SofaWare: Gil Shwed's Thuggish Behavior Must Be Stopped, Law Enforced'

Check Point Software Technologies is trying to effect a takeover of SofaWare Technologies, the smaller company complained in court yesterday.

At SofaWare's request, the court agreed to prevent its board from convening for 15 days, until further hearings.

SofaWare founder Adi Ruppin asked the court to "enforce the law and halt further thuggish behavior by a wealthy, influential man named Gil Shwed, the chief executive and chairman and major shareholder in Check Point."

Ruppin requested that the Tel Aviv District Court issue a temporary injunction against Shwed, Check Point, Amanet Technologies (an investor in SofaWare), Miriam Steinitz, Eyal Deshef and Avraham Assaf of Amanet. Ruppin also asked the court to prevent the convening of the SofaWare board of directors yesterday, and prevent any decision from being made that would be binding on SofaWare, which has been in a cooperative relationship with Check Point.

Judge Nissim Yeshaya granted the injunctions, which prevent the board from convening until a hearing under Judge Yehooda Zaft in 15 days.

Corporate brutality

Accusing Shwed, Ruppin said he hadn't complained to the police because only physical brutality is prohibited under law, not corporate brutality.

In his petition, Ruppin said that, in 1998, he and his partner Etay Bogner contacted Shwed and presented a new information security application. Shwed liked it, and in 1999, when SofaWare was established, Check Point received one ordinary share. Today, it holds less than 0.1 percent of the startup's shareholders' equity.

In 2000, SofaWare signed a number of agreements with Check Point, which agreed to provide convertible loans to the startup. The loans were convertible into 60 percent of SofaWare's equity on a fully diluted basis, which would give it a majority on the board.

Up to the date of SofaWare's petition, Check Point had not converted the loan into shares, Ruppin noted.

Under their alliance, SofaWare develops products using Check Point technology. The bigger company has the exclusive marketing right to the products. But, at some point, Ruppin claimed, a "sorry picture" began to emerge: Check Point began to market the products in violation of the agreements.

The violations hurt the two companies' relations, Ruppin alleged, ending in an explosion over pricing at a board meeting at SofaWare in February 2003. Ruppin had demanded that Check Point make the prices more competitive.

But Shwed declared that Check Point would never sell at such a price, Ruppin continued. Ruppin reminded Shwed that it was a SofaWare board meeting, not a Check Point one, and for his pains ("chutzpah in saying such grave things to the distinguished Mr Shwed") was told by Shwed that he should resign immediately.

Shortly thereafter, Ruppin related, Shwed suggested Ruppin sell his shares in SofaWare and get out. He refused. Then a board meeting was summoned, with his dismissal on the agenda. After several postponements, the meeting was finally scheduled for May 26 at Check Point's offices.

Ahead of the meeting, Ruppin claimed, he took advantage of the SofaWare articles of association to appoint up to three directors representing his interests. But, he said, Check Point announced it opposed the appointments on the grounds that the articles should be interpreted differently.

Check Point also announced that it was appointing another director on its behalf to the SofaWare board, thus hoping to gain a majority on the five-person board, consisting of two Check Point representatives, two SofaWare representatives, and one for Amanet, who was expected to support Check Point's position.

On May 26, Ruppin claimed, Check Point physically prevented the directors he had appointed from entering the room in which the board of directors meeting was to take place. In response, these representatives announced that the meeting would be held in Check Point's waiting room. Thus, two parallel meetings were held.

The two meetings reached contradictory conclusions, Ruppin related. The directors for Check Point decided to fire Ruppin, while the other meeting agreed unanimously to disperse without reaching a decision.

Later, Ruppin said he contacted Check Point's representatives several times to prevent the continuing existence of two boards reaching opposite decisions.

But Check Point and Shwed ignored his missives, he said, and are persisting with their unilateral efforts to operate a shadow board of directors.

Check Point's representatives have begun to enact the "shadow" board decision to usurp powers from the SofaWare board, Ruppin said. For instance, they sign letters in the company's name, and sign pay slips.

Check Point recently scheduled a board meeting for yesterday, Ruppin finished. On the agenda were issues such as SofaWare's survival, pay raises, and granting bonuses to various officers faithful to Check Point. This is the board meeting that the court has blocked.

Representatives for Check Point refused to comment.