Civil Case (Haifa) 29536-07-26 SP STRATEGIC HOLDINGS LLC v. Inmod Ltd. - part 2

12-34-56-78 Chekhov v.  State of Israel, P.D.  51 (2)

9. Respondents 4-6 are members of the company's board of directors and were appointed to serve on a special committee convened for the purpose of examining an offer to purchase all of the company's shares.
10. Towards the end of 2025, the company has decided to embark on a process of examining the possibility of selling all of its shares and turning it into a private company.  As part of this process, the company's board of directors appointed on November 4,2025, a special committee composed of independent directors: Dr.  Hadar Ron, Mr. Nadav Kenneth and Mr. Michael Engel, for the purpose of examining and supervising the sale process and the contacts with bidders.  In order to locate potential buyers, the first special committee was assisted by the services of Bank of America, a well-known investment bank, which managed the process of bringing and coordinating purchase offers from investors.
11. Among the many acquisition proposals examined by the first committee was a proposal to purchase the company's entire shares by a group led by Mr. Meir Shamir, which also included Mr. Mizrahi (hereinafter: "Shamir Group"). In addition to the aforesaid, the Steel Group, the group of foreign companies of which the Applicant is a member, sent a letter to the Company's Board of Directors and to Mr. Mizrahi, in the framework of which it offered to purchase 51% of the Company's shares at a price of $18 per share.
12. After the first special committee examined the proposals presented to it, including the Shamir Group's proposal, the First Special Committee announced in February 2026 its decision not to advance any of the proposals presented to it, including the Shamir Group's proposal.
13. On June 17,2026, the Strategy, Ltd M.N. Business which is owned by Mr. Mizrahi, a new proposal for the purchase of the company's entire shares by way of a merger.  As a result, the Board of Directors decided on June 23,2026 to appoint a new special committee, which will be assisted by external legal and economic advice.  The members of the special committee were appointed the independent directors Dr.  Hadar Ron, Mr. Nadav Kenneth and Dr.  Shlomo Ness, who replaced the previous chairman of the board of directors.  The special committee took upon itself to examine the new proposal that was placed before it and any additional proposals that would be placed before it, in accordance with the fiduciary duties of its members and while promoting the best interests of the company and its shareholders.
14. On July 9,2026, on the eve of the submission of the application, the Applicant submitted a proposal on its behalf for the acquisition of the Company. Already on July 10,2026, the Company published a notice to the public stating that the Applicant's offer to purchase the Company's shares on July 9,2026 was submitted to the Board of Directors, forwarded to the Special Committee and will also be discussed by it, in accordance with the fiduciary duties that apply to its members.

Copied from Nevo          Summary of the parties' arguments

15. As part of the application It was argued that in the establishment of the special committee, there were a series of serious flaws and omissions, including in the way the company was conducted and in the representations it made to the public. Therefore, and against the background of the fact that the Applicant submitted a competing tender offer and a financial preference, it is important to grant the remedies requested by the Applicant.
16. It was argued that while Mr. Moshe Mizrahi actually holds about 7% of the company's shares, he has a real ability to direct the company's activities and has enormous influence over what happens in the company, its organs and the decision-making mechanisms of the board of directors, which is composed of his associates, in a manner that shows that Mr. Mizrahi is the controlling shareholder of the company, all in contrast to the company's conduct and its presentations to the public as if the company has no controlling shareholder, This is also reflected in the lack of relevant considerations and the lack of good faith in the company's decision-making processes.
17. In this context, The Applicant referred to, inter alia, the manner in which the members of the Board of Directors are appointed, the fact that it is a rigid and gradual board of directors, the fact that the company's shares are distributed among tens of thousands of shareholders, which enables the core of the founders, headed by Mr. Mizrahi, to maintain practical influence over the composition of the board of directors and the decision-making mechanisms in the company, while limiting the ability of the shareholders from the public to influence its management in real time.
18. The Applicant claimed that there are business relationships between Mr. Mizrahi and the directors who are ostensibly classified as independent. In this context, it was argued by the Respondent that Respondents 4 and 5 served alongside Mr. Mizrahi on a number of boards of directors and therefore cannot be recognized as independent or independent directors.  It was argued that the fact that the purchase offer submitted by the Applicant before the First Special Committee, of which Respondents 4 and 5 were included, as well as Dr.  Michael Engel, was rejected by the First Special Committee, confirms the conclusion and this should be seen as a first step by Mr. Mizrahi to promote his proposal and to deprive the Applicant, as a minority shareholder in the company, while thwarting the possibility of holding a competitive, transparent sale proceeding and egalitarian in which the Applicant's proposal or any other proposal for the benefit of the Company and its shareholders will be examined.  Furthermore, , It was claimed that Mr. Mizrahi acted during the relevant period to cool down the possibility of an acquisition transaction and at the same time purchased shares of the company in the amount of tens of millions of shekels in order to increase his holdings and consolidate his position as the controlling shareholder, using insider information and taking advantage of the company's business opportunity.
19. The Applicant further claimed that as early as March 2026, and before the "Mizrahi Group" proposal was submitted, the Applicant warned the Board of Directors in connection with Mr. Mizrahi's conduct, but the response she received related only to a quantitative claim that in view of Mr. Mizrahi's holdings in the shares, he was not a controlling shareholder and that Respondents 4 and 5 were independent directors.
20. The Applicant argued that the defects that she pointed out justify granting the requested temporary remedies, and even the balance of convenience is clearly tilted in favor of granting the application, since the best interests of all shareholders are at stake, and the damage that may be caused if the requested relief is not granted is immediate and irreversible. According to the Applicant, if the improper corporate proceeding promoted by the Company and/or Mr. Mizrahi is advanced on the basis of the erroneous assumption that the Company has no controlling shareholder, and if additional decisions are made by a special committee whose lawfulness and competence are subject to theDoubt, may create a new reality that cannot be reversed.  On the other hand, it is argued that the damage caused to the respondents is limited, if it exists at all.  The remedy is not decisive in dispute, is not supposed to obligate the company to engage with the applicant or any party, and does not prevent a clean, genuine examination and egalitarian of the proposal of the "Mizrahi Group" through a competent and untainted mechanism, and the requested remedies are intended to preserve the existing situation until the material flaws that occurred in the decision of the Board of Directors and the composition of the Special Committee are clarified.
21. Finally, it was argued by the Respondent that considerations of honesty and good faith also support the granting of relief, since the Applicant turns to the court in order to prevent harm to the integrity of corporate governance and the fairness of the proceeding, and not in order to obtain an unfair advantage.
22. The respondents argued in the responses submitted on their behalf that the application for interim relief should be rejected.
23. In the response filed by respondents 1-3, it was argued that the application was intended to sabotage the proper operation of the company, and all this out of extraneous motives of an activist fund that is trying to aggressively take over the company and its resources, and demands, in the framework of the motion, to prevent the convening and activity of a special committee appointed by the company's board of directors as a voluntary move that is not required by law, in order to examine the purchase offer submitted to the company on behalf of a group of investors of which Mr. Mizrahi is a member - CEO and director of the company and a minority shareholder.
24. It was noted that the application does not present a prima facie basis for the existence of a cause of action, since the applicant does not indicate any obligation in law or case law to examine the purchase offer through an independent committee, nor does it indicate a legal obligation according to which the committee members will meet the qualifications of an external director in the sense of Article 240 Companies Law, התשנ"I-1999And in any case there are no consequences Regulation 5a(a) to the Mitigation Regulations with regard to the identity of the members of the Special Committee. Moreover, it was argued that the Applicant does not meet the burden of proving that Mr. Mizrahi is a controlling shareholder in the company, including that it does not contradict the presumption of lack of control.  Moreover, , It was argued that the Applicant does not meet the burden of proving her claim that the directors and members of the Special Committee are not independent and independent.
25. It is claimed that the balance of convenience works in a way that Distinct as to the granting of the requested orders. According to respondents 1-3, no damage will be caused if the requested orders are not granted, even if at the end of the day the applicant wins the claim.  Because, In any case, the special committee is not authorized to approve the transaction or make any binding decision on behalf of the company.  The actions of the special committee that the temporary orders are intended to prevent: convening the special committee, examining the purchase offer, formulating conclusions and recommending to the company's board of directors whether to approve it or not - do not create a reversible situation.  On the other hand, the issuance of orders and the prevention of the convening of the special committee will paralyze the company's ability to examine, evaluate, and improve Mr. Mizrahi's acquisition offer so that the offer expires and the company and the shareholders are liable to lose a transaction that could have advanced the company and brought an optimal return to the shareholders.
26. It was argued that the application was plagued by delays and impediments. It was noted that a special committee in a similar panel, which included Dr.  Hadar Ron and Mr. Nadav Kenneth, in the framework of the application, which the Applicant claimed to be unworthy, convened several months ago and examined the purchase offers of various bidders, including one submitted by the Applicant and a proposal submitted by the Shamir Group, of which Mr. Mizrahi is a member, and decided not to proceed with the proposals.  If the Applicant Reasoning Since a special committee should not be convened in such a composition and should not be allowed to discuss a purchase offer on behalf of Mr. Mizrahi, it should have already approached at that stage and petitioned for the temporary orders to which it is now petitioning.  Therefore, it was argued that since the Applicant did not act as asaid, the Applicant created a representation that she did not object to the action of the Special Committee and to the composition and composition of its members, and that the application suffers from a substantial delay.  At the same time, it was argued that the Applicant's silence on the date prior to the convening of the Committee establishes estoppel and impediments against her.
27. Respondents 1-3 further argued that the interim remedies are identical to the final remedies in the statement of claim, and this reason is sufficient to lead to the rejection of the application.
28. Finally, it was claimed that the application was filed in bad faith and in a lack of cleanliness, while concealing material details, including the identity of the applicant and the foreign interests guiding it. In addition, it was claimed that the applicant is obscuring material facts, including the fact that a committee with an almost identical composition, which included the two directors about whom the applicant raises allegations of dependence on Mr. Mizrahi, convened only a few months ago, examined and rejected, inter alia, a purchase offer made by the Shamir Group, which included Mr. Mizrahi.
29. In the framework of the response submitted by respondents 4-6, respondents 4-6 added that the application should be dismissed as it is premature and theoretical, and in fact seeks to prevent the convening of the special committee even before it examined the proposals, even if only initially, and before it negotiated their terms, and when in any case the engagement in the proposal is subject to the approval of the company's shareholders' meeting.
30. Respondents 4-6 further argued that not only did consistent court rulings determine that there was no reason to grant relief Temporary, whose essence is to prevent the convening of a decision-making body, as opposed to a temporary remedy that prevents the execution of decisions, that there is no main remedy in the claim that the temporary relief is intended to serve, and even for this reason the application should be rejected.
31. 0031. In addition, it was argued that the chances of the lawsuit being accepted are low, since, inter alia, the competence of independent directors is examined according to the foreign law that has not been claimed and has not been proven, and the attempt to circumvent the application of the foreign law by claiming that Mizrahi is a baseless controlling shareholder.

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32. Finally, it was argued that the members of the Special Committee are objective, impartial and have no personal or business connection or relationship of dependence between them and Mr. Mizrahi, which raises a concern that they cannot fairly examine a transaction with him, and in any event, the Applicant has not presented data that could establish a concrete personal or economic connection that may cloud their judgment, and in any event, the balance of convenience clearly tends to the conclusion that the request for the issuance of the requested orders should not be granted.