SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
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 April 2005
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. Form of Placement Agency Agreement with Lehman Brothers Inc. dated
April 14, 2005.
2. Press Release re Magal Security Systems Ltd. Announces $16.3 Million
Direct Equity Placement dated April 15, 2005.
ITEM 1
Press Release Source: Magal Security Systems Ltd.
Magal Security Systems Ltd. Announces $16.3 Million Direct Equity Placement
Friday April 15, 7:00 am ET
YAHUD, Israel, April 15 /PRNewswire-FirstCall/ -- Magal Security Systems Ltd.
("Magal") (NASDAQ: MAGS, TASE: MAGS) announced today that it has definitive
commitments from unaffiliated institutional investors and certain affiliated
investors for the purchase of an aggregate of 1,700,000 registered ordinary
shares. Shares sold to the unaffiliated institutional investors were sold at a
purchase price of $9.50 per share and shares sold to affiliated investors were
sold at a purchase price of $9.92 per share (the closing price of the ordinary
shares on the Nasdaq National Market on April 14, 2005) for aggregate gross
proceeds of approximately $16.3 million. The affiliated investors are Jacob
Even-Ezra, Magal's Chairman of the Board and Chief Executive Officer and Nathan
Kirsh, a member of the Board of Directors of the Company and a trustee of the
Eurona Foundation that controls Mira Mag Inc, a major shareholder of the
Company. The offering is expected to close on or prior to April 18, 2005. Lehman
Brothers Inc. acted as the exclusive placement agent for the transaction.
A registration statement relating to these securities has been filed with and
declared effective by the Securities and Exchange Commission.
This press release does not constitute an offer to sell or the solicitation of
an offer to buy, and these securities cannot be sold in any state in which this
offer, solicitation, or sale would be unlawful prior to registration or
qualification under the securities laws of any such state.
A prospectus and prospectus supplement relating to this transaction may be
obtained from Lehman Brothers Inc. at 745 Seventh Avenue, New York, New York
10019, or directly from Magal.
About Magal Security Systems Ltd.:
Magal Security Systems Ltd. (Magal) is engaged in the development, manufacturing
and marketing of computerized security systems, which automatically detect,
locate and identify the nature of unauthorized intrusions. Magal also supplies
Video Monitoring Services through Smart Interactive Systems, Inc., a subsidiary
established in the U.S. in June 2001. The Company's products are currently used
in more than 70 countries worldwide to protect national borders, airports,
correctional facilities, nuclear power stations and other sensitive facilities
from terrorism, theft and other threats. Israeli-based Magal has subsidiaries in
the U.S., Canada, the U.K., Germany, Mexico, Romania and an office in China.
Magal has been traded in the U.S. on the NASDAQ National Market since 1993 and
in Israel on the Tel-Aviv Stock Exchange (TASE) since July 2001 under the symbol
MAGS.
This press release contains forward-looking statements, which are subject to
risks and uncertainties. Such statements are based on assumptions and
expectations which may not be realized and are inherently subject to risks and
uncertainties, many of which cannot be predicted with accuracy and some of which
might not even be anticipated. Future events and actual results, financial and
otherwise, may differ from the results discussed in the forward-looking
statements. A number of these risks and other factors that might cause
differences, some of which could be material, along with additional discussion
of forward-looking statements, are set forth in the Company's Annual Report on
Form 20-F filed with the Securities and Exchange Commission.
Contact:
Magal Security Systems Ltd.
Roi Levy
Tel: +972-3-539-1444
Fax: +972-3-536-6245
E-mail: magalssl@trendline.co.il
OR
Gelbart-Kahana International
Ehud Helft/Kenny Green
Tel: +1-866-704-6710
Int'l dial: +972-3-607-4717
E-mail: ehud@gk-biz.com
kenny@gk-biz.com
ITEM 2
MAGAL SECURITY SYSTEMS LTD.
1,700,000 Ordinary Shares
(par value NIS 1.0 per share)
PLACEMENT AGENCY AGREEMENT
--------------------------
April 14, 2005
Lehman Brothers Inc.
745 Seventh Avenue
New York, New York 10019
Ladies and Gentlemen:
Magal Security Systems Ltd, a corporation organized under the laws of the
State of Israel (the "Company"), proposes, subject to the terms and conditions
stated herein, to issue and sell 1,700,000 ordinary shares (the "Shares"), par
value NIS 1.0 per share (the "Ordinary Shares"), to certain investors
(collectively, the "Investors"). The Company desires to engage you as its
placement agent (the "Placement Agent") in connection with such issuance and
sale. The Shares are described more fully in the Registration Statement (as
hereinafter defined).
The Company hereby confirms as follows its agreements with the Placement
Agent:
1. Agreement to Act as Placement Agent. On the basis of the
representations, warranties and agreements of the Company herein contained and
subject to all the terms and conditions of this Agreement, the Placement Agent
agrees to act as the Company's exclusive placement agent in connection with the
issuance and sale, on a best efforts basis, by the Company of the Shares to the
Investors. Upon the occurrence of the Closing (as hereinafter defined), the
Company shall pay to the Placement Agent 6.12426% of the proceeds received by
the Company from the sale of the Shares to all Investors. Certain potential
Investors listed on Schedule 1 hereto are affiliated with the Company.
2. Delivery and Payment. Concurrently with the execution and delivery of
this Agreement, the Company, the Placement Agent, and JPMorgan Chase Bank, N.A.,
as escrow agent (the "Escrow Agent"), shall enter into an Escrow Agreement
substantially in the form of Exhibit A attached hereto (the "Escrow Agreement"),
pursuant to which an escrow account will be established, at the Company's
expense, for the benefit of the Company and the Investors (the "Escrow
Account"). Prior to the Closing Date (as hereinafter defined), each of the
Investors will deposit in the Escrow Account an amount equal to the price per
Share as shown on the cover page of the Prospectus multiplied by the number of
Shares to be purchased by such Investor (such amounts in the aggregate are
herein referred to as the "Escrow Funds"). At 9:00 a.m., New York City time, on
April 18, 2005 or at such other time on such other date as may be agreed upon by
the Company and the Placement Agent (such date is hereinafter referred to as the
"Closing Date"), the Escrow Agent will disburse the Escrow Funds from the Escrow
Account to the Company and the Placement Agent as provided in the Escrow
Agreement and the Company shall deliver the Shares to the Investors, which
delivery may be made through the facilities of the
Depository Trust Company. The closing of the sale of the Shares to the Investors
(the "Closing") shall take place at the office of Morrison & Foerster LLP, 1290
Avenue of the Americas, New York, New York 10104. All actions taken at the
Closing shall be deemed to have occurred simultaneously.
Certificates evidencing the Shares shall be in definitive form and shall be
registered in such names and in such denominations as the Placement Agent shall
request by written notice to the Company.
3. Representations and Warranties of the Company. The Company represents
and warrants to the Placement Agent that:
(a) Registration Statement. The Company has filed with the Securities and
Exchange Commission (the "Commission") a "shelf" registration statement on Form
F-3 (Registration No. 333-123265), which has become effective, relating to the
Ordinary Shares and certain other securities of the Company, under the
Securities Act of 1933, as amended (the "Act"), and the rules and regulations
(collectively referred to as the "Rules and Regulations") of the Commission
promulgated thereunder. The registration statement, as amended at the time it
became effective, including the exhibits and information (if any) deemed to be
part of the registration statement at the time of effectiveness pursuant to Rule
430A or 434(d) under the Act, is hereinafter referred to as the "Registration
Statement." No stop order suspending the effectiveness of the Registration
Statement has been issued and, to the Company's knowledge, no proceeding for
that purpose has been initiated or threatened by the Commission. The Company, if
required by the Rules and Regulations of the Commission, proposes to file the
Prospectus (as defined below) with the Commission pursuant to Rule 424(b) of the
Rules and Regulations. The Prospectus, in the form in which it is to be filed
with the Commission pursuant to Rule 424(b) of the Rules and Regulations, or, if
the Prospectus is not to be filed with the Commission pursuant to Rule 424(b),
the Prospectus in the form included as part of the Registration Statement at the
time the Registration Statement became effective, is hereinafter referred to as
the "Prospectus," except that if any revised prospectus or prospectus supplement
shall be provided to the Placement Agent by the Company for use in connection
with the offering and sale of the Shares which differs from the Prospectus
(whether or not such revised prospectus or prospectus supplement is required to
be filed by the Company pursuant to Rule 424(b) of the Rules and Regulations),
the term "Prospectus" shall be deemed to include such revised prospectus or
prospectus supplement, as the case may be, from and after the time it is first
provided to the Placement Agent for such use. Any preliminary prospectus or
prospectus subject to completion included in the Registration Statement or filed
with the Commission pursuant to Rule 424 under the Act is hereafter called a
"Preliminary Prospectus." Any reference herein to the Registration Statement,
any Preliminary Prospectus or the Prospectus shall be deemed to refer to and
include the documents incorporated by reference therein pursuant to Item 9 of
Form F-3 which were filed under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") on or before the last to occur of the effective date of the
Registration Statement, the date of the Preliminary Prospectus, or the date of
the Prospectus, and any reference herein to the terms "amend," "amendment" or
"supplement" with respect to the Registration Statement, any Preliminary
Prospectus or the Prospectus shall be deemed to refer to and include (i) the
filing of any document under the Exchange Act after the effective date of the
Registration Statement, the date of such Preliminary Prospectus or the date
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of the Prospectus, as the case may be, which is incorporated therein by
reference and (ii) any such document so filed.
(b) Registration Statement and Prospectus. When the Registration Statement
became effective, upon the filing or first delivery to the Investors of the
Prospectus, as of the date hereof, and at the Closing Date, the Registration
Statement (and any post-effective amendment thereto) and the Prospectus (as
amended or as supplemented if the Company shall have filed with the Commission
any amendment or supplement to the Registration Statement or the Prospectus)
contained and will contain all statements which are required to be stated
therein in accordance with the Act and the Rules and Regulations, complied and
will comply with the Act and the Rules and Regulations, and did not and will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
(in the light of the circumstances under which they were made, in the case of
the Prospectus) not misleading, each Preliminary Prospectus, as of the date
filed with the Commission, did not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; except that no representation or
warranty is made in this Section 3(b) with respect to statements or omissions
made in reliance upon and in conformity with written information furnished to
the Company expressly for inclusion in any Preliminary Prospectus, the
Registration Statement, or the Prospectus, or any amendment or supplement
thereto, as stated in Section 7(b) hereof. The Company has not distributed any
offering material in connection with the offering and sale of the Shares, other
than the Registration Statement, the Preliminary Prospectus and the Prospectus.
(c) Subsidiaries. The subsidiaries listed on Schedule 2 attached hereto
(each a "Subsidiary", and collectively the "Subsidiaries") are the only
"significant subsidiaries" (as such term is defined in Rule 1-02 of Regulation
S-X promulgated by the Commission) of the Company. The Company owns, directly or
indirectly, all of the capital stock of the Subsidiaries free and clear of any
lien, charge, security interest, encumbrance, right of first refusal or other
restriction, and all the issued and outstanding shares of capital stock of the
Subsidiaries are validly issued and are fully paid, nonassessable and free of
preemptive and similar rights.
(d) Financial Statements. The consolidated financial statements and the
related notes thereto included or incorporated by reference in the Registration
Statement and the Prospectus comply with the applicable requirements of the Act
and the Exchange Act, as applicable, and present fairly, the financial position
of the Company and its Subsidiaries as of the dates indicated and the results of
their operations and the changes in their consolidated cash flows for the
periods specified; such financial statements have been prepared in conformity
with generally accepted accounting principles applied on a consistent basis
throughout the periods covered thereby (except as otherwise stated therein and
subject, in the case of unaudited financial statements, to the absence of
footnotes and normal year end adjustments), and the other financial information
included or incorporated by reference in the Registration Statement and the
Prospectus has been derived from the accounting records of the Company and its
Subsidiaries and presents fairly the information shown thereby.
(e) No Material Adverse Change. Except as set forth in or otherwise
contemplated by the Registration Statement (exclusive of any amendment thereof)
or the Prospectus (exclusive
3
of any supplement thereto), since the date of the most recent financial
statements of the Company included or incorporated by reference in the
Registration Statement and the Prospectus and prior to Closing, (i) there has
not been and will not have been any change in the capital stock of the Company
(except for changes in the number of Ordinary Shares outstanding of the Company
due to the issuance of shares upon the exercise or conversion of securities
exercisable for, or convertible into, Ordinary Shares outstanding on the date
hereof) or long-term debt of the Company or any of its Subsidiaries or any
dividend or distribution of any kind declared, set aside for payment, paid or
made by the Company on any class of capital stock, or any material adverse
change, or any development that would reasonably be expected to result in a
material adverse change, in or affecting the business, properties, management,
consolidated financial position, stockholders' equity, or results of operations
of the Company and its Subsidiaries taken as a whole (a "Material Adverse
Change"); (ii) neither the Company nor any of its Subsidiaries has entered or
will enter into any transaction or agreement, not in the ordinary course of
business, that is material to the Company and its Subsidiaries taken as a whole
or incurred or will incur any liability or obligation, direct or contingent, not
in the ordinary course of business, that is material to the Company and its
Subsidiaries taken as a whole; and (iii) neither the Company nor any of its
Subsidiaries has sustained or will sustain any material loss or interference
with its business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor disturbance or dispute or any action,
order or decree of any court or arbitrator or governmental or regulatory
authority, except in each case as otherwise disclosed in the Registration
Statement and the Prospectus.
(f) Organization. Each Subsidiary is, and at the Closing Date will be, duly
organized, validly existing as a corporation and in good standing under the laws
of its jurisdiction of organization. Each of the Company and each Subsidiary is,
and at the Closing Date will be, duly qualified as a foreign corporation for
transaction of business and in good standing under the laws of each other
jurisdiction in which its respective ownership or lease of property or the
conduct of its respective business requires such qualification, and have, and at
the Closing Date will have, all corporate power and authority necessary to own
or hold its respective properties and to conduct their respective businesses as
described in the Registration Statement and the Prospectus, except where the
failure to be so qualified or in good standing or have such power or authority
would not, individually or in the aggregate, have a material adverse effect or
would reasonably be expected to have a material adverse effect on or affecting
the business, properties, management, consolidated financial position,
stockholders' equity or results of operations of the Company and its
Subsidiaries taken as a whole (a "Material Adverse Effect").
(g) Capitalization. The issued and outstanding shares of capital stock of
the Company have been validly issued, are fully paid and nonassessable and,
other than as disclosed in or contemplated by the Registration Statement or the
Prospectus, are not subject to any preemptive or similar rights. The Company has
an authorized, issued and outstanding capitalization as set forth in the
Registration Statement and the Prospectus as of the dates referred to therein
(other than the grant of additional options under the Company's existing stock
option plans, or changes in the number of outstanding Ordinary Shares of the
Company due to the issuance of Ordinary Shares upon the exercise or conversion
of securities exercisable for, or convertible into, Ordinary Shares which are
outstanding on the date hereof) and such authorized capital stock conforms to
the description thereof set forth in the Registration Statement and the
Prospectus. The description of the securities of the Company in the Registration
Statement and
4
the Prospectus is, and at the Closing Date will be, complete and accurate in all
material respects. Except as disclosed in or contemplated by the Registration
Statement or the Prospectus, as of the date referred to therein, the Company did
not have outstanding any options to purchase, or any rights or warrants to
subscribe for, or any securities or obligations convertible into, or
exchangeable for, or any contracts or commitments to issue or sell, any shares
of capital stock or other securities.
(h) Capitalization of Subsidiaries. All the outstanding shares of capital
stock of each Subsidiary have been duly and validly authorized and issued and
are fully paid and nonassessable, and, except as otherwise set forth in the
Registration Statement or Prospectus, all outstanding shares of capital stock of
the Subsidiaries are owned by the Company either directly or indirectly or
through wholly owned subsidiaries free and clear of any perfected security
interest or any other security interests, claims, liens or encumbrances.
(i) Due Authorization and Enforceability. The Company has full legal power
and authority to enter into this Agreement and the Escrow Agreement (together,
the "Transaction Documents") and to consummate the transactions contemplated
hereby and thereby. The Transaction Documents have been duly authorized,
executed and delivered by the Company in accordance with Israeli, federal, state
and local law and constitute legal, valid and binding obligations of the Company
enforceable against the Company in accordance with their respective terms except
as rights to indemnity and contribution hereunder may be limited by federal or
state securities laws and matters of public policy and except as such
enforceability may be subject to the effect of applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights generally
and equitable principles of general applicability.
(j) The Shares. The Shares have been duly authorized by the Company and,
when issued and delivered and paid for as provided herein, will be validly
issued, fully paid and nonassessable and will conform to the descriptions
thereof in the Prospectus; and the issuance of the Shares is not subject to any
preemptive or similar rights.
(k) No Violation or Default. Neither the Company nor its any of
Subsidiaries is (i) in violation of its charter, association or similar
organizational documents; (ii) in default, and no event has occurred that, with
notice or lapse of time or both, would constitute such a default, in the due
performance or observance of any term, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound or to which any of the
property or assets of the Company or any of its Subsidiaries is subject; or
(iii) in violation of any law or statute or any judgment, order, rule or
regulation of any court or arbitrator or governmental or regulatory authority,
except, in the case of each of clauses (ii) and (iii) above, for any such
violation or default that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(l) No Conflicts. The execution, delivery and performance by the Company of
each of the Transaction Documents, the issuance and sale by the Company of the
Shares and the consummation by the Company of the transactions contemplated by
the Transaction Documents will not (i) conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
or result in the creation or imposition of any lien, charge or
5
encumbrance upon any property or assets of the Company or any of its
Subsidiaries pursuant to, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which the Company or any of its Subsidiaries
is a party or by which the Company or any of its Subsidiaries is bound or to
which any of the property or assets of the Company or any of its Subsidiaries is
subject; (ii) result in any violation of the provisions of the charter or
association or similar organizational documents of the Company or any of its
Subsidiaries; or (iii) result in the violation of any law or statute or any
judgment, order, rule or regulation of any court or arbitrator or governmental
or regulatory authority, except, in the case of each of clauses (i) and (iii)
above, for any such conflict, breach, violation, default, lien, charge or
encumbrance that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(m) No Consents Required. No consent, approval, authorization, order,
registration or qualification of or with any court or arbitrator or governmental
or regulatory authority is required for the execution, delivery and performance
by the Company of each of the Transaction Documents, the issuance and sale by
the Company of the Shares and the consummation by the Company of the
transactions contemplated by the Transaction Documents, except for the
registration of the Shares under the Act and such consents, approvals,
authorizations, orders and registrations or qualifications as may be required
under applicable state securities laws or by the by-laws and rules of the
National Association of Securities Dealers, Inc. ("NASD") in connection with the
distribution of the Shares by the Placement Agent.
(n) Legal Proceedings. There are no legal, governmental or regulatory
actions, suits or proceedings pending, nor, to the Company's knowledge, any
legal, governmental or regulatory investigations, to which the Company or any of
its Subsidiaries is a party or to which any property of the Company or any of
its Subsidiaries is the subject that, individually or in the aggregate, if
determined adversely to the Company or any of its Subsidiaries, would reasonably
be expected to have a Material Adverse Effect or materially and adversely affect
the ability of the Company to perform its obligations under the Transaction
Documents; to the Company's knowledge, no such actions, suits or proceedings are
threatened or contemplated by any governmental or regulatory authority or
threatened by others; and (i) to the Company's knowledge, there are no current
or pending legal, governmental or regulatory investigations, actions, suits or
proceedings that are required under the Act to be described in the Prospectus
that are not so described; and (ii) there are no contracts or other documents
that are required under the Act to be filed as exhibits to the Registration
Statement that are not so filed.
(o) Independent Accountants. Kost Forer Gabbay Kaisierer, a member of Ernst
& Young Global, who have certified certain financial statements of the Company
and its Subsidiaries, are independent public accountants (the "Accountants")
with respect to the Company and its Subsidiaries as required by the Act.
(p) Title to Real and Personal Property. Each of the Company and each of
its Subsidiaries has good and valid title in fee simple to all items of real
property and good and valid title to all personal property owned by it, in each
case, free and clear of all liens, encumbrances and claims except those that (i)
do not materially interfere with the use made and proposed to be made of such
property by the Company or such Subsidiary or (ii) would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect.
Any real property
6
leased by the Company and each of its Subsidiaries is held by each of them under
valid, existing and enforceable leases, except those that (A) do not materially
interfere with the use made or proposed to be made of such property by the
Company or such Subsidiary or (B) would not be reasonably expected, individually
or in the aggregate, to have a Material Adverse Effect.
(q) Title to Intellectual Property. Each of the Company and its
Subsidiaries owns or possesses adequate rights to use all patents, patent
applications, trademarks, service marks, trade names, trademark registrations,
service mark registrations, copyrights, licenses and know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) (collectively, the "Intellectual Property"),
necessary for the conduct of their respective businesses as conducted as of the
date hereof, except to the extent that the failure to own or possess adequate
rights to use such Intellectual Property would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect; and neither
the Company nor any of its Subsidiaries has received any written notice of any
claim of infringement or conflict which asserted Intellectual Property rights of
others, which infringement or conflict, if the subject of an unfavorable
decision, would result in a Material Adverse Effect.
(r) No Undisclosed Relationships. No relationship, direct or indirect,
exists between or among the Company or any of its Subsidiaries, on the one hand,
and the directors, officers, stockholders, customers or suppliers of the Company
or any of its Subsidiaries, on the other, which is required by the Act to be
disclosed in the Registration Statement and the Prospectus and is not so
disclosed.
(s) Investment Company Act. The Company is not and, after giving effect to
the offering and sale of the Shares to be sold by the Company and the
application of the proceeds thereof as described in the Prospectus, will not be
an "investment company" or an entity "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended, and the
rules and regulations of the Commission promulgated thereunder.
(t) Foreign Designation. The Company is not a Passive Foreign Investment
Company ("PFIC") within the meaning of Section 1297 of the United States
Internal Revenue Code of 1986, as amended, and does not expect to become a PFIC
in the future. Neither is the Company a "foreign personal holding company" or a
"controlled foreign corporation" within the meaning of the United States
Internal Revenue Code of 1986, as amended.
(u) Foreign Corrupt Practices Act. Neither the Company nor any of its
Subsidiaries nor, to the knowledge of the Company, any director, officer, agent,
employee or affiliate of the Company or any of the Significant Subsidiaries is
aware of or has taken any action, directly or indirectly, that would result in a
violation by such persons of the FCPA, including, without limitation, making use
of the mails or any means or instrumentality of interstate commerce corruptly in
furtherance of an offer, payment, promise to pay or authorization of the payment
of any money, or other property, gift, promise to give, or authorization of the
giving of anything of value to any "foreign official" (as such term is defined
in the FCPA) or any non-U.S. political party or official thereof or any
candidate for non-U.S. political office, in contravention of the FCPA and the
Company, the Significant Subsidiaries and, to the knowledge of the Company, its
affiliates have conducted their businesses in compliance with the FCPA and have
instituted and maintain policies and procedures designed to ensure, and
7
which are reasonably expected to continue to ensure, continued compliance
therewith. "FCPA" means Foreign Corrupt Practices Act of 1977, as amended, and
the rules and regulations thereunder.
(v) Taxes. Each of the Company and its Subsidiaries has filed all foreign,
federal, state, and local tax returns which have been required to be filed and
paid all taxes shown thereon through the date hereof, to the extent that such
taxes have become due and are not being contested in good faith; and, except as
otherwise disclosed in or contemplated by the Registration Statement or the
Prospectus, no tax deficiency has been determined adversely to the Company or
any of its Subsidiaries which has had, or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(w) Approved Enterprise Status. The Company is in compliance in all
material respects with all conditions and requirements stipulated by the
instruments of approval granted to it with respect to the "Approved Enterprise"
status of any of the Company's facilities as well as with respect to the other
tax benefits received by the Company as set forth under the caption "Israeli
Taxation" in the Prospectus and by Israeli laws and regulations relating to such
"Approved Enterprise" status and the aforementioned other tax benefits received
by the Company. The Company has not received any notice of any proceeding or
investigation relating to revocation or modification of any "Approved
Enterprise" status granted with respect to any of the Company's facilities.
(x) Office of the Chief Scientist. Except as described in the Prospectus,
the Company is not in material violation of any conditions or requirements
stipulated by the instruments of approval granted to any of them by the Office
of the Chief Scientist in the Ministry of Industry & Trade and any applicable
laws and regulations, with respect to any research and development grants given
to them by such office, which violation, individually or in the aggregate, could
have a Material Adverse Effect. All information supplied by the Company and its
Israeli subsidiaries with respect to the applications for such research and
development grants was true, correct and complete in all material respects when
supplied to the appropriate authorities.
(y) ISA Exemption, OCS Approval and Investment Center Approval. In
connection with the offer, issuance and sale of the Shares, the Company is not
required to obtain (i) an exemption from the Israeli Securities Authority (the
"ISA") from the requirement to publish a prospectus in Israel, (ii) the approval
of the Office of the Chief Scientist in the Israeli Ministry of Industry and
Commerce (the "OCS") to issue and sell the Shares, or (iii) the approval of the
Investment Center of the Israeli Ministry of Industry, Trade and Labor (the
"IC").
(z) Additional Government Payments. There are no transfer taxes, stamp
duties on issuance or other similar fees or charges and no capital gains,
income, withholding or other taxes under the laws of Israel or any political
subdivision thereof, federal, state or local laws, required to be paid by the
Placement Agent in connection with the execution and delivery of this Agreement
or the sale of the Shares as contemplated herein.
(aa) Licenses and Permits. Each of the Company and its Subsidiaries
possesses or has obtained all licenses, certificates, permits and other
authorizations issued by, and has made all declarations and filings with, the
appropriate federal, state, local or foreign governmental or
8
regulatory authorities that are necessary for the ownership or lease of their
respective properties or the conduct of their respective businesses as described
in the Registration Statement and the Prospectus (the "Permits"), except where
the failure to possess, obtain or make the same would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect; and
except as disclosed in or contemplated by the Registration Statement or the
Prospectus, neither the Company nor any of its Subsidiaries has received written
notice of any proceeding relating to revocation or modification of any such
Permit or has any reason to believe that such Permit will not be renewed in the
ordinary course, except where the failure to obtain any such renewal would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(bb) No Labor Disputes. No labor disturbance by or dispute with employees
of the Company or its Subsidiaries exists or, to the knowledge of the Company,
is threatened which would reasonably be expected to result in a Material Adverse
Effect.
(cc) Compliance With Environmental Laws. Each of the Company and its
Subsidiaries (i) is in compliance with any and all applicable federal, state,
local, Israeli and other foreign laws, rules, regulations, decisions and orders
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
(collectively, "Environmental Laws"); (ii) has received and is in compliance
with all permits, licenses or other approvals required of it under applicable
Environmental Laws to conduct its business as described in the Registration
Statement and the Prospectus; and (iii) has not received written notice of any
actual or potential liability for the investigation or remediation of any
disposal or release of hazardous or toxic substances or wastes, pollutants or
contaminants, except, in the case of any of clauses (i), (ii) or (iii) above,
for any such failure to comply or failure to receive required permits, licenses,
other approvals or liability as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(dd) Compliance With ERISA. Each material employee benefit plan subject to
and, within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), that is maintained, administered or
contributed to by the Company or any of its affiliates for employees or former
employees of the Company and its Subsidiaries has been maintained in material
compliance with its terms and the requirements of any applicable statutes,
orders, rules and regulations, including but not limited to ERISA and the
Internal Revenue Code of 1986, as amended (the "Code"); no prohibited
transaction, within the meaning of Section 406 of ERISA or Section 4975 of the
Code, has occurred which would result in a material liability to the Company
with respect to any such plan excluding transactions effected pursuant to a
statutory or administrative exemption; and for each such plan that is subject to
the funding rules of Section 412 of the Code or Section 302 of ERISA, no
"accumulated funding deficiency" as defined in Section 412 of the Code has been
incurred, whether or not waived, and the fair market value of the assets of each
such plan (excluding for these purposes accrued but unpaid contributions)
exceeds the present value of all benefits accrued under such plan determined
using reasonable actuarial assumptions.
(ee) Sarbanes-Oxley Act. There is and has been no failure on the part of
the Company and any of the Company's directors or officers, in their capacities
as such, to comply with any
9
applicable provisions of the Sarbanes Oxley Act of 2002 and the rules and
regulations promulgated therewith (the "Sarbanes Oxley Act").
(ff) Accounting Controls. Each of the Company and its Subsidiaries
maintains systems of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability;
(iii) access to assets is permitted only in accordance with management's general
or specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for
the Company and designed such disclosure controls and procedures to ensure that
material information relating to the Company and its Subsidiaries is made known
to the certifying officers by others within those entities. The Company's
certifying officers have evaluated the effectiveness of the Company's controls
and procedures as of a date during the year ended December 31, 2003 prior to the
filing date of the Form 20-F for the year ended December 31, 2003 (such date,
the "Evaluation Date"). The Company presented in its Form 20-F the conclusions
of the certifying officers about the effectiveness of the disclosure controls
and procedures based on their evaluations as of the Evaluation Date. Since the
Evaluation Date, there have been no significant changes in the Company's
internal controls (as such term is defined in Item 307(b) of Regulation S-K
under the Rules and Regulations) or, to the Company's knowledge, in other
factors that could significantly affect the Company's internal controls such
that would have a Material Adverse Effect.
(gg) Operations. The operations of the Company and the Subsidiaries are and
have been conducted at all times in compliance with applicable financial
recordkeeping and reporting requirements of the Currency and Foreign
Transactions Reporting Act of 1970, as amended, the money laundering statutes of
all jurisdictions to which the Company or the Subsidiaries are subject, the
rules and regulations thereunder and any related or similar rules, regulations
or guidelines, issued, administered or enforced by any governmental agency
(collectively, the "Money Laundering Laws") and no action, suit or proceeding by
or before any court or governmental agency, authority or body or any arbitrator
involving the Company or any of the Subsidiaries with respect to the Money
Laundering Laws is pending or, to the best knowledge of the Company, threatened.
(hh) Asset Controls. Neither the Company nor any of the Subsidiaries nor,
to the knowledge of the Company, any director, officer, agent, employee or
affiliate of the Company or any of the Subsidiaries is currently subject to any
United States sanctions administered by the Office of Foreign Asset Control of
the United States Treasury Department ("OFAC"); and the Company will not
directly or indirectly use the proceeds of the offering, or lend, contribute or
otherwise make available such proceeds to any subsidiary, joint venture partner
or other person or entity, for the purpose of financing the activities of any
person currently subject to any United States sanctions administered by OFAC.
(ii) Insurance. Each of the Company and its Subsidiaries carries, or is
covered by, insurance in such amounts and covering such risks as the Company
reasonably believes is
10
adequate for the conduct of their respective businesses as described in the
Registration Statement and the Prospectus and the value of their respective
properties and as is customary for companies engaged in similar businesses in
similar industries.
(jj) No Unlawful Payments. Neither the Company nor any of its Subsidiaries
has at anytime during the last five years (i) used any corporate funds for any
unlawful contribution to any candidate for public office; or (ii) made any
payment to any federal or state government officer or official or other person
charged with similar public duties, other than payments required or permitted by
the laws of the United States or any jurisdiction thereof.
(kk) Government Contracts. There is no outstanding allegation of improper
or illegal activities arising from any government audit or non-audit review,
including without limitation, by the Defense Contract Audit Agency, of the
Company or work performed by the Company or any of its Subsidiaries or
subcontractors. There are no pending civil or criminal penalties or
administrative sanctions arising from a government audit or non-audit review of
the Company or work performed by the Company or any of its Subsidiaries or
subcontractors, including, but not limited to, termination of contracts,
forfeiture of profits, suspension of payments, fines, or suspension or debarment
from doing business with any U.S. federal government agency. As of the date
hereof, the Company does not believe that it will be required to make any
adjustments to the financial statements included or incorporated by reference in
the Registration Statement and the Prospectus as a result of any pending
government audit or non-audit review of the Company.
(ll) Immunity. Neither the Company nor any of the Subsidiaries nor any of
its or their respective properties or assets has any immunity from the
jurisdiction of any court or from any legal process (whether through service or
notice, attachment prior to judgment, attachment in aid of execution or
otherwise) under the laws of the State of Israel or the State of Canada.
(mm) Consent to Jurisdiction; Appointment of Agent for Service of Process.
The Company has the power to submit, and pursuant to this Agreement has legally,
validly, effectively and irrevocably submitted to the personal jurisdiction of
any federal or state court in the State of New York, County of New York, and has
the power to designate, appoint and empower, and pursuant to this Agreement has
legally, validly and effectively designated, appointed and empowered, an agent
for service of process in any suit of proceeding based on or arising under this
Agreement in any federal or state court in the State of New York, County of New
York.
(nn) Enforceability of New York Judgment. Any final judgment for a fixed or
readily calculable sum of money rendered by any court of the State of New York
or of the United Stated located in the State of New York having jurisdiction
under its own domestic laws in respect of any suit, action or proceeding against
the Company based upon this Agreement would be declared enforceable against the
Company by the courts of Israel without reexamination, review of the merits of
the cause of action in respect of which the original judgment was given or
relitigation of the matters adjudicated upon or payment of any stamp,
registration or similar tax or duty, provided that such judgment is obtained in
compliance with legal requirements of the jurisdiction of the court rendering
such judgment and in compliance with all legal requirements of this Agreement
and that service of process was made personally on the Company or on the
appropriate process agent (service of process effected in the manner set forth
in this Agreement
11
assuming its validity under New York law, will be effective, insofar as Israeli
law is concerned, to confer valid personal jurisdiction over the Company), and
provided further that certain basic principles of due process and public policy
have been respected. The Company is not aware of any reason why the enforcement
in Israel of such a judgment in respect of this Agreement would be contrary to
public policy in Israel or any political subdivision thereof.
(oo) No Broker's Fees. Neither the Company nor any of its Subsidiaries is a
party to any contract, agreement or understanding with any person (other than
this Agreement) that would give rise to a valid claim against the Company or any
of its Subsidiaries or the Placement Agent for a brokerage commission, finder's
fee or like payment in connection with the offering and sale of the Shares.
(pp) No Registration Rights. No person has the right to require the Company
or any of its Subsidiaries to register any securities for sale under the Act by
reason of the filing of the Registration Statement with the Commission or by
reason of the issuance and sale of the Shares, except for rights which have been
waived.
(qq) No Stabilization. The Company has not taken, directly or indirectly,
any action designed to or that could reasonably be expected to cause or result
in any stabilization or manipulation of the price of the Shares.
(rr) Forward-Looking Statements. No forward-looking statement (within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act) (a "Forward-Looking Statement") contained in the Registration Statement and
the Prospectus has been made or reaffirmed without a reasonable basis or has
been disclosed other than in good faith. The Forward-Looking Statements
incorporated by reference in the Registration Statement and the Prospectus from
the Company's Annual Report on Form 20-F for the year ended December 31, 2003
(i) are within the coverage of the safe harbor for forward-looking statements
set forth in Section 27A of the Act, Rule 175(b) under the Act or Rule 3b-6
under the Exchange Act, as applicable, (ii) were made by the Company with a
reasonable basis and in good faith and reflect the Company's good faith
reasonable best estimate of the matters described therein, and (iii) have been
prepared in accordance with Item 10 of Regulation S-K under the Act.
(ss) Contracts. All such contracts to which the Company is a party have
been duly authorized, executed and delivered by the Company, constitute valid
and binding agreements of the Company, and are enforceable against the Company
in accordance with the terms thereof, subject to the effect of applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
equitable principles of general applicability.
(tt) Certificates. No statement, representation or warranty made in the
certificate to be delivered to the Placement Agent pursuant to Section 6(h)
below will be, when made, inaccurate, untrue or incorrect in any material
respect.
4. Further Agreements of the Company. The Company covenants and agrees with
the Placement Agent that:
(a) Effectiveness. The Registration Statement has become effective, and if
Rule 430A is used or the filing of the Prospectus is otherwise required under
Rule 424(b), the
12
Company will file the Prospectus (properly completed if Rule 430A has been used)
pursuant to Rule 424(b) within the prescribed time period and will provide a
copy of such filing to the Placement Agent promptly following such filing.
(b) Amendments or Supplements. The Company will not, during such period as
the Prospectus would be required by law to be delivered in connection with sales
of the Shares by an underwriter or dealer in connection with the offering
contemplated by this Agreement, file any amendment or supplement to the
Registration Statement or the Prospectus, except as required by law, unless a
copy thereof shall first have been submitted to the Placement Agent within a
reasonable period of time prior to the filing thereof and the Placement Agent
shall not have reasonably objected thereto in good faith.
(c) Notice to Placement Agent. The Company will notify the Placement Agent
promptly, and will, if requested, confirm such notification in writing, (1) when
any post-effective amendment to the Registration Statement becomes effective,
but only during the period mentioned in Section 4(b); (2) of any request by the
Commission for any amendment to the Registration Statement or any amendment or
supplement to the Prospectus or for additional information, but only during the
period mentioned in Section 4(b); (3) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose or the threat thereof, but only
during the period mentioned in Section 4(b); (4) of becoming aware of the
occurrence of any event during the period mentioned in Section 4(b) that in the
judgment of the Company makes any statement made in the Registration Statement
or the Prospectus untrue in any material respect or that requires the making of
any changes in the Registration Statement or the Prospectus in order to make the
statements therein, in light of the circumstances in which they are made, not
misleading; and (5) of receipt by the Company of any notification with respect
to any suspension of the qualification of the Shares for offer and sale in any
jurisdiction. If at any time the Commission shall issue any order suspending the
effectiveness of the Registration Statement in connection with the offering
contemplated hereby, the Company will make every reasonable effort to obtain the
withdrawal of any such order at the earliest possible moment. If the Company has
omitted any information from the Registration Statement, pursuant to Rule 430A,
it will use its best efforts to comply with the provisions of and make all
requisite filings with the Commission pursuant to said Rule 430A and to notify
the Placement Agent promptly of all such filings.
(d) Ongoing Compliance of the Prospectus. If, at any time when a Prospectus
relating to the Shares is required to be delivered under the Act, the Company
becomes aware of the occurrence of any event as a result of which the
Prospectus, as then amended or supplemented, would, in the reasonable judgment
of counsel to the Company or counsel to the Placement Agent, include any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, or the Registration Statement, as then amended
or supplemented, would, in the reasonable judgment of counsel to the Company or
counsel to the Placement Agent, include any untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein not
misleading, or if for any other reason it is necessary, in the reasonable
judgment of counsel to the Company or counsel to the Placement Agent, at any
time to amend or supplement the Prospectus or the Registration Statement to
13
comply with the Act or the Rules and Regulations, the Company will promptly
notify the Placement Agent and, subject to Section 4(b) hereof, will promptly
prepare and file with the Commission, at the Company's expense, an amendment to
the Registration Statement or an amendment or supplement to the Prospectus that
corrects such statement or omission or effects such compliance and will deliver
to the Placement Agent, without charge, such number of copies thereof as the
Placement Agent may reasonably request. The Company consents to the use of the
Prospectus or any amendment or supplement thereto by the Placement Agent, and
the Placement Agent agrees to provide to each Investor, prior to the Closing, a
copy of the Prospectus and any amendments or supplements thereto.
(e) Delivery of Copies. The Company will furnish to the Placement Agent and
its counsel, without charge in New York City (i) one copy of the Registration
Statement, including financial statements and schedules, and all exhibits
thereto and (ii) so long as a prospectus relating to the Shares is required to
be delivered under the Act, as many copies of each Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto as the Placement Agent may
reasonably request.
(f) Compliance with Undertakings. The Company will comply with all the
undertakings contained in the Registration Statement.
(g) Blue Sky Compliance. Prior to the sale of the Shares to the Investors,
the Company will cooperate with the Placement Agent and its counsel in
connection with the registration or qualification of the Shares for offer and
sale under the state securities or Blue Sky laws of such jurisdictions as the
Placement Agent may reasonably request; provided, that in no event shall the
Company be obligated to qualify to do business in any jurisdiction where it is
not now so qualified or to take any action which would subject it to general
service of process in any jurisdiction where it is not now so subject.
(h) Use of Proceeds. The Company will apply the net proceeds from the
offering and sale of the Shares in the manner set forth in the Prospectus under
the caption "Use of Proceeds."
(i) Exchanges. The Company will use its best efforts to ensure that the
Shares are quoted on the NASDAQ National Market and the Tel Aviv Stock Exchange
at the time of the Closing.
(j) Reports. For a period of three years from the Closing Date, the Company
will furnish to the Placement Agent, as soon as they are available, copies of
all reports or other communications (financial or other) furnished to holders of
the Shares, other than any such reports or communications filed with the
Commission pursuant to the Commission's EDGAR system.
(k) Clear Market. For a period of 90 days after the date hereof, the
Company will not (1) offer, pledge, announce the intention to sell, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase or otherwise
transfer or dispose of, directly or indirectly, any Ordinary Shares or any
securities convertible into or exercisable or exchangeable for Ordinary Shares;
or (2) enter into any swap or other agreement that transfers, in whole or in
part, any of the economic
14
consequences of ownership of the Ordinary Shares, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery of Ordinary
Shares or such other securities, in cash or otherwise, without the prior written
consent of the Placement Agent, other than (i) the Shares to be sold hereunder,
(ii) securities issued pursuant to stock option plans, deferred compensation
plans, restricted stock plans and employee stock purchase plans existing on, or
upon the conversion or exchange of convertible or exchangeable securities
outstanding as of, the date of this Agreement; (iii) the issuance by the Company
of any Ordinary Shares as consideration for mergers, acquisitions, other
business combinations, or strategic alliances, occurring after the date of this
Agreement, provided that each recipient of Ordinary Shares pursuant to this
clause (iii) agrees that all such Ordinary Shares remain subject to restrictions
substantially similar to those contained in this subsection; or (iv) the offer,
issuance or sale of any securities of the Company in exchange for any
"underwater" options of the Company.
5. Expenses. Whether or not the transactions contemplated by this Agreement
are consummated or this Agreement is terminated, the Company will pay all costs
and expenses incident to the performance of the obligations of the Company under
this Agreement, including but not limited to costs and expenses of or relating
to (i) the preparation, printing and filing of the Registration Statement
(including each pre- and post-effective amendment thereto) and exhibits thereto,
each Preliminary Prospectus, the Prospectus and any amendment or supplement to
the Prospectus, and the photocopying of copies thereof, (ii) the preparation and
delivery of certificates representing the Shares, (iii) furnishing (including
costs of shipping and mailing) such copies of the Registration Statement
(including all pre- and post-effective amendments thereto), the Prospectus and
any Preliminary Prospectus, and all amendments and supplements to the
Prospectus, as may be requested for use in connection with the direct placement
of the Shares, (iv) the quotation of the Ordinary Shares on the NASDAQ National
Market and the Tel Aviv Stock Exchange, (v) the registration or qualification of
the Shares for offer and sale under the securities or Blue Sky laws of such
jurisdictions designated pursuant to Section 4(g), including the reasonable
fees, disbursements and other charges of counsel to the Placement Agent in
connection therewith and the preparation and printing of preliminary,
supplemental and final Blue Sky memoranda, (vi) fees, disbursements and other
charges of counsel to the Company, (vii) fees and disbursements of the
Accountants incurred in delivering the letter(s) described in 6(f) of this
Agreement and (viii) the fees of the Escrow Agent. The Company shall reimburse
the Placement Agent, upon request for all reasonable out-of-pocket costs and
expenses, which expenses shall not exceed $75,000 in the aggregate without the
Company's prior approval, which approval shall not be unreasonably withheld or
delayed.
6. Conditions of the Obligations of the Placement Agent. The obligations of
the Placement Agent hereunder are subject to the following conditions:
(a) (i) No stop order suspending the effectiveness of the Registration
Statement or the qualification or registration of the Shares under the
securities or Blue Sky laws of any jurisdiction shall be in effect and no
proceedings for that purpose shall be pending or threatened by any securities or
other governmental authority (including, without limitation, the Commission),
(ii) any request for additional information on the part of the staff of any
securities or other governmental authority (including, without limitation, the
Commission) shall have been complied with to the satisfaction of the staff of
the Commission or such authorities and (iii) after the date hereof no amendment
or supplement to the Registration Statement or the Prospectus
15
shall have been filed unless a copy thereof was first submitted to the Placement
Agent and the Placement Agent did not reasonably object thereto in good faith.
(b) Since the respective dates as of which information is given in the
Registration Statement (exclusive of any amendment thereof) and the Prospectus
(exclusive of any supplement thereto), (i) there shall not have been a Material
Adverse Change whether or not arising from transactions in the ordinary course
of business, in each case other than as set forth in or contemplated by the
Registration Statement (exclusive of any amendment thereof) or the Prospectus
(exclusive of any supplement thereto), and (ii) the Company shall not have
sustained any material loss or interference with its business or properties from
fire, explosion, flood or other casualty, whether or not covered by insurance,
or from any labor dispute or any court or legislative or other governmental
action, order or decree, which is not set forth in the Registration Statement
(exclusive of any amendment thereof) or the Prospectus (exclusive of any
supplement thereto), if in the judgment of the Placement Agent any such
development makes it impracticable or inadvisable to consummate the sale and
delivery of the Shares to Investors.
(c) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there shall have been no litigation
or other proceeding instituted against the Company or any of its officers or
directors in their capacities as such, before or by any federal, state or local
court, commission, regulatory body, administrative agency or other governmental
body, domestic or foreign, which litigation or proceeding is reasonably expected
by management to have a Material Adverse Effect.
(d) Each of the representations and warranties of the Company contained
herein shall be true and correct at the Closing Date, as if made on such date,
and all covenants and agreements herein contained to be performed on the part of
the Company and all conditions herein contained to be fulfilled or complied with
by the Company at or prior to the Closing Date shall have been duly performed,
fulfilled or complied with.
(e) The Placement Agent shall have received an opinion, dated the Closing
Date, of each of:
(i) Carter Ledyard & Milburn LLP, special U.S. counsel to the Company,
in substantially the form attached hereto as Exhibit B; and
(ii) Friedman & Co., Advocates, special Israeli counsel to the
Company, in substantially the form attached hereto as Exhibit C.
(f) Concurrently with the execution and delivery of this Agreement, or, if
the Company elects to rely on Rule 430A, on the date of the Prospectus, the
Accountants shall have furnished to the Placement Agent a letter, dated the date
of its delivery (the "Original Letter"), addressed to the Placement Agent and in
form and substance reasonably satisfactory to the Placement Agent, containing
statements and information of the type customarily included in accountants'
"comfort letters" to underwriters. At the Closing Date, the Accountants shall
have furnished to the Placement Agent a letter, dated the date of its delivery,
which shall confirm, on the basis of a review in accordance with the procedures
set forth in the Original Letter, that nothing has come to their attention
during the period from the date of the Original Letter referred
16
to in the prior sentence to a date (specified in the letter) not more than five
days prior to the Closing Date which would require any change in the Original
Letter if it were required to be dated and delivered at the Closing Date.
(g) At the Closing Date, there shall be furnished to the Placement Agent a
certificate, dated the date of its delivery, signed by each of the President and
the Chief Financial Officer of the Company, each in his or her capacity as such,
in form and substance reasonably satisfactory to the Placement Agent to the
effect that each signer has carefully examined the Registration Statement and
the Prospectus and that to each of such person's knowledge:
(i) (A) As of the date of such certificate, (x) the Registration
Statement does not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading and (y) the Prospectus
does not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading and (B) no event has occurred as a result of which it
is necessary to amend or supplement the Prospectus in order to make the
statements therein not untrue or misleading in any material respect.
(ii) Each of the representations and warranties of the Company
contained in this Agreement are true and correct as if such representations
and warranties were made on the Closing Date.
(iii) Each of the covenants and agreements required in this Agreement
to be performed by the Company on or prior to the Closing Date and each
condition required herein to be fulfilled or complied with by the Company
on or prior to the Closing Date has been duly performed, fulfilled or
complied with.
(iv) No stop order suspending the effectiveness of the Registration
Statement or of any part thereof has been issued and no proceedings for
that purpose have been instituted or are contemplated by the Commission.
(v) Subsequent to the date of the most recent financial statements in
the Prospectus, there has been no material adverse change in the financial
position or results of operations of the Company, except as set forth in or
contemplated by the Prospectus.
(h) The Shares shall be qualified for sale in such states as the Placement
Agent may reasonably request and each such qualification shall be in effect and
not subject to any stop order or other proceeding on the Closing Date; provided
that in no event shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action which would
subject it to taxation or general service of process in any jurisdiction where
it is not now so subject.
(i) The Company shall have furnished or caused to be furnished to the
Placement Agent such certificates, in addition to those specifically mentioned
herein, as the Placement Agent may have reasonably requested as to the accuracy
and completeness, at the Closing Date of any statement in the Registration
Statement or the Prospectus, as to the accuracy, at the
17
Closing Date of the representations and warranties of the Company, as to the
performance by the Company of its obligations hereunder, or as to the
fulfillment of the conditions concurrent and precedent to the obligations
hereunder of the Placement Agent.
(j) The Placement Agent shall have received executed "lock-up" agreements,
each substantially in the form of Exhibit D hereto, from the executive officers
and directors of the Company and Mira Mag, Inc. relating to sales and certain
other dispositions of Ordinary Shares or certain other securities, and such
lock-up agreements shall be full force and effect on the Closing Date.
7. Indemnification and Contribution.
(a) Indemnification of the Placement Agent. The Company agrees to indemnify
and hold harmless the Placement Agent, its affiliates, directors, officers,
employees, agents and each person, if any, who controls such Placement Agent
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
from and against any and all losses, claims, damages and liabilities, joint or
several (including, without limitation, reasonable fees of outside legal counsel
and other expenses reasonably incurred in connection with any suit, action or
proceeding or any claim asserted, as such fees and expenses are incurred) that
arise out of, or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or the Prospectus (or
any amendment or supplement thereto) or any Preliminary Prospectus, or caused by
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, except
insofar as such losses, claims, damages or liabilities arise out of, or are
based upon, any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with any information furnished
to the Company in writing by the Placement Agent expressly for use therein, it
being understood and agreed that the only such information furnished by the
Placement Agent consists of the information described as such in subsection (b)
below.
(b) Indemnification of the Company. The Placement Agent agrees to indemnify
and hold harmless the Company, its affiliates, directors and officers who signed
the Registration Statement and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act to
the same extent as the indemnity set forth in paragraph (a) above, but only with
respect to any losses, claims, damages or liabilities that arise out of, or are
based upon, any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with any information furnished
to the Company in writing by the Placement Agent expressly for use in the
Registration Statement or the Prospectus (or any amendment or supplement
thereto) or any Preliminary Prospectus, it being understood and agreed upon that
the only such information furnished by the Placement Agent consists of the
following: the statements set forth (i) under the heading "Plan of
Distribution," (ii) on the cover page and (iii) on the back cover in any
Preliminary Prospectus and the Prospectus.
(c) Notice and Procedures. If any suit, action, proceeding (including any
governmental or regulatory investigation), claim or demand shall be brought,
threatened or asserted against any person in respect of which indemnification
may be sought pursuant to either
18
paragraph (a) or (b) above, such person (the "Indemnified Person") shall
promptly notify the person against whom such indemnification may be sought (the
"Indemnifying Person") in writing; provided that the failure to notify the
Indemnifying Person shall not relieve it from any liability that it may have
under this Section 7 except to the extent that it has been prejudiced thereby;
and provided, further, that the failure to notify the Indemnifying Person shall
not relieve it from any liability that it may have to an Indemnified Person
otherwise than under this Section 7. If any such proceeding shall be brought,
threatened or asserted against an Indemnified Person and it shall have notified
the Indemnifying Person thereof, the Indemnifying Person shall retain counsel
reasonably satisfactory to the Indemnified Person to represent the Indemnified
Person and any others entitled to indemnification pursuant to this Section 7
that the Indemnifying Person may designate in such proceeding and shall pay the
fees and expenses of such counsel related to such proceeding, as incurred. In
any such proceeding, any Indemnified Person shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such Indemnified Person unless (i) the Indemnifying Person and the
Indemnified Person shall have mutually agreed to the contrary; (ii) the
Indemnifying Person has failed within a reasonable time to retain counsel
reasonably satisfactory to the Indemnified Person; (iii) the Indemnified Person
shall have reasonably concluded that there may be legal defenses available to it
that are different from or in addition to those available to the Indemnifying
Person; or (iv) the named parties in any such proceeding (including any
impleaded parties) include both the Indemnifying Person and the Indemnified
Person and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It is
understood and agreed that the Indemnifying Person shall not, in connection with
any proceeding or related proceeding in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm (in addition to any local
counsel) for all Indemnified Persons, and that all such fees and expenses shall
be paid or reimbursed as they are incurred. Any such separate firm for the
Placement Agent, its affiliates, directors, officers, employees and agents and
any control persons of the Placement Agent shall be designated in writing by
Lehman Brothers Inc. and any such separate firm for the Company, its directors,
its officers who signed the Registration Statement and any control persons of
the Company shall be designated in writing by the Company. The Indemnifying
Person shall not be liable for any settlement of any proceeding with respect to
which indemnification is available hereunder effected without its written
consent, but if any such proceeding is settled with such consent or if there be
a final judgment in any such proceeding for the plaintiff, the Indemnifying
Person agrees to indemnify each Indemnified Person from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an Indemnified Person shall have requested
that an Indemnifying Person reimburse the Indemnified Person for fees and
expenses of counsel in connection with any such proceeding as contemplated by
this paragraph, the Indemnifying Person shall be liable for any settlement of
any proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by the Indemnifying Person of such
request and (ii) the Indemnifying Person shall not have reimbursed the
Indemnified Person in accordance with such request prior to the date of such
settlement. No Indemnifying Person shall, without the written consent of the
Indemnified Person (which consent shall not be unreasonably withheld,
conditioned or delayed), effect any settlement of any pending or threatened
proceeding in respect of which any Indemnified Person is or could have been a
party and indemnification could have been sought hereunder by such Indemnified
Person, unless such settlement (x) includes an unconditional release of such
Indemnified Person, in form and
19
substance reasonably satisfactory to such Indemnified Person, from all liability
on claims that are the subject matter of such proceeding and (y) does not
include any statement as to or any admission of fault, culpability or a failure
to act by or on behalf of any Indemnified Person.
(d) Contribution. If the indemnification provided for in paragraphs (a) and
(b) above is unavailable to an Indemnified Person or insufficient in respect of
any losses, claims, damages or liabilities referred to therein, then each
Indemnifying Person under such paragraph, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or payable by
such Indemnified Person as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Placement Agent on the
other from the offering of the Shares or (ii) if the allocation provided by
clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
but also the relative fault of the Company on the one hand and the Placement
Agent on the other in connection with the statements or omissions that resulted
in such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Placement Agent on the other shall be deemed to be in the same
respective proportions as the net proceeds (before deducting expenses) received
by the Company from the sale of the Shares and the total fee received by the
Placement Agent in connection therewith, in each case as set forth in the table
on the cover of the Prospectus, bear to the aggregate offering price of the
Shares. The relative fault of the Company on the one hand and the Placement
Agent on the other shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Placement Agent and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
(e) Limitation on Liability. The Company and the Placement Agent agree that
it would not be just and equitable if contribution pursuant to this Section 7
were determined by pro rata allocation or by any other method of allocation that
does not take account of the equitable considerations referred to in paragraph
(d) above. The amount paid or payable by an Indemnified Person as a result of
the losses, claims, damages and liabilities referred to in paragraph (d) above
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses incurred by such Indemnified Person in connection with
any such action or claim. Notwithstanding the provisions of this Section 7, in
no event shall the Placement Agent be required to contribute any amount in
excess of the fee received by it with respect to the offering of the Shares
exceeds the amount of any damages that the Placement Agent has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
(f) Non-Exclusive Remedies. The remedies provided for in this Section 7 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to any Indemnified Person at law or in equity.
20
8. Right of First Refusal. As further consideration for the Placement
Agent's services, the Company agrees that the Placement Agent shall have the
right, but not the obligation, which right is exercisable in the Placement
Agent's sole discretion, to provide investment banking services to the Company
on an exclusive basis through November 24, 2005. Such services may include
acting as lead managing underwriter and exclusive bookrunner for an offering of
the Company's equity securities or debt securities, assisting the Company with
respect to any mergers, acquisitions or divestitures for which the services of
an investment banking firm are utilized, including in connection with a change
in control (as defined below), acting as exclusive placement agent for any
private placement of debt and/or equity securities and providing other financial
advisory services. In the event that the Placement Agent agrees to provide such
services, the Placement Agent shall be paid fees to be mutually agreed between
the Company and Placement Agent, based upon the Placement Agent's customary fees
for such services. The Company and the Placement Agent hereby further agree
that, notwithstanding anything to the contrary contained herein or any oral
representations or assurances previously or subsequently made by the parties,
this Section 8 does not constitute a commitment by or obligation of the
Placement Agent to act as underwriter or placement agent in connection with any
such offering of securities or in any other capacity set forth herein. Such a
commitment on the part of the Placement Agent will exist only upon the execution
of a final, written underwriting or placement agent agreement or any other
applicable agreement and then only in accordance with the terms and conditions
of such agreement. In any event the Placement Agent may determine in its sole
discretion for any reason (including, without limitation, the results of its due
diligence investigation, a material change in the Company's financial condition
business or prospects, the lack of appropriate internal Placement Agent
committee approvals or then current market conditions) not to participate in
such an offering of securities. For purposes of the foregoing, a "change in
control" shall mean the signing of a definitive agreement for (i) a merger,
consolidation, sale or exchange of capital stock or other transaction which
results in the shareholders of the Company immediately prior to such transaction
owning less than 50% of the Company's (or the surviving company's) voting stock
immediately after such transaction, or (ii) the sale of all or substantially all
of the Company's assets.
9. Termination.
(a) The obligations of the Placement Agent under this Agreement may be
terminated, in the absolute discretion of the Placement Agent, at any time prior
to the Closing Date, by notice to the Company from the Placement Agent, without
liability on the part of the Placement Agent to the Company if, prior to
delivery and payment for the Shares, (i) trading generally shall have been
suspended or materially limited on or by any of the New York Stock Exchange, the
American Stock Exchange, the National Association of Securities Dealers, Inc.,
the Chicago Board Options Exchange, the Chicago Mercantile Exchange or the
Chicago Board of Trade; (ii) trading of any securities issued or guaranteed by
the Company shall have been suspended on any exchange or in any over-the-counter
market; (iii) a general moratorium on commercial banking activities shall have
been declared by federal or New York State authorities; or (iv) there shall have
occurred any outbreak or escalation of hostilities within or outside the United
States, that, in the judgment of the Placement Agent, is material and adverse
and makes it impracticable or inadvisable to proceed with the offering, sale or
delivery of the Shares on the Closing Date on the terms and in the manner
contemplated by this Agreement and the Prospectus.
21
(b) The obligations of the parties under this Agreement shall be
automatically terminated in the event that notice is given by the Placement
Agent to the Escrow Agent prior to the close of business on the date scheduled
for receipt of the Requisite Funds, that the Requisite Funds have not been
deposited by the Investors into the Escrow Account by the close of business on
the Closing Date.
(c) If this Agreement shall be terminated pursuant to any of the provisions
hereof (otherwise than pursuant to Section 9(b) and other than a termination of
the Placement Agent's engagement pursuant to Section 9(a)), or if the sale of
the Shares provided for herein is not consummated because any condition to the
obligations of the Placement Agent set forth herein is not satisfied or because
of any refusal, inability or failure on the part of the Company to perform any
agreement herein or comply with any provision hereof, the Company will, subject
to demand by the Placement Agent, reimburse you for all reasonable out-of-pocket
expenses incurred in connection herewith not to exceed $75,000 in the aggregate
without the Company's prior approval, which approval shall not be unreasonably
withheld or delayed.
10. Notices. Notice given pursuant to any of the provisions of this
Agreement shall be in writing and, unless otherwise specified, shall be mailed
or delivered (a) if to the Company, at the office of the Company, P.O. Box 70,
Industrial Zone, 56000, Yahud, Israel, Attention: Jacob Even-Ezra, Chairman
(facsimile: (972) (3) 539 - 1444), with a copy to Carter Ledyard & Milburn LLP,
2 Wall Street, New York, New York 10005, Attention: Steven J. Glusband, Esq..
(facsimile: (212) 732 - 3232), or (b) if to the Placement Agent, at the office
of Lehman Brothers Inc., 745 Seventh Avenue, 5th Floor, New York, New York
10019, Attention: Keith Canton (facsimile: (212) 520 -9328) with a copy to
Morrison & Foerster LLP, 1290 Avenue of the Americas, New York, New York 10104,
Attention: Anna T. Pinedo, Esq. (facsimile: (212) 468-7900). Any such notice
shall be effective only upon receipt. Any notice under Section 7 may be made by
facsimile or telephone, but if so made shall be subsequently confirmed in
writing.
11. Survival. The respective representations, warranties, agreements,
covenants, indemnities and other statements of the Company and the Placement
Agent set forth in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement shall remain in full force and effect, regardless of
(i) any investigation made by or on behalf of the Company, any of its officers
or directors, the Placement Agent or any controlling person referred to in
Section 7 hereof and (ii) delivery of and payment for the Shares. The respective
agreements, covenants, indemnities and other statements set forth in Sections 5,
7 and 8 hereof shall remain in full force and effect, regardless of any
termination or cancellation of this Agreement.
12. Successors. This Agreement shall inure to the benefit of and shall be
binding upon the Placement Agent, the Company and their respective successors
and legal representatives, and nothing expressed or mentioned in this Agreement
is intended or shall be construed to give any other person any legal or
equitable right, remedy or claim under or in respect of this Agreement, or any
provisions herein contained, this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of such
persons and for the benefit of no other person except that (i) the
indemnification and contribution contained in Sections 7(a) and (d) of this
Agreement shall also be for the benefit of the directors, officers, employees
and agents of the Placement Agent and any person or persons who control
22
the Placement Agent within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act and (ii) the indemnification and contribution contained in
Sections 7(b) and (d) of this Agreement shall also be for the benefit of the
directors of the Company, the officers of the Company who have signed the
Registration Statement and any person or persons who control the Company within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act. No
purchaser of Shares shall be deemed to be a successor Investor by reason merely
of such purchase.
13. Applicable Law. The validity and interpretations of this Agreement, and
the terms and conditions set forth herein, shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
conflicts of laws provisions thereof.
14. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15. Entire Agreement. This Agreement constitutes the entire understanding
between the parties hereto as to the public offering of the Shares by the
Company and supersedes all prior understandings, written or oral, relating to a
public offering of the Shares by the Company (including without limitation that
certain engagement letter between the Placement Agent and the Company dated
November 24, 2004).
23
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the Placement Agent.
Very truly yours,
MAGAL SECURITY SYSTEMS LTD.
By:
-----------------------
Name:
Title:
Confirmed as of the date first above mentioned:
LEHMAN BROTHERS INC.
By:
--------------------
Name:
Title:
SCHEDULE 1
Affiliates
----------
Jacob Even-Ezra
Nathan Kirsh
Mira Mag, Inc.
SCHEDULE 2
List of Significant Subsidiaries
--------------------------------
U.S. Subsidiaries
-----------------
Magal-Senstar, Inc.
Other Subsidiaries
------------------
Canada
------
Senstar-Stellar Corporation
EXHIBIT A
---------
ESCROW AGREEMENT
EXHIBIT B
---------
Matters to be Covered in the Carter Ledyard & Milburn LLP Legal Opinion
-----------------------------------------------------------------------
1. The Registration Statement and the Prospectus as amended or
supplemented (other than the financial statements, including the notes
and schedules thereto, other financial and accounting data and
information about the Placement Agent, contained therein, as to which
such counsel need express no opinion) comply as to form in all
material respects with the requirements of the Act and the Rules and
Regulations thereunder.
2. The issuance and sale by the Company of the Shares, and the
consummation by the Company of the transactions contemplated by the
Placement Agency Agreement, do not (a) violate the provisions of any
U.S. federal or state law, rule or regulation applicable to the
Company; or (b) violate any U.S. judgment, decree, order or award of
any U.S. federal or state court, governmental body or arbitrator
specifically naming the Company or its U.S. Subsidiaries of which such
counsel is aware.
3. To our knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued under the Act and no
proceedings for that purpose have been instituted or are pending or
threatened by the Commission.
4. The Company is not an "investment company" or an entity "controlled"
by an "investment company," as such terms are defined in the
Investment Company Act.
5. The U.S. Subsidiary has been duly organized, are validly existing and
in good standing under the laws of its jurisdiction of organization
and has all requisite power and authority to conduct its business as
it is described in the Prospectus.
6. There are no legal or governmental proceedings pending to which the
Company or its U.S. Subsidiary is a party or of which any property of
the Company or its Subsidiary is the subject which are required by the
Act or the Rules and Regulations thereunder to be described in the
Registration Statement or the Prospectus that are not so described.
In addition, such counsel shall state that while such counsel is not
passing upon and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus, or any supplements or amendments thereto, no facts
have come to the attention of such counsel which have caused her to believe that
either the Registration Statement or any amendments thereto, at the time the
Registration Statement or any such amendments became effective, contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
or that the Prospectus, as of the Closing, contained an untrue statement of a
material fact or omitted to state a material fact necessary in order to
B-1
make the statements therein, in light of the circumstances under which they were
made, not misleading (it being understood that such counsel need express no
belief as to the financial statements, including the notes and schedules
thereto, or any other financial or accounting information, or the information
regarding the Placement Agent or the method of distribution of the Shares
included in the Registration Statement or the Prospectus or any such amendments
or supplements thereto).
B-2
EXHIBIT C
---------
Matters to be Covered in the Friedman & Co. Legal Opinion
---------------------------------------------------------
1. The Company is a corporation duly organized and validly existing under
the laws of the State of Israel and has all requisite corporate power
and authority to conduct its business as it is described in the
Prospectus, to enter into and perform its obligations under the
Transaction Documents (as such term is defined in the Placement Agency
Agreement), and to carry out the transactions contemplated by the
Transaction Documents. The Company is duly qualified to do business as
a foreign corporation and is in good standing under the laws of each
jurisdiction which requires such qualification, except where the
failure to be so qualified or in good standing or have such power or
authority would not, individually or in the aggregate, have a material
adverse effect or would reasonably be expected to have a material
adverse effect on or affecting the business, properties, management,
consolidated financial position, stockholders' equity or results of
operations of the Company and its Subsidiaries taken as a whole (a
"Material Adverse Effect").
2. The currently outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid and
nonassessable.
3. The Shares have been duly authorized and, when issued, sold and
delivered to the Investors against payment therefor in accordance with
the provisions of the Placement Agency Agreement, will be validly
issued, fully paid and non-assessable and will conform as to legal
matters in all material respects to the description of the Shares
contained in the Prospectus under the caption "Description of Ordinary
Shares."
4. The execution and delivery by the Company of the Transaction
Documents, and the consummation by the Company of the transactions
contemplated thereby, have been duly authorized by all necessary
corporate action on the part of the Company, and the Transaction
Documents have been duly executed and delivered by the Company.
5. The issuance and sale by the Company of the Shares, and the
consummation by the Company of the transactions contemplated by the
Transaction Documents, do not (a) violate the provisions of any
Israeli law, rule or regulation applicable to the Company; (b) violate
the provisions of the Company's Memorandum of Association or Articles
of Association, each as amended to date; or (c) violate any judgment,
decree, order or award of any court, governmental body or arbitrator
specifically naming the Company or its Israeli Subsidiary of which
such counsel is aware.
6. The statements in the Prospectus under the heading "Description of
Ordinary Shares" insofar as they constitute summaries of matters of
law or regulations or legal conclusions, have been reviewed by such
counsel and are accurate.
C-1
EXHIBIT D
---------
LOCK UP LETTERS
April 14, 2005
Lehman Brothers Inc.
745 Seventh Avenue
New York, New York 10019
Ladies and Gentlemen:
The undersigned understands that you, as Placement Agent, propose to
enter into a Placement Agency Agreement (the "Placement Agency Agreement") with
Magal Security Systems Ltd, an Israeli corporation (the "Company"), providing
for the offering (the "Offering") of 1,700,000 ordinary shares (the "Shares"),
par value NIS 1.0 per share (the "Ordinary Shares"), of the Company. Capitalized
terms used herein and not otherwise defined shall have the meanings set forth in
the Placement Agency Agreement.
In consideration of the foregoing, and in order to induce you to act as
Placement Agent in the offering, and for other good and valuable consideration
receipt of which is hereby acknowledged, the undersigned hereby agrees that,
without the prior written consent of Lehman Brothers Inc., the undersigned will
not, during the period beginning on the date of the final prospectus supplement
relating to the Offering of the Shares and ending on the date 90 days after the
date of such final prospectus supplement, (1) offer, pledge, announce the
intention to sell, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly, any Ordinary Shares or any securities convertible into or
exercisable or exchangeable for Ordinary Shares (including without limitation,
Ordinary Shares which may be deemed to be beneficially owned by the undersigned
in accordance with the rules and regulations of the Securities and Exchange
Commission and securities which may be issued upon exercise of a stock option or
warrant), or (2) enter into any swap or other agreement that transfers, in whole
or in part, any of the economic consequences of ownership of the Ordinary
Shares, whether any such transaction described in clause (1) or (2) above is to
be settled by delivery of Ordinary Shares or such other securities, in cash or
otherwise. In addition, the undersigned agrees that, without the prior written
consent of Lehman Brothers Inc., it will not, during the period ending 90 days
after the date of the Prospectus, make any demand for or exercise any right with
respect to, the registration of any Ordinary Shares or any security convertible
into or exercisable or exchangeable for Ordinary Shares.
Notwithstanding the foregoing, the restrictions set forth in clause (1)
and (2) above shall not apply to (a) transfers (i) as a bona fide gift or gifts,
provided that the donee or donees thereof agree to be bound in writing by the
restrictions set forth herein, (ii) to any trust for the direct or indirect
benefit of the undersigned or the immediate family of the undersigned, provided
that the trustee of the trust agrees to be bound in writing by the restrictions
set forth herein, and provided further that any such transfer shall not involve
a disposition for value, (iii) with the prior written consent of Lehman Brothers
Inc., or (iv) effected pursuant to any exchange of "underwater" options with the
Company or (b) the acquisition or exercise of any stock option issued pursuant
to the Company's existing stock option plan, including any
D-1
exercise effected by the delivery of Shares of the Company held by the
undersigned. For purposes of this letter agreement, "immediate family" shall
mean any relationship by blood, marriage or adoption, not more remote than first
cousin. None of the restrictions set forth in this letter agreement shall apply
to Ordinary Shares acquired in open market transactions.
In furtherance of the foregoing, the Company, and any duly appointed
transfer agent for the registration or transfer of the securities described
herein, are hereby authorized to decline to make any transfer of securities if
such transfer would constitute a violation or breach of this letter agreement.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to enter into this letter agreement. All authority
herein conferred or agreed to be conferred and any obligations of the
undersigned shall be binding upon the successors, assigns, heirs or personal
representatives of the undersigned.
The undersigned understands that, if the Placement Agency Agreement
does not become effective, or if the Placement Agency Agreement (other than the
provisions thereof which survive termination) shall terminate or be terminated
prior to payment for and delivery of the Shares to be sold thereunder, the
undersigned shall be released form all obligations under this letter agreement.
This lock-up agreement shall be governed by and construed in accordance
with the laws of the State of New York, without regard to the conflict of laws
principles thereof.
Very truly yours,
[NAME OF OFFICER OR
DIRECTOR] [MIRA MAG INC.]
-------------------------
Title:
Accepted as of the date
first set forth above:
LEHMAN BROTHERS INC.
By:
-------------------
Name:
Title:
D-2
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: April 15, 2005