SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
F O R M 1 0 - KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended: December 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-18863
AMERICAN BODY ARMOR & EQUIPMENT, INC.
(Name of small business issuer in its charter)
Florida 59-2044869
(State of Incorporation) (I.R.S. Employer I.D. No.)
191 Nassau Place Road
Yulee, Florida 32097
(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number, including area code: (904) 261-4035
Securities registered under Section 12(b) of the Act:
Common Stock, par value of $.03 per share
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
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Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. _____
The issuer's revenues for the fiscal year ending December 31, 1995 were
$11,741,367.
As of March 18, 1996, the registrant has 6,825,835 shares of Common Stock, par
value of $.03 per share, outstanding, and the aggregate market value of
outstanding voting stock (based upon closing of such stock on the American Stock
Exchange at the close of business on March 18, 1996) held by non-affiliates was
approximately $9,600,000.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PAST FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Exchange
Act of 1934 after the distribution of securities under a plan confirmed
by a court.
Yes X No
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DOCUMENTS INCORPORATED BY REFERENCE:
DOCUMENT FORM 10-KSB PART
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Proxy Statement for 1996 Annual Meeting III
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT
Yes No X
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
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GENERAL
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Since 1969, American Body Armor & Equipment, Inc. (the
"Company" or "ABA") has been engaged in the development, manufacture and
distribution of bullet and projectile resistant garments. These include bullet
resistant and sharp instrument penetration resistant vests, bullet resistant
blankets, bomb disposal suits and helmets, bomb protection and disposal
equipment and load bearing vests. In addition to these products, the Company
develops, manufactures and distributes other ballistic protection and security
equipment, including explosive ordnance device ("EOD") handling and detection
equipment, EOD suppression and disposal equipment, helmets, face masks, shields,
hard armor ballistic plates, customized armor for vehicles and other custom
armored products.
In May 1992, the Company filed for relief under Chapter 11 of
the United States Bankruptcy Code. The bankruptcy filing was the result of a
general decline in the Company's operations, which included significant
operating losses in 1989 and 1991, and the inability to collect a $1.5 million
receivable related to the shipment of vests to a Middle East customer in April
1991. The Company emerged from Chapter 11 protection effective September 20,
1993, upon confirmation by the United States Bankruptcy Court for the Middle
District of Florida, Jacksonville Division (the "Bankruptcy Court") of the
Company's Third Amended and Restated Plan of Reorganization (the "Plan"). See
Item 7, "Financial Statements", Note 1 to Financial Statements.
On January 18, 1996, Kanders Florida Holdings, Inc. ("KFH")
purchased a majority interest in the Company by acquiring all of the Company's
3% Convertible Preferred Stock, stated value $1.00 per share (the "Preferred
Stock") and $.03 Par Value Common Stock (the "Common Stock"), owned by the
Company's two largest shareholders, Clark Schwebel, Inc. ("Clark Schwebel") and
Hexcel Corporation ("Hexcel"). Immediately following the sale of such capital
stock to KFH (such sale, the "KFH Transaction") the then outside members of the
Board of Directors resigned and three new members were elected to serve on the
Board. The sole shareholder of KFH, Warren B. Kanders, was elected Chairman of
the Company's Board of Directors. For further information regarding the Board
of Directors, please refer to the Company's definitive proxy statement which is
incorporated herein by reference and which the Company intends to file with the
Securities and Exchange Commission not later than 120 days after the end of the
fiscal year ended December 31, 1995.
In late 1995, the Company elected to convert 242,851 shares of
the Company's Preferred Stock to Common Stock at 110% of the aggregate stated
value of the Preferred Stock at a conversion price equal to the fair market
value of the Common Stock. The fair market value of the Common Stock was
determined by an independent valuation firm as of the conversion date. See Item
5, "Market For Common Equity And Related Stockholder Matters".
On January 19, 1996, the Board of Directors of the Company
elected to require the holders of the Company's Preferred Stock to convert such
shares to shares of the Company's Common Stock at 110% of the aggregate stated
value of the Preferred Stock, at a conversion price of $.77 per share (fair
market value, as determined by an independent valuation firm), as required by
the Company's Amended and Restated Articles of Incorporation. All shares of the
Company's Preferred Stock were deemed to have been converted upon such election
by the Board of Directors. See Item 5, "Market For Common Equity And Related
Stockholder Matters".
OPERATIONS
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The Company currently manufactures and distributes a wide
range of products in the United States and in markets throughout the world.
PRODUCTS
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BODY ARMOR
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The Company manufactures two basic types of body armor: (i)
concealable armor, which is generally intended to be worn beneath the user's
clothing, and (ii) tactical armor, which is worn externally and is designed to
protect more coverage area and defeat higher level ballistic threats by
incorporating ballistic hard armor plates. Both types of armor are manufactured
using multiple layers of an aramid or polyethylene ballistic fabric, stitched
for integrity, covered and finally enclosed in an outer carrier. See Item 1,
"Description of Business - Raw Materials, Sources and Availability".
The Company's concealable vests are contoured to closely fit
the user's body shape. Most of the Company's concealable vests are sold with a
shock plate, which is an insert designed to improve the protection of vital
organs against sharp instrument attack and to provide enhanced blunt trauma
protection. These vests may be supplemented with additional armor plates made of
metal, ceramic or Comspec(Trademark), to withstand increased ballistic threat
levels than the vest is otherwise designed to deter.
The Company's tactical vests are designed to give maximum all
around protection and incorporate additional coverage around the neck, shoulders
and kidneys than that provided by the Company's concealable vests. A groin
protector is often supplied as an accessory. These vests usually contain pockets
to incorporate panels constructed from small high-alumina ceramic tiles or
pressed polycarbonate Comspec(Trademark), which provides additional protection
against rifle fire. The Company's tactical vests are offered in a variety of
styles, including tactical assault vests, tactical police jackets, floatation
vests, high-coverage armor and flak jackets, each of which is manufactured to
protect against varying degrees of ballistic threats.
SHARP INSTRUMENT PENETRATION ARMOR
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The Company manufactures knife resistant vests designed
primarily for use by personnel in correctional facilities and other law
enforcement employees who are exposed to threats from sharp instruments. These
vests are constructed using an aramid ballistic fiber and titanium foil and are
available in both concealable and tactical versions. In addition, these vests
can be combined with ballistic armor configurations to provide combined
ballistic resistant and sharp instrument penetration resistant protection.
EXPLOSIVE ORDNANCE DISPOSAL EQUIPMENT ("EOD")
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The Company manufactures and distributes a wide range of EOD
disposal and handling equipment as well as distributing EOD detection equipment
manufactured by a third party. This equipment includes bomb disposal suits,
which are primarily constructed of an aramid ballistic fabric covered by a
Nomex(Registered) brand fire-retardant cover. These suits cover the user's
entire body (except hands) and include a fitted helmet that provides protection
and communication capabilities. Other EOD equipment manufactured by the Company
includes bomb protection blankets and letter bomb suppression pouches.
HARD ARMOR AND SHIELDS
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ABA manufactures a variety of hard armor and ballistic
shields, which are manufactured using aramid ballistic fibers, polyethylene
ballistic material, ballistic steel, ceramic tiles, ballistic glass or a
combination of any one or more of these materials. These products include
tactical face masks and helmets, Comspec(Trademark) shields, barrier shields and
blankets as well as upgrade armor plates. Upgrade armor plates are designed to
fit into pockets available on most ABA tactical vests. When used in conjunction
with the ballistic vests, these plates provide additional ballistic protection
against increased ballistic threats, including assault rifle ballistic
protection.
OTHER PRODUCTS
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The Company also manufactures a variety of other products,
including non-ballistic load bearing vests constructed of raschel knit
material, which are designed to allow for multiple pocket configurations to be
used to carry equipment. Other specialty products manufactured by the Company
include armored press vests, executive vests, raincoats and fireman turnout
coats to provide various levels of ballistic protection.
Other activities of the Company include the design and
manufacture of specialty armor applications for vehicles, watercraft, aircraft
and armor for stationary protection, which can be custom designed for each
individual application or provided as a "kit" to be installed on site anywhere
in the world.
MANUFACTURING
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The Company manufactures substantially all of its bullet, bomb
and projectile resistant garments and other ballistic protection devices. The
primary raw materials used by the Company in manufacturing ballistic resistant
garments are aramid ballistic fibers and polyethylene ballistic materials. The
Company purchases such materials either directly from the manufacturer or as a
woven cloth from a number of weaving companies located in the United States and
abroad. See Item 1, "Description of Business - Raw Materials, Sources and
Availability".
The Company believes it is currently in compliance in all
material respects with all applicable environmental regulations.
RESEARCH AND DEVELOPMENT
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The Company continually develops new products to meet the
demands of the marketplace. Customer needs, including specific use requirements
and cost, drive the development process. The Company's product development
process involves combining state-of-the-art ballistic fibers, cover materials
and unique weaves with improved design and manufacturing processes to produce
competitively priced products which provide the maximum comfort at the lowest
possible weight, while meeting the customer's ballistic threat requirements.
During the fiscal year ended December 31, 1995, the Company had expenditures
related to new product development and testing of $444,118, as compared with
$263,596 during the fiscal year ended December 31, 1994. See Item 6,
"Management's Discussion and Analysis or Plan of Operations-Year Ended December
31, 1995 Compared to Year Ended December 31, 1994".
RAW MATERIALS, SOURCES AND AVAILABILITY
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The primary raw materials used by the Company in manufacturing
ballistic garments are aramid ballistic fibers and polyethylene ballistic
materials. The Company purchases cloth woven out of the aramid fiber from a
number of independent weaving companies, including Clark Schwebel, a former
shareholder of the Company. The Company purchases more than 10% of its aramid
fiber requirements from Clark Schwebel. In the opinion of management, the
Company enjoys a satisfactory relationship with this supplier. See Item 12,
"Certain Relationships and Related Transactions".
The ballistic materials and the fiber weaving services
required by the Company are readily available from a number of suppliers
worldwide. There are many suppliers available to the Company worldwide that
ensure, in the opinion of management, adequate supplies of the necessary
ballistic and fiber materials to meet the Company's needs.
The Company purchases other raw materials used in the
manufacture of its products, such as ceramic tile, ballistic steel and cover
materials, from a variety of sources. The Company believes additional sources of
supply of these materials are readily available.
CUSTOMERS
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The Company's products are sold nationally and
internationally, primarily to law enforcement agencies and the military. Sales
to domestic law enforcement agencies, including police departments, state
correctional facilities, highway patrols and sheriff's departments, comprise the
largest portion of the Company's business.
Sales to the United States federal law enforcement and
military branches, including federal correctional facilities, also comprise a
significant portion of the Company's business.
The majority of sales by the Company to the military and other
federal agencies are made pursuant to a standard purchasing contract between the
Company and the General Services Administration of the federal government, which
is commonly referred to as a "GSA Contract". The Company also responds to
invitations by military branches and government agencies to bid for particular
orders.
Sales to international customers are made primarily to
military and law enforcement agencies. International sales are primarily made on
terms requiring ABA to receive payment in advance of shipment or payment through
a letter of credit confirmed by a major United States bank. All sales are made
under terms requiring payment in United States currency.
During 1995, the Company had no sales to individual customers
which exceeded 10% of total sales.
MARKETING AND DISTRIBUTION
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The Company's distribution network consists of sales to a
network of independent domestic distributors and independent international
agents, who in turn re-sell the products to the end user. In certain rare
situations, the Company sells directly to end users. The Company has many
independent domestic distributor locations as well as many independent
international agent representatives. Sales representatives employed by the
Company are compensated on a salary plus commission basis with commission
amounts subject to review based upon the profitability of the contract.
The Company employs regional sales managers who are
responsible for marketing the Company's products to domestic distributors and
law enforcement agencies in the United States. These regional sales managers are
responsible for calling upon the individuals within the distributor organization
or agency who are responsible for making purchasing decisions in order to
provide product demonstrations and information concerning the Company's
products.
During 1994, the Company reorganized its government and
international sales areas. The customer service representatives are
responsible for developing the Company's network of international agents,
identifying potential government and international sales opportunities, and
providing information concerning the Company's products to the distributors.
The Company's primary marketing emphasis is on the development
of relationships with key distributors and agents in order to improve the
quality of the distribution network. In conjunction with this effort, the
Company may work on joint marketing efforts with distributors for special
promotions and direct mailings. The Company's national advertising is generally
targeted toward increased name recognition and new product introduction,
primarily for domestic law enforcement agencies. This form of advertising
consists of advertisements in law enforcement trade magazines and attendance at
trade shows. During the fiscal years ended December 31, 1995 and 1994,
advertising and marketing expenditures were approximately $240,000 and $200,000,
respectively.
BACKLOG
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The Company's backlog of orders consists of orders received
but not yet manufactured. In the case of orders from new customers or
international customers, such backlog includes only orders where management
believes an acceptable assurance of payment has been received. Such assurance is
normally in the form of a substantial prepayment prior to placing the order into
production along with payment of the remaining balance prior to shipment, or a
confirmed letter of credit or other acceptable form of bank guarantee of
payment.
As of December 31, 1995, the Company had an estimated backlog
of $3,058,000, as compared to $1,205,000 as of December 31, 1994. As of March 8,
1996, the Company had an estimated backlog of $2,900,000. Management believes
that a backlog of approximately four weeks production provides for reasonable
production scheduling. The Company may reduce or increase production in the
future as a result of changes in the level or mix of backlog. See Item 6,
"Management's Discussion and Analysis or Plan of Operations - Results of
Operations - Year Ended December 31, 1995 Compared to Year Ended December 31,
1994".
GOVERNMENT AND INDUSTRY REGULATIONS AND STANDARDS
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The bullet, sharp instrument penetration and bomb resistant
garments and accessories manufactured and sold by the Company are not currently
subject to government regulations. However, law enforcement agencies and the
military publish invitations for bidding which specify certain standards of
performance which bidders' products must meet. The National Institute of Justice
(the "NIJ"), under the auspices of the United States Department of Justice, has
issued a revised voluntary ballistic standard (NIJ 0101.03) for bullet resistant
vests. The Company regularly submits its vests to independent laboratories for
ballistic testing under this voluntary ballistic standard. In addition, such
garments and enclosures are regularly submitted by the Company for rating by
independent laboratories in accordance with a test commonly referred to as V50.
This test involves exposing the tested item to blasts of fragments of increasing
velocity until 50% of the fragments penetrate the tested item. The tested item
is then given a velocity rating which may be used by prospective purchasers in
assessing the suitability of the Company's products for a particular
application.
COMPETITION
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The ballistic resistant garment business is highly
competitive. In the United States law enforcement, government and military
markets, the Company has four major competitors. Financial information on these
competitors is relatively scarce. The Company believes that the principal
elements of competition in the sale of ballistic resistant garments are price
and quality. In the law enforcement and military markets, the Company
occasionally bids for orders in response to invitations for bidding which set
forth product performance specifications. The Company believes that its products
are priced competitively and that the quality of its products is competitive
with products manufactured by other companies having similar ballistic
capabilities. In the international market, the Company's competition consists
primarily of its larger American competitors as well as two large international
companies and, depending upon the market, smaller local manufacturers. In
certain international markets, the Company's ability to be competitive is
adversely affected by import duties imposed on its products.
EMPLOYEES
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As of December 31, 1995, the Company had 131 employees, 4 of
whom were executive officers of the Company. Of the remaining employees, 9 were
office personnel, 104 were employed in manufacturing, quality assurance,
research and development, purchasing, shipping and warehousing and 14 were sales
personnel. As of December 31, 1994, the total number of employees of the Company
was 114. The increase of 17 employees between 1994 and 1995 was due primarily to
an increase in manufacturing personnel.
ITEM 2. DESCRIPTION OF PROPERTY
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The Company occupies a 50,000 square foot office, sales,
manufacturing and warehouse facility in Nassau County, Florida. This facility
has been utilized as the Company's primary manufacturing facility and
headquarters since 1987. As a result of a sale leaseback transaction, the
Company has leased this facility since July 1989. The Company's current lease is
for a six year term ending April 30, 1999, at an annual base rental of $110,000
(plus annual inflationary escalations). The lease provides the Company with
options to extend the lease for two additional five year terms at prevailing
market rental rates; however, to the extent the Company makes certain
improvements to the facility, the Company may elect to extend the lease at the
present rental rate. In addition, the lease requires the Company to pay all
utilities and maintenance expenses incurred in connection with the premises, as
well as all real estate taxes, insurance, water and sewer charges. The Company
believes that it has adequate insurance coverage for this property and its
contents.
ITEM 3. LEGAL PROCEEDINGS
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As a part of the Company's Plan, unsecured creditors were
given the opportunity to elect to receive cash or stock in satisfaction of their
claims. Osprey International, Ltd. ("Osprey") did not elect stock. Pursuant to
the provisions of the Plan, the failure to elect stock constituted a cash
election. Pursuant to the Plan, Osprey was entitled to receive $7,500 in cash.
After the Plan's effective date, Osprey filed a motion to permit it to elect
stock. On July 25, 1994, the Bankruptcy Court denied Osprey's motion on the
grounds that it was both moot and meritless. The Bankruptcy Court also denied
Osprey's subsequent motion to alter or amend the Order denying the motion to
permit a stock election and Findings of Fact and Conclusions of Law separately
entered. On November 7, 1994, Osprey filed a Notice of Appeal of the Bankruptcy
Court's Orders. In its appeal, Osprey requested the Bankruptcy Court to require
the Company to issue to Osprey certain shares previously held in a disputed
claims reserve account established by the Company in connection with its
reorganization, plus new shares of Common Stock to satisfy its claim. Osprey has
not sought monetary relief as part of its claim.
OTHER LEGAL MATTERS
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In November 1989, the Federal Trade Commission (the "FTC")
conducted an investigation into the accuracy of the Company's claims that body
armor it sold between 1988 and 1990 complied with testing and certification
procedures promulgated by the NIJ.
On November 2, 1994, the FTC issued a consent order embodying
a voluntary settlement of the FTC's charges that the Company engaged in false
advertising. Under the consent order, the Company admitted no violations of law
but agreed to establish a Body Armor Replacement Program (the "Program") under
which persons who had purchased body armor covered by the Program would be
identified and offered the chance to buy new, replacement body armor at a
reduced price. The consent order sets forth many detailed requirements governing
the conduct of the Program, the retention of records and the avoidance of false
or misleading advertising. Failure to comply with the requirements could make
the Company liable for civil penalties.
On January 4, 1995, the Company filed with the FTC a
comprehensive Compliance Report detailing the manner in which it was performing
the obligations imposed upon it by the consent order. As of March 18, 1996, the
FTC had not asked for additional information or questioned the Company's
compliance with the consent order.
In addition to the above, the Company, in the normal course of
its business, is subject to claims and litigation in the areas of product and
general liability. The Company believes that it has adequate insurance coverage
for most claims that are incurred in the normal course of business. In such
cases, the effect on the Company's financial statements is generally limited to
the amount of its insurance deductibles. Management does not believe at this
time that any such claims will have a material impact on the Company's financial
position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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There were no matters submitted to a vote of security
holders during the last quarter of the fiscal year ended December 31, 1995.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
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Effective March 18, 1996, the Company's Common Stock began
trading on the American Stock Exchange under the symbol "ABE". The closing price
of the Company's Common Stock on its first day of trading on the American Stock
Exchange was $5.375. Prior to March 18, 1996, the Company's Common Stock was
traded in the over-the-counter market, and was listed in the bid and ask quotes
of brokers as reported by the National Quotation Bureau, Inc. (the "Bulletin
Board") under the symbol "ABOA".
The following table sets forth the range of high and low bid
prices of the Company's Common Stock as listed on the Bulletin Board for the
last two fiscal years. Such quotations reflect inter-dealer prices without
retail mark-up, mark-down or commission, and may not necessarily represent
actual transactions. The stock bid prices were determined from information
provided by a majority of the market makers for the Company's Common Stock to
the Bulletin Board.
Common Stock Bid Prices
High Low
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Fiscal Year 1994
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Quarter Ended 3/31/94 $2.50 $ .75
Quarter Ended 6/30/94 $2.50 $1.00
Quarter Ended 9/30/94 $2.25 $1.25
Quarter Ended 12/31/94 $2.00 $1.00
Fiscal Year 1995
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Quarter Ended 3/31/95 $1.25 $ .75
Quarter Ended 7/1/95 $1.00 $ .625
Quarter Ended 9/30/95 $ .9375 $ .875
Quarter Ended 12/31/95 $3.25 $1.00
As of March 14, 1996, the number of holders of record of the
Company's Common Stock was approximately 500. Holders of shares held in
"nominee" or street names are included in this number.
The Company did not declare any cash dividends on its Common
Stock during the last three fiscal years, and does not anticipate paying cash
dividends on its Common Stock in the foreseeable future. Any earnings in the
near future will be utilized to fund the growth of the Company's business. In
addition, the Company is precluded from paying dividends on its Common Stock
pursuant to its financing agreement with LaSalle Business Credit, Inc.
("LaSalle").
In late 1995, the Company elected to convert 242,851 shares of
the Company's Preferred Stock to Common Stock at 110% of the aggregate stated
value of the Preferred Stock at a conversion price equal to the fair market
value of the Common Stock. The fair market value of the Common Stock was
determined by an independent valuation firm as of the conversion date. See Item
1, "Description of Business - General".
On January 19, 1996, the Board of Directors of the Company
elected to require the holders of the Company's Preferred Stock to convert such
shares to shares of the Company's Common Stock at 110% of the aggregate stated
value of the Preferred Stock, at a conversion price of $.77 per share (fair
market value, as determined by an independent valuation firm), as required by
the Company's Amended and Restated Articles of Incorporation. All shares of the
Company's Preferred Stock were deemed to have been converted upon such election
by the Board of Directors. See Item 1, "Description of Business - General".
ITEM 6. MANAGEMENT'S DISCUSSION AND
- ------- ANALYSIS OR PLAN OF OPERATIONS
------------------------------
This analysis of the Company's results of operations and
financial condition should be viewed in conjunction with the accompanying
financial statements, including the notes thereto, contained in Item 7 of this
Annual Report on Form 10-KSB.
Results of Operations
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Fresh-Start Reporting
- ---------------------
The Company emerged from Chapter 11 bankruptcy reorganization
on September 20, 1993 as a result of the confirmation of the Company's Plan by
the Bankruptcy Court. In connection with the confirmation of the Plan, the
Company adopted "fresh-start reporting" in accordance with the American
Institute of Certified Public Accountants Statement of Position 90-7, "Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code". Accordingly,
since September 20, 1993, the Company's financial statements have been prepared
as if it were a new reporting entity.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
- ---------------------------------------------------------------------
Net sales for the fiscal year ended December 31, 1995 ("Fiscal
1995") amounted to $11,741,367, as compared to $11,355,142 for the fiscal year
ended December 31, 1994 ("Fiscal 1994"). This increase of $386,225 (3.4%)
between periods results primarily from an increase in sales in the domestic
market.
The Company's gross profit amounted to $4,298,287 (37% of
sales) in Fiscal 1995, as compared to $3,614,339 (32% of sales) in Fiscal 1994.
The increase of $683,948 in gross profit in Fiscal 1995 is due to positive
manufacturing variances (better utilization of labor and purchases of raw
material). In addition, the domestic market experienced better margins and
contributed a greater percentage to the overall sales figures.
Selling, general and administrative expenses ("SG&A Expenses")
amounted to $2,976,975 (25.3% of sales) in Fiscal 1995, as compared to
$2,432,521 (21.4% of sales) in Fiscal 1994. The increase in SG&A Expenses
amounted to $544,454 or 22.3%. Increases in salaries for additional personnel in
the sales and marketing areas of the Company and domestic commissions (due to
the increase in domestic sales) comprised the majority of the overall increase
in SG&A Expenses. In addition, increased domestic travel costs were incurred and
certain costs associated with the KFH Transaction are included in the Fiscal
1995 expenses.
Increases in research and development expenses were incurred
due to new vest certification and testing costs, as well as in connection with
the ISO 9002 certification of the Company's quality control standards. The
Company received the ISO 9002 certification in October 1995. See Item 1,
"Description of Business-Research and Development".
Non-operating income amounted to $227,500 in Fiscal 1995. This
income is non-recurring and relates to the termination of a non-compete
agreement entered into in 1990 between the Company and a competitor.
Interest expense of $280,891 in Fiscal 1995 represents an
increase of $64,573 (or 30%), as compared to Fiscal 1994. This increase resulted
primarily from higher borrowings under the Company's financing agreement with
LaSalle.
Income before income taxes for Fiscal 1995 amounted to
$823,803, as compared to $701,904 for Fiscal 1994. This increase in pre-tax
profit reflects the improved margins and non-recurring, non-operating income
received in Fiscal 1995, being partially offset by the increase in SG&A
Expenses.
Effective September 20, 1993 the Company adopted the
provisions of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" ("SFAS 109"). In accordance with this standard, the Company
recorded a deferred tax asset, representing its cumulative net operating loss
carryforward and deductible temporary differences, subject to applicable limits
and an asset valuation allowance. Any future benefit obtained from the
realization of this asset will be applied to reduce the reorganization value in
excess of amounts allocable to identifiable assets. As of December 31, 1995,
the gross amount of this deferred tax asset was $2,037,000, of which the
entire amount has been offset by a valuation allowance.
The Company's backlog of orders consists of orders received
but not yet manufactured. As of March 8, 1996, the Company had a backlog of
orders of approximately $2,900,000. Management believes that a backlog of
approximately four weeks production provides for reasonable production
scheduling. See Item 1, "Description of Business - Backlog".
Liquidity and Capital Resources
- --------------------------------
The Company's principal sources of working capital during
Fiscal 1995 were bank borrowings from LaSalle and trade credit. The Company's
financing agreement with LaSalle was renewed effective July 1, 1994, at terms
more favorable to the Company. The interest rate charged by LaSalle decreased to
LaSalle's Reference Rate plus 2.0% from LaSalle's Reference Rate plus 3.75%. As
of December 31, 1995, the interest rate on the outstanding loans was 10.5%. The
new financing agreement provides a revolving credit facility for borrowings of
up to $3,000,000 in the aggregate, with maximum availability based upon 50% of
eligible inventories (with a cap of $850,000) and 85% of eligible accounts
receivable. An additional $250,000 capital expenditure facility also became
effective on July 1, 1994. The financing agreement contains certain restrictive
covenants, including limitations on the encumbrance and transfer of assets, the
creation of indebtedness and the maintenance of certain levels of tangible net
worth and working capital. In addition, the financing agreement restricts the
payment of dividends other than dividends on Preferred Stock. The financing
agreement is collateralized by substantially all of the Company's assets. The
financing agreement expires on June 30, 1996, and is subject to a 1% prepayment
penalty.
As of December 31, 1995, the Company was indebted to LaSalle
in the aggregate amount of $1,997,060, and had additional availability from
which to borrow in the amount of approximately $230,000, as compared to
$1,668,061 and $295,377, respectively, as of December 31, 1994.
In conjunction with the Plan, the Company retained or incurred
administrative claims liabilities amounting to $925,000. This amount included
unsecured creditors electing cash payments upon the effective date of the Plan,
professional fees awarded by the Bankruptcy Court for services provided during
the pendency of the proceeding, amounts set aside for contingent or disputed
claims and deferred claims payments required by the Confirmation Order. As of
December 31, 1995, $736,294 of these liabilities had been paid and the remaining
balance of $188,706 is included in current liabilities as of December 31, 1995.
As of December 31, 1995, the Company had working capital of
$795,370, which reflects an improvement of $755,038 from December 31, 1994. This
increase reflects the Company's continued profitability.
The Company had an income tax net operating loss carryforward
("NOL") of approximately $4,700,000 as of December 31, 1995. Until January 18,
1996, this loss carryforward was relatively unrestricted as to the amount
which could have been utilized in any year to offset future income tax
liabilities of the Company. However, due to the sale of all of the issued and
outstanding shares of capital stock owned by Clark Schwebel and Hexcel on
January 18, 1996 to KFH, which sale resulted in a change in control of the
Company, the amount of the NOL that can be utilized in any one year is
restricted to approximately $300,000.
The Company anticipates that continuing profitable operations
and utilization of its line of credit borrowing capacity with LaSalle 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 and the purchase of capital equipment.
The Company is in the process of finalizing its capital
expenditure plan for the fiscal year ending December 31, 1996. Such expenditures
approximate $250,000, which will include, among other things, upgrading the
Company's Management Information Systems and miscellaneous capital equipment
during the next twelve month period.
Effect of Inflation and Changing Prices
- ---------------------------------------
The Company is effected by changes in the cost of its raw
materials, primarily fabric woven from Kevlar(Registered) yarn and Spectra
Shield(Registered), which costs have not increased substantially over the past
year. Such increases can normally be passed on to customers in the normal course
of business. The Company does not expect inflation to have a material impact on
either the Company's ability to obtain raw materials or its results of
operations.
ITEM 7. FINANCIAL STATEMENTS
- ------ --------------------
The following financial statements for the fiscal years ended
December 31, 1995 and 1994 are furnished as part of this Annual Report on Form
10-KSB:
Index to Financial Statements Pages
----------------------------- -----
Financial Statements F-1
Independent Auditors' Report F-2
Balance Sheet F-3
Income Statement F-4
Statements of Stockholders' Equity F-5
Statements of Cash Flows F-6
Notes to Financial Statements F-7 to F-17
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
American Body Armor & Equipment, Inc.
Fernandina Beach, Florida
We have audited the accompanying balance sheets of American Body Armor &
Equipment, Inc. (the "Company") as of December 31, 1995 and 1994 and the related
statements of income, stockholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1995 and
1994, and the results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Jacksonville, Florida
February 23, 1996
AMERICAN BODY ARMOR & EQUIPMENT, INC.
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
ASSETS 1995 1994
---- ----
CURRENT ASSETS:
Cash and cash equivalents $ 272,972 $ 315,231
Accounts receivable, net of allowance for
doubtful accounts of $100,000 2,319,754 1,574,990
Inventories 1,101,935 1,042,405
Prepaid expenses and other current assets 287,000 90,458
----------- -----------
Total current assets 3,981,661 3,023,084
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $270,450 and $122,379 474,359 502,935
REORGANIZATION VALUE IN EXCESS OF AMOUNTS
ALLOCABLE TO IDENTIFIABLE ASSETS, net 3,586,574 3,886,574
OTHER ASSETS 117,867 57,906
----------- -----------
TOTAL ASSETS $ 8,160,461 $ 7,470,499
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capitalized
lease obligation $ 2,082,398 $ 1,681,544
Accounts payable, accrued expenses and other
current liabilities 1,103,893 1,301,208
----------- -----------
Total current liabilities 3,186,291 2,982,752
LONG-TERM DEBT AND CAPITALIZED LEASE
OBLIGATION, less current portion 27,550 60,793
----------- -----------
Total liabilities 3,213,841 3,043,545
----------- -----------
COMMITMENTS AND CONTINGENCIES
(Notes 7, 8, 9 and 10)
STOCKHOLDERS'EQUITY:
Convertible preferred stock, $1 stated value,
1,700,000 shares authorized, 1,214,292
and 1,457,143 shares issued and outstanding 1,214,292 1,457,143
Common stock, $.03 par value, 15,000,000 shares
authorized, 5,091,133 and 4,697,255 shares
issued and outstanding 152,734 140,918
Additional paid-in capital 2,592,761 2,318,890
Retained earnings 986,833 510,003
----------- -----------
Total stockholders' equity 4,946,620 4,426,954
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,160,461 $ 7,470,499
=========== ===========
NET SALES $11,741,367 $11,355,142
COST AND EXPENSES:
Cost of sales 7,443,080 7,740,803
Selling, general and administrative expenses 2,976,975 2,432,521
Research and development costs 444,118 263,596
Interest expense, net 280,891 216,318
----------- -----------
11,145,064 10,653,238
----------- -----------
OPERATING INCOME 596,303 701,904
NON-OPERATING INCOME 227,500
----------- -----------
INCOME BEFORE INCOME TAXES 823,803 701,904
INCOME TAXES 303,650 278,500
----------- -----------
NET INCOME $ 520,153 $ 423,404
=========== ===========
NET EARNINGS PER COMMON SHARE AND
COMMON EQUIVALENT SHARE $ 0.08 $ 0.07
=========== ===========
See notes to financial statements.
AMERICAN BODY ARMOR & EQUIPMENT, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
Convertible
Preferred Stock Common Stock
--------------------- ------------------ Additional
Stated Par Paid-in Retained
Shares Value Shares Value Capital Earnings Total
--------- --------- --------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994 1,700,000 $1,700,000 4,415,833 $132,475 $2,075,441 $137,599 $4,045,515
Dividends on preferred stock (51,000) (51,000)
Conversion of preferred stock (242,857) (242,857) 275,400 8,262 234,595
Issuance of stock in lieu of
directors' fees 6,022 181 8,854 9,035
Net income 423,404 423,404
--------- ---------- --------- -------- ---------- -------- ----------
BALANCE, DECEMBER 31, 1994 1,457,143 1,457,143 4,697,255 140,918 2,318,890 510,003 4,426,954
Dividends on preferred stock (43,323) (43,323)
Conversion of preferred stock (242,851) (242,851) 346,922 10,408 232,443
Issuance of stock in lieu of
directors' fees 14,000 420 13,580 14,000
Issuance of stock granted
under stock plans 32,956 988 27,848 28,836
Net income 520,153 520,153
--------- ---------- --------- -------- ---------- -------- ----------
BALANCE, DECEMBER 31, 1995 1,214,292 $1,214,292 5,091,133 $152,734 $2,592,761 $986,833 $4,946,620
========= ========== ========= ======== ========== ======== ==========
</TABLE>
See notes to financial statements.
AMERICAN BODY ARMOR & EQUIPMENT, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1994
1995 1994
OPERATING ACTIVITIES:
Net income $ 520,153 $ 423,404
Adjustments to reconcile net income to cash
used in operating activities:
Depreciation and amortization 148,071 118,116
Gain on disposal of property and equipment (750)
Deferred income taxes 300,000 263,500
Directors' fees 14,000 9,035
Increase in accounts receivable (744,764) (558,509)
Increase in inventories (59,530) (107,832)
(Increase) decrease in prepaid expenses
and other assets (256,503) 95,628
Decrease in accounts payable, accrued
liabilities and other current liabilities (168,479) (370,733)
--------- ---------
Net cash used in operating activities (247,802) (127,391)
--------- ---------
INVESTING ACTIVITIES:
Capital expenditures (128,495) (117,897)
Proceeds from disposal of property
and equipment 9,750
--------- ---------
Net cash used in investing activities (118,745) (117,897)
--------- ---------
FINANCING ACTIVITIES:
Preferred stock dividends (43,323) (51,000)
Borrowings under capital expenditures facility 52,000
Repayments of long-term debt and capitalized
lease obligation (13,388) (4,391)
Net borrowings under line of credit 328,999 595,817
--------- ---------
Net cash provided by financing activities 324,288 540,426
--------- ---------
NET (DECREASE) INCREASE IN CASH (42,259) 295,138
CASH, BEGINNING OF YEAR 315,231 20,093
--------- ---------
CASH, END OF YEAR $ 272,972 $ 315,231
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Income taxes paid $ 3,400 $ 15,000
========= =========
Interest paid $ 273,538 $ 213,798
========= =========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Capitalized lease obligation entered into
for equipment $ 43,451
=========
Issuance of stock granted under stock plan $ 28,836
=========
See notes to financial statements.
AMERICAN BODY ARMOR & EQUIPMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business - American Body Armor & Equipment, Inc. is a
manufacturer of ballistic and stab resistant armor and bomb disposal
equipment. The Company's products are sold domestically and
internationally, primarily to law enforcement agencies and the military.
The Company has no foreign manufacturing operations.
Basis of Presentation - On September 20, 1993, the Company emerged from
Chapter 11 bankruptcy reorganization and adopted the recommended
fresh-start reporting treatment for such entities, as set forth in the
American Institute of Certified Public Accountants' Statement of Position
90-7, "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code" ("SOP 90-7"). As such, the Company's 1995 and 1994
financial statements have been prepared as if the Company were a new
reporting entity and are not comparable to financial statements of
previous periods.
The Company's Plan of Reorganization under Chapter 11 bankruptcy became
effective on September 20, 1993 (the "Effective Date"). The Plan of
Reorganization was designed to repay secured claims in full with interest
without impairment, to repay over time unsecured claims related to an FTC
Replacement Vest Consent Agreement (see Note 8) via replacement of vests,
and to repay general unsecured, tort and lease claims in cash or a
combination of preferred and common stock.
In connection with the adoption of fresh-start reporting, the Company was
required to determine its reorganization value by consideration of several
factors and reliance on various valuation methods, including discounted
estimated future cash flows, market comparables and price/earnings ratios.
All such valuations depended in large part upon the Company's projected
future operating results and cash flows, with such projections including
assumptions as to anticipated sales and margins, marketing plans,
operating expense levels and capital expenditure programs.
Cash Equivalents - The Company considers all highly liquid investments
purchased with original maturities of three months or less to be cash
equivalents.
Concentration of Credit Risk - The Company's accounts receivable consist
of amounts due from customers, including amounts due from distributors,
located throughout the United States. International sales generally
require cash in advance or confirmed letters of credit on U.S. banks.
Inventories - Inventories are stated at the lower of cost or market
determined on the first-in, first-out ("FIFO") basis.
AMERICAN BODY ARMOR & EQUIPMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994 (Continued)
Property and Equipment - In accordance with SOP 90-7, property and
equipment consisting primarily of manufacturing equipment and office
furniture and fixtures were recorded at their estimated fair values upon
emergence from bankruptcy. Subsequent additions of property and equipment
have been recorded at cost. Property and equipment are depreciated over
their estimated useful lives of 3 to 10 years on a straight-line basis.
Reorganization Value in Excess of Amounts Allocable to Identifiable Assets
- Reorganization value in excess of amounts allocable to identifiable
assets is amortized or otherwise reduced in amounts not less than those
which would be recognized on a straight-line basis over twenty-five years.
Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Income Taxes - In connection with the adoption of fresh-start reporting,
the Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS 109"). Under the asset and liability
method specified thereunder, deferred taxes are determined based on the
difference between the financial reporting and tax bases of assets and
liabilities. Deferred tax liabilities are offset by deferred tax assets
representing the tax-effected cumulative net operating loss carryforwards
and deductible temporary differences, subject to applicable limits and an
asset valuation allowance. Future benefits obtained from utilization of
net operating loss carryforwards or from the reduction in the income tax
asset valuation allowance existing on September 20, 1993 have been and
will be applied to reduce reorganization value in excess of amounts
allocable to identifiable assets.
Revenue Recognition - The Company records sales at gross amounts to be
received, including amounts to be paid to agents as commissions.
Non-operating income includes amounts received in settlement of a
non-competition agreement.
New Accounting Standards - Statement of Financial Accounting Standards
(SFAS) No. 123, "Accounting for Stock-Based Compensation", establishes
financial accounting and reporting requirements for stock-based employee
compensation plans. The Company intends to adopt the reporting
requirements of SFAS 123 in 1996 and does not expect implementation of the
new standard to have a significant impact on its financial position or
results of operations. The Company will also be required to adopt the
provisions of Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to be Disposed of" for the year ending December 31, 1996. The impact of
such adoption is not presently known.
AMERICAN BODY ARMOR & EQUIPMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994 (Continued)
2. INVENTORIES
Inventories are summarized as follows:
December 31,
---------------------------
1995 1994
---------- ----------
Raw materials $ 546,707 $ 651,479
Work-in-process 382,680 273,838
finished goods 172,548 117,088
---------- ----------
$1,101,935 $1,042,405
========== ==========
3. ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accounts payable, accrued expenses and other current liabilities are
summarized as follows:
December 31,
---------------------------
1995 1994
---------- ----------
Trade and other payables $ 466,441 $ 524,769
Accrued expenses:
Payroll and related taxes 143,721 146,675
Unresolved bankruptcy claims 188,706 279,082
Other 240,470 70,227
Other current liabilities 64,555 280,445
---------- ----------
$1,103,893 $1,301,208
========== ==========
AMERICAN BODY ARMOR & EQUIPMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994 (Continued)
4. INDEBTEDNESS
December 31,
-------------------------
1995 1994
----------- ----------
Debt:
Line-of-credit under revolving credit and
security agreement expiring June 30, 1996 $1,997,060 $1,668,061
Capital expenditure facility under revolving
credit and security agreement expiring
June 30, 1996 52,000
Mortgage loan payable in monthly installments
of $310 including interest at 8.5 percent
through August 1996, with a balloon installment
of $23,684 due September 1996, collateralized by
a first mortgage on a condominium apartment 24,886 26,301
Other installment loan 839 4,524
----------- ----------
2,074,785 1,698,886
Less current portion (2,074,785) (1,673,256)
----------- ----------
$ - $ 25,630
=========== ==========
Capitalized lease obligation:
Equipment lease bearing interest at 10.88%,
expiring November, 1999, collateralized by
equipment with an amortized cost of
approximately $35,000 at December 31, 1995 $ 35,163 $ 43,451
Less current portion (7,613) (8,288)
----------- ----------
$ 27,550 $ 35,163
=========== ==========
Effective with the emergence from Chapter 11 bankruptcy reorganization,
the Company entered into a revolving credit facility replacing the
Company's previous pre-petition and "debtor-in-possession" facility. The
revolving credit facility, as renewed July 1, 1994, provides for the
borrowing in the aggregate of up to $3,000,000, with maximum availability
based upon 50% of eligible inventories (with a cap of $850,000) and 85% of
eligible accounts receivable. Interest is payable at the Bank's Reference
Rate plus 2% (10.5% at December 31, 1995). Additional borrowings of
approximately $230,000 were available under the revolving credit facility
at December 31, 1995. The Company also has a related capital expenditures
facility which provides for borrowings up to $250,000. The facility
contains certain restrictive covenants including limitations on the
encumbrance and transfer of assets and the creation of indebtedness and
the maintenance of certain levels of tangible net worth and working
capital. In addition, the facility restricts the payment of dividends
other than those dividends on preferred stock. The agreement is
collateralized by substantially all of the Company's assets other than
those assets collateralizing the mortgage and installment loan.
AMERICAN BODY ARMOR & EQUIPMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994 (Continued)
Aggregate principal maturities on indebtedness are as follows:
Obligation
Under
Capitalized
Year ending December 31, Debt Lease
----------- ----------
1996 $ 2,074,785 11,065
1997 11,065
1998 11,065
1999 10,143
----------- ----------
$ 2,074,785 43,338
===========
Less amount representing interest
on obligation under capitalized lease (8,175)
----------
$ 35,163
==========
5. SALES INFORMATION AND SIGNIFICANT CUSTOMERS
Information with respect to sales to principal geographic areas for the
years ended December 31, 1995 and 1994 is as follows:
1995 1994
----------- -----------
Foreign $ 1,370,003 $ 1,594,831
Domestic 10,371,364 9,760,311
----------- -----------
$11,741,367 $11,355,142
=========== ===========
Approximately 32% of the Company's sales during the year ended December
31, 1994 were derived from two significant customers, the United States
government, including various agencies, and the government of Puerto Rico.
AMERICAN BODY ARMOR & EQUIPMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994 (Continued)
6. INCOME TAXES
Income tax expense for the years ended December 31, 1995 and 1994
consisted of the following components:
1995 1994
----------- -----------
Current $ 3,650 $ 15,000
Deferred 300,000 263,500
----------- -----------
Total provision for income taxes $ 303,650 $ 278,500
=========== ===========
Significant components of the Company's net deferred tax asset are as
follows:
1995 1994
----------- -----------
Deferred tax assets:
Reserves not currently deductible $ 206,000 $ 217,500
Operating loss carryforwards 1,783,000 1,755,000
Other 48,000 133,000
----------- -----------
2,037,000 2,105,500
Deferred tax asset valuation allowance (2,037,000) (2,105,500)
----------- -----------
Net deferred tax asset $ - $ -
=========== ===========
The Company provided a valuation allowance of $2,037,000 and $2,105,500
against deferred tax assets recorded as of December 31, 1995 and 1994 in
view of, among other things, historical operating losses and the
expiration dates and other limitations on usage of the net operating loss
carryforwards.
The Plan of Reorganization resulted in an ownership change since a
substantial portion of the new stock was issued to the creditors of the
Company. However, since the ownership change occurred pursuant to Chapter
11 proceedings and because more than 50% of the new stock was issued to
qualifying creditors and shareholders, the Company has taken advantage of
certain favorable rules contained in Section 382(1)(5) relating to usage
of net operating losses. After an ownership change, Section 382(1)(5)
requires a reduction in the amount of net operating loss carryforwards and
other tax attributes. As of emergence from bankruptcy, the net operating
loss carryforward was estimated to have been reduced to approximately
$5,200,000 as a result of the adjustments required by Section 382. As of
December 31, 1995 the Company's net operating losses approximate
$4,700,000 and expire in varying amounts in fiscal years 2003 to 2008. See
also Note 12.
AMERICAN BODY ARMOR & EQUIPMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994 (Continued)
7. OPERATING LEASES
The Company leases its manufacturing facilities under a six year operating
lease expiring in 1999, with an option to renew. The Company is also party
to various other equipment and vehicle leases. Approximate total future
minimum annual lease payments under all such arrangements are as follows:
Year ending December 31
1996 $174,000
1997 165,000
1998 141,000
1999 132,000
2000 47,000
--------
$659,000
========
The Company incurred rent expense of approximately $161,000 and $167,000
during the years ended December 31, 1995 and 1994.
8. COMMITMENTS AND CONTINGENCIES
Chapter 11 Proceedings - The Company has provided for payment of certain
classes of bankruptcy related claims. Such amounts include amounts with
respect to claims that have been allowed by the Bankruptcy Court, as well
as amounts with respect to claims that are still being disputed by the
Company. Among the disputed claims is one in which an unsecured creditor
did not originally exercise its opportunity to elect to receive stock in
satisfaction of its claim, but has since asserted that it is so entitled.
While there can be no assurance that the actual amounts of any such claims
that are ultimately allowed by the Bankruptcy Court will not exceed the
amounts reserved, the Company does not expect that any variance between
such actual and reserved amounts will have a material adverse effect on
the Company's financial position.
Employment Contracts - The Company is party to several employment
contracts with its management. Such contracts are for varying periods and
include restrictions on competition after termination. These agreements
provide for salaries, bonuses and other benefits and also specify and
delineate the granting of various stock options, as further described in
Note 9.
AMERICAN BODY ARMOR & EQUIPMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994 (Continued)
Legal/Litigation Matters - In November 1989, the Federal Trade Commission
("FTC") conducted an investigation into the accuracy of the Company's
claims that body armor sold by the Company between 1988 and 1990 complied
with testing and certification procedures promulgated by the National
Institute of Justice ("NIJ"). On November 2, 1994, the FTC issued a
consent order embodying a voluntary settlement of the FTC's charges that
the Company engaged in false advertising. Under the consent order, the
Company admitted no violations of law but agreed to establish a Body Armor
Replacement Program (the "Program") under which persons who had purchased
body armor covered by the Program would be identified and offered the
chance to buy new, replacement body armor at a reduced price. The consent
order sets forth many detailed requirements governing the conduct of the
Program, the retention of records and the avoidance of false or misleading
advertising. Failure to comply with the requirements could make the
Company liable for civil penalties. On January 4, 1995, the Company filed
with the FTC a comprehensive Compliance Report detailing the manner in
which it was performing the obligations imposed upon it by the consent
order. The FTC has not asked for additional information or questioned the
Company's compliance with the consent order. Management has established
reserves to cover the estimated cost of the above program.
In addition to the above, the Company, in the normal course of business,
is subjected to claims and litigation in the areas of product and general
liability. Management does not believe any of such claims will have a
material impact on the Company's financial position.
9. STOCKHOLDERS' EQUITY AND REDEEMABLE PREFERRED STOCK
Convertible Preferred Stock - The Plan of Reorganization provided for the
filing by the Company of its Restated Articles of Incorporation which
authorized the issuance of 15,000,000 shares of common stock, $.03 par
value ("common stock") and 1,700,000 shares of $1 stated value, 3%
convertible preferred stock ("preferred stock"). Pursuant to the Plan of
Reorganization, the Company issued 4,415,833 shares of its new common
stock and 1,700,000 shares of preferred stock.
In 1995 and 1994, the Company elected to convert 242,851 shares of
preferred stock to common stock at $.77 per share and 242,857 shares of
preferred stock to common stock at $.97 per share, respectively, under
conversion provisions calling for the issuance of common stock, the fair
market value of which represents 110% of the aggregate stated value of the
preferred stock then subject to redemption.
Stock Options and Grants - In 1994, the Company implemented an incentive
stock plan and an outside directors' stock plan, which plans collectively
provide for the granting to certain key employees of options to acquire
the Company's common stock as well as providing for the grant of common
stock to outside directors and to all full time employees. Pursuant to
such plans, 1,050,000 shares of common stock were reserved and made
available for distribution. The option prices of stock which may be
purchased under the incentive stock plan are not less than the fair market
value of common stock on the dates of the grants. Stock granted under the
plans results in the recognition of compensation expense in the Company's
financial statements.
AMERICAN BODY ARMOR & EQUIPMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994 (Continued)
The following is a summary of stock option activity in 1995 and 1994:
Number of
Option Price Shares
Shares Per Share Exercisable
------ ------------ -----------
Granted 727,500 $.79 - $1.05 384,000
Forfeited (69,000) $.79 - $1.05
-------
Outstanding at December 31, 1994 658,500 384,000
Granted 136,000 $.97
Forfeited (11,000) $.79 - $1.05
-------
Outstanding at December 31, 1995 783,500 461,667
=======
The following is a summary of employee stock grant activity in 1995 and
1994:
Shares
------
Granted 128,500
Forfeited (9,877)
-------
Outstanding at December 31, 1994 118,623
Issued 32,956
Forfeited (14,186)
-------
Outstanding at December 31, 1995 71,481
=======
Under this plan, 14,000 and 6,022 shares were issued to directors in 1995
and 1994, respectively.
AMERICAN BODY ARMOR & EQUIPMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994 (Continued)
Earnings Per Share - The following table details the number of shares used
in computing primary and fully diluted earnings per share:
1995 1994
---------- ----------
Primary:
Weighted average common shares outstanding 4,753,999 4,625,394
Effect of shares issuable under stock option
and stock grant plans, based on the treasury
stock method 325,290 254,498
Effect of shares issuable under conversion of
preferred stock 1,290,383 922,507
---------- ----------
6,369,672 5,802,399
========== ==========
Fully diluted:
Weighted average common shares outstanding 4,753,999 4,625,394
Effect of shares issuable under stock option
and stock grant plans, based on the treasury
stock method 598,191 284,319
Effect of shares issuable under conversion of
preferred stock 1,290,383 922,507
---------- ----------
6,642,573 5,832,220
========== ==========
Primary and fully diluted earnings per share are the same amounts.
10. RELATED PARTY TRANSACTIONS
The Company purchases a primary raw material for the manufacture of its
products from a significant stockholder. During the years ended December
31, 1995 and 1994 approximately $5,040,000 and $3,428,000 of such
materials were purchased. No amounts were payable to such stockholder as
of December 31, 1995 and 1994. See also Note 12.
AMERICAN BODY ARMOR & EQUIPMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994 (Continued)
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
At December 31, 1995 and 1994, the Company's financial instruments
consisted of cash and cash equivalents, receivables, payables and other
evidences of indebtedness. Because the cash equivalents and receivables
and payables have short maturities, their market value approximates their
carrying value as presented in the balance sheets. Effective September 20,
1993, the Company restructured the terms of its liabilities in accordance
with the Plan of Reorganization, which resulted in the issuance of
indebtedness at then fair market values. The Company later renewed its
bank credit facility on then market terms in June, 1994. Because the
interest rates on the Company's indebtedness are generally variable and
the debts are of relatively short maturities, management believes the
carrying values of debt as of December 31, 1995 and 1994 approximate fair
value.
12. SUBSEQUENT EVENT
On January 18, 1996, Kanders Florida Holdings, Inc. ("KFH") purchased a
majority interest in the Company by acquiring all of the Company's
preferred stock and common stock owned by the Company's two largest
shareholders, Clark Schwebel, Inc. and Hexcel Corporation. Upon such
transaction, the Company elected to convert all outstanding preferred
stock to common shares. After this conversion, KFH owned approximately 66%
of the Company.
This change in control of the Company resulted in the imposition of an
annual limitation on the use of the Company's net operating loss
carryforwards in future years.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
- ------ ACCOUNTING AND FINANCIAL DISCLOSURE
------------------------------------------------
None.
PART III
The information called for pursuant to this Part III, Items 9,
10, 11 and 12, is incorporated by reference from the Company's definitive proxy
statement which the Company intends to file with the Securities and Exchange
Commission not later than 120 days after the end of the fiscal year ended
December 31, 1995.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
- ------ CONTROL PERSONS; COMPLIANCE WITH SECTION
16(a) OF THE EXCHANGE ACT
--------------------------------------------
ITEM 10. EXECUTIVE COMPENSATION
- ------- ----------------------
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
- -------- OWNERS AND MANAGEMENT
-----------------------------------------
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED
- ------- TRANSACTIONS
-----------------------------------------
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
- -------- -----------------------------------------
(a) Exhibits
The following Exhibits are hereby filed as part of this
Annual Report on Form 10-KSB:
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2.1 Order confirming Debtor's Third Amended and Restated Plan of
Reorganization with the Third Amended and Restated Plan of
Reorganization attached thereto (incorporated by reference
from Exhibit 2 to Form 8-K, Current Report of the Company,
dated October 1, 1993).
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) (incorporated by reference
from Exhibit 3 to Form 8-K, Current Report of the Company,
dated October 1, 1993).
3.2* Amended and Restated Bylaws of American Body Armor &
Equipment, Inc., as amended on January 18, 1996.
10.1 Loan and Security Agreement between American Body Armor &
Equipment, Inc. and StanChart Business Credit dated
September 21, 1993 (incorporated by reference from
Exhibit 10.2 to Form 10-KSB for the fiscal year ended
December 31, 1993).
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 (incorporated by reference
from Exhibit 10.3 to Form 10-KSB for the fiscal year ended
December 31, 1993).
10.3 Amendment #1 to Loan and Security Agreement between American
Body Armor & Equipment, Inc. and LaSalle Business Credit,
Inc., dated September 20, 1993 (incorporated by reference
from Exhibit 10(a) to Form 10-QSB for the quarterly period
ended June 30, 1994).
10.4 Form of Indemnification Agreement for Directors of the
Registrant, dated September 21, 1993 (incorporated by
reference from Exhibit 10.4 to Form 10-KSB for the fiscal
year ended December 31, 1993).
10.5 Form of Indemnification Agreement for Officers of the
Registrant, dated February 28, 1994 (incorporated by
reference from Exhibit 10.5 to Form 10-KSB for the fiscal
year ended December 31, 1993).
10.6* Employment Agreement between Jonathan M. Spiller and
American Body Armor & Equipment, Inc., effective January 18,
1996.**
10.7* Employment Agreement between J. Michael Elliott and American
Body Armor & Equipment, Inc., effective January 18, 1996.**
10.8* Employment Agreement between Richard T. Bistrong and American
Body Armor & Equipment, Inc., effective January 18, 1996.**
10.9 American Body Armor & Equipment, Inc. 1994 Incentive Stock
Plan (incorporated by reference from Form S-8 filed on
October 10, 1994, Reg. No. 33-018863).***
10.10 American Body Armor & Equipment, Inc. 1994 Directors Stock
Plan (incorporated by reference from Form S-8 filed on
October 31, 1994, Reg. No. 33-018863).***
10.11 Lease for the Company's primary facility located in Yulee,
Florida, dated July 26, 1993, effective May 1, 1993
(incorporated by reference from Exhibit 28.1 to Form 10-KSB
for the fiscal year ended December 31, 1993).
20.1 1996 Definitive Proxy Statement to be filed with the
Securities and Exchange Commission not later than 120 days
after the end of the fiscal year ended December 31, 1995
(incorporated by reference).
27.1* Financial Data Schedule.
* Filed herewith.
** This Exhibit represents a management contract.
*** This Exhibit represents a compensatory plan.
(b) Reports on Form 8-K
During the Fourth Quarter of Fiscal 1995, there were no
reports on Form 8-K filed by the Company. In the First Quarter of 1996, a report
on Form 8-K was filed by the Company in connection with the KFH Transaction,
which transaction resulted in a change in control of the Company.
SIGNATURES
In accordance with Section 13 or 15(d) 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.
/s/Jonathan M. Spiller
----------------------------------
Jonathan M. Spiller
President and Chief Executive Officer
Dated: March 29, 1996
In accordance with the Securities Exchange Act, this report has been signed
below by the following persons on behalf of the Registrant and in the capacities
and on the dates indicated:
/s/Jonathan M. Spiller /s/Warren B. Kanders
- ------------------------------- ----------------------------------
Jonathan M. Spiller Warren B. Kanders
President and Chief Executive Officer Chairman of the Board of Directors
March 29, 1996 March 29, 1996
/s/Carol T. Burke /s/Nicholas Sokolow
- ------------------------------- ----------------------------------
Carol T. Burke Nicholas Sokolow
Vice President - Finance Director
Principal Financial Officer March 29, 1996
March 29, 1996
/s/Burtt R. Ehrlich
- -------------------------------
Burtt R. Ehrlich
Director
March 29, 1996
EXHIBIT INDEX
The following Exhibits are filed herewith:
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3.2 Amended and Restated Bylaws of American Body Armor &
Equipment, Inc., as amended on January 18, 1996.
10.6 Employment Agreement between Jonathan M. Spiller and
American Body Armor & Equipment, Inc., effective
January 18, 1996.*
10.7 Employment Agreement between J. Michael Elliott and American
Body Armor & Equipment, Inc., effective January 18, 1996.*
10.8 Employment Agreement between Richard T. Bistrong and
American Body Armor & Equipment, Inc., effective January 18,
1996.*
27.1 Financial Data Schedule.
* This Exhibit represents a management contract.
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
AMERICAN BODY ARMOR & EQUIPMENT, INC.
ARTICLE I.
Office and Seal.
Section 1. The principal office of the corporation in Florida
shall be located in the City of Yulee. The corporation may have such
additional offices as the Board of Directors from time to time may
determine.
Section 2. The corporate seal of the corporation shall have
inscribed thereon the name of the corporation, the year in which
incorporated and the words "Florida - Corporate - Seal."
ARTICLE II.
Stockholders.
Section 1. All meetings of the stockholders shall be held at
the principal office of the corporation in Florida, or at such other
place, either within or without the State of Florida, as from time to
time may be determined by the Board of Directors and specified in the
notice of such meeting.
Section 2. The annual meeting of the stockholders shall be
held at a date, time and place designated by the Board of Directors and
stated in the notice of meeting, in compliance with the Florida
Statutes. At such meeting, the stockholders shall elect the entire Board
of Directors and shall transact such other business as properly may come
before the meeting.
Section 3. Special meetings of stockholders may be called at
any time by the President or by a majority of the Directors. It shall
also be the duty of the President to call such meetings whenever
requested in writing to do so by the records holders of more than 10% of
the stock issued and outstanding and entitled to vote, which request
shall state the objects of the proposed meeting. Business transacted at
all special meetings shall be confined to the objects stated in the
notice.
Section 4. A majority in number of shares issued and
outstanding and entitled to vote, represented by the holders in person
or by proxy, shall be requisite at all meetings to constitute a quorum
for the election of directors or the transaction of other business. If,
however, such majority shall not be present or represented at any such
meeting, the stockholders entitled to vote thereat, present in person
or by proxy, shall have power to adjourn the meeting from time to time
without notice other than announcement at the meeting, until the
requisite amount of voting stock shall be present. At any such adjourned
meeting at which the requisite amount of voting stock shall be
represented, any business may be transacted which might have been
transacted at the meeting as originally notified.
Section 5. At any meeting of the stockholders at which a
quorum is present, the affirmative vote of the holders of a majority of
the stock entitled to vote thereat, present in person or by proxy, shall
be had on any matter coming before such meeting in order to constitute
such action the valid act of the stock- holders thereon, unless
otherwise provided by law, except for the election of directors who
shall be elected by a plurality vote.
Section 6. At each meeting of the stockholders, every
stockholder of stock shall be entitled to one vote for every share of
common stock and one vote for every share of preferred stock on each
matter submitted to a vote at a meeting of stockholders. Every
stockholder may vote the stock the stockholder owns as shown in the
record of stockholders of the corporation as of the record date,
determined pursuant to Section 7 of this Article II, either in person,
or by proxy appointed by an instrument in writing subscribed by such
stockholder personally or by his attorney-in-fact and bearing a date not
more than 11 months prior to the date of the meeting, unless the
authority granted by such instrument shall have terminated by its own
terms prior to the date of such meeting. If such instrument expressly
provides, any proxy holder may appoint, in writing, a substitute to act
in his or her place. A telegraph, telex, or cablegram, a facsimile
trans- mission of a signed instrument, or a photographic, photostatic,
or equivalent reproduction of a signed instrument is a sufficient
instrument.
Section 7. The Board of Directors may fix in advance a date,
not exceeding 70 days prior to the date of holding any meeting of
stockholders, or the date for the payment of any dividend, or the date
for the allotment of rights, as a record date for the determination of
the stockholders entitled to notice of, and to vote at, any such
meeting, or entitled to receive payment of any such dividend, or to any
such allotment of rights, and in such case only stockholders of record
on the date so fixed shall be entitled to such notice of, and to vote
at, such meeting, or to receive payment of such dividend, or to receive
such allotments of rights, as the case may be. If no record date is
established by the Board of Directors prior to authorization of payment
of any dividend, such record date for purposes of determining
entitlement to receive payment of such dividend shall be the day the Board
of Directors authorize payment of a dividend.
Section 8. Notice of the time and place of the annual meeting
of stockholders and notice of the time, place and purpose of each
special meeting of the stockholders shall be given at least 10 and not
more than 60 days before the date set for such meeting to each
stockholder of record having the right and entitled to vote at such
meeting.
Section 9. No notice of any stockholders' meeting shall at
any time be required to be published in any newspaper. However, the
Board of Directors may, if it so desires, cause notice of any
stockholders' meeting to be published in such newspapers as the Board
may designate.
ARTICLE III.
Board of Directors.
Section 1. The management of all of the affairs, business and
property of the corporation shall be vested in its Board of Directors.
The number of Directors of the corporation shall be four (4), but said
number may be changed within the maximum and minimum limits provided by
the Articles of Incorporation, by amendment of this By-Law. The
Directors shall be elected at the Annual Meeting of Stockholders, except
as otherwise provided for filling vacancies. Each Director shall hold
office until the annual meeting of stockholders held next after his or
her election or other manner of appointment, and until his or her
successor shall have been elected and shall qualify or until his or her
death, resignation or removal. Directors need not be stockholders.
Section 2. The annual meeting of the Board of Directors shall
be held in each year immediately after and at the same place as the
annual meeting of stockholders. No notice of the annual meeting of the
Board of Directors need be given.
Section 3. Regular meetings of the Board of Directors may be
held at such places and at such times as the Board from time to time
shall determine by resolution. If any day fixed for a regular meeting
shall be a legal holiday at the place where the meeting is to be held,
then the meeting which otherwise would be held on that day shall be held
at the same hour on the next succeeding business day not a legal
holiday. No notice of regular meetings of the Board of Directors need be
given.
Section 4. Special meetings of the Board of Directors shall
be held whenever called by the President or by a majority of the
Directors. Notice of each special meeting of the Board of Directors
shall be given to each Director at least ten days before the day on
which the special meeting is to be held. Every such notice shall state
the time and place of the meeting and the purpose thereof. The business
transacted at such special meeting shall be confined to the purposes
stated in the notice.
Section 5. At least a majority of the Directors shall be
present at each meeting of the Board of Directors in order to constitute
a quorum for the transaction of business. Members of the Board of
Directors shall be deemed present at a meeting of such Board of
Directors if a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each
other is used. The affirmative vote of a majority of the Directors
present at any meeting of the Board of Directors, at which a quorum is
present, shall be had upon any matter coming before said Board in order
to constitute such action the valid action of the Board thereon. In the
absence of a quorum, any two of the Directors present may adjourn any
meeting from time to time until a quorum is had. Notice of any such
adjourned meeting need not be given.
Section 6. Any action required or permitted to be taken at
any meeting of the Board of Directors or any Committee thereof may be
taken without a meeting, if a written consent to such action is signed
by all members of the Board of Directors or of such Committee, as the
case may be, and such written consent or consents are filed with the
minutes of proceedings of the Board of Directors or Committee.
Section 7. The Board of Directors may hold its meetings at
such places within or without the State of Florida as it from time to
time may determine or as shall be specified or fixed in the respective
notice or waivers of notice thereof.
Section 8. All vacancies in the Board of Directors, whether
caused by death, resignation, removal or otherwise, shall be filled by a
majority vote of the remaining Directors.
Section 9. Any Director may resign at any time by giving
written notice to the President or to the Secretary. The resignation of
any Director shall take effect at the time specified in such notice;
and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 10. Any Director may be removed at any time, with or
without cause, by a vote of the holders of a majority of the stock
present, in person or by proxy, at any special meeting of the
stockholders called for that purpose.
Section 11. The Directors may appoint from their number, one
or more Committees, including an Executive Committee consisting of the
President and one or more other members of the Board, except that the
President shall not serve on an Audit Committee. Any Committee may hold
meetings at such place as may be agreed upon by the members thereof. The
president or any members of any Committee may call a meeting upon ten
days' notice, given in person or by mail, telegram or telephone. Any
meeting of any Committee shall be a legal meeting without notice if all
the members shall be present thereat or if written waiver thereof shall
have been given either before, at or after such meeting. Members of any
such Committee shall be deemed present at a meeting of such Committee if
a conference telephone, or similar communications equipment by means of
which all persons participating in the meeting can hear each other is
used. A majority of a Committee shall constitute a quorum and in any
case the affirmative vote of a majority of the entire Committee shall be
necessary to adopt any resolution. The Committee may make its own rules
of procedure but shall keep regular minutes of its proceedings and shall
report the same to the Board of Directors at the next Directors' meeting
held thereafter.
During the intervals between meetings of the Board of
Directors, the Executive Committee, if appointed hereunder, may have and
shall exercise all the powers of the Board of Directors in the
management of the affairs, business and property of the corporation, in
such manner as the Executive Committee shall deem for the best interests
of the corporation in all cases in which specific directions shall not
have been given by the Board of Directors. The Executive Committee shall
not have power to fill vacancies in said Committee or in the Board of
Directors or to make or amend the By-Laws of the corporation.
Section 12. The Board of Directors, irrespective of any
personal interest of any of its members, may establish reasonable
compensation of all directors for services to the corporation as
directors, officers, or otherwise, or may delegate such authority to a
Committee.
ARTICLE IV.
Officers of the Corporation.
Section 1. The officers of the corporation shall be a
President, such number of Vice Presidents as the Board of Directors from
time to time may determine, a Secretary, a Treasurer, and such Assistant
Secretaries and Assistant Treasurers and such other subordinate officers
as the Board from time to time may elect or appoint. All officers
elected or appointed by the Board shall hold their respective offices
only at and during the pleasure of the Board of Directors, and may be
removed at any time with or without cause, and notwithstanding the
contract rights, if any, of the removed officer. Removal of an officer
shall be without prejudice to any contract rights pursuant to a written
employment contract or agreement entered into between the corporation
and any such officer pursuant to authorization of the Board of
Directors.
Section 2. Any person may hold two or more offices, except
that the President shall not be also the Secretary or Assistant
Secretary, but in no case shall one person sign a single instrument of
any kind in more than one capacity. None of the officers except the
President need be a member of the Board of Directors.
Section 3. The President shall be the chief executive officer
of the corporation. He or she shall preside at all meetings of the
stockholders and directors, shall have active and general management of
the business of the corporation, and shall see that all orders and
resolutions of the Board are carried into effect. He or she shall be
ex-officio a member of all standing Committees except the audit
Committee, and shall have the general powers and duties of supervision
and management usually vested in the office of president of a
corporation. The President also shall appoint and discharge all
subordinate agents and employees and fix their salaries, subject to
review by the Board of Directors, and shall designate the duties they
are to perform.
Section 4. The Vice President or Vice Presidents, if such
shall be elected, shall perform such duties as may be assigned by the
Board of Directors or by the President.
Section 5. The Secretary shall keep the minutes of the
meetings of the Board of Directors and the minutes of the meetings of
the stockholders. He or she shall attend to the giving and serving of
all notices of the corporation. He or she shall have charge of the stock
certificate books and such other books and papers as the Board may
direct, and shall perform all the duties incidental to his office.
Section 6. The Treasurer shall have the care and custody of
all of the funds and securities of the corporation and shall deposit the
same in the name of the corporation in such banks or depositaries as the
Board of Directors may from time to time select.
Section 7. The other officers of the corporation shall
perform such duties as may be assigned by the Board of Directors or by
the President.
Section 8. The Board of Directors, by resolution, may require
any or all of the officers of the Corporation to give bonds in favor of
the corporation, with sufficient surety or sureties, and in such amounts
as the Board of Directors may fix, conditioned for the faithful
performance of the duties of their respective offices.
ARTICLE V.
Stock.
Section 1. The certificates for shares of the capital stock
of the corporation shall be in such form as shall be approved by the
Board of Directors. The shares of stock of the corporation shall be
transferable only on the books of the corporation by the holder thereof
in person or by his attorney, upon surrender for cancellation of the
certificate or certificates, with an assignment and power of transfer
endorsed thereon or attached thereto duly executed, and with such proof
of authenticity of the signature as the corporation or its agents
reasonably may require.
Section 2. All stock certificates shall be signed by the
President or a Vice President, and the Secretary or an Assistant
Secretary, or the Treasurer or an Assistant Treasurer, and shall bear
the seal of the company, which seal may be facsimile, engraved or
printed. Where such certificate is signed by a transfer agent or an
assistant transfer agent, other than the corporation itself, or by
transfer clerk acting on behalf of the corporation and a registrar, the
signature of any of the officers named above may be facsimile. In case
any officer who signed, or whose facsimile signature has been used on
any certificate, shall cease to be such officer for any reason before
the certificate has been delivered by the corporation, such certificate
may nevertheless be issued and delivered by the corporation as though
the person who signed it or whose facsimile signature has been used
thereon had not ceased to be such officer of the corporation.
Section 3. No certificate for shares of stock in the
corporation shall be issued in place of any certificate alleged to have
been lost, stolen or destroyed, except upon production to the
corporation or its agents of satisfactory evidence of such loss, theft
or destruction, and upon delivery to the corporation of a bond of
indemnity in such amount and upon such terms and secured by such
security as the Board of Directors in its discretion may require.
ARTICLE VI.
Execution of Contracts - Fiscal Year.
Section 1. All checks, drafts, notes, bonds, contracts and
other instruments shall be signed by such officers as may be designated
from time to time by resolution of the Board of Directors.
Section 2. The fiscal year of the corporation shall be the 12
month period ending on December 31.
ARTICLE VII.
Notices.
Section 1. Whenever the provisions of a statute, or the
Articles of Incorporation or any of these By-Laws require or permit
notice to be given to any Director, officer or stockholder, it shall not
be construed to require personal notice, but any such notice may be
given in writing by depositing the same in a post office or letter box
in a post-paid sealed wrapper, or by delivering the same to a telegraph
company for transmission by wire, the cost thereof being prepaid, in
either case addressed as the same appears on the books of the
corporation, and the time when the same shall be so mailed or delivered
to the telegraph company shall be deemed to be the time of the giving of
such notice.
Section 2. Any stockholder or Director may waive in writing
or by telegraph any notice required or permitted to be given under any
provisions of any statute or of the Articles of Incorporation or of
these By-laws, either before, at or after the meeting or other event of
which notice is so provided. All stockholders or Directors present at
any meeting shall be deemed to have waived any and all notice thereof.
ARTICLE VIII.
Reimbursement and Indemnification of
Directors and Officers
The corporation shall indemnify and hold harmless each person
who shall serve at any time after September 22, 1993 as a Director or
officer of the corporation from and against any and all claims and
liabilities to which such person shall or may become subject by reason
of his or her having heretofore or hereafter been a Director or officer
of the corporation, or by reason of any action alleged to have been
heretofore or hereafter taken or omitted by him or her as such Director
or officer, and shall reimburse each such person for all legal and other
expenses reasonably incurred by him or her in connection with any such
claim or liability, except that no such person shall be indemnified
against or be reimbursed for any expense incurred in connection with any
claim or liability which shall be finally adjudged to have arisen out of
his or her own gross and willful negligence or misconduct. The rights
accruing to any person under the foregoing provisions of this Article
shall not exclude any other right to which he or she lawfully may be
entitled, nor shall anything herein contained restrict the right of the
corporation to indemnify or reimburse such person in any proper case
even though not specifically provided for herein. The corporation, its
Directors, officers, employees and agents, shall be fully protected in
taking any action or making any payment under this Article, or in
refusing so to do, in reliance upon the advice of counsel.
ARTICLE IX.
Amendment of By-Laws
The Board of Directors, by a vote of a majority of those
present at any meeting at which a quorum is present, may alter, amend or
repeal these By-Laws or any of them, and any By-Law or alteration,
amendment or repeal so made may be further amended, altered or repealed
by the Board of Directors as herein provided, or by the stockholders
entitled to vote at any regular or special meeting of the stockholders.
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement"), dated as of January
18, 1996, between AMERICAN BODY ARMOR & EQUIPMENT, INC., a Florida
corporation (the "Company"); and JONATHAN M. SPILLER (the "Employee").
W I T N E S S E T H :
WHEREAS, the Company desires to employ the Employee and to be
assured of his services on the terms and conditions hereinafter set
forth; and
WHEREAS, the Employee is willing to accept such employment on
such terms and conditions; and
WHEREAS, the parties desire to terminate the Employment
Agreement, dated as of January 1, 1994, between the Company and the
Employee, as amended (the "1994 Employment Agreement"), and to have the
terms and provisions of this Agreement govern their respective rights
and obligations.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, the Company and the Employee
hereby agree as follows:
1. Termination of 1994 Employment Agreement; Employment. The
1994 Employment Agreement is hereby terminated in all respects and shall
be of no further force or effect, and from and after the date hereof,
the terms and provisions of this Agreement shall govern the respective
rights and obligations of the parties hereto with respect to the subject
matter hereof. The Company hereby employs the Employee as the President
and Chief Executive Officer of the Company, and the Employee accepts
such employment, upon the terms and subject to the conditions set forth
in this Agreement.
2. Term. The term of this Agreement shall be three (3) years,
commencing on the date hereof and ending on January 17, 1999 (the
"Initial Term"), subject to earlier termination pursuant to the
provisions of Section 10 herein. The employment of the Employee shall
automatically continue hereunder following the Initial Term for
successive one (1) year periods (the "Renewal Terms") (on terms to be
mutually agreed upon by the parties), unless the Company or the Employee
gives notice to the other at least sixty (60) days prior to the end of
the Initial Term of its or his election to terminate this Agreement at
the end of the Initial Term. Subsequent to the Initial Term, the
employment of the Employee hereunder may be terminated at the end of any
Renewal Term by delivery by either the Employee or the Company of a
written notice to the other party at least sixty (60) days prior to the
end of any Renewal Term.
3. Duties. During the term of this Agreement, the Employee
shall serve as the President and Chief Executive Officer of the Company
and shall perform all duties commensurate with his position and as may
be assigned to him by the Board of Directors of the Company. The
Employee shall devote his full business time and energies to the
business and affairs of the Company and shall use his best efforts,
skills and abilities to promote the interests of the Company and to
diligently and competently perform the duties of his position.
4. Compensation and Benefits. (a) During the term of this
Agreement, the Company shall pay to the Employee, and the Employee shall
accept from the Company, as compensation for the performance of services
under this Agreement and the Employee's observance and performance of
all of the provisions hereof, a salary of $160,000 per year (the "Base
Compensation"). The Employee's salary shall be payable in accordance
with the normal payroll practices of the Company and shall be subject to
withholding for applicable taxes and other amounts.
(b) During the term of this Agreement, the Employee shall
be entitled to participate in or benefit from, in accordance with the
eligibility and other provisions thereof, the Company's medical
insurance and other fringe benefit plans or policies as the Company may
make available to, or have in effect for, its personnel with
commensurate duties from time to time. The Company retains the right to
terminate or alter any such plans or policies from time to time. The
Employee shall also be entitled to four weeks paid vacation each year,
sick leave and other similar benefits in accordance with policies of the
Company from time to time in effect for personnel with commensurate
duties.
(c) The Employee shall also be entitled to
participate, at the sole and absolute discretion of the Compensation Committee
of the Board of Directors of the Company, in the Company's incentive stock
option plan. Such participation shall be based upon, among other things, the
Employee's performance and the Company's performance. In addition, the Employee
may be entitled, during the term of this Agreement, to receive such additional
options, at such exercise prices and other terms, and/or to participate in such
other bonus plans, whether during the term of this Agreement or upon termination
pursuant to Section 10 hereof, as the Compensation Committee of the Board of
Directors of the Company may, in its sole and absolute discretion, determine.
(d) The Company shall provide the Employee with a leased
automobile for the Employee's business use. In addition, the Company shall
reimburse the Employee for the Employee's dues at Marsh Landing Country Club.
5. Reimbursement of Business Expenses. During the term of this
Agreement, upon submission of proper invoices, receipts or other
supporting documentation satisfactory to the Company and in specific
accordance with such guidelines as may be established from time to time
by the Company's Board of Directors, the Employee shall be reimbursed by
the Company for all reasonable business expenses actually and
necessarily incurred by the Employee on behalf of the Company in
connection with the performance of services under this Agreement.
6. Representation of Employee. The Employee represents and
warrants that he is not party to, or bound by, any agreement or
commitment, or subject to any restriction, including but not limited to
agreements related to previous employment containing confidentiality or
noncompete covenants, which in the future may have a possibility of
adversely affecting the business of the Company or the performance by
the Employee of his duties under this Agreement. The Employee further
covenants and agrees that except as herein provided, he will not sell,
transfer, assign, pledge or otherwise dispose of any shares of capital
stock or securities convertible into capital stock of the Company until
January 18, 1999; provided, however, that the restrictions with respect
to such dispositions as set forth in this sentence shall not apply to
the Employee in the event of a "change in control" of the Company. For
purposes hereof, a "change in control" of the Company shall be deemed to
have occurred in the event that: (i) (A) Warren B. Kanders ("Kanders")
is no longer Chairman of the Board of Directors of the Company, or (B)
Kanders and entities controlled by Kanders do not, through the ownership
of voting securities or otherwise, control the election of the Board of
Directors of the Company, and (ii) Kanders and entities controlled by
Kanders own in the aggregate less than 25% of the issued and outstanding
shares of common stock of the Company. In addition, in the event that
this Agreement is terminated by the Company without cause prior to the
expiration of the Initial Term, or upon a change in control, a pro-rata
number of options, if any, for the purchase of common stock of the
Company granted to the Employee shall vest on the date of such
termination or change in control, as the case may be, based upon the
number of months elapsed under this Agreement in relation to the total
number of months during the Initial Term of this Agreement, and the
balance of such options shall no longer be exercisable by the Employee,
and shall terminate.
7. Confidentiality. For purposes of this Section 7, all
references to the Company shall be deemed to include the Company's
affiliates and subsidiaries.
(a) Confidential Information. The Employee acknowledges that
as a result of his employment with the Company, the Employee has and will
continue to have knowledge of, and access to, proprietary and confidential
information of the Company, including, without limitation, research and
development plans and results, software, data bases, technology, inventions,
trade secrets, technical information, know-how, plans, specifications, methods
of operations, product information, product availability, pricing information,
financial, business and marketing information and plans and the identity of
customers and suppliers (collectively, the "Confidential Information"), and
that such information, even though it may be contributed, developed or
acquired by the Employee, constitutes valuable, special and unique assets of
the Company developed at great expense which are the exclusive property of the
Company. Accordingly, the Employee shall not, at any time, either during or
subsequent to the term of this Agreement, use, reveal, report, publish,
transfer or otherwise disclose to any person, corporation or other entity, any
of the Confidential Information without the prior written consent of the
Company, except to responsible officers and employees of the Company and other
responsible persons who are in a contractual or fiduciary relationship with
the Company and who have a need for such information for purposes in the best
interests of the Company, and except for such information which is or becomes
of general public knowledge from authorized sources other than the Employee.
The Employee acknowledges that the Company would not enter into this Agreement
without the assurance that all such confidential and proprietary information
will be used for the exclusive benefit of the Company.
(b) Return of Confidential Information. Upon the
termination of Employee's employment with the Company, the Employee shall
promptly deliver to the Company all drawings, manuals, letters, notes,
notebooks, reports and copies thereof and all other materials relating to the
Company's business, including without limitation any materials incorporating
Confidential Information, which are in the Employee's possession or control.
8. Noncompetition. For purposes of this Section 8, all
references to the Company shall be deemed to include the Company's
affiliates and subsidiaries. The Employee will not utilize his special
knowledge of the business of the Company and his relationships with
customers, suppliers of the Company and others to compete with the
Company. During the term of this Agreement and for a period of one (1)
year after the expiration or termination of this Agreement, the Employee
shall not engage, directly or indirectly or have an interest, directly
or indirectly, anywhere in the United States of America or any other
geographic area where the Company does business or in which its products
are marketed, alone or in association with others, as principal,
officer, agent, employee, director, partner, stockholder or lender
(except with respect to his employment by the Company), or through the
investment of capital, lending of money or property, rendering of
services or otherwise, in any business competitive with or substantially
similar to that engaged in by the Company, including without limitation,
the development, manufacture and distribution of bullet and projectile
resistant garments, including bullet resistant and sharp instrument
penetration resistant vests, bullet resistant blankets, bomb disposal
suits and helmets, bomb protection and disposal equipment and load
bearing vests, and other ballistic protection and security equipment,
including explosive ordnance device (EOD) handling and detection
equipment, EOD suppression and disposal equipment, helmets, face masks,
shields, hard armor ballistic plates, customized armor for vehicles and
other custom armored products, and related products, or any other
business engaged in by the Company at the time in question for which the
Emmployee is directly or indirectly responsible (it being understood
hereby, that the ownership by the Employee of 5% or less of the stock of
any company listed on a national securities exchange shall not be deemed
a violation of this Section 8); provided, however, that in the event the
Employee is terminated without cause, then the provisions of this
Section 8 will continue to be applicable to the Employee, except that,
in the event that Base Compensation is not paid to the Employee pursuant
to Section 10(d) hereof, then the restrictions on sale of the Company's
securities contained in Section 6 hereof shall not be applicable to the
extent necessary to allow the Employee to sell a sufficient number of
shares of common stock of the Company as will result in gross proceeds
to the Employee equal to his Base Compensation during such one (1) year
period as described in this Section 8, less any salary, commissions,
wages or other income received by the Employee from any other source
during such period. During the same period, the Employee shall not, and
shall not permit any of his employees, agents or others under his
control to, directly or indirectly, on behalf of himself or any other
person, (i) call upon, accept business from, or solicit the business of
any person who is, or who had been at any time during the preceding two
years, a customer of the Company or any successor to the business of the
Company, or otherwise divert or attempt to divert any business from the
Company or any such successor, or (ii) directly or indirectly recruit or
otherwise solicit or induce any person who is an employee of, or
otherwise engaged by, the Company or any successor to the business of
the Company to terminate his or her employment or other relationship
with the Company or such successor, or hire any person who has left the
employ of the Company or any such successor during the preceding two
years. The Employee shall not at any time, directly or indirectly, use
or purport to authorize any person to use any name, mark, logo, trade
dress or other identifying words or images which are the same as or
similar to those used at any time by the Company in connection with any
product or service, whether or not such use would be in a business
competitive with that of the Company. Any breach or violation by the
Employee of the provisions of this Section 8 shall toll the running of
any time periods set forth in this Section 8 for the duration of any
such breach or violation.
9. Remedies. The restrictions set forth in Sections 7 and 8
are considered by the parties to be fair and reasonable. The Employee
acknowledges that the restrictions contained in Section 7 and 8 will not
prevent him from earning a livelihood. The Employee further acknowledges
that the Company would be irreparably harmed and that monetary damages
would not provide an adequate remedy in the event of a breach of the
provisions of Sections 7 or 8. Accordingly, the Employee agrees that, in
addition to any other remedies available to the Company, the Company
shall be entitled to injunctive and other equitable relief to secure the
enforcement of these provisions, and shall be entitled to receive
reimbursement from the Employee for all attorneys' fees and expenses
incurred by the Company in enforcing these provisions. If any provisions
of Sections 7, 8, or 9 relating to the time period, scope of activities
or geographic area of restrictions is declared by a court of competent
jurisdiction to exceed the maximum permissible time period, scope of
activities or geographic area, the maximum time period, scope of
activities or geographic area, as the case may be, shall be reduced to
the maximum which such court deems enforceable. If any provisions of
Sections 7, 8, or 9 other than those described in the preceding sentence
are adjudicated to be invalid or unenforceable, the invalid or
unenforceable provisions shall be deemed amended (with respect only to
the jurisdiction in which such adjudication is made) in such manner as
to render them enforceable and to effectuate as nearly as possible the
original intentions and agreement of the parties.
10. Termination. This Agreement may be terminated prior to
the expiration of the term set forth in Section 2 upon the occurrence of
any of the events set forth in, and subject to the terms of, this
Section 10.
(a) Death. This Agreement will terminate
immediately and automatically upon the death of the Employee. In the event that
this Agreement is terminated upon the death of the Employee, then a pro-rata
number of options for the purchase of common stock of the Company granted to the
Employee, based upon the number of months elapsed under this Agreement in
relation to the total number of months during the Initial Term of this
Agreement, shall accrue to the estate of the Employee (the "Accrued Death
Options"), and such Accrued Death Options shall vest on January 18, 1999, and
the balance of any options shall no longer be exercisable by the Employee or his
estate, and shall terminate.
(b) Disability. This Agreement may be terminated
at the Company's option, immediately upon notice to the Employee, if the
Employee shall suffer a permanent disability. For the purposes of this
Agreement, the term "permanent disability" shall mean the Employee's inability
to perform his duties under this Agreement for a period of 90 consecutive days
or for an aggregate of 120 days, whether or not consecutive, in any twelve month
period, due to illness, accident or any other physical or mental incapacity, as
solely determined by the Board of Directors of the Company. In the event that
this Agreement is terminated upon the permanent disability of the Employee, then
a pro-rata number of options for the purchase of common stock of the Company
granted to the Employee, based upon the number of months elapsed under this
Agreement in relation to the total number of months during the Initial Term of
this Agreement, shall accrue to the Employee (the "Accrued Disability
Options"), and such Accrued Disability Options shall vest on January 18, 1999,
and the balance of any options shall no longer be exercisable by the Employee,
and shall terminate.
(c) Cause. This Agreement may be terminated at the
Company's option, immediately upon notice to the Employee, upon: (i) breach by
the Employee of any material provision of this Agreement; (ii) gross negligence
or willful misconduct of the Employee in connection with the performance of his
duties under this Agreement, or Employee's willful refusal to perform any of his
duties or responsibilities required pursuant to this Agreement; (iii) fraud,
criminal conduct, dishonesty or embezzlement by the Employee; or (iv) Employee's
misappropriation for personal use of assets or business opportunities of the
Company.
(d) Without Cause. This Agreement may be
terminated at any time by the Company without cause upon giving the Employee
three (3) days prior written notice of such termination. In such event, the
Employee shall be entitled to receive his Base Compensation in accordance with
the provisions of Section 4(a) hereof throughout the balance of the term of this
Agreement, reduced, dollar for dollar, with any salary, commissions, wages or
other income received by him from any other source during such period.
11. Miscellaneous.
(a) Survival. The provisions of Sections 7, 8, and
9 shall survive the termination of this Agreement.
(b) Entire Agreement. This Agreement sets forth
the entire understanding of the parties and merges and supersedes any prior or
contemporaneous agreements between the parties pertaining to the subject matter
hereof.
(c) Modification. This Agreement may not be
modified or terminated orally, and no modification, termination or attempted
waiver of any of the provisions hereof shall be binding unless in writing and
signed by the party against whom the same is sought to be enforced; provided,
however, that Employee's compensation may be increased at any time by the
Company without in any way affecting any of the other terms and conditions of
this Agreement, which in all other respects shall remain in full force and
effect.
(d) Waiver. Failure of a party to enforce one or
more of the provisions of this Agreement or to require at any time
performance of any of the obligations hereof shall not be construed
to be a waiver of such provisions by such party nor to in any way affect the
validity of this Agreement or such party's right thereafter to enforce any
provision of this Agreement, nor to preclude such party from taking any other
action at any time which it would legally be entitled to take.
(e) Successors and Assigns. Neither party shall
have the right to assign this Agreement, or any rights or obligations hereunder,
without the consent of the other party; provided, however, that upon the sale of
all or substantially all of the assets, business and goodwill of the Company to
another company, or upon the merger or consolidation of the Company with another
company, this Agreement shall inure to the benefit of, and be binding upon, both
Employee and the company purchasing such assets, business and goodwill, or
surviving such merger or consolidation, as the case may be, in the same manner
and to the same extent as though such other company were the Company; and
provided, further, that the Company shall have the right to assign this
Agreement to any affiliate or subsidiary of the Company. Subject to the
foregoing, this Agreement shall inure to the benefit of, and be binding upon,
the parties hereto and their legal representatives, heirs, successors and
assigns.
(f) Communications. All notices, requests, demands
and other communications under this Agreement shall be in writing and shall be
deemed to have been given at the time personally delivered or when mailed in any
United States post office enclosed in a registered or certified postage prepaid
envelope and addressed to the addresses set forth below, or to such other
address as any party may specify by notice to the other party; provided,
however, that any notice of change of address shall be effective only upon
receipt.
To the Company: American Body Armor &
Equipment, Inc.
85 Nassau Place
Yulee, Florida 32097
Attn.: Warren B. Kanders
With a copy to: Kane Kessler, P.C.
1350 Avenue of the Americas
New York, New York 10019
Attn.: Robert L. Lawrence, Esq.
To the Employee: Jonathan M. Spiller
128 Lamplighter Lane
Ponte Vedra Beach, FL 32082
(g) Severability. If any provision of this
Agreement is held to be invalid or unenforceable by a court of competent
jurisdiction, such invalidity or unenforceability shall not affect the validity
and enforceability of the other provisions of this Agreement and the provision
held to be invalid or unenforceable shall be enforced as nearly as possible
according to its original terms and intent to eliminate such invalidity or
unenforceability.
(h) Jurisdiction; Venue. This Agreement shall be
subject to the exclusive jurisdiction of the courts of New York County, New
York. Any breach of any provision of this Agreement shall be deemed to be a
breach occurring in the State of New York by virtue of a failure to perform an
act required to be performed in the State of New York, and the parties
irrevocably and expressly agree to submit to the jurisdiction of the courts of
New York County, New York for the purpose of resolving any disputes among them
relating to this Agreement or the transactions contemplated by this Agreement.
(i) Governing Law. This Agreement is made and
executed and shall be governed by the laws of the State of New York, without
regard to the conflicts of law principles thereof.
IN WITNESS WHEREOF, each of the parties hereto have duly
executed this Agreement as of the date set forth above.
AMERICAN BODY ARMOR & EQUIPMENT, INC.
By:/s/Richard T. Bistrong
------------------------------------
Name: Richard T. Bistrong
Title: Vice President-
Sales Marketing
/s/Jonathan M. Spiller
-----------------------------------
Jonathan M. Spiller
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement"), dated as of January 18, 1996,
between AMERICAN BODY ARMOR & EQUIPMENT, INC., a Florida corporation (the
"Company"); and J. MICHAEL ELLIOTT (the "Employee").
W I T N E S S E T H :
WHEREAS, the Company desires to employ the Employee and to be assured
of his services on the terms and conditions hereinafter set forth; and
WHEREAS, the Employee is willing to accept such employment on such
terms and conditions; and
WHEREAS, the parties desire to terminate the Employment Agreement,
dated as of January 1, 1994, between the Company and the Employee, as amended
(the "1994 Employment Agreement"), and to have the terms and provisions of
this Agreement govern their respective rights and obligations.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, the Company and the Employee hereby
agree as follows:
1. Termination of 1994 Employment Agreement; Employment. The 1994
Employment Agreement is hereby terminated in all respects and shall be of no
further force or effect, and from and after the date hereof, the terms and
provisions of this Agreement shall govern the respective rights and obligations
of the parties hereto with respect to the subject matter hereof. The Company
hereby employs the Employee as a Vice President of the Company, and the Employee
accepts such employment, upon the terms and subject to the conditions set forth
in this Agreement.
2. Term. The term of this Agreement shall be one (1) year, commencing
on the date hereof and ending on January 17, 1997 (the "Initial Term"),
subject to earlier termination pursuant to the provisions of Section 10
herein. At the Company's option, the employment of the Employee shall
automatically continue hereunder following the Initial Term for a two (2)
year period (the "First Renewal Term") on the same terms and conditions as
herein set forth; provided, that if the Company elects not to renew this
Agreement at the expiration of the Initial Term, the Company shall give
the Employee written notice at least thirty (30) days prior to the
expiration of the Initial Term of its election not to renew this
Agreement. The employment of the Employee shall automatically continue
hereunder following the First Renewal Term for successive one (1) year
periods (the "Further Renewal Terms") (on terms to be mutually agreed
upon by the parties), unless the Company or the Employee gives notice to
the other at least sixty (60) days prior to the end of the First Renewal
Term of its or his election to terminate this Agreement at the end of
the First Renewal Term. Subsequent to the First Renewal Term, the
employment of the Employee hereunder may be terminated at the end of any
Further Renewal Term by delivery by either the Employee or the Company
of a written notice to the other party at least sixty (60) days prior to
the end of any Further Renewal Term.
3. Duties. During the term of this Agreement, the Employee shall
serve as the a Vice President of the Company and shall perform all duties
commensurate with his position and as may be assigned to him by an officer of
the Company. The Employee shall devote his full business time and energies to
the business and affairs of the Company and shall use his best efforts, skills
and abilities to promote the interests of the Company and to diligently and
competently perform the duties of his position.
4. Compensation and Benefits. (a) During the term of this Agreement,
the Company shall pay to the Employee, and the Employee shall accept from the
Company, as compensation for the performance of services under this Agreement
and the Employee's observance and performance of all of the provisions hereof,
a salary of $100,000 per year (the "Base Compensation"). The Employee's salary
shall be payable in accordance with the normal payroll practices of the
Company and shall be subject to withholding for applicable taxes and other
amounts.
(b) During the term of this Agreement, the Employee shall be entitled
to participate in or benefit from, in accordance with the eligibility and
other provisions thereof, the Company's medical insurance and other fringe
benefit plans or policies as the Company may make available to, or have in
effect for, its personnel with commensurate duties from time to time. The
Company retains the right to terminate or alter any such plans or policies
from time to time. The Employee shall also be entitled to four weeks paid
vacation each year, sick leave and other similar benefits in accordance with
policies of the Company from time to time in effect for personnel with
commensurate duties.
(c) The Employee shall be entitled to receive non-qualified options
to purchase 8,500 shares of the Company's common stock and incentive stock
options to purchase 11,500 shares of the Company's common stock, in each case
at an exercise price of $.97 per share of common stock. Such options shall be
exercisable for a period of eight (8) years from the date of grant, and all
of such options shall vest on January 18, 1999; provided, however, that in
the event that the Company elects not to renew this Agreement upon expiration
of the Initial Term, or in the event that this Agreement is terminated by the
Company without cause prior to the expiration of the Initial Term or the
First Renewal Term, or a "change in control" (as hereinafter defined) occurs,
then a pro-rata number of such options shall vest on the date of such
termination, non-renewal or change in control, as the case may be, based
upon the number of months elapsed under this Agreement in relation to the
total number of months during the Initial Term and the First Renewal Term of
this Agreement, and the balance of such options shall no longer be exercisable
by the Employee, and shall terminate; and, provided, further, that upon a
breach by the Employee of the provisions of Sections 7 or 8 hereof, the
Employee shall have no right to exercise any such options granted hereunder
or otherwise held by the Employee. The Employee shall also be entitled to
participate, at the sole and absolute discretion of the Compensation
Committee of the Board of Directors of the Company, in the Company's
incentive stock option plan. Such participation shall be based upon, among
other things, the Employee's performance and the Company's performance. In
addition, the Employee may be entitled, during the term of this Agreement, to
receive such additional options, at such exercise prices and other terms,
and/or to participate in such other bonus plans, whether during the term of this
Agreement or upon termination pursuant to Section 10 hereof, as the
Compensation Committee of the Board of Directors of the Company may, in
its sole and absolute discretion, determine.
(d) The Company shall reimburse the Employee for gasoline, routine
maintenance and certain other reasonable automobile expenses (to be determined
by the Company) in connection with the Employee's business use of his personal
automobile. In addition, the Company shall reimburse the Employee for the
Employee's monthly dock rental at Pablo Creek Marina.
5. Reimbursement of Business Expenses. During the term of this
Agreement, upon submission of proper invoices, receipts or other supporting
documentation satisfactory to the Company and in specific accordance with such
guidelines as may be established from time to time by the Company's Board of
Directors, the Employee shall be reimbursed by the Company for all reasonable
business expenses actually and necessarily incurred by the Employee on behalf of
the Company in connection with the performance of services under this Agreement.
6. Representation of Employee. The Employee represents and warrants
that he is not party to, or bound by, any agreement or commitment, or
subject to any restriction, including but not limited to agreements
related to previous employment containing confidentiality or noncompete
covenants, which in the future may have a possibility of adversely
affecting the business of the Company or the performance by the Employee
of his duties under this Agreement. The Employee further covenants and
agrees that except as herein provided, he will not sell, transfer,
assign, pledge or otherwise dispose of any shares of capital stock or
securities convertible into capital stock of the Company until (i)
January 18, 1997, in the case that the Company chooses not to renew this
Agreement for the First Renewal Term, or (ii) January 18, 1999 if the
Employee chooses not to renew this Agreement, or if this Agreement is
renewed for the First Renewal Term; provided, however, that the
restrictions with respect to such dispositions as set forth in this
sentence shall not apply to the Employee in the event of a "change in
control" of the Company. For purposes hereof, a "change in control" of
the Company shall be deemed to have occurred in the event that: (i) (A)
Warren B. Kanders ("Kanders") is no longer Chairman of the Board of
Directors of the Company, or (B) Kanders and entities controlled by
Kanders do not, through the ownership of voting securities or otherwise,
control the election of the Board of Directors of the Company, and (ii)
Kanders and entities controlled by Kanders own in the aggregate less
than 25% of the issued and outstanding shares of common stock of the Company.
7. Confidentiality. For purposes of this Section 7, all references
to the Company shall be deemed to include the Company's affiliates and
subsidiaries.
(a) Confidential Information. The Employee acknowledges that as a
result of his employment with the Company, the Employee has and will
continue to have knowledge of, and access to, proprietary and
confidential information of the Company, including, without limitation,
research and development plans and results, software, data bases,
technology, inventions, trade secrets, technical information, know-how,
plans, specifications, methods of operations, product information,
product availability, pricing information, financial, business and
marketing information and plans and the identity of customers and
suppliers (collectively, the "Confidential Information"), and that such
information, even though it may be contributed, developed or acquired by
the Employee, constitutes valuable, special and unique assets of the
Company developed at great expense which are the exclusive property of
the Company. Accordingly, the Employee shall not, at any time, either
during or subsequent to the term of this Agreement, use, reveal, report,
publish, transfer or otherwise disclose to any person, corporation or
other entity, any of the Confidential Information without the prior
written consent of the Company, except to responsible officers and
employees of the Company and other responsible persons who are in a
contractual or fiduciary relationship with the Company and who have a
need for such information for purposes in the best interests of the
Company, and except for such information which is or becomes of general
public knowledge from authorized sources other than the Employee. The
Employee acknowledges that the Company would not enter into this
Agreement without the assurance that all such confidential and proprietary
information will be used for the exclusive benefit of the Company.
(b) Return of Confidential Information. Upon the termination of
Employee's employment with the Company, the Employee shall promptly
deliver to the Company all drawings, manuals, letters, notes, notebooks,
reports and copies thereof and all other materials relating to the
Company's business, including without limitation any materials
incorporating Confidential Information, which are in the Employee's
possession or control.
8. Noncompetition. For purposes of this Section 8, all references to
the Company shall be deemed to include the Company's affiliates and
subsidiaries. The Employee will not utilize his special knowledge of the
business of the Company and his relationships with customers, suppliers of the
Company and others to compete with the Company. During the term of this
Agreement and for a period of six (6) months (in the case of expiration or
termination after the Initial Term), or one (1) year (in the case of expiration
or termination after the First Renewal Term or any Further Renewal Term) after
the expiration or termination of this Agreement, the Employee shall not engage,
directly or indirectly or have an interest, directly or indirectly, anywhere in
the United States of America or any other geographic area where the Company does
business or in which its products are marketed, alone or in association with
others, as principal, officer, agent, employee, director, partner, stockholder
or lender (except with respect to his employment by the Company), or through the
investment of capital, lending of money or property, rendering of services or
otherwise, in any business competitive with or substantially similar to that
engaged in by the Company, including without limitation, the development,
manufacture and distribution of bullet and projectile resistant garments,
including bullet resistant and sharp instrument penetration resistant vests,
bullet resistant blankets, bomb disposal suits and helmets, bomb protection and
disposal equipment and load bearing vests, and other ballistic protection and
security equipment, including explosive ordnance device (EOD) handling and
detection equipment, EOD suppression and disposal equipment, helmets, face
masks, shields, hard armor ballistic plates, customized armor for vehicles and
other custom armored products, and related products, or any other business
engaged in by the Company at the time in question for which the Employee is
directly or indirectly responsible (it being understood hereby, that the
ownership by the Employee of 5% or less of the stock of any company listed on a
national securities exchange shall not be deemed a violation of this Section 8);
provided, however, that in the event the Employee is terminated without cause,
then the provisions of this Section 8 will continue to be applicable to the
Employee, except that, in the event that Base Compensation is not paid to the
Employee pursuant to Section 10(d) hereof, then the restrictions on sale of the
Company's securities contained in Section 6 hereof shall not be applicable to
the extent necessary to allow the Employee to sell a sufficient number of shares
of common stock of the Company as will result in gross proceeds to the Employee
equal to his Base Compensation during such six (6) month or one (1) year period,
as the case may be, as described in this Section 8, less any salary,
commissions, wages or other income received by the Employee from any other
source during such period. In the event that this Agreement is not renewed by
the Company after the Initial Term, then the Company shall, upon each payroll
period of the Company, for a period of six (6) months or, if sooner, the
date on which gross proceeds of $50,000 are realized by the Employee from
a sale of his shares of common stock of the Company as hereinafter described,
loan to the Employee an amount equal to his Base Compensation for such
period, bearing interest at a rate per annum equal to the base rate as
established by Citibank, N.A., and the Employee shall repay such loan
from the proceeds of the sale of his shares of common stock of the
Company. The restrictions on sale of the Company's securities contained
in Section 6 hereof shall not be applicable to the extent necessary to
permit the sale hereinabove described. During the same six (6) month or
one (1) year non-competition period, as the case may be, the Employee
shall not, and shall not permit any of his employees, agents or others
under his control to, directly or indirectly, on behalf of himself or
any other person, (i) call upon, accept business from, or solicit the
business of any person who is, or who had been at any time during the
preceding two years, a customer of the Company or any successor to the
business of the Company, or otherwise divert or attempt to divert any
business from the Company or any such successor, or (ii) directly or
indirectly recruit or otherwise solicit or induce any person who is an
employee of, or otherwise engaged by, the Company or any successor to
the business of the Company to terminate his or her employment or other
relationship with the Company or such successor, or hire any person who
has left the employ of the Company or any such successor during the
preceding two years. The Employee shall not at any time, directly or
indirectly, use or purport to authorize any person to use any name,
mark, logo, trade dress or other identifying words or images which are
the same as or similar to those used at any time by the Company in
connection with any product or service, whether or not such use would be
in a business competitive with that of the Company. Any breach or
violation by the Employee of the provisions of this Section 8 shall toll
the running of any time periods set forth in this Section 8 for the
duration of any such breach or violation.
9. Remedies. The restrictions set forth in Sections 7 and 8 are
considered by the parties to be fair and reasonable. The Employee acknowledges
that the restrictions contained in Section 7 and 8 will not prevent him from
earning a livelihood. The Employee further acknowledges that the Company would
be irreparably harmed and that monetary damages would not provide an adequate
remedy in the event of a breach of the provisions of Sections 7 or 8.
Accordingly, the Employee agrees that, in addition to any other remedies
available to the Company, the Company shall be entitled to injunctive and other
equitable relief to secure the enforcement of these provisions, and shall be
entitled to receive reimbursement from the Employee for all attorneys' fees and
expenses incurred by the Company in enforcing these provisions. If any
provisions of Sections 7, 8, or 9 relating to the time period, scope of
activities or geographic area of restrictions is declared by a court of
competent jurisdiction to exceed the maximum permissible time period, scope of
activities or geographic area, the maximum time period, scope of activities or
geographic area, as the case may be, shall be reduced to the maximum which such
court deems enforceable. If any provisions of Sections 7, 8, or 9 other than
those described in the preceding sentence are adjudicated to be invalid or
unenforceable, the invalid or unenforceable provisions shall be deemed amended
(with respect only to the jurisdiction in which such adjudication is made) in
such manner as to render them enforceable and to effectuate as nearly as
possible the original intentions and agreement of the parties.
10. Termination. This Agreement may be terminated prior to the
expiration of the term set forth in Section 2 upon the occurrence of any of
the events set forth in, and subject to the terms of, this Section 10.
(a) Death. This Agreement will terminate immediately and
automatically upon the death of the Employee. In the event that this
Agreement is terminated upon the death of the Employee, then a pro-rata
number of options for the purchase of common stock of the Company
granted to the Employee, based upon the number of months elapsed under
this Agreement in relation to the total number of months during the
Initial Term and the First Renewal Term of this Agreement, shall accrue
to the estate of the Employee (the "Accrued Death Options"), and such
Accrued Death Options shall vest on January 18, 1999, and the balance of
any options shall no longer be exercisable by the Employee or his
estate, and shall terminate.
(b) Disability. This Agreement may be terminated at the Company's
option, immediately upon notice to the Employee, if the Employee shall suffer
a permanent disability. For the purposes of this Agreement, the term
"permanent disability" shall mean the Employee's inability to perform his
duties under this Agreement for a period of 90 consecutive days or for an
aggregate of 120 days, whether or not consecutive, in any twelve month period,
due to illness, accident or any other physical or mental incapacity, as solely
determined by the Board of Directors of the Company. In the event that this
Agreement is terminated upon the permanent disability of the Employee, then
a pro-rata number of options for the purchase of common stock of the Company
granted to the Employee, based upon the number of months elapsed under this
Agreement in relation to the total number of months during the Initial Term and
the First Renewal Term of this Agreement, shall accrue to the Employee (the
"Accrued Disability Options"), and such Accrued Disability Options shall vest on
January 18, 1999, and the balance of any options shall no longer be exercisable
by the Employee, and shall terminate.
(c) Cause. This Agreement may be terminated at the Company's option,
immediately upon notice to the Employee, upon: (i) breach by the Employee of
any material provision of this Agreement; (ii) gross negligence or willful
misconduct of the Employee in connection with the performance of his duties
under this Agreement, or Employee's willful refusal to perform any of his
duties or responsibilities required pursuant to this Agreement; (iii) fraud,
criminal conduct, dishonesty or embezzlement by the Employee; or (iv)
Employee's misappropriation for personal use of assets or business
opportunities of the Company.
(d) Without Cause. This Agreement may be terminated at any time by
the Company without cause upon giving the Employee three (3) days prior
written notice of such termination. In such event, the Employee shall be
entitled to receive his Base Compensation in accordance with the provisions
of Section 4(a) hereof throughout the balance of the term of this Agreement,
reduced, dollar for dollar, with any salary, commissions, wages or other
income received by him from any other source during such period.
11. Miscellaneous.
(a) Survival. The provisions of Sections 7, 8, and 9 shall survive
the termination of this Agreement.
(b) Entire Agreement. This Agreement sets forth the entire
understanding of the parties and merges and supersedes any prior or
contemporaneous agreements between the parties pertaining to the subject matter
hereof.
(c) Modification. This Agreement may not be modified or terminated
orally, and no modification, termination or attempted waiver of any of the
provisions hereof shall be binding unless in writing and signed by the party
against whom the same is sought to be enforced; provided, however, that
Employee's compensation may be increased at any time by the Company without in
any way affecting any of the other terms and conditions of this Agreement,
which in all other respects shall remain in full force and effect.
(d) Waiver. Failure of a party to enforce one or more of the
provisions of this Agreement or to require at any time performance of any of
the obligations hereof shall not be construed to be a waiver of such
provisions by such party nor to in any way affect the validity of this Agreement
or such party's right thereafter to enforce any provision of this Agreement, nor
to preclude such party from taking any other action at any time which it would
legally be entitled to take.
(e) Successors and Assigns. Neither party shall have the right to
assign this Agreement, or any rights or obligations hereunder, without the
consent of the other party; provided, however, that upon the sale of all or
substantially all of the assets, business and goodwill of the Company to
another company, or upon the merger or consolidation of the Company with
another company, this Agreement shall inure to the benefit of, and be binding
upon, both Employee and the company purchasing such assets, business and
goodwill, or surviving such merger or consolidation, as the case may be, in
the same manner and to the same extent as though such other company were the
Company; and provided, further, that the Company shall have the right to assign
this Agreement to any affiliate or subsidiary of the Company. Subject to the
foregoing, this Agreement shall inure to the benefit of, and be binding upon,
the parties hereto and their legal representatives, heirs, successors and
assigns.
(f) Communications. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been given at the time personally delivered or when mailed in any United
States post office enclosed in a registered or certified postage prepaid
envelope and addressed to the addresses set forth below, or to such other
address as any party may specify by notice to the other party; provided,
however, that any notice of change of address shall be effective only upon
receipt.
To the Company: American Body Armor &
Equipment, Inc.
85 Nassau Place
Yulee, Florida 32097
Attn.: Jonathan M. Spiller
With a copy to: Kane Kessler, P.C.
1350 Avenue of the Americas
New York, New York 10019
Attn.: Robert L. Lawrence, Esq.
To the Employee: J. Michael Elliott
4025 Shoal Creek Lane E.
Jacksonville, FL 32225
(g) Severability. If any provision of this Agreement is held to be
invalid or unenforceable by a court of competent jurisdiction, such invalidity
or unenforceability shall not affect the validity and enforceability of the
other provisions of this Agreement and the provision held to be invalid or
unenforceable shall be enforced as nearly as possible according to its
original terms and intent to eliminate such invalidity or unenforceability.
(h) Jurisdiction; Venue. This Agreement shall be subject to the
exclusive jurisdiction of the courts of New York County, New York. Any breach
of any provision of this Agreement shall be deemed to be a breach occurring in
the State of New York by virtue of a failure to perform an act required to be
performed in the State of New York, and the parties irrevocably and expressly
agree to submit to the jurisdiction of the courts of New York County, New York
for the purpose of resolving any disputes among them relating to this
Agreement or the transactions contemplated by this Agreement.
(i) Governing Law. This Agreement is made and executed and shall be
governed by the laws of the State of New York, without regard to the
conflicts of law principles thereof.
IN WITNESS WHEREOF, each of the parties hereto have duly executed this
Agreement as of the date set forth above.
AMERICAN BODY ARMOR & EQUIPMENT, INC.
By:/s/ Jonathan M. Spiller
Name: Jonathan M. Spiller
Title: President and
Chief Executive Officer
/s/ J. Michael Elliott
J. Michael Elliott
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement"), dated as of January 18, 1996,
between AMERICAN BODY ARMOR & EQUIPMENT, INC., a Florida corporation (the
"Company"); and RICHARD T. BISTRONG (the "Employee").
W I T N E S S E T H :
WHEREAS, the Company desires to employ the Employee and to be assured
of his services on the terms and conditions hereinafter set forth; and
WHEREAS, the Employee is willing to accept such employment on such
terms and conditions; and
WHEREAS, the parties desire to terminate the Employment Agreement,
dated as of February 6, 1995, between the Company and the Employee (the "1995
Employment Agreement") and to have the terms and provisions of this Agreement
govern their respective rights and obligations.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, the Company and the Employee hereby
agree as follows:
1. Termination of 1995 Employment Agreement; Employment. The 1995
Employment Agreement is hereby terminated in all respects and shall be of no
further force or effect, and from and after the date hereof, the terms and
provisions of this Agreement shall govern the respective rights and obligations
of the parties hereto with respect to the subject matter hereof. The Company
hereby employs the Employee as the Vice President -- Sales and Marketing of the
Company, and the Employee accepts such employment, upon the terms and subject to
the conditions set forth in this Agreement.
2. Term. The term of this Agreement shall be three (3) years,
commencing on the date hereof and ending on January 17, 1999 (the "Initial
Term"), subject to earlier termination pursuant to the provisions of Section 10
herein. The employment of the Employee shall automatically continue hereunder
following the Initial Term for successive one (1) year periods (the "Renewal
Terms") (on terms to be mutually agreed upon by the parties), unless the Company
or the Employee gives notice to the other at least sixty (60) days prior to the
end of the Initial Term of its or his election to terminate this Agreement at
the end of the Initial Term. Subsequent to the Initial Term, the employment of
the Employee hereunder may be terminated at the end of any Renewal Term by
delivery by either the Employee or the Company of a written notice to the
other party at least sixty (60) days prior to the end of any Renewal Term.
3. Duties. During the term of this Agreement, the Employee shall serve
as the Vice President -- Sales and Marketing of the Company and shall perform
all duties commensurate with his position and as may be assigned to him by an
officer of the Company. The Employee shall devote his full business time and
energies to the business and affairs of the Company and shall use his best
efforts, skills and abilities to promote the interests of the Company and to
diligently and competently perform the duties of his position.
4. Compensation and Benefits. (a) During the term of this Agreement,
the Company shall pay to the Employee, and the Employee shall accept from the
Company, as compensation for the performance of services under this Agreement
and the Employee's observance and performance of all of the provisions hereof,
a salary of $120,000 per year (the "Base Compensation"). The Employee's salary
shall be payable in accordance with the normal payroll practices of the
Company and shall be subject to withholding for applicable taxes and other
amounts.
(b) During the term of this Agreement, the Employee shall be entitled
to participate in or benefit from, in accordance with the eligibility and
other provisions thereof, the Company's medical insurance and other fringe
benefit plans or policies as the Company may make available to, or have in
effect for, its personnel with commensurate duties from time to time. The
Company retains the right to terminate or alter any such plans or policies
from time to time. The Employee shall also be entitled to four weeks paid
vacation each year, sick leave and other similar benefits in accordance with
policies of the Company from time to time in effect for personnel with
commensurate duties.
(c) The Employee shall be entitled to receive non-qualified options to
purchase 21,250 shares of the Company's common stock and incentive stock
options to purchase 28,750 shares of the Company's common stock, in each case
at an exercise price of $.97 per share of common stock. Such options shall be
exercisable for a period of eight (8) years from the date of grant, and all of
such options shall vest on January 18, 1999; provided, however, that upon a
breach by the Employee of the provisions of Sections 7 or 8 hereof, the
Employee shall have no right to exercise any such options granted hereunder or
otherwise held by the Employee; and provided, further, that in the event that
this Agreement is terminated by the Company without cause prior to the
expiration of the Initial Term, or a "change in control" (as hereinafter
defined) occurs, then a pro-rata number of such options shall vest on the date
of such termination or change in control, as the case may be, based upon the
number of months elapsed under this Agreement in relation to the total number of
months during the Initial Term of this Agreement, and the balance of such
options shall no longer be exercisable by the Employee, and shall terminate.
The Employee shall also be entitled to participate, at the sole and absolute
discretion of the Compensation Committee of the Board of Directors of the
Company, in the Company's incentive stock option plan. Such participation
shall be based upon, among other things, the Employee's performance and the
Company's performance. In addition, the Employee may be entitled, during the
term of this Agreement, to receive such additional options, at such exercise
prices and other terms, and/or to participate in such other bonus plans,
whether during the term of this Agreement or upon termination pursuant to
Section 10 hereof, as the Compensation Committee of the Board of Directors of
the Company may, in its sole and absolute discretion, determine.
(d) The Company shall provide the Employee an automobile allowance of
$600 per month.
5. Reimbursement of Business Expenses. During the term of this
Agreement, upon submission of proper invoices, receipts or other supporting
documentation satisfactory to the Company and in specific accordance with such
guidelines as may be established from time to time by the Company's Board of
Directors, the Employee shall be reimbursed by the Company for all reasonable
business expenses actually and necessarily incurred by the Employee on behalf of
the Company in connection with the performance of services under this Agreement.
6. Representation of Employee. The Employee represents and warrants
that he is not party to, or bound by, any agreement or commitment, or subject
to any restriction, including but not limited to agreements related to
previous employment containing confidentiality or noncompete covenants, which in
the future may have a possibility of adversely affecting the business of the
Company or the performance by the Employee of his duties under this Agreement.
The Employee further covenants and agrees that except as herein provided, he
will not sell, transfer, assign, pledge or otherwise dispose of any shares of
capital stock or securities convertible into capital stock of the Company until
January 18, 1999; provided, however, that the restrictions with respect to such
dispositions as set forth in this sentence shall not apply to the Employee in
the event of a "change in control" of the Company. For purposes hereof, a
"change in control" of the Company shall be deemed to have occurred in the event
that: (i) (A) Warren B. Kanders ("Kanders") is no longer Chairman of the Board
of Directors of the Company, or (B) Kanders and entities controlled by Kanders
do not, through the ownership of voting securities or otherwise, control the
election of the Board of Directors of the Company, and (ii) Kanders and entities
controlled by Kanders own in the aggregate less than 25% of the issued and
outstanding shares of common stock of the Company.
7. Confidentiality. For purposes of this Section 7, all references
to the Company shall be deemed to include the Company's affiliates and
subsidiaries.
(a) Confidential Information. The Employee acknowledges that as a
result of his employment with the Company, the Employee has and will continue
to have knowledge of, and access to, proprietary and confidential information
of the Company, including, without limitation, research and development plans
and results, software, data bases, technology, inventions, trade secrets,
technical information, know-how, plans, specifications, methods of operations,
product information, product availability, pricing information, financial,
business and marketing information and plans and the identity of customers and
suppliers (collectively, the "Confidential Information"), and that such
information, even though it may be contributed, developed or acquired by the
Employee, constitutes valuable, special and unique assets of the Company
developed at great expense which are the exclusive property of the Company.
Accordingly, the Employee shall not, at any time, either during or subsequent to
the term of this Agreement, use, reveal, report, publish, transfer or otherwise
disclose to any person, corporation or other entity, any of the Confidential
Information without the prior written consent of the Company, except to
responsible officers and employees of the Company and other responsible persons
who are in a contractual or fiduciary relationship with the Company and who have
a need for such information for purposes in the best interests of the Company,
and except for such information which is or becomes of general public knowledge
from authorized sources other than the Employee. The Employee acknowledges that
the Company would not enter into this Agreement without the assurance that all
such confidential and proprietary information will be used for the exclusive
benefit of the Company.
(b) Return of Confidential Information. Upon the termination of
Employee's employment with the Company, the Employee shall promptly deliver to
the Company all drawings, manuals, letters, notes, notebooks, reports and
copies thereof and all other materials relating to the Company's business,
including without limitation any materials incorporating Confidential
Information, which are in the Employee's possession or control.
8. Noncompetition. For purposes of this Section 8, all references to
the Company shall be deemed to include the Company's affiliates and
subsidiaries. The Employee will not utilize his special knowledge of the
business of the Company and his relationships with customers, suppliers of the
Company and others to compete with the Company. During the term of this
Agreement and for a period of one (1) year after the expiration or termination
of this Agreement, the Employee shall not engage, directly or indirectly or have
an interest, directly or indirectly, anywhere in the United States of America or
any other geographic area where the Company does business or in which its
products are marketed, alone or in association with others, as principal,
officer, agent, employee, director, partner, stockholder or lender (except
with respect to his employment by the Company), or through the investment of
capital, lending of money or property, rendering of services or otherwise, in
any business competitive with or substantially similar to that engaged in by
the Company, including without limitation, the development, manufacture and
distribution of bullet and projectile resistant garments, including bullet
resistant and sharp instrument penetration resistant vests, bullet resistant
blankets, bomb disposal suits and helmets, bomb protection and disposal
equipment and load bearing vests, and other ballistic protection and security
equipment, including explosive ordnance device (EOD) handling and detection
equipment, EOD suppression and disposal equipment, helmets, face masks,
shields, hard armor ballistic plates, customized armor for vehicles and other
custom armored products, and related products, or any other business engaged
in by the Company at the time in question for which the Employee is directly
or indirectly responsible (it being understood hereby, that the ownership by
the Employee of 5% or less of the stock of any company listed on a national
securities exchange shall not be deemed a violation of this Section 8);
provided, however, that in the event the Employee is terminated without cause,
then the provisions of this Section 8 will continue to be applicable to the
Employee, except that, in the event that Base Compensation is not paid to the
Employee pursuant to Section 10(d) hereof, then the restrictions on sale of
the Company's securities contained in Section 6 hereof shall not be applicable
to the extent necessary to allow the Employee to sell a sufficient number of
shares of common stock of the Company as will result in gross proceeds to the
Employee equal to his Base Compensation during such one (1) year period as
described in this Section 8, less any salary, commissions, wages or other
income received by the Employee from any other source during such period. During
the same period, the Employee shall not, and shall not permit any of his
employees, agents or others under his control to, directly or indirectly, on
behalf of himself or any other person, (i) call upon, accept business from, or
solicit the business of any person who is, or who had been at any time during
the preceding two years, a customer of the Company or any successor to the
business of the Company, or otherwise divert or attempt to divert any business
from the Company or any such successor, or (ii) directly or indirectly recruit
or otherwise solicit or induce any person who is an employee of, or otherwise
engaged by, the Company or any successor to the business of the Company to
terminate his or her employment or other relationship with the Company or such
successor, or hire any person who has left the employ of the Company or any such
successor during the preceding two years. The Employee shall not at any time,
directly or indirectly, use or purport to authorize any person to use any name,
mark, logo, trade dress or other identifying words or images which are the same
as or similar to those used at any time by the Company in connection with any
product or service, whether or not such use would be in a business competitive
with that of the Company. Any breach or violation by the Employee of the
provisions of this Section 8 shall toll the running of any time periods set
forth in this Section 8 for the duration of any such breach or violation.
9. Remedies. The restrictions set forth in Sections 7 and 8 are
considered by the parties to be fair and reasonable. The Employee acknowledges
that the restrictions contained in Section 7 and 8 will not prevent him from
earning a livelihood. The Employee further acknowledges that the Company would
be irreparably harmed and that monetary damages would not provide an adequate
remedy in the event of a breach of the provisions of Sections 7 or 8.
Accordingly, the Employee agrees that, in addition to any other remedies
available to the Company, the Company shall be entitled to injunctive and other
equitable relief to secure the enforcement of these provisions, and shall be
entitled to receive reimbursement from the Employee for all attorneys' fees and
expenses incurred by the Company in enforcing these provisions. If any
provisions of Sections 7, 8, or 9 relating to the time period, scope of
activities or geographic area of restrictions is declared by a court of
competent jurisdiction to exceed the maximum permissible time period, scope of
activities or geographic area, the maximum time period, scope of activities or
geographic area, as the case may be, shall be reduced to the maximum which such
court deems enforceable. If any provisions of Sections 7, 8, or 9 other than
those described in the preceding sentence are adjudicated to be invalid or
unenforceable, the invalid or unenforceable provisions shall be deemed amended
(with respect only to the jurisdiction in which such adjudication is made) in
such manner as to render them enforceable and to effectuate as nearly as
possible the original intentions and agreement of the parties.
10. Termination. This Agreement may be terminated prior to the
expiration of the term set forth in Section 2 upon the occurrence of any of
the events set forth in, and subject to the terms of, this Section 10.
(a) Death. This Agreement will terminate immediately and
automatically upon the death of the Employee. In the event that this
Agreement is terminated upon the death of the Employee, then a pro-rata number
of options for the purchase of common stock of the Company granted to the
Employee, based upon the number of months elapsed under this Agreement in
relation to the total number of months during the Initial Term of this
Agreement, shall accrue to the estate of the Employee (the "Accrued Death
Options"), and such Accrued Death Options shall vest on January 18, 1999, and
the balance of any options shall no longer be exercisable by the Employee or his
estate, and shall terminate.
(b) Disability. This Agreement may be terminated at the Company's
option, immediately upon notice to the Employee, if the Employee shall suffer
a permanent disability. For the purposes of this Agreement, the term
"permanent disability" shall mean the Employee's inability to perform his
duties under this Agreement for a period of 90 consecutive days or for an
aggregate of 120 days, whether or not consecutive, in any twelve month period,
due to illness, accident or any other physical or mental incapacity, as solely
determined by the Board of Directors of the Company. In the event that this
Agreement is terminated upon the permanent disability of the Employee, then a
pro-rata number of options for the purchase of common stock of the Company
granted to the Employee, based upon the number of months elapsed under this
Agreement in relation to the total number of months during the Initial Term
of this Agreement, shall accrue to the Employee (the "Accrued Disability
Options"), and such Accrued Disability Options shall vest on January 18, 1999,
and the balance of any options shall no longer be exercisable by the Employee,
and shall terminate.
(c) Cause. This Agreement may be terminated at the Company's option,
immediately upon notice to the Employee, upon: (i) breach by the Employee of
any material provision of this Agreement; (ii) gross negligence or willful
misconduct of the Employee in connection with the performance of his duties
under this Agreement, or Employee's willful refusal to perform any of his
duties or responsibilities required pursuant to this Agreement; (iii) fraud,
criminal conduct, dishonesty or embezzlement by the Employee; or (iv) Employee's
misappropriation for personal use of assets or business opportunities of the
Company.
(d) Without Cause. This Agreement may be terminated at any time by
the Company without cause upon giving the Employee three (3) days prior
written notice of such termination. In such event, the Employee shall be
entitled to receive his Base Compensation in accordance with the provisions of
Section 4(a) hereof throughout the balance of the term of this Agreement,
reduced, dollar for dollar, with any salary, commissions, wages or other
income received by him from any other source during such period.
11. Miscellaneous.
(a) Survival. The provisions of Sections 7, 8, and 9 shall survive
the termination of this Agreement.
(b) Entire Agreement. This Agreement sets forth the entire
understanding of the parties and merges and supersedes any prior or
contemporaneous agreements between the parties pertaining to the subject matter
hereof.
(c) Modification. This Agreement may not be modified or terminated
orally, and no modification, termination or attempted waiver of any of the
provisions hereof shall be binding unless in writing and signed by the party
against whom the same is sought to be enforced; provided, however, that
Employee's compensation may be increased at any time by the Company without
in any way affecting any of the other terms and conditions of this Agreement,
which in all other respects shall remain in full force and effect.
(d) Waiver. Failure of a party to enforce one or more of the
provisions of this Agreement or to require at any time performance of any of
the obligations hereof shall not be construed to be a waiver of such
provisions by such party nor to in any way affect the validity of this Agreement
or such party's right thereafter to enforce any provision of this Agreement, nor
to preclude such party from taking any other action at any time which it would
legally be entitled to take.
(e) Successors and Assigns. Neither party shall have the right to
assign this Agreement, or any rights or obligations hereunder, without the
consent of the other party; provided, however, that upon the sale of all or
substantially all of the assets, business and goodwill of the Company to
another company, or upon the merger or consolidation of the Company with another
company, this Agreement shall inure to the benefit of, and be binding upon, both
Employee and the company purchasing such assets, business and goodwill, or
surviving such merger or consolidation, as the case may be, in the same manner
and to the same extent as though such other company were the Company; and
provided, further, that the Company shall have the right to assign this
Agreement to any affiliate or subsidiary of the Company. Subject to the
foregoing, this Agreement shall inure to the benefit of, and be binding upon,
the parties hereto and their legal representatives, heirs, successors and
assigns.
(f) Communications. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been given at the time personally delivered or when mailed in any United
States post office enclosed in a registered or certified postage prepaid
envelope and addressed to the addresses set forth below, or to such other
address as any party may specify by notice to the other party; provided,
however, that any notice of change of address shall be effective only upon
receipt.
To the Company: American Body Armor &
Equipment, Inc.
85 Nassau Place
Yulee, Florida 32097
Attn.: Jonathan M. Spiller
With a copy to: Kane Kessler, P.C.
1350 Avenue of the Americas
New York, New York 10019
Attn.: Robert L. Lawrence, Esq.
To the Employee: Richard T. Bistrong
4503 Old Lantern Court
Ponte Vedra Beach, FL 32082
(g) Severability. If any provision of this Agreement is held to be
invalid or unenforceable by a court of competent jurisdiction, such invalidity
or unenforceability shall not affect the validity and enforceability of the
other provisions of this Agreement and the provision held to be invalid or
unenforceable shall be enforced as nearly as possible according to its
original terms and intent to eliminate such invalidity or unenforceability.
(h) Jurisdiction; Venue. This Agreement shall be subject to the
exclusive jurisdiction of the courts of New York County, New York. Any breach
of any provision of this Agreement shall be deemed to be a breach occurring in
the State of New York by virtue of a failure to perform an act required to be
performed in the State of New York, and the parties irrevocably and expressly
agree to submit to the jurisdiction of the courts of New York County, New York
for the purpose of resolving any disputes among them relating to this
Agreement or the transactions contemplated by this Agreement.
(i) Governing Law. This Agreement is made and executed and shall be
governed by the laws of the State of New York, without regard to the conflicts
of law principles thereof.
IN WITNESS WHEREOF, each of the parties hereto have duly executed this
Agreement as of the date set forth above.
AMERICAN BODY ARMOR & EQUIPMENT, INC.
By: /s/Jonathan M. Spiller
Name: Jonathan M. Spiller
Title: President and
Chief Executive Officer
/s/ Richard T. Bistrong
Richard T. Bistrong
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<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
company's financial statements for the years ended December 31, 1995 and 1994
and independent auditor's report
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 272972
<SECURITIES> 0
<RECEIVABLES> 2419754
<ALLOWANCES> 100000
<INVENTORY> 1101935
<CURRENT-ASSETS> 3981661
<PP&E> 744809
<DEPRECIATION> 270450
<TOTAL-ASSETS> 8160461
<CURRENT-LIABILITIES> 3186291
<BONDS> 27550
0
1214292
<COMMON> 152734
<OTHER-SE> 3579594
<TOTAL-LIABILITY-AND-EQUITY> 8160461
<SALES> 11741367
<TOTAL-REVENUES> 11741367
<CGS> 7443080
<TOTAL-COSTS> 1935964
<OTHER-EXPENSES> 1485129
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 280891
<INCOME-PRETAX> 823803
<INCOME-TAX> 303650
<INCOME-CONTINUING> 520153
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 520153
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
