Indeed, insofar as this was the case, this was reasonable and logical business conduct on the part of Bitan Wines. It is certainly understandable to the heart of a party to the agreement who is careful to conduct himself carefully and wishes to put the matter explicitly in writing, and thus to avoid leaving an opening for future litigation. This is especially true when it comes to a buyer who pays a large sum of money in cash, who is interested in ensuring, as far as possible, that his investment will not go down the drain. The problem is that the argument that in this case the split of the consideration was made due to the caution of Bitan Wines encounters difficulty on the evidentiary level" (Gangina case, paragraph 21 of the judgment of Justice Y. Amit).
In our case, I am of the opinion that this is the case: the acquiring company sought to operate on its own in the electron microscope market in Israel, and for this purpose sought to neutralize the competition on the part of Eisenberg and Kahane's situation personally. In this context, the acquiring company did not want to leave the question vague as to whether the commitment of the Eisenberg company was sufficient to ensure, effectively, non-competition on Kahane's part as well. Instead, as appears from the evidence detailed above, the acquiring company insisted that Kahane would also commit to it, personally, in a non-compete agreement, and saw this as an essential condition for the entire transaction. Therefore, even if it is possible that competition on Kahane's part would have amounted to bad faith, even without the non-compete agreement that was entered into with him, it is clear that from the perspective of the acquiring company he was "A real need" that Kahane will enter into a non-compete agreement as a condition for the entire engagement, and that Kahane's limitation in the agreement (as opposed to reliance on general obligations derived, as a matter of law, from Eisenberg's obligations and Kahane's status in it) has real economic value for it.
- Interim Summary: As to the question of whose initiative to split the agreements was, I am of the opinion, contrary to the District Court's ruling, that the appellants were able to prove that it was the purchasing company that sought to receive a separate personal undertaking on the part of Kahane to non-compete, and thus there is an indication of the authenticity of the non-competition agreement. As to the question of the existence of economic logic in splitting the consideration, I clarified that the appellants were not able to establish the economic logic underlying the manner in which the consideration was split and that this constitutes a certain indication of the inauthenticity of the agreement. Finally, with regard to the most important indication - the question of the existence of a real need for a non-compete agreement - I held, contrary to the view of the District Court, that there was a real need for Kahane's engagement in an agreement that prevents competition on his part in the acquiring company.
- In view of the aforesaid, I am of the opinion, contrary to the District Court's determination, that the non-compete agreement is an authentic agreement, despite the fact that the appellants have not been able to establish that the manner of splitting the consideration is authentic.
In this context, I would like to make a brief comment, beyond necessity: indeed, as I explained above, the manner in which the consideration is split may be an indication of the authenticity of the non-competition agreement. At the same time, it seems that there may be cases in which even though the non-competition agreement is authentic, the receipt for it is not, in its entirety, authentic. In other words, there may be cases in which on the one hand the various indications show that the employee's engagement with a non-competition clause was indeed necessary in view of his ability to compete with the employer (or a third party that acquired the employer's activity) and the employer's (or third party's desire to prevent such competition), and on the other hand the amount of consideration stated in the non-competition agreement is not in line with the economic value which is embodied in the agreement not to compete. In this situation, it cannot be argued that the non-compete agreement is not valid, since The Employee's Commitment authentic, and on the other hand, it seems that The consideration given to the employee is not authentic, and part of this consideration reflects a receipt that was not given due to the employee's undertaking not to compete with the employer. Without setting any conclusions on the matter, it is possible that in such cases - If it is determined that despite the authenticity of the agreement, the total amount of consideration is not authentic - It will be possible to tax the portion of the consideration that does not reflect compensation for non-competition in accordance with its true nature.