U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 1995
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from __________ to _____________
Commission file number 0-18863
American Body Armor & Equipment, Inc.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Florida 59-2044869
(State or Other Jurisdiction of Incorporation (I.R.S. Employer ID #)
or Organization)
85 Nassau Place, Yulee, Florida 32097
(Address of Principal Executive Offices)
(904)261-4035
(Issuer's Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's class of
common equity, as of the latest practicable date: $.03 par value Common
Stock - 4,697,255 / $1.00 stated value Preferred Stock - 1,457,143
<PAGE>
PART I
Item 1. Financial Statements
AMERICAN BODY ARMOR & EQUIPMENT, INC.
BALANCE SHEET (UNAUDITED)
Sept. 30,
1995
-----------
ASSETS (unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 19,890
Accounts receivable, net of allowance for
doubtful accounts of $96,265 1,683,399
Inventories 1,316,360
Prepaid expenses and other current assets 139,745
------------
Total current assets 3,159,394
PROPERTY, PLANT AND EQUIPMENT, net 467,775
REORGANIZATION VALUE IN EXCESS OF
AMOUNTS ALLOCABLE TO IDENTIFIABLE
ASSETS, net 3,589,574
OTHER ASSETS 69,360
------------
TOTAL ASSETS $ 7,286,103
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short term borrowings and current portion $1,567,754
of long-term debt
Accounts payable, accrued expenses and
other current liabilities 824,926
------------
Total current liabilities 2,392,680
LONG-TERM DEBT AND CAPITALIZED
LEASE OBLIGATION, less current portion 44,454
------------
Total liabilities 2,437,134
STOCKHOLDERS' EQUITY:
Convertible preferred stock, $1 stated
value, 1,700,000 shares authorized,
1,457,143 issued and outstanding 1,457,143
Common stock, $.03 par value, 15,000,000
shares authorized; 4,697,255 shares
issued and outstanding 140,918
Additional paid-in capital 2,318,890
Retained earnings 932,018
-----------
Total stockholders' equity 4,848,969
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $7,286,103
==========
See notes to condensed financial statements
<PAGE>
AMERICAN BODY ARMOR & EQUIPMENT, INC.
INCOME STATEMENTS
FOR THE THREE MONTHS ENDED
Sept. 30, Sept. 30,
1995 1994
----------- -----------
(unaudited) (unaudited)
NET SALES $2,929,806 $2,965,587
COST AND EXPENSES:
Cost of sales 1,824,104 1,981,814
Selling, general and 892,411 665,986
administrative expenses
Interest expense, net 71,697 59,123
------------ ------------
OPERATING INCOME BEFORE INCOME TAXES 141,594 258,664
NON-OPERATING INCOME 227,500 0
------------ ------------
INCOME BEFORE INCOME TAXES 369,094 258,664
INCOME TAXES 143,000 100,000
------------ ------------
NET INCOME $ 226,094 $ 158,664
========== ==========
See notes to condensed financial statements
<PAGE>
AMERICAN BODY ARMOR & EQUIPMENT, INC.
INCOME STATEMENTS
FOR THE NINE MONTHS ENDED
Sept. 30, Sept. 30,
1995 1994
----------- -----------
(unaudited) (unaudited)
NET SALES $8,405,940 $8,835,425
COST AND EXPENSES:
Cost of sales 5,260,526 6,053,424
Selling, general and administrative 2,409,202 2,026,583
expenses
Interest expense, net 201,374 156,774
----------- -----------
OPERATING INCOME BEFORE INCOME TAXES 534,838 598,644
NON-OPERATING INCOME 227,500 0
----------- -----------
INCOME BEFORE INCOME TAXES 762,338 598,664
INCOME TAXES 297,000 231,000
----------- -----------
NET INCOME $ 465,338 $ 367,644
========== ==========
See notes to condensed financial statements
<PAGE>
AMERICAN BODY ARMOR & EQUIPMENT, INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
Sept. 30, Sept. 30,
1995 1994
----------- -----------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 465,338 $ 367,644
Adjustments to reconcile net income to
cash used in operating activities:
Depreciation 103,687 89,105
Deferred income taxes 297,000 231,000
Increase in accounts receivable (108,409) (344,542)
Increase in inventories (273,955) (285,458)
Increase in prepaid expenses and
other assets (60,741) (46,719)
(Decrease) increase in accounts
payable, accrued liabilities
and other current liabilities (476,282) 113,007
---------- --------
Net Cash (used in) provided by
operating activities (53,362) 124,037
----------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures (68,527) (78,434)
CASH FLOWS FROM FINANCING ACTIVITIES:
Preferred stock dividends (43,323) ---
Net decrease in Bank line of credit
& payments of long-term debt (130,129) (63,502)
------------ ----------
Net Cash used in financing activities (173,452) (63,502)
------------ ----------
NET DECREASE IN CASH AND CASH
EQUIVALENTS (295,341) (17,899)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 315,231 20,093
----------- ---------
CASH AND CASH EQUIVALENTS, END OF
PERIOD $ 19,890 $ 2,194
========= =========
See notes to condensed financial statements
<PAGE>
AMERICAN BODY ARMOR & EQUIPMENT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 1995
Basis of Presentation
The accompanying condensed financial statements are unaudited for the
periods, but include all adjustments (consisting only of normal recurring
accruals) which management considers necessary for the fair presentation
of results as of September 30, 1995 and for the three and nine month
periods ended September 30, 1995 and September 30, 1994. Moreover, these
condensed financial statements do not purport to contain complete
disclosure in conformity with generally accepted accounting principles and
should be read in conjunction with the financial statements included in
the Company's Annual Report on Form 10-KSB for the year ended December 31,
1994.
The results reflected for the three and nine month periods ended September
30, 1995 are not necessarily indicative of the results for the entire year
to end on December 31, 1995.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with the financial
statements and notes thereto included herein and the financial statements
and management's discussion and analysis of financial condition and
results of operations included in the Company's annual report on Form 10-
KSB for the year ended December 31, 1994.
Results of Operations
Three Months Ended September 30,1995 Compared to Three Months Ended
September 30, 1994
Sales for the three months ended September 30, 1995, were $2,929,806,
representing a decrease of $35,781 compared to the same period in 1994.
Domestic law enforcement sales increased by 27% while International law
enforcement and military sales decreased by over 40%. While it is quite
usual for the mix of Domestic versus International sales to change from
quarter to quarter, the primary cause for the decrease in International
sales relates to stagnant buying in Latin America, our largest
International customer source. The increase in Domestic law enforcement
sales resulted from the Company's efforts to sell competitively-priced
quality products coupled with the fact that the Company is expanding its
Domestic distribution network each month. Although U.S. Government agency
sales continue to be negatively impacted by reduced sales on a multi year
supply contract for a large government agency, these sales have been
increasing each quarter in 1995. The Company expects the U.S. Government
agency sales to continue to increase in the fourth quarter.
Gross profit on sales for 1995 increased by $121,929 compared to the prior
year, primarily due to a decrease in the cost of sales in the third
quarter, compared to the prior year, of $157,710. The gross profit margin
(sales less manufacturing costs for materials, labor and overhead as a
percent of total sales) increased to 38% for the 1995 period from 33% in
1994. This increase in gross profit margin is primarily due to positive
manufacturing variances (better utilization of labor and materials). For
the full year of 1994, the gross profit margin was 31.8%.
Selling, General and Administrative Expenses for the 1995 period were
$892,411 compared to $665,986 in the 1994 period. The increase in actual
dollar amount of selling, general and administrative expenses between the
periods, amounted to $226,425 or 34%. This increase is primarily the
result of two main activities: 1) increased research and development
expenses and 2) increased travel and entertainment for the domestic
salesmen due to the increase in the distribution network.
Non-operating income amounted to $227,500 in the third quarter of 1995.
This income is non-recurring and relates to the dissolution of a non-
compete agreement entered into in 1990 between the Company and a
competitor.
Interest expense of $71,697 for the 1995 period is $12,574 higher than the
prior year period. The increase is primarily a result of higher interest
rates, loan fees and increased borrowings due to payments related to the
confirmation of the Company's Bankruptcy reorganization.
Income tax expense for the three month period ended September 30, 1995
represents a deferred tax expense amounting to 39% of pre-tax income.
This tax rate reflects the statutory rate plus state taxes. The Company's
operating loss carry forward, amounting to approximately $5 million,
results in no taxes being currently payable. The entire amount of income
tax expense for the period reduces the Company's deferred tax asset and
related valuation reserve resulting in a reduction in the intangible asset
"Reorganization Value in Excess of Amounts Allocable to Identifiable
Assets".
For the third quarter of 1995, pre tax income and net income amounted to
$369,094 and $226,094, respectively, compared to $258,664 and $158,664 for
the 1994 period. This change reflects improved margins and the non-
recurring non-operating income received in the third quarter, as discussed
above, being partially offset by the increase in selling, general and
administrative expenses.
Nine Months Ended September 30, 1995 Compared to Nine Months Ended
September 30, 1994
Sales for the nine months ended September 30, 1995 were $8,405,940
representing a decrease of $429,485 compared to the same period in 1994.
The decrease results primarily from the decrease in Government and
International sales as discussed previously. Domestic law enforcement
sales are up 45% over last year while Government and International sales
are down 56% and 52%, respectively.
Although the Company had a decrease in sales volume between the periods,
gross profit increased by $363,413. The gross profit margin (sales less
manufacturing costs for materials, labor and overhead as a percent of
total sales) increased to 37.4% for the 1995 period from 31.5% in 1994.
This increase in gross profit margin reflects a change in the mix of sales
between the periods. International sales, which were higher in 1994 than
in 1995, are often at lower profit margins than Domestic sales.
Selling, General and Administrative Expenses for the first nine months of
1995 were $2,409,202 (28.7% of sales) compared to $2,026,583 (22.9% of
sales) in the 1994 period. Increases in research and development costs
accounted for 40% of the overall dollar increase between the periods,
while increased domestic travel accounted for approximately 25% of the
increase. Employee stock grant awards amounted to approximately $39,000
during the 1995 period while there were no grants awarded in 1994.
Selling general and administrative expenses as a percentage of sales
increased by 4.5% of sales. This percentage increase resulted from the
lower Government and International sales volume.
Interest expense of $201,374 for the 1995 period was $44,600 higher than
the prior year. Increased borrowings due to payments made related to the
confirmation of the Company's Bankruptcy reorganization as well as
increased interest rates and loan fees are the reason for the increase.
Income tax expense for the nine month period ended 1995 represents a
deferred tax expense amounting to 39% of pre-tax income. The Company's
operating loss carry forward, amounting to approximately $5 million,
results in no taxes being currently payable. The entire amount of the
income tax expense for the period reduces the Company's deferred tax asset
and related valuation reserve, resulting in a reduction in the intangible
asset "Reorganization Value in Excess of Amounts Allocable to
Identifiable Assets".
For the first nine months of 1995, pre-tax income and net income increased
to $762,338 and $465,338, respectively, from $598,644 and $367,644 for the
1994 period. The 27% increase is the result of improved margins and the
receipt of $227,500 of non-recurring income, as discussed previously,
being partially offset by higher selling general and administrative
expenses.
Financial Condition
The Company's backlog of open orders amounted to approximately $1,195,000
at September 30, 1995 compared to $1,205,000 at December 31, 1994 and
$1,140,000 at September 30, 1994. Management believes that a backlog of
approximately four weeks production provides reasonable production
scheduling without causing unacceptable delivery delays for customers.
As of September 30, 1995, the interest rate on the outstanding loans was
the Bank's Reference Rate plus 2.0% (10.75%). The Financing Agreement
expires on June 30, 1996. As of September 30, 1995, the Company was
indebted to LaSalle Business Credit, Inc. ("LaSalle") in the aggregate
amount of $1,559,169 and had additional availability from which to borrow
in the amount of $549,679 compared to $1,668,061 and $295,377,
respectively, at December 31, 1994. As collateral for this loan, LaSalle
holds a security interest in virtually all of the assets of the Company.
As of September 30, 1995, the Company had working capital of $766,714
which reflects continued improvement from the July 1, 1995 and December
31, 1994 working capital amounts of $398,948 and $40,332, respectively.
This improvement reflects the Company's continued profitability.
The Company anticipates that continuing profitable operations and
utilization of its line of credit borrowing capacity will enable the
Company to meet its liquidity and working capital requirements during the
next year. Such requirements include generating sufficient cash to make
payments required under the Plan of Reorganization and to pay dividends on
and meet the intended redemption schedule on the outstanding Preferred
Stock.
In September 1995, 242,857 shares of the Company's $1 stated value
Preferred Stock were scheduled for redemption. Under the terms of the
Preferred Stock, the Company may elect to redeem such stock in a cash
redemption at the stated value of the Preferred Stock or by converting
such shares into the Company's $.03 par value Common Stock having a
current market value equal to 110% of the stated value of the Preferred
Stock.
At the June 9, 1995 Board of Directors meeting, the Company elected to
convert the shares into Common Stock. Such conversion has not yet been
effected as the Company is still awaiting the valuation of the Company's
stock by an independent valuation firm.
PART II
Item 1. Legal Proceedings
On August 10, 1995, Second Chance Body Armor filed a lawsuit against the
Company for product disparagement. The suit was filed in the U.S.
District Court, District of Massachusetts. As of November 6, 1995 no
probability of an outcome has been determined. The Company's insurance
carrier has been put on notice of this litigation.
No other reportable events occurred during the quarter. Reference is
provided to the information contained in Item 3 of the Company's Annual
Report on Form 10-KSB for the period ended December 31, 1994.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Items
None
Item 6. Exhibits & Reports on Form 8-K
a. Exhibits
*Exhibit 2.1 - Order confirming Debtor's Third Amended and
Restated Plan of Reorganization with the Third
Amended and Restated Plan of Reorganization
attached thereto (Exhibit 2 to Form 8-K, Current
Report of the Company, dated October 1, 1993)
*Exhibit 3.1 - Articles of Restatement of Articles of
Incorporation of American Body Armor & Equipment,
Inc. (with the Amended and Restated Articles of
Incorporation of American Body Armor & Equipment,
Inc. attached thereto) (Exhibit 3 to Form 8-K,
Current Report of the Company, dated October 1,
1993)
*Exhibit 3.2 - Amended and Restated By Laws of American Body
Armor & Equipment, Inc. (Exhibit 4 to Form 8-K,
Current Report of the Company, dated October 1,
1993)
*Exhibit 10.1 - Loan and Security Agreement between American
Body Armor & Equipment, Inc. and StanChart
Business Credit dated September 21, 1993
(Exhibit to Form 10-KSB for the fiscal year
ended December 31, 1993)
*Exhibit 10.2 - Revolving Loan Note dated October 27, 1993
effective as of September 20, 1993 between
American Body Armor & Equipment, Inc. and
StanChart Business Credit (Exhibit to Form
10-KSB for the fiscal year ended December 31,
1993)
*Exhibit 10.3 - Amendment #1 to Loan and Security Agreement
between American Body Armor & Equipment, Inc.
and LaSalle Business Credit, Inc. dated
September 20, 1993 (Exhibit to Form 10-QSB
for the quarterly period ended June 30, 1994)
*Exhibit 10.4 - Form of Indemnification Agreement for
Directors of the Registrant, dated September
21, 1993 (Exhibit to Form 10-KSB for the
fiscal year ended December 31, 1993)
*Exhibit 10.5 - Form of Indemnification Agreement for
Officers of the Registrant, dated February 8,
1994 (Exhibit to Form 10-KSB for the fiscal
year ended December 31, 1993)
*Exhibit 10.6 - Employment Agreement between Jonathan M.
Spiller and American Body Armor & Equipment,
Inc., effective January 1, 1994 (Exhibit 10-
QSB for the quarterly period ended June 30,
1994)
*Exhibit 10.7 - Employment Agreement between J. Michael
Elliott and American Body Armor & Equipment,
inc., effective January 1, 1994 (Exhibit to
Form 10-QSB for the quarterly period ended
June 30, 1994)
Exhibit 10.8 - Employment Agreement between Richard T.
Bistrong and American Body Armor & Equipment,
Inc., effective February 6, 1995
*Exhibit 10.9 - American Body Armor & Equipment, Inc. 1994
Incentive Stock Plan (from Form S-8 filed on
October 10, 1994 Reg. No. 33-018863)
*Exhibit 10.10 - American Body Armor & Equipment, Inc. 1994
Directors Stock Plan (from Form S-8 filed on
October 31, 1994 Reg. No. 33-018863)
Exhibit 27 - Financial Data Schedule
b. The Company filed no reports on Form 8-K during the quarter ended
September 30, 1995.
_________________________________
*incorporated herein by reference
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AMERICAN BODY ARMOR &
EQUIPMENT, INC.
November 14, 1995
/s/ Jonathan M. Spiller
Jonathan M. Spiller
President and Chief Executive Officer
/s/ Carol T. Burke
Carol T. Burke
Chief Accounting Officer
<PAGE>
EXHIBIT INDEX
Sequential
Exhibit No. Page No.
*Exhibit 2.1 - Order confirming Debtor's Third Amended
and Restated Plan of Reorganization
with the Third Amended and Restated
Plan of Reorganization attached thereto
(Exhibit 2 to Form 8-K, Current Report
of the Company, dated October 1, 1993)
*Exhibit 3.1 - Articles of Restatement of Articles of
Incorporation of American Body Armor &
Equipment, Inc. (with the Amended and
Restated Articles of Incorporation of
American Body Armor & Equipment, Inc.
attached thereto) (Exhibit 3 to Form 8-
K, Current Report of the Company, dated
October 1, 1993)
*Exhibit 3.2 - Amended and Restated By Laws of
American Body Armor & Equipment, Inc.
(Exhibit 4 to Form 8-K, Current Report
of the Company, dated October 1, 1993)
*Exhibit 10.1 - Loan and Security Agreement between
American Body Armor & Equipment, Inc.
and StanChart Business Credit dated
September 21, 1993 (Exhibit to Form 10-
KSB for the fiscal year ended December
31, 1993)
*Exhibit 10.2 - Revolving Loan Note dated October 27,
1993 effective as of September 20, 1993
between American Body Armor &
Equipment, Inc. and StanChart Business
Credit (Exhibit to Form 10-KSB for the
fiscal year ended December 31, 1993)
*Exhibit 10.3 - Amendment #1 to Loan and Security
Agreement between American Body Armor &
Equipment, Inc. and LaSalle Business
Credit, Inc. dated September 20, 1993
(Exhibit to Form 10-QSB for the
quarterly period ended June 30, 1994)
*Exhibit 10.4 - Form of Indemnification Agreement for
Directors of the Registrant, dated
September 21, 1993 (Exhibit to Form 10-
KSB for the fiscal year ended December
31, 1993)
*Exhibit 10.5 - Form of Indemnification Agreement for
Officers of the Registrant, dated
February 8, 1994 (Exhibit to Form 10-
KSB for the fiscal year ended December
31, 1993)
*Exhibit 10.6 - Employment Agreement between Jonathan
M. Spiller and American Body Armor &
Equipment, Inc., effective January 1,
1994 (Exhibit 10-QSB for the quarterly
period ended June 30, 1994)
*Exhibit 10.7 - Employment Agreement between J. Michael
Elliott and American Body Armor &
Equipment, inc., effective January 1,
1994 (Exhibit to Form 10-QSB for the
quarterly period ended June 30, 1994)
Exhibit 10.8 - Employment Agreement between Richard T.
Bistrong and American Body Armor &
Equipment, Inc., effective February 6,
1995
*Exhibit 10.9 - American Body Armor & Equipment, Inc.
1994 Incentive Stock Plan (from Form S-
8 filed on October 10, 1994 Reg. No.
33-018863)
*Exhibit 10.10 - American Body Armor & Equipment, Inc.
1994 Directors Stock Plan (from Form S-
8 filed on October 31, 1994 Reg. No.
33-018863)
Exhibit 27 - Financial Data Schedule
_________________________________
*incorporated herein by reference
AMERICAN BODY ARMOR & EQUIPMENT, INC.
EMPLOYMENT AGREEMENT
BY THIS AGREEMENT, made as of this 6th day of February, 1995,
AMERICAN BODY ARMOR & EQUIPMENT, INC., a Florida corporation ("Company")
and RICHARD TODD BISTRONG ("Employee"), in consideration of mutual
benefits set forth herein, hereby agree as follows:
1. Employment. The Company hereby employs the Employee and the
Employee hereby accepts employment upon the terms and conditions
hereinafter set forth.
2. Term. Subject to the provisions for termination as hereafter
provided, the term of this agreement shall begin on February 6, 1995, and
shall terminate on January 30, 1997.
3. Compensation. For all services rendered by the Employee under
this agreement, the Company shall compensate the Employee by paying the
Employee the sum of the following:
(i) $120,000 per year, payable in 26 equal installments (once
every two weeks) (called "Regular Compensation").
(ii) $30,000 payable within thirty (30) days following
Employee's commencement of employment under this agreement
(called "Signing Bonus").
(iii) An amount equal to 2% of the annual net, pre-tax profit
generated by the Company during 1995 and 1996 in excess of
$400,000 per year, as determined according to the Company's
Audited Financial Statement, subject to a maximum of
$45,000 per year (called "Profit Bonus").
(iv) Commission on net eligible base product domestic sales to
other than military and GSA customers at the following
percentages:
- No commissions payable on the first $6,000,000 of net
eligible annual base product domestic sales.
- For achieving annual net eligible base product domestic
sales in excess of $6,000,000 but less than $15,000,000,
commission at the rate of 2.5%.
- For achieving annual net eligible base product domestic
sales in excess of $15,000,000 but less than $25,000,000,
commission at the rate of 2%.
- For achieving annual net eligible base product domestic
sales in excess of $25,000,000, commission at the rate of
1.5% ("Commission Bonus").
Eligible base product sales includes all products currently
manufactured and sold by the Company. Base products shall not
include Gallet helmets, Scanmail Letter Bomb Detectors or any other
products not currently being sold by the Company.
During the first year of the employees employment with the Company,
the total compensation paid to the employee as Regular Compensation,
Profit Bonus and Commission Bonus, will not be less than $190,000
("First Year Guaranteed Compensation").
Net profits shall be calculated in accordance with Company's normal
accounting principles consistently applied throughout its operation and
after all profit sharing contributions. Employee will receive the Profit
Bonus as to net profits earned by the Company during each fiscal year
during the term hereof no later than sixty (60) days following the end of
the fiscal year.
In the event of certain early terminations of this agreement as provided
hereafter, compensation (including First Year Guaranteed Compensation")
payable to the Employee shall (unless otherwise stated) be limited to
amounts Fully Accrued. The term "Fully Accrued" means (i) as to Regular
Compensation the percentage of a year's Regular Compensation as shall
equal the percentage of the year which has expired on the termination
date, (ii) as to Signing Bonus, the entire Signing Bonus, (iii) as to
Profit Bonus only the applicable percentage of net profits having occurred
on or before the date of termination, in which case the $400,000 figure
shall be adjusted based on the percentage of the year which has expired on
the termination date and (iv) as to commissions, only the commission on
orders received and accepted at the date of termination (subject to
adjustment for any non-payments for orders shipped, unless due to failure
on the part of the Company).
4. Duties. The Employee is engaged as Vice President, Sales and
Marketing of the Company to supervise, develop, coordinate and effect all
sales and marketing efforts of the Company's base products, excluding
military and international sales. The precise services of the Employee
may be extended or curtailed, from time to time, at the direction of the
Company. (The Company shall endeavor, but shall not be required, to
provide thirty days advance notice of a material extension or a
curtailment of such services.) If the Employee is elected or appointed as
a director or other officer of the Company during the term of this
agreement, he shall serve in such capacity or capacities without further
compensation; but nothing herein shall be construed as requiring the
Company to cause the election or appointment of the Employee as such
director or other officer.
5. Extent of Services. The Employee shall devote his entire time,
attention and energy to the business of the Company, and shall not during
the term of this agreement, engage in any other business activity whether
or not such business activity is pursued for gain, profit or other
pecuniary advantage; but this shall not be construed as preventing the
Employee from investing his assets in such form or manner as will not
require any services on the part of Employee in the operation of the
affairs of the venture to which such investments are made.
6. Stock Options. The Company shall grant Employee the following
options, pursuant to the terms and conditions of the American Body Armor
and Equipment, Inc. Stock Option Plan:
(i) The Company shall grant the Employee the right and option
to purchase from it 50,000 shares of authorized, issued,
and outstanding common stock of the Company ("Common
Stock") at an exercise price of $0.97 per share. The
option shall be exercisable as follows:
33.3% on February 6, 1996
additional 33.3% on February 6, 1997
additional 33.4% on February 6, 1998,
except that if Employee's employment is terminated without
cause, the option may be exercised within ninety (90) days
following termination. Moreover, if 45% or more of
Company's outstanding shares are sold to a person or group,
the entire option shall be immediately exercisable. The
option shall expire February 6, 2004, or 90 days after the
date of termination of employment, if sooner. Common Stock
issued pursuant to this option may, at the election of the
Board, be registered pursuant to the Securities Act of 1933
and until such registration, if any, shall constitute
restricted securities subject to Rule 144. These options
shall be "non-qualified" for Federal income tax purposes.
(ii) Issuance of shares upon exercise of the options described
above will be subject to payment to the Company by Employee
of the Employee's share of applicable withholding and
payroll tax deposits relating to the "spread" between the
exercise price and the fair market value of the underlying
shares on the date of exercise (such spread is deemed
compensation for federal income tax purposes). Such amount
may be paid by the surrender to the Company of underlying
shares having a value on such date equal to the amount of
the applicable taxes required to be withheld by the Company
from Employee's compensation.
7. Expenses. The Employee is authorized to incur reasonable
expenses for promoting the business of the Company, including expenses for
entertainment, travel and similar items subject to guidelines and policies
established by the Company. The Company will reimburse the Employee for
all such expenses in accordance with the Company's reimbursement policies
for salaried employees, as in effect from time to time.
8. Automobile. The Company will provide the Employee with $600 per
month as a car allowance.
9. Vacation. The Employee shall be entitled each year to a
vacation of four weeks, during which time his compensation shall be paid
in full.
10. Medical Insurance. The Company shall provide employee with
medical insurance on the same basis as the Company generally provides
medical insurance benefits for management employees.
11. Relocation Expenses. In connection with the employee's
relocation to Florida to take up his responsibilities, the Company agrees
to reimburse the employee for the following expenses:
(i) $20,000 called a "Relocation Bonus" to be paid at the
closing on the sale of the Employee's residence in
Cincinnati.
(ii) Employee's reasonable and customary legal fees on the sale
of the Employee's residence in Cincinnati.
(iii) Employee's reasonable and customary real estate sales
commissions on the sales of the Employee's residence in
Cincinnati.
(iv) Reasonable moving expenses for the physical move of the
employee's personal effects from Cincinnati to Florida.
All expenses to be backed up by appropriate documentation to
support such charges.
12. Disability. If the Employee is unable to perform his services
by reason of illness or incapacity for a period of more than sixteen
weeks, the compensation otherwise payable to him during the continued
period of such illness or incapacity shall be reduced by 50%, less any
other disability paid by the Company or insurance policies provided by the
Company. The Employee's full compensation shall be reinstated upon his
return to full employment and to the discharge of his full duties
hereunder. Anything contained herein to the contrary notwithstanding, the
Company may terminate this agreement at any time after the Employee shall
have been absent from his employment, for whatever cause, for a continuous
period of not less than six months, and all obligations of the Company to
the Employee which have not already Fully Accrued shall cease upon any
such termination.
13. Termination.
(a) Without Cause. Without cause, the Company may terminate
this agreement at any time upon three days' written notice to the
Employee. In such event, the Employee shall continue to receive his
Guaranteed Compensation of $190,000 for the first twelve months on a pro-
rated basis, and then the Regular Compensation throughout the balance of
the term of this agreement, but shall be entitled to his Profit Bonus and
Commission Bonus only to the extent Fully Accrued on the date of
termination. (In the event that the remaining original term is less than
six months, Employee shall receive his Regular Compensation for six months
following termination.)
(b) With Cause. Company may terminate the employment of the
Employee hereunder immediately upon written notice thereof in the event of
material malfeasance, misfeasance or nonfeasance by the Employee in
connection with his employment or if he is convicted of a felony. In such
event, the Company shall pay the Employee only such compensation as shall
have Fully Accrued on the date of termination.
(c) Upon Sale of Business. Notwithstanding anything herein
contained to the contrary, the Company may terminate this agreement upon
ten days' notice to the Employee upon the happening of any of the
following events: (i) sale by the Company of substantially all of its
assets to a single purchaser or to a group of associated purchasers; (ii)
sale, exchange or other disposition, in one transaction, of 45% of the
outstanding shares of capital stock of the Company; (iii) a bona fide
decision by the Company to terminate its business and liquidate its
assets; or (iv) the merger or consolidation of the Company in a
transaction which the shareholders of the Company receive less than 50% of
the outstanding voting shares of the new or continued corporation. Upon
such a termination Employee will receive his Regular Compensation for a
period of six (6) months, but shall receive his Profit Bonus and
Commission Bonus only to the extent Fully Accrued on the date of
termination.
(d) Termination by Employee. The Employee may terminate this
agreement at any time upon thirty days' prior written notice to the
Company. In such event, the Employee shall be entitled to receive his
compensation only to the extent Fully Accrued on the date of termination
and Employee shall have no right to exercise his rights under any stock
options. If Employee terminates this contract within the first six
months, Employee must repay the Signing Bonus and Relocation Bonus.
14. Death During Employment. If the Employee dies during the term
of this employment, the Company shall pay to the estate of the Employee
the compensation which would be Fully Accrued as of the end of the
calendar month in which his death occurs. In addition, the Company shall
pay $5,000, within sixty days after the death of the Employee, to the
widow of the Employee, or, if he is not then survived by his widow, then
to the Employee's estate.
15. Non-Disclosure. Employee hereby agrees with Company that
Employee will keep confidential any and all confidential information of
Company, including Company's know-how, trade secrets, manufacturing
techniques, product design, marketing plans, sales data, customer lists,
and other information, data and proprietary information relating to
Company's business (herein called "Proprietary Information") and will not
at any time, without prior written consent of Company, disclose or make
known or allow to be disclosed or made known such Proprietary Information
to any person, firm, corporation or other business entity other than
Company and persons or entities designated by Company. This provision
shall survive the termination of this Agreement.
16. Restrictive Covenants. For a period of one year from the
termination of Employee's employment hereunder (unless that period is
extended as provided in this section) Employee shall not engage in
competition (as hereafter defined) with Company within any state in the
United States, Europe, Mexico, Israel, or within any other country in
which the Company has any existing customers on the date of termination or
in which areas the Employee has solicited customers on behalf of Company
(which area is herein called the "Restricted Area").
The term "engage in competition" means direct or indirect
competition by the Employee with Company without Company's prior express
written consent in any business involving the manufacture and/or sale of
projectile-resistant garments and materials and other ballistic protection
devices, specifically including, without limitation, bullet-proof vests,
knife vests and bomb suits, whether such competition be by Employee's (i)
engaging in that business directly or indirectly, or through any other
person as an owner, shareholder, partner, principal, consultant, sales
agent or employee, or in any other manner or capacity connected with or
related to such business; or (ii) making his services available to any
person, firm or corporation engaged in competition with Company in that
business.
If the Employee violates any part of this restriction, then the
period during which the restriction applies shall be extended by one day
for each day on which any violation occurs. If suit is brought to enforce
this paragraph and Employee is found to have violated the foregoing
restrictions one or more times, for the purposes of preventing the
Employee from benefitting from his own wrong, (i) Company shall be
entitled to an injunction restraining the Employee from further violation
for a period of one year from the date of the final judgment or decree,
less only any such days as the Employee has not violated this agreement;
(ii) Company shall be entitled to liquidated damages of 1/100 of
Employee's annual compensation for each day which Employee is found to
have been in violation of this Restrictive Covenant, which Employee and
Company agree to be a reasonable estimate of the damages which Company
will suffer from such breach, the actual damages not being subject to
precise measurement.
Employee and Company agree that a breach of this Restrictive
Covenant will result in irreparable injury to the Company which cannot be
fully compensated by monetary damages and, accordingly, Company shall be
entitled to an injunction or to specific performance to prevent a breach
or contemplated breach of this covenant.
This Section 176 ("Restrictive Covenants") shall apply whether
or not Employee is terminated with cause and in the event the term of this
Agreement expires and Company does not enter into a new agreement. The
parties acknowledge that the stock options are specific consideration for
this Restrictive Covenant. Upon Employee's breach of this restrictive
covenant, Employee shall have no right to exercise his rights under any
stock options.
Notwithstanding the foregoing, this Section 16 (Restrictive
Covenant) shall not apply in the event the term of this Agreement expires
without termination under Section 13 and Company and Employee do not enter
into a new employment agreement unless one of the three following
conditions occurs: (i) at the time the Agreement expired, the Company had
grounds to terminate the employment of Employee "with cause", as provided
in Section 13(b) hereof; (ii) the Company offered Employee the opportunity
to renew his employment on substantially the same terms as this Agreement,
excluding the Signing Bonus, the First Year Guaranteed Compensation, the
Relocation Bonus and reimbursement of other Relocation Expenses; or (iii)
the Company agrees to continue paying Regular Compensation for one (1)
year following termination of employment.
Notwithstanding the foregoing, this Section 16 (Restrictive
Covenant) shall not apply in the event the Employee is terminated without
cause (pursuant to Section 13(a), within three (3) months of the
expiration of this Agreement, unless the Company agrees to continue paying
Regular Compensation for one (1) year following termination of employment.
This Section 16 (Restrictive Covenant) shall not apply if the
Company (including any successor interested such as successor by merger,
or sale of assets) ceases to do business as a going concern.
17. Solicitation of Company Employees. For a period of twelve (12)
months following termination of Employee's employment hereunder, Employee
shall not solicit or encourage any officer or employee to leave the
Company's employment or hire any officer, employee or consultant which was
employed by the Company within one year of the Employee's termination of
employment.
18. Notices. Any notice required or permitted to be given under
this agreement shall be sufficient if in writing, and sent by registered
mail to his residence in the case of the Employee, or to the principal
office in case of the Company.
19. Waiver of Breach. The waiving by the Company of a breach of any
provision in this agreement by the Employee shall not operate or be
construed as a waiver of any subsequent breach by the Employee.
20. Assignment. The rights and obligations of the Company under
this agreement shall inure to and be binding upon the successors and
assigns of the Company.
21. Entire Agreement/Release. This instrument contains the entire
agreement of the parties with respect to the subject hereof, and no
representations, inducements, promises or agreements, whether written or
oral, not expressly set forth herein shall be of any force and effect, and
all prior discussions, negotiations, understandings and agreements are
superseded by this Agreement. This Agreement may not be changed or
altered except by an agreement in writing signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought.
IN WITNESS WHEREOF, the parties hereto have executed this agreement
as of the day and year first above written.
AMERICAN BODY ARMOR &
EQUIPMENT, INC.
By: ______________________________________
Company
______________________________________
Employee
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED
FINANCIAL STATEMENTS OF AMERICAN BODY ARMOR & EQUIPMENT, INC. AS OF AND FOR THE
QUARTER ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JUL-02-1995
<PERIOD-END> SEP-30-1995
<CASH> 19,890
<SECURITIES> 0
<RECEIVABLES> 1,779,664
<ALLOWANCES> 96,265
<INVENTORY> 1,316,360
<CURRENT-ASSETS> 3,159,394
<PP&E> 693,841
<DEPRECIATION> 226,066
<TOTAL-ASSETS> 7,286,103
<CURRENT-LIABILITIES> 2,392,680
<BONDS> 44,454
<COMMON> 140,918
0
1,457,143
<OTHER-SE> 3,250,908
<TOTAL-LIABILITY-AND-EQUITY> 7,286,103
<SALES> 2,929,806
<TOTAL-REVENUES> 2,929,806
<CGS> 1,824,104
<TOTAL-COSTS> 527,284
<OTHER-EXPENSES> 365,127
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 71,697
<INCOME-PRETAX> 369,094
<INCOME-TAX> 143,000
<INCOME-CONTINUING> 226,094
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
