SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C., 20459
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
--------------
COMMISSION FILE # 0-8027
EASTCO INDUSTRIAL SAFETY CORP.
------------------------------
(Exact name of registrant as specified in its charter)
NEW YORK 11-1874010
-------- ----------
(State or other jurisdiction of (Employer. I.D. #)
incorporation or organization)
130 West 10th Street, Huntington Station, N.Y. 11746
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(Address of principal executive offices and zip code)
(516) 427-1802
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports)
and (2) has been subject to such filing requirements for the past 90 days.
YES X NO
--- ----
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Class Outstanding at May 1, 1997
----- ---------------------------
Common Stock, par value 1,683,079
$.12 per share
<PAGE>
PART I - FINANCIAL INFORMATION
EASTCO INDUSTRIAL SAFETY CORP. AND SUBSIDIARIES
-----------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
March 31, June 30,
1997 1996
---- ----
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 51,341 $ 646,030
Accounts receivable - (less allowance
for doubtful accounts of $146,000 at
March 31, 1997 and $155,000 at
June 30, 1996) 5,166,589 4,669,070
Inventories - (note 2) 6,163,734 5,230,237
Other 751,626 441,763
-------- ---------
TOTAL CURRENT ASSETS 12,133,290 10,987,100
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, at cost - 2,691,135 2,625,703
Less accumulated depreciation and
amortization 1,304,686 1,347,608
--------- ---------
1,386,449 1,278,095
OTHER ASSETS 76,960 206,910
-------- --------
TOTAL ASSETS $13,596,699 $12,472,105
=========== ===========
See accompanying notes.
<PAGE>
EASTCO INDUSTRIAL SAFETY CORP. AND SUBSIDIARIES
-----------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
March 31, June 30,
1997 1996
---- ----
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Loans Payable $4,846,758 $5,853,075
Current maturities of long-term debt 32,415 56,044
Accounts payable 2,731,882 3,234,127
Accrued expenses 273,370 291,341
TOTAL CURRENT LIABILITIES 7,884,425 9,434,587
--------- ---------
LONG-TERM DEBT, less current maturities 416,073 433,738
-------- --------
SHAREHOLDERS' EQUITY (DEFICIENCY)
Common stock, $.12 par value;
authorized - 20,000,000 shares,
issued 1,583,079 shares
in March 1997 and 765,488 shares
in June 1996 189,970 91,859
Additional paid-in capital 9,407,208 6,742,476
Retained deficit (4,300,977) (4,230,555)
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TOTAL SHAREHOLDERS' EQUITY 5,296,201 2,603,780
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $13,596,699 $12,472,105
========== ==========
See accompanying notes.
<PAGE>
EASTCO INDUSTRIAL SAFETY CORP. AND SUBSIDIARIES
-----------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
-------------------------------------------------
Three Months Ended March 31,
----------------------------
1997 1996
---- ----
Net Sales $7,623,275 $6,966,572
Cost of Sales 6,132,861 5,491,100
--------- ---------
Gross Profit 1,490,414 1,475,472
--------- ---------
Selling, general & administrative expenses 1,204,501 1,188,754
Interest expense (NET) 154,879 212,729
Other expense (income) (NET) 10,065 ( 15,987)
------ ---------
1,369,445 1,385,496
--------- ---------
Net income 120,969 89,976
Opening (deficit) (4,421,946) (4,271,814)
--------- ---------
Closing (deficit) $(4,300,977) $(4,181,838)
=========== ============
Income per common share $ .08 $ .25
============ ===========
Weighted average number of
common shares outstanding 1,583,079 361,488
========= =======
See accompanying notes.
<PAGE>
EASTCO INDUSTRIAL SAFETY CORP. AND SUBSIDIARIES
-----------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
-------------------------------------------------
Nine Months Ended March 31,
---------------------------
1997 1996
---- ----
Net Sales $20,472,420 $19,739,719
Cost of Sales 16,645,526 15,624,922
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Gross Profit 3,826,894 4,114,797
---------- ----------
Selling, general & administrative expenses 3,421,068 3,431,369
Interest expense (NET) 502,761 599,496
Other income (NET) (26,513) (52,822)
Settlement with underwriter - 78,000
----- ------
3,897,316 4,056,043
--------- ---------
Net (loss) / income (70,422) 58,754
Opening (deficit) (4,230,555) (4,240,592)
--------- ---------
Closing (deficit) $(4,300,977) $(4,181,838)
---------- ----------
(Loss) / income per common share $ (.06) $ .16
========== ==========
Weighted average number of
common shares outstanding 1,219,884 357,564
========= =======
See accompanying notes.
<PAGE>
EASTCO INDUSTRIAL SAFETY CORP. AND SUBSIDIARIES
-----------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
Nine Months Ended March 31,
---------------------------
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) / Income $ (70,422) $ 58,754
------ ------
Adjustment to reconcile results of operations
to net cash effect of operating activities:
Depreciation and amortization 90,438 112,910
Settlement with underwriter - 72,025
Net changes in assets and liabilities:
(Increase) in accounts receivable (497,519) (781,424)
(Increase) in inventories (933,497) (1,027,163)
(Increase) / Decrease in other current assets (309,863) 171,518
Decrease / (Increase) in other assets 129,950 (62,104)
(Decrease) / Increase in accounts payable (502,245) 82,545
(Decrease) in accrued expenses (17,971) (87,593)
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Total Adjustments (2,040,707) (1,519,286)
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Net cash (used for) operating activities (2,111,129) (1,460,532)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (198,792) (37,608)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of warrants - 48,750
Repayments of long-term debt (41,294) (35,928)
Borrowings under line of credit agreement 22,863,989 20,553,406
Repayments under line of credit agreement (23,870,306) (19,490,727)
Proceeds from convertible subordinated debenture - 250,000
Net proceeds of private placement 154,000 -
Net proceeds of public offering 2,608,843 -
--------- -------
Net cash provided by financing activities 1,715,232 1,325,501
--------- ---------
NET (DECREASE) IN CASH (594,689) (172,639)
CASH, beginning of period 646,030 521,210
-------- -------
CASH, end of period $ 51,341 $ 348,571
======== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 497,310 $ 607,131
======== ========
Income taxes $ 10,533 $ 5,179
======== ========
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
Issuance of common stock in connection
with settlement with underwriter $ 78,000
========
<PAGE>
EASTCO INDUSTRIAL SAFETY CORP. AND SUBSIDIARIES
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. Company's Opinion on Unaudited Financial Statements
---------------------------------------------------
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
accruals) necessary to present fairly the consolidated balance sheets as of
March 31, 1997 and June 30, 1996 (audited) and the related statements of
operations and deficit for each of the three month and nine month periods
ended March 31, 1997 and 1996 and cash flows for the nine month periods
ending March 31, 1997 and 1996.
The results of operations for the three and nine month periods ended March
31, 1997 and 1996 are not necessarily indicative of the results for the
entire year.
2. Inventories
-----------
Inventories consist of the following:
March 31, June 30,
1997 1996
---- ----
Raw materials $ 2,317,329 $ 1,701,676
Work-in-process 744,042 514,555
Finished goods 3,102,363 3,014,006
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Total $ 6,163,734 $ 5,230,237
========== ==========
3. Litigation
----------
The Company is a party to various asbestos lawsuits alleging damages
from exposure to asbestos products allegedly sold by the Company. Refer
to Part II, Other Information, Item 1 "Legal Proceedings" in Form 10-QSB
December 31, 1996, and Item 3 in Form 10-KSB for June 30, 1996.
<PAGE>
EASTCO INDUSTRIAL SAFETY CORP. AND SUBSIDIARIES
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
----------------------------------------------------
FINANCIAL CONDITION AND CONSOLIDATED RESULTS OF OPERATIONS
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Liquidity and Capital Resources
- -------------------------------
The Company had working capital as of March 31, 1997 of approximately
$4,249,000 as compared to approximately $1,553,000 as of June 30, 1996. A
substantial portion of the Company's working capital consists of inventory,
which was approximately $6,164,000 and $5,230,000 as of March 31, 1997 and
June 30, 1996, respectively. The Company is required to maintain substantial
inventories of its numerous products in order to meet the immediate shipping
requirements of its customers who require products on short notice. The
Company believes that its current working capital position will be sufficient
to satisfy its needs for the next twelve months.
The amounts outstanding under the Company's loan agreement with Congress
Financial Corporation at March 31, 1997 and June 30, 1996 were $4,847,000 and
$5,558,000, respectively. The Company has $1,397,000 available for borrowing
at March 31, 1997 after adjusting for its liability for outstanding checks,
as compared to $76,000 at June 30, 1996.
Net cash used for operating activities was principally a result of an
increase in inventory, accounts receivable and other current assets and a
decrease in accounts payable, which was partially offset by a decrease in
other assets. Cash flows used in investing activities was for the purchase
of machinery and equipment. Cash flows provided by financing activities was
principally from private placements and the successful public offering of the
Company's common stock, offset by a pay down of the Company's line of credit.
At the present time, the Company, together with a variety of defendants, is
party to various asbestos-related lawsuits involving a number of plaintiffs
alleging damages from exposure to asbestos products previously sold by the
Company. The Company may become a party to additional asbestos-related
actions in the future. The Company is also party to other non-asbestos-related
litigation. The Company can not, at this time, determine the outcome
of this uncertainty. To date, the Company's insurance coverage has been
adequate and the Company's costs relative to asbestos litigation against it
has not been material.
In April 1997, the Company, through a newly formed wholly-owned subsidiary,
acquired for cash and stock certain assets of PR Industries and the stock of
Protective Knitting, Inc., two branded protective glove manufacturers. A
portion of the cash paid for these two companies came from the Company's
capital expenditure line with Congress Financial Corp. Reference is made to
Part II other information, Item 5 (d) and 5 (e).
<PAGE>
Results of Operations
- ---------------------
Net sales for the three months ended March 31, 1997 were $7,623,000 as
compared to $6,967,000 for the three months ended March 31, 1996, an increase
of $656,000 or 9.4%. Sales in the manufacturing segment increased 12.4% to
$5,647,000 from $5,023,000 compared to the same quarter last year, while
sales in the distribution segment reversed its trend of the prior two
quarters and increased 1.6% to $1,976,000.
Net sales for the nine months ended March 31, 1997 were $20,472,000, compared
with sales for the period ending March 31, 1996 of $19,740,000. For the nine
months ended March 31, 1997 distribution sales were $6,023,000, a decrease of
$631,000 or 9.5% compared to the same period last year, while the
manufacturing sales increased 10.4% to $14,449,000 from $13,086,000 for the
same period in the prior year. The increase in sales for the manufacturing
division is due to the improvement in the Company's inventory position, as
well as the continued improvement in overall industry conditions. The lower
sales in the distribution division was due in part to stricter customer
credit criteria for environmental accounts.
The Company's gross profit margin decreased to 19.6% of sales for the third
quarter of fiscal 1997 as compared to 21.2% for the third quarter fiscal
1996, and the gross profit margin for the nine months ended March 31, 1997
dropped to 18.7% from 20.8% for the similar period in the prior year. The
Company's decrease in gross profit is primarily the result of a change in the
sales mix and also, in part, an increase in the minimum wage in its
manufacturing plant in Puerto Rico.
Selling, general and administrative expenses for the quarter ended March 31,
1997 were approximately $1,205,000 or 15.8% of sales compared to
approximately $1,189,000 or 17.1% for the same period last year. These
expenses for the nine months ended March 31, 1997 were approximately
$3,421,000 (or 16.7% of sales) as compared to approximately $3,431,000 (or
17.4% of sales) for the same period in the prior year. These decreases in
selling, general and administrative expenses as a percentage of sales were
due to the increase in sales volume experienced as well as the effect of the
Company's continuing cost reductions.
Interest expense was approximately $155,000 for the third quarter of fiscal
1997, a decrease of approximately $58,000 when compared to the same quarter
of fiscal 1996. For the nine months ended March 31, 1997, the interest
expense was approximately $503,000, against approximately $599,000 in the
same period in the prior year. These decreases were due to the lower rates
charged by Congress Financial Corporation and the reduced borrowing under our
line of credit due to funds received from the public offering.
The Company showed earnings of $.08 per share for the quarter ended March 31,
1997 against earnings of $.25 per share in the quarter ended March 31, 1996.
For the nine months ended March 31, 1997 the Company showed a per share loss
of $.06 against $.16 per share earnings for the same period in the prior
year. In both the quarter and nine-month comparisons, the March 31, 1996
figures were restated to reflect a 1 for 10 reverse stock split.
<PAGE>
The increase in shares outstanding was mainly due to shares issued in connection
with private placements that occurred in the fourth quarter of fiscal 1996
and the first quarter of fiscal 1997 and the public offering in the second
quarter of 1997.
Risks
- -----
From time to time, information provided by the Company or statements made by
its employees, or information provided in its filings with the Securities and
Exchange Commission may contain forward looking information. The Company's
actual future results may differ materially from those projections or
statements made in such forward looking information as a result of various
risks and uncertainties, including but not limited to competition,
management, losses, availability of capital, asbestos litigation,
substantial availability of Tyvek(R), the absence of dividends, and tax
incentives. There can be no assurances that asbestos litigation will not
have an adverse effect upon the Company in the future. The market price of
the Company's Common Stock may be volatile at times in response to
fluctuations in the Company's quarterly operating results, changes in analyst
earnings estimates, market conditions, as well as general conditions and
other factors general to the Company.
<PAGE>
PART II
OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
See Form 10-QSB for the quarter ended December 31, 1996 with
respect to the annual meeting of shareholders held on January
22, 1997.
Item 5. OTHER INFORMATION
-----------------
(a) Effective March 1, 1997, Lawrence Densen became president and chief
executive officer; Alan E. Densen and Anthony P. Towell became
senior vice presidents;
(b) Effective February 1, 1997, Arthur Wasserspring became chief
financial officer and vice president of finance; and Richard
Boyen was elected vice president of manufacturing.
(c) On April 16, 1997, Dr. Bruce Friedman was elected to the board of
directors to serve until the next annual meeting and until his
successor is chosen.
(d) On April 17, 1997 Eastco Glove Technologies Inc., a newly formed
wholly owned subsidiary of the Company, acquired all of the
outstanding shares of Protective Knitting Inc. from Steven Robins
and Phillip Robins for 100,000 shares of the Company's common stock
which was issued to a voting trust of which Alan E. Densen,
Lawrence Densen and Anthony P. Towell, as trustees, have the voting
rights for a term of five years. Except for the voting rights,
Steven Robins and Phillip Robins each acquired the beneficial
rights to 50,000 shares and may sell same under Rule 144 after one
year. At the same time, PR Industries Inc. (wholly owned by Steven
Robins and Phillip Robins) sold to Eastco Glove Technologies Inc.
inventory in the amount of $139,000 and machinery and equipment for
the satisfaction of liens and encumbrances in the amount of
$500,000 thereon. The acquired business manufactures protective
gloves and had approximate revenues of $1.1 million in 1996.
(e) On April 22, 1997 the Company borrowed $440,000 on a $1,000,000
capital expenditure line that it presently has with Congress
Financial Corp. The proceeds of this borrowing were used to partly
finance the acquisition referred to in the above paragraph. The
interest rate on this loan is at 1 1/4 % over prime. The loan is to
be paid back in twenty-nine monthly installments commencing June 1,
1997.
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a)
10.01.1 Modification to employment agreement with Alan E.
Densen dated March 1, 1997.
10.02.1 Modification to employment agreement with Lawrence
Densen dated March 1, 1997.
10.03.1 Modification to employment agreement with Anthony
P. Towell dated March 1, 1997.
10.08 Stock Exchange Agreement among Eastco Glove
Technologies Inc., Eastco Industrial Safety Corp., Steven Robins
and Phillip Robins dated April 17, 1997.
10.09 Asset Purchase Agreement among PR Industries Inc.,
Steven Robins, Phillip Robins, Eastco Glove Technologies Inc.
and Eastco Industrial Safety Corp., dated April 17, 1997.
10.10 Voting Trust Agreement among Eastco Industrial
Safety Corp., Alan E. Densen, Anthony P. Towell, Lawrence Densen,
Steven Robins and Phillip Robins dated April 17, 1997.
10.11 Employment agreement with Arthur Wasserspring
dated February 1, 1997.
10.12 Employment agreement with Richard Boyen dated
February 1, 1997.
10.13 Amendment #8 to Financing Agreements with Congress
Financial Corp. dated April 17, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant had duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 13, 1997
EASTCO INDUSTRIAL SAFETY CORP.
By: /s/LAWRENCE DENSEN
------------------
Lawrence Densen
President & Chief Executive
Officer
By: /s/ ARTHUR WASSERSPRING
-----------------------
Arthur J. Wasserspring
Vice President of
Finance/Chief Financial
Officer
Exhibit 10.01.1
Modification Agreement
Modification Agreement made as of this 1st day of March, 1997 by and
between Eastco Industrial Safety Corp., a New York corporation with offices at
130 West 10th Street, Huntington Station, New York 11746 (hereinafter referred
to as the "Employer") and Alan E. Densen, an individual residing at 325 Doral
Court, Jericho, New York 11753, (hereinafter referred to as the "Employee").
Whereas, the Employee has entered into an employment agreement with the
Employer dated as of July 1, 1995 (the "Agreement"); and
Whereas, the parties desired to amend the Agreement.
Now Therefore, in consideration of the promises and mutual covenants
hereinafter set forth, it is agreed as follows:
1. The first "Whereas" clause and Section 1 of the Agreement is hereby
amended to change the corporate position of the Employee from President to
Senior Vice-President.
2. Section 4 a.(i) of the Agreement is amended to change the first
sentence in the Agreement to provide that the Employee shall be paid a minimum
of $133,000 through and including June 30, 1997.
3. Section 10 of the Agreement is amended to provide that the first
sentence of Section 10 a.(ii) is amended to change 120 days during any twelve-
month period to any 6 months in any consecutive 24 month period.
4. Except as modified hereunder the Employment Agreement of July 1, 1995
shall continue in full force and effect.
In Witness Whereof, the undersigned have executed this Agreement as of the
day and year first above written.
EASTCO INDUSTRIAL SAFETY CORP.
By: /s/ ANTHONY P. TOWELL
---------------------
ANTHONY P. TOWELL
By:/s/ ALAN E. DENSEN
-------------------
ALAN E. DENSEN, Employee
Exhibit 10.02.1
Modification Agreement
Modification Agreement made as of this 1st day of March, 1997 by and
between Eastco Industrial Safety Corp., a New York corporation with offices at
130 West 10th Street, Huntington Station, New York 11746 (hereinafter referred
to as the "Employer") and Lawrence Densen, an individual residing at 3 Riga
Lane, Melville, New York 11747, (hereinafter referred to as the "Employee").
Whereas, the Employee has entered into an employment agreement with the
Employer dated as of July 1, 1995 (the "Agreement"); and
Whereas, the parties desired to amend the Agreement.
Now Therefore, in consideration of the promises and mutual covenants
hereinafter set forth, it is agreed as follows:
1. The first "Whereas" clause and Section 1 of the Agreement is hereby
amended to change the corporate position of the Employee from Senior Vice-
President to President and Chief Executive Officer.
2. Section 4 a.(i) of the Agreement is amended to change the first
sentence in the Agreement to provide that the Employee shall be paid a minimum
of $125,000 pro-rated for the last four (4) months of the fiscal year ending
June 30, 1997.
3. Section 10 of the Agreement is amended to provide that the first
sentence of Section 10 a.(ii) is amended to change 120 days during any twelve-
month period to any 6 months in any consecutive 24 month period.
4. Except as modified hereunder the Employment Agreement of July 1, 1995
shall continue in full force and effect.
In Witness Whereof, the undersigned have executed this Agreement as of the
day and year first above written.
EASTCO INDUSTRIAL SAFETY CORP.
By: /s/ ANTHONY P. TOWELL
---------------------
ANTHONY P. TOWELL
By:/s/ LAWRENCE DENSEN
-------------------
LAWRENCE DENSEN, Employee
Exhibit 10.03.1
Modification Agreement
Modification Agreement made as of this 1st day of March, 1997 by and
between Eastco Industrial Safety Corp., a New York corporation with offices at
130 West 10th Street, Huntington Station, New York 11746 (hereinafter referred
to as the "Employer") and Anthony P. Towell, an individual residing at 301
Centre Island Road, Oyster Bay, New York 11771, (hereinafter referred to as
the "Employee").
Whereas, the Employee has entered into an employment agreement with the
Employer dated as of July 1, 1995 (the "Agreement"); and
Whereas, the parties desired to amend the Agreement.
Now Therefore, in consideration of the promises and mutual covenants
hereinafter set forth, it is agreed as follows:
1. The first "Whereas" clause and Section 1 of the Agreement is hereby
amended to change the corporate position of the Employee from Vice-President of
Finance, Treasurer, Chief Financial Officer and Secretary to Senior Vice-
President and Secretary.
2. Section 4 a.(i) of the Agreement is amended to change the first
sentence in the Agreement to provide that the Employee shall be paid a minimum
of $85,500 through and including June 30, 1997.
3. Section 10 of the Agreement is amended to provide that the first
sentence of Section 10 a.(ii) is amended to change 120 days during any twelve-
month period to any 6 months in any consecutive 24 month period.
4. Except as modified hereunder the Employment Agreement of July 1, 1995
shall continue in full force and effect.
In Witness Whereof, the undersigned have executed this Agreement as of the
day and year first above written.
EASTCO INDUSTRIAL SAFETY CORP.
By:/s/ ALAN E. DENSEN
-------------------
ALAN E. DENSEN
By: /s/ ANTHONY P. TOWELL
---------------------
ANTHONY P. TOWELL, Employee
Exhibit 10.08
STOCK EXCHANGE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT (the "Agreement"), dated the 17th day of
April, 1997, is between EASTCO GLOVE TECHNOLOGIES, INC., a Minnesota corporation
with offices located at 130 West 10th Street, Huntington Station, New York 11746
(the "Purchaser"), EASTCO INDUSTRIAL SAFETY CORP., a New York corporation with
offices located at 130 West 10th Street, Huntington Station, New York 11746
("Eastco"), STEVEN ROBINS, residing at 9743 Dorset Lane, Eden Prairie, Minnesota
55347, and PHILLIP ROBINS, residing at 16611 Canterbury Drive, Minnetonka,
Minnesota 55345 (each hereinafter, jointly and severally referred to as the
"Seller").
WHEREAS, Protective Knitting, Inc. ("PKI") is engaged in the business of
knitting and distributing of cut resistant gloves; and
WHEREAS, the authorized capital stock of PKI consists of 2,000 shares of
common stock; and
WHEREAS, the Seller is the owner of all of the issued and outstanding
shares of capital stock of PKI (the "PKI Stock"); and
WHEREAS, the Seller desires to transfer to the Purchaser and the Purchaser
desires to acquire from the Seller, as of the Closing Date (as hereinafter
defined) all of the PKI Stock; and
WHEREAS, Eastco will issue 100,000 shares of its Common Stock par value
$.12 (the "Eastco Stock") in exchange for the PKI Stock; and
WHEREAS, the parties desire to set forth the terms and conditions of this
transaction.
NOW, THEREFORE, the parties hereto, in consideration of the mutual promises
contained herein, hereby agree as follows:
ARTICLE 1
EXCHANGE OF STOCK
-----------------
1.01 On the Closing Date, subject to and upon the terms and conditions
contained herein, the Seller shall sell, transfer, convey, assign and deliver
to the Purchaser, and Purchaser will acquire from Seller, all right, title and
interest in and to, good and marketable title, free and clear of any lien,
security interest, pledge, charge or encumbrance all of the PKI Stock in
exchange for the Eastco Stock.
<PAGE>
ARTICLE 2
CLOSING
-------
2.01 CLOSING DATE AND PLACE. The closing of the transactions contemplated
hereunder (the "Closing") shall take place on or before April 17, 1997 (the
"Closing Date") at the offices of Hessian, McKasy & Soderberg at 4700 IDS
Center, 80 South Eighth Street, Minneapolis, Minnesota at 10:30 a.m. local time
(unless such other place is mutually agreed upon).
ARTICLE 3
SELLER'S REPRESENTATIONS AND WARRANTIES
---------------------------------------
Seller hereby represents and warrants to Purchaser and Eastco as follows,
which representations and warranties are true as of the date hereof, shall be
true as of the Closing and which shall survive the Closing:
3.01 ORGANIZATION AND AUTHORITY. PKI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Minnesota
with full corporate power and authority to own, lease and operate its properties
and to carry on its businesses as currently conducted. PKI is duly qualified
and in good standing in each other jurisdiction in which qualification is
required for it to own or lease the properties or to conduct the businesses it
owns, leases or conducts therein, consisting of the jurisdictions listed in
Section 3.01 of the Disclosure Schedule (The Disclosure Schedule is annexed
hereto and is made part of this Agreement).
3.02 AFFILIATED ENTITIES. Except as set forth in Section 3.02 of the
Disclosure Schedule, PKI does not own, directly or indirectly, any capital stock
or other securities of any corporation, limited liability company, partnership,
foreign company or other entity (herein an "Entity"), or has any direct or
indirect equity or ownership interest in any Entity. Each Entity listed in
Section 3.02 of the Disclosure Schedule is the type of entity indicated in such
Section, organized in its jurisdiction of organization, as specified in such
Section. Section 3.02 of the Disclosure Schedule specifies the percentage of
all the shares or other interests in each Entity owned by PKI. PKI has no duty
or obligation to purchase any additional shares or other interests therein, or
to make any contributions to capital or other payments thereto, except as
specified in Section 3.02 of the Disclosure Schedule.
3.03 CAPITALIZATION. The authorized capital stock of PKI consists of 2,000
shares of Common Stock, of which 1,000 shares are issued and outstanding as of
the date hereof, and are owned as set forth in Section 3.03 of the Disclosure
Schedule, free and clear of any lien, security interest, pledge, charge or
encumbrance.
(a) there are no outstanding options, warrants, rights, contracts or
scrip to purchase any PKI Stock;
<PAGE>
(b) there are no instruments, evidences of indebtedness, debt or
equity securities or contracts convertible into or exchangeable
for any PKI Stock;
(c) PKI does not have any commitment of any kind to issue, grant,
sell or otherwise create any options, warrants, rights,
contracts, scrip, instruments, evidences of indebtedness, debt
or equity securities or contracts; and
(d) PKI has not granted, created or entered into any agreement to
grant or create any phantom stock or deferred compensation,
profit participation or other interests or rights that have
features similar to equity interests.
Each issued and outstanding share of PKI Stock has been duly authorized and
validly issued and is fully paid and non-assessable; all of such PKI Stock was
issued in compliance with all applicable laws; and no share of PKI Stock was
issued in violation of, or is subject to, any preemptive or similar rights. No
changes in the amount of outstanding PKI Stock is contemplated.
3.04 AUTHORITY. Seller has full power and authority to enter into this
Agreement and any other document executed and delivered by them in accordance
with the terms of this Agreement and to carry out all of their duties and
obligations hereunder and thereunder.
3.05 NO CONFLICTS. Except as disclosed in Section 3.05 of the Disclosure
Schedule, neither the execution and delivery of this Agreement or any other
document in accordance with this Agreement, nor the consummation of the
transactions provided for herein and therein, nor compliance with any of the
provisions hereof or thereof, will (a) violate, conflict with, or result in a
breach of any provisions of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result
in the termination of, or accelerate the performance required by, or result in
a right of termination or acceleration, the loss of a material benefit or the
creation of any lien, claim, security interest, charge or encumbrance upon any
of the properties or assets of the Seller or PKI under any of the terms,
conditions or provisions of PKI's certificate of incorporation or by-laws, any
note, bond, mortgage, indenture, deed of trust or other financing document, or
any license, permit, lease or other agreement, instrument or obligation to which
the Seller or PKI is a party, or by which any of them is bound or any of their
properties or assets may be subject, or (b) violate any judgment, ruling, order,
writ, injunction or decree in effect as of the date hereof or any statute, rule
or regulation applicable to the Seller or PKI or any of their assets.
3.06 FINANCIAL STATEMENTS. The unaudited financial statements and
unaudited interim financial statements of PKI delivered to Purchaser, as
described in Section 3.06 of the Disclosure Schedule, have been prepared in
accordance with generally acceptable accounting principles ("GAAP") applied on
a consistent basis during the periods involved and fairly present the
consolidated financial position of PKI as at the dates thereof and the
consolidated results of its operations, changes in shareholders' equity and
consolidated cash flows for the periods set forth therein and, in the case of
unaudited interim financial statements, reflect all adjustments necessary to a
fair statement of results for the interim periods presented, subject to normal,
<PAGE>
recurring year-end audit adjustments, none of which is material or is reasonably
expected to be material in the case of the unaudited interim financial
statements for all periods subsequent to December 31, 1996. All financial
statements referred to in this Subsection 3.06 are collectively called the
"Financial Statements." As used herein, "Material Adverse Effect" means a
material adverse effect on the business, condition (financial or otherwise),
results of operations, or prospects of PKI, taken as a whole.
3.07 LIABILITIES. Except as disclosed in Section 3.07 of the Disclosure
Schedule, PKI does not have any liabilities or obligations due or to become due,
whether absolute, accrued, contingent or otherwise, and there are no claims or
causes of action (including those relating to employee benefit plans, as defined
in Section 3(3) of ERISA, presently maintained or formerly maintained by PKI),
that have been or are likely to be asserted against PKI, except for normal and
recurring current liabilities incurred in the ordinary and usual course of
business of PKI consistent with past practices (the "Ordinary Course") and
except for such other liabilities and obligations as are not, in the aggregate,
likely to have a Material Adverse Effect. Section 3.07 of the Disclosure
Schedule sets forth a schedule of all of the liabilities of PKI as of the date
hereof. No past or present or future creditor of the Seller or PR Industries
Inc. shall have any claim against PKI.
3.08 ASSETS. Section 3.08 of the Disclosure Schedule sets forth a
complete schedule of all of the Assets including inventories, receivables,
intellectual property rights owned by PKI at the time of the Closing. All
inventories are in good saleable condition and machinery and equipment are in
good operating condition, free of all defects. All accounts receivable are
collectable. There are no liens or encumbrances against any of the assets and
no one has any right or claim against same. Except as set forth in Section 3.08
of the Disclosure Schedule, PKI has good and marketable title to or a valid,
binding and enforceable leasehold interest in all of its respective properties
and assets, real, personal and mixed, tangible and intangible free and clear of
all mortgages, liens, claims, pledges, charges, encumbrances or title defects.
[If any asset of PKI is not located at 4311 Peavey Road, Chaska, Minnesota (the
"Facility") that is indicated in Section 3.08 of the Disclosure Schedule.]
3.09 NAMES. Section 3.09 sets forth all names that PKI has been known
by or done business under for the past five (5) years.
3.10 TAX RETURNS AND AUDITS. Except as Disclosed in Section 3.10 of the
Disclosure Schedule:
(a) PKI has timely filed or timely requested an extension to file
all returns, information returns, declarations, reports,
estimates and statements relating to any Taxes (collectively,
"Returns") required to be filed in respect of any Taxes (as
defined below);
(b) all Taxes required to be paid by PKI have been paid in full and
<PAGE>
no taxes are due and payable for any period subsequent to that
period for which Taxes have been paid;
(c) there are no outstanding audits, examinations, deficiencies or
refund litigation with respect to any Taxes of PKI; and
As used herein, "Taxes" shall mean and include all taxes, charges, fees, levies
and other assessments, including all net income, gross income, gross receipts,
sales, use, ad valorem, transfer, property, franchise, profits, license,
withholding, payroll, employment, unemployment compensation premiums, excise,
severance, stamp, occupation and other taxes, customs, duties, fees, assessments
and charges of any kind, together with any interest and any penalties, additions
to tax or additional amounts, imposed by any taxing authority (domestic or
foreign) on PKI.
3.11 CONDUCT OF BUSINESS. Except to the extent disclosed in Section 3.11
of the Disclosure Schedule, since December 31, 1996, PKI has conducted its
business in (and only in) the Ordinary Course and PKI has not experienced any
change which individually or in the aggregate has had or is reasonably likely
to have a Material Adverse Effect.
3.12 LITIGATION AND PROCEEDINGS. Except as set forth in Section 3.12 of
the Disclosure Schedule, (a) no claim, action, suit, arbitration, proceeding or
governmental investigation or inquiry is pending or is threatened against or
affecting PKI or its respective assets, and (b) no claim, action, suit,
arbitration proceeding or governmental investigation or inquiry has had or is
reasonably likely to have a Material Adverse Effect. PKI is not a party to or
is it bound by any order, judgment, decree, injunction or ruling of any court
or any governmental or administrative department, commission, agency or
instrumentality, any arbitrator or any other Person that has had or is
reasonably likely to have a Material Adverse Effect. PKI and PR Industries, Inc.
("PRI") are in compliance with the agreement dated July 18, 1996 among Bettcher
Industries, Inc. and PKI and PRI, and have violated none of its terms.
3.13 COMPLIANCE WITH LAWS. Except as Disclosed in Section 3.13 of the
Disclosure Schedule, PKI has previously conducted and is currently conducting
its business in compliance with all applicable laws, rules, regulations and
requirements of each jurisdiction in which any such business is carried on,
except for failures to comply which individually or in the aggregate have not
had and are not reasonably likely to have a Material Adverse Effect. No changes
would be required in the processes, properties, practices or procedures of PKI
in order to comply with such laws, rules, regulations and requirements, and PKI
has not received any notice or communication of any non-compliance with such
laws, rules, regulations and requirements that has not been cured.
3.14 LICENSES AND PERMITS. Except as Disclosed in Section 3.14 of the
Disclosure Schedule, PKI has all governmental approvals, consents, licenses,
registrations and permits (collectively "Governmental Approvals") necessary to
carry on its businesses as they are currently conducted, except where the
failure to have any such Governmental Approval is not reasonably likely to have
a Material Adverse Effect; and no event has occurred which would allow
<PAGE>
revocation or termination of, or would result in the impairment of its rights
with respect to, any such approval, consent, license, registration or permit,
except to the extent that such revocation, termination or impairment would not
have a Material Adverse Effect. Section 3.14 of the Disclosure Schedule sets
forth a listing of all Governmental Approvals held by PKI.
3.15 [Purposely Omitted]
3.16 LEASES. PKI is not a party to any lease of real or personal property
requiring it to pay more than $1,000 per year in rent.
3.17 CONTRACTS AND COMMITMENTS. Section 3.17 of the Disclosure Schedule
sets forth a complete and accurate summary of all written, and accurate and
complete summaries of all oral, contracts, agreements, commitments or
arrangements (collectively, "Contracts") to which PKI is a party or by which it
is bound.
Each Contract is in full force and effect and no event or condition has occurred
or exists, or is alleged by any of the other parties thereto to have occurred
or exist, which constitutes or with the lapse of time or giving of notice might
constitute a default or a basis for acceleration or termination under any
Contract, except for such defaults or bases for acceleration or termination as
in the aggregate are not reasonably likely to have a Material Adverse Effect.
3.18 BANK AND OTHER ACCOUNTS. All bank, brokerage, custodial, money
market and other accounts and safe deposit boxes of the PKI or which contain any
assets of PKI are listed in Section 3.18 of the Disclosure Schedule. Such
Section reflects:
(a) the name of each bank, brokerage firm or other institution in
which such account or box is maintained and the number of the
account or box;
(b) the balance therein as of a recent designated date or a brief
description of the contents thereof; and
(c) the name of each individual authorized to sign thereon or have
access thereto and the title or position of the individual.
3.19 EMPLOYEE RELATIONS. Seller has previously made available to Purchaser
correct and complete copies of all labor and collective bargaining agreements
to which PKI is a party or by which it is bound. A list of all such agreements
are set forth in Section 3.19 of the Disclosure Schedule. No unfair labor
practice charges or complaints are pending or, to the knowledge of seller,
threatened against PKI with the National Labor Relations Board or any similar
state agency. There have been no material work stoppages or other such
controversies during the last five years and, to the knowledge of the seller,
none are threatened.
<PAGE>
3.20 EMPLOYEE BENEFIT PLANS. For purposes of this Section 3.20:
(a) "Arrangement" means any material written personnel policy
(including vacation time, holiday pay and bonus programs, moving
expense reimbursement programs and sick leave), salary reduction
agreement, change-in-control agreement, employment agreement,
stock option plan, consulting agreement or any other material
written benefit program, contract or agreement, (1) which
currently is being maintained or, to the extent there remains
outstanding obligations or liabilities with respect thereto, has
at any time been maintained, for employees of PKI or (2) to
which PKI currently makes or is required to make or, to the
extent there remains outstanding obligations or liabilities with
respect thereto, has at any time made or been required to make
contributions;
(b) "Plan" includes each employee benefit plan as defined in Section
3(3) of ERISA (other than a Multiemployer Plan) (1) which
currently is maintained for employees of PKI or (2) to which PKI
currently makes or is required to make contributions;
(c) "Qualified Plan" means any Plan which is an employee pension
benefit plan as defined in Section 3(2) of ERISA and which is
intended to meet the qualification requirements of Section
401(a) of the Code;
(d) "Title IV Plan" means any Qualified Plan that is a defined
benefit plan (as defined in Section 3(35) of ERISA) and is
subject to Title IV of ERISA; and
(e) "Multiemployer Plan" means any employee benefit plan that is a
"multiemployer plan" within the meaning of Section 3(37) of
ERISA and to which PKI now has or ever had any obligation to
contribute.
Section 3.20 of the Disclosure Schedule sets forth a correct and complete list
of all Arrangements and Plans which are currently in effect or with respect to
which PKI has any contingent liability, none of which constitutes a Title IV
Plan. Except as set forth in Section 3.20 of the Disclosure Schedule, to the
knowledge of the seller:
(1) each Arrangement and Plan is being administered in material
compliance with its terms and with all filing, reporting,
disclosure and other requirements of all applicable
statutes (including ERISA) and all regulations thereunder;
(2) no action is pending or threatened against PKI, or any
officer, director or employee thereof, or any fiduciary of
any Arrangement or Plan with respect to any Arrangement or
Plan;
<PAGE>
(3) neither PKI, nor any officer, director or employee of PKI,
nor any fiduciary, has engaged in any transaction in
violation of Section 406(a) or (b) of ERISA or which is a
"prohibited transaction" (as defined in Section 4975(c)(1)
of the Code) for which no exemption exists under Section
408(b) of ERISA or Section 4975(d) of the Code or for which
no administrative exemption has been granted under Section
408(a) of ERISA which, assuming the taxable period of such
transaction expired as of the date hereof, could subject
PKI to a tax or penalty imposed by either Section 4975 of
the Code or Section 502(i) of ERISA;
(4) there have been no improper withdrawals, applications or
transfers of assets from any Plan or the trusts or other
funding media relating thereto, and no breaches of
fiduciary obligation with respect to the administering of
any Plans or trusts or other funding media relating
thereto;
(5) each Qualified Plan (together with its related funding
instrument) is intended to be qualified and tax exempt
under Sections 401 and 501 of the Code and is the subject
of a favorable IRS determination letter issued pursuant to
Rev. Proc. 93-39 with respect to such qualification and
exemption;
(6) PKI has not received notice that any material inquiry or
investigation by the Department of Labor, the IRS or the
PBGC is pending relating to any Arrangement or Plan or any
trust related thereto or funding medium thereunder; and
(7) there are no Plans or Arrangements to which PKI is a party
or by which it is bound and under which, as a result of
this Agreement or any transaction contemplated by this
Agreement, any director, officer, employee or other agent
of PKI or any other party claiming through any such Person
shall or may acquire rights with respect to any Plan or
Arrangement (including, without limitation, the creation,
increase or extension of new or existing rights), become
entitled to a distribution or payment with respect to any
Plan or Arrangement at a date earlier than if this
Agreement had not been signed or such transaction had not
occurred, or otherwise receive or become vested in rights
or benefits with respect to any Plan or Arrangement;
(8) PKI has made all contributions required in connection with
any Multiemployer Plan as of the date hereof by the terms
of the Multiemployer Plan or by the terms of any collective
<PAGE>
bargaining agreement and it has no material contingent
liability with respect to any Multiemployer Plan; and
(9) PKI does not expect to terminate or withdraw from (in a
complete withdrawal as defined in Section 4203 of ERISA or
in a partial withdrawal as defined in Section 4205 of
ERISA), any Multiemployer Plan, nor is PKI aware of any
withdrawal liability (as defined in Section 4201 of ERISA)
assessed against PKI with respect to any Multiemployer Plan
under Subtitle E of Title IV of ERISA.
3.21 INTELLECTUAL PROPERTY. Section 3.21 of the Disclosure Schedule sets
forth a correct and complete list of all letters patent, patent applications,
trade names, trademarks, service marks, trademark registrations and
applications, copyright registrations and applications, and all agreements,
licenses and other rights with respect to any intellectual property, both
domestic and foreign, presently owned, possessed, used or held by PKI or
necessary for the conduct of any of its businesses (the "Intellectual
Property"). Except as set forth in such Section 3.21 of the Disclosure
Schedule:
(a) PKI owns or has binding, enforceable rights to use the
Intellectual Property;
(b) to the knowledge of the seller, neither the conduct of any
business of PKI nor any of the products sold or services
provided by PKI infringes upon or is inconsistent with the
rights of any other Person; and
(c) to the knowledge of the seller, neither the conduct of any other
Person's business nor the nature of any of the products it sells
or services it provides infringes upon or is inconsistent with
any Intellectual Property rights of PKI except for such
infringements or inconsistencies that have not had and are not
in the aggregate reasonably likely to have a Material Adverse
Effect.
3.22 INSURANCE. Section 3.22 of the Disclosure Schedule sets forth a
summary of all insurance policies applicable to PKI during the past five years.
Such summary sets forth the type of insurance, name of the insurance company,
policy amount, number, term and description of coverage. There are no defaults
of PKI with respect to any such policies which would in the aggregate be
reasonably likely to result in a denial of coverage, termination of policy or
material increase in premium. Representations contained in the letter of Risk
Management Consulting Associates to Eastco dated April 1, 1997, a copy of which
is annexed hereto as Exhibit "1", are true and correct.
3.23 INTERESTED TRANSACTIONS. Except as set forth in Section 3.23 of the
Disclosure Schedule, no director or officer of PKI and no shareholder therein
(a) owns, directly or indirectly, any interest in, or is a director, officer,
substantial stockholder or employee of, or consultant to, any competitor,
lessor, sublessee, supplier, customer or distributor of PKI or is in any other
way associated with or involved in any businesses conducted by PKI other than
in such capacity as a director, officer or shareholder of PKI, (b) owns,
directly or indirectly, in whole or in part, any property, asset or right,
tangible or intangible, which is associated with any property, asset or right
<PAGE>
owned by PKI or which PKI is presently operating or using or the use of which
is presently contemplated for their business, or (c) is an official or employee
of, or is otherwise connected with, any labor organization having dealings with
PKI.
3.24 BROKERS AND FINDERS. Neither the Seller, PKI nor any of PKI's
officers, directors, shareholders or employees has employed any broker, finder
or financial advisor or incurred any liability for any financial advisory fees,
brokerage fees, commissions or finders' fees, and no other broker or finder has
acted for PKI, directly or indirectly, in connection with this Agreement or the
transactions provided for herein.
3.25 SINCE DECEMBER 31, 1996 . Except as indicated in Section 3.25 of the
Disclosure Schedule, since December 31, 1996:
(a) PKI has not paid, declared or made any Dividends or other
Distributions on or with respect to its stock or purchased,
redeemed or otherwise acquired any of its stock;
(b) there has been no material adverse change in the condition
(financial or otherwise), assets, liabilities (contingent or
otherwise), business, operations, prospects, facilities or
profitability of PKI;
(c) PKI has not sold or otherwise disposed of any material assets or
incurred or become subject to any material liabilities,
contingent or otherwise, other than in the Ordinary Course;
(d) PKI has not paid or agreed to pay any bonuses or granted or
agreed to grant any raises to any of its employees or
established or agreed to establish or improve any Plans or
Arrangements for any of its employees;
(e) PKI has not made any loans to any of its officers, directors or
Shareholders or to any Affiliate of any of its officers,
directors or Shareholders, other than advances in the Ordinary
Course;
(f) PKI has not entered into any contract, lease or transaction or
made any commitment, which contract, lease, transaction or
commitment is expected to be Materially Adverse to PKI or any of
its businesses;
(g) PKI has not written off any material receivable or determined
that any material receivable is uncollectible or granted any
material and unusual discount to any Person for any other
reason;
(h) PKI has not executed any guaranty except in the Ordinary Course
or entered into or modified any loan or credit agreement or any
<PAGE>
contract concerning any line or credit or similar financing
agreement or arrangement;
(i) no material damage or destruction has occurred to any facility
or material assets of PKI, whether or not covered by insurance;
and
(j) no other event has occurred which reasonably might be expected
to have a Material Adverse Effect.
3.26 ENVIRONMENTAL MATTERS. To the best of Seller's knowledge after due
inquiry, except as set forth in Section 3.26 of the Disclosure Schedule, PKI and
the Facility is in compliance with all federal, state and local environmental
laws, regulations or ordinances, including but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), and
PKI has not received any notice that it is the subject of any federal, state or
local investigation, the purpose of which (or one of the purposes of which) is
to evaluate whether any remedial or other action is needed. Except as set forth
in Section 3.26 of the Disclosure Schedule, the real property and Facility of
PKI has not been used for hazardous waste storage, treatment or disposal and
there does not exist (a) any contamination of soils, surface water or ground
water on or beneath the surface of any of PKI's real property, (b) any hazardous
materials or petroleum derivatives on or in the real property of PKI or the
building improvements or so close thereto as to have a Material Adverse effect
on the value thereof, (c) any chemical or petroleum or petroleum derivative
underground storage tank on the real property of PKI, (d) any asbestos or
asbestos-containing materials, or (e) any violation of any applicable federal,
state or local environmental laws, regulations or ordinances, including, without
limitation, CERCLA, or other state of affairs, which would require PKI to take
remedial, clean-up or other related action.
3.27 HAZARDOUS MATERIALS. Except as set forth in Section 3.27 of the
Disclosure Schedule, PKI, at any time in the past, has not manufactured,
distributed, sold, dealt or stored any Hazardous Materials or products made of,
in whole or in part, any "Hazardous Materials". As used herein, Hazardous
Materials are any materials containing any (1) "hazardous substances", as
defined by CERCLA or any similar applicable state or local law, (2) petroleum,
including crude oil or any fraction thereof, (3) natural gas, natural gas
liquids or synthetic gas usable fuel and (4) asbestos, plychlorinated biphenyls
("PCB's") or isomers of dioxin.
3.28 NO MISLEADING STATEMENT, OMISSION OR OTHER INFORMATION. To the best
of Seller's knowledge after due inquiry, there is no material fact relevant to
the assets, liabilities, business or future business prospects of PKI, which has
not been set forth or described in this Agreement or the Disclosure Schedule,
the nondisclosure of which would have a Material Adverse Effect on PKI's
business or could result in liability to the Purchaser. None of the information
included in this Agreement and the Disclosure Schedule or other documents
furnished or to be furnished by PKI or the Seller contains any untrue statement
of a material nature or is misleading an any material resect or omits to state
any material fact necessary in order to make any of the statements herein or
therein not material misleading.
<PAGE>
ARTICLE 4
EASTCO's and PURCHASER'S REPRESENTATIONS AND WARRANTIES
-------------------------------------------------------
Eastco and Purchaser hereby represents and warrants to Seller as follows,
which representations and warranties are true as of the date hereof, shall be
true as of the Closing and which shall survive the Closing:
4.01 ORGANIZATION AND AUTHORITY. Eastco is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York
with full power and authority to own, lease and operate its property and to
carry on its business as now being conducted. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Minnesota with full power and authority to own, lease and operate its property
and to carry on its business as now being conducted.
4.02 AUTHORIZATION. Eastco and Purchaser have full corporate power and
authority to enter into this Agreement and to carry out their obligations
hereunder. The execution and delivery of this Agreement and the consummation
of the transactions provided for herein have been duly authorized by the Board
of Directors of the Purchaser and Eastco, and no other corporate proceedings on
the part of Eastco and Purchaser is necessary to authorize this Agreement and
the transactions provided for herein. This Agreement has been duly executed and
delivered by Eastco and Purchaser and is a legal, valid and binding obligation
of the Purchaser, enforceable against Eastco and Purchaser in accordance with
its terms, subject to the qualification, however, that enforcement of the rights
and remedies created hereby is subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general application
relating to or affecting creditors' rights and to general equity principles.
4.03 NO VIOLATIONS. Neither the execution and delivery of this Agreement
by Eastco and Purchaser, nor the consummation of the transactions provided for
herein, nor compliance by Eastco and Purchaser with any of the provisions hereof
will (a) violate, conflict with, or result in a breach of any provisions of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration, or the creation of any lien, claim, security interest, charge or
encumbrance upon any of the properties or assets of Eastco and Purchaser, under
any of the terms, conditions or provisions of (1) their certificate of
incorporation or by-laws, (2) any note, bond, mortgage, indenture, deed of trust
or other financing document, or (3) any license, permit, lease, agreement or
other instrument or obligation to which Eastco and Purchaser is a party, or by
which either of them is bound or any of their properties or assets may be
subject, or (b) violate any judgment, ruling, order, writ, injunction or decree
in effect as of the date hereof or any statute, rule or regulation, applicable
to Eastco and Purchaser or any of their assets.
4.04 BROKERS AND FINDERS. Neither the Purchaser nor Eastco nor any of
Purchaser's or Eastco's officers, directors, shareholders or employees has
<PAGE>
employed any broker, finder or financial advisor or incurred any liability for
any financial advisory fees, brokerage fees, commissions or finders' fees, and
no other broker or finder has acted for Eastco or Purchaser, directly or
indirectly, in connection with this Agreement or the transactions provided for
herein.
ARTICLE 5
CONDITIONS PRECEDENT TO THE CLOSING
-----------------------------------
5.01 CONDITIONS TO OBLIGATIONS OF THE SELLER. The obligation of the Seller
to effect the Closing shall be subject to the fulfillment, at or prior to the
Closing Date, of each of the following conditions:
5.01.01 REPRESENTATIONS AND WARRANTIES OF PURCHASER AND EASTCO. The
representations and warranties of Purchaser and Eastco set forth in Article 4
shall be true and correct in all material respects as of the date of this
Agreement and as of the Closing Date, as though made at and as of the Closing,
except as otherwise contemplated in this Agreement, and the Seller shall have
received a Purchaser and Eastco Closing Certificate to that effect. As used
herein, "Purchaser and Eastco Closing Certificate" means a certificate in form
and substance reasonably satisfactory to Seller, dated the Closing Date, and
signed by the Purchaser and Eastco.
5.01.02 ISSUANCE OF EASTCO STOCK.
(a) At the Closing, Eastco shall deliver to Seller certificates
representing their proportionate ownership interests of
Eastco Stock. The Seller is acquiring the Eastco Stock for
their own account (and not for the account of others) for
investment and not with a view to the distribution thereof.
The Seller will not sell or otherwise dispose of such
shares without registration under the Securities Act of
1933, as amended, or an exemption therefrom, and the
certificate or certificates representing such shares shall
contain a legend substantially similar to the following:
"The securities which are
represented by this certificate have
not been registered under the
Securities Act of 1933, as amended.
The securities have been acquired
for investment purposes only and not
with a view to distribution or
resale, and may not be sold,
transferred, made subject to a
security interest, pledged,
hypothecated or otherwise disposed
of unless and until registered under
the Securities Act of 1933, as
amended, or an opinion of counsel
acceptable to Eastco Industrial
<PAGE>
Safety Corp. is received that
registration is not required under
such Act."
(b) Until one year after the Closing, unless Rule 144 under the
Securities Act of 1933 would then otherwise authorize the
public sale of any of Eastco's common stock acquired by
Seller, Eastco will give at least ten (10) days notice of
the filing of a registration statement with the Securities
and Exchange Commission for the sale of its securities
("Registration Statement"), the first time after the date
hereof. Eastco will use its best efforts to include the
Eastco Stock in the Registration Statement. Notice shall
not be required to be given by Eastco if Eastco is unable
to include the Eastco Stock in such Registration Statement
because of the failure to obtain the consent of anyone
outside of Eastco which is necessary. Eastco shall not be
required to include the Eastco Stock with respect to any
Registration Statement applicable to any securities of
Eastco presently outstanding, the amendment of any existing
Registration Statement or to the filing of an S-8 or other
employee or benefit plan of Eastco. The inclusion of the
Eastco Stock in such Registration Statement will be at
Eastco's sole expense except for any commissions or
discounts payable and must be requested in writing by the
holders of at least 50% of the Eastco Stock within seven
(7) days of the giving by Eastco of notice to them. The
Seller shall cooperate in the preparation of such
Registration Statement by promptly providing and disclosing
all information required of them with respect to such
Registration Statement and which they have knowledge of.
5.01.03 SATISFACTION OF ALL OUTSTANDING LOANS. At the Closing,
Seller shall have arranged for all liens and encumbrances of PKI to be paid in
full.
5.01.04 PURCHASER'S DELIVERIES. At Closing there shall be delivered
to Seller the following:
(a) Asset Purchase Agreement by and among PR Industries, Inc.,
Purchaser and Eastco and all documents thereunder which
shall be consummated simultaneously with the closing of
this Agreement;
(b) Certified resolutions of the Purchaser and Eastco
authorizing the execution, delivery and consummation by
Purchaser and Eastco, respectively, of this Agreement.
5.01.05 OPINION OF PURCHASER'S COUNSEL. At the Closing, Seller
<PAGE>
shall receive a signed opinion of Purchaser's Counsel, dated the Closing Date
and in the form of Exhibit "2" hereto.
5.02 CONDITIONS TO OBLIGATIONS OF PURCHASER AND EASTCO. The obligations
of Purchaser and Eastco to effect the Closing shall be subject to the
fulfillment, at or prior to the Closing Date, of each of the following
conditions:
5.02.01 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller set forth in Article 3 shall be true and correct in all
material respects as of the date of this Agreement and as of the Closing, as
though made at and as of the Closing Date, except as otherwise contemplated in
this Agreement, and Purchaser shall have received a Seller Closing Certificate
to that effect. As used herein, "Seller Closing Certificate" means a
certificate in form and substance reasonably satisfactory to Purchaser, dated
the Closing Date.
5.02.02 NO MATERIAL ADVERSE CHANGE. Since December 31, 1996, there
shall have been no material adverse change in the businesses, condition
(financial or otherwise), results of operations or prospects of PKI, taken as
a whole, and Purchaser shall have received a Seller Closing Certificate to that
effect.
5.02.03 SELLER'S DELIVERIES. At Closing there shall be delivered
to Purchaser the following:
(a) certificate of good standing of PKI in each jurisdiction
set forth in Section 3.01 of the Disclosure Schedule;
(b) certified copies of the certificate of incorporation and
by-laws of PKI;
(c) resignations of all of the officers and directors of PKI;
(d) all books and records and corporate books of PKI;
(e) Asset Purchase Agreement by and among PRI Industries, Inc.,
Purchaser and Eastco and all documents thereunder which
shall be consummated simultaneously with the closing of
this Agreement;
(f) Voting trust agreement in the form annexed hereto as
Exhibit "3".
(g) Transfer of all intellectual properties used by PKI.
5.02.04 OPINION OF PKI GENERAL COUNSEL. At the Closing, Purchaser
shall receive a signed opinion of PKI's General Counsel, dated the Closing Date
and in the form of Exhibit "4" hereto.
<PAGE>
ARTICLE 6
INDEMNIFICATION
---------------
6.01 INDEMNIFICATION OF PURCHASER AND EASTCO. After the Closing, and for
a period of twenty-four (24) months, the Seller shall indemnify and hold the
Purchaser and Eastco harmless against, and reimburse the Purchaser and Eastco
for, any actual damage, claim, loss, cost or expense incurred by the Purchaser
and Eastco (including reasonable attorney's fees up to $40,000 with respect to
(i) and (ii) below and $50,000 with respect to (iii) below) resulting from (a)
any breach of the representations, warranties, covenants or obligations of the
Seller in this Agreement, (b) any misrepresentation in, or omission, from, this
Agreement, the Disclosure Schedule and any information, certificate, license,
report, or other instrument furnished to the Purchaser and Eastco pursuant to
this Agreement. No attorney's fees will be reimbursed if: (a) an insurance
policy owned by the Purchaser or Eastco or anyone else covers the cost of any
claim under this section; or (b) the claim does not concern any other third
party. The Purchaser or Eastco shall consult with Seller or Robins on a claim
prior to settlement of any such claim; however, the final decision-making
authority in any such matter shall rest solely with the Purchaser or Eastco.
An offset shall be authorized against any agreement to which Purchaser or Eastco
and any Seller is a party, if the offset applies to (i) an account payable due
by Seller or PKI; or (ii) taxes owed by Seller or PKI; or (iii) potential
lawsuits with respect to (A) the Bettcher settlement and (B) the Kolms and
Plemmons claims involving possible infringement of Patent Numbers 4,838,017 and
4,777,789, both referred to in Section 3.12 of the Disclosure Schedule that
accrue prior to the date of this Agreement; and provided that notice of a claim
for accounts payable, taxes, or a matter referred to in Section 3.12 of the
Disclosure Schedule (1) is applicable to PKI, (2) Purchaser or Eastco or PKI is
given notice of such claim for accounts payable, taxes, or a matter referred to
in Section 3.12 of the Disclosure Schedule during the 24 month period following
the date of Closing by the claimant, (3) Purchaser or Eastco promptly gives
notice to Seller of such claim, and (4) Seller does not resolve such claim to
Purchaser's or Eastco's satisfaction within thirty days thereafter. Otherwise,
an offset shall not be allowed against any agreement to which Purchaser or
Eastco and any Seller is a party unless Purchaser or Eastco procures a judgment
against a Seller for the amount to be offset.
6.02 INDEMNIFICATION OF SELLER. After the Closing, the Purchaser and
Eastco shall indemnify and hold the Seller harmless against, and reimburse the
Seller for any actual damage, claim, loss, cost or expense incurred by the
Seller (including reasonable attorney's fees) resulting from any breach of the
representations, warranties, covenants or obligations of the Purchaser and
Eastco in this Agreement.
ARTICLE 7
MISCELLANEOUS PROVISIONS
-------------------------
7.01 NOTICES. All notices required or permitted to be given under this
Agreement shall be in writing and shall be given by certified or registered
mail, postage prepaid, or by delivery through Federal Express or any other
private courier service with a copy faxed at the same time. Such notices shall
be mailed and faxed to the following addresses and facsimile numbers:
<PAGE>
If to Eastco or the Purchaser, to:
Mr. Arthur Wasserspring
Eastco Industrial Safety Corp.
130 West 10th Street
Huntington Station, New York 11746
Facsimile: (516) 427-1840
with a copy to:
Mr. Herbert W. Solomon
Hollenberg Levin Solomon Ross
Belsky and Daniels, LLP
585 Stewart Avenue
Garden City, NY 11530
Facsimile: (516) 745-6642
If to Seller to:
Steven Robins
PR Industries, Inc.
4311 Peavey Road
Chaska, Minnesota 55318
Facsimile: (612) 448-2873
Phillip Robins
PR Industries, Inc.
4311 Peavey Road
Chaska, Minnesota 55318
Facsimile: (612) 448-2873
with copies to:
Manly Zimmerman, Esq.
Zimmerman & Bix Ltd.
Suite 400
514 Nicollet Mall
Minneapolis, MN 55408
Facsimile: (612) 333-5005
Notices shall be effective (a) if mailed with the proper postage prepaid, three
Business Days after the date of mailing, (b) delivery by private courier, on the
date of delivery, and in each case thereafter by facsimile.
<PAGE>
7.02 GOVERNING LAW. The validity and effectiveness of this Agreement shall
be governed by and construed accordance with the internal laws of the State of
New York, without giving effect to the provisions, policies or principles of any
state law relating to choice or conflict of laws.
7.03 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the Parties and their respective successors and assigns.
7.04 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which may bear the signatures of less than all the
Parties, but all of which together shall constitute one agreement.
7.05 ENTIRE AGREEMENT. This Agreement, together with the Exhibits hereto,
and the Disclosure Schedule constitutes the entire agreement among the Parties
with respect to the subject matter of this Agreement, and no Party shall be
bound by any communications between or among any of them on the subject matter
hereof unless in writing. Any prior agreements between the Seller and the
Purchaser are hereby terminated.
7.06 SEVERABILITY. The Parties agree that if any term or provision of this
Agreement contravenes or is invalid under any federal, state or local law, court
decision, rule, ordinance or regulation, this Agreement shall, as to the
jurisdiction in which such legal authority is promulgated or rendered, be
construed as if it did not contain the offending term or provision, and the
remaining provisions of this Agreement shall not be affected thereby; provided,
however, that if the removal of such offending term or provision materially
alters the burdens or benefits of any of the Parties under this Agreement, the
Parties agree to negotiate in good faith such modifications to this Agreement
as are appropriate to insure that the burdens and benefits of each Party under
such modified Agreement are reasonably comparable to the burdens and benefits
originally contemplated and expected.
7.07 CAPTIONS. The captions herein are inserted for convenience of
reference only and shall not affect the construction of this Agreement.
7.08 ARBITRATION. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association (the "Association"). Any claim brought by Seller shall be settled
by the Association at its offices in Nassau County, New York; any claim brought
by Purchaser or Eastco shall be settled by the Association at its offices in
Minneapolis, Minnesota. A judgment upon the award rendered by the Arbitrators
may be entered in any court having jurisdiction thereof.
7.09 EXPENSES. Except as otherwise provided herein, the parties hereto
shall be responsible for their own costs and expenses with respect to the
transactions contemplated hereby, including but not limited to legal fees.
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
by their respective officers thereunto duly authorized, all on the date first
written above.
EASTCO GLOVE TECHNOLOGIES, INC.
By: /s/ LAWRENCE DENSEN
--------------------
LAWRENCE DENSEN
EASTCO INDUSTRIAL SAFETY CORP.
By: /s/ LAWRENCE DENSEN
--------------------
LAWRENCE DENSEN
/s/ STEVEN ROBINS
-------------------
STEVEN ROBINS
/s/ PHILLIP ROBINS
------------------
PHILLIP ROBINS
Exhibit 10.09
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (the "Agreement"), dated the 17th day of
April, 1997, is by and among PR INDUSTRIES, INC., a Minnesota corporation with
offices located at 4311 Peavey Road, Chaska, Minnesota 55318 (the "Seller"),
STEVEN ROBINS, residing at 9743 Dorset Lane, Eden Prairie, Minnesota 55347,
PHILLIP ROBINS, residing at 16611 Canterbury Drive, Minnetonka, Minnesota 55345,
(the latter two individuals herein being referred to as "Robins"), EASTCO GLOVE
TECHNOLOGIES, INC., a Minnesota corporation with offices at 130 West 10th
Street, Huntington Station, New York 11746 (the "Purchaser") and EASTCO
INDUSTRIAL SAFETY CORP., a New York corporation with offices at 130 West 10th
Street, Huntington Station, New York 11746 ("Eastco").
WHEREAS, the Seller owns and operates an industrial knitting and knit glove
screen coating business located at 4311 Peavey Road, Chaska, Minnesota, and;
WHEREAS, Robins are the owners of all of the outstanding shares of the
common stock of the Seller, and;
WHEREAS, the Seller desires to sell certain machinery and equipment and
inventory, which it owns, to the Purchaser; and
WHEREAS, the Seller and Robins have agreed to enter into certain
restrictive covenant agreements, not to engage in the industrial knitting and
knit glove screen coating business and not to disclose the customer lists and
trade secrets of such business which said agreements are a condition of this
Agreement; and
WHEREAS, the parties desire to set forth the terms and conditions of this
Agreement.
NOW, THEREFORE, the parties hereto, in consideration of the mutual promises
contained herein, hereby agree as follows:
ARTICLE 1
SALE AND PURCHASE OF ASSETS
---------------------------
1.01 The Seller shall sell to the Purchaser all of that machinery and
equipment ("Machinery and Equipment") specified on Exhibit "1" annexed hereto
and such inventory (the "Inventory") of Seller that Purchaser determines to
purchase. Purchase shall make the determination of Inventory that it desires
to purchase immediately prior to the closing. The Machinery and Equipment to
be purchased and the Inventory are herein referred to as the "Assets".
<PAGE>
ARTICLE 2
CLOSING
-------
2.01 Closing Date and Place. The closing of the transactions contemplated
hereunder (the "Closing") shall take place on or about April 17, 1997 (the
"Closing Date") at the offices of Hessian, McKasy & Soderberg at 4700 IDS
Center, 80 South Eighth Street, Minneapolis, Minnesota at 10:30 a.m. local time
(unless such other place is mutually agreed upon).
2.02 Purchase Price. In consideration of the sale of the Assets to the
Purchaser, and in reliance upon the representations, warranties, covenants, and
agreements made herein by the Seller and Robins, Eastco shall:
2.01.01 Satisfy all liens and encumbrances on the Assets in an
amount not to exceed $500,000 which shall be paid by Seller to the lien holders
on the Closing Date.
2.02.02 Payment for the Inventory to be purchased shall be based
upon the cost of each item or market price, whichever is lower. The
determination of Inventory to be purchased at the Closing shall be made solely
by Eastco who shall be entitled to purchase all of Seller's inventory, any part
of same or no inventory.
ARTICLE 3
SELLER AND ROBINS REPRESENTATIONS AND WARRANTIES
------------------------------------------------
Seller and Robins hereby represent and warrant to Purchaser and Eastco as
follows, which representations and warranties are true as of the date hereof,
shall be true as of the Closing and which shall survive the Closing:
3.01 Organization and Authority. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Minnesota
with full corporate power and authority to own, lease and operate its properties
and to carry on its businesses as currently conducted.
3.02 Affiliated Entities. Except as set forth in Section 3.02 of the
Disclosure Schedule, Seller does not own, directly or indirectly, any capital
stock or other securities of any corporation, limited liability company,
partnership, foreign company or other entity (herein an "Entity"), or has any
direct or indirect equity or ownership interest in any Entity. (The Disclosure
Schedule is annexed hereto and is made part of this Agreement.)
3.03 Capitalization. The authorized capital stock of Seller consists of
2,000 shares of Common Stock, of which 1,000 shares are issued and outstanding
<PAGE>
as of the date hereof, and are owned as set forth in Section 3.03 of the
Disclosure Schedule, free and clear of any lien, security interest, pledge,
charge or encumbrance.
3.04 Authority. Seller has full power and authority to enter into this
Agreement and any other document executed and delivered by it in accordance with
the terms of this Agreement and to carry out all of its duties and obligations
hereunder.
3.05 No Conflicts. Except as disclosed in Section 3.05 of the Disclosure
Schedule, neither the execution and delivery of this Agreement or any other
document in accordance with this Agreement, nor the consummation of the
transactions provided for herein and therein, nor compliance with any of the
provisions hereof or thereof, will (a) violate, conflict with, or result in a
breach of any provisions of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result
in the termination of, or accelerate the performance required by, or result in
a right of termination or acceleration, the loss of a material benefit or the
creation of any lien, claim, security interest, charge or encumbrance upon any
of the properties or assets of the Seller under any of the terms, conditions or
provisions of Seller's certificate of incorporation or by-laws, any note, bond,
mortgage, indenture, deed of trust or other financing document, or any license,
permit, lease or other agreement, instrument or obligation to which the Seller
is a party, or by which it is bound or any of its properties or assets may be
subject, or (b) violate any judgment, ruling, order, writ, injunction or decree
in effect as of the date hereof or any statute, rule or regulation applicable
to the Seller or any of its assets.
3.06 Liabilities. Except as disclosed in Section 3.06 of the Disclosure
Schedule, the Seller does not have any liabilities or obligations due or to
become due, whether absolute, accrued, contingent or otherwise, and there are
no claims or causes of action (including those relating to employee benefit
plans, as defined in Section 3(3) of ERISA, presently maintained or formerly
maintained by the Seller), that have been or are likely to be asserted against
the Seller, except for normal and recurring current liabilities incurred in the
ordinary and usual course of business of the Seller consistent with past
practices (the "Ordinary Course") and except for such other liabilities and
obligations as are not, in the aggregate, likely to have an adverse effect.
Seller shall not be rendered insolvent as a result of this transaction. Section
3.06 of the Disclosure Schedule sets forth a schedule of all of the liabilities
of the Seller as of the date hereof. Purchaser shall not be obligated for any
taxes of any type, sales taxes or the claim of any creditor of Seller, Robins
or anyone else as a result of this transaction.
3.07 Compliance with Laws. To the best of Seller's and Robins' knowledge
after due inquiry, except as Disclosed in Section 3.07 of the Disclosure
Schedule, the Seller has previously conducted and is currently conducting its
business in compliance with all applicable laws, rules, regulations and
requirements of each jurisdiction in which any such business is carried on,
except for failures to comply which individually or in the aggregate have not
had and are not reasonably likely to have an adverse effect. No changes would
be required in the processes, properties, practices or procedures of the Seller
in order to comply with such laws, rules, regulations and requirements, and the
Seller and Robins have not received any notice or communication of any non-
compliance with such laws, rules, regulations and requirements that has not been
cured.
<PAGE>
3.08 Assets and Title to Properties. Except as set forth in Section 3.08
of the Disclosure Schedule, Seller has good and marketable title to or a valid,
binding and enforceable leasehold interest in all of its respective properties
and assets, real, personal and mixed, tangible and intangible, including the
Assets, free and clear of all mortgages, liens, claims, pledges, charges,
encumbrances or title defects of a material nature and which are in good usable
condition. No past or present creditor of Seller or Protective Knitting Inc.
or Robins shall have any claim against the Assets or the Purchaser or Eastco
with respect to the sale of the Assets to the Purchaser. The Assets shall be
delivered to the Purchaser in good working and operating condition, free of any
defects and the inventory in good saleable condition and are all located at 4311
Peavey Road, Chaska, Minnesota. Seller has not been known by any other name
during the last five years other than PR Industries Inc.
3.09 Litigation and Proceedings. Except as set forth in Section 3.09 of
the Disclosure Schedule, (a) no claim, action, suit, arbitration, proceeding or
governmental investigation or inquiry is pending or is threatened against or
affecting the Seller or its respective assets, and (b) no claim, action, suit,
arbitration proceeding or governmental investigation or inquiry has had or is
reasonably likely to have a Material Adverse Effect. As used herein, "Material
Adverse Effect" means a material adverse effect on the business condition,
financial or otherwise, results of operations or prospects of Seller taken as
a whole. The Seller and Robins are not a party to or is it bound by any order,
judgment, decree, injunction or ruling of any court or any governmental or
administrative department, commission, agency or instrumentality, any arbitrator
or any other Person that has had or is reasonably likely to have a Material
Adverse Effect. Protective Knitting, Inc. ("PKI") and Seller are in compliance
with the agreement dated July 18, 1996 among Bettcher Industries, Inc., PKI and
Seller, and have violated none of its terms.
3.10 Interested Transactions. Except as set forth in Section 3.10 of the
Disclosure Schedule, no director or officer of the Seller and no shareholder
therein (a) owns, directly or indirectly, any interest in, or is a director,
officer, substantial stockholder or employee of, or consultant to, any
competitor, lessor, sublessee, supplier, customer or distributor of the Seller
or is in any other way associated with or involved in any businesses conducted
by the Seller other than in such capacity as a director, officer or shareholder
of the Seller, (b) owns, directly or indirectly, in whole or in part, any
property, asset or right, tangible or intangible, which is associated with any
property, asset or right owned by the Seller or which the Seller is presently
operating or using or the use of which is presently contemplated for their
business, or (c) is an official or employee of, or is otherwise connected with,
any labor organization having dealings with the Seller.
3.11 Brokers and Finders. Neither the Seller, nor any of Seller's
officers, directors, shareholders or employees has employed any broker, finder
or financial advisor or incurred any liability for any financial advisory fees,
brokerage fees, commissions or finders' fees, and no other broker or finder has
acted for Seller, directly or indirectly, in connection with this Agreement or
the transactions provided for herein.
3.12 No Misleading Statement, Omission or Other Information. To the best
<PAGE>
of Seller's and Robins' knowledge after due inquiry, there is no material fact
relevant to the assets, liabilities, business or future business prospects of
the Seller, which has not been set forth or described in this Agreement or the
Disclosure Schedule, the nondisclosure of which would have an adverse effect on
the Seller's business or could result in liability to the Purchaser. None of
the information included in this Agreement and the Disclosure Schedule or other
documents furnished or to be furnished by the Seller and Robins contains any
untrue statement of a material nature or is misleading an any material resect
or omits to state any material fact necessary in order to make any of the
statements herein or therein not material misleading.
ARTICLE 4
EASTCO's and PURCHASER'S REPRESENTATIONS AND WARRANTIES
-------------------------------------------------------
Eastco and Purchaser hereby represents and warrants to Seller as follows,
which representations and warranties are true as of the date hereof, shall be
true as of the Closing and which shall survive the Closing:
4.01 Organization and Authority. Eastco is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York
with full power and authority to own, lease and operate its property and to
carry on its business as now being conducted. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Minnesota with full power and authority to own, lease and operate its property
and to carry on its business as now being conducted.
4.02 Authorization. Eastco and Purchaser have full corporate power and
authority to enter into this Agreement and to carry out their obligations
hereunder. The execution and delivery of this Agreement and the consummation
of the transactions provided for herein have been duly authorized by the Board
of Directors of the Purchaser and Eastco, and no other corporate proceedings on
the part of Eastco and Purchaser is necessary to authorize this Agreement and
the transactions provided for herein. This Agreement has been duly executed and
delivered by Eastco and Purchaser and is a legal, valid and binding obligation
of the Purchaser, enforceable against Eastco and Purchaser in accordance with
its terms, subject to the qualification, however, that enforcement of the rights
and remedies created hereby is subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general application
relating to or affecting creditors' rights and to general equity principles.
4.03 No Violations. Neither the execution and delivery of this Agreement
by Eastco and Purchaser, nor the consummation of the transactions provided for
herein, nor compliance by Eastco and Purchaser with any of the provisions hereof
will (a) violate, conflict with, or result in a breach of any provisions of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration, or the creation of any lien, claim, security interest, charge or
<PAGE>
encumbrance upon any of the properties or assets of Eastco and Purchaser, under
any of the terms, conditions or provisions of (1) their certificate of
incorporation or by-laws, (2) any note, bond, mortgage, indenture, deed of trust
or other financing document, or (3) any license, permit, lease, agreement or
other instrument or obligation to which Eastco and Purchaser is a party, or by
which either of them is bound or any of their properties or assets may be
subject, or (b) violate any judgment, ruling, order, writ, injunction or decree
in effect as of the date hereof or any statute, rule or regulation, applicable
to Eastco and Purchaser or any of their assets.
4.05 Brokers and Finders. Neither the Purchaser nor Eastco nor any of
Purchaser's or Eastco's officers, directors, shareholders or employees has
employed any broker, finder or financial advisor or incurred any liability for
any financial advisory fees, brokerage fees, commissions or finders' fees, and
no other broker or finder has acted for Eastco or Purchaser, directly or
indirectly, in connection with this Agreement or the transactions provided for
herein.
ARTICLE 5
CONDITIONS PRECEDENT TO THE CLOSING
-----------------------------------
5.01 Conditions to Obligations of the Seller. The obligation of the Seller
to effect the Closing shall be subject to the fulfillment, at or prior to the
Closing Date, of each of the following conditions:
5.01.01 Representations and Warranties of Purchaser and Eastco. The
representations and warranties of Purchaser and Eastco set forth in Article 4
shall be true and correct in all material respects as of the date of this
Agreement and as of the Closing Date, as though made at and as of the Closing,
except as otherwise contemplated in this Agreement, and the Seller shall have
received a Purchaser and Eastco Closing Certificate to that effect. As used
herein, "Purchaser and Eastco Closing Certificate" means a certificate in form
and substance reasonably satisfactory to Seller, dated the Closing Date, and
signed by the Purchaser and Eastco.
5.01.02 Purchaser's Deliveries. At Closing there shall be delivered
to Seller the following:
(a) employment contract with Steven Robins duly executed
in the form annexed hereto as Exhibit "2";
(b) employment and consulting agreement with Phillip
Robins in the form annexed hereto as Exhibit "3";
(c) Stock Exchange Agreement between Purchaser, Eastco and
Steven Robins and Phillip Robins in the form annexed
hereto as Exhibit "4";
<PAGE>
(d) non-compete agreement with Steven Robins in the form
annexed hereto as Exhibit "5";
(e) non-compete agreement with Phillip Robins in the form
annexed hereto as Exhibit "6";
(f) non-compete agreement with Seller in the form annexed
hereto as Exhibit "7";
(g) lease between Purchaser and Seller in the form annexed
hereto as Exhibit "8".
(h) certified resolutions of the Purchaser and Eastco
authorizing the execution, delivery and consummation
by Purchaser and Eastco, respectively, of this
Agreement.
5.01.05 Opinion of Purchaser's Counsel. At the Closing, Seller
shall receive a signed opinion of Purchaser's Counsel, dated the Closing Date
and in the form of Exhibit "9" hereto.
5.02 Conditions to Obligations of Purchaser and Eastco. The obligations
of Purchaser and Eastco to effect the Closing shall be subject to the
fulfillment, at or prior to the Closing Date, of each of the following
conditions:
5.02.01 Representations and Warranties. The representations and
warranties of Seller and Robins set forth in Article 3 shall be true and correct
in all material respects as of the date of this Agreement and as of the Closing,
as though made at and as of the Closing Date, except as otherwise contemplated
in this Agreement, and Purchaser shall have received a Seller Closing
Certificate to that effect. As used herein, "Seller Closing Certificate" means
a certificate in form and substance reasonably satisfactory to Purchaser, dated
the Closing Date.
5.02.02 Satisfaction of All Outstanding Liens and Encumbrances. At
the Closing, and subject to Section 2.02.01 the Seller and Robins shall have
arranged for all liens and encumbrances on the Assets to be paid in full and to
pay all accounts payable of Seller.
5.02.03 Seller's Deliveries. At Closing there shall be delivered
to Purchaser the following:
(a) certificate of good standing of Seller;
(b) Certified copies of the certificate of incorporation
and by-laws of the Seller;
<PAGE>
(c) employment contract with Steven Robins duly executed
in the form annexed hereto as Exhibit "2";
(d) employment and consulting agreement with Phillip
Robins in the form annexed hereto as Exhibit "3";
(e) stock exchange agreement between Purchaser, Eastco and
Steven Robins and Phillip Robins in the form annexed
hereto as Exhibit "4";
(f) non-compete agreement with Steven Robins in the form
annexed hereto as Exhibit "5";
(g) non-compete agreement with Phillip Robins in the form
annexed hereto as Exhibit "6";
(h) non-compete agreement with Seller in the form annexed
hereto as Exhibit "7";
(i) lease between Purchaser and Seller in the form annexed
hereto as Exhibit "8";
(j) An Environmental Assessment Report which is
satisfactory to the Purchaser;
(k) certified resolutions of the shareholders and Board of
Directors of the Seller, duly authorizing the
execution, delivery and consummation of this
Agreement;
(l) bill of sale for the Assets.
5.02.04 Opinion of Seller's General Counsel. At the Closing,
Purchaser shall receive a signed opinion of Seller's General Counsel, dated the
Closing Date and in the form of Exhibit "10" hereto.
ARTICLE 6
INDEMNIFICATION
---------------
6.01 Indemnification of Purchaser and Eastco. After the Closing, and for
a period of twenty-four (24) months, the Seller shall indemnify and hold the
Purchaser and Eastco harmless against, and reimburse the Purchaser and Eastco
for, any actual damage, claim, loss, cost or expense incurred by the Purchaser
and Eastco (including reasonable attorney's fees up to $20,000 with respect to
<PAGE>
(i) and (ii) below and $50,000 with respect to (iii) below) resulting from (a)
any breach of the representations, warranties, covenants or obligations of the
Seller or Robins in this Agreement, (b) any misrepresentation in, or omission,
from, this Agreement, the Disclosure Schedule and any information, certificate,
license, report, or other instrument furnished to the Purchaser and Eastco
pursuant to this Agreement. No attorney's fees will be reimbursed if: (a) an
insurance policy owned by the Purchaser or Eastco or anyone else covers the cost
of any claim under this section; or (b) the claim does not concern any other
third party. The Purchaser or Eastco shall consult with Seller or Robins on a
claim prior to settlement of any such claim; however, the final decision-making
authority in any such matter shall rest solely with the Purchaser or Eastco.
In the event that Seller should cease operations of file for bankruptcy
protection, as long as these events were not related to or caused by any
obligation under this Agreement, and only under these conditions, then Robins
shall assume Seller's obligation of indemnification under this section for the
remaining balance of the twenty-four (24) months from the date of Closing. An
offset shall be authorized against any agreement to which Purchaser or Eastco
and Seller or Robins is a party, if the offset applies to (i) an account payable
due by Seller; or (ii) taxes owed by Seller; or (iii) potential lawsuits with
respect to the Bettcher settlement referred to in Section 3.12 of the Disclosure
Schedule that accrue prior to the date of this Agreement; and provided that
notice of a claim for accounts payable, taxes, or a matter referred to in
Section 3.12 of the Disclosure Schedule (1) is applicable to Seller, (2)
Purchaser or Eastco or Seller or Robins is given notice of such claim for
accounts payable, taxes, or a matter referred to in Section 3.12 of the
Disclosure Schedule during the 24 month period following the date of Closing by
the claimant, (3) Purchaser or Eastco promptly gives notice to Seller or Robins
of such claim, and (4) Seller or Robins does not resolve such claim to
Purchaser's or Eastco's satisfaction within thirty days thereafter. Otherwise,
an offset shall not be allowed against any agreement to which Purchaser or
Eastco and Seller or Robins is a party unless Purchaser or Eastco procures a
judgment against Seller or Robins for the amount to be offset.
6.02 Indemnification of Seller. After the Closing, the Purchaser and
Eastco shall indemnify and hold the Seller and Robins harmless against, and
reimburse the Seller and Robins for any actual damage, claim, loss, cost or
expense incurred by the Seller and Robins (including reasonable attorney's fees)
resulting from any breach of the representations, warranties, covenants or
obligations of the Purchaser and Eastco in this Agreement.
ARTICLE 7
MISCELLANEOUS PROVISIONS
-------------------------
7.01 Disclosure of Information. Both Purchaser and Eastco recognize and
acknowledge that Seller shall continue in the business of manufacturing and
selling knit retail liners, knit clean gloves, knit conductive gloves, knit
coating shells, cut and sewn liners, waterproof breathable products of all
types, dipped gloves of all types and other gloves manufactured for the sale to
the consumer trade and that Seller and Purchaser will be conducting their
respective businesses in the same building. As a result, Purchaser and Eastco,
their employees, agents, and officers will come in contact with Seller's method
of doing business and its confidential information during the negotiation of
this Agreement. Therefore, with respect to Seller's remaining business (not
being sold to Purchaser), Purchaser and Eastco recognize and acknowledge that
Seller's trade secrets, customer lists and other proprietary secret or
confidential information as such secret lists and information exist now and from
<PAGE>
time to time are valuable, special and unique assets of Seller and invaluable
to its business. Purchaser, Eastco, their employees, agents and officers will
not at any time disclose such confidential information to any person for any
reason; nor shall any such person make use of any confidential information for
his own purposes or for the benefit of any person including both Purchaser and
Eastco under any circumstances at any time in the future.
7.02 Covenants of Purchaser and Eastco. Purchaser and Eastco will respect
the secrecy of Seller's proprietary waterproof breathable technology and will
not, directly or indirectly, alone or together or with any other person or
persons, at any time for a period of five (5) years after the disengagement of
the shared operations:
A. Own, manage, operate, or participate in the ownership, management, or
operation or divulge or otherwise cooperate or assist others to obtain
information or become a representative of any company or person, who or which
designs, manufactures, sells, markets, distributes or otherwise deals in or with
waterproof breathable products as developed and produced by Seller including
breathable dipped three dimensional products of all types made from copoly ether
ester elastomers or polyurethane or similar materials or deal in or with the
technology for the manufacture of waterproof breathable three dimensional
inserts, membranes, or products;
B. Attempt to induce any customer who purchases the foregoing products
from Seller for the aforesaid five (5) year period to purchase or otherwise
acquire any competing aforementioned product from any person other than Seller
or to cease purchasing such products from Seller or to curtail its purchases
from Seller or to reduce, rescind or postpone any purchase order at any time
given to Seller; or
C. Attempt to induce any officer, employee, consultant, agent,
independent contractor, distributor, salesperson or representative of Seller to
terminate his, her, or its relationship with Seller or simultaneously represent
any competitor of Seller or to compete with Seller.
7.03 Equitable Remedies. Notwithstanding paragraph 7.11 of this Agreement,
Purchaser and Eastco acknowledge any breach of paragraph 7.01 or 7.02 of this
Agreement could result in substantial and irreparable damages to Seller and that
the amount of damages would be difficult, if not impossible, to calculate in
monetary terms. Therefore, Purchaser and Eastco agree that in the event of any
such breach or a threatened breach of paragraph 7.01 or 7.02 of this Agreement,
Seller may seek and obtain a preliminary, temporary or permanent injunction,
restraining order or other relief in equity. Seller's right to injunctive or
other relief in equity shall be in addition to all other rights and remedies
Seller may otherwise have at law, in equity or otherwise, in the event of any
breach or threatened breach against the guilty person. Seller's right to
injunctive or other relief in equity may be exercised at its option, prior or
subsequent to or contemporaneous with or in lieu of any rights or remedies
Seller may have by reason of a breach of paragraph 7.01 or 7.02 of this
Agreement
7.04 Notices. All notices required or permitted to be given under this
Agreement shall be in writing and may be given by certified or registered mail,
<PAGE>
postage prepaid or by delivery through Federal Express or any other private
courier service with a copy faxed at the same time. Such notices shall be
mailed and faxed to the following addresses and facsimile numbers:
If to Eastco or the Purchaser, to:
Mr. Arthur Wasserspring
Eastco Industrial Safety Corp.
130 West 10th Street
Huntington Station, New York 11746
Facsimile: (516) 427-1840
with a copy to:
Mr. Herbert W. Solomon
Hollenberg Levin Solomon Ross Belsky and Daniels, LLP
585 Stewart Avenue, Suite 700
Garden City, NY 11530
Facsimile: (516) 745-6642
If to Seller, to:
PR Industries, Inc.
4311 Peavey Road
Chaska, Minnesota 55318
Facsimile: (612) 448-2873
with copies to:
Manly Zimmerman, Esq.
Zimmerman & Bix Ltd., Suite 400
514 Nicollet Mall
Minneapolis, MN 55408
Facsimile: (612) 333-5005
If to Robins, to:
Steven Robins
PR Industries, Inc.
4311 Peavey Road
Chaska, Minnesota 55318
Facsimile: (612) 448-2873
and
Phillip Robins
PR Industries, Inc.
4311 Peavey Road
<PAGE>
Chaska, Minnesota 55318
Facsimile: (612) 448-2873
Notices shall be effective (a) if mailed with the proper postage prepaid, three
Business Days after the date of mailing, (b) if delivery by private courier, on
the date of delivery, and after each of the foregoing by facsimile.
7.05 Governing Law. The validity and effectiveness of this Agreement shall
be governed by and construed accordance with the internal laws of the State of
New York, without giving effect to the provisions, policies or principles of any
state law relating to choice or conflict of laws.
7.06 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns.
7.07 Counterparts. This Agreement may be executed in one or more
counterparts, each of which may bear the signatures of less than all the
parties, but all of which together shall constitute one agreement.
7.08 Entire Agreement. This Agreement, together with the Exhibits hereto,
and the Disclosure Schedule constitutes the entire agreement among the parties
with respect to the subject matter of this Agreement, and no Party shall be
bound by any communications between or among any of them on the subject matter
hereof unless in writing. Any prior agreements between the Seller, Robins and
the Purchaser are hereby terminated.
7.09 Severability. The parties agree that if any term or provision of this
Agreement contravenes or is invalid under any federal, state or local law, court
decision, rule, ordinance or regulation, this Agreement shall, as to the
jurisdiction in which such legal authority is promulgated or rendered, be
construed as if it did not contain the offending term or provision, and the
remaining provisions of this Agreement shall not be affected thereby; provided,
however, that if the removal of such offending term or provision materially
alters the burdens or benefits of any of the parties under this Agreement, the
parties agree to negotiate in good faith such modifications to this Agreement
as are appropriate to insure that the burdens and benefits of each Party under
such modified Agreement are reasonably comparable to the burdens and benefits
originally contemplated and expected.
7.10 Captions. The captions herein are inserted for convenience of
reference only and shall not affect the construction of this Agreement.
7.11 Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association (the "Association"). Any claim brought by Seller or Robins shall
be settled by the Association at its offices in Nassau County, New York; any
claim brought by Purchaser or Eastco shall be settled by the Association at its
offices in Minneapolis, Minnesota. A judgment upon the award rendered by the
Arbitrators may be entered in any court having jurisdiction thereof.
<PAGE>
7.12 Expenses. Except as otherwise provided herein, the parties hereto
shall be responsible for their own costs and expenses with respect to the
transactions contemplated hereby, including but not limited to legal fees.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers thereunto duly authorized, all on the date first
written above.
PR INDUSTRIES INC.
By: /s/ PHILLIP ROBINS
------------------
PHILLIP ROBINS
EASTCO GLOVE TECHNOLOGIES, INC.
By: /s/ LAWRENCE DENSEN
-------------------
LAWRENCE DENSEN
EASTCO INDUSTRIAL SAFETY CORP.
By: /s/ LAWRENCE DENSEN
-------------------
LAWRENCE DENSEN
/s/ PHILLIP ROBINS
------------------
PHILLIP ROBINS
/s/ STEVEN ROBINS
------------------
STEVEN ROBINS
EXHIBIT 10.10
VOTING TRUST AGREEMENT
-----------------------
VOTING TRUST AGREEMENT made on the 17th day of April, 1997, by and among
Eastco Industrial Safety Corp., a New York corporation with offices at 130 West
10th Street, Huntington Sation, New York 11746 (the "Company"), parties whose
names and signatures are set forth at the end of this Agreement (the
"Shareholders"), and Alan E. Densen, Anthony P. Towell and Lawrence Densen or
their survivors and their successors in trust (the "Trustees").
WHEREAS on the date hereof, Eastco Glove Technologies, Inc., a Minnesota
corporation (and a wholly-owned subsidiary of the Company) with offices at 130
West 10th Street, Huntington Station, New York 11746, acquired all of the issued
and outstanding shares of Protective Knitting, Inc., a Minnesota corporation
with offices at 4311 Peavey Road, Chaska, Minnesota 55318 ("PKI") pursuant to
a stock exchange agreement ("Stock Exchange Agreement") in exchange for 100,000
shares of the Company, and
WHEREAS as a condition to the closing (the "Closing") under the Stock
Exchange Agreement, and contingent upon the Closing thereto being consummated,
the parties are entering into this Agreement as a material inducement to Eastco
to proceed with and consummate the Closing; and
WHEREAS the Trustees have consented to act under this Agreement for the
purposes herein provided,
IT IS THEREFORE AGREED:
1. Transfer of Shares to Trustees. The Shareholders simultaneously with
the execution of this Agreement, shall indorse in blank and assign and deliver
their share certificates to the Trustees, who shall cause the shares represented
thereby to be transferred to them, as voting trustees, on the books of the
Company.
2. Voting Trust. The voting trust hereby created shall continue for five
years from the date hereof. Throughout such period, the Trustees, by majority
vote, shall have the exclusive right to vote upon such shares or to give written
consents in lieu of voting thereon, subject to any limitation on the right to
vote contained in the Certificate of Incorporation or other certificate filed
pursuant to law, in person or by proxy at all meetings of the Company's
shareholders, and in all proceedings wherein the vote or written consent of
shareholders may be required or authorized by law.
3. Trust Certificates. The Trustees shall issue and deliver to each of
the Shareholders, or to his nominee, certificates for the number of shares
<PAGE>
transferred by them to the Trustees in form substantially as follows:
Trust Certificate
No.__________________ 100,000 Shares
Alan E. Densen, Lawrence Densen and
Anthony P. Towell, voting trustees of the
shares of Eastco Industrial Safety Corp.,
under an agreement dated April 17, 1997,
having received certain shares of the Company,
pursuant to such agreement, which agreement
the holder hereof by accepting this
certificate ratifies and adopts, hereby
certify that _____________________ will
be entitled to receive a certificate for
_____________________ fully paid common shares
of Eastco Industrial Safety Corp., of the par
value of $0.12 each, on the expiration of the
voting trust agreement, and in the meantime
shall be entitled to receive payments equal to
any dividends that may be collected by the
undersigned trustees upon a like number of
such shares held by it under the terms of the
trust agreement.
This certificate is transferable only on
the books of the undersigned Trustees by the
registered holder in person or by his duly
authorized attorney, and the holder hereof, by
accepting this certificate, manifests his
consent that the undersigned Trustees may
treat the registered holder hereof as the true
owner for all purposes, except the delivery of
share certificates, which delivery shall not
be made without the surrender hereof.
IN WITNESS WHEREOF, Alan E. Densen,
Anthony P. Towell and Lawrence Densen have
executed this certificate this 17th day of
April, 1997.
----------------------
Alan E. Densen, Trustee
--------------------------
Anthony P. Towell, Trustee
--------------------------
Lawrence Densen, Trustee
4. Sale/Registration of Stock.
(a) In the event that a Shareholder desires, after one (1) year
from the date hereof, to sell its shares as authorized pursuant to Rule 144
promulgated under the Securities Act of 1933, said Shareholder shall provide
fifteen (15) days notice to the parties hereto. Upon receipt of said notice,
the Trustees shall release the shares to be sold from this Agreement and
permit their sale pursuant to Rule 144.
<PAGE>
(b) In the event that the Company intends to file a registration
statement with respect to its common stock (except on Form S-8 or any other
inappropriate form or if the underwriter objects thereto or with respect to
any existing registration to be amended), then the Company on one occasion
will give the Shareholders at least 10 days notice and if the Shareholder
states that he will be selling his shares within thirty days of the effective
date of the registration statement, then the Company at its expense except
for discounts and commissions, will include such shares in such registration
statement, provided that the Shareholder duly cooperates as required in the
filing of such registration statement.
5. Dividends. The Trustees shall collect and receive any dividends
that may accrue upon the shares subject to this Trust, and subject to
deduction as provided in paragraph 10 hereof, shall divide the same among the
trust certificate holders in proportion to the number of shares respectively
represented by their trust certificates.
6. Liability. The Trustees shall use their best judgment in voting
upon the stock held by them, but shall not be liable for the consequence of
any vote cast, or consent given by them, in good faith, and in the absence of
gross negligence.
7. Transfer at Termination. At the expiration of the term of the
trust hereby created, the Trustees shall, upon surrender of the trust
certificates, deliver to the holders thereof shares of stock of the Company
equivalent in amount to the shares represented by the trust certificates
surrendered.
8. Dissolution of Company. In the event of the dissolution or total
or partial liquidation of the Company, whether voluntary or involuntary, the
Trustees shall receive the monies, securities, rights, or property to which
the holders of the Company's capital stock deposited hereunder are entitled,
and shall distribute the same among the registered holders of voting trust
certificates in proportion to their interests, as shown by the books of the
Trustees. Alternatively, the Trustees may in their discretion deposit such
monies, securities, rights, or property with any bank or trust company doing
business in the State of New York with authority and instructions to
distribute the same as above provided, and upon such deposit all further
obligations or liabilities of the Trustees in respect of such monies,
securities, rights or property so deposited shall cease.
9. Reorganization of Company. If the Company is merged into or
consolidated with another corporation, or all or substantially all of its
assets are transferred to another corporation, then in connection with such
transfer the term "Company" for all purposes of this Agreement shall be
deemed to include such successor corporation, and the Trustees shall receive
and hold under this Agreement any stock of such successor corporation
received on account of the ownership, as Trustees hereunder, of the stock
held hereunder prior to such merger, consolidation, and transfer. Voting
trust certificates issued and outstanding under this Agreement at the time of
such merger, consolidation or transfer may remain outstanding, or the
Trustees may, in their discretion, substitute for such voting trust
certificates new voting trust certificates in appropriate form and the terms
"stock" and "capital stock" as used herein shall be taken to include any
<PAGE>
stock which may be received by the Trustees in lieu of all or any part of the
Company's capital stock. Any stock dividends, splits, shares issued upon any
recapitalization shall be added to this Voting Trust.
10. Rights of Trustees.
(a) Until the actual delivery to the holders of voting trust
certificates issued hereunder of stock certificates in exchange therefor, and
until the surrender of the voting trust certificates of cancellation, the
Trustees shall have the right, subject to the provisions of this paragraph
hereinafter set forth, to exercise, in person or by their nominees or
proxies, all stockholders' voting rights and powers in respect of all stock
deposited hereunder, and to take part in or consent to any corporate or
stockholders' action of any kind whatsoever. The right to vote shall include
the right to vote for the election of directors, and in favor of or against
any resolutions or proposed action of any character whatsoever, which may be
presented at any meeting or require the consent of the Company's
stockholders. Without limiting such general right, it is understood that
such action or proceeding may include, upon terms satisfactory to the
Trustees or to their nominees or proxies thereto appointed by them,
mortgaging, creating a security interest in, and pledging of all or any part
of the Company' property, the lease or sale of all or any part of its
property, for cash, securities, or other property, and the dissolution of the
Company, or its consolidation, merger, reorganization or capitalization.
(b) In voting the stock held by them hereunder, either in person or
by their nominees or proxies, the Trustees shall exercise their best judgment
to select suitable directors of the Company, and shall otherwise, insofar as
they may as a stockholder of the Company, take such part or action in respect
to the management of its affairs as they may deem necessary so as to be kept
advised on the affairs of the Company and its management.
(c) The death of a trustee shall terminate his trusteeship. Any
trustee may resign at any time and may be replaced by his successors.
11. Compensation and Reimbursement of Trustees. The Trustees
shall serve without compensation. The Trustees shall have the right to incur
and pay such reasonable expenses and charges, to employ and pay such agents,
attorneys, and counsel as they may deem necessary and proper to effectuate
this Agreement. All such expenses or charges incurred by and due to the
Trustees may be deducted from the dividends or other monies or property
received by them on the stock deposited hereunder. Nothing herein contained
shall disqualify the Trustees or successor Trustees, or incapacitate them
from serving the Company or any of its subsidiaries as officer or director,
or in any other capacity, and in any such capacity receiving compensation.
12. Entire Agreement. This Agreement supersedes all agreements
previously made between the parties relating to its subject matter. There
are no other understandings or agreements between them.
13. Non-Waiver. No delay or failure by a party to exercise any
right under this Agreement, and no partial or single exercise of that right,
shall constitute a waiver of that or any other right, unless otherwise
expressly provided herein.
14. Headings. Headings in this Agreement or for convenience only
and shall not be used to interpret or construe its provisions.
<PAGE>
15. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
17. Binding Effect. The provisions of this Agreement shall be
binding upon and inure to the benefit of each of the parties and their
respective legal representatives, successor and assigns.
IN WITNESS WHEREOF, the parties have signed this Agreement.
/s/ Alan E. Densen
--------------------
Alan E. Densen, Trustee
/s/ Lawrence Densen
--------------------
Lawrence Densen, Trustee
/s/ Anthony P. Towell
---------------------
Anthony P. Towell, Trustee
Corporate Seal
Attest: EASTCO INDUSTRIAL SAFETY CORP.
/s/ Anthony P. Towell By: /s/ Lawrence Densen
- --------------------- --------------------------
Anthony P. Towell Lawrence Densen, President
The following Shareholders:
Address Number of Shares
------- ----------------
/s/ Steven Robins 9743 Dorset Lane 50,000
- -----------------
Steven Robins Eden Prairie, MN 55347
/s/ Phillip Robins 16611 Canterbury Drive 50,000
- ------------------
Phillip Robins Minnetonka, MN 55345
EXHIBIT 10.11
EASTCO INDUSTRIAL SAFETY CORP.
EMPLOYMENT AGREEMENT
---------------------
EMPLOYMENT AGREEMENT made as of this 1st day of February, 1997 by and
between EASTCO INDUSTRIAL SAFETY CORP., a New York corporation, having an
office at 130 West 10th Street, Huntington, New York 11746 (hereinafter
referred to as "Employer" and sometimes the "Company") and ARTHUR
WASSERSPRING, an individual residing at 6 The Mews, Syosset, New York 11791
(hereinafter referred to as "Employee");
W I T N E S SE T H:
WHEREAS, the Employee is to be employed in the capacity of Vice-President
of Finance, and as an executive officer of the Company, and the
parties wish that such employment be continued during the term of this
Agreement; and
WHEREAS, the Employer and Employee desire to set forth the terms and
conditions of such employment;
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein set forth it is agreed as follows:
1. Employment of Vice-President of Finance. Employer hereby employs
Employee as Vice-President of Finance of Employer, in which position Employee
shall be deemed an "executive officer" of the Company.
2. Term.
a. The term of this Agreement shall commence on February 1, 1997
and shall be for a period of three years which shall initially terminate on
January 31, 2000. Each 12 month period from February 1 through January 31
during the term hereof shall be referred to as an "Annual Period." During
the term hereof, Employee shall devote all of his business time and efforts
to the Employer.
b. Subject to Section 9 below, unless Employer or Employee shall
determine to the contrary and shall so notify the other on or before January
31, 1999, this Agreement shall automatically continue for the Annual Period
of February 1, 2000 to January 31, 2001 and shall automatically continue for
subsequent Annual Periods thereafter unless, at least twelve months before
the end of a subsequent Annual Period, notice is given by one party to the
other of such party's desire to terminate this Agreement at such time. For
example, if this Agreement has not been otherwise properly and earlier
terminated, and no notice of termination is given on or before January 31,
2000, then this Agreement shall continue for the Annual Period February 1,
2001 to January 31, 2002.
<PAGE>
c. If the Employer gives notice not to renew for an Annual Period
as heretofore provided, then the Employee may elect to resign immediately
from employment and shall be entitled to be paid, monthly in advance, his
compensation under Sections 4(a) and (b) of this Agreement until this
Agreement terminates, but no other monies under this Agreement. For example,
if the Employer decides not to continue this Agreement for the Annual Period
beginning February 1, 2000, then on giving notice prior to February 1, 1999,
the Employee shall be entitled to resign immediately from employment and
shall be entitled to receive his compensation in full under Sections 4(a) and
(b) on or before the first day of each month until January 31, 2000.
3. Duties. The Employee shall perform in a faithful and diligent
manner, during all normal business hours, those functions generally performed
by persons of such title and position specified herein, and all related
duties on behalf of the Employer and its subsidiaries and shall be available
to confer and consult with and advise the officers and directors of Employer
at such times that may be required by Employer.
4. Compensation.
a. During the Annual Period ending January 31, 1998 the
Employee's annual salary shall be at the rate of $92,500 per annum and
thereafter as determined by the Board of Directors of the Employer, but at no
less than the foregoing amount. Employee's annual salary shall be increased
to no less than $101,750 (110% of the previous amount) at February 1, 1999
and, subject to this Agreement being continued, thereafter as determined by
the Board of Directors, but at no time less than the foregoing increased
amount. Employee shall be paid at such times in accordance with the current
corporate practice of the Employer.
b. Employer shall include Employee, his spouse and minor
children, if any, in its health insurance program available to Employer's
executive officers.
c. Employee shall receive $500 per month as an automobile
allowance, plus reimbursement for reasonable operating, maintenance,
insurance and repair expenses.
d. Employee shall be entitled to participate in such benefit
plans as the Employer generally makes available to all executive officers of
the Company.
<PAGE>
e. Employer shall maintain a term life insurance policy on
Employee for the benefit of a beneficiary named by Employee in an amount not
less than $200,000 for so long as the Employee is actively rendering services
for the Employer.
f. In the event that Employee is mentally or physically
incapacitated during the term of this Agreement, so that he is unable to
render services on a full-time basis, and such incapacity occurs during any
period of twenty-four (24) consecutive months, then he shall be entitled to
receive at least full compensation as provided under this Agreement for the
first six months of such disability, and thereafter, one-half compensation
for the next six months, less any payments that he has received from social
security or disability insurance, or similar insurance payable to him from
any source other than insurance that he has purchased on his own behalf and
after such twelve (12) months of disability, he shall receive no compensation
while disabled. Payment shall be made as provided herein, irrespective of
the Employer's termination of this Agreement under Section 9(a)(D).
g. Upon the demise of the Employee, all compensation to the
Employee (other than as provided under Section 4(e)), which is not yet
payable by the Employer shall terminate. In the event that Sections 2(c),
9(b), and 9(c) of this Agreement become applicable prior to the demise of the
Employee, then the Employer shall continue to be required to make the
payments thereunder.
5. Vacation. Employee shall be entitled to receive four (4) weeks paid
vacation time during each Annual Period of employment upon dates reasonably
agreed upon by Employer and Employee.
6. Restrictive Covenants. The Employee agrees that he will not
directly or indirectly, on behalf of himself or others:
a. While in the employ of the Employer, solicit, sell or offer to
sell to anyone else any product or service similar to that sold or offered by
the Employer, except on behalf of the Employer, or provide services similar
to that being provided by him to the Employer under this Agreement, to anyone
else that makes products or supplies services similar to that sold or offered
by the Employer;
b. In the foregoing event that Employee is receiving compensation
pursuant to Section 2(c) of this Agreement, and for such period that
compensation is payable thereunder, Employee shall not (i) solicit, sell, or
offer to sell to anyone any product or service similar to that sold or
offered by the Employer; or (ii) provide services similar to that provided by
him to the Employer under this Agreement, to anyone that makes or sells
products or services similar to that sold or offered by the Employer. In
such event, Employee shall forfeit all rights to payments provided for in
Section 2(c) of this Agreement by returning all monies previously paid to him
under Section 2(c) and he shall not be entitled to the payment of any
remaining monies still payable under Section 2(c); or
<PAGE>
c. In the event that Employee is not receiving compensation
pursuant to Section 2(c) of this Agreement, then for a period of twelve (12)
months after the termination of his services with the Employer, irrespective
of time, manner or reason for termination (unless Employee is terminated
without cause pursuant to this Agreement), sell or offer to sell products or
services similar to that sold or offered by the Employer to any customers of
the Employer on any list that Employee has that belongs to or was provided by
the Employer or that Employee solicited on behalf of the Employer.
7. Non-Disclosure of Trade Secrets. The Employee recognizes and
acknowledges that he will be given and has had access to the confidential
methods, techniques, trade secrets, procedures, materials and confidential
information of the Employer. The Employee will not, directly or indirectly on
behalf of himself or others, during or at any time after the termination of
his providing services hereunder, irrespective of time, manner or cause of
termination, disclose, publish, disseminate or utilize same or any portion of
same.
8. Remedies in the Event of Employee's Breach. In the event of a
breach or threatened breach by the Employee of the provisions of this
Agreement, the Employer, notwithstanding any provision of this Agreement to
the contrary, shall be entitled to an injunction restraining the Employee
from violating any of the provisions of Paragraphs "6" or "7" of this
Agreement. Nothing herein shall be construed to prohibit the Employer from
pursuing any other legal or equitable remedies available to it for such
breach, including the recovery of damages from the Employee.
9. Termination.
a. Termination by the Employer.
Employer may terminate this Agreement upon notice for Cause without the
obligation to make further payments to the Employee other than as provided in
Section 4(f) of this Agreement. For purposes of this Agreement, "Cause"
shall mean (A) the conviction of Employee for the commission of a felony;
(B) the habitual abuse of alcohol or controlled substances, excluding
prescription drugs prescribed for the Employee; (C) the violation of any
obligations of the Employee under this Agreement or the failure of the
Employee to perform his duties under this Agreement as required; and (D) the
physical or mental disability of the Employee for more than six (6) months in
any twenty-four (24) consecutive month period. Notwithstanding anything to
the contrary in this Section 9, Employer may not terminate Employee's
employment under this Agreement for Cause unless Employee shall have first
received forty-five (45) days' notice from the Employer advising Employee of
the specific acts or omissions alleged to constitute Cause, and such acts or
omissions continue after Employee shall have had a reasonable opportunity
during such period to correct the acts or omissions so complained of, unless
the Employee determines that the Employer has been harmed in such manner that
the harm to the Employer cannot be immediately corrected without resorting to
a legal remedy.
<PAGE>
b. Termination by Employee
i. Employee shall have the right to terminate his employment
under this Agreement upon forty-five (45) days' notice to the Company upon
the occurrence of any of the following events:
(A) Employee is not retained as Vice-President of
Finance or other comparable position;
(B) Employer acts to materially reduce Employee's duties
and responsibilities hereunder;
(C) Employer acts to change the geographic location of
the performance of Employee's duties from the New York Metropolitan area.
For purposes of this Agreement, the New York Metropolitan area shall be
deemed to be the area within 50 road miles of Employer's present offices;
(D) A failure by Employer to obtain the assumption of
this Agreement by any successor; or
(E) A material breach of this Agreement by Employer,
which is not cured within forty-five (45) days of written notice by Employee
of such breach.
ii. If Employee shall terminate this Agreement under Section
9(b)(i), Employer's obligations under Section 4 shall be absolute and
unconditional and not subject to any offset or counterclaim and Employee
shall continue, until the end of this Agreement, to be entitled to receive:
(a) his compensation under Sections 4(a) and (b) on or before the first of
each month until the termination of this Agreement; and (b) vesting of all
options and warrants that he holds, under any plan or otherwise prior to the
date of termination, that may be legally vested at that time, without any
payment required to be made by Employee.
<PAGE>
c. Termination by Employee Upon a Change in the Company's Board
of Directors.
Employee shall have the right to terminate his employment under this
Agreement by notice to the Employer within six months of the withdrawal from
the Company's Board of Directors of a majority of the present members of the
Board of Directors, as constituted on the date of this Agreement, other than
by reason of a voluntary resignation or the demise of such directors. If
Employee terminates this Agreement pursuant to this provision, in lieu of all
other monies payable to him under this Agreement and not yet payable as of
the date of his notice of termination, he shall be entitled to a one-time
bonus equal to one dollar less than three times the present value of the base
amount of the Employee's salary, as determined in accordance with Section
280G of the Internal Revenue Code, as amended, payable absolutely,
unconditionally and immediately and not subject to any offset or
counterclaim.
10. Arbitration. Subject to paragraph 8 of this Agreement where an
application for an injunction is sought, which may be coupled with any other
remedy, any controversies between Employer and Employee involving the
construction or application of any of the terms, provisions or conditions of
this Agreement shall on the written request of either party served on the
other by submitted to arbitration. Such arbitration shall comply with and be
governed by the rules of the American Arbitration Association in Nassau
County, New York. An arbitration demand must be made within one (1) year of
the date on which the party demanding arbitration first had notice of the
existence of the claim to be arbitrated, or the right to arbitration along
with such claim shall be considered to have been waived. One arbitrator
shall be selected according to the procedures of the American Arbitration
Association. The cost of arbitration shall be born by the losing party or in
such proportions as the arbitrator shall decide. The arbitrator shall have
no authority to add to, subtract from or otherwise modify the provisions of
this Agreement, or to award punitive damages to either party.
11. Attorneys' Fees and Costs. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which he may be entitled.
<PAGE>
12. Entire Agreement; Survival.
a. This Agreement contains the entire agreement between the
parties with respect to the transactions contemplated herein and supersedes,
as of the effective date hereof any prior agreement or understanding between
Employer and Employee with respect to Employee's employment by Employer. The
unenforceability of any provision of this Agreement shall not effect the
enforceability of any other provision. This Agreement may not be amended
except by an agreement in writing signed by the Employee and the Employer, or
any waiver, change, discharge or modification as sought.
b. The provisions of Sections 6, 7, 8, 10, 11, 14, 16, and 17
shall survive the termination of this Agreement.
13. Assignment. This Agreement may not be assigned by the Employee,
and shall be binding upon any purported successors and assigns of Employer.
14. Notices. Any notice required or given under this Agreement shall
be sufficient if in writing and sent by registered mail or certified mail to
the addresses hereinabove set forth or to such other addresses as any of the
parties hereto may designate in writing, transmitted by registered or
certified mail to the other.
15. Successors. This Agreement shall be binding upon the heirs,
successors and assigns of the Employee. This Agreement shall inure to the
benefit of and be binding upon the Employer, its successors and assigns,
including, without limitation, any corporation which may acquire all or
substantially all of the assets and business of the Employer or with or into
which the Employer may be consolidated or merged.
16. Governing Law. This Agreement and all the amendments hereof, and
waivers and consents with respect thereto shall be governed by the internal
laws of the state of New York, without regard to the conflicts laws
principles thereof.
17. Severability of Agreement. Should any part of this Agreement for
any reason be declared invalid by a court of competent jurisdiction, such
decision shall not affect the validity of any remaining portion, which
remaining provisions shall remain in full force and effect as if this
Agreement had been executed with the invalid portion thereof eliminated, and
it is hereby declared the intention of the parties that they would have
executed the remaining portions of this Agreement without including any such
part, parts or portions which may, for any reason, be hereafter declared
invalid.
IN WITNESS WHEREOF, the undersigned have executed this agreement as
of the day and year first above written.
EASTCO INDUSTRIAL SAFETY CORP.
By: /s/ Alan E. Densen
-------------------
Alan E. Densen
Its: President
/s/ ARTHUR WASSERSPRING
-----------------------
ARTHUR WASSERSPRING
EXHIBIT 10.12
EASTCO INDUSTRIAL SAFETY CORP.
EMPLOYMENT AGREEMENT
---------------------
EMPLOYMENT AGREEMENT made as of this 1st day of February, 1997 by and
between EASTCO INDUSTRIAL SAFETY CORP., a New York corporation, having an
office at 130 West 10th Street, Huntington, New York 11746 (hereinafter
referred to as "Employer" and sometimes the "Company") and RICHARD BOYEN, an
individual residing at 303 Timberlake Drive, Union Grove, Alabama 35175
(hereinafter referred to as "Employee");
W I T N E S SE T H:
WHEREAS, the Employee is to be employed in the capacity of Vice-President
of Manufacturing Operations, and as an executive officer of the
Company, and the parties wish that such employment be continued during the
term of this Agreement; and
WHEREAS, the Employer and Employee desire to set forth the terms and
conditions of such employment;
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein set forth it is agreed as follows:
1. Employment of Vice-President of Manufacturing Operations. Employer
hereby employs Employee as Vice-President of Manufacturing Operations of
Employer, in which position Employee shall be deemed an "executive officer"
of the Company.
2. Term.
a. The term of this Agreement shall commence on February 1, 1997
and shall be for a period of three years which shall initially terminate on
January 31, 2000. Each 12 month period from February 1 through January 31
during the term hereof shall be referred to as an "Annual Period." During
the term hereof, Employee shall devote all of his business time and efforts
to the Employer.
b. Subject to Section 9 below, unless Employer or Employee shall
determine to the contrary and shall so notify the other on or before January
31, 1999, this Agreement shall automatically continue for the Annual Period
of February 1, 2000 to January 31, 2001 and shall automatically continue for
subsequent Annual Periods thereafter unless, at least twelve months before
the end of a subsequent Annual Period, notice is given by one party to the
other of such party's desire to terminate this Agreement at such time. For
example, if this Agreement has not been otherwise properly and earlier
terminated, and no notice of termination is given on or before January 31,
2000, then this Agreement shall continue for the Annual Period February 1,
2001 to January 31, 2002.
<PAGE>
c. If the Employer gives notice not to renew for an Annual Period
as heretofore provided, then the Employee may elect to resign immediately
from employment and shall be entitled to be paid, monthly in advance, his
compensation under Sections 4(a) and (b) of this Agreement until this
Agreement terminates, but no other monies under this Agreement. For example,
if the Employer decides not to continue this Agreement for the Annual Period
beginning February 1, 2000, then on giving notice prior to February 1, 1999,
the Employee shall be entitled to resign immediately from employment and
shall be entitled to receive his compensation in full under Sections 4(a) and
(b) on or before the first day of each month until January 31, 2000.
3. Duties. The Employee shall perform in a faithful and diligent
manner, during all normal business hours, those functions generally performed
by persons of such title and position specified herein, and all related
duties on behalf of the Employer and its subsidiaries and shall be available
to confer and consult with and advise the officers and directors of Employer
at such times that may be required by Employer.
4. Compensation.
a. During the Annual Period ending January 31, 1998 the
Employee's annual salary shall be at the rate of $96,500 per annum and
thereafter as determined by the Board of Directors of the Employer, but at no
less than the foregoing amount. Employee's annual salary shall be increased
to no less than $106,150 (110% of the previous amount) at February 1, 1999
and, subject to this Agreement being continued, thereafter as determined by
the Board of Directors, but at no time less than the foregoing increased
amount. Employee shall be paid at such times in accordance with the current
corporate practice of the Employer.
b. Employer shall include Employee, his spouse and minor
children, if any, in its health insurance program available to Employer's
executive officers, without any cost to the Employee.
c. Employee shall receive $500 per month as an automobile
allowance, plus reimbursement for reasonable operating, maintenance,
insurance and repair expenses.
d. Employee shall be entitled to participate in such benefit
plans as the Employer generally makes available to all executive officers of
the Company.
<PAGE>
e. Employer shall maintain a term life insurance policy on
Employee for the benefit of a beneficiary named by Employee in an amount not
less than $200,000 for so long as the Employee is actively rendering services
for the Employer.
f. In the event that Employee is mentally or physically
incapacitated during the term of this Agreement, so that he is unable to
render services on a full-time basis, and such incapacity occurs during any
period of twenty-four (24) consecutive months, then he shall be entitled to
receive at least full compensation as provided under this Agreement for the
first six months of such disability, and thereafter, one-half compensation
for the next six months, less any payments that he has received from social
security or disability insurance, or similar insurance payable to him from
any source other than insurance that he has purchased on his own behalf and
after such twelve (12) months of disability, he shall receive no compensation
while disabled. Payment shall be made as provided herein, irrespective of
the Employer's termination of this Agreement under Section 9(a)(D).
g. Upon the demise of the Employee, all compensation to the
Employee (other than as provided under Section 4(e)), which is not yet
payable by the Employer shall terminate. In the event that Sections 2(c),
9(b), and 9(c) of this Agreement become applicable prior to the demise of the
Employee, then the Employer shall continue to be required to make the
payments thereunder.
5. Vacation. Employee shall be entitled to receive four (4) weeks paid
vacation time during each Annual Period of employment upon dates reasonably
agreed upon by Employer and Employee.
6. Restrictive Covenants. The Employee agrees that he will not
directly or indirectly, on behalf of himself or others:
a. While in the employ of the Employer, solicit, sell or offer to
sell to anyone else any product or service similar to that sold or offered by
the Employer, except on behalf of the Employer, or provide services similar
to that being provided by him to the Employer under this Agreement, to anyone
else that makes products or supplies services similar to that sold or offered
by the Employer;
b. In the foregoing event that Employee is receiving compensation
pursuant to Section 2(c) of this Agreement, and for such period that
compensation is payable thereunder, Employee shall not (i) solicit, sell, or
offer to sell to anyone any product or service similar to that sold or
offered by the Employer; or (ii) provide services similar to that provided by
him to the Employer under this Agreement, to anyone that makes or sells
products or services similar to that sold or offered by the Employer. In
such event, Employee shall forfeit all rights to payments provided for in
Section 2(c) of this Agreement by returning all monies previously paid to him
under Section 2(c) and he shall not be entitled to the payment of any
remaining monies still payable under Section 2(c); or
<PAGE>
c. In the event that Employee is not receiving compensation
pursuant to Section 2(c) of this Agreement, then for a period of twelve (12)
months after the termination of his services with the Employer, irrespective
of time, manner or reason for termination (unless Employee is terminated
without cause pursuant to this Agreement), sell or offer to sell products or
services similar to that sold or offered by the Employer to any customers of
the Employer on any list that Employee has that belongs to or was provided by
the Employer or that Employee solicited on behalf of the Employer.
7. Non-Disclosure of Trade Secrets. The Employee recognizes and
acknowledges that he will be given and has had access to the confidential
methods, techniques, trade secrets, procedures, materials and confidential
information of the Employer. The Employee will not, directly or indirectly on
behalf of himself or others, during or at any time after the termination of
his providing services hereunder, irrespective of time, manner or cause of
termination, disclose, publish, disseminate or utilize same or any portion of
same.
8. Remedies in the Event of Employee's Breach. In the event of a
breach or threatened breach by the Employee of the provisions of this
Agreement, the Employer, notwithstanding any provision of this Agreement to
the contrary, shall be entitled to an injunction restraining the Employee
from violating any of the provisions of Paragraphs "6" or "7" of this
Agreement. Nothing herein shall be construed to prohibit the Employer from
pursuing any other legal or equitable remedies available to it for such
breach, including the recovery of damages from the Employee.
9. Termination.
a. Termination by the Employer.
Employer may terminate this Agreement upon notice for Cause without the
obligation to make further payments to the Employee other than as provided in
Section 4(f) of this Agreement. For purposes of this Agreement, "Cause"
shall mean (A) the conviction of Employee for the commission of a felony;
(B) the habitual abuse of alcohol or controlled substances, excluding
prescription drugs prescribed for the Employee; (C) the violation of any
obligations of the Employee under this Agreement or the failure of the
Employee to perform his duties under this Agreement as required; and (D) the
physical or mental disability of the Employee for more than six (6) months in
any twenty-four (24) consecutive month period. Notwithstanding anything to
the contrary in this Section 9, Employer may not terminate Employee's
employment under this Agreement for Cause unless Employee shall have first
received forty-five (45) days' notice from the Employer advising Employee of
the specific acts or omissions alleged to constitute Cause, and such acts or
omissions continue after Employee shall have had a reasonable opportunity
during such period to correct the acts or omissions so complained of, unless
the Employee determines that the Employer has been harmed in such manner that
the harm to the Employer cannot be immediately corrected without resorting to
a legal remedy.
<PAGE>
b. Termination by Employee
i. Employee shall have the right to terminate his employment
under this Agreement upon forty-five (45) days' notice to the Company upon
the occurrence of any of the following events:
(A) Employee is not retained as Vice-President of
Manufacturing Operations or other comparable position;
(B) Employer acts to materially reduce Employee's duties
and responsibilities hereunder;
(C) Employer acts to change the geographic location of
the performance of Employee's duties from beyond 50 road miles of where the
Employee presently performs his duties in Decatur, Alabama;
(D) A failure by Employer to obtain the assumption of
this Agreement by any successor; or
(E) A material breach of this Agreement by Employer,
which is not cured within forty-five (45) days of written notice by Employee
of such breach.
ii. If Employee shall terminate this Agreement under Section
9(b)(i), Employer's obligations under Section 4 shall be absolute and
unconditional and not subject to any offset or counterclaim and Employee
shall continue, until the end of this Agreement, to be entitled to receive:
(a) his compensation under Sections 4(a) and (b) on or before the first of
each month until the termination of this Agreement; and (b) vesting of all
options and warrants that he holds, under any plan or otherwise prior to the
date of termination, that may be legally vested at that time, without any
payment required to be made by Employee.
<PAGE>
c. Termination by Employee Upon a Change in the Company's Board
of Directors.
Employee shall have the right to terminate his employment under this
Agreement by notice to the Employer within six months of the withdrawal from
the Company's Board of Directors of a majority of the present members of the
Board of Directors, as constituted on the date of this Agreement, other than
by reason of a voluntary resignation or the demise of such directors. If
Employee terminates this Agreement pursuant to this provision, in lieu of all
other monies payable to him under this Agreement and not yet payable as of
the date of his notice of termination, he shall be entitled to a one-time
bonus equal to one dollar less than three times the present value of the base
amount of the Employee's salary, as determined in accordance with Section
280G of the Internal Revenue Code, as amended, payable absolutely,
unconditionally and immediately and not subject to any offset or
counterclaim.
10. Arbitration. Subject to paragraph 8 of this Agreement where an
application for an injunction is sought, which may be coupled with any other
remedy, any controversies between Employer and Employee involving the
construction or application of any of the terms, provisions or conditions of
this Agreement shall on the written request of either party served on the
other by submitted to arbitration. Such arbitration shall comply with and be
governed by the rules of the American Arbitration Association in Nassau
County, New York. An arbitration demand must be made within one (1) year of
the date on which the party demanding arbitration first had notice of the
existence of the claim to be arbitrated, or the right to arbitration along
with such claim shall be considered to have been waived. One arbitrator
shall be selected according to the procedures of the American Arbitration
Association. The cost of arbitration shall be born by the losing party or in
such proportions as the arbitrator shall decide. The arbitrator shall have
no authority to add to, subtract from or otherwise modify the provisions of
this Agreement, or to award punitive damages to either party.
11. Attorneys' Fees and Costs. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which he may be entitled.
<PAGE>
12. Entire Agreement; Survival.
a. This Agreement contains the entire agreement between the
parties with respect to the transactions contemplated herein and supersedes,
as of the effective date hereof any prior agreement or understanding between
Employer and Employee with respect to Employee's employment by Employer. The
unenforceability of any provision of this Agreement shall not effect the
enforceability of any other provision. This Agreement may not be amended
except by an agreement in writing signed by the Employee and the Employer, or
any waiver, change, discharge or modification as sought.
b. The provisions of Sections 6, 7, 8, 10, 11, 14, 16, and 17
shall survive the termination of this Agreement.
13. Assignment. This Agreement may not be assigned by the Employee,
and shall be binding upon any purported successors and assigns of Employer.
14. Notices. Any notice required or given under this Agreement shall
be sufficient if in writing and sent by registered mail or certified mail to
the addresses hereinabove set forth or to such other addresses as any of the
parties hereto may designate in writing, transmitted by registered or
certified mail to the other.
15. Successors. This Agreement shall be binding upon the heirs,
successors and assigns of the Employee. This Agreement shall inure to the
benefit of and be binding upon the Employer, its successors and assigns,
including, without limitation, any corporation which may acquire all or
substantially all of the assets and business of the Employer or with or into
which the Employer may be consolidated or merged.
16. Governing Law. This Agreement and all the amendments hereof, and
waivers and consents with respect thereto shall be governed by the internal
laws of the state of New York, without regard to the conflicts laws
principles thereof.
17. Severability of Agreement. Should any part of this Agreement for
any reason be declared invalid by a court of competent jurisdiction, such
decision shall not affect the validity of any remaining portion, which
remaining provisions shall remain in full force and effect as if this
Agreement had been executed with the invalid portion thereof eliminated, and
it is hereby declared the intention of the parties that they would have
executed the remaining portions of this Agreement without including any such
part, parts or portions which may, for any reason, be hereafter declared
invalid.
IN WITNESS WHEREOF, the undersigned have executed this agreement as
of the day and year first above written.
EASTCO INDUSTRIAL SAFETY CORP.
By: /s/ Alan E. Densen
------------------
Alan E. Densen
Its: President
/s/ RICHARD BOYEN
-----------------
RICHARD BOYEN
EXHIBIT 10.13
AMENDMENT NO. 8 TO FINANCING AGREEMENTS
---------------------------------------
April 17, 1997
Congress Financial Corporation
1133 Avenue of the Americas
New York, NY 10036
Gentlemen:
Congress Financial Corporation ("Congress") and Eastco Industrial Safety
Corp. ("Eastco") have entered into certain financing arrangements pursuant to
the Accounts Financing Agreement [Security Agreement], dated as of October 1,
1991, between Congress and Eastco, as amended (the "Accounts Agreement"), the
Covenants Supplement to Accounts Financing Agreement [Security Agreement],
dated as of October 1, 1991, between Congress and Eastco, as amended (the
"Covenants Supplement") and all other agreements, documents and instruments
at any time executed and/or delivered in connection therewith or related
thereto (all of the foregoing, together with the Accounts Agreement and the
Covenants Supplement, as the same have hereto fore or contemporaneously been
or may be hereafter amended, modified, supplemented, extended, renewed,
restated or replaced, collectively, the "Financing Agreements").
Eastco and its wholly-owned subsidiary, Eastco Glove Technologies, Inc.
(Eastco Glove") have entered into the Asset Purchase Agreement, dated April
17, 1997, by and among PR Industries, Inc. ("PRI"), Steven Robins, Phillip
Robins, Eastco Glove and Eastco pursuant to which Eastco Glove will purchase
certain machinery, equipment and inventory of PRI (the "Asset Purchase").
Eastco and Eastco Glove have also entered into the Stock Exchange Agreement,
dated April 17, 1997, by and among Steven Robins, Phillip Robins, Eastco
Glove and Eastco pursuant to which Eastco Glove will acquire from Steven
Robins and Phillip Robins all of the issued and outstanding shares of the
capital stock of Protective Knitting, Inc. ("PKI") in exchange for 100,000
shares of common stock of Eastco (the "Stock Acquisition").
Eastco has requested that Congress (a) consent to the Asset Purchase,
(b) consent to the Stock Acquisition, (c) agree to make loans and other
financial accommodations to Eastco Glove as a borrower under the Financing
Agreements, including a term loan in the original principal amount of
$217,000, (d) agree to make PKI a guarantor of the obligations of Eastco to
Congress under the Financing Agreements, and (e) agree to certain amendments
to the Financing Agreements in connection with all of the foregoing.
<PAGE>
Congress is willing to (a) consent to the Asset Purchase, (b) consent to
the Stock Acquisition, (c) agree to make such loans and other financial
accommodations to Eastco Glove as a borrower under the Financing Agreements,
including the term loan, (d) agree to make PKI a guarantor of the obligations
of Eastco to Congress under the Financing Agreement, and (e) agree to such
amendments, subject to the terms and conditions contained herein. By this
Amendment, Congress and Eastco desire and intend to evidence such consents,
agreements and amendments.
In consideration of the foregoing, and the respective agreements and
covenants contained herein, the parties hereto agree as follows:
1. Definitions.
-----------
(a) Additional Definitions. As used in this Amendment,
----------------------
the following terms shall have the respective meanings given to them below
and the Accounts Agreement and the Covenants Supplement shall be deemed and
are hereby amended to include, in addition and not in limitation, the
following definitions:
(i) "Acquired Stock" shall mean all of the issued and
outstanding stock of PKI acquired by Eastco Glove pursuant to the Purchase
Agreements.
(ii) "Eastco" shall mean Eastco Industrial Safety Corp., a New
York corporation, and its successors and assigns.
(iii) "Eastco Glove" shall mean Eastco Glove Technologies,
Inc., a Minnesota corporation, and its successors and assigns.
(iv) "PKI" shall mean Protective Knitting, Inc., a Minnesota
corporation, and its successors and assigns.
(v) "Purchase Agreements" shall mean, individually and
collectively, the Asset Purchase Agreement, dated April 17, 1997, by and
among Eastco, Eastco Glove, PR Industries, Inc., Steven Robins and Phillip
Robins, the Stock exchange Agreement, dated April 17, 1997, by and among
Eastco, Eastco Glove, Steven Robins and Phillip Robins and all bills of sale,
assignment and assumption agreements and agreements of transfer as are
referred to therein and all side letters with respect thereto, and all
agreements, documents and instruments executed and/or delivered in connection
therewith, as all of the foregoing now exist or any hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.
(vi) "Purchased Assets" shall mean all of the assets and
properties acquired by Eastco Glove from PR Industries, Inc. pursuant to the
Purchase Agreements.
<PAGE>
(vii) "Term Loan" shall mean the outstanding Obligations
owed to Congress by Eastco Glove consisting of the secured term loan made by
Congress to Eastco glove evidenced by the Term Note.
(viii) "Term Note" shall mean the Term Promissory Note,
dated of even date herewith, made by Eastco Glove payable to Congress in the
original principal amount of $217,000.
(b) Amendments to Definitions.
-------------------------
(i) All references to the term "Borrower" in the Accounts
Agreement, the Covenants Supplement and any of the other Financing Agreements
shall be deemed and each such reference is hereby amended to mean,
individually and collectively, Eastco and Eastco Glove, and their respective
successors and assigns.
(ii) All references to the term "Financing Agreements" in the
Accounts Agreement, the Covenants Supplement and any of the other Financing
Agreements shall be deemed and each such reference is hereby amended to
include the Term Note, the Guarantee and Waiver by PKI in favor of Congress
of the obligations of Eastco and Eastco Glove to Congress and the General
Security Agreement by PKI in favor of Congress.
(iii) All references to the term "Obligations" in the
Accounts Agreement, the Covenants Supplement and any of the other Financing
Agreements shall be deemed and each such reference is hereby amended to
include the Term Loan.
(c) Interpretation. For purposes of this Amendment,
--------------
unless otherwise defined herein, all terms used herein, shall have the
respective meanings assigned to such terms in the Financing Agreements.
2. Consent. Subject to the terms and conditions contained
-------
herein, Lender hereby confirms that it has no objection to (a) the purchase
by Eastco Glove of the Purchased Assets from PKI pursuant to the terms of the
Purchase Agreements (as in effect on the date hereof) and (b) the acquisition
by Eastco Glove of the Acquired Stock pursuant to the terms of the Purchase
Agreements (as in effect on the date hereof).
3. Term Loan. Subject to, and upon the terms and conditions
---------
contained herein, and in the other Financing Agreements, Congress agrees to
make the Term Loan to Eastco Glove on the date hereof in the original
principal amount of $217,000. The Term Loan is (a) evidenced by the Term
Note in the original principal amount of $217,000 executed and delivered by
Eastco Glove to Congress concurrently herewith, (b) to be repaid, together
with interest and other amounts payable thereunder, in accordance with the
provisions of the Term Note, the Accounts Agreement, the covenants
Supplement, this Amendment and the other Financing Agreements, and (c)
secured by all of the Collateral.
<PAGE>
4. Amendment Fee. In consideration of the amendments set
-------------
forth herein, Borrower may, on the date hereof, pay to Lender, or Lender at
its option shall charge the account of Borrower maintained by Lender, an
amendment fee in the amount of $4,400, which fee is fully earned as of the
date hereof.
5. Conditions Precedent. The effectiveness of the consent
--------------------
in Section 2 above and the other amendments to the Financing Agreements
provided for herein shall only be effective upon the satisfaction of each of
the following conditions precedent in a manner reasonably satisfactory to
Lender:
(a) Congress shall have received, in form and substance
satisfactory to Congress, evidence that the Purchase Agreements have been
duly executed and delivered by and to the appropriate parties thereto and the
transactions contemplated under the terms of the Purchase Agreements have
been consummated prior to or contemporaneously with the execution of this
Amendment;
(b) no Event of Default, or act, condition or event which with
notice or passage of time or both would constitute an Event of Default shall
exist or have occurred;
(c) Congress shall have received, in form and substance
satisfactory to Congress, an original of the Term Note, duly authorized,
executed and delivered by Eastco Glove;
(d) Congress shall have received true, correct and complete copies
of the Purchase Agreements;
(e) Congress shall have received, in form and substance
satisfactory to Congress, a Guarantee and Waiver, a General Security
Agreement and UCC-1 financing statements, duly authorized, executed and
delivered by PKI;
(f) Congress shall have received, in form and substance
satisfactory to Congress, an amended Exhibit 2.1 to the Covenants Supplement
listing all the subsidiaries of each of Eastco and Eastco Glove as of the
date hereof;
(g) Congress shall have received, in form and substance
satisfactory to Congress, a Landlord Agreement by PR Industries in favor of
Congress with respect to the location leased by Eastco Glove situated at 4311
Peavey Road, Chaska, Minnesota;
(h) Congress shall have received, in form and substance
satisfactory to Congress, evidence that all liens and encumbrances on the
<PAGE>
Purchased Assets have been released by any such lien holders;
(i) Congress shall have received, in form and substance
satisfactory to Congress, copies of all documents and records with respect to
requisite corporate actions and proceedings which Congress may have requested
in connection with this Amendment and such documents where requested by
Congress or its counsel to be certified by appropriate corporate officers or
governmental authorities; and
(j) Congress shall have received, an original of this Amendment,
duly authorized, executed and delivered by Eastco, Eastco Glove, Puerto Rico
Safety Equipment Corporation, Puerto Rico Safety Corporation, Disposable
Safety Wear Inc., Safety Wear Corp. and PKI.
6. Representations and Warranties. Borrower hereby
------------------------------
represents, warrants and covenants with and to Congress as follows, which
representations, warranties and covenants are continuing and shall survive
the execution and delivery thereof, and the truth and accuracy of, and
compliance with each, together with the representations, warranties and
covenants in the other Financing Agreements, being a continuing condition of
the making of the loans by Congress to Eastco and Eastco Glove.
(a) The Purchase Agreements and the transactions contemplated
hereunder have been duly executed, delivered and performed in accordance with
their terms by the respective parties thereto in all respects, including the
fulfillment (not merely the waiver, except as may be disclosed to Congress
and consented to in writing by Congress) of all conditions precedent set
forth therein and giving effect to the terms of the Purchase Agreements and
the assignments to be executed and delivered thereunder, Borrower acquired
and has good and marketable title to the Purchased Assets and Acquired Stock,
free and clear of all claims, liens, pledges and encumbrances of any kind,
except as permitted pursuant to the term of the Financing Agreements.
(b) All actions and proceedings, required by the Purchase
Agreements, applicable law or regulation (including, but not limited to,
compliance with the Hart-Scott-Rodino Anti-Trust Improvements Act ;of 1976,
as amended) have been taken and the transactions required thereunder have
been duly and validly taken and consummated.
(c) No court of competent jurisdiction has issued any injunction,
restraining order or other order which prohibits consummation of the
transactions described in the Purchase Agreements and no governmental or
other action or proceeding has been threatened or commenced, seeking any
injunction, restraining order or other order which seeks to void or
<PAGE>
otherwise modify the transactions described in the Purchase Agreements.
(d) Borrower has delivered, or cause to be delivered, to Congress,
true, correct and complete copies of the Purchase Agreements.
(e) No Event of Default exists on the date of this Amendment
(after giving effect to the amendments to the financing Agreements, made by
this Amendment.
(f) This Amendment has been duly executed and delivered by Eastco,
Eastco Glove and the other parties hereto and is in full force and effect as
of the date hereof and the agreements and obligations of the Eastco, Eastco
Glove and the other parties hereto contained herein constitute legal, valid
and binding obligations of Eastco, Eastco Glove and the parties hereto
enforceable against Eastco, Eastco Glove and the parties hereto in accordance
with its terms.
7. Effect of this Amendment. Except as specifically
------------------------
modified pursuant hereto, no other changes or modifications to the Financing
Agreements are intended or implied and in all other respects the Financing
Agreements are hereby specifically ratified, restated and confirmed by all
parties hereto as of the effective date hereof. To the extent of any
conflict between the terms of this Amendment and the other Financing
Agreements, the terms of this Amendment shall control.
8. Further Assurances. The parties hereto shall execute and
------------------
deliver such additional documents and take such additional action as may be
requested by such parties to effectuate the provisions and purposes of this
Amendment.
9. Governing Law. The validity, construction and effect of
-------------
this Agreement shall be governed by the laws of the State of New York.
10. Binding Effect. This Amendment shall be binding upon and
--------------
inure to the benefit of each of the parties hereto and their respective
successors and assigns.
11. Counterparts. This Amendment may be executed in any
------------
number of counterparts, but all of such counterparts shall together
constitute but one and the same agreement. In making proof of this
Amendment, it shall not be necessary to produce or account for more than one
<PAGE>
counterpart thereof signed by each of the parties hereto.
Very truly yours,
EASTCO INDUSTRIAL SAFETY CORP.
By: \s\ Arthur Wasserspring
-----------------------
Title: Vice-President of Finance
EASTCO GLOVE TECHNOLOGIES, INC.
By: \s\ Arthur Wasserspring
-------------------------
Title: Vice-President
ACKNOWLEDGED AND AGREED:
CONGRESS FINANCIAL CORPORATION
By: \s\ Andrew Robin
-------------------------
Title: Senior Vice-President
<PAGE>
CONSENT
-------
The undersigned guarantors hereby consent to the foregoing Amendment and
ratify and confirm the terms of their respective Guarantee and Waivers as
applicable to all present and future indebtedness, liabilities and
obligations of EASTCO INDUSTRIAL SAFETY CORP. and EASTCO GLOVE TECHNOLOGIES,
INC. to CONGRESS FINANCIAL CORPORATION including, without limitation, all
indebtedness, liabilities and obligations under the Financing Agreements as
amended pursuant to the foregoing.
PUERTO RICO SAFETY EQUIPMENT CORPORATION
By: \s\ Arthur Wasserspring
-------------------------
Title: Vice President
PUERTO RICO SAFETY CORPORATION
By: \s\ Arthur Wasserspring
-------------------------
Title: Vice President
DISPOSABLE SAFETY WEAR INC.
By: \s\ Arthur Wasserspring
-------------------------
Title: Vice President
SAFETY WEAR CORP.
By: \s\ Arthur Wasserspring
-------------------------
Title: Vice President
PROTECTIVE KNITTING, INC.
By: \s\ Arthur Wasserspring
-------------------------
Title: Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 51,341
<SECURITIES> 0
<RECEIVABLES> 5,312,589
<ALLOWANCES> (146,000)
<INVENTORY> 6,163,734
<CURRENT-ASSETS> 12,133,290
<PP&E> 2,691,135
<DEPRECIATION> (1,304,686)
<TOTAL-ASSETS> 13,596,699
<CURRENT-LIABILITIES> 7,884,425
<BONDS> 0
0
0
<COMMON> 189,970
<OTHER-SE> 5,106,231
<TOTAL-LIABILITY-AND-EQUITY> 13,596,699
<SALES> 20,472,420
<TOTAL-REVENUES> 20,472,420
<CGS> 16,645,526
<TOTAL-COSTS> 16,645,526
<OTHER-EXPENSES> 3,394,555
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 502,761
<INCOME-PRETAX> (70,422)
<INCOME-TAX> 0
<INCOME-CONTINUING> (70,422)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (70,422)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
