SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 10549
FORM 10-K/A No. 1
(Mark One)
{ X } ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1995
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to ______
Commission file number - 019893
-------------------------
ALPHA PRO TECH, LTD.
(exact name of registrant as specified in its charter)
----------
Delaware 63-1009183
- ------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.
incorporation or organization
Suite 112, 60 Centurian Drive
Markham, Ontario L3R 9R2
- ------------------------------- -----------------------------------
Address of principal offices Zip Code
Registrant's telephone number including area code: 905-479-0654
Securities registered pursuant to Section 12(g) of the Act:
Common Shares Par Value $.01 Per Share
--------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 |_|
The number of registrants's Common Shares outstanding as of March 25, 1996 was
19,921,336.
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 25, 1996 was $36,724,983 based on the average bid and
asked price on that date.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 or Regulation S-K (Sec. 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. |X|
<PAGE>
This filing on Form 10-K/A No. 1 amends the Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, of Alpha Pro Tech, Ltd. (the "Company").
The undersigned Registrant hereby amends the following items, financial
statements, exhibits or other portions of its report on Form 10-K for the fiscal
year ended December 31, 1995, (the "Form 10-K"), as set forth below:
The following Items are hereby amended and restated to read in their entirety as
they appear in this amendment.
Part III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The executive officers and directors of the Company are listed in the
table below and brief summaries of their business experience and certain other
information with respect to them are set forth thereafter:
Name Age Director or Executive
---- --- ---------------------
Officer Since Position with the Company
------------- -------------------------
Sheldon Hoffman 58 July 11, 1989 CEO & Director of the
Company and Alpha Pro
Tech, Inc.
Al Millar 54 July 11, 1989 President & Director of
the Company and Alpha
Pro Tech, Inc.
Robert Isaly 67 November 15, 1989 Director
John Ritota 45 December 18, 1991 Director
Donald E. Bennett, Jr. 55 June 23, 1994 Director and President of
the Company's Apparel
Division
Lloyd Hoffman 35 July 1, 1993 Vice President and
Controller
SHELDON HOFFMAN is a chartered accountant and has been a director and chief
executive officer of the Company since July 11, 1989. Mr. Hoffman founded and
was president of Absco Aerosols Ltd., a custom manufacturer of aerosols and
liquids, from 1967 to 1985 until that company was sold to CCL Industries Inc.
("CCL"), a manufacturer of aerosol and liquid products and containers. Mr.
Hoffman joined CCL from 1986 to 1987 as director of business development and
then joined CCW Systems Ltd., a water filter manufacturer, as president and
chief executive officer. Mr. Hoffman devotes full time to the Company's
operations.
ALEXANDER W. MILLAR has been a director of the Company since July 11, 1989 and
president since August 1, 1989. Mr. Millar has spent over 20 years as a
professional in sales and marketing including international marketing. Mr.
Millar, in various sales capacities, including vice-president of sales, was
associated with Mr. Hoffman at Absco Aerosols Ltd. from 1971 to 1985, when the
business was sold to CCL. He then joined CCL as manager of business development
for North America. In March, 1988, he formed Milmed International Distributors
Limited to distribute the Company's products internationally. In 1989 Milmed
gave up its rights to distribute these products internationally at which time
Milmed ceased operations. Mr. Millar devotes full time to the Company's
operations.
<PAGE>
ROBERT ISALY has been a director of the Company since November 20, 1989. He was
the owner of a nursery, Florida Bedding Plants Inc. from 1986 to 1992 and is
currently an independent businessman.
JOHN RITOTA has been a director of the Company since December 18, 1991 and since
1981 to the present time has been operating a general dentistry practice, Ritota
and Ritota, with his brother in Del Ray Beach, Florida.
DONALD E. BENNETT, JR. joined the Company on March 24, 1994 as President of its
newly formed Apparel Division which was established to acquire the assets of
Disposable Medical Products, Inc. ("DMPI"), a manufacturer of medical apparel
items including bouffant caps, shoe covers, gowns, coveralls and lab coats. Mr.
Bennett owned and operated DMPI for approximately twenty years prior to the
Company's acquisition of its assets. (See "Certain Relationships and Related
Transactions").
LLOYD HOFFMAN has been employed by the Company starting November 15, 1991 in the
capacity of accountant and since early 1995 in the capacity of Vice President
and Controller. From 1987 to 1991, Mr. Hoffman was a shareholder and was in
charge of finance and administration at Software Concept Inc., a developer of
software for association and magazine publishers.
There are no family relationships between the above persons other than
Lloyd Hoffman who is the son of Sheldon Hoffman.
Settlement with British Columbia Securities Commission
On November 10, 1995, Sheldon Hoffman a Director and CEO of the Company and
Alexander Millar, a Director and President of the Company settled all
outstanding matters pending before the British Columbia Securities
Commission (the "BCSC"), which were commenced in March 1992 by the British
Columbia Superintendent of Brokers ("Superintendent"). See "Recent
Developments-Matters Before the British Columbia Securities Commission."
The settlement provides that as to each of Messrs. Hoffman and Millar: a
Cease Trade Order as to sales by them of the Company's securities in
British Columbia shall remain in effect for 2 years; each shall be
prohibited from becoming or acting as a director or officer of any British
Columbia reporting issuer, other than the Company, until such time as they
have successfully completed a course of study satisfactory to the
Superintendent concerning the duties of directors and officers of reporting
issuers; full payment to the BCSC shall have been made of $29,000 as to
Hoffman and $14,500 as to Millar; and the Superintendent consents to their
acting in the capacity of a director or officer of a British Columbia
reporting issuer. All matters pending as to Robert Isaly, a Director of the
Company, were dropped. The payments to the BCSC are being made monthly over
a two year period ending in December, 1997. Messrs. Millar and Hoffman are
enrolled in a course of study scheduled to begin and be completed during
the month of March, 1997.
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information as of May 10, 1996 with
respect to shares of Common Stock of the Company beneficially owned by each
director of the Company, each executive officer of the Company, by all officers
and directors as a group, and by persons known to the Company to be beneficial
owners of more than 5% of the Company's Stock.
Directors, Executive Officers Number of Shares
and 5% Shareholders Beneficially Owned Percent of Class
- ------------------------------ ------------------ ----------------
Cede & Co. 10,348,384* 46.8%
Box 20 Bowling Green Sta.
New York, NY
U.S.A. 10004
Al Millar, President & Director 1,341,611 (1)(8) 6.1%
423 Herridge Circle
Newmarket, Ontario
L3Y 7H7
Canada
Sheldon Hoffman, CEO 1,049,297 (2)(8) 4.7%
and Director
Robert H. Isaly, Director 615,613 (3) 2.8%
John Ritota, Director 140,194 (4) 0.6%
Lloyd Hoffman, VP & Controller 273,000 (5) 1.2%
Donald E. Bennett, Jr., Pres., 163,334 (6) .7%
Apparel Division of Company
James C. Rothstein** 450,000 (7) 2.0%
All Directors and Officers 4,033,049 18.2%
as a Group (7 persons)
* This company is nominee for beneficial owners of these shares whose
identity is unknown to the Company.
** Less than 1%
<PAGE>
(1) Includes 300,000 options currently exercisable at $0.75 per share, expiring
October 27, 1998; 200,000 currently exercisable options at $1.34 per share,
expiring December 21, 2000; 46,840 currently exercisable Warrants at $1.03
per share expiring January 31, 1997; and includes 44,198 shares and
currently exercisable options to purchase 35,000 shares at $0.75 per share
owned beneficially by Mr. Millar's wife as to which Mr. Millar denies
beneficial ownership.*
(2) Includes 300,000 currently exercisable options at $0.75 per share, expiring
October 27, 1998; 200,000 options currently exercisable at $1.34 per share,
expiring December 21, 2000; Warrants to purchase 48,544 shares at $1.03 per
share expiring January 31, 1997; and includes 42,821 shares owned
beneficially by Mr. Hoffman's wife, as to which Mr. Hoffman denies
beneficial ownership. Does not include 420,051 shares held by Hoffman
Family Trust, as to which Mr. Hoffman denies beneficial ownership. The
beneficiaries of the Hoffman Family Trust are Mr. Hoffman's wife and their
two children. Mr. Hoffman does not have the power to vote or dispose of the
shares held by the Trust.*
(3) Includes 141,523 shares owned beneficially by Mr. Isaly's wife, as to which
Mr. Isaly denies beneficial ownership; 108,000 currently exercisable
options at $0.75 per share, expiring October 27, 1998; and 50,000 options
currently exercisable at $1.34 per share expiring December 21,
2000.*
(4) Includes currently exercisable options to purchase 50,000 shares at $0.75
per share, expiring October 27, 1998; 50,000 currently exercisable options
at $1.34 per share expiring December 21, 2000; and includes 2,000 shares
held by Mr. Ritota's wife as to which Mr. Ritota denies beneficial
ownership.*
(5) Includes 135,000 options currently exercisable at $0.75 per share, expiring
October 27, 1998, 25,000 options currently exercisable at $1.34 per share
expiring December 21, 2000; and 5,000 shares beneficially owned by Mr.
Hoffman's wife, as to which Mr. Hoffman denies beneficial ownership. Mr.
Hoffman disclaims beneficial ownership with respect to any shares of the
Company held in the Hoffman Family Trust (see (2) above), except to the
extent of his pecuniary interest therein. See "Certain Relationships and
Related Transactions". *
(6) Includes 100,000 options currently exercisable at $1.00 per share, 50,000
of which expire on April 29, 1999 and 50,000 of which expire on December
31, 1999; 25,000 currently exercisable options at $2.03 per share, expiring
June 22, 2000; 25,000 options currently exercisable at $1.34 per share,
expiring December 21, 2000; and 6667 Warrants currently exercisable at $.75
per share, expiring March 1, 1999.*
(7) Includes 100,000 options currently exercisable at $0.843 per share expiring
December 31, 2001. See "Management- Employee Arrangements."*
<PAGE>
(8) Pursuant to an escrow agreement made in June 1989 between the National
Trust Company, the Company and certain shareholders of Alpha Pro Tech, Ltd.
(the "Escrow Agreement"), 3,150,000 of the Company's shares are held in
escrow by the National Trust Company, Vancouver, B.C., and are subject to
certain performance criteria before they are released. The Escrow Agreement
provides that the shares will be released to the shareholders, pro rata, on
the basis of one share for each $0.30 of Net Cumulative Cash Flow (as
defined in the Escrow Agreement) in any fiscal period commencing June 1,
1989. The Escrow Agreement was a condition of an agreement relating to the
purchase of certain assets by the Company to commence the manufacturing and
marketing of its products, and a requirement of the Vancouver Stock
Exchange. The shareholders pursuant to the Escrow Agreement included the
following persons named in the foregoing table in the following amounts: Al
Millar as to 675,000 shares; Sheldon Hoffman as to 337,500 shares; Hoffman
Family Trust as to 337,500 shares; Irving Bronfman as to 675,000 shares and
Robert Isaly, on behalf of various persons, as to 450,000 shares. The
balance of 675,000 shares were owned by John Russell and are deemed to be
cancelled.
* A currently exercisable option or warrant is one which is exercisable
within 60 days from the date hereof.
Percentages are based on 20,605,463 Common Shares of the Company outstanding on
December 31, 1996 plus currently exercisable options and warrants for 1,805,051
shares held by directors and officers, for an aggregate total of 22,410,514
shares.
Messrs. Sheldon Hoffman, Al Millar and Lloyd Hoffman are residents of Canada and
Messrs. Ritota, Isaly, Bennett and Scheerer reside in the United States.
Director's Meetings
The Board of Directors of the Company met 4 times during the year ended December
31, 1995. In 1995 the Company had no standing nominating or compensation
committees, these matters being handled by the entire Board of Directors. In
1993, the Board of Directors of the Company formed an Administrative Committee
for the 1993 Stock Option Plan For Directors consisting of Messrs. Al Millar and
Sheldon Hoffman which recommends granting of non-qualified stock options to
non-employee directors. The Board of Directors also has an Audit Committee which
reviews the scope and plan of the annual audit, reviews the audit results and
report thereon, oversees action taken by the Company's independent auditors and
reviews the Company's internal controls. The Company's Audit Committee sits for
a term of one year and a new audit committee is formed each year following the
annual meeting. In 1995 the Audit Committee was composed of Messrs. Hoffman,
Isaly and James C. Rothstein. Mr. Rothstein did not stand for re-election to the
Board at the annual meeting in June, 1996. One meeting of the Audit committee
was held in 1995.
In addition to participation at Board and Committee Meetings, the Company's
directors discharge their responsibilities throughout the year through personal
meetings and other communications, including considerable telephone contact with
the CEO and others regarding matters of interest and concern to the Company.
Compensation of Directors
Directors who are not officers or employees of the Company ("Outside Directors")
are reimbursed for their direct expenses incurred in attending a meeting.
<PAGE>
EXECUTIVE COMPENSATION
Report of Compensation Committee
In 1995 the Company's executive compensation program was administered by the
Board of Directors. The entire Board makes recommendations on two of the three
key components of the Company's executive compensation program, base salary and
contractual incentive awards, and the Outside directors recommend and award the
long-term incentives.
The Company's executive compensation program is structured to help the Company
achieve its business objectives by:
o providing compensation opportunities that will attract, motivate and
retain highly qualified managers and executives.
o linking executives' total compensation to company and individual job
performance.
o providing an appropriate balance between incentives focused on achievement
of annual business plans and longer term incentives tied to increases in
shareholder value.
The Company's executive compensation program is designed to provide competitive
compensation opportunities for all corporate officers. The Company's total
compensation levels fall in the low to middle of the range of rates paid by
other employers of similar size and complexity, although complete comparative
information is not easily obtainable.
Base Salaries
The Company's salary levels are intended to be consistent with competitive
practices and levels of responsibility, with salary increases reflecting
competitive trends, the overall financial performance of the Company, and the
performance of the individual.
Contractual Incentive Awards
Pursuant to the executive compensation program, the Company has contracted to
provide two of its executive employees with profit participation incentive
compensation. Messrs. Millar and Hoffman are each entitled to a cash incentive
participation equal to 5% of the consolidated annual pre-tax profits of the
Company.
<PAGE>
Stock Options
The Company periodically grants incentive and non-qualified stock options to
purchase the Company's Common Stock in order to provide certain Compensation to
key employees of the Company and its subsidiaries with a competitive total
compensation package and to reward them for their contribution to the Company's
short and long-term stock performance. These stock options are designed to align
the employees' interest with those of the shareholders. All options have an
option price that is not less than the fair market value of the stock on the
date of grant. The term of the options and the dates after which they become
exercisable are established by the Board, with respect to incentive stock
options, within the parameters of the 1993 Incentive Stock Option Plan and by
the Administrative Committee with respect to the 1993 Stock Option Plan For
Directors. The Company does not grant stock appreciation rights.
1995 Compensation
The CEO, President and President of the Company's Disposable Apparel Division
are compensated on a salary and pay-for-performance approach. Taken into
consideration are overall Company performance in attaining annual growth in
revenues, the addition or development of new and enhanced products, pretax
earnings, and the achievement of short and long term goals of the Company's
business as established in its five year plan. Messrs. Hoffman and Millar's
salaries were increased in 1995 from its previous level of $100,000 to $115,000.
No contractual incentive awards were paid for 1995.
Compliance with Section 162(m) of the Internal Revenue Code of 1986
Deductibility of Compensation. Effective January 1, 1994, the Internal Revenue
Service under Section 162(m) of the Internal Revenue Code will generally deny
the deduction of compensation paid to the Chairman and the four other highest
paid executive officers required to be named in the Summary Compensation Table
to the extent such compensation exceeds $1 million per executive per year
subject to an exception for compensation that meets certain "performance-based"
requirements. Whether the Section 162(m) limitations with respect to an
executive will be exceeded and whether the Company's tax deductions for
compensation paid in excess of the $1 million limit will be denied will depend
upon the resolution of various factual and legal issues that cannot be resolved
at this time. As to options granted under the 1993 Incentive Stock Option Plan,
the Committee intends to qualify to the extent practicable such options under
the rules governing the Section 162(m) limitation so that compensation
attributable to such options will not be subject to limitation under such rules.
As to other compensation, while it is not expected that compensation to
executives of the Company will exceed the Section 162(m) limitation in the
foreseeable future (and no officer of the Company received compensation in 1994
which resulted under Section 162(m) in the non-deductibility of such
compensation to the Company), various relevant considerations will be reviewed
from time to time, taking into account the interests of the Company and its
Shareholders, in determining whether to endeavor to cause such compensation to
be exempt from the Section 162(m) limitation.
Respectfully submitted,
Sheldon Hoffman, Chief Executive Officer
Al Millar, President
Donald E. Bennett, Jr.
Robert H. Isaly
John Ritota
James C. Rothstein
<PAGE>
Compensation Committee Interlocks and Insider Participation
The Membership of the Compensation Committee is set forth under "Report of the
Compensation Committee". Except with respect to their compensation arrangements,
Mr. Hoffman, CEO and Mr. Millar, President, participated in executive
compensation deliberations and recommendations of the Board of Directors.
Summary Compensation Table
The following table sets forth the aggregate cash and cash equivalent forms of
compensation paid by the Company during the last three fiscal years for services
in all capacities to those persons who were as of December 31, 1995, the Chief
Executive Officer and each of the most highly compensated executive officers (a
total of three persons), to the extent each earned more than $100,000 in salary
and bonus ("Named Officers").
Annual Compensation Long Term Compensation
------------------- ----------------------
Awards
------
Other Shares
Name and Annual Underlying
Principal Compen- Options All Other
Position Year Salary($) Bonus($) sation($) (#) Compensation($)
- -------- ---- --------- -------- --------- -------- ---------------
Shelly Hoffman, 1995 115,000 --- --- 200,000 4,500
CEO 1994 100,000 --- --- --- 4,500
1993 100,000 --- --- 300,000 4,500
Al Millar, 1995 115,000 --- --- 200,000 7,500
Pres. 1994 100,000 --- --- --- 7,500
1993 100,000 --- --- 300,000 7,500
The following table contains information concerning the stock option grants
under the 1993 Incentive Stock Option Plan which were made for the fiscal year
ended December 31, 1994 to the Named Officers.
<PAGE>
OPTION GRANTS FOR FISCAL YEAR 1995
<TABLE>
<CAPTION>
Individual Grants Potential Realizable Value
at Assumed Annual Rates
Options Percent Exercise Expiration of
Granted of Total Price Date Stock Price Appreciation
(#) Options ($/Sh) for
Granted Option Term (2)
to Employees -------------------------
in Fiscal Year 5% 10%
------- -------------- ------ ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Sheldon Hoffman 200,000 25.5% $1.34 12/21/2000 $342,043 $431,617
Al Millar 200,000 25.5% $1.34 12/21/2000 342,043 431,617
Lloyd Hoffman 25,000 3.2% $1.34 12/21/2000 42,755 53,952
Donald E. Bennett, Jr. 50,000 $1.00 04/29/1999
25,000 $2.03 06/22/2000
25,000 15.8% $1.34 12/21/2000 171,341 216,211
</TABLE>
- --------------
(1) Each option was granted under the 1993 Incentive Stock Option Plan. Each
option is immediately exercisable for all the option shares.
(2) There is no assurance provided to any executive officer or any other holder
of the Company's securities that the actual stock price appreciation over
the five-year option term will be the assumed 5% and 10% levels or at any
other defined level. Unless the market price of the Common Stock does in
fact appreciate over the option term, no value will be realized from the
option grants made to the executive officers.
Employment Arrangements
Messrs. Hoffman and Millar receive annual car allowances of $4,500 and $7,500,
respectively.
Messrs. Hoffman and Millar are also entitled to a combined bonus equal to 10% of
the pre-tax net profits of the Company (5% to each). No bonus was earned with
respect to the fiscal years ended December 31, 1993, 1994 or 1995.
Donald E. Bennett, Jr., entered into a three year employment agreement with the
Company in March 1994 as President of the newly formed Apparel Division
providing for an annual salary of $65,000, a $700 per month automobile allowance
and 15% of the Division's net profit before taxes. During 1995 the agreement was
amended to eliminate the 15% of net profits provision and to increase his annual
salary to $100,000.
Stock Option Plans
Incentive Stock Option Plan
The Company has an Incentive Stock Option Plan (the "Plan") for Officers and
other Key Employees with 2,100,000 shares reserved for grant thereunder. The
Plan, which was adopted by the Board of Directors in October, 1993 was approved
by Shareholders at the Annual Meeting in June 1994. The Plan, is administered by
the Board of Directors which selects the employees to whom the options are
granted, determines the number of shares subject to each option, sets the time
or times when the options will be granted, determines the time when the options
may be exercised and establishes the market value of the shares. The Plan
provides that the purchase price under the option shall be at least 100 percent
of the fair market value of the shares of the Company's Common Stock. The
options are not transferrable. There are limitations on the amount of incentive
stock options that an employee can be granted in a single calendar year. The
terms of each option granted under the Plan is determined by the Board of
Directors, but in no event may such term exceed ten years. Between October 28,
1993 and September, 1996, five-
<PAGE>
year, options covering an aggregate of 1,774,000 shares were granted to 31
employees at an average exercise price of $0.95 per share.
Included in those employees to whom options were granted are the following
executive officers:
Name Number of Options Granted
---- -------------------------
Al Millar, President 500,000
Sheldon Hoffman, CEO 500,000
Donald Bennett, President 150,000
Apparel Division
In addition, Donna Millar, an employee of the Company and the wife of Al Millar,
President, was granted an option to purchase 35,000 shares and Lloyd Hoffman, an
officer of the company and the son of Sheldon Hoffman, was granted an option to
purchase 235,000 shares.
Directors Stock Option Plan
The Board of Directors of the Company in October 1993 approved the 1993
Directors Stock Option Plan (the "Directors Plan") covering an aggregate of
600,000 shares of Common Stock. The Board of Directors or a Committee thereof
administers the Directors Plan. Directors of the Company who are not employees
of the Company are eligible to participate in the Plan. Each option granted will
have an exercise price equal to fair market value on the date of grant. As of
December 31, 1995 options covering an aggregate of 400,000 shares have been
granted to 5 directors and two former directors at an average exercise price of
$1.02 per share as follows:
Name Option Date Expiration Date Number of Shares
Robert Isaly 12/21/95 12/21/2000 50,000
Robert Isaly 10/28/93 10/27/98 108,000
John Ritota 12/21/95 12/21/2000 50,000
John Ritota 10/28/93 10/27/98 50,000
Irving Bronfman** 10/28/93 10/27/98 25,000 (1)
Hans Rieder* 10/28/93 10/27/98 42,000 (1)
Robert Gayton** 10/28/93 10/27/98 25,000 (1)
Jim Rothstein*** 06/23/95 06/22/2000 25,000
Jim Rothstein*** 12/22/95 12/21/2000 25,000
The Company does not have any pension, profit sharing or similar plans
established for its employees, other than the bonus payable to Messrs. Hoffman
and Millar described above.
- ---------------
* Retired as a director on June 24, 1994.
** Retired as a director on June 23, 1995.
*** Did not stand for re-election at June 21, 1996 Annual Meeting
(1) These options were exercised
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Interest of Certain Persons in Material Transactions
No director or executive officer of the Company, no proposed nominee for
election as a director of the Company and no associate or affiliate of any of
the foregoing, has any material interest, direct or indirect, in any transaction
since the commencement of the Company's last fiscal year in any proposed
transaction, which, in either case, has materially affected or will materially
affect the Company or any of its subsidiaries, except as follows: James C.
Rothstein, a nominee for election as a director purchased 200,000 Units
consisting of 200,000 shares of the Company's Common Stock together with 2-year
Warrants to purchase an additional 200,000 shares of Common Stock at $.75 per
share in March 1995 at a purchase price of $.75 per Unit for an aggregate of
$150,000, pursuant to a private placement.
Donald E. Bennett, Jr., President of the Company's Apparel Division formed in
1994 and a director of the Company was an owner and officer of Disposable
Medical Products, Inc. ("DMP"). Mr. Bennett was also a purchaser of 6667 Units
in March 1995 pursuant to the private placement referred to above, on the same
terms and conditions for an aggregate of $5000.
On March 25, 1994, the Company, through its wholly owned subsidiary Alpha Pro
Tech, Inc., acquired the assets of DMP and 96.8% of the shares of DMP's wholly
owned subsidiary DPI De Mexico for $336,000 including $32,000 of direct
acquisition costs. As part of the transaction the Company paid $319,000 to DMP.
Mr. Bennett was an officer and one of the previous owners of DMP and as noted
above is now an employee of the Company. Prior to the acquisition, DMP had been
operating as a debtor in possession under Chapter 11 of the Bankruptcy Code.
Under the purchase agreement, the Company operated DMP under a post petition
financing agreement through March 1995. In March 1995, the acquisition was
finalized and all related payments were made. Under the terms of the agreement,
the Company was entitled to the risks and rewards of operating DMP in exchange
for providing DMP with sufficient working capital for continuing operations.
DMP's operations have been consolidated into those of the Company's since April
1, 1994.
The Company was one of several defendants in a lawsuit commenced by John Russell
("Russell"), in the Circuit Court of Jefferson County, Alabama on May 25, 1990
against BFD Inc., BFD Industries Inc., Alexander Millar, Sheldon Hoffman, Irving
Bronfman, 779177 Ontario Inc., and Milmed International Distributors Ltd.,
alleging breach of contract, fraud, conversion, and conspiracy against the
defendants, jointly. Compensatory and punitive damage originally claimed in the
aggregate amount of $25,000,000.00 were increased to $40,000,000 in 1993.
Messrs. Millar, Hoffman are directors and officers of the Company and Mr.
Bronfman was a director and officer of the Company. Russell, the Company and the
other co-defendants settled and compromised all claims involved in the
litigation pursuant to a Settlement Agreement dated August 19, 1994, the terms
of which provided for the payment by the Company of $250,000 to Mr. Russell and
the cancellation of 675,000 of the Company's Common Shares owned by Mr. Russell.
As of January 31, 1996 Messrs. Millar and Sheldon Hoffman loaned $48,245 and
$50,000 respectively to the Company. The terms of the loan provided for a Note
to each of Messrs. Millar and Hoffman, payable on demand, bearing interest at
15% per annum and to be secured by and repaid from the proceeds of an
anticipated income tax refund of approximately $168,000. In addition Messrs.
Millar and Hoffman were issued Warrants to purchase 46,840 and 48,544 shares
respectively of the Company's Common Stock at $1.03 per share, the fair market
value of the Common Stock on the date of issuance of the Warrant. The Warrants
expire on January 31, 1997. Interest on the loans have accrued but have not been
paid.
<PAGE>
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: February 6, 1997 By: /S/ SHELDON HOFFMAN
-------------------
SHELDON HOFFMAN
Chief Executive Officer
