This
Proxy Statement is being furnished in connection with the solicitation of
proxies in response to a demand made by certain of our shareholders, who
together represent approximately 17.81% of our outstanding shares, to convene an
Extraordinary General Meeting of Shareholders, or the Extraordinary Meeting,
pursuant to Section 63(b) of the Israeli Companies Law. The
Extraordinary Meeting will be held at 10:00 a.m. (Israel time) on Thursday,
August 12, 2010, at our offices at 17 Altalef Street, Industrial Zone, Yehud
56100, Israel.
This
Proxy Statement, the attached Notice of Extraordinary General Meeting and the
enclosed proxy card are being mailed to shareholders on or about July 9,
2010.
Purpose
of the Extraordinary Meeting
At the
Extraordinary Meeting, shareholders will be asked to:
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Item
1A:
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Consider
and vote upon a shareholder proposal to terminate the service as directors
of our Company of all members of the Board of Directors, including without
limitation, Mr. Jacob Perry, Mr. Jacob Even-Ezra, Mr. Ze’ev Livne, Mr.
Jacob Nuss and Mr. Barry Stiefel, but excluding Mr. Nathan Kirsh and the
Company’s external directors, effective as of the close of the
Extraordinary Meeting.
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Item
1B:
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Subject
to the adoption of Item 1A at the Extraordinary Meeting, consider and vote
upon a shareholder proposal to appoint Messrs. Avihu Ben-Nun, Yoav Stern,
Zivi R. Nedivi, Ami Amir and Israel (Relik) Shafir as directors of our
Company, effective as of the close of the Extraordinary
Meeting.
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Item
2:
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In
the event that Item 1A is rejected at the Extraordinary Meeting, consider
and vote upon our proposal to approve certain proposed transactions with
Mr. Nathan Kirsh, a director, which is intended to allow Mr. Kirsh
becoming a holder of more than 25% of our outstanding
shares.
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Recommendation
of the Board of Directors
Our Board
of Directors recommends a vote AGAINST each of Items 1A and Item 1B and FOR Item
2.
Proxy
Procedure
Only
holders of record of our ordinary shares, par value of NIS 1.00 per share, as of
the close of business on July 7, 2010 are entitled to notice of, and to vote in
person or by proxy at, the Extraordinary Meeting. As of July 2, 2010
there were 10,396,548 outstanding ordinary shares.
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Voting in
Person. If your shares are registered directly in your
name with our transfer agent (i.e. you are a “registered shareholder”),
you may attend and vote in person at the Extraordinary
Meeting. If you are a beneficial owner of shares registered in
the name of your broker, bank, trustee or nominee (i.e. your shares are
held in “street name”), you are also invited to attend the Extraordinary
Meeting; however, to vote in person at the Extraordinary Meeting as a
beneficial owner, you must first obtain a “legal proxy” from your broker,
bank, trustee or nominee authorizing you to do
so.
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Voting by
Mail. You may submit your proxy by mail by completing,
signing and mailing the enclosed proxy card in the enclosed, postage-paid
envelope, or, for shares held in street name, by following the voting
instructions provided by your broker, bank trustee or
nominee. The proxy must be received by our transfer agent or at
our registered office in Israel at least forty-eight (48) hours prior to
the appointed time of the Extraordinary Meeting to be validly included in
the tally of ordinary shares voted at the Extraordinary
Meeting. If directions are not given or directions are not in
accordance with the options listed on a proxy card, such shares will be
voted AGAINST each of Item 1A and Item 1B and FOR Item
2.
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Change
or Revocation of Proxy
If you
are a registered shareholder, you may change your vote at any time prior to the
exercise of authority granted in the proxy by delivering a written notice of
revocation to our Corporate Secretary, by granting a new proxy bearing a later
date using, or by attending the Extraordinary Meeting and voting in
person. Attendance at the Extraordinary Meeting will not cause your
previously granted proxy to be revoked unless you specifically so
request.
If your
shares are held in street name, you may change your vote by submitting new
voting instructions to your broker, bank, trustee or nominee or, if you have
obtained a legal proxy from your broker, bank, trustee or nominee giving you the
right to vote your shares, by attending the Extraordinary Meeting and voting in
person.
Quorum
The
presence of two shareholders, holding at least one-third (1/3) of our company’s
total voting rights, represented in person or by proxy at the Extraordinary
Meeting, will constitute a quorum. If within half an hour from the
time designated for the Extraordinary Meeting a quorum is not present, the
Extraordinary Meeting will stand adjourned to the same day in the following
week, at the same time and place. If within half an hour from the
time designated for the reconvened Meeting a quorum is not present, two
shareholders present in person or by proxy will constitute a
quorum.
Abstentions
will be counted towards the quorum. The proposals presented at the
Extraordinary Meeting are not “routine” matters under New York Stock
Exchange Rule 452, and a New York Stock Exchange member organization therefore
may not make a “broker non-vote” in connection with any of the
proposals.
Unsigned
or unreturned proxies, including those not returned by banks, brokers, or other
record holders, will not be counted for quorum or voting purposes.
Majority
Vote Standard
Each
ordinary share entitles the holder to one vote. An affirmative vote
of the holders of a majority of the ordinary shares represented at the
Extraordinary Meeting, in person or by proxy, entitled to vote and voting
thereon, is required to approve each of the proposals, except as otherwise
stated in the proposal.
In
tabulating the voting result for any particular proposal, shares that constitute
broker non-votes and abstentions are not considered votes cast on that
proposal. Unsigned or unreturned proxies, including those not
returned by banks, brokers, or other record holders, will not be counted for
voting purposes.
We have
received indications from our principal shareholder, Mr. Nathan Kirsh who holds
approximately 24.2% of our issued and outstanding ordinary shares, that he
presently intends to vote AGAINST Item 1A and Item 1B and FOR Item
2.
Cost
of Soliciting Votes for the Annual Meeting
We will
bear the cost of soliciting proxies from our shareholders. Proxies
will be solicited by mail and may also be solicited in person, by telephone or
electronic communication, by our directors, officers and
employees. We will reimburse brokerage houses and other custodians,
nominees and fiduciaries for their expenses in accordance with the regulations
of the Securities and Exchange Commission, or the SEC, concerning the sending of
proxies and proxy material to the beneficial owners of our
stock.
Security
Ownership of Certain Beneficial Owners and Management
The
following table sets forth certain information, as of July 2, 2010, pertaining
to the beneficial ownership of our ordinary shares by (i) all shareholders known
to us to own beneficially 5% or more of our ordinary shares and (ii) all
directors and executive officers as a group. Except for Mr. Nathan
Kirsh, whose beneficial ownership is set forth in the table below, and Mr. Jacob
Even-Ezra and Mr. Jacob Perry, each of whom beneficially owns less than 5% of
our ordinary shares, none of our directors beneficially own our ordinary
shares.
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Name
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Number of
Ordinary Shares
Beneficially Owned(1)
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Percentage of
Outstanding
Ordinary Shares(2)
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Nathan Kirsh (3)
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2,516,267 |
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24.2 |
% |
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Clough
Capital Partners L.P. (4)
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704,042 |
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6.77 |
% |
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Grace
& White, Inc. (5).
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607,526 |
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5.84 |
% |
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Diker
Management LLC (6)
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604,495 |
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5.81 |
% |
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Prescott
Group Aggressive Small Cap Master Fund, G.P. (7)
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544,427 |
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5.23 |
% |
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(1)
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Beneficial
ownership is determined in accordance with the rules of the SEC and
generally includes voting or investment power with respect to
securities. Ordinary shares relating to options or convertible
notes currently exercisable or exercisable within 60 days of the date of
this table are deemed outstanding for computing the percentage of the
person holding such securities but are not deemed outstanding for
computing the percentage of any other person. Except as
indicated by footnote, the persons named in the table above have sole
voting and investment power with respect to all shares shown as
beneficially owned by them.
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(2)
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The
percentages shown are based on 10,396,548 ordinary shares issued and
outstanding as of July 2, 2010.
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(3)
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Based
upon a Schedule 13D/A filed with the Securities and Exchange Commission on
May 17, 2010. Includes: (i) 1,446,772 ordinary shares held of
record by Mira Mag Inc., or Mira Mag, a company organized in Liberia; and
(ii) 1,069,495 ordinary shares held of record by Ki Corporation Limited,
or Ki Corporation, a company organized in Liberia. The Eurona
Foundation holds 100% of Ki Corporation. Ki Corporation holds
100% of the shares of Mira Mag. The Eurona Foundation is a
Liechtenstein trust controlled by Mr. Kirsh, who also serves as its
trustee. Mr. Kirsh may be deemed to have beneficial ownership
of the ordinary shares held of record by Mira Mag and Ki
Corporation.
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(4)
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Based
solely upon, and qualified in its entirety with reference to, a Schedule
13D filed with the SEC on June 17, 2010. The Schedule 13D
indicates that the shares include shares beneficially owned by the Clough
Client Accounts for which Clough Capital Partners L.P. serves as
investment adviser. Such shares may be deemed beneficially
owned by (a) Clough Capital Partners L.P., (b) Clough Capital Partners
LLC, the general partner of Clough Capital Partners L.P., and (c) Messrs.
Charles Clough, James Canty and Eric Brock, the managing members of Clough
Capital Partners LLC. Each such reporting person disclaims
beneficial ownership of such shares except to the extent of its respective
pecuniary interest therein.
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(5)
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Based
solely upon, and qualified in its entirety with reference to, a Schedule
13G/A filed with the SEC on February 1, 2010. The Schedule
13G/A indicates that Grace & White, Inc. is a registered investment
adviser.
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(6)
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Based
solely upon, and qualified in its entirety with reference to, a Schedule
13D filed with the SEC on June 21, 2010. The Schedule 13D
indicates that as the sole general partner of certain Diker partnerships
with respect to stock directly owned by certain Diker funds, or the Diker
Funds, Diker GP has the power to vote and dispose of the shares owned by
the Diker Funds and, accordingly, may be deemed the beneficial owner of
such shares. Pursuant to investment advisory agreements, Diker
Management, LLC serves as the investment manager of the Diker Funds.
Accordingly, Diker Management may be deemed the beneficial owner of shares
held by the Diker Funds. Charles M. Diker and Mark N. Diker are
the managing members of each of Diker GP, LLC and Diker Management LLC,
and in that capacity direct their operations. Therefore,
Charles M. Diker and Mark N. Diker may be deemed the beneficial owners of
shares beneficially owned by Diker GP, LLC and Diker Management LLC. Diker
GP, LLC, Diker Management LLC, Charles M. Diker and Mark N. Diker disclaim
all beneficial ownership, however, as affiliates of a registered
investment adviser, and in any case disclaim beneficial ownership except
to the extent of their pecuniary interest in the
shares.
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(7)
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Based
solely upon, and qualified in its entirety with reference to, a Schedule
13D filed with the SEC on June 14, 2010. The Schedule 13D
indicates that Prescott Group Aggressive Small Cap, L.P. and Prescott
Group Aggressive Small Cap II, L.P., referred to together as the Small Cap
Funds, are the general partners of Prescott Group Aggressive Small Cap
Master Fund, G.P., or Prescott Master Fund. Prescott Group
Capital Management, L.L.C., or Prescott Capital, serves as the general
partner of the Small Cap Funds and may direct the Small Cap Funds, the
general partners of Prescott Master Fund, to direct the vote and
disposition of the ordinary shares held by the Prescott Master
Fund. The Schedule 13D further indicates that Mr. Frohlich, the
principal of Prescott Capital, may direct the vote and disposition of the
ordinary shares held by Prescott Master
Fund.
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SHAREHOLDER
PROPOSAL FOR REMOVAL AND ELECTION OF DIRECTORS
(Items 1A
and 1B on the Proxy Card)
On June
13, 2010, we received a letter that was sent by counsel on behalf of certain of
our shareholders, (i) Clough Investment Partners I, L.P., Clough Investment
Partners II, L.P., Clough Offshore Fund, Ltd., Clough Global Equity Fund, Clough
Global Allocation Fund and The Flatley Foundation, (ii) Prescott Group
Aggressive Small Cap, L.P. and Prescott Group Aggressive Small Cap TI, L.P., and
(iii) Diker Micro-Value Fund, L.P., Diker Micro-Value QP Fund, L.P., Diker Micro
and Small Cap Fund, L.P. and Diker M&S Cap Master, Ltd., referred to
collectively in this Proxy Statement as the Dissident
Shareholders. The Dissident Shareholders together represent
approximately 17.81% of our outstanding shares. For information
regarding the beneficial ownership of the Dissident Shareholders, see table
above “Security Ownership of Certain Beneficial Owners and
Management.” The Dissident Shareholders demanded, pursuant to Section
63(b) of the Israeli Companies Law, that we convene an extraordinary general
meeting of shareholders to consider and vote upon the following two shareholder
proposals:
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(i)
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To
terminate the service as directors of the Company of all members of the
Board of Directors, including without limitation, Mr. Jacob Perry, Mr.
Jacob Even-Ezra, Mr. Ze’ev Livne, Mr. Jacob Nuss and Mr. Barry Stiefel,
but excluding Mr. Nathan Kirsh and the Company’s external directors,
effective as of the close of the Extraordinary Meeting. Messrs. Jacob
Perry, Jacob Even-Ezra, Ze’ev Livne, Jacob Nuss and Barry Stiefel are
referred to collectively in this Proxy Statement as the Standing
Directors. All of the Standing Directors were reelected to
serve in such capacity by our shareholders at our 2010 Annual General
Meeting of Shareholders held on June 23, 2010. A biography of
each of the Standing Directors and each of the three directors not subject
to the termination demand is set forth
below.
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(ii)
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If
the proposal to remove the Standing Directors from office is adopted at
the Extraordinary Meeting, to appoint Messrs. Avihu Ben-Nun, Yoav Stern,
Zivi R. Nedivi, Ami Amir and Israel (Relik) Shafir as directors of the
Company, effective as of the close of the Extraordinary Meeting. A
biography of each of the Dissident Shareholders’ director nominees, as
provided to us by counsel for the Dissident Shareholders, is set forth
below.
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Biographies
of Standing Directors
The
following information with respect to each of the Standing Directors is based
upon our records and information furnished to us.
Jacob Perry
(66) has served as the chairman of our board of directors since January
2008. Prior thereto, Mr. Perry served as the deputy chairman of our
board of directors from 2006 and has served as a director of our company since
December 2002. From 1995 to December 2002, Mr. Perry served as the
president and chief executive officer of Cellcom Israel Ltd., one of Israel’s
leading cellular phone operators. Mr. Perry served 29 years with the
Israeli General Security Service and served as its director from 1988 until
1995. Mr. Perry has also served as a coordinator to the Israeli Prime
Minister on the subject of prisoners of war and missing persons. Mr.
Perry was a board member of El-Al Israel Airlines and a member of the management
of many public organizations. Mr. Perry is also a chairman of the
board of directors of Mizrahi Tefahot Bank B.M. Mr. Perry serves as a
director of Tamarind Technologies and New Kopel, an Israeli vehicle and car
service group. Mr. Perry holds a B.A. degree in Oriental Studies and
History of the Jewish People from Tel Aviv University and completed the Advanced
Management Program at Harvard Business School.
Jacob Even-Ezra
(79) has served as a director since 1984 and is a member of our
investment committee. From 1984 until December 2007, Mr. Even-Ezra
served as the chairman of our board of directors. From 1984 until
2006, Mr. Even-Ezra served as our chief executive officer, and from 1987 until
1990 he also served as our president. Mr. Even-Ezra is currently a
member of the Executive Council and the Management Committee of Tel Aviv
University. From 1985 to 1988, Mr. Even-Ezra also served as the
chairman of the Israel Export Institute. Mr. Even-Ezra holds a B.Sc.
degree in Electrical Engineering from the Technion - Israel Institute of
Technology.
Zeev Livne
(66) has
served as a director since July 2004. Mr. Livne has served as the chairman of Livne
Strategic Consultants Ltd. since
2001. Prior to that, Mr. Livne served in the
Israel Defense Forces, or IDF, for 39 years and retired as a Major
General. During his long military career with the IDF, Mr. Livne
served as the Defense Attaché to the United States and Canada from 1997 to 2001,
Military Secretary to the Prime Minister of Israel from 1996 to 1997 and Ground
Force Commander from 1994 to 1996. From 1992 to 1994, Mr. Livne
established the IDF Home Front Command and served as its first
Commander. Mr. Livne serves on the board of directors of PAZKAR Ltd.,
a private Israeli company. Mr. Livne holds a B.A. degree in History
from Tel Aviv University and an M.A. degree in Geography from the University of
Haifa.
Jacob Nuss
(63) has served as a director since 1993 and is a member of our audit
committee. Mr. Nuss has served as the vice president - internal
auditing of Israel Aircraft Industries Ltd., or IAI, since 2004, and served as
IAI’s deputy vice president - internal auditing from 1999 to
2003. From 1993 to 1999, Mr. Nuss served as the director of finance
of IAI’s electronics group. From 1991 to 1993, Mr. Nuss served as
assistant to the chairman of the board of directors of IAI. Mr. Nuss
has served in various financial management capacities at IAI since
1975. Mr. Nuss holds a B.A. degree in Economics and Business
Management from Bar Ilan University and an M.B.A. degree in Business from Tel
Aviv University. Mr. Nuss holds a certificate in internal
auditing.
Barry Stiefel
(60) has served as a director since November
2008. Mr. Stiefel served as a director of one of our UK subsidiaries
from 1986 to 1990. Since 2001, Mr. Stiefel has served as a consultant
for a number of companies, including Premedia Limited and its
subsidiaries. From 1990 until 2001, Mr. Stiefel was the chief
executive officer of Meridian VAT Reclaim Group, which he
founded. Between 1985 and 1990, Mr. Stiefel served as consultant in
the field of trade finance. From 1981 to 1985, Mr. Stiefel served as
finance director of Fisher Brothers Lumber Company Limited, a South African
company. Mr. Stiefel holds a B.Sc. degree in Mathematics and
Chemistry and a B.A. degree in Accounting, both from the University of
Witwatersrand in South Africa. Mr. Stiefel is a chartered accountant
in South Africa and is registered as an auditor (not in public practice) in the
United Kingdom.
Biographies
of Directors Continuing in Office
The
following information with respect to each of our directors continuing in office
is based upon our records and information furnished to us.
Nathan
Kirsh (78) has
served as a director since 1984. Mr. Kirsh is an independent
investor. Mr. Kirsh serves as one of the trustees of the Eurona
Foundation, the beneficial owner of 100% of the ordinary shares of our company
that are held by Mira Mag Inc. Mr. Kirsh holds a B.S. degree in
Commerce from the University of Witwatersrand, Johannesburg, South
Africa.
Shaul
Kobrinsky (58) has
served as an outside director since July 2004 and is the chairman of our audit
committee and a member of our investment committee and mergers and acquisition
committee. Mr. Kobrinsky has served as the President and Chief
Executive Officer of Urdan Industries Ltd., an investment and holding company
since 1997. Since 2003, Mr. Kobrinsky has served as senior managing
director of Alagem Capital Group, a Beverly Hills based investment
group. From 1989 to 1997, Mr. Kobrinsky served as chief executive
officer of Cargal Ltd., an Israeli company that manufactures
corrugates. Prior to that and from 1984, Mr. Kobrinsky served as
deputy managing director of Clal Industries Ltd., a holding and investment
company. Mr. Kobrinsky serves as an outside director and a member of
the audit committee of Scope Metal Trading Ltd., a public company traded on the
Tel Aviv Stock Exchange. Mr. Kobrinsky holds a B.A. degree in
Economics from Tel Aviv University. Mr. Kobrinsky is a member of the
Antitrust Court of the State of Israel.
Liza
Singer (39) has
served as an outside director since June 2010. Ms. Singer served as
the owner’s representative in the Lewis Trust Group, an investment assessment
and development entity that focuses on tourist projects and the development of
marine and hotels resorts, since 2003. Since 2007, Ms. Singer has
also served as the Chief Operating Officer and Country Manager of Brack Capital
Real Estate. Between 2002 and 2003, Ms. Singer served as the Vice
President of Business Development of the Baran Group, a provider of engineering
and construction services. From 2000 to 2001, Ms. Singer served as
investment director of Syntek Capital, a private-equity investment company, and
between 1999 and 2000, Ms. Singer served as an associate at APAX Partners &
Co., a venture capital fund. Ms. Singer was also an accountant at
Kesselman & Kesselman, the Israeli member firm of
PricewaterhouseCoopers. Ms. Singer has an LLB degree, a BA degree in
accounting and an MBA degree, all from Tel Aviv University. Ms.
Singer is a certified public accountant (Israel).
Biographies
of Dissident Shareholder Director Nominees
The
following information with respect to each director nominated by the
Dissident Shareholders has been
furnished to us by counsel for the Dissident Shareholders.
Major Gen., (Ret) Avihu
Ben-Nun, 70
Major
Gen. (Ret.) Avihu Ben-Nun served for 34 years in the Israeli Air Force, retired
in 1992, after 2 years as Head of Strategic Planning Division in the Israeli
Defense Forces' General Staff Headquarters, and 5 years as the Supreme Commander
of the Israeli Air Force. Since his retirement, Mr. Ben-Nun serves as the
Chairman of Universal Motors Israel (UMI), which he founded through a merger
between 3 competitors, and led to become the exclusive distributor of all
General Motors exported brands in Israel and the leading distributor and vehicle
importer in the Israeli automotive market. He also served as Chairman of GM UMIT
R&D and General Motors’ R&D center in Israel. Mr. Ben-Nun held key
executive positions in the private sector as well as voluntary positions in the
public sector. He also serves on the Board of Directors of leading companies,
including Kardan Ltd, ExactCost and FIRST Israel, and in the past on the Boards
of Golden Wings V.C. Fund, Elbit Systems Ltd., Bank Mizrahi, Electronic Data
Systems Israel Ltd. (which he also established) and Advanced Material
Technology. In the public sector, Mr. Ben-Nun is a director of the
Israel-America Chamber of Commerce and the Tel Aviv Chamber of Commerce, former
President of the Israeli Air Force Association, Chairman of the Israeli Vehicles
Importer Association and Vice-Chairman of the Combined Chamber of Commerce and
of the Council of the Federation of Israeli Chamber of Commerce. Mr. Ben-Nun
holds a Bachelor degree from Auburn University, Alabama; graduated with
distinction from the US Air Force Air Warfare College, graduated the Advanced
Management Program at Harvard Business School and was awarded an Honorary
Doctorate from the Technion in Haifa, Israel.
Mr. Yoav Stern,
56
Mr. Stern
served from late 2008 throughout part of 2009 as the Acting President and Chief
Executive Officer of the Company, during which he repositioned the Company after
suffering continuous losses, and redesigned its business plan for the corning
years, which was approved for execution by the Company’s Board. Since 1997, Mr.
Stern serves as the Co-Chairman of the Board of Directors of Bogen
Communications International Inc. (NASDAQ: BOGN), a New Jersey and European
based digital voice processing company with annual revenues of approximately $50
million. During 2007-2008, Mr. Stem led the privatization and deregistration of
Bogen through a series of public tender offers, and he is continuously involved
in its M&A, financing and strategic development activities. Prior to 1995,
Mr. Stem was a Co-Chief Executive Officer of Bogen's predecessor company,
European Gateway Acquisition Corporation (NASDAQ: EGAC). Mr. Stern was the
founder and managing partner of Helix Capital LLC, a private M&A and
turnaround advisory firm based in San Francisco and New York. During
1998-2003, Mr, Stern served as the Executive Chairman of Kellstrom Industries
Inc., an industry leader in the airborne equipment segments of the international
aviation services after-market. Together with Mr. Nedivi, he led a series of
complex M&A and financing transactions that increased Kellstrom's annual
revenues from $8 million to $330 million. Following the September 11 attacks and
the downturn in the aviation industry, Mr. Stem introduced a financial
turnaround plan for Kellstrom and raised $100 million from private equity funds
as well as from GE Capital and Sumitomo Bank, thus enabling Kellstrom to
significantly recover from brink of liquidation. Mr. Stem is still one of the
largest private shareholders of Kellstrom, Mr. Stern was also the President of
WordStar International Inc., a California based publicly traded software
company, which he led through a turnaround process and a three-way public merger
that resulted in it becoming the largest consumer software company (The Learning
Company (NYSE: TLC)). Mr. Stern served as a director and executive officer in
various private and public companies, including Random Access Inc. and Elron
Electronic Industries Ltd. (NASDAQ: ELRNF), in which he was extensively involved
in major M&A transactions, the raising of public equity and debt and
business restructuring. Mr. Stem served for 25 years in active duty and reserve
service in the Israeli Air Force, as a fighter pilot and senior flight leader of
various aircrafts (such as F-15, A-4, Mirage and Kfir), an Avionic Systems
Officer, a Commander of the Operational Training Unit and an F-15 Deputy
Squadron Commander. Mr. Stem earned a Practical Engineering Diploma (magna cum
laude) in advance mechanics and automation from ORT Technological College,
Israel, graduated the Israeli Air Force Academy and holds a B.Sc. Degree (cum
laude) in Mathematics and Computer Science from Tel Aviv
University.
Mr. Zivi R. Nedivi
52
Mr.
Nedivi has served, between 2008 and 2010 as the Chief Executive Officer and
thereafter as Special Advisor of Axiorn Investment Advisors, LLC, a hedge fund
located in New York, focused on foreign currency trading with assets under
management of over $1.6 billion, servicing large financial institutions,
including Deutsche Bank and the World Bank. Prior to joining Axiom, Mr. Nedivi
served as the Chief Operating Officer of Lumenis Ltd., a global leader in
medical and aesthetic lasers and light based technology. From 1995 until 2005,
Mr. Nedivi served as President and Chief Executive Officer of Kellstrom
Aerospace (as well as its predecessor companies), an industry leader in the
airborne equipment segments of the international aviation services after-market.
Together with Mr. Stern, he led complex M&A and financing transactions that
increased Kellstrom's annual revenues from $8 million to $330 million. Following
the September 11 attacks and the downturn in the aviation industry, Mr. Nedivi
also planned and executed a turnaround plan for Kellstrom, thus enabling it to
significantly recover from brink of liquidation. Mr. Nedivi is still one of the
largest private shareholders of Kellstrom. Mr. Nedivi was also the General
Manager of Maakav Ltd., a private aviation management company based in Israel,
which represented certain American companies in Israel, including companies
active in the distribution of aircraft parts. Mr. Nedivi served as a Human
Engineering Consultant to Israel Aircraft Industries Ltd. on the Lavi fighter
aircraft program. He also served for seven years in the Israel Air Force as an
F-15 fighter pilot and held the rank of Major.
Mr. Ami Amir,
66
Mr. Amir
established and currently serves as the General Partner at Partech
International, a global venture fund, focusing on sourcing and investing in
local early stage technology companies. Mr. Amir founded Radvision Ltd. (NASD:
RVSN) in 1993 and managed it as the Chief Executive Office for 9 years. Under
his leadership, the company became a market leader in the voice and video over
IP space. During 2000, Mr. Amir initiated the IPO of Radvision on NASDAQ in
which an amount of $85 million was raised by the company and led the company's
growth to 300 employees and revenues in excess of $70 million. Prior to
Radvision, Mr. Amir served for 6 years as the Chief Executive Officer of RAD
Inc., during which he led RAD to over $20 million in sales to OEMs and
distributors. Mr. Amir’s extensive technical background includes years spent in
R&D building real time, embedded electronic warfare systems and large
software based communications systems, Internet related technologies and
solutions and developing various hardware and software. Mr. Amir holds a B. Sc.
Electrical Engineering from Technion in Haifa, Israel.
Brig. Gen. (Res.) Israel
(Relik) Shafir, 57
Mr.
Shafir joined the Company in 2009 and resigned in early 2010. He served as the
Vice President of Business Development and Command and Control Products Manager.
Mr. Shafir currently serves as the Chief Executive Officer of Thermal Cleaning
Technologies Ltd., a subsidiary of IDT Energy, a company pursuing the cleanup of
contaminated soils. Mr. Shafir was the founder and Chief Executive Officer of
4DM-Technologies, a software company in the field of Command and Control
software for management of emergency situations. After selling the source code
to the Israel Aircraft Industry, Mr. Shafir headed a project of upgrading the
system for municipal and statewide security applications. Mr. Shafir is the Head
of the Commission for Safety in Civil Aviation which was appointed by the
Israeli Minister of Defense and Minister of Transportation to redesign civil
aviation safety procedural and control issues. Mr. Shafir has vast experience in
the Israeli Air Force, where he served as a fighter pilot, the Commander of the
Israeli Air Force Academy, Commander of Hazor AFB (an all F-16 base) and
Commander of Tel-Nof Air Force Base, the largest Air Force base in Israel. Mr.
Shafir majored in Mathematics and Philosophy at the University of Bar-Ilan,
Israel and has a MBA from the Naval Post Graduate School in Monterey,
California.
Our
Board of Directors Statement AGAINST the Shareholder Proposals
Our Board
of Directors strongly opposes the adoption of the two shareholder
proposals. We believe that it is in the best interest of our
shareholders to maintain the current composition of our Board of
Directors. To that extent, all the members of our Board of Directors
were recently re-elected at our 2010 Annual General Meeting of our Shareholders
held on June 23, 2010, by a majority of more than 80% of the votes represented
at the meeting. We believe that our current Board of Directors has
the knowledge, experience, independence and commitment to best represent the
interests of all of our shareholders. Our Board of Directors
navigated our company through the recent economic turmoil that adversely
impacted the company and has taken decisive action to improve shareholder value
based on its deep experience and interest in the company. To that
end, our Board of Directors implemented management changes, cost cutting
measures and adopted a new strategic plan for the company. Under the
leadership of the current Board of Directors and management team, we are
executing on our strategy to create value for our company and its
shareholders. Our Board of Directors is focused on one central goal
to best maximize shareholder value and we ask to you to reject the proposal to
remove from office our highly qualified and capable directors.
The
Dissident Shareholders have invested in us and we value and respect the
Dissident Shareholders. However, we do not believe that the director
nominees proposed by the Dissident Shareholders would strengthen our company or
add value to our shareholders. The Dissident Shareholders have not
presented any plan for improving our company’s position. Based on the
biographies provided to us, it appears that the director nominees are affiliated
with our former interim Chief Executive Officer, Mr. Yoav Stern, one of the
director nominees, whose temporary engagement with our company was not made
permanent. Both Mr. Stern and Mr. Shafir held managerial positions in our
company for less than a year and we view their contribution to the development
of the our business as minimal, if at all. None of the other directors nominees
have any special knowledge or experience in perimeter security, our core
business. We
therefore urge you to reject both of the shareholder proposals.
FOR
ALL OF THE FOREGOING REASONS, THE BOARD OF DIRECTORS RECOMMENDS THAT
SHAREHOLDERS VOTE “AGAINST” THE SHAREHOLDER PROPOSALS. PROXIES
RECEIVED BY THE COMPANY WILL BE VOTED “AGAINST” THE SHAREHOLDER PROPOSALS UNLESS
THE SHAREHOLDER SPECIFIES OTHERWISE IN THE PROXY.
Under the
Israeli Companies Law and our Articles of Association, the affirmative vote of
the holders of a majority of the ordinary shares represented at the
Extraordinary Meeting, in person or by proxy, entitled to vote and voting on the
matter, is required to approve each of the above shareholder
proposals.
BOARD
OF DIRECTORS AND COMMITTEES
Election
of Directors
Our
Articles of Association provide for a board of directors of not less than three
and not more than 11 members, as may be determined from time to time at our
annual general meeting. Our board of directors is currently composed
of eight directors, including two outside directors appointed in accordance with
the Israeli Companies Law.
Our
directors (except the outside directors, as detailed below), are elected by our
shareholders at our annual general meeting and hold office until the next annual
general meeting. All the members of our board of directors (except
the outside directors), may be reelected upon completion of their term of
office. Our annual general meetings of shareholders are held at least
once every calendar year, but not more than 15 months after the last preceding
annual general meeting. In the intervals between our annual general
meetings of shareholders, the board of directors may from time to time appoint a
new director to fill a casual vacancy or to add to their number, and any
director so appointed will remain in office until our next annual general
meeting of shareholders and may be re-elected.
Outside
and Independent Directors
Outside
Directors. The Israeli Companies Law requires Israeli
companies with shares that have been offered to the public in or outside of
Israel to appoint at least two outside directors. The Israeli
Companies Law provides that a person may not be appointed as an outside director
if the person, or the person’s relative, partner, employer or an entity under
that person’s control, has or had during the two years preceding the date of
appointment any affiliation with the company, or any entity controlling,
controlled by or under common control with the company. The term
“relative” means a spouse, sibling, parent, grandparent, child or child of
spouse or spouse of any of the above. In general, the term
“affiliation” includes an employment relationship, a business or professional
relationship maintained on a regular basis, control and service as an office
holder. Regulations promulgated under the Israeli Companies Law
include certain additional relationships that would not be deemed an
“affiliation” with a company for the purpose of service as an outside director.
In addition, no person may serve as an outside director if the person’s position
or other activities create, or may create, a conflict of interest with the
person’s responsibilities as director or may otherwise interfere with the
person’s ability to serve as director. If, at the time an outside
director is appointed, all current members of the board of directors are of the
same gender, then that outside director must be of the other
gender. A director of one company may not be appointed as an outside
director of another company if a director of the other company is acting as an
outside director of the first company at such time.
At least
one of the elected outside directors must have “accounting and financial
expertise” and any other outside director must have “accounting and financial
expertise” or “professional qualification,” as such terms are defined by
regulations promulgated under the Israeli Companies Law. However,
Israeli companies listed on certain stock exchanges outside Israel, including
The NASDAQ Global Market, such as our company, are not required to appoint an
outside director with “accounting and financial expertise” if a director with
accounting and financial expertise who qualifies as an independent director for
purposes of audit committee membership under the laws of the foreign country in
which the stock exchange is located serves on its board of
directors. All of the outside directors of such a company must have
“professional qualification.”
The
outside directors are elected by shareholders at a general
meeting. The shareholders voting in favor of their election must
include at least one-third of the shares of the non-controlling shareholders of
the company who voted on the matter. This minority approval
requirement need not be met if the total shareholdings of those non-controlling
shareholders who vote against their election represent 1% or less of all of the
voting rights in the company.
In
general, outside directors serve for a three-year term and may be reelected to
one additional three-year term. However, Israeli companies listed on
certain stock exchanges outside Israel, including The NASDAQ Global Market, such
as our company, may appoint an outside director for additional terms of not more
than three years subject to certain conditions. Such conditions
include the determination by the audit committee and board of directors, that in
view of the director’s professional expertise and special contribution to the
company’s board of directors and its committees, the appointment of the outside
director for an additional term is in the best interest of the
company. Outside directors can be removed from office only by the
same special percentage of shareholders that can elect them, or by a court, and
then only if the outside directors cease to meet the statutory qualifications
with respect to their appointment or if they violate their fiduciary duty to the
company.
Each
committee of the board of directors that is authorized to exercise powers vested
in the board of directors must include at least one outside director and the
audit committee must include all the outside directors. An outside
director is entitled to compensation as provided in regulations adopted under
the Israeli Companies Law and is otherwise prohibited from receiving any other
compensation, directly or indirectly, in connection with such
service.
Independent
Directors. In general, NASDAQ Listing Rules require that the
board of directors of a NASDAQ-listed company have a majority of independent
directors and that its audit committee have at least three members and be
comprised only of independent directors, each of whom satisfies the respective
“independence” requirements of NASDAQ and the SEC. However, foreign
private issuers, such as our company, may follow certain home country corporate
governance practices instead of certain requirements of the NASDAQ Listing
Rules. On June 30, 2006, we provided NASDAQ with a notice of
non-compliance with respect to the requirement to maintain a majority of
independent directors, as defined under NASDAQ Listing
Rules. Instead, under Israeli law and practice we are required to
appoint at least two outside directors, within the meaning of the Israeli
Companies Law, to our board of directors. However, despite such
notification of non-compliance, we maintain a majority of independent
directors. In addition, in accordance with the rules of the SEC and
NASDAQ, we have the mandated three independent directors, as defined by the
rules of the SEC and NASDAQ, on our audit committee.
Pursuant
to a recent amendment to the Israeli Companies Law, an Israeli company whose
shares are publicly traded may elect to adopt a provision in its articles of
association pursuant to which a specified part of its board of directors will be
comprised of individuals complying with certain independence criteria prescribed
by the Israeli Companies Law. Such independent directors shall have
all the qualifications of an outside director; however, he or she is not subject
to the “accounting and financial expertise” or “professional qualification”
requirements and may be elected and removed from office by a simple majority
vote of the general shareholders meeting. We have not included such a
provision in our articles of association.
Our Board
of Directors has determined that Ms. Singer and Mr. Kobrinsky qualify both as
independent directors under the requirements of the SEC and NASDAQ and as
outside directors under the requirements of the Israeli Companies
Law. Our Board of Directors has further determined that Messrs. Nuss
and Livne qualify as independent directors under the requirements of the SEC and
NASDAQ.
Audit
Committee
Under the
Israeli Companies Law, the board of directors of any public company must
establish an audit committee. The audit committee must consist of at
least three directors and must include all of the outside
directors. The audit committee may not include the chairman of the
board of directors; any director employed by the company or providing services
to the company on an ongoing basis; or a controlling shareholder or any of the
controlling shareholder’s relatives. The responsibilities of the
audit committee include identifying irregularities in the management of the
company’s business and approving related party transactions as required by
law. Under Israeli law, an audit committee may not approve an action
or a transaction with a controlling shareholder, or with an office holder,
unless at the time of approval two outside directors are serving as members of
the audit committee and at least one of the outside directors was present at the
meeting in which an approval was granted.
In
addition, the NASDAQ Listing Rules require us to establish an audit committee
comprised of at least three members, all of whom must be independent directors,
each of whom is financially literate and satisfies the respective
‘‘independence’’ requirements of the SEC and NASDAQ and one of whom has
accounting or related financial management expertise at senior levels within a
company.
Our audit
committee consists of three board members who satisfy the respective
“independence” requirements of the SEC, NASDAQ and Israeli law for audit
committee members. Our audit committee is currently composed of
Messrs. Shaul Kobrinsky and Jacob Nuss and Ms. Liza Singer. The audit
committee meets at least once each quarter. Our audit committee
charter is available on our website at www.magal-s3.com.
Investment
Committee
Our board
of directors has established an investment committee, which is responsible for
the investment of our cash and our hedging transactions. The
investment committee is currently composed of Messrs. Jacob Even-Ezra and Shaul
Kobrinsky.
Mergers
and Acquisitions Committee
Our board
of directors has established a mergers and acquisitions committee, which is
responsible for the examination and review of merger and acquisition
opportunities and making recommendations to the board of directors with respect
to such opportunities. The mergers and acquisitions committee is
currently composed of Messrs. Jacob Even-Ezra, Ze’ev Livne and Shaul
Kobrinsky.
APPROVAL
OF CERTAIN TRANSACTIONS WITH MR. NATHAN KIRSH, OUR PRINCIPAL
SHAREHOLDER
AND A DIRECTOR
(Item 2
on the Proxy Card)
As a
result of the difficult economic situation during the past two years, especially
in Europe, and the tight credit markets, we will require additional funding to
execute our strategic plan. We intend to effectuate a $15 million
rights offering, in which we will offer all of our shareholders the right to
subscribe to purchase our ordinary shares, on a pro rata basis, at a price per
share that will be determined by our Board of Directors. Our Board of
Directors has appointed a special committee that will oversee the rights
offering and will make a recommendation to the Board of Directors with respect
to the terms of the rights offering. The special committee is
composed of the Chairman of our Board of Directors and our two outside directors
within the meaning of Israeli law. We believe that such financing
will provide us with the necessary funds to allow us to achieve our goals. The
rights offering, which will be made in accordance with U.S. securities laws,
will require the filing of a registration statement with the SEC and will be
subject to SEC review, which may be a lengthy process.
Each
shareholder who elects to subscribe to purchase his or her entire pro rata share
of the rights offering will be entitled to subscribe for additional shares at
the same price per share. In the event that such shareholders chose
to exercise such option for a total number of remaining shares in excess of the
number available, the remaining shares available for purchase will be allocated
to such shareholders based on the number of shares such shareholders have
elected to purchase pursuant to the pro rata subscription right. Mr.
Nathan Kirsh, our principal shareholder and a director, has undertaken to
exercise such oversubscription right in full and to subscribe for all of the
shares offered in the rights offering, subject to the shareholder approval of
this proposal and provided that prior to Meeting there will be no “Change of
Control,” as such term is defined below.
In order
to finance our operations during the interim period, Mr. Kirsh has agreed to
provide us with a six month bridge loan in the aggregate principal amount of
$5.0 million. The principal amount will bear interest at the rate of
three month LIBOR+4% per annum, which accrues on a quarterly
basis. The principal amount will be paid to us within five business
days following the fulfillment of certain conditions, including shareholder
approval of this proposal and that prior to the Extraordinary Meeting there will
be no “Change of Control,” as such term is defined below.
The
bridge loan is for a term of six months, which may be extended by us for up to
an additional 60 days upon prior written notice. The principal amount
and accrued interest will be payable at the end of term unless repaid earlier,
as described below. In the event of a “Change of Control,” the entire
bridge loan, including accrued interest, will become immediately due and
payable. For this purpose “Change of Control” means: (x) the purchase
by any person or entity (other than Mr. Kirsh) of: (i) all or substantially all
of our assets or (ii) more than 50% of our outstanding share capital (including
through the issuance of shares and securities convertible into shares); (y) the
replacement of the Chairman of our Board of Directors (other than as a result of
his death or incapacity or as a result of his voluntary resignation), or (z) the
replacement of more than 50% of the members of our Board of Directors (excluding
outside directors within the meaning of the Israeli Companies Law) within a 90
day period during the term of the bridge loan.
Two
business days prior to the effective date of the rights offering, we intend to
effect a private placement of 150,000 of our ordinary shares to Mr. Kirsh at an
initial price per share equal to the closing price of our ordinary shares on the
date prior to the private placement. Upon the effective date of the
rights offering, the private placement price per share will be adjusted to a
price per share equal to the higher of the price per share in the rights
offering and the closing price of our ordinary shares on the date prior to the
effective date of the rights offering provided that in no event will the
adjusted private placement price per share be less than the initial price per
share The private placement consideration from Mr. Kirsh will be paid
to us by means of a set off against a portion of the then outstanding bridge
loan, including accrued interest. The outstanding balance of the
bridge loan, including accrued interest, will be paid by us to Mr. Kirsh within
five business days after the successful closing of the rights
offering.
This
private placement is being made for the purpose of allowing Mr. Kirsh to
participate in the rights offering under Israeli law. Mr. Kirsh
currently holds approximately 24.2% of our issued and outstanding
shares. Under Israeli law, an acquisition of shares in a public
company must be made by means of a tender offer if as a result of the
acquisition the purchaser would become a 25% or greater shareholder of the
company unless there is already another 25% or greater shareholder of the
company. This rule does not apply if, among other things, the
acquisition was made in a private placement that received shareholder approval
as a private placement that is intended to allow the offeree to hold 25% or more
of the voting rights in the company if there is no other shareholder holding 25%
or more of such voting rights. Accordingly, if our shareholders
approve the private placement, Mr. Kirsh’s holdings will increase to
approximately 25.65% and he will be entitled to participate in the rights
offering without the need to conduct a tender offer.
Under
NASDAQ Listing Rules shareholder approval may be deemed to be required for the
rights offering if the price per share in the rights offering is less than the
greater of the book or market value of our ordinary shares.
Our Audit
Committee and Board of Director have approved the terms of the rights offering,
the bridge loan from Mr. Nathan Kirsh and the private placement in which Mr.
Nathan Kirsh will become a 25% or greater shareholder.
It is
therefore proposed that at the Extraordinary Meeting our shareholders adopt the
following resolution:
“RESOLVED, subject to the
rejection of Item 1A, that the terms of the private placement, which is intended
toallow Mr. Nathan Kirsh to become a 25% or greater shareholder, and the terms
of the rights offering, as described in the Proxy Statement for the
Extraordinary General Meeting dated July 4, 2010, be, and hereby are,
approved.”
This
Proxy Statement does not constitute an offer to sell or the solicitation of
offers to buy any securities of our Company and will not constitute an offer,
solicitation or sale of any security in any state or jurisdiction in which such
offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such state or
jurisdiction
The
Board of Directors recommends a vote FOR the foregoing resolution.
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By
Order of the Board of Directors
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Jacob
Perry
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Chairman
of the Board of Directors
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Dated:
July 4, 2010