OMB
APPROVAL
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OMB
Number: 3235-0065
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Expires:
January
31, 2008
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Estimated
average burden
|
hours
per response 425.00
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Delaware
(State
or other jurisdiction of incorporation
or organization)
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6719
(Primary
Standard Industrial Classification
Code Number)
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95-4302784
(I.R.S.
Employer Identification
Number)
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Arotech
Corporation
1229
Oak Valley Drive
Ann
Arbor, Michigan 48108
Tel:
(800) 281-0356 Fax: (734) 761-5368
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Thomas
J. Paup
1229
Oak Valley Drive
Ann
Arbor, Michigan 48108
Tel:
(734) 761-5836 Fax: (734) 761-5368
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|||
(Address,
including ZIP code, and telephone number, including area code,
of
Registrant’s principal executive offices)
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(Name,
address, including ZIP code, and telephone number, including area
code, of
agent for service)
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Steven
M. Skolnick, Esq.
Lowenstein
Sandler PC
65
Livingston Avenue
Roseland,
New Jersey 07068
Tel:
(973) 597-2500 Fax: (973) 597-2400
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AND
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Yaakov
Har-Oz, Adv.
Arotech
Corporation
Western
Industrial Zone
Beit
Shemesh 99000, Israel
Tel:
+(972-2) 990-6623 Fax: +(972-2) 990-6688
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Table
of Contents
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Page
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3
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6
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18
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19
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20
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20
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23
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25
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26
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27
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27
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27
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49
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50
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50
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51
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53
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70
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70
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71
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76
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91
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93
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94
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94
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Ø
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We
develop, manufacture and market advanced high-tech multimedia
and
interactive digital solutions for use-of-force training and driving
training of military, law enforcement, security and other personnel
through our Simulation
and Training Division:
|
·
|
We
provide simulators, systems engineering and software products
to the
United States military, government and private industry through
our
subsidiary FAAC Incorporated, located in Ann Arbor, Michigan
(“FAAC”);
and
|
·
|
We
provide specialized “use of force” training for police, security personnel
and the military through our subsidiary IES Interactive Training,
Inc.,
located in Ann Arbor, Michigan
(“IES”).
|
Ø
|
We
utilize sophisticated lightweight materials and advanced engineering
processes to armor vehicles and to manufacture aviation armor
through our
Armor
Division:
|
·
|
We
use state-of-the-art lightweight armoring materials, special
ballistic
glass and advanced engineering processes to fully armor military
and
civilian SUV’s, buses and vans, through
our subsidiaries MDT Protective Industries, Ltd., located in
Lod,
Israel
(“MDT”), of which we own 75.5%, and MDT
Armor Corporation, located in Auburn, Alabama (“MDT Armor”),
of which we own 88%;
and
|
·
|
We
provide ballistic armor kits for rotary and fixed wing aircraft
and marine
armor through our subsidiary Armour of America, located in Auburn,
Alabama
(“AoA”).
|
Ø
|
We
manufacture and sell lithium and Zinc-Air batteries for defense
and
security products and other military applications through our
Battery
and Power Systems Division:
|
·
|
We
develop and sell rechargeable and primary lithium batteries and
smart
chargers to the military and to private defense industry in the
Middle
East, Europe and Asia through our subsidiary Epsilor Electronic
Industries, Ltd., located in Dimona, Israel (in Israel’s Negev desert
area) (“Epsilor”);
|
·
|
We
develop, manufacture and market primary Zinc-Air batteries, rechargeable
batteries and battery chargers for the military, focusing on
applications
that demand high energy and light weight, through our subsidiary
Electric
Fuel Battery Corporation, located in Auburn, Alabama (“EFB”);
and
|
·
|
We
produce water-activated lifejacket lights for commercial aviation
and
marine applications through our subsidiary Electric Fuel (E.F.L.)
Ltd.,
located in Beit Shemesh, Israel
(“EFL”).
|
This
Offering
|
|
Shares
offered by the selling stockholders
|
1,717,888,
including up to 1,419,667 shares of common stock issuable
upon conversion
of the Company’s Senior Secured Convertible Notes and 298,221 shares of
common stock issuable upon exercise of warrants.
|
Use
of proceeds
|
All
net proceeds from the sale of the shares of common stock
will go to the
stockholder who offers and sells them. We will not receive
any proceeds
from this offering. However, we would receive proceeds of
$2,480,006 if
all of the warrants issued to the selling stockholders and
outstanding as
of the date of this prospectus are exercised for cash. Any
such funds
would be used for general corporate purposes.
|
Risk
factors
|
The
purchase of our common stock involves a high degree of risk.
You should
carefully review and consider “Risk Factors” beginning on page
6.
|
Nasdaq
trading symbol
|
ARTX
|
·
|
we
must dedicate a portion of our cash flows from operations to
pay principal
and interest and, as a result, we may have less funds available
for
operations and other purposes;
|
·
|
it
may be more difficult and expensive to obtain additional funds
through
financings, if available at all;
|
·
|
we
are more vulnerable to economic downturns and fluctuations in
interest
rates, less able to withstand competitive pressures and less
flexible in
reacting to changes in our industry and general economic conditions;
and
|
·
|
if
we default under any of our existing debt instruments, including
paying
the outstanding principal when due, and if our creditors demand
payment of
a portion or all of our indebtedness, we may not have sufficient
funds to
make such payments.
|
·
|
our
financial condition at the time;
|
·
|
restrictions
in the agreements governing our other indebtedness;
and
|
·
|
other
factors, including the condition of the financial markets and
our
industry.
|
·
|
the
U.S. Federal Acquisition Regulations, which regulate the formation,
administration and performance of government contracts;
|
·
|
the
U.S. Truth in Negotiations Act, which requires certification
and
disclosure of all cost and pricing data in connection with contract
negotiations; and
|
·
|
the
U.S. Cost Accounting Standards, which impose accounting requirements
that
govern our right to reimbursement under certain cost-based government
contracts.
|
·
|
announcements
by us, our competitors or our
customers;
|
·
|
the
introduction of new or enhanced products and services by us or
our
competitors;
|
·
|
changes
in the perceived ability to commercialize our technology compared
to that
of our competitors;
|
·
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rumors
relating to our competitors or us;
|
·
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actual
or anticipated fluctuations in our operating results;
|
·
|
the
issuance of our securities, including warrants, in connection
with
financings and acquisitions; and
|
·
|
general
market or economic conditions.
|
·
|
divide
our board of directors into three classes serving staggered three-year
terms;
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·
|
only
permit removal of directors by stockholders “for cause,” and require the
affirmative vote of at least 85% of the outstanding common stock
to so
remove; and
|
·
|
allow
us to issue preferred stock without any vote or further action
by the
stockholders.
|
Ø
|
1,419,667
shares of common stock that may be acquired upon the conversion
of
currently outstanding convertible notes;
and
|
Ø
|
298,221
shares of common stock that may be acquired upon the exercise
of currently
outstanding warrants.
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Number
of Outstanding Shares Beneficially
Owned Prior to Offering
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Number
of Shares Beneficially
Owned Prior to Offering, Including Shares Potentially Issuable
on Exercise
of Warrants and Conversion of Convertible Debt(1)
|
Maximum
Number of Shares to be Sold Pursuant to this
Prospectus
|
Shares
Beneficially Owned After Offering, Including Shares Potentially
Issuable
on Exercise of Warrants and Conversion of Convertible
Debt
(2)
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|||||||||||||
Name
of Selling Stockholder
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Number
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Percent
|
||||||||||||||
Smithfield
Fiduciary LLC(3)
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247,921
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1,276,934(4)
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1,029,013
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247,921
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2.1
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%
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||||||||||
Omicron
Master Trust(3)
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53,681
|
94,899(5)
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41,218
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53,681
|
*
|
|||||||||||
Portside
Growth and Opportunity Fund(3)
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-
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314,166(6)
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314,166
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-
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-
|
|||||||||||
Iroquois
Master Fund Ltd.(3)
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100,705
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212,287(7)
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111,582
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100,705
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*
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|||||||||||
Cranshire
Capital L.P.(3)
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52,451
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171,232(8)
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118,781
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52,451
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*
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|||||||||||
Mainfield
Enterprises Inc.(3)
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-
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41,273(9)
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41,273
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-
|
-
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|||||||||||
Rockmore
Investment Master Fund Ltd.(3)
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4,999
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66,854(10)
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61,855
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4,999
|
*
|
*
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Less
than 1%.
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(1)
|
Includes
all shares being registered hereby, and assumes (i) conversion
of all
convertible notes at an assumed rate of conversion based solely
on the
number of conversion shares being registered hereby, and (ii)
exercise of
all warrants held by the selling stockholders, without regard
to any
limitations on conversions or exercise. Also assumes that the
selling
stockholders acquire no additional shares of common stock before
completion of this offering. For purposes of determining beneficial
ownership of our common stock, owners of options, warrants and
other
convertible securities exercisable or convertible within sixty
days are
considered to be the beneficial owners of the shares of common
stock for
which such securities are exercisable or
convertible.
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(2)
|
Assumes
that all of the shares offered by the selling stockholders under
this
prospectus are sold. Percentage ownership is computed in accordance
with
Rule 13d-3 promulgated by the Securities and Exchange Commission,
based on
the assumption (expressly required by the applicable rules of
the
Securities and Exchange Commission) that only the person whose
ownership
is being reported has exercised such derivative securities for
shares of
common stock, and is based on 11,983,576 shares issued and outstanding
as
of April 17, 2007.
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(3)
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The
terms of the notes and warrants whose underlying shares of common
stock
are included for resale under this prospectus prohibit conversion
of the
convertible notes and exercise of the warrants to the extent
that
conversion of the convertible notes and exercise of the warrants
would
result in the holder, together with its affiliates, beneficially
owning in
excess of 4.999% of our outstanding shares of common stock.
|
(4)
|
Consists
of (i) 889,651 shares of common stock being registered hereby,
of which
132,552 shares are issuable based on the $14.00 conversion price
of the
remaining convertible notes, (ii) 139,362 shares of common stock
issuable
upon exercise of the warrants being registered hereby, and (iii)
247,921
shares of common stock. Highbridge Capital Management, LLC (“Highbridge”)
is the trading manager of Smithfield Fiduciary LLC (“Smithfield”) and
consequently has voting control and investment discretion over
the
securities held by Smithfield. Messrs. Glenn Dubin and Henry
Swieca
control Highbridge. Each of Highbridge and Messrs. Dubin and
Swieca
disclaims beneficial ownership of the securities held by
Smithfield.
|
(5)
|
Consists
of (i) 41,218 shares of common stock issuable upon exercise of
the
warrants being registered hereby, and (ii) 53,681 shares of common
stock.
Omicron
Capital, L.P., a Delaware limited partnership (“Omicron Capital”), serves
as investment manager to Omicron Master Trust, a trust formed
under the
laws of Bermuda (“Omicron”), Omicron Capital, Inc., a Delaware corporation
(“OCI”), serves as general partner of Omicron Capital, and Winchester
Global Trust Company Limited (“Winchester”) serves as the trustee of
Omicron. By reason of such relationships, Omicron Capital and
OCI may be
deemed to share dispositive power over the securities
owned by Omicron, and Winchester may be deemed to share voting
and
dispositive power over the securities
owned by Omicron. Omicron Capital, OCI and Winchester disclaim
beneficial
ownership of such securities.
Omicron Capital has delegated authority from the board of directors
of
Winchester regarding the portfolio management decisions with
respect to
the securities
owned by Omicron and, as of April
21, 2003, Mr. Olivier H. Morali and Mr. Bruce T. Bernstein, officers
of
OCI, have delegated authority from the board of directors of
OCI regarding
the portfolio management decisions of Omicron Capital with respect
to the
securities
owned by Omicron. By reason of such delegated authority, Messrs.
Morali
and Bernstein may be deemed to share dispositive power over the
securities
owned by Omicron. Messrs. Morali and Bernstein disclaim beneficial
ownership of such securities
and neither of such persons has any legal right to maintain such
delegated
authority. No other person has sole or shared voting or dispositive
power
with respect to the securities
being offered by Omicron, as those terms are used for purposes
under
Regulation 13D-G of the Securities Exchange Act of 1934, as amended.
Omicron and Winchester are not “affiliates” of one another, as that term
is used for purposes of the Securities Exchange Act of 1934,
as amended,
or of any other person named in this prospectus as a selling
stockholder.
No person or “group” (as that term is used in Section 13(d) of the
Securities Exchange Act of 1934, as amended, or the SEC’s Regulation
13D-G) controls Omicron and
Winchester.
|
(6)
|
Consists
of (i) 272,893 shares of common stock being registered hereby,
of which
51,930 shares are issuable based on the $14.00 conversion price
of the
remaining convertible notes, and (ii) 41,273 shares of common
stock
issuable upon exercise of the warrants being registered hereby.
Ramius
Capital Group, LLC is the investment adviser of Portside Growth
and
Opportunity Fund and consequently has voting control and investment
discretion over securities held by Portside. Ramius Capital disclaims
beneficial ownership of the securities held by Portside. Peter
A. Cohen,
Morgan B. Stark, Thomas W. Strauss and Jeffrey M. Solomon are
the sole
managing members of C4S & Co., LLC, the sole managing member of Ramius
Capital. As a result, Messrs. Cohen, Stark, Strauss and Solomon
may be
considered beneficial owners of any securities deemed to be beneficially
owned by Ramius Capital. Each of Messrs. Cohen, Stark, Strauss
and Solomon
disclaims beneficial ownership of the securities held by
Portside.
|
(7)
|
Consists
of (i) 111,582 shares of common stock being registered hereby,
of which
21,233 shares are issuable based on the $14.00 conversion price
of the
remaining convertible notes, and (ii) 100,705 shares of common
stock.
Joshua Silverman has voting control and investment discretion
over the
securities held by this selling stockholder. Mr. Silverman disclaims
beneficial ownership of the securities held by Iroquois Master
Fund
Ltd.
|
(8)
|
Consists
of (i) 83,686 shares of common stock being registered hereby,
of which
15,924 shares are issuable based on the $14.00 conversion price
of the
remaining convertible notes, (ii) 35,095 shares of common stock
issuable
upon exercise of the warrants being registered hereby, and (iii)
52,451
shares of common stock. Mitchell P. Kopin, President of Downsview
Capital
Inc., the General Partner of Cranshire Capital L.P., has the
right to vote
and/or dispose of the shares held by this selling stockholder. Mr.
Kopin and Downsview Capital, Inc. both disclaim beneficial ownership
of
these securities.
|
(9)
|
Consists
of 41,273 shares of common stock issuable upon exercise of the
warrants
being registered hereby. Pursuant
to an investment management agreement, Avi Vigder has voting
and
dispositive control over the Shares held by Mainfield Enterprises,
Inc.
Avi Vigder disclaims beneficial ownership of said
shares.
|
(10)
|
Consists
of (i) 61,855 shares of common stock being registered hereby,
of which
11,771 shares are issuable based on the $14.00 conversion price
of the
remaining convertible notes, and (ii) 4,999 shares of common
stock.
Rockmore Capital, LLC (“Rockmore Capital”) and Rockmore Partners, LLC
(“Rockmore Partners”), each a limited liability company formed under the
laws of the State of Delaware, serve as the investment manager
and general
partner, respectively, to Rockmore Investments (US) LP, a Delaware
limited
partnership, which invests all of its assets through Rockmore
Investment
Master Fund Ltd., an exempted company formed under the laws of
Bermuda
(“Rockmore Master Fund”). By reason of such relationships, Rockmore
Capital and Rockmore Partners may be deemed to share dispositive
power
over the shares of our common stock owned by Rockmore Master
Fund.
Rockmore Capital and Rockmore Partners disclaim beneficial ownership
of
such shares of our common stock. Rockmore Partners has delegated
authority
to Rockmore Capital regarding the portfolio management decisions
with
respect to the shares of common stock owned by Rockmore Master
Fund and,
as of August 18, 2006, Mr. Bruce T. Bernstein and Mr. Brian Daly,
as
officers of Rockmore Capital, are responsible for the portfolio
management
decisions of the shares of common stock owned by Rockmore Master
Fund. By
reason of such authority, Messrs. Bernstein and Daly may be deemed
to
share dispositive power over the shares of our common stock owned
by
Rockmore Master Fund. Messrs. Bernstein and Daly disclaim beneficial
ownership of such shares of our common stock and neither of such
persons
has any legal right to maintain such authority. No other person
has sole
or shared voting or dispositive power with respect to the shares
of our
common stock as those terms are used for purposes under Regulation
13D-G
of the Securities Exchange Act of 1934, as amended. No person
or “group”
(as that term is used in Section 13(d) of the Securities Exchange
Act of
1934, as amended, or the SEC’s Regulation 13D-G) controls Rockmore Master
Fund.
|
Ø
|
on
any national securities exchange or quotation service on which
the
securities may be listed or quoted at the time of sale;
|
Ø
|
in
the over-the-counter market;
|
Ø
|
in
transactions otherwise than on these exchanges or systems or
in the
over-the-counter market;
|
Ø
|
through
the writing of options, whether such options are listed on an
options
exchange or otherwise;
|
Ø
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
Ø
|
block
trades in which the broker-dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal
to
facilitate the transaction;
|
Ø
|
purchases
by a broker-dealer as principal and resale by the broker-dealer
for its
account;
|
Ø
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
Ø
|
privately
negotiated transactions;
|
Ø
|
short
sales;
|
Ø
|
sales
pursuant to Rule 144;
|
Ø
|
broker-dealers
may agree with the selling securityholders to sell a specified
number of
such shares at a stipulated price per share;
|
Ø
|
a
combination of any such methods of sale;
and
|
Ø
|
any
other method permitted pursuant to applicable law.
|
·
|
divide
our board of directors into three classes serving staggered three-year
terms;
|
·
|
only
permit removal of directors by stockholders “for cause,” and require the
affirmative vote of at least 85% of the outstanding common stock
to so
remove; and
|
·
|
allow
us to issue preferred stock without any vote or further action
by the
stockholders.
|
Ø
|
declare
or pay a dividend in shares of common stock or make a distribution
of
shares of common stock to holders of our outstanding common
stock;
|
Ø
|
subdivide
or combine our common stock; or
|
Ø
|
issue
shares of our capital stock in any reclassification of our common
stock.
|
Ø
|
We
develop, manufacture and market advanced high-tech multimedia
and
interactive digital solutions for use-of-force training and driving
training of military, law enforcement, security and other personnel
through our Simulation
and Training Division:
|
·
|
We
provide simulators, systems engineering and software products
to the
United States military, government and private industry through
our
subsidiary FAAC Incorporated, located in Ann Arbor, Michigan
(“FAAC”);
and
|
·
|
We
provide specialized “use of force” training for police, security personnel
and the military through our subsidiary IES Interactive Training,
Inc.,
located in Ann Arbor, Michigan
(“IES”).
|
Ø
|
We
utilize sophisticated lightweight materials and advanced engineering
processes to armor vehicles and to manufacture aviation armor
through our
Armor
Division:
|
·
|
We
use state-of-the-art lightweight armoring materials, special
ballistic
glass and advanced engineering processes to fully armor military
and
civilian SUV’s, buses and vans, through
our subsidiaries MDT Protective Industries, Ltd., located in
Lod,
Israel
(“MDT”), of which we own 75.5%, and MDT
Armor Corporation, located in Auburn, Alabama (“MDT Armor”),
of which we own 88%;
and
|
·
|
We
provide ballistic armor kits for rotary and fixed wing aircraft
and marine
armor through our subsidiary Armour of America, located in Auburn,
Alabama
(“AoA”).
|
Ø
|
We
manufacture and sell lithium and Zinc-Air batteries for defense
and
security products and other military applications through our
Battery
and Power Systems Division:
|
·
|
We
develop and sell rechargeable and primary lithium batteries and
smart
chargers to the military and to private defense industry in the
Middle
East, Europe and Asia through our subsidiary Epsilor Electronic
Industries, Ltd., located in Dimona, Israel (in Israel’s Negev desert
area) (“Epsilor”);
|
·
|
We
develop, manufacture and market primary Zinc-Air batteries, rechargeable
batteries and battery chargers for the military, focusing on
applications
that demand high energy and light weight, through our subsidiary
Electric
Fuel Battery Corporation, located in Auburn, Alabama (“EFB”);
and
|
·
|
We
produce water-activated lifejacket lights for commercial aviation
and
marine applications through our subsidiary Electric Fuel (E.F.L.)
Ltd.,
located in Beit Shemesh, Israel
(“EFL”).
|
Ø
|
Our
Vehicle
Simulation
group provides high fidelity vehicle simulators for use in operator
training and is marketed under our FAAC
nameplate;
|
Ø
|
Our
Military
Operations
group provides weapon simulations used to train military pilots
in the
effective use of air launched weapons and is also marketed under
our FAAC
nameplate; and
|
Ø
|
Our
Use
of Force
group provides training products focused on the proper employment
of hand
carried weapons and is marketed under our IES Interactive Training
nameplate.
|
Ø
|
Off-road
driving on severe slopes, including muddy or swampy terrain;
|
Ø
|
Driving
in night vision goggle and blackout conditions;
|
Ø
|
Convoy
training; and
|
Ø
|
The
use of the Central Tire Inflation System in response to changing
terrain.
|
Ø
|
MILO
(Multiple Interactive Learning/training Objectives)
-
provides use-of-force simulation for military and law enforcement.
This
simulator designed with “plug in” modules to customize the training system
to meet end user needs. We believe that the MILO is the most
technologically advanced judgment-training simulator in the
world.
|
Ø
|
A2Z
Classroom Trainer
-
a state-of-the-art computer based training (CBT) system that
allows
students to interact with realistic interactive scenarios projected
life-size in the classroom.
|
Ø
|
Range
FDU (Firearms Diagnostic Unit)
-
a unique combination of training and interactive technologies
that give
instructors a first-person perspective of what trainees are seeing
and
doing when firing a weapon.
|
Ø
|
IES
Studio Productions
-
providing cutting edge multimedia video services for law enforcement,
military and security agencies, utilizing the newest equipment
to create
the training services required by the most demanding authorities.
|
Ø
|
Officer’s
Presence and Demeanor
-
Picture-on-picture digital recordings of the trainee’s actions allow
visual review of the trainee’s reaction, body language and weapons
handling during the course of the scenario, which then can be
played back
for debriefing of the trainee’s actions.
|
Ø
|
Verbalization
-
Correct phrases, timing, manner and sequence of an officer’s dialogue are
integrated within the platform of the system, allowing the situation
to
escalate or de-escalate through the officer’s own words in the context of
the scenario and in conjunction with the trainer.
|
Ø
|
Less-Than-Lethal
Training
-
Training in the use of non-lethal devices such as TASER,
OC (pepper spray), batons and other devices can be used with
the video
training scenarios with appropriate reactions to each. We produce
an
interactive system especially for TASER
products called the TASER™ Judgmental Trainer, which delivers advance
simulated training for law enforcement and government agencies
deploying
TASER non-lethal devices.
|
Ø
|
Soft
Hand Tactics
-
Low level physical control tactics with the use of additional
equipment
such as take-down dummies.
|
Ø
|
Firearms
Training and Basic Marksmanship
-
Either utilizing laser based training weapons or in conjunction
with a
live-fire screen, the use of “Live Ammunition” training can be employed on
the system.
|
Ø
|
Provides
repeatable training to a standard based on established
policy
|
Ø
|
Quick
dissemination and reinforcement of correct behavior and
policies
|
Ø
|
Helps
reduce liability
|
Ø
|
More
efficient than “traditional and redundant” role-playing
methods
|
Ø
|
Realistic
scenarios instead of outdated “play-acting”
|
Ø
|
Interactive
training of up to 250 students simultaneously with wireless
keypads
|
Ø
|
Easy
Self-Authoring of interactive training
content
|
Ø
|
PC
platform facilitates low cost of
ownership
|
Ø
|
Easy
to use Windows XP-based software
|
Ø
|
Easy
to deploy in any classroom
|
Ø
|
Fall
of shot feedback
|
Ø
|
Trigger
pressure analysis
|
Ø
|
Recoil
control, grip and stance assessment
|
Ø
|
Sight
alignment
|
Ø
|
Sight
picture analysis and target
reacquisition
|
Ø
|
Leading
Technology − We
believe that we offer better-developed, more dynamic software
than our
competitors. Additionally, we incorporate leading graphics and
motion-cueing technologies in our systems to provide customers
with the
most realistic simulation experience on the market.
|
Ø
|
Long
History in the Simulation Software Business − As
a market leader in the simulation software business for more
than thirty
years, FAAC’s professionals understand customer requirements and operating
environments. Thus, we build our software to meet and exceed
demanding
customers’ expectations.
|
Ø
|
Service
Reputation − We
are known for providing strong customer service, a characteristic
that
drives new business within our chosen markets.
|
Ø
|
Standardized
Development Processes − We
generally deliver our products to market quickly and at high
quality due
to our standardized development processes.
|
Ø
|
The
David, a combat patrol, command and reconnaissance armored vehicle
that is
specifically designed for urban
combat;
|
Ø
|
Command
vehicles (such as the Land Rover Defender 110);
and
|
Ø
|
Pickup
trucks, such as the Defender 130.
|
Ø
|
Sports
utility vehicles (such as the GM Suburban, the Toyota Land Cruiser
and the
Land Rover Defender);
|
Ø
|
Pick-up
trucks, such as the Ford F550;
|
Ø
|
Passenger
vans (such as the Chevrolet Express, the General Motors Savana
and the
Ford Econoline); and
|
Ø
|
Small
buses (based on vehicles in the Mercedes-Benz Vario and Sprinter
lines).
|
Ø
|
Primary
batteries;
|
Ø
|
Rechargeable
batteries;
|
Ø
|
Smart
chargers;
|
Ø
|
State
of charge indicators; and
|
Ø
|
Control
and monitoring battery circuits
|
Ø
|
Armed
forces in the Middle East and Asia;
|
Ø
|
Military
original equipment manufacturers (OEMs);
and
|
Ø
|
Various
battery manufacturers.
|
Ø
|
Tactical
radios
|
Ø
|
SIGINT
systems
|
Ø
|
Training
systems
|
Ø
|
SATCOM
radios
|
Ø
|
Nightscope
power
|
Ø
|
Guidance
systems
|
Ø
|
Surveillance
systems
|
Ø
|
Sensors
|
Division
|
2006
|
2005
|
2004
|
|||||||
Simulation
and Training Division
|
$
|
11,518,000
|
$
|
9,379,000
|
$
|
12,691,000
|
||||
Battery
and Power Systems Division
|
9,213,000
|
4,523,000
|
8,325,000
|
|||||||
Armor
Division
|
20,582,000
|
4,440,000
|
4,002,000
|
|||||||
TOTAL:
|
$
|
41,313,000
|
$
|
18,342,000
|
$
|
25,018,000
|
Year
Ended December 31, 2007
|
High
|
Low
|
|||||
Second
Quarter (through April 30, 2007)
|
$
|
3.32
|
$
|
2.15
|
|||
First
Quarter
|
$
|
4.87
|
$
|
3.03
|
Year
Ended December 31, 2006
|
High
|
Low
|
|||||
Fourth
Quarter
|
$
|
3.69
|
$
|
1.43
|
|||
Third
Quarter
|
$
|
3.92
|
$
|
1.88
|
|||
Second
Quarter
|
$
|
8.12
|
$
|
2.25
|
|||
First
Quarter
|
$
|
8.96
|
$
|
5.18
|
Year
Ended December 31, 2005
|
High
|
Low
|
|||||
Fourth
Quarter
|
$
|
10.64
|
$
|
5.04
|
|||
Third
Quarter
|
$
|
16.66
|
$
|
9.80
|
|||
Second
Quarter
|
$
|
20.44
|
$
|
14.00
|
|||
First
Quarter
|
$
|
24.92
|
$
|
17.64
|
Year
Ended December 31,
|
||||||||||||||||
2002
|
2003**
|
2004
|
2005
|
2006
|
||||||||||||
(dollars
in thousands, except per share data)
|
||||||||||||||||
Statement
of Operations Data:
|
||||||||||||||||
Revenues
|
$
|
6,407
|
$
|
17,326
|
$
|
49,954
|
$
|
49,045
|
$
|
43,120
|
||||||
Research
and development expenses and costs of revenues, exclusive
of amortization
of intangibles
|
5,108
|
12,141
|
35,742
|
35,684
|
34,095
|
|||||||||||
Selling,
general and administrative expenses and their impairment
and amortization
of intangible assets
|
5,982
|
10,255
|
18,394
|
34,662
|
17,577
|
|||||||||||
Operating
loss
|
(4,683
|
)
|
(5,070
|
)
|
(4,182
|
)
|
(21,301
|
)
|
(8,551
|
)
|
||||||
Other
income
|
-
|
-
|
-
|
339
|
361
|
|||||||||||
Financial
income (expenses), net
|
100
|
4,039
|
4,229
|
(2,706
|
)
|
(7,520
|
)
|
|||||||||
Loss
before minority interest in (loss) earnings of subsidiary
and tax
expenses
|
(4,583
|
)
|
(9,109
|
)
|
(8,411
|
)
|
(23,668
|
)
|
(15,709
|
)
|
||||||
Taxes
on income
|
-
|
(396
|
)
|
(586
|
)
|
(237
|
)
|
(232
|
)
|
|||||||
Gain
(loss) from affiliated company
|
-
|
-
|
-
|
(75
|
)
|
355
|
||||||||||
Minority
interest in (loss) earnings of subsidiary
|
(355
|
)
|
157
|
(45
|
)
|
57
|
17
|
|||||||||
Loss
from continuing operations
|
(4,938
|
)
|
(9,348
|
)
|
(9,042
|
)
|
(23,923
|
)
|
(15,569
|
)
|
||||||
Income
(loss) from discontinued operations
|
(13,566
|
)
|
110
|
-
|
(120
|
)
|
-
|
|||||||||
Net
loss for the period
|
(18,504
|
)
|
(9,238
|
)
|
(9,042
|
)
|
(24,043
|
)
|
(15,569
|
)
|
||||||
Deemed
dividend to certain stockholders of common stock
|
-
|
(350
|
)
|
(3,329
|
)
|
-
|
(434
|
)
|
||||||||
Net
loss attributable to stockholders of common stock
|
$
|
(18,504
|
)
|
$
|
(9,588
|
)
|
$
|
(12,371
|
)
|
$
|
(24,043
|
)
|
$
|
(16,003
|
)
|
|
Basic
and diluted net loss per share from continuing operations
|
$
|
(2.13
|
)
|
$
|
(3.41
|
)
|
$
|
(2.48
|
)
|
$
|
(4.07
|
)
|
$
|
(1.87
|
)
|
|
Loss
per share for combined operations
|
$
|
(8.00
|
)
|
$
|
(3.45
|
)
|
$
|
(2.48
|
)
|
$
|
(4.09
|
)
|
$
|
(1.87
|
)
|
|
Weighted
average number of common shares used in computing basic and
diluted net
loss per share (in thousands)
|
2,313
|
2,778
|
4,995
|
5,872
|
8,599
|
As
At December 31,
|
||||||||||||||||
2002
|
2003**
|
2004
|
2005
|
2006
|
||||||||||||
(dollars
in thousands)
|
||||||||||||||||
Balance
Sheet Data:
|
||||||||||||||||
Cash,
cash equivalents, investments in marketable debt securities and
restricted
collateral deposits
|
$
|
2,091
|
$
|
14,391
|
$
|
13,832
|
$
|
10,864
|
$
|
3,059
|
||||||
Receivables
and other assets*
|
7,895
|
8,898
|
25,746
|
29,166
|
28,051
|
|||||||||||
Property
and equipment, net of depreciation
|
2,555
|
2,293
|
4,601
|
4,253
|
3,741
|
|||||||||||
Goodwill
and other intangible assets, net
|
7,522
|
7,440
|
54,113
|
40,586
|
40,217
|
|||||||||||
Total
assets
|
$
|
20,063
|
$
|
33,022
|
$
|
98,292
|
$
|
84,869
|
$
|
75,068
|
||||||
Current
liabilities*
|
$
|
7,272
|
$
|
6,710
|
$
|
26,381
|
$
|
26,317
|
$
|
15,738
|
||||||
Long-term
liabilities*
* *
|
3,753
|
4,686
|
6,438
|
12,287
|
4,370
|
|||||||||||
Stockholders’
equity
|
9,038
|
21,626
|
65,473
|
46,265
|
54,960
|
|||||||||||
Total
liabilities and stockholders equity*
|
$
|
20,063
|
$
|
33,022
|
$
|
98,292
|
$
|
84,869
|
$
|
75,068
|
*
|
Includes assets and liabilities, as applicable, from discontinued
operations.
|
*
*
|
Restated.
|
*
* *
|
Includes minority interest.
|
Ø
|
we
develop, manufacture and market advanced high-tech multimedia
and
interactive digital solutions for use-of-force and driving training
of
military, law enforcement, security and other personnel (our
Simulation
and Training Division);
|
Ø
|
we
provide aviation armor kits and we utilize sophisticated lightweight
materials and advanced engineering processes to armor vehicles
(our
Armoring
Division);
and
|
Ø
|
we
develop, manufacture and market primary Zinc-Air batteries, rechargeable
batteries and battery chargers for defense and security products
and other
military applications (our Battery
and Power Systems Division).
|
Ø
|
Our
Simulation
and Training Division,
located in Ann Arbor, Michigan, consisting
of:
|
·
|
FAAC
Incorporated, which provides simulators, systems engineering
and software
products to the United States military, government and private
industry
(“FAAC”); and
|
·
|
IES
Interactive Training, Inc., which provides specialized “use of force”
training for police, security personnel and the military
(“IES”).
|
Ø
|
Our
Armor
Division,
consisting of:
|
·
|
MDT
Protective Industries, Ltd., located in Lod, Israel, which specializes
in
using state-of-the-art lightweight ceramic materials, special
ballistic
glass and advanced engineering processes to fully armor vans
and SUVs, and
is a leading supplier to the Israeli military, Israeli special
forces and
special services (“MDT”) (75.5% owned);
|
·
|
MDT
Armor Corporation, located in Auburn, Alabama, which conducts
MDT’s United
States activities (“MDT Armor”) (88% owned);
and
|
·
|
Armour
of America, located in Auburn, Alabama, which provides ballistic
armor
kits for rotary and fixed wing aircraft, marine armor, personnel
armor,
military vehicles and architectural applications, including both
the
LEGUARD Tactical Leg Armor and the Armourfloat Ballistic Floatation
Device, which is a unique vest that is certified by the U.S.
Coast Guard
(“AoA”).
|
Ø
|
Our
Battery
and Power Systems Division,
consisting of:
|
·
|
Epsilor
Electronic Industries, Ltd., located in Dimona, Israel (in Israel’s Negev
desert area), which develops and sells rechargeable and primary
lithium
batteries and smart chargers to the military and to private industry
in
the Middle East, Europe and Asia (“Epsilor”);
|
·
|
Electric
Fuel Battery Corporation, located in Auburn, Alabama, which manufactures
and sells Zinc-Air batteries and battery chargers for the military,
focusing on applications that demand high energy and light weight
(“EFB”);
and
|
·
|
Electric
Fuel (E.F.L.) Ltd., located in Beit Shemesh, Israel, which produces
water-activated lifejacket lights for commercial aviation and
marine
applications, focusing on obtaining and implementing demonstration
projects in the U.S. and Europe
(“EFL”).
|
Year
Ended December 31,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
Revenues:
|
||||||||||
Simulation
and Training Division
|
$
|
21,951,337
|
$
|
26,805,772
|
$
|
21,464,406
|
||||
Armor
Division
|
12,571,779
|
12,322,678
|
17,988,687
|
|||||||
Battery
and Power Systems Division
|
8,597,623
|
9,916,145
|
10,500,753
|
|||||||
$
|
43,120,739
|
$
|
49,044,595
|
$
|
49,953,846
|
|||||
Cost
of revenues:
|
||||||||||
Simulation
and Training Division
|
$
|
14,196,298
|
$
|
15,835,735
|
$
|
11,739,690
|
||||
Armor
Division
|
12,299,756
|
11,206,442
|
15,449,084
|
|||||||
Battery
and Power Systems Division
|
5,997,592
|
7,341,559
|
6,822,320
|
|||||||
$
|
32,493,646
|
$
|
34,383,736
|
$
|
34,011,094
|
|||||
Research
and development expenses:
|
||||||||||
Simulation
and Training Division
|
$
|
308,738
|
$
|
209,554
|
$
|
395,636
|
||||
Armor
Division
|
20,546
|
139,514
|
17,065
|
|||||||
Battery
and Power Systems Division
|
1,272,170
|
951,361
|
1,318,678
|
|||||||
$
|
1,601,454
|
$
|
1,300,429
|
$
|
1,731,379
|
|||||
Sales
and marketing expenses:
|
||||||||||
Simulation
and Training Division
|
$
|
2,514,981
|
$
|
2,704,880
|
$
|
3,185,001
|
||||
Armor
Division
|
366,923
|
834,090
|
565,981
|
|||||||
Battery
and Power Systems Division
|
656,604
|
853,378
|
1,171,235
|
|||||||
All
Other
|
175,814
|
79,242
|
-
|
|||||||
$
|
3,714,322
|
$
|
4,471,590
|
$
|
4,922,217
|
Year
Ended December 31,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
General
and administrative expenses:
|
||||||||||
Simulation
and Training Division
|
$
|
2,562,868
|
$
|
3,849,881
|
$
|
2,852,969
|
||||
Armor
Division
|
1,031,333
|
2,181,355
|
1,323,982
|
|||||||
Battery
and Power Systems Division
|
994,136
|
974,704
|
965,058
|
|||||||
All
Other
|
7,104,479
|
7,856,495
|
5,514,857
|
|||||||
$
|
11,692,816
|
$
|
14,862,435
|
$
|
10,656,866
|
|||||
Other
income:
|
||||||||||
Simulation
and Training Division
|
$
|
361,560
|
$
|
338,900
|
$
|
-
|
||||
Armor
Division
|
-
|
-
|
-
|
|||||||
Battery
and Power Systems Division
|
-
|
-
|
-
|
|||||||
All
Other
|
-
|
-
|
-
|
|||||||
$
|
361,560
|
$
|
338,900
|
$
|
-
|
|||||
Financial
expense (income):
|
||||||||||
Simulation
and Training Division
|
$
|
(129,908
|
)
|
$
|
22,294
|
$
|
27,842
|
|||
Armor
Division
|
54,476
|
(2,463
|
)
|
13,503
|
||||||
Battery
and Power Systems Division
|
(50,590
|
)
|
122,236
|
54,511
|
||||||
All
Other
|
7,645,922
|
2,563,622
|
4,133,109
|
|||||||
$
|
7,519,900
|
$
|
2,705,689
|
$
|
4,228,965
|
|||||
Tax
expenses:
|
||||||||||
Simulation
and Training Division
|
$
|
49,383
|
$
|
63,976
|
$
|
77,811
|
||||
Armor
Division
|
-
|
94,671
|
134,949
|
|||||||
Battery
and Power Systems Division
|
182,776
|
32,846
|
320,878
|
|||||||
All
Other
|
-
|
46,179
|
52,471
|
|||||||
$
|
232,159
|
$
|
237,672
|
$
|
586,109
|
|||||
Amortization
of intangible assets:
|
||||||||||
Simulation
and Training Division
|
$
|
1,049,136
|
$
|
1,213,261
|
$
|
1,323,403
|
||||
Armor
Division
|
295,067
|
1,348,248
|
661,914
|
|||||||
Battery
and Power Systems Division
|
509,239
|
509,239
|
509,239
|
|||||||
$
|
1,853,442
|
$
|
3,070,748
|
$
|
2,494,556
|
|||||
Impairment
of goodwill and other intangible assets:
|
||||||||||
Simulation
and Training Division
|
$
|
-
|
$
|
-
|
$
|
320,279
|
||||
Armor
Division
|
316,024
|
12,256,756
|
-
|
|||||||
Battery
and Power Systems Division
|
-
|
-
|
-
|
|||||||
$
|
316,024
|
$
|
12,256,756
|
$
|
320,279
|
|||||
Gain
(loss) from affiliated company:
|
||||||||||
Simulation
and Training Division
|
$
|
354,898
|
$
|
(75,000
|
)
|
$
|
-
|
|||
Armor
Division
|
-
|
-
|
-
|
|||||||
Battery
and Power Systems Division
|
-
|
-
|
-
|
|||||||
$
|
354,898
|
$
|
(75,000
|
)
|
$
|
-
|
||||
Minority
interest in loss (profit) of subsidiaries:
|
||||||||||
Simulation
and Training Division
|
$
|
-
|
$
|
-
|
$
|
-
|
||||
Armor
Division
|
17,407
|
57,149
|
(44,694
|
)
|
||||||
Battery
and Power Systems Division
|
-
|
-
|
-
|
|||||||
$
|
17,407
|
$
|
57,149
|
$
|
(44,694
|
)
|
||||
Income
(loss) from continuing operations:
|
||||||||||
Simulation
and Training Division
|
$
|
2,116,299
|
$
|
3,170,091
|
$
|
1,541,775
|
||||
Armor
Division
|
(1,812,346
|
)
|
(15,678,786
|
)
|
(222,485
|
)
|
||||
Battery
and Power Systems Division
|
(964,304
|
)
|
(869,178
|
)
|
(661,166
|
)
|
||||
All
Other
|
(14,908,808
|
)
|
(10,545,538
|
)
|
(9,700,437
|
)
|
||||
$
|
(15,569,159
|
)
|
$
|
(23,923,411
|
)
|
$
|
(9,042,313
|
)
|
||
Loss
from discontinued operations:
|
||||||||||
Simulation
and Training Division
|
$
|
-
|
$
|
-
|
$
|
-
|
||||
Armor
Division
|
-
|
-
|
-
|
|||||||
Battery
and Power Systems Division
|
-
|
(120,000
|
)
|
-
|
||||||
|
$ | - |
$
|
(120,000
|
)
|
$
|
-
|
|||
Net
income (loss):
|
||||||||||
Simulation
and Training Division
|
$
|
2,116,299
|
$
|
3,170,091
|
$
|
1,541,775
|
||||
Armor
Division
|
(1,812,346
|
)
|
(15,678,786
|
)
|
(222,485
|
)
|
||||
Battery
and Power Systems Division
|
(964,304
|
)
|
(989,178
|
)
|
(661,166
|
)
|
||||
All
Other
|
(14,908,808
|
)
|
(10,545,538
|
)
|
(9,700,437
|
)
|
||||
$
|
(15,569,159
|
)
|
$
|
(24,043,411
|
)
|
$
|
(9,042,313
|
)
|
Ø
|
IES
and FAAC recognized revenues from the sale of interactive use-of-force
training systems and from the provision of maintenance services
in
connection with such systems.
|
Ø
|
MDT,
MDT Armor and AoA recognized revenues from payments under vehicle
armoring
contracts, for service and repair of armored vehicles, and on
sale of
armoring products.
|
Ø
|
EFB
and Epsilor recognized revenues from the sale of batteries, chargers
and
adapters to the military, and under certain development contracts
with the
U.S. Army.
|
Ø
|
EFL
recognized revenues from the sale of water-activated battery
(WAB)
lifejacket lights.
|
Ø
|
Decreased
revenues from our Simulation and Training Division ($4.9 million
less in
2006 versus 2005).
|
Ø
|
Decreased
revenues from our Battery and Power Systems Division, particularly
Epsilor
($1.3 million less in 2006 versus
2005).
|
Ø
|
Decreases
in certain general and administrative expenses in comparison
to 2005, such
as auditing, legal expenses and travel expenses, as a result
of
cost-cutting programs implemented by management, which resulted
in a
decrease of $1.3 million over general and administrative expenses
in
2005.
|
Ø
|
Decrease
in general and administrative expenses related to FAAC, primarily
payroll,
legal and other expenses, which resulted in a decrease of $493,000
over
general and administrative expenses in
2005.
|
Ø
|
Decrease
in general and administrative expenses related to IES as a result
of the
consolidation of IES and FAAC operations, which resulted in a
decrease of
$398,000 over general and administrative expenses in
2005.
|
Ø
|
Decrease
in general and administrative expenses related to AoA due to
decrease in
operations, employees and the relocation of AoA to Alabama, which
resulted
in a decrease of $970,000 over general and administrative expenses
in
2005.
|
Ø
|
IES
and FAAC recognized revenues from the sale of interactive use-of-force
and
driver operator training systems and from the provision of maintenance
services in connection with such systems;
|
Ø
|
MDT,
MDT Armor and AoA recognized revenues from payments under vehicle
armoring
contracts, for service and repair of armored vehicles, and on
sale of
armoring products;
|
Ø
|
EFB
and Epsilor recognized revenues from the sale of batteries, chargers
and
adapters to the military, and under certain development contracts
with the
U.S. Army; and
|
Ø
|
EFL
recognized revenues from the sale of lifejacket lights and from
subcontracting fees received in connection with Phase IV of the
United
States Department of Transportation (DOT) electric bus
program.
|
Ø
|
$26.8
million for the Simulation and Training Division, compared to
$21.5
million in 2004, an increase of $5.3 million, or 25%, due primarily
to the
increased revenues of FAAC (approximately $4.5 million).
|
Ø |
$12.3
million for the Armor Division, compared to $18.0 million in
2004, a
decrease of $5.7 million, or 32%, due primarily to the decreased
revenues
from MDT Armor (approximately $8.3 million) as a result of a
slowdown in
armoring orders related to the Iraq War. This decrease was partially
offset by higher revenues recorded by us in 2005 from AoA in
comparison to
2004, due to the fact that
AoA’s revenues were included for all of 2005 but only for the last
five
months of 2004. On a pro forma basis, AoA’s revenues decreased in 2005
versus 2004, due to decisions by customers to utilize methods
of armor not
produced by AoA (hard armor instead of soft armor), the change
in U.S.
military priorities from acquiring new armor to funding the ground
forces
in Iraq and Afghanistan, and, following Hurricane Katrina, the
fact that
substantial funds earmarked for defense were delayed to provide
funds for
hurricane relief.
|
Ø
|
$9.9
million for the Battery and Power Systems Division, compared
to $10.5
million in 2004, a decrease of $585,000, or 6%, due primarily
to decreased
sales of lithium batteries and chargers by our Epsilor subsidiary
as a
result of reduced equipment purchases by one of its customers,
offset to
some extent by increased revenues from our Zinc-Air military
batteries.
|
Ø
|
The
inclusion of the general and administrative expenses of AoA in
our results
for all of 2005 but only five months of 2004 ($836,000);
|
Ø
|
Increases
in general and administrative expenses in our FAAC subsidiary
due to legal
expenses, employee relocation, accounting, incentive pay accruals,
and
similar expenses ($809,000);
|
Ø
|
Increase
in other corporate general and administrative expenses such as
auditing,
legal and travel expenses ($800,000);
and
|
Ø
|
Increase
in costs related to abandoned acquisition activities ($1.1
million).
|
Payment
Due by Period
|
||||||||||||||||
Contractual
Obligations
|
Total
|
Less
Than 1 Year
|
1-3
Years
|
3-5
Years
|
More
than 5 Years
|
|||||||||||
Long-term
debt
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
Short-term
debt*
|
$
|
6,079,637
|
$
|
6,079,637
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
Promissory
note due to purchase of subsidiaries
|
$
|
454,350
|
$
|
302,900
|
$
|
151,450
|
$
|
-
|
$
|
-
|
||||||
Operating
lease obligations*
*
|
$
|
793,422
|
$
|
621,678
|
$
|
166,282
|
$
|
5,462
|
$
|
-
|
||||||
Capital
lease obligations
|
$
|
269,756
|
$
|
79,623
|
$
|
138,811
|
$
|
51,322
|
$
|
-
|
||||||
Severance
obligations*
* *
|
$
|
4,039,049
|
$
|
-
|
$
|
4,039,049
|
$
|
-
|
$
|
-
|
*
|
Includes
convertible securities in the gross amount of $2,583,629. Also
includes
$3,496,008 in short-term bank debt.
|
**
|
Includes
operating lease obligations related to rent.
|
***
|
Includes
obligations related to special severance pay arrangements in
addition to
the severance amounts due to certain employees pursuant to Israeli
severance pay law (the amount shown in the table above with payment
due
during the next 1-3 years might not be paid in the period stated
in the
event the employment agreements to which such severance obligations
relate
are extended).
|
Name
|
Age
|
Position
|
||
Robert
S. Ehrlich
|
68
|
Chairman
of the Board and Chief Executive Officer
|
||
Steven
Esses
|
43
|
President,
Chief Operating Officer and Director
|
||
Thomas
J. Paup
|
58
|
Vice
President - Finance and Chief Financial Officer
|
||
Dr.
Jay M. Eastman
|
58
|
Director
|
||
Jack
E. Rosenfeld
|
68
|
Director
|
||
Lawrence
M. Miller
|
60
|
Director
|
||
Edward
J. Borey
|
56
|
Director
|
||
Seymour
Jones
|
75
|
Director
|
Name
|
Fees
Earned or Paid in Cash
($)
|
Option
Awards(1)
($)
|
Total
($)
|
|||||||
Dr.
Jay M. Eastman
|
$
|
27,375
|
$
|
30,157(2
|
)
|
$
|
57,532
|
|||
Jack
E. Rosenfeld
|
$
|
42,000
|
$
|
30,157(3
|
)
|
$
|
72,157
|
|||
Lawrence
M. Miller
|
$
|
40,500
|
$
|
30,157(4
|
)
|
$
|
70,657
|
|||
Edward
J. Borey
|
$
|
33,375
|
$
|
20,074(5
|
)
|
$
|
53,449
|
|||
Seymour
Jones
|
$
|
25,125
|
$
|
1,705(6
|
)
|
$
|
26,830
|
(1)
|
This
column reflects the compensation cost for the year ended December 31,
2006 of each director’s options, calculated in accordance with SFAS 123R
and using a Black-Scholes valuation model. See Note 2.r. of the Notes
to Consolidated Financial Statements for a discussion of the
assumptions
we made in determining the grant date fair value and compensation
costs of
our equity awards.
|
(2)
|
As
of December 31, 2006, Dr. Eastman held options to purchase an
aggregate of 13,570 shares of our common stock, 8,570 shares of
which were vested as of that same
date.
|
(3)
|
As
of December 31, 2006, Mr. Rosenfeld held options to purchase an
aggregate of 13,570 shares of our common stock, 8,570 shares of
which were vested as of that same
date.
|
(4)
|
As
of December 31, 2006, Mr. Miller held options to purchase an
aggregate of 13,570 shares of our common stock, 8,570 shares of
which were vested as of that same
date.
|
(5)
|
As
of December 31, 2006, Mr. Borey held options to purchase an
aggregate of 10,000 shares of our common stock, 5,000 shares of
which were vested as of that same
date.
|
(6)
|
As
of December 31, 2006, Prof. Jones held options to purchase an
aggregate of 2,500 shares of our common stock, none of which was
vested as of that same date.
|
Name
|
Age
|
Position
|
||
Jonathan
Whartman
|
52
|
Senior
Vice President
|
||
Yaakov
Har-Oz
|
49
|
Senior
Vice President, General Counsel and Secretary
|
||
William
Graham
|
47
|
Vice
President of Government Affairs
|
||
Norman
Johnson
|
54
|
Controller
|
||
Dean
Krutty
|
41
|
President,
Simulation Division
|
||
Yosef
Bar
|
64
|
General
Manager, MDT Protective Industries
|
||
Ronen
Badichi
|
41
|
General
Manager, Epsilor Electronics Industries, Ltd.
|
||
Graydon
Hansen
|
48
|
President,
Electric Fuel Battery Corporation
|
Ø
|
Robert
S. Ehrlich, our Chairman and Chief Executive
Officer;
|
Ø
|
Steven
Esses, our President and Chief Operating Officer;
|
Ø
|
Thomas
J. Paup, our Vice President - Finance and Chief Financial Officer;
and
|
Ø
|
Avihai
Shen, our former Vice President - Finance and Chief Financial
Officer, who
ceased to act as our Chief Financial Officer in February 2006,
and whose
employment with us terminated on March 31,
2006.
|
Ø
|
cash
salary;
|
Ø
|
bonus,
some of which is paid in cash in the year in which it is earned
and some
of which is accrued in the year in which it is earned but is
paid in cash
in a subsequent year;
|
Ø
|
stock
options; and
|
Ø
|
grants
of restricted stock, where (i) the stock vests over a period
of time or
pursuant to the attainment of set goals, (ii) sale of such stock
is
prohibited for a period of time, and (iii) with respect to certain
grants
of restricted stock, unvested stock is forfeited to us should
the
executive officer’s employment be terminated under certain
circumstances.
|
Ø
|
accruals
(but not cash payments) in respect of pension plans, which consist
of a
savings plan, life insurance and statutory severance pay benefits,
and a
continuing education fund;
|
Ø
|
accruals
(but not cash payments) in respect of contractual termination
compensation
in excess of the Israeli statutory
minimum;
|
Ø
|
the
use of an automobile and cash reimbursement for certain Israeli
taxes on
the use of that automobile that are paid by our Israeli executive
officers
and reimbursed by us in accordance with Israeli tax
regulations;
|
Ø
|
annual
statutory holiday pay; and
|
Ø
|
redemption
of all unused vacation days and up to a maximum of 30 unused
sick
days.
|
Name
of Executive Officer
|
Title
|
Minimum
Bonus
|
Maximum
Bonus
|
|||
Robert
S. Ehrlich
|
Chairman
and Chief Executive Officer
|
35%
of annual base salary
|
75%
of annual base salary
|
|||
Steven
Esses
|
President
and Chief Operating Officer
|
20%
of annual base salary
|
75%
of annual base salary
|
|||
Thomas
J. Paup
|
Vice
President - Finance and Chief Financial Officer
|
None
|
50%
of annual base salary
|
|||
Avihai
Shen
|
Former
Vice President - Finance and Chief Financial Officer
|
None
|
None
|
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards(2)
($)
|
Option
Awards(3)
($)
|
Non-Equity
Incentive Plan Compensation
($)
|
All
Other Compensation
($)
|
Total
($)
|
|||||||||||||||||
Robert
S. Ehrlich
|
2006
|
$
|
312,173
|
$
|
105,000
|
$
|
205,507
|
$
|
-
|
$
|
-
|
$
|
483,331
|
(4)
|
$
|
1,106,011
|
|||||||||
Chairman,
Chief Executive Officer
|
2005
|
$
|
275,362
|
$
|
49,875
|
$
|
309,425
|
$
|
-
|
$
|
-
|
$
|
132,753
|
(5)
|
$
|
767,415
|
|||||||||
and
a director
|
2004
|
$
|
275,907
|
$
|
99,750
|
$
|
103,918
|
$
|
-
|
$
|
75,250
|
$
|
731,372
|
(6)
|
$
|
1,286,197
|
|||||||||
Thomas
J. Paup
|
2006
|
$
|
135,000
|
$
|
20,000
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
2,596
|
(7)
|
$
|
157,956
|
|||||||||
Vice
President - Finance and
|
2005
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||||
Chief
Financial Officer
|
2004
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||||
Steven
Esses
|
2006
|
$
|
62,211
|
(8)
|
$
|
116,000
|
(9)
|
$
|
65,421
|
$
|
-
|
$
|
-
|
$
|
252,929
|
(10)
|
$
|
496,561
|
|||||||
President,
Chief Operating Officer and
|
2005
|
$
|
56,722
|
(11)
|
$
|
112,000
|
(12)
|
$
|
110,550
|
$
|
-
|
$
|
-
|
$
|
277,123
|
(13)
|
$
|
556,395
|
|||||||
a
director
|
2004
|
$
|
65,506
|
(14)
|
$
|
106,000
|
(15)
|
$
|
45,129
|
$
|
-
|
$
|
-
|
$
|
54,088
|
(16)
|
$
|
270,723
|
|||||||
|
|||||||||||||||||||||||||
Avihai
Shen*
|
2006
|
$
|
41,601
|
$
|
0
|
$
|
(27,585)
|
(17)
|
$
|
-
|
$
|
-
|
$
|
15,567
|
(18)
|
$
|
29,583
|
||||||||
Former
Vice President - Finance and
|
2005
|
$
|
157,013
|
$
|
0
|
$
|
25,950
|
$
|
-
|
$
|
-
|
$
|
140,965
|
(19)
|
$
|
327,928
|
|||||||||
Chief
Financial Officer
|
2004
|
$
|
155,845
|
$
|
97,000
|
$
|
1,635
|
$
|
-
|
$
|
-
|
$
|
68,743
|
(20)
|
$
|
323,223
|
*
|
Mr.
Shen ceased to act as our Chief Financial Officer in February
2006, and
his employment with us terminated on March 31,
2006.
|
(1)
|
We
paid the amounts reported for each named executive officer in
U.S. dollars
and/or New Israeli Shekels (NIS). We have translated amounts
paid in NIS
into U.S. dollars at the exchange rate of NIS into U.S. dollars
at the
time of payment or accrual.
|
(2)
|
Reflects
the value of restricted stock awards granted to our executive
officers
based on the compensation cost of the award computed in accordance
with
Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 123 (revised 2004), Share-Based Payment, which we refer
to as SFAS 123R, but excluding any impact of assumed forfeiture
rates. See
Note 2.r. of the Notes to Consolidated Financial Statements. The
number of shares of restricted stock received by our executive
officers
pursuant to such awards in 2006, vesting in equal amounts over
three
years, was as follows: Mr. Ehrlich, 320,000; Mr. Paup, 85,000;
Mr. Esses, 160,000. The number of shares of restricted stock received
by our executive officers pursuant to such awards in 2004, vesting
in
equal amounts over three years, was as follows: Mr. Ehrlich, 24,285;
Mr. Esses, 11,785; Mr. Shen, 2,142. There were no such awards in
2005.
|
(3)
|
No
options were issued in 2006. Amounts for 2005 and 2004 do not
reflect
compensation cost calculated in accordance with SFAS 123R since
SFAS 123R
had not been adopted as at such date. See Note 2.r. of the Notes to
Consolidated Financial Statements for a discussion of the assumptions
we
made in determining the grant date fair value and compensation
costs of
our equity awards.
|
(4)
|
Of
this amount, $151,760 represents payments to Israeli pension
and education
funds; $218,907 represents our accrual for severance pay that
will be
payable to Mr. Ehrlich upon his leaving our employ other than
if he is
terminated for cause, such as a breach of trust; $26,689 represents
the
increase of the accrual for vacation days redeemable by Mr. Ehrlich;
and
$21,217 represents the increase of our accrual for severance
pay that
would be payable to Mr. Ehrlich under the laws of the State of
Israel if
we were to terminate his
employment.
|
(5)
|
Of
this amount, $45,362 represents payments to Israeli pension and
education
funds; $67,024 represents our accrual for severance pay that
will be
payable to Mr. Ehrlich upon his leaving our employ other than
if he is
terminated for cause, such as a breach of trust; $(51,928) represents
the
decrease of the accrual for vacation days redeemable by Mr. Ehrlich;
$(40,483) represents the decrease of the accrual for sick days
redeemable
by Mr. Ehrlich; $(25,976) represents the decrease of our accrual
for
severance pay that would be payable to Mr. Ehrlich under the
laws of the
State of Israel if we were to terminate his employment; $61,195
represents
payment for redemption of accrued but unused vacation days; and
$33,394
represents payment for redemption of accrued but unused sick
days.
|
(6)
|
Of
this amount, $548,477 represents payments to Israeli pension
and education
funds, $500,000 of which was deposited by us in a Rabbi Trust
for Mr.
Ehrlich’s benefit (pursuant to the terms of the Rabbi Trust, funds in
the
Rabbi Trust continue to be owned by us, and benefit from all
gains and
bear the risk of all losses resulting from investments of Rabbi
Trust
funds); $76,766 represents our accrual for severance pay that
would be
payable to Mr. Ehrlich upon a “change of control” or upon the occurrence
of certain other events; $28,603 represents the increase of the
accrual
for vacation days redeemable by Mr. Ehrlich; and $28,529 represents
the
increase of our accrual for severance pay that would be payable
to Mr.
Ehrlich under the laws of the State of Israel if we were to terminate
his
employment.
|
(7)
|
Represents
the increase in our accrual for Mr. Paup for accrued but unused
vacation
days.
|
(8)
|
Does
not include $178,176 that we paid in consulting fees to Sampen
Corporation, a New York corporation owned by members of Steven
Esses’s
immediate family, from which Mr. Esses receives a salary. See
“Certain
Relationships and Related Transactions - Consulting Agreement
with Sampen
Corporation,” below.
|
(9)
|
Does
not include $30,720 that we paid as a bonus to Sampen Corporation,
a New
York corporation owned by members of Steven Esses’s immediate family, from
which Mr. Esses receives a salary. See “Certain Relationships and Related
Transactions - Consulting Agreement with Sampen Corporation,”
below.
|
(10)
|
Of
this amount, $112,627 represents payments to Israeli pension
and education
funds; and $86,707 represents the increase of our accrual for
severance
pay that would be payable to Mr. Esses if we were to terminate
his
employment.
|
(11)
|
Does
not include $178,176 that we paid in consulting fees to Sampen
Corporation, a New York corporation owned by members of Steven
Esses’s
immediate family, from which Mr. Esses receives a salary. See
“Certain
Relationships and Related Transactions - Consulting Agreement
with Sampen
Corporation,” below.
|
(12)
|
Includes
a $100,000 signing bonus that was paid to Mr. Esses in 2005 and
the
$12,000 minimum bonus to which Mr. Esses is entitled pursuant
to the terms
of his employment contract. Does not include $30,720 that we
paid as a
bonus to Sampen Corporation, a New York corporation owned by
members of
Steven Esses’s immediate family, from which Mr. Esses receives a salary.
See “Certain Relationships and Related Transactions - Consulting Agreement
with Sampen Corporation,” below.
|
(13)
|
Of
this amount, $186,707 represents the increase of our accrual
for severance
pay that would be payable to Mr. Esses if we were to terminate
his
employment; and $41,369 represents the increase of the accrual
for sick
leave and vacation days redeemable by Mr.
Esses.
|
(14=)
|
Does
not include $208,100 that we paid in consulting fees to Sampen
Corporation, a New York corporation owned by members of Steven
Esses’s
immediate family, from which Mr. Esses receives a salary. See
“Certain
Relationships and Related Transactions - Consulting Agreement
with Sampen
Corporation,” below.
|
(15)
|
Does
not include $110,000 that we paid as a bonus to Sampen Corporation,
a New
York corporation owned by members of Steven Esses’s immediate family, from
which Mr. Esses receives a salary. See “Certain Relationships and Related
Transactions - Consulting Agreement with Sampen Corporation,”
below.
|
(16)
|
Of
this amount, $12,116 represents payments to Israeli pension and
education
funds; and $3,759 represents the increase of the accrual for
vacation days
redeemable by Mr. Esses.
|
(17)
|
Represents
recapture of expenses in respect of restricted stock that was
returned to
us upon termination of Mr. Shen’s
employment.
|
(18)
|
Of
this amount, $3,369 represents payment to Mr. Shen for redemption
of
accrued but unused vacation days.
|
(19)
|
Of
this amount, $26,889 represents payments to Israeli pension and
education
funds; $104,602 represents the increase of our accrual for severance
pay
that would be payable to Mr. Shen if we were to terminate his
employment;
$(28,597) represents the decrease of the accrual for sick leave
and
vacation days redeemable by Mr. Shen; $(5,526) represents the
decrease in
our accrual for severance pay that would be payable to Mr. Shen
under the
laws of the State of Israel if we were to terminate his employment;
and
$35,131 represents payment to Mr. Shen for redemption of accrued
but
unused vacation days. Mr. Shen left our employ effective March
31, 2006,
and these amounts were accordingly paid to
him.
|
(20)
|
Of
this amount, $26,889 represents payments to Israeli pension and
education
funds; $21,568 represents the increase in our accrual for vacation
days
redeemable by Mr. Shen; and $13,404 represents the increase of
our accrual
for severance pay that would be payable to Mr. Shen under the
laws of the
State of Israel if we were to terminate his
employment.
|
Name
of Borrower
|
Date
of Loan
|
Original
Principal Amount of Loan
|
Amount
Outstanding as of 12/31/06
|
Terms
of Loan
|
|||||||||
Robert
S. Ehrlich
|
12/28/99
|
$
|
167,975
|
$
|
201,570
|
Ten-year
non-recourse loan to purchase our stock, secured by the shares
of stock
purchased.
|
|||||||
Robert
S. Ehrlich
|
02/09/00
|
$
|
789,991
|
$
|
766,027
|
Twenty-five-year
non-recourse loan to purchase our stock, secured by the shares
of stock
purchased.
|
|||||||
Robert
S. Ehrlich
|
06/10/02
|
$
|
36,500
|
$
|
42,818
|
Twenty-five-year
non-recourse loan to purchase our stock, secured by the shares
of stock
purchased.
|
|
Performance
Period
|
|
All
Other
Stock
Awards:
Number
of
Shares
of
|
|||||||||||||||||||
Grant
|
DeterminingRelease
|
Estimate
Future Payouts Under Equity
Incentive Plan Awards(1)
|
Stock(2)
|
|||||||||||||||||||
Name
|
Date
|
of
Restrictions
|
Threshold
(#)
|
Target
1 (#)
|
Target
2 (#)
|
Maximum
(#)
|
(#)
|
|||||||||||||||
Robert
S. Ehrlich
|
12/19/06
|
(2)
|
-
|
-
|
-
|
-
|
80,000
|
|||||||||||||||
12/19/06
|
01/01/07
to 12/31/07
|
40,000
|
32,000
|
8,000
|
80,000
|
-
|
||||||||||||||||
12/19/06
|
01/01/08
to 12/31/08
|
(3)
|
(3)
|
(3)
|
80,000
|
-
|
||||||||||||||||
12/19/06
|
01/01/09
to 12/31/09
|
(3)
|
(3)
|
(3)
|
80,000
|
-
|
||||||||||||||||
Thomas
J. Paup
|
12/19/06
|
(2)
|
-
|
-
|
-
|
-
|
21,250
|
|||||||||||||||
12/19/06
|
01/01/07
to 12/31/07
|
10,625
|
8,500
|
2,125
|
21,250
|
-
|
||||||||||||||||
12/19/06
|
01/01/08
to 12/31/08
|
(3)
|
(3)
|
(3)
|
21,250
|
-
|
||||||||||||||||
12/19/06
|
01/01/09
to 12/31/09
|
(3)
|
(3)
|
(3)
|
21,250
|
-
|
||||||||||||||||
Steven
Esses
|
12/19/06
|
(2)
|
-
|
-
|
-
|
-
|
40,000
|
|||||||||||||||
12/19/06
|
01/01/07
to 12/31/07
|
20,000
|
16,000
|
4,000
|
40,000
|
-
|
||||||||||||||||
12/19/06
|
01/01/08
to 12/31/08
|
(3)
|
(3)
|
(3)
|
40,000
|
-
|
||||||||||||||||
12/19/06
|
01/01/09
to 12/31/09
|
(3)
|
(3)
|
(3)
|
40,000
|
-
|
(1)
|
The
threshold number of restricted shares vests based solely based
on
continued employment during the performance period. If 90% of
the EBITDA
performance goal is met for the applicable performance period,
the first
target number of shares of restricted stock will be freed of
their
restrictions. If 90% of the revenue performance goal is met for
the
applicable performance period, the second target number of shares
of
restricted stock will be freed of their restrictions. If 90%
of both the
EBITDA and the revenue performance goals are met for the applicable
performance period, the maximum number of shares of restricted
stock will
be freed of their restrictions. Performance-based shares that
do not vest
in one year roll over to the following year and become part of
the
following year’s performance-based pool.
|
(2)
|
Removal
of the restrictions on these shares was made contingent on the
executive
officer renouncing certain of his outstanding stock options.
This occurred
in February 2007.
|
(3)
|
Performance
criteria for these shares have not yet been set; hence, there
are no
threshold or target levels listed.
|
Name
|
Number
of Shares
Acquired
on Vesting
(#)
|
Value
Realized
on
Vesting(1)
($)
|
|||||
Robert
S. Ehrlich
|
31,428
|
$
|
95,855
|
||||
Steven
Esses
|
11,785
|
$
|
35,944
|
(1)
|
Reflects
the aggregate market value of the shares of restricted stock
determined
based on a per share price of $3.05, the closing price of our
common stock
on the Nasdaq Global Market on December 29, 2006, which was the last
trading day of 2006.
|
Option
Awards
|
Stock
Awards
|
||||||||||||||||||||||||
Equity
Incentive Plan Awards
|
|||||||||||||||||||||||||
Number
of Securities Underlying
Un-exercised Options(1)
(#)
|
Option
Exercise Price ($)
|
Option
Expiration
Date
|
Number
of Shares that Have Not Vested (#)
|
Market
Value of Shares that Have
Not Vested(2)
($)
|
Number
of Unearned Shares that Have Not Vested (#)
|
Market
Value of
Unearned Shares that Have Not Vested(2)
($)
|
|||||||||||||||||||
Name
|
Exercisable
|
Unexercisable
|
|||||||||||||||||||||||
Robert
S. Ehrlich
|
3,571
|
(3) |
0
|
$
|
5.46
|
08/09/09
|
80,000
|
$
|
244,000
|
240,000
|
$
|
732,000
|
|||||||||||||
2,036
|
(3) |
0
|
$
|
5.46
|
10/31/09
|
-
|
-
|
-
|
-
|
||||||||||||||||
107,143
|
0
|
$
|
6.44
|
12/29/10
|
-
|
-
|
-
|
-
|
|||||||||||||||||
11,857
|
(3) |
0
|
$
|
5.46
|
08/24/11
|
-
|
-
|
-
|
-
|
||||||||||||||||
3,428
|
(3) |
0
|
$
|
5.46
|
10/23/11
|
-
|
-
|
-
|
-
|
||||||||||||||||
5,179
|
(3) |
0
|
$
|
5.46
|
12/31/11
|
-
|
-
|
-
|
-
|
||||||||||||||||
4,687
|
(3) |
0
|
$
|
5.46
|
04/01/12
|
-
|
-
|
-
|
-
|
||||||||||||||||
1,116
|
(3) |
0
|
$
|
5.46
|
07/01/12
|
-
|
-
|
-
|
-
|
||||||||||||||||
4,688
|
(3) |
0
|
$
|
5.46
|
10/01/12
|
-
|
-
|
-
|
-
|
||||||||||||||||
6,295
|
(3) |
0
|
$
|
5.46
|
01/01/13
|
-
|
-
|
-
|
-
|
||||||||||||||||
Thomas
J. Paup
|
3,571
|
(3) |
0
|
$
|
5.18
|
12/31/10
|
21,250
|
$
|
64,813
|
63,750
|
$
|
194,438
|
|||||||||||||
Steven
Esses
|
32,153
|
(3) |
0
|
$
|
5.46
|
02/24/08
|
40,000
|
$
|
122,000
|
120,000
|
$
|
366,000
|
|||||||||||||
21,428
|
(3) |
0
|
$
|
5.46
|
12/31/08
|
-
|
-
|
-
|
-
|
||||||||||||||||
8,204
|
(3) |
0
|
$
|
5.46
|
12/29/10
|
-
|
-
|
-
|
-
|
||||||||||||||||
714
|
0
|
$
|
8.54
|
07/22/12
|
-
|
-
|
-
|
-
|
|||||||||||||||||
1,786
|
0
|
$
|
11.62
|
07/22/12
|
-
|
-
|
-
|
-
|
|||||||||||||||||
2,500
|
(3) |
0
|
$
|
5.46
|
01/31/13
|
-
|
-
|
-
|
-
|
||||||||||||||||
7,143
|
(3) |
0
|
$
|
5.46
|
07/09/13
|
-
|
-
|
-
|
-
|
||||||||||||||||
Avihai
Shen*
|
891
|
0
|
$
|
8.54
|
03/31/08
|
-
|
-
|
-
|
-
|
||||||||||||||||
582
|
0
|
$
|
10.22
|
10/15/14
|
-
|
-
|
-
|
-
|
|||||||||||||||||
582
|
0
|
$
|
11.90
|
10/15/14
|
-
|
-
|
-
|
-
|
|||||||||||||||||
194
|
0
|
$
|
18.20
|
10/15/14
|
-
|
-
|
-
|
-
|
|||||||||||||||||
582
|
0
|
$
|
19.88
|
10/15/14
|
-
|
-
|
-
|
-
|
*
|
Mr.
Shen ceased to act as our Chief Financial Officer in February
2006, and
his employment with us terminated on March 31,
2006.
|
(1)
|
All
options in the table are vested.
|
(2)
|
Reflects
the aggregate market value of the shares of restricted stock
determined
based on a per share price of $3.05, the closing price of our
common stock
on the Nasdaq Global Market on December 29, 2006, which was the last
trading day of 2006.
|
(3)
|
These
options were renounced and abandoned by the named executive officer
in
February 2007.
|
Ø
|
$81,884,
representing statutory severance under the Israeli
law;
|
Ø
|
$111,568,
representing additional severance in the amount of (1) $98,733,
which was
7.9 months’ salary at the annual salary rate of $150,000 per year, and (2)
$12,835, which is the value of 7.9 months’ of agreed benefits applicable
to an annual salary rate of $150,000 per year;
and
|
Ø
|
Payment
in respect of accrued but unused vacation through the date of
termination.
|
ROBERT
S. EHRLICH
|
|||||||||||||||||||||||||
Payments
and Benefits
|
Non-
Renewal(1)
|
Death
or
Disability(2)
|
Cause(3)
|
Good
Reason(4)
|
Change
of
Control(5)
|
Retirement(6)
|
Termination
at
Will(7)
|
Other
Employee
Termination(8)
|
|||||||||||||||||
Accrued
but unpaid:
|
|||||||||||||||||||||||||
Base
salary
|
$
|
25,000
|
$
|
25,000
|
$
|
25,000
|
$
|
25,000
|
$
|
25,000
|
$
|
25,000
|
$
|
25,000
|
$
|
25,000
|
|||||||||
Bonus
|
6,960
|
6,960
|
6,960
|
6,960
|
6,960
|
6,960
|
6,960
|
6,960
|
|||||||||||||||||
Vacation
|
32,352
|
32,352
|
32,352
|
32,352
|
32,352
|
32,352
|
32,352
|
32,352
|
|||||||||||||||||
Recuperation
pay(9)
|
314
|
314
|
314
|
314
|
314
|
314
|
314
|
314
|
|||||||||||||||||
Benefits:
|
|||||||||||||||||||||||||
Manager’s
insurance(10)
|
3,958
|
3,958
|
3,958
|
3,958
|
3,958
|
3,958
|
3,958
|
3,958
|
|||||||||||||||||
Continuing
education fund(11)
|
1,875
|
1,875
|
1,875
|
1,875
|
1,875
|
1,875
|
1,875
|
1,875
|
|||||||||||||||||
Tax
gross-up on automobile
|
1,777
|
1,777
|
-
|
1,777
|
1,777
|
1,777
|
1,777
|
-
|
|||||||||||||||||
Contractual
severance
|
1,218,750
|
1,625,400
|
-
|
1,625,400
|
3,250,800
|
1,625,400
|
1,218,750
|
-
|
|||||||||||||||||
Statutory
severance(12)
|
407,163
|
407,163
|
-
|
407,163
|
407,163
|
407,163
|
407,163
|
-
|
|||||||||||||||||
Benefits:
|
|||||||||||||||||||||||||
Manager’s
insurance(10)
|
142,470
|
142,470
|
-
|
142,470
|
142,470
|
142,470
|
142,470
|
-
|
|||||||||||||||||
Vacation
|
81,818
|
81,818
|
-
|
81,818
|
81,818
|
81,818
|
81,818
|
-
|
|||||||||||||||||
Continuing
education fund(12)
|
67,500
|
67,500
|
-
|
67,500
|
67,500
|
67,500
|
67,500
|
-
|
|||||||||||||||||
Automobile(13)
|
42,857
|
42,857
|
-
|
42,857
|
42,857
|
42,857
|
42,857
|
-
|
|||||||||||||||||
Tax
gross-up(13)
|
57,858
|
57,858
|
-
|
57,858
|
57,858
|
57,858
|
57,858
|
-
|
|||||||||||||||||
TOTAL:
|
$
|
2,090,652
|
$
|
2,497,302
|
$
|
70,459
|
$
|
2,497,302
|
$
|
4,122,702
|
$
|
2,497,302
|
$
|
2,090,652
|
$
|
70,459
|
(1)
|
“Non-renewal”
is defined in Mr. Ehrlich’s employment agreement as a decision, made with
written notice of at least 120 days in advance of the effective
date of
such decision, by either us or Mr. Ehrlich not to renew Mr. Ehrlich’s
employment for an additional one-year term. Pursuant to the terms
of Mr.
Ehrlich’s employment agreement, in the absence of such notice, Mr.
Ehrlich’s employment agreement automatically
renews.
|
(2)
|
“Disability”
is defined in Mr. Ehrlich’s employment agreement as a physical or mental
infirmity which impairs the Mr. Ehrlich’s ability to substantially perform
his duties and which continues for a period of at least 180 consecutive
days.
|
(3)
|
“Cause”
is defined in Mr. Ehrlich’s employment agreement as (i) conviction
for fraud, crimes of moral turpitude or other conduct which reflects
on us
in a material and adverse manner; (ii) a willful failure to carry
out a
material directive of our Board of Directors, provided that such
directive
concerned matters within the scope of Mr. Ehrlich’s duties, would not give
Mr. Ehrlich “Good Reason” to terminate his agreement (see footnote 4
below) and was capable of being reasonably and lawfully performed;
(iii)
conviction in a court of competent jurisdiction for embezzlement
of our
funds; and (iv) reckless or willful misconduct that is materially
harmful
to us.
|
(4)
|
“Good
Reason” is defined in Mr. Ehrlich’s employment agreement as (i) a change
in Mr. Ehrlich’s status, title, position or responsibilities which, in Mr.
Ehrlich’s reasonable judgment, represents a reduction or demotion in
his
status, title, position or responsibilities as in effect immediately
prior
thereto; (ii) a reduction in Mr. Ehrlich’s base salary; (iii) the failure
by us to continue in effect any material compensation or benefit
plan in
which Mr. Ehrlich is participating; (iv) the insolvency or the
filing (by
any party, including us) of a petition for the winding-up of
us; (v) any
material breach by us of any provision of Mr. Ehrlich’s employment
agreement; (vi) any purported termination of Mr. Ehrlich’s employment for
cause by us which does not comply with the terms of Mr. Ehrlich’s
employment agreement; and (vii) any movement of the location
where Mr.
Ehrlich is generally to render his services to us from the Jerusalem/Tel
Aviv area of Israel.
|
(5)
|
“Change
of Control” is defined in Mr. Ehrlich’s employment agreement as (i) the
acquisition (other than from us in any public offering or private
placement of equity securities) by any person or entity of beneficial
ownership of 20% or more of the combined voting power of our
then-outstanding voting securities; or (ii) individuals who,
as of January
1, 2000, were members of our Board of Directors (the “Original Board”),
together with individuals approved by a vote of at least ⅔ of the
individuals who were members of the Original Board and are then
still
members of our Board, cease for any reason to constitute at least
⅓ of our
Board of us; or (iii) approval by our shareholders of a complete
winding-up or an agreement for the sale or other disposition
of all or
substantially all of our
assets.
|
(6)
|
“Retirement”
is not defined in Mr. Ehrlich’s employment agreement; in view of Mr.
Ehrlich’s age at the time the employment agreement was negotiated and
entered into, the concept of retirement was subsumed into Termination
at
Will.
|
(7)
|
“Termination
at Will” is defined in Mr. Ehrlich’s employment agreement as Mr. Ehrlich
terminating his employment with us on written notice of at least
120 days
in advance of the effective date of such
termination.
|
(8)
|
“Other
Employee Termination” means a termination by Mr. Ehrlich of his employment
without giving us the advance notice of 120 days needed to make such
a
termination qualify as a “Termination at
Will.”
|
(9)
|
Pursuant
to Israeli law and our customary practice, we pay Mr. Ehrlich in
July of
each year the equivalent of ten days’ “recuperation pay” at the statutory
rate of NIS 318 (approximately $75) per
day.
|
(10)
|
Payments
to managers’ insurance, a benefit customarily given to senior executives
in Israel, come to a total of 15.83% of base salary, consisting of
8.33%
for payments to a fund to secure payment of statutory severance
obligations, 5% for pension and 2.5% for disability. The managers’
insurance funds reflected in the table do not include the 8.33% payments
to a fund to secure payment of statutory severance obligations with
respect to amounts paid prior to December 29, 2006, which funds are
reflected in the table under the “Statutory severance”
heading.
|
(12)
|
Pursuant
to Israeli law, we must contribute an amount equal to 7.5% of Mr.
Ehrlich’s base salary to a continuing education fund, up to the
permissible tax-exempt salary ceiling according to the income tax
regulations in effect from time to time. At December 29, 2006, the
ceiling
then in effect was NIS 15,712 (approximately $3,720). In Mr. Ehrlich’s
case, we have customarily contributed to his continuing education
fund in
excess of the tax-exempt ceiling, and then reimbursed Mr. Ehrlich
for the
tax. The sums in the table reflect this additional contribution and
the
resultant tax reimbursement.
|
(12)
|
Under
Israeli law, employees terminated other than for cause receive severance
in the amount of one month’s base salary for each year of work, at their
salary rate at the date of
termination.
|
(13)
|
Under
the terms
of Mr. Ehrlich’s employment agreement, we must under certain circumstances
provide him with the use of the company car that he was driving at
the
time of termination for a period of time after termination and pay
the tax
on the benefit thereon. The taxable value of this use is reflected
in the
table.
|
STEVEN
ESSES
|
||||||||||||||||||||||||||||
Payments
and Benefits
|
Non-
Renewal(1)
|
Death
or
Disability(2)
|
Cause(3)
|
Good
Reason(4)
|
Change
of
Control(5)
|
Change
of
Location(6)
|
Retirement(7)
|
Early
Retirement(8)
|
Other
Employee
Termination(9)
|
|||||||||||||||||||
Accrued
but unpaid(10)
|
||||||||||||||||||||||||||||
Base
salary
|
$
|
5,000
|
$
|
5,000
|
$
|
5,000
|
$
|
5,000
|
$
|
5,000
|
$
|
5,000
|
$
|
5,000
|
$
|
5,000
|
$
|
5,000
|
||||||||||
Vacation
|
39,068
|
39,068
|
39,068
|
39,068
|
39,068
|
39,068
|
39,068
|
39,068
|
39,068
|
|||||||||||||||||||
Sick
leave(11)
|
17,455
|
17,455
|
-
|
17,455
|
17,455
|
17,455
|
17,455
|
17,455
|
-
|
|||||||||||||||||||
Recuperation
pay(12)
|
188
|
188
|
188
|
188
|
188
|
188
|
188
|
188
|
188
|
|||||||||||||||||||
Benefits:
|
||||||||||||||||||||||||||||
Manager’s
insurance(13)
|
792
|
792
|
792
|
792
|
792
|
792
|
792
|
792
|
792
|
|||||||||||||||||||
Continuing
education fund(14)
|
1,335
|
1,335
|
1,335
|
1,335
|
1,335
|
1,335
|
1,335
|
1,335
|
1,335
|
|||||||||||||||||||
Tax
gross-up on automobile
|
1,912
|
1,912
|
-
|
1,912
|
1,912
|
1,912
|
1,912
|
1,912
|
-
|
|||||||||||||||||||
Contractual
severance
|
330,000
|
330,000
|
-
|
330,000
|
660,000
|
330,000
|
330,000
|
330,000
|
-
|
|||||||||||||||||||
Statutory
severance(15)
|
16,198
|
16,198
|
-
|
16,198
|
16,198
|
16,198
|
16,198
|
16,198
|
-
|
|||||||||||||||||||
Benefits:
|
||||||||||||||||||||||||||||
Manager’s
insurance(13)
|
9,498
|
9,498
|
-
|
9,498
|
9,498
|
9,498
|
9,498
|
9,498
|
-
|
|||||||||||||||||||
Vacation
|
5,455
|
5,455
|
-
|
5,455
|
5,455
|
5,455
|
5,455
|
5,455
|
-
|
|||||||||||||||||||
Continuing
education fund(14)
|
16,020
|
16,020
|
-
|
16,020
|
16,020
|
16,020
|
16,020
|
16,020
|
-
|
|||||||||||||||||||
Automobile(16)
|
10,128
|
10,128
|
-
|
10,128
|
10,128
|
10,128
|
10,128
|
10,128
|
-
|
|||||||||||||||||||
Tax
gross-up(16)
|
12,440
|
12,440
|
-
|
12,440
|
12,440
|
12,440
|
12,440
|
12,440
|
-
|
|||||||||||||||||||
TOTAL:
|
$
|
465,489
|
$
|
465,489
|
$
|
46,383
|
$
|
465,489
|
$
|
795,489
|
$
|
465,489
|
$
|
465,489
|
$
|
465,489
|
$
|
46,383
|
(1)
|
“Non-renewal”
is defined in Mr. Esses’s employment agreement as a decision, made with
written notice of at least 90 days in advance of the effective date
of
such decision, by either us or Mr. Esses not to renew Mr. Esses’s
employment for an additional two-year term. Pursuant to the terms
of Mr.
Esses’s employment agreement, in the absence of such notice, Mr. Esses’s
employment agreement automatically
renews.
|
(2)
|
“Disability”
is defined in Mr. Esses’s employment agreement as a physical or mental
infirmity which impairs the Mr. Esses’s ability to substantially perform
his duties and which continues for a period of at least 180 consecutive
days.
|
(3)
|
“Cause”
is defined in Mr. Esses’s employment agreement as (i) conviction for
fraud, crimes of moral turpitude or other conduct which reflects
on us in
a material and adverse manner; (ii) a willful failure to carry out
a
material directive of our Chief Executive Officer, provided that
such
directive concerned matters within the scope of Mr. Esses’s duties, would
not give Mr. Esses “Good Reason” to terminate his agreement (see footnote
4 below) and was capable of being reasonably and lawfully performed;
(iii)
conviction in a court of competent jurisdiction for embezzlement
of our
funds; and (iv) reckless or willful misconduct that is materially
harmful
to us.
|
(4)
|
“Good
Reason” is defined in Mr. Esses’s employment agreement as (i) a change in
(a) Mr. Esses’s status, title, position or responsibilities which, in Mr.
Esses’s reasonable judgment, represents a reduction or demotion in his
status, title, position or responsibilities as in effect immediately
prior
thereto, or (b) in the primary location from which Mr. Esses shall
have
conducted his business activities during the 60 days prior to such
change;
or (ii) a reduction in Mr. Esses’s base salary; (iii) the failure by us to
continue in effect any material compensation or benefit plan in which
Mr.
Esses is participating; (iv) the insolvency or the filing (by any
party,
including us) of a petition for the winding-up of us; (v) any material
breach by us of any provision of Mr. Esses’s employment agreement; and
(vi) any purported termination of Mr. Esses’s employment for cause by us
which does not comply with the terms of Mr. Esses’s employment
agreement.
|
(5)
|
“Change
of Control” is defined in Mr. Esses’s employment agreement as (i) the
acquisition (other than from us in any public offering or private
placement of equity securities) by any person or entity of beneficial
ownership of 30% or more of the combined voting power of our
then-outstanding voting securities; or (ii) individuals who, as of
January
1, 2000, were members of our Board of Directors (the “Original Board”),
together with individuals approved by a vote of at least ⅔ of the
individuals who were members of the Original Board and are then still
members of our Board, cease for any reason to constitute at least
⅓ of our
Board of us; or (iii) approval by our shareholders of a complete
winding-up or an agreement for the sale or other disposition of all
or
substantially all of our assets.
|
(6)
|
“Change
of location” is defined in Mr. Esses’s employment agreement as a change in
the primary location from which Mr. Esses shall have conducted his
business activities during the 60 days prior to such
change.
|
(7)
|
“Retirement”
is defined as Mr. Esses terminating his employment with us at age
65 or
older on at least 150 days’ prior
notice.
|
(8)
|
“Early
Retirement” is defined as Mr. Esses terminating his employment with us at
age 55 or older (up to age 65) on at least 150 days’ prior
notice.
|
(9)
|
Any
termination by Mr. Esses of his employment with us that does not
fit into
any of the prior categories, including but not limited to Mr. Esses
terminating his employment with us, with or without notice, other
than at
the end of an employment term or renewal thereof, in circumstances
that do
not fit into any of the prior
categories.
|
(10)
|
Does
not include a total of $12,800 in accrued but unpaid consulting fees
due
at December 29, 2006 to Sampen Corporation, a New York corporation
owned
by members of Steven Esses’s immediate family, from which Mr. Esses
receives a salary. See “Certain Relationships and Related Transactions -
Consulting Agreement with Sampen Corporation,”
below.
|
(11)
|
Limited
to an aggregate of 30 days.
|
(12)
|
Pursuant
to Israeli law and our customary practice, we pay Mr. Esses in July
of
each year the equivalent of six days’ “recuperation pay” at the statutory
rate of NIS 318 (approximately $75) per
day.
|
(13)
|
Payments
to managers’ insurance, a benefit customarily given to senior executives
in Israel, come to a total of 15.83% of base salary, consisting of
8.33%
for payments to a fund to secure payment of statutory severance
obligations, 5% for pension and 2.5% for disability. The managers’
insurance funds reflected in the table do not include the 8.33% payments
to a fund to secure payment of statutory severance obligations with
respect to amounts paid prior to December 29, 2006, which funds are
reflected in the table under the “Statutory severance”
heading.
|
(14)
|
Pursuant
to Israeli law, we must contribute an amount equal to 7.5% of Mr.
Esses’s
base salary to a continuing education fund, up to the permissible
tax-exempt salary ceiling according to the income tax regulations
in
effect from time to time. At December 29, 2006, the ceiling then
in effect
was NIS 15,712 (approximately $3,720). In Mr. Esses’s case, we have
customarily contributed to his continuing education fund in excess
of the
tax-exempt ceiling, and then reimbursed Mr. Esses for the tax. The
sums in
the table reflect this additional contribution and the resultant
tax
reimbursement.
|
(15)
|
Under
Israeli law, employees terminated other than for cause receive severance
in the amount of one month’s base salary for each year of work, at their
salary rate at the date of
termination.
|
(16)
|
Under
the terms of Mr. Esses’s employment agreement, we must under certain
circumstances provide him with the use of the company car that he
was
driving at the time of termination for a period of time after termination
and pay the tax on the benefit thereon. The taxable value of this
use is
reflected in the table.
|
Name
and Address of Beneficial Owner(1)
|
Shares
Beneficially Owned(2)(3)
|
Percentage
of Total
Shares
Outstanding(3)
|
|||||
Robert
S. Ehrlich
|
529,466(4)
|
4.4
|
%
|
||||
Steven
Esses
|
245,713(5)
|
2.0
|
%
|
||||
Thomas
J. Paup
|
88,571(6)
|
*
|
|||||
Dr.
Jay M. Eastman
|
8,571(7)
|
*
|
|||||
Jack
E. Rosenfeld
|
8,713(8)
|
*
|
|||||
Lawrence
M. Miller
|
32,693(9)
|
*
|
|||||
Edward
J. Borey
|
6,142(10)-
|
*
|
|||||
Prof.
Seymour Jones
|
1,190(11)
|
*
|
|||||
All
of our directors and executive officers as a group (8 persons)
|
921,060(12)
|
7.5
|
%
|
*
|
Less
than one percent.
|
(1)
|
The
address of each named beneficial owner is in care of Arotech Corporation,
1229 Oak Valley Drive, Ann Arbor, Michigan
48108.
|
(2)
|
Unless
otherwise indicated in these footnotes, each of the persons or entities
named in the table has sole voting and sole investment power with
respect
to all shares shown as beneficially owned by that person, subject
to
applicable community property laws.
|
(3)
|
Based
on 11,983,576 shares of common stock outstanding as of February 28,
2007.
For purposes of determining beneficial ownership of our common stock,
owners of options exercisable within sixty days are considered to
be the
beneficial owners of the shares of common stock for which such securities
are exercisable. The percentage ownership of the outstanding common
stock
reported herein is based on the assumption (expressly required by
the
applicable rules of the Securities and Exchange Commission) that
only the
person whose ownership is being reported has exercised his options
for
shares of common stock.
|
(4)
|
Consists
of 44,154 shares held directly by Mr. Ehrlich, 320,000 shares of
unvested
restricted stock (in which shares Mr. Ehrlich disclaims beneficial
ownership), 3,571 shares held by Mr. Ehrlich’s wife (in which shares Mr.
Ehrlich disclaims beneficial ownership), 11,527 shares held in Mr.
Ehrlich’s pension plan, 214 shares held by children sharing the same
household (in which shares Mr. Ehrlich disclaims beneficial ownership),
and 150,000 shares issuable upon exercise of options exercisable
within 60
days of February 28, 2007.
|
(5)
|
Consists
of 11,785 shares held directly by Mr. Esses,
160,000 shares of unvested restricted stock (in which shares Mr.
Esses
disclaims beneficial ownership),
and 73,928 shares issuable upon exercise of options exercisable within
60
days of February 28, 2007.
|
(6)
|
Consists
of 85,000
shares of unvested restricted stock (in which shares Mr. Paup disclaims
beneficial ownership) and 3,571
shares issuable upon exercise of options exercisable within 60 days
of
February 28, 2007.
|
(7)
|
Consists
of 8,571 shares issuable upon exercise of options exercisable within
60
days of February 28, 2007.
|
(8)
|
Consists
of 142 shares owned directly by Mr. Rosenfeld and 8,571 shares issuable
upon exercise of options exercisable within 60 days of February 28,
2007.
|
(9)
|
Consists
of 23,271 shares held by Mr. Miller as trustee of the Rose Gross
Charitable Foundation, in which shares Mr. Miller disclaims beneficial
ownership, 851 shares held directly by Mr. Miller, and 8,571 shares
issuable upon exercise of options exercisable within 60 days of February
28, 2007.
|
(10)
|
Consists
of 1,142 shares owned directly by Mr. Borey and 5,000 shares issuable
upon
exercise of options exercisable within 60 days of February 28,
2007.
|
(11)
|
Consists
of 1,190 shares issuable upon exercise of options exercisable within
60
days of February 28, 2007.
|
(12)
|
Includes
259,402 shares issuable upon exercise of options exercisable within
60
days of February 28, 2007.
|
Plan
Category
|
Number
of securities to be issued upon exercise of outstanding
options, warrants and rights
(a)
|
Weighted-average
exercise price of outstanding options, warrants and
rights
(b)
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
(c)
|
|||||||
Equity
compensation plans approved by security holders(1)
|
1,535,829
|
$
|
3.33
|
310,174
|
(1)
|
For
a description of the material features of grants of options and warrants
other than options granted under our employee stock option plans,
please
see Note 13.d. and 13.e. of the Notes to the Consolidated Financial
Statements.
|
● |
incorporated
documents are considered part of this prospectus;
and
|
● |
we
can disclose important information to you by referring you to those
documents.
|
● |
the
description of our common stock contained in the Registration Statement
on
Form 8-A, Commission
File No. 0-23336, as filed with the Securities and Exchange Commission
on
February 2, 1994;
and
|
● |
our
Annual Report on Form 10-K for the fiscal year ended December 31,
2006
filed with the Securities
and Exchange Commission
on
April 17, 2007, as amended on April 30,
2007.
|
Item
13.
|
Other
Expenses of Issuance and
Distribution
|
SEC
Registration Fee.
|
$
|
6,085.63
|
||
Legal
Fees and Expenses
|
5,000.00
|
|||
Accounting
Fees and Expenses
|
8,000.00
|
|||
Printing
and Engraving
|
3,000.00
|
|||
Miscellaneous
|
2,914.37
|
|||
Total:
|
$
|
25,000.00
|
Item
14.
|
Indemnification
of Directors and Officers
|
Item
15.
|
Recent
Sales of Unregistered
Securities
|
Ø
|
Pursuant
to the terms of a Securities Purchase Agreement dated September 30,
2003
(the “Purchase Agreement”) by and between Arotech Corporation and six
institutional investors (the “Debenture Holders”), we issued and sold to
the Debenture Holders (i) an aggregate principal amount of $5,000,000
in
8% secured convertible debentures due September 30, 2006, convertible
into
shares of our common stock at any time after January 1, 2004 at a
conversion price of $1.15 per share, and (ii) three-year warrants
to
purchase up to an aggregate of 1,250,000 shares of our common stock
at any
time after January 1, 2004 at an exercise price of $1.4375 per share.
|
Ø
|
In
September 2003, we increased our holdings in both of our vehicle
armoring
subsidiaries to 88% of MDT Armor Corporation and 75.5% in MDT Protective
Industries Ltd. We acquired the additional stake from AGA Means of
Protection and Commerce Ltd. in exchange for the issuance to AGA
of
126,000 shares of our common stock.
|
Ø
|
Under
the terms of an independent contractor agreement between us and InteSec
Group LLC, we pay InteSec a commission in stock of 5% of the military
battery sales that InteSec brings to us from U.S. and NATO defense,
security and military entities and U.S. defense contractors. Pursuant
to
the terms of this agreement, in July 2003, we issued 215,294 shares
to
InteSec.
|
Ø
|
Pursuant
to the terms of a Securities Purchase Agreement dated January 7,
2004 (the
“SPA”) by and between us and several institutional investors (the
“Investors”), we issued and sold to the Investors registered stock off of
our effective shelf registration statement at a price of $1.88 per
share,
and three-year warrants to purchase up to an aggregate of 9,840,426
shares
of our common stock at any time beginning six months after closing
(the
“Warrants”) at an exercise price per share equal to $1.88. The common
stock underlying the Warrants was not registered.
|
Ø
|
Under
the terms of an independent contractor agreement between us and InteSec
Group LLC, we pay InteSec a commission in stock of 5% of the military
battery sales that InteSec brings to us from U.S. and NATO defense,
security and military entities and U.S. defense contractors. Pursuant
to
the terms of this agreement, in February 2004, we issued 74,215 shares
to
InteSec.
|
Ø
|
In
November 2000 and May 2001, we issued a total of 916,667 warrants
to an
investor, which warrants contained certain antidilution provisions:
a
Series A warrant to purchase 666,667 shares of our common stock at
a price
of $3.22 per share, and a Series C warrant to purchase 250,000 shares
at a
price of $3.08 per share. Operation of the antidilution provisions
provided that the Series A warrant should be adjusted to be a warrant
to
purchase 888,764 shares at a price of $2.48 per share, and the Series
C
warrant should be adjusted to be a warrant to purchase 333,286 shares
at a
price of $2.31 per share. After negotiations, the investor agreed
to
exercise its warrants immediately, in exchange for a lowering of
the
exercise price to $1.45 per share (which was paid in cash), and the
issuance of a new six-month Series D warrant to purchase 1,222,050
shares
at an exercise price of $2.10 per share. The new Series D warrant
does not
have similar antidilution provisions.
|
Ø
|
In
June 2004, we issued at par value a total of 40,000 shares of our
stock to
the general manager of one of our subsidiaries, as a special stock
bonus.
|
Ø
|
In
July 2004, warrants to purchase 8,814,235 shares of common stock,
having
an aggregate exercise price of $16,494,194, were exercised. In connection
with this exercise, we issued to those exercising warrants an aggregate
of
8,717,265 new five-year warrants to purchase shares of common stock
at an
exercise price of $1.38 per share.
|
Ø
|
In
October 2004, we granted a total of 430,000 shares of our common
stock as
stock bonuses to two employees. Under the terms of this grant, the
sale or
other transfer of these shares is restricted for a period of two
years
from the date of grant, and such shares automatically return to us
if the
employee leaves our employ during such two-year period under circumstances
that would not entitle the employee to statutory severance under
Israeli
law (generally, resignation without good cause or dismissal with
good
cause).
|
Ø
|
In
December 2004, we granted a total of 310,000 shares of our common stock as
stock bonuses to five employees. Under the terms of this grant, the
sale
or other transfer of these shares is restricted for a period of two
years
from the date of grant, and such shares automatically return to us
if the
employee leaves our employ during such two-year period under circumstances
that would not entitle the employee to statutory severance under
Israeli
law (generally, resignation without good cause or dismissal with
good
cause).
|
Ø
|
In
December 2004, we donated 40,000 shares of our common stock to a
charitable organization recognized by the Internal Revenue Service
as
tax-exempt under Section 501(c)(3) of the Internal Revenue Code of
1986,
as amended.
|
Ø
|
In
January 2005, we granted 10,000 shares of our common stock as a stock
bonus to an employee. Under the terms of this grant, the sale or
other
transfer of these shares is restricted for a period of two years
from the
date of grant, and such shares automatically return to us if the
employee
leaves our employ during such two-year period under circumstances
that
would not entitle the employee to statutory severance under Israeli
law
(generally, resignation without good cause or dismissal with good
cause).
|
Ø
|
On
May 17, 2005, we issued an aggregate of 8,264,463 shares of our common
stock to the two former shareholders (the “Former Shareholders”) of FAAC
Incorporated (“FAAC”) as part of the earnout consideration for our
purchase of FAAC. Of these shares, 3,479,464 shares were sold by
the
Former Shareholders. The remaining 4,784,999 shares were returned
to us
for cancellation in 2005.
|
Ø
|
In
June 2005, we granted a total of 50,000 shares of our common stock
as
stock bonuses to two employees of FAAC. Under the terms of this grant,
the
sale or other transfer of these shares is restricted, 50% for a period
of
one year from the date of grant and 50% for a period of two years
from the
date of grant, and such shares automatically return to us if the
employees
leave our employ during such restricted periods under certain
circumstances (generally, resignation without good cause or dismissal
with
good cause).
|
Ø
|
In
August 2005, pursuant to the terms of agreements between us and Artemis
Equity LLC, we issued an aggregate of 425,000 shares of our common
stock
as part of the fee arrangements in connection with investment banking
and
financial consulting services that Artemis rendered to us.
|
Ø
|
In
August 2005, pursuant to the terms of an agreement between us and
RK
Equity Advisors, LLC, we issued 9,600 shares of our common stock
as part
of the fee arrangements in connection with investor relations services
that RK Equity rendered to us.
|
Ø
|
Pursuant
to the terms of a Securities Purchase Agreement dated September 29,
2005
(the “Purchase Agreement”) by and between Arotech Corporation and five
institutional investors (the “Investors”), we issued and sold to the
Investors (i) an aggregate of $17.5 million principal amount of senior
secured notes (the “Notes”), and (ii) one year warrants (“Warrants”),
which are not exercisable for the six month period following closing,
to
purchase up to 5,250,000 shares of common stock (30% warrant coverage)
at
an exercise price of $1.10 per share.
|
Ø
|
Pursuant
to the terms of our senior secured notes due March 31, 2008 (the
“Notes”),
we are obligated to repay the principal amount of the Notes over
the term
of the Notes, with the principal amount being amortized in twelve
payments
payable at our option in cash and/or by requiring the conversion
of a
portion of the Notes into shares of our common stock, provided certain
conditions are met. In this connection, we elected on December 23,
2005 to
make the first payment of $1,458,333.34, which was due on January
31,
2006, by requiring the conversion of a portion of the Notes into
shares of
our common stock. Pursuant to the terms of the Notes, the price used
to
determine the number of shares to be issued upon such conversion
was
calculated using an 8% discount to the average trading price of our
common
stock during 17 of the 20 consecutive trading days ending two days
before
the installment payment date. This calculation resulted in a volume
weighted average price of $0.4199, which after application of the
8%
discount resulted in a discounted price of $0.3863 per share (a total
of
3,775,134 shares of our common stock after rounding). The Notes further
provide that within two trading days after we send notice of an election
to convert a portion of the Notes into shares of our common stock,
we must
issue to the holders of our Notes a number of shares of our common
stock
equal to the quotient of (x) the amount of the Note being paid in
stock,
divided by (y) the conversion price of $1.00 per share, rounded up
to the
nearest whole share of common stock. Accordingly, on December 29,
2005, we
issued an aggregate of 1,458,335 shares of our common stock to the
holders
of the Notes. The remaining shares issuable upon such conversion
were
required to be issued by the installment payment date of January
31, 2006.
Accordingly, on January 31, 2006, we issued an aggregate of 2,316,799
additional shares of our common stock to the holders of the Notes.
|
Ø
|
Pursuant
to the terms of our senior secured notes due March 31, 2008 (the
“Notes”),
we are obligated to repay the principal amount of the Notes over
the term
of the Notes, with the principal amount being amortized in twelve
payments
payable at our option in cash and/or by requiring the conversion
of a
portion of the Notes into shares of our common stock, provided certain
conditions are met. In this connection, we elected on March 1, 2006
to
make the second payment of $1,458,333.34, which is due on March 31,
2006,
by requiring the conversion of a portion of the Notes into shares
of our
common stock. Pursuant to the terms of the Notes, the price used
to
determine the number of shares to be issued upon such conversion
will be
calculated using an 8% discount to the average trading price of our
common
stock during 17 of the 20 consecutive trading days ending two days
before
the installment payment date. This calculation resulted in a volume
weighted average price of $0.44, which after application of the 8%
discount resulted in a discounted price of $0.4048 per share (a total
of
3,602,604 shares of our common stock after rounding). The Notes further
provide that within two trading days after we send notice of an election
to convert a portion of the Notes into shares of our common stock,
we must
issue to the holders of our Notes a number of shares of our common
stock
equal to the quotient of (x) the amount of the Note being paid in
stock,
divided by (y) the conversion price of $1.00 per share, rounded up
to the
nearest whole share of common stock. Accordingly, on March 1, 2005,
we
issued an aggregate of 1,458,335 shares of our common stock to the
holders
of the Notes. The remaining shares issuable upon such conversion
were
required to be issued by the installment payment date of March 31,
2006.
Accordingly, on March 31, 2006, we issued an aggregate of 2,144,269
additional shares of our common stock to the holders of the Notes.
|
Ø
|
Pursuant
to the terms of Amendment Agreements dated March 27, 2006 and March
28,
2006, we and certain of our existing warrant holders (“Investors”) agreed
to amend certain of the Investors’ existing warrants (consisting of
415,200 warrants to purchase common stock at a price of $2.20 per
share,
797,872 warrants to purchase common stock at a price of $1.88 per
share,
274,748 warrants to purchase common stock at a price of $1.45 per
share,
125,000 warrants to purchase common stock at a price of $1.4375 per
share,
and 2,502,658 warrants to purchase common stock at a price of $1.38
per
share - a total of 4,115,478 warrants) to provide for an exercise
price
equal to $0.40, in exchange for (i) immediate exercise by the Investors
of
all such warrants, with the exercise price being deposited in a collateral
account to secure our obligation to repay its 8% secured convertible
debentures due in September 2006, and (ii) the issuance to the Investors
of a total of 1,646,192 warrants, expiring on March 31, 2008, with
an
exercise price equal to $0.594 per share.
|
Ø
|
On
April 7,
2006, we and each holder (each, an “Investor” and
collectively, the
“Investors”) of our Senior Secured Convertible Notes due 2008 (the
“Notes”) entered into a Conversion Agreement dated April
7, 2006 (collectively, the “Conversion Agreements”) pursuant to which an
aggregate of $6,148,903.60 principal amount of the Notes was
converted into 15,372,259 shares of our common stock. The amount
converted
will eliminate our obligation to make the installment payments under
the
Notes on each of March 31, 2008, January 31, 2008, November 30, 2007
and
September 30, 2007 (aggregating a total of $5,833,333.33). In addition,
an
additional $315,570.27 as a result of the conversion was applied
against
part of the installment payment due July 31, 2007. As a result of
the
conversion, $8,434,429.73 of principal remains outstanding under
the
Notes. Each Investor also agreed, among other things, to defer the
installment payment due on May 31, 2006 to July 31, 2006.
|
Ø
|
Pursuant
to the terms of an Amendment Agreement dated April 11, 2006, we and
Mainfield Enterprises Inc. (“Mainfield”) agreed to amend certain of
Mainfield’s existing warrants (consisting of 155,700 warrants to purchase
common stock at a price of $2.20 per share, 1,063,829 warrants to
purchase
common stock at a price of $1.88 per share, and 225,000 warrants
to
purchase common stock at a price of $1.38 per share - a total of
1,444,529
warrants) to provide for an exercise price equal to $0.40, in exchange
for
(i) immediate exercise by Mainfield of all such warrants, with the
exercise price being deposited in a collateral account to secure
our
obligation to repay its 8% secured convertible debentures due in
September
2006, and (ii) the issuance to Mainfield of 577,812 warrants, expiring
on
March 31, 2008, with an exercise price equal to $0.594 per
share.
|
Item
16.
|
Exhibits
|
Exhibit
No.
|
Description
|
||||||
(1)
|
3.1
|
Amended
and Restated Certificate of Incorporation
|
|||||
(4)
|
3.1.1
|
Amendment
to our Amended and Restated Certificate of Incorporation
|
|||||
(13)
|
3.1.2
|
Amendment
to our Amended and Restated Certificate of Incorporation
|
|||||
(14)
|
3.1.3
|
Amendment
to our Amended and Restated Certificate of Incorporation
|
|||||
(24)
|
3.1.4
|
Amendment
to our Amended and Restated Certificate of Incorporation
|
|||||
(2)
|
3.2
|
Amended
and Restated By-Laws
|
|||||
(14)
|
4.1
|
Specimen
Certificate for shares of common stock, $.01 par value
|
|||||
*
* *
|
5.1
|
Legal
Opinion of Lowenstein Sandler PC
|
|||||
†(1)
|
10.1.1
|
Form
of Management Employment Agreements
|
|||||
†*
*(1)
|
10.1.2
|
General
Employee Agreements
|
|||||
*
*(1)
|
10.2
|
Office
of Chief Scientist documents
|
Exhibit
No.
|
Description
|
||||||
(2)
|
10.2.1
|
Letter
from the Office of Chief Scientist to us dated January 4,
1995
|
|||||
(20)
|
10.3
|
Promissory
Note dated December 3, 1999, from Robert S. Ehrlich to us
|
|||||
(20)
|
10.4
|
Promissory
Note dated February 9, 2000, from Robert S. Ehrlich to us
|
|||||
(20)
|
10.5
|
Promissory
Note dated January 12, 2001, from Robert S. Ehrlich to us
|
|||||
(3)
|
10.6
|
Form
of Common Stock Purchase Warrant dated May 8, 2001
|
|||||
(4)
|
10.7
|
Securities
Purchase Agreement dated December 31, 2002 between us and the
Investors
|
|||||
(4)
|
10.8
|
Form
of 9% Secured Convertible Debenture due June 30, 2005
|
|||||
(4)
|
10.9
|
Form
of Warrant dated December 31, 2002
|
|||||
(4)
|
10.10
|
Form
of Security Agreement dated December 31, 2002
|
|||||
(4)
|
10.11
|
Form
of Intellectual Property Security Agreement dated December 31,
2002
|
|||||
†(5)
|
10.12
|
Settlement
Agreement and Release between us and Yehuda Harats dated December
31,
2002
|
|||||
(5)
|
10.13
|
Commercial
lease agreement between Commerce Square Associates L.L.C. and I.E.S.
Electronics Industries U.S.A., Inc. dated September 24,
1997
|
|||||
(5)
|
10.14
|
Amendment
to Commercial lease agreement between Commerce Square Associates
L.L.C.
and I.E.S. Electronics Industries U.S.A., Inc. dated as of May 1,
2000
|
|||||
(5)
|
10.15
|
Agreement
of Lease dated December 6, 2000 between Janet Nissimet
al.
and M.D.T. Protection (2000) Ltd. [English summary of Hebrew
original]
|
|
||||
(5)
|
10.16
|
Agreement
of Lease dated August 22, 2001 between Aviod Building and Earthworks
Company Ltd.et
al.
and M.D.T. Protective Industries Ltd. [English summary of Hebrew
original]
|
|
||||
(6)
|
10.17
|
Securities
Purchase Agreement dated September 30, 2003 between us and the Investors
named therein
|
|||||
(19)
|
10.17.1
|
Amendment
Agreement dated February 15, 2006 between us and Smithfield Fiduciary
LLC
|
|||||
(21)
|
10.17.2
|
Amendment
Agreement dated March 27/28, 2006 between us and the Investors named
therein
|
|||||
(6)
|
10.18
|
Form
of 8% Secured Convertible Debenture due September 30, 2006
|
|||||
(6)
|
10.19
|
Form
of Warrant dated September 30, 2003
|
|||||
(6)
|
10.20
|
Form
of Security Agreement dated September 30, 2003
|
|||||
(6)
|
10.21
|
Form
of Intellectual Property Security Agreement dated September 30,
2003
|
|||||
(7)
|
10.22
|
Form
of Amendment and Exercise Agreement dated December 10,
2003
|
|||||
(7)
|
10.23
|
Form
of Supplemental Warrant dated December 18, 2003
|
|||||
(8)
|
10.24
|
Stock
Purchase and Sale Agreement dated January 7, 2004 between us and
the
shareholders of FAAC Incorporated
|
|||||
(8)
|
10.25
|
Securities
Purchase Agreement dated January 7, 2004 between us and the Investors
named therein
|
|||||
(8)
|
10.26
|
Registration
Rights Agreement dated January 7, 2004 between us and the Investors
named
therein
|
|||||
(8)
|
10.27
|
Form
of Warrant dated January 7, 2004
|
|||||
(9)
|
10.28
|
Share
Purchase Agreement dated January 7, 2004 between us and the shareholders
of Epsilor Electronics Industries, Ltd.
|
|||||
(9)
|
10.29
|
Management
Agreement dated January __, 2004 among us, Office Line Ltd. and Hezy
Aspis
|
|||||
**(10)
|
10.30
|
Settlement
Agreement between us and I.E.S. Electronics Industries, Ltd. Dated
February 4, 2004
|
|||||
†(11)
|
10.31
|
Consulting
agreement dated January 1, 2004 between us and Edward J.
Borey
|
|||||
(11)
|
10.32
|
Promissory
Note dated July 1, 2002 from Robert S. Ehrlich to us
|
|||||
(11)
|
10.33
|
Lease
dated April 8, 1997, between AMR Holdings, L.L.C. and FAAC
Incorporated
|
|||||
(11)
|
10.34
|
Lease
dated as of March 22, 2004 between us and Fisk Building Associates
L.L.C.
|
|||||
(12)
|
10.35
|
Stock
Purchase Agreement dated as of July 15, 2004 between us and Armour
of
America, Incorporated and its sole shareholder
|
|||||
(13)
|
10.36
|
Securities
Purchase Agreement dated as of July 15, 2004, by and among us and
various
investors
|
|||||
†(14)
|
10.37
|
Consulting
Agreement, effective as of January 1, 2005, between us and Sampen
Corporation
|
Exhibit
No.
|
Description
|
||||||
†(25)
|
10.38
|
Fourth
Amended and Restated Employment Agreement, dated April 16, 2007 between
us, EFL and Robert S. Ehrlich
|
|||||
†(15)
|
10.39
|
Employment
Agreement, effective as of January 1, 2005 between EFL and Steven
Esses
|
|||||
(16)
|
10.40
|
Stock
Purchase Agreement dated as of May 17, 2005, by and among us and
various
purchasers
|
|||||
(17)
|
10.41
|
Securities
Purchase Agreement dated September 29, 2005 between us and the Investors
named therein
|
|||||
(17)
|
10.42
|
Form
of Senior Secured Convertible Note due March 31, 2008
|
|||||
(17)
|
10.43
|
Form
of Warrant dated September 29, 2005
|
|||||
(17)
|
10.44
|
Form
of Security Agreement dated September 29, 2005
|
|||||
(17)
|
10.45
|
Form
of Intellectual Property Security Agreement dated September 29,
2005
|
|||||
†(18)
|
10.46
|
Employment
Agreement between the Company and Thomas J. Paup dated December 30,
2005
|
|||||
†(18)
|
10.47
|
Separation
Agreement and Release of Claims among the Company, EFL and Avihai
Shen
dated January 5, 2006
|
|||||
(19)
|
10.48
|
Form
of Warrant dated February 15, 2006
|
|||||
(20)
|
10.49
|
Lease
dated February 10, 2006 between Arbor Development Company LLC and
FAAC
Incorporated
|
|||||
(21)
|
10.50
|
Form
of Warrant dated March 28/29, 2006
|
|||||
(22)
|
10.51
|
Conversion
Agreement dated April 7, 2006 between us and the Investors named
therein
|
|||||
(23)
|
10.52
|
Form
of Warrant dated April 11, 2006
|
|||||
(14)
|
21.1
|
List
of Subsidiaries of the Registrant
|
|||||
*
|
Consent
of BDO Seidman, LLP
|
||||||
*
|
Consent
of Kost, Forer, Gabbay & Kasierer, a member of Ernst & Young
Global
|
||||||
*
|
Consent
of Stark Winter Schenkein & Co., LLP
|
||||||
***
|
23.4
|
Consent
of Lowenstein Sandler PC (contained in the opinion filed as Exhibit
5.1)
|
|
||||
***
|
24.1
|
Power
of Attorney (included as part of the signature page filed
herewith)
|
|
*
|
Filed
herewith
|
**
|
English
translation or summary from original
Hebrew
|
***
|
Previously
filed
|
†
|
Includes
management contracts and compensation plans and
arrangements
|
(1)
|
Incorporated
by reference to our Registration Statement on Form S-1 (Registration
No.
33-73256), which became effective on February 23,
1994
|
(2)
|
Incorporated
by reference to our Registration Statement on Form S-1 (Registration
No.
33-97944), which became effective on February 5,
1996
|
(3)
|
Incorporated
by reference to our Current Report on Form 8-K filed May 7, 2001
(EDGAR
Film No. 1623989)
|
(4)
|
Incorporated
by reference to our Current Report on Form 8-K filed January 6,
2003
|
(5)
|
Incorporated
by reference to our Annual Report on Form 10-K for the year ended
December
31, 2002
|
(6)
|
Incorporated
by reference to our Current Report on Form 8-K filed October 3,
2003
|
(7)
|
Incorporated
by reference to our Current Report on Form 8-K filed December 23,
2003
|
(8)
|
Incorporated
by reference to our Current Report on Form 8-K filed January 9,
2004
|
(9)
|
Incorporated
by reference to our Current Report on Form 8-K filed February 4,
2004
|
(10)
|
Incorporated
by reference to our Current Report on Form 8-K filed February 5,
2004
|
(11)
|
Incorporated
by reference to our Annual Report on Form 10-K for the year ended
December
31, 2003
|
(12)
|
Incorporated
by reference to our Quarterly Report on Form 10-Q for the quarter
ended
June 30, 2004
|
(13)
|
Incorporated
by reference to our Current Report on Form 8-K filed July 15,
2004
|
(15)
|
Incorporated
by reference to our Quarterly Report on Form 10-Q for the quarter
ended
June 30, 2004
|
(16)
|
Incorporated
by reference to our Current Report on Form 8-K filed May 17,
2005
|
(17)
|
Incorporated
by reference to our Current Report on Form 8-K filed September 30,
2005
|
(18)
|
Incorporated
by reference to our Current Report on Form 8-K filed January 5,
2006
|
(19)
|
Incorporated
by reference to our Current Report on Form 8-K filed February 16,
2006
|
(20)
|
Incorporated
by reference to our Annual Report on Form 10-K for the year ended
December
31, 2005
|
(21)
|
Incorporated
by reference to our Current Report on Form 8-K filed March 30,
2006
|
(22)
|
Incorporated
by reference to our Current Report on Form 8-K filed April 7,
2006
|
(23)
|
Incorporated
by reference to our Current Report on Form 8-K filed April 12,
2006
|
(24)
|
Incorporated
by reference to our Quarterly Report on Form 10-Q for the quarter
ended
June 30, 2006
|
(25)
|
Incorporated
by reference to our Annual Report on Form 10-K for the year ended
December
31, 2006
|
Item
17.
|
Undertakings
|
AROTECH
CORPORATION
|
|||
|
|||
By:
|
/s/
Robert S. Ehrlich
|
||
Name:
|
Robert
S. Ehrlich
|
||
Title:
|
Chairman
and Chief Executive Officer
|
Signature
|
Title
|
Date
|
||
/s/
Robert S. Ehrlich
|
Chairman,
Chief Executive Officer and Director
|
May
1, 2007
|
||
Robert
S. Ehrlich
|
(Principal
Executive Officer)
|
|||
*
|
Vice
President - Finance and Chief Financial Officer
|
May
1, 2007
|
||
Thomas
J. Paup
|
(Principal
Financial Officer)
|
|||
/s/
Norm Johnson
|
Controller
|
May
1, 2007
|
||
Norm
Johnson
|
(Principal
Accounting Officer)
|
|||
*
|
President,
Chief Operating
|
May
1, 2007
|
||
Steven
Esses
|
Officer
and Director
|
|||
Director
|
May
__, 2007
|
|||
Dr.
Jay M. Eastman
|
||||
*
|
Director
|
May
1, 2007
|
||
Lawrence
M. Miller
|
||||
*
|
Director
|
May
1, 2007
|
||
Jack
E. Rosenfeld
|
||||
|
Director
|
May
__, 2007
|
||
Edward
J. Borey
|
||||
*
|
Director
|
May
1, 2007
|
||
Seymour
Jones
|
||||
*
|
May
1, 2007
|
|||
By:
/s/
Robert S. Ehrlich
|
||||
Robert
S. Ehrlich, Attorney-In-Fact
|