As Filed with the Securities and Exchange Commission on July 7, 1995
Registration No. 33-81892
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 4 ON FORM S-3
TO
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
ELECTRONIC ASSOCIATES, INC.
(Exact name of registrant as specified in its charter)
New Jersey 21-0606484
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
185 Monmouth Parkway
West Long Branch, New Jersey 07764-9989
(908) 229-1100
(Address, including zip code, and
telephone number, including area
code, of registrant's principal
executive offices)
Richard P. Jaffe, Esquire
Mesirov Gelman Jaffe
Cramer & Jamieson
1735 Market Street, 38th Floor
Philadelphia, PA 19103-7598
(215) 994-1046
(Name, address, including
zip code, and telephone number,
including area code, of agent
for service)
_____________________________________________
Approximate date of commencement of proposed sale to public: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.[ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box.[X]
____________________________________________
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to Section 8(a), may determine.
<PAGE>
CROSS REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY FORM S-3
FILED AS PART OF REGISTRATION STATEMENT
<TABLE>
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Item
Number
in Form
S-3 Item Caption in Form S-3 Caption in Prospectus
- --- ------------------------ ---------------------
<S> <C> <C>
1 Forepart of Registration Statement and Outside Front Cover Page
Cover Page of Prospectus
2 Inside Front and Outside Back Cover Pages of Prospectus Inside Front Cover Page; Table of
Contents
3 Summary of Information, Risk Factors and Ratio of The Company; Risk Factors; Selected
Earnings to Fixed Charges Consolidated Financial Data; and
Selected Unaudited Pro Forma Combined
Condensed Financial Data
4 Use of Proceeds Use of Proceeds
5 Determination of Offering Price Cover Page
6 Dilution Inapplicable
7 Selling Security Holders Plan of Distribution and Selling
Securityholders
8 Plan of Distribution Plan of Distribution and Selling
Securityholders
9 Description of Securities to be Registered Inapplicable
10 Interests of Named Experts and Counsel Legal Matters
11 Material Changes The Company; and Selected Unaudited
Pro Forma Combined Condensed
Financial Data
12 Incorporation of Certain Information by Reference Incorporation of Certain Information
by Reference
13 Disclosure of Commission Position on Indemnification Indemnification of Directors and
for Securities Act Liabilities Officers
</TABLE>
(ii)
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission but has not yet become effective. These
securities may not be sold nor may offers to buy be accepted prior to the time
the registration statement becomes effective. This Prospectus shall not
constitute an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such State.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JULY 7, 1995
Prospectus
10,600,523 Shares
[LOGO]
ELECTRONIC ASSOCIATES, INC.
Common Stock
This Prospectus relates to the offer for sale of 10,600,523 shares of
common stock (the "Shares") of Electronic Associates, Inc. (the "Company" or
"EAI") from time to time after the date hereof by certain stockholders and
warrant holders ("Warrant Holders") of the Company (the Warrant Holders and such
stockholders are collectively referred to as the "Selling Securityholders" and
individually as a "Selling Securityholder"), together with the 10,600,523
Preferred Stock Purchase Rights ("Rights") associated with such Shares. The
Rights associated with the Shares are not exercisable or transferrable apart
from the Shares as of the date of this Prospectus and no additional
consideration has been, or will be, received by the Company in connection with
the granting of such Rights upon the issuance of the Shares. Except as described
elsewhere in this Prospectus, the Company will not receive any portion of the
proceeds from the sale of the Shares offered hereby. See "Plan of Distribution
and Selling Securityholders."
THE SECURITIES BEING SOLD HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE
OF RISK. THE COMPANY HAS EXPERIENCED LOSSES FOR THE PAST FOUR YEARS. SEE "RISK
FACTORS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION (THE "COMMISSION") NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The Shares will be offered by the Selling Securityholders or their donees
for resale by this Prospectus from time to time after the date hereof in one or
more transactions on the New York Stock Exchange ("NYSE"), in negotiated
transactions, or private transactions, or otherwise, or a combination of such
methods of sale, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. The Selling
Securityholders may effect such transactions by selling the Shares to or through
broker-dealers, and such broker-dealers may receive compensation in the form of
underwriting discounts, concessions or commissions (which compensation may be in
excess of customary commissions). Any broker-dealers that participate in the
distribution of the Shares, including, without limitation, the Warrant Holders,
may be deemed to be underwriters and any commissions received by them and any
profit on the resale of Shares sold by them might be deemed to be underwriting
discounts and commissions under the Securities Act of 1933, as amended (the
"Securities Act"). Each of the Selling Securityholders may also be deemed to be
an underwriter as defined in the Act.
The Company's common stock (the "Common Stock") is traded on the NYSE under
the symbol EA. However, as a result of, among other things, continuing losses,
the Company has been informed by the NYSE that its shares of Common Stock no
longer qualify for listing on the NYSE. Although the NYSE has not taken any
affirmative action to de-list the Common Stock, it has reserved the right to do
so. See "Risk Factors." On June 29, 1995, the last reported sale price of the
Common Stock as reported by the NYSE was $8.00.
The expenses relating to the offering are estimated to be $320,000, of
which $75,000 will be paid by certain Selling Securityholders and $245,000 will
be paid by the Company.
The Date of this Prospectus is __________, 1995.
<PAGE>
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection with
the offer made hereby and, if given or made, such information or representations
must not be relied upon as having been authorized by the Company or the Selling
Securityholders. This Prospectus does not constitute an offer to sell or
solicitation of an offer to buy, nor shall there be any sale of these securities
by anyone in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities law of any
such State, or in which the person making such offer or solicitation is not
qualified to do so, or to any person to whom it is unlawful to make such offer
or solicitation.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended ("Exchange Act"), and in accordance therewith
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's Regional Offices at 500 West
Madison Street, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300,
New York, New York 10048. Copies of such material can be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed rates.
The Company's Common Stock is listed on the New York Stock Exchange
("NYSE"), 11 Wall Street, New York, New York 10005. Information regarding the
Company is also available at the NYSE.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1994, as amended on Form 10-K/A dated April 28, 1995, Quarterly Report on Form
10-Q for the quarter ended April 1, 1995, Current Report on Form 8-K dated
January 4, 1995, as amended on Form 8-K/A dated March 17, 1995, relating to the
Tanon Acquisition (as such term is hereinafter defined), Current Report on Form
8-K dated January 16, 1995, as amended on Form 8-K/A dated March 30, 1995,
relating to the BarOn Investment (as such term is hereinafter defined), and
Current Report on Form 8-K dated May 24, 1995, relating to updated pro forma
financial data and historical financial statements for Tanon Manufacturing, Inc.
and BarOn Technologies Ltd., are incorporated herein by reference and made a
part hereof.
All documents filed subsequent to the date of this Prospectus by the
Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 prior to the termination of the offering described in this
Prospectus shall be deemed to be incorporated in this Prospectus and to be a
part hereof from the date of filing of such documents. Any statement contained
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The description of the Company's Common Stock is incorporated herein by
reference from the registration statement therefor under Section 12 of the
Exchange Act, including any amendment or report filed for the purpose of
updating such description.
(2)
<PAGE>
The description of the Company's Preferred Stock Purchase Rights is
incorporated herein by reference from the registration statement therefor under
Section 12 of the Exchange Act, including any amendment or report filed for the
purpose of updating such description.
The Company will provide, without charge, to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the oral or written
request of such person, a copy (without exhibits, unless such exhibits are
specifically incorporated by reference into the information that this Prospectus
incorporates) of any and all information that has been incorporated by reference
in this Prospectus. Written or telephone requests for such information should be
directed to Shareholder Relations, Electronic Associates, Inc., 185 Monmouth
Parkway, West Long Branch, New Jersey 07764-9989, telephone: (980) 229-1100.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
AVAILABLE INFORMATION................................................................... (2)
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE......................................... (2)
THE COMPANY............................................................................. (4)
RISK FACTORS ........................................................................... (6)
USE OF PROCEEDS......................................................................... (14)
SELECTED CONSOLIDATED FINANCIAL DATA.................................................... (15)
SELECTED UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA.......................... (17)
PLAN OF DISTRIBUTION AND SELLING SHAREHOLDERS........................................... (18)
LEGAL MATTERS........................................................................... (25)
EXPERTS................................................................................. (25)
INDEMNIFICATION OF DIRECTORS AND OFFICERS............................................... (25)
</TABLE>
(3)
<PAGE>
THE COMPANY
General
The Company is in the business of providing contract electronic
manufacturing services to original equipment manufacturers. The Company
functions in whole or in part as the manufacturing arm of its customers,
providing services which range from the assembly of printed circuit boards to
the complete procurement, production, assembly, testing and delivery of entire
electronic products and systems.
The Company has invested in new manufacturing equipment to accommodate the
increased business for surface mount technology ("SMT") equipment. The SMT
process is increasingly replacing the older, through-hole technology previously
utilized in the assembly of printed circuit boards. SMT allows for production of
a smaller circuit board, with greater component and circuit density, resulting
in increased performance. Management believes that SMT will continue to
constitute an increasing percentage of printed circuit board production and
assembly.
The Company manufactures over 1,500 different assemblies which are
incorporated into product lines of over 30 different companies. The Company
provides its services primarily to manufacturers of: micro, mini and mainframe
computers; computer peripheral equipment; high quality graphic equipment; office
equipment; telecommunications equipment; consumer appliances, industrial tools
and measuring devices.
During 1994, the Company's sales and gross profit increased to
approximately $30.5 million and $2.8 million, respectively, while sales, general
and administrative expenses declined. The Company's net loss from continuing
operations in 1994 was $4,784,000 which includes a provision for restructuring
of $2,400,000, compared to a loss of $4,664,000 in 1993 from continuing
operations. During the first quarter of 1995, the Company's sales increased to
$19,056,000 from $5,377,000 in the first quarter of 1994, primarily as a result
of the Tanon Acquisition. The Company had a net loss of $8,598,000 for the first
quarter of 1995, which included a charge of $6,012,000 representing the
write-off of in-process research and development resulting from its investment
in BarOn, compared with a net loss of $661,000 for the first quarter of 1994.
Historically, the Company has had substantial recurring sales from existing
customers. Current marketing efforts are aimed at obtaining long-term
relationships with new customers, as well as maintaining its current customer
base. The Company employs a variety of marketing techniques for the sale of its
products, including direct sales efforts by an in-house sales force, and the
utilization of independent sales representatives. The Company's backlog consists
of firm purchase orders which are typically shipped within twelve months from
receipt of order. As of year-end 1994 and 1993, the Company's backlog from
continuing operations totalled approximately $19,240,000, and $19,453,000,
respectively.
The shares of the Company's Common Stock have been continuously listed for
trading on the NYSE since 1962; however, the Common Stock presently does not
meet the NYSE's requirements for continued listing. See "Risk Factors."
The Company's principal executive offices are located at 185 Monmouth
Parkway, West Long Branch, New Jersey 07764-9989, and its telephone number is
(908) 229-1100.
(4)
<PAGE>
Recent Developments
On January 4, 1995, the Company acquired Tanon Manufacturing, Inc.
("Tanon"), a privately owned contract electronic manufacturing firm with
operations located in Fremont, California (the "Tanon Acquisition"). The Tanon
Acquisition has been reported as a purchase for accounting purposes and,
accordingly, the results of operations of Tanon are included with those of the
Company from January 4, 1995 forward. Tanon's manufacturing services consist
primarily of the assembly of printed circuit boards, the manufacturing and
assembly of integrated electro-mechanical systems and related engineering
support. At the closing of the Tanon Acquisition, the Company issued 1,538,462
shares of its Common Stock and granted options to purchase its common stock with
a combined appraised value of $14,460,000 in exchange for all the outstanding
common stock of Tanon and outstanding options to purchase common stock of Tanon.
In addition, (a) the Company invested $2,000,000 in Tanon, and (b) the Company
has agreed to use its best efforts to invest in (or, at the Company's option,
loan to) Tanon (in form and on terms acceptable to the Company and its lenders)
up to an additional $5,000,000 subject to receipt by the Company of an
acceptable operating plan.
On January 16, 1995, the Company acquired a 25.01% equity interest in BarOn
Technologies Ltd. ("BarOn"), a privately-owned Israeli corporation based in
Haifa, Israel (the "BarOn Investment"). BarOn is a development stage company
engaged in the research and development of a computer input device that can
directly digitize handwriting in a variety of languages, from any surface. The
BarOn Investment has been accounted for as a purchase of a minority interest
using the equity method of accounting, and, accordingly, the Company's
investment in BarOn and the 25.01% equity interest in the results of BarOn are
included in the consolidated results of the Company from January 16, 1995
forward. At the closing of the BarOn Investment, the Company acquired 25.01% of
the ordinary shares of BarOn for a consideration of cash and shares of Common
Stock in the Company and a right to acquire an additional 8.33% of the ordinary
shares of BarOn. The Company acquired 8.33% of the 25.01% equity interest in
BarOn from certain shareholders of BarOn for $2,700,000 which was paid in cash
at closing. The balance of 16.68% was acquired from BarOn in exchange for
$3,000,000 in cash and 127,592 shares of Common Stock of the Company with an
estimated value of $1,000,000 payable as follows: (i) of such $3,000,000 cash
payment, $2,000,000 was paid at closing in the form of $1,500,000 in cash and
the cancellation of BarOn's obligation to repay the Company $500,000 pursuant to
the terms of a business loan to BarOn, and (ii) the $1,000,000 balance due BarOn
and the issuance and delivery of the 127,592 shares of common stock of the
Company are presently due and payable to BarOn. Pursuant to the terms of an
Investment Agreement with BarOn, BarOn is obligated to issue to the Company
ordinary shares to increase the Company's equity interest by 8.33%, which would
give the Company an aggregate equity interest of up to 33-1/3% of the
outstanding ordinary shares of BarOn, in the event that the Company elects to
make certain subsequent investments. The subsequent investments, which would
aggregate $2,000,000 in cash, together with the delivery of 255,183 shares of
Common Stock of the Company with an estimated value of $2,000,000, are at the
option of the Company, which is exercisable on the earlier of BarOn's reaching
certain development milestones or September 30, 1995.
(5)
<PAGE>
RISK FACTORS
In addition to the information set forth elsewhere in, and incorporated by
reference into, this Prospectus, the following factors should be considered
carefully in evaluating the Company and its business before purchasing the
Shares offered hereby.
Absence of Profitable Operations
The Company has not had a profitable year since 1990. Although the Company
has eliminated certain operations and reduced expenses in an attempt to improve
its operating results, there can be no assurance that the Company's results of
operations will improve or that the Company will be profitable in the future.
History of Losses
The Company has incurred significant losses in each of the last four years
and for the quarterly period ended April 1, 1995, accumulating to approximately
$23 million. The Company's accumulated deficit was approximately $21 million as
of April 1, 1995. In addition, the Company had negative cash flows from
continuing operations in each of the last four years and for the quarterly
period ended April 1, 1995. Moreover, under the Company's asset based credit
facility, the Company's borrowing capacity can be severely curtailed by its
lenders.
Delisting of the Company's Common Stock from Trading on the New York Stock
Exchange
The Company has been informed by the New York Stock Exchange ("NYSE") that
the Company's Common Stock no longer qualifies for listing on the NYSE. In order
for the Company to maintain the listing of its Common Stock on the NYSE, the
Company must meet certain continued listing criteria, including without
limitation, minimum levels with respect to (1) the number of shareholders and
shareholdings (1,200 holders each owning 100 shares or more), (2) the number of
publicly-held shares (600,000), (3) the aggregate market value of publicly-held
shares ($5,000,000) and of all outstanding shares ($8,000,000), and (4) minimum
annual earnings (average of $600,000 per year for prior three years). On
September 11, 1991, the NYSE notified the Company in writing that a review of
the Company's annual financial results for the fiscal year ended December 31,
1990 indicated that the Company had fallen below the continued listing criteria
for aggregate market value of outstanding shares (less than $8,000,000) and
average earnings for the prior three years (less than $600,000 per year). As of
the date of this Prospectus, the Company believes that it is in compliance with
all of the NYSE's continued listing criteria, with the exception of the minimum
average earnings of $600,000 for each of the last three fiscal years. The NYSE
has indicated in a letter dated March 29, 1995 approving the listing of
additional shares of Common Stock, that consideration is being given to the
appropriateness of continued listing of the Company's Common Stock. Management
of the Company met with representatives of the NYSE on April 21, 1995 to discuss
this matter and is awaiting a response from the NYSE. To date, to the Company's
knowledge, the NYSE has taken no affirmative action to delist the Common Stock,
but has reserved the right to do so in the future. If the Company's Common Stock
is delisted from the NYSE, it could have a material adverse effect on the price
and liquidity of the Company's Common Stock.
In the event that the Company's Common Stock is de-listed from the NYSE, it
could seek to list its Common Stock on the National Association of Securities
Dealers Inc.'s Automated Quotation System ("NASDAQ") or another exchange. While
the Company believes that it is presently eligible for listing on the NASDAQ
Small-Cap Market System but not the NASDAQ National Market System, there can be
no assurance that the Company would be eligible for listing its Common Stock on
either of such NASDAQ listing systems or any other exchange at such time. If the
Company would be ineligible to list its Common Stock on NASDAQ or
(6)
<PAGE>
any other exchange at such time, there would be no established trading
market for the Company's Common Stock except as may be established in the
National Association of Securities Dealers Inc.'s OTC Bulletin Board Service or
in the "pink sheets," which, as discussed above, could have a material adverse
effect on the price and liquidity of the Company's Common Stock. In addition,
the Company's Common Stock could then become subject to the Commission's "penny
stock" rules which regulate broker-dealer sales practices. Such rules could
restrict the ability of broker-dealers to sell the Company's Common Stock, which
could also have a material adverse effect on the price and liquidity of the
Company's Common Stock.
Working Capital Needs and Liquidity Problems
As described above, the Company has experienced negative cash flow from
operations and significant operating losses in each of the four years ending
December 31, 1994 and for the quarterly period ended April 1, 1995. In January
and February 1994, in order to conserve cash and reduce expenses, the Company
imposed a 20% decrease in pay on substantially all employees, arranged for
additional concessions from its West Long Branch landlord, deferred certain
debts and lease payments and arranged to raise capital as described below. Cash
flows from financing activities during 1994 amounted to $13,192,000, resulting
primarily from the issuance of 1,200,000 units (each unit consisting of one
share of Common Stock, a Class A Warrant (hereinafter defined) and a Class B
Warrant (hereinafter defined)) (the "February Units") in the private placement
completed in February 1994 (the "February 1994 Private Placement") and the
issuance of 2,500,000 units (each unit consisting of one share of Common Stock
and one Class C Warrant (hereinafter defined) (the "June Units") in the private
placement commenced in June 1994 (the "June 1994 Private Placement") and
exercise of related Class C Warrants issued in the June 1994 Private Placement,
net of reductions in outstanding debt. The proceeds from these activities were
used to maintain cash balances for working capital and to consummate the Tanon
Acquisition and the BarOn Investment.
In order to provide additional capital, on April 14, 1995, the Company
completed the sale of 525,000 shares of Common Stock at $5.85 per share for net
proceeds of approximately $3,000,000 in an offering exempt from the registration
provisions under the Securities Act, which proceeds are being used for working
capital purposes. In addition, in contemplation of the Tanon Acquisition, the
Company has implemented measures to reduce costs, including the closing and sale
of its Southwest operations in Arizona and Mexico, which the Company completed
in the second quarter of 1995, and consolidation of its corporate administrative
functions with those of its newly acquired subsidiary, Tanon, and reduction of
certain other administrative expenses, which the Company expects to complete
during the third quarter of 1995. Although the Company's projections indicate
that operating losses and negative cash flows from operations will continue
during 1995, management believes that its available cash, together with funds
available under its existing lines of credit, will enable the Company to meet
its obligations in the normal course of business through December 31, 1995,
however, no assurance can be given in that regard.
Further, the Company's business plan includes making certain additional
investments with respect to Tanon and BarOn as a result of the acquisitions made
in January 1995, which may require, among other things, additional cash
resources in excess of those presently available. The Class A and Class B
warrants issued in the February 1994 Private Placement, if exercised, could
provide the Company with additional capital of approximately $4,400,000.
Additional capital could also come from the exercise of the other warrants held
by Warrant Holders of which the underlying shares are covered by this Prospectus
(such warrants, together with the Class A Warrants and Class B Warrants are
collectively hereinafter referred to as the "Warrants"). However, none of the
Warrants have been exercised and no assurance can be given that any such
Warrants will be exercised. In addition, the Company is presently in
negotiations with its existing lenders to increase the amount available under
its revolving credit facilities and is attempting to raise additional capital.
There can be no assurance that such additional borrowings or financing will be
available.
(7)
<PAGE>
The Company maintains an asset based credit facility with Congress
Financial Corporation, which is described in detail in note 5, "Notes Payable
and Line of Credit" of Notes To Consolidated Financial Statements at Item 8 of
the Company's latest Annual Report on Form 10-K, as amended on Form 10-K/A, for
the year ended December 31, 1994. At May 26, 1995, the Company's month end for
accounting purposes, the Company had $3,786,000 outstanding under this credit
facility and had $371,000 available for borrowing. There are two covenants with
which the Company must comply under this facility. Working capital, as defined,
must exceed $750,000 and tangible net worth must exceed negative $500,000. The
Company was in compliance with both covenants as of May 26, 1995 and believes
that it is in compliance with such covenants as of the date of this Prospectus.
Tanon maintains a separate revolving line of credit with a commercial bank
that provides for short-term borrowings up to $5.5 million based on eligible
accounts receivable and inventories. At May 26, 1995, Tanon had $5.5 million
outstanding and no additional borrowing availability under this line of credit.
This line bears interest at prime plus 1.5% and is due on demand. The credit
agreement pertaining to this line of credit restricts Tanon from entering into
certain transactions and contains covenants regarding the maintenance of working
capital, minimum net worth and debt-to-equity ratios, together with minimum
profitability requirements. The covenants require Tanon to maintain or achieve
working capital in an amount greater than deficit $150,000, tangible net worth
of not less than $2.8 million, a quick ratio of .50 to 1, a debt to equity ratio
of less than 5.50 to 1, and minimum quarterly profitability of $20,000 for each
fiscal quarter of Tanon. Tanon was in compliance with such covenants as of May
26, 1995 and the Company believes that Tanon is in compliance with such
covenants as of the date of this Prospectus, with the exception of the minimum
quarterly profitability requirement which Tanon did not achieve for its first
quarter ended April 1, 1995 and which the Company believes Tanon did not achieve
for its second quarter ended July 1, 1995. Tanon obtained a waiver from its
lender for the non-compliance with such covenant for the first quarter ended
April 1, 1995 and for the second quarter ended July 1, 1995.
Limitations on Dividend Payments
The Company has not had a profitable year since 1990 and has paid no cash
dividends from that date through the date of this Prospectus. If the Company
were to become profitable, it would expect that all of such earnings would be
retained to support the business of the Company. Accordingly, the Company does
not anticipate paying cash dividends on its Common Stock in the foreseeable
future. Moreover, certain financial covenants set forth in the Company's current
loan agreement prohibit the Company from paying cash dividends.
Dependence on a Limited Number of Customers and the Electronics Industry
Concurrent Computer Corporation, Iris Graphics, Inc. and Dialogic
Corporation were the Company's largest customers during the fiscal year ended
December 31, 1994 and accounted for 33%, 25% and 11%, respectively, of the
Company's net sales for such period. Two customers of Tanon, Tandem Computers
Incorporated and another customer which is a private company, accounted for
39% and 16%, respectively, of Tanon's net sales during its fiscal year ended
December 31, 1994. The Company expects that most of its and Tanon's current
customers will continue to account for a significant portion of its net sales.
However, since customer contracts can be cancelled and purchase levels can be
changed or purchases delayed at any time, the timely replacement of cancelled,
delayed or reduced contracts with new orders cannot be assured. In addition,
substantially all of the Company's and Tanon's customers are in the computer,
telecommunications and electronics industries which are each subject to rapid
technological changes. Such technological changes could have a material adverse
effect on the Company's and Tanon's major customers which, in turn, could have a
material adverse effect on the Company's results of operations.
(8)
<PAGE>
At December 31, 1994, the Company had accounts receivable of
approximately $2,150,000 from one of its major customers that has indicated
to management of the Company as having cash flow difficulties. At the request of
this customer, the Company agreed to extend the terms of this receivable by an
additional 15 days to 75 days and said customer agreed to reimburse the Company
by paying interest at market rates for the balance outstanding beyond normal
terms. The Company evaluates this receivable balance continuously and maintains
constant dialogue with management of the customer. As of June 22, 1995, the
outstanding balance with this customer was approximately $800,000 and such
receivable has been paid in accordance with the special terms, with the
exception of such customer's failure to make a $300,000 payment which was due on
June 22, 1995. On July 1, 1995 such customer paid $150,000 and has indicated to
management that it will attempt to pay all past due balances on or about July
10, 1995, however, there can be no assurance that the balance of such receivable
will be collected in full. Recently, the level of sales with this customer has
been substantially reduced. The loss of such sales has been offset, in part, by
the increased sales to another current customer of the Company.
Between December 31, 1993 and December 31, 1994, total accounts receivables
increased from $3,598,000 to $5,958,000 representing an increase of $2,360,000
or 65.6%. The increase is primarily due to an increase in sales in the fourth
quarter of 1994 from the fourth quarter of 1993 of $2,496,000, including sales
to the customer discussed in the immediately preceding paragraph.
Availability of Raw Materials
The Company relies on third-party suppliers for components which it uses in
its assembly processes. At various times in the electronics industry there have
been shortages of these kinds of components. While management believes that
these shortages have not impacted significantly its performance in the past, if
shortages should occur in the future, the Company may be forced to delay
manufacturing and shipments, which could have a material adverse effect on the
Company's results of operations.
Competition
The Company competes with numerous domestic and offshore contract
manufacturers as well as the in-house manufacturing capabilities of certain of
its existing and potential customers. Some of the Company's competitors have
substantially greater manufacturing, financial and marketing resources than the
Company. The Company believes that the significant competitive factors in
contract manufacturing are technology, quality, service, price and ability to
deliver finished products on a timely and reliable basis. The Company's
inability to compete effectively in any of these areas could have a material
adverse effect on the Company's business.
Environmental Compliance and Current Litigation
The Company is subject to a variety of environmental regulations relating
to the use, storage, discharge and disposal of hazardous chemicals used during
its manufacturing process. Any failure by the Company to comply with present and
future regulations could restrict the Company's ability to expand its facilities
or require the Company to acquire costly equipment or to incur other expenses to
comply with environmental regulations, or incur fines and penalties.
In addition, there are two lawsuits presently pending which involve
environmental claims against EAI, namely, the Lemco Associates lawsuit and the
Bridgeport Rental and Oil Services Superfund Site lawsuit. In October, 1992,
Lemco Associates L.P., a limited partnership ("Lemco"), the owner of property
previously owned by EAI, initiated an action against EAI and others alleging,
among other things, that the defendants created environmental contamination at
the property and is seeking damages in unspecified amounts. EAI has denied
Lemco's allegations, asserted numerous defenses to the claims asserted and made
cross claims
(9)
<PAGE>
for indemnification and contribution against co-defendants and
others. In addition, the Company has made a demand upon its insurance carriers
for coverage for the claims made by Lemco and cross claims and third party
claims may be filed against these insurance companies seeking indemnification
against these claims. To date, the Company's insurance carriers have agreed to
pay 71% of its defense costs under a reservation of rights. Discovery in this
matter is ongoing. By letter dated March 30, 1995, Lemco has provided the
Company with a statement of its remediation costs to date, as well as an
estimate of future remediation costs associated with the contamination for which
it seeks recovery in this action. Specifically, Lemco claims that it has
expended approximately $424,000 in remediation costs, including fees for legal
oversight and consultation. It further estimates that its future remediation
costs will amount to approximately $4,900,000. Such amount is included in a
report made by Lemco's environmental consultants based on their current
assessment of the extent of contamination and the method and period required to
complete the remediation. Further, by letter dated June 7, 1995, Lemco has
provided the Company with an appraisal report made by a real estate appraisal
company engaged by Lemco in support of Lemco's claim for diminution in the value
of the property. Such report states that it is the appraisal company's opinion
that the market value of the property as of May 23, 1988 was $3.6 million and as
of April 14, 1995 was $750,000. Based on the foregoing, management believes that
the range of possible loss in this matter ranges from zero to approximately $8.2
million, not including costs and expenses, such as legal and expert fees, which
will be incurred in connection with this matter, and not taking into account the
amount of any loss which may be offset by insurance coverage as discussed above.
At this time, the Company and its consultants have not investigated and
evaluated the information recently received from Lemco nor has an independent
analysis of the site been performed to determine the appropriateness of Lemco's
claims and of the estimated cost of remediation and diminution in value of the
property. Such investigation, evaluation and analysis of this matter is expected
to be completed by September 1995; therefore, it is not possible to predict its
outcome at this time. Moreover, there is no assurance that the outcome of this
matter will come within the above-mentioned range of possible loss.
The second matter involves environmental claims against EAI and others
regarding the Bridgeport Rental and Oil Services Superfund Site in Logan
Township, New Jersey (the "B.R.O.S. Site"). By letter dated August 31, 1988, the
United States Environmental Protection Agency ("EPA") notified EAI that the EPA
had identified EAI as one of the parties potentially responsible for clean up
costs at, and for any other possible damages in connection with, the B.R.O.S.
Site. EAI's alleged connection to the B.R.O.S. Site is through Rollins
Environmental Services, Inc. ("Rollins") which is a waste transporter that was
allegedly hired by EAI to transport certain waste material alleged to be
hazardous from EAI's operations for appropriate disposal. Information in the
EPA's files suggests that the EPA is likely to assert that one shipment of waste
allegedly generated by EAI and presumed to constitute less than one quarter of
one percent of the total liquid waste allegedly released at the B.R.O.S. Site,
was delivered to the B.R.O.S. Site in 1973 by Rollins. On March 29, 1989, the
New Jersey Department of Environmental Protection and Energy ("DEPE") issued an
administrative directive under New Jersey's Spill Compensation and Control Act
to over one hundred companies, including EAI, demanding payment by May 15, 1989
of $9,224,189 as DEPE's share of remedial costs at the B.R.O.S. Site. By letter
dated August 29, 1989, and by similar letters to fifty-seven other alleged waste
generators, or transporters of waste allegedly released at the B.R.O.S. Site,
the EPA demanded that the targeted companies, individually or jointly, pay to
the "EPA Hazardous Substances Trust Fund" the sum of $17.8 million by September
29, 1989 in full reimbursement of past costs incurred by the EPA in connection
with the B.R.O.S. Site. The EPA estimated at that time that the costs of the
remaining remedial work will be in the range of $70 - $100 million. On May 15,
1989, a group of companies among those which had received demands from DEPE,
including EAI, without admitting liability, made a "good faith" payment of
$1,344,500 in response to DEPE's directive demanding payment of $9,224,189.
EAI's share of this payment was $5,000. On September 29, 1989, a group of
companies, including EAI, targeted by the EPA responded to the EPA's demand
letter for past costs of $17.8 million by declining to make any payments at that
time and by offering to negotiate a settlement of the EPA's claims. Litigation
has been initiated in the federal courts with respect to the remediation alleged
to be required at the B.R.O.S. Site. EAI is not a party to this litigation but
is participating in informal discovery and
(10)
<PAGE>
settlement negotiations with respect to the federal court actions without
admitting liability. Rollins has agreed to pay administrative expenses which may
be assessed against EAI in connection with its participation in the settlement
process as well as defend EAI should EAI be sued after participating in the
settlement process. Rollins has not agreed to assume any liability that any of
its customers may incur as a result of these claims, including liability for any
amount that EAI may agree to pay in settlement. EAI has pursued insurance
coverage for these claims. To date, one carrier has responded, has agreed to pay
one-third of EAI's defense costs and has otherwise reserved rights. The other
carrier to which EAI has submitted the B.R.O.S. claims has denied coverage on
grounds that EAI believes are without merit under New Jersey law. This insurance
company advised EAI that it has no information at this time that would support
EAI's claim of coverage under any of the policies issued by it to EAI. EAI has
asked for reconsideration of its position and is awaiting a response. Based
solely upon the alleged single shipment of waste generated by EAI and presumed
to constitute less than one quarter of one percent of the total liquid waste
allegedly released at the B.R.O.S. Site discussed above, management believes
that the range of possible loss in this matter ranges from zero to approximately
$300,000, not including costs and expenses which will be incurred in connection
with this matter which are not paid by Rollins as discussed above, and not
taking into account the amount of any loss which may be offset by insurance
coverage as discussed above or which may be recoverable from Rollins based on
indemnification claims. Settlement discussions in this matter are ongoing and
the Company's participation in such settlement discussions has been limited to
date; therefore, it is not possible to predict its outcome at this time.
Moreover, there is no assurance that the outcome of this matter will come within
the above-referenced range of possible loss.
Dependence on Key Executives
The Company is continually assessing and evaluating its management team.
The Company is and will continue to be dependent upon the ability and experience
of its executive officers, including Joseph R. Spalliero. There can be no
assurance that the Company will be able to retain experienced management. If,
for any reason, the Company is unable to retain such management, the Company's
operations could be adversely affected.
Possible Volatility of Stock Price
The trading price of the Company's Common Stock could be subject to
significant fluctuations in response to variations in quarterly operating
results, general conditions in the electronics industry, general conditions in
the economy and other factors, including the relatively small number of shares
held publicly.
Limitation of Net Operating Loss Carrryforward
A limitation on the ability to utilize a portion of the Company's net
operating loss carryforwards, which amounted to approximately $23.4 million as
of December 31, 1994, may result if future stock ownership changes exceed
certain thresholds as defined in Section 382 of the Internal Revenue Code of
1986.
Future Sales of Common Stock
At March 31, 1995, the Company had approximately 10,480,000 shares of
Common Stock outstanding. Of these shares, approximately 7,500,000 shares are
"restricted" or "affiliate" securities as such terms are defined in the
Securities Act and may not be sold in the absence of registration under the
Securities Act or an exemption therefrom, including the exemption contained in
Rule 144. The Company has granted certain holders of restricted or affiliate
shares of Common Stock certain rights which enable such holders to require the
Company to register shares of Common Stock held by them, including without
limitation, (i) the 1,200,000 shares included in the February Units sold in the
February 1994 Private Placement, (ii) the 2,500,000 shares included
(11)
<PAGE>
in the June Units sold by the Company in the June 1994 Private Placement,
(iii) the 1,482,744 shares purchased upon exercise of the Class C Warrants
included in the June Units sold by the Company in the June 1994 Private
Placement, and (iv) the 1,538,000 shares issued to stockholders of Tanon upon
consummation of the Tanon Acquisition on January 4, 1995. Of such shares,
6,725,000 shares are included in the Registration Statement in which this
Prospectus is a part. None of the Company's approximately 7,500,000 restricted
or affiliated securities outstanding as of March 31, 1995 are currently for sale
in the public in reliance upon Rule 144. As of December 31, 1994, the Company
has granted to employees and others options to purchase up to 3,352,836 shares
of Common Stock, of which all such shares are covered by currently effective
registration statements. The Company also expects to file a registration
statement shortly covering options issued to employees to purchase up to
approximately 690,000 shares of Common Stock. The Company has also issued
warrants which are exercisable for an aggregate of approximately 4,500,000
shares of the Company's Common Stock and which contain certain registration
rights for the underlying shares. Of such warrants, 3,876,084 shares (including
without limitation, the shares underlying the Class A Warrants and Class B
Warrants issued in the February 1994 Private Placement) are included in the
Registration Statement in which this Prospectus is a part. Possible or actual
sales made under Rule 144, or pursuant to exemptions under the Securities Act,
or pursuant to registration rights, of the aforementioned shares of Common Stock
or shares of Common Stock issued upon the exercise of the aforementioned stock
options or warrants may have a material adverse effect upon the market price of
the Company's Common Stock.
Control by Board of Directors
As of March 31, 1995, all officers and directors of the Company as a group
beneficially owned approximately 3,235,806 shares or 26.75% of the outstanding
Common Stock or options or warrants exercisable for Common Stock, assuming the
exercise of presently exercisable options and warrants held by such persons.
Consequently, the Board of Directors can and will be able to continue to
exercise significant influence over the Company and its affairs.
Possible Issuances of Preferred Stock
Shares of Preferred Stock of the Company may be issued by the Board of
Directors of the Company, without shareholder approval, on such terms as the
Board of Directors may determine. The rights of the holders of Common Stock will
be subject to, and may be adversely affected by, the rights of the holders of
any Preferred Stock that may be issued in the future. Moreover, although the
ability to issue Preferred Stock may provide flexibility in connection with
possible acquisitions and other corporate purposes, such issuance may make it
more difficult for a third party to acquire, or may discourage a third party
from acquiring, control of the Company. The Company has no outstanding Preferred
Stock.
Provisions with Possible Anti-Takeover Effect
The New Jersey Business Corporation Act ("NJBCA") provides that in
determining whether a proposal or offer to acquire a corporation is in the best
interests of the corporation, the corporation's board of directors may, in
addition to considering the effects of any action on shareholders, consider any
of the following: (a) the effects of the proposed action on the corporation's
employees, suppliers, creditors and customers, (b) the effects on the community
in which the corporation operates and (c) the long-term as well as short term
interests of the corporation and its shareholders, including the possibility
that these interests may best be served by the continued independence of the
corporation and if, based on these factors, the board of directors determines
that any such offer is not in the best interest of the corporation, it may
reject the offer. The New Jersey Shareholders Protection Act (the "Protection
Act"), prohibits a publicly held New Jersey corporation with its principal
executive office and significant business operations in New Jersey from engaging
in any business combination with an "Interested Shareholder" (defined generally
as a beneficial owner of 10% or more of the outstanding voting stock)
(12)
<PAGE>
for a period of five years from the date the Interested Shareholder became
an Interested Shareholder, unless such transaction is approved by the board of
directors prior to the date the shareholder became an Interested Shareholder. In
addition, the Protection Act prohibits any business combination at any time with
an Interested Shareholder other than a transaction that (i) is approved by the
board of directors for the applicable company prior to the date the Interested
Shareholder became an Interested Shareholder; or (ii) is approved by the
affirmative vote of the holders of two-thirds of the voting stock not
beneficially owned by the Interested Shareholder at a meeting called for that
purpose; or (iii) satisfies certain stringent price and terms criteria.
The Company's Certificate of Incorporation and By-Laws provide that the
Board of Directors of the Company shall be divided into three classes, each of
which serves for a three year term, with one class standing for election every
year. As a result, it ordinarily requires two annual meeting cycles and more
than one year for stockholders holding a majority of the shares to elect a
majority of the Board. The Company has also adopted a Shareowners Rights Plan,
pursuant to which it has granted to shareholders one Preferred Stock Purchase
Right for each outstanding share of Common Stock. Under certain conditions, each
Right entitles shareholders to purchase one 1/100th of a share of Series A
Junior Participating Preferred Stock of the Company at an exercise price of
$11.00, which Rights expire in 1998. The Rights are exercisable only if a person
or group acquires 15% or more of EAI's outstanding Common Stock (except in a
transaction directly with the Company which the Board determines is in the best
interests of shareowners) or commences a tender offer the consummation of which
would result in ownership by a person or group of 15% or more of the Common
Stock. In the event a person or group acquires 15% or more of EAI's outstanding
Common Stock (except in a transaction directly with the Company which the Board
determines is in the best interest of shareowners) each Right will entitle all
other holders to receive, upon exercise, EAI Common Stock with a value of twice
the exercise price. In addition, at any time after a 15% position is acquired,
the Board of Directors may, at its option, require each outstanding Right to be
exchanged for one share of Common Stock. Further, if EAI is acquired in a merger
or other business combination transaction after the Rights become exercisable,
each Right will entitle its holder to purchase, at the Right's then-current
exercise price, a number of the acquiring company's common shares having a value
at that time of twice the Right's exercise price.
These provisions of New Jersey Law, the Company's Certificate of
Incorporation and By-Laws, and Preferred Stock Purchase Rights Plan could delay
or impede the removal of incumbent directors and could make a merger, tender
offer or proxy contest involving the Company more difficult, even if such event
could be beneficial to the interests of the stockholders. Such provisions could
limit the price that certain investors might be willing to pay in the future for
the Company's Common Stock.
(13)
<PAGE>
USE OF PROCEEDS
The Company will not receive any portion of the proceeds of the resale of
the Shares by the Selling Securityholders. However, the Company could receive
gross cash proceeds of up to approximately $6.5 million from the issuance of the
Shares upon the exercise of the Warrants, assuming the exercise in full of the
Warrants. As of the date of this Prospectus, none of the Warrant Holders has
exercised his or her Warrants and, therefore, no proceeds have been received.
There can be no assurance that any of the Warrants will be exercised.
In the event any of such Warrants is exercised, the net proceeds therefrom
will be used for working capital purposes. Pending expenditure, the Company will
invest the proceeds, if any, of the sale of Shares upon the exercise of the
Warrants in investment grade, interest-bearing securities.
(14)
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth historical consolidated financial data of
the Company for the three-month periods ended April 1, 1995 and March 31, 1994
and for each of the years in the five-year period ended December 31, 1994. The
selected historical consolidated financial data for each of the years ended
December 31, 1990 through 1994 presented below were derived from the
consolidated financial statements of the Company, which were audited by Arthur
Andersen LLP, independent public accountants. The financial data of the Company
for the three-month periods ended April 1, 1995 and March 31, 1994 were derived
from the unaudited consolidated condensed financial statements of the Company.
The results for the three-month periods ended April 1, 1995 and March 31, 1994
are not necessarily indicative of results for the full year or any future
period. This data should be read in conjunction with the Company's financial
statements and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" incorporated by reference in the Company's Form 10-K, as
amended on Form 10-K/A dated April 28, 1995, filed for the year ended December
31, 1994 and Form 10-Q filed for the quarter ended April 1, 1995.
<TABLE>
<CAPTION>
(thousands of dollars, except per share data)
Quarterly Period Ended
April 1 March 31 Year Ended December 31,
--------------------------------------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
- ------------------------------------------------------------------------------------------------------------------------
Unaudited Unaudited
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Results: (Note 1)
Sales from Continuing $ 19,056 $5,377 $30,539 $26,024 $22,248 $22,933 $19,620
Operations
Provision (Credit) for -- -- 2,400 (68) 285 -- --
Restructuring
Loss from Continuing $ (8,064) (536) (4,784) (5,348) (3,524) (6,811) (497)
Operations Before Taxes
Loss from Continuing $ (8,064) (536) (4,784) (4,664) (3,189) (5,227) (334)
Operations, Net
Income from Discontinued $ -- -- -- 1,327 651 1,531 793
Operations, Net
Net Income (Loss) $ (8,598) (661) (4,784) (3,337) (2,538) (3,696) 459
Income (Loss) per
Common Share:
Continuing Operations $ (.84) (.19) (.95) (1.76) (1.22) (2.02) (.12)
Discontinued Operations $ -- -- -- .50 .25 .59 .28
Net Income (Loss) $ (.84) (.19) (.95) (1.26) (.97) (1.43) .16
- -------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data:
Current Assets $ 23,977 -- 16,969 7,355 14,547 12,267 12,168
Current Liabilities $ 25,254 -- 12,603 8,614 11,594 5,019 4,339
Working Capital $ (1,277) -- 4,366 (1,259) 2,953 7,248 7,829
Net Property and $ 5,139 -- 2,719 3,603 4,344 2,351 2,610
Equipment
Total Assets $ 45,732 -- 22,845 12,762 19,836 14,805 15,153
Long-Term Debt $ 1,431 -- 690 1,820 1,678 605 703
Shareholders' Equity $ 16,367 -- 7,244 (546) 2,776 5,137 9,671
(Deficit)
Common Shares 10,484 -- 8,108 2,661 2,646 2,588 2,602
Outstanding
Book Value per $ 1.56 -- .89 (.21) 1.05 1.99 3.72
Common Share
- -------------------------------------------------------------------------------------------------------------------------
Other Data:
Number of Shareholders 4,417 -- 4,447 4,600 4,718 4,877 4,969
of Record
Number of Employees 520 -- 334 315 458 368 379
Orders Received $ 19,165 -- 30,326 18,805 31,592 20,064 24,656
Sales Backlog at End of $ 33,596 -- 19,240 19,453 26,676 17,260 20,239
Period
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(15)
<PAGE>
Note (1): 1995 amounts include the results of Tanon Manufacturing, Inc.
from the date of the Tanon Acquisition (January 4, 1995) and EAI's
equity in the results of BarOn Technologies Ltd. from the date of the
BarOn Investment (January 16, 1995).
(16)
<PAGE>
SELECTED UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA
The following selected unaudited pro forma combined condensed financial
data for the year ended December 31, 1994, and three months ended March 31,
1994, give effect to the consummation of the Tanon Acquisition 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 BarOn Investment 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. The unaudited pro forma
combined condensed statements of operations assume the Tanon Acquisition and
BarOn Investment were consummated on January 1, 1994. The selected unaudited pro
forma combined condensed financial data exclude any nonrecurring costs expected
to be incurred by EAI and Tanon in connection with the Tanon Acquisition
contemplated by the Tanon Acquisition Agreement. Also excluded from the selected
unaudited pro forma combined condensed financial data are any benefits that may
result from the Tanon Acquisition due to synergies that may be derived and the
elimination of duplicate efforts. The pro forma financial data presented are for
informational purposes only and are not necessarily indicative of the results
that actually would have occurred had the Tanon Acquisition and BarOn Investment
been consummated on the dates indicated or the results that may occur in the
future. This data should be read in conjunction with the Company's financial
statements and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" incorporated by reference in the Company's Form 10-K, as
amended on Form 10-K/A dated April 28, 1995, filed for the year ended December
31, 1994 and Form 10-Q filed for the quarter ended April 1, 1995 and pro forma
financial statements and notes related thereto incorporated by reference in the
Company's Current Report on Form 8-K dated January 4, 1995, as amended, relating
to the Tanon Acquisition, Current Report on Form 8-K dated January 16, 1995, as
amended, relating to the BarOn Investment, and Current Report on Form 8-K dated
May 24, 1995, relating to updated pro forma financial data and historical
financial statements for Tanon and BarOn.
<TABLE>
<CAPTION>
(thousands of dollars)
For the Three For the Year
Months Ended Ended
March 31, 1994 December 31, 1994
-------------- -----------------
<S> <C> <C>
Operating Results:
Sales.............................................................. $16,730 $81,274
Costs and Expenses
Costs of Sales.................................................. 15,448 75,256
Selling, General and Administrative............................. 1,806 8,179
Other Expenses, Net............................................. 358 1,456
------- -------
Total Costs and Expenses........................................... 17,612 84,891
------- -------
Net Loss........................................................... $ (882) $(3,617)
======= =======
Loss per Common Share.............................................. $ (.14) $ (.45)
======= =======
Weighted Average Number of Common Shares
Outstanding....................................................... 6,313 7,957
======= =======
</TABLE>
(17)
<PAGE>
PLAN OF DISTRIBUTION AND
SELLING SECURITYHOLDERS
The Shares will be offered by the Selling Securityholders or their donees
for resale by this Prospectus from time to time after the date hereof in one or
more transactions on the NYSE, in negotiated transactions, or private
transactions, or otherwise, or a combination of such methods of sale, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. The Selling Securityholders may effect
such transactions by selling the Shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of underwriting discounts,
concessions or commissions (which compensation may be in excess of customary
commissions). The following table sets forth as of June 30, 1995 (a) the name
of each Selling Securityholder, (b) the nature of any position, office or other
material relationship which the Selling Securityholder has had within the past
three years with the Company, (c) the number of Shares owned prior to the
offering, (d) the number of Shares to be offered for the Selling
Securityholder's account, (e) the number of Shares to be owned by the Selling
Securityholder after completion of the offering, and (f) the percentage of
Common Stock to be owned by the Selling Securityholder after completion of the
offering.
<TABLE>
<CAPTION>
Number of Percentage of
Relation- Number of Shares Number of Shares Owned Common Stock
Name of Selling ship to Owned Prior to Shares After Owned After
Securityholder Company(1) Offering Offered Offering(8) Offering(8)
- ------------- ----------- ----------------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Laura Huberfeld 1,058,826(2) 1,058,826 -0- -0-
Naomi Bodner 1,058,826(2) 1,058,826 -0- -0-
Dale Enterprises, Inc. 529,413(2) 529,413 -0- -0-
Daniel Lemberg 529,413(2) 529,413 -0- -0-
Cong. Ahavas Tzdokah V'chesed 114,714(2) 114,714 -0- -0-
Rita Folger 88,233(2) 88,233 -0- -0-
Martin Chopp 35,292(2) 35,292 -0- -0-
Shushana Mueller 35,292(2) 35,292 -0- -0-
Ezra Birnbaum 17,646(2) 17,646 -0- -0-
L.B. Partners, L.P. 17,646(2) 162,646 -0- -0-
and
145,000(10)
Seth Joseph Antine Director 17,646(2) 17,646 91,167 less than 1%
and
91,167(12)
Daniel Bock 17,646(2) 17,646 -0- -0-
Moses Mayer 17,646(2) 17,646 -0- -0-
Nachum Barnesky 17,646(2) 17,646 -0- -0-
Moses Elias 17,646(2) 17,646 -0- -0-
Reuvain Schepansky 17,646(2) 17,646 -0- -0-
Fred Rudy 8,823(2) 8,823 -0- -0-
</TABLE>
(18)
<PAGE>
<TABLE>
<CAPTION>
Number of Percentage of
Relation- Number of Shares Number of Shares Owned Common Stock
Name of Selling ship to Owned Prior to Shares After Owned After
Securityholder Company(1) Offering Offered Offering(8) Offering(8)
- ------------- ----------- ----------------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Charles A. Milo and Loretta W. Former Director, 1,225,250(3) 1,225,250 -0- -0-
Milo, Joint Tenants President and CEO
185 Monmouth Parkway 230,000(4) 230,000 -0- -0-
Associates, L.P.
Norcross Securities, Inc. 50,000(5) 50,000 -0- -0-
Mezzanine Financial Fund, L.P. 75,000(6) 75,000 -0- -0-
Charles T. Parton Former Chairman 11,000(7) 5,000 6,000 less than 1%
Bruce F. Coe Former Director 10,000(7) 4,000 6,000 less than 1%
George McCaffrey, III 145,000(9) 145,000 -0- -0-
Michael P. McCaffrey 145,000(9) 145,000 -0- -0-
Anthony B. Petrelli 50,000(9) 50,000 -0- -0-
Eugene L. Neidiger 48,000(9) 48,000 -0- -0-
Charles C. Bruner 48,000(9) 48,000 -0- -0-
Robert L. Parrish 24,500(9) 24,500 -0- -0-
J. Henry Morgan 19,500(9) 19,500 -0- -0-
Randall S. Mallett 1,000(9) 1,000 -0- -0-
Regina L. Neidiger 3,000(9) 3,000 -0- -0-
John J. Turk 16,000(9) 16,000 -0- -0-
William J. Geiger 36,000(10) 36,000 -0- -0-
Chester Shure 36,000(10) 36,000 -0- -0-
Gruntal & Co. (Hollander 15,000(10) 15,000 -0- -0-
IRA)
Ronald Koenig 25,000(10) 25,000 -0- -0-
Geert Kersten 20,000(10) 20,000 -0- -0-
Albert Resnick 36,000(10) 36,000 -0- -0-
All American Funding 36,000(10) 36,000 -0- -0-
Corp.
James A. Wiggins 20,000(10) 20,000 -0- -0-
</TABLE>
(19)
<PAGE>
<TABLE>
<CAPTION>
Number of Percentage of
Relation- Number of Shares Number of Shares Owned Common Stock
Name of Selling ship to Owned Prior to Shares After Owned After
Securityholder Company(1) Offering Offered Offering(8) Offering(8)
- ------------- ----------- ----------------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Lenore Katz 36,000(10) 36,000 -0- -0-
Molumply Capital Management 10,000(10) 10,000 -0- -0-
Profit Sharing Plan
Alvin M. Petersen 10,000(10) 10,000 -0- -0-
Leo M. Harrison 20,000(10) 20,000 -0- -0-
Bernard J. Meinerz Trust 16,000(10) 16,000 -0- -0-
#1
John D. Ballard 72,000(10) 72,000 -0- -0-
Cong. Ohel Yonah 20,000(10) 20,000 -0- -0-
Lloyd D. Renard 20,000(10) 20,000 -0- -0-
Gustave Birnberg 20,000(10) 20,000 -0- -0-
Robert/Viola Enright 146,000(10) 146,000 -0- -0-
Jacob Koval 26,000(10) 26,000 -0- -0-
Porpoise Investors I, L.P. 46,000(10) 46,000 -0- -0-
David/Esther Mann 36,000(10) 36,000 -0- -0-
Jules Nordlicht 550,000(10) 550,000 -0- -0-
Mark A. Nordlicht 50,000(10) 50,000 -0- -0-
Norman Weiss 36,000(10) 36,000 -0- -0-
George M. Gilstrap 40,348(10) 40,348 -0- -0-
Meshiva Yeshiva Rabbi Chaim 18,000(10) 18,000 -0- -0-
Berlin
Stephen R. Levy 20,000(10) 20,000 -0- -0-
Philip Shaiman Irrevocable Trust 27,000(10) 27,000 -0- -0-
Philip Shaiman 59,000(10) 59,000 -0- -0-
Universal Partners, L.P. 36,000(10) 36,000 -0- -0-
Joseph and Sylvia Tagnoli 55,500(10) 55,500 -0- -0-
Presentation Homes Profit 53,500(10) 53,500 -0- -0-
Sharing Plan
George D. Kickliter 32,600(10) 32,600 -0- -0-
Jerry A. Hahn 65,500(10) 65,500 -0- -0-
</TABLE>
(20)
<PAGE>
<TABLE>
<CAPTION>
Number of Percentage of
Relation- Number of Shares Number of Shares Owned Common Stock
Name of Selling ship to Owned Prior to Shares After Owned After
Securityholder Company(1) Offering Offered Offering(8) Offering(8)
- ------------- ----------- ----------------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
H.K. Financial Corporation 72,000(10) 72,000 -0- -0-
Southwest Securities fbo C. 36,000(10) 36,000 -0- -0-
Wesley Woodcock
Southwest Securities fbo Milton 51,000(10) 51,000 -0- -0-
P. Kudlac
Russell D. Evans 20,000(10) 20,000 -0- -0-
Philip Huberfeld 10,000(10) 10,000 -0- -0-
Congregation Eitz Chaim 36,000(10) 36,000 -0- -0-
Harry Slam 144,000(10) 144,000 -0- -0-
G. Corson Ellis, Jr. Former Director 36,000(10) 36,000 113,067 1.1%
and
113,067(13)
Cong. Beth Mikroh Inc. 36,000(10) 36,000 -0- -0-
Ilan Falkovich 18,000(10) 18,000 -0- -0-
Isaac and Bina Levy 10,000(10) 10,000 -0- -0-
Sara Esses c/o Rudy 26,000(10) 26,000 -0- -0-
Jeffrey Rubin 18,000(10) 18,000 -0- -0-
Paramount Acquisition, Inc. 32,521(10) 32,521 -0- -0-
Delaware Charter Guarantee TTEE 10,000(10) 10,000 -0- -0-
Custody for Jerry Hahn, IRA
Morris and Elaine Rubin 36,000(10) 36,000 -0- -0-
J.M. Hull Associates, L.P. 36,000(10) 36,000 -0- -0-
Robert P. Krauss 166,000(10) 166,000 -0- -0-
Jack Mueller 40,000(10) 40,000 -0- -0-
K.K. Yankopolus, MD 10,000(10) 10,000 -0- -0-
Harmonic Research Inc. 20,000(10) 20,000 -0- -0-
Ohr Somayach/Joseph Tanenbaum 10,000(10) 10,000 -0- -0-
Education Center
Lakewood Trading Group, LLC 223,775(10) 223,775 -0- -0-
David Lowy 72,000(10) 72,000 -0- -0-
Joshua Silber 14,000(10) 14,000 -0- -0-
</TABLE>
<PAGE>
(21)
<TABLE>
<CAPTION>
Number of Percentage of
Relation- Number of Shares Number of Shares Owned Common Stock
Name of Selling ship to Owned Prior to Shares After Owned After
Securityholder Company(1) Offering Offered Offering(8) Offering(8)
- ------------- ----------- ----------------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Gross Foundation 60,000(10) 60,000 -0- -0-
Paul and Lillian Lapa 18,000(10) 18,000 -0- -0-
Alphonse Inclema 40,000(10) 40,000 -0- -0-
Richard and Rhonda Weinberg 22,000(10) 22,000 -0- -0-
LMWW Custodian fbo Lewis 20,000(10) 20,000 -0- -0-
Pearlstein P/S Plan
Wagner Resources 120,000(10) 120,000 -0- -0-
Wagner Equipment Engineering Co. 439,000(10) 439,000 -0- -0-
Wagner Construction P/S Plan 130,000(10) 130,000 -0- -0-
Lee James Wagner 20,000(10) 20,000 -0- -0-
Wagner's Associated 20,000(10) 20,000 -0- -0-
Phillip J. Kendall 20,000(10) 20,000 -0- -0-
Wayne Alvey 91,033(11) 45,517 45,516 less than 1%
Frank D. Berry, Jr. 22,758(11) 22,758 -0- -0-
William H. Curry, Jr. 22,758(11) 22,758 -0- -0-
John Hogue 18,206(11) 18,206 -0- -0-
James Krehbiel 136,549(11) 68,275 68,274 less than 1%
H. Glenn Lutge 13,654(11) 13,654 -0- -0-
Bruce McGraw 72,826(11) 72,826 -0- -0-
Margaret C. Myers 29,585(11) 29,585 -0- -0-
Paul I. Myers, III 9,103(11) 9,103 -0- -0-
Paul I. Myers, III, Executor of 29,585(11) 29,585 -0- -0-
the Estate of Paul I. Myers
Mauro Pappalardo 9,103(11) 9,103 -0- -0-
Dominic Vincent Spalliero 4,551(11) 4,551 -0- -0-
Joseph R. Spalliero President and 992,259(11) 496,130 496,129 4.7%
Director
Tracie Anne Spalliero 4,551(11) 4,551 -0- -0-
Joseph Robert Spalliero, Jr. 4,551(11) 4,551 -0- -0-
</TABLE>
(22)
<PAGE>
<TABLE>
<CAPTION>
Number of Percentage of
Relation- Number of Shares Number of Shares Owned Common Stock
Name of Selling ship to Owned Prior to Shares After Owned After
Securityholder Company(1) Offering Offered Offering(8) Offering(8)
- ------------- ----------- ----------------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Vincent J. Spalliero 4,551(11) 4,551 -0- -0-
Cheryl Vaughn 45,516(11) 45,516 -0- -0-
Robert Zehntner 27,309(11) 27,309 -0- -0-
</TABLE>
______________________________________
(1) Except as expressly set forth in the table, each of the Selling
Securityholders has had no relation to the Company within the past three years.
(2) Such Selling Securityholder, who is also a Warrant Holder, as defined
under this Prospectus, purchased units comprised of one share of Common Stock,
one Class A Warrant exercisable for one share of Common Stock at $1.00 per share
(the "Class A Warrants") and one Class B Warrant exercisable for one share of
Common Stock at $1.75 per share (the "Class B Warrants"), in the Company's
February 1994 Private Placement. Accordingly, of such total number of Shares
offered hereunder, one-third of such Shares represent the shares in the units,
one-third of such Shares are issuable upon exercise of the Class A Warrants and
one-third of such Shares are issuable upon exercise of the Class B Warrants.
(3) As of May 31, 1994, in connection with the Company's sale of units in
the February 1994 Private Placement, Charles A. Milo, former President and
Director of the Company, received written notice by the holders of not less than
300,000 of such units, exercising their Conversion Right requiring the
outstanding indebtedness incurred by the Company in connection with the Milo
Acquisition and evidenced by the MTI Note to be automatically converted into
398,042 units on the basis of $0.85 per unit. Accordingly, of such total number
of Shares offered hereunder, 398,042 of such Shares represent the shares in the
units, 398,042 of such Shares are issuable upon exercise of Class A Warrants and
398,042 of such Shares are issuable upon exercise of Class B Warrants. The
balance of 31,124 Shares were acquired in the Milo Acquisition.
(4) Represents (i) 100,000 Shares of Company's Common Stock and (ii) a
warrant to purchase 130,000 shares of Company's Common Stock, exercisable from
August 4, 1995 through August 4, 1998 at a purchase price of $1.50 per Share.
The 100,000 Shares were purchased pursuant to a Subscription Agreement by and
between Company and 185 Monmouth Parkway Associates, the Landlord of the
Company's West Long Branch facility, which Shares were consideration for a rent
abatement of approximately $114,000 over the period February, 1994 through
March, 1995. The warrant to purchase 130,000 shares was granted by the Company
to the Landlord in exchange for certain rent abatements totaling approximately
$2.7 million granted during the 1993 renegotiation of the Company's lease at its
West Long Branch facility.
(5) Represents a warrant to purchase up to 50,000 Shares of the Company's
Common Stock at the price of $1.00 per share through January 6, 1998. The
Company has agreed to grant to Norcross a warrant to purchase up to an
additional 50,000 shares of the Company's Common Stock at the price of $1.00 per
share through January 6, 1998 if all of the Class A Warrants comprising a
portion of the units of securities sold in the February 1994 Private Placement
are exercised. The warrant to purchase 50,000 Shares and the agreement to issue
another such warrant were granted to Norcross pursuant to a Letter Agreement
dated January 28, 1994 by and between Norcross and the Company, in exchange for
investment banking services provided by Norcross in connection with the
Company's February 1994 Private Placement.
(6) Represents the shares that were acquired by Mezzanine in full payment
of the fee payable by the Company on August 12, 1994, under the Mezzanine
Participation in the Congress Loan Agreement pursuant to Mezzanine's option to
convert such fee into shares of Company's Common Stock.
(7) Effective May 2, 1994 Charles T. Parton, former Chairman of the
Company's Board of Directors, and Bruce F. Coe resigned as directors of the
Company. Options granted to each of them under the Company's 1994 Directors Plan
were cancelled and the Board of Directors awarded 5,000 shares of Common Stock
to Mr. Parton and 4,000 shares of Common Stock to Mr. Coe in each case.
(8) Assumes that all Shares which are registered are sold in the Offering.
Also, calculation is based on approximately 10,480,000 shares of EAI Common
Stock outstanding at March 31, 1995.
(9) Represents the Unit Warrants to purchase, in the aggregate, 250,000
units (each unit consisting of one share of Common Stock of the Company and a
Class C Warrant to purchase one share of Common Stock at the price of $4.60 per
share) issued by the Company to Neidiger, Tucker, Bruner, Inc. ("NTB") in
consideration of the placement agent services performed by NTB in the June 1994
(23)
<PAGE>
Private Placement, which NTB Unit Warrants were assigned by NTB to the named
officers and employees of NTB. The NTB Unit Warrants are exercisable for a
period of 5 years at an exercise price of $3.025 per unit. Accordingly, of such
total number of Shares offered hereunder, one-half of such Shares represent the
shares issuable upon exercise of the NTB Unit Warrants and one-half of such
Shares represent the shares issuable upon exercise of the Class C Warrants
issuable upon exercise of the NTB Unit Warrants.
(10) Such shares were purchased in the June 1994 Private Placement and also
upon exercise of the Class C Warrants to purchase one share of Common Stock at
the purchase price of $4.60 per share sold as part of the units issued in the
June 1994 Private Placement.
(11) Such shares were acquired in the Tanon Acquisition.
(12) Includes (i) options currently exercisable to purchase 66,667 shares
of Common Stock at an exercise price of $4.44 per share granted under the
Company's 1994 Equity Incentive Plan, (ii) options currently exercisable to
purchase 22,500 shares of Common Stock at an exercise price of $4.38 per share
granted under the Company's 1994 Stock Option Plan for Non-Employee Directors,
and (iii) 2,000 shares owned by Mr. Antine and his wife, as joint tenants, as to
which they share voting and dispositive power.
(13) Includes (i) option s currently exercisable to purchase 66,667 shares
of Common Stock at an exercise price $4.44 per share granted under the Company's
1994 Equity Incentive Plan, (ii) 4,500 shares purchased upon exercise of options
granted under the 1991 Stock Option Plan at an average exercise price of $2.54
per share in June 1995, (iii) 3,400 shares held by Mr. Ellis' wife, as to which
shares he disclaims beneficial ownership, and (iv) options currently exercisable
to purchase 22,500 shares of Common Stock at an exercise price of $3.25 per
share granted under the Company's 1994 Stock Option Plan for Non-Employee
Directors. Mr. Ellis resigned as a director of the Company effective July 5,
1995.
(24)
<PAGE>
LEGAL MATTERS
The validity of the shares being offered hereby will be passed upon for the
Company by Mesirov Gelman Jaffe Cramer & Jamieson, 1735 Market Street,
Philadelphia, Pennsylvania 19103-7598. Richard P. Jaffe, a partner of such law
firm, is the Secretary of the Company.
EXPERTS
The audited financial statements and schedules of Electronic Associates,
Inc., incorporated by reference in this Prospectus and in the Registration
Statement of which the Prospectus is a part, have been audited by Arthur
Andersen LLP, independent public accountants, as stated in their report included
therein, and have been included herein in reliance upon the authority of said
firm as experts in accounting and auditing in giving said report.
The audited financial statements and schedules of Tanon Manufacturing, Inc.
as of and for the year ended December 31, 1994, incorporated by reference in
this Prospectus and in the Registration Statement of which the Prospectus is a
part, have been audited by Arthur Andersen LLP, independent public accountants,
as stated in their report included therein, and have been included herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said report.
The financial statements of Tanon Manufacturing, Inc. as of and for the
year ended December 31, 1993, incorporated by reference in this Prospectus and
in the Registration Statement of which the Prospectus is a part, have been
included herein in reliance upon the report of KPMG Peat Marwick LLP,
independent auditors, included therein, and upon the authority of said firm as
experts in accounting and auditing.
The financial statements of Tanon Manufacturing, Inc. as of December 31,
1992 and for the years ended December 31, 1992 and 1991, incorporated by
reference in this Prospectus and in the Registration Statement of which the
Prospectus is a part, have been included herein and in the Registration
Statement in reliance upon the report of Shilling & Kenyon Inc., certified
public accountants, included therein, and upon the authority of said firm as
experts in accounting and auditing.
The financial statements of BarOn as of December 31, 1994, 1993 and 1992,
and for the years ended December 31, 1994 and 1993 and the period from inception
in 1992 through December 31, 1992, incorporated by reference in this Prospectus
and in the Registration Statement of which the Prospectus is a part, have been
included herein and in the Registration Statement in reliance upon the reports
of Luboshitz, Kasierer & Co. and Yosef Shimony, certified public accountants,
included therein, and upon the authority of said firms as experts in accounting
and auditing.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
As authorized under New Jersey law, the Company's Certificate of
Incorporation eliminates the personal liability of directors and officers to the
Company and its shareholders for monetary damages for acts or omissions
(including negligent and grossly negligent acts or omissions) in violation of
directors' and officers fiduciary duties of care. The duty of care refers to the
fiduciary duty of directors and officers to manage the affairs of the
corporation with the same degree of care as would be applied by an "ordinarily
prudent person under similar circumstances." The Certificate of Incorporation
does not, however, in any way eliminate or limit the liability of a director or
officer for breaching his duty of loyalty (i.e., the duty to refrain from fraud,
self-dealing, and transactions involving improper conflicts of interest) to the
Company or its shareholders, failing to act in good faith, or knowingly
violating or obtaining an improper personal benefit. These provisions do not
have
(25)
<PAGE>
any effect on the availability of equitable remedies (such as an injunction
or rescission) for breach of fiduciary duty. However, as a practical matter,
equitable remedies may not be available in particular circumstances.
Article 37 of the Company's by-laws ("Article 37") provides, among other
things, that the Company shall, to the fullest extent permitted by the laws of
the State of New Jersey as from time to time in effect, indemnify any person who
is or was made a party or is threatened to be made a party to any proceeding by
reason of the fact that he is or was a director or officer of the Company or,
while serving as a director or officer of the Company, is or was serving at the
request of the Company as a director, officer, trustee, employee or agent of
another corporation, partnership, trust, employee benefit plan or other
enterprise against all expenses and liabilities. Article 37 further provides
that the Company shall, from time to time, reimburse or advance to any such
director or officer the funds necessary for payment of expenses incurred in
connection with any proceeding, upon receipt of a written undertaking by or on
behalf of such director or officer to repay such amount unless it shall
ultimately be determined that he is entitled to indemnification. The rights and
authority conferred in Article 37 are not exclusive of any other right which an
indemnified party may have or acquire under any statute, provision of the
Company's by-laws, agreement, vote of the shareholders or directors or
otherwise. The Company's by-laws specify that the right to indemnification is a
contract right, enforceable against the Company with respect to any act or
omission which occurs while such by-law provision is in effect, even if such
by-law provision is not in effect when the claim for indemnification is made.
The NJBCA generally provides that a corporation may, and in certain
circumstances, shall, indemnify its officers, directors, employees and agents
("Corporate Agents"), Corporate Agents of constituent corporations that it has
absorbed by merger or consolidation, and Corporate Agents of other corporations
if such Corporate Agents serve at the indemnifying corporation's request. A
corporation may indemnify such Corporate Agent in a civil proceeding if the
Corporate Agent acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the corporation and, in a criminal
proceeding, if he had no reasonable cause to believe his conduct was unlawful,
except that indemnification is not permitted in an action by or in the right of
the corporation if the Corporate Agent is adjudged to be liable to the
corporation, unless the court in which the proceeding was brought shall have
determined that indemnification is appropriate in light of the circumstances of
the case.
The Company has purchased and maintains insurance for its officers and
directors against certain liabilities, including liabilities under the
Securities Act. The effect of such insurance is to indemnify any officer or
director of the Company against expenses, judgements, fines, attorney's fees and
other amounts paid in settlements incurred by him, subject to certain
exclusions. Such insurance does not insure against any such amount incurred by
an officer or director as a result of his own dishonesty.
These provisions of the Company's Certificate of Incorporation and By-laws
apply only to claims against a director or officer arising out of his service in
such a capacity. Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers or
persons controlling the Company pursuant to the foregoing provisions, the
Company has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and therefore is unenforceable.
(26)
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
<TABLE>
<S> <C>
SEC registration fee $ 22,367
Legal fees and expenses 175,000*
Accounting fees and expenses 100,000*
Blue sky fees and expenses 2,000*
Printing expenses 15,000*
Miscellaneous 5,633*
--------
TOTAL $320,000
========
</TABLE>
__________________
*Estimated.
Item 15. Indemnification of Directors and Officers
As authorized under New Jersey law, the Company's Certificate of
Incorporation eliminates the personal liability of directors and officers to the
Company and its shareholders for monetary damages for acts or omissions
(including negligent and grossly negligent acts or omissions) in violation of
directors' and officer's fiduciary duties of care. The duty of care refers to
the fiduciary duty of directors and officers to manage the affairs of the
corporation with the same degree of care as would be applied by an "ordinarily
prudent person under similar circumstances." The Certificate of Incorporation
does not, however, in any way eliminate or limit the liability of a director or
officers for breaching his duty of loyalty (i.e., the duty to refrain from
fraud, self-dealing, and transactions involving improper conflicts of interest)
to the Company or its shareholders, failing to act in good faith, knowingly
violating or obtaining an improper personal benefit. These provisions do not
have any effect on the availability of equitable remedies (such as an injunction
or rescission) for breach of fiduciary duty. However, as a practical matter,
equitable remedies may not be available in particular circumstances.
Article 37 of the Company's by-laws ("Article 37") provides, among other
things, that the Company shall, to the fullest extent permitted by the laws of
the State of New Jersey as from time to time in effect, indemnify any person who
is or was made a party or is threatened to be made a party to any proceeding by
reason of the fact that he is or was a director or officer of the Company or,
while serving as a director or officer of the Company, is or was serving at the
request of the Company as a director, officer, trustee, employee or agent of
another corporation, partnership, trust, employee benefit plan or other
enterprise against all expenses and liabilities. Article 37 further provides
that the Company shall, from time to time, reimburse or advance to any such
director or officer the funds necessary for payment of expenses incurred in
connection with any proceeding, upon receipt of a written undertaking by or on
behalf of such director or officer to repay such amount unless it shall
ultimately be determined that he is entitled to indemnification. The rights and
authority conferred in Article 37 are not exclusive of any other right which an
indemnified party may have or acquire under any statute, provision of the
Company's by-laws, agreement, vote of the shareholders or directors or
otherwise. The Company's By-laws specify that the right to indemnification is a
contract right, enforceable against the Company
II-1
<PAGE>
with respect to any act or omission which occurs while such By-law provision is
in effect, even if such By-law provision is not in effect when the claim for
indemnification is made.
The NJBCA generally provides that a corporation may, and in certain
circumstances, shall, indemnify its officers, directors, employees and agents
("Corporate Agents"), Corporate Agents of constituent corporations that it has
absorbed by merger or consolidation, and Corporate Agents of other corporations
if such Corporate Agents serve at the indemnifying corporation's request. A
corporation may indemnify such Corporate Agent in a civil proceeding if the
Corporate Agent acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the corporation and, in a criminal
proceeding, if he had no reasonable cause to believe his conduct was unlawful,
except that indemnification is not permitted in an action by or in the right of
the corporation if the Corporate Agent is adjudged to be liable to the
corporation, unless the court in which the proceeding was brought shall have
determined that indemnification is appropriate in light of the circumstances of
the case.
The Company has purchased and maintains insurance for its officers and
directors against certain liabilities, including liabilities under the
Securities Act. The effect of such insurance is to indemnify any officer or
director of the Company against expenses, judgements, fines, attorney's fees and
other amounts paid in settlements incurred by him, subject to certain
exclusions. Such insurance does not insure against any such amount incurred by
an officer or director as a result of his own dishonesty.
II-2
<PAGE>
Item 16. Exhibits
<TABLE>
<CAPTION>
Exhibit No.
<S> <C>
+*2.1 Agreement and Plan of Reorganization by and among Electronic Associates, Inc., Tanon
Manufacturing, Inc., EA Acquisition Corp. and Joseph R. Spalliero, dated December 12, 1994.
*2.2 Form of Investment Agreement dated January 16, 1995 by and between Electronic Associates, Inc.
and BarOn Technologies Ltd., was filed as Exhibit 10.1 to the Company's Current Report on Form
8-K (Date of Report: January 16, 1995), as amended, and is hereby incorporated herein by
reference.
*2.3 Form of Stock Purchase Agreement, dated January 10, 1995, between the Company and various
shareholders of BarOn Technologies Ltd., was filed as Exhibit 10.2 to the Company's Current
Report on Form 8-K (date of report: January 16, 1995), as amended, and is hereby incorporated
herein by reference.
*2.4 Form of Shareholders Agreement, dated January 16, 1995, among the Company, BarOn
Technologies Ltd. and the shareholders of BarOn Technologies Ltd., was filed as Exhibit 10.3
to the Company's Current Report on Form 8-K (Date of Report: January 16, 1995), as amended,
and is hereby incorporated herein by reference.
+4.1 Specimen of Common Stock share Certificate.
4.2 Rights Agreement, dated as of February 10, 1988, between the Company and Manufacturers Hanover
Trust Company, as Rights Agent, was filed as Exhibit 1 to the Company's Form 8-A, dated
February 11, 1988, and is hereby incorporated by reference. (File No. 1-4680)
4.3 Amendment, dated as of October 24, 1990, to the Rights Agreement, was filed as Exhibit 2 to
the Company's Form 8, dated October 24, 1990, and is hereby incorporated by reference.
5 Opinion of Mesirov Gelman Jaffe Cramer & Jamieson.
23.1 Consent of Mesirov Gelman Jaffe Cramer & Jamieson is included in their opinion filed as
Exhibit 5 hereto.
23.2 Consent of Arthur Andersen LLP, Independent Public Accountants of Electronic Associates,
Inc.
23.3 Consent of KPMG Peat Marwick LLP, Independent Auditors of Tanon Manufacturing, Inc.
23.4 Consent of Shilling & Kenyon Inc., Certified Public Accountants of Tanon Manufacturing, Inc.
23.5 Consent of Luboshitz, Kasierer & Co., and Yosef Shimony, Independent Auditors of BarOn
Technologies Ltd.
II-3
<PAGE>
23.6 Consent of Arthur Andersen LLP, Independent Public Accountants of Tanon Manufacturing, Inc.
+24 Power of attorney (set forth on signature page hereto).
</TABLE>
__________
+ Previously Filed.
* The Company will furnish supplementally to the Commission, upon request,
copies of any Appendices, Schedules and Exhibits to the named Agreement
which are omitted from Exhibit Nos. 2.1 through 2.4.
II-4
<PAGE>
Item 17. Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933 (the "Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement:
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the registration statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the undersigned Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the provisions discussed in Item 14 of this registration statement,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all
requirements for filing on Form S-3 and has duly caused this Amendment No. 4 to
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of West Long Branch, New Jersey on the
6th day of July, 1995.
ELECTRONIC ASSOCIATES, INC.
By: /s/ Joseph R. Spalliero
--------------------------------
Joseph R. Spalliero, President
Pursuant to the requirements of the Securities Act of 1933, Amendment No. 4
to this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Irwin L. Gross Chairman of the Board July 6, 1995
- ----------------------------
Irwin L. Gross
/s/ Joseph R. Spalliero President and Director July 6, 1995
- ---------------------------- (Principal Executive
Joseph R. Spalliero Officer)
/s/ Jonathan R. Wolter Treasurer and Vice July 6, 1995
- ---------------------------- President, Finance
Jonathan R. Wolter Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ Bruce P. Murray Director July 6, 1995
- ----------------------------
Bruce P. Murray
/s/ Jules M. Seshens Director July 6, 1995
- ----------------------------
Jules M. Seshens
[Signatures continued on next page]
II-6
<PAGE>
/s/ Seth Joseph Antine Director July 6, 1995
- ---------------------------
Seth Joseph Antine
/s/ Michael M. Michigami Director July 6, 1995
- ---------------------------
Michael M. Michigami
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
<S> <C> <C>
+*2.1 Agreement and Plan of Reorganization by and Among Electronic Associates, Inc., Tanon
Manufacturing, Inc., EA Acquisition Corp. and Joseph R. Spalliero, dated December 12, 1994.
*2.2 Form of Investment Agreement dated January 16, 1995 by and between Electronic Associates, Inc.
and BarOn Technologies Ltd., was filed as Exhibit 10.1 to the Company's Current Report on Form
8-K (Date of Report: January 16, 1995), as amended, and is hereby incorporated herein by
reference.
*2.3 Form of Stock Purchase Agreement, dated January 10, 1995, between the Company and various
shareholders of BarOn Technologies Ltd., was filed as Exhibit 10.2 to the Company's Current
Report on Form 8-K (date of report: January 16, 1995), as amended, and is hereby incorporated
herein by reference.
*2.4 Form of Shareholders Agreement, dated January 16, 1995, among the Company, BarOn Technologies
Ltd. and the shareholders of BarOn Technologies Ltd., was filed as Exhibit 10.3 to the
Company's Current Report on Form 8-K (Date of Report: January 16, 1995), as amended, and is
hereby incorporated herein by reference.
+4.1 Specimen of Common Stock share Certificate.
4.2 Rights Agreement, dated as of February 10, 1988, between the Company and Manufacturers Hanover
Trust Company, as Rights Agent, was filed as Exhibit 1 to the Company's Form 8-A, dated
February 11, 1988, and is hereby incorporated by reference. (File No. 1-4680).
4.3 Amendment, dated as of October 24, 1990, to the Rights Agreement, was filed as Exhibit 2 to the
Company's Form 8, dated October 24, 1990, and is hereby incorporated by reference.
5 Opinion of Mesirov Gelman Jaffe Cramer & Jamieson.
+23.1 Consent of Mesirov Gelman Jaffe Cramer & Jamieson is included in their opinion filed as Exhibit
5 hereto.
23.2 Consent of Arthur Andersen LLP, Independent Public Accountants of Electronic Associates, Inc.
23.3 Consent of KPMG Peat Marwick LLP, Independent Auditors of Tanon Manufacturing, Inc.
23.4 Consent of Shilling & Kenyon Inc., Certified Public Accountants of Tanon Manufacturing, Inc.
23.5 Consent of Luboshitz, Kasierer & Co., and Yosef Shimony, Independent Auditors of BarOn
Technologies Ltd.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
<S> <C> <C>
23.6 Consent of Arthur Andersen LLP, Independent Public Accountants of Tanon Manufacturing, Inc.
+24 Power of attorney (set forth on signature page hereto).
</TABLE>
_______________
+ Previously Filed.
* The Company will furnish to the Commission, upon request, copies of any
Appendices, Schedules and Exhibits to the named Agreement which are omitted
from Exhibit Nos. 2.1 through 2.4.
Exhibit 5
Opinion of Mesirov Gelman Jaffe Cramer & Jamieson
<PAGE>
(215) 994-1000
July 6, 1995
SECURITIES AND EXCHANGE COMMISSION
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Electronic Associates, Inc.
Registration File No. 33-81892
Gentlemen:
This firm is counsel to Electronic Associates, Inc. (the "Company"). In
such capacity, we have assisted in the preparation of the Company's Registration
Statement on Form S-1, File No. 33-81892, as amended, filed with the Securities
and Exchange Commission under the Securities Act of 1933, including, without
limitation, Amendment No. 3 on Form S-3 which, among other things, converted
such Registration Statement into a Registration Statement on Form S-3 (such
Registration Statement, as amended is referred to as the "Registration
Statement"). The Registration Statement covers 10,600,523 shares of the
Company's Common Stock ("Shares") to be sold by certain securityholders named in
the Registration Statement (the "Selling Securityholders") and 10,600,523
Preferred Stock Purchase Rights (the "Rights") associated with the Shares. Of
the 10,600,523 Shares and associated Rights, (i) 6,724,439 Shares (the
"Outstanding Shares") and associated Rights have been issued by the Company to
certain of the Selling Securityholders and (ii) 3,876,084 Shares ("Warrant
Shares") and associated Rights are issuable by the Company to certain of the
Selling Securityholders upon exercise of certain warrants (the "Warrants").
In this connection, we have examined and considered the original or copies,
certified or otherwise identified to our satisfaction, of the Company's
Certificate of Incorporation, as amended, its By-laws, as amended, resolutions
of its Board of Directors and shareholders, the Warrants, and such other
documents and corporate records relating to the Company and the issuance and
sale of the Shares and associated Rights, as we deemed appropriate for purposes
of rendering this opinion.
Based upon the foregoing, it is our opinion that:
1. The Outstanding Shares and associated Rights are validly issued,
fully paid and non-assessable; and
2. The Warrant Shares, when issued and sold in accordance with the
terms of, and for the consideration set forth in, the Warrants, will, together
with the associated Rights, be validly issued, fully paid and non-assessable.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
July 6, 1995
Page Two
We hereby expressly consent to the reference to our firm in the
Registration Statement under the Prospectus caption "Legal Matters," to the
inclusion of this opinion as an exhibit to the Registration Statement, and to
the filing of this opinion with any other appropriate governmental agency.
Richard P. Jaffe, a partner in this firm, is the Secretary of the Company.
Very truly yours,
/s/ Mesirov Gelman Jaffe Cramer & Jamieson
Exhibit 23.2
Consent of Arthur Andersen LLP
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Electronic Associates, Inc.:
As independent public accountants, we hereby consent to the incorporation
by reference in this Form S-3 Registration Statement of our report dated April
14, 1995 included in Electronic Associates, Inc.'s Form 10-K for the year ended
December 31, 1994, as amended by Form 10-K/A dated April 28, 1995 and to all
references to our firm included in or made a part of this registration
statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Roseland, New Jersey
June 30, 1995
Exhibit 23.3
Consent of KPMG Peat Marwick LLP
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Electronic Associates, Inc.
We consent to the incorporation by reference in the Registration Statement
on Form S-3 of Electronic Associates, Inc. of our report dated March 31, 1994,
with respect to the balance sheet of Tanon Manufacturing, Inc. as of December
31, 1993 and the related statements of operations, shareholders' equity and cash
flows for the year ended December 31, 1993, which report appears in the Form 8-K
of Electronic Associates, Inc. dated January 4, 1995. We also consent to the
reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
San Jose, California
July 7, 1995
Exhibit 23.4
Consent of Shilling & Kenyon Inc.
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Electronic Associates, Inc.:
As independent public accountants of Tanon Manufacturing, Inc., we hereby
consent to the incorporation by reference in this Form S-3 Registration
Statement of our report dated September 23, 1994 included in the financial
statements of Tanon Manufacturing, Inc. as of December 31, 1992 and for the
years ended December 31, 1992 and 1991 filed as part of Exhibit 99 to Electronic
Associates, Inc.'s Form 8-K (date of report: January 4, 1995), as amended by
Form 8-K/A dated March 17, 1995 and to all references to our firm included in or
made a part of this registration statement.
/s/ Shilling & Kenyon, Inc.
SHILLING & KENYON, INC.
San Jose, California
July 6, 1995
Exhibit 23.5
Consents of Luboshitz, Kasierer & Co., and Yosef Shimony
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Electronic Associates, Inc.:
As independent public accountants of BarOn Technologies Ltd., we hereby
consent to the incorporation by reference in this Form S-3 Registration
Statement of our report dated March 21, 1995 included in the financial
statements of BarOn Technologies Ltd. as of December 31, 1993 and December 31,
1992 and for the year ended December 31, 1993 and for the period from inception
in 1992 through December 31, 1992 filed as part of Exhibit 99.1 to Electronic
Associates, Inc.'s Form 8-K (date of report: January 4, 1995), as amended by
Form 8-K/A dated March 30, 1995, and our report dated March 21, 1995 included in
the financial statements of BarOn Technologies Ltd. as of December 31, 1994 and
December 31, 1993 and for the years ended December 31, 1994 and December 31,
1993 filed as part of Exhibit 99.2 to Electronic Associates, Inc.'s Form 8-K
(date of report: May 24, 1995), and to all references to our firm included in or
made a part of this registration statement.
/s/ Luboshitz, Kasierer & Co.
LUBOSHITZ, KASIERER & CO., C.P.A. (Isr.)
Tel-Aviv, Israel
June 30, 1995
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Electronic Associates, Inc.:
As independent public accountants of BarOn Technologies Ltd., we hereby
consent to the incorporation by reference in this Form S-3 Registration
Statement of our report dated March 21, 1995 included in the financial
statements of BarOn Technologies Ltd. as of December 31, 1993 and December 31,
1992 and for the year ended December 31, 1993 and for the period from inception
in 1992 through December 31, 1992 filed as part of Exhibit 99.1 to Electronic
Associates, Inc.'s Form 8-K (date of report: January 4, 1995), as amended by
Form 8-K/A dated March 30, 1995, and my report dated March 21, 1995 included in
the financial statements of BarOn Technologies Ltd. as of December 31, 1994 and
December 31, 1993 and for the years ended December 31, 1994 and December 31,
1993 filed as part of Exhibit 99.2 to Electronic Associates, Inc.'s Form 8-K
(date of report: May 24, 1995), and to all references to our firm included in or
made a part of this registration statement.
/s/ Shimony Yosef
YOSEF SHIMONY, C.P.A. (Isr.)
Tel-Aviv, Israel
June 29, 1995
Exhibit 23.6
Consent of Arthur Andersen LLP
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Electronic Associates, Inc.:
As independent public accountants, we hereby consent to the incorporation
by reference in this Registration Statement of our report dated March 3, 1995 on
the financial statements of Tanon Manufacturing, Inc. included in Electronic
Associates, Inc.'s Form 8-K dated May 24, 1995 and to all references to our Firm
included in this registration statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Roseland, New Jersey
June 29, 1995
