<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
Current Report Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 16, 1995
Electronic Associates, Inc.
(Exact name of registrant as specified in its charter)
New Jersey
(State or other jurisdiction of incorporation)
<TABLE>
<S> <C>
1-4680 21-0606484
(Commission File Number) (IRS Employer Identification No.)
</TABLE>
185 Monmouth Parkway, West Long Branch, New Jersey 07764-9989
(Address of principal executive offices, including zip code)
(908) 229-1100
(Registrant's telephone number)
(Former name or former address, if changed since last
report.)
<PAGE>
Item 7. Financial Statements and Exhibits
(a) Financial statements of businesses acquired.
The audited balance sheets of BarOn Technologies Ltd. ("BarOn") as of
December 31, 1993 and December 31, 1992 and related statements of operations,
shareholders' equity and cash flows for the year ended December 31, 1993 and for
the period from inception in 1992 through December 31, 1992, together with the
unaudited balance sheet of BarOn as of September 30, 1994 and related statements
of operations, shareholders' equity and cash flows for the nine months ended
September 30, 1994 are attached as an exhibit to this report on Form 8-K. The
historical financial statements of Tanon Manufacturing Inc. ("Tanon") which are
reflected in the pro forma financial information were previously filed as an
exhibit to the Company's Report on Form 8-K (Date of Report: January 4, 1995),
as amended.
(b) Pro forma financial information.
The following Unaudited Pro Forma Combined Condensed Balance Sheet as
of September 30, 1994, and the Unaudited Pro Forma Combined Condensed Statements
of Operations for the twelve months ended December 31, 1993, and nine months
ended September 30, 1994, give effect to the consummation of the business
combination with Tanon contemplated by the Agreement and Plan of Reorganization
dated December 12, 1994 (the "Tanon Acquisition Agreement") accounted for under
the purchase method of accounting and the acquisition of 25.01% of the ordinary
shares of BarOn contemplated by the BarOn Stock Purchase Agreements ("BarOn
Stock Purchase Agreements") between the Company and various shareholders of
BarOn and the BarOn Investment Agreement ("BarOn Investment Agreement") between
the Company and BarOn (collectively the "Tanon and BarOn Acquisitions")
accounted for as a purchase of a minority interest using the equity method of
accounting. The Unaudited Pro Forma Combined Condensed Financial Statements are
based on the historical financial statements of the Company, Tanon and BarOn
under the assumptions and adjustments set forth in the accompanying Notes to the
Unaudited Pro Forma Combined Condensed Financial Statements.
The Unaudited Pro Forma Combined Condensed Balance Sheet assumes that
the Tanon and BarOn Acquisitions were consummated on September 30, 1994, and the
Unaudited Pro Forma Combined Condensed Statements of Operations assume the Tanon
and BarOn Acquisitions were consummated on January 1, 1993 and that 1,239,130
of the 1,482,744 shares of Common Stock of the Company purchased by certain
Class C Warrant holders upon exercise of their Class C Warrants at $4.60 per
share in December 1994, were exercised on January 1, 1993 for purposes of the
Unaudited Pro Forma Combined Condensed Statements of Operations and were
exercised on September 30, 1994 for purposes of the Pro Forma Combined Condensed
Balance Sheet.
The Pro Forma adjustments are based on the Tanon Acquisition Agreement
and the BarOn Stock Purchase Agreements and BarOn Investment Agreement. For
purposes of developing the Unaudited Pro Forma Combined Condensed Balance Sheet,
the book values of Tanon's assets have been adjusted to estimated fair value,
identified intangible assets have been established at estimated fair value and
the excess purchase price has been assigned to goodwill. The excess of the
purchase price over the estimated fair value of the Company's 25.01% equity
interest in the net assets of BarOn has been determined to represent in-process
research and development with no alternative future use, and, accordingly will
be charged to expense on the effective date of the BarOn Stock Purchase
Agreements and BarOn Investment Agreement (January 16, 1995). This charge, which
is estimated to amount to $6,020,000, has not been reflected in the accompanying
Unaudited Pro Forma Combined Condensed Statements of Operations. While the
Company's management does not expect
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any material adjustments to these assignments, the determination of the final
assignment to goodwill with respect to the acquisition of Tanon and in process
research and development with respect to the Tanon and BarOn Acquisitions is
subject to appraisals, evaluations and other studies of the fair value of
BarOn's and Tanon's assets and liabilities, including intangible assets, which
are currently in process as of the date of this report.
In December 1994, in contemplation of the Tanon acquisition, the
Company committed to a plan to close its Southwest operations in Tucson, Arizona
and Nogales, Mexico. The Company also decided to substantially consolidate its
administrative facilities, currently located in West Long Branch, New Jersey,
into Fremont, California. In connection with these decisions the Company expects
to record a provision for restructuring expense of between $2,000,000 and
$2,500,000 in the fourth quarter of 1994. This charge is not reflected in the
accompanying Unaudited Pro Forma Combined Condensed Statements of Operations.
Also, excluded from the Unaudited Pro Forma Combined Condensed Statements of
Operations are any benefits which may result from the business combination with
Tanon due to synergies that may be derived and the elimination of duplicate
efforts.
The Unaudited Pro Forma Combined Condensed Financial Statements may not
be indicative of the results that actually would have occurred if the Tanon and
BarOn Acquisitions had been in effect on the dates indicated or which may be
obtained in the future. The Unaudited Pro Forma Combined Condensed Financial
Statements should be read in conjunction with the historical financial
statements and accompanying notes for the Company, Tanon and BarOn.
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<PAGE>
Unaudited Pro Forma Combined Condensed Balance Sheet
September 30, 1994
(in thousands)
<TABLE>
<CAPTION>
Historical
--------------------------------
Pro Forma Pro Forma
ASSETS EAI Tanon Adjustments Combined
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $2,688 $699 $3,387
Accounts receivable-trade 6,769 8,186 14,955
Notes receivable 1,160 -- (1,000)(a) 160
Inventory 5,055 4,626 9,681
Net assets of discontinued operations 322 -- 322
Prepaid expenses and other assets 377 633 1,010
Income taxes receivable 101 101
------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 16,371 14,245 (1,000) 29,616
------------------------------------------------------------------------------
Investment in BarOn -- -- 980(d) 980
Equipment and leasehold improvements - net 3,125 2,286 66(b) 5,477
Goodwill and other intangible assets - net 639 12,127(b) 12,766
Other assets 304 90 394
Deferred income taxes 144 (144)(b) 0
Long-term receivable from sale of discontinued
operations 558 558
------------------------------------------------------------------------------
$20,997 $16,765 $12,029 $49,791
==============================================================================
LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES:
Bank debt & current portion of long-term liabilities $6,037 7,031 (1,000)(a) 12,068
Accounts payable - Trade 4,578 6,583 11,161
Accrued expenses 1,074 773 1,300(b)(d) 3,147
------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 11,689 14,387 300 26,376
LONG-TERM LIABILITIES:
Long-term debt and capitalized leases 755 950 -- 1,705
Other long-term liabilities 2,382 577 -- 2,959
------------------------------------------------------------------------------
TOTAL LONG TERM DEBT 3,137 1,527 -- 4,664
------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES __ __ __ __
SHAREHOLDERS EQUITY
Common stock 15,128 42 18,558 (c) 33,728
Retained earnings (deficit) (8,482) 809 (6,829)(c)(d) (14,502)
------------------------------------------------------------------------------
6,646 851 11,729 19,226
Less common stock in treasury, at cost (475) 0 (475)
------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 6,171 851 11,729 18,751
------------------------------------------------------------------------------
$20,997 $16,765 $12,029 $49,791
==============================================================================
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Balance Sheet.
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<PAGE>
Unaudited Pro Forma Combined Condensed Statement Of Operations
For The Year Ended December 31, 1993
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Historical
-------------------------------- Pro Forma Pro Forma
EAI Tanon Adjustments Combined
<S> <C> <C> <C> <C>
Sales................................... $26,024 $39,451 $ ---- $65,475
Cost and Expenses
Cost of Sales........................ 24,344 35,867 13(a) 60,224
Selling, general and administrative.. 7,000 2,653 809(b) 10,462
Nonrecurring (expenses) income....... (454) 815 ---- 361
Other expenses, net.................. 482 408 78(c) 968
------- --------- ------------ -----------
Total Costs and Expenses...... 31,372 39,743 900 72,015
------- -------- ---------- --------
Loss from Continuing Operations before
Income Tax (benefit)................. (5,348) (292) (900) (6,540)
Income Tax (benefit).................... (684) (70) ---- (754)
-------- ---------- ---------- ----------
Loss from Continuing Operations......... (4,664) (222) (900) (5,786)
Income from Discontinued Operations..... 1,327 ---- ---- 1,327
------- ---------- ---------- --------
Net Loss.............................. $(3,337) $ (222) $ (900) $(4,459)
======== ========= =========== =========
Earnings/(Loss) Per Share
of Common Stock....................... $ (1.26) ---- ---- $ (.80)(d)
Weighted Average Number of Common
Stock Outstanding..................... 2,647 ---- ---- 5,552 (d)
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed
Statements of Operations.
Unaudited Pro Forma Combined Condensed Statement Of Operations
For The Nine Months Ended September 30, 1994
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Historical
-------------------------------- Pro Forma Pro Forma
EAI Tanon Adjustments Combined
<S> <C> <C> <C> <C>
Sales................................... $22,491 $35,774 $ ---- $58,265
Cost and Expenses
Cost of Sales........................ 19,715 33,902 10(a) 53,627
Selling, general and administrative.. 3,204 1,978 607(b) 5,789
Other expenses, net.................. 440 485 169(c) 1,094
------- ---------- ---------- --------
Total Costs and Expenses...... 23,359 36,365 786 60,510
------- ---------- ---------- --------
Net Loss............................. $(868) $ (591) $ (786) $(2,245)
======== ========= =========== =========
Earnings/(Loss) Per Share
of Common Stock...................... $ (.20) ---- ---- $ (.31)(d)
Weighted Average Number of Common
Stock Outstanding.................... 4,390 ---- ---- 7,295 (d)
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed
Statements of Operations.
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<PAGE>
Notes to Unaudited Pro Forma Combined Condensed Balance Sheet
The Unaudited Pro Forma Combined Condensed Balance Sheet
was prepared to reflect the business combination between the Company and Tanon
pursuant to the Tanon Acquisition Agreement accounted for under the purchase
method of accounting and the acquisition of 25.01% of the ordinary shares of
BarOn contemplated by the BarOn Stock Purchase Agreements between the Company
and various shareholders of BarOn and the BarOn Investment Agreement between
the Company and BarOn accounted for as a purchase of a minority interest using
the equity method of accounting as of September 30, 1994.
The following is a summary of pro forma adjustments
reflected in the Unaudited Pro Forma Combined Condensed Balance Sheet:
<TABLE>
<S> <C> <C>
a) Represents the elimination of the $1,000,000 Note due to the Company from
Tanon.
b) The business combination with Tanon will be accounted for by the Company using
the purchase method of accounting and, therefore, a preliminary allocation of the
purchase price to the Company's assets and liabilities to reflect their estimated fair
values has been made, with the remainder allocated to excess of purchase price
over net assets acquired. Pro forma adjustments are based upon currently
available information, including a preliminary estimate of the fair value of certain
assets and a preliminary estimate of certain liabilities. The excess of purchase
price over net assets acquired (goodwill) has been determined as follows:
Purchase Price:
Estimated value of shares of $10,500,000
Common Stock of the Company exchanged for
100% of the outstanding shares of Tanon
Common Stock (1)
Conversion of options to acquire shares of 1,400,000
Tanon Common Stock into options to acquire
shares of Common Stock of the Company (2)
Estimated fees, expenses and other
accruals (3) 1,000,000
----------
Subtotal $12,900,000
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
Less:
Historical Stockholders' Equity of Tanon at 851,000
September 30, 1994
Adjustment to acquired assets and
liabilities to reflect estimated
fair values
Customer Relationships (4) 1,740,000
Equipment (5) 66,000
Deferred Income Taxes (6) (144,000)
-----------
Excess of purchase price over net
assets acquired $10,387,000
-----------
-----------
(1) Represents the issuance of 1,538,462
shares of Common Stock of the Company at
an appraised value of $6.82 per share to
acquire 100% of the outstanding shares of
Tanon Common Stock at the conversion rate
of a .91033 share of Common Stock of the
Company for each share of Tanon Common
Stock. The appraised value was developed
by applying an estimated discount factor
to the $8.50 per share market value of the
Common Stock of the Company at the
effective time of the business combination
based on the lack of liquidity associated
with the unregistered shares of Common
Stock of the Company issued to the former
Tanon shareholders.
Approximately 610,000 of the shares of
Common Stock of the Company
issued have been discounted by 35% from
the $8.50 market value, as no
effort will be made by the Company's
management to register these
shares. The remaining 928,000 shares of
Common Stock of the Company
have been discounted by 10% from the $8.50
market value as the Company's management
has agreed to use its best efforts to
register these shares.
(2) Represents additional consideration from
the exchange of outstanding options to
acquire shares of Tanon Common Stock for
options to acquire shares of Common Stock
of the Company based on options to acquire
221,389 shares of Tanon Common Stock
outstanding at September 30, 1994 at an
average exercise price of $.95 per share.
The additional consideration reflects the
exchange of an option to purchase a .91033
share of Common Stock of the Company for
each Tanon option and a
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
corresponding increase in the average
exercise price to $1.05 versus a market
value of $8.50 per share of Common Stock
of the Company. The number of option
shares determined based upon the
conversion rate has been reduced by 8% in
order to provide for the estimated
cancellation of options before they vest
resulting from normal employee turnover.
(3) Represents an estimate of expenses related
to the acquisition, including legal fees,
accounting fees, due diligence costs and
other accruals.
(4) Represents the estimated value of the
existing customers with whom Tanon
has significant relationships.
(5) Represents the adjustment to Tanon's fixed
assets acquired to reflect
estimated fair value.
(6) Represents the establishment of a
valuation allowance against Tanon's
deferred tax assets because of its
uncertain realization in the Company's
consolidated federal tax return.
</TABLE>
c) Represents the elimination of Tanon's historical
stockholders' equity, the estimated value of shares of the Company's Common
Stock and options to acquire shares of the Company's Common Stock exchanged
for shares of Common Stock of Tanon and options to acquire shares of Common
Stock of Tanon, the estimated value of shares of the Company's Common Stock
contributed to the capital of BarOn, and the proceeds from the issuance of
1,239,130 of the 1,482,744 shares of Common Stock of the Company
purchased by certain Class C Warrant holders upon exercise of their Class C
Warrants at $4.60 per share in December, 1994, the proceeds from which
amounted to approximately $5,700,000 and were used to finance the $2,700,000
cash paid to various shareholders of BarOn pursuant to the BarOn Stock
Purchase Agreements and the $3,000,000 cash to be contributed to the capital
of BarOn pursuant to the BarOn Investment Agreement.
d) The acquisition of the 25.01% equity interest in
BarOn will be accounted for as a purchase of a minority interest under the
equity method of accounting and, therefore, a preliminary allocation of the
purchase price to the acquired assets and liabilities to reflect their
estimated fair value has been made.
<TABLE>
<S> <C> <C>
Purchase Price:
Cash and estimated value of the Company's Common Stock contributed to the capital of
BarOn (1) $ 4,000,000
Cash paid to various shareholders of BarOn(2) 2,700,000
Estimated fees, expenses and other accruals(3) 300,000
-------------
Total Purchase Price 7,000,000
</TABLE>
-8-
<PAGE>
<TABLE>
<S> <C> <C>
Investment:
Historical Stockholders' Deficit of BarOn at September 30, 1994
adjusted for the Company's share of cash and the Company's Common
Stock contributed to
the capital of BarOn(4) 980,000
Research and Development costs charged to expense at acquisition date(5) 6,020,000
------------
Total Investment: $ 7,000,000
============
</TABLE>
(1) Represents the contribution of $3,000,000 in cash and 127,592 shares
of the Company's Common Stock with an estimated value of $1,000,000 to
BarOn capital in exchange for 16.68% of the issued and ordinary shares
of BarOn in accordance with the BarOn Investment Agreement.
(2) Represents cash paid to various shareholders of BarOn in exchange for
an aggregate equity interest in BarOn of 8.33% in accordance with
BarOn Stock Purchase Agreements.
(3) Represents an estimate of expenses related to the BarOn acquisition,
including legal fees, accounting fees, due diligence costs and other
accruals.
(4) Represents the Company's 25.01% Equity Interest in BarOn's historical
stockholders deficit adjusted for the contribution of cash and the
Company's Common Stock to BarOn capital in (1) above. BarOn historical
deficit of ($80,000) plus the Company's capital contribution of
$4,000,000 results in adjusted BarOn equity of $3,920,000. The
Company's 25.01% equity interest in adjusted BarOn Equity is $980,000.
(5) Represents the portion of the purchase price allocated to in-process
research and development with no alternative future use charged to
expense at the acquisition date.
Notes to Unaudited Pro Forma Combined Condensed Statements of Operations
The Unaudited Pro Forma Combined Condensed Statements of
Operations have been prepared to reflect the business combination between the
Company and Tanon pursuant to the Tanon Acquisition Agreement, which was
accounted for under the purchase method of accounting, and the acquisition of
25.01% of the ordinary shares of BarOn contemplated by the BarOn Stock Purchase
Agreements between the Company and various shareholders of BarOn and the BarOn
Investment Agreement between the Company and BarOn, which was accounted for as
a purchase of a minority interest using the equity method of accounting, as if
the acquisitions occurred January 1, 1993.
The excess of the purchase price over the fair value of the
net assets acquired (goodwill) in the business combination with Tanon is being
amortized on a straight-line basis over a 20-year period. Included in goodwill
is a component of the purchase price associated with Tanon's research and
development activities conducted prior to the date of the business combination.
Management is currently evaluating whether such acquired research and
development is economically viable and whether it has an alternative future use.
To the extent that such research and development has no alternative future use,
it will be expensed immediately. Further, management is assessing the estimated
fair value and estimated economic
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<PAGE>
lives of other acquired intangibles. To the extent such intangibles are
identified, amortization expense based on their estimated useful life will be
reflected in the Company's future consolidated statements of operations.
The excess of the purchase price over the estimated fair
value of the Company's 25.01% equity interest in the net assets of BarOn has
been determined to be in-process research and development with no alternative
future use, and, accordingly will be charged to expense on the effective date
of the BarOn Stock Purchase Agreements and the BarOn Investment Agreement
(January 16, 1995). This charge which is estimated to amount to $6,020,000 has
not been reflected in the accompanying Unaudited Pro Forma Combined Condensed
Statements of Operations.
The following is a summary of pro forma adjustments
reflected in the Unaudited Pro Forma Combined Condensed Statements of
Operations:
<TABLE>
<S> <C>
a) Represents the increase in depreciation resulting from the adjustment to Tanon's
fixed assets to reflect estimated fair value.
b) Represents amortization of estimated goodwill which
arose from the business combination with Tanon of
$10,387,000 over a period of 20 years and
amortization of the estimated value of acquired
Tanon customer relationships of $1,740,000 over a
period of 6 years.
c) Represents the Company's 25.01% share of the net loss of BarOn for each period
presented under the equity method of accounting.
d) Pro forma combined earnings per share amounts as presented in the accompanying
unaudited Pro Forma Combined Condensed Statements of Operations are based on
the combined weighted average number of shares of Common Stock of the
Company outstanding for each period presented, adjusted to reflect the additional
1,538,462 shares of Common Stock of the Company to be issued to Tanon
shareholders at the conversion rate of a .91033 share of Common Stock of the
Company for each share of Tanon Common Stock, the 127,592 shares of Common
Stock of the Company contributed to the capital of BarOn and the issuance of
1,239,130 of the 1,482,744 shares of Common Stock of the Company issued to
certain Class C Warrant holders of the Company upon exercise of their Class C
Warrants at $4.60 per share in December, 1994, the proceeds from which amounted
to approximately $5,700,000 and were used to finance the $2,700,000 cash paid
to various shareholders of BarOn pursuant to the BarOn Stock Purchase Agreements
and the $3,000,000 cash to be contributed to the capital of BarOn pursuant to
the BarOn Investment Agreement.
</TABLE>
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<PAGE>
(c) Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
2 Agreement and Plan of Reorganization by and among
Electronic Associates, Inc., Tanon Manufacturing, Inc., EAI
Acquisition Corp. and Joseph R. Spalliero, dated December
12, 1994, was filed as Exhibit 2 to the Company's Report on
Form 8-K (date of Report: January 4, 1995), as amended, and
is hereby incorporated herein by reference.
10.1 Investment Agreement dated January 16, 1995 by and between the Company and BarOn
Technologies Ltd.
10.2 Form of Stock Purchase Agreement between the Company and various shareholders of
BarOn Technologies Ltd.
10.3 Shareholders Agreement dated January 16, 1995 among the Company, BarOn
Technologies Ltd. and the shareholders of BarOn Technologies Ltd.
99.1 The audited balance sheet of BarOn Technologies Ltd. as of
December 31, 1993 and December 31, 1992 and related
statements of operations, shareholders' equity and cash
flow for the year ended December 31, 1993 and for the
period from inception in 1992 through December 31, 1992,
together with the unaudited balance sheet of BarOn
Technologies Ltd. as of September 30, 1994 and related
statements of operations, shareholders' equity and cash
flows for the nine months ended September 30, 1994.
99.2 The audited financial statements of Tanon Manufacturing,
Inc. as of December 31, 1993 and December 31, 1992 and for
the years ended December 31, 1993, 1992 and 1991, together
with the unaudited financial statements of Tanon
Manufacturing, Inc. as of October 1, 1994 and for the nine
months ended October 1, 1994 and October 2, 1993, were
filed as Exhibit 99 to the Company's Report on Form 8-K
(date of Report: January 4, 1995), as amended, and are
hereby incorporated herein by reference.
</TABLE>
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereto duly authorized.
<TABLE>
<S> <C>
ELECTRONIC ASSOCIATES, INC.
Registrant
By: /s/ Jonathan R. Wolter
JONATHAN R. WOLTER
Treasurer and Vice President, Finance
(Principal Financial and Accounting
Officer)
</TABLE>
Date: March 30, 1995
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<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
<S> <C> <C>
2 Agreement and Plan of Reorganization by and among Electronic
Associates, Inc., Tanon Manufacturing, Inc., EAI Acquisition
Corp. and Joseph R. Spalliero, dated December 12, 1994, was filed
as Exhibit 2 to the Company's Report on Form 8-K (date of Report:
January 4, 1995), as amended, and is hereby incorporated herein
by reference.
10.1 Form of Investment Agreement dated January 16, 1995 by and between
the Company and BarOn Technologies Ltd.
10.2 Form of Stock Purchase Agreement between the Company and various
shareholders of BarOn Technologies Ltd.
10.3 Form of Shareholders Agreement among the Company, BarOn
Technologies Ltd. and the shareholders of BarOn Technologies Ltd.
99.1 The audited balance sheet of BarOn Technologies Ltd. ("BarOn") as
of December 31, 1993 and December 31, 1992 and related statements
of operations, shareholders' equity and cash flow for the year
ended December 31, 1993 and for the period from inception in 1992
through December 31, 1992, together with the unaudited balance
sheet of BarOn Technologies Ltd. as of September 30, 1994 and
related statements of operations, shareholders' equity and cash
flows for the nine months ended September 30, 1994.
99.2 The audited financial statements of Tanon Manufacturing, Inc. as
of December 31, 1993 and December 31, 1992 and for the years
ended December 31, 1993, 1992 and 1991, together with the
unaudited financial statements of Tanon Manufacturing, Inc. as of
October 1, 1994 and for the nine months ended October 1, 1994 and
October 2, 1993, were filed as Exhibit 99 to the Company's Report
on Form 8-K (date of Report: January 4, 1995), as amended, and
are hereby incorporated herein by reference.
</TABLE>
<PAGE>
Exhibit 10.1
Form of Investment Agreement
<PAGE>
INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT ("Agreement") is entered into this
16th day of January, 1995 by and between Electronic Associates, Inc., a New
Jersey corporation ("EA"), and BarOn Technologies Ltd., an Israel corporation
("BarOn"). All of the above are sometimes hereafter collectively referred to as
the "Parties."
B A C K G R O U N D
EA is in the business of, among other things, contract
manufacturing of electronic products, subassemblies and systems. BarOn is the
developer of the electronic pen, a device that can directly digitize handwriting
in any language, from any surface (the "ElectronicPen").
BarOn and EA desire to enter into this Agreement pursuant to
which EA will acquire up to a 25% equity interest in BarOn.
Initially capitalized terms not defined in this Investment
Agreement shall have the respective meanings set forth on the Definitions
Appendix attached to this Investment Agreement as Appendix I.
NOW, THEREFORE, in consideration of the premises and the
mutual promises and undertakings made in this Agreement, and in consideration of
the representations, warranties, and covenants contained in this Agreement, the
Parties hereby agree as follows:
SECTION 1: SALE AND PURCHASE OF BARON STOCK.
1.1 Issuance of BarOn Stock. (a) On the Closing Date, BarOn
shall issue to EA 1,732,970 ordinary shares of BarOn such that immediately after
the issuance thereof, the Aggregate Amount of EA Holdings will equal 25.01% of
all of the issued and outstanding shares of BarOn, on a fully diluted basis (the
"BarOn Stock").
(b) On the Escrow Closing Date (as defined in
Section 1.3), BarOn shall deliver to the Escrow Agent to be held pursuant to
the terms of the Escrow Agreement (as defined in Section 1.3), such documents
and instruments as are necessary to cause BarOn to issue 1,188,544 additional
ordinary shares of BarOn ("BarOn Escrow Shares"). The BarOn Escrow Shares shall
be released for the consideration set forth in Sections 1.2.1 and 1.2.2 hereof
in accordance with the terms of the Escrow Agreement. Schedule 1.1(b) attached
hereto sets forth the capitalization of BarOn as of the date hereof, reflecting
the transactions contemplated by this Agreement and the Stock Purchase
Agreements, in the event of any inconsistency between this Agreement and other
agreements in existence at the date hereof, such table shall control.
1.2 Capital Investments. EA shall invest in the capital
of BarOn the sum of $8,000,000 (of which $5,000,000 shall be invested in cash
and $3,000,000 in EA stock the
<PAGE>
valuation of which is determined as hereinafter set forth). Notwithstanding
anything to the contrary which may be contained or implied in this Agreement, if
the issuance to BarOn of the EA Stock (as defined in Section 1.3) pursuant to
this Agreement shall cause BarOn to own or control 4.99% or more of EA
(considering only the shares of EA stock issued to BarOn pursuant to this
Agreement), EA shall invest cash in the capital of BarOn in lieu of shares of EA
Stock, to the extent such stock consideration would otherwise cause BarOn's
interest in EA by virtue of the EA Stock invested in BarOn hereunder to equal or
exceed the 4.99% threshold.
1.2.1 Initial Investment. (a) On the Closing
Date, EA shall contribute the
amount of $2,000,000 to the capital of BarOn of which (i) $1,500,000 will be
paid to BarOn by certified or bank check or wire transfer of immediately
available funds in Dollars to the account of ABA#___________ ("BarOn Wire
Instructions"); and (ii) $500,000 will be contributed by cancellation of that
certain note dated October 20, 1994 in the original principal amount of $500,000
made by BarOn and delivered to EA ("EA Loan"). BarOn shall utilize up to
$250,000 of such amount for BarOn's marketing expenditures in the United States,
if needed.
(b) Promptly after the Closing, if not
formed by BarOn prior to
Closing, BarOn or BarOn's designee shall cause to be formed a United States
corporation, which corporation shall be a wholly-owned subsidiary of BarOn
("U.S. Subsidiary"). On the four-month anniversary of the Closing Date, EA shall
complete the initial investment by delivery to BarOn of $1,000,000 in cash,
which shall be paid to BarOn by certified or bank check or in accordance with
BarOn Wire Instructions, and one-third of the EA Escrow Shares ("Subsidiary
Investment"). BarOn shall utilize at least $750,000 of the cash portion of the
Subsidiary Investment for BarOn's marketing expenditures in the United States,
if needed.
1.2.2 Subsequent Investments. EA shall make the
following subsequent
capital contributions in cash and EA Stock upon the occurrence of certain events
as hereinafter set forth:
1.2.2.1 Investment Upon Establishment of
Beta Program. Upon the
earlier of (i) September 30, 1995 or (ii) BarOn's establishment of a Beta
program with a major customer, EA shall contribute the amount of $1,000,000 in
cash, which shall be paid to BarOn by certified or bank check or in accordance
with BarOn Wire Instructions (the "Beta Investment") and one-third of the EA
Escrow Shares. BarOn shall use the Beta Investment for working capital purposes.
1.2.2.2 Investment Upon Placement of Significant
Order. Upon the
earlier of (i) September 30, 1995 or (ii) the placement of an order with BarOn
or the U.S. Subsidiary for a commercial quantity of the ElectronicPen, EA shall
make an additional investment (the "ElectronicPen Investment") comprised of
$1,000,000 in cash, which shall be paid to BarOn by certified or bank check or
in accordance with BarOn Wire Instructions, and one-third of the EA Escrow
Shares. BarOn shall use the ElectronicPen Investment for working capital
purposes.
(4)
<PAGE>
1.3 Issuance of EA Stock: Escrow Agreement. On or before
February 16, 1995 (the "Escrow Closing Date"), EA shall issue $3,000,000 of
fully paid, non-assessable shares of common stock of EA ("EA Stock") valued as
hereinafter set forth and shall deliver the EA Stock (the "EA Escrow Shares") to
the Escrow Agent to be released at the rate of one-third of the amount of the EA
Escrow Shares upon the occurrence of each of the Subsidiary Investment, Beta
Investment and ElectronicPen Investment, pursuant to the terms of the Escrow
Agreement, substantially in the form attached hereto as Exhibit A ("Escrow
Agreement"), to be entered into within thirty (30) days after Closing.
Notwithstanding the foregoing, if the Escrow Agreement is not entered into for
any reason, each party shall nonetheless be obligated to deliver the BarOn
Escrow Shares or the EA Escrow Shares, as the case may be, to the other party at
the same time or times, and upon the same conditions, as would have been
applicable to deliveries by the Escrow Agent under the Escrow Agreement.
1.3.1 Valuation of EA Stock. Each share of EA
Stock to be delivered
hereunder shall be valued at the average closing price of EA Stock on the New
York Stock Exchange for the 30 trading days immediately prior to the Closing
("Pre-Closing EA Share Price"). Notwithstanding the foregoing, in the event that
the average closing price of EA Stock on the New York Stock Exchange for the 20
trading days immediately following Closing (the "Post-Closing EA Share Price")
is less than the Pre-Closing EA Share Price by a factor of 10% or more of the
Pre- Closing EA Share Price, then EA shall issue and deliver to the Escrow Agent
to be held pursuant to the terms of the Escrow Agreement that number of shares
of EA Stock equal to the difference between (x) the number of shares of EA Stock
equal to the quotient of $3,000,000 divided by the Post-Closing Share Price and
(y) the EA Stock delivered to the Escrow Agent at Closing based on the
Pre-Closing EA Share Price.
1.3.2 Registration of EA Stock. BarOn shall be
granted "piggyback"
registration rights in accordance with the terms of the form of Registration
Agreement attached hereto as Exhibit B to be entered into at Closing.
1.4 Adjustments to Amount of BarOn Escrow
Shares.
1.4.1 Failure to Make Beta Investment. In the
event that EA determines,
in its sole discretion, not to make the Beta Investment to BarOn in accordance
with the provisions of Section 1.2.2.1 hereof: (i) Escrow Agent shall not be
obligated to issue the first portion of 535,226 BarOn Escrow Shares; and (ii) EA
shall not be required to make the ElectronicPen Investment as set forth in
Section 1.2.2.2 hereof.
1.4.2 Failure to Make ElectronicPen Investment.
In the event that EA
makes the Beta Investment in accordance with the provisions of Section 1.2.2.1
hereof, but determines, in its sole discretion, not to make the ElectronicPen
Investment in accordance with the provisions of Section 1.2.2.2 hereof, Escrow
Agent shall not be obligated to issue the second portion of 653,318 BarOn Escrow
Shares.
(5)
<PAGE>
SECTION 2. THE CLOSING.
2.1 The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Mesirov Gelman
Jaffe Cramer & Jamieson, 1735 Market Street, Philadelphia, PA 19103, on January
16, 1995 at 9:00 a.m. Philadelphia local time or on such other date and at such
other time and place as EA and BarOn may mutually agree upon, following the
satisfaction or waiver of all conditions to the obligations of the Parties to
consummate the transactions contemplated hereby (the "Closing Date").
SECTION 3. DELIVERIES AND OTHER ACTIONS AT CLOSING.
3.1 At the Closing, (i) BarOn shall deliver to EA the
various certificates, instruments, documents and agreements referred to in
Section 9.1; and (ii) EA shall deliver to BarOn the various certificates,
instruments, documents and agreements referred to in Section 9.2. The foregoing,
however, shall not be construed as a covenant by any Party to deliver
certificates, documents, instruments, consents or agreements of third parties or
that any third party will take any particular action.
SECTION 4. EA OPTION TO PURCHASE ADDITIONAL EQUITY IN BARON.
4.1 Until the earlier of (i) three years from the Closing,
or (ii) an initial public offering of equity of (or equivalent rights to or in)
BarOn, or (iii) a sale of BarOn equity to a purchaser other than EA or (iv) a
sale to a "strategic partner", in the event that BarOn determines to seek
additional capital by offering additional equity in BarOn ("Additional Equity")
following the Closing, EA shall have the right of first offer to purchase in
whole but not in part, such Additional Equity prior to BarOn's selling
Additional Equity to a third party. In the event BarOn rejects EA's offer, BarOn
shall be entitled to sell Additional Equity to a third party so long as the
purchase price for such Additional Equity is equal to or greater than that
offered to EA. In the event the purchase price offered by the third party for
the Additional Equity is less than the EA offer, BarOn shall first offer to sell
such Additional Equity to EA on the terms as offered by it. Notwithstanding the
foregoing, BarOn shall not be obligated to sell Additional Equity to EA if,
immediately after the sale to EA of any Additional Equity, the sum of the
Additional Equity purchased by EA and the equity interest hereunder shall exceed
49% of all the issued and outstanding common stock of BarOn.
EA and BarOn agree that it may be in the best interests of
both EA and BarOn for BarOn to have a strategic partner and agree that BarOn
shall be entitled to identify such a strategic partner.
SECTION 5. SHAREHOLDERS' AGREEMENT.
(6)
<PAGE>
5.1 On or prior to the Closing Date, EA, BarOn and the
shareholders of BarOn listed on Schedule 7.2, shall enter into a Shareholders
Agreement, substantially in the form attached hereto as Exhibit C.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF EA.
EA represents and warrants to BarOn that the statements
contained in this Section 6 are correct and complete as of the Closing Date,
except as set forth in Appendix II attached hereto.
6.1 REPRESENTATIONS AND WARRANTIES OF EA REGARDING
THE TRANSACTION.
6.1.1 Organization. EA is a corporation duly
incorporated, validly existing,
and in good standing under the laws of the State of New Jersey. EA is duly
authorized to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required and where the failure to so
qualify would have a material adverse effect on its business.
6.1.2 Authorization of Transaction. EA has full
corporate power and
authority to execute and deliver this Investment Agreement and the agreements to
be executed at Closing (collectively the "Investment Agreement") and to perform
its obligations thereunder. This Investment Agreement constitutes the valid and
legally binding obligation of EA, enforceable in accordance with its terms and
conditions, subject to applicable bankruptcy, insolvency, and other laws
affecting the enforceability of creditors rights generally, and general
principles of equity and the exercise of judicial discretion in particular
cases. EA is not required to give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any government or governmental agency
in order to consummate the transactions contemplated by this Investment
Agreement, other than obtaining official approval of listing of the EA Stock on
the New York Stock Exchange, subject to official notice of issuance.
6.1.3 Non-Contravention. Neither the execution
and the delivery of this
Investment Agreement, nor the consummation of the transactions contemplated
hereby, will (i) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which EA is subject or any
provision of its charter or bylaws or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument or other arrangement
to which EA is bound or to which any of its assets are subject.
6.1.4 Brokers' Fees. EA has no Liability or
obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Investment Agreement for which BarOn could become liable or
obligated.
(7)
<PAGE>
6.1.5 Investment. EA acknowledges that it has
had access to, and has
received information relating to BarOn and has had an opportunity to ask
questions of, and receive answers from, officers of BarOn concerning BarOn's
business and prospects. EA is acquiring the shares of BarOn Stock and the BarOn
Escrow Shares for its own account without a view to the distribution thereof
within the meaning of the Securities Act, and will not directly or indirectly
offer or sell the shares of BarOn Stock or the BarOn Escrow Shares or solicit
any offer to purchase such shares, other than in conformity with the Securities
Act. EA acknowledges that neither the shares of BarOn Stock nor the BarOn Escrow
Shares have been registered under the Securities Act, and EA shall not transfer
any such shares except in compliance with such Securities Act or an opinion that
registration is not required under the Securities Act, and a legend to that
effect shall be placed on the certificates representing the shares of BarOn
Stock and BarOn Escrow Shares.
6.1.6 Duly Authorized. The shares of EA Stock to
be issued hereunder,
will be, when issued in accordance with the terms hereof, duly authorized,
validly issued, fully paid and nonassessable shares of EA Stock, free and clear
of all liens, and encumbrances whatsoever.
6.2 OTHER REPRESENTATIONS AND WARRANTIES OF EA.
6.2.1 Filings with the SEC. EA has made all
filings with the SEC that it
has been required to make within the past three years under the Securities Act
and the Securities Exchange Act of 1934 (the "Exchange Act") (collectively, the
"Public Reports") and, to the best of EA's knowledge, it has made public
disclosure of all material facts it is required to disclose. Each of the Public
Reports has complied with the Securities Act and the Exchange Act in all
material respects. None of the Public Reports, as of their respective dates,
contained any untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
SECTION 7: REPRESENTATIONS, WARRANTIES AND COVENANTS OF BARON.
BarOn represents, warrants and covenants to EA that the
statements contained in this Section 7 are correct and complete as of the
Closing Date except as set forth in the disclosure schedule delivered by BarOn
to EA on the Closing Date, and attached hereto as Appendix III (the "Disclosure
Schedule"). The Disclosure Schedule will be arranged in paragraphs corresponding
to the lettered and numbered paragraphs contained in this Section 7,
Shareholders Agreement and Minutes of Closing.
7.1 Organization, Qualification, and Corporate Power; No
Subsidiaries. BarOn is a corporation duly incorporated, validly existing, and in
good standing under the laws of Israel. BarOn is duly authorized to conduct
business and is in good standing in Israel and under the laws of each
jurisdiction where such qualification is required and where the failure to so
qualify would have a material adverse effect on its business. BarOn has full
corporate power and authority and all licenses, permits, and authorizations
necessary to carry on the businesses in which it is engaged and in which it
presently proposes to engage and to own and use the properties owned and used by
(8)
<PAGE>
it. Section 7.1 of the Disclosure Schedule lists the directors and officers of
BarOn. BarOn has delivered to EA correct and complete copies of the charter and
bylaws of BarOn (as amended to date). The minute books (containing the records
of meetings of the stockholders, the board of directors, and any committees of
the board of directors), the stock certificate books, and the stock record books
of BarOn are correct and complete. BarOn is not in default under or in violation
of any provision of its charter or bylaws. BarOn has no Subsidiaries.
7.2 Capitalization. The entire authorized capital stock of
BarOn consists of 11,000,000 ordinary shares, of which 7,791,100 shares are
issued and outstanding. All of the issued and outstanding shares of BarOn Stock
have been duly authorized, are validly issued, fully paid, and nonassessable,
and are held of record and owned beneficially by the respective Shareholders as
set forth in Schedule 7.2 hereto. There are no outstanding or authorized
options, warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require BarOn to
issue, sell, or otherwise cause to become outstanding any of its capital stock.
There are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to BarOn. There are no voting
trusts, proxies, or other agreements or understandings with respect to the
voting of the capital stock of BarOn.
7.3 Non-Contravention. Neither the execution and the
delivery of this Investment Agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which BarOn is subject or
any provision of the charter or bylaws of BarOn or (ii) conflict with, result in
a breach of, constitute a default under, result in the acceleration of, create
in any party the right to accelerate, terminate, modify, or cancel, or require
any notice under any agreement, contract, lease, license, instrument, or other
arrangement to which BarOn is a party or by which it is bound or to which any of
its assets is subject (or result in the imposition of any Security Interest upon
any of its assets). Except for an exchange control permit from the Bank of
Israel, which has been obtained by BarOn, BarOn is not required to give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency or any other party in order
for the Parties to consummate the transactions contemplated by this
Investment Agreement.
7.4 Brokers' Fees. BarOn has no Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Investment Agreement.
7.5 Title to Assets. BarOn has good and marketable title to,
or a valid leasehold interest in, the properties and assets in its possession,
located on its premises, or shown on the Most Recent Balance Sheet or acquired
after the date thereof, free and clear of all Security Interests, except for
properties and assets disposed of in the Ordinary Course of Business since the
date of the Most Recent Balance Sheet.
(9)
<PAGE>
7.6 Authorization. BarOn has full corporate power and
authority to execute and deliver this Investment Agreement and to perform its
obligations hereunder. This Investment Agreement constitutes the valid and
legally binding obligation of BarOn enforceable against BarOn in accordance with
its terms and conditions, subject to applicable bankruptcy, insolvency, and
other laws affecting the enforceability of creditors rights generally, and
general principles of equity and the exercise of judicial discretion in
particular cases.
7.7 Financial Statements. Attached hereto as Exhibit D are
the following financial statements of BarOn (collectively the "Financial
Statements"): (i) audited balance sheets and statements of income, changes in
stockholders' equity, and cash flow, as of and for the fiscal years ended
December 31, 1992 and December 31, 1993 (the "Most Recent Fiscal Year End"); and
(ii) unaudited balance sheets and statements of income, changes in stockholders'
equity, and cash flow (the "Most Recent Financial Statements") as, of and for
the nine months ended September 30, 1994 (the "Most Recent Fiscal Quarter End"
and the "Most Recent Fiscal Month End"). The Financial Statements (including the
notes thereto) have been prepared in accordance with Israeli GAAP applied on a
consistent basis throughout the periods covered thereby, present fairly the
financial condition of BarOn as of such dates and the results of operations of
BarOn for such periods, are correct and complete in all material respects, and
are consistent with the books and records of BarOn (which books and records are
correct and complete in all material respects). The Financial Statements have
been presented in United States currency as a convenience.
7.8 Events Subsequent to Most Recent Fiscal Quarter End.
Since the Most Recent Fiscal Quarter End, there has not been any material
adverse change in the business, financial condition, operations or results of
operations of BarOn taken as a whole. Without limiting the generality of the
foregoing, since that date:
(i) BarOn has not sold, leased, transferred,
or assigned any of its assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
(ii) BarOn has not entered into any agreement,
contract, lease, or license (or series of related agreements, contracts, leases,
and licenses) either involving more than $20,000 or outside the Ordinary Course
of Business, other than the EA Loan;
(iii) no party (including BarOn) has accelerated,
terminated, modified, or cancelled any agreement, contract, lease, or license
(or series of related agreements, contracts, leases, and licenses) involving
more than $20,000 to which BarOn is a party or by which BarOn or its assets is
bound;
(iv) BarOn has not imposed any Security Interest
upon any of its assets, tangible or intangible;
(v) BarOn has not made any capital expenditure
(or series of related capital expenditures) outside the Ordinary Course of
Business;
(10)
<PAGE>
(vi) BarOn has not made any capital investment
in, any loan to, or any acquisition of the securities or assets of, any other
Person (or series of related capital investments, loans, and acquisitions)
either involving more than $10,000 or outside the Ordinary Course of Business;
(vii) Except for the EA Loan, BarOn has not
issued any note, bond, or other debt security or created, incurred, assumed, or
guaranteed any indebtedness for borrowed money or capitalized lease obligation
either involving more than $20,000 singly or $50,000 in the aggregate;
(viii) BarOn has not granted any license or
sublicense of any rights under or with respect to any Intellectual Property,
except to the extent of any license implied in the sale of a product;
(ix) there has been no change made or authorized
in the charter or bylaws of BarOn;
(x) BarOn has not issued, sold, or otherwise
disposed of any of its capital stock (except upon exercise of options, warrants
or rights), or granted any options, warrants, or other rights to purchase or
obtain (including upon conversion, exchange, or exercise) any of its capital
stock;
(xi) BarOn has not declared, set aside, or paid
any dividend or made any distribution with respect to its capital stock (whether
in cash or in kind) or redeemed, purchased, or otherwise acquired any of its
capital stock;
(xii) BarOn has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to its property;
(xiii) BarOn has not made any loan to, or entered
into any other transaction with, any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xiv) BarOn has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors, officers, and
employees (or taken any such action with respect to any other employee benefit
plan);
(xv) BarOn has not made any other change in
employment terms for any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xvi) there has not been any other material
occurrence, event, incident, action, failure to act, or transaction outside the
Ordinary Course of Business involving BarOn; and
(xvii) BarOn has not committed to any of the
foregoing.
(11)
<PAGE>
7.9 Undisclosed Liabilities. BarOn has no Liability, except
for (i) Liabilities set forth on the face of the Most Recent Balance Sheet (or
in any notes thereto); (ii) Liabilities which have arisen after the Most Recent
Fiscal Month End in the Ordinary Course of Business; and (iii) the EA Loan.
7.10 Legal Compliance. BarOn is in material compliance with
all applicable laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of all governments
(and all agencies thereof) having jurisdiction, and BarOn has not been notified
of any action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand, or notice against BarOn alleging any failure so to comply.
7.11 Tax Matters.
(i) BarOn has filed all Tax Returns that it was
required to file and all Taxes owed by BarOn pursuant to the Tax Returns have
been paid. BarOn is not currently the beneficiary of any extension of time
within which to file any Tax Return. No current claim has been made by an
authority in a jurisdiction where BarOn does not file Tax Returns that it is or
may be subject to taxation by that jurisdiction. There are no Security Interests
on any of the assets of BarOn that arose in connection with any failure (or
alleged failure) to pay any Tax.
(ii) There is no dispute or claim concerning
any Tax Liability of BarOn either (a) claimed or raised by any authority in
writing or (b) as to which any of the directors and officers (and employees
responsible for Tax matters) of BarOn has Knowledge based upon personal contact
with any agent of such authority. Section 7.11 of the Disclosure Schedule lists
all federal, state, local, and foreign income Tax Returns filed with respect to
BarOn for taxable periods ended on or after December 31, 1992, indicates those
Tax Returns that have been audited, and indicates those Tax Returns that
currently are the subject of audit. BarOn has made available to EA correct and
complete copies of all income Tax Returns, examination reports, and statements
of deficiencies assessed against or agreed to by BarOn since December 31, 1992.
(iii) The unpaid Taxes of BarOn (a) did not, as
of the Most Recent Fiscal Month End, exceed the reserve for Tax Liability
(rather than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of the Most
Recent Balance Sheet (rather than in any notes thereto) and (b) do not exceed
that reserve as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of BarOn in filing its Tax
Returns.
7.12 Real Property.
7.12.1 BarOn does not own any real property.
7.12.2 Section 7.12.2 of the Disclosure Schedule
lists all real property leased or subleased to BarOn. BarOn has delivered to
EA correct and complete copies of the leases
(12)
<PAGE>
and subleases listed in Section 7.12.2 of the Disclosure Schedule (as amended to
date). With respect to each lease and sublease listed in Section 7.12.2 of the
Disclosure Schedule:
(i) the lease or sublease is legal,
valid, binding, enforceable, and in full force and effect as to BarOn, and to
the Knowledge of the employees of BarOn with responsibility for real property
matters is similarly enforceable against the other party to such lease or
sublease;
(ii) no party to the lease or sublease
is in breach or default, and no event has occurred which, with notice or lapse
of time, would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(iii) all facilities leased or subleased
thereunder have received all approvals of governmental authorities (including
licenses and permits) required in connection with the operation thereof and have
been operated and maintained in accordance with applicable laws, rules, and
regulations, the failure of which to have could cause a material adverse effect
on BarOn or its business;
7.13 Intellectual Property.
7.13.1 BarOn owns or has the right to use pursuant
to license, sublicense, agreement, or permission all Intellectual Property
necessary or desirable for the operation of its businesses as presently
conducted and as presently proposed to be conducted. Each item of Intellectual
Property owned or used by BarOn immediately prior to the Closing hereunder will
be owned or available for use by BarOn on identical terms and conditions
immediately subsequent to the Closing hereunder. BarOn has taken all necessary
and desirable action to maintain and protect each item of Intellectual Property
that it owns or uses, the failure of which to take could adversely effect its
ability to operate its business as presently conducted and as presently proposed
to be conducted.
7.13.2 To the Knowledge of BarOn, BarOn has not
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of third parties, and none of
the directors and officers (and employees with responsibility for Intellectual
Property matters) of BarOn has in the past three years received any charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that BarOn
must license or refrain from using any Intellectual Property rights of any
third party). To the Knowledge of BarOn, no third party has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of BarOn during the past three years.
7.13.3 Section 7.13.3 of the Disclosure Schedule
identifies each patent or registration which has been issued to BarOn with
respect to any of its Intellectual Property, identifies each pending patent
application or application for registration which BarOn has made with respect
to any of its Intellectual Property, and identifies each license, agreement,
or other
(13)
<PAGE>
permission which BarOn has granted to any third party with respect to any of its
Intellectual Property (together with any exceptions), except for any license
implied by the sale of a product. BarOn has made available to EA correct and
complete copies of all such patents, registrations, applications, licenses,
agreements, and permissions (as amended to date) and has made available to EA
correct and complete copies of all other written documentation evidencing
ownership and prosecution (if applicable) of each such item. Section 7.13.3 of
the Disclosure Schedule also identifies each trade name or unregistered
trademark used by BarOn in connection with its business. With respect to each
item of Intellectual Property required to be identified in Section 7.13.3 of the
Disclosure Schedule:
(i) BarOn possesses all rights, title,
and interest in and to the item, free and clear of any Security Interest,
license, or other restriction;
(ii) the item is not subject to any
outstanding injunction, judgment, order, decree, ruling, or charge; and
(iii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or is threatened
which challenges the legality, validity, enforceability, use, or ownership of
the item.
7.13.4 Section 7.13.4 of the Disclosure Schedule
identifies each item of Intellectual Property that any third party owns and
that BarOn uses pursuant to license, sublicense, agreement, or permission
material to the operation of BarOn's business, other than general purpose
software. BarOn has made available to EA correct and complete copies of all
such licenses, sublicenses, agreements, and permissions (as amended to date).
With respect to each item of Intellectual Property required to be identified
in Section 7.13.4 of the Disclosure Schedule, to the Knowledge of the
employees of BarOn with responsibility for intellectual property matters:
(i) the license, sublicense,
agreement, or permission covering the item is legal, valid, binding,
enforceable, and in full force and effect;
(ii) the license, sublicense,
agreement, or permission will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following
the Closing;
(iii) no party to the license, sublicense,
agreement, or permission is in breach or default, and no event has occurred
which with notice or lapse of time would constitute a breach or default or
permit termination, modification, or acceleration thereunder;
(iv) no party to the license, sublicense,
agreement, or permission has repudiated any provision thereof;
(14)
<PAGE>
(v) with respect to each sublicense,
the representations and warranties set forth in subsections (i) through (iv)
above are true and correct with respect to the underlying license; and
(vi) BarOn has not granted any
sublicense or similar right with respect to the license, sublicense, agreement,
or permission.
7.14 Tangible Assets. BarOn owns or leases all buildings,
machinery, equipment, and other tangible assets necessary for the conduct of
its business as presently conducted and as presently proposed to be conducted.
7.15 Contracts. Section 7.15 of the Disclosure Schedule
lists the following executory contracts and other executory agreements to which
BarOn is a party as of December 31, 1994 including, without limitation:
(i) any agreement (or group of
related agreements) for the lease of personal property to or from any Person
providing for lease payments in excess of $25,000 per annum;
(ii) any agreement (or group of related
agreements) for the furnishing or receipt of services, the performance of which
will extend over a period of more than one year, or involve consideration in
excess of $50,000, excluding, however, legal fees to Arnold & Porter;
(iii) any agreement concerning a
partnership or joint venture;
(iv) any agreement (or group of
related agreements) under which BarOn has created, incurred, assumed, or
guaranteed any indebtedness for borrowed money, or any capitalized lease
obligation, in excess of $15,000 or under which it has imposed a Security
Interest on any of its assets, tangible or intangible;
(v) any agreement concerning
noncompetition (other than pursuant to this Investment Agreement or the Letter
of Intent);
(vi) any agreement with any of
shareholder of BarOn or an Affiliate of any of them, other than the agreement
with Intex Corporation and other agreements described in the Disclosure
Schedule;
(vii) any profit sharing, stock option,
stock purchase, stock appreciation, deferred compensation, severance, or other
plan or arrangement for the benefit of its current or former directors,
officers, and employees;
(15)
<PAGE>
(viii) any agreement for the employment
of any individual on a full-time, part-time, consulting, or other basis
providing annual compensation in excess of $75,000 or providing severance
benefits other than those required by law;
(ix) any agreement under which BarOn
has advanced or loaned any amount to any of its directors, officers, and
employees outside the Ordinary Course of Business;
(x) any agreement under which the
consequences of a default or termination could have an adverse effect on the
business, financial condition, operations, or results of operations of BarOn;
and
(xi) any other agreement (or group of
related agreements) the performance of which by BarOn involves consideration
in excess of $25,000.
BarOn has made available to EA a correct and complete copy of each written
agreement (as amended to date) listed in Section 7.15 of the Disclosure Schedule
and a written summary setting forth the terms and conditions of each oral
agreement referred to in Section 7.15 of the Disclosure Schedule. With respect
to each such agreement, to the Knowledge of the employees responsible for such
contracts: (a) the agreement is legal, valid, binding, enforceable, and in full
force and effect; (b) the agreement will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby; (c) no party is in breach
or default, and no event has occurred which with notice or lapse of time would
constitute a breach or default, or permit termination, modification, or
acceleration, under the agreement; and (d) no party (including BarOn) has
repudiated any provision of the agreement.
7.16 Insurance. BarOn has been covered during the past 2
years by insurance in scope and amount customary and reasonable for the
businesses in which it has engaged during such period.
7.17 Litigation. Section 7.17 of the Disclosure Schedule
sets forth each instance in which BarOn (i) is subject to any outstanding
injunction, judgment, order, decree, ruling, or charge or (ii) is a party or is
overtly threatened to be made a party to any action, suit, proceeding, hearing,
or investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator. None of the actions, suits, proceedings, hearings, and
investigations set forth in Section 7.17 of the Disclosure Schedule could result
in any adverse change in the business, financial condition, operations, or
results of operations of BarOn.
7.18 Employee Benefits. Other than as set forth in Section
7.18 of the Disclosure Schedule, BarOn does not maintain, is not required to
maintain, does not contribute to, is not required to contribute to, and is not
otherwise a party to or bound by any profit sharing, stock option, stock
purchase, stock appreciation, deferred compensation, severance, pension,
retirement, severance, medical/hospital benefits, insurance or other similar
plan.
(16)
<PAGE>
7.19 Guaranties and Indemnifications. Other than in the
Ordinary Course of Business, BarOn is not a guarantor or otherwise liable for
any Liability or obligation (including indebtedness) of any other Person, and
has not indemnified any Person or agreed to indemnify any person for any
Liability.
7.20 Certain Business Relationships with Shareholders.
Except in their capacity as directors, officers or employees of BarOn, none of
the shareholders of BarOn and their Affiliates has been involved in any business
arrangement or relationship with BarOn within the past 12 months, and none of
such Shareholders and their Affiliates owns any asset, tangible or intangible,
which is used in the business of BarOn, except as set forth in Section 7.20 of
the Disclosure Schedule.
7.21 Disclosure. The representations and warranties
contained in this Section 7 do not contain any untrue statement of a material
fact or intentionally omit to state any material fact necessary in order to make
the statements and information contained in this Section 7 not misleading.
SECTION 8. POST-CLOSING COVENANTS.
The Parties agree as follows with respect to the period following the Closing.
8.1 General. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Investment Agreement, each of the Parties will take such further action
(including the execution and delivery of such further instruments and documents)
as any other Party may request, all at the sole cost and expense of the
requesting Party (unless the requesting Party is entitled to indemnification
therefor under Section 10.2 or Section 10.3 below), so long as such documents do
not increase the liability or risk of liability of the Party of whom action is
requested.
SECTION 9. CONDITIONS TO OBLIGATION TO CLOSE.
The obligations of EA and BarOn to consummate the transactions to be performed
by them in connection with the Closing is further subject to the conditions set
forth below.
9.1 Conditions to Obligation of EA. The obligation of EA to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the representations and warranties of BarOn
set forth in this Investment Agreement shall be true and correct in all material
respects at and as of the Closing Date;
(ii) BarOn shall have performed and complied
with all of its covenants hereunder in all material respects as of the Closing;
(17)
<PAGE>
(iii) EA and BarOn shall have each obtained all
necessary approvals regarding the transactions contemplated by this Investment
Agreement from its respective Board of Directors and shareholders;
(iv) no action, suit, or proceeding shall be
pending before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator
wherein an unfavorable injunction, judgment, order, decree, ruling, or charge
would (a) prevent consummation of any of the transactions contemplated by this
Investment Agreement, (b) cause any of the transactions contemplated by this
Investment Agreement to be rescinded following consummation, or (c) affect
adversely the right of EA to own the BarOn Stock or the BarOn Escrow Shares;
(v) BarOn shall have delivered to EA a
certificate to the effect that each of the conditions specified above in
Sections 9.1(i)-(iv) is satisfied in all respects;
(vi) BarOn shall have received all necessary
authorizations, consents, and approvals of governments and governmental agencies
referred to in Investment Agreement;
(vii) no material adverse change in the assets
or business of BarOn shall have occurred since September 30, 1994;
(viii) EA shall have received from special
counsel to BarOn an opinion in form and substance reasonably acceptable to EA
and addressed to EA, and dated as of the Closing Date;
(ix) all actions to be taken by BarOn or its
shareholders in connection with the consummation of the transactions
contemplated hereby and all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to EA;
(x) EA shall promptly take steps to cause the
EA Stock to be officially approved for listing on the New York Stock Exchange,
subject to official notice of issuance;
(xi) the Pre-Closing EA Share Price shall not
be $4.00 or less; and
(xii) prior to or contemporaneously with the
Closing, either (i) certain shareholders of BarOn shall have consummated Stock
Purchase Agreements between EA and such shareholders, pursuant to which EA
shall have acquired good and marketable title to an aggregate of 649,000
ordinary shares of BarOn, free and clear of all liens, security interests,
charges and encumbrances of any nature; or (ii) BarOn shall issue to EA that
number of ordinary shares of BarOn which, together with the aggregate number
of ordinary shares of BarOn sold by the shareholders pursuant to the Stock
Purchase Agreements, shall be 649,000 shares of BarOn.
(18)
<PAGE>
EA may waive any condition specified in this Section 9.1 if it executes a
writing so stating at or prior to the Closing.
9.2 Conditions to Obligations of BarOn. The obligation of
BarOn to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties of EA
set forth in this Investment Agreement shall be true and correct in all material
respects at and as of the Closing Date;
(ii) EA shall have performed and complied with
all of its covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be
pending before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (a) prevent
consummation of any of the transactions contemplated by this Investment
Agreement or (b) cause any of the transactions contemplated by this
Investment Agreement to be rescinded following consummation (nor shall
any such injunction, judgment, order, decree, ruling, or charge be in
effect);
(iv) EA shall have delivered to BarOn, a
certificate to the effect that each of the conditions specified above in Section
9.2(i)-(iii) is satisfied in all respects;
(v) the Parties shall have received all
authorizations, consents, and approvals of governments and governmental agencies
referred to in Investment Agreement;
(vi) BarOn shall have received from special
counsel to EA an opinion in form and substance acceptable to counsel for BarOn,
addressed to BarOn, and dated as of the Closing Date;
(vii) no material adverse change in the assets or
business of EA will have occurred since September 30, 1994;
(viii) all certificates, opinions, instruments,
and other documents required to effect the transactions contemplated hereby will
be satisfactory in form and substance to the BarOn.
BarOn may waive any conditions specified in this Section 9.2 if it execute a
writing so stating at or prior to the Closing.
SECTION 10. REMEDIES FOR BREACHES OF THIS INVESTMENT AGREEMENT.
10.1 Survival of Representations and Warranties.
Document No. 214490_5
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All of the representations and warranties of the
Parties contained in this Investment Agreement shall survive the Closing
hereunder and continue in full force and effect for a period of two years
thereafter (except for matters relating to environmental issues or Taxes of
BarOn, which shall continue in full force and effect for a period of five
years after the Closing, subject to any applicable statutes of limitations).
10.2 Indemnification Provisions for Benefit of EA. In the
event any third party makes a claim against BarOn or EA which indicates that
BarOn has breached (or in the event any third party alleges facts that, if true,
would mean BarOn has breached) any of its representations, warranties, and
covenants contained herein, and, provided that EA makes a written claim for
indemnification against BarOn pursuant to Section 11.7 below within the survival
period set forth in Section 10.1, then BarOn agrees to indemnify EA from and
against the entirety of any Adverse Consequences EA may suffer resulting from,
arising out of, relating to, or caused by such third party claim through and
after the date of the claim for indemnification (including any Adverse
Consequences any such party may suffer after the end of any applicable survival
period).
10.3 Indemnification Provisions for Benefit of BarOn. In the
event any third party makes a claim against BarOn or EA which indicates that EA
has breached (or in the event any third party alleges facts that, if true, would
mean EA has breached) any of its representations, warranties, and covenants
contained herein, and provided BarOn makes a written claim for indemnification
against EA pursuant to Section 11.7 below within the survival period set forth
in Section 10.1, then EA agrees to indemnify BarOn from and against the entirety
of any Adverse Consequences BarOn may suffer through and after the date of the
claim for indemnification resulting from, arising out of, relating to, or caused
by such third party claim through and after the date of the claim for
indemnification (including any Adverse Consequences any such party may suffer
after the end of any applicable survival period).
10.4 Indemnification Procedure.
10.4.1 If any third party shall notify any Party
(the "Indemnified Party") with respect to any matter (a "Third Party Claim")
which may give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Section 10, then the Indemnified Party shall
promptly notify each Indemnifying Party thereof in writing; provided, however,
that no delay on the part of the Indemnified Party in notifying any Indemnifying
Party shall relieve the Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is prejudiced.
10.4.2 Any Indemnifying Party will have the right
to defend the Indemnified Party against the Third Party Claim with counsel of
its choice reasonably satisfactory to the Indemnified Party so long as (a) the
Indemnifying Party notifies the Indemnified Party in writing within 15 days
after the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to,
Document No. 214490_5
(20)
<PAGE>
in the nature of, or caused by the Third Party Claim, and (b) the Indemnifying
Party and its counsel conducts the defense of the Third Party Claim actively and
diligently.
10.4.3 So long as the Indemnifying Party is
conducting the defense of the Third Party Claim in accordance with Section
10.4.2 above, (a) the Indemnified Party may retain separate co-counsel at its
sole cost and expense and participate in the defense of the Third Party Claim,
(b) the Indemnified Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnifying Party (not to be withheld unreasonably), and
(c) the Indemnifying Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnified Party (not to be withheld
unreasonably).
10.4.4 In the event any of the conditions in
Section 10.4.2 above is or becomes unsatisfied, however, (a) the Indemnified
Party may defend against, and consent to the entry of any judgment or enter into
any settlement with respect to, the Third Party Claim in any manner it may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith), (b) the
Indemnifying Parties will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim (including
attorneys' fees and expenses), and (c) the Indemnifying Parties will remain
responsible for any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided in this Section 10.
10.5 Determination of Adverse Consequences. The Parties
shall take into account the time cost of money (using the "prime rate" as
announced by Citibank, N.A. from time to time as the discount rate) in
determining Adverse Consequences for purposes of this Section 10.
SECTION 11. MISCELLANEOUS.
11.1 Press Releases and Public Announcements. No Party shall
issue any press release or make any public announcement relating to the subject
matter of this Investment Agreement or the business of the other party without
the prior written approval of the other; provided, however, that EA may make any
public disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities.
11.2 No Third-Party Beneficiaries. This Investment
Agreement shall not confer any rights or remedies upon any Person other than
the Parties and their respective successors and permitted assigns.
11.3 Entire Agreement. This Investment Agreement, and any
other documents referred to herein constitute the entire agreement among the
Parties and supersede any prior understandings, agreements, or representations
by or among the Parties, written or oral, to the extent they relate in any way
to the subject matter hereof, except for the prior Confidentiality Agreement
between the Parties, which shall remain in full force and effect.
Document No. 214490_5
(21)
<PAGE>
11.4 Succession and Assignment. This Investment Agreement
shall be binding upon and inure to the benefit of the Parties named herein and
their respective successors and permitted assigns. Neither Party may assign
either this Investment Agreement or any of its rights, interests, or obligations
hereunder without the prior written approval of the other party.
11.5 Counterparts. This Investment Agreement may be executed
in one or more counterparts, each of which shall be deemed an original but all
of which together will constitute one and the same instrument.
11.6 Headings. The section headings contained in this
Investment Agreement are inserted for convenience only and shall not affect in
any way the meaning or interpretation of this Investment Agreement.
11.7 Notices. All notices, requests, demands, claims, and
other communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
five business days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, or if (and then three business day after) it
is sent by overnight courier service, and addressed to the intended recipient as
set forth below:
<TABLE>
<S> <C>
If to BarOn: Attn: Dr. Ehud Baron
BarOn Technologies Ltd.
Gutwirth Science Park
Technion City
Haifa 32000 Israel
</TABLE>
Document No. 214490_5
(22)
<PAGE>
<TABLE>
<S> <C>
With a copy to: Steven G. Tepper, Esquire
Arnold and Porter
399 Park Avenue
New York, NY 10022
If to EA: Attn: Jules M. Seshens
Electronic Associates, Inc.
185 Monmouth Parkway
West Long Branch, NJ 07764
Israel Address:
c/o BarOn Technologies Ltd.
=======================
With a copy to: Richard P. Jaffe, Esq.
Mesirov Gelman Jaffe Cramer
& Jamieson
1735 Market Street
Philadelphia, PA 19103
</TABLE>
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
11.8 Governing Law. This Investment Agreement shall be
governed by and construed in accordance with the internal laws of the State of
New Jersey without giving effect to any choice or conflict of law provision or
rule (whether of the State of New Jersey or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
New Jersey.
11.9 Jurisdiction. To the fullest extent permitted by
applicable law, EA and BarOn hereby irrevocably and unconditionally agree that
any suit, action or proceeding with respect to this Agreement, or any action or
proceeding to execute or otherwise enforce any judgment in respect of a breach
thereof, if brought by EA against BarOn or any of its property shall be brought
in Israel, and if brought by BarOn against EA shall be brought in the State of
New Jersey. By execution and delivery of this Agreement, EA and BarOn each
irrevocably submits to the exclusive jurisdiction of such courts, as aforesaid.
In addition, EA and BarOn each hereby irrevocably waive, to the fullest extent
permitted by law, any objection which either may now or hereafter have
Document No. 214490_5
(23)
<PAGE>
to the laying of venue in any suit, action or proceeding arising out of or
relating to this Agreement, brought in any such court as aforesaid, and hereby
irrevocably waives any claim that any such suit, action or proceeding brought in
any such court has been brought in an inconvenient forum.
11.10 Amendments and Waivers. No amendment of any provision of
this Investment Agreement shall be valid unless the same shall be in writing and
signed by EA and BarOn. No delay or omission by any Party in exercising any
right, remedy or power hereunder or existing at law or in equity shall be
construed as a waiver thereof, and any such right, remedy or power may be
exercised by the Party from time to time and as often as may be deemed expedient
or necessary by such Party. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
11.11 Severability. Any term or provision of this Investment
Agreement that is invalid or unenforceable in any situation in any jurisdiction
shall not affect the validity or enforceability of the remaining terms and
provisions hereof (or of the invalid or unenforceable term or provision to the
extent any part thereof may not be invalid or unenforceable), or the validity or
enforceability of the offending term or provision in any other situation or in
any other jurisdiction.
11.12 Expenses. Each of the Parties will bear its own costs
and expenses (including legal and accounting fees and expenses) incurred in
connection with this Investment Agreement and the transactions contemplated
hereby incurred by it in connection herewith.
11.13 Construction. The Parties have participated jointly in
the negotiation and drafting of this Investment Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Investment
Agreement shall be construed as if drafted jointly by the Parties and no
presumption or burden of proof shall arise favoring or disfavoring any Party by
virtue of the authorship of any of the provisions of this Investment Agreement.
Any reference to any federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise. The word "including" shall mean including
without limitation. The Parties intend that each representation, warranty, and
covenant contained herein shall have independent significance. If any Party has
breached any representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the Party has not breached shall not detract from or
mitigate the fact that the Party is in breach of the first representation,
warranty, or covenant.
11.14 Specific Performance. Each of the Parties acknowledges
and agrees that the other Parties would be damaged irreparably in the event any
of the provisions of this Investment Agreement are not performed in accordance
with their specific terms or otherwise are breached. Accordingly, each of the
Parties agrees that the other Parties shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Investment Agreement
and to enforce specifically this Investment Agreement and the terms and
provisions hereof in any action instituted
Document No. 214490_5
(24)
<PAGE>
in any court of the United States or any state thereof having jurisdiction over
the Parties and the matter, in addition to any other remedy to which they may be
entitled, at law or in equity.
11.15 Remedies Cumulative. No remedy conferred upon a Party
(including but not limited to the indemnifications set forth in Section 10) is
intended to be exclusive of any other remedy, and each and every such remedy
shall be cumulative and shall be in addition to any other remedy given hereunder
or now or hereafter existing at law or in equity.
* * * * *
IN WITNESS WHEREOF, the Parties hereto have executed this
Investment Agreement on the date first above written.
ELECTRONIC ASSOCIATES, INC.
Attest:_____________By:__________________________________
Secretary BRUCE P. MURRAY, Chairman
BARON TECHNOLOGIES LTD.
Attest:_____________By:__________________________________
Secretary
Document No. 214490_5
(25)
<PAGE>
APPENDIX I
DEFINITIONS APPENDIX
"Adverse Consequences" means all actions, suits,
proceedings, hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages, dues, penalties,
fines, costs, amounts paid in settlement, Liabilities, obligations, Taxes,
liens, losses, expenses, and fees, including court costs and attorneys' fees and
expenses.
"Affiliate" has the meaning set forth in Rule 12-2 of the
regulations promulgated under the Securities Exchange Act of 1934, as amended.
"Aggregate Amount of EA Holdings" means the number of
ordinary shares of BarOn acquired by EA hereunder and pursuant to Stock Purchase
Agreements with shareholders of BarOn.
"Closing" has the meaning set forth in Section 2.1.
"Closing Date" has the meaning set forth in Section 2.1.
"Code" means the Internal Revenue Code of 1986, as amended.
"Disclosure Schedule" has the meaning set forth in
Section 7.
"Escrow Agent" shall mean Yosef Shimony, certified public
accountant (Israel), 24 Geula Street, Tel Aviv, Israel 63309, or such other
party upon which the Parties shall mutually agree.
"Financial Statement" has the meaning set forth in
Section 7.7.
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"Indemnified Party" has the meaning set forth in
Section 10.4.1.
"Indemnifying Party" has the meaning set forth in
Section 10.4.1.
"Intellectual Property" means (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations, continuations-
in-part, revisions, extensions, and reexaminations thereof, (b) all trademarks,
service marks, logos, trade names, and corporate names, together with all
translations, adaptations, derivations, and combinations thereof and including
all goodwill associated therewith, and all
Document No. 214490_5
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applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets
(including ideas, research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and cost
information, and business and marketing plans and proposals which constitute
trade secrets under common law), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable
investigation.
"Letter of Intent" means that certain letter of intent dated
October 20, 1994 from Electronic Associates, Inc. to BarOn R & D Ltd.
"Liability" means any liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Most Recent Balance Sheet" means the balance sheet
contained within the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set
forth in Section 7.7.
"Most Recent Fiscal Quarter End" has the meaning set forth
in Section 7.7.
"Most Recent Fiscal Year End" has the meaning set forth in
Section 7.7.
"Ordinary Course of Business" means the ordinary course of
BarOn's (or, where applicable to EA, EA's) business consistent with its past
customs and practices (including with respect to quantity and frequency).
"Party" has the meaning set forth in the preface of this
Investment Agreement.
"Person" means an individual, a partnership, a corporation,
an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"Securities Act" means the Securities Act of 1933, as
amended.
"Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for Taxes not yet due and payable,
(c) purchase money liens and liens securing rental payments under
Document No. 214490_5
(2)
<PAGE>
capital lease arrangements, and (d) other liens arising in the Ordinary Course
of Business and not incurred in connection with the borrowing of money.
"Stock Purchase Agreements" means those certain stock
purchase agreements dated ______________ between EA and the various shareholders
of BarOn set forth on Schedule 1 of this Agreement, pursuant to which EA
purchased ordinary shares of BarOn aggregating 8.33% of the issued and
outstanding shares of BarOn.
"Subsidiary" means any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns a majority of the common stock
or has the power to vote or direct the voting of sufficient securities to elect
a majority of the directors.
"Tax" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Sec. 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim
for refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in
Section 10.4.1.
Document No. 214490_5
(3)
<PAGE>
APPENDIX II
EXCEPTIONS TO
REPRESENTATIONS, WARRANTIES AND
COVENANTS OF EA
NONE
Document No. 214490_5
<PAGE>
Exhibit 10.2
Form of Stock Purchase Agreement
Document No. 214490_5
(5)
<PAGE>
---------------------------------------------------
STOCK PURCHASE AGREEMENT
dated as of January 10, 1995
between
--------------------------------
and
Electronic Associates, Inc.
------------------------------------------------------
Document No. 230034_1
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement, dated as of the 10th of
January 1995, (this "Agreement") between ________________________ (the "Seller")
and
Electronic Associates, Inc.
a corporation duly organized and validly existing under the laws of the State of
New Jersey in the United States of America, with offices at 185 Monmouth
Parkway, West Long Branch, New Jersey, 07664 (the "Purchaser") .
WITNESSETH:
WHEREAS, the Seller is a record owner of, and has the sole
dispositive power with respect to, the ______________ issued and outstanding
ordinary shares par value N.I.S. 0.01 per share of BarOn Technologies Ltd. (the
"Company") out of which _____________ shares are sold hereunder (the "Shares of
BarOn Stock");
WHEREAS, the Seller desires to sell its Shares of BarOn
Stock to the Purchaser and the Purchaser desires to acquire the Shares of BarOn
Stock from the Seller upon the terms and conditions set forth herein; and
WHEREAS, the parties desire to provide for certain
undertakings, conditions, representations, warranties and covenants in
connection with the transactions contemplated hereby;
NOW, THEREFORE, in consideration of the premises and
of the mutual covenants and agreements herein contained, the parties hereby
agree as follows:
ARTICLE 1
Purchase and Sale of Shares of BarOn Stock
Section 1.1 Purchase and Sale of Shares of BarOn Stock. At
the Closing, subject to the terms and conditions set forth herein, the Seller
shall sell, transfer and assign to the Purchaser, and the Purchaser shall
purchase from the Seller, the Shares of BarOn Stock.
Section 1.2 Purchase Price. The purchase price for the
Shares of BarOn Stock to be paid at the Closing by the Purchaser to the Seller
shall be _____________ of. The purchase price shall be paid by bank check.
Document No. 230034_1
(7)
<PAGE>
Section 1.3 Delivery of Stock Certificates.
a) At the Closing, the Seller shall deliver to the Purchaser
stock certificates, together with a duly executed and a
witnessed transfer deed signed by the Seller. The purchaser
shall counter sign the transfer deed and return it to the
President of the company.
b) The Seller shall take all actions necessary to accomplish
the transfer of the Shares of BarOn Stock to the Purchaser
on the books and records of the Company and with the Israeli
companies registrar.
Section 1.4 Closing. Subject to the satisfaction of the
conditions precedent specified in Sections 3.01 and 3.02 hereof and on the terms
set forth herein, the consummation of the transactions contemplated by this
Agreement shall take place at the offices of Richard Jaffe Esq. at 10:00 a.m.
Philadelphia time on January 10, 1995 (the "Closing"). At the Closing, the
parties shall exchange the certificates specified in Sections 3.01(a) and
3.02(a) and shall execute such documents as may be deemed necessary or advisable
in the opinion of counsel to the Purchaser and the Seller to effectuate the
transactions contemplated by this Agreement.
ARTICLE 2
Representations and Warranties
Section 2.1 Representations and Warranties of the Seller.
The Seller represents and warrants to the Purchaser as follows:
(a) Ownership; Authorization. The Shares of BarOn Stock
represent ______ % of the issued shares of the Company's stock. The Seller
presently owns, and will own at the time of the Closing, both beneficially and
of record, the Shares of BarOn Stock free and clear of any restrictions on
transfer (other than any restrictions under the federal or and state securities
laws), options, warrants, purchase rights, contracts, commitments, equities,
claims, and demands. The Seller has the sole and exclusive right, power and
authority to enter into this Agreement and to sell all of the Shares of BarOn
Stock as provided herein. Upon such sale, the Purchaser shall receive good and
valid title to all Shares of BarOn Stock, subject to no liens, encumbrances or
other adverse interests of any kind.
(b) Execution. This Agreement has been duly executed and
delivered by the Seller and is binding upon and enforceable against the Seller
in accordance with its terms and conditions, subject to applicable bankruptcy,
insolvency, and other laws affecting the enforceability of creditors' rights
generally, and general principles of equity.
(c) Delivery. The Certificates for the Shares of BarOn
Stock will be, when delivered to the Purchaser, in good form for delivery.
(d) No Government Consents. The Seller is not required
to give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or
Document No. 230034_1
(8)
<PAGE>
governmental agency or other party (including any spouse) in order for him/her
or it to consummate the transactions contemplated by this Agreement.
(e) Non-Contravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which the Seller is subject
or, if the Seller is a corporation, any provision of its charter or by-laws or
(ii) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which the Seller is a party or by
which he, she or it is bound or to which any of his, her or its assets is
subject.
(f) Brokers' Fees. The Seller has no liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which the
Purchaser could become liable or obligated.
Section 2.2 Representations and Warranties of the
Purchaser.
(a) Execution. This Agreement has been duly executed and
delivered by the Purchaser and is binding upon and
enforceable against the Purchaser in accordance with its
terms and conditions, subject to applicable bankruptcy,
insolvency, and other laws affecting the enforceability of
creditors' rights generally, and general principles of
equity.
(b) No Government Consents. The Purchaser is not required to
give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or
governmental agency or other party (including any spouse) in
order for him/her or it to consummate the transactions
contemplated by this Agreement.
(c) Non-Contravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (i) violate any
constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court
to which the Purchaser is subject or, any provision of its
charter or by laws or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other
arrangement to which the Purchaser is a party or by which
he, she or it is bound or to which any of his, her or its
assets is subject.
(d) Upon closing the Seller shall submit an opinion of
counsel verifying the provisions of this section 2.2.
Document No. 230034_1
(9)
<PAGE>
ARTICLE 3
Conditions Precedent
Section 3.1 Conditions to the Obligations of the Seller. The
obligation of the Seller to consummate the sale of the Shares of BarOn Stock in
accordance with this Agreement is subject to the satisfaction on or prior to the
Closing of each of the following conditions precedent, unless waived by it in
accordance with Section 5.6 hereof:
(a) Certificate. The representations and warranties of the
Purchaser in Section 2.2 hereof shall be true in all
material respects as of the Closing, and the Purchaser shall
have complied with or performed all of the agreements,
covenants and obligations hereunder required to be performed
by it as of the Closing. The Seller shall have received a
certificate to such effect, dated as of the Closing, and
executed by the Purchaser, which certification shall be
stated to be the best of the Purchaser's knowledge after
reasonable investigation.
Section 3.2 Conditions to the Obligations of the Purchaser.
The obligation of the Purchaser to consummate the sale of the Shares of BarOn
Stock in accordance with this Agreement is subject to the satisfaction on or
prior to the Closing of each of the following conditions precedent, unless
waived by it in accordance with Section 5.7 hereof:
(a) Certificate. The representations and warranties of the
Seller set forth in Section 2.1 hereof shall be true as of
the Closing, and the Seller shall have complied with or
performed all of the agreements, covenants and obligations
hereunder required to be performed by it as of the Closing.
The Purchaser shall have received a certificate to such
effect, dated as of the Closing, executed by the Seller,
which certification shall be stated to the best of such
Seller's knowledge after reasonable investigation.
(b) Opinion of Counsel. The Seller shall have delivered to
the Purchaser an opinion of counsel of _____________ in
Exhibit A hereto identical to the form attached hereto as
Exhibit A".
ARTICLE 4
Not Applicable
ARTICLE 5
Other Agreements of the Parties
Section 5.1 Covenants, etc. To Bind. All covenants,
agreements, warranties and representations made herein or in any certificates
delivered in connection with the Closing by or on behalf of the Purchaser or
the Seller shall bind the Purchaser and the Seller, respectively, and such
covenants, agreements, warranties and representations shall survive the
execution and delivery
Document No. 230034_1
(10)
<PAGE>
of this Agreement, any investigation made by or on behalf of the Purchaser or
the Seller, but shall not survive the Closing.
Section 5.2 Purchaser Access to the Company. The Purchaser
represents and warrants that it has been given the full opportunity to evaluate
the Company from all aspects deemed by it to be of importance, had been given
access to all documents and professionals engaged by the Company in order to
allow the Purchaser to make a decision and that it found the Company and the
Shares of BarOn Stock satisfactory to its needs.
Section 5.3 Stamp duties imposed by the State of Israel
on this transaction and its registration shall be born by both parties in
equal shares.
Section 5.4 Notices. All notices and other communications
required or permitted to be given under this Agreement shall be in writing and
shall be effective only if delivered personally or by overnight delivery service
or sent by confirmed telex, telegram or facsimile transmission, or by certified
or registered mail, postage prepaid and return receipt requested, as follows:
If to the Seller to:
[To Be Added]
Attention:
with required copies to:
Steven G. Tepper, Esquire
Arnold & Porter
399 Park Avenue
New York, N.Y. 10022
Facsimile No: (212) 715-1399
Telephone No: (212) 715-1140
If to the Purchaser to:
Electronic Associates, Inc.
185 Monmouth Parkway
West Long Branch, New Jersey 07764
Facsimile No: (908) 571-0583
Telephone No: (908) 229-1100
Attention: Jules M. Seshens
Document No. 230034_1
(11)
<PAGE>
and also to:
Mr Jules M. Seshens.
Gutwirth Park, Technion City,
Haifa 32000, Israel.
With required copies to:
========================
Richard P. Jaffe, Esq.
Mesirov Gelman Jaffe
Cramer & Jamieson
1735 Market Street
Philadelphia, PA 19103-7598
Facsimile No: (215) 994-1111
Telephone No: (215) 944-1000
or to such other address as any party to this Agreement shall specify by notice
to the other party or parties, and shall be deemed to have been given upon
receipt.
Section 5.5 Assignment Binding Effect; Benefits. Neither this
Agreement nor any right, remedy, obligation or liability arising hereunder or by
reason hereof shall be assignable by any party to this Agreement without the
prior written consent of the other party or parties hereto. This Agreement shall
be binding upon and inure to the benefit of the parties to this Agreement and
their respective successors and permitted assigns. Nothing expressed or referred
to in this Agreement is intended or shall be construed to give any person other
than the parties to this Agreement or their respective successors or permitted
assigns any legal or equitable right, remedy or claim under or in respect of
this Agreement or any provision contained herein, it being the intention of the
parties to this Agreement that this Agreement is for the sole and exclusive
benefit of such parties or such successors and assigns and for the benefit of no
other person.
Section 5.6 Waiver; Amendment.
Document No. 230034_1
(12)
<PAGE>
(a) The Seller and the Purchaser may by an instrument in
writing executed in the same manner as this Agreement: (i)
extend the time for the performance of any of the agreements
of the other party under this Agreement; (ii) waive any
inaccuracies in the representations or warranties of the
other party contained in this Agreement or in any document
delivered pursuant hereto or thereto; (iii) waive the
performance by the other party of any of the agreements to
be performed by it under this Agreement; or (iv) waive the
satisfaction or fulfillment of any condition to the
obligations of the party so waiving. The waiver by any party
hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any other or
subsequent breach hereunder.
(b) This Agreement may be amended, modified or supplemented
by the written agreement of the Purchaser and the Seller.
Section 5.7 Cumulative Rights. Each and every right granted
to each party hereunder, or under any other document delivered in connection
herewith, and each and every right allowed it by law or equity, shall be
cumulative and may be exercised from time to time. No failure on the part of any
party to exercise, and no delay in exercising (except where a specific time
period is specified), any right shall operate as a waiver thereof, nor shall any
single or partial exercise by any party of any right preclude any other future
exercise thereof or the exercise of any other right.
Section 5.8 Entire Agreement. This Agreement and the
documents executed in connection herewith together constitute the entire
agreement between the Seller and the Purchaser with respect to the transactions
contemplated hereby. All prior negotiations, discussions and agreements by and
among the parties hereto which are not reflected in the above-described
agreements and documents are merged into said agreements and documents and have
no further force and effect.
Section 5.9 Article and Section Headings. Article and
Section headings contained in this Agreement are for convenience of reference
only and shall not affect in any way the meaning or interpretation of this
Agreement.
Section 5.10 Public Announcement. Except as required by law,
the parties shall refrain from making any public announcement of the
transactions contemplated by this Agreement except jointly with, and upon
express approval, of each other.
Section 5.11 Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed to constitute an
original and shall become effective when one or more counterparts have been
signed by each party hereto and delivered to the other party or parties.
Section 5.12 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of Israel without giving effect to
conflict of laws principles thereof.
Document No. 230034_1
(13)
<PAGE>
Section 5.13 Jurisdiction. To the fullest extent permitted
by applicable law, the Purchaser hereby irrevocably and unconditionally agrees
that any suit, action or proceeding with respect to this Agreement, or any
action or proceeding to execute or otherwise enforce any judgement in respect
of a breach thereof, brought by the Purchaser against the Seller or any of his
or her or its property shall be brought in Israel, and by execution and delivery
of this Agreement, the Purchaser irrevocably submits to the exclusive
jurisdiction of such court. In addition, the Purchaser hereby irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of venue in any suit, action or proceeding
arising out of or relating to this Agreement, brought in any such court, and
hereby irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.
IN WITNESS WHEREOF, this Agreement has been executed by the
parties hereto as of the day and year first above written.
ELECTRONIC ASSOCIATES, INC.
By:___________________________
Title:________________________
-------------------------------
Seller
Document No. 230034_1
(14)
<PAGE>
Exhibit A
MATTERS TO BE ADDRESSED IN OPINION OF
COUNSEL TO BE DELIVERED UNDER SECTION 5.02(b)
OF THE AGREEMENT
a. is the owner of record of ____________ ordinary
shares of BarOn Technologies, Ltd.
b. All of the Shares of BarOn Stock are owned by the
Seller.
c. The Agreement has been duly executed and delivered by the
Seller and (assuming due authorization, execution and delivery by the Purchaser)
constitutes the valid, binding and enforceable obligation of the Seller.
d. In rendering the foregoing opinions, counsel may rely as
to factual matters upon certificates or other documents furnished by the Seller
and such other documents and data as such counsel shall deem appropriate.
Document No. 230034_1
<PAGE>
Exhibit 10.3
Form of Shareholders Agreement
Document No. 230034_1
(2)
<PAGE>
Shareholders Agreement
Dated: January 16,1995
entered into
Between and Among:
Ehud BarOn
and: Dimotech
and: Intex Israel Technologies
Corporation, Ltd.
and: Edward Wolfe
and: E&M Computing, Ltd.
and: Shmuel Geva
and: Rami Entin
and: Zvi Bar-nes
and: Gad Rosenberg
and: Joseph Zaltzman
and: Micha Segev
Each one of the above parties shall be referred to as "Shareholder" and all of
them collectively shall be referred to as "The Shareholders".
and: Electronic Associates Inc
(hereinafter EA)
Document No. 229995_1
<PAGE>
Whereas EA and BarOn Technologies Ltd (hereinafter BarOn)
shall enter into an Investment Agreement dated Jan 16. 1995 (hereinafter The
Investment Agreement) under which EA purchases shares of BarOn and,
Whereas under the Investment Agreement EA has been granted
certain rights, the implementation of which require, or may in the future
require certain positive votes of The Shareholder or of The Shareholders within
the framework of Shareholders general meetings, and,
Whereas certain Shareholders have entered in the past into
certain agreements with BarOn granting them certain rights some of which have
currently been exercised, some of which are no longer effective, some of which
shall be terminated according to this Shareholders Agreement and some of which
(as listed in Appendix "A") shall remain effective and binding and,
Whereas The Parties wish to define the relationships among
themselves and to contractually regulate certain issues herein addressed. Now
therefore, in consideration of the mutual premises hereinafter set forth, The
Shareholders mutually agree as follows:
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6 The preamble to this agreement constitutes an integral part thereof.
7 This agreement shall become effective simultaneously with the closing of the
Investment Agreement.
3. The Shareholders hereby undertake to vote in favor of any
Shareholder meetings resolutions necessary for the
implementation of all of BarOn's obligations under the
Investment Agreement.
4. Subject to the closing of the Investment Agreement:
a) The Shareholders hereby acknowledge the fulfillment
by BarOn of all previous obligations towards each
one of them to their full satisfaction and agree to
discharge BarOn from all liabilities and debts of
any kind other than those listed in Appendix A.
b) The Shareholders agree unconditionally to give up
and revoke all previous contractual rights with
BarOn and with each other, except for the rights
specified in this Shareholders Agreement, the
ownership of their shares of BarOn, and the rights
set forth in Appendix "A" (Intex Corporation).
c) In view of the previous sections 4(a) and 4(b) The Shareholders declare that
there is no longer a need for their consent for the consummation of the
Investment and Manufacturing Agreements between BarOn and EA and/or
</TABLE>
Document No. 229995_1
(4)
<PAGE>
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for each of the Stock Purchase Agreements between The Shareholders and
EA.
5. a) Mr Shmuel Geva, Mr Zvi Bar-nes, Mr Gad Rosenberg, Mr Rami Entin, Mr
----------- ----------- ------------- ----------
Joseph Zaltzman, Mr Micha Segev (hereinafter Hilan group) mutually agree
--------------- -----------
to be represented at BarOn's Shareholders meetings by Mr Shumuel Geva
------------
who at the group's discretion may be replaced at any time and from time
to time.
b) Mr Edward Wolfe agrees to be represented at BarOn's
Shareholders meetings by Dr Ehud BarOn. Dr Ehud
BarOn, Mr Edward Wolfe and E.M Computing Ltd shall
be referred to herein as the "BarOn Group".
c) For the purposes of this Agreement, the Hilan group
and the BarOn group shall each be deemed as a
single Shareholder and will have the full
accumulated rights of all their group members.
(Changes within the Hilan Group shall not change
its rights hereunder).
6. The parties hereto agree:
a) To cause by their positive vote that the Board of Directors of BarOn shall
consist of nine (9) Directors.
b) Any single Shareholder, for each holding of 10.1% of the issued stock of
BarOn will have the right to propose the nomination of one Director.
c) Not withstanding the foregoing provisions, a single
Shareholder who is a party hereto, whose share in
the issued stock of BarOn was reduced and/or
diluted to less than 10.1% shall maintain the right
to propose one Director so long as his decreased
holding is 7% or more of the issued stock of BarOn.
d) To the extent possible according to Israeli law, EA
may elect to request the nomination of one Director
only, having the voting power of the full number of
Directors that EA is entitled to propose.
e) To vote in favor of the nomination of the Directors to BarOn's Board of
Directors proposed in accordance with sections 7 (a) (b) (c) and (d) above.
7. a) The Shareholders mutually agree to vote in favor of the nomination of an
observer proposed by E&M Computing Ltd so long E&M Computing Ltd
holds 4% or more of the issued stock of BarOn.
</TABLE>
Document No. 229995_1
(5)
<PAGE>
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b) The observer shall be invited to attend all BarOn's Board Meetings and all
meetings held at BarOn.
8. Under the terms and conditions of the Investment Agreement,
not later than Sept 30, 1995, EA is contemplated to increase
its holdings up to 33.33% of BarOn's issued stock, of which
EA is currently purchasing only 25.01%. It is hereby agreed
that until September 30, 1995 EA's vote shall be deemed to
have the power of 33.33%, after which date EA's vote shall
be in compliance with its actual holdings.
9. The Shareholders mutually understand and agree that:
a) 659,400 shares (8.46%) of the stock of BarOn (hereinafter Prior Reserved
Stock) was reserved prior to the Investment Agreement for distribution at
the sole discretion of Ehud BarOn.
b) Part of the Prior Reserved Stock has already been
allocated to Ed Wolfe and certain employees and the
rest will be allocated at the sole discretion of
Ehud BarOn.
c) The number of shares that each of The Shareholders
received in the past including EA, was calculated
as if the entire Prior Reserved stock was already
issued (fully diluted basis).
d) The issuance by Dr BarOn of the Prior Reserved Stock is hereby
pre-approved and shall not require any additional resolution.
10. a) The Shareholders agree that neither The Shareholders meetings nor the
Board of Directors will adopt resolutions under which BarOn will authorize:
(i) a merger.
(ii) A sale of assets of real estate, technology, or patents.
(iii) Grants of an exclusive licenses for any of its technologies.
(except for subsidiaries).
(iv) An acquisition of another entity.
(v) The making of any loans.(Normal bank
deposits including normal bank monetary
investments shall not be considered as
"Loans").
that shall become valid against the negative vote
of the majority of the Directors nominated by EA.
b) The Board of Directors shall authorize the setting up of an executive
committee consisting of three members out of which one shall be elected on
the recommendation of EA.
</TABLE>
Document No. 229995_1
(6)
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c) The provisions of this section 10 are not
transferable by EA and shall remain effective for
three years or until an I.P.O or upon the reduction
of EA's holding to less than 20.2% of the amount of
issued shares of BarOn, whichever comes first
11. The Parties mutually agree to vote in favor of the adoption
of the attached English form of the Articles of Association
for the management of BarOn as set forth in Appendix "C".
12. This Agreement shall terminate automatically upon the
issuance of an Initial Public Offering which all parties
undertake to make their best effort to materialize.
13. This Agreement shall also constitute a Shareholders Meeting
Unanimous Resolution authorizing the arrangements set forth
herein and as a ratification of all previous acts of BarOn
and its Board of Directors.
14. Those of The Shareholders who have signed a Stock Purchase
Agreement for the sale of certain shares to EA hereby
authorize Avi Goldsobel Esq. to deliver such Stock Purchase
Agreements and related documents to EA and upon EA's
signature and Closing to receive, as their trustee, the
monetary consideration (checks or other instruments). Mr
Goldsobel shall deliver the consideration to each of The
Shareholders according to their share.
15. BarOn hereby undertakes to issue to EA additional shares and all selling
Shareholders agree, if so requested by BarOn, to cover any amount of shares which
may be missing in order to reach the amount of 649,000 shares to be sold to EA.
The price per share of the additional allocation referred herein shall be as set forth
in the Stock Purchase Agreements to cover their proportionate share in any amount
of BarOn's shares which may be, at the time of closing missing for the fulfillment
of the sale to EA.
16. In the event that not all of The Shareholders, the names of
which appear herein shall actually sign this Agreement, this
Agreement shall be binding upon the parties whose signatures
are affixed hereto.
17. a) The provisions of this Agreement cannot be changed without the prior
written consent of all parties hereto.
b) No sale of shares by each of the parties hereto
shall become effective unless the buyer has agreed
to be bound by the provisions of this Agreement and
to maintain the rights of the seller (except for
the rights set forth in section 10 hereto).
</TABLE>
Document No. 229995_1
(7)
<PAGE>
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18. The Parties agree that all future offerings of shares by
BarOn Technologies Ltd or its subsidiaries to one or more of
the Parties (after EA has exercised its rights under section
4 of the Investment Agreement or the expiration thereof in
accordance with its provisions) shall be offered on the same
terms to all the parties according to their pro-rated share.
</TABLE>
<TABLE>
<S> <C> <C>
Ehud BarOn Dimotech Intex Israel Technologies
Corporation Ltd
---------------- ----------------------------- ------------------------
Edward Wolfe E&M Computing Ltd Shmuel Geva
---------------- ----------------------------- ------------------------
Rami Entin Joseph Zaltzman Gad Rosenberg
---------------- ----------------------------- ------------------------
Zvi Bar-nes Micha Segev Electronic Associates, Inc.
---------------- ----------------------------- ------------------------
-------------------------
BarOn Technologies, Ltd.
Gutwirth Science Park,
Technion City, Haifa 32000
Israel. (for the guaranty
of Sections 15 and 18)
</TABLE>
Document No. 229995_1
(8)
<PAGE>
