IES Files $3 Million Suit against Arotech Corp -- Formally Known as Electric Fuel Corp -- and Its Officers Robert Ehrlich and Yehuda Harats.Business Editors/Legal Writers
TEL AVIV Tel Aviv (tĕl əvēv`), city (1994 pop. 355,200), W central Israel, on the Mediterranean Sea. Oficially named Tel Aviv–Jaffa, it is Israel's commercial, financial, communications, and cultural center and the core of its largest , Israel--(BUSINESS WIRE)--Oct. 29, 2003
I.E.S. Group (TASE TASE Tel Aviv Stock Exchange
TASE The All Seeing Eye
TASE Tactical Air Support Element
TASE Thrust Assessment Support Environment
TASE Telecontrol Application Service Elements (IEC communications protocol) :IES) announced today that it has filed a nearly $3 million suit in the Tel Aviv District The Tel Aviv District is one of six administrative districts of Israel with a population of 1,204,000 residents. It is 99.0% Jewish and 1.0% Arab (0.7% Muslim, 0.3% Christian). The district capital is Tel Aviv. Court, Israel, against Arotech Corp (Nasdaq:ARTX) (formally known as Electric Fuel Corp), Mr. Robert Ehrlich
Robert Leroy "Bob" Ehrlich, Jr. (born November 25, 1957) is an American politician who served as the 60th Governor of Maryland from 2003 to 2007. , who serves as Arotech's CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , President, CFO See Chief Financial Officer. and Chairman of the Board of Directors, and Mr. Yehuda Harats, who served, at the time that the initial agreements between the parties were executed (in August 2002), as Arotech's President and CEO. Mr. Harats later resigned and filed his own suit against Arotech.
IES Group's lawsuit alleges that following execution of the initial agreements by the parties, the IES Group discovered that Defendants have deliberately and systematically breached a substantial and decisive portion of the undertakings and the representations made by them in their agreements with Plaintiffs and on which Plaintiffs relied at the time they entered into such agreements with Defendants.
The lawsuit states that in August 2002, the IES Group sold its interactive use-of-force training systems operations (which operates out of Littleton, Colorado), to the Arotech Group in consideration for $4.8 million in cash and promissory notes and 3.25 million shares of Electric Fuel. The lawsuit alleges that these shares were not registered for trading until 9 months following the date by which Arotech was obligated ob·li·gate
tr.v. ob·li·gat·ed, ob·li·gat·ing, ob·li·gates
1. To bind, compel, or constrain by a social, legal, or moral tie. See Synonyms at force.
2. To cause to be grateful or indebted; oblige. to register such shares. It is also alleged that Arotech has breached its undertaking to register a pledge on the shares of companies within the Arotech Group in order to secure the payment of $1.8 million out of the consideration.
The lawsuit further alleges that, upon Arotech's release of its financial statements for the nine-month period ended on September 30, 2002, IES realized that Arotech breached its undertaking in respect of the truthfulness of the representations it made to IES. The figures in Arotech's financial statements were materially and adversely changed, due to matters that were concealed from Plaintiffs, and caused a sharp decline in Arotech's shareholders equity and a 70% drop in its available cash reserves Cash reserves
See: Cash investments
Investment funds that are held in short-term assets such as Treasury bills and certificates of deposit until more permanent investment opportunities are available. .
The lawsuit further alleges that, in light of Arotech's failure to comply with its obligations, including, among things, the obligations to provide the pledges required in the agreements and to timely register the shares, Plaintiffs were forced to enter into two additional agreements with defendants in December 2002 in order to minimize their damages. The lawsuit asserts that these agreements have also been breached by the Defendants.
Therefore, the IES Group has requested a judgment against Defendants in the amount of approximately $3 million in damages, incurred by the IES Group as a result of Arotech's alleged breaches of its undertakings pursuant to the August 2002 and December 2002 agreements.
From July 2002 to June 2003, Arotech incurred a loss of nearly $16.4 million, and its aggregated losses totaled nearly $104 million. During the said period, Arotech had a negative operating cash flow Operating cash flow
Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. .