EASTCO INDUSTRIAL SAFETY CORP.
AND
AMERICAN STOCK TRANSFER & TRUST COMPANY
------------------------
SUBSCRIPTION AGENCY AGREEMENT
DATED AS OF ______________
SUBSCRIPTION AGENCY AGREEMENT dated as of __________, 1996 by and
between EASTCO INDUSTRIAL SAFETY CORP. (the "Company") and AMERICAN STOCK
TRANSFER & TRUST COMPANY as Subscription Agent (the "Subscription Agent").
WHEREAS, the Company has caused a Registration Statement on Form SB-2
(Registration No. 333-09517) under the Securities Act of 1933, as amended (the
"Act"), to be filed with the Securities and Exchange Commission (the
"Commission") relating to the distribution by the Company of nontransferable
subscription rights (the "Rights") to subscribe for units ("Units"), which
registration statement was declared effective by the Commission on ______, 1996
(the "Effective Date"); and
WHEREAS, each Unit consists of one share of common stock $0.12 par
value ("Common Stock") and one Class B Redeemable Common Stock Purchase Warrant
("Class B Warrant"), issuable upon the exercise of the Rights (such Registration
Statement, in the form in which it first becomes effective under the Act, and as
it may thereafter be amended from time to time, is referred to herein as the
"Registration Statement"; the distribution of the Rights and the sale of Units
upon the exercise thereof as contemplated by the Registration Statement is
referred to herein as the "Rights Offering"); and
WHEREAS, the Rights will be distributed to holders of record of shares
of Common Stock as of the close of business on ____________ (the "Record Date")
at a rate of four Rights for each five shares of Common Stock held on the Record
Date; and
WHEREAS, the Rights are non-transferable and upon the expiration date
for the Rights ("Expiration Date"), Royce Investment Group, Inc. ("Royce") will
purchase all unsubscribed for Units; and
WHEREAS, the Company has reserved for issuance, and has authorized the
issuance of, an aggregate number of authorized and unissued shares of Common
Stock (the "Underlying Shares") and Class B Warrants equal to the aggregate
number of Rights to be distributed pursuant to the Rights Offering; and
WHEREAS, Rights holders will be entitled to subscribe to purchase, at a
per Unit price of $5.00 (the "Subscription Price"); and
WHEREAS, the Company desires the Subscription Agent to act on its
behalf in connection with the Rights Offering as set forth herein, and the
Subscription Agent is willing so to act.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto hereby agree as follows:
SECTION 1. Appointment of Subscription Agent. The Company hereby
appoints the Subscription Agent to act as agent for the Company in accordance
with the instructions set forth in this Agreement, and the Subscription Agent
hereby accepts such appointment. The Company may from time to time appoint such
co-subscription agents as it may deem necessary or desirable.
SECTION 2. Issue of Securities.
(a) The Company has distributed or will distribute the Rights
to holders of record of shares of Common Stock as of the close of business on
the Record Date. The Company will promptly notify the Subscription Agent upon
the effectiveness of the Registration Statement. As transfer agent for the
shares of Common Stock, the Subscription Agent shall provide such assistance as
the Company may require in order to effect the distribution of the Rights to
holders of record of shares of Common Stock as of the close of business on the
Record Date, it being understood that Rights Certificates (as defined in Section
3(b) hereof) shall be mailed to record holders (except those located in
_________________________) of the Common Stock together with a copy of the
Prospectus no later than two business days following the Effective Date.
(b) The Company has authorized the issuance of and will hold
in reserve the Underlying Shares, and upon the valid exercise of Rights, the
Company will issue Underlying Shares and Class B Warrants to validly exercising
Rights holders as set forth in the Registration Statement.
SECTION 3. Subscription Privilege; Form of Subscription Certificates.
(a) Each Right carries with it a Subscription Privilege,
pursuant to which the holder of such Right, upon the valid exercise of the Right
pursuant to Section 7 hereof, has the right to purchase from the Company one
Underlying Share and one Class B Warrant for the Subscription Price.
(b) The Rights shall be evidenced by subscription certificates
(the "Subscription Certificates"). The Subscription Certificates (and the form
of election to exercise or transfer Rights to be printed on the reverse thereof)
shall be substantially in the form attached as Exhibit A hereto. Neither the
Subscription Certificates, nor the Rights represented thereby, shall be
transferable.
SECTION 4. Signature and Registration.
(a) The Subscription Certificates shall be executed on behalf
of the Company by two of its executive officers. Any Subscription Certificate
may be signed on behalf of the Company by any person who, at the actual date of
the execution of such Subscription Certificate, shall be a proper officer of the
Company to sign such Subscription Certificate, even if at the date of the
execution of this Agreement or the date of the actual issuance of such
certificate any such person is not such an officer.
(b) The Subscription Agent will keep or cause to be kept, at
its principal offices in New York, books for registration and transfer of the
Rights issued hereunder. Such books shall show the names and addresses of the
respective holders of the Rights and the number of Rights evidenced by each
outstanding Subscription Certificate.
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SECTION 5. Mutilated, Destroyed, Lost or Stolen Subscription
Certificates. Upon receipt by the Company and the Subscription Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Subscription Certificate, and, in case of loss, theft or destruction, of
indemnity and/or security satisfactory to them which may be in the form of an
open penalty bond, and reimbursement to the Company and the Subscription Agent
of all reasonable expenses incidental thereto, and upon surrender and
cancellation of the Subscription Certificate if mutilated, the Company will make
and deliver a new Subscription certificate of like tenor to the Subscription
Agent for delivery to the registered owner in lieu of the Subscription
Certificate so lost, stolen, destroyed or mutilated. If required by the Company
or the Subscription Agent, an indemnity bond must be sufficient in the judgment
of both to protect the Company, the Subscription Agent or any agent thereof from
any loss which any of them may suffer if a Subscription Certificate is replaced.
SECTION 6. Subsequent Issue of Subscription Certificates. Subsequent to
their original issuance, no Subscription Certificates shall be issued except
such Subscription Certificates issued in replacement of mutilated, destroyed,
lost or stolen Subscription Certificates pursuant to Section 5 hereof.
SECTION 7. Exercise of Rights; Exercise Price; Expiration Date.
(a) The holder of any Subscription Certificate may exercise
some or all of the Rights evidenced thereby (but not in amounts of less than one
Right or an integral multiple thereof) by delivering to the Subscription Agent,
on or prior to 5:00 p.m., New York time, on ____________ (the "Expiration
Date"), a properly completed and executed Subscription Certificate evidencing
such Rights if the holder of such right has provided special delivery
instructions on Form 2 of the Subscription Certificate) together with payment of
the Subscription Price for each Underlying Share subscribed for pursuant to the
Subscription Privilege. In the case of holders of Rights that are held of record
through The Depository Trust Company ("DTC"), exercises of the Subscription
Privilege may be effected by instructing DTC to transfer Rights (such rights
being "DTC Exercised Rights") from the DTC account of such holder to the DTC
account of the Subscription Agent, together with payment of the Subscription
Price for each Underlying share subscribed for pursuant to the Subscription
Privilege.
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(b) The Rights shall expire at 5:00 p.m., New York time, on
the Expiration Date.
(c) The "Subscription Price" shall be $5.00 per Unit
subscribed for pursuant to the Subscription Privilege payable (in United States
dollars) (i) by certified check or bank check drawn upon a U.S. bank or postal,
telegraphic or express money order payable to the Subscription Agent, or (ii) by
wire transfer of funds to the account maintained by the Subscription Agent for
such purpose at _________________________. The Subscription Price shall be
deemed to have been received by the Subscription Agent only upon (i) receipt by
the Subscription Agent of any certified check or bank check drawn upon a U.S.
bank or of any postal, telegraphic or express money order or (ii) receipt of
good funds in the Subscription Agent's account designated above, in payment of
the Subscription Price.
(d) If an exercising Rights holder has not indicated the
number of Rights being exercised, or if the Subscription Price payment forwarded
by such holder to the Subscription Agent is not sufficient to purchase the
number of Units subscribed for, the Rights holder will be deemed to have
exercised the Subscription Privilege with respect to the maximum number of whole
Rights which may be exercised for the Subscription Price delivered to the
Subscription Agent and, to the extent that the Subscription Price payment
delivered by such holder exceeds the Subscription Price multiplied by the number
of Rights exercised (such excess being the "Subscription Excess"), the
Subscription Agent will refund the Subscription Excess to such Rights holder
without interest or deduction.
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(e) Once a holder of Rights has exercised a Right, such
exercise may not be revoked.
SECTION 8. Payment for Units, Delivery of Units, Refund and
Subscription Excess.
(a) The closing of the sale of the Units upon exercise of the
Rights (the "Closing") will take place at 10:00 a.m., New York time, on the
third business day after the Underwriter receives notice from the Subscription
Agent as to the number of unsubscribed Units for which it is committed to
purchase (such date and time being referred to herein as the "Closing Date"). At
the Closing, the Subscription Agent shall pay to the Company and/or its
designees as specified in writing, by wire transfer, certified or bank check or
other method acceptable to the Company and/or its designees, the amount of all
funds received by the Subscription Agent in payment of the Subscription Price
for Underlying Shares subscribed for pursuant to the Subscription Privilege less
the aggregate Refund due to the Rights holders who exercise Rights.
Notwithstanding the foregoing, the closing shall occur regardless of whether or
not the Underwritten Public Offering occurs.
(b) The Company shall deliver, or arrange to have delivered,
at the closing the number of Units as are properly subscribed for pursuant to
the Rights Offering and as soon as practicable after the Closing, the
Subscription Agent shall deliver to each exercising Rights holder certificate(s)
representing the shares of Common Stock purchased and Class B Warrants pursuant
to the Subscription Privilege.
SECTION 9. Fractional Rights and Shares.
(a) The Company shall not issue fractions of shares nor shall
the Subscription Agent distribute Subscription Certificates which evidence
fractional Rights. The number of Rights issued to each holder will be rounded
down to the nearest lower whole number.
(b) The Company shall not issue fractional shares of Common
Stock or Warrants to exercising Rights holders upon exercise and acceptance of
Rights.
SECTION 10. Transferability of Rights. The Rights are non-transferable.
SECTION 11. Reports. The Subscription Agent shall notify both the
Company and its designated representatives by telephone as requested during the
period commencing with the mailing of Subscription Certificates and ending on
the Expiration Date (and in the case of guaranteed deliveries pursuant to
Section 7(b), the period ending two NASDAQ trading days after the Expiration
Date), which notice shall thereafter be confirmed in writing, of (i) the number
of Rights exercised on the day of such request, (ii) the number of Units
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subscribed for pursuant to the Subscription Privilege and the number of such
Rights for which payment has been received, (iii) the number of Rights subject
to guaranteed delivery pursuant to Section 7(b) on such day, (iv) the number of
Rights for which defective exercises have been received on such day and (v)
cumulative totals derived from the information set forth in clauses (i) through
(iv) above. At or before 5:00 p.m., New York time, on the first NASDAQ trading
day following the Expiration Date, the Subscription Agent shall certify in
writing to the Company the cumulative totals through the Expiration Date derived
from the information set forth in clauses (i) through (iv) above. The
Subscription Agent shall also maintain and update a listing of holders who have
fully or partially exercised their Rights, and holders who have not exercised
their Rights. The Subscription Agent shall provide the Company or its designated
representatives with the information compiled pursuant to this Section 11 as any
of them shall request.
SECTION 12. Future Instructions and Interpretation.
(a) All questions as to the timeliness, validity, form and
eligibility of any exercise of Rights will be determined by the Company and the
Underwriter, whose determinations shall be final and binding. The Company in its
sole discretion may waive any defect or irregularity, permit a defect or
irregularity to be corrected within such time as it may determine or reject the
purported exercise of any Right. Subscriptions will not be deemed to have been
received or accepted until all irregularities have been waived or cured within
such time as the Company determines in its sole discretion. Neither the Company
nor the subscription Agent shall be under any duty to give notification of any
defect or irregularity in connection with the submission of Subscription
Certificates or incur any liability for failure to give such notification.
(b) The Subscription Agent is hereby authorized and directed
to accept instructions with respect to the performance of its duties hereunder
from an authorized officer of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and it shall not be liable
for any action taken or suffered to be taken by it in good faith in accordance
with instructions of any such officer.
SECTION 13. Payment of Taxes. The Company covenants and agrees that it
will pay when due and payable all documentary, stamp and other taxes, if any,
which may be payable in respect of the issuance or delivery of any Subscription
Certificate or of the Underlying Shares and Class B Warrants; provided, however,
that the Company shall not be liable for any tax liability arising out of any
transaction which results in, or is deemed to be, an exchange of Rights or
securities or a constructive dividend with respect to the Rights or securities
and provided further that the Company shall not be required to pay any tax or
other governmental charge which may be payable in respect of any delivery of any
Subscription Certificate or the issuance or delivery of certificates for shares
of Common Stock or Class B Warrants in a name other than that of the registered
holder of such Subscription Certificate evidencing the Rights exercised, and the
Subscription Agent shall not issue any such certificate until such tax or
governmental charge, if required, shall have been paid.
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SECTION 14. Cancellation and Destruction of Subscription Certificates.
All Subscription Certificates surrendered for the purpose of exercise or
substitution shall be canceled by the Subscription Agent, and no Subscription
Certificates shall be issued in lieu thereof except as expressly permitted by
provisions of this Agreement. The Subscription Agent shall deliver all canceled
Subscription Certificates to the Company, or shall, at the written request of
the Company, destroy such canceled Subscription Certificates, and in such case
shall deliver a certificate of destruction thereof to the Company.
SECTION 15. Right of Action. All rights of action in respect of this
Agreement are vested in the Company and the respective registered holders of the
Subscription Certificates; and any registered holder of any Subscription
Certificate, without the consent of the Subscription Agent or of the holder of
any other Subscription Certificate, may, on his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Subscription Certificate in the manner
provided in such Subscription Certificate and in this Agreement.
SECTION 16. Concerning the Subscription Agent.
(a) The Company agrees to pay to the Subscription Agent
compensation in the amount of $_____________ for all services rendered by it
hereunder and, from time to time, on demand of the Subscription Agent, its
reasonable out-of-pocket expenses and disbursements for mailing, postage and
delivery. The Company also agrees to indemnify the Subscription Agent for, and
to hold it harmless against, any loss, liability, or expense incurred without
negligence or bad faith on the part of the Subscription Agent for anything done
or omitted by the Subscription Agent in connection with the acceptance and
administration of this Agreement, including the costs and expenses of defending
against any claim of liability in the premises, provided that the Subscription
Agent shall have provided the Company with notice of any such claim promptly
after such claim became known to the Subscription Agent, and provided further
that the Company shall have the right to assume the defense of any such claim
upon receipt of written notice thereof from the Subscription Agent. If the
Company assumes the defense of any such claim, the Subscription Agent shall be
entitled to participate in (but not control) the defense of any such claim at
its own expense. The Company shall not indemnify the Subscription Agent with
respect to any claim or action settled without its consent, which consent shall
not be unreasonably withheld.
(b) The Subscription Agent shall be protected and shall incur
no liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any
Subscription Certificate, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice direction, consent,
certificate, statement or other paper or document reasonable believed by it to
be genuine and to be signed, executed and, where necessary verified or
acknowledged by the proper person or persons.
SECTION 17. Merger or Consolidation of Subscription Agent. Any
corporation into which the Subscription Agent or any successor Subscription
Agent may be merged or with which it may be consolidated or any corporation
resulting from any merger or consolidation to which the Subscription Agent
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or any successor Subscription Agent shall be a party, or any corporation
succeeding to the corporate trust business of the Subscription Agent or any
success or Subscription Agent, shall be the successor to the Subscription Agent
under this Agreement without the execution or filing of any paper or any further
act on the part of any of the parties hereto.
SECTION 18. Duties of Subscription Agent. The Subscription Agent
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the holders of
Subscription Certificates by their acceptance thereof shall be bound:
(a) The Subscription Agent may consult with legal counsel (who
may be, but is not required to be, legal counsel for the Company), and the
opinion of such counsel shall be full and complete authorization and protection
to the Subscription Agent as to any actions taken or omitted by it in good faith
and in accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Subscription Agent shall deem it necessary or desirable that any
fact or matter be proved or established by the Company prior to taking or
suffering any action hereunder, such fact or matter (unless other evidence in
respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate signed by the Chairman of
the Board, the President or a Vice President (including any Senior or Executive
Vice President) and by the Treasurer or any Assistant Treasurer or the Secretary
or any Assistant Secretary of the Company and delivered to the Subscription
Agent; and such certificate shall be full authorization to the Subscription
Agent for any action taken or suffered in good faith by it under the provisions
of this Agreement in reliance upon such certificate.
(c) The Subscription Agent shall be liable hereunder only for
its own negligence or willful misconduct.
(d) The Subscription Agent shall not be liable for or by
reason of any of the statements of fact or recitals contained in this Agreement
or in the Subscription Certificates or be required to verify the same, but all
such statements and recitals are and shall be deemed to have been made by the
Company only.
(e) The Subscription Agent shall not be under any
responsibility in respect of the validity of this Agreement or the execution and
delivery hereof (except the due execution hereof by the Subscription Agent) or
in respect of the validity or execution of any Subscription Certificate; nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Subscription Certificate; nor
shall it by any act hereunder be deemed to make any representation or warranty
as to the authorization or reservation of any shares of Common Stock to be
issued pursuant to this Agreement or any Subscription Certificate or as to
whether any shares of Common Stock will, when issued, be validly authorized and
issued, fully paid and non-assessable.
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(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Subscription Agent for the carrying out or
performing by the Subscription Agent of the provisions of this Agreement.
(g) Nothing herein shall preclude the Subscription Agent from
acting in any other capacity for the Company.
SECTION 19. Notices to the Company, Holders, Royce Investment Group,
Inc. and Subscription Agent. All notices and other communications provided for
or permitted hereunder shall be made by hand delivery, prepaid first-class mail,
or telecopier:
(a) If to the Company, to:
Eastco Industrial Safety Corp.
130 West 10th Street
Huntington Station, NY 11746
Att: Anthony P. Towell
Telecopier: (516) 427-1840
with copies to:
Hollenberg Levin Solomon Ross Belsky & Daniels, LLP
585 Stewart Avenue, Suite 700
Garden City, NY 11530
Att: Herbert W. Solomon, Esq.
Telecopier: (516) 745-6642
Royce Investment Group, Inc.
199 Crossways Park Drive
Woodbury, New York 11797
Att: John Higgins, Vice-President of
Corporate Finance
Telecopier: (516) 364-2518
Lester Morse, P.C.
111 Great Neck Road
Great Neck, New York 11021
Att: Steve Morse, Esq.
Telecopier: (516) 487-1452
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(b) if to the Subscription Agent, to:
American Stock Transfer & Trust Company
40 Wall Street
New York, NY 10005
Att: Executive Vice-President
Telecopier: (718) 234-5001
(c) if to a registered holder, at the address shown on the
registry books of the Company.
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; two business
days after being deposited in the mail, postage prepaid, if mailed as aforesaid;
when answered back if telexed; and when receipt is acknowledged, if telecopied.
SECTION 20. Supplements and Amendments. The Company and the
Subscription Agent may from time to time supplement or amend this Agreement
without the approval of any holders of Subscription Certificates in order to
cure any ambiguity or to correct or supplement any provision contained herein
which may be defective or inconsistent with any other provision herein, or to
make any other provisions in regard to matters or questions arising hereunder
which the Company and the Subscription Agent may deem necessary or desirable and
which shall not materially adversely affect the interests of the holders of the
Subscription Certificates.
SECTION 21. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Subscription Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
SECTION 22. Termination. This Agreement shall terminate at 5: 00 p.m.,
New York time, on the seventh day following the Expiration Date. Upon
termination of this Agreement, and provided that all shares of Common Stock and
Class B Warrants for Rights accepted for execution prior to such termination are
issued and delivered by the Company, the Company shall be discharged from all
obligations under this Agreement except for its obligations to the Subscription
Agent under Sections 13 and 16 hereof and except with respect to the obligation
of the Company to provide instruction and direction to the Subscription Agent as
may be provided in this Agreement.
SECTION 23. Governing Law. This Agreement and each Subscription
Certificate shall be deemed to be a contract made under the laws of the State of
New York and for all purposes shall be construed in accordance with the internal
laws of said State.
SECTION 24. Benefits of This Agreement. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company, the
Subscription Agent and the holders of the Subscription Certificates any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Subscription Agent and
the holders of the Subscription Certificates.
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SECTION 25. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, but all such counterparts shall together constitute one and
the same instrument.
SECTION 26. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF the undersigned have caused this Subscription Agency
Agreement to be executed by their duly authorized representative as of the date
first above written.
EASTCO INDUSTRIAL SAFETY CORP.
By:_________________________________
Name:
Title:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By:________________________________
Name:
Title:
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