SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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Filed by a Party other than the Registrant [ ]
Check the appropriate box:
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[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Eastco Industrial Safety Corp.
-----------------------------
(Name of Registrant as Specified in Its Charter)
Eastco Industrial Safety Corp.
-----------------------------
(Name of Person(s) Filing Proxy Statement)
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___________________________________________________________
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EASTCO INDUSTRIAL SAFETY CORP.
130 West 10th Street
Huntington Station, New York 11746
________________________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
________________________________________
The annual meeting of the stockholders of Eastco Industrial Safety Corp. will
be held on April 8, 1998 at 3:30 p.m. at the Company's office located at 130
West 10th Street, Huntington Station, New York 11746. The meeting is called
for the following purposes:
ELECTION OF DIRECTORS
The election of four directors to hold office for the term continuing through
the annual meeting following the fiscal year ended June 30, 1999 and until
the election and qualification of their respective successors.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
To ratify the appointment of Cornick, Garber & Sandler, LLP, Certified Public
Accountants, as independent auditors.
TRANSACTION OF OTHER BUSINESS
To transact such other business as may properly come before the meeting or
any adjournments thereof.
Stockholders of record at the close of business on February 27, 1998 are
entitled to receive notice of, and to vote at, this meeting. Sending in your
proxy will not prevent you from attending and voting at the meeting in person
should you later decide to do so.
The accompanying form of proxy is solicited by the Board of Directors of the
Company. Reference is made to the enclosed proxy statement for further
information with respect to the business to be transacted at the meeting.
If you do not expect to attend the meeting in person, please sign and date
the enclosed proxy and mail it promptly in the enclosed envelope.
By order of the Board of Directors.
LAWRENCE DENSEN
President
DATED: February 27, 1998
EASTCO INDUSTRIAL SAFETY CORP.
130 West 10th Street
Huntington Station, New York 11746
__________________________________
PROXY STATEMENT
__________________________________
The proxy statement mailed to stockholders commencing approximately on March
3, 1998 is furnished in connection with the solicitation of proxies by the
Board of Directors of Eastco Industrial Safety Corp. (the "Company") in
connection with the annual meeting of stockholders (the "Annual Meeting") of
the Company to be held April 8, 1998 at 3:30 p.m. at the offices of the
Company located at 130 West 10th Street, Huntington Station, New York 11746.
Proxies will be voted in accordance with directions specified thereon or
otherwise in accordance with the judgment of the persons designated as
proxies. Any proxy on which no direction is specified will be voted in favor
of the action described in the proxy statement.
A proxy in the enclosed form may be revoked at any time, prior to it being
voted at the Annual Meeting, by sending a subsequently dated proxy or by
giving written notice to the Company, in each case to the attention of
Anthony P. Towell, Secretary, at the address set forth above. Stockholders
who attend the meeting may withdraw their proxies at any time before their
shares are voted by voting their shares in person.
The expense of the solicitation of proxies for the meeting, including the
cost of preparing, assembling and mailing the notice, proxy card and proxy
statement, the handling and tabulation of proxies received and the charges of
brokerage houses and other institutions, nominees or fiduciaries in
forwarding such documents of the proxy material to beneficial owners, will be
paid by the Company. In addition to the mailing of the proxy material, such
solicitation may be made in person or by telephone by directors, officers or
regular employees of the Company. It is estimated that the total cost of
proxy solicitations by the Company will not exceed $10,000.
The matters to be considered at this Annual Meeting will be the election of
four directors to hold office for the term continuing through the annual
meeting following the fiscal year ended June 30, 1999 ("1999 Annual Meeting")
and until the election and qualification of their respective successors, and
the ratification of the appointment of Cornick, Garber & Sandler, LLP,
Certified Public Accountants, as independent auditors. The Company is aware
of no other matters to be presented for action at this meeting.
Under SEC rules, boxes and a designated blank space are provided on the proxy
card for stockholders to mark if they wish either to abstain on one or more
of the proposals or to withhold authority to vote for one or more nominees
for director.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The Company's voting securities consist solely of Common Stock. Holders of
Common Stock at the close of business on February 27, 1998 will be entitled
to vote. Each share of Common Stock entitles the holder to one (1) vote on
each matter to be voted upon. On the record date there were outstanding
1,683,079 shares of Common Stock.
STOCK OWNERSHIP OF DIRECTORS
The following table sets forth as of February 27, 1998 the number of shares
of Common Stock owned by each of the present directors of the Company,
together with certain information with respect to each:
Number of
Shares
Director Beneficially Percent
Name Since Owned (1) (1)
- - ---- ----- ----------- ------
Lawrence Densen 1986 203,202(2)(5) 11.4%
Alan E. Densen 1958 199,615(3)(5) 11.2%
Anthony P. Towell 1989 224,315(4)(5) 12.5%
Dr. Martin Fleisher 1989 1,000(6) *
James Favia 1995 3,000(6) *
Charles Holzberg 1996 417(7) *
Dr. Bruce Friedman 1997 0 *
___________________
* Less than 1%
(1) Beneficial ownership is determined in accordance with Rule 13d-3 under
the Securities Exchange Act of 1934.
(2) Includes a total of: (a) 12,256 incentive stock options exercisable
between $2.25 and $30.00 per share; (b) 48,618 non-qualified options
exercisable between $2.50 and $5.106 per share; and (c) 40,528 warrants
exercisable between $5.351 and $13.00 per share.
(3) Includes a total of: (a) 7,200 incentive stock options exercisable
between $2.25 and $10.625 per share; (b) 43,618 non-qualified options
exercisable between $2.50 and $5.106 per share; and (c) 41,495 warrants
exercisable between $5.351 and $13.00 per share.
(4) Includes a total of: (a) 7,200 incentive stock options exercisable
between $2.25 and $10.625 per share; (b) 43,618 non-qualified options
exercisable between $2.50 and $5.106 per share; and (c) 42,997 warrants
exercisable between $5.351 and $13.00 per share.
(5) Includes 100,000 shares of Common Stock for each Messrs. L. Densen, A.
Densen, and A. Towell, who are each trustees under a voting trust
agreement dated April 17, 1997 (the "Voting Trust Agreement") by and
among Eastco Glove Technologies, Inc., the Company, Steven Robins and
Phillip Robins. The Voting Trust Agreement was a condition to the closing of
a stock exchange agreement (the "Stock Exchange Agreement") dated April 17,
1997 by and among Eastco Glove Technologies, Inc., the Company, Steven Robins
and Phillip Robins. Pursuant to the Stock Exchange Agreement and the Voting
Trust Agreement, 100,000 shares of the Company's Common Stock were issued,
said shares being issued in the names of Lawrence Densen, Alan E. Densen and
Anthony P. Towell as trustees until the 5 year term of the voting trust
expires or Steven Robins or Phillip Robins desires to sell the shares after
one year pursuant to Rule 144 of the Securities Act of 1933.
(6) Includes non-qualified stock options to acquire 1,000 shares of Common
Stock, exercisable at $16.876 per share until July 26, 2005.
(7) Includes warrants to acquire 417 shares of Common Stock, exercisable at
$13.00 per share until April 11, 1999.
As of February 27, 1998 the directors and executive officers of the Company,
nine persons, owned of record and beneficially a total of 650,673 shares
representing 32.3% of the issued and outstanding Common Stock of the Company.
The foregoing assumes the exercise of all of the outstanding options and
warrants held by each of such persons.
Lawrence Densen became President and Chief Executive Officer of the Company
effective March 1, 1997. Prior to this time, he served as Senior Vice
President and has also been a Vice President. He has been a director of the
Company since 1986. He is the son of Alan E. Densen.
Alan E. Densen is a Senior Vice President and has been a director of the
Company since 1958 and Co-Chairman of the Board since March, 1997. From 1958
through March 1, 1997 (except for the period September 1993 to January 1994,
when he served as its Senior Vice President), he served as President and
Chief Executive Officer of the Company. He was also Treasurer and Chief
Financial Officer of the Company through 1992. He is the father of Lawrence
Densen.
Anthony P. Towell is a Senior Vice President and has been Secretary of the
Company since 1993, as well as Vice President and Co-Chairman of the Board
since March, 1997. From 1992 through February 1,1997, he served as the
Company's Vice President of Finance, Treasurer, and Chief Financial Officer,
and from 1989 to 1992 he served as its Vice President. He has been a
director of the Company since 1989. In addition, he has been a director of
Windswept Environmental Group, Inc. ("Windswept")(formerly Tradewinds, Inc.)
since November, 1996. He was a director from 1988 through September, 1997 of
Nytest Environmental Inc. ("Nytest"), a hazardous waste testing company. He
was a director from 1988 to 1995 of New York Testing Laboratories, Inc.
("NYT"), a laboratory testing company and manufacturer of automotive
accessories. Mr. Towell was a director of Ameridata Technologies, Inc.
("Ameridata"), a provider of computer products and services from 1991 to
1996. The common stock of Windswept and Nytest are registered, and the common
stock of Ameridata was registered, under Section 12(g) and (b), respectively,
of the Securities Exchange Act of 1934.
Richard Boyen has been employed with the Company since 1994, serving as Vice
President of Manufacturing Operations since February 1, 1997. From 1990 until
his employment with the Company in 1994, he served as Director of
Manufacturing for Kappler Safety Group, a manufacturer of industrial and
safety disposable clothing.
Arthur Wasserspring has been employed with the Company since 1994, serving as
Treasurer and Chief Financial Officer, as well as Vice President of Finance
since February 1, 1997. From July, 1989 until his employment with the
Company in 1994, he served as a financial and business consultant for
companies in the distribution, manufacturing, retail and other industries.
Dr. Martin Fleisher has been a director of the Company since 1989. He
holds a Ph.D. in biochemistry from New York University, and has been an
attending clinical chemist at Memorial Sloan-Kettering Cancer Center since
1967. He devotes only a limited portion of his time to the business of the
Company.
James Favia has been a director of the Company since July 26, 1995. He has
been a consultant during the past five years to Donald & Co. ("Donald"),
which has acted in the past as the Company's investment advisor. He is a
chartered financial analyst and has an MBA in finance which he obtained from
New York University in 1959. He was a director of T.J. Systems until
November, 1994. The common stock of T.J. Systems is registered under Section
12(g) of the Securities Exchange Act of 1934. He devotes only a limited
portion of his time to the business of the Company.
Charles Holzberg has been a director of the Company since December 5, 1996.
He has been President , since 1975 of The Charles Holzberg Agency, Inc., a
general agent for the sale of life insurance. He devotes only a limited
portion of his time to the business of the Company.
Dr. Bruce Friedman has been a director of the Company since April 16, 1997.
Since 1988, he has served as President of the Flower Hill Chiropractic
Office, P.C., where he is a chiropractic doctor. He devotes only a limited
portion of his time to the business of the Company.
ELECTION OF DIRECTORS
Present Composition of Board
The bylaws of the Company provide that there will be not less than three nor
more than seven directors. The present size of the board is fixed at seven
(7) directors. The Board of Directors is divided into two (2) classes. The
term of office of Lawrence Densen, Alan Densen, and Anthony P. Towell does
not expire until the Company's annual meeting following the fiscal year ended
June 30, 1998 and when their successors are elected. Herbert Schneiderman
("Schneiderman") resigned as a director effective December 5, 1996 and his
seat for the unexpired term has been filled by Charles Holzberg.
Nominees for Director
The Board of Directors has unanimously nominated and designated the following
individuals for election as directors for a two-year term continuing through
the Company's 1999 annual meeting and until their successors are elected and
take their places:
James Favia
Dr. Martin Fleisher
Dr. Bruce Friedman
Charles Holzberg
Reference should be made to "Stock Ownership of Directors", above, for
disclosure of their business experience and stock ownership, and to "Certain
Relationships and Related Transactions," below, for additional information
about them.
Proxies in the enclosed form will be voted for the nominees named above.
Authority may be withheld for any nominee. In addition, stockholders may
nominate additional nominees as candidates for the position as director.
Although the Board of Directors does not anticipate that any nominee will be
unavailable for election, in the event of such occurrence, the proxy will be
voted for such substitute, if any, as the Board of Directors may designate.
Proxies will not vote for a greater number of persons than the number of
nominees named. Directors will be elected by the vote of a majority of
stockholders present or by proxy at the Annual Meeting. Abstentions are not
counted in determining the number of votes required to attain a majority of
the outstanding shares in connection with this proposal. "Broker Non-Votes"
(which represent shares of Common Stock held by stockbrokers and not voted by
the brokers) will not be considered as votes cast in determining the outcome
of this proposal.
MEETINGS OF THE BOARD OF DIRECTORS AND CERTAIN
COMMITTEES THEREOF
Seven meetings of the Board of Directors were held during the fiscal year
ending June 30, 1997. The Board of Directors has established a Compensation
Committee, a Stock Option Committee and an Audit Committee. The Company does
not have a standing nominating committee. The Compensation Committee consists
of Messrs. Fleisher, Holzberg and Towell. The purpose of the Compensation
Committee is to review the Company's compensation of its executives, to make
determinations relative thereto and to submit recommendations to the Board of
Directors with respect thereto. The Stock Option Committee consists of
Messrs. Fleisher, Favia and Holzberg. The purpose of the Stock Option
Committee is to select the persons to whom options will be granted to
purchase shares of the Company's Common Stock under the Company's Stock
Option Plans and to make various other determinations with respect to such
plans. The Company's Audit Committee consists of Messrs. Towell, Fleisher and
Holzberg. The purpose of the Audit Committee is to provide general oversight
of audit, legal compliance and potential conflict of interest matters. The
Stock Option Committee met once during the fiscal year ended June 30, 1997.
The Audit Committee and the Compensation Committee met twice during the
fiscal year ended June 30, 1997. On December 5, 1996, Charles Holzberg was
elected to fill the seats of Herbert Schneiderman on the foregoing three
committees. Members of the Board of Directors who are not employees of the
Company receive a fee of $500 per meeting attended in person.
PRINCIPAL HOLDERS OF SECURITIES
The following table sets forth, as of February 27, 1998, the ownership with
respect to each person known to own beneficially more than 5% of the
Company's common stock:
Name and Address of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Owner(1) of Class
- - -------------- -------------------- ------------------- -----------
Common Stock Lawrence Densen 203,202 11.4%
$0.12 par value 130 W. 10th Street
Huntington Station, NY
Common Stock Alan E. Densen 199,615 11.2%
$0.12 par value 130 W. 10th Street
Huntington Station, NY
Common Stock Anthony P. Towell 224,315 12.5%
$0.12 par value 130 W. 10th Street
Huntington Station, NY
(1) With respect to each of the above-listed individuals, please see the
footnotes under "Stock Ownership of Directors," above, for an explanation of
each individual's beneficial ownership.
EXECUTIVE COMPENSATION
Summary
The following describes the components of the total compensation of the CEO
and each other executive officer of the Company whose total annual salary and
bonus exceeds $100,000.
Summary Compensation Table
Annual Compensation Long term compensation
------------------------ --------------------------------------
Awards Payouts
------------------ -----------------
Other Securities All
Name and annual Restricted underlying LTIP other
principal Salary Bonus compen- stock options/ payouts compen-
position Year ($) ($) sation($) award(s)($) SARs (#)(5) ($) sation($)
- - -------- ---- ------ ----- ---------- --------- ---------- ------ --------
Lawrence1997 115,381 -0- 4,200 -0- 85,200(1) -0- -0-
Densen, 1996 103,848 -0- 4,200 -0- 9,003(2) -0- -0-
CEO 1995 87,000 -0- 4,200 -0- 85,236(4) -0- -0-
Alan E. 1997 130,486 -0- 35,672(3) -0- 35,200(1) -0- -0-
Densen, 1996 119,731 -0- 35,672(3) -0- 9,003(2) -0- -0-
Sr. VP 1995 110,000 -0- 35,672(3) -0- 85,236(4) -0- -0-
- - ------
(1) Includes incentive stock options granted on June 23, 1997 and modified
on January 21, 1998 to acquire 50,000 and 25,000 shares to Lawrence
Densen and Alan Densen, respectively, pursuant to the Company's 1996
Incentive Stock Option Plan and exercisable at $2.50 per share. Twenty
20%) of these options are immediately exercisable, with the remaining
options to become exercisable in the event the Company meets specified
net sales and pre-tax income levels or, in the event that all options
thereunder have not become exercisable by fiscal year ended June 30,
2001, then all remaining non-vested options shall become exercisable
immediately. No options shall be exercised after June 22, 2007.
Also includes non-qualified stock options granted on June 23, 1997 and
modified on January 21, 1998 to acquire 35,000 and 10,000 shares to
Lawrence Densen and Alan Densen, respectively, exercisable at $2.50 per
share. The terms of these non-qualified options are identical to those
set forth in the preceding paragraph with respect to incentive stock
options.
Also includes incentive stock options granted on June 23, 1997 to
acquire 200 shares to each Lawrence Densen and Alan Densen pursuant to
the Company's 1996 Incentive Stock Option Plan and exercisable at $2.25
per share for a period of ten years.
(2) Warrants to acquire 9,003 shares of Common Stock at $5.351 granted
February 23, 1996 until February 22, 2001, in consideration of the
guaranty of overadvances by Congress to the Company. These warrants
provide for adjustment in the event of dilution as a result of sales of
securities at less than the exercise price.
(3) Primarily life insurance premiums on the life of Alan E. Densen owned by
Mr. Densen's wife and paid for by the Company.
(4) Includes incentive stock options granted January 20, 1995 to acquire
2,000 shares at $10.625 as well as non-qualified stock options to
acquire 83,236 shares exercisable at $5.106 per share, each exercisable
until January 19, 2005. Because it was determined that the audited
pre-tax profit for fiscal 1995 was greater than $50,000, non-qualified
options can now be exercised for 41,618 shares of Common Stock. The
remaining 41,618 non-qualified options can not be exercised during the
first five years. The non-qualified options provide for adjustment in
the event of dilution as a result of sales of securities at less than
the exercise price.
(5) Each person's options including only options directly held by such
person.
Stock Options
- - -------------
OPTION/SAR GRANTS IN LAST FISCAL YEAR
[Individual Grants]
Number of Percent of
securities total options /
underlying SARs granted Exercise
Options/SARs in fiscal or base Expiration
Name granted (#)(1) year price ($/Sh) Date
- - ----- -------------- -------------- ------------- -----------
Lawrence 85,000 22.8% 2.50 6/22/2007
Densen,
CEO 200 * 2.25 6/22/2007
Alan E. 35,000 9.4% 2.50 6/22/2007
Densen,
Sr. VP 200 * 2.25 6/22/2007
- - -------
* Less than 1% of total
(1) See note (1) above in the Summary Compensation Table.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
Number
of securities Value
underlying unexercised in-
unexercised the-money options
Shares SARs at FY-end (#) SARs at FY-end($)
acquired on Value exercisable / exercisable /
Name exercise (#) realized ($) unexercisable(3) unexercisable
- - ----- -------------- -------------- ------------- ----------------
Lawrence 0 0 60,874/109,618 3,275/12,750
Densen
CEO (1)
Alan E. 0 0 50,818/69,618 1,775/5,250
Densen,
Sr.VP(1)(2)
- - ------
(1) See footnotes (1),(2) and (4) above in the Summary Compensation Table.
Does not include warrants to acquire 30,825 shares each which were
assigned on June 23, 1997 to each Messrs. L. Densen and A. Densen by
Anthony P. Towell.
(2) Does not include warrants, held by Alan Densen's wife, to acquire 1,667
shares of Common Stock, exercisable at $13.00 per share until April 11,
1999.
(3) Each person's options include only options directly held by such person.
Employment Agreements and Change in Control Features
As of July 1, 1995, Alan E. Densen entered into an employment agreement which
provided for him to serve as the Company's President for a term of five years
and Lawrence Densen also entered into an employment agreement to serve as
Senior Vice-President for a term of five years. Anthony P. Towell has a
similar contract to that described herein for Alan E. Densen and Lawrence
Densen but with a lesser amount of compensation. (The employment agreements
of Lawrence Densen, Alan E. Densen and Anthony P. Towell are referred to as
"Employment Agreements".) Effective March 1, 1997, Messrs. L. Densen, A.
Densen, and A. Towell signed modification agreements (the "1997 Modification
Agreements"). The 1997 Modification Agreement of Lawrence Densen changed his
position with the Company to President and increased his salary to $125,000
in fiscal 1997, which figure was pro-rated for that portion of the fiscal
year during which Lawrence Densen served in such capacity. The 1997
Modification Agreements of Alan Densen and Anthony Towell changed each one's
position to Senior Vice President. Pursuant to the 1997 Modification
Agreements of Messrs. L. Densen, A. Densen, and A. Towell, the Company may
terminate each individual's Employment Agreement as a result of physical or
mental disability, or failure or inability to perform required duties for a
period of 6 months in any 24 month period. At the end of each fiscal year
during the term of the Employment Agreements, they are automatically extended
for one additional year to be added at the end of the then current term of
the agreements, unless the Board of Directors determines not to extend the
Employment Agreements. Each may also terminate their Employment Agreement
upon 30 days written notice. The base annual salaries for Lawrence Densen and
Alan E. Densen were $115,381 and $130,486, respectively, for fiscal 1997
which is to be increased at the discretion of the Board of Directors but not
less than 10% of the minimum compensation paid to the employees in the prior
fiscal year. For fiscal 1997, their base fiscal salaries are $125,000 and
$133,000, respectively. Each is entitled to receive an annual bonus equal to
3 1/3% of the Company's earnings before interest and taxes for the fiscal
year ended June 30, 1997 and each fiscal year thereafter during the term of
the Employment Agreement, and Lawrence Densen is entitled to .75% of the
Company's revenues in excess of $20.5 million (which was waived for fiscal
1996 and 1997). Bonuses are to be paid within 30 days after the completion of
the Company's audited financial statements for each fiscal year and is to be
paid in cash or registered shares of common stock of the Company. In
addition, each, in accordance with Company policy, is entitled to receive
reimbursement of ordinary and necessary business expenses, a monthly
automobile allowance of $700 and disability, medical and hospitalization
insurance.
The Employment Agreements entered into by Messrs. L. Densen and A. Densen
include provisions that provide for their right to terminate the Employment
Agreements and thereby receive additional compensation, as provided below, in
the event that they are not elected or retained as President and Senior
Vice-President, respectively, or as a director of the Company; the Company
acts to materially reduce their duties and responsibilities under the
Employment Agreement; the Company changes the geographic location of their
duties to a location from the New York metropolitan area; their base
compensation is reduced by 10% or more; any successor to the Company fails to
assume the Employment Agreements; any other material breach of the Employment
Agreements which is not cured by the Company within 30 days; and a "Change of
Control" by which a person, other than a person who is an officer and/or
director of the Company as of the effective date of the agreements, or a
"group" as defined in Section 13(d)(3) of the Securities Exchange Act of
1934, becomes the beneficial owner of 20% or more of the combined voting
power of the then outstanding securities of the Company or the composition of
the board changes so that officers of the Company no longer hold a majority
of the seats.
In the event that Messrs. L. Densen or A. Densen terminate their positions
because of any of the aforesaid reasons other than a "Change of Control", or
if the Company terminates their employment in any way that is a breach of the
Employment Agreement by the employer, Messrs. L. Densen and A. Densen shall
be entitled to receive, in addition to their salary continuation, as a bonus,
a cash payment equal to their total base salary plus projected expenses and
bonuses for the remainder of the term thereof, payable within 30 days of
termination and all stock options, warrants and other stock appreciation
rights granted by the Company, with the exception of qualified incentive
stock option plans, to them shall become immediately exercisable at an
exercise price of $0.10 per share. In the event that either owns or is
entitled to receive any unregistered securities of the Company, than the
Company shall register such securities within 120 days of the their
termination. In the event that there is a "Change of Control", Messrs. L.
Densen and A. Densen shall be paid within 30 days thereof a one-time bonus
equal to their total minimum base salary for the next three years.
Messrs. L. Densen and A. Densen, and also A. Towell, in modification
agreements to their Employment Agreements dated as of June 30, 1996 (the
"1996 Modification Agreements"), have waived: (i) their right to bonuses
based upon the Company's earnings before interest and taxes for the fiscal
years ended June 30, 1996 through June 30, 2000; (ii) their exercise rights
on options and warrants and compensation payable in the event of a Change in
Control with respect two private placements completed in 1996 and the
Company's Rights and Standby Offering in 1996 ("Offerings"). See "Certain
Relationships and Related Transactions" for a discussion of these Offerings;
and (iii) their right to terminate their relationship with the Company, as
per the terms of their respective Employment Agreements. The 1996
Modification Agreements and waivers provide that their right to terminate
their Employment Agreements and waiver of their bonuses shall not be waived
in the event that there is a material breach of such agreements by the
Company. Messrs. L. Densen and A. Densen, and also A. Towell have agreed that
the issuance of shares in the Offering will not result in any "change of
control" rights under their respective Employment Agreements.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Anthony P. Towell, a Senior Vice President of the Company, served as a member
of the Compensation Committee during the fiscal year ended June 30, 1997.
On June 24, 1997, the Board of Directors approved and accepted the June 23,
1997 report of the Company's Stock Option Committee, which recommended among
several other option grants, the grants of options under the Company's 1996
Incentive Stock Option Plan and Non-Qualified Stock Option Plan which are
described above in "Executive Compensation-Summary Compensation Table (Note
1)."
See "Certain Relationships and Related Transactions" regarding Messrs.
Schneiderman's and Holzberg's ownership of certain warrants issued in
connection with a reduction of indebtedness regarding the Company's premises.
On January 31, 1995, the exercise price of such warrants were reduced to
$13.00 per share and extended until April 11, 1999.
Reference should also be made to "Certain Relationships and Related
Transactions" with regard to warrants granted to Donald & Co. Securities Inc.
("Donald"). James Favia, a director of the Company, serves as a consultant
to Donald.
On July 26, 1995, the Board of Directors granted non-qualified options to
acquire 1,000 shares of Common Stock to each of Martin Fleisher, James Favia
and Herbert Schneiderman. The options are exercisable at a price of $16.876
per share and expire on the earlier of July 26, 2005 or within thirty days of
the termination of their position as a director.
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who beneficially own more than
ten percent of the Company's Common Stock, to file initial reports of
ownership and reports of changes in ownership with the Securities and
Exchange Commission. Executive officers, directors and greater than ten
percent beneficial owners are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the Company
and written representations from the Company's executive officers and
directors, the Company believes that during the fiscal year ended June 30,
1997 all Section 16(a) filing requirements applicable to its executive
officers, directors and greater than ten percent beneficial owners were
complied with.
STATEMENT PURSUANT TO SECTION 726(d) BUSINESS CORPORATION LAW
The Company has obtained from National Union Insurance Company a Directors
and Officers Liability and Company Reimbursement Policy for the period
September 16, 1997 to September 16, 1998. The policy provides annual coverage
of $5,000,000 per loss with an aggregate of $5,000,000 for all claims for
directors and officers liability. Coverage is in accordance with the terms
of the policy and is subject to various exceptions contained therein. The
insurance is on a claims made basis. The premium paid for this insurance by
the Company was $47,000. This statement is delivered pursuant to Section
726(d) of the Business Corporation Law of the State of New York.
1994 INCENTIVE STOCK OPTION PLAN
On January 28, 1994, the Board of Directors adopted the 1994 Incentive Stock
Option Plan under Section 422 of the Internal Revenue Code which was approved
by the stockholders on December 15, 1994. A total of 10,000 shares were
authorized to be issued under the 1994 Plan. The 1994 Plan expires on January
27, 2004 and no additional options may be issued after such date.
The following summary provides a description of the significant provisions of
the 1994 Plan. However, such summary is qualified in its entirety by
reference to the full text of the 1994 Plan.
Eligibility to participate in the 1994 Plan is limited to employees of the
Company and its subsidiaries. The term of an option will not exceed 10
years. Options will not be transferable except upon death and, in such
event, transferability will be effected by will or by the laws of descent and
distribution.
Options which are granted by the Board of Directors under the 1994 Plan are
subject to the following limitations: (i) options may not be granted at less
than 100% of fair market value at the time of grant, (ii) options granted to
employees who own more than 10% of the Company's outstanding Common Stock
will be granted at not less than 110% of the fair market value for a term of
five years, and (iii) the aggregate market value of the Common Stock for
which options are exercisable during any calendar year by an individual is
limited to $100,000, but the value may exceed $100,000 for which options may
be granted to an individual.
For purposes of the 1994 Plan, fair market value is the last price for the
Company's Common Stock as quoted by NASDAQ.
No disposition of Common Stock received upon exercise of Options shall be
made within two (2) years from the date of grant of the Option nor within one
(1) year after the exercise.
The 1994 Plan provides that the payment of the exercise price of options
shall be in cash or in shares of the Company's Common Stock of equivalent
value.
An option granted under the 1994 Plan may not be exercised unless, at the
time of exercise, the optionee is then in the Company's employ and has
completed at least twelve (12) months of continuous employment with the
Company from the date of grant of the option.
In the event of any future recapitalization, reorganization, split-up or
consolidation of shares, the number of shares and exercise price shall be
proportionately adjusted.
Schedule of Options Under 1994 Plan
- - -----------------------------------
Unexercised Options
The table set forth below provides to February 27, 1998 a schedule of
unexercised options heretofore granted by the Company pursuant to the 1994
Plan.
Aggregate
Number
of Shares Exercise
Date of Subject Price Date
Grant Option To Option Per Share(1) of Expiration
- - ------------ --------- ------------ -------------
January 20, 1995 8,500 $10.625 January 19, 2005
________
(1) The exercise price of the options equals the fair market value of the
Company's Common Stock on the date of grant.
Exercised Options
As of February 27, 1998, no options under the 1994 Plan have been exercised.
Remaining Options
1,500 additional options may be granted under the 1994 Plan.
1996 STOCK OPTION PLANS
At a special meeting of shareholders held on August 12, 1996, the
shareholders approved: (i) an incentive stock option plan (the "1996
Incentive Plan"); and (ii) a non-qualified stock option plan (the "1996
Non-Qualified Plan").
1996 INCENTIVE STOCK OPTION PLAN
The 1996 Incentive Plan authorizes the grant of 300,000 shares of Common
Stock, subject to adjustment as provided in the plan. Eligibility to
participate in the 1996 Incentive Plan is limited to key employees of the
Company and its subsidiaries. The 1996 Incentive Plan terminates May 12,
2006. The term of each option may not exceed ten years. Options will not be
transferable except upon death and, in such event, transferability will be
effected by will or by the laws of descent and distribution. Incentive Stock
Options may not be granted at less than 100% of fair market value at the time
of the grant. Options granted to employees who own more than 10% of the
Company's outstanding Common Stock will be granted at not less than 110% of
fair market value for a term of five years. The aggregate market value of
stock for which Incentive Stock Options are exercisable during any calendar
year by an individual is limited to $100,000, but the value may exceed
$100,000 for which options may be granted to an individual. Payment of the
exercise price for options under the 1996 Incentive Plan are to be made in
cash or by the exchange of Common Stock having equivalent value.
Schedule of Options Under 1996 Incentive Plan
- - ---------------------------------------------
Unexercised Options
The table set forth below provides to February 27, 1998 a schedule of
unexercised options heretofore granted by the Company pursuant to the 1996
Incentive Plan.
Aggregate
Number
of Shares Exercise
Date of Subject Price Date
Grant Option To Option Per Share(1) of Expiration
- - ------------ --------- ------------ -------------
June 23, 1997 56,700 $2.25 June 22, 2007
June 23, 1997* 175,000 $2.50 June 22, 2007
________
* Originally granted on June 23, 1997 and modified on January 21, 1998.
(1) The exercise price of the options equals the fair market value of the
Company's Common Stock on the date of grant.
Exercised Options
As of February 27, 1998, no options under the 1996 Incentive Plan have been
exercised.
Remaining Options
68,300 additional options may be granted under the 1996 Incentive Plan.
1996 NON-QUALIFIED STOCK OPTION PLAN
The 1996 Non-Qualified Plan authorizes the grant of 300,000 shares of Common
Stock, subject to adjustment as provided in the plan, to key employees,
consultants and others. The 1996 Non-Qualified Plan terminates May 11, 2006.
Options granted shall specify the exercise price, the duration of the option,
the number of shares to which the option applies and such other terms and
conditions not inconsistent with the 1996 Non-Qualified Plan as the
committee, or other legally permissible entity, administering the 1996
Non-Qualified Plan shall determine provided that the option price shall not
be less than 100% of the fair market value at the time the option is granted
and no option may be exercisable for more than ten (10) years after the date
on which it is granted. Payment of the exercise price for options under the
1996 Non-Qualified Plan is to be made in cash, by the exchange of Common
Stock having equivalent value or through a "Cashless Exchange". If a
Participant elects to utilize a "Cashless Exercise" (as defined in the Plan),
he shall be entitled to a credit equal to the amount of that equity by which
the current Fair Market Value exceeds the option price on that number of
options surrendered and to utilize that credit to exercise additional options
held by him that such equity could purchase. There shall be canceled that
number of options utilized for the credit and for the options exercised with
such credit.
Schedule of Options Under 1996 Non-Qualified Plan
- - -------------------------------------------------
Unexercised Options
The table set forth below provides to February 27, 1998 a schedule of
unexercised options heretofore granted by the Company pursuant to the 1996
Non-Qualified Plan.
Aggregate
Number
of Shares Exercise
Date of Subject Price Date
Grant Option To Option Per Share(1) of Expiration
- - ------------ --------- ------------ -------------
June 23, 1997 3,000 $2.25 June 22, 2007
June 23, 1997* 100,000 $2.50 June 22, 2007
________
* Originally granted on June 23, 1997 and modified on January 21, 1998.
(1) The exercise price of the options equals the fair market value of the
Company's Common Stock on the date of grant.
Exercised Options
As of February 27, 1998, no options under the 1996 Non-Qualified Plan have
been exercised.
Remaining Options
197,000 additional options may be granted under the 1996 Non-Qualified Plan.
Options Granted and Exercised
During the
Three Fiscal Years Ended June 30, 1997
---------------------------------------
Options Granted
During the three fiscal years ended June 30, 1997, the following options were
granted and remain outstanding:
a) On January 20, 1995, 8,500 options were granted under the 1994
Plan to employees, including 2,000 options granted at an exercise
price of $10.625 to each of Messrs. A. Densen, A. Towell and L.
Densen which options expire on January 19, 2005;
b) On July 26, 1995, Messrs. J. Favia and M. Fleisher were each
granted non-qualified stock options to acquire 1,000 shares of
Common Stock at an exercise price of $16.876 per share until July
26, 2005;
c) During February 1996, in consideration for their guaranty to
Congress Financial Corp. ("Congress") for overadvances made by
Congress, Messrs. A. Densen, L. Densen and A. Towell were each
issued warrants for a term of five years to purchase 9,003 shares
of Common Stock at $5.351 per share commencing February 23, 1996.
This guaranty has since been returned to them;
d) On June 23, 1997, a total of 231,700 options were granted under
the 1996 Incentive Plan, including the following options, modified
on January 21, 1998, all of which expire on June 22, 2007:
(i) Lawrence Densen: Granted options to acquire 50,000
shares at an exercise price of $2.50 per share and 200
shares at an exercise price of $2.25 per share.
(ii) Alan Densen: Granted options to acquire 25,000
shares at an exercise price of $2.50 per share and 200
shares at an exercise price of $2.25 per share.
(iii) Anthony P. Towell: Granted options to acquire
25,000 shares at an exercise price of $2.50 per share and
200 shares at an exercise price of $2.25 per share.
(iv) Arthur Wasserspring: Granted options to acquire
25,000 shares at an exercise price of $2.50 per share and
200 shares at an exercise price of $2.25 per share.
(v) Richard Boyen: Granted options to acquire 25,000
shares at an exercise price of $2.50 per share and 200
shares at an exercise price of $2.25 per share.
e) On June 23, 1997, a total of 103,000 options were granted under
the 1996 Non-Qualified Plan, including the following options,
modified on January 21, 1998, and granted at an exercise price of
$2.50, expiring on June 22, 2007:
(i) Lawrence Densen: Granted options to acquire a total
of 35,000 under the 1996 Non-Qualified Plan.
(ii) Alan Densen: Granted options to acquire a total of
10,000 under the 1996 Non-Qualified Plan.
(iii) Anthony P. Towell: Granted options to acquire a
total of 10,000 under the 1996 Non-Qualified Plan.
(iv) Arthur Wasserspring: Granted options to acquire a
total of 15,000 under the 1996 Non-Qualified Plan.
(v) Richard Boyen: Granted options to acquire a total of
15,000 under the 1996 Non-Qualified Plan.
Options Exercised
No options were exercised during the three fiscal years ended June 30, 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During September 1993, the Company's lender, Congress, agreed to provide an
overadvance to the Company of $500,000. In connection therewith, Messrs. A.
Densen, L. Densen and A. Towell obtained a junior participation interest from
Congress by advancing $250,000 of their funds to Congress. $250,000 of this
overadvance was repaid to Congress during fiscal 1994. Mr. L. Densen was
repaid his junior participation of $35,000 by Congress during May, 1996. The
remaining balance of $215,000 was repaid by Congress during December, 1996.
A group of investors (the "Associates") holds a first mortgage on the
Company's executive offices and warehouse facility in the principal amount of
$433,737 as of June 30, 1997 and security interest on the Company's personal
property. The wives of Alan E. Densen and Anthony P. Towell, executive
officers and directors of the Company, Charles Holzberg, a director of the
Company, and Herbert Schneiderman, a previous director of the Company, are
members of Associates, together owning approximately 38% thereof. During the
fiscal year ended June 30, 1997, the Company paid Associates $121,107 in
principal and interest on the mortgage, of which $65,063 constituted
interest.
The Company had employment agreements with Messrs. A. Densen, A. Towell and
L. Densen, which commenced as of the effective date of the Company's 1994
public offering in April, 1994. As of July 1, 1995, these executive officers
entered into new agreements, which were modified by the 1996 Modification
Agreements and the 1997 Modification Agreements. See "Executive Compensation
- - -- Employment Agreements and Change in Control Features" with regard to
provisions contained in the Employment Agreements of Lawrence Densen, the
Company's President and CEO as of March 1, 1997, and Alan E. Densen, the
Company's Senior Vice-President as of March 1, 1997, and waivers contained in
the 1996 and 1997 Modification Agreements. Similar provisions are contained
in the Employment Agreement and the 1996 and 1997 Modification Agreements
with Anthony P. Towell.
On April 18, 1995, the Company entered into an agreement with Donald to act
as its investment advisor for a term of three years at a retainer of $3,000
per month, which was canceled during November, 1996. Donald was also granted
a five year warrant to purchase 12,500 shares exercisable at $12.50 per
share, the closing market price on the date of grant. James Favia, a director
of the Company, serves as a consultant to Donald.
On July 10, 1995 the Company terminated its relationship with Lew Lieberbaum
& Co., Inc. ("Lew Lieberbaum"), now known as First Asset Management Inc., the
Company's underwriter in its 1994 public offering. Pursuant to an agreement
dated July 10, 1995, the Company canceled all of Lew Lieberbaum's rights
under the Underwriting Agreement (the "Underwriting Agreement"), including,
but not limited to, the right of first refusal to act on behalf of the
Company in future transactions, the cancellation of all Underwriter's
Warrants held by Lew Lieberbaum or its affiliates, their right to
representation on the Company's Board of Directors and the termination of any
obligation by holders of securities subject to a "lock-up" to obtain the
permission of Lew Lieberbaum prior to sale or other disposition of said
securities. At the same time, Leonard A. Neuhaus and Sheldon Lieberbaum, who
were affiliated with Lew Lieberbaum, resigned as directors of the Company. In
exchange, the Company issued 10,000 shares of common stock to Lew Lieberbaum.
During February 1996, Messrs. A. Densen, A. Towell and L. Densen, executive
officers and directors of the Company, guaranteed to Congress overadvances to
the Company of up to $500,000 in excess of the Company's eligible borrowings.
The Company issued warrants for a term of five years in consideration for
their guaranty to each Messrs. A. Densen, A. Towell, and L. Densen to
purchase 9,003 shares of Common Stock at $5.351 per share which expire on
February 22, 2001, and are subject to adjustment in the event of dilution as
a result of sales of securities at less than the exercise price. (The
adjustments as a result of the Offerings increased the number of shares
subject to the exercise of this warrant from 8,870 to 9,003 with an exercise
price reduced from $5.431 to $5.351 per share.) The overadvance has since
been repaid and their guarantees have been returned to them.
The first mortgage held by Associates, which was dated in 1992 and upon which
interest was being paid at the rate of 14%, was scheduled to come due on July
1, 1997 in the amount of approximately $434,000. Associates and the Company
have agreed to extend the mortgage for five years from July 1, 1997 with
interest at 12% per annum or 3% over prime, whichever is greater. At the end
of five years, the mortgage will come due in the amount of approximately
$283,000. The Company intends to explore the refinancing of this mortgage
with various lenders.
On April 17, 1997 Eastco Glove Technologies Inc., a newly formed wholly owned
subsidiary of the Company, acquired all of the outstanding shares of
Protective Knitting Inc., a Minnesota corporation, from Steven Robins and
Phillip Robins for 100,000 shares of the Company's Common Stock which was
issued to a voting trust of which Alan E. Densen, Lawrence Densen and Anthony
P. Towell, as trustees, have the voting rights for a term of five years.
Except for the voting rights, Steven Robins and Phillip Robins each acquired
the beneficial rights to 50,000 shares and may sell same under Rule 144 after
one year. At the same time, PR Industries Inc. (a Minnesota corporation
wholly owned by Steven Robins and Phillip Robins) sold to Eastco Glove
Technologies Inc. inventory in the amount of $139,000 and machinery and
equipment for the satisfaction of liens and encumbrances in the amount of
$500,000 thereon. The acquired business manufactures protective gloves and
had approximate revenues of $1.1 million in 1996.
Considering the circumstances of each transaction, the Company believes that
all transactions heretofore with officers/directors and shareholders of the
Company and their affiliates have been made, and in the future will be made
on terms no less favorable to the Company than those available from
unaffiliated parties and will be approved by a majority of the disinterested
directors.
PROPOSAL TO RATIFY APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company has appointed and proposed ratification
of the firm of Cornick, Garber & Sandler, LLP as the Company's independent
auditors for the fiscal year ending June 30, 1998. Cornick, Garber & Sandler,
LLP has advised the Company that it has no financial interest of any kind in
the Company and has had no connection with the Company at any time in the
past except for the professional relationship between auditor and client.
The affirmative vote of the holders of a majority of the shares of Common
Stock represented at the Annual Meeting will be required for approval of the
auditors. In accordance with New York State law, abstentions are not counted
in determining the votes cast in connection with the selection of auditors.
If such approval is not obtained, selection of independent auditors will be
reconsidered by the Board of Directors.
Representatives of Cornick, Garber & Sandler, LLP are expected to be present
at the Annual Meeting with the opportunity to make a statement if they desire
to do so, and shall be available to respond to appropriate questions.
The Board of Directors unanimously recommends a vote FOR ratification of the
appointment of Cornick, Garber & Sandler, LLP as independent auditors.
PROCEDURE FOR SUBMISSION OF 1998 STOCKHOLDER PROPOSALS
Proposals by stockholders for inclusion in the 1998 annual meeting proxy
statement must be received by Eastco Industrial Safety Corp. at 130 West 10th
Street, Huntington Station, New York 11746, Attention: Anthony P. Towell,
prior to November 17, 1998. All such proposals are subject to the applicable
rules and requirements of the Securities and Exchange Commission.
OTHER MATTERS
So far as the Board of Directors is aware, only the aforementioned matters
will be acted upon at the meeting. If any other matters properly come before
the meeting, it is intended that the accompanying proxy may be voted on such
other matters in accordance with the best judgment of the person or persons
voting said proxy.
By order of the Board of Directors.
Dated: February 27, 1998
LAWRENCE DENSEN
President
EASTCO INDUSTRIAL SAFETY CORP.
130 West 10th Street
Huntington Station, New York 11746
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
April 8, 1998
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints LAWRENCE DENSEN and ARTHUR WASSERSPRING
and each or either of them (with power of substitution) and proxies for the
undersigned, to vote all shares of Common Stock of record on February 27,
1998 of EASTCO INDUSTRIAL SAFETY CORP. which the undersigned would be
entitled to vote if personally present at the Annual Meeting of Stockholders
to be held on April 8, 1998 at 3:30 p.m. local time, or at any adjournment
thereof, upon the matters set forth in the Notice of and Proxy Statement for
said Meeting, copies of which have been received by the undersigned, and, in
their discretion, upon all other matters which may properly come before said
meeting. Without otherwise limiting the generality of the foregoing said
proxies are directed to vote as follows:
No. 1: ELECTION OF DIRECTORS
To serve for the term continuing through the Annual Meeting following
the fiscal year ending June 30, 1999 and qualification of their
respective successors.
James Favia, Dr. Martin Fleisher, Dr. Bruce Friedman, Charles Holzberg
[ ] FOR all nominees listed above (except as withheld in the space
below.)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed above.
(Instruction: To withhold authority to vote for any individual nominee
write that nominee's name in the space provided below.)
____________________________________________________________________
No. 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Proposal to ratify the appointment of Cornick, Garber & Sandler, LLP,
Certified Public Accountants, as the independent auditors to examine the
financial statements of the Company for fiscal year ended June 30, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED. IF NO CONTRARY DIRECTION IS GIVEN ABOVE, AND THIS PROXY IS
PROPERLY SIGNED, THE SHARES WILL BE VOTED FOR THE PROPOSALS LISTED ABOVE.
Your proxy is important to assure a quorum at the meeting whether or not you
plan to attend in person. You may revoke this proxy at any time, and the
giving of it will not affect your right to attend the meeting and vote in
person.
Dated _________________________, 1998
_____________________________________________
Signature
_____________________________________________
Signature, if held jointly
_____________________________________________
Number of Shares as of February 27, 1998
This proxy must be signed exactly as name appears. When shares are held by
joint tenants, both must sign. When signing as attorney or as trustee,
executor or guardian, please give full title as such. If a corporation,
please sign in full corporate name by President or other authorized officer.
If a partnership, please sign in partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.