As Filed with the Securities and Exchange Commission on September 25, 1996
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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EA INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
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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)
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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]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
<TABLE>
<CAPTION>
Calculation of Registration Fee
================================================================================================================================
Title of each class of Proposed Maximum Proposed maximum
securities to be Amount to be offering price per aggregate offering Amount of
registered registered unit (1) price (1) Registration Fee
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 3,045,599 (2) $ 3.0625 $9,327,147 $3,217
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Common Stock 357,143 (3) $ 3.0625 $1,093,751 $ 378
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Common Stock 125,000 $ 3.0625 $ 382,813 $ 133
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Preferred Stock Purchase Rights 3,527,742 (4) N/A N/A N/A
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Total Registration Fee $3,728
================================================================================================================================
</TABLE>
(1) Determined pursuant to Rule 457(c) under the Securities Act of 1933, as
amended ("Securities Act"), solely for purposes of calculation of the
registration fee, based upon the average of the high and low prices
reported in the consolidated reporting system on September 18, 1996.
[Notes continued on next page.]
<PAGE>
(2) Represents shares of the Company's Common Stock into which (i) certain 9%
Convertible Subordinated Debentures due May 3, 1998 in the aggregate
principal amount of $8,100,000 ("Convertible Debentures") issued by the
Company in May and June 1996 to certain of the Selling Securityholders, are
convertible and (ii) certain 7% Convertible Subordinated Notes due December
29, 1997 in the aggregate principal amount of $2,070,000 ("Convertible
Notes") reissued by the Company in August 1996 to certain of the Selling
Securityholders, are convertible. For purposes of determining the number of
shares of the Company's Common Stock issuable upon conversion of the
Convertible Debentures to include in this registration statement, the
Company assumed a conversion price of $4.00 per share. The actual number of
shares of Common Stock to be issued upon the conversion of the Convertible
Debentures will be equal to: the principal amount of the Convertible
Debentures converted divided by a conversion price per share equal to the
lesser of (i) eighty percent (80%) of the average of the closing price of
the Company's Common Stock as traded on the NYSE for the five days
immediately preceding the date of notice of conversion to the Company, or
(ii) $4.00. In accordance with Rule 416 under the Securities Act, this
registration statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon the conversion of the
Convertible Debentures and Convertible Notes to prevent dilution resulting
from stock splits, stock dividends or similar transactions or by reason of
changes in the conversion price as aforesaid.
(3) Represents shares of the Company's Common Stock which may be acquired upon
exercise of a certain Warrant, dated September 3, 1996, held by one of the
Selling Securityholders. In accordance with Rule 416 under the Securities
Act, this registration statement also covers such indeterminate number of
additional shares of Common Stock as may become issuable upon exercise of
such Warrant to prevent dilution resulting from stock splits, stock
dividends or similar transactions.
(4) The Rights associated with the Shares of Common Stock are not exercisable
or transferable apart from the Shares of Common Stock at the present time
and no additional consideration has been, or will be, received by the
Company in connection with the granting of such Rights upon issuance of the
Common Stock. Accordingly, no material independent value is attributable to
the Rights and no separate registration fee is required with respect to
such Rights pursuant to Rule 457.
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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.
(ii)
<PAGE>
CROSS REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY FORM S-3
FILED AS PART OF REGISTRATION STATEMENT
Item
Number
in Form
S-3 Item Caption in Form S-3 Caption in Prospectus
- --- ------------------------ ---------------------
1 Forepart of Registration Statement Cover Page
and Outside Cover Page of Prospectus
2 Inside Front and Outside Back Cover Inside Front Cover Page;
Pages of Prospectus Table of Contents
3 Summary of Information, Risk Factors The Company; Risk Factors;
and Ratio of Earnings to Fixed and Selected Consolidated
Charges 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 Inapplicable
Registered
10 Interests of Named Experts and Legal Matters
Counsel
11 Material Changes The Company
12 Incorporation of Certain Documents Incorporation of Certain
by Reference Information by Reference
13 Disclosure of Commission Position Indemnification of Directors
on Indemnification for Securities and Officers
Act Liabilities
(iii)
<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 SEPTEMBER 25, 1996
Prospectus
- ----------
3,527,742 Shares
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[LOGO] EAI
EA INDUSTRIES, INC.
Common Stock
This Prospectus relates to the offer for sale of 3,527,742 shares of common
stock (the "Shares") of EA Industries, Inc. (the "Company" or "EAI") from time
to time after the date hereof by a certain stockholder, warrant holder ("Warrant
Holder"), and certain convertible subordinated debenture holders ("Debenture
Holders") and convertible subordinated note holders ("Note Holders") (the
stockholder, Warrant Holder, Debenture Holders and Note Holders are collectively
referred to as the "Selling Securityholders" and individually as a "Selling
Securityholder"), together with the 3,527,742 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 FIVE YEARS. SEE "RISK
FACTORS" COMMENCING ON PAGE 9 OF THIS PROSPECTUS.
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,
pledgees, transferees or other successors in interest 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 Debenture 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 Securities 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 it does not meet certain of the
NYSE's requirements for continued listing of its shares of common stock.
Although the NYSE has not taken any affirmative action to delist the Common
Stock, it has reserved the right to do so. See "Risk Factors." On September 13,
1996, the last reported sale price of the Common Stock as reported by the NYSE
was $3.25.
The expenses relating to the offering are estimated to be $39,728 all of
which will be paid by the Company.
The Date of this Prospectus is September __, 1996.
<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, Suite 1400, Chicago, Illinois 60661 and Seven 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 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,
1995, Proxy Statement dated April 29, 1996 filed in connection with the
Company's Annual Meeting of Stockholders held on May 30, 1996, Quarterly Report
on Form 10-Q for the quarterly period ended March 30, 1996, and Quarterly Report
on Form 10-Q for the quarterly period ended June 29, 1996, 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 Exchange Act 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, EA Industries, Inc., 185 Monmouth Parkway,
West Long Branch, New Jersey 07764-9989, telephone: (908) 229-1100.
TABLE OF CONTENTS
Page
----
AVAILABLE INFORMATION.................................................. (2)
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................ (2)
THE COMPANY............................................................ (4)
RISK FACTORS .......................................................... (9)
USE OF PROCEEDS........................................................ (18)
SELECTED CONSOLIDATED FINANCIAL DATA................................... (19)
PLAN OF DISTRIBUTION AND SELLING SHAREHOLDERS.......................... (20)
LEGAL MATTERS.......................................................... (23)
EXPERTS................................................................ (23)
INDEMNIFICATION OF DIRECTORS AND OFFICERS.............................. (23)
(3)
<PAGE>
THE COMPANY
General
The Company, through its wholly-owned subsidiary, Tanon Manufacturing, Inc.
("Tanon"), is engaged principally in the business of providing contract
electronic manufacturing services ranging from the assembly of printed circuit
boards to the complete procurement, production, assembly, test and delivery of
entire electronic products and systems. Tanon was acquired by the Company on
January 4, 1995. References to the Company with respect to any time period after
January 3, 1995 shall be deemed to include Tanon unless the context otherwise
requires.
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.
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.
In addition, the Company, through its one-third investment in BarOn
Technologies, Ltd. ("BarOn"), a privately owned Israeli corporation based in
Haifa, Israel, and its indirect interest in a joint venture with Israel Aircraft
Industries, Ltd., an Israeli government corporation ("IAI"), seeks to develop
and market new, high technology products. The investment in BarOn was acquired
in 1995. BarOn has developed and is in the process of commercializing an
electronic computer input pen that captures handwriting independent of surface
or language. The Company, through a 52.3% owned subsidiary, Electronic
Associates Technologies Israel, Ltd. ("EATI"), formed the joint venture with IAI
in August 1995 to review, evaluate and exploit the commercial potential of
products based on non-military technologies developed by IAI. See "The Company -
Recent Developments."
Results of Operations
During 1995, the Company's sales increased to approximately $77.1 million
from $30.5 million in 1994 and cost of sales increased to approximately $76.4
million from approximately $27.8 million, primarily as a result of the
additional sales generated by Tanon. Selling, general and administrative
expenses also increased primarily as a result of the addition of the Tanon
operations. The Company had a loss from operations of $30,894,000 for 1995,
which included charges of $7,874,000 and $11,672,000, representing the charge to
expense of purchased in-process research and development resulting from its
investments in BarOn and the Joint Venture with IAI, respectively. This loss
compared with a loss from operations of $4,784,000 in 1994 which included a
provision for restructuring of $2,400,000. During the first six months of 1996,
the Company's sales increased to approximately $46.4 million from approximately
$37.2 million, and cost of sales increased to approximately $43.4 million from
approximately $37.1 million but decreased as a percentage of revenue to 93.6%
from 99.5%, as compared to the same period in 1995. Selling, general and
administrative expenses increased in total but also decreased as a percentage of
sales. The Company had a loss from operations of $1,713,000 for the first six
months of 1996. This compared with a loss from operations of $10,035,000 in the
first six months of 1995 which included a non-recurring charge of $6,012,000
representing the charge to expense for purchased in-process research and
development resulting from the Company's investment in BarOn.
(4)
<PAGE>
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
services, 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 1995, the Company's backlog from continuing
operations totalled approximately $47.3 million, of which approximately $27.0
million was attributable to Tanon's backlog. The Company's and Tanon's backlogs
at the end of 1994 were approximately $19.2 million and $15.7 million,
respectively. The Company's backlog at June 29, 1996 was approximately $35.2
million. As a result of obtaining the Schroder Loan Facility discussed below,
the Company consolidated all of its contract electronic manufacturing business
into Tanon, and, accordingly, such backlog at June 29, 1996 represents the
backlog for the consolidated electronic manufacturing business of Tanon.
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.
Recent Developments
Schroder Loan Facility. On May 3, 1996, Tanon replaced the Company's
existing asset based credit facility and the Tanon separate revolving line of
credit with a new asset based credit facility provided by IBJ Schroder Bank &
Trust Company ("Schroder") to Tanon. Under the terms of this new facility,
Schroder will advance up to $13,000,000 in the form of a revolving loan with
availability subject to the amount of a borrowing base comprised generally of
the sum of (1) up to between 80% and 85% of eligible accounts receivable, (2) up
to 18% of eligible inventory subject to an availability sublimit of $3,000,000
and (3) up to 75% (reduced by one percentage point on the first day of each
month following May 3, 1996) of the liquidation value of certain of the
Company's machinery and equipment, subject to an availability sublimit of
$1,250,000 (the "Schroder Loan Facility"). The Schroder Loan Facility has a
three-year term and bears interest at an annual rate equal to the sum of the
base commercial rate determined by Schroder and publicly announced to be in
effect from time to time plus 1-1/2%. Each fiscal quarter, Tanon will also be
obligated to pay a fee at a rate equal to one-half of one percent (1/2%) per
annum of the average unused portion of the Schroder Loan Facility. The Company
paid a commitment issuance fee of $75,000 to Schroder on March 25, 1996 and an
additional $50,000 fee at the closing of the Schroder Loan Facility. Advances
under the Schroder Loan Facility can only be used to fund the Company's
electronic contract manufacturing operators which are now being conducted solely
by Tanon. The agreement with Schroder requires Tanon to maintain certain
financial ratios, including current assets to current liabilities and earnings
to certain fixed charges, and to maintain a minimum net worth. At June 29, 1996,
Tanon was in compliance with all of these requirements. As a result of the new
facility, Tanon's available borrowing capacity increased by approximately
$3,000,000 as compared to the sum of the two prior facilities.
Concurrent with, and as a condition to, the closing of the Schroder Loan
Facility, the Company consolidated all of its contract electronic manufacturing
business into its wholly-owned subsidiary, Tanon, by assigning to Tanon all of
the assets and liabilities related to the contract electronic manufacturing
business conducted directly by the Company. As a result, EAI is now principally
a holding company with all operations being conducted by various subsidiaries
with EAI providing strategic, financial and other support to such subsidiaries.
(5)
<PAGE>
Acquisition of Aydin Corporation Equity Interest and Issuance of
Convertible Debentures. On May 6, 1996, the Company purchased 596,927 shares of
the common stock of Aydin Corporation ("Aydin"), a NYSE listed company, in a
private transaction from the then Chairman and Chief Executive officer of Aydin.
The purchase price for such shares was $18 per share or an aggregate of
$10,752,186 and the shares acquired represented approximately 11.64% of the
outstanding shares of common stock of Aydin. On May 6, 1996, the closing price
of the common stock of Aydin as reported by the NYSE was $15.50. Aydin designs,
manufactures and sells wireless, digital LOS radios and various other
telecommunications equipment systems, computer monitors and workstations, mostly
for utilities, network access equipment, airborne and ground data acquisition,
radar simulation, modernization and air-defense C3 equipment and systems.
To fund a portion of the purchase price of the Aydin common stock, on May
3, 1996, the Company sold certain 9% Convertible Subordinated Debentures in the
aggregate principal amount of $7,000,000. The balance of the purchase price was
funded with existing cash of the Company. The Company sold additional 9%
Convertible Subordinated Debentures in the aggregate principal amount of
$1,100,000 during the remainder of May and June 1996 (such Convertible
Subordinated Debentures in the aggregate principal amount of $8,100,000 are
collectively referred to herein as the "Convertible Debentures"). The Company
has agreed to pay a placement fee equal to 5% of the proceeds raised in the sale
of the Convertible Debentures, payable in installments during August and
September 1996. These Convertible Debentures will mature on May 3, 1998 and are
convertible into shares of the Company's Common Stock at a conversion price per
share equal to the lesser of (i) four dollars ($4) per share or (ii) 80% of the
average closing price of the Company's Common Stock as traded on the NYSE for
the five (5) days preceding the date of the notice to the Company that the
holder wishes to exercise its conversion right; provided that in no event shall
the holder convert less than $100,000 of the unpaid principal balance of the
Convertible Debentures at one time. Such conversion is conditioned on, among
other things, the Company causing the shares underlying the debentures to be
listed on the NYSE. The registration statement of which this Prospectus is a
part covers the shares of the Company's Common Stock underlying the Convertible
Debentures. In the event the registration statement is not declared effective or
the NYSE has not approved the listing of the underlying shares by November 30,
1996, the Company will be obligated to pay certain penalties and the holders of
the Convertible Debentures may then declare the entire unpaid principal and
interest due and payable.
During May 1996, the Company initiated discussions with the Board of
Directors of Aydin concerning a possible merger or other combination with Aydin.
Since that time, both companies have been conducting due diligence on the
business and prospects of each other and have had a number of discussions about
the structure and terms of possible transactions. As of the date of this
Prospectus, the due diligence and negotiation process is continuing. Any merger
or other combination with Aydin would be subject to the outcome of those due
diligence reviews, the execution of a definitive acquisition agreement and the
approval of such transaction by both Boards of Directors and shareholders of EAI
and Aydin. There can be no assurance that these conditions will be satisfied and
that a transaction will be consummated. The investment in Aydin Common Stock is
carried on the books of the Company at the historical cost of $18 per share. As
the Company is discussing a possible merger or other combination with Aydin, no
adjustment to current market value has been made for the difference between the
purchase price paid for the Aydin shares and the current market price of Aydin
Common Stock. The closing price of the Aydin common stock as reported by the
NYSE at September 13, 1996 was $11.125 per share.
Joint Venture with IAI. The Company's indirect joint venture with IAI has
selected one application for development and exploitation, the Vista Application
("Vista") and a licensee, Vista Computer Vision, Ltd. ("VCV") has been formed.
Vista is a system for the automatic inspection of manufactured parts, capable of
detecting defects as small as 20 microns. VCV is owned 50% by IAI and 50% by the
Company's subsidiary, EATI, which is the entity through which the Company formed
the joint venture with IAI. The funding for the initial operations of VCV was
made by EATI in June 1996 as a capital contribution of $250,000 to VCV
(6)
<PAGE>
and a $750,000 Subordinated Capital Note. The note matures five years after its
issuance and bears interest at 8% per annum. Payments on the note may be made
only out of remaining profits of VCV after distribution of at least 50% of all
accumulated profits. Upon liquidation of VCV, the note would be subordinate to
all other debts of VCV but would have a preference over payments to equity
holders of VCV.
On June 28, 1996, the Company loaned $1 million to EATI to enable EATI to
make the above capital contribution and loan to VCV (the "EATI Loan"). The EATI
Loan bears interest at 10% per annum, payable annually. The principal is
repayable in five equal annual installments beginning on June 1, 2002 and
continuing on June 1 of each year thereafter. The Company may at its option,
accelerate the EATI Loan and demand repayment 18 months after the date of
issuance of the loan. The EATI Loan is subordinated to all other debts of EATI
but would have a preference over payments to equity holders of EATI.
At June 29, 1996, the Joint Venture formed with IAI had remaining funds of
$7,597,000. Such funds can only be used to fund expenses of the Joint Venture,
and accordingly, has been classified as Restricted Cash by the Company. With the
exception of the initial investment of $6.3 million in EATI, and the EATI Loan,
the Company is unable to determine at this time the effect, if any, of the
Company's investment in the Joint Venture on the results of operation of the
Company or on its liquidity and capital resources. The Joint Venture is also
currently exploring other opportunities in addition to Vista. See "Risk Factors
- - Working Capital Needs and Liquidity Problems."
BarOn Loan Agreement. On July 1, 1996, the Company entered into a Loan
Agreement (the "BarOn Loan Agreement") with BarOn. Pursuant to the BarOn Loan
Agreement, the Company has agreed to provide to BarOn a revolving line of credit
of $2 million until July 1, 1998 ("Revolving Line Period"). During the Revolving
Line Period, any unused availability under the line will be reduced in the
event, and to the extent, that BarOn is able to obtain other funds through
equity or debt financing. Advances under the line will be made in the Company's
sole discretion. Such advances bear interest at an annual rate equal to the sum
of the base commercial rate (the "Base Rate") as determined by Schroder from
time to time plus one and one half percent (1-1/2%). Interest is due each
calendar quarter and, at the option of BarOn, any payment for such interest may
be deferred until the succeeding July 1. Deferred interest bears additional
interest at the rate of two and one half percent (2-1/2%) plus the Base Rate.
The Company, at its option, may require that interest be paid in cash or by
issuance of ordinary shares of BarOn at an agreed value of $4.00 per share (the
"Agreed Value"). BarOn, at its option, may make any interest payments due on or
before July 1, 1997 in ordinary shares of BarOn at the Agreed Value. As of July
30, 1996, BarOn had borrowed $430,000 under the BarOn Loan Agreement. In
addition, the entire amount outstanding under the line of credit during and upon
expiration of the Revolving Loan Period is due on the earliest to occur of
(i) an initial public offering by BarOn, (ii) the sale of equity or borrowings
by BarOn exceeding the amount outstanding by at least $500,000 (unless
prohibited by such lender or investor), (iii) availability of excess cash flow
from operations in an amount equal to or in excess of the amount outstanding, or
(iv) June 1, 2000.
In consideration of the Company's agreement to open the line of credit,
BarOn has granted the Company antidilution protection for all shares currently
owned by the Company. This protection provides that the Company will be issued
additional shares if BarOn issues shares of its capital stock, instruments
convertible into such stock, or options or warrants to purchase such shares, at
any price below the Agreed Value. In addition, BarOn issued the Company a
warrant (the "BarOn Warrant") to purchase 1 million shares of BarOn's ordinary
shares at any time before July 1, 2001 at an exercise price equal to the Agreed
Value. The BarOn Warrant contains antidilution provisions substantially similar
to those described above and the Company has piggyback and demand registration
rights for shares purchased pursuant to the BarOn Warrant.
The Company and BarOn have also revised their agreement, effective on July
1, 1996, regarding the manufacture of the products of BarOn. The revised
agreement has a five year term and provides
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that the Company or a subsidiary of the Company will manufacture all of BarOn's
products on an exclusive basis at a price established based on actual component
costs plus labor charges, overhead and an agreed upon profit margin. This price
is consistent with prices charged to unrelated customers of the Company for
comparable manufacturing services. As of the date of this Prospectus, the
Company is not yet manufacturing products for BarOn. See "Risk Factors - Working
Capital Needs and Liquidity Problems."
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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.
The Company makes certain forward-looking statements in this Registration
Statement, including the following factors, relating to financial projections,
operating losses, cash flow requirements, additional capital needs, and current
litigation, among others. These forward-looking statements reflect numerous
assumptions and involve a number of risks and uncertainties. Among the factors
that could cause actual results to differ materially from these forward-looking
statements include the following: loss of current customers, reduction in orders
from current customers, or delays in ordering by current customers, higher
material or labor costs than anticipated, unexpected increases in financing
costs, unfavorable results in litigation against the Company; and the other
risks detailed from time to time in the Company's Commission reports, including
but not limited to, its Annual Report on Form 10-K for the year ended December
31, 1995, Proxy Statement dated April 29, 1996, and Quarterly Reports on Form
10-Q for the quarterly periods ending March 30, 1996 and June 29, 1996,
respectively.
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 five years
and for the six-month period ended June 29, 1996, aggregating to approximately
$48.6 million. The Company's accumulated deficit was approximately $46.8 million
as of June 29, 1996. In addition, the Company had negative cash flows from
continuing operations in each of the last five years and for the six-month
period ended June 29, 1996.
Delisting of the Company's Common Stock from Trading on the New York Stock
Exchange
Although the Company's Common Stock is currently listed and trading on the
NYSE, currently and since September 11, 1991, the Company has not been in
compliance with one or more of the criteria necessary for continued listing on
the NYSE. The Company and the NYSE have had discussions with respect to this
issue. 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 net tangible assets available to Common Stock of $8,000,000 and
minimum average earnings of $600,000 for each of the last three fiscal years. To
the Company's knowledge as of the date hereof, the NYSE has not taken any
affirmative action to delist the Common Stock, but, as it has each time it has
authorized the listing of additional shares on the NYSE, it stated in a letter
dated March 29, 1995 and again in a letter dated March 14, 1996, 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 March 6, 1996
to discuss this matter and the Company's financial plan for 1996, after which
the NYSE indicated in its letter dated March 14, 1996 that the Company's
financial results for the first quarter of 1996 will be reviewed and measured
against such plan. Management of the Company met again with representatives of
the NYSE on July 31, 1996 to discuss the Company's results of operations for the
first quarter ended March 30, 1996 and the Company's future plans, with no
further changes or developments resulting from such meeting. 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 and the Company's
ability to raise capital from the sale of equity.
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In the event that the Company's Common Stock is delisted 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 on another exchange.
Although the Company believes that it is currently eligible for listing on the
NASDAQ Small-Cap Market System (but not on the NASDAQ National Market System),
there can be no assurance that the Company would be eligible for listing its
Common Stock on NASDAQ or any exchange at such time. If the Company would be
ineligible to list its Common Stock on NASDAQ or 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, 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 incurred significant losses and had
negative cash flows from operations in each of the last five years and in the
six months ended June 29, 1996. In order to continue operations, the Company has
had to raise additional capital to offset cash utilized in operating and
investing activities. The Company raised approximately $33,200,000 and
$8,100,000 during 1995 and the first six months of 1996, respectively, from the
issuance of Common Stock, the exercise of stock options and warrants and the
sale of convertible notes and debentures. Among such capital raising activities,
in December 1995, the Company completed the sale of 7% convertible subordinated
notes of the Company in the aggregate principal amount of $10,000,000 to GFL
Performance Fund Limited ("GFL Performance Fund") and GFL Advantage Fund Limited
("GFL Advantage Fund"). As of August 13, 1996, $6,905,000 principal amount of
such notes had been converted into 2,211,986 shares of the Company's Common
Stock in accordance with their terms. On August 19, 1996, GFL Performance Fund
Limited transferred and assigned its $1,025,000 outstanding principal amount
note of the Company to an unrelated third party. Also, on August 19, 1996, GFL
Advantage Fund transferred and assigned its $2,070,000 outstanding principal
amount note of the Company to the Note Holders including Irwin L. Gross,
chairman of the Company and certain trusts for daughters' benefit. In connection
with such assignment, the Company cancelled the prior note held by GFL Advantage
Fund and reissued certain 7% Convertible Subordinated Notes of the Company in
the aggregate principal amount of $2,070,000 due December 29, 1997 (the
"Convertible Notes") to the Note Holders. These Convertible Notes will mature on
December 29, 1997 and are convertible into shares of the Company's Common Stock
at the conversion price per share of $2.67. The underlying Shares of Common
Stock of the Company into which such Convertible Notes are convertible are
included in the registration statement of which this Prospectus is a part. The
Company has agreed to issue an aggregate of 245,318 additional Shares of Common
Stock of the Company to the Note Holders in exchange for the Note Holders'
conversion of the Convertible Notes prior to December 31, 1996. In such event,
no interest payments will be made on the Convertible Notes. Such Shares are also
included in the registration statement of which the Prospectus is a part. As a
result of the assignments of the subordinated convertible notes referred to
above, neither GFL Performance Fund nor GFL Advantage Fund owns any securities
of the Company as of the date hereof.
In May and June 1996, the Company raised the $8,100,000 referred to above
from the sale of the Convertible Debentures which was used in part, in
purchasing approximately 11.64% of the outstanding shares of common stock of
Aydin. The underlying Shares of Common Stock of the Company into which such
Convertible Debentures are convertible are included in the registration
statement of which this Prospectus is a part. See "The Company - Recent
Developments."
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On May 3, 1996, Tanon replaced the Company's existing asset based credit
facility and the Tanon separate revolving line of credit with a new asset based
facility provided by Schroder to Tanon. See "The Company - Recent Developments."
The Company's financial projections indicate that operating losses and
negative cash flows will continue, although at a declining rate, during the
remainder of 1996. The purchase of the Aydin common stock, the BarOn Loan
Agreement and the EATI Loan discussed under the heading "The Company - Recent
Developments" of this Prospectus have resulted in the need to raise additional
capital. In addition, the Company's contract manufacturing operations conducted
through Tanon require additional working capital of approximately $2,000,000 as
a result of delaying the shipments of orders at the requests of customers,
operating losses by Tanon and capital expenditures by Tanon. The Company is
presently seeking to borrow up to $3,000,000 for up to six months to fund a
portion of the aggregate amount required to fund its holding company expenses,
make advances to BarOn under the BarOn Loan Agreement, pay costs incurred and to
be incurred in conducting the Aydin due diligence review, and provide additional
working capital to Tanon. Although the Company has no current plans to sell the
Aydin common stock owned by the Company, such loan may be secured by the Aydin
common stock. Further, the Company will need to raise additional capital during
the remainder of 1996 or the first quarter of 1997 through the sale of Common
Stock or the issuance of debt securities to repay the $3,000,000 short term
loan, to fund the future holding company expenses, provide additional working
capital to Tanon as discussed above and fund anticipated expansion of contract
manufacturing operations conducted through Tanon. At the date hereof, the
Company does not have any commitments, understandings or agreements for the
$3,000,000 short term loan or additional capital needs, and accordingly, there
can be no assurance that the Company will be successful in obtaining the
$3,000,000 short term loan or the subsequent raising of additional capital.
Failure to obtain such short term loan or the additional capital could have
a material adverse effect on the financial condition and operations of the
Company.
The remaining unexercised Class A and Class B warrants issued in February
1994, if exercised, could provide the Company with additional capital of
approximately $1,700,000. To date, Class A and Class B warrants to purchase
2,202,977 shares have been exercised and the Company has received $1,584,121 in
proceeds. In addition, in February 1996, the Company received unsecured
promissory notes in the aggregate principal amount of $1,096,000 as payment for
the exercise of Class A and Class B warrants to purchase 796,084 shares of
Common Stock. These promissory notes bear interest at the rate of 7% per annum
and are due on or before February 14, 1997. No assurance can be given that the
remaining unexercised warrants will be exercised or that such promissory notes
will be paid in full.
Limitations on Dividend Payments
The Company has not had a profitable year since 1990 and there have been no
cash dividends declared since 1956 and no stock dividends declared since 1966.
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
Substantially all of the Company's net sales during the year ended December
31, 1995 were derived from customers which were also customers of the Company or
Tanon during 1994. In 1995, the customers which accounted for more than 10% of
the Company's sales from continuing operations were Advanced Fibre
Communications, Inc., Ungerman Bass, Inc. and Dialogic Corporation, which
accounted for 23%, 14%, and 13% of sales, respectively. In 1995, the Company
initiated a disengagement from providing further services to a significant
customer, which disengagement process has been completed as of the date of this
Prospectus. As
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a result, management believes that sales to the customer will be less than 10%
of Company sales in 1996. The loss of revenue from the customer has been offset
by the Company's ability to expand services to other customers and by attracting
new customers. Currently, the Company remains dependent upon its large
customers. The loss of one or more of these customers could have a material
adverse effect on operations. 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 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 major customers which, in turn, could have a
material adverse effect on the Company's results of operations.
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
asserted a counterclaim against Lemco and cross claims against co-defendants and
others for indemnification and contribution. 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 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
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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 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. Lemco's appraisal expert subsequently determined in October
1995 that the value of the property as of April 14, 1995 was $960,000. Lemco
purchased the property in question in 1979 for approximately $400,000. The
Company's experts have estimated that, based upon hydrogeologic data gathered to
date by Lemco's experts, the major source of continuing contamination of
groundwater was released into the water table about late 1984 or, using more
conservative extrapolations, about mid-1979. Lemco's environmental consultants
have recently issued a new report indicating that, based upon further
hydrogeologic data, the contamination occurred before 1979. The Company's
experts believe that the data upon which Lemco's experts base their opinion is
unreliable and seek further data from additional hydrogeologic tests which have
not yet been performed. Based on the foregoing, management believes that the
range of possible loss in this matter ranges from zero to approximately $7.8
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.
The Company and its consultants recently completed the investigation and
evaluation of additional information received from Lemco and have determined
that Lemco's remediation cost estimates are premature and conceptual in nature.
In addition, an independent analysis of the site to determine the
appropriateness of Lemco's claims and of the estimated cost of remediation has
not been completed; 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 Company is vigorously defending this matter. On May 3, 1996, the
Superior Court of New Jersey referred this case to mediation in an effort to
explore opportunities for settlement. Mediation proceedings have commenced and
are expected to continue through December, 1996. In the event the matter cannot
be resolved through mediation, the case will be referred back to the Court for
trial.
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,
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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 settlement
negotiations with respect to the federal court actions without admitting
liability. As of the date of this Prospectus, Rollins and the other defendants
have negotiated a settlement in principle with the governmental plaintiffs and a
consent decree is expected to be filed with the court in or before December
1996. Rollins has agreed in principle to make payments pursuant to the expected
consent decree on behalf of EAI, and to include the claims against EAI in the
release from the government entities. EAI has also pursued insurance coverage
for the B.R.O.S. 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 upon
the foregoing, management believes that the only remaining liability of EAI
with respect to the B.R.O.S. claims after the above-referenced settlements are
effectuated will be for costs and expenses incurred in connection with this
matter not paid by Rollins as discussed above, which are not expected to be
material and do not take into account the amount of any such costs or
expenses which may be offset by insurance coverage as discussed above, however,
no assurance can be given as to the outcome of this matter until such
settlements are effectuated.
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. 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 Carryforward
An annual limitation of approximately $4.9 million on the ability to
utilize a portion of the Company's net operating loss carryforwards, which
amounted to approximately $33.6 million as of December 31, 1995, has resulted
from stock ownership changes exceeding certain thresholds as defined in Section
382 of the Internal Revenue Code of 1986 (the "Code"). Further limitations may
occur if additional stock ownership changes occur which exceed certain
thresholds as defined by Section 382 of the Code.
Future Sales of Common Stock
At June 29, 1996, the Company had approximately 19,080,510 shares of Common
Stock outstanding. Of these shares, approximately 1,300,816 shares are
"restricted" or "affiliate" securities, as such terms are defined in the
Securities Act, which are not covered by currently effective registration
statements and
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may not be sold in the absence of registration under the Securities Act or an
exemption therefrom, including the exemption contained in Rule 144 of the
Securities Act. To the Company's knowledge, none of the Company's "restricted"
or "affiliate" securities outstanding as of June 29, 1996 are currently for sale
in the public in reliance upon Rule 144. The Company has granted certain holders
of "restricted" or "affiliate" shares of Common Stock rights which enable such
holders to require the Company to register shares of Common Stock held by them.
Currently, the Company has effective registration statements on file with the
Commission relating to the offer for sale of an aggregate of 13,414,575 shares
of Common Stock of the Company by certain stockholders, option holders, warrant
holders, and convertible debenture or note holders, which shares are held or may
be acquired by such securityholders upon exercise of certain options, warrants
and convertible debentures or notes held by such securityholders. As of the date
of this Prospectus, a substantial number of the shares included in such
effective registration statements have been sold by the named securityholders,
however, a number of such shares remain to be sold.
As of June 29, 1996, the Company has granted to employees and others
options to purchase up to approximately 6,923,471 shares of Common Stock in
addition to the options mentioned in the immediately preceding paragraph, all of
which are also covered by currently effective registration statements. The
Company has also issued warrants which are exercisable for an aggregate of
approximately 3,575,107 shares of the Company's Common Stock and which contain
certain registration rights for the underlying shares. Of such warrants,
1,993,107 shares are included in the currently effective registration statements
of the Company referred to in the immediately preceding paragraph. Also, in
addition to the "restricted" or "affiliate" shares and registered shares
referred to above, in offerings exempt from the registration provisions under
the Securities Act, (i) on April 14, 1995, the Company completed the sale of
540,712 shares of Common Stock, after adjustment; (ii) on July 21, 1995, the
Company completed the sale of 416,667 shares of Common Stock; (iii) on September
19, 1995, the Company completed the sale of convertible debentures in the
principal amount of $3,150,000, which debentures were subsequently converted
into 700,000 shares of Common Stock; (iv) on October 2, 1995, the Company
completed the sale of convertible debentures in the principal amount of
$450,000, which debentures were subsequently converted into 100,000 shares of
Common Stock; and (v) on August 3, 1995, the Company sold 1,517,614 shares of
its Common Stock, after adjustment.
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, or upon conversion of
the convertible notes and debentures, may have a material adverse effect upon
the market price of the Company's Common Stock.
Control by Board of Directors
As of June 29, 1996, all officers and directors of the Company as a group
beneficially owned approximately 3,698,324 shares or 18.3% of the outstanding
Common Stock or options or warrants exercisable for Common Stock, or convertible
debentures or notes which are convertible into Common Stock, assuming the
exercise of presently exercisable options and warrants, and conversion of
presently convertible debentures and notes 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
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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) 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
(16)
<PAGE>
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.
(17)
<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, approximately $10,170,000 of
liabilities of the Company as of the date of this Prospectus would be converted
to equity upon the conversion of the Convertible Debentures and Convertible
Notes into Shares of Common Stock of the Company as provided in accordance with
the terms thereof, assuming the conversion in full thereof. Further, the Company
would receive approximately $1,071,429 upon exercise of the Warrants to purchase
357,143 shares of Common Stock, assuming the exercise in full thereof. As of the
date of this Prospectus, none of the Debenture Holders or Note Holders has
converted his or her Convertible Debentures or Convertible Notes, nor has the
Warrant Holder exercised any portion of the Warrant, however, the Note Holders
have agreed with the Company to convert their Convertible Notes in the aggregate
principal amount of $2,070,000 before December 31, 1996. In exchange therefor,
the Company has agreed to issue an aggregate of 245,318 additional shares of
Common Stock of the Company to the Note Holders, which Shares are also included
in the registration statement of which this Prospectus is a part. There can be
no assurance that any or all of the Convertible Debentures and Convertible Notes
will be converted or that any or all of the Warrant will be exercised.
(18)
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth historical consolidated financial data of
the Company for the six-month periods ended June 29, 1996 and July 1, 1995 and
for each of the years in the five-year period ended December 31, 1995. The
selected historical consolidated financial data for each of the years ended
December 31, 1991 through 1995 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 six-month periods ended June 29, 1996 and July 1, 1995 were derived from
the unaudited consolidated condensed financial statements of the Company. The
results for the six-month periods ended June 29, 1996 and July 1, 1995 are not
necessarily indicative of results for the full year or any future period.
Historical information for the six months ended June 29, 1996 and July 1, 1995
and at June 29, 1996 reflects, in the opinion of management, all adjustments
(consisting only of nominal recurring adjustments) necessary to present fairly
the results for the interim periods. 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 filed for the year ended December 31, 1995
and Forms 10-Q filed for each of the quarters ended March 30, 1996 and June 29,
1996, respectively.
<TABLE>
<CAPTION>
(in thousands, except share data and certain other data)
Six-Month Period Ended
June 29 July 1 Year Ended December 31,
----------------------------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------
Unaudited Unaudited
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Results: (Note 1)
Sales from Continuing
Operations $ 46,413 $ 37,233 $ 77,085 $ 30,539 $ 26,024 $ 22,248 $ 22,933
Provision for
Restructuring -- -- -- 2,400 -- 285 --
Loss from Continuing
Operations Before Taxes $ (3,301) (11,085) (30,894) (4,784) (5,348) (3,524) (6,811)
Loss from Continuing
Operations $ (3,301) (11,085) (30,894) (4,784) (4,664) (3,189) (5,227)
Income from Discontinued
Operations $ -- -- -- -- 1,327 651 1,531
Net Income (Loss) $ (3,301) (11,085) (30,894) (4,784) (3,337) (2,538) (3,696)
Income (Loss) per
Common Share:
Continuing Operations $ (0.19) (1.05) (2.50) (.95) (1.76) (1.22) (2.02)
Discontinued Operations $ -- -- -- -- .50 .25 .59
Net Income (Loss) $ (0.19) (1.05) (2.50) (.95) (1.26) (.97) (1.43)
- --------------------------------------------------------------------------------------------------------------------
Balance Sheet Data:
Current Assets $ 35,529 -- 44,514 16,969 7,355 14,547 12,267
Current Liabilities $ 24,589 -- 25,938 12,603 8,614 11,594 5,019
Working Capital $ 10,940 -- 18,576 4,366 (1,259) 2,953 7,248
Net Property and
Equipment $ 10,752 -- 8,071 2,719 3,603 4,344 2,351
Total Assets $ 71,544 -- 66,625 22,845 12,762 19,836 14,805
Long-Term Debt $ 3,437 -- 1,731 690 1,820 1,678 605
Shareholders' Equity
(Deficit) $ 23,514 -- 19,930 7,244 (546) 2,776 5,137
Common Shares
Outstanding 19,081 -- 15,827 8,108 2,661 2,646 2,588
Book Value per
Common Share $ 1.23 -- 1.21 .89 (.21) 1.05 1.99
- --------------------------------------------------------------------------------------------------------------------
Other Data:
Number of Shareholders
of Record 4,171 -- 4,254 4,447 4,600 4,718 4,877
Number of Employees 539 -- 514 334 315 458 368
Orders Received $ 34,321 -- 105,150 30,326 18,805 31,592 20,064
Sales Backlog at End of
Period $ 35,213 -- 47,305 19,240 19,453 26,676 17,260
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Note (1): 1995 amounts include the results of Tanon Manufacturing, Inc.
from the date of the Tanon Acquisition (January 4, 1995), EAI's equity
in the results of BarOn Technologies Ltd. from the date of the BarOn
Investment (January 16, 1995), and EAI's equity in the results of the
JVA with Israel Aircraft Industries, Ltd. from the date of formation
(August 8, 1995).
(19)
<PAGE>
PLAN OF DISTRIBUTION AND
SELLING SECURITYHOLDERS
The Shares will be offered by the Selling Securityholders or their
donees, pledgees, transferees or other successors in interest 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 August 21, 1996 (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>
Percentage
of Common
Number of Stock
Relation- Number of Number of Shares Owned
Name of Selling ship to Shares Owned Shares Owned After After
Securityholder Company(1) Prior to Offering Offered Offering Offering(2)
- -------------- ---------- ----------------- ------- -------- -----------
<S> <C> <C> <C> <C> <C>
Leonard Adams 12,500 12,500(3) -0- -0-
Laura Huberfeld & 1,700,527 (7) 37,500(3) 1,305,884 6.9%
Naomi Bodner
Partnership
Broadway Partners 50,000 50,000(3) -0- -0-
Robert Cohen 37,500 37,500(3) -0- -0-
Lenore Katz 12,500 12,500(3)
Kids Associates 10,000 10,000(3) -0- -0-
Nicole and Michael
Kubin 12,500 12,500(3) -0- -0-
Chanie Lerner 51,000 50,000(3) 1,000 less than 1%
Millenco, LP 700,000 700,000(3)
Newark Sales Corp. 470,901 362,500(3) 108,401 less than 1%
Jules Nordlicht 322,500 312,500(3) 10,000 less than 1%
Mark Nordlicht 100,000 100,000(3) -0- -0-
Dennis Poster 50,000 50,000(3) -0- -0-
CMR Associates,
L.L.C. 62,500 62,500(3) -0- -0-
Stefanie Rubin 15,000 15,000(3) -0- -0-
Wayne Saker 25,000 25,000(3) -0- -0-
Saleslink, Ltd. 175,000 175,000(3) -0- -0-
</TABLE>
(20)
<PAGE>
<TABLE>
<CAPTION>
Percentage
of Common
Number of Stock
Relation- Number of Number of Shares Owned
Name of Selling ship to Shares Owned Shares Owned After After
Securityholder Company(1) Prior to Offering Offered Offering Offering(2)
- -------------- ---------- ----------------- ------- -------- -----------
<S> <C> <C> <C> <C> <C>
Elizabeth Gross 477,959 467,959(4) 10,000 less than 1%
Trust A U/T/A of
Irwin Gross Trust
dated 3/20/90
Gabrielle Gross 477,959 467,959(4) 10,000 less than 1%
Trust B U/T/A of
Irwin Gross Trust
dated 3/20/90
Irwin L. Gross Chairman 1,836,016 (5) 84,681(4) 1,751,335 9.2%
Broad Capital 1,700,527 (7) 357,143(6) 1,305,884 6.9%
Associates, Inc.
Aryeh Trading, Inc. 125,000 (8) -0- -0- -0-
</TABLE>
- ----------
(1) Except as expressly set forth in the table, none of the Selling
Securityholders has had any relation to the Company within the past three years.
(2) Assumes that all Shares which are registered are sold in the Offering.
Also, calculation is based on approximately 19,080,510 shares of EAI Common
Stock outstanding at June 29, 1996.
(3) Represents shares of the Company's Common Stock into which certain 9%
Convertible Subordinated Debentures due May 3, 1998 in the aggregate principal
amount $8,100,000, issued by the Company in May and June 1996 to the Selling
Securityholders listed above, are convertible. For purposes of determining the
number of shares of the Company's Common Stock to include in this registration
statement, the Company assumed a conversion price of $2.40 per share. The actual
number of shares of Common Stock to be issued upon the conversion of the
Convertible Debentures will be equal to: the principal amount of the Convertible
Debentures converted divided by a conversion price per share equal to the lesser
of (i) eighty percent (80%) of the average of the closing price of the Company's
Common Stock as traded on the NYSE for the five days immediately preceding the
date of notice of conversion to the Company, or (ii) $4.00; provided that no
less than $100,000 of the principal amount of the Convertible Debentures may be
converted at any one time. In accordance with Rule 416 under the Securities Act,
this registration statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon the conversion of the notes
to prevent dilution resulting from stock splits, stock dividends or similar
transactions or by reason of changes in the conversion price as aforesaid.
(4) Represents shares of the Company's Common Stock into which certain 7%
Convertible Subordinated Notes due December 29, 1997 in the aggregate principal
amount of $2,070,000, reissued by the Company to the Selling Securityholders
listed above, are convertible. The Convertible Notes represent the outstanding
balance of the 7% convertible subordinated note issued by the Company to GFL
Advantage Fund in December 1995. The Selling Securityholders listed above
acquired such convertible subordinated note from GFL Advantage Fund on August
19, 1996, and as a result, the Company reissued the Convertible Notes to such
Selling Securityholders upon cancellation of the note assigned by GFL Advantage
Fund. The Note Holders have agreed with the Company to convert the Convertible
Notes before December 31, 1996. In exchange therefor, the Company has agreed to
issue an aggregate of 245,318 additional Shares of Common Stock of the Company
to the Note Holders, which Shares are also included in the registration
statement of which the Prospectus is a part.
(5) In addition to the Shares referred to in footnote 4 above as being
offered hereby by Mr. Gross, the 1,836,016 shares of Common Stock includes (i)
20,000 shares of Common Stock held by Mr. Gross; (ii) warrants to purchase an
aggregate of 262,000 shares of Common Stock issued by the Company to Mr. Gross
in connection with his retention as a consultant to the Company in March 1994,
(iii) options to purchase 1,000,000 shares of Common Stock granted pursuant to
the Company's Equity Incentive Plan, (iv) options to purchase 333,333 shares of
Common Stock of a total of 1,000,000 shares granted by the Company to Mr. Gross
pursuant to the Company's Equity Incentive Plan, and (iv) options to purchase
34,500 shares of Common Stock of a total 60,000 shares granted pursuant to the
1994 Stock Option Plan for Non-Employee directors. Mr. Gross disclaims any
beneficial ownership of the shares referred to in Note 4 as being offered by the
Elizabeth Gross Trust A and Gabrielle Gross Trust B.
(6) Represents shares of the Company's Common Stock which may be acquired
upon exercise of a Warrant granted by the Company to Broad Capital Associates,
Inc. ("Broad Capital") on September 3, 1996 as additional consideration for
Broad Capital's exercise
(21)
<PAGE>
of certain options to purchase 357,143 shares of Common Stock of the
Company for proceeds to the Company of approximately $1 million. The issuance of
such shares currently remains subject to official notice of listing on the NYSE.
In accordance with Rule 416 under the Securities Act, this registration
statement also covers such indeterminate number of additional shares of Common
Stock as may become issuable upon exercise of such warrant to prevent dilution
resulting from stock splits, stock dividends or similar transactions.
(7) Includes (i) 357,143 shares of Common Stock held by Broad Capital, and
(ii) options to purchase 242,857 shares granted to Broad Capital by the Company
pursuant to the Company's Equity Incentive Plan. Also includes Class B Warrants
to purchase 352,942 shares of Common Stock held by the 1995 Huberfeld Family
Charitable Income Trust ("Huberfeld Trust"), in which Mr. Murray Huberfeld is
the sole voting trustee, and Class B Warrants to purchase 352,942 shares of
Common Stock held by the 1995 Bodner Family Charitable Income Trust ("Bodner
Trust"), in which Mr. David Bodner is the sole voting trustee. Also includes the
37,500 shares referred to above offered by the Laura Huberfeld & Naomi Bodner
Partnership. Laura Huberfeld and Naomi Bodner are the respective spouses of
Messrs. Huberfeld and Bodner. Messrs. Huberfeld and Bodner are principals of
Broad Capital. Each of Broad Capital, the Huberfeld Trust and the Bodner Trust,
and the Laura Huberfeld & Naomi Bodner Partnership disclaim beneficial ownership
in the shares beneficially owned by each of the other parties.
(8) Represents the shares of Common Stock issued by the Company to the
named Selling Securityholder in partial payment of the placement fee equal to 5%
of the proceeds raised in the sale of the Convertible Debentures in May and June
1996. The issuance of such shares currently remains subject to official notice
of listing on the NYSE.
(22)
<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 EA Industries, 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 indicated in their report with respect
thereto, and have been included herein in reliance upon the authority of said
firm as experts in accounting and auditing in giving said reports.
The financial statements of BarOn as of December 31, 1995 and 1994, and for
the years ended December 31, 1995 and 1994 and the period from inception in 1992
through December 31, 1995, incorporated by reference in this Prospectus and in
the Registration Statement of which the Prospectus is a part, have been audited
by Luboshitz, Kasierer & Co. and Yosef Shimony, independent public accountants,
as indicated in their reports with respect thereto, and have been included
herein in reliance 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 law 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
(23)
<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.
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.
(24)
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
SEC registration fee $ 3,728
Legal fees and expenses $15,000*
Accounting fees and expenses $15,000*
Blue sky fees and expenses $ 2,500*
Printing expenses $ 2,500*
Miscellaneous $ 1,000*
-------
TOTAL $39,728
=======
- ----------
*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
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, knowingly violating
law 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 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.
II-1
<PAGE>
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
Exhibit No.
- -----------
*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 was filed as
Exhibit 2 to the Company's Current Report on Form 8-K (Date of
Report: January 4, 1995) and is hereby incorporated herein by
reference.
*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.
*2.5 Form of Pre-Incorporation Agreement in connection with the IAI
Joint Venture was filed as Exhibit 2.1 to the Company's Current
Report on Form 8-K (Date of Report: August 3, 1995) and is hereby
incorporated herein by reference.
*2.6 Form of Joint Venture Agreement in connection with IAI Joint
Venture was filed as Exhibit 2.2 to the Company's Current Report
on Form 8-K (Date of Report: August 3, 1995) and is hereby
incorporated herein by reference.
4.1 Specimen of Common Stock share Certificate was filed as Exhibit
4.1 to the Company's Registration Statement on Form S-1, No.
33-81892 and is hereby incorporated herein by reference.
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 herein 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 herein by reference.
(File No. 1-4680).
4.4 Form of Subscription Agreement and Form of 9% Convertible
Subordinated Debenture issued in connection with raising $8.1
million in May and June of 1996 were filed as Exhibit 10.31 to
the Company's Form 10-Q for the quarterly period ended March 30,
1996 and are hereby incorporated herein by reference.
II-3
<PAGE>
4.5 Warrant, dated September 3, 1996, to purchase 357,143 shares of
Common Stock issued by the Company to Broad Capital Associates,
Inc.
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
EA Industries, Inc.
23.3 Consent of Luboshitz, Kasierer & Co., and Yosef Shimony,
Independent Auditors of BarOn Technologies Ltd.
- ----------
* 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 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 25th day of
September, 1996.
EA INDUSTRIES, INC.
By: /s/ Stanley O. Jester
--------------------------------
Stanley O. Jester, Treasurer and
Vice President, Finance
Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Irwin L. Gross, Stanley O. Jester, and
Howard Kamins, General Counsel of Registrant, and each of them, his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
/s/ Irwin L. Gross Chairman of the Board September 25, 1996
- ------------------------ (Principal Executive
Irwin L. Gross Officer)
/s/ Joseph R. Spalliero President and Director September 25, 1996
- ------------------------
Joseph R. Spalliero
[Signatures continued on next page]
II-6
<PAGE>
/s/ Stanley O. Jester Treasurer and Vice September 25, 1996
- ----------------------- President, Finance
Stanley O. Jester Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ Bruce P. Murray Director September 25, 1996
- -----------------------
Bruce P. Murray
/s/ Jules M. Seshens Director September 25, 1996
- -----------------------
Jules M. Seshens
/s/ Seth Joseph Antine Director September 25, 1996
- -----------------------
Seth Joseph Antine
/s/ David J. Reibstein Director September 25, 1996
- -----------------------
David J. Reibstein
/s/ Mark S. Hauser Director September 25, 1996
- -----------------------
Mark S. Hauser
/s/ William Spier Director September 25, 1996
- -----------------------
William Spier
II-7
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No.
- ----------- ----------- --------
*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 was filed as
Exhibit 2 to the Company's Current Report on Form
8-K (Date of Report: January 4, 1995) and is
hereby incorporated herein by reference.
*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.
*2.5 Form of Pre-Incorporation Agreement in connection
with the IAI Joint Venture was filed as Exhibit
2.1 to the Company's Current Report on Form 8-K
(Date of Report: August 3, 1995) and is hereby
incorporated herein by reference.
*2.6 Form of Joint Venture Agreement in connection with
IAI Joint Venture was filed as Exhibit 2.2 to the
Company's Current Report on Form 8-K (Date of
Report: August 3, 1995) and is hereby incorporated
herein by reference.
4.1 Specimen of Common Stock share Certificate was
filed as Exhibit 4.1 to the Company's Registration
Statement on Form S-1, No. 33-81892 and is hereby
incorporated herein by reference.
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
herein 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 herein by reference. (File No. 1-4680).
<PAGE>
4.4 Form of Subscription Agreement and Form of 9%
Convertible Subordinated Debenture issued in
connection with raising $8.1 million in May and
June of 1996 were filed as Exhibit 10.31 to the
Company's Form 10-Q for the quarterly period ended
March 30, 1996 and are hereby incorporated herein
by reference.
4.5 Warrant, dated September 3, 1996, to purchase
357,143 shares of Common Stock issued by the
Company to Broad Capital Associates, Inc.
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 Luboshitz, Kasierer & Co., and Yosef
Shimony, Independent Auditors of BarOn
Technologies Ltd.
- --------
* 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 4.5
Warrant dated September 3, 1996
Issued to Broad Capital Associates, Inc.
<PAGE>
This Warrant and the Common Stock issuable on exercise of this Warrant (the
"Underlying Shares") may be transferred, sold, assigned or hypothecated,
only if registered by the Company under the Securities Act of 1933 (the
"Act") and if registered or qualified in every applicable state, or if the
Company has received the favorable opinion of counsel to the Holder, which
opinion and counsel shall be satisfactory to counsel to the Company, to the
effect that such registration or qualification of the Warrant or the
Underlying Shares is not necessary in connection with such transfer, sale,
assignment or hypothecation.
EA INDUSTRIES, INC.
WARRANT
DATED: as of September 3, 1996
Number of Shares: 357,143
Holder: Broad Capital Associates, Inc.
Address: 152 West 57th Street
New York, NY 10019
THIS CERTIFIES THAT the Holder is entitled to purchase from EA INDUSTRIES,
INC., a New Jersey corporation (hereinafter called the "Company"), at $3.00 per
share until July 31, 1997 and thereafter at $8.125 per share the number of
shares of the Company's common stock set forth above ("Common Stock").
Notwithstanding the foregoing, this Warrant may not be exercised prior to the
first day on which the Company shall have sufficient authorized and unreserved
Common Stock to permit such exercise.
1. All rights granted under this Warrant shall expire on July 5, 2000, and
no shares of Common Stock may be acquired under this Warrant from and after such
date.
2. This Warrant and the Common Stock issuable on exercise of this Warrant
(the "Underlying Shares") may be transferred, sold, assigned or hypothecated,
only if registered by the Company under the Securities Act of 1933 (the "Act")
and registered and qualified in every applicable state or if the Company has
received the favorable opinion of counsel to the Holder, which opinion and
counsel shall be satisfactory to counsel to the Company, to the effect that
registration of the Warrant or the Underlying Shares and registration and
qualification in every applicable state is not necessary in connection with such
transfer, sale, assignment or hypothecation. The Underlying Shares shall be
appropriately legended to reflect this restriction and stop transfer
instructions shall apply. The restrictions on transfer contained in this Section
shall apply to all successive transfers.
3. The Company shall include the underlying shares in the next registration
statement filed by the Company on Form S-3, or such other Form as the Company
shall select, provided, however, that the filing of such registration statement
shall not, in the Company's reasonable discretion, have a material adverse
effect on the Company.
4. Any permitted assignment of this Warrant shall be effected by the Holder
by (i) executing an appropriate form of assignment, (ii) surrendering the
Warrant for cancellation at the office of the Company, accompanied by the
opinion of Counsel referred to above; and (iii) unless in connection with an
effective
<PAGE>
registration statement which covers the sale of this Warrant and/or the
Underlying Shares, delivery to the Company of a statement by the Holder (in a
form acceptable to the Company and its counsel) that such Warrant is being
acquired by the Holder for investment and not with a view to its distribution or
resale; whereupon the Company shall issue, in the name or names specified by the
Holder (including the Holder) new Warrants representing in the aggregate rights
to purchase the same number of Shares as are purchasable under the Warrant
surrendered. Such Warrants shall be exercisable immediately upon any such
assignment of the number of Warrants assigned.
5. The term "Holder" should be deemed to include any transferee Holder of
this Warrant pursuant to a transfer in compliance with the requirements
described herein.
6. The Company covenants and agrees that all shares of Common Stock which
may be issued upon exercise hereof will, upon issuance, be duly and validly
issued, fully paid and non-assessable and no personal liability will attach to
the Holder thereof.
7. This Warrant shall not entitle the Holder to any voting rights or other
rights as a stockholder of the Company.
8. In the event that the outstanding shares of Common Stock of the Company
are at any time increased or decreased or changed into or exchanged for a
different number or kind of share or other security of the Company or of another
corporation through reorganization, merger, consolidation, liquidation,
recapitalization, stock split, combination of shares or stock dividends payable
with respect to such Common Stock, appropriate adjustments in the number and
kind of such securities then subject to this Warrant shall be made effective as
of the date of such occurrence so that the position of the Holder upon exercise
will be the same as it would have been had he owned immediately prior to the
occurrence of such events the Common Stock subject to this Warrant. Such
adjustment shall be made successively whenever any event listed above shall
occur and the Company will notify the Holder of the Warrant of each such
adjustment. Any fraction of a share resulting from any adjustment shall be
eliminated.
9. The rights represented by this Warrant may be exercised at any time
within the period above specified by (i) surrender of this Warrant at the
principal executive office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the Holder at the address of
the Holder appearing on the books of the Company); (ii) payment to the Company
by check or wire transfer of the exercise price for the number of Shares
specified in the above-mentioned purchase form together with applicable stock
transfer taxes, if any and (iii) unless in connection with an effective
registration statement which covers the sale of the shares underlying the
Warrant, the delivery to the Company of a statement by the Holder (in a form
acceptable to the Company and its counsel) that such Shares are being acquired
by the Holder for investment and not with a view to their distribution or
resale. The certificates for the Common Stock so purchased shall be delivered to
the Holder within a reasonable time, not exceeding ten (10) days, after the
rights represented by this Warrant shall have been so exercised, and shall bear
a restrictive legend with respect to any applicable securities laws.
10. This Warrant shall be governed by and construed in accordance with the
internal laws of New Jersey.
IN WITNESS WHEREOF, EA INDUSTRIES, INC. has caused this Warrant to be
signed by its duly authorized officer under its corporate seal, and to be dated
as of the date set forth above.
EA INDUSTRIES, INC.
By:____________________________
Exhibit 5
Opinion of Mesirov Gelman Jaffe Cramer & Jamieson
<PAGE>
MESIROV GELMAN JAFFE CRAMER & JAMIESON
1735 Market Street, Philadelphia PA 19103-7598
(215) 994-1000
September 25, 1996
SECURITIES AND EXCHANGE COMMISSION
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: EA Industries, Inc.
Registration Statement on Form S-3
Gentlemen:
This firm is counsel to EA Industries, Inc. (the "Company"). In such
capacity, we have assisted in the preparation of the Company's Registration
Statement on Form S-3, ("Registration Statement"), filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, covering
3,527,742 shares of the Company's Common Stock ("Shares") to be sold by certain
securityholders named in the Registration Statement (the "Selling
Securityholders") and the 3,527,742 Preferred Stock Purchase Rights associated
with such Shares. Of the 3,527,742 Shares, (i) 125,000 have been issued by the
Company to a certain Selling Securityholder (the "Outstanding Shares"), (ii)
357,143 ("Warrant Shares") are issuable by the Company to a certain Selling
Securityholder upon exercise of a certain warrant (the "Warrant"), (iii)
2,025,000 ("Debenture Shares") are those into which certain 9% convertible
subordinated debentures ("Convertible Debentures") are convertible, and (iv)
1,020,599 ("Note Shares") are those into which certain 7% convertible
subordinate notes (the "Convertible Notes") are convertible and which the
Company may issue as additional consideration for conversion of such Convertible
Notes on or before December 31, 1996.
In this connection, we have made such inquiry of the Company and 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, the Warrant,
Convertible Debentures, Convertible Notes and such other documents and corporate
records relating to the Company and the issuance and sale of the Shares, as we
deemed necessary or appropriate for purposes of rendering this opinion.
Based upon the foregoing, it is our opinion that:
1. Subject to official notice of listing on the New York Stock Exchange,
the Outstanding Shares are validly issued, fully paid and non-assessable.
2. Subject to official notice of listing on the New York Stock Exchange,
the Warrant Shares, when issued in accordance with the terms of, and for
the consideration set forth in, the Warrant, will be validly issued, fully paid
and non-assessable.
3. The Debenture Shares, when issued upon conversion of the Convertible
Debentures in accordance with the terms of, and for the consideration set forth
in, the Convertible Debentures, will be validly issued, fully paid and
non-assessable.
<PAGE>
Securities and Exchange Commission
September 25, 1996
Page Two
4. The Note Shares, when issued upon conversion of the Convertible Notes
and upon conversion on or before December 31, 1996 in accordance with the terms
of, and for the consideration set forth in, the Convertible Notes, will be
validly issued, fully paid and non-assessable.
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 of 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 EA Industries, Inc.:
As independent public accountants, we hereby consent to the incorporation by
reference in this Form S-3 Registration Statement of our report dated March 25,
1996 included in EA Industries, Inc.'s (formerly known as Electronic Associates,
Inc.) Annual Report on Form 10-K for the year ended December 31, 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
September 18, 1996
Exhibit 23.3
Consents of Luboshitz, Kasierer & Co., and Yosef Shimony
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To EA Industries, 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 February 29, 1996 included in the financial statements of BarOn
Technologies Ltd. as of December 31, 1995 and December 31, 1994 and for the
years ended December 31, 1995 and December 31, 1994 and for the period from
inception in 1992 through December 31, 1995 included in EA Industries, Inc.'s
(formerly known as Electronic Associates, Inc.) Annual Report on Form 10-K for
the year ended December 31, 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
September 18, 1996
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANT
To EA Industries, Inc.:
As an independent public accountant of BarOn Technologies Ltd., I hereby consent
to the incorporation by reference in this Form S-3 Registration Statement of my
report dated February 29, 1996 included in the financial statements of BarOn
Technologies Ltd. as of December 31, 1995 and December 31, 1994 and for the
years ended December 31, 1995 and December 31, 1994 and for the period from
inception in 1992 through December 31, 1995 included in EA Industries, Inc.'s
(formerly known as Electronic Associates, Inc.) Annual Report on Form 10-K for
the year ended December 31, 1995, and to all references to my firm included in
or made a part of this registration statement.
/s/ Yosef Shimony
YOSEF SHIMONY, C.P.A. (Isr.)
Tel-Aviv, Israel
September 19, 1996
