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 WEST LONG BRANCH, N.J., Jan. 12 /PRNewswire/ -- Electronic Associates, Inc. (EAI) (NYSE: EA) today announced that it has entered into agreements for the sale of its securities to a limited number of investors in a private placement. The private placement involves the sale and issuance of 1,200,000 units of securities, with expected gross proceeds of $1,020,000 or $0.85 per unit. Each unit will consist of one share of EAI common stock, one Class A warrant entitling the holder to purchase one share of EAI common stock at $1.00 per share and one Class B warrant entitling the holder to purchase one share of EAI common stock at $1.75 per share. The warrants will not be exercisable unless and until the company's shareholders, by a vote of 2/3 of the votes cast, approve an amendment to the company's Certificate of Incorporation to authorize additional shares of common stock issuable upon exercise of the warrants. The company is obliged to use its best efforts to hold its annual meeting as soon as possible to seek shareholder approval to increase the authorized capital stock of the company to not less than 15,000,000 shares of common stock. It is anticipated that the annual meeting of shareholders will be held in April or May, 1994.
 The agreements entered into in connection with the private placement are subject to the satisfaction by Jan. 25, 1994 of certain conditions relating to, among other things, the purchasers' due diligence and the renegotiation of the company's lease for its New Jersey facility on terms reasonably satisfactory to the purchasers. If such conditions are satisfied, it is anticipated that the transaction will close in January or early February. The proceeds will be used for working capital purposes.
 The private placement would normally require approval of shareholders according to the Shareholder Approval Policy of the New York Stock Exchange. The audit committee of the board of directors of EAI determined that the delay necessary in securing shareholder approval prior to closing the private placement would seriously jeopardize the financial viability of the company. Because of that determination, the audit committee, pursuant to an exception provided in the Exchange's shareholder approval policy for such a situation, expressly approved the company's omission to seek the shareholder approval that would otherwise have been required under that policy. The Exchange has accepted the company's application for the exception. EAI, in reliance on the exception, is mailing to all shareholders a letter notifying them of its intention to issue the units without seeking their approval. Ten days after such notice is mailed and subject to satisfying the other conditions to closing, the company will proceed to issue certificates for the shares of EAI common stock and warrants comprising the units.
 The Class A and Class B warrants each will have a term of four years. The Class A warrant may expire earlier as to 82 percent of the shares covered thereby if the company satisfies certain financial performance objectives. In addition, the Class A warrant may not be transferred separately from the common stock until after Dec. 31, 1994. Purchasers of the units will be granted certain demand and piggyback rights to have the shares purchased and shares issuable upon exercise of the warrants registered under the Securities Act of 1933.
 As of Dec. 31, 1993, the company had 2,661,164 shares of common stock outstanding. After giving effect to the proposed private placement, excluding the exercise of the warrants, 36 percent of the outstanding shares of common stock will be held by the new investors. If all of the Class A and Class B warrants are exercised by the investors, a total of 2,400,000 additional shares of EAI common stock will be issued and the new investors will own approximately 63 percent of the then outstanding shares of common stock. Each of the purchasers of the units has represented that he is acquiring securities of the company for investment purposes. The exercise of all or a portion of the warrants to be issued to the investors is likely to result in a change in ownership of the company and the loss of a significant portion of the company's net operating loss carryforward that would otherwise be available to reduce any future taxable income.
 The company anticipates operating losses for the fourth quarter of fiscal year 1993 at least equal to and possibly greater than the losses reported for the prior quarter. The anticipated losses are expected to result from continued operating losses and possible year end adjustments, including the probable write-off of obsolete and slow moving inventory and an uncollectible account receivable, and the possible creation of certain reserves. The fourth quarter and fiscal year ended on Dec. 31, 1993, and it is not possible to quantify the amount of the losses at this time. As of Dec. 31, 1993, the company's accounts payable more than 60 days old amounted to approximately $1,680,000, which represents approximately 45 percent of total payables.
 As a result of lower sales which adversely impact the company's borrowing capacity under its asset based credit facility and continued operating losses, the company is experiencing a cash shortfall. The infusion of capital from the private placement is expected to address immediate working capital requirements; however, the company believes that it will require additional working capital of approximately $1.0 million during the second quarter of fiscal year 1994. The additional capital could come from the exercise of the Class A warrants; however, there can be no assurance that these warrants will be exercised to provide the capital required, or that capital can be obtained from other sources.
 EAI is a contract manufacturing company, providing manufacturing services for products designed and marketed by customers. The company's common stock has traded on the New York Stock Exchange since 1962.
 -0- 1/12/94
 /CONTACT: James F. Shanley of Electronic Associates, Inc., 908-229-1100 ext. 655/

CO: Electronic Associates, Inc. ST: New Jersey IN: CPR SU: ERP

LD -- NY079 -- 1557 01/12/94 17:18 EST
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Publication:PR Newswire
Date:Jan 12, 1994

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