Ephraim Fields Calls on Bob Ehrlich of Arotech Corp. to Immediately Repay Company Loan
Accesswire
3 hours ago
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- Calls for immediate repayment of $0.5 million, low-interest loan from the Company.
- Mr. Ehrlich has received approximately $15 million of additional compensation from ARTX since receiving the loan 15 years ago.
- The $15 million of compensation equates to 40% of ARTX’s current market capitalization.
- Significant shareholder value has been destroyed under Mr. Ehrlich’s leadership.
- Questions Board’s decision to grant loan and subsequent compensation.
- Cautions Board not to take actions that are not in the best interests of all shareholders.
- Believes value of underlying assets vastly exceeds Company’s current stock price.
NEW YORK, NY / ACCESSWIRE / September 1, 2015 / Earlier today Ephraim Fields of Echo Lake Capital issued a letter to Bob Ehrlich, Executive Chairman of the Board of Arotech Corp. ("ARTX" or the "Company") (Nasdaq GM: ARTX) In the letter Mr. Fields called on Mr. Ehrlich to immediately repay a $0.5 million loan that the Company provided him over 15 years ago. Mr. Fields believes this highly unusual loan (which is non- recourse, has a 25 year life and bears interest at Fed Funds + 1%) never was and continues to be not in the best interests of all ARTX shareholders.
Mr. Fields noted that since being given this loan, Mr. Ehrlich has also received approximately $15 million of compensation, which Mr. Fields believes is excessive considering ARTX's size and the significant destruction of shareholder value that has occurred under Mr. Ehrlich’s leadership.
Mr. Fields also questioned ARTX's Board of Directors' decision to grant the loan as well as to provide Mr. Ehrlich additional compensation despite the Company's abysmal performance.
Mr. Fields believes ARTX has a bloated and inefficient overhead structure, but that the value of the Company's underlying assets vastly exceeds its current stock price.
Mr. Fields concluded: "As experienced investors we've seen many instances of what we believe to be poor performance, insufficient Board oversight and excessive personal greed....but very few that rival this one."
CONTACT:
Ephraim Fields
ef@echolakecapital.com
A full copy of the letter can be found below:
September 1, 2015
To: Robert S. Ehrlich - Arotech Corp.
Cc: Jay M. Eastman - Lucid, Inc.
Michael E. Marrus - Emerging Growth Equities, LTD.
Seymour Jones - New York University
Richard I. Rudy - Advanced Energy Capital, LLC
Steven Esses - Arotech Corp.
Kenneth W. Cappell - Yeshiva University
Dear Bob:
As you are likely aware from our numerous conversations, we believe we are the single largest shareholder of Arotech Corp. ("ARTX" or the "Company").
On February 9, 2000 ARTX's Board of Directors (the "Board") gave you a 25 year non-recourse loan bearing annual interest at 1% over the then-current federal funds rate. We find it difficult to believe that any credible Board of Directors would believe that such an outrageous loan was in the best interests of shareholders; however, this is just one of many questionable actions the Board has undertaken and, if necessary, we will highlight other such examples.
The aggregate amount outstanding under this loan is $0.5 million and we feel that after benefitting from this low-interest loan for over fifteen years, you should repay it immediately for two primary reasons:
1) Since you were given the loan, you've received what we consider to be a disgraceful amount of additional compensation (approximately $15 million), so clearly you should have the financial resources necessary to repay the loan.
2) Under your leadership, ARTX's financial position has weakened and significant shareholder value has been destroyed. As a result, ARTX would greatly benefit from getting repaid and could easily use the cash in a value enhancing manner.
Regarding your compensation, from 2000 until 2014 you have received approximately $15 million of compensation from the Company, an amount which equates to a shocking 40% of ARTX's current market capitalization. We believe your compensation is unjustifiable and wildly excessive considering the Company's size and its atrocious performance under your leadership. We can't believe any credible Board would continue rewarding you with such generous compensation considering your poor performance, but we will publicly address this matter at a later time. For now we simply state that considering your historically large and generous compensation it is appropriate that you immediately repay the loan.
We also feel it is imperative that you repay the loan because of ARTX's weakened financial situation and the tremendous destruction of shareholder value that has occurred under your leadership. ARTX has approximately $13 million of net debt and recently may have needed to modify its debt covenants. Therefore, we hope you appreciate how helpful it would be for the Company (and its shareholders) if ARTX had additional cash to deploy in a value enhancing manner. Clearly it does not benefit shareholders to be lending you money, especially at a rate that is lower than the rate the Company pays on its own debt. In the future we will have more to say publicly about the destruction of shareholder value that has occurred under your leadership, but for now we will just present the below table which illustrates the stock's extended and material underperformance(1).
View photo
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You have overseen the destruction of massive amounts of shareholder value at ARTX while personally enriching yourself at the expense of other shareholders. We think it's about time you did at least one good thing for all ARTX shareholders and repaid this ridiculous and needless loan. You've benefited from this low-interest loan for over fifteen years, even though we believe the loan never was and continues to be not in the best interests of all shareholders.
As experienced investors we've seen many instances of what we believe to be poor performance, insufficient Board oversight and excessive personal greed....but very few that rival this one.
We believe ARTX has several problems that can be easily fixed, including a bloated and inefficient overhead structure; however, the value of the Company's underlying assets vastly exceeds its current stock price and we intend to make sure that long-term value is created for all shareholders.
Finally, we caution you and rest of ARTX's Board to refrain from taking any actions that are not clearly in the best interests of all shareholders.
Sincerely,
Ephraim Fields
Echo Lake Capital
1) All pricing data as per Bloomberg and as of August 29, 2015.
SOURCE: Echo Lake Capital
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