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 August 2006
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 Statements File Nos. 333-9050 and 333-123265 and Form S-8
Registration Statement File No. 333-06246.
Magal Security Systems Ltd.
6-K Items
1. Magal Security Systems Ltd. Proxy Statement for Annual General Meeting
to be held September 28, 2006.
2. Magal Security Systems Ltd. Proxy Card.
ITEM 1
MAGAL SECURITY SYSTEMS LTD.
P.O. Box 70,
Industrial Zone,
Yehud 56100, Israel
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NOTICE OF 2006 ANNUAL GENERAL MEETING OF SHAREHOLDERS
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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 on Thursday, September
28, 2006 at 10:00 a.m., at our offices at 17 Altalef Street, Industrial Zone,
Yehud 56100, Israel, for the following purposes:
1. To elect directors;
2. To ratify the reappointment of Kost Forer Gabbay & Kasierer,
independent certified public accountants in Israel, a member firm of Ernst &
Young Global, as our independent registered public accountants for the year
ending December 31, 2006 and to authorize our Audit Committee to fix the
remuneration of the auditors in accordance with the volume and nature of their
services; and
3. To review and discuss our Directors' Report, Consolidated
Financial Statements and Auditors' Report for the year ended December 31, 2005.
Shareholders of record at the close of business on August 18, 2006 are
entitled to notice of and to vote at the Meeting. You can vote by proxy either
by mail or in person. If voting by mail, the proxy must be received by our
transfer agent or at our registered office in Israel at least forty-eight (48)
hours prior to the appointed time of the Meeting to be validly included in the
tally of ordinary shares voted at the Annual General Meeting. Detailed proxy
voting instructions are provided both in the Proxy Statement and on the enclosed
proxy card.
BY ORDER OF THE BOARD
OF DIRECTORS
/s/ Jacob Even-Ezra
JACOB EVEN-EZRA
Chairman of the Board of Directors and
Chief Executive Officer
Yehud, Israel
August 21, 2006
MAGAL SECURITY SYSTEMS LTD.
P.O. Box 70,
Industrial Zone,
Yehud 56100, Israel
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PROXY STATEMENT
2006 ANNUAL GENERAL MEETING OF SHAREHOLDERS
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This statement is being furnished in connection with the solicitation
of proxies on behalf of the Board of Directors of Magal Security Systems Ltd. to
be voted at the 2006 Annual General Meeting of Shareholders, or the Meeting, and
at any adjournment thereof, pursuant to the accompanying Notice of 2006 Annual
General Meeting of Shareholders. The Meeting will be held on Thursday, September
28, 2006 at 10:00 a.m., at our offices at 17 Altalef Street, Industrial Zone,
Yehud 56100, Israel.
This Proxy Statement, the attached Notice of 2006 Annual General
Meeting and the enclosed proxy card are being mailed to shareholders on or about
August 22, 2006.
Purpose of the Annual General Meeting
It is proposed that at the Meeting the following resolutions be
adopted (i)to elect six directors for terms expiring in 2007; and (ii) to ratify
the reappointment of Kost Forer Gabbay & Kasierer, independent certified public
accountants in Israel, a member firm of Ernst & Young Global, as our independent
registered public accountants for the year ending December 31, 2006 and to
authorize our Audit Committee to fix their remuneration accordance with the
volume and nature of their services. In addition, our Directors' Report,
Consolidated Financial Statements and Auditor's Report for the year ended
December 31, 2005 will be presented and discussed.
We are not aware of any other matters that will come before the
Meeting. If any other matters properly come before the Meeting, the persons
designated as proxies intend to vote on such matters in accordance with the
judgment of the Board of Directors.
Proxy Procedure
Only holders of record of our ordinary shares, par value of NIS 1.00
per share, as of the close of business on August 18, 2006, are entitled to
notice of, and to vote in person or by proxy at, the Meeting.
Shares eligible to be voted and for which a proxy card is properly
signed and returned and actually received by our transfer agent or at our
registered office in Israel at least forty-eight (48) hours prior to the
beginning of the Meeting will be voted as directed. 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 directors
and FOR each proposal 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.
We will bear the cost of soliciting proxies from our shareholders.
Proxies will be solicited by mail and may also be solicited personally or by
telephone by our directors, officers and employees. We will reimburse brokerage
houses and other custodians, nominees and fiduciaries for their expenses in
accordance with the regulations of the U.S. Securities and Exchange Commission
concerning the sending of proxies and proxy material to the beneficial owners of
stock.
You may vote by submitting your proxy with voting instructions by mail
if you promptly complete, sign, date and return the accompanying proxy card in
the enclosed self-addressed envelope to our transfer agent or to our registered
office in Israel at least forty-eight (48) hours prior to the appointed time of
the Meeting. You may revoke your proxy at any time prior to the exercise of
authority granted in the proxy by giving a written notice of revocation to our
Corporate Secretary, by submitting a subsequently dated, validly executed proxy,
or by voting in person.
Quorum and Voting
As of August 18, 2006, the record date for determination of
shareholders entitled to vote at the Meeting, there were outstanding 10,390,248
ordinary shares. Each ordinary share entitles the holder to one vote.
The presence of two shareholders, holding at least one third (1/3) of
our issued share capital voting rights, represented in person or by proxy at the
Meeting, will constitute a quorum. An affirmative vote of the holders of a
majority of the ordinary shares represented at the Meeting, in person or by
proxy, entitled to vote and voting thereon, is required to approve each of the
proposals, except as otherwise stated in the proposal.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information, as of August 18,
2006, pertaining to the beneficial ownership of our ordinary shares by (i)
persons known to us to own beneficially five percent or more of our 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.
Number of Ordinary Percentage of
Shares Beneficially Outstanding
Name of Beneficial Owner Owned (1) Ordinary Shares (2)
------------------------ ------------------- -------------------
Nathan Kirsh (3) .............................. 1,832,227 17.63%
Mira Mag Inc. (4).............................. 1,485,852 14.30%
Jacob Even-Ezra (5) ........................... 348,969 3.33%
Izhar Dekel (6) ............................... 154,427 1.47%
Clough Capital Partners L.P. (7) .............. 663,069 6.39%
Diker Management LLC (8) ...................... 612,077 5.90%
All directors and executive officers as a
group (consisting of 16 persons) ............ 2,608,775 24.77%
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(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. In addition, ordinary
shares relating to options currently exercisable or exercisable within
60 days of the record date are deemed outstanding for computing the
percentage of the person holding such securities but are not deemed
outstanding for computing the percentage of any other person. Except as
indicated by footnote, and subject to community property laws where
applicable, the persons named in the table have sole voting and
investment power with respect to all shares shown as beneficially owned
by them.
(2) The percentage of outstanding ordinary shares is based on 10,390,248
ordinary shares outstanding as of August 18, 2006.
(3) Includes Mr. Kirsh's beneficial ownership of 1,485,852 ordinary shares
held by Mira Mag. (see footnote (4) below) Mr. Kirsh is a trustee of the
Eurona Foundation, which owns an 81.5% interest in Mira Mag. Mr. Kirsh
is also the beneficial owner of an additional 346,375 ordinary shares.
(4) Mira Mag is the holder of 1,823,131 ordinary shares. The beneficial
owners and their percentage interest in these shares are: The Eurona
Foundation 81.5%, or 1,485,852 ordinary shares, and Jacob Even-Ezra's
three children 18.5%, or 337,279 ordinary shares. Jacob Even-Ezra
beneficially owns all of the 337,279 shares held by Mira Mag in which
his children, Ornit Dekel and Guy and Asaf Even-Ezra, have an interest.
The Eurona Foundation is an entity controlled by Nathan Kirsh, the
trustees of which are Prinz Michael von Liechtenstein, Altenbach 8, P.O.
Box 339, FL 9490 Vaduz, Liechtenstein, and Nathan Kirsh, Spintex
Village, Ezulwini, Swaziland.
(5) Includes Mr. Even-Ezra's beneficial ownership of 337,279 ordinary shares
held by Mira Mag (see footnote (4) above), Mr. Even-Ezra's beneficial
ownership of an additional 219,554 ordinary shares and 76,897 ordinary
shares held by a trustee.
2
(6) Include Mr. Dekel's beneficial ownership of 42,000 ordinary shares and
112,427 shares held by Mr. Dekel's wife, Ornit Dekel.
(7) Based on information provided by Clough Capital Partners L.P. in a
filing with the Securities and Exchange Commission, dated February 14,
2006.
(8) Based on information provided by Diker Management LLC in a filing with
the Securities and Exchange Commission, dated February 15, 2006.
I. ELECTION OF DIRECTORS
(Item 1 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. 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 named in the following table. Messrs.
Even-Ezra, Dekel, Kirsh, Nuss, Perry and Livne currently serve as our directors.
In addition, we have two outside directors currently serving three-year terms,
Mr. Shaul Kobrinsky and Mrs. Anat Winner, who are not standing for election at
this Meeting.
Each director, other than the outside 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 (other
than outside directors) may be reelected upon completion of their term of
office. The outside directors will hold office for a three-year term and,
pursuant to the Israeli Companies Law may be re-elected only for one additional
three-year term.
All directors, other than outside directors who serve for three years,
hold office until the next annual general meeting of shareholders and until
their successors have been elected.
In the event any of the 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.
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 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 us 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 as Director for Terms Expiring in 2007
Name Age Position with the Company
---- --- -------------------------
Jacob Even-Ezra...... 75 Chairman of the Board and Chief Executive Officer
Izhar Dekel.......... 54 President and Director
Nathan Kirsh......... 74 Director
Jacob Nuss........... 58 Director
Jacob Perry ......... 62 Director
Zeev Livne .......... 61 Director
Jacob Even-Ezra has served as our chairman of the board and chief
executive officer since 1984. He is currently a member of the Executive Council
and the Management Committee of Tel Aviv University.
3
From 1985 to 1988, Mr. Even-Ezra was also chairman of the Israel Export
Institute. Mr. Even-Ezra holds a B.Sc. in Electrical Engineering from Israel
Institute of Technology, or the Technion.
Izhar Dekel has served as our president since 1990 and as a director
since 1993. Mr. Dekel holds an M.B.A. degree and a B.A. in Economics and
International Relations from the Hebrew University of Jerusalem.
Nathan Kirsh has served as a director since 1984. Mr. Kirsh is an
independent investor. Mr. Kirsh serves as one of the trustees of the Eurona
Foundation, the beneficial owner of 81.5% of the outstanding ordinary shares
of our company that are held by Mira Mag Inc. Mr. Kirsh holds a B.A. in
Commerce from the University of Witwatersrand, Johannesburg.
Jacob Nuss has served as a director since 1993. Mr. Nuss currently
serves as the vice president - internal auditing of Israel Aircraft Industries
Ltd., or IAI, and served as IAI's deputy vice president - internal auditing from
1999 to 2003. Mr. Nuss has served in various financial management capacities
at IAI since 1995. IAI is a former shareholder in our company. Mr. Nuss holds
an M.B.A. in Business from Recanati Business School and a B.A. in Economics
and Business Management from Bar Ilan University. Mr.Nuss also holds a
certificate in internal auditing.
Jacob Perry has served as a director since December 2002. Mr. Perry
is also the chairman of the board of directors of various companies, including
Mizrahi Tefahot Bank B.M. and Lipman Electronic Engineering Ltd. From 1995 to
December 2002, Mr. Perry was president and chief executive officer of Cellcom
Israel Ltd., one of Israel's cellular phone operators. Mr. Perry served 29
years with 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 team of many
public organizations. Mr. Perry holds an A.M.P. from Harvard Business School
and a B.A. in Oriental Studies and History of the Jewish People from
Tel-Aviv University.
Zeev Livne has served as a director since July 2004. Mr. 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 the IDF, Mr. Livne served as the
Defense Attache to the U.S. and Canada from 1997 to 2001, Military Secretary
to the Prime Minister of Israel from 1996 to 1997 and Ground Force Commander
from 1994 to 1996. From 1992 to 1994, Mr. Livne established the IDF Home
Front Command and served as its first commander. Mr. Livne serves on the board
of directors of "PAZKAR," a private Israeli company. Mr. Livne holds a B.A.
in History from the Tel Aviv University, and an M.A. in Geography from the
University of Haifa.
Mr. Even-Ezra is Mr. Dekel's father-in-law. 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.
Outside Directors Continuing in Office
Shaul Kobrinsky, 54, was appointed to serve as an outside director in
July 2004. Mr. 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 as a chief executive officer of Cargal
Ltd., an Israeli company that manufactures corrugate boards and boxes.
Previously, and since 1984, Mr. Kobrinsky served as deputy managing director of
Clal 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, 47, was appointed to serve as an outside director in July
2004. Mrs. 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
4
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.
Outside Directors
The Israeli Companies Law requires Israeli companies with shares that
have been offered to the public in or outside of Israel to appoint at least two
outside directors. Outside directors must be Israeli residents who are qualified
to be appointed as directors, unless the company's shares have been offered to
the public outside of Israel or have been listed on a stock exchange outside of
Israel. No person may be appointed as an outside director if, at the time of the
appointment or during the two years that preceded the appointment, the person or
the person's relative, partner, employer or an entity of which he is a
controlling shareholder had an interest in the company, in a person who was a
controlling shareholder of the company at the time of the appointment, or in an
entity which was controlled by the company or its controlling shareholder at the
time of the appointment or during the two years that preceded the appointment.
In addition, no person may serve as an outside director if the person's
position or other activities create, or may create, a conflict of interest with
the person's responsibilities as an outside director or may otherwise interfere
with the person's ability to serve as an outside director. If, at the time
outside directors are to be appointed, all current members of the board of
directors are of the same gender, then at least one outside director must be of
the other gender.
According to a March 2005 amendment to the Israeli Companies Law,
effective as of January 2006, at least one of the outside directors must be an
"accounting and financial expert" and the other outside directors must be
"professional experts," as such terms are defined by regulations promulgated
under the Israeli Companies Law. This requirement does not apply to outside
directors appointed prior to the March 2005 amendment; however a company can not
renew the appointment of any such outside director for an additional term unless
the outside director is (i) an accounting and financial expert or (ii) a
professional expert and at the time the appointment is to be renewed, an outside
director who is an accounting and financial expert serves on the board of
directors.
The outside directors are elected by shareholders. The shareholders
voting in favor of their election must include at least one-third of the shares
of the non-controlling shareholders of the company who voted on the matter. This
minority approval requirement need not be met if the total shareholdings of
those non-controlling shareholders who vote against their election represent 1%
or less of all of the voting rights in the company. Outside directors serve for
a three-year term, which may be renewed for only one additional three-year term.
Outside directors can be removed from office only by the same special percentage
of shareholders that can elect them, or by a court, and then only if the outside
directors cease to meet the statutory qualifications with respect to their
appointment or if they violate their duty of loyalty to the company.
Any committee of the board of directors that is authorized to exercise
powers vested in the board of directors must include at least one outside
director and the audit committee must include all the outside directors. An
outside director is entitled to compensation as provided in regulations adopted
under the Israeli Companies Law and is otherwise prohibited from receiving any
other compensation, directly or indirectly, in connection with such service.
Independent Directors
In general, under NASDAQ Stock Market Rules a majority of our Board of
Directors must qualify as independent directors within the meaning of the NASDAQ
Marketplace Rules and our Audit Committee must have at least three members and
be comprised only of independent directors, each of whom satisfies the
respective "independence" requirements of NASDAQ and the Securities and Exchange
Commission. However, on June 27, 2006, we provided NASDAQ with a notice of
non-compliance with respect to the requirement to maintain a majority of
independent directors, as defined
5
under NASDAQ Marketplace Rules. Instead, we follow Israeli law and practice
which requires that we appoint at least two outside directors, within the
meaning of the Israeli Companies Law, to our Board of Directors. In addition, in
accordance with rules of the Securities and Exchange Commission, we have the
mandated three independent directors, as defined by the Securities and Exchange
Commission and NASDAQ rules, on our Audit Committee.
Our Board of Directors has determined that Mrs. Winner and Mr.
Kobrinsky qualify both as independent directors under the Securities and
Exchange Commission and NASDAQ requirements and as outside directors under the
Israeli Companies Law requirements. Our Board of Directors has further
determined that Messrs. Nuss and Livne qualify as independent directors under
the requirments of the Securities and Exchange Commission and NASDAQ.
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.
The responsibilities of the Audit Committee also include approving
related-party transactions as required by law. 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
outside directors are serving as members of the audit committee and at least one
of the outside directors was present at the meeting in which an approval was
granted.
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 Mrs. Anat Winner and Messrs. Shaul Kobrinsky and Jacob Nuss. Our
Board of Directors has determined that Mrs. Anat Winner qualifies as a financial
expert. The Audit Committee meets at least once each quarter. Our Audit
Committee charter is available on our website at www.magal-ssl.com.
Internal Auditor
Under the Companies Law, a 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.
Shareholder Communications with the Board of Directors
Our shareholders may communicate with the members of our Board of
Directors by writing directly to the Board of Directors or specified individual
directors to:
Corporate Secretary
Magal Security Systems Ltd.
P.O. Box 70,
Industrial Zone,
Yehud 56100, Israel
Our Corporate Secretary will deliver any shareholder communications to
the specified individual director, if so addressed, or to one of our directors
who can address the matter.
6
Executive Compensation
During the fiscal year ended December 31, 2005, we paid aggregate
compensation to all of our officers and directors as a group (consisting then of
16 persons) of approximately $1.4 million. In addition, we have provided
automobiles to our executive officers at our expense. We have two key-man life
insurance policies for Izhar Dekel. We are the beneficiary of one of these
policies and certain of Mr. Dekel's family members are the beneficiaries of the
other policy. We bear the cost of each of these insurance policies. We also have
a key-man life insurance policy for Jacob Even-Ezra, of which we are the
beneficiary.
Directors who are not officers of our company or of any entity that
beneficially owns 5% or more of our ordinary shares, as well as our outside
directors, receive an annual fee of approximately $5,600 and an additional fee
of approximately $300 for each board or committee meeting that they attend.
Under the Israeli Companies Law, the board of directors must approve
all compensation arrangements for the chief executive officer of the company,
and unless provided otherwise in the company's articles of association, all
compensation arrangements for officers and employees (other than the company's
directors) are subject to the chief executive officer's approval. Directors'
compensation arrangements (other than outside directors) also require audit
committee approval before board approval and shareholder approval. However,
pursuant to amendments to the Companies Regulations (Relief from Related Party
Transactions), 5760-2000, directors' compensation and employment arrangements do
not require, in certain circumstances, shareholder approval. In addition, under
these regulations, if the director or office holder is a controlling shareholder
of the company, then the employment and compensation arrangements of such
director or office holder do not require shareholder approval if such
arrangements meet certain criteria.
An outside director is entitled to compensation as provided in
regulations promulgated under the Israeli Companies Law and is otherwise
precluded from receiving any other compensation, directly or indirectly, in
connection with such service.
During 2005, we granted options for the purchase of total of 53,500
ordinary shares to certain of our directors and executive officers. During 2004,
we granted options to purchase 94,500 ordinary shares to certain of our
directors and executive officers. We have no service contracts with any of our
directors to provide services as a director that provide for benefits upon
termination of employment. However, we do have employment agreements with
certain of our directors in connection with their service as employees.
Stock Option Plan
On October 27, 2003, our Board of Directors approved the 2003 Israeli
Share Option Plan ("the 2003 Plan") which was approved by our shareholders in
July 2004. The Board has elected to allot the options under Israel's capital
gain tax treatment.
Under the 2003 Plan, stock options will be periodically granted to our
employees, Directors, officers and consultants, in accordance with the decision
of our Board of Directors. Our Board of Directors has the authority to determine
the number of options, if any, which will be granted to each of the recipients,
the dates of the grant of such options, the date of their exercise as well as
their rate of conversion into shares in respect of each stock option, and the
purchase price thereof. Subject to shareholder approval, the 2003 Plan will be
effective for ten years and shall terminate in October 2013.
Under the 2003 Plan, no option may be exercised before the second
anniversary of the date on which it was granted, and each option expires on or
before the fifth anniversary of the date on which it was granted. Pursuant to
the plan, any options that are cancelled or not exercised within the option
period will become available for future grants.
As of August 18, 2006, options to purchase 343,000 shares were
outstanding and additional options to purchase 299,676 shares were available for
grant.
Grants of stock options under the 2003 Plan are accounted for by us
over the exercise periods thereof as a compensation expense with a corresponding
credit to our contributed capital. Ordinary shares subject to options under the
2003 Plan are to be valued for this purpose at their market value at the time
the options are granted.
7
II. APPOINTMENT OF AUDITORS
(Item 2 on the Proxy Card)
Our Board of Directors first appointed Kost Lev-Ari & Forer,
independent certified public accountants in Israel, as our auditors in 1984 and
has reappointed the firm, which was merged into Kost Forer Gabbay & Kasierer and
is now a member firm of Ernst & Young Global, as our auditors since such time.
Kost Forer Gabbay & Kasierer has no relationship with us or any of our
affiliates except as auditors. As a result of Kost Forer Gabbay & Kasierer's
knowledge of our operations, our Audit Committee and Board of Directors are
convinced that such firm has the necessary personnel, professional
qualifications and independence to act as our auditors. Our Board of Directors
has again recommended, pursuant to the recommendation of our Audit Committee,
that Kost Forer Gabbay & Kasierer be selected as our auditors for the fiscal
year ending December 31, 2006 and recommends that the shareholders ratify and
approve the selection.
Shareholders will be asked to ratify the appointment of Kost Forer
Gabbay & Kasierer, a Member of Ernst & Young Global, as our independent auditors
for the year ending December 31, 2006 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.
It is therefore proposed that at the Meeting our shareholders adopt the
following resolution:
"RESOLVED, that the appointment of Kost Forer Gabbay &
Kasierer, independent certified public accountants in Israel, a member
firm of Ernst & Young Global, as the independent registered public
accountants of the Company to conduct the annual audit of our financial
statements for the year ending December 31, 2006, 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,
-----------------------
2004 2005
---- ----
Services Rendered Fees Fees
----------------- ---- ----
Audit (1)................. $275,311 $266,936
Audit-related (2)......... 17,404 10,000
Tax (3)................... 18,183 45,100
Other (4)................. 19,380 184,124
Total .................... $330,278 $506,160
--------------
(1) Audit fees consist of services that would normally be provided in
connection with statutory and regulatory filings or engagements.
(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.
(4) Other fees in 2005 principally relate to fees with regard to our public
offering.
8
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.
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. 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, 2005 will be
presented. We will hold a discussion with respect to the financial statements at
the Meeting. This Item III will not involve a vote of the shareholders.
The foregoing Auditors' Report and Consolidated Financial Statements
may be viewed on our website - www.magal-ssl.com.
None of the Auditors' Report, the Consolidated Financial Statements or
the contents of our website form part of the proxy solicitation material.
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.
COPIES OF THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER
31, 2005 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, YEHUD 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: August 21, 2006
9
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 September 28, 2006 at 10:00
a.m. at the registered office of the Company, 17 Altalef Street, Industrial
Zone, Yehud 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):
(Continued and to be signed on the reverse side)
ANNUAL GENERAL MEETING OF SHAREHOLDERS OF
MAGAL SECURITY SYSTEMS LTD.
September 28, 2006
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" PROPOSAL 2.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [X]
--------------------------------------------------------------------------------
1. The election of six directors for terms expiring in 2007.
[ ] FOR ALL NOMINEES NOMINEES:
( )JACOB EVEN-EZRA
[ ] WITHHOLD AUTHORITY FOR ALL NOMINEES ( )IZHAR DEKEL
( )NATHAN KIRSH
[ ] FOR ALL EXCEPT ( )JACOB NUSS
(See instructions below) ( )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)
2. Ratification of the reappointment of Kost Forer Gabbay & Kasierer,
independent certified public accountants in Israel, a member firm of
Ernst & Young Global, as the Company's independent registered public
accountants for the year ending December 31, 2006 and to authorize the
Company's Audit Committee to fix the remuneration of the auditors in
accordance with the volume and nature of their services.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY WILL BE VOTED AS SPECIFIED HEREIN. 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 FOR ITEM 2. 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 AS PROXIES.
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: August 23, 2006