Emblaze Systems (formerly Geo Interactive) and its founders, Zur Daboosh, Naftali Shani, Eli Reifman, and Sharon Carmel, are petitioning for dismissal of Malam Systems’ suit for a 50.1% stake in Emblaze. Emblaze said the claim should be dismissed because it was filed after a six-year delay..
Emblaze Systems’ statement of defense alleges that the true value of the claim is NIS 873 million. According to Emblaze, granting Malam permission to sue after the long delay will harm not only the respondents, but thousands of investors who have bought Emblaze shares.
Emblaze claims that people bought its shares based on its known legal and business status, in the absence of any indication that Malam was considering the disavowal of its contractual obligations, declarations, and concessions in the 1995 separation agreement signed by the parties.
According to Emblaze, Malam’s delay in filing suit constitutes a waiver of any basis for a claim on its part based on the relations between the two companies. Emblaze alleges that even if there had been any real basis for Malam’s suit, which the respondents deny, the length of time since the agreement was signed exceeds any feasible period for canceling the separation agreement.
Emblaze claims that Malam was aware at the time of all the salient facts, but waited six years before announcing the cancellation of the separation agreement and its demand for 50.1% of Emblaze.
According to Emblaze, Malam omitted from its statement of claim its willingness to pay $400,000 for the shares. This sum constitutes 0.06% of the value of the shares, which were worth $600 million as of October 22, 2000. Malam is now demanding the shares for free.
Emblaze alleges that the claim is unsubstantiated and groundless. Emblaze claims it was filed under the cynical assumption that the very act of filing suit against a public company and its founders, which have a good reputation, constitutes enough of a nuisance to force the respondents to compromise.
Malam alleges it signed a $400,000 investment agreement with the respondents, entitling it to 50.1% of Emblaze. After Emblaze’s business began to mature, its entrepreneurs decided it was best to get rid of Malam by refunding its original investment and becoming sole beneficiaries of Emblaze’s success.
According to Malam, the Emblaze founders managed through fraud and misrepresentation to persuade Malam to sign a separation agreement, under which the founders would receive sole ownership of the company in exchange for a refund of the original investment.
Published by Israel's Business Arena on May 1, 2001