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DECLARATION OF STATUS FOR ISRAELI INCOME TAX PURPOSES

 Do not send this form to the IRS. See separate instructions on the back cover of this form.

Read this form together with the Offer to Purchase and Letter of Transmittal accompanying this form.

Terms used herein but not otherwise defined herein have the definitions ascribed thereto in the Offer to Purchase.

 

PAYER'S NAME: American Stock Transfer & Trust Company, as Depositary

Who may use this form and why?

Holders of Shares who wish to tender their Shares pursuant to the Offer to Purchase and the related Letter of Transmittal (which, as amended from time to time, together constitute the “Offer”) may use this form if they tender their Shares in the Offer to the Depositary and they are either:

THIS FORM IS NOT INTENDED FOR YOUR USE IF YOU ARE A “RESIDENT OF ISRAEL” (OTHER THAN A BANK, BROKER OR FINANCIAL INSTITUTION RESIDENT IN ISRAEL).

PLEASE NOTE THAT IF YOU PROVIDE A DECLARATION FORM, YOU ALSO CONSENT TO THE PROVISION OF YOUR DECLARATION FORM TO THE PURCHASER AND/OR THE DEPOSITARY AND TO THE ISRAELI TAX AUTHORITY (THE “ITA”), IN CASE THE ITA SO REQUESTS, FOR PURPOSES OF AUDIT OR OTHERWISE.

To whom should you deliver this form?

If you wish to submit this form and (1) you hold your Shares directly, i.e., you are a registered holder, complete and sign this form and mail or deliver it to the Depositary (together with the Letter of Transmittal by which you tender your Shares) at one of its addresses set forth below, or (2) you hold your Shares through a broker, dealer, commercial bank, financial institution, trust company or other nominee (a “Broker”), complete and sign this form and mail or deliver it (together with the instruction letter by which you tender your Shares) to such Broker.

Until when should I deliver this form?

As described above, this form should be delivered together with the Letter of Transmittal or instruction letter by which you tender your Shares prior to 10:00 a.m., New York time, on the on the Initial Completion Date or Final Expiration Date (as defined in Section 1 of the Offer to Purchase), as applicable.

You are urged to consult your own tax advisors to determine the particular tax consequences to you should you tender your Shares in the Offer, including, without limitation, the effect of any state, local or foreign income and any other tax laws and whether or not you should use this form.

SIGN HERE:
	Signature of Shareholder           (or individual authorized to sign on your behalf)		Date		Capacity in which acting

                            

Number of Shares: ___________________

INSTRUCTIONS

 Forming Part of the Declaration of Status for Israeli Income Tax Purposes

I.     General Instructions. This Declaration Form (Declaration of Status for Israeli Income Tax Purposes), or this Form, should be completed by holders of Shares who wish to tender their Shares pursuant to the Offer, and who are either: (i) NOT and at the date of purchase of their Shares were not “residents of Israel” for purposes of the Ordinance (See Instruction II below), and if the holder of Shares is a corporation, the corporation is NOT and at the date of purchase of its Shares was not a “resident of Israel”, Israeli residents are NOT “controlling shareholders” of such corporation within the meaning of Section 68A of the Ordinance (See Instruction III below), and Israeli residents are NOT the beneficiaries of, or are entitled to, 25.0% or more of the revenues or profits of such corporation, whether directly or indirectly, who acquired their Shares after Magal’s initial public offering on Nasdaq in 1993 or (ii) a bank, broker or financial institution that are “residents of Israel” within the meaning of that term in Section 1 of the Ordinance, holding Shares solely on behalf of beneficial shareholder(s) who acquired their Shares after Magal’s initial public offering on Nasdaq in 1993, and are subject to the provisions of the Ordinance and the regulations promulgated thereunder relating to the withholding of Israeli tax, including with respect to the cash payment (if any) made by them to such beneficial shareholder(s) with respect to Shares tendered by them and accepted for payment by the Purchaser pursuant to the Offer.  Israeli residents who are NOT Eligible Israeli Brokers should not use this Form.

        Part I (Identification and details of Shareholder). You should complete Item 1, 2 and 5 through 8 and either (i) Item 3, if you are an individual, or (ii) Item 4, if you are a corporation (or limited liability company), trust, partnership or other entity.

        Part II (Declaration by Non-Israeli Shareholder). If you are NOT an Israeli resident, you should complete either Section A (for Individuals), Section B (for Corporations), Section C (for Partnerships) or Section D (for Trusts). If you do not mark a box you will be deemed to answer that the corresponding item is not correct with respect to you.

        Part III (Declaration by Israeli Bank, Broker or Financial Institution). If you are an Eligible Israeli Broker, you should complete this Item.

        Part IV (Certification). By signing this Form, you also make the statements in Part IV.

        Inadequate Space. If the space provided on this Form is inadequate, you should insert such details on a separate signed schedule and attached to this Form.

        Determination of Validity. All questions as to the validity, form or eligibility (including time of receipt) of this Form will be, subject to applicable law, determined by the Purchaser, in its sole discretion. None of the Purchaser, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in any Form or incur any liability for failure to give any such notification. For more details, see Section 5 of the Offer to Purchase.

        Questions and Requests for Assistance or Additional Copies. Questions and requests for assistance may be directed to the Information Agent at the address or telephone numbers set forth on the back cover. Additional copies of this Form may be obtained from the Information Agent.

II.     Definition of Resident of Israel for Israeli Tax Purposes

Section 1 of the Ordinance defines a “resident of Israel” or a “resident” as follows:

 “(A) with respect to an individual - a person whose center of vital interests is in Israel; for this purpose, the following provisions will apply:

(1)  in order to determine the center of vital interests of an individual, account will be taken of the individual’s family, economic and social connections, including, among others:

 

(a) place of permanent home;

 

                (b) place of residential dwelling of the individual and the individual's immediate family;

 

(c) place of the individual's regular or permanent occupation or the place of his permanent employment;

(d) place of the individual's active and substantial economic interests;

(e) place of the individual's activities in organizations, associations and other institutions;

(2) the center of vital interests of an individual will be presumed to be in Israel:

(a) if the individual was present in Israel for 183 days or more in the tax year;

(b)  if the individual was present in Israel for 30 days or more in the tax year, and the total period of the individual’s presence in Israel that tax year and the two previous tax years is 425 days or more.

For the purposes of this provision, “day” includes a part of a day.

(3) the presumption in subparagraph (2) may be rebutted either by the individual or by the assessing officer;

 

        (4) …;

 

(1) it was incorporated in Israel;

(2) the "control and management" of its business is exercised in Israel, except for a body of persons, the business of which is controlled and managed in Israel by an individual who became an Israel resident for the first time or is a returning resident, as set forth in section 14(a) and ten years have not yet passed since he became an Israeli resident as aforesaid, or by any person on his behalf, provided that such body of persons would not be an Israel resident if the control and management of its business were not by a said individual or by a person on his behalf, unless the body of persons requested otherwise."

III.  Definition of Controlling Shareholder for Purposes of Section 68A of the Ordinance

         Section 68A of the Ordinance defines “controlling shareholders” as follows:

        “Controlling shareholders” – shareholders that hold, directly or indirectly, alone, or together with another, or together with another Israeli resident, one or more of the means of control at a rate exceeding 25.0%.”

        Section 88 of the Ordinance defines the terms “means of control” and “together with another” as follows:

        “Means of control” – in a corporation – each of the following:

(1) the right to profits;

(2) the right to appoint a director or a chief executive officer in the company, or equivalent position holders in another corporation;

(3) a voting right in the general meeting of a company, or in an equivalent body in another corporation;

        

(4) the right to a portion of the remainder of the assets after settlement of liabilities, upon wind-up;

        

(5) the right to instruct anyone holding the rights listed in clauses (1) to (4) on the manner in which his right shall be executed;

        

and all, whether by virtue of shares, rights to shares or other rights, or in any other manner, including by way of voting agreements or through a trust.”

“Together with another” – together with a relative, and together with he who is not a relative and they have between them cooperation on a permanent basis under an agreement regarding material issues of a corporation, directly or indirectly;"

        This Letter of Transmittal and certificates and any other required documents should be sent or delivered by each shareholder or that shareholder’s broker, dealer, commercial bank, trust company or other nominee to the Depositary at one of its addresses set forth below.

 

The Depositary for the Offer is:

Mail or deliver this Letter of Transmittal, or a facsimile, together with the certificate(s) representing your shares, to:

 

American Stock Transfer & Trust Company, LLC

 

6201 15^th Avenue

Attn: Corporate Actions Dept.

Brooklyn, N.Y. 11219

 Fax number 718-234-5001

For assistance call 877-248-6417

___________________

 

Questions or requests for assistance may be directed to the Information Agent at its telephone numbers listed below.  Additional copies of the Offer to Purchase and this Letter of Transmittal may be obtained from the Information Agent.  A shareholder may also contact brokers, dealers, commercial banks or trust companies for assistance concerning the Offer.

 

The Information Agent for the Offer is:

 

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