AFS.L Regulatory News (AFS)

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL. PLEASE SEE THE IMPORTANT NOTICES AT THE END OF THIS ANNOUNCEMENT.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.

For immediate release

27 February 2020

Amiad Water Systems Ltd.

("Amiad" or the "Company")

Update on Potential Investment, Proposed Directorate Change and Notice of Extraordinary General Meeting

Further to the Company's announcements of 2 September 2019, 11 September 2019 and 22 November 2019, Amiad (AIM: AFS), a leading global producer of water treatment and filtration solutions, is pleased to confirm that it has entered into a conditional subscription agreement (the "Subscription Agreement") with FIMI for an investment of up to £17,600,000 in the Company through a subscription for new Ordinary Shares by FIMI (the "Subscription") and an open offer to Qualifying Shareholders (the "Proposed Open Offer"). In addition, there are proposed director changes to the Board, which include two representatives of FIMI joining the Board, as set out further below.

The Board gives notice that an Extraordinary General Meeting of the Company is to be held at 11.00 am (UK time) on 2 April 2020 at the offices of Bryan Cave Leighton Paisner LLP, Adelaide House, London Bridge, London, EC4R 9HA, United Kingdom to seek the requisite shareholder approvals as described below.

Further details on the proposals are set out in the Circular. Investors are encouraged to read the Circular in its entirety as it contains important information in relation to the proposals. Unless the context otherwise requires, capitalised terms used in this announcement shall have the meanings given to them in the Circular.

Details of the Capital Raising

The Subscription Agreement provides that FIMI will subscribe for up to 7,652,174 Subscription Shares at the Offer Price of £2.30 per Ordinary Share.

The Company intends to give all Qualifying Shareholders an opportunity to participate in the Capital Raising via the Proposed Open Offer for up to 856,556 Proposed Open Offer Shares at the Offer Price. Valid applications by Qualifying Shareholders will be satisfied by clawback of the Subscription Shares from FIMI (which will therefore reduce its subscription amount).

FIMI and HaChoshlim have also irrevocably undertaken not to take up their entitlements under the Proposed Open Offer to provide other Qualifying Shareholders with the opportunity to apply for additional Proposed Open Offer Shares pursuant to an excess application facility to mitigate the dilutive effect of the Subscription. The Subscription and the Proposed Open Offer are conditional on (i) the requisite resolutions being passed at the Extraordinary General Meeting and (ii) receipt of approval by the Director General of the Competition Authority in Israel. As described below, the Proposed Open Offer will only be formally launched, should these conditions be satisfied.

In addition, as announced on 22 November 2019, FIMI has entered into a conditional agreement with HaChoshlim, to acquire, subject to the completion of the Capital Raising, a further 1,109,918 new Ordinary Shares pursuant to the HaChoshlim/FIMI Share Purchase Agreement.

Following completion of the Capital Raising and the HaChoshlim/FIMI Share Purchase Agreement, FIMI will hold between approximately 39.56% and 42.38% of the Enlarged Share Capital depending on the level of participation from Qualifying Shareholders in the Proposed Open Offer while HaChoshlim (together with Kibbutz Amiad) would hold 32.91% of the Company's Enlarged Share Capital.

Benefits of the Capital Raising

It is expected that the Capital Raising will assist the Company in delivering its five-year strategic plan. This includes the funding of its organic growth through further investment in research and development of new products and solutions in both the irrigation and industrial segments. The investment will also allow the Company to scale up its production through the automation of certain processes resulting in improved efficiency. Aside from assisting in the Company's expected organic growth through research and development and scaled up production, the investment will support the Company's aspiration of extending its water filtration solutions portfolio and its access to new markets through the acquisition of new technologies and channels to market. Finally, the Company will benefit from the extensive experience of FIMI Investment Funds, who following the investment will be the Company's largest shareholder, in improving the performance of global industrial companies.

In recent years, the Company has not been able to access external capital and in 2019 suspended its dividend for that year in order to invest in its business. The Independent Directors believe that the external capital and expertise provided by FIMI will enable the Company to invest in its five-year strategic plan, achieve its growth ambitions and provide it with a stable footing in a globally competitive marketplace.

Proposed Directorate Change

As part of the Capital Raising, the Company has agreed to enter into the Relationship Agreements with each of FIMI and HaChoshlim to regulate the future relationship between each of them and the Company. The Relationship Agreements are conditional on the Admission. In accordance with the terms of the Relationship Agreements and the HaChoshlim/FIMI Share Purchase Agreement, there will be a number of changes to the Board as outlined below.

·; The following individuals will be appointed to the Board as Representative Directors (as defined in the Relationship Agreements) for FIMI:

o Ishay Davidi, the founder of FIMI and its CEO since 1996, with effect from Admission; and

o Lilach Asher Topilsky, a senior partner at FIMI, with effect from the conclusion of the Extraordinary General Meeting.

·; Ran Shahor will be appointed to the Board as an Independent Director (as defined in the Relationship Agreements) with effect from the conclusion of the Extraordinary General Meeting.

·; Jenny Cohen Derfler, Dori Ivzori and Zehava Simon shall each resign from their positions as directors of the Company with effect from Admission. Dori Ivzori will continue to serve as the CEO of the Company.

The remuneration of each of the new directors shall be the same as the remuneration of each of the current directors (excluding the non-Israeli resident external directors) (details of the current directors remuneration is included in the Company's financial statements and annual report for the year ended 31 December 2018).

Each of Dori Ivzori and Avishay Afriat, being the executive directors of the Company, have both undertaken to the Company that although they will not be from Admission, or in the case of Avishay Afriat has never been, a member of the Board, they will continue to be responsible, along with the Board, for the compliance of the Company with the AIM Rules and shall continue to provide the Board with all information which the Company needs to comply with the AIM Rules.

Further details on each of the proposed new directors are set out below:

Ishay Davidi

Mr Davidi, aged 57, is the founder and has served as Chief Executive Officer of FIMI since 1996. Prior to establishing FIMI, Mr Davidi was the CEO of the Tikvah Fund, a private Israeli investment fund founded by the late Sanford Bernstein. Mr Davidi has also held senior management positions in a variety of leading Israeli industrial and high-tech companies. Mr Davidi is the Chairman of the Board of Directors of Hadera Paper (TASE-listed) and Polyram Plastic Industries. He is a Director of Gilat Satellite Networks (NASDAQ/TASE-listed), Ham-Let (TASE-listed), Bet Shemesh Engines (TASE-listed), C.Mer Industries (TASE-listed), Kamada Ltd. (NASDAQ/TASE-listed) and Rekah Pharmaceutical Industries (TASE-listed).

Lilach Asher Topilsky

Ms Asher Topilsky (née Asher), aged 49, is currently a senior partner at FIMI, having previously been the Chief Executive Officer at Israel Discount Bank Ltd., the Chairman of Mercantile Discount Bank Ltd. (a subsidiary of Israel Discount Bank Ltd.) and the Head of the Retail Division of Bank Hapoalim BM. Ms Asher Topilsky is the Chairman of the Board of Directors of G1 Secure Solutions (TASE-listed) and director of Kamada Ltd. (NASDAQ/TASE-listed). Ms Asher Topilsky has an MBA from Northwestern University and an undergraduate degree in Economics and Management from Tel-Aviv University.

Ran Shahor

Mr Shahor, aged 62, is the President and co-founder of HolistiCyber. Prior to HolistiCyber, Mr Shahor served as the CEO of BSI, a global provider of holistic (cyber, HR and physical) security solutions, as well as the CEO& Co-Founder of Focal Energy where he continues to serve as a board member. Mr Shahor was also previously the Managing Partner of Star Ventures, a $1 billion global venture capital group where he served as a board member in Azimuth Technologies and Maayan Ventures (TASE-listed), Unity (NASDAQ-listed) and a number of privately owned companies. Prior to his time at Star Ventures, Mr Shahor had a long and decorated career with the Israeli Defense Forces. He was the Commander of the IDF's top Special Forces unit and also served as the acting Military Secretary of the Israeli Defense Minister. Mr Shahor has a Law degree and an MBA from Tel-Aviv University.

As at the date of this announcement, none of Mr Davidi, Ms Asher Topilsky or Mr Shahor have any direct personal interest in any ordinary shares of the Company. However, FIMI currently holds 4,101,758 ordinary shares of the Company and following the completion of the Capital Raising and the HaChoshlim/FIMI Share Purchase Agreement will hold up to 12,863,850 ordinary shares of the Company, representing up to 42.38% of the enlarged issued share capital of the Company. Mr Davidi is the founder and chief executive officer and Ms Asher Topilsky is a senior partner of FIMI Opportunity Funds.

The matters required to be disclosed in relation to the appointments of Mr Davidi, Ms Asher Topilsky and Mr Shahor pursuant to paragraph (g) of Schedule Two to the AIM Rules for Companies will follow in due course.

Relationship Agreements

FIMI Relationship Agreement

As mentioned above, immediately following Admission, FIMI will be entitled to exercise or control voting rights in the Company of approximately 42.38 per cent. of the enlarged share capital of the Company (assuming none of the Qualifying Shareholders takes up their entitlements under the Proposed Open Offer) giving it the ability to exercise a controlling influence on the business of the Company and to cause or take actions that are not in, or may conflict with, the best interests of the Shareholders as a whole.

Accordingly, the Company and FIMI have agreed in the Subscription Agreement that FIMI will, upon Admission, enter into the FIMI Relationship Agreement which will regulate the relationship between FIMI and the Company in order to ensure that the Company is capable of carrying on its business at an arm's length from FIMI and on normal commercial terms.

The FIMI Relationship Agreement will continue for so long as the Ordinary Shares are admitted to trading on AIM and, for so long as FIMI is the beneficial holder of in aggregate, 25 per cent. or more of the issued shares of the Company.

Along with the HaChoshlim/FIMI Shareholders' Agreement and the HaChoshlim Relationship Agreement (details of which are provided below), the FIMI Relationship Agreement contains provisions setting out how the parties may exercise their voting rights in relation to the appointment of directors, namely:

a) for so long as Yariv Avisar is a director of the Company, the Board shall comprise two FIMI Representative Directors, one Independent Director proposed by FIMI (and whose identity has been approved by the Audit Committee), Yariv Avisar, two external directors appointed in accordance with the Companies Law and (for so long as HaChoshlim holds any shares in the Company) one HaChoshlim Representative Director;

b) if Yariv Avisar ceases to be a director of the Company, the Board shall comprise two FIMI Representative Directors, one Independent Director proposed by FIMI (and whose identity has been approved by the Audit Committee), two external directors appointed in accordance with the Companies Law and (for so long as HaChoshlim holds any shares in the Company) one HaChoshlim Representative Director;

c) HaChoshlim shall have one non-voting observer in relation to the Board;

d) the terms of reference of the Audit Committee shall require that the identity of every proposed Independent Director be approved by a majority of members of the Audit Committee; and

e) (subject to compliance with relevant statutory requirements, the AIM Rules and the Market Abuse Regulation), the management of HaChoshlim shall be entitled to receive information relating to the Company, its business and its assets and liabilities which is similar to that provided to the management of FIMI.

For so long as the FIMI Relationship Agreement is effective, the provisions of the FIMI Relationship Agreement regarding how the parties exercise their voting rights in relation to the appointment of directors shall take precedence over the provisions of the HaChoshlim/FIMI Shareholders' Agreement setting out HaChoshlim and FIMI's respective rights to propose candidates to the Board if the Company ceases to be listed on a Reputable Securities Exchange.

FIMI has also agreed to procure that:

a) all transactions between FIMI or any of its Associates and any member of the Group (including trading arrangements) will be conducted at arm's length and on normal commercial terms; and

b) except in connection with any sale or merger of the Company or a listing of the Company's shares in any other Reputable Securities Exchange, it shall not take any action or omit to take any action which would be likely to result in, or to otherwise seek, cancellation of the Company's shares from trading on AIM without the prior written approval of a majority of each of (i) the board of directors of the Company; and (ii) the Independent Directors of the Company.

HaChoshlim Relationship Agreement

Immediately following the completion of the sale of the HaChoshlim Shares under the HaChoshlim/FIMI Share Purchase Agreement, HaChoshlim will enter into the HaChoshlim Relationship Agreement with the Company which is on substantially the same terms as the FIMI Relationship Agreement set out above.

HaChoshlim/FIMI Shareholders' Agreement

Conditional upon, inter alia, completion of the Subscription Agreement and the HaChoshlim/FIMI Share Purchase Agreement, FIMI and HaChoshlim have entered into the HaChoshlim/FIMI Shareholders' Agreement which will regulate their future relationship, including in relation to certain economic arrangements as described in the Circular.

The HaChoshlim/FIMI Shareholders' Agreement includes provisions setting out the parties' rights to propose and nominate directors to the Board that will apply only if the FIMI Relationship Agreement and HaChoshlim Relationship Agreement are terminated according to their terms (e.g. if the Company's Ordinary Shares are no longer admitted to trading on AIM). The HaChoshlim/FIMI Shareholders' Agreement provides that FIMI shall be entitled to propose five candidates to the Board. For so long as the Company is listed on a Reputable Securities Exchange, HaChoshlim shall be entitled to propose two candidates to the Board and, after the Company ceases to be listed on a Reputable Securities Exchange, HaChoshlim shall be entitled to propose and nominate one-third of the members of the Board.

However, (a) if HaChoshlim sells more than 75 per cent. of the number of shares held by it following Admission, HaChoshlim will be entitled to propose only one candidate to the Board; and (b) if HaChoshlim sells the remainder of the shares held by it following Admission, HaChoshlim shall not have a right to propose candidates to the Board. In addition, as long as the Company is listed on a Reputable Securities Exchange, FIMI will have the right to propose the two external directors which will be elected and appointed by the Shareholders according to the Companies Law. The above provisions relating the rights of FIMI and HaChoshlim to propose and nominate directors are subordinate to the terms of the FIMI Relationship Agreement and the HaChoshlim Relationship Agreement and shall not apply for so long as these agreements are effective.

Under the terms of the FIMI Relationship Agreement and the HaChoshlim Relationship Agreement, FIMI and HaChoshlim are precluded from voting in favour of any resolution resulting in a cancellation of the Company's admission to trading on AIM, unless this is in conjunction with the transfer of the Company's listing to another Reputable Securities Exchange. FIMI and HaChoshlim will therefore be able to support a transfer of the Company's listing and following such transfer of listing they will be able to vote to alter the Board composition as set out above.

Notice of Extraordinary General Meeting and Shareholder Circulars

Certain matters relating to the Subscription, namely the entry into the Subscription Agreement, the Relationship Agreements, the appointment of Ishay Davidi and Lilach Asher Topilsky, the approval of their remuneration and the entry into of the indemnification and exemption agreements, are, for the purposes of the Israeli Companies Law 5759-1999, related party transactions and therefore require Shareholder approval. An Extraordinary General Meeting of the Company is therefore being convened for 2 April 2020 at the offices of Bryan Cave Leighton Paisner LLP, Adelaide House, London Bridge, London, EC4R 9HA, United Kingdom.

Further details on the resolutions to be considered at the Extraordinary General Meeting, as well as on the Subscription and associated matters, can be found in the Circular that will be published today on Amiad's website (www.amiad.com) by no later than 11.00am (UK time) and will be made available to the Shareholders as an electronic communication.

The details of the Proposed Open Offer will be contained in a separate circular that will be sent to Qualifying Shareholders following the receipt of approval of the Subscription by the Director General of the Competition Authority in Israel or, if later, the approval by the Shareholders of the resolutions at the Extraordinary General Meeting.

Related Party Transaction

As FIMI is a substantial shareholder (as defined in the AIM Rules) of the Company, for the purposes of the Subscription, the Subscription is classified as a related party transaction under the AIM Rules. The Board considers, having consulted with the Company's Nominated Adviser, Stifel Nicolaus Europe Limited, that the terms of the Subscription Agreement are fair and reasonable insofar as the Shareholders are concerned.

Yariv Avisar, Non-Executive Chairman, commented: 

"We are pleased to have secured equity funding from our supportive shareholder, FIMI, which will enable us to invest in our growth and deliver on our strategy and vision of being the premier producer of water treatment and filtration solutions. We are always mindful of our other shareholders and look forward to providing them with the opportunity to participate in an equity fundraising, via an open offer on the same terms, and thank them for their continued support."

This announcement contains inside information for the purposes of the Market Abuse Regulation (596/2014/EU). Upon the publication of this announcement, this inside information is now considered to be in the public domain and such persons shall therefore cease to be in possession of inside information. The person responsible for arranging for the release of this announcement on behalf of the Company is Dori Ivzori.

Enquiries

About Amiad

Amiad Water Systems (AIM: AFS) is a leading global producer of automatic, self-cleaning water treatment and filtration products and systems. Through its engineering skills and ability to innovate, Amiad provides cost-effective "green" solutions for the irrigation and industrial purposes. In these markets, its unique and high-quality products are being integrated into the core of systems for filtration and water treatment, micro irrigation and membrane protection, wastewater and potable water treatment, cooling systems and sea water filtration.

Headquartered in Israel, Amiad provides these solutions through ten subsidiaries and a comprehensive network of distributors to customers in more than 80 countries.

For additional information or product details, please visit www.amiad.com.

Important Notices

This announcement is not for release, publication or distribution outside the United Kingdom except to the extent that it would be lawful to do so. The release, publication or distribution of this announcement (in whole or in part) in or into or from jurisdictions other than the United Kingdom may be restricted by the laws of those jurisdictions and therefore persons into whose possession this announcement comes should inform themselves about, and observe, any such restrictions. Failure to comply with any such restrictions may constitute a violation of the securities laws of any such jurisdiction.

This announcement does not constitute an offer to sell or an invitation to subscribe for, or solicitation of an offer to subscribe for or buy, Capital Raising Shares to any person in any jurisdiction to whom it is unlawful to make such offer or solicitation. In particular, this document must not be taken, transmitted, distributed or sent, directly or indirectly, in, or into, the United States of America, Canada, Australia, Japan or the Republic of South Africa or transmitted, distributed or sent to, or by, any national, resident or citizen of such countries. Accordingly, the Capital Raising Shares may not, subject to certain exceptions, be offered or sold, directly or indirectly, in, or into, or from the United States of America, Canada, Australia, Japan or the Republic of South Africa or in any other country, territory or possession where to do so may contravene local securities laws or regulations. The Capital Raising Shares have not been, and will not be, registered under the Securities Act or under the securities legislation of any state of the United States of America, any province or territory of Canada, Australia, Japan or the Republic of South Africa and they may not be offered or sold, directly or indirectly, within the United States of America, Canada, Australia, Japan or the Republic of South Africa or to or for the account or benefit of any national, citizen or resident of the United States of America, Canada, Australia, Japan or the Republic of South Africa or to any US person (within the definition of Regulation S made under the Securities Act).

Stifel, which is authorised and regulated by the FCA, is acting as nominated adviser and broker to the Company and for no-one else in connection with the matters described in this announcement and will not regard any other person (whether or not a recipient of this Circular) as a client in relation to the matters set out in this announcement and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice on the contents of this announcement or any other transaction or matter referred to in this announcement. Stifel has not authorised the contents of, or any part of, this announcement and no liability whatsoever is accepted by Stifel for the accuracy of any information or opinion contained in this announcement or for the omission of any information. Its responsibilities as the Company's nominated adviser under the AIM Rules are owed to the London Stock Exchange and the Company and not to any other person. No representation or warranty, express or implied, is made by Stifel as to any of the contents of this announcement.

Except as expressly referred to in this announcement, neither the contents of the Company's website, nor any website directly or indirectly linked to the Company's website, are incorporated in, or form part of, this announcement.