments which the
underwriters or agents may be required to make in respect thereof, under
underwriting or other agreements. The terms of any indemnification provisions
will be set forth in a prospectus supplement. We may grant underwriters who
participate in the distribution of the securities an option to purchase
additional securities to cover over-allotments, if any, in connection with the
20
distribution. Certain underwriters, dealers or agents and their associates may
engage in transactions with, and perform services for us in the ordinary course
of business.
If so indicated in a prospectus supplement, we will authorize
underwriters or other persons acting as our agents to solicit offers by
institutional investors to purchase securities pursuant to contracts providing
for payment and delivery on a future date. We may enter into contracts with
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions and other institutional
investors. The obligations of any institutional investor will be subject to the
condition that its purchase of the offered securities will not be illegal, at
the time of delivery. The underwriters and other agents will not be responsible
for the validity or performance of contracts.
In connection with the offering of the securities, certain underwriters
and selling group members and their respective affiliates, may engage in
transactions that stabilize, maintain or otherwise affect the market price of
the securities. These transactions may include stabilization transactions
effected in accordance with Rule 104 of Regulation M promulgated by the SEC
pursuant to which these persons may bid for or purchase securities for the
purpose of stabilizing their market price.
The underwriters in an offering of the securities may also create a
"short position" for their account by selling more securities in connection with
the offering than they are committed to purchase from us. In that case, the
underwriters could cover all or a portion of the short position by either
purchasing securities in the open market following completion of the offering of
these securities or by exercising any over-allotment option granted to them by
us. In addition, any managing underwriter may impose "penalty bids" under
contractual arrangements with other underwriters, which means that they can
reclaim from an underwriter (or any selling group member participating in the
offering) for the account of the other underwriters, the selling concession for
the securities that are distributed in the offering but subsequently purchased
for the account of the underwriters in the open market. Any of the transactions
described in this paragraph or comparable transactions that are described in any
accompanying prospectus supplement may result in the maintenance of the price of
the securities at a level above that which might otherwise prevail in the open
market.
Each series of securities will be a new issue of securities and will
have no established trading market other than the ordinary shares that are
listed on Nasdaq. Any ordinary share sold pursuant to a prospectus supplement
will be eligible for quotation and trading on Nasdaq, subject to official notice
of issuance. Any underwriters to whom securities are sold by us for public
offering and sale may make a market in the securities, but such underwriters
will not be obligated to do so and may discontinue any market making at any time
without notice. The securities may or may not be listed on a national securities
exchange or eligible for quotation and trading on Nasdaq. The ordinary shares
issued herewith will be listed for trade on the Tel Aviv Stock Exchange.
21
Experts
Our consolidated financial statements as of December 31, 2004 and 2003
and as of December 31, 2003 and 2002, and for each of the three years in the
periods ended December 31, 2004 and December 31,2003, respectively, included in
our Interim Report on Form 6-K dated March 4, 2005, and included in our Annual
Report on Form 20-F for the year ended December 31, 2003, respectively and
incorporated by reference into this Registration Statement, have been audited by
Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global, Independent
Registered Public Accounting Firm, as set forth in their reports thereon
incorporated herein by reference. These consolidated financial statements are
incorporated herein by reference in reliance upon such reports given on the
authority of that firm as experts in accounting and auditing.
Legal Matters
Certain legal matters in connection with this offering relating to U.S.
law will be passed upon for us by Carter Ledyard & Milburn LLP, New York, New
York. The validity of the securities being offered by this prospectus and other
legal matters concerning this offering relating to Israeli law will be passed
upon for us by S. Friedman & Co., Advocates, Tel-Aviv, Israel.
Where You Can Find More Information
We file annual and special reports and other information with the
Securities and Exchange Commission (Commission File Number 0-21388). These
filings contain important information that does not appear in this prospectus.
For further information about us, you may read and copy these filings at the
SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549.
You may obtain information on the operation of the public reference room by
calling the SEC at (800) SEC-0330, and may obtain copies of our filings from the
public reference room by calling (202) 942-8090.
The SEC allows us to "incorporate by reference" information into this
prospectus, which means that we can disclose important information to you by
referring you to other documents which we have filed or will file with the SEC.
We are incorporating by reference in this prospectus the documents listed below
and all amendments or supplements we may file to such documents, as well as any
future filings we may make with the SEC on Form 20-F under the Exchange Act
before the time that all of the securities offered by this prospectus have been
sold or de-registered.
o Our Annual Report on Form 20-F for the fiscal year ended December
31, 2003;
o Our reports of Form 6-K submitted to the SEC on July 7, 2004,
March 4, 2005 and April 1, 2005; and
o The description of our Ordinary Shares contained in our
Registration Statement on Form 8-A, File No. 0-21388, including
any amendment or reports for the purpose of updating such
description.
In addition, we may incorporate by reference into this prospectus our
reports on Form 6-K filed after the date of this prospectus (and before the time
that all of the securities offered by this prospectus have been sold or
de-registered) if we identify in the report that it is being incorporated by
reference in this prospectus.
Certain statements in and portions of this prospectus update and
replace information in the above-listed documents incorporated by reference.
Likewise, statements in or portions of a future document
22
incorporated by reference in this prospectus may update and replace statements
in and portions of this prospectus or the above-listed documents.
We shall provide you without charge, upon your written or oral request,
a copy of any of the documents incorporated by reference in this prospectus,
other than exhibits to such documents, which are not specifically incorporated
by reference into such documents. Please direct your written or telephone
requests to Magal Security Systems Ltd. P.O. Box 70 Industrial Zone, Yahud
56100, Israel, Attn: Raya Asher, Chief Financial Officer, telephone number
(972)(3) 539-1444. You also may obtain information about us by visiting our
website at www.magal-ssl.com. Information contained in our website is not a part
of this prospectus.
We are an Israeli company and are a "foreign private issuer" as defined
in Rule 3b-4 under the Securities Exchange Act of 1934. As a result, (1) our
proxy solicitations are not subject to the disclosure and procedural
requirements of Regulation 14A under the Exchange Act, (2) transactions in our
equity securities by our officers and directors are exempt from Section 16 of
the Exchange Act, and (3) until November 4, 2002, we were not required to make,
and did not make, our SEC filings electronically, so that those filings are not
available on the SEC's Web site. However, since that date, we have been making
all required filings with the SEC electronically, and these filings are
available over the Internet at the SEC's Web site at http://www.sec.gov.
In addition, we are not required under the Exchange Act to file
periodic reports and financial statements as frequently or as promptly as United
States companies whose securities are registered under the Exchange Act.
We distribute annually to our shareholders an annual report containing
financial statements that have been examined and reported on, with an opinion
expressed by, an independent registered public accounting firm. We prepare our
financial statements in United States dollars and in accordance with accounting
principles generally accepted in the United States.
In addition, since we are also listed on the Tel Aviv Stock Exchange,
or TASE, we submit copies of all our filings with the SEC to the Israeli
Securities Authority and TASE. Such copies can be retrieved electronically
through the TASE internet messaging system (www.maya.tase.co.il) and, in
addition, with respect to filings effected as of November 2003 through the MAGNA
distribution site of the Israeli Securities Authority (www.magna.isa.gov.il).
Enforceability of Civil Liabilities
Service of process upon us and upon our directors and officers and the
Israeli experts named in this prospectus, most of whom reside outside the United
States, may be difficult to obtain within the United States. Furthermore,
because substantially all of our assets and substantially all of our directors
and officers are located outside the United States, any judgment obtained in the
United States against us or any of our directors and officers may not be
collectible within the United States.
We have been informed by our legal counsel in Israel, S. Friedman & Co.
Advocates, that there is doubt as to the enforceability of civil liabilities
under the Securities Act of 1933 and the Exchange Act of 1934 in original
actions instituted in Israel. However, subject to specified time limitations,
Israeli courts may enforce a United States final executionable judgment in a
civil matter including a monetary or compensatory judgment in a non-civil
matter, obtained after due process before a court of competent
23
jurisdiction according to the laws of the state in which the judgment is given
and the rules of private international law currently prevailing in Israel, the
laws of which do not prohibit the enforcement of judgment of Israeli courts,
provided that:
o the judgment is enforceable in the state in which it was given;
o adequate service of process has been effected and the defendant
has had a reasonable opportunity to present his arguments and
evidence;
o the judgment and the enforcement thereof are not contrary to the
law, public policy, security or sovereignty of the State of
Israel;
o the judgment was not obtained by fraud and does not conflict with
any other valid judgment in the same matter between the same
parties;
o an action between the same parties in the same matter is not
pending in any Israeli court at the time the lawsuit is
instituted in the foreign court and the judgment is no longer
appealable and the judgment is executory in the country in which
it was given; and
o the judgment is final and may be freely executed in the country
in which it was given.
We have irrevocably appointed Perimeter Products, Inc. as our agent to receive
service of process in any action against us in the state and federal courts
sitting in the City of New York, Borough of Manhattan, arising out of this
offering or any purchase or sale of securities in connection therewith.
If a foreign judgment is enforced by an Israeli court, it generally
will be payable in Israeli currency, which can then be converted into
non-Israeli currency and transferred out of Israel. The usual practice in an
action before an Israeli court to recover an amount in a non-Israeli currency is
for the Israeli court to render judgment for the equivalent amount in Israeli
currency at the rate of exchange in force on the date thereof, but the judgment
debtor may make payment in foreign currency. Pending collection, the amount of
the judgment of an Israeli court stated in Israeli currency ordinarily will be
linked to the Israeli consumer price index plus interest at the annual statutory
rate set by Israeli regulations prevailing at such time. Judgment creditors must
bear the risk of unfavorable exchange rates.
24
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Magal Security Systems Ltd.
Ordinary Shares and Warrants
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 8. Indemnification of Directors and Officers
The Israeli Companies Law, 1999-5759, or the Companies Law, provides
that a company may not exonerate office holders from liability for a breach of
their duty of loyalty, but may exonerate in advance office holders from their
liability to the company, in whole or in part, for a breach of their duty of
care. Our articles of association provide that, subject to any restrictions
imposed by the Companies Law, we may enter into an insurance contract providing
coverage for the liability of any of our office holders for:
o a breach of their duty of care to us or to another person;
o a breach of their duty of loyalty to us, provided that they acted
in good faith and had reasonable grounds to assume that their act
would not prejudice our interests; and
o a financial liability imposed upon them in favor of another
person for an act performed by them in their capacity as office
holders.
In addition, we may indemnify office holders against the following
expenses or liabilities imposed upon them in their capacity as office holders:
o a financial liability imposed on them in favor of another person
by any judgment, including a settlement or an arbitrator's award
approved by a court; and
o reasonable litigation expenses, including attorneys' fees,
incurred by such office holders or imposed upon them by a court,
in connection with proceedings instigated by us against them or
that are instigated on our behalf or by another person, or as a
result of a criminal charge from which they were acquitted or a
criminal charge in which they were convicted for a criminal
offense that does not require proof of intent.
The Companies Law provides that a company may not indemnify an office
holder nor enter into an insurance contract which would provide coverage for any
monetary liability incurred as a result of any of the following:
o a breach by an officer holder of their duty of loyalty, unless
the office holder acted in good faith and had a reasonable basis
to believe that the act would not prejudice the company;
o a breach by an office holder of their duty of care if such breach
was committed intentionally or recklessly;
II-1
o an act or omission with the intent to unlawfully derive a
personal benefit; or
o a fine levied against the office holder as a result of a criminal
offense.
These provisions are specifically limited in their scope by the
Companies Law, which provides that a company may not indemnify an office holder,
or enter into an insurance contract that would provide coverage for any monetary
liability incurred as a result of certain improper actions. However, pursuant to
a recent amendment to the Israeli Companies Law, a company may indemnify any of
its office holders for reasonable litigation costs incurred by such office
holder in connection with any investigation or other legal proceedings taken by
any governmental or other authorized authority, provided that:
o such investigation or proceedings did not result in indictment or
if such indictment has been filed the hearing of the charges has
been stayed by the Israeli State Attorney; or
o The charges have not been substituted by a monetary liability.
In addition, pursuant to such recent amendment a company may indemnify
any of its office holders for reasonable litigation costs incurred by such
office holder also if the charges have been substituted by monetary liability
provided the offense in which such office holder has been indicted does not
require criminal intent.
Pursuant to the Companies Law, indemnification of, and procurement of
insurance coverage for, our office holders must be approved by our audit
committee and our board of directors and, in specified circumstances, by our
shareholders.
We have indemnified our office holders to the fullest extent permitted
by law. We currently maintain a directors and officers liability insurance
policy with a per-claim and aggregate coverage limit of $5 million.
Item 9. Exhibits
(a) Exhibits
Exhibit
No. Description of Exhibit
-------- ----------------------
3.1 Memorandum of Association of the Registrant (1)
3.2 Articles of Association of the Registrant (2)
4.1 Specimen of Ordinary Share Certificate (3)
5 Opinion of S. Friedman & Co., Advocates regarding
legality of the securities being registered*
23.1 Consent of Kost Forer Gabbay & Kasierer, a member of
Ernst & Young Global, Independent Registered Public
Accounting Firm
23.2 Consent of S. Friedman & Co., Advocates (included in
Exhibit 5 hereto)*
II-2
24 Power of Attorney (included in the signature page to
the Registration Statement)*
-------------------
(1) Previously filed as exhibit 3.1 to the Registrant's Registration Statement
on Form F-1 (No. 33-57438), filed with the Commission on January 26, 1993, as
amended, and incorporated herein by reference.
(2) Previously filed as exhibit 3.2 to the Registrant's Registration Statement
on Form F-1 (No. 33-57438), filed with the Commission on January 26, 1993, as
amended, and incorporated herein by reference and an amendment thereto
previously filed as exhibit 4.3 to the Registrant's Registration Statement on
Form S-8 (No. 333-6246), filed with the Commission on January 7, 1997 and
incorporated herein by reference and further amendments thereto previously filed
as exhibit 1.2 to the Registrant's Annual Report on Form 20-F for the fiscal
year ended December 31, 2000, filed with the Commission on June 29, 2001 and
incorporated herein by reference.
(3) Previously filed as exhibit 1 to the Registrant's Registration Statement on
Form 8-A, filed with the Commission on March 18, 1993, as amended, and
incorporated herein by reference.
* Previously filed.
Item 10. Undertakings
The undersigned Registrant hereby undertakes as follows:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section 10(a)
(3) of the Securities Act of 1933 (the "Securities
Act");
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this
Registration Statement (or the most recent
post-effective amendment thereof) which,
individually or in the aggregate, represent a
fundamental change in the information set forth in
this Registration Statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the Registration Statement or any material change to
such information in this Registration Statement; and
(iv) To file a post-effective amendment to this
Registration Statement to include any financial
statements required by Item 8.A of Form 20-F (17 CFR
249.220f) at the start of any delayed offering or
throughout a continuous offering;
provided, however, that paragraphs (i), (ii) and (iv) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act") that are incorporated by reference in this Registration
Statement.
II-3
(2) For the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered that remain
unsold at the termination of the offering.
(4) For purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act that is
incorporated by reference in this Registration Statement shall
be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide
offering thereof.
(5) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the
provisions referred to in Item 15, or otherwise, the
Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final
adjudication of such issue.
(6) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed
as part of this Registration Statement in reliance upon Rule
430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under
the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared
effective.
(7) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it complies with all of
the requirements for filing on Form F-3 and has duly caused this amendment to
its registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Yahud, Israel, on March 31, 2005.
By: /s/Jacob Even-Ezra
------------------
Name: Jacob Even-Ezra
Title: Chief Executive Officer and
Chairman of the Board
Pursuant to the requirements of the Securities Act, this registration
statement has been signed below by the following persons in the capacities
indicated on March 31, 2005.
Signature Title
--------- -----
/s/Jacob Even-Ezra Chief Executive Officer and
------------------ Chairman of the Board
Jacob Even-Ezra
* Chief Financial Officer and Principal
------------------ Accounting Officer
Raya Asher
* President and Director
------------------
Izhar Dekel
* Director
------------------
Nathan Kirsh
II-5
* Director
------------------
Jacob Nuss
* Director
------------------
Jacob Perry
* Director
------------------
Zeev Livne
* External Director
------------------
Shaul Kobrinsky
* External Director
------------------
Anat Winner
Perimeter Products, Inc.
By * Authorized Representative in
---------------- the United States
Name: Martha Lee
Title: President
By: /s/Jacob Even-Ezra
------------------
Jacob Even-Ezra
Attorney-in-fact
II-6
EXHIBIT INDEX
Exhibit
No. Description of Exhibit
-------- ----------------------
3.1 Memorandum of Association of the Registrant (1)
3.2 Articles of Association of the Registrant (2)
4.1 Specimen of Ordinary Share Certificate (3)
5 Opinion of S. Friedman & Co., Advocates regarding
legality of the securities being registered*
23.1 Consent of Kost Forer Gabbay & Kasierer, a member of
Ernst & Young Global, Independent Registered Public
Accounting Firm
23.2 Consent of S. Friedman & Co., Advocates (included in
Exhibit 5 hereto)*
24 Power of Attorney (included in the signature page to
the Registration Statement)*
-------------------
(1) Previously filed as exhibit 3.1 to the Registrant's Registration Statement
on Form F-1 (No. 33-57438), filed with the Commission on January 26, 1993, as
amended, and incorporated herein by reference.
(2) Previously filed as exhibit 3.2 to the Registrant's Registration Statement
on Form F-1 (No. 33-57438), filed with the Commission on January 26, 1993, as
amended, and incorporated herein by reference and an amendment thereto
previously filed as exhibit 4.3 to the Registrant's Registration Statement on
Form S-8 (No. 333-6246), filed with the Commission on January 7, 1997 and
incorporated herein by reference and further amendments thereto previously filed
as exhibit 1.2 to the Registrant's Annual Report on Form 20-F for the fiscal
year ended December 31, 2000, filed with the Commission on June 29, 2001 and
incorporated herein by reference.
(3) Previously filed as exhibit 1 to the Registrant's Registration Statement on
Form 8-A, filed with the Commission on March 18, 1993, as amended, and
incorporated herein by reference.
* Previously filed.