SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
* * * * *
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
EA INDUSTRIES, INC.
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(Name of Registrant as Specified In Its Charter)
SAME
------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total Fee Paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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<PAGE>
EA INDUSTRIES, INC.
- --------------------------------------------------------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held March 31, 1998
- --------------------------------------------------------------------------------
Please take notice that a Special Meeting of Shareholders of EA Industries,
Inc., a New Jersey corporation (the "Company"), will be held at the Ocean Place
Hilton Resort and Spa, One Ocean Boulevard, Long Branch, NJ, on Tuesday March
31, 1998, at 2:00 p.m. for the following purposes:
1. To consider and act upon a proposal to approve amendments to
certain Subordinated Convertible Notes of the Company originally issued to
GFL Performance Fund Limited and GFL Advantage Fund Limited and now held by
the former Chairman of the Board of Directors of the Company, certain
trusts for the benefit of members of his family and an unaffiliated
investor and the issuance of warrants to purchase shares of Common Stock of
the Company in connection with such amendments.
2. To consider and act upon a proposal to approve amendments to
certain 10% Series A Subordinated Convertible Notes of the Company
originally issued to the former Chairman of the Board of Directors of the
Company, certain trusts for the benefit of members of his family and an
unaffiliated investor and the issuance of warrants to purchase shares of
Common Stock of the Company in connection with such amendments.
The Board of Directors has fixed February 19, 1998 as the record date for
the determination of shareholders entitled to vote at the Special Meeting. Only
shareholders of record at the close of business on that date will be entitled to
notice of, and to vote at, the Special Meeting.
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING IN PERSON. WHETHER
OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING IN PERSON, YOU ARE URGED TO
SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY. A SELF-ADDRESSED ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.
By order of the Board of Directors.
Richard P. Jaffe,
Secretary
West Long Branch, New Jersey
March 9, 1998
- --------------------------------------------------------------------------------
IMPORTANT
Please sign, date and mail your Proxy Card.
- --------------------------------------------------------------------------------
<PAGE>
EA INDUSTRIES, INC. 185 MONMOUTH PARKWAY
WEST LONG BRANCH, NEW JERSEY 07764-9989
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON
March 31, 1998
--------
GENERAL
This Proxy Statement and accompanying proxy are furnished by EA Industries,
Inc. (the "Company" or "EAI") to the shareholders ("Shareholders") of the
Company in connection with the solicitation of proxies by the Board of Directors
for use in voting at the Special Meeting of Shareholders to be held at the Ocean
Place Hilton Resort and Spa, One Ocean Boulevard, Long Branch, NJ, at 2:00 p.m.,
local time, or at any adjournment thereof (the "meeting"). This Proxy Statement
and the enclosed proxy are first being mailed to shareholders on or about March
10,, 1998. The cost of the solicitation of proxies for the Annual Meeting will
be borne by the Company.
Voting Securities and Proxies
At the close of business on February 19, 1998, the record date for the
meeting, there were outstanding and entitled to vote 9,758,360 shares of Common
Stock (the "Common Stock"). The owners of Common Stock have all voting rights
with respect to matters to come before the meeting. Each share of Common Stock
is entitled to one vote.
All properly executed proxies received in time for the meeting will be
voted as specified. Anyone giving a proxy may revoke it at any time prior to the
voting thereof by signing, dating and delivering a subsequent proxy or by
written notice to the Secretary of the Company or by attending the meeting and
filing written notice of revocation with the Secretary prior to any vote. All
shares represented by executed and unrevoked proxies will be voted in accordance
with the specifications therein. Proxies submitted without specification will be
voted FOR the proposal to approve amendments to certain Subordinated Convertible
Notes of the Company originally issued to GFL Performance Fund Limited and GFL
Advantage Fund Limited and now held by the former chairman of the Board of
Directors of the Company, certain trusts for the benefit of members of his
family and an unaffiliated investor; and FOR a proposal to approve amendments to
certain 10% Series A Subordinated Convertible Notes of the Company originally
issued to the former chairman of the Board of Directors of the Company, certain
trusts for the benefit of members of his family and an unaffiliated investor.
Approval of the two proposals requires the affirmative vote of a majority
of the votes cast by the holders of Common Stock entitled to vote on each such
proposal. The vote on each proposal will be tabulated as set forth below.
All votes will be tabulated by an inspector of election at the meeting who
will separately tabulate affirmative votes, negative votes, and broker
non-votes. Any proxy submitted and containing an abstention or broker non-vote
will not be counted as a vote cast on any matter to which it relates.
Abstentions and broker non-votes will be counted for purposes of determining
whether a quorum is present at the meeting.
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of March 9, 1998, information with
respect to the ownership of the Company's outstanding Common Stock by (i) each
person who is known to the Company to be the beneficial owner of more than 5% of
the Company's outstanding shares of Common Stock, (ii) each director, (iii) each
of the Company's executive officers, and (iv) all executive officers and
directors as a group. Unless otherwise indicated, each individual has sole
voting and investment power with respect to the shares beneficially owned by
him.
<TABLE>
<CAPTION>
Amount and
Nature of
Name and Beneficial Ownership Percent
Address of (number of shares) of
Beneficial Owner* Position of Common Stock Class
- ----------------- -------- -------------------- -------
<S> <C> <C> <C>
Irwin L. Gross Former Chairman of the Board 186,667(1) 1.93%
Frank G. Brandenberg President, Chief 185,000(2) 1.92%
Executive Officer
and Director
Edward A. Blechschmidt Director 0(3) (4)
Kenneth W. Cannestra Director 0(3) (4)
Bryan I. Finkel Director 0(3) (4)
Ross Manire Director 0(3) (4)
Shrawan K. Singh Director 0(3) (4)
Ronald Verdoom Director 0(3) (4)
James Crofton Vice President 50,000(5) (4)
Finance and Treasurer
(Chief Financial Officer)
Jose Flahaux Vice President 60,000(6) (4)
Howard Kamins Vice President and General Counsel 0(7) (4)
Warburg, Pincus Counsellors, Inc. None 1,120,026(8) 11.31%
466 Lexington Avenue
New York, NY 10017
Mellon Bank Corporation None 1,170,225(9) 12.37%
One Mellon Bank Center
Pittsburgh, PA 15258
All directors and executive officers
as a group (10 Persons) 295,000(2)-(7) 3.02%
</TABLE>
*Addresses are included only for persons who beneficially own more than 5%
of the outstanding Common Stock.
(1) Represents 20,000 shares of Common Stock held by Mr. Gross, a currently
exercisable warrant to purchase 65,000 shares of Common Stock granted for
consulting services and currently exercisable options to purchase 101,667
shares of Common Stock granted under the Company's Equity Incentive Plan.
Does not include 20,000 shares of Common Stock held of record by
irrevocable trusts for the benefit of the children of Mr. Gross with
respect to which an independent trustee exercises voting and investment
power. Mr. Gross disclaims beneficial ownership of such shares. Does not
include 339,461 shares of Common Stock into which certain 7% Convertible
Notes will be convertible, or warrants to purchase an aggregate of 328,400
shares of Common Stock which will be issued, if Proposal 1 is approved,
which are held by irrevocable trusts for the benefit of the children of
Mr. Gross with respect to which an independent trustee exercises voting and
investment power. Mr. Gross disclaims beneficial ownership of such shares.
Does not include 40,197 shares of Common Stock into which certain 7%
Convertible Notes held by Mr. Gross will be convertible, or warrants to
purchase an aggregate of 38,900
2
<PAGE>
shares of Common Stock which will be issued, if Proposal 1 is approved.
Does not include 333,200 shares of Common Stock into which certain 10%
Series A Convertible Notes will be convertible, or warrants to purchase an
aggregate of 322,300 shares of Common Stock which will be issued, if
Proposal 2 is approved, which are held by irrevocable trusts for the
benefit of the children of Mr. Gross with respect to which an independent
trustee exercises voting and investment power. Mr. Gross disclaims
beneficial ownership of such shares. Does not include 320,800 shares of
Common Stock into which certain 10% Series A Convertible Notes held by Mr.
Gross will be convertible, or warrants to purchase an aggregate of 310,400
shares of Common Stock which will be issued, if Proposal 2 is approved.
(2) Represents currently exercisable options to purchase 185,000 shares of
Common Stock granted under the Company's Equity Incentive Plan. Does not
include options to purchase 495,000 shares of Common Stock granted under
the Company's Equity Incentive Plan, which are not currently exercisable.
(3) Does not include options to purchase 105,000 shares of Common Stock granted
under the Company's Equity Incentive Plan, which are not currently
exercisable.
(4) Represents less than 1% of the outstanding shares of Common Stock.
(5) Represents currently exercisable options to purchase 50,000 shares of
Common Stock granted under the Company's Equity Incentive Plan. Does not
include options to purchase 180,000 shares of Common Stock granted under
the Company's Equity Incentive Plan, which are not currently exercisable.
(6) Represents currently exercisable options to purchase 60,000 shares of
Common Stock granted under the Company's Equity Incentive Plan. Does not
include options to purchase 180,000 shares of Common Stock granted under
the Company's Equity Incentive Plan, which are not currently exercisable.
(7) Does not include options to purchase 100,000 shares of Common Stock granted
under the Company's Equity Incentive Plan, which are not currently
exercisable.
(8) Represents shares of Common Stock owned as of January 12, 1998 and 428,571
shares issuable upon conversion of 6% Series A Convertible Notes of the
Company which are currently convertible.
(9) Represents shares held by Mellon Bank Corporation and/or its direct or
indirect subsidiaries: Mellon Bank, N.A., Mellon Capital Management
Corporation, The Dreyfus Corporation, Dreyfus Growth & Value Fund, Inc.,
Dreyfus Aggressive Growth Fund and Premier Aggressive Growth Fund, Inc.
Background
The purpose of this Special Meeting is to consider and vote on amendments
to certain outstanding convertible securities issued by the Company. As
previously reported, the Company has incurred significant losses and has had
negative cash flows from operations in each of the last six years. In order to
continue operations, the Company has had to raise additional capital to offset
cash utilized in its operating and investing activities. In order to assess the
merits of the proposals being submitted to shareholders, the Board of Directors
of the Company has concluded that it is helpful to understand the scope of such
capital formation transactions. The following are descriptions of the relevant
transactions:
GFL Financing
Original Terms
Among its 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"). GFL
Advantage Fund and GFL Performance Fund converted $7,930,000 principal amount of
such notes into 810,661 shares of the Company's Common Stock in
3
<PAGE>
accordance with their terms. On August 19, 1996, GFL Performance Fund
transferred and assigned its $1,025,000 outstanding principal amount note of the
Company to a third party, unrelated to the Company, its management or to the GFL
Funds, who thereafter converted such note. Also, on August 19, 1996, GFL
Advantage Fund transferred and assigned its $2,070,000 outstanding principal
amount note of the Company to Irwin L. Gross, then Chairman of the Company and
certain trusts benefiting his family (the "Gross GFL Note Holders") for a cash
payment of $2,725,000. In connection with such assignment, the Company canceled
the prior note held by GFL Advantage Fund and reissued certain Convertible Notes
(the "Gross GFL Convertible Notes") of the Company in the aggregate principal
amount of $2,070,000 due December 29, 1997 to the Gross GFL Note Holders. These
Gross GFL Convertible Notes had a maturity date of December 29, 1997 and were
convertible into shares of the Company's Common Stock at the fixed conversion
price per share of $2.67 (pre Reverse Stock Split basis).
Amended Terms
On February 6, 1997, the Company amended the Gross GFL Convertible Notes
(the "February GFL Convertible Notes") by (i) increasing the aggregate principal
amount of such notes to $2,725,000 (the purchase price paid by the Gross GFL
Note Holders) and (ii) reducing the fixed conversion price of such notes to
$1.50 per share, Such amendments were made in consideration of the Gross GFL
Note Holders agreeing to forego interest and make certain other loans to the
Company. The rights of the holders of the February GFL Convertible Notes to
receive additional shares of Common Stock a result of lowering the cap on the
conversion price to $1.50 per share was subject to listing of the additional
shares on the New York Stock Exchange. The Gross GFL Note Holders subsequently
sold $600,000 principal amount of February GFL Convertible Notes to an
unaffiliated investor (the "Gross GFL Note Holders and this investor are
referred to as the "GFL Note Holders"). In October 1997, the Gross GFL Note
Holders exercised their conversion rights in accordance with the terms of the
February Convertible Notes with respect to $226,709 in principal of the notes
and received 151,139 shares of Common Stock.
In January 1998, The Company and the GFL Note Holders agreed to amend (the
"January 1998 Amendments") the terms of the February Convertible Notes as
follows:
(i) to extend the maturity date of the February GFL Convertible Notes to
December 31, 1998;
(ii) to increase the conversion price to the lesser of (a) 80% of the
average of the volume weighted average price per share of the Company's Common
Stock (as reported by Bloomberg Business Services in its Volume at Price
Service) for the five days immediately preceding the date of notice of
conversion to the Company or (b) $5.00; and
(iii) to provide for interest payments in cash or shares of Common Stock at
the conversion price at the option of the holders or the Company.
In consideration of the January 1998 Amendments the Company agreed to issue
to the GFL Note Holders warrants (the "Gross Warrants") to purchase an aggregate
of 483,393 shares of Common Stock at a price of $5.00 per share for a period of
five years. The GFL Note Holders were also granted demand and piggyback
registration rights for the shares issuable upon conversion of the Convertible
Notes and exercise of the Gross Warrants. These notes as amended in January 1998
are referred to as the "Convertible Notes".
4
<PAGE>
The following table describes in summary fashion the effects of the various
amendments of the Convertible Notes and the impact of Proposal 1:
<TABLE>
<CAPTION>
Proposal regarding Gross Convertible Notes
--------------------------------------------------------------------------------------------
(1) (2) (3) (4)
Number of Shares Number of Shares
Number of Shares Issuable after lowering Issuable after raising
Principal Amount Originally Issuable Conversion price Conversion Price Cap
Name of Holder Of Note On Conversion Cap to $1.50 to $5.00
- -------------- ---------------- ------------------- ----------------------- ----------------------
<S> <C> <C> <C> <C>
Irwin L. Gross $200,987 75,276 133,991 40,197
Gabrielle Gross Trust $848,652 317,847 565,768 169,730
Elizabeth Gross Trust $848,652 317,847 565,768 169,730
Connie Lerner $600,000 224,719 400,000 120,000
---------- ------- --------- -------
Total $2,498,291 935,689 1,665,527 449,657
========== ======= ========= =======
<CAPTION>
(5) (6) (7) (8)
Reduction in Number Total Number of
of Shares Issuable Cash to be paid Shares To
On Conversion Warrants to On Warrant Be Issued
(3)-(4) Be Issued Exercise (4)+(6)
------------------- ----------- --------------- ---------------
<S> <C> <C> <C> <C>
Irwin L. Gross 93,794 38,900 $194,500 79,097
Gabrielle Gross Trust 396,038 164,200 $821,000 333,930
Elizabeth Gross Trust 396,038 164,200 $821,000 333,930
Connie Lerner 280,000 116,093 $580,465 236,093
--------- ------- ---------- -------
Total 1,165,870 483,393 $2,416,965 983,050
========= ======= ========== =======
</TABLE>
The NYSE formally informed the Company in late 1997 that because the
amendments that created the February GFL Convertible Notes were made when
Mr. Gross was a director of the Company, the listing on the NYSE of the shares
of Common Stock issuable upon conversion of the Convertible Notes would be
subject to approval by the shareholders of the Company. If the shareholders do
not approve the amended terms contained in the Convertible Notes the GFL Note
Holders have the right to accelerate the payment of outstanding principal and
interest on the Convertible Notes with a 22% penalty.
Series A Notes
Original Terms
During the period beginning on October 25, 1996 and ending on April 10,
1997, the Company borrowed an additional aggregate total of $3,520,000 from the
then Chairman of its Board of Directors, certain trusts benefiting his family
(collectively, the "Gross Series A Holders") and an unaffiliated investor (the
"Series A Investor"). The proceeds of these loans were used to provide working
capital for the Company; primarily for day to day operations of Tanon
Manufacturing, Inc. ("Tanon"), the Company's principal operating subsidiary.
These loans were represented by certain 10% Series A Convertible Notes (the
"Series A Notes") issued by the Company in January 1997. The Series A Notes will
mature on January 22, 1999 and were originally convertible at the option of the
holder (i) after January 1, 1998, into shares of Common Stock of the Company at
a conversion price of $3.50 per share, or (ii) into shares of Common Stock of
Tanon, after completion of an initial public offering of shares of Common Stock
of Tanon at a conversion price equal to the quotient of (a) $25.0 million,
divided by (b) the number of shares of Common Stock of Tanon that were issued
and outstanding at the close of business on the day immediately prior to the
effective date of the registration statement covering the shares of Common Stock
of Tanon offered in such initial public offering, without giving effect to the
number of shares of Common Stock of Tanon being offered in such initial public
offering.
Amended Terms
In January 1998, the Company and the Gross Series A Holders agreed to amend
the terms of the Series A Notes
(i) to provide for interest payments in cash or stock at the
conversion price at the option of the holders and the Company; and
(ii) to increase the conversion price to the lesser of (a) 80% of the
average of the volume weighted average price per share of the Company's
Common Stock (as reported by Bloomberg Business Services in its Volume at
Price Service) for the five days immediately preceding the date of notice
of conversion to the Company, or (b) $5.00.
5
<PAGE>
In consideration of these amendments (the "Series A Amendments") the
Company agreed to issue to the Gross Series A Holders warrants (the "Series A
Warrants") to purchase an aggregate of 632,700 shares of Common Stock at a price
of $5.00 per share for a period of five years. The Gross Series A Note Holders
were also granted demand and piggyback registration rights for the shares of
Common Stock issuable upon conversion of the Amended Series A Notes and exercise
of the Series A Warrants. These amendments do not affect the terms of one of the
Series A Notes, in the original principal amount of $250,000, issued to the
Series A Investor. These notes as amended in January 1998 are referred to as the
"Amended Series A Notes."
The NYSE formally informed the Company in late 1997 that because the
amendments were made when Mr. Gross was a director of the Company, the listing
on the NYSE of the shares of Common Stock issuable upon conversion of the Series
A Notes would be subject to approval by the shareholders of the Company. If the
shareholders do not approve the amended terms contained in the Amended Series A
the Gross Series A Note Holders have the right to accelerate the payment of
outstanding principal and interest on the Amended Series A Notes with a 22%
penalty. The following table describes in summary fashion the effects of the
various amendment of the foregoing notes and the impact of Proposal 2:
<TABLE>
<CAPTION>
Proposal regarding Series A Gross Convertible Notes
------------------------------------------------------------------
(1) (2) (3)
Number of Shares
Number of Shares Issuable After Raising
Principal Amount Originally Issuable Conversion Price Cap
Name of Holder of Note on Conversion to $5.00
- -------------- ---------------- ------------------- ----------------------
<S> <C> <C> <C>
Irwin L. Gross $1,604,000 458,286 320,800
Gabrielle Gross Trust $733,000 209,429 146,600
Elizabeth Gross Trust $733,000 209,429 146,600
Gross Family Remainder Trust $98,000 28,000 19,600
Gross Family Annuity Trust $102,000 29,143 20,400
---------- ------- -------
Total $3,270,000 934,287 654,000
========== ======= =======
<CAPTION>
(4) (5) (6) (7)
Reduction in Number Total Number
of Shares Issuable Cash to be of shares to
on Conversion Warrants to Paid on Warrant Be Issued
Name of Holder (2)-(3) Be Issued Exercise (3)+(5)
- -------------- -------------------- ----------- --------------- ------------
<S> <C> <C> <C> <C>
Irwin L. Gross 137,486 310,400 $1,552,000 622,200
Gabrielle Gross Trust 62,829 141,800 $709,000 288,400
Elizabeth Gross Trust 62,829 141,800 $709,000 288,400
Gross Family Remainder Trust 8,400 19,000 $95,000 38,600
Gross Family Annuity Trust 8,743 19,700 $98,500 40,100
------- ------- ---------- ---------
Total 280,287 632,700 $3,163,500 1,277,700
======= ======= ========== =========
</TABLE>
Other Convertible Securities
In addition to the foregoing convertible debentures the following
convertible securities are also outstanding:
10% Series B Convertible Notes
In April and July 1997, the Company issued 10% Series B Convertible Notes
(the "Series B Notes") in the aggregate principal amount of $1,000,000. The
Series B Notes will mature on January 22, 1999 and are convertible at the option
of the holder:
(i) after January 1, 1998, into shares of Common Stock of the Company
at a conversion price of $2.50 per share; or
(ii) into shares of Common Stock of Tanon after completion of an
initial public offering of shares of Common Stock of Tanon at a conversion
price equal to the quotient of (a) $25.0 million, divided by (b) the number
of shares of Common Stock of Tanon that were issued and outstanding at the
close of business on the day immediately prior to the effective date of the
registration statement covering the shares of Common Stock of Tanon offered
in such initial public offering, without giving effect to the number of
shares of Common Stock of Tanon being offered in such initial public
offering.
6
<PAGE>
The Series B Notes bear interest at the rate of 10% per annum, payable
annually in arrears on January 15, 1998 and January 22, 1999. Interest is
payable at the option of the Company in cash or stock of the Company at the
conversion prices described above.
6% Convertible Notes
In April 1997, the Company issued 6% Convertible Notes in the aggregate
principal amount of $4,500,000 (the "6% Convertible Notes"). The 6% Convertible
Notes bear interest at 6% per annum, payable quarterly and mature on April 30,
1999. The 6% Convertible Notes are convertible at a conversion price per share
equal to the lesser of:
(i) 76.5% of the average of the volume weighed average price per share
of the Company's Common Stock (as reported by Bloomberg Business Services
in its Volume at Price Service) for the five days immediately preceding the
date of notice of conversion to the Company, or (ii) $3.395.
In addition, the Company issued a 6% Convertible Note which is non-interest
bearing in the principal amount of $315,000 as a placement fee to an
unaffiliated party. The Company had agreed to list the shares issuable upon
conversion of the 6% Convertible Notes on the NYSE and to cause them to be
covered by an effective registration statement under the Securities Act by
December 1, 1997, or to pay a cash penalty equal to ten percent (10%) of the
outstanding principal and to pay interest from that date through the effective
date of the registration statement at eighteen percent (18%) per annum. The
Company has asked the holders of the 6% Convertible Notes to waive or reduce
these penalties. The shares underling the 6% Convertible Notes have been listed
on the NYSE.
Proposal 1
To approve (i) the terms of the January 1998 Amendments, and (ii) to
approve of the issuance of the Gross Warrants. The form of the January
1998 Convertible Notes are attached to this Proxy Statement as
Attachment A and the form of the Gross Warrants are attached hereto as
Attachment B.
The following table lists the current holders of the GFL Convertible Notes,
the principal amount of the notes they hold, the number of shares of Common
Stock of the Company they would receive upon conversion at the maximum
conversion price of $5.00 per share and upon the exercise of the Gross Warrants:
<TABLE>
<CAPTION>
Proposal regarding Gross Convertible Notes
----------------------------------------------------------------------------------------------
(1) (2) (3) (4)
Number of Shares Number of Shares
Number of Shares Issuable after lowering Issuable after raising
Principal Amount Originally Issuable Conversion price Conversion Price Cap
Name of Holder Of Note On Conversion Cap to $1.50 to $5.00
- -------------- ---------------- ------------------- ----------------------- ----------------------
<S> <C> <C> <C> <C>
Irwin L. Gross $ 200,987 75,276 133,991 40,197
Gabrielle Gross Trust $ 848,652 317,847 565,768 169,730
Elizabeth Gross Trust $ 848,652 317,847 565,768 169,730
Connie Lerner $ 600,000 224,719 400,000 120,000
---------- ------- ------- -------
Total $2,498,291 935,689 1,665,527 499,657
========== ======= ========= =======
<CAPTION>
(5) (6) (7) (8)
Reduction in Number Total Number of
of Shares Issuable Cash to be paid Shares To
On Conversion Warrants to On Warrant Be Issued
Name of Holder (3)-(4) Be Issued Exercise (4)+(6)
- -------------- ------------------- ----------- --------------- ---------------
<S> <C> <C> <C> <C>
Irwin L. Gross 93,794 38,900 $194,500 79,097
Gabrielle Gross Trust 396,038 164,200 $821,000 333,930
Elizabeth Gross Trust 396,038 164,200 $821,000 333,930
Connie Lerner 280,000 116,093 $580,465 236,093
--------- ------- ---------- -------
Total 1,165,870 483,393 $2,416,965 983,050
========= ======= ========== =======
</TABLE>
The Board of Directors believes that the January 1998 Amendments were
appropriate in light of the circumstances under which they were made, including
the Company's financial condition and the availability of alternative sources of
capital at the time the GFL Convertible Notes were originally issued and at the
times they were amended, and that the future
7
<PAGE>
exercise of the Gross Warrants could provide additional capital resources for
the Company at a reasonable cost. If Proposal 1 is not approved, and the holders
of all of the Convertible Notes exercise their rights to demand payment of the
notes with the 22% penalty the Company would be obligated to pay $3,047,915 to
these holders. Substantially all of the assets of the Company are held in the
Company's operating subsidiary and such assets are pledged to secure financings
of that subsidiary. In addition, as described above the Company has a
substantial outstanding balance in other convertible securities. The Company has
no agreements or commitments with anyone to provide additional capital to the
Company. Therefore, no assurance can be given that the Company would be able to
raise sufficient funds to repay this amount.
The Board of Directors of the Company believes that the January 1998
Amendments are in the best interests of the Company and its Shareholders and
recommends a vote FOR Proposal 1.
Proposal 2
To approve (i) the terms of the Series A Note as originally issued to
the Series A Investor, (ii) to approve the terms of the Series A
Amendments, and (iii) to approve of the issuance of the Series A
Warrants. The form of the revised Series A Notes giving effect to the
Series A Amendments are attached to this Proxy Statement as Attachment
C and the form of the Series A Warrants are attached hereto as
Attachment D.
The following table lists the current holders of the Series A Notes, the
principal amount of the notes they hold, the number of shares of Common Stock of
the Company they would receive upon conversion at the maximum conversion price
of $5.00 per share and the number of Series A Warrants they would receive:
<TABLE>
<CAPTION>
Proposal regarding Series A Gross Convertible Notes
--------------------------------------------------------------------------------------------
(1) (2) (3) (4)
Number of Shares Reduction in Number
Number of Shares Issuable After Raising of Shares Issuable
Principal Amount Originally Issuable Conversion Price Cap on Conversion
Name of Holder of Note on Conversion to $5.00 (2)-(3)
- ------------- ---------------- ------------------- ---------------------- -------------------
<S> <C> <C> <C> <C>
Irwin L. Gross $1,604,000 458,286 320,800 137,486
Gabrielle Gross Trust $733,000 209,429 146,600 62,829
Elizabeth Gross Trust $733,000 209,429 146,600 62,829
Gross Family Remainder Trust $98,000 28,000 19,600 8,400
Gross Family Annuity Trust $102,000 29,143 20,400 8,743
---------- ------- ------- -------
Total $3,270,000 934,287 654,000 280,287
========== ======= ======= =======
<CAPTION>
(5) (6) (7)
Total Number
Cash to be of shares to
Warrants to Paid on Warrant Be Issued
Name of Holder Be Issued Exercise (3)+(5)
- -------------- ----------- --------------- ------------
<S> <C> <C> <C>
Irwin L. Gross 310,400 $1,552,000 622,200
Gabrielle Gross Trust 141,800 $709,000 288,400
Elizabeth Gross Trust 141,800 $709,000 288,400
Gross Family Remainder Trust 19,000 $95,000 38,600
Gross Family Annuity Trust 19,700 $98,500 40,100
------- ---------- ---------
Total 632,700 $3,163,500 1,277,700
======= ========== =========
</TABLE>
The Board of Directors believes that the Series A Amendments were
appropriate in light of the circumstances under which they were made, including
the Company's financial condition and the availability of alternative sources of
capital, at the time the Series A Notes were originally issued and at the time
they were amended and that the future exercise of the Series A Warrants could
provide additional capital resources for the Company at a reasonable cost If
Proposal 2 is not approved, and the holders of all of the Convertible Notes
exercise their right s to demand payment of the notes with the 22% penalty the
Company would be obligated to pay $4,709,948 to these holders. Substantially all
of the assets of the Company are held in the Company's operating subsidiary and
such assets are pledged to secure financing of that subsidiary. In addition, as
described above the Company has a substantial outstanding balance in other
convertible securities.
8
<PAGE>
Therefore, no assurance can be given that the Company would be able to raise
sufficient funds to repay this amount.
The Board of Directors of the Company believes that the Series A Amendments
are in the best interests of the Company and its Shareholders and recommends a
vote FOR Proposal 2.
MISCELLANEOUS
The cost of the solicitation of proxies will be borne by the Company. In
addition to the use of the mails, proxies may be solicited personally, or by
telephone or telegraph, by certain of the Company's directors, officers and a
group of management employees who will not receive any extra compensation for
such solicitation other than out-of-pocket expenses, and by the American Stock
Transfer & Trust Company which has been engaged to assist the Company in the
solicitation of proxies. The cost of solicitation (excluding customary
out-of-pocket expenses) is included in the monthly fees of approximately $850
paid by the Company to the American Stock Transfer & Trust Company for services
as transfer agent for the Company's Common Stock.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Consolidated Balance Sheet, Statement of Operations,
Statement of Shareholders' Equity, Statement of Cash Flows, and Notes to
Consolidated Financial Statements (the "Company's Financial Statements") for the
years ended December 31, 1995, December 31, 1996 and December 31, 1997 are
incorporated by reference to the Company's Annual Report on Form 10-K for the
year ended December 31, 1997. All documents containing or referring to the
Company's Financial Statements filed subsequent to the date of this Proxy
Statement by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act prior to the date of the meeting shall be deemed to be incorporated
herein and to be a part hereof from the date of filing of such documents. Any
statements 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 Proxy Statement 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 statements. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement.
- --------------------------------------------------------------------------------
IMPORTANT
Please sign, date and mail your Proxy Card.
- --------------------------------------------------------------------------------
By order of the Board of Directors.
Richard P. Jaffe, Secretary
West Long Branch, New Jersey
March 9, 1998
<PAGE>
Attachment A
NEITHER THIS NOTE, NOR THE SHARES OF COMMON STOCK ISSUABLE UPON
CONVERSION HEREOF HAVE BEEN OR WILL BE REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS, EXCEPT AS
EXPRESSLY PROVIDED HEREIN, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR (B) AN OPINION OF COUNSEL ACCEPTABLE TO COUNSEL FOR THE
ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED AND THAT THE PROPOSED TRANSFER MAY
BE MADE WITHOUT VIOLATION OF THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAW.
No. ______ __, 1998
$ ----------------
EA INDUSTRIES, INC.
CONVERTIBLE NOTE
DUE DECEMBER 31, 1998
EA INDUSTRIES, INC. ("EA" or the "Company"), a New Jersey corporation,
for value received, and intending to be legally bound, hereby promises to pay to
the order of ______________, or its registered assigns, the principal amount of
____________________ ($_________) on December 31,1999 ("Maturity Date"), without
interest. Overdue principal payments shall accrue interest at eighteen percent
(18%) per annum until paid, which interest shall be payable on demand. This Note
is one of a number of Convertible Notes issued by the Company in a private
placement of $2,498,291 in aggregate principal and warrants to purchase an
aggregate of 367,300 shares of Common Stock. This Note and such other
Convertible Notes are collectively referred to herein as the "7% Notes"). The
terms and conditions of all 7% Notes shall be identical in all respects and all
7% Notes shall rank pari passu. This note replaces and supersedes a 7%
Convertible Note dated_____ in the current principal amount of
_________________issued by the Company ("The GFL Note") to the Holder. The GFL
Note is hereby declared null and void .
For each dollar of principal value represented by this Note the holder
hereof will also receive a warrant (in the form of Exhibit "A" hereto) to
purchase .1934898 shares of Common Stock. This Note or any portion of the
principal value and attached warrants may be sold, assigned, hypothecated, given
or otherwise transferred only as a unit consisting of one dollar of principal
and an attached warrant to purchase .1934898 shares of Common Stock.
<PAGE>
The Warrant shall become exercisable as the principal on the 7% Notes
held by the Holder are converted into shares of Common Stock so that at the time
that one dollar of principal on the notes is converted warrants to purchase
.1934898 shares of Common Stock shall become exercisable. Payments of principal
and interest on this Note shall be made in lawful money of the United States of
America by delivery of a check to the address provided by the payee as shown on
the Note Register. The Company may treat the person in whose name this Note is
registered (the "Holder") on the Note Register kept by the Company as the owner
of this Note for the purpose of receiving payment and for all other purposes,
and the Company shall not be affected by any notice to the contrary. This Note
is transferable only (i) in accordance with the terms hereof and (ii) by
surrender thereof at the office of the Company at 185 Monmouth Parkway, West
Long Branch, New Jersey, duly endorsed or accompanied by a written instrument
duly executed by the Holder of this Note or his attorney duly authorized in
writing.
The Company shall have the option to make interest payments hereunder
in fully paid and non-assessable shares of Common Stock of EA ("EA Shares" or
"Shares"). This option may be exercised on any one or more of the dates interest
is payable under this Note by delivery of written notice to the Holder at least
fifteen (15) days before such payment date. If this option is elected, EA shall
issue and dispatch to the Holder one or more Certificates for the aggregate
number of whole Shares of Common Stock of EA determined by dividing the
Conversion Price (determined pursuant to paragraph 2 as if the Holder was
converting a portion of the principal of this Note) into the total amount of
lawful money of the United States of America which the Holder would have
received if the aggregate amount of interest on this Note which is being paid in
EA Shares were being paid in such lawful money. No fractional shares will be
issued in payment of interest on this Note. In lieu thereof, the Holder may be
issued a number of Shares which reflects a rounding up to the next whole number
or may be paid in lawful money of the United States of America.
NOTWITHSTANDING THE FOREGOING, PAYMENT OF INTEREST IN EA SHARES IS
EXPRESSLY CONDITIONED IN EACH CASE UPON (i) SUFFICIENT AUTHORIZED, UNISSUED AND
UNRESERVED COMMON STOCK OF THE ISSUER OF SUCH SHARES TO PERMIT SUCH PAYMENT,
(ii) OFFICIAL NOTICE OF THE LISTING (THE "LISTING") OF SUCH SHARES ON THE NEW
YORK STOCK EXCHANGE OR THE NASDAQ NATIONAL MARKET SYSTEM, IF APPLICABLE, PRIOR
TO SUCH PAYMENT, AND (iii) COMPLIANCE WITH ALL FEDERAL AND STATE SECURITIES LAWS
AND REGULATIONS. IN THE EVENT (i) THERE IS INSUFFICIENT AUTHORIZED, UNISSUED AND
UNRESERVED COMMON STOCK OF THE ISSUER OF THE SHARES TO BE ACQUIRED UPON AN
INTEREST PAYMENT DATE, (ii) SUCH LISTING OF THE SHARES TO BE ACQUIRED UPON AN
INTEREST PAYMENT DATE DOES NOT OCCUR PRIOR TO SUCH DATE, OR (iii) THE ISSUER OF
THE SHARES TO BE ACQUIRED UPON AN INTEREST PAYMENT DATE IS UNABLE TO COMPLY WITH
ALL FEDERAL AND STATE SECURITIES LAWS IN ISSUING SUCH SHARES, SUCH INTEREST
PAYMENT SHALL BE MADE IN U.S. DOLLARS. INABILITY TO MAKE INTEREST PAYMENTS IN
SHARES SHALL NOT BE DEEMED TO BE AN EVENT OF DEFAULT HEREUNDER.
2
<PAGE>
1. Restrictions on Transfer of Securities. By accepting this Note, the
Holder hereby acknowledges that, except as expressly set forth herein, neither
this Note nor any Shares issuable in the event of conversion have been, or will
be, registered under the Securities Act of 1933, as amended (the "Securities
Act"), or any state securities laws and represents for himself and his legal
representative that he is acquiring this Note and will acquire any Shares
(hereinafter defined) issued upon conversion hereof, for his own account, for
investment purposes only and not with a view to, or for sale in connection with,
any distribution of such securities, and agrees to reaffirm in writing this
investment representation at the time of exercise of the conversion right set
forth below, subject to the Company's agreement to register the Shares as set
forth in Section 4 below. The Holder shall not transfer this Note or any Shares
(or any interest therein) until (i) it shall have first given written notice to
the Company describing the manner of any such proposed transfer, and (ii) either
(a) the Company has received from Holder's counsel an opinion satisfactory to
the Company and its counsel that such transfer may be made without compliance
with the registration provisions of the Securities Act and that the proposed
transfer may be made without violation of the Securities Act and any applicable
state securities law, or (b) a registration statement filed by the Company
covering the Note or Shares to be transferred is in effect under the Securities
Act and there has been compliance with the applicable state securities laws.
2. Conversion of Note. This Note may be converted into shares of Common
Stock of the Company, as follows:
(a) Conversion. Subject to and upon compliance with the provisions of this
section captioned "Conversion of Note", at the option of the Holder, at any time
after April 15, 1998 and prior to the close of business on the Maturity Date,
the unpaid principal balance of the Note may be converted in whole, or from time
to time in part, into EA Shares, at a conversion price (the "Conversion price")
per EA Share equal to the lesser of (i) $5.00 per share or (ii) eighty percent
(80.00%) of the arithmetic average of the volume weighted average price per
share of the Company's Common Stock (as reported by Bloomberg Business Services
in its Volume at Price Service) for the five trading days immediately preceding
the date the Company receives the Holder's notice of Holder's intention to
exercise its right of.
The term EA Share Price is sometimes referred to herein as the
"Conversion Price." The conversion as set forth herein shall be subject to such
adjustment or adjustments, if any, of such Conversion Price and of the
securities or other property issuable upon such conversion as set forth below,
upon delivery of the Note to the offices of the Company, together with the form
of conversion notice attached thereto (the "Conversion Notice"), duly executed
by the Holder thereof. The Conversion Notice shall state the principal amount
thereof to be so converted, the Shares into which such amount is being converted
and shall include or be accompanied by representations as to the Holder's
investment intent substantially similar to those contained in this Note. Shares
issuable upon conversion of the Note shall be issued in the name of the Holder
and shall be transferable only in accordance with all of the terms and
restrictions contained herein. Upon such conversion, Company shall pay, in cash,
all accrued and unpaid interest through the conversion date on the Note or such
part thereof delivered for conversion. No fractional Shares shall be issued or
delivered upon conversion of the Note. In case the Note shall be surrendered for
the conversion of only a portion of the principal amount thereof, the Company
shall, at the time of issuing the Shares issuable upon the conversion of such
portion, execute and deliver to the
3
<PAGE>
Holder of the Note so surrendered a new note equal in principal amount to the
unconverted portion of the surrendered Note, dated the most recent date to which
interest shall have been paid on the surrendered Note.
NOTWITHSTANDING THE FOREGOING, THE CONVERSION OF THE NOTE INTO EITHER
EA SHARES IS EXPRESSLY CONDITIONED IN EACH CASE UPON (i) SUFFICIENT AUTHORIZED,
UNISSUED AND UNRESERVED COMMON STOCK OF THE ISSUER OF SUCH SHARES TO PERMIT SUCH
CONVERSION, (ii) OFFICIAL NOTICE OF THE LISTING (THE "LISTING") OF SUCH SHARES
ON THE NEW YORK STOCK EXCHANGE OR THE NASDAQ NATIONAL MARKET SYSTEM, IF
APPLICABLE, PRIOR TO SUCH CONVERSION, AND (iii) COMPLIANCE WITH ALL FEDERAL AND
STATE SECURITIES LAWS AND REGULATIONS. IN THE EVENT (i) THERE IS INSUFFICIENT
AUTHORIZED, UNISSUED AND UNRESERVED COMMON STOCK OF THE ISSUER OF THE SHARES TO
BE ACQUIRED UPON CONVERSION, (ii) SUCH LISTING OF THE SHARES TO BE ACQUIRED UPON
CONVERSION DOES NOT OCCUR PRIOR THERETO, OR (iii) THE ISSUER OF THE SHARES TO BE
ACQUIRED UPON CONVERSION IS UNABLE TO COMPLY WITH ALL FEDERAL AND STATE
SECURITIES LAWS AND REGULATIONS IN ISSUING SUCH SHARES, THIS NOTE SHALL NOT BE
CONVERTIBLE INTO SUCH SHARES AS AFORESAID.
(b) Adjustments.
(i) Subdivision or Combination. Whenever the Company shall subdivide or
combine the outstanding shares of its Common Stock issuable upon conversion of
this Note, including stock dividends and stock splits, the Conversion Price in
effect with respect to such Shares being subdivided or combined immediately
prior to such subdivision or combination shall be proportionately decreased in
the case of subdivision or increased in the case of combination effective at the
time of such subdivision or combination.
(ii) Reclassification or Change. Whenever any reclassification or
change of the outstanding shares of Common Stock of the Company shall occur
(other than a change in par value, or from par value to no par, or from no par
to par value, or as a result of a subdivision or combination) effective
provision shall be made whereby the Holder shall have the right, at any time
thereafter, to receive upon conversion of this Note the kind of stock, other
securities or property receivable upon such reclassification or change by a
holder of the number of shares of Common Stock of the Company issuable upon
conversion of this Note immediately prior to such reclassification or change.
Thereafter, the rights of the Holder with respect to the adjustment of the
amount of securities or other property obtainable upon conversion of this Note
shall be appropriately continued and preserved, so as to afford as nearly as may
be possible protection of the nature afforded by this paragraph (c). The
provisions of this clause (iii) shall apply to successive transactions of the
nature to which it relates.
4
<PAGE>
(iii) Notices of Record Date. In case
(A) the Company shall declare a dividend (or make any other
distribution) on its shares of Common Stock payable otherwise than in cash out
of its earned surplus; or
(B) the Company shall grant the holders of its Common Stock the
right to subscribe for or purchase any shares of its capital stock of any class;
or
(C) the Company shall make any distribution on or in respect of
the Common Stock in connection with the dissolution, liquidation or winding up
of the Company; or
(D) there is to be a reclassification or change of the Common
Stock of the Company (other than the subdivision or combination of its
outstanding shares of Common Stock), a consolidation or merger to which the
Company is a party and in connection with which approval of any class of
stockholders of the Company is required, or a sale or conveyance of the property
of the Company as an entirety or substantially as an entirety, then and in each
such event, the Company shall mail or cause to be mailed to the Holder a notice
specifying the date on which any record is to be taken for the purpose of such
dividend, distribution or granting of rights, or the date on which such
reclassification, consolidation or merger is expected to become effective, and
the time, if any, as of which the holders of record of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization or reclassification. Such notice
shall be mailed at least 30 days prior to the record or effective date therein
specified.
(iv) Notice of Adjustment of Conversion Price, etc. If there shall be
any adjustment as provided in (b) hereof, or if securities or property other
than shares of Common Stock of the Company shall become issuable or deliverable
in lieu of shares of such Common Stock upon the conversion of this Note, the
Company shall forthwith cause written notice thereof to be sent by registered or
certified mail, postage prepaid, to the Holder, which notice shall be
accompanied by a certificate of the principal financial officer of the Company
setting forth in reasonable detail the facts requiring any such adjustment and
the Conversion Price and number of Shares issuable upon the conversion of this
Note after such adjustment, or the kind and amount of any such securities or
property so issuable or deliverable upon the conversion of this Note, as the
case may be.
3. Default. If any of the following conditions or events ("Events of Default")
shall occur and be continuing:
(a) if the Company shall default in the payment of principal of this Note
when the same becomes due and payable, whether at maturity or by declaration of
acceleration or otherwise;
(b) if the Company shall default in the payment of any interest on this Note
and shall fail to cure such default within ten days after receipt of written
notice thereof from the Holder to the Company;
5
<PAGE>
(c) if the Company shall materially default in the performance of or
compliance with any term contained herein and such default shall not have been
remedied within thirty days after receipt of written notice thereof from the
Holder to the Company;
(d) if the Company shall make an assignment for the benefit of creditors, or
shall admit in writing its inability to pay its debts as they become due, or a
voluntary petition for reorganization under Title 11 of the United States Code
("Title 11") shall be filed by the Company or an order shall be entered granting
relief to the Company under Title 11 or a petition shall be filed by the Company
in bankruptcy, or the Company shall be adjudicated a bankrupt or insolvent, or
shall file any petition or answer seeking for itself any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any present or future statute, law or regulation, or shall file any
answer admitting or not contesting the material allegations of a petition filed
against the Company in any such proceeding, or shall seek or consent to or
acquiesce in the appointment of any trustee, receiver or liquidator of the
Company or of all or any substantial part of the properties of the Company or if
the Company or its directors or majority shareholders shall take any action
looking to the dissolution or liquidation of the Company;
(e) if within 90 days after the commencement of an action against the Company
seeking a reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, such action shall not have been dismissed or nullified or all orders
or proceedings thereunder affecting the operations or the business of the
Company stayed, or if the stay of any such order or proceeding shall thereafter
be set aside, or if, within 90 days after the appointment without the consent or
acquiescence of the Company of any trustee, receiver or liquidator of the
Company or of all or any substantial part of the properties of the Company such
appointment shall not have been vacated;
then, and in any such event, Holder may at any time (unless such Event of
Default shall theretofore have been remedied) at its option, by written notice
to the Company, declare the Note to be due and payable, whereupon the Note shall
forthwith mature and become due and payable, together with interest accrued
thereon, and thereafter interest shall be due, at the rate of eighteen percent
(18%) per annum on the entire principal balance until the same is fully paid,
and on any overdue interest (but only to the extent permitted by law), without
presentment, demand, protest or notice, all of which are hereby waived.
In case of a default in the payment of any principal of or interest on
the Note, (whether at maturity or by acceleration) the Company will pay to the
Holder such further amount as shall be sufficient to cover the cost and expenses
of collection, including, without limitation, reasonable attorneys' fees,
expenses and disbursements. No course of dealing and no delay on the part of
Holder in exercising any right shall operate as a waiver thereof or otherwise
prejudice such Holder's rights, powers or remedies. No right, power or remedy
conferred by this Note upon Holder shall be exclusive of any other right, power
or remedy referred to herein or now or hereafter available at law, in equity, by
statute or otherwise.
6
<PAGE>
4. Registration Rights.
(a) Piggyback registration. If the Company proposes to file a
registration statement under the Securities Act with respect to an offering by
the Company for its own account of its Common Stock (other than a registration
statement on Form S-4 or S-8 or any form substituting therefor or filed in
connection with an exchange offer or an offering of securities solely to
existing stockholders or employees) during the period commencing on January 1,
1998 and ending on December 31, 1998, the Company shall in each case give
written notice of such proposed filing to the Holder and such notice shall offer
the Holder the opportunity to register such number of shares issuable upon
conversion ("Shares") as the Holder has acquired or contemplates acquiring upon
conversion and requests in writing within ten days after receipt of such notice.
If such offering is an underwritten offering, the amount of Shares included by
Holder may be reduced in the sole discretion of the managing underwriter. In
connection with a piggy-back registration pursuant to subsection 4(a), the
Company will bear all registration expenses, except sales commissions and the
fees and expenses of counsel to the Holder which shall be borne by Holder. The
Holder shall deliver such documents, and provide the Company with such
information, as is necessary or desirable to effectuate such registration.
(b) Demand registration. Upon written notice at any time beginning on
January 1, 1998 and ending on December 31, 1998, from holders of at least
$500,000 in aggregate principal of the 7% Notes that he, she or it contemplates
conversion and transfer of all or any of his, her or its Shares under such
circumstances that a public offering, within the meaning of the Securities Act
of such securities will be involved, the Company, as promptly as possible after
the receipt of such notice, shall file at its expense a post-effective amendment
or a new registration statement under the Securities Act with respect to the
offering and sale or other disposition of the subject Shares with respect to
which it shall have received such notice. Within 10 days after receiving any
such notice, the Company shall give notice to the other holders of 7% Notes
advising them that the Company is proceeding with such registration and offering
to include therein the underlying Shares of such holders. If audited interim
financial statements are required to be prepared for use in connection with the
registration statement, the holders of 7% Notes will bear the expense. The
holders of 7% Notes will also bear the expense of fees of counsel for the
holders and sales commissions on the underlying Shares of such holders. The
Company agrees to use its best efforts to cause the registration statement to
become effective. In no event shall the Company be required to file a
registration statement pursuant to the requirements of this subsection (b) more
than once.
(c) In the event that the Company shall take action to permit a public
offering or sale or other distribution of the Shares pursuant to Subsection 4(a)
or (b) above, the Company shall:
(i) Supply to the Holder two executed copies of each registration
statement and a reasonable number of copies of the preliminary, final and
other prospectus or offering circular in conformity with requirements of
the Securities Act and the Rules and Regulations promulgated thereunder and
such other documents as the Holder shall reasonably request.
(ii) Cooperate in taking such action as may be necessary to register
or qualify the Shares under such other securities acts or blue sky laws of
such jurisdictions as the Holder shall reasonably request and to do any and
all other acts and things which may be necessary or advisable to enable the
7
<PAGE>
Holder of such Shares to consummate such proposed sale or other disposition
of the Shares in any such jurisdiction; provided, however, that in no event
shall the Company be obligated, in connection therewith, to qualify to do
business or to file a general consent to service of process in any
jurisdiction where it shall not then be qualified.
(iii) Indemnify and hold harmless Holder and each underwriter, within
the meaning of the Act, who may purchase from or sell for Holder, any
Shares, from and against any and all losses, claims, damages, and
liabilities (including, but not limited to, any and all expenses whatsoever
reasonably incurred in investigating, preparing, defending or settling any
claim) arising from (A) any untrue statement of a material fact contained
in a registration statement furnished pursuant to of this Section 4, or any
prospectus or offering circular included therein, or (B) any omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading (unless such untrue statement or
omission was based upon information furnished or required to be furnished
in writing to the Company by such Holder or underwriter expressly for use
therein), which indemnification shall include each person, if any, who
controls any such Holder or underwriter, within the meaning of the
Securities Act; provided, however, that the Company shall not be so
obligated to indemnify any such Holder or underwriter or controlling person
unless such Holder and underwriter shall at the same time indemnify the
Company, its respective directors, each officer signing any registration
statement or any amendment to any registration statement and each person,
if any, who controls the Company within the meaning of the Securities Act,
from and against any and all losses, claims, damages and liabilities
(including, but not limited to, any and all expenses whatsoever reasonably
incurred in investigating, preparing, defending or settling and claim)
arising from (C) any untrue statement of a material fact contained in any
registration statement or any amendment to any registration statement or
prospectus or offering circular furnished pursuant to of this Section 4, or
(D) any omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, but the
indemnity of such Holder, underwriter or controlling person shall be
limited to liability based upon untrue statements of a material fact or
omission to state a material fact required to make such statements not
misleading contained within information furnished in writing to the Company
by such Holder or underwriter or controlling person expressly for use
therein. The indemnity agreement of the Company herein shall not inure to
the benefit of any such underwriter (or to the benefit of any person who
controls such underwriter) on account of any losses, claims, damages,
liabilities (or actions or proceedings in respect thereof) arising from the
sale of any of such Shares by such underwriter to any person if such
underwriter failed to send or give a copy of the prospectus or offering
circular furnished pursuant to of this Section 4, as the same may then be
supplemented or amended, to such person with or prior to the written
confirmation of the sale involved.
(iv) Keep effective for a period of not less than three (3) months nor
more than (9) months after the initial effectiveness thereof all such
registrations under the Securities Act.
(d) The Company's obligation under Subsection (a) and (b) shall be
conditioned upon a timely receipt by the Company in writing of:
(i) Information as to the terms of such public offering furnished by
or on behalf of Holder intending to make a public distribution of his
Shares; and
8
<PAGE>
(ii) Such other information as the Company may reasonably require from
Holder or any underwriter for inclusion in such registration statement or
post-effective amendment.
Notwithstanding any provision contained in this Note to the contrary,
the Company's liability for payment of interest shall not exceed the limits
imposed by applicable usury law. If any provision hereof requires interest
payments in excess of the then legally permitted maximum rate, such provision
shall automatically be deemed to require such payment at the then
legally-permitted maximum rate.
5. Miscellaneous
(a) Notices. All notices required or permitted to be given under this
Note shall be in writing (delivered by hand or sent certified or registered
mail, return receipt requested) addressed to the following addresses:
If to Holder: At its address on the Note
Register of the Company
If to Company 185 Monmouth Parkway
or Tanon: West Long Branch, NJ 07764-9989
Attn: Frank Brandenberg, President and Chief
Executive Officer
and a copy to:
Richard P. Jaffe, Esquire
Mesirov Gelman Jaffe Cramer & Jamieson
1735 Market Street
Philadelphia, PA 19103
All notices shall be deemed given upon personal delivery or upon deposit of such
notice in the United States mails, with all postage affixed.
(b) Failure or Indulgence Not Waiver. No failure or delay on the part
of Holder hereof in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any right, power or privilege. All rights and remedies existing hereunder are
cumulative to, and not exclusive of, any rights or remedies otherwise available.
9
<PAGE>
(c) Assignability. Subject to Section 1 hereof, this Note shall be
binding upon Company, its successors and assigns, and shall inure to the benefit
of Holder and Holder's successors, assigns, legal representatives, heirs and
guardians.
(d) Governing Law. This Note shall be governed by the laws of the State
of New Jersey without regard to the conflict of law provisions thereof.
IN WITNESS WHEREOF, the Company has caused this Note to be signed in
its name by its duly authorized officer this ____ day of February, 1998.
EA INDUSTRIES, INC.
By:____________________________________
10
<PAGE>
CONVERSION NOTICE
TO: EA INDUSTRIES, INC.
185 Monmouth Parkway
West Long Branch, NJ 07764-9989
The undersigned Holder of this Note hereby confirms that it irrevocably
exercises his right to convert [all] [or $___________] of this Note into
___________ shares of Common Stock of EA INDUSTRIES, INC at the Conversion Price
of $_________________ per share in accordance with the terms of this Note, and
directs that the Shares issuable and deliverable upon such conversion be
registered in the name of the undersigned and delivered to the undersigned,
together with a Note for the balance of the principal amount of this Note, if
any.
The undersigned hereby acknowledges that the Shares (i) have not been
and will not be at the time of acquisition by the undersigned registered under
the Securities Act of 1933, as amended, or under any state securities laws,
except as set forth in this Note, and hereby represents and warrants to the
Company that he is acquiring the Shares for his own account, for investment, and
not with a view to, or for sale in connection with, any distribution of such
Shares; and (ii) are transferable only in accordance with all the terms and
restrictions contained in the Note and in the Subscription Agreement pursuant to
which the Holder purchased this Note and to which the Holder is, or hereby
agrees to become, a party.
Dated:_____________________ 19__
- -------------------------------- -----------------------------
Witness Signature of Holder
-----------------------------
(Print Name of Holder)
Social Security Number or
Taxpayer ID Number:__________
-----------------------------
-----------------------------
-----------------------------
Address
11
<PAGE>
Attachment B
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 __________, 1998
Number of Shares: _______________________
Holder: _______________________
Address: _______________________
THIS CERTIFIES THAT the Holder is entitled to purchase from EA
INDUSTRIES, INC., a New Jersey corporation (hereinafter called the "Company"),
at $5.00 per share the number of shares of the Company's common stock set forth
above ("Common Stock").
1. All rights granted under this Warrant shall expire on
____________, 2003, and no shares of Common Stock may be acquired under this
Warrant from and after such date.
2. This Warrant is issued as a part of a private placement of
Convertible Notes (the 7% Notes") of $2,498,291 in aggregate principal and
warrants to purchase an aggregate of 367,300 shares of Common Stock. For each
dollar of principal value issued to a holder that holder will also receive a
warrant to purchase .1934898 shares of Common Stock. The principal value and
attached warrants may be sold, assigned, hypothecated, given or otherwise
transferred only as a unit consisting of one dollar of principal and an attached
warrant to purchase .1934898 shares of Common Stock.
This Warrant shall become exercisable as the principal on the
7% Notes held by the Holder are converted into shares of Common Stock so that at
the time that
<PAGE>
one dollar of principal on the notes is converted warrants to purchase .1934898
shares of Common Stock shall become eexercisable.
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. 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 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.
4. 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.
5. 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.
6. This Warrant shall not entitle the Holder to any voting
rights or other rights as a stockholder of the Company.
7. At the request of the Holder, the Company shall register
such number of Underlying Shares as the Holder has acquired or contemplates
acquiring on the same terms and conditions as are applicable to the shares
issuable upon conversion of the 7% Notes.
8. NOTWITHSTANDING THE FOREGOING, EXERCISE OF THIS WARRANT IS
EXPRESSLY CONDITIONED IN EACH CASE UPON (i) SUFFICIENT AUTHORIZED, UNISSUED AND
UNRESERVED COMMON STOCK OF THE ISSUER OF SUCH SHARES TO PERMIT SUCH PAYMENT,
(ii) OFFICIAL NOTICE OF THE LISTING (THE "LISTING") OF SUCH SHARES ON THE NEW
YORK STOCK EXCHANGE OR THE NASDAQ NATIONAL MARKET SYSTEM, IF
<PAGE>
APPLICABLE, PRIOR TO SUCH EXERCISE, AND (iii) COMPLIANCE WITH ALL FEDERAL AND
STATE SECURITIES LAWS AND REGULATIONS.
9. 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.
10. 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.
11. 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:_______________________
<PAGE>
Attachment C
NEITHER THIS NOTE, NOR THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION
HEREOF HAVE BEEN OR WILL BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS, EXCEPT AS
EXPRESSLY PROVIDED HEREIN, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR (B) AN OPINION OF COUNSEL ACCEPTABLE TO COUNSEL FOR THE
ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED AND THAT THE PROPOSED TRANSFER MAY
BE MADE WITHOUT VIOLATION OF THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAW.
No. ______ __, 1998
$ ----------------
EA INDUSTRIES, INC.
10% SERIES A CONVERTIBLE NOTE
DUE JANUARY 22, 1999
EA INDUSTRIES, INC. ("EA" or the "Company"), a New Jersey
corporation, for value received, and intending to be legally bound, hereby
promises to pay to the order of ______________, or its registered assigns, the
principal amount of ____________________ ($_________) on January __, 1999
("Maturity Date"), with interest from the date hereof (computed on the basis of
a 360-day year of twelve 30-day months) payable in arrears on June 15, 1998 and
on the Maturity Date, on the unpaid principal balance at the rate of 10% per
annum until such unpaid principal balance shall become due and payable (whether
at maturity or by acceleration or otherwise). Overdue principal payments and (to
the extent permitted by applicable law) any overdue interest shall accrue
interest at eighteen percent (18%) per annum until paid, which interest shall be
payable on demand.
This Note is one of a number of 10% Series A Convertible Notes
issued by the Company in a private placement of $3,561,180 [reflects outstanding
principal and interest on 10/31/97 and will be updated to date of issuance] in
aggregate principal and warrants to purchase an aggregate of 632,700 shares of
Common Stock. (This Note and such other 10% Series A Convertible Notes are
collectively referred to herein as the "10% Series A Convertible Notes"). The
terms and conditions of all 10% Series A Convertible Notes shall be identical in
all respects and all 10% Series A Convertible Notes shall rank pari passu. This
note replaces and supersedes a 10% Series A Convertible Note number ___issued by
Tanon Manufacturing, Inc. ("The Tanon Note") to the Holder. The Tanon Note is
hereby declared null and void.
<PAGE>
For each dollar of principal value represented by this Note
the holder hereof will also receive a warrant (in the form of Exhibit "A"
hereto) to purchase .1776658 shares of Common Stock. This Note or any portion of
the principal value and attached warrants may be sold, assigned, hypothecated,
given or otherwise transferred only as a unit consisting of one dollar of
principal and an attached warrant to purchase .1776658 shares of Common Stock.
The Warrant shall become exercisable as the principal on the
10% Series A Notes held by the Holder are converted into shares of Common Stock
so that at the time that one dollar of principal on the notes is converted
warrants to purchase .1776658 shares of Common Stock shall become exercisable.
Payments of principal and interest on this Note shall be made
in lawful money of the United States of America by delivery of a check to the
address provided by the payee as shown on the Note Register. The Company may
treat the person in whose name this Note is registered (the "Holder") on the
Note Register kept by the Company as the owner of this Note for the purpose of
receiving payment and for all other purposes, and the Company shall not be
affected by any notice to the contrary. This Note is transferable only (i) in
accordance with the terms hereof and (ii) by surrender thereof at the office of
the Company at 185 Monmouth Parkway, West Long Branch, New Jersey, duly endorsed
or accompanied by a written instrument duly executed by the Holder of this Note
or his attorney duly authorized in writing.
The Company shall have the option to make interest payments
hereunder in fully paid and non-assessable shares of Common Stock of EA ("EA
Shares" or "Shares"). This option may be exercised on any one or more of the
dates interest is payable under this Note by delivery of written notice to the
Holder at least fifteen (15) days before such payment date. If this option is
elected, EA shall issue and dispatch to the Holder one or more Certificates for
the aggregate number of whole Shares of Common Stock of EA determined by
dividing the Conversion Price (determined pursuant to paragraph 2 as if the
Holder was converting a portion of the principal of this Note) into the total
amount of lawful money of the United States of America which the Holder would
have received if the aggregate amount of interest on this Note which is being
paid in EA Shares were being paid in such lawful money. No fractional shares
will be issued in payment of interest on this Note. In lieu thereof, the Holder
may be issued a number of Shares which reflects a rounding up to the next whole
number or may be paid in lawful money of the United States of America.
NOTWITHSTANDING THE FOREGOING, PAYMENT OF INTEREST IN EA SHARES
IS EXPRESSLY CONDITIONED IN EACH CASE UPON (i) SUFFICIENT AUTHORIZED, UNISSUED
AND UNRESERVED COMMON STOCK OF THE ISSUER OF SUCH SHARES TO PERMIT SUCH PAYMENT,
(ii) OFFICIAL NOTICE OF THE LISTING (THE "LISTING") OF SUCH SHARES ON THE NEW
YORK STOCK EXCHANGE OR THE NASDAQ NATIONAL MARKET SYSTEM, IF APPLICABLE, PRIOR
TO SUCH PAYMENT, AND (iii) COMPLIANCE WITH ALL FEDERAL AND STATE SECURITIES LAWS
AND REGULATIONS. IN THE EVENT (i) THERE IS INSUFFICIENT AUTHORIZED, UNISSUED AND
UNRESERVED
2
<PAGE>
COMMON STOCK OF THE ISSUER OF THE SHARES TO BE ACQUIRED UPON AN INTEREST PAYMENT
DATE, (ii) SUCH LISTING OF THE SHARES TO BE ACQUIRED UPON AN INTEREST PAYMENT
DATE DOES NOT OCCUR PRIOR TO SUCH DATE, OR (iii) THE ISSUER OF THE SHARES TO BE
ACQUIRED UPON AN INTEREST PAYMENT DATE IS UNABLE TO COMPLY WITH ALL FEDERAL AND
STATE SECURITIES LAWS IN ISSUING SUCH SHARES, SUCH INTEREST PAYMENT SHALL BE
MADE IN U.S. DOLLARS. INABILITY TO MAKE INTEREST PAYMENTS IN SHARES SHALL NOT BE
DEEMED TO BE AN EVENT OF DEFAULT HEREUNDER.
1. Restrictions on Transfer of Securities. By accepting this Note, the Holder
hereby acknowledges that, except as expressly set forth herein, neither this
Note nor any Shares issuable in the event of conversion have been, or will be,
registered under the Securities Act of 1933, as amended (the "Securities Act"),
or any state securities laws and represents for himself and his legal
representative that he is acquiring this Note and will acquire any Shares
(hereinafter defined) issued upon conversion hereof, for his own account, for
investment purposes only and not with a view to, or for sale in connection with,
any distribution of such securities, and agrees to reaffirm in writing this
investment representation at the time of exercise of the conversion right set
forth below, subject to the Company's agreement to register the Shares as set
forth in Section 4 below. The Holder shall not transfer this Note or any Shares
(or any interest therein) until (i) it shall have first given written notice to
the Company describing the manner of any such proposed transfer, and (ii) either
(a) the Company has received from Holder's counsel an opinion satisfactory to
the Company and its counsel that such transfer may be made without compliance
with the registration provisions of the Securities Act and that the proposed
transfer may be made without violation of the Securities Act and any applicable
state securities law, or (b) a registration statement filed by the Company
covering the Note or Shares to be transferred is in effect under the Securities
Act and there has been compliance with the applicable state securities laws.
2. Conversion of Note. This Note may be converted into shares of Common Stock of
the Company, as follows:
(a) Conversion. Subject to and upon compliance with the provisions of
this section captioned "Conversion of Note", at the option of the Holder, at any
time after April 15, 1998 and prior to the close of business on the Maturity
Date, the unpaid principal balance of the Note may be converted in whole, or
from time to time in part, into EA Shares, at a conversion price (the
"Conversion price") per EA Share equal to the lesser of (i) $5.00 per share or
(ii) eighty percent (80.00%) of the arithmetic average of the volume weighted
average price per share of the Company's Common Stock (as reported by Bloomberg
Business Services in its Volume at Price Service) for the five trading days
immediately preceding the date the Company receives the Holder's notice of
Holder's intention to exercise its right of.
The term EA Share Price is sometimes referred to herein as the
"Conversion Price." The conversion as set forth herein shall be subject to such
adjustment or adjustments, if any, of such Conversion Price and of the
securities or other property issuable upon such conversion as set forth below,
upon delivery of the Note to the offices of the Company, together with the form
of conversion notice attached thereto (the "Conversion Notice"), duly executed
by the Holder thereof. The Conversion Notice shall state the principal amount
thereof to be so converted, the Shares into which such amount is being
3
<PAGE>
converted and shall include or be accompanied by representations as to the
Holder's investment intent substantially similar to those contained in this
Note. Shares issuable upon conversion of the Note shall be issued in the name of
the Holder and shall be transferable only in accordance with all of the terms
and restrictions contained herein. Upon such conversion, Company shall pay, in
cash, all accrued and unpaid interest through the conversion date on the Note or
such part thereof delivered for conversion. No fractional Shares shall be issued
or delivered upon conversion of the Note. In case the Note shall be surrendered
for the conversion of only a portion of the principal amount thereof, the
Company shall, at the time of issuing the Shares issuable upon the conversion of
such portion, execute and deliver to the Holder of the Note so surrendered a new
note equal in principal amount to the unconverted portion of the surrendered
Note, dated the most recent date to which interest shall have been paid on the
surrendered Note.
NOTWITHSTANDING THE FOREGOING, THE CONVERSION OF THE NOTE INTO EITHER
EA SHARES IS EXPRESSLY CONDITIONED IN EACH CASE UPON (i) SUFFICIENT AUTHORIZED,
UNISSUED AND UNRESERVED COMMON STOCK OF THE ISSUER OF SUCH SHARES TO PERMIT SUCH
CONVERSION, (ii) OFFICIAL NOTICE OF THE LISTING (THE "LISTING") OF SUCH SHARES
ON THE NEW YORK STOCK EXCHANGE OR THE NASDAQ NATIONAL MARKET SYSTEM, IF
APPLICABLE, PRIOR TO SUCH CONVERSION, AND (iii) COMPLIANCE WITH ALL FEDERAL AND
STATE SECURITIES LAWS AND REGULATIONS. IN THE EVENT (i) THERE IS INSUFFICIENT
AUTHORIZED, UNISSUED AND UNRESERVED COMMON STOCK OF THE ISSUER OF THE SHARES TO
BE ACQUIRED UPON CONVERSION, (ii) SUCH LISTING OF THE SHARES TO BE ACQUIRED UPON
CONVERSION DOES NOT OCCUR PRIOR THERETO, OR (iii) THE ISSUER OF THE SHARES TO BE
ACQUIRED UPON CONVERSION IS UNABLE TO COMPLY WITH ALL FEDERAL AND STATE
SECURITIES LAWS AND REGULATIONS IN ISSUING SUCH SHARES, THIS NOTE SHALL NOT BE
CONVERTIBLE INTO SUCH SHARES AS AFORESAID.
(b) Adjustments.
(i) Subdivision or Combination. Whenever the Company shall subdivide or
combine the outstanding shares of its Common Stock issuable upon conversion of
this Note, including stock dividends and stock splits, the Conversion Price in
effect with respect to such Shares being subdivided or combined immediately
prior to such subdivision or combination shall be proportionately decreased in
the case of subdivision or increased in the case of combination effective at the
time of such subdivision or combination.
(ii) Reclassification or Change. Whenever any reclassification or
change of the outstanding shares of Common Stock of the Company shall occur
(other than a change in par value, or from par value to no par, or from no par
to par value, or as a result of a subdivision or combination) effective
provision shall be made whereby the Holder shall have the right, at any time
thereafter, to receive upon conversion of this Note the kind of stock, other
securities or property receivable upon such reclassification or change by a
holder of the number of shares of Common Stock of the Company issuable upon
conversion of this Note immediately prior to such reclassification or change.
Thereafter, the rights of the Holder with respect to the adjustment of the
amount of securities or other property
4
<PAGE>
obtainable upon conversion of this Note shall be appropriately continued and
preserved, so as to afford as nearly as may be possible protection of the nature
afforded by this paragraph (c). The provisions of this clause (iii) shall apply
to successive transactions of the nature to which it relates.
(iii) Notices of Record Date. In case
(A) the Company shall declare a dividend (or make any other
distribution) on its shares of Common Stock payable otherwise than in cash out
of its earned surplus; or
(B) the Company shall grant the holders of its Common Stock the
right to subscribe for or purchase any shares of its capital stock of any class;
or
(C) the Company shall make any distribution on or in respect of
the Common Stock in connection with the dissolution, liquidation or winding up
of the Company; or
(D) there is to be a reclassification or change of the Common
Stock of the Company (other than the subdivision or combination of its
outstanding shares of Common Stock), a consolidation or merger to which the
Company is a party and in connection with which approval of any class of
stockholders of the Company is required, or a sale or conveyance of the property
of the Company as an entirety or substantially as an entirety, then and in each
such event, the Company shall mail or cause to be mailed to the Holder a notice
specifying the date on which any record is to be taken for the purpose of such
dividend, distribution or granting of rights, or the date on which such
reclassification, consolidation or merger is expected to become effective, and
the time, if any, as of which the holders of record of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization or reclassification. Such notice
shall be mailed at least 30 days prior to the record or effective date therein
specified.
(iv) Notice of Adjustment of Conversion Price, etc. If there shall be
any adjustment as provided in (b) hereof, or if securities or property other
than shares of Common Stock of the Company shall become issuable or deliverable
in lieu of shares of such Common Stock upon the conversion of this Note, the
Company shall forthwith cause written notice thereof to be sent by registered or
certified mail, postage prepaid, to the Holder, which notice shall be
accompanied by a certificate of the principal financial officer of the Company
setting forth in reasonable detail the facts requiring any such adjustment and
the Conversion Price and number of Shares issuable upon the conversion of this
Note after such adjustment, or the kind and amount of any such securities or
property so issuable or deliverable upon the conversion of this Note, as the
case may be.
3. Default. If any of the following conditions or events ("Events of Default")
shall occur and be continuing:
(a) if the Company shall default in the payment of principal of this
Note when the same becomes due and payable, whether at maturity or by
declaration of acceleration or otherwise;
5
<PAGE>
(b) if the Company shall default in the payment of any interest on this
Note and shall fail to cure such default within ten days after receipt of
written notice thereof from the Holder to the Company;
(c) if the Company shall materially default in the performance of or
compliance with any term contained herein and such default shall not have been
remedied within thirty days after receipt of written notice thereof from the
Holder to the Company;
(d) if the Company shall make an assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts as they
become due, or a voluntary petition for reorganization under Title 11 of the
United States Code ("Title 11") shall be filed by the Company or an order shall
be entered granting relief to the Company under Title 11 or a petition shall be
filed by the Company in bankruptcy, or the Company shall be adjudicated a
bankrupt or insolvent, or shall file any petition or answer seeking for itself
any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, or shall file any answer admitting or not contesting the material
allegations of a petition filed against the Company in any such proceeding, or
shall seek or consent to or acquiesce in the appointment of any trustee,
receiver or liquidator of the Company or of all or any substantial part of the
properties of the Company or if the Company or its directors or majority
shareholders shall take any action looking to the dissolution or liquidation of
the Company;
(e) if within 90 days after the commencement of an action against the
Company seeking a reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future statute,
law or regulation, such action shall not have been dismissed or nullified or all
orders or proceedings thereunder affecting the operations or the business of the
Company stayed, or if the stay of any such order or proceeding shall thereafter
be set aside, or if, within 90 days after the appointment without the consent or
acquiescence of the Company of any trustee, receiver or liquidator of the
Company or of all or any substantial part of the properties of the Company such
appointment shall not have been vacated;
then, and in any such event, Holder may at any time (unless such Event of
Default shall theretofore have been remedied) at its option, by written notice
to the Company, declare the Note to be due and payable, whereupon the Note shall
forthwith mature and become due and payable, together with interest accrued
thereon, and thereafter interest shall be due, at the rate of eighteen percent
(18%) per annum on the entire principal balance until the same is fully paid,
and on any overdue interest (but only to the extent permitted by law), without
presentment, demand, protest or notice, all of which are hereby waived.
In case of a default in the payment of any principal of or interest on
the Note, (whether at maturity or by acceleration) the Company will pay to the
Holder such further amount as shall be sufficient to cover the cost and expenses
of collection, including, without limitation, reasonable attorneys' fees,
expenses and disbursements. No course of dealing and no delay on the part of
Holder in exercising any right shall operate as a waiver thereof or otherwise
prejudice such Holder's rights, powers or remedies. No right, power or remedy
conferred by this Note upon Holder shall be exclusive of any other right, power
or remedy referred to herein or now or hereafter available at law, in equity, by
statute or otherwise.
6
<PAGE>
4. Registration Rights.
(a) Piggyback registration. If the Company proposes to file a
registration statement under the Securities Act with respect to an offering by
the Company for its own account of its Common Stock (other than a registration
statement on Form S-4 or S-8 or any form substituting therefor or filed in
connection with an exchange offer or an offering of securities solely to
existing stockholders or employees) during the period commencing on January 1,
1998 and ending on December 31, 1998, the Company shall in each case give
written notice of such proposed filing to the Holder and such notice shall offer
the Holder the opportunity to register such number of shares issuable upon
conversion ("Shares") as the Holder has acquired or contemplates acquiring upon
conversion and requests in writing within ten days after receipt of such notice.
If such offering is an underwritten offering, the amount of Shares included by
Holder may be reduced in the sole discretion of the managing underwriter. In
connection with a piggy-back registration pursuant to subsection 4(a), the
Company will bear all registration expenses, except sales commissions and the
fees and expenses of counsel to the Holder which shall be borne by Holder. The
Holder shall deliver such documents, and provide the Company with such
information, as is necessary or desirable to effectuate such registration.
(b) Demand registration. Upon written notice at any time beginning on
January 1, 1998 and ending on December 31, 1998, from holders of at least
$500,000 in aggregate principal of the 10% Series A Notes that he, she or it
contemplates conversion and transfer of all or any of his, her or its Shares
under such circumstances that a public offering, within the meaning of the
Securities Act of such securities will be involved, the Company, as promptly as
possible after the receipt of such notice, shall file at its expense a
post-effective amendment or a new registration statement under the Securities
Act with respect to the offering and sale or other disposition of the subject
Shares with respect to which it shall have received such notice. Within 10 days
after receiving any such notice, the Company shall give notice to the other
holders of 10% Series A Notes advising them that the Company is proceeding with
such registration and offering to include therein the underlying Shares of such
holders. If audited interim financial statements are required to be prepared for
use in connection with the registration statement, the holders of 10% Series A
Notes will bear the expense. The holders of 10% Series A Convertible Notes will
also bear the expense of fees of counsel for the holders and sales commissions
on the underlying Shares of such holders. The Company agrees to use its best
efforts to cause the registration statement to become effective. In no event
shall the Company be required to file a registration statement pursuant to the
requirements of this subsection (b) more than once.
(c) In the event that the Company shall take action to permit a public
offering or sale or other distribution of the Shares pursuant to Subsection 4(a)
or (b) above, the Company shall:
(i) Supply to the Holder two executed copies of each registration
statement and a reasonable number of copies of the preliminary, final and other
prospectus or offering circular in conformity with requirements of the
Securities Act and the Rules and Regulations promulgated thereunder and such
other documents as the Holder shall reasonably request.
7
<PAGE>
(ii) Cooperate in taking such action as may be necessary to register or
qualify the Shares under such other securities acts or blue sky laws of such
jurisdictions as the Holder shall reasonably request and to do any and all other
acts and things which may be necessary or advisable to enable the Holder of such
Shares to consummate such proposed sale or other disposition of the Shares in
any such jurisdiction; provided, however, that in no event shall the Company be
obligated, in connection therewith, to qualify to do business or to file a
general consent to service of process in any jurisdiction where it shall not
then be qualified.
(iii) Indemnify and hold harmless Holder and each underwriter, within
the meaning of the Act, who may purchase from or sell for Holder, any Shares,
from and against any and all losses, claims, damages, and liabilities
(including, but not limited to, any and all expenses whatsoever reasonably
incurred in investigating, preparing, defending or settling any claim) arising
from (A) any untrue statement of a material fact contained in a registration
statement furnished pursuant to of this Section 4, or any prospectus or offering
circular included therein, or (B) any omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading (unless such untrue statement or omission was based upon information
furnished or required to be furnished in writing to the Company by such Holder
or underwriter expressly for use therein), which indemnification shall include
each person, if any, who controls any such Holder or underwriter, within the
meaning of the Securities Act; provided, however, that the Company shall not be
so obligated to indemnify any such Holder or underwriter or controlling person
unless such Holder and underwriter shall at the same time indemnify the Company,
its respective directors, each officer signing any registration statement or any
amendment to any registration statement and each person, if any, who controls
the Company within the meaning of the Securities Act, from and against any and
all losses, claims, damages and liabilities (including, but not limited to, any
and all expenses whatsoever reasonably incurred in investigating, preparing,
defending or settling and claim) arising from (C) any untrue statement of a
material fact contained in any registration statement or any amendment to any
registration statement or prospectus or offering circular furnished pursuant to
of this Section 4, or (D) any omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
but the indemnity of such Holder, underwriter or controlling person shall be
limited to liability based upon untrue statements of a material fact or omission
to state a material fact required to make such statements not misleading
contained within information furnished in writing to the Company by such Holder
or underwriter or controlling person expressly for use therein. The indemnity
agreement of the Company herein shall not inure to the benefit of any such
underwriter (or to the benefit of any person who controls such underwriter) on
account of any losses, claims, damages, liabilities (or actions or proceedings
in respect thereof) arising from the sale of any of such Shares by such
underwriter to any person if such underwriter failed to send or give a copy of
the prospectus or offering circular furnished pursuant to of this Section 4, as
the same may then be supplemented or amended, to such person with or prior to
the written confirmation of the sale involved.
(iv) Keep effective for a period of not less than three (3) months nor
more than (9) months after the initial effectiveness thereof all such
registrations under the Securities Act.
(d) The Company's obligation under Subsection (a) and (b) shall be
conditioned upon a timely receipt by the Company in writing of:
8
<PAGE>
(i) Information as to the terms of such public offering furnished by or
on behalf of Holder intending to make a public distribution of his Shares; and
(ii) Such other information as the Company may reasonably require from
Holder or any underwriter for inclusion in such registration statement or
post-effective amendment.
Notwithstanding any provision contained in this Note to the contrary,
the Company's liability for payment of interest shall not exceed the limits
imposed by applicable usury law. If any provision hereof requires interest
payments in excess of the then legally permitted maximum rate, such provision
shall automatically be deemed to require such payment at the then
legally-permitted maximum rate.
5. Miscellaneous
(a) Notices. All notices required or permitted to be given under this
Note shall be in writing (delivered by hand or sent certified or registered
mail, return receipt requested) addressed to the following addresses:
If to Holder: At its address on the Note
Register of the Company
If to Company 185 Monmouth Parkway
or Tanon: West Long Branch, NJ 07764-9989
Attn: Frank Brandenberg, President and Chief
Executive Officer
and a copy to:
Richard P. Jaffe, Esquire
Mesirov Gelman Jaffe Cramer & Jamieson
1735 Market Street
Philadelphia, PA 19103
All notices shall be deemed given upon personal delivery or upon deposit of such
notice in the United States mails, with all postage affixed.
(b) Failure or Indulgence Not Waiver. No failure or delay on the part
of Holder hereof in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any right, power or privilege. All rights and remedies existing hereunder are
cumulative to, and not exclusive of, any rights or remedies otherwise available.
9
<PAGE>
(c) Assignability. Subject to Section 1 hereof, this Note shall be
binding upon Company, its successors and assigns, and shall inure to the benefit
of Holder and Holder's successors, assigns, legal representatives, heirs and
guardians.
(d) Governing Law. This Note shall be governed by the laws of the State
of New Jersey without regard to the conflict of law provisions thereof.
IN WITNESS WHEREOF, the Company has caused this Note to be signed in
its name by its duly authorized officer this ____ day of February, 1998.
EA INDUSTRIES, INC.
By:____________________________________
10
<PAGE>
CONVERSION NOTICE
TO: EA INDUSTRIES, INC.
185 Monmouth Parkway
West Long Branch, NJ 07764-9989
The undersigned Holder of this Note hereby confirms that it irrevocably
exercises his right to convert [all] [or $___________] of this Note into
___________ shares of Common Stock of EA INDUSTRIES, INC at the Conversion Price
of $_________________ per share in accordance with the terms of this Note, and
directs that the Shares issuable and deliverable upon such conversion be
registered in the name of the undersigned and delivered to the undersigned,
together with a Note for the balance of the principal amount of this Note, if
any.
The undersigned hereby acknowledges that the Shares (i) have not been
and will not be at the time of acquisition by the undersigned registered under
the Securities Act of 1933, as amended, or under any state securities laws,
except as set forth in this Note, and hereby represents and warrants to the
Company that he is acquiring the Shares for his own account, for investment, and
not with a view to, or for sale in connection with, any distribution of such
Shares; and (ii) are transferable only in accordance with all the terms and
restrictions contained in the Note and in the Subscription Agreement pursuant to
which the Holder purchased this Note and to which the Holder is, or hereby
agrees to become, a party.
Dated:_____________________ 19__
- -------------------------------- -----------------------------
Witness Signature of Holder
-----------------------------
(Print Name of Holder)
Social Security Number or
Taxpayer ID Number:__________
-----------------------------
-----------------------------
-----------------------------
Address
11
<PAGE>
Attachment D
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 __________, 1998
Number of Shares: _______________________
Holder: _______________________
Address: _______________________
THIS CERTIFIES THAT the Holder is entitled to purchase from EA
INDUSTRIES, INC., a New Jersey corporation (hereinafter called the "Company"),
at $5.00 per share the number of shares of the Company's common stock set forth
above ("Common Stock").
1. All rights granted under this Warrant shall expire on
____________, 2003, and no shares of Common Stock may be acquired under this
Warrant from and after such date.
2. This Warrant is issued as a part of a private placement of
Convertible Notes (the "Series A Notes") of $3,561,180 [reflects outstanding
principal and interest on 10/31/97; will be updated to date of issuance] in
aggregate principal and warrants to purchase an aggregate of 632,700 shares of
Common Stock. For each dollar of principal value issued to a holder that holder
will also receive a warrant to purchase .1776658 shares of Common Stock. The
principal value and attached warrants may be sold, assigned, hypothecated, given
or otherwise transferred only as a unit consisting of one dollar of principal
and an attached warrant to purchase .1776658 shares of Common Stock..
This Warrant shall become exercisable as the principal on the 10% Series A Notes
held by the Holder are converted into shares of Common Stock so that at the time
that one
<PAGE>
dollar of principal on the notes is converted warrants to purchase .1776658
shares of Common Stock shall become exercisable.
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. 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 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.
4. 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.
5. 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.
6. This Warrant shall not entitle the Holder to any voting rights or
other rights as a stockholder of the Company.
7. At the request of the Holder, the Company shall register such number
of Underlying Shares as the Holder has acquired or contemplates acquiring on the
same terms and conditions as are applicable to the shares issuable upon
conversion of the Series A Notes.
8. NOTWITHSTANDING THE FOREGOING, EXERCISE OF THIS WARRANT IS EXPRESSLY
CONDITIONED IN EACH CASE UPON (i) SUFFICIENT AUTHORIZED, UNISSUED AND UNRESERVED
COMMON STOCK OF THE ISSUER OF SUCH SHARES TO PERMIT SUCH PAYMENT, (ii) OFFICIAL
NOTICE OF THE LISTING (THE "LISTING") OF SUCH SHARES ON THE NEW YORK STOCK
EXCHANGE OR THE NASDAQ NATIONAL MARKET SYSTEM, IF APPLICABLE, PRIOR TO SUCH
EXERCISE, AND (iii) COMPLIANCE WITH ALL FEDERAL AND STATE SECURITIES LAWS AND
REGULATIONS.
<PAGE>
9. 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.
10. 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.
11. 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:_______________________
