SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 26, 1998
EA Industries, Inc.
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(Exact name of registrant as specified in its charter)
New Jersey
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(State or other jurisdiction of incorporation)
1-4680 21-0606484
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(Commission File Number) (IRS Employer Identification No.)
185 Monmouth Parkway, West Long Branch, New Jersey 07764-9989
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(Address of principal executive offices, including zip code)
(732) 229-1100
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(Registrant's telephone number)
N/A
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(Former name or former address, if changed since last report.)
Item 5. Other Events.
Lemco Associates
The Company on a regular basis reviews and updates its public
disclosures with respect to this litigation. As previously reported, in October
1992, Lemco Associates L.P., a limited partnership ("Lemco Suit"), the owner
of property previously owned by EAI, initiated an action (the "Lemco Suit"),
against EAI and others alleging, among other things, that the defendants created
environmental contamination at the property and seeking damages in unspecified
amounts. EAI filed a response to the complaint in which it denied Lemco's
allegations, asserted numerous defenses to the claims asserted and asserted a
counterclaim against Lemco and crossclaims against co-defendants and others for
indemnification and contribution.
Although the Company's insurance carriers have not formally denied
coverage or refused to provide a defense for the Company, the Company believed
that settlement or other resolution of the Lemco Suit would be more likely with
the active participation of the insurance carriers. By court order, after
request by the Company, (i) the carriers were added as third party defendants in
the Lemco Suit, (ii) the court ordered expedited discovery with respect to the
insurance claim, (iii) the court scheduled a settlement conference for April 7,
1998 and (iv) the court has set a new trial date of May 5, 1998. Discovery in
the Lemco Suit is ongoing.
The Company and Lemco have agreed to settle the Lemco Suit for the sum
of $8,500,000 (the "Settlement") and the Company has assigned to Lemco all of
its rights to be indemnified by the insurance carriers who have issued policies
covering claims of the type asserted in the Lemco Suit for the relevant time
periods. The Settlement is subject to final approval by the courts of New
Jersey, including all appeals, that (a) the Settlement is fair, reasonable and
non-conclusive, (b) a determination that the carriers have policies of insurance
which would require them to act as indemnitors with respect to the claims
asserted in the Lemco Suit and to pay the Settlement and (c) a determination
that the indemnification is assignable to Lemco as part of the Settlement. If it
is detemined by the courts that the carriers have defenses that would reduce
their obligations to an amount less than $8,500,000, then the Company would be
responsible to pay Lemco one third of the difference between the Settlement and
the amount awarded by the court to the carriers, up to a maximum of $333,333. If
the court determines that the responsibility is less than $7,500,000, Lemco at
its sole discretion may void the Settlement. If Lemco settles the claims against
the carriers for less than $8,500,000, the Company has no responsibility to pay
Lemco any part of the difference. The Company has agreed to cooperate with Lemco
in obtaining court approval of the Settlement and in prosecuting the claims
against the carriers. On March 26, 1998, Lemco and the Company petitioned the
Superior Court of New Jersey, Law Division, Monmouth County to approve the
Settlement.
Item 7. Exhibits
Settlement Agreement between Lemco Associates, L.P. and EA Industries, Inc.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereto duly authorized.
EA Industries, Inc.
Registrant
By: /s/ Howard P, Kamins
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Howard P. Kamins
Date: March 26, 1998 Vice President and General Counsel
SETTLEMENT, AGREEMENT
This Settlement Agreement is made this day of March, 1998, by and
between the Plaintiff, Lemco Associates, L.P. ("Lemco"), having an address c/o
Andrew Hoffmann, Esq., 30201 Aurora Road, Cleveland, Ohio 44138, and the
Defendant, Electronics Associates, Inc. (currently known as EA Industries, Inc.
("EAI")), having an address at 185 Monmouth Parkway, West Long Branch, New
Jersey.
WHEREAS, on September 14, 1992, the Plaintiff Lemco filed an action in the
Superior Court of New Jersey, Law Division, Monmouth County, under Docket No.
L-6492-92, (hereinafter referred to as the "Legal Action"), against, among
others, the Defendant EAI to recover monies and damages for past and future
investigatory and remedial actions and loss of property value due to discharges
of hazardous substances, including but not limited to chlorinated solvents at
property located at 500 Long Branch Avenue, (Block 460, Lots 1, 2, 3 and 4),
Long Branch, Monmouth County, New Jersey,
WHEREAS, the Complaint filed by the Plaintiff Lemco in the Legal Action
involves allegations of liability against the Defendant EAI;
WHEREAS, the Defendant EAI filed an answer denying any and all liability to
the Plaintiff Lemco in the Legal Action;
WHEREAS, the Plaintiff Lemco alleges damages, including but not limited to,
amounts set forth in expert reports which currently exceed $10,300,000, plus
potential off-site active groundwater remediation costs;
WHEREAS, the Defendant EAI represents that it has made a diligent and
thorough search for all insurance policies covering claims of the type asserted
in the Legal Action for the relevant time periods, and has provided a complete
list to Plaintiff Lemco of all of the policies which it has located, see Exhibit
1, and EAI further represents that these policies cover the claims of the type
asserted in the Legal Action and covers the relevant property and that the
limits of the cited policies have been diminished only in the amounts which it
has cited to Lemco in the list of policies and coverage in Exhibit 1;
WHEREAS, the Plaintiff Lemco and the Defendant EAI, in order to avoid the
further time and expense of litigating the Legal Action, are desirous of
settling their disputes in accordance with the terms and conditions set forth in
this Settlement Agreement;
NOW, THEREFORE, it is hereby agreed as follows,
1. The Plaintiff Lemco and the Defendant EAI hereby agree to settle the
Legal Action for the sum of Eight Million Five Hundred Thousand Dollars
$8,500,000 ("Settlement"), subject to and dependent upon fulfillment of the
additional terms and conditions set forth herein.
2. EAI hereby assigns to Lemco all of its rights to be indemnified by the
insurance carriers who have issued policies covering claims of the type asserted
in the Legal Action for the relevant time periods. This indemnification does not
include EAI's claim for defense costs.
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3. This Settlement shall be conditioned upon and subject to final approval
of the Settlement by the Courts of New Jersey, including all appeals, that (a)
the Settlement is fair, reasonable and non-collusive; (b) a determination that
the carriers have policies of insurance which require them to act as indemnitors
with respect to the claims asserted in the Legal Action and to pay the
Settlement; and (c) a determination that the indemnification is assignable to
Lemco as part of the Settlement.
4. If it is determined by the Court that the carriers have defenses that
would reduce their obligations to an amount less than the Settlement, then EAI
shall be responsible to pay Lemco one-third (1/3) of the difference between the
Settlement and the amount awarded by the Court from the carriers, up to a
maximum of $333,333. In the event the responsibility of the carriers is
determined by the Court to be less than $7,500,000, then Lemco, at its sole
discretion, may void this Agreement and the litigation shall proceed to trial.
If Lemco settles the claims against the carriers for an amount less than the
Settlement, EAI shall have no responsibility to pay Lemco any part of the
difference.
5. Immediately after execution of this Settlement Agreement, EAI and Lemco
shall petition the Superior Court of New Jersey, Law Division, Monmouth County
to approve the Settlement embodied herein and to find that the amount of this
Settlement is fair, reasonable and non-collusive; that both of the carriers have
policies of insurance which require them to act as indemnitors with respect to
the claims asserted in the Legal Action and to pay the settlement;
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and that the indemnification is assignable to Lemco as part of the Settlement.
Lemco and EAI shall provide notice of this hearing to EAI's insurers, Hartford
and Travelers, as well as to the other Defendants in the Legal Action.
6. EAI and Lemco shall jointly use their best efforts to prosecute the
claims against Hartford and Travelers, each at their own expense, and RAI and
Lemco shall provide any documents in their possession, any witnesses and any
experts which can reasonably assist in prosecuting the claims cited herein
against the carriers.
7. Lemco shall execute a Release whereby it shall relinquish any and all
claims and rights against EAI which were raised or could have been raised in the
Legal Action or in any other forum and which arise out of the allegations which
are the subject matter of the Legal Action. This Release shall be held in escrow
by Lemco's attorneys, Brach, Eichler, Rosenberg, Silver, Bernstein, Hammer &
Gladstone, and shall not be released to EAI unless and until all the terms of
this Settlement Agreement are fulfilled ("Final Approval")
8. Upon the effective date of the above-referenced Release, EAI shall be
barred from making any crossclaims against any of the other defendants in the
Legal Action.
9. On Final Approval, Lemco shall obtain signatures on and shall file with
the Superior Court of New Jersey a Stipulation of Dismissal With Prejudice
dismissing all its claims in the Legal Action against EAI.
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10. The parties acknowledge that they have thoroughly read and reviewed the
terms and provisions of this Settlement Agreement and are familiar with same,
that the terms and provisions contained herein are clearly understood by them
and that they have fully and unconditionally consented to those terms and
provisions. The parties further acknowledge that they have had the full benefit
and advice of legal counsel of their own selection, or the opportunity to obtain
the benefit and advice of counsel of their own selection, in regard to
understanding the terms, meaning and effect of this Settlement Agreement, and
that this Settlement Agreement has been entered into by them freely,
voluntarily, with full knowledge and without duress. Each party represents and
warrants to the parties hereto that the execution, delivery and performance of
this Settlement Agreement has been duly authorized on its behalf and is within
its power and authority and that the person signing on behalf of the party has
sufficient authority and has been duly authorized to execute this Settlement
Agreement. Each party hereto represents and warrants to the other parties that
this Settlement Agreement constitutes a legal, valid and binding obligation
enforceable against such party in accordance with its terms.
11. This Settlement Agreement shall be binding upon and shall inure to the
benefit of Lemco and EAI and their officers, former officers, directors, former
directors, employees, former employees, representatives, former representatives,
assignees, successors, predecessors and assigns.
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12. The provisions of this Settlement Agreement are not severable, and if
any provisions are found to be unenforceable, this Settlement Agreement shall
become null and void
13. This writing constitutes the entire understanding and agreement between
the parties respecting the settlement of the Legal Action. No changes,
alterations, modifications or qualifications to the terms hereto shall be made
or be binding unless in writing and signed by both parties.
14. The parties agree that the Superior Court of New Jersey, Law Division,
Monmouth County, shall retain jurisdiction for purposes of enforcing all of the
terms and provisions of this Agreement including, but not limited to, any relief
sought for a breach of or default under this Settlement Agreement.
15, This Settlement Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey, without giving effect to
principles of conflict of laws.
16. It is understood and agreed that this Settlement Agreement may be
executed in several counterparts, each of which shall, for all purposes, be
deemed original, and all of such counterparts, taken together, shall constitute
one and the same Settlement Agreement, even though all of the parties hereto may
not have executed the same counterpart of this Agreement.
17. All notices or other communications required or permitted to be given
hereunder shall be in writing and shall be deemed to have duly given: (i) when
personally delivered by a party hereto, or by messenger, to a person over the
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age of 18 years at the address listed below, or by (ii) next day express
courier, or (iii) upon delivery or refusal of same after having been mailed by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to Lemco:
William J. Friedman, Esq.
Brach, Eichler, Rosenberg, Silver,
Bernstein, Hammer & Gladstone
101 Eisenhower Parkway
Roseland, New Jersey 07068
and
Andrew W. Hoffmann, Esq.
Lemco Associates
30201 Aurora Road
Cleveland, Ohio 44139
If to EAI:
Herbert J. Stern, Esq.
Stern & Greenberg
75 Livingston Avenue
Roseland, New Jersey 07068
and
President
EA industries
185 Monmouth Parkway
West Long Branch, New Jersey 07764
or to such other additional address as any party shall have specified by notice
to the others in accordance with this paragraph.
IN WITNESS WHEREOF, the undersigned have duly executed this Settlement
Agreement as of the day and year first above written.
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LEMCO ASSOCIATES, L.P.
By:
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Andrew W. Hoffmann, Esq.
Title:
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Date:
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EA INDUSTRIES, INC.
By:
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Title/Position:
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Date:
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