SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1994
or
Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____ to _____
Commission File Number: 0-3585
________________________
EVEREST & JENNINGS INTERNATIONAL LTD.
(Exact name of registrant as specified in its charter)
DELAWARE 95-2536185
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1100 CORPORATE SQUARE DRIVE, ST. LOUIS, MISSOURI 63132
(Address of principal executive offices)
Registrant's telephone number, including area code: 314-995-7000
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
________________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
the filing requirements for the past 90 days: Yes X No
Shares of Common Stock outstanding as of November 14, 1994: 72,199,612.
1 of 42
<PAGE>
QUARTERLY REPORT ON FORM 10-Q
SEPTEMBER 30, 1994
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 27
Item 2. Changes in Securities 27
Item 3. Defaults upon Senior Securities 27
Item 4. Submission of Matters to a Vote of Security Holders 27
Item 5. Other Information 27
Item 6. Exhibits and Reports on Form 8-K 28
SIGNATURE 28
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The consolidated financial statements included herein have been
prepared by the management of Everest & Jennings International Ltd. (the
"Company") without audit pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, all
adjustments (consisting only of normal recurring accruals) necessary to
state fairly the results for the interim periods presented herein in
accordance with generally accepted accounting principles for interim
financial information have been made (however, the consolidated financial
statements included herewith do not include any adjustments that might
result from the Company's inability to emerge from or complete its ongoing
restructuring activities and continue as a going concern -- see Note 1 to
the unaudited Consolidated Financial Statements). Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. Management
believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these consolidated
financial statements be read in conjunction with the consolidated financial
statements and the notes thereto included in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993.
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except per-share data)
Three Months Ended September 30
-------------------------------
1994 1993
-------- --------
(Unaudited)
Revenues $19,829 $23,458
Cost of sales 13,467 17,746
_______ _______
Gross profit 6,362 5,712
Selling expenses 5,047 7,280
General and administrative expenses 1,411 1,986
_______ _______
Total operating expenses 6,458 9,266
_______ _______
Loss from operations (96) (3,554)
Interest expense, BIL (Note 5) 263 435
Interest expense 424 1,230
_______ _______
Loss before income taxes (783) (5,219)
Income tax provisions 114 17
_______ _______
Net loss $( 897) $(5,236)
Loss per share (Note 7) $(.01) $(.57)
Weighted average number of Common
Shares outstanding 72,199,612 9,146,000
The accompanying Notes are an integral part of these
Consolidated Financial Statements
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except per-share data)
Nine Months Ended September 30
------------------------------
1994 1993
-------- --------
(Unaudited)
Revenues $60,188 $71,734
Cost of sales 42,068 53,826
_______ _______
Gross profit 18,120 17,908
Selling expenses 15,384 19,317
General and administrative expenses 4,257 9,917
_______ _______
Total operating expenses 19,641 29,234
_______ _______
Loss from operations (1,521) (11,326)
Interest expense, BIL (Note 5) 592 1,389
Interest expense 1,126 3,127
_______ _______
Loss before income taxes (3,239) (15,842)
Income tax provisions 271 208
_______ _______
Net loss $(3,510) $(16,050)
Loss per share (Note 7) $(.05) $(1.75)
Weighted average number of Common
Shares outstanding 72,199,612 9,162,000
The accompanying Notes are an integral part of these
Consolidated Financial Statements
<PAGE>
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
September 30 December 31
1994 1993
------------ -----------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 491 $ 1,872
Restricted cash (Note 12) 1,287 ---
Accounts receivable, less allowance
for doubtful accounts of $2,036
in 1994 and $2,956 in 1993 18,339 15,677
Inventories (Note 9) 19,337 17,034
Assets held for sale (Notes 1 and 6) 11,346 12,864
Other current assets 1,487 1,494
______ ______
Total current assets 52,287 48,941
______ ______
PROPERTY, PLANT AND EQUIPMENT:
Land 148 150
Buildings and improvements 3,629 3,597
Machinery and equipment 12,997 12,410
______ ______
16,774 16,157
Less accumulated depreciation
and amortization (10,154) (9,105)
______ ______
Property, plant and equipment, net 6,620 7,052
INTANGIBLE ASSETS, NET 788 1,007
OTHER ASSETS 493 515
______ ______
TOTAL ASSETS $60,188 57,515
The accompanying Notes are an integral part of these
Consolidated Financial Statements
<PAGE>
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
LIABILITIES AND STOCKHOLDERS' DEFICIT
September 30 December 31
1994 1993
------------ -----------
(Unaudited)
CURRENT LIABILITIES:
Short-term borrowings and current installments
of long-term debt of $1,558 in 1994
and $1,562 in 1993 (Note 5) $11,720 $20,897
Short-term borrowings from BIL (Note 5) 14,802 ---
Accounts payable 8,065 8,099
Accrued payroll costs 6,895 9,360
Accrued interest, BIL (Note 5) 777 185
Accrued expenses 11,421 10,863
Accrued restructuring expenses (Notes 1 & 6) 4,232 6,292
______ ______
Total current liabilities 57,912 55,696
______ ______
LONG-TERM DEBT, NET OF CURRENT PORTION
(Note 5) 13,234 3,622
LONG-TERM BORROWINGS FROM BIL (Note 5) --- 4,802
OTHER LONG-TERM LIABILITIES 361 403
COMMITMENTS AND CONTINGENCIES (Note 12)
STOCKHOLDERS' DEFICIT: (Notes 4, 10 and 11)
Series A Convertible Preferred Stock 11,089 11,089
Series B Convertible Preferred Stock 1,317 1,317
Series C Convertible Preferred Stock 20,000 20,000
Common Stock, par value: $.01;
authorized 120,000,000 shares 722 722
Additional paid-in capital 105,578 105,578
Accumulated deficit (146,705) (142,449)
Minimum pension liability adjustment (2,606) (2,606)
Cumulative translation adjustments (714) (659)
______ ______
Total stockholders' deficit (11,319) (7,008)
______ ______
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT $60,188 $57,515
The accompanying Notes are an integral part of these
Consolidated Financial Statements
<PAGE>
<TABLE>
EVEREST & JENNINGS INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
(Dollars in thousands)
(unaudited)
<CAPTION>
Series A Series B Series C
Convertible Convertible Convertible
Preferred Stock Preferred Stock Preferred Stock Common Stock
--------------- --------------- --------------- ------------
SharesAmount Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
<C> <C> <C> <C>
Balance at December 31, 1993 6,622,206 $11,089 786,357 $1,317 20,000,000 $20,000 72,199,612 $722
Accrued Dividends on Series A
Convertible Preferred Stock -- -- -- -- -- -- -- --
Net loss -- -- -- -- -- -- -- --
Translation adjustments of
consolidated subsidiaries -- -- -- -- -- -- -- --
_________ _______ _______ ______ __________ _______ __________ ____
Balance at September 30, 1994 6,622,206 $11,089 786,357 $1,317 20,000,000 $20,000 72,199,612 $722
</TABLE>
<PAGE>
<TABLE>
EVEREST & JENNINGS INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
(Dollars in thousands)
(unaudited)
(continued)
<CAPTION>
Minimum
Additional Accumu- Pension Cumulative
Paid-in lated Liability Translation
Capital Deficit Adjustment Adjustments Total
---------- ------- ---------- ----------- -----
<S> <C> <C> <C>
<C> <C>
Balance at December 31, 1993 $105,578 $(142,449) $(2,606) $(659) $(7,008)
Accrued Dividends on Series A
Convertible Preferred Stock -- (746) -- -- (746)
Net loss -- (3,510) -- -- (3,510)
Translation adjustments -- -- -- (55) (55)
______ ________ ______ ____ ______
Balance at September 30, 1994 $105,578 $(146,705) $(2,606) $(714) $(11,319)
The accompanying Notes are an integral part of this
Consolidated Financial Statement
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Nine Months Ended September 30
------------------------------
1994 1993
-------- --------
(Unaudited)
Cash flows from operating activities:
Net loss $(3,510) $(16,050)
Adjustment to reconcile net loss to
cash used in operating activities:
Depreciation and amortization 1,331 1,296
Changes in operating assets and liabilities:
Accounts receivable (2,662) (1,471)
Inventories (2,303) (2,317)
Accounts payable (34) (9,522)
Accrued payroll costs, expenses and
interest, BIL (1,315) 1,220
Accrued restructuring expenses (2,060) (4,391)
Other, net (739) (470)
______ ______
Cash used in operating activities (11,292) (31,705)
______ ______
Cash flows from investing activities:
Capital expenditures (671) (2,960)
Changes in Assets held for sale 1,518 ---
Changes in other long-term assets and
liabilities, net (29) (58)
______ ______
Cash provided by (used in)
investing activities 818 (3,018)
______ ______
Cash flows from financing activities:
Advances from BIL 10,000 38,008
Increase (decrease) in short-term and
long-term borrowings, net 435 (3,074)
______ ______
Cash provided by financing activities 10,435 34,934
______ ______
Effect of exchange rate changes on cash flow (55) (176)
______ ______
Increase (decrease) in cash balance (94) 35
Cash and cash equivalents balance at
beginning of year 1,872 145
Restricted cash (1,287) ---
______ ______
Cash and cash equivalents balance at end
of the nine-month period $ 491 $ 180
Supplemental disclosures of cash flow information:
Cash paid for interest $ 1,106 $ 2,078
Cash paid for income taxes $ 203 $ 303
The accompanying Notes are an integral part of these
Consolidated Financial Statements
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per-share data)
NOTE 1 -- CORPORATE RESTRUCTURING
The Company has incurred substantial financial losses in a continuing
effort to restructure its operations with the objective of becoming a
stronger long-term competitor in the durable medical equipment industry.
Restructuring activities have included asset sales, significant reductions
in headcount, salaries and fringe benefits, plant closures and
consolidations, product line rationalization, debt to equity conversion and
outsourcing of manufacturing operations. In addition to the foregoing, the
Company is pursuing the sale or other disposition of the Smith & Davis
institutional business and Everest & Jennings de Mexico.
The accompanying consolidated financial statements have been prepared
under the going concern concept. The going concern concept anticipates an
entity will continue in its present form and, accordingly, uses the
historical cost basis to prepare financial statements. The Company has
incurred substantial restructuring expenses and recurring operating losses
and has a net capital deficiency at September 30, 1994. No assurance can
be made that the Company will successfully emerge from or complete its
restructuring activities.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies followed for the three month period and
nine month period ended September 30, 1994 are the same as those disclosed
in the Notes to the Company's December 31, 1993 Consolidated Financial
Statements, which were included in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993. All dollar amounts in these
Notes to Unaudited Consolidated Financial Statements are in thousands
except per-share data or as otherwise specified. In the opinion of
management, all adjustments, consisting of normal recurring adjustments
necessary for a fair presentation of (a) the consolidated results of
operations for the three month periods and nine month periods ended
September 30, 1994 and 1993; (b) the consolidated financial position at
September 30, 1994 and December 31, 1993; and (c) the consolidated cash
flows for the nine month periods ended September 30, 1994 and 1993 have
been made (however, the consolidated financial statements included herewith
do not include any adjustments that might result from the Company's
inability to emerge from or complete its ongoing restructuring activities
and continue as a going concern -- see Note 1 to the unaudited Consolidated
Financial Statements). Certain reclassifications have been made to prior
period financial statements to conform with current period presentation.
NOTE 3 -- ACQUISITION
In January, 1994, the Company completed the acquisition (the
"Acquisition") of Medical Composite Technology, Inc. ("MCT"). The $10.6
million purchase price consisted of the issuance of 8,000,000 shares of
Common Stock, $2 million in the form of pre-closing cash advances, and the
assumption of $0.6 million of net liabilities. Additionally, the Company
assumed the equivalent of 107,614 unvested stock options for the purchase
of the Company's Common Stock.
The Acquisition was accounted for as a purchase. Of the $10.6 million
purchase price, $9.7 million was attributable to in-process research and
development, and was expensed in the fourth quarter of 1993. The balance
of the purchase price over the fair value of assets acquired, $0.9 million,
was allocated to goodwill and is being amortized over a period of three
years.
For purposes of consolidated financial statement presentation, the
Acquisition was accounted for as if it was completed on December 31, 1993.
Accordingly, the Company's consolidated financial statements as of
September 30, 1994 and December 31, 1993 include the assets and liabilities
of MCT.
Pro forma combined results of operations (unaudited) of the Company and
MCT for the nine month and three month periods ended September 30, 1993 are
shown below. Pro forma results of operations are not necessarily
indicative of the results of operations if the companies had constituted a
single entity during the period combined (dollars in millions except per
share data):
Nine Months Three Months
Ended Ended
Sept. 30, 1993 Sept. 30, 1993
-------------- --------------
Net sales $72.4 $23.7
Net loss from continuing
operations (28.1) (6.0)
Net loss per share (1.64) (.35)
NOTE 4 -- DEBT RESTRUCTURING AND CONVERSION
As of September 30, 1993, the Company, Everest & Jennings, Inc. ("E&J
Inc."), Jennings Investment Co. and BIL entered into a Debt Conversion
Agreement to provide for the conversion (the "Debt Conversion Transaction")
of approximately $75 million in principal and accrued, unpaid interest (the
"Converted BIL Debt"), owed by the Company and E&J Inc. Pursuant to the
Debt Conversion Agreement, (a) the Company and E&J Inc. issued to BIL a
Convertible Promissory Note -- Common Stock (the "Common Stock Note") in
the initial principal amount of $45 million and a Convertible Promissory
Note -- Preferred Stock (the "Preferred Stock Note") in the original
principal amount of $20 million; (b) BIL agreed to lend to E&J Inc. $5.7
million to allow E&J Inc. to repay the outstanding balance of cash advances
owed by E&J Inc. to the Hongkong & Shanghai Banking Corporation ("HSBC")
under the terms of a Revolving Credit Agreement dated as of September 30,
1992, as amended (the "Revolving Credit Agreement"), between E&J Inc. and
HSBC; (c) Brierley Investments Limited, an affiliate of BIL, agreed to
guarantee a letter of credit facility ("Letter of Credit Facility") between
E&J Inc. and HSBC (or an alternative commercial lending institution) in an
amount not exceeding $6 million through and including September 30, 1995;
(d) BIL, as guarantor of the obligations of E&J Inc. under the Revolving
Credit Agreement, agreed to an amendment of the Revolving Credit Agreement
whereby cash advances of up to $10 million were made available for E&J
Inc.'s working capital needs; (e) the Company and E&J Inc. agreed to
indemnify (the "Indemnification Obligation") BIL from and against any and
all losses arising out of BIL's guarantee of the Letter of Credit Facility
and the Revolving Credit Agreement; (f) BIL agreed to lend to the Company
and E&J Inc. up to $12.5 million pursuant to the terms of the Revolving
Promissory Note; (g) BIL and the Company and E&J Inc. entered into a
Security Agreement (the "Security Agreement") pursuant to which the Company
and E&J Inc. granted a security interest in all of their assets to BIL to
secure on a pari passu basis the obligations of the Company and E&J Inc. to
BIL under the Common Stock Note, the Preferred Stock Note, the Revolving
Promissory Note and the Indemnification Obligation; and (h) the Company and
BIL entered into a Registration Rights Agreement pursuant to which the
Company granted to BIL registration rights with respect to shares of Common
Stock held as of the date of the Registration Rights Agreement and shares
of Common Stock obtained by BIL as a result of the conversion of the Common
Stock Note and Series C Preferred Stock issuable upon conversion of the
Promissory Stock Note.
The Company held a Special Meeting of Stockholders on December 31,
1993, to ratify and approve the Debt Conversion Transaction. Concurrent
with ratification and approval of the Debt Conversion Transaction, the
Company's stockholders approved and adopted amendments to the Company's
Certificate of Incorporation to increase the number of authorized shares of
Common Stock from 25,000,000 to 120,000,000 and to increase the number of
authorized shares of Preferred Stock from 11,000,000 to 31,000,000 (the
"Recapitalization Proposals").
BIL had agreed, upon stockholder approval of the Debt Conversion
Transaction and the Recapitalization Proposals, to advance E&J Inc. $10
million to pay HSBC the cash advance it made to E&J Inc. under the
Revolving Credit Agreement. Such advance by BIL to E&J Inc. which has
resulted in an increase in the principal amount of the Common Stock Note
from $45 million to $55 million. However, subsequent to the Special
Meeting of Stockholders, BIL and E&J Inc. agreed to transfer $10 million
from the Revolving Promissory Note to the Common Stock Note, thus
increasing the balance of the Common Stock Note to $55 million.
The Common Stock Note was convertible into that number of shares of
Common Stock equal to the outstanding principal balance of that Note at
conversion divided by a stated conversion price ($1.00 per share, subject
to antidilution adjustment).
The Common Stock Note automatically converted in full upon satisfaction
of all of the following conditions: (a) ratification of the Debt
Conversion Transaction by the stockholders of the Company; (b) approval and
adoption of the Common Stock Amendment and the Preferred Stock Amendment by
the stockholders of the Company; (c) the filing and effectiveness of an
amendment to the Company's Certificate of Incorporation to effect the
Common Stock Amendment and the Preferred Stock Amendment; (d) adoption by
the Board of Directors of resolutions to designate the Series C Preferred
Stock and the filing and effectiveness of a Certificate of Designations of
the Series C Preferred Stock (the "Series C Certificate of Designations");
(e) reservation of a sufficient number of shares of Series C Preferred
Stock for issuance on conversion of the Preferred Stock Note; (f)
reservation of a sufficient number of Common shares for issuance on
conversion of the Common Stock Note and the Series C Preferred Stock issued
on conversion of the Preferred Stock Note; and (g) approval for listing on
the American Stock Exchange of the Common shares issuable on conversion of
the Common Stock Note and the Series C Preferred Stock issued on conversion
of the Preferred Stock Note. BIL waived condition (g), and the Common
Stock Note converted into 55 million shares of Common stock on January 12,
1994.
The Preferred Stock Note was convertible into that number of shares of
Series C Preferred Stock equal to the outstanding principal balance of that
Note at conversion divided by a stated conversion price ($1.00 per share,
subject to antidilution adjustment). The Series C Preferred Stock is
convertible into shares of Common Stock on a one-for-one basis.
The Preferred Stock Note automatically converted in full upon
satisfaction of all of the following conditions: (a) ratification of the
Debt Conversion Transaction by the stockholders of the Company; (b)
approval and adoption of the Common Stock Amendment and the Preferred Stock
Amendment by the stockholders of the Company; (c) the filing and
effectiveness of an amendment to the Company's Certificate of Incorporation
to effect the Common Stock Amendment and the Preferred Stock Amendment; (d)
adoption by the Board of Directors of resolutions to designate the Series C
Preferred Stock and the filing and effectiveness of the Series C
Certificate of Designations; (e) reservation of a sufficient number of
shares of Series C Preferred Stock for issuance on conversion of the
Preferred Stock Note; (f) reservation of a sufficient number of Common
shares for issuance on conversion of the Common Stock Note and the Series C
Preferred Stock issued on conversion of the Preferred Stock Note; and (g)
approval for listing on the American Stock Exchange of the Common shares
issuable on conversion of the Common Stock Note and the Series C Preferred
Stock issued on conversion of the Preferred Stock Note. BIL waived
condition (g), and the Preferred Stock Note converted into 20 million
shares of Series C Convertible Preferred Stock on January 12, 1994.
The conversions of both the Common Stock Note and the Preferred Stock Note
were reflected in the consolidated financial statements as of December 31,
1993. No gain or loss was recognized as a result of the Debt Conversion
Transaction.
NOTE 5 -- DEBT
The Company's debt as of September 30, 1994 and December 31, 1993 is as
follows:
September 30 December 31
1994 1993
------------ -----------
Revolving Promissory Note to BIL $14,802 $ 4,802
Loans payable to HSBC 10,000 10,000
Other domestic debt 9,534 10,844
Foreign debt 5,420 3,675
______ ______
Total debt 39,756 29,321
Less short-term debt and current installments
of long-term debt 26,522 20,897
______ ______
Long-term debt, net of current
installments, including Revolving
Promissory Note to BIL $13,234 $ 8,424
On September 30, 1992, E&J Inc. entered into a $20 million unsecured
Revolving Credit Agreement with HSBC. Advances under the Revolving Credit
Agreement bear interest at the prime rate announced by Marine Midland Bank,
N.A. from time to time. Repayment of existing debt with BIL is
subordinated to the HSBC debt, and Brierley Investments Limited, an
affiliate of BIL, has guaranteed its repayment.
In September, 1993, the outstanding HSBC loan balance of $5.7 million
was repaid utilizing a cash advance provided by BIL under the Revolving
Promissory Note. Furthermore, as of September 30, 1993, HSBC and E&J Inc.
agreed to amend the Revolving Credit Agreement and extend its term for
approximately one year. The HSBC facility, as amended, provides up to $6
million for letter of credit availability and, additionally, cash advances
of up to $10 million to E&J Inc. As of September 30, 1994, the term of the
HSBC facility was extended for two years.
On October 8, 1993, E&J Inc. fully utilized the $10 million in cash
advances under the Revolving Credit Agreement to repay a $10 million loan
from Mercantile Bank, resulting in no further cash availability under the
Revolving Credit Agreement.
As of September 30, 1993, the Company entered into the Debt Conversion
Agreement with BIL whereby $75 million of indebtedness was restructured by
the issuance of the Common Stock Note and the Preferred Stock Note (see
Note 4). The balance of the indebtedness owed BIL ($6.8 million) which was
not converted into the Common Stock Note and the Preferred Stock Note was
treated as advances under the Revolving Promissory Note.
As part of the Debt Conversion Transaction, BIL agreed to provide the
Company and E&J Inc. a revolving credit facility of up to $12.5 million, as
evidenced by the Revolving Promissory Note. At September 30, 1994, this
facility was completely utilized. Additionally, BIL had advanced the
Company an additional $2.3 million. The Revolving Promissory Note and
other advances mature on September 30, 1995, bear interest at the rate of
8% per annum, and are secured by a lien on and security interest in all
assets of the Company and E&J Inc. The Revolving Promissory Note is
subordinated to all other secured debt borrowed or guaranteed by the
Company or E&J Inc. As of September 30, 1994, $0.8 million of accrued,
unpaid interest was due BIL under the Revolving Promissory Note.
The Company's Smith & Davis subsidiary has a credit facility in the
amount of $13 million (based on asset levels) secured by substantially all
of the assets of Smith & Davis. This line of credit bears interest at
prime plus 2%. At September 30, 1994, the Company had borrowed $4.8
million under this credit facility and had $0.3 million available under
this credit facility. Additionally, Smith & Davis had other borrowings
primarily consisting of amounts owed under certain industrial revenue bonds
totaling $1.0 million at September 30, 1994, with interest rates ranging
from 8% to prime plus 3%. These amounts are due at various semi-annual
intervals through 1996.
At September 30, 1994, the Company was contingently liable under
existing letters of credit in the aggregate amount of approximately $3.5
million.
The Company's Canadian subsidiary has credit facilities in the
aggregate of $4.7 million, of which $4.4 million was borrowed as of
September 30, 1994 at interest rates ranging from prime plus 1/2% to prime
plus 3/4%. The loans are secured by the assets of the Canadian subsidiary.
The Company's Mexican subsidiary has a credit facility in the aggregate
of $1.5 million, of which $1.0 million was borrowed at September 30, 1994
at interest rates approximating 13%. The loans are secured by the assets
of the Mexican subsidiary.
Accordingly, at September 30, 1994 the Company owed $22.1 million to
banks and other commercial lenders, $2.9 million under capitalized lease
obligations, and $14.8 million to BIL.
During the nine months ended September 30, 1994, the Company required
$10.4 million of additional financing to fund its operating requirements
and accrued restructuring expenses. Of this amount, $10 million has been
provided to the Company by BIL, bringing the total advances under the
Revolving Promissory Note to $14.8 million as of September 30, 1994. The
Company expects to need additional financing at least through the end of
1994, and will seek to amend the Revolving Promissory Note with BIL to
provide for such requirement.
NOTE 6 -- ASSETS HELD FOR SALE
On September 30, 1994, Smith & Davis Manufacturing Company, a wholly-
owned subsidiary of Everest & Jennings International Ltd., signed a letter
of intent for the sale of its institutional business. The sale is subject
to many terms and conditions including execution of a definitive agreement.
The transaction is expected to be completed in the fourth quarter of 1994.
Net assets held for sale include those for the disposition of the
Company's Smith & Davis institutional business and the Company's Mexican
subsidiary, and consist of the following as of September 30, 1994 and
December 31, 1993 (stated at estimated net realizable values):
September 30 December 31
1994 1993
------------ -----------
Smith & Davis:
Accounts receivable $3,481 $ 4,999
Inventories 5,124 4,401
Land and buildings 1,000 1,490
Machinery & equipment 1,200 1,100
Other assets --- 196
______ ______
10,805 12,186
Everest & Jennings de Mexico:
Net assets 541 678
______ ______
Total assets held for sale $11,346 $12,864
Results of operations for the Smith & Davis institutional business for
the nine month and three month periods ended September 30, 1994 were as
follows:
Nine Months Three Months
Ended Ended
Sept. 30, 1994 Sept. 30, 1994
-------------- --------------
Revenues $15,488 $ 5,015
Cost of sales 11,139 3,599
_____ _____
Gross profit 4,349 1,416
Operating expenses 5,019 1,534
Interest expense 387 160
_____ _____
Net loss $(1,057) $ (278)
During the phase out period through the estimated disposal date, the
results of the Smith & Davis institutional business are being charged
against Accrued restructuring expenses on the consolidated balance sheet.
The operating results of the Company's Mexican subsidiary for the three
month period ended September 30, 1994 and the nine month period ended
September 30, 1994 were not material.
NOTE 7 -- LOSS PER SHARE
Loss per share for the three and nine month periods ended September 30,
1994 and 1993 is calculated based on the weighted average number of shares
of Common Stock during the periods.
NOTE 8 -- INCOME TAXES
In January 1993, the Company adopted SFAS 109, "Accounting for Income
Taxes". SFAS 109 utilizes an asset and liability approach in accounting
for income taxes and requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have
been recognized in the Company's consolidated financial statements or tax
returns. Since it is unlikely that the Company will realize the future tax
benefits of the deferred tax asset related to its substantial net operating
losses, a valuation allowance has been established for the full amount and
thus the adoption of SFAS 109 had no impact on the consolidated financial
statements of the Company.
The Company's foreign source income is not material.
NOTE 9 -- INVENTORIES
Inventories at September 30, 1994 and December 31, 1993 consist of the
following:
September 30 December 31
1994 1993
------------ -----------
Raw materials $8,232 $ 8,219
Work-in-process 6,746 4,131
Finished goods 4,359 4,684
______ ______
$19,337 $17,034
NOTE 10 -- COMMON STOCK
On March 17, 1992, the stockholders of the Company approved a Plan of
Reclassification. Under the Plan of Reclassification, the Certificate of
Incorporation of the Company was amended to replace the Company's
authorized Class A Common Stock and Class B Common Stock with a new single
class of Common Stock having 25,000,000 authorized shares, and reclassified
each outstanding Class A Common share and each outstanding Class B Common
share into one share of such new single class of Common Stock. The Plan of
Reclassification became effective as of the close of business on November
18, 1993.
On December 31, 1993, the Company's stockholders approved the Debt
Conversion Transaction (see Note 4), which resulted in the issuance of 55
million shares of Common Stock and 20 million shares of 7% Series C
Convertible Preferred Stock for conversion of the Common Stock Note and the
Preferred Stock Note, respectively.
On December 31, 1993, the Company issued 8 million shares of Common
Stock to the stockholders of MCT (see Note 3).
NOTE 11 -- STOCK OPTIONS
Effective April 25, 1994, the Company adopted the 1994 Everest &
Jennings Stock Option Plan (the "1994 Plan"), providing for the granting of
nonqualified stock options to purchase up to 4,412,000 shares of the
Company's Common Stock to selected full-time employees of the Company.
Under the 1994 Plan, the options become exercisable in 50% increments when
the Company achieves certain performance goals, and are automatically
exercisable five years after the grant date, assuming continuous employment
with the Company.
Information regarding the 1994 Plan is as follows:
1994 Activity Number of Shares Option Prices
------------- ---------------- -------------
Options granted on 8/1/94 3,672,000 $0.85
Options cancelled (97,000) $0.85
_________
Options outstanding at 9/30/94 3,575,000
No options were exercisable at September 30, 1994, pursuant to this Plan.
At September 30, 1994, 837,000 shares were available for the granting of
additional options.
NOTE 12 -- CONTINGENT LIABILITIES
In June, 1994 an Arbitrator ruled in favor of ICF Kaiser Engineers,
Inc. ("ICF Kaiser") against the Company relating to a Demand for
Arbitration (the "Demand") against the Company before the American
Arbitration Association in Los Angeles, California. In the Demand, ICF
Kaiser claimed breach of contract between the parties for consulting and
clean up work by ICF Kaiser at E&J's former facilities located in
Camarillo, California. The Arbitration Award is in the sum of
approximately $1.3 million. ICF Kaiser has obtained judgments against the
Company in California and Missouri in the amount of the arbitration award.
ICF Kaiser began enforcement of such judgment during September, 1994 by
garnishing the Company's general disbursing bank accounts in the amount of
their judgment, thus restricting the Company's use of such funds. The
Company is currently considering its options related to this matter, and
has recorded an appropriate reserve in its consolidated financial
statements to reflect this matter.
In 1990, a class action suit was filed in the United States District
Court for the Central District of California by a stockholder of the
Company against the Company and certain of its present and former directors
and officers seeking unspecified damages for alleged non-disclosure and
misrepresentation concerning the Company in violation of federal securities
laws. The Company twice moved to dismiss the complaint on various grounds.
After the first such motion was granted, plaintiff filed a first amended
complaint, which subsequently was dismissed by order filed in September,
1991. Plaintiff then notified the court that it did not intend to further
amend the complaint, and an order dismissing the complaint was entered in
November, 1991. Plaintiff filed a notice of appeal to the Court of Appeals
for the Ninth Circuit in December, 1991. The case was briefed and oral
argument heard in June, 1993. In January, 1994, the Court of Appeals
ordered that the plaintiff's submission be vacated pending the outcome of a
petition for rehearing in another case that addresses a similar procedural
issue that was argued on appeal in that case. The Company continues to
believe the case is without merit and intends to contest the asserted
complaints vigorously. The ultimate liability, if any, cannot be
determined at this time.
The Company has been named as a defendant in a lawsuit filed by the
State of California pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act 42 U.S.C. par. 9601 et sec. The Company was
originally notified of this action in December, 1992. The lawsuit seeks to
recover response and remediation costs in connection with the release or
threatened release of hazardous substances at 5619-5621 Randolph Street, in
the City of Commerce, California ("Randolph Street Site"). It is alleged
the Randolph Street Site was used for the treatment, storage and disposal
of hazardous substances. The Company has been named as a defendant as a
result of its ownership of a former subsidiary of the Company which
allegedly disposed of hazardous waste materials at the Randolph Street
Site. Investigation with respect to potential liability of the Company is
in the early stages. Issues to be addressed include whether the Company
has any responsibility for the alleged hazardous waste disposals of its
former subsidiary; whether the subsidiary actually sent hazardous waste
materials to the Randolph Street Site; the nature, extent and costs of the
ultimate cleanup required by the State of California; the share of that
cleanup which may ultimately be allocated to the Company's former
subsidiary and/or the Company; and the extent to which insurance coverage
may be available for any costs which may eventually be assigned to the
Company. Remedial investigations performed on behalf of the State of
California at the Randolph Street Site have disclosed soil and groundwater
contamination. The Company has recorded a reserve of $1.0 million for this
matter, which was included in the Consolidated Statements of Operations for
1993.
In March, 1993, E&J Inc. received a notice from the United States
Environmental Protection Agency ("EPA") regarding an organizational meeting
of generators with respect to the Casmalia Resources Hazardous Waste
Management Facility ("Casmalia Site") in Santa Barbara County, California.
The EPA alleges that the Casmalia Site is an inactive hazardous waste
treatment, storage and disposal facility which accepted large volumes of
commercial and industrial wastes from 1973 until 1989. In late 1991, the
Casmalia Site owner/operator abandoned efforts to actively pursue site
permitting and closure and is currently conducting only minimal maintenance
activities. The EPA estimates the Casmalia Site's closure trust fund,
approximately $10 million, is substantially insufficient to cover cleanup
and closure of the site. Since August, 1992, the EPA has undertaken
certain interim stabilization actions to control actual or threatened
releases of hazardous substances at the Casmalia Site. The EPA is seeking
cooperation from generators to assist in the cleaning up, and closing of,
the Casmalia Site. E&J Inc. and 64 other entities were invited to the
organizational meeting. The EPA has identified E&J Inc. as one of the
larger generators of hazardous wastes transported to the Casmalia Site.
E&J Inc. is a member of a manufacturers' group of potentially responsible
parties which has investigated the site and proposed a remediation plan to
the EPA. To reflect E&J Inc.'s estimated allocation of costs thereunder, a
reserve of $1.0 million has been recorded, which was included in the
Consolidated Statements of Operations for 1993.
In 1989, a patent infringement case was initiated against E&J Inc. and
other defendants. E&J Inc. prevailed at trial with a directed verdict of
patent invalidity and non-infringement. The plaintiff filed an appeal with
the U.S. Court of Appeals for the Federal Circuit. In June, 1993, the
Court of Appeals vacated the District Court's decision and remanded the
case for trial. Impacting the retrial of this litigation was a re-
examination proceeding before the Board of Patent Appeals with respect to
the subject patent. A ruling was rendered in November, 1993 sustaining the
claim of the patent which E&J Inc. has been charged with infringing. Upon
the issuance of a patent re-examination certificate by the U.S. Patent
Office, it is anticipated that the plaintiff will present a motion to the
District Court for an early retrial of the case. E&J Inc. believes that
this case is without merit and intends to contest it vigorously. The
ultimate liability of E&J Inc., if any, cannot be determined at this time.
The Company and its subsidiaries are parties to other lawsuits and
other proceedings arising out of the conduct of its ordinary course of
business, including those relating to product liability and the sale and
distribution of its products. While the results of such lawsuits and other
proceedings cannot be predicted with certainty, management does not expect
that the ultimate liabilities, if any, will have a material adverse effect
on the consolidated financial position or results of operations of the
Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1994
The following table summarizes operating results of the Company for the
three months ended September 30, 1994 and 1993 (dollars in millions):
Three Months Ended September 30
-------------------------------
1994 1993
------------ ------------
Amount % Amount %
------ --- ------ ---
Revenue $19.8 100 $23.5 100
Cost of sales 13.4 68 17.8 76
______ ____ ______ ____
Gross profit 6.4 32 5.7 24
Operating expenses 6.5 33 9.3 39
______ ____ ______ ____
Operating loss (0.1) (1) (3.6) (15)
Interest expense 0.7 3 1.6 7
______ ____ ______ ____
Loss before income taxes (0.8) (4) (5.2) (22)
Income tax provisions 0.1 (1) -- --
______ ____ ______ ____
Net loss $(0.9) ( 5) $(5.2) (22)
Third quarter 1994 revenues of $19.8 million decreased $3.7 million, or
16%, from 1993, due primarily to exclusion of the Smith & Davis
institutional business (see Note 6 to the unaudited Consolidated Financial
Statements). Revenues of this business and related costs were included in
the consolidated results of operations of the Company for 1993 but not
1994. If the 1994 third quarter revenues of the Smith & Davis
institutional business ($5.0 million) had been included in the consolidated
results, revenues would have increased by $1.3 million or 6% from 1993
levels. Third quarter 1993 wheelchair sales and operations were negatively
impacted by the relocation of the Company's primary domestic manufacturing
facility from Camarillo, California to St. Louis, Missouri which occurred
during 1992. Delivery delays caused by the 1992 move have decreased and
lead times have been brought into line with historic levels. To improve
the Company's operating efficiencies and cost structure, certain production
rationalizations are occurring. These rationalizations should be
substantially completed by the end of 1994. A corresponding reduction of
duplicate overheads should occur when the rationalizations are completed.
Third quarter 1994 revenues of the Company's Canadian and Mexican
subsidiaries increased $0.9 million or 25%, due primarily to a large
government contract being awarded the Mexican subsidiary and favorable
acceptance of new products and marketing techniques in Canada.
Total Company third quarter gross profit increased $0.7 million from
$5.7 million in 1993 to $6.4 million in 1994. Additionally, the Smith &
Davis institutional business gross profit ($1.4 million) was excluded from
the Company's 1994 operating results. As a percentage of sales, gross
profits improved for the quarter from 24% during 1993 to 32% during 1994.
Operating results of the Company's primary domestic manufacturing facility,
which was relocated from Camarillo, California to St. Louis, Missouri
during 1992, continue to improve as computer systems are brought on line
and cost reductions are put in place to improve the Company's operating
efficiencies and cost structure. These cost reductions have been partially
offset by increases in sales to distributors during 1994 of lower margin
private label wheelchairs.
Total Company third quarter operating expenses decreased $2.8 million
from $9.3 million in 1993 to $6.5 million in 1994 due primarily to
exclusion of the Smith & Davis institutional business operating expenses
($1.5 million) from the Company's 1994 operating results and reduced
general and administrative spending levels, particularly in the data
processing area where duplicate facilities were operated during 1993.
These reductions were partially offset by increases in research and
development spending of $0.1 million from $0.3 million during 1993 to $0.4
million during 1994.
Interest expense of $0.7 million in the third quarter of 1994 decreased
from the comparable period in the prior year due to the conversion of $75
million of debt to equity which occurred during the fourth quarter of 1993.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
The following table summarizes operating results of the Company for the
nine months ended September 30, 1994 and 1993 (dollars in millions):
Nine Months Ended September 30
------------------------------
1994 1993
------------ ------------
Amount % Amount %
------ --- ------ ---
Revenue $60.2 100 $71.7 100
Cost of sales 42.1 70 53.8 75
______ ____ ______ ____
Gross profit 18.1 30 17.9 25
Operating expenses 19.6 32 29.2 41
______ ____ ______ ____
Operating loss (1.5) (2) (11.3) (16)
Interest expense 1.7 3 4.5 6
______ ____ ______ ____
Loss before income taxes (3.2) (5) (15.8) (22)
Income tax provisions 0.3 1 0.2 --
______ ____ ______ ____
Net loss $(3.5) (6) $(16.0) (22)
Revenues for the nine months ended September 30, 1994 of $60.2 million
decreased $11.5 million, or 16%, from 1993, due primarily to exclusion of
the Smith & Davis institutional business. Revenues of this business and
related costs were included in the consolidated results of operations of
the Company for 1993 but not 1994. If the revenues for the nine months
ended September 30, 1994 of the Smith & Davis institutional business ($15.5
million) had been included in the consolidated results, revenues would have
increased by $4.0 million or 6% from 1993 levels. Fiscal 1993 wheelchair
sales and operations were negatively impacted by the relocation of the
Company's primary domestic manufacturing facility from Camarillo,
California to St. Louis, Missouri which occurred during 1992. Delivery
delays caused by the 1992 move have decreased and lead times have been
brought into line with historic levels. To improve the Company's operating
efficiencies and cost structure, certain production rationalizations are
occurring. These rationalizations should be substantially completed by the
end of 1994. A corresponding reduction of duplicate overheads should occur
when the rationalizations are completed.
Revenues for the nine months ended September 30, 1994 in the Everest &
Jennings' Canadian and Mexican subsidiaries increased $0.5 million or 4%,
due primarily to a large government contract being awarded the Mexican
subsidiary and favorable acceptance of new products and marketing
techniques in Canada.
Total Company gross profit for the nine months ended September 30, 1994
increased $0.2 million from $17.9 million in 1993 to $18.1 million in 1994,
due primarily to cost reductions put in place to improve the Company's
operating efficiencies and cost structure. Additionally, the Smith & Davis
institutional business gross profit ($4.3 million) has been excluded from
the Company's 1994 operating results. As a percentage of sales, gross
profits improved from 25% in 1993 to 30% in 1994. Operating results of the
Company's primary domestic manufacturing facility, which was relocated from
Camarillo, California to St. Louis, Missouri during 1992, continue to
improve as computer systems are brought on line and continued improvements
are made to the Company's operating efficiencies and cost structure.
Additionally, 1993 results were adversely affected by a $1.0 million charge
to reserves for excess and obsolete inventory. These gains have been
partially offset by increases in sales to distributors during 1994 of lower
margin private label wheelchairs.
Total Company operating expenses for the nine months ended September
30, 1994 decreased $9.6 million from $29.2 million in 1993 to $19.6 million
in 1994 due primarily to exclusion of the Smith & Davis institutional
business operating expenses ($5.0 million) from the Company's 1994
operating results and reduced general and administrative spending levels,
particularly in the data processing area where duplicate facilities were
operated during 1993. These reductions were partially offset by increases
in research and development spending of $0.8 million from $0.6 million
during 1993 to $1.4 million during 1994.
Interest expense of $1.7 million for the nine months ended September
30, 1994 decreased from the comparable period in the prior year due to the
conversion of $75 million of debt to equity which occurred during the
fourth quarter of 1993.
In January 1993 the Company adopted the provisions of SFAS No. 109,
"Accounting for Income Taxes" ("SFAS 109"). The adoption of SFAS 109 did
not have an impact on the consolidated financial statements.
Liquidity and Capital Resources
The Company's primary sources of liquidity are cash provided from
operations, borrowings and cash on hand. At September 30, 1994, the
Company had $1.8 million in cash or $0.1 million less than the $1.9 million
in cash at December 31, 1993. At September 30, 1994, approximately $1.3
million of the Company's cash was restricted due to a garnishment placed on
the Company's domestic bank accounts pursuant to a judgment awarded against
the Company, as discussed in Note 12. At September 30, 1994, total debt of
$39.8 million was $10.5 million higher than the $29.3 million in debt at
December 31, 1993. The increase was due primarily to advances from BIL in
the amount of $10 million during the first nine months of 1994.
On September 30, 1992 the Company entered into a $20 million Revolving
Credit Agreement with HSBC. The repayment of this facility was guaranteed
by Brierley Investments Limited, an affiliate of BIL. The facility would
not have been made available to the Company without such guaranty. As of
September 30, 1994, HSBC and E&J Inc. agreed to amend the Revolving Credit
Agreement and extend its term for approximately two years. The HSBC
facility, as amended, provides to E&J Inc. up to $6 million letter of
credit availability and up to $10 million of cash advances. The $10
million of cash advances has been fully utilized.
At September 30, 1994 and December 31, 1993, under the debt agreements
with BIL and HSBC, the Company was obligated to repay the following amounts
at the various dates listed below.
9/30/94 12/31/93
Balance Balance
Debt Agreement $ millions $ millions Repayment Date
-------------- ---------- ---------- --------------
Revolving Promissory Note 14.8 4.8 June 30,
1995
HSBC Revolving Credit
Agreement (1) 10.0 10.0
September 30, 1996
Accrued, unpaid interest
due BIL 0.8 0.2 -----
_____ _____
TOTAL $25.6 $15.0
(1)Excludes approximately $3.5 million and $3.7 million,
respectively, committed with respect to outstanding letters of
credit as of both September 30, 1994 and December 31, 1993.
As of September 30, 1993, the Company entered into the Debt Conversion
Agreement with BIL whereby $75 million of indebtedness was restructured by
the issuance of the Common Stock Note and the Preferred Stock Note. The
balance of the BIL indebtedness ($6.8 million) which was not converted into
the Common Stock Note and the Preferred Stock Note was treated as advances
under the Revolving Promissory Note. See Note 4 to the unaudited
Consolidated Financial Statements for a discussion of the Debt Conversion
Transaction.
As part of the Debt Conversion Transaction, BIL agreed to provide to
the Company and E&J Inc. a revolving credit facility of up to $12.5
million, as evidenced by the Revolving Promissory Note. As of September
30, 1994 this facility was completely utilized and an additional $2.3
million had been advanced to the Company and E&J Inc. by BIL under such
Note.
The Company's Smith & Davis subsidiary has secured credit line of up to
$13 million (based on asset levels) which is secured by substantially all
of the subsidiary's assets. At September 30, 1994 Smith & Davis had
borrowed $4.8 million and had $0.3 million available under this line. The
Company expects to either extend this credit line in 1994 or terminate it
upon the sale or other disposition of the Smith & Davis institutional
business.
The Company's Canadian subsidiary has existing credit facilities in the
aggregate of $4.7 million, on which $4.4 million was borrowed as of
September 30, 1994.
During June, 1994 the Company's Mexican operation obtained a credit
facility in the aggregate of $1.5 million, on which $1.0 million was
borrowed as of September 30, 1994.
Accordingly, at September 30, 1994 the Company owed $22.1 million to
banks and other commercial lenders, $2.9 million under capitalized lease
obligations, and $14.8 million to BIL.
During the nine months ended September 30, 1994, the Company required
$10.4 million of additional financing to fund its operating requirements
and accrued restructuring expenses. Of this amount, $10 million has been
provided to the Company by BIL, bringing the total advances under the
Revolving Promissory Note to $14.8 million as of September 30, 1994. On
October 17, 1994, the Company borrowed an additional $1.5 million from BIL
for such purposes. The Company expects to need additional financing at
least through the end of 1994, and will seek to amend the Revolving
Promissory Note with BIL to provide for such requirement.
The Company's 1994 year to date revenues and operating results have
been negatively impacted by ongoing price competition, liquidity
constraints and loss of market share during prior years. The loss of
customer confidence stemming from the relocation of the Company's primary
domestic wheelchair manufacturing facility from California to St. Louis,
Missouri, which resulted in long lead times, shipping delays, inventory
imbalances and production inefficiencies in the St. Louis manufacturing
operations, is expected to adversely impact revenues, operating income and
cash flow of the Company at least through the end of 1994. Management
continues to address the Company's problems with manufacturing and shipment
delays. Additionally, the Company has addressed the rationalization of the
Company's production facilities and the increased outsourcing of products
and product components, the effects of which will be to lower the Company's
production costs. Order rates, margins and market share must increase,
production and operating costs must be reduced and customer confidence must
be restored in the very near term if the Company is to generate the cash
flow necessary to fund its operations on a continuing basis and to achieve
profitability.
With respect to institutional products, the Company anticipates, for
the remainder of the year, severe price and product competition. The
Company is pursuing the sale or other disposition of (i) the Smith & Davis
hospital bed and nursing home bed and furniture business and (ii) Everest &
Jennings de Mexico, as discussed in Note 6.
Management believes that the Company's domestic and international
manufacturing capacity is sufficient to meet anticipated demand for the
foreseeable future.
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 12 to the unaudited Consolidated Financial Statements for a
description of certain pending legal proceedings.
During the quarter ended September 30, 1994, ICF Kaiser began
enforcement of its judgment in the amount of approximately $1.3 million by
garnishing the Company's general disbursing bank accounts in the amount of
their judgment, thus restricting the Company's use of such funds. The
Company is currently considering its options related to this matter, and
has recorded an appropriate reserve in its consolidated financial
statements to reflect this matter. See Item 1 to the Company's Report 10-Q
for the Quarterly Period Ended June 30, 1994.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
During the nine months ended September 30, 1994, the Company borrowed a
total of $10 million from BIL as advances under the Revolving Promissory
Note to provide cash necessary for operations of the Company's headquarters
and manufacturing facility in St. Louis, Missouri and for accrued
restructuring expenses, as follows:
$1,500,000 January 31, 1994
1,100,000 March 14, 1994
400,000 March 28, 1994
1,250,000 March 31, 1994
1,300,000 April 25, 1994
800,000 June 30, 1994
1,000,000 July 20, 1994
1,500,000 August 12, 1994
1,150,000 September 15, 1994
_________
$10,000,000
Since September 30, 1994, the Company has borrowed an additional $1.5
million from BIL for the same purposes, as follows:
$1,500,000 October 17, 1994
Each of the foregoing borrowings was treated as an advance under the
Revolving Promissory Note, which bears interest at 8.0% per annum and
requires that all principal and unpaid interest is due on June 30, 1995.
Interest has been accrued accordingly, with a balance of $0.8 million as of
September 30, 1994.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS:
10 (fa)* Everest & Jennings International Ltd. Stock
Option Plan dated April 25, 1994 and related form of Stock
Option Agreement dated as of August 1, 1994.
10 (fb)* Fifth Amendment to Revolving Credit Agreement
dated September 1, 1994 by and between Everest & Jennings,
Inc. and The Hongkong and Shanghai Banking Corporation
Limited.
REPORTS ON FORM 8-K:
There were no reports on Form 8-K filed by the Company during the
quarter ended September 30, 1994.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Date: November 14, 1994 EVEREST & JENNINGS INTERNATIONAL LTD.
(Registrant)
By (TIMOTHY W. EVANS)
Timothy W. Evans
Vice President and
Chief Financial Officer
By (BEVIL J. HOGG)
Bevil J. Hogg
President and
Chief Executive Officer
* Filed herewith in this Quarterly Report on Form 10-Q
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page
- - ----------- ----------- ----
10 (fa)* Everest & Jennings International Ltd. Stock 30
Option Plan dated April 25, 1994 and related form
of Stock Option Agreement dated as of August 1, 1994.
10 (fb)* Fifth Amendment to Revolving Credit Agreement 39
dated September 1, 1994 by and between Everest &
Jennings, Inc. and The Hongkong and Shanghai
Banking Corporation Limited.
* Filed herewith in this Quarterly Report on Form 10-Q
EXHIBIT 10 (fa)
EVEREST & JENNINGS INTERNATIONAL LTD.
STOCK OPTION PLAN
SECTION 1
GENERAL PROVISIONS
1.1 PURPOSE
The purposes of the 1994 Stock Option Plan dated April 25, 1994 (the
"Plan") of Everest & Jennings International Ltd. (the "Company") are to
promote the interests of the Company and its stockholders by (i) attracting
and retaining employees of outstanding ability; (ii) motivating employees
by means of performance-related incentives to achieve longer-range
performance goals; (iii) providing incentive compensation opportunities
which are competitive with those of other major corporations; and (iv)
enabling such employees to participate in the long-term growth and
financial success of the Company.
1.2 DEFINITIONS
"Award" -- means a grant or award under the Plan.
"Board of Directors" -- means the Board of Directors of the Company.
"Code" -- means the Internal Revenue Code of 1986, as amended from
time to time.
"Committee" -- means the Committee appointed to administer the Plan.
"Common Stock" -- means common stock of the Company, or any stock
substituted for such common stock through a recapitalization.
"Company" -- means Everest & Jennings International Ltd. and its
Subsidiaries.
"Disability Date" -- means the date on which a Participant is deemed
disabled under the retirement plan of the Company applicable to the
Participant.
"Employee" -- means an employee, consultant or a member of the Board
of Directors of the Company.
"Fair Market Value" -- means the closing price of the Common Stock on
the American Stock Exchange on the date on which it is to be valued
hereunder.
"Normal Retirement Date" -- has the meaning set forth in the
retirement plan, if any, of the Company applicable to the Participant.
"Participant" -- means an Employee who is selected by the Committee to
receive an Award under the Plan.
"Subsidiary" -- means any corporation in which the Company possesses
directly or indirectly fifty percent (50%) or more of the total combined
voting power of all classes of its stock having voting power.
1.3 ADMINISTRATION
The Plan shall be administered by the Committee, which shall at all
times consist of three or more members, and a majority of which shall be
non-management members of the Board of Directors. The Committee shall have
sole and complete authority to adopt, alter and repeal such administrative
rules, guidelines and practices governing the operation of the Plan as it
shall from time to time deem advisable, and to interpret the terms and
provisions of the Plan. Awards under the Plan shall be confirmed, as
appropriate in the discretion of the Committee, by an Award agreement
executed by the Committee and the Participant. The Committee's decisions
are final and binding upon all parties. By accepting any benefits under
the Plan, each Participant, and each person claiming under or through him,
shall be conclusively deemed to have indicated his acceptance and
ratification of, and consent to, all provisions of the Plan and any action
or decision under the Plan by the Company, the Board of Directors or the
Committee.
1.4 ELIGIBILITY
The Committee shall select the Employees eligible to be Participants
in the Plan.
1.5 SHARES RESERVED
(a) There shall be reserved for issuance pursuant to the Plan from
authorized and unissued shares or treasury shares or a combination of both
a total of five million (5,000,000) shares of Common Stock of the Company.
(b) In the event of a stock dividend or split, recapitalization,
reclassification, merger, consolidation, spin-off, combination or exchange
of shares or similar corporate change, or any distributions to common
shareholders other than cash dividends, the Committee may, at its sole
discretion, in order to prevent the dilution or enlargement of the values
of the shares of Common Stock reserved hereunder, make such substitution or
adjustment, if any, as it deems to be appropriate and equitable, as to the
number or in kind of shares of Common Stock or other securities issued or
reserved for issuance pursuant to the Plan, including the number of
outstanding stock options or stock appreciation rights and the price
thereof, and the number of outstanding Awards of other types to fairly
preserve the intended benefits of the Plan to the Participants and the
Company.
1.6 CHANGE OF CONTROL
In order to maintain the Participants' rights in the event of Change
of Control of the Company, as hereinafter defined, the Committee shall,
notwithstanding anything to the contrary contained in the Plan, either at
the time an Award is made hereunder or at any time prior to or
simultaneously with a Change of Control (i) provide for the acceleration of
any time periods or waiver of any conditions relating to the exercise or
realization of such Awards so that such Awards may be exercised or realized
in full on or before a date fixed by the Committee; or (ii) provide for
purchase of such Awards, upon the Participant's request, for an amount of
cash equal to the amount which could have been attained upon the exercise
or realization of such rights had such Awards been currently exercisable or
payable; or (iii) cause the Awards then outstanding to be assumed, or new
rights substituted therefor which are equivalent to the Awards, by the
surviving corporation in such change. The Committee may, in its
discretion, include such further provisions and limitations in any
agreement entered into with respect to an Award as it may deem equitable
and in the best interests of the Company.
A "Change of Control" shall be deemed to have occurred if:
(i) Brierley Investments Limited and its affiliates ("BIL") own
less than a majority of the Company's voting stock and there has been a
change in the composition of the Board of Directors so that a majority of
the Board of Directors have been members of the Board of Directors for less
than twenty-four months, unless the election of each new director who was
not a director at the beginning of the period was approved by a vote of at
least two-thirds of the directors then still in office who were directors
at the beginning of such period;
(ii) any person (including a group as defined in Section 13(d)
(3) of the Securities Exchange Act of 1934) becomes, directly or
indirectly, the beneficial owner of 20% or more of the shares of the
Company entitled to vote for the election of directors and BIL owns less
than a majority of the Company's voting stock;
(iii) as a result of or in connection with any cash tender
offer, exchange offer, merger or other business combination, sales of
assets or contested election, or combination of the foregoing, the persons
who were directors of the Company just prior to such event cease to
constitute a majority of the Company's Board of Directors; or
(iv) the Company ceases to be a publicly-owned Company or a sale
or other disposition of all or substantially all of the assets and/or
common stock and/or preferred stock of the Company occurs.
1.7 WITHHOLDING
The Company shall have the right to deduct from all amounts paid in
cash (whether under this Plan or otherwise) or to require a cash payment of
any taxes required by law to be withheld therefrom. In the case of
payments of Awards in the form of Common Stock, at the Committee's
discretion the participant may be required to pay to the Company the amount
of any taxes required to be withheld with respect to such Common Stock or,
in lieu, thereof, the Company shall have the right to retain (or the
Participant may be offered the opportunity to elect to tender) the number
of shares of Common Stock whose Fair Market Value equals the amount
required to be withheld.
1.8 NONTRANSFERABILITY
No Award shall be assignable or transferable, and no right or interest
of any Participant shall be subject to any lien, obligation or liability or
the Participant, except by will or the laws of descent and distribution.
1.9 NO RIGHT TO EMPLOYMENT
No person shall have any claim or right to be granted an Award, and
the grant of any Award shall not be construed as giving a Participant the
right to be retained in the employ of the Company. Further, the Company
expressly reserves the right at any time to dismiss a Participant free from
any liability, or any claim under the Plan, except as provided herein or in
any agreement entered into with respect to an Award.
1.10 MISSOURI LAW CONTROLS
The validity, construction, interpretation, administration and effect
of the Plan and of its rules and regulations, and rights relating to the
Plan, shall be determined solely in accordance with the laws of Missouri.
1.11 AMENDMENT
(a) Subject to approval by the Board of Directors, the Committee may
amend, suspend or terminate the Plan or any portion thereof at any time,
provided that no amendment shall be made without stockholder approval which
shall increase (except as provided in Section 1.5(b) hereof) the total
number of shares of Common Stock reserved for issuance pursuant to the
Plan. Notwithstanding anything to the contrary contained herein the
Committee may amend the Plan in such manner as may be necessary to conform
the Plan with applicable federal and state rules and regulations.
(b) The Committee may amend, modify or terminate any outstanding
Award with the Participant's written consent at any time prior to payment
or exercise in any manner not inconsistent with the terms of the Plan,
including without limitation, to change the date or dates as of which a
stock option becomes exercisable.
1.12 DIVIDENDS, EQUIVALENTS AND VOTING RIGHTS; CASH PAYMENTS
Awards may provide the Participant with (i) dividends or dividend
equivalents, voting rights and such other stockholder rights as the
Committee in its discretion determines to extend to Participants prior to
vesting; and (ii) to the extent determined by the Committee, cash payments
in lieu of or in addition to an Award.
1.13 SECURITIES LAWS
The Company shall not be obligated to issue Common Stock pursuant to
any Award under the Plan if such issuance would violate any applicable
federal or state securities law, or any rule or regulation of any
regulatory agency or any certified exchange on which the Common Stock is
then listed. Unless rendered unnecessary by reason of registration of the
Common Stock under the Securities Act of 1933, any Participant may be
required by the Committee to furnish the company with a certificate,
satisfactory to counsel for the Company, stating in substance that the
Participant is acquiring the Common Stock for investment purposes only and
not with a view to, or for sale in connection with, any distribution of the
Common Stock. If the Committee determines that the listing, registration
or qualification of the Common Stock upon any securities exchange or under
any state or federal law, or the consent or approval of any government
regulatory body, is necessary or desirable as a condition of, or in
connection with, the issue or purchase of Common Stock under the Plan, such
registration, qualification, consent or approval shall be effected or
obtained prior to such issuance or purchase.
1.14 EFFECT ON OTHER BENEFITS
The value of an Award is not includable for determining compensation
or benefits under any other compensation or benefit plan of the Company.
1.15 EFFECT OF TERMINATION OF EMPLOYMENT ON VESTING
Except as otherwise provided by the Committee, if a Participant ceases
to be an Employee for any reason other than upon the occurrence of a
Participant's death (in which case a non-vested Award shall be forfeited
one (1) year after the Participant's death), a Participant's rights to any
nonvested Award shall be immediately forfeited thirty (30) days after the
Participant's termination date; provided, however, the Committee may
determine, in its discretion, that any portion of a Participant's nonvested
Award shall become vested upon termination of employment. The Committee,
at the time of grant of an Award, shall specify such terms and conditions
as appropriate for the exercise of any vested Awards following termination
of employment.
1.16 EFFECTIVE DATE
The Plan shall be effective as of April 25, 1994, subject to the
approval of the stockholders of the Company. No stock option may be
granted more than five years after the effective date of the Plan.
SECTION 2
STOCK OPTIONS
2.1 AUTHORITY OF COMMITTEE
Subject to the provisions of the Plan, the Committee shall have sole
and complete authority to determine the Employees to whom stock options
shall be granted, the number of shares to be covered by each stock options
and the conditions and limitations, if any, in addition to those set forth
in Section 2.3 hereof, applicable to the exercise of the stock options.
2.2 OPTION PRICE
The Committee shall establish the option price at the time each stock
option is granted, subject to Board approval only if the option price is
less than Fair Market Value. The option price shall be subject to
adjustment in accordance with the provisions of Section 1.5(b) hereof.
2.3 EXERCISE OF OPTIONS
(a) The Committee may determine that any stock option shall become
exercisable in installments and may determine that the right to exercise
such stock option as to such installments shall expire on different dates
or on the same date.
(b) The option price of each share as to which an option is exercised
shall be paid in full at the time of such exercise. Such payment shall be
made in cash, by tender of shares of Common Stock owned by the Participant
valued at Fair Market Value as of the date of exercise, subject to such
limitations on the tender of Common Stock as the Committee may impose, or
by a combination of cash and shares of Common Stock. In addition, the
Committee may provide the Participant with assistance in financing the
option price and applicable taxes, on such terms and conditions as it
determines appropriate.
<PAGE>
EVEREST & JENNINGS INTERNATIONAL LTD.
STOCK OPTION AGREEMENT
THIS IS A STOCK OPTION AGREEMENT ("Agreement") dated as of August 1,
1994 between EVEREST & JENNINGS INTERNATIONAL LTD., a Delaware corporation
(the "Company"), and ___________________ ("Optionee").
THE PARTIES AGREE AS FOLLOWS:
1. Grant of Option
The Company hereby grants Optionee a "non-qualified" option (the
"Option") to purchase ______ shares (the "Option Shares") of the Company's
Common Stock (the "Common Stock"), at an exercise price of $0.85 per share.
This Option is granted pursuant to the Company's 1994 Stock Option Plan
dated April 25, 1994 (the "Plan"). The terms and conditions of this Option
are those specified in that plan as supplemented by this Agreement. A copy
of the Plan is attached to this Agreement. Capitalized terms that appear
in this Agreement that are not defined in this Agreement have the meanings
given them in Subsection 1.2 of the Plan.
2. Type of Options and Taxation
The Company intends that the Option be a "non-qualified" stock option.
Optionee is invited to consult a tax advisor regarding the federal, state
and any other income tax consequences associated with exercising this
Option and selling or otherwise disposing of Option Shares.
3. Term
This Option shall terminate on the earliest to occur of (a) November 1,
1999, (b) one month after Optionee ceases to be an Employee for reasons
other than Optionee's death, or (c) one year after Optionee ceases to be an
Employee due to Optionee's death.
4. Vesting
(a) This Option shall not be exercisable to any extent until the
earlier to occur of the following:
(i) 50% will be exercisable on the first day of the second
fiscal quarter which follows four consecutive fiscal quarters where
the Company's cumulative cash flow is in excess of $1.00. Cash
flow will be calculated by taking "Cash used in or provided by
operating activities" as shown in the Company's Consolidated
Statements of Cash Flows;
(ii) 50% will be exercisable on the first day of the second
fiscal quarter which follows four consecutive fiscal quarters where
the cumulative operating profit equals or exceeds $2 million during
such quarters. Operating profit will be calculated in a manner
consistent with the Company's Consolidated Statements of
Operations; and
(the following paragraph (iii) appears only in agreements with employees
below level of Vice President):
(iii) the balance, if any, of the options will become
exercisable in full on the earlier of August 1, 1999, or the first
day of the second fiscal quarter following the quarter in which the
Company achieves a #1 ranking in its industry for customer
satisfaction, as determined by an independent survey organization.
(the following paragraph (iii) appears only in agreements with employees at
level of Vice President or above):
(iii) the balance, if any, of the options will become
exercisable in full on August 1, 1999.
(b) Notwithstanding Subsection 4(a), this Option shall become
fully exercisable upon a "Change of Control". A "Change of Control"
shall be deemed to have occurred if, after this Option was granted:
(i) Brierley Investments Limited and its affiliates ("BIL")
own less than a majority of the Company's voting stock and there is
a change in the composition of the Board of Directors of the
Company so that a majority of the Board of Directors have been
members of the Board of Directors for less than 24 months, unless
the election of each new director who was not a director at the
beginning of the period was approved by a vote of at least two-
thirds of the directors then still in office who were directors at
the beginning of such period;
(ii) any person (including a "group" as defined in Section
13(d) (3) of the Securities Exchange Act of 1934, as amended)
becomes, directly or indirectly, the beneficial owner of shares
having voting power equal to 20% or more of the total combined
voting power of all outstanding shares of the Company entitled to
vote for the election of directors and BIL owns less than a
majority of the Company's voting stock;
(iii) as a result of or in connection with any cash tender
offer, exchange offer, merger or other business combination, sale
of assets or contested election, or combination of the foregoing,
the persons who were directors of the Company just prior to such
event cease to constitute a majority of the Company's Board of
Directors; or
(iv) the Company ceases to be a publicly-owned Company or a
sale or other disposition of all or substantially all of the assets
and/or common stock and/or preferred stock of the Company occurs.
(c) Subsections 4(a) and (b) are subject in all respects to
Subsection 1.15 of the Plan. Accordingly, the rules set forth in that
Subsection 1.15 that would accelerate the exercisability of this Option
or cause the forfeiture of that portion of this Option that had not
become exercisable under the circumstances described in that Subsection
1.15, shall prevail over the provisions of Subsections 4(a) and (b) of
this agreement.
5. Method of Exercise
This Option shall be exercisable by means of an irrevocable written
notice to the Company stating the number of Option Shares with respect to
which the Option is then being exercised and containing such
representations and warranties as the Company then specifies in accordance
with Section 6 of this Agreement. The written notice shall be signed by
the Optionee and shall be delivered in accordance with Subsection 10(e) of
this Agreement. It shall be accompanied by payment in full of the exercise
price for the Option Shares then being purchased, as well as any
withholding taxes required to be paid in connection with the exercise. The
exercise price shall be paid in cash or by check or, subject to any
limitations that the Committee may impose, by delivery of shares of Common
Stock valued in accordance with Subsection 2.3(b) of the Plan. Any
required withholding taxes shall be paid in cash or by check. However, if
the Committee chooses to permit Optionee to pay all of or any portion of
the exercise price or any withholding taxes by means of a promissory note
(see Subsection 2.3(b) of the Plan) and Optionee elects to take advantage
of that opportunity, the exercise notice shall be accompanied by such
documents and other items as the Committee then specifies including,
without limitation, a promissory note and pledge agreement containing such
terms and conditions as are then prescribed by the Committee and stock
certificates representing shares pledged to secure that promissory note.
6. Restrictions on Issuance and Resale
(a) Applicable Law. The Company will not be obligated to issue or
sell any Option Shares or recognize any sale or other transfer of
Option Shares if, in the opinion of the Company or its counsel, such
issuance, sale or other transfer might constitute a violation by the
Company of any federal, state or other securities or other laws
including, without limitation, the Securities Act of 1933, as amended
(collectively "Applicable Law"). The Company may, but shall not be
obligated to, register or qualify the issuance, sale or other transfer
of the Option Shares under any Applicable Law. If the Company or its
counsel deems it necessary or advisable, the exercise of this Option
or any portion of this Option or the sale of other transfer of any
Option Shares will be conditioned upon the receipt by the Company and
the accuracy of representations and warranties regarding the Optionee's
or transferee's investment intentions, business experience, access to
information, ability to absorb financial risk and other matters
relevant to the availability of one or more exemptions from the
requirement to register or qualify the issuance, sale or other transfer
of the Option Shares under any Applicable Law. In addition, the
Company may impose stop transfer instructions on Optionee's or such
other transferee's right to sell or otherwise transfer Option Shares if
the Company or its counsel deems such instructions necessary or
advisable in order to comply with any Applicable Law.
(b) Stock Exchange Requirements. The Company will not be
obligated to issue or sell any Option Shares if, in the opinion of the
Company or its counsel, such issuance or sale might constitute a
violation of any rule of, or listing agreement to which the Company is
a party with, any stock exchange.
7. Legends on Stock Certificates
Stock certificates evidencing Option Shares may bear such restrictive
legends as the Company or its counsel deems necessary or advisable in order
to comply with any Applicable Law.
8. Changes in Capital Structure
In the event of a stock dividend or split, recapitalization,
reclassification, merger, consolidation, spin-off, combination or exchange
of shares or similar corporate change, or any distributions to common
shareholders other than cash dividends, the Committee may, at its sole
discretion, in order to prevent the dilution or enlargement of the values
of the shares of Common Stock reserved hereunder, make such substitution or
adjustment, if any, as it deems to be appropriate and equitable, as to the
number or kind of shares of Common Stock or other securities issued or
reserved for issuance pursuant to the Plan, including the number of
outstanding stock options or stock appreciation rights and the price
thereof, and the number of outstanding Awards of other types to fairly
preserve the intended benefits of the Plan to the Optionee and the Company.
9. Change of Control
In order to maintain the Optionee's rights in the event of Change of
Control of the Company, as hereinafter defined, the Committee shall,
notwithstanding anything to the contrary contained in the Plan, either at
the time an Award is made hereunder or at any time prior to or
simultaneously with a Change in Control (i) provide for the acceleration of
any time period or waiver of any conditions relating to the exercise or
realization of such awards so that such awards may be exercised or realized
in full on or before a date fixed by the Committee; or (ii) provide for
purchase of such Awards, upon the Optionee's request, for an amount of cash
equal to the amount which could have been attained upon the exercise or
realization of such rights had such Awards been currently exercisable or
payable; or (iii) cause the Awards then outstanding to be assumed, or new
rights substituted therefor which are equivalent to the Awards, by the
surviving corporation in such change. The Committee may, in its
discretion, include such further provisions and limitations in any
agreement entered into with respect to an Award as may deem equitable and
in the best interests of the Company.
A "Change of Control" shall be deemed to have occurred if:
(i) Brierley Investments Limited and its affiliates ("BIL")
own less than a majority of the Company's voting stock and there
has been a change in the composition of the Board of Directors so
that a majority of the Board of Directors have been members of the
Board of Directors for less than 24 months, unless the election of
each new director who was not a director at the beginning of the
period was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning
of such period;
(ii) any person (including a group as defined in Section
13(d) (3) of the Securities Exchange Act of 1934) becomes, directly
or indirectly, the beneficial owner of 20% or more of the shares of
the Company entitled to vote for the election of directors and BIL
owns less than a majority of the Company's voting stock;
(iii) as a result of or in connection with any cash tender
offer, exchange offer, merger or other business combination, sales
of assets or contested election, or combination of the foregoing,
the persons who were directors of the Company just prior to such
event cease to constitute a majority of the Company's Board of
Directors; or
(iv) the Company ceases to be a publicly-owned Company or a
sale or other disposition of all or substantially all of the assets
and/or common stock and/or preferred stock of the Company occurs.
10. Miscellaneous
(a) As used in this agreement, the term "Option Shares" includes
any and all securities issued with respect to or in exchange for shares
of Common Stock.
(b) Subject to the limitations set forth in Subsection 1.8 of the
Plan, this Agreement shall be binding upon and inure to the benefit of
the executors, administrators, heirs, legal representatives and
successors of the parties.
(c) Neither this agreement nor the Option confers any rights of
employment or continuing employment on Optionee.
(d) This agreement shall be governed by, and construed in
accordance with, the laws of the state of Missouri.
(e) All notices and other communications under this agreement
shall be in writing and shall be deemed given on the date delivered
personally or on the second business day following the day on which
mailed by certified mail, return receipt requested, or by registered
mail, at the following address or such other address as shall be
specified by like notice:
If to the Company: If to Optionee:
Everest & Jennings International Ltd. (Optionee's name)
1100 Corporate Square Drive c/o Everest & Jennings Intl. Ltd.
St.Louis, Missouri 63132 1100 Corporate Square Drive
Attention: President St.Louis, Missouri 63132
(f) This Agreement, together with the Plan, contain all of the
terms and conditions relating to their subject matter. They supersede
any and all prior or contemporaneous agreements or understandings
regarding that subject matter.
(g) This agreement may be signed in counterparts. Each
counterpart shall be deemed an original of this Agreement, but all
counterparts together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the Company and Optionee have executed this
Agreement as of the date that appears in its first paragraph.
EVEREST & JENNINGS INTERNATIONAL LTD.
By: (BEVIL J. HOGG)
Title: President and Chief Executive Officer
OPTIONEE
_____________________________________
Attachment
Everest & Jennings International Ltd. 1994 Stock Option Plan dated
April 25, 1994.
EXHIBIT 10 (fb)
FIFTH AMENDMENT TO REVOLVING CREDIT AGREEMENT
FIFTH AMENDMENT TO REVOLVING CREDIT AGREEMENT, dated as of September
1, 1994 (the "Fifth Amendment"), between THE HONGKONG AND SHANGHAI
BANKING CORPORATION LIMITED, a banking company organized and existing
under the laws of Hong Kong, acting through its Chicago Branch (the
"Bank"), and EVEREST & JENNINGS, INC., a California corporation (the
"Borrower") with its principal place of business at 1100 Corporate Square
Drive, St. Louis, Missouri 63132, and acknowledged by BRIERLEY
INVESTMENTS LIMITED, a company incorporated under the laws of New Zealand
(the "Guarantor"), and by BIL SECURITIES (OFFSHORE) LIMITED, a company
incorporated under the laws of New Zealand ("BIL Securities").
WITNESSETH:
WHEREAS, the Borrower and the Bank entered into a Revolving Credit
Agreement dated as of September 30, 1992 as amended (i) by the First
Amendment to Revolving Credit Agreement dated as of February 5, 1993
between the Bank and the Borrower and acknowledged by the Guarantor and
BIL Securities, (ii) by the Second Amendment to Revolving Credit
Agreement dated as of March 30, 1993 between the Bank and the Borrower
and acknowledged by the Guarantor and BIL Securities, (iii) by the Third
Amendment to Revolving Credit Agreement dated as of September 30, 1993
between the Bank and the Borrower and acknowledged by the Guarantor and
BIL Securities, and (iv) by the Fourth Amendment to Revolving Credit
Agreement dated as of October 8, 1993 between the Bank and the Borrower
and acknowledged by the Guarantor and BIL Securities (such Revolving
Credit Agreement as so amended, as amended hereby and as it may be
further amended from time to time being the "Agreement") pursuant to
which the Bank agreed to extend credit to the Borrower upon the terms and
subject to the conditions set forth in the Agreement;
WHEREAS, to secure the obligations of the Borrower to the Bank, the
Guarantor issued for the benefit of the Bank a guaranty dated as of
September 30, 1992 and BIL Securities entered into a subordination
agreement dated as of September 30, 1992 for the benefit of the Bank and
such guaranty and subordination agreement remain in full force and
effect;
WHEREAS, the Borrower, the Guarantor and BIL Securities have
requested the Bank to extend by approximately two years the scheduled
occurrence of the Cash Advance Repayment Date, the Letter of Credit
Availability Date and the Repayment Date and to waive, for purposes of
this Fifth Amendment only, the requirement that any such extension may
not exceed 364 days (the "Section 2.6 Requirement") and the Bank is
willing to so extend such scheduled dates and to waive the Section 2.6
Requirement, subject to the terms and conditions hereof and to the
continuing effectiveness of the Guarantee and the Subordination
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
agreement as contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
Section 1. Definitions. Unless otherwise specifically defined
herein, each capitalized term shall have the meaning ascribed to such
term in the Agreement. Unless otherwise indicated, any reference to a
"section" is a reference to a section in the Agreement.
Section 2. Ratification. Except as amended hereby, all of the
terms and conditions of the Agreement shall remain and continue in full
force and effect and are hereby confirmed in all respects. Without
limiting the terms of the Guarantee, by its acknowledgment of this Fifth
Amendment, the Guarantor affirms for the benefit of the Bank that the
Guarantee shall remain and continue in full force and effect, the
Guarantor confirms the Guarantee in all respects and the Guarantor
acknowledges that the Borrower's obligations in respect of Cash Advances
made, and Letters of Credit issued, under the Agreement constitute
Obligations (as such term is defined in the Guarantee). Without limited
the terms of the Subordination Agreement, by its acknowledgment of this
Fifth Amendment, BIL Securities affirms for the benefit of the Bank that
the Subordination Agreement shall remain and continue in full force and
effect and confirms the Subordination Agreement in all respects.
Section 3. Amendments to the Agreement.
(a) Section 1.1 of the Agreement is hereby amended by
modifying the following terms to read as follows and any reference
in the Agreement to such terms shall have the following meanings:
(1) "Cash Advance Repayment Date" means the earlier to
occur of (i) September 30, 1996 and (ii) such Date to which the
Obligations may be accelerated hereunder.
(2) "Letter of Credit Availability Date" means the
earlier to occur of (i) September 30, 1996, or such date to
which the Letter of Credit Availability Date may, in the sole
discretion of the Bank, be extended pursuant to Section 2.6,
and (ii) such date to which the Obligations may be accelerated
hereunder.
(3) "Repayment Date" means the earliest to occur of (i)
September 30, 1997 or 364 days from such later date to which
the Letter of Credit Availability Date may, in the sole
discretion of the Bank, be extended pursuant to Section 2.6,
(ii) the latest termination or stated expiration date of any
Letter of Credit issued hereunder and (iii) such date to which
the Obligations may be accelerated hereunder.
Section 4. Waiver. Solely for purposes of this Fifth Amendment,
the Bank hereby waives the Section 2.6 Requirement.
Section 5. Effectiveness. This Fifth Amendment shall become
effective upon its execution by the parties hereto, the acknowledgment of
the Guarantor and of BIL Securities and delivery of the executed Fifth
Amendment, as so acknowledged, to the Bank and upon delivery to the Bank
of a certificate of the Guarantor in form and substance reasonably
satisfactory to the Bank. Without limiting the provisions of Section 8.2
of the Agreement, the Borrower hereby agrees to pay the fees and expenses
incurred by the Bank (including the reasonable legal fees of Baker &
McKenzie) in connection with the preparation and negotiation of this
Fifth Amendment.
Section 6. Representations and Warranties. The Borrower hereby
repeats such of the representations and warranties contained in Article
IV of the Agreement as if fully set forth herein and represents and
warrants that, except as previously disclosed to the Bank in writing,
each such representation and warranty is true and correct as of the date
hereof, provided that the representation and warranty contained in
Section 4.7 shall also refer to the most recent audited and unaudited
financial statements delivered by the Borrower to the Bank. For the
avoidance of doubt, this Fifth Amendment constitutes an Operative
Document.
Section 7. Governing Law. This Fifth Amendment shall be governed
by the laws of the State of Illinois (without regard to any conflicts of
law).
Section 8. Execution in Counterparts. This Fifth Amendment may be
executed by the parties hereto in counterparts, each of which shall be
deemed to be an original and all of which shall constitute together but
one and the same agreement and all signatures need not appear on any one
counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Fifth
Amendment to be executed by their respective officers as of the date
first set above.
THE HONGKONG AND SHANGHAI
BANKING CORPORATION LIMITED EVEREST & JENNINGS, INC.
By: (MICHAEL C. CUTLIP) By: (TIMOTHY W. EVANS)
Its: Vice President Its: Vice President - Finance
Date: 9-21-94 Date: 9-7-94
Acknowledged by: Acknowledged by:
BRIERLEY INVESTMENTS LIMITED BIL SECURITIES (OFFSHORE)
LIMITED
By: (RODNEY PRICE) By: (M.S. HORTON)
Its: Executive Director Its: Director
Date: 9-20-94 Date: 9-21-94
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000033837
<NAME> EVEREST & JENNINGS INTERNATIONAL LTD.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 1,778
<SECURITIES> 0
<RECEIVABLES> 18,339
<ALLOWANCES> (2,036)
<INVENTORY> 19,337
<CURRENT-ASSETS> 12,833
<PP&E> 16,774
<DEPRECIATION> (10,154)
<TOTAL-ASSETS> 60,188
<CURRENT-LIABILITIES> 57,912
<BONDS> 13,234
<COMMON> 722
0
32,406
<OTHER-SE> (44,447)
<TOTAL-LIABILITY-AND-EQUITY> 60,188
<SALES> 60,188
<TOTAL-REVENUES> 60,188
<CGS> 42,068
<TOTAL-COSTS> 42,068
<OTHER-EXPENSES> 19,641
<LOSS-PROVISION> 0
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</TABLE>
