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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: January 5, 1994
EVEREST & JENNINGS INTERNATIONAL LTD.
(Exact name of registrant as specified in its charter)
DELAWARE 0-3585 95-2536185
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(State of Organization) (Commission Number) (IRS Employer I.D. #)
1100 Corporate Square Drive, St. Louis, Missouri 63132
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314) 995-7000
NOT APPLICABLE
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
The Registrant held a special meeting (the "Special Meeting") of its
stockholders on December 31, 1993, at which the stockholders approved (i) the
terms of a transaction (the "Debt Conversion Transaction") whereby $75,000,000
in principal amount of indebtedness plus accrued, unpaid interest owed by the
Registrant and its wholly-owned subsidiary, Everest & Jennings, Inc. ("E&J
Inc."), to BIL (Far East Holdings) Limited or its affiliates (collectively
"BIL") is converted into shares of a new Series C Convertible Preferred Stock
and into shares of Common Stock and (ii) amendments to the Registrant's
Certificate of Incorporation to increase the number of authorized Common shares
from 25,000,000 to 120,000,000 (the "Common Stock Amendment") and to increase
the number of authorized shares of Preferred Stock from 11,000,000 to
31,000,000 (the "Preferred Stock Amendment") (collectively the
"Recapitalization Proposals").
SUMMARY OF DEBT CONVERSION TRANSACTION
As of September 30, 1993, the Registrant, E&J Inc., Jennings Investment Co.
(a wholly-owned subsidiary of E&J Inc.) 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 Registrant and E&J Inc. to BIL. Pursuant to
the Debt Conversion Agreement, (a) the Registrant 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. the ability to repay the outstanding balance of cash advances owed by E&J
Inc. to The Hongkong and Shanghai Banking Corporation Limited ("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 June 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
Registrant 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 Registrant and E&J Inc. up to $12.5 million pursuant to the terms
of a Revolving Promissory Note; (g) BIL and the Registrant and E&J Inc. entered
into a Security Agreement (the "Security Agreement") pursuant to which the
Registrant 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 Registrant and E&J
Inc. to
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BIL under the Common Stock Note, the Preferred Stock Note, the
Revolving Promissory Note and the Indemnification Obligation; and (h) the
Registrant and BIL entered into a Registration Rights Agreement pursuant to
which the Registrant 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.
BIL has agreed, upon stockholder approval of the Debt Conversion
Transaction and the Recapitalization Proposals, to advance to E&J Inc. $10
million to pay HSBC the cash advance made by it to E&J Inc. under the Revolving
Credit Agreement. Such advance by BIL to E&J Inc. will result in an increase
in the principal amount of the Common Stock Note from $45 million to $55
million.
The Common Stock Note matures on March 31, 1994, bears interest at the rate
of 8% per annum from and after March 31, 1994, and is secured by a lien on and
security interest in all assets of the Registrant and E&J Inc. on a pari passu
basis with the repayment and other obligations of the Registrant and E&J Inc.
under the Preferred Stock Note, the Revolving Promissory Note and the
Indemnification Obligation. The Common Stock Note is subordinated to all debt
borrowed by the Registrant or E&J Inc. from, or the payment of which has been
guaranteed by the Registrant or E&J Inc. to, HSBC, the Pension Benefit Guaranty
Corporation, Congress Financial Corporation and any other financial institution
constituting a principal lender to the Registrant and/or E&J Inc.
The Common Stock Note is convertible into a 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 will convert in full upon
satisfaction of all of the following conditions: (a) ratification of the Debt
Conversion Transaction by the stockholders of the Registrant; (b) approval and
adoption of the Common Stock Amendment and the Preferred Stock Amendment by the
stockholders of the Registrant; (c) the filing and effectiveness of an
amendment to the Registrant'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. The Common Stock Note
is not convertible until each of the foregoing conditions has been satisfied.
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The Preferred Stock Note matures on March 31, 1994, bears interest at the
rate of 8% per annum from and after March 31, 1994, and is secured by a lien on
and security interest in all assets of the Registrant and E&J Inc. on a pari
passu basis with the repayment and other obligations of the Registrant and E&J
Inc. under the Common Stock Note, the Revolving Promissory Note and the
Indemnification Obligation. The Preferred Stock Note is subordinated to all
debt borrowed by the Registrant or E&J Inc. from, or the payment of which has
been guaranteed by the Registrant or E&J Inc. to, HSBC, the Pension Benefit
Guaranty Corporation, Congress Financial Corporation and any other financial
institution constituting a principal lender to the Registrant and/or E&J Inc.
The Preferred Stock Note is convertible into a 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 will convert in full upon satisfaction of all of the following
conditions: (a) ratification of the Debt Conversion Transaction by the
stockholders of the Registrant; (b) approval and adoption of the Common Stock
Amendment and the Preferred Stock Amendment by the stockholders of the
Registrant; (c) the filing and effectiveness of an amendment to the
Registrant'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. The Preferred Stock Note is not
convertible until each of the foregoing conditions has been satisfied.
A copy of the Debt Conversion Agreement, Common Stock Note, Preferred Stock
Note, Revolving Promissory Note, Security Agreement, and Registration Rights
Agreement has been filed as Exhibits 10(es) through (ex) to the Registrant's
Quarterly Report on Form 10-Q for the Quarterly Period ended September 30,
1993.
SUMMARY OF THE RECAPITALIZATION PROPOSALS
COMMON STOCK AMENDMENT
The Common Stock Amendment will increase the number of Common shares which
the Registrant has authority to issue from 25,000,000 to 120,000,000.
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Of the 25,000,000 shares of Common Stock previously authorized, 9,199,612
shares were issued and outstanding as of the date of the Special Meeting.
The terms of the Debt Conversion Agreement and the Preferred Stock Note
require that the Series C Preferred Stock have the same voting rights as, and
the right to vote together with, the Common shares.
PREFERRED STOCK AMENDMENT
The Preferred Stock Amendment will increase the number of shares of
Preferred Stock which the Registrant has authority to issue from 11,000,000 to
31,000,000. The Board of Directors has broad discretion to designate and
establish different series of Preferred Stock and the terms of such series
prior to issuance. For example, the Board has the power to designate the
dividend rate, terms for redemption, priority over other classes of securities,
purchase or sinking fund provisions, terms of conversion, voting rights and
preemptive rights for each series of Preferred Stock.
Of the 11,000,000 shares of Preferred Stock previously authorized,
6,622,206 shares of Series A Preferred Stock and 786,357 shares of Series B
Preferred Stock were issued and outstanding as of the date of the Special
Meeting.
PRINCIPAL TERMS OF SERIES C PREFERRED STOCK
The Series C Preferred Stock Certificate of Designations includes the
following terms agreed upon by the Registrant and BIL pursuant to the Debt
Conversion Agreement and the Preferred Stock Note: DIVIDENDS -- 7% cumulative
dividends mandatorily payable (subject to applicable law), commencing after the
Registrant achieves two consecutive fiscal quarters of operating profit,
accruing as of the first day of such quarters, and payable on the first
business day of each April, commencing with the first April following the end
of the fiscal year in which the second of the consecutive fiscal quarters
occurs and payable in kind, in shares of Common Stock ("In-Kind Dividend
Stock"), at the option of the Registrant; CONVERSION - convertibility into
Common shares on a share-for-share basis, subject to anti-dilution provisions;
REGISTRATION RIGHTS - as contained in the Registration Rights Agreement, and as
follows with respect to shares of Common Stock issuable upon conversion of
Series C Preferred Stock: (a) the holder may make a one-time demand that the
Registrant register distribution of shares of Common Stock for not less than
500,000 shares; and (b) the holder has the right to request that the
distribution of its shares of Common Stock be included in any registration
statement under the Securities Act of 1933 filed by the Registrant; SINKING
FUND - none; REDEMPTION - none; PREEMPTIVE RIGHTS - none; VOTING RIGHTS - the
same voting rights as, and the right (except as limited by applicable law) to
vote together with, the Common shares; and LIQUIDATION PREFERENCE - a
liquidation preference per share equal to $1.00.
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SIGNATURES
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 hereunto duly authorized.
EVEREST & JENNINGS INTERNATIONAL LTD.,
a Delaware corporation
Date: January 5, 1994 By: /s/ Ralph E. Wolf
Name: Ralph E. Wolf
Title: Executive Vice President,
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial
Officer of the Registrant)
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