WARRANT EXERCISE FEE AGREEMENT
AGREEMENT dated as of the ___ of ______, 1996, by and among Royce
Investment Group, Inc. ("Royce"), Eastco Industrial Safety Corp. (the
"Company") and American Stock Transfer & Trust Company (the "Warrant Agent").
W I T N E S S E T H:
WHEREAS, on __________________ 1996, the Company entered into a
Standby Agreement with Royce pursuant to which the Company has distributed to
its stockholders non-transferable Rights to purchase 703,591 Units (as
defined below) and Royce has agreed to purchase the Unsubscribed Units; and
WHEREAS, in connection with the Rights offering each stockholder has
received Rights on the basis of four Rights for every five shares of Common
Stock owned by them; and
WHEREAS, each Right allows the stockholder to purchase one Unit at a
price of $5.00 per Unit with each Unit consisting of one share of the
Company's Common Stock ("Common Stock"), and one Class B Common Stock Purchase
Warrant (the "Class B Warrants"); and
WHEREAS, the Company has entered into an agreement dated as of
__________________, 1996 by and between the Company and the Warrant Agent (the
"Warrant Agreement"), covering 703,591 Class B Warrants (plus an additional
70,359 Class B Warrants that may be issued upon exercise of the Underwriter's
Warrants); and
WHEREAS, each Class B Warrant entitles the holder to purchase one
share of Common Stock at an exercise price of $6.25 per share commencing on
___________(18 months from the effective date of the Registration Statement)
and expiring on the close of business on _____________ (36 months from the
effective date of the Registration Statement; and
WHEREAS, the parties hereto wish to provide Royce, a member of the
National Association of Securities Dealers, Inc. ("NASD") with certain rights
on an exclusive basis in connection with the exercise of the Class B Warrants
during the exercise period.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the parties hereto agree as follows:
Section 1. Description of the Class B Warrants. The Company's Class B
Warrants may be exercised on or after _______________________, 199_ and expire
at 5:00 p.m. New York time on _____________________, _________ (the
"Expiration Date"), subject to (i) the Company's right to extend the
Expiration Date, at which time all rights evidenced by the Class B Warrants
shall cease and the Class B Warrants shall become void and (ii) certain
redemption rights commencing on or after ___________, ________ (18 months from
the effective date of the Registration Statement). In accordance with
the provisions of the Warrant Agreement, the holder of each Class B Warrant
shall have the right to purchase from the Company, and the Company shall issue
and sell to such holders of Class B Warrants, one fully paid and
non-assessable share of the Company's Common Stock for every Class B Warrant
exercised at an Exercise Price of $6.25 per share, subject to adjustment as
provided in the Warrant Agreement.
Section 2. Notification of Exercise. Within five (5) days of the last
day of each month commencing ____________, 199_ (18 months from the date of
the Company's Prospectus or sooner if the Company shall permit the exercise of
Class B Warrants at an earlier date with the consent of Royce), the Warrant
Agent or the Company will notify Royce of each Class B Warrant certificate
which has been properly completed and delivered for exercise by holders of
Class B Warrants during each such month, the determination of the proper
completion to be in the sole and absolute reasonable discretion of the Company
and the Warrant Agent. The Company or the Warrant Agent will provide Royce
with such information, in connection with the exercise of each Class B
Warrant, as Royce shall reasonably request.
Section 3. Payment to Royce. The Company hereby agrees to pay to
Royce an amount equal to seven (7%) percent of the then exercise price (i.e.
$.4375 per share based on the initial exercise price of the Class B Warrants
which is $6.25 per share) for each Class B Warrant exercised (the "Exercise
Fee") a portion of which may be allowed by Royce to the dealer who solicited
the exercise (which may also be Royce) provided that:
(a) such Class B Warrant is exercised no earlier than one year from
the effective date of the Company's Registration Statement;
(b) at the time of exercise, the market price of the Company's Common
Stock is higher than the applicable Exercise Price of the Class B Warrant
being exercised;
(c) the holders of Class B Warrants being exercised have indicated in
writing, either in the Form of Election contained on the specimen Class B
Warrant Certificate attached hereto as Exhibit A, or by written documents
signed and dated by the holders and specifically stating that the exercise of
such Class B Warrants were solicited by Royce or another member of the NASD;
and
(d) Royce, and/or the member of the NASD which solicited the exercise
of Class B Warrants delivers a certificate to the Company within five (5)
business days of receipt of information relating to such exercised Class B
Warrants from the Company or the Warrant Agent in the form attached hereto as
Exhibit B, stating that:
(1) the Class B Warrants exercised were not held in a
discretionary account;
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(2) Royce or the member of the NASD which solicited the exercise of
Class B Warrants did not, (unless granted an exemption by the Securities and
Exchange Commission from the provisions thereof), within the applicable number
of business days under Rule l0b-6 immediately preceding the date of exercise
of the Class B Warrant bid for or purchase the Common Stock of the Company or
any securities of the Company immediately convertible into or exchangeable for
the Common Stock (including the Class B Warrants) or otherwise engage in any
activity that would be prohibited by Rule 10b-6 under the Securities Exchange
Act of 1934, as amended, with one engaged in a distribution of the Company's
securities; and
(3) in connection with the solicitation, it disclosed the
compensation it would receive upon exercise of the Class B Warrant.
Section 4. Payment of the Exercise Fee. The Company hereby agrees to
pay over to Royce within two (2) business days after receipt by the Company of
the certificate described in Section 3(d) above, the Exercise Fee out of the
proceeds it received from the applicable Exercise Price paid for the Class B
Warrants to which the certificate relates.
Section 5. Inspection of Records. Royce may at any time during
business hours, at its expense, examine the records of the Company and the
Warrant Agent which relate to the exercise of the Class B Warrants.
Section 6. Termination. Royce shall be entitled to terminate this
Agreement prior to the exercise of all Class B Warrants at any time upon five
(5) business days, prior notice to the Company and the Warrant Agent.
Notwithstanding any such termination notice, Royce shall be entitled to
receive an Exercise Fee for the exercise of any Class B Warrant for which it
has already delivered to the Company prior to any such termination the
certificate required by Section 3(d) of this Agreement.
Section 7. Notices. Any notice or other communication required or
permitted to be given pursuant to this Agreement shall be in writing and shall
be deemed sufficiently given if sent by first class certified mail, return
receipt requested, postage prepaid, addressed as follows: if to the Company at
130 West 10th Street, Huntington Station, New York 11746, copy to Herbert W.
Solomon, Esq., Hollenberg Levin Solomon Ross Belsky & Daniels, LLP 585 Stewart
Avenue, Garden City, New York 11530-4732; if to Royce at 199 Crossways Park
Drive, Woodbury, NY 11797; and if to the Warrant Agent at American Stock
Transfer & Trust Company, 40 Wall Street, New York, N. Y. 10005, or such other
address as such party shall have given notice to other parties hereto in
accordance with this Section. All such notices or other communications shall
be deemed given three (3) business days after mailing, as aforesaid.
Section 8. Supplements and Amendments. The Company, the Warrant Agent
and Royce may from time-to-time supplement or amend this Agreement by a
written instrument signed by the party to be
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charged, without the approval of any holders of Class B Warrants in
order to cure any ambiguity or to correct or supplement any provisions
contained herein or to make any other provisions in regard to matters or
questions arising hereunder which the Company, the Warrant Agent and Royce may
deem necessary or desirable and which do not adversely affect the interests of
the holders of Class B Warrants.
Section 9. Assignment. This Agreement may not be assigned by any
party without the express written approval of all other parties, except that
Royce may assign this Agreement to its successors.
Section 10. Governing Law. This Agreement will be deemed made under
the laws of the State of New York with respect to matters of contract law and
for all purposes shall be governed by and construed in accordance with the
internal laws of said State, without regard to the conflicts of laws
provisions thereof.
Section 11. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give any person or corporation other than the Company,
the Warrant Agent and Royce any legal or equitable right, remedy or claim
under this Agreement; and this Agreement shall be for the sole and exclusive
benefit of, and be binding upon, the Company, the Warrant Agent and Royce and
their respective successors and permitted assigns.
Section 12. Descriptive Headings. The descriptive headings of the
sections of this Agreement are inserted for convenience only and shall not
control or affect the meanings or construction of any of the provisions
hereof.
Section 13. Superseding Agreement. This Agreement supersedes any and
all prior agreements between the parties with respect to the subject matter
hereof.
Section 14. Exclusive Agreement. It is understood that this
agreement is on an exclusive basis to solicit the exercise of the Class B
Warrants and that the Company may not engage other broker-dealers to solicit
the exercise of Class B Warrants without the consent of Royce.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
EASTCO INDUSTRIAL SAFETY CORP.
By:____________________________________
ROYCE INVESTMENT GROUP, INC.
By:____________________________________
AMERICAN STOCK TRANSFER & TRUST COMPANY
By: ____________________________________
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CERTIFICATE
The undersigned, being the _______________________________ of Royce Investment
Group, Inc. ("Royce") pursuant to Section 3(d) of the Warrant Exercise Fee
Agreement relating to the exercise of Warrants dated ____________________,
1996 between Eastco Industrial Safety Corp. (the "Company") and American Stock
Transfer & Trust Company (the "Warrant Agent") hereby certifies that:
1. The Company or the Warrant Agent has notified Royce that
_________________________ Class B Warrants (as defined in the Agreement) have
been exercised during ________________ 199_.
2. The exercise of ____________________ of such Class B Warrants was
solicited by Royce.
3. Such Class B Warrants were not held in a discretionary account.
4. _______________ did not, within _____ business days immediately
preceding ________ 199_, bid for or purchase the Common Stock of the Company
or any securities of the Company immediately convertible into or exchangeable
for the Common Stock (including Class B Warrants) or otherwise engage in any
activity that would be prohibited by Rule l0b-6 under the Securities Exchange
Act of 1934, as amended, to one engaged in a distribution of the Company's
securities.
5. In connection with the solicitation of the exercise of the Class B
Warrants, ___________________ disclosed the compensation it will receive to
holders of the Class B Warrants.
DATED: ___________________, 199_
ROYCE INVESTMENT GROUP, INC.
By:_____________________________
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