Mr. Knapfler, who believed in the deal, nevertheless signed the draft agreement on behalf of the foundation. The day after the board meeting, on May 18, 2016, he himself transferred the advance in the amount of 450,000 euros, from his own sources. In light of Mr. Nehemiah's request, he agreed to transfer an additional sum of 100,000 euros, before any agreement was signed.
- There is no dispute that at the end of the day, the fund did not invest in the company, and no agreement was reached with it. The parties disagree about the reason for this. The defendants against them place emphasis on an economic examination conducted by the fund, which revealed that the outline that is being formulated will not yield the desired return, taking into account the company's situation. In other words, her financial situation kept the fund away from her. Knepfler places another emphasis, according to which if the fund had entered into a transaction, it would have had to return the advance he had paid, and thus, as far as he was concerned, a "stakeholder transaction" would have been created, which required special procedures. Hence, the promotion of the deal would have been delayed, while everyone sought to advance it quickly in light of the company's burning need for cash.
Either way, when it became clear that the fund would not move forward with the deal, Mr. Knepfler decided to take action, and commit to it personally.
The Agreement with Mr. Knepfler
- Towards the end of May 2016, an agreement was signed between ADN, Mr. Knafler and Guy Development (Appendix 6 to the amended Statement of Defense) (hereinafter: the Agreement). The agreement bears the date of May 24, 2016, and according to Mr. Knepfler, it was signed on May 29, 2016.
Even earlier, on May 18, 2016, Mr. Knafler was sent a forecast document (N/4; hereinafter: the forecast document) prepared by Mr. Rappaport (hereinafter: Mr. Rappaport).
- In accordance with the agreement, Mr. Knepfler will purchase all of the issued and paid-up share capital of Guy Development, which holds, as may be recalled, about 24% of the shares of the French company. ADN also undertook to transfer to Mr. Knafler 8% of the shares of the French company held by it, which will be allocated to Guy Development.
It was agreed that Mr. Knepfler would be entitled to 80% of the available cash flow that would derive from the assets in France through the property companies. ADN will be entitled to the balance.
- The transaction was set at €4 million, which Mr. Knepfler was to transfer to ADN (clause 1.4). In this regard, it was held that:
- No later than 30 days from the date of signing, Mr. Knepfler was required to pay €1,450,000 (it should be noted that there is a contradiction between the numerical amount and the sum in words quoting €1.5 million). This is in addition to the down payment he paid in the amount of 550,000 euros.
- No later than 90 days from the date of signing, Mr. Knepfler was required to complete the payment of the balance of the consideration (clause 1.4.2).
- The sum of €400,000 of the consideration was supposed to be held in the trust hands of Adv. Lederman, until the additional shares were allocated to Guy Development and transferred to Mr. Knefler.
- Clause 3.2 of the Agreement stipulates that as of "the Closing Date", Mr. Knepfler will receive veto rights regarding the French company's activity in all matters relating to the sale or transfer of the property companies, the pledge of the assets, etc. The agreement granted him additional protections that cannot be detailed here.
- The agreement also included several statements on behalf of the parties:
- ADN, which was defined as a seller, declared that the shares of Guy Development are free of any foreclosure or lien (clause 5.1). It was further noted in the same section that "Guy Development and/or [the French company] and/or the property companies comply with all their obligations, including financial covenants. Beyond the aforesaid, it is declared that Guy Development has no debt and/or obligation to any third party."
In clause 5.3, the seller stated that "its most recent financial statements faithfully reflect its situation and it is not aware of any material information that may materially affect the value of the assets and/or the property companies and/or Guy Development and/or [the French company], which was not disclosed in the company's reports and/or its reports to the public. The valuation of the assets, as used to prepare the seller's financial statements, was transferred to the buyer [to the buyer] in advance."