SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 12 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 3, 1996
Graham-Field Health Products, Inc.
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(Exact Name of Registrant as Specified in Charter)
Delaware 0-10881NY 11-2578230
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(State or Other Juris- (Commission File (IRS Employer
diction of Incorporation) Number) Identification No.)
400 Rabro Drive East, Hauppauge, NY 11788
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 582-5900
Not applicable
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(Former Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events.
The Everest & Jennings Merger
On September 3, 1996, Graham-Field Health Products, Inc., a Delaware
corporation (the "Company"), entered into an Agreement and Plan of Merger (the
"Merger Agreement"), by and among Everest & Jennings International Ltd., a
Delaware corporation ("E&J"), BIL (Far East Holdings) Limited (together with
its affiliates,"BIL"), E&J Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of the Company ("Sub"), and the Company providing for
the acquisition of E&J by the Company. BIL owns shares of common and preferred
stock of E&J representing approximately 86% of the aggregate voting power of
all outstanding shares of capital stock of E&J. Pursuant to the Merger
Agreement, following the satisfaction of the conditions contained therein,
Sub will be merged with and into E&J with E&J to continue as the surviving
corporation wholly owned by the Company (the "Merger"). The Company has received
the written opinion of Jefferies & Company, Inc. to the effect that the
consideration payable by the Company pursuant to the Merger Agreement is fair
from a financial point of view to the Company's stockholders.
In the Merger, each share of E&J's common stock, par value $.10 per share
(the "E&J Common Stock"), other than shares of E&J Common Stock cancelled
pursuant to the Merger Agreement or shares of E&J Common Stock the holders of
which have exercised appraisal rights under Delaware law, will be converted into
the right to receive .35 (the "Conversion Number") shares of common stock, par
value $.025 per share, of the Company (the "Company Common Stock"); provided
that the Conversion Number will be reduced to the extent necessary so that the
maximum value (determined as set forth in the Merger Agreement) of the fraction
of a share of Company Common Stock into which each share of E&J Common Stock is
converted in the Merger will not exceed $5.50. There were 7,196,565 shares of
E&J Common Stock outstanding on August 1, 1996.
In addition, at the effective time of the Merger:
(i) BIL will purchase for cash additional shares of Company Common Stock
having a value (determined as set forth in the Merger Agreement)
equal to the outstanding principal and interest on E&J's
indebtedness to Hong Kong and Shanghai Banking Corporation Limited
(subject to a cap of $25 million), which indebtedness (the "HSBC
Indebtedness") is currently guaranteed by BIL. The proceeds of such
stock purchase will be contributed by the Company to E&J immediately
following the Merger and used to discharge the HSBC Indebtedness.
(ii) The Company will issue up to $61 million stated value of a new
Series B Cumulative Convertible Preferred Stock (the "Series B
Preferred Stock") to BIL in exchange for certain indebtedness of E&J
owing to BIL
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and shares of E&J preferred stock owned by BIL. The Series B
Preferred Stock will be entitled to a dividend of 1.5% per annum
payable quarterly, will vote on an as-converted basis as a single
class with the Company Common Stock and the Series C Preferred Stock
(as defined in clause (iii) below), will not be subject to
redemption and will be convertible (x) at the option of the holder
thereof, at a conversion price of $20 per share (or, in the case of
certain dividend payment defaults, at a conversion price of $15.50
per share), (y) at the option of the Company, at a conversion price
equal to current trading prices (subject to a minimum conversion
price of $15.50 and a maximum conversion price of $20 per share) and
(z) automatically on the fifth anniversary of the date of issuance
at a conversion price of $15.50 per share. Such conversion prices
are subject to customary antidilution adjustments. A form of the
Certificate of Designations of the Series B Preferred Stock, setting
forth the terms thereof, is attached to the Merger Agreement as
Exhibit A.
(iii) BIL will purchase for cash $10 million stated value of a new Series
C Cumulative Convertible Preferred Stock (the "Series C Preferred
Stock"), the proceeds of which will be available to the Company for
general corporate purposes. The Series C Preferred Stock will be
entitled to a dividend of 1.5% per annum payable quarterly, will
vote on an as-converted basis as a single class with the Company
Common Stock and the Series B Preferred Stock, will be subject to
redemption as a whole at the option of the Company on the fifth
anniversary of the date of issuance at stated value and, if
not so redeemed, will be convertible automatically on the
fifth anniversary of the date of issuance at a conversion price of
$20 per share, subject to customary antidilution adjustments. A form
of the Certificate of Designations of the Series C Preferred Stock,
setting forth the terms thereof, is attached to the Merger Agreement
as Exhibit B.
(iv) Certain indebtedness in the amount of $4 million owing by the
Company to BIL will be exchanged for an equal amount of unsecured
subordinated indebtedness of the Company maturing on April 1, 2001
and bearing interest at the effective rate of 7.7% per annum. A
summary term sheet relating to such subordinated indebtedness is
attached to the Merger Agreement as Exhibit C.
The Merger Agreement contains customary representations and warranties of
the parties, which will not survive the effectiveness of the Merger. In
addition, in the Merger Agreement the Company and E&J have agreed to operate
their businesses in the ordinary course pending consummation of the Merger, and
E&J has agreed not to solicit or enter into
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negotiations or agreements relating to a competing business combination
transaction. The Merger is conditioned, among other things, upon the approval of
the holders of at least a majority of the outstanding shares of E&J capital
stock entitled to vote thereon, upon the approval of the holders of at least a
majority of the shares of Company Common Stock voting at a special meeting of
the stockholders of the Company, and upon the expiration of certain regulatory
waiting periods. Either party may terminate the Merger Agreement if the Merger
is not consummated on or prior to December 31, 1996.
To induce the Company and Sub to enter into the Merger Agreement, BIL
entered into a Stockholder Agreement dated as of September 3, 1996 (the
"Stockholder Agreement") with the Company and Irwin Selinger, the Chairman of
the Board and Chief Executive Officer of the Company, pursuant to which, among
other things, BIL has agreed concurrently with the execution of the Stockholder
Agreement, to execute and deliver to the Company an Irrevocable Proxy to vote
BIL's shares in favor of the Merger Agreement and the Merger. BIL also has
agreed in the Stockholder Agreement to grant the Company a right of first
refusal with respect to certain sales of Company securities acquired by BIL
pursuant to the Merger Agreement, to indemnify the Company against certain
existing actions and proceedings to which E&J and its subsidiaries are parties
and, so long as BIL owns securities representing at least 5% of the voting
power of the outstanding capital stock of the Company, not to acquire
additional shares of Company Common Stock without the consent of the Board of
Directors of the Company, which consent will not be unreasonably withheld, seek
to acquire ownership of the Company, engage in any solicitation of proxies with
respect to the Company or otherwise seek or propose to acquire control of the
Board of Directors of the Company. Pursuant to the Stockholder Agreement, BIL
will have the right to designate two members of the Company's Board of Directors
(subject to reduction if BIL reduces its ownership of Company Common Stock), and
will have the right to participate on a pro rata basis in certain future stock
issuances by the Company. The Stockholder Agreement will automatically terminate
upon a termination of the Merger Agreement in accordance with its terms or upon
a change of control of the Company's Board of Directors. In addition, if any
person becomes the owner of securities representing more than 15% but less than
100% of the voting power of the outstanding capital stock of the Company with
the approval of the Board of Directors and the restrictions imposed by the
Company on the activities of such person are less onerous than those imposed on
BIL, then the Stockholder Agreement will be revised to provide for comparable
restrictions. Upon consummation of the transactions contemplated by the Merger
Agreement and after giving effect to the conversion of the Series B Preferred
Stock at $15.50 and the Series C Preferred Stock at $20.00, BIL will own shares
of common and preferred stock of the Company representing approximately 34% of
the aggregate voting power of all outstanding shares of capital stock of the
Company.
In addition, on September 3, 1996, the Company entered into a Registration
Rights Agreement with BIL (the "Registration Rights Agreement") providing
certain demand and "piggyback" registration rights to BIL with respect to the
securities of the Company to be acquired by BIL pursuant to the Merger
Agreement. The Company will be required to pay the expenses incurred by BIL in
connection with any such registrations. The Registration Rights Agreement will
automatically terminate upon a termination of the Merger Agreement in accordance
with its terms.
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The Rights Amendment and the 1996 Rights Agreement
On September 3, 1996, prior to the execution of the Merger Agreement, the
Company entered into an amendment (the "Rights Amendment") to the Rights
Agreement dated as of July 21, 1989 between the Company and American Stock
Transfer & Trust Company, as Rights Agent (the "1989 Rights Agreement"), with
the effect of exempting the events and transactions contemplated by the Merger
Agreement and the Stockholder Agreement from the 1989 Rights Agreement. In
addition, on that date the rights previously issued under the 1989 Rights
Agreement were called for redemption on September 17, 1996.
In addition, on September 3, 1996, the Company entered into a new Rights
Agreement with American Stock Transfer & Trust Company, as Rights Agent (the
"1996 Rights Agreement"). As contemplated by the 1996 Rights Agreement, the
Company's Board of Directors has declared a dividend of one new preferred share
purchase right (a "Right") for each outstanding share of Company Common Stock
outstanding on September 17, 1996. Each Right entitles the holder thereof to
purchase from the Company one one-hundredth of a share of Series A Junior
Participating Preferred Stock, par value $.01 per share, of the Company (the
"Preferred Shares") at a price of $35.00 per one one-hundredth of a Preferred
Share, subject to adjustment as provided in the 1996 Rights Agreement. A
complete description of the Rights is contained in the Summary of Rights
attached as Exhibit C to the 1996 Rights Agreement.
Until the earlier to occur of (i) 10 days following a public announcement
that a person or group of affiliated or associated persons have acquired (an
"Acquiring Person") beneficial ownership of 15% or more of the outstanding
shares of capital stock of the Company entitled generally to vote in the
election of directors ("Voting Shares") or (ii) 10 business days (or such later
date as may be determined by action of the Board of Directors prior to such time
as any person or group of affiliated persons becomes an Acquiring Person)
following the commencement of, or announcement of an intention to make, a tender
offer or exchange offer the consummation of which would result in a person or
group becoming an Acquiring Person (the earlier of such dates being called the
"Distribution Date"), the Rights will be evidenced, with respect to any of the
Common Stock certificates outstanding as of the Record Date, by such Common
Stock certificate. Notwithstanding the foregoing, BIL will not be an Acquiring
Person by virtue of its ownership of any Voting Shares acquired in accordance
with the Merger Agreement or the Stockholder Agreement (the "BIL Voting
Shares"), but BIL will become an Acquiring Person if it acquires any Voting
Shares other than BIL Voting Shares or shares distributed generally to the
holders of any series or class of capital stock of the Company. In addition, the
1996 Rights Agreement contains provisions exempting the Merger and the other
events and transactions contemplated by the Merger Agreement and the Stockholder
Agreement from the 1996 Rights Agreement.
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The 1996 Rights Agreement provides that, until the Distribution Date (or
earlier redemption or expiration of the Rights), the Rights will be transferred
with and only with the Common Stock. The Rights are not exercisable until the
Distribution Date. The Rights will expire on September 3, 2006.
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $1 per share but will be entitled to an aggregate
dividend of 100 times the dividend declared per share of Common Stock. In the
event of liquidation, the holders of the Preferred Shares will be entitled to a
minimum preferential liquidation payment of $100 per share but will be entitled
to an aggregate payment of 100 times the payment made per share of Common Stock.
Each Preferred Share will have 100 votes, voting together with the shares of
Common Stock. Finally, in the event of any merger, consolidation or other
transaction in which the Common Stock is exchanged, each Preferred Share will be
entitled to receive 100 times the amount received per share of Common Stock.
These rights are protected by customary antidilution provisions. Because of the
nature of the Preferred Shares' dividend, liquidation and voting rights, the
value of the one one-hundredth interest in a Preferred Share purchasable upon
exercise of each Right should approximate the value of one share of Common
Stock.
In the event that the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold after a person or group has become an Acquiring Person, proper
provision will be made so that each holder of a Right will thereafter have the
right to receive, upon the exercise thereof at the then current exercise price
of the Right, that number of shares of common stock of the acquiring company
which at the time of such transaction will have a market value of two times the
exercise price of the Right.
In the event that any person or group of affiliated or associated persons
becomes an Acquiring Person, the 1996 Rights Agreement provides that proper
provision shall be made so that each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which will thereafter be void), will
thereafter have the right to receive (subject to adjustment) upon exercise that
number of shares of Common Stock having a market value of two times the exercise
price of the Right. At any time after any person or group becomes an Acquiring
Person and prior to the acquisition by such person or group of 50% or more of
the outstanding Voting Shares, the Board of Directors of the Company may
exchange the Rights (other than Rights owned by such person or group, which will
have become void), in whole or in part, at an exchange ratio of one share of
Common Stock, or one one-hundredth of a Preferred Share (or of a share of a
class or series of the Company's preferred stock having equivalent rights,
preferences and privileges), per Right (subject to adjustment).
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At any time prior to a person or group of affiliated or associated persons
becoming an Acquiring Person, the Board of Directors of the Company may redeem
the Rights in whole, but not in part, at a price of $.01 per Right (the
"Redemption Price"). The redemption of the Rights may be made effective at such
time on such basis with such conditions as the Board of Directors in its sole
discretion may establish. Immediately upon any redemption of the Rights in
accordance with this paragraph, the right to exercise the Rights will terminate
and the only right of the holder of the Rights will be to receive the Redemption
Price.
The terms of the Rights may be amended by the Board of Directors of the
Company without the consent of the holders of the Rights, including an amendment
to (a) lower certain thresholds described above to not less than the greater of
(i) any percentage greater than the largest percentage of the outstanding Voting
Shares then known to the Company to be beneficially owned by any person or group
of affiliated or associated persons and (ii) 10%, (b) fix a Final Expiration
Date later than September 3, 2006, (c) reduce the Redemption Price, (d) increase
the Purchase Price or (e) in the event that the Merger Agreement is terminated
in accordance with its terms without the Merger having been consummated, delete
references to BIL and the Merger as the Board of Directors deems appropriate,
except that from and after such time as any person or group of affiliated or
associated persons becomes an Acquiring Person no such amendment may adversely
affect the interests of the holders of the Rights (other than the Acquiring
Person and its affiliates and associates).
As of August 7, 1996, there were 14,175,608 shares of Common Stock issued
and outstanding and no shares of Common Stock held in the treasury of the
Company. As long as the Rights are attached to the Common Stock, the Company
will issue one Right with each new share of Common Stock so that all such shares
will have Rights attached. The Company's Board of Directors has reserved for
issuance upon exercise of the Rights 300,000 Preferred Shares.
The Proposed Charter and Incentive Program Amendments
Subject to obtaining stockholder approval, the Board of Directors of the
Company has adopted several amendments to the Certificate of Incorporation of
the Company, including:
(i) increasing the number of authorized shares of Company Common Stock
to 60 million;
(ii) requiring that any action required or permitted to be taken by the
stockholders of the Company be effected at an annual or special
meeting of stockholders of the Company and may not be effected by
any consent in writing in lieu of a meeting of such stockholders;
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(iii) providing that special meetings of stockholders may be called only
by the Chief Executive Officer of the Company or by the Secretary of
the Company at the written request of a majority of the Board of
Directors;
(iv) providing that directors can only be removed from office for cause
by the affirmative vote of the holders of more than 50% of the
voting power of the then outstanding Voting Shares; and
(v) requiring the affirmative vote of the holders of at least 80% of the
voting power of the then outstanding Voting Shares to amend the
provisions described in clauses (ii), (iii) and (iv) above and
certain related provisions contained in the Certificate of
Incorporation and Bylaws of the Company.
The text of the proposed amendments is attached to the Merger Agreement as
Exhibit D.
In addition, the stockholders of the Company also will be asked to approve
an increase in the number of shares available for the granting of options under
the Company's Incentive Program by 900,000. This will accommodate the conversion
of options currently held by E&J employees into options to purchase the Company
Common Stock.
* * *
The Merger Agreement (including the forms of Certificate of Designations of
the Series B Preferred Stock and the Series C Preferred Stock attached thereto
as exhibits), the Stockholder Agreement, the Registration Rights Agreement, the
Rights Amendment and the 1996 Rights Agreement are attached hereto as Exhibits
2(a), 4(f), 4(g), 4(a) and 4(b), respectively, and are incorporated herein by
reference. The foregoing descriptions of such documents are qualified in their
entirety by reference to those documents filed hereto as exhibits.
Additional information with respect to the Merger and the other
transactions contemplated thereby is included in the press release issued
September 3, 1996 attached hereto as Exhibit 99(a).
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Not Applicable.
(b) Not Applicable.
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(c) Exhibit No. Description
----------- -----------
2(a) Agreement and Plan of Merger, dated as
of September 3, 1996, by and among Graham-
Field Health Products, Inc. (the
"Company'), E&J Acquisition Corp.,
Everest & Jennings International Ltd.
and BIL (Far East Holdings) Limited
("BIL")
4(a) First Amendment, dated as of September 3, 1996, to
the Rights Agreement, dated as of July 21, 1989,
between the Company and American Stock Transfer &
Trust Company, as Rights Agent
4(b) Rights Agreement dated as of September 3, 1996
between the Company and American Stock Transfer &
Trust Company, as Rights Agent (the "1996 Rights
Agreement")
4(c) Form of Certificate of Designations of
Series A Junior Participating Preferred
Stock, included as Exhibit A to the 1996
Rights Agreement
4(d) Form of Rights Certificate, included as
Exhibit B to the 1996 Rights Agreement
4(e) Summary of Rights to Purchase Preferred
Shares, included as Exhibit C to the
1996 Rights Agreement
4(f) Stockholder Agreement, dated as of
September 3, 1996, among the Company, BIL
and Irwin Selinger
4(g) Registration Rights Agreement, dated as
of September 3, 1996, between the Company
and BIL
99(a) Press Release, dated September 3, 1996
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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.
GRAHAM-FIELD HEALTH PRODUCTS, INC.
Date: September 3, 1996 By: /s/ Richard S. Kolodny
--------------------------------
Name: Richard S. Kolodny
Title: Vice President, General
Counsel and Secretary
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EXHIBIT INDEX
-------------
Item No. Description Page No.
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2(a) Agreement and Plan of Merger, dated as of September 3, 1996,
by and among Graham-Field Health Products, Inc. (the
"Company"), E&J Acquisition Corp., Everest & Jennings
International Ltd. and BIL (Far East Holdings) Limited
("BIL")
4(a) First Amendment, dated as of September 3, 1996, to the
Rights Agreement, dated as of July 21, 1989, between the
Company and American Stock Transfer & Trust Company, as
Rights Agent
4(b) Rights Agreement dated as of September 3, 1996 between the
Company and American Stock Transfer & Trust Company, as
Rights Agent (the "1996 Rights Agreement")
4(c) Form of Certificate of Designations of Series A Junior
Participating Preferred Stock, included as Exhibit A to
the 1996 Rights Agreement
4(d) Form of Rights Certificate, included as Exhibit B to the
1996 Rights Agreement
4(e) Summary of Rights to Purchase Preferred Shares, included
as Exhibit C to the 1996 Rights Agreement
4(f) Stockholder Agreement, dated as of September 3, 1996, among
the Company, BIL and Irwin Selinger
4(g) Registration Rights Agreement, dated as of September 3,
1996, between the Company and BIL
99(a) Press Release, dated September 3, 1996
Exhibit 2(a)
AGREEMENT AND PLAN OF MERGER
dated as of September 3, 1996
by and among
GRAHAM-FIELD HEALTH PRODUCTS, INC.,
BIL (FAR EAST HOLDINGS) LIMITED,
E&J ACQUISITION CORP.
and
EVEREST & JENNINGS INTERNATIONAL LTD.
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TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is attached
but is inserted for convenience only.
Page
No.
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ARTICLE I
THE MERGER
1.01 The Merger.................................................... 2
1.02 Effective Time................................................ 2
1.03 Certificate of Incorporation and Bylaws of the
Surviving Corporation...................................... 2
1.04 Directors and Officers of the Surviving
Corporation................................................ 2
1.05 Effects of the Merger......................................... 3
1.06 Further Assurances............................................ 3
ARTICLE II
CONVERSION OF SHARES
2.01 Conversion of Capital Stock................................... 3
2.02 Closing; Closing Deliveries................................... 5
2.03 Exchange of Certificates...................................... 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.01 Organization and Qualification................................ 11
3.02 Capital Stock; Indebtedness................................... 12
3.03 Authority Relative to this Agreement.......................... 13
3.04 Non-Contravention; Approvals and Consents..................... 14
3.05 SEC Reports and Financial Statements.......................... 15
3.06 Absence of Certain Changes or Events.......................... 16
3.07 Absence of Undisclosed Liabilities............................ 16
3.08 Legal Proceedings............................................. 17
3.09 Information Supplied.......................................... 17
3.10 Compliance with Laws and Orders............................... 17
3.11 Compliance with Agreements; Certain Agreements................ 18
3.12 Taxes ...................................................... 19
3.13 Benefit Plans; ERISA.......................................... 19
3.14 Labor Matters................................................. 25
3.15 Environmental Matters......................................... 25
3.16 Intellectual Property Rights.................................. 27
3.17 Affiliate Transactions........................................ 28
3.18 Vote Required................................................. 28
3.19 Opinion of Financial Advisor.................................. 29
3.20 Ownership of Parent Common Stock.............................. 29
3.21 Section 203 of the DGCL Not Applicable........................ 29
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No.
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ARTICLE III-A
REPRESENTATIONS AND WARRANTIES OF BIL
3A.01 Organization and Qualification............................... 29
3A.02 Authority Relative to this Agreement......................... 29
3A.03 Non-Contravention; Approvals and Consents.................... 30
3A.04 Legal Proceedings............................................ 30
3A.05 Purchase for Investment...................................... 30
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
4.01 Organization and Qualification................................ 31
4.02 Capital Stock................................................. 32
4.03 Authority Relative to this Agreement.......................... 33
4.04 Non-Contravention; Approvals and Consents..................... 34
4.05 SEC Reports and Financial Statements.......................... 35
4.06 Absence of Certain Changes or Events.......................... 36
4.07 Absence of Undisclosed Liabilities............................ 36
4.08 Legal Proceedings............................................. 36
4.09 Information Supplied.......................................... 37
4.10 Compliance with Laws and Orders............................... 37
4.11 Compliance with Agreements; Certain Agreements................ 38
4.12 Taxes ...................................................... 38
4.13 Employee Benefit Plans; ERISA................................. 39
4.14 Labor Matters................................................. 43
4.15 Environmental Matters......................................... 44
4.16 Intellectual Property Rights.................................. 45
4.17 Vote Required................................................. 46
4.18 Opinion of Financial Advisor.................................. 46
4.19 Parent Rights Agreement....................................... 46
4.20 Ownership of Company Common Stock............................. 46
4.21 Section 203 of the DGCL Not Applicable........................ 46
ARTICLE V
COVENANTS
5.01 Covenants of the Company and Parent........................... 47
5.02 No Solicitations.............................................. 52
5.03 Conduct of Business of Sub.................................... 53
5.04 Third Party Standstill Agreements............................. 53
5.05 Purchases of Common Stock of the Other Party.................. 53
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No.
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ARTICLE VI
ADDITIONAL AGREEMENTS
6.01 Access to Information; Confidentiality........................ 53
6.02 Preparation of Registration Statement and Proxy
Statement.................................................. 54
6.03 Approval of Stockholders...................................... 55
6.04 Company Affiliates............................................ 56
6.05 Stock Exchange Listing........................................ 56
6.06 PBGC Waiver Payments.......................................... 56
6.07 Regulatory and Other Approvals................................ 56
6.08 Company Option Plans.......................................... 57
6.09 Expenses...................................................... 57
6.10 Brokers or Finders............................................ 57
6.11 Takeover Statutes............................................. 57
6.12 Conveyance Taxes.............................................. 58
6.13 [Intentionally Left Blank].................................... 58
6.14 Related Party Contracts and Transactions...................... 58
6.15 Benefit Arrangements.......................................... 58
6.16 Indemnification of Directors and Officers..................... 58
6.17 Contributed Shares and Debt................................... 60
6.18 Excess HSBC Indebtedness...................................... 60
6.19 Mexican Subsidiary............................................ 60
ARTICLE VII
CONDITIONS
7.01 Conditions to Each Party's Obligation to Effect
the Merger................................................. 60
7.02 Conditions to Obligation of Parent and Sub to
Effect the Merger.......................................... 62
7.03 Conditions to Obligation of the Company to Effect
the Merger................................................. 64
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.01 Termination................................................... 65
8.02 Effect of Termination......................................... 65
8.03 Amendment..................................................... 66
8.04 Waiver. ...................................................... 66
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No.
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ARTICLE IX
GENERAL PROVISIONS
9.01 Non-Survival of Representations, Warranties,
Covenants and Agreements................................... 66
9.02 Notices ...................................................... 67
9.03 Entire Agreement; Incorporation of Exhibits................... 68
9.04 Public Announcements.......................................... 68
9.05 No Third Party Beneficiary.................................... 69
9.06 No Assignment; Binding Effect................................. 69
9.07 Headings...................................................... 69
9.08 Invalid Provisions............................................ 69
9.09 Governing Law................................................. 69
9.10 Enforcement of Agreement...................................... 69
9.11 Certain Definitions........................................... 70
9.12 Counterparts.................................................. 71
EXHIBITS
EXHIBIT A Form of Certificate of Designations of Parent
Series B Cumulative Convertible Preferred Stock
EXHIBIT B Form of Certificate of Designations of Parent
Series C Cumulative Convertible Preferred Stock
EXHIBIT C Term Sheet for Unsecured Subordinated Promissory
Note
EXHIBIT D Parent Amendment
EXHIBIT E Form of Affiliate Agreement
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GLOSSARY OF DEFINED TERMS
The following terms, when used in this Agreement, have the meanings
ascribed to them in the corresponding Sections of this Agreement listed below:
"affiliate" -- Section 9.11(a)
"Affiliate Agreement" -- Section 6.04
"Agreement" -- Preamble
"Alternative Proposal" -- Section 5.02
"Antitrust Division" -- Section 6.07
"Appraised Value" -- Section 2.02(b)(iii)
"beneficially" -- Section 9.11(b)
"BIL" -- Preamble
"BIL Company Preferred Shares" -- Sections 2.02(b)(iii)
"BIL Debt" -- Section 2.02(b)(iii)
"business day" -- Section 9.11(c)
"CERCLA" -- Section 3.15(c)
"CERCLIS" -- Section 3.15(e)
"Certificate of Merger" -- Section 1.02
"Certificates" -- Section 2.03(b)
"Claim" -- Section 6.16(a)
"Closing" -- Section 2.02(a)
"Closing Date" -- Section 2.02(a)
"Code" -- Section 2.03(g)
"Common Stock Trust" -- Section 2.03(e)(iii)
"Company" -- Preamble
"Company Affiliates" -- Section 6.04
"Company Benefit Plan" -- Section 3.13(o)(i)
"Company Common Stock" -- Preamble
"Company Defined Benefit Plan" -- Section 3.13(o)(ii)
"Company Disclosure Letter" -- Section 3.01
"Company ERISA Affiliate" -- Section 3.13(o)(iii)
"Company Financial Statements" -- Section 3.05
"Company Intellectual Property" -- Section 3.16
"Company Option Plans" -- Section 3.02(a)
"Company Pension Benefit Plan" -- Section 3.13(o)(iv)
"Company Permits" -- Section 3.10
"Company Preferred Stock" -- Section 2.01(d)
"Company Qualified Plan" -- Section 3.13(o)(v)
"Company SEC Reports" -- Section 3.05
"Company Series A Preferred Stock" -- Section 2.01(d)
"Company Series B Preferred Stock" -- Section 2.01(d)
"Company Series C Preferred Stock" -- Section 2.01(d)
"Company Stockholders' Approval" -- Section 6.03(b)
"Company Stockholders' Meeting" -- Section 6.03(b)
"Company Stock Option" -- Section 6.08
"Company Subject Defined
Benefit Plan" -- Section 3.13(o)(vi)
"Confidentiality Agreement" -- Section 6.01
"Constituent Corporations" -- Section 1.01
"Contracts" -- Section 3.04(a)
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<PAGE>
"Contributed Debt" -- Section 2.02(b)(iii)
"Contributed Shares" -- Section 2.02(b)(iii)
"control," "controlling,"
"controlled by" and "under common
control with" -- Section 9.11(a)
"Conversion Number" -- Section 2.01(c)(i)
"DGCL" -- Section 1.01
"Dissenting Share" -- Section 2.01(e)(i)
"Effective Time" -- Section 1.02
"Environmental Law" -- Section 3.15(g)(i)
"Environmental Permits" -- Section 3.15(a)
"ERISA" -- Section 3.13(o)(vii)
"Excess Shares" -- Section 2.03(e)(ii)
"Exchange Act" -- Section 3.04(b)
"Exchange Agent" -- Section 2.03(a)
"Exchange Fund" -- Section 2.03(a)
"Fair Market Value" -- Section 2.01(c)(ii)(A)
"FTC" -- Section 6.07
"GAAP" -- Section 3.13(o)(viii)
"Governmental or Regulatory
Authority" -- Section 3.04(a)
"group" -- Section 9.11(e)
"Hazardous Material" -- Section 3.15(g)(ii)
"HSBC" -- Section 6.06
"HSBC Debt Payment" -- Section 2.02(b)(i)
"HSBC Indebtedness" -- Section 2.02(b)(i)
"HSR Act" -- Section 3.04(b)
"Indemnified Parties" -- Section 6.16(a)
"Industrial Property" -- Section 3.16
"Intellectual Property" -- Section 3.16
"Investment Assets" -- Section 3.17
"laws" -- Section 3.04(a)
"Lien" -- Section 3.02(b)
"material", "material adverse
effect" and "materially adverse" -- Section 9.11(d)
"Merger" -- Preamble
"Merger Consideration Per Share" -- Section 2.01(c)(i)
"Mexican Subsidiary" -- Section 6.19
"NPL" -- Section 3.15(c)
"NYSE" -- Section 2.01(c)(ii)(B)
"Options" -- Section 3.02
"orders" -- Section 3.04(a)
"Outstanding Note" -- Section 2.02(b)(v)
"Parent" -- Preamble
"Parent Amendment" -- Section 6.03(a)
"Parent Benefit Plan" -- Section 4.13(n)(i)
"Parent Common Stock" -- Section 2.01(c)
"Parent Defined Benefit Plan" -- Section 4.13(n)(ii)
"Parent Disclosure Letter" -- Section 4.01
"Parent Employee Benefit Plans" -- Section 4.13(b)
"Parent ERISA Affiliate" -- Section 4.13(n)(iii)
"Parent Financial Statements" -- Section 4.05
"Parent Incentive Program" -- Section 4.02(a)
"Parent Intellectual Property" -- Section 4.16
"Parent Pension Benefit Plan" -- Section 4.13(n)(iv)
"Parent Permits" -- Section 4.10
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"Parent Preferred Stock" -- Section 4.02(a)
"Parent Qualified Plan" -- Section 4.13(n)(v)
"Parent Rights" -- Section 4.02(a)
"Parent Rights Agreement" -- Section 4.02(a)
"Parent SEC Reports" -- Section 4.05
"Parent Series A Preferred Stock" -- Section 4.02(a)
"Parent Series B Preferred Stock" -- Section 2.02(b)(iii)
"Parent Series C Preferred Stock" -- Section 2.02(b)(iv)
"Parent Stockholders' Approval" -- Section 6.03(a)
"Parent Stockholders' Meeting" -- Section 6.03(a)
"Parent Subject Defined Benefit Plan" -- Section 4.13(n)(vi)
"PBGC" -- Section 3.13(o)(ix)
"PBGC Waiver" -- Section 3.13(m)
"person" -- Section 9.11(e)
"Plan" -- Section 3.13(o)(x)
"Plan Amendment" -- Section 6.03(a)
"Proxy Statement" -- Section 3.09
"Registration Rights Agreement" -- Preamble
"Registration Statement" -- Section 4.09
"Representatives" -- Section 9.11(f)
"Sales Price" -- Section 2.01(c)(ii)(B)
"SEC" -- Section 3.04(b)
"Secretary of State" -- Section 1.02
"Securities Act" -- Section 3.04(b)
"Stockholder Agreement" -- Preamble
"Stockholders' Meetings" -- Section 6.03(b)
"Sub" -- Preamble
"Sub Common Stock" -- Section 2.01(a)
"Subsidiary" -- Section 9.11(g)
"Surviving Corporation" -- Section 1.01
"Surviving Corporation Common Stock" -- Section 2.01(a)
"taxes" -- Section 3.12(c)
"Trading Day" -- Section 2.01(c)(ii)(C)
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This AGREEMENT AND PLAN OF MERGER dated as of September 3, 1996 ("this
Agreement") is made and entered into by and among Graham-Field Health Products,
Inc., a Delaware corporation ("Parent"), E&J Acquisition Corp., a Delaware
corporation wholly owned by Parent ("Sub"), BIL (Far East Holdings) Limited, a
Hong Kong Corporation (together with its affiliates, "BIL"), and Everest &
Jennings International Ltd., a Delaware corporation (the "Company").
WHEREAS, the Boards of Directors of Parent, Sub and the Company have each
determined that it is advisable and in the best interests of their respective
stockholders to consummate, and have approved, the business combination
transaction provided for herein in which Sub would merge with and into the
Company and the Company would become a wholly-owned subsidiary of Parent (the
"Merger");
WHEREAS, the respective Boards of Directors of Parent and the Company have
determined that the Merger is in furtherance of and consistent with their
respective long-term business strategies and is fair to and in the best
interests of their respective stockholders, and Parent has approved this
Agreement and the Merger as the sole stockholder of Sub;
WHEREAS, BIL is the majority stockholder of the Company;
WHEREAS, concurrently with the execution and delivery of this Agreement,
Parent and BIL have entered into (i) a stockholder agreement of even date
herewith pursuant to which, among other things, BIL has agreed to vote its
shares of common stock, par value $0.10 per share, of the Company ("Company
Common Stock"), and its shares of Company Preferred Stock (as defined in Section
3.02) in favor of the Merger (the "Stockholder Agreement"), and (ii) a
registration rights agreement of even date herewith pursuant to which the
Company has agreed to register shares of capital stock of Parent to be received
by BIL in the Merger (the "Registration Rights Agreement"); and
WHEREAS, Parent, Sub, BIL and the Company desire to make certain
representations, warranties and agreements in connection with the Merger and
also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and
<PAGE>
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
1.01 The Merger. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined in Section 1.02), Sub shall be
merged with and into the Company in accordance with the General Corporation Law
of the State of Delaware (the "DGCL"). At the Effective Time, the separate
existence of Sub shall cease and the Company shall continue as the surviving
corporation in the Merger (the "Surviving Corporation"). Sub and the Company are
sometimes referred to herein as the "Constituent Corporations". As a result of
the Merger, the outstanding shares of capital stock of the Constituent
Corporations shall be converted or canceled in the manner provided in Article
II.
1.02 Effective Time. At the Closing (as defined in Section 2.02(a)), a
certificate of merger (the "Certificate of Merger") shall be duly prepared and
executed by the Surviving Corporation and thereafter delivered to the Secretary
of State of the State of Delaware (the "Secretary of State") for filing, as
provided in Section 251 of the DGCL, as soon as practicable on the Closing Date
(as defined in Section 2.02(a)). The Merger shall become effective at the time
of the filing of the Certificate of Merger with the Secretary of State (the date
and time of such filing being referred to herein as the "Effective Time").
1.03 Certificate of Incorporation and Bylaws of the Surviving Corporation.
At the Effective Time, (i) the Certificate of Incorporation of the Company as in
effect immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law and such Certificate of Incorporation, and (ii) the Bylaws of the Company
as in effect immediately prior to the Effective Time shall be the Bylaws of the
Surviving Corporation until thereafter amended as provided by law, the
Certificate of Incorporation of the Surviving Corporation and such Bylaws.
1.04 Directors and Officers of the Surviving Corporation. The directors of
Sub and the officers of Sub immediately prior to the Effective Time shall, from
and after the Effective Time, be the directors and officers, respectively, of
the Surviving Corporation, until their respective successors shall have been
duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Surviving Corporation's
Certificate of Incorporation and Bylaws.
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1.05 Effects of the Merger. Subject to the foregoing, the effects of the
Merger shall be as provided in the applicable provisions of the DGCL.
1.06 Further Assurances. Each party hereto will, either prior to or after
the Effective Time, execute such further documents, instruments, deeds, bills of
sale, assignments and assurances and take such further actions as may reasonably
be requested by one or more of the others to consummate the Merger, to vest the
Surviving Corporation with full title to all assets, properties, rights,
approvals, immunities and franchises of either of the Constituent Corporations
or to effect the other purposes of this Agreement.
ARTICLE II
CONVERSION OF SHARES
2.01 Conversion of Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof:
(a) Capital Stock of Sub. Each issued and outstanding share of the common
stock, par value $.01 per share, of Sub ("Sub Common Stock") shall be converted
into and become one fully paid and nonassessable share of common stock, par
value $.01 per share, of the Surviving Corporation ("Surviving Corporation
Common Stock"). Each certificate representing outstanding shares of Sub Common
Stock shall at the Effective Time represent an equal number of shares of
Surviving Corporation Common Stock.
(b) Cancellation of Treasury Stock and Stock Owned by Parent and
Subsidiaries. All shares of Company Common Stock that are owned by the Company
as treasury stock and any shares of Company Common Stock owned by Parent, Sub or
any other wholly-owned Subsidiary (as defined in Section 9.11) of Parent shall
be canceled and retired and shall cease to exist and no stock of Parent or other
consideration shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock. (i) Each issued and outstanding
share of Company Common Stock (other than shares to be canceled in accordance
with Section 2.01(b) and other than Dissenting Shares (as defined in Section
2.01(e))) shall be converted into the right to receive .35 (as the same may be
adjusted pursuant to Section 2.01(c)(ii), the "Conversion Number") of a fully
paid and nonassessable share of common stock, par value $.025 per share, of
Parent ("Parent Common Stock"), subject to reduction as provided in paragraph
(ii) below (the "Merger Consideration Per Share").
(ii) Notwithstanding the provisions of paragraph (i) above, if the Fair
Market Value (as defined below) of the Merger
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Consideration Per Share computed in accordance with paragraph (i) above exceeds
$5.50, the Conversion Number shall be reduced to the extent necessary to cause
the Fair Market Value of the Merger Consideration Per Share to equal $5.50. For
purposes of this Agreement, (A) the "Fair Market Value" of each share of Parent
Common Stock shall mean the arithmetic average of the Sales Prices (as defined
below) on each of the ten (10) consecutive Trading Days (as defined below)
ending on and including the fifth Trading Day before the Closing Date; (B)
"Sales Price" shall mean, on any Trading Day, the closing sales price of a share
of Parent Common Stock reported on The New York Stock Exchange, Inc. ("NYSE")
Composite Tape on such day; and (C) "Trading Day" shall mean any day on which
securities are traded on the NYSE.
(iii) If, prior to the Effective Time, Parent shall pay a dividend in,
subdivide, combine into a smaller number of shares or issue by reclassification
of its shares, any shares of Parent Common Stock, the Conversion Number shall be
multiplied by a fraction, the numerator of which shall be the number of shares
of Parent Common Stock outstanding immediately after, and the denominator of
which shall be the number of such shares outstanding immediately before, the
occurrence of such event, and the resulting product shall from and after the
date of such event be the Conversion Number, subject to further adjustment in
accordance with this paragraph.
(iv) All shares of Company Common Stock converted in accordance with
paragraph (i) of this Section 2.01(c) shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such shares (other than Dissenting Shares)
shall cease to have any rights with respect thereto, except the right to receive
the Merger Consideration Per Share to be issued or paid in consideration
therefor (determined in accordance with this Section 2.01), upon the surrender
of such certificate in accordance with this Article II, without interest.
(d) Company Preferred Stock. Each issued and outstanding share of Series A
Convertible Preferred Stock, par value $.01 per share, of the Company ("Company
Series A Preferred Stock"), Series B Convertible Preferred Stock, par value $.01
per share, of the Company ("Company Series B Preferred Stock"), and Series C
Convertible Preferred Stock, par value $.01 per share, of the Company ("Company
Series C Preferred Stock" and, together with the Company Series A Preferred
Stock and the Company Series B Preferred Stock, the "Company Preferred Stock"),
shall continue to be an issued and outstanding share of each such series of
Company Preferred Stock.
(e) Dissenting Shares. (i) Notwithstanding any provision of this Agreement
to the contrary, each outstanding share of Company Common Stock the holder of
which has not voted in favor of the Merger, has perfected such holder's right to
an appraisal of such holder's shares in accordance with the
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<PAGE>
applicable provisions of the DGCL and has not effectively withdrawn or lost such
right to appraisal (a "Dissenting Share"), shall not be converted into or
represent a right to receive the Merger Consideration Per Share, but the holder
thereof shall be entitled only to such rights as are granted by the applicable
provisions of the DGCL; provided, however, that any Dissenting Share held by a
person at the Effective Time who shall, after the Effective Time, withdraw the
demand for appraisal or lose the right of appraisal, in either case pursuant to
the DGCL, shall be deemed to be converted into, as of the Effective Time, the
right to receive the Merger Consideration Per Share pursuant to Section 2.01(c).
(ii) The Company shall give Parent (x) prompt notice of any written
demands for appraisal, withdrawals of demands for appraisal and any other
instruments served pursuant to the applicable provisions of the DGCL relating to
the appraisal process received by the Company and (y) the opportunity to direct
all negotiations and proceedings with respect to demands for appraisal under the
DGCL. The Company will not voluntarily make any payment with respect to any
demands for appraisal and will not, except with the prior written consent of
Parent, settle or offer to settle any such demands.
(f) Stock Option Plans. The Company Option Plans(as defined in
Section 3.02(a), the stock option agreements executed pursuant thereto, and
each option to purchase Company Common Stock granted thereunder that is
outstanding at the Effective Time shall be cancelled and Parent shall grant to
the holder of each such option an option under the Parent Incentive Program (as
defined in Section 4.02) to purchase shares of Parent Common Stock, as more
fully described in Section 6.08.
(g) Parent Rights. Each share of Parent Common Stock issued to holders of
Company Common Stock pursuant to this Agreement shall be issued together with
one associated Parent Right (as defined in Section 4.02(a)) in accordance with
the Parent Rights Agreement (as defined in Section 4.02(a)). References herein
to the shares of Parent Common Stock issuable pursuant to this Agreement shall
be deemed to include the associated Parent Rights.
2.02 Closing; Closing Deliveries.
(a) Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
8.01, and subject to the satisfaction or waiver (where applicable) of the
conditions set forth in Article VII, the closing of the Merger (the "Closing")
will take place at the offices of Milbank, Tweed, Hadley & McCloy, One Chase
Manhattan Plaza, New York, New York, at 10:00 a.m., local time, on the business
day following satisfaction of the condition set forth in Section 7.01.(a),
unless another date,
5
<PAGE>
time or place is agreed to in writing by the parties hereto (the "Closing
Date").
(b) Closing Deliveries. At the Closing:
(i) In exchange for the delivery by wire transfer of immediately available
funds from BIL to Parent in an amount equal to the HSBC Debt Payment (as defined
below), Parent shall deliver to BIL a certificate representing a number of
shares of Parent Common Stock (disregarding fractions) equal to the amount
determined by dividing (x) the amount of the HSBC Debt Payment by (y) the
greater of (A) $13.00 and (B) the Fair Market Value of each share of Parent
Common Stock. For purposes hereof, the term "HSBC Debt Payment" means an amount
equal to the aggregate amount of principal, interest and prepayment penalties or
premiums that would be required to be paid by the Company to Hong Kong and
Shanghai Banking Corporation Limited ("HSBC") in order to pay off and discharge
in full all indebtedness owing by the Company to HSBC (the "HSBC Indebtedness")
on and as of the Closing Date; provided that the HSBC Debt Payment shall in no
event exceed $25 million.
(ii) Parent shall apply the funds delivered to Parent by BIL pursuant to
the immediately preceding paragraph to pay off and discharge in full the HSBC
Indebtedness, and shall cause HSBC to deliver to BIL an instrument in form and
substance reasonably satisfactory to BIL evidencing HSBC's release of BIL from
its guarantee of the HSBC Indebtedness.
(iii) Parent shall deliver to BIL a certificate representing shares of
Series B Cumulative Convertible Preferred Stock, par value $.01 per share, of
Parent ("Parent Series B Preferred Stock") having an aggregate stated value
equal to the lesser of (A) the sum of (I) the aggregate unpaid principal of and
accrued and unpaid interest on the indebtedness of the Company owing to BIL on
the Closing Date (the "BIL Debt") and (II) the aggregate liquidation value of
the shares of Company Preferred Stock owned by BIL on the Closing Date (the "BIL
Company Preferred Shares") and (B) $61 million, in exchange for the delivery by
BIL to Parent of:
(x) an instrument reasonably satisfactory in form and substance to
Parent assigning to Parent BIL Debt, together with any and all security
interests and other Liens previously granted to BIL with respect thereto,
in an aggregate principal amount which, together with accrued interest
thereon, does not exceed the Appraised Value (as defined below) of the
Parent Series B Preferred Stock to be issued to BIL hereunder; and
(y) certificates representing BIL Company Preferred Stock, duly
endorsed for transfer in blank or accompanied by duly executed stock
powers in blank, having an aggregate liquidation value which does not
exceed the result obtained
6
<PAGE>
by subtracting (A) the aggregate unpaid principal of and accrued interest
on the BIL Debt referred to in clause (x) above from (B) the Appraised
Value of the Parent Series B Preferred Stock to be issued to BIL
hereunder.
For purposes hereof, "Appraised Value" means the fair market value as of the
Closing Date of the Parent Series B Preferred Stock to be issued to BIL
hereunder as determined by and set forth in a written report of an investment
banking or valuation firm designated by Parent and reasonably acceptable to BIL
delivered to Parent and BIL at least five (5) days prior to the Closing Date;
provided that the Appraised Value of such shares shall not exceed their
aggregate stated value.
In the event that the liquidation value of the Company Preferred Stock
owned by BIL on the Closing Date exceeds the resulting amount referred to in
clause (y) above, BIL shall contribute shares of Company Preferred Stock
representing such excess amount (the "Contributed Shares") to the capital of the
Company in accordance with Section 6.17. In the event that, after giving effect
to the contribution of the Contributed Shares, the unpaid principal of and
accrued interest on the BIL Debt held by BIL on the Closing Date exceeds the
amount referred to in clause (x) above, BIL shall contribute BIL Debt
representing such excess amount (the "Contributed Debt") to the capital of the
Company in accordance with Section 6.17.
The terms, limitations and relative rights and preferences of the Parent
Series B Preferred Stock will be as set forth in the form Certificate of
Designations of the Series B Convertible Preferred Stock of Parent attached as
Exhibit A hereto.
(iv) In exchange for the delivery by wire transfer of immediately
available funds from BIL to Parent in the amount of $10 million, Parent shall
deliver to BIL a certificate representing shares of Series C Cumulative
Convertible Preferred Stock, par value $.01 per share, of Parent ("Parent Series
C Preferred Stock") having an aggregate stated value equal to $10 million. The
terms, limitations and relative rights and preferences of the Parent Series C
Preferred Stock will be as set forth in the form of Certificate of Designations
of the Series C Convertible Preferred Stock of Parent attached as Exhibit B
hereto.
(v) In exchange for the delivery by BIL to Parent of the Unsecured
Promissory Note dated July 18, 1996 evidencing the loan by BIL to Parent of U.S.
$4 million (the "Outstanding Note"), duly endorsed for transfer to Parent,
Parent shall deliver to BIL an unsecured subordinated promissory note reflecting
the terms set forth in Exhibit C hereto and such other terms not inconsistent
therewith as are customary for subordinated indebtedness, including covenants of
Parent (which shall in no event be more onerous to Parent than covenants
contained in Parent's senior indebtededness) and events of default, as Parent
and BIL shall mutually agree; provided that if BIL and Parent cannot agree on
the terms of such note, the Outstanding Note shall remain outstanding in
accordance with its terms.
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<PAGE>
(vi) There shall also be delivered to Parent, Sub and the Company the
certificates and other documents and instruments required to be delivered under
Article VII.
2.03 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, Parent shall, or shall cause
the Surviving Corporation to, deposit with a bank or trust company designated
before the Closing Date by Parent and reasonably acceptable to the Company (the
"Exchange Agent"), certificates representing the number of duly authorized whole
shares of Parent Common Stock issuable pursuant to Section 2.01(c), which shall
be held for the benefit of and distributed to the holders of Company Common
Stock in accordance with this Section. The Exchange Agent shall agree to hold
such shares of Parent Common Stock (such shares of Parent Common Stock being
referred to herein as the "Exchange Fund") for delivery as contemplated by this
Section and upon such additional terms as may be agreed upon by the Exchange
Agent, the Company and Parent.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Surviving Corporation shall cause the Exchange Agent to mail
or deliver to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock (the "Certificates") whose shares are converted pursuant to
Section 2.01(c) into the right to receive the Merger Consideration Per Share (i)
a letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon delivery of
the Certificates to the Exchange Agent and shall be in customary form and have
such other provisions as the Surviving Corporation may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing the Merger Consideration Per Share and
cash in lieu of fractional shares in accordance with Section 2.03(e). Upon
surrender of a Certificate for cancellation to the Exchange Agent, together with
such letter of transmittal duly executed and completed in accordance with its
terms, the holder of such Certificate shall be entitled to receive in exchange
therefor (1) a certificate representing that number of whole shares of Parent
Common Stock which such holder has the right to receive pursuant to Section
2.01(c) and (2) the cash amount payable in lieu of fractional shares in
accordance with Section 2.03(e), and the Certificate so surrendered shall
forthwith be canceled. In no event shall the holder of any Certificate be
entitled to receive interest on any of the consideration to be received in the
Merger. In the event of a transfer of ownership of Company Common Stock which is
not registered in the transfer records of the Company, the aggregate Merger
Consideration Per Share may be issued to a transferee if the Certificate
representing such Company Common Stock is presented to the Exchange Agent
accompanied by all documents required to evidence and effect such transfer and
by evidence
8
<PAGE>
that any applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.03(b), each Certificate shall be deemed at any
time after the Effective Time for all corporate purposes of Parent, except as
limited by paragraph (c) below, to represent ownership of the aggregate number
of shares of Parent Common Stock into which the number of shares of Company
Common Stock represented thereby have been converted as contemplated by this
Article II. Notwithstanding the foregoing, Certificates representing Company
Common Stock surrendered for exchange by any person constituting an "affiliate"
of the Company for purposes of Section 6.04 shall not be exchanged until Parent
has received an Affiliate Agreement (as defined in Section 6.04) as provided in
Section 6.04.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with respect to
Parent Common Stock with a record date on or after the Effective Time shall be
paid to the holder of any unsurrendered Certificate with respect to the shares
of Parent Common Stock represented thereby and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to Section 2.03(e)
until the holder of record of such Certificate shall surrender such Certificate
in accordance with this Section. Subject to the effect of applicable laws and to
the provisions of Section 2.03(e), following surrender of any such Certificate,
there shall be paid to the record holder of the certificates representing whole
shares of Parent Common Stock issued in exchange therefor, without interest, (i)
at the time of such surrender, the amount of cash payable with respect to any
fractional share of Parent Common Stock to which such holder is entitled
pursuant to Section 2.03(e) and the amount of dividends or other distributions,
if any, with a record date on or after the Effective Time which theretofore
became payable, but which were not paid by reason of the immediately preceding
sentence, with respect to such whole shares of Parent Common Stock, and (ii) at
the appropriate payment date, the amount of dividends or other distributions
with a record date on or after the Effective Time but prior to surrender and a
payment date subsequent to surrender payable with respect to such whole shares
of Parent Common Stock.
(d) No Further Ownership Rights in Company Common Stock. All shares of
Parent Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms hereof (and any cash paid pursuant to Section 2.03(e))
shall be deemed to have been issued at the Effective Time in full satisfaction
of all rights pertaining to the shares of Company Common Stock represented
thereby. From and after the Effective Time, the stock transfer books of the
Company shall be closed and there shall be no further registration of transfers
on the stock transfer books of the Surviving Corporation of the shares of
Company Common Stock which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates
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<PAGE>
are presented to the Surviving Corporation for any reason, they shall be
canceled and exchanged as provided in this Section.
(e) No Fractional Shares. (i) No certificate or scrip representing
fractional shares of Parent Common Stock to which holders of Company Common
Stock would otherwise be entitled pursuant to Section 2.01(c) will be issued in
the Merger upon the surrender for exchange of Certificates, and such fractional
share interests will not entitle the owner thereof to vote or to any rights of a
stockholder of Parent.
(ii) As promptly as practicable following the Effective Time, the
Exchange Agent shall determine the aggregate number of whole shares of
Parent Common Stock represented by fractional shares of Parent Common
Stock to which holders of Company Common Stock would be entitled but for
the provisions of clause (i) of this Section 2.03(e) (such number of
shares being herein called the "Excess Shares"). As soon after the
Effective Time as practicable, the Exchange Agent, as agent for the
holders of Company Common Stock, shall sell the Excess Shares at then
prevailing prices on the NYSE, all in the manner provided in paragraph
(iii) of this Section 2.03(e).
(iii) The sale of the Excess Shares by the Exchange Agent shall be
executed on the NYSE through a member firm of the NYSE and shall be
executed in round lots to the extent practicable. Until the net proceeds
of such sale or sales have been distributed to the holders of Company
Common Stock, the Exchange Agent will hold such proceeds in trust for the
holders of Company Common Stock (the "Common Stock Trust"). Parent shall
pay all commissions, transfer taxes and other out-of-pocket transaction
costs, including the expenses and compensation of the Exchange Agent,
incurred in connection with such sale of the Excess Shares. In addition,
Parent shall pay the Exchange Agent's compensation and expenses in
connection with such sale. The Exchange Agent shall determine the portion
of the Common Stock Trust to which each holder of Company Common Stock
shall be entitled, if any, by multiplying the amount of the aggregate net
proceeds comprising the Common Stock Trust by a fraction, the numerator of
which is the amount of the fractional share interest to which such holder
of Company Common Stock is entitled and the denominator of which is the
aggregate amount of fractional share interests to which all holders of
Company Common Stock are entitled.
(iv) As soon as practicable after the determination of the amount of
cash, if any, to be paid to holders of Company Common Stock in lieu of any
fractional share interests in accordance with the immediately preceding
paragraph, the Exchange Agent shall make available such amounts to such
holders of Company Common Stock in a manner consistent with paragraphs (b)
and (c) of this Section 2.03.
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(f) Termination of Exchange Fund and Common Stock Trust. Any portion of
the Exchange Fund and Common Stock Trust which remains undistributed to the
stockholders of the Company for six (6) months after the Effective Time shall be
delivered to the Surviving Corporation, upon demand, and any stockholders of the
Company who have not theretofore complied with this Article II shall thereafter
look only to the Surviving Corporation (subject to abandoned property, escheat
and other similar laws) as general creditors for payment of their claim for
Parent Common Stock, cash in lieu of fractional shares of Parent Common Stock
and any dividends or distributions with respect to Parent Common Stock. Neither
Parent nor the Surviving Corporation shall be liable to any holder of shares of
Company Common Stock for shares of Parent Common Stock (or dividends or
distributions with respect thereto) or cash payable in respect of fractional
share interests delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
3.01 Organization and Qualification. Each of the Company and its
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and has all
requisite corporate power and authority to conduct its business as and to the
extent now conducted and to own, use and lease its assets and properties, except
for such failures to be so incorporated, existing and in good standing or to
have such power and authority which, individually or in the aggregate, are not
having and could not be reasonably expected to have a material adverse effect
(as defined in Section 9.11) on the Company and its Subsidiaries taken as a
whole. Each of the Company and its Subsidiaries is duly qualified, licensed or
admitted to do business and is in good standing in each jurisdiction in which
the ownership, use or leasing of its assets and properties, or the conduct or
nature of its business, makes such qualification, licensing or admission
necessary, except for such failures to be so qualified, licensed or admitted and
in good standing which, individually or in the aggregate, are not having and
could not be reasonably expected to have a material adverse effect on the
Company and its Subsidiaries taken as a whole. Section 3.01 of the letter dated
the date hereof and delivered to Parent and Sub by the Company concurrently with
the execution and delivery of this Agreement (the "Company Disclosure Letter")
sets forth (i) the name and jurisdiction of incorporation of each Subsidiary (as
defined in Section 9.11) of the Company, (ii) its authorized capital stock,
(iii) the number of issued and outstanding shares of capital
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stock and (iv) the record owners of such shares. Except for interests in the
Subsidiaries of the Company and as disclosed in Section 3.01 of the Company
Disclosure Letter, the Company does not directly or indirectly own any equity or
similar interest in, or any interest convertible into or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity. The Company
has previously delivered to Parent correct and complete copies of the
certificate or articles of incorporation and bylaws (or other comparable charter
documents) of the Company and each of its Subsidiaries.
3.02 Capital Stock; Indebtedness. (a) The authorized capital stock of the
Company consists solely of 12,000,000 shares of Company Common Stock and
31,000,000 shares of Company Preferred Stock, consisting of 10,000,000 shares of
Company Series A Preferred Stock, 1,000,000 shares of Company Series B Preferred
Stock and 20,000,000 shares of Company Series C Preferred Stock. As of August 1,
1996, 7,196,565 shares of Company Common Stock were issued and outstanding,
no shares were held in the treasury of the Company, 2,865,420 shares
were reserved for issuance upon conversion of the Company Preferred Stock
and 380,887 shares were reserved for issuance upon the exercise of stock options
granted under the Company employee stock option plans described in Section 3.02
of the Company Disclosure Letter (the "Company Option Plans"). Since such date,
except as set forth in Section 3.02 of the Company Disclosure Letter, there has
been no change in the number of issued and outstanding shares of Company Common
Stock or shares of Company Common Stock held in treasury. As of the date hereof,
there are 7,867,842 shares of Company Series A Preferred Stock issued and
outstanding, 786,357 shares of Company Series B Preferred Stock issued and
outstanding and 20,000,000 shares of Company Series C Preferred Stock issued and
outstanding, all of which are owned beneficially and of record by BIL. All of
the issued and outstanding shares of Company Common Stock and Company Preferred
Stock are, and all shares of Company Common Stock reserved for issuance will be,
upon issuance in accordance with the terms specified in the instruments or
agreements pursuant to which they are issuable, duly authorized, validly issued,
fully paid and nonassessable. Except pursuant to this Agreement, the Stockholder
Agreement and the Registration Rights Agreement and except as set forth in
Section 3.02 of the Company Disclosure Letter, there are no outstanding
subscriptions, options, warrants, rights (including "phantom" stock rights),
preemptive rights or other contracts, commitments, understandings or
arrangements, including any right of conversion or exchange under any
outstanding security, instrument or agreement (together, "Options"), obligating
the Company or any of its Subsidiaries to issue or sell any shares of capital
stock of the Company or to grant, extend or enter into any Option with respect
thereto.
(b) Except as disclosed in Section 3.02 of the Company Disclosure Letter,
all of the outstanding shares of capital stock of each Subsidiary of the Company
are duly authorized, validly issued, fully paid and nonassessable and are owned,
beneficially and of record, by the Company or a Subsidiary wholly owned,
directly or indirectly, by the Company, free and clear of any
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liens, claims, mortgages, encumbrances, pledges, security interests, equities
and charges of any kind (each a "Lien"). Except as disclosed in Section 3.02 of
the Company Disclosure Letter, there are no (i) outstanding Options obligating
the Company or any of its Subsidiaries to issue or sell any shares of capital
stock of any Subsidiary of the Company or to grant, extend or enter into any
such Option or (ii) voting trusts, proxies or other commitments, understandings,
restrictions or arrangements in favor of any person other than the Company or a
Subsidiary wholly owned, directly or indirectly, by the Company with respect to
the voting of or the right to participate in dividends or other earnings on any
capital stock of any Subsidiary of the Company.
(c) Except as disclosed in Section 3.02 of the Company Disclosure Letter,
there are no outstanding contractual obligations of the Company or any
Subsidiary of the Company to repurchase, redeem or otherwise acquire any shares
of Company Common Stock or any capital stock of any Subsidiary of the Company or
to provide funds to, or make any investment (in the form of a loan, capital
contribution or otherwise) in, any Subsidiary of the Company or any other
person.
(d) As of the date of this Agreement, the HSBC Indebtedness is
approximately $25,350,000 and the principal amount of and accrued and unpaid
interest on the BIL Debt is approximately $24,875,000.
3.03 Authority Relative to this Agreement. The Company has the requisite
corporate power and authority to enter into this Agreement and, subject to
obtaining the Company Stockholders' Approval (as defined in Section 6.03(b)), to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly approved by the Board of
Directors of the Company, the Board of Directors of the Company has recommended
adoption of this Agreement by the stockholders of the Company and directed that
this Agreement be submitted to the stockholders of the Company for their
consideration, and no other corporate proceedings on the part of the Company or
its stockholders are necessary to authorize the execution, delivery and
performance of this Agreement by the Company and the consummation by the Company
of the transactions contemplated hereby, other than obtaining the Company
Stockholders' Approval. This Agreement has been duly and validly executed and
delivered by the Company and, subject to the obtaining of the Company
Stockholders' Approval, constitutes a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
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3.04 Non-Contravention; Approvals and Consents. (a) The execution and
delivery of this Agreement by the Company do not, and the performance by the
Company of its obligations hereunder and the consummation of the transactions
contemplated hereby will not, conflict with, result in a violation or breach of,
constitute (with or without notice or lapse of time or both) a default under,
result in or give to any person any right of payment or reimbursement,
termination, cancellation, modification or acceleration of, or result in the
creation or imposition of any Lien upon any of the assets or properties of the
Company or any of its Subsidiaries under, any of the terms, conditions or
provisions of (i) the certificates or articles of incorporation or bylaws (or
other comparable charter documents) of the Company or any of its Subsidiaries,
or (ii) except as described in Section 3.04 of the Company Disclosure Letter and
subject to obtaining the Company Stockholders' Approval in accordance with the
DGCL, the Company's Certificate of Incorporation and Bylaws and the taking of
the actions described in paragraph (b) of this Section, (x) any statute, law,
rule, regulation or ordinance (together, "laws"), or any judgment, decree,
order, writ, permit or license (together, "orders"), of any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any foreign country or any domestic or foreign state, county,
city or other political subdivision (a "Governmental or Regulatory Authority")
applicable to the Company or any of its Subsidiaries or any of their respective
assets or properties, or (y) except as described in Section 3.04 of the Company
Disclosure Letter, any note, bond, mortgage, security agreement, indenture,
license, franchise, permit, concession, contract, lease or other instrument,
obligation or agreement of any kind (together, "Contracts") to which the Company
or any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any of their respective assets or properties is bound, excluding
from the foregoing clauses (x) and (y) conflicts, violations, breaches,
defaults, terminations, modifications, accelerations and creations and
impositions of Liens which, individually or in the aggregate, could not be
reasonably expected to have a material adverse effect on the Company and its
Subsidiaries taken as a whole or on the ability of the Company to consummate the
transactions contemplated by this Agreement.
(b) Except (i) for the filing of a premerger notification report by the
Company under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder (the "HSR Act"), (ii) for the
filing of the Proxy Statement (as defined in Section 3.09) and the Registration
Statement (as defined in Section 4.09) with the Securities and Exchange
Commission (the "SEC") pursuant to the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder (the "Exchange Act"), and the
Securities Act of 1933, as amended, and the rules and regulations thereunder
(the "Securities Act"), the declaration of the effectiveness of the Registration
Statement by the SEC and filings with various
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state securities authorities that are required in connection with the
transactions contemplated by this Agreement, (iii) for the filing of the
Certificate of Merger and other appropriate merger documents required by the
DGCL with the Secretary of State and appropriate documents with the relevant
authorities of other states in which the Constituent Corporations are qualified
to do business, and (iv) as disclosed in Section 3.04 of the Company Disclosure
Letter, no consent, approval or action of, filing with or notice to any
Governmental or Regulatory Authority or other public or private third party is
necessary or required under any of the terms, conditions or provisions of any
law or order of any Governmental or Regulatory Authority or any Contract to
which the Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries or any of their respective assets or properties is
bound for the execution and delivery of this Agreement by the Company, the
performance by the Company of its obligations hereunder or the consummation of
the transactions contemplated hereby, other than such consents, approvals,
actions, filings and notices which the failure to make or obtain, as the case
may be, individually or in the aggregate, could not be reasonably expected to
have a material adverse effect on the Company and its Subsidiaries taken as a
whole or on the ability of the Company to consummate the transactions
contemplated by this Agreement.
3.05 SEC Reports and Financial Statements. The Company delivered to Parent
prior to the execution of this Agreement a true and complete copy of each form,
report, schedule, registration statement, definitive proxy statement and other
document (together with all amendments thereof and supplements thereto) filed by
the Company or any of its Subsidiaries with the SEC since December 31, 1992 (as
such documents have since the time of their filing been amended or supplemented,
the "Company SEC Reports"), which are all the documents (other than preliminary
material) that the Company and its Subsidiaries were required to file with the
SEC since such date. As of their respective dates, the Company SEC Reports (i)
complied as to form in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and (ii) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The audited consolidated financial statements and unaudited interim
consolidated financial statements (including, in each case, the notes, if any,
thereto) included in the Company SEC Reports (the "Company Financial
Statements") complied as to form in all material respects with the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with GAAP (as defined in Section 3.13(o)(viii)), except as may be
indicated therein or in the notes thereto and except with respect to unaudited
statements as permitted by Form 10-Q of the SEC, and, as of the respective dates
thereof, fairly presented (subject, in the case of the
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unaudited interim financial statements, to year-end audit adjustments) the
consolidated financial position of the Company and its consolidated subsidiaries
as at the respective dates thereof and the consolidated results of their
operations and cash flows for the respective periods then ended. Except as set
forth in Section 3.05 of the Company Disclosure Letter, each Subsidiary of the
Company is treated as a consolidated subsidiary of the Company in the Company
Financial Statements for all periods covered thereby.
3.06 Absence of Certain Changes or Events. Except as disclosed in the
Company SEC Reports filed prior to the date of this Agreement or in Section 3.06
of the Company Disclosure Letter, (a) since December 31, 1995 there has not been
any change, event or development having, or that could be reasonably expected to
have, individually or in the aggregate, a material adverse effect on the Company
and its Subsidiaries taken as a whole, and (b) between June 30, 1996 and the
date hereof (i) the Company and its Subsidiaries have conducted their respective
businesses only in the ordinary course consistent with past practice and (ii)
neither the Company nor any of its Subsidiaries has taken any action which, if
taken after the date hereof, would constitute a breach of any provision of
clause (ii) of Section 5.01(a).
3.07 Absence of Undisclosed Liabilities. Except for matters reflected or
reserved against in the balance sheet as of June 30, 1996 included in the
Company Financial Statements or as disclosed in Section 3.07 of the Company
Disclosure Letter, neither the Company nor any of its Subsidiaries had at such
date, or has incurred since that date, any liabilities or obligations (whether
absolute, accrued, contingent, fixed or otherwise, or whether due or to become
due) of any nature that would be required by GAAP to be reflected on a
consolidated balance sheet of the Company and its consolidated subsidiaries
(including the notes thereto), except liabilities or obligations (i) which were
incurred in the ordinary course of business consistent with past practice or
(ii) which have not been, and could not be reasonably expected to be,
individually or in the aggregate, materially adverse to the Company and its
Subsidiaries taken as a whole.
3.08 Legal Proceedings. Except as disclosed in the Company SEC Reports
filed prior to the date of this Agreement or in Section 3.08 of the Company
Disclosure Letter, (i) there are no actions, suits, arbitrations or proceedings
pending or, to the knowledge of the Company, threatened against, relating to or
affecting, nor to the knowledge of the Company are there any Governmental or
Regulatory Authority investigations or audits
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pending or threatened against, relating to or affecting, the Company or any of
its Subsidiaries or any of their respective assets and properties which,
individually or in the aggregate, could be reasonably expected to have a
material adverse effect on the Company and its Subsidiaries taken as a whole or
on the ability of the Company to consummate the transactions contemplated by
this Agreement, and (ii) neither the Company nor any of its Subsidiaries is
subject to any continuing order of any Governmental or Regulatory Authority
which, individually or in the aggregate, could be reasonably expected to have a
material adverse effect on the Company and its Subsidiaries taken as a whole or
on the ability of the Company to consummate the transactions contemplated by
this Agreement.
3.09 Information Supplied. The joint proxy statement relating to the
Stockholders' Meetings (as defined in Section 6.03(b)), as amended or
supplemented from time to time (as so amended and supplemented, the "Proxy
Statement"), and any other documents to be filed by the Company with the SEC or
any other Governmental or Regulatory Authority in connection with the Merger and
the other transactions contemplated hereby will (in the case of the Proxy
Statement and any such other documents filed with the SEC under the Exchange Act
or the Securities Act) comply as to form in all material respects with the
requirements of the Exchange Act and the Securities Act, respectively, and will
not, on the date of its filing or, in the case of the Proxy Statement, at the
date it is mailed to stockholders of the Company and of Parent and at the time
of the Stockholders' Meetings, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading, except that no representation is made by the
Company with respect to information included therein with respect to Parent and
its Subsidiaries, including information incorporated by reference therein from
documents filed by Parent or any of its Subsidiaries with the SEC.
3.10 Compliance with Laws and Orders. The Company and its Subsidiaries
hold all permits, licenses, variances, exemptions, orders and approvals of all
Governmental and Regulatory Authorities necessary for the lawful conduct of
their respective businesses (the "Company Permits"), except for failures to hold
such permits, licenses, variances, exemptions, orders and approvals which,
individually or in the aggregate, are not having and could not be reasonably
expected to have a material adverse effect on the Company and its Subsidiaries
taken as a whole. The Company and its Subsidiaries are in compliance with the
terms of the Company Permits, except failures so to comply which, individually
or in the aggregate, are not having and could not be reasonably expected to have
a material adverse effect on the Company and its Subsidiaries taken as a whole.
Except as disclosed in the Company SEC Reports filed prior to the date of this
Agreement, the Company and its Subsidiaries are not
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in violation of or default under any law or order of any Governmental or
Regulatory Authority, except for such violations or defaults which, individually
or in the aggregate, are not having and could not be reasonably expected to have
a material adverse effect on the Company and its Subsidiaries taken as a whole.
3.11 Compliance with Agreements; Certain Agreements.
(a) Except as disclosed in the Company SEC Reports filed prior to the date
of this Agreement or Section 3.11 of the Company Disclosure Letter, neither the
Company nor any of its Subsidiaries nor, to the knowledge of the Company, any
other party thereto is in breach or violation of, or in default in the
performance or observance of any term or provision of, and no event has occurred
which, with notice or lapse of time or both, could be reasonably expected to
result in a default under, (i) the certificate of incorporation or bylaws (or
other comparable charter documents) of the Company or any of its Subsidiaries or
(ii) any Contract to which the Company or any of its Subsidiaries is a party or
by which the Company or any of its Subsidiaries or any of their respective
assets or properties is bound, except in the case of clause (ii) for breaches,
violations and defaults which, individually or in the aggregate, are not having
and could not be reasonably expected to have a material adverse effect on the
Company and its Subsidiaries taken as a whole.
(b) Except as disclosed in Section 3.11 of the Company Disclosure Letter
or in the Company SEC Reports filed prior to the date of this Agreement or as
provided for in this Agreement, as of the date hereof, neither the Company nor
any of its Subsidiaries is a party to any oral or written (i) consulting
agreement not terminable on thirty (30) days' or less notice, (ii) union or
collective bargaining agreement, (iii) agreement with any executive officer or
other key employee of the Company or any of its Subsidiaries the benefits of
which are contingent or vest, or the terms of which are materially altered, upon
the occurrence of a transaction involving the Company or any of its Subsidiaries
of the nature contemplated by this Agreement, (iv) agreement with respect to any
executive officer or other key employee of the Company or any of its
Subsidiaries providing any term of employment or compensation guarantee or (v)
agreement or plan, including any stock option, stock appreciation right,
restricted stock or stock purchase plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement.
3.12 Taxes. (a) Each of the Company and its Subsidiaries has filed all
material tax returns and reports required to be filed by it, or requests for
extensions to file such returns or reports have been timely filed or granted and
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have not expired, and all such tax returns and reports are complete and accurate
in all respects, except to the extent that such failures to file, have
extensions granted that remain in effect or be complete and accurate in all
respects, as applicable, individually or in the aggregate, would not have a
material adverse effect on the Company and its Subsidiaries taken as a whole;
provided, however, the Company makes no representation or warranty with respect
to the availability to the Surviving Corporation of any net operating loss or
tax credit carryover of the Company and its Subsidiaries. The Company and each
of its Subsidiaries has paid or accrued (or the Company has paid on its behalf)
all taxes shown as due on such tax returns and reports. The most recent
financial statements contained in the Company SEC Reports reflect an adequate
reserve for all taxes payable by the Company and its Subsidiaries for all
taxable periods and portions thereof accrued through the date of such financial
statements, and no deficiencies for any taxes have been proposed, asserted or
assessed against the Company or any of its Subsidiaries that are not adequately
reserved for thereon, except for inadequately reserved taxes and inadequately
reserved deficiencies that would not, individually or in the aggregate, have a
material adverse effect on the Company and its Subsidiaries taken as a whole. No
requests for waivers of the time to assess any taxes against the Company or any
of its Subsidiaries have been granted or are pending, except for requests with
respect to such taxes that have been adequately reserved for in the most recent
financial statements contained in the Company SEC Reports, or, to the extent not
adequately reserved, the assessment of which would not, individually or in the
aggregate, have a material adverse effect on the Company and its Subsidiaries
taken as a whole.
(b) As used in this Section 3.13 and in Section 4.12, "taxes" shall
include all federal, state, local and foreign income, franchise, property,
sales, use, excise and other taxes, including obligations for withholding taxes
from payments due or made to any other person and any interest, penalties or
additions to tax.
3.13 Benefit Plans; ERISA. (a) Section 3.13(a) of the Company Disclosure
Letter (i) contains a true and complete list and description of each Company
Benefit Plan, (ii) identifies each Company Benefit Plan that is a Company
Qualified Plan, (iii) identifies each Company Benefit Plan which at any time
during the five-year period preceding the date of this Agreement was a Company
Defined Benefit Plan and (iv) lists, describes and identifies each other Plan
maintained, established, sponsored or contributed to by a Company ERISA
Affiliate, or any predecessor thereof, which, during the five-year period
preceding the date of this Agreement, was at any time a Company Defined Benefit
Plan. Neither the Company nor any of its Subsidiaries has scheduled or agreed
upon future increases of benefit levels (or creations of new benefits) with
respect to any Company Benefit Plan, and no such increases or creation of
benefits have
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been proposed, made the subject of representations to employees or requested or
demanded by employees under circumstances which make it reasonable to expect
that such increases will be granted. Except as disclosed in Section 3.13(a) of
the Company Disclosure Letter, no loan is outstanding between the Company or any
of its Subsidiaries and any employee. No Company Benefit Plan established by
Everest & Jennings Canadian Limited is or was a defined benefit plan under
applicable Canadian laws and regulations, except for the Executive Employee
Pension Plan, which is fully funded in accordance with all applicable Canadian
laws and regulations and as to which all required contributions have been made.
(b) Neither the Company nor any of its Subsidiaries maintains or is
obligated to provide benefits under any life, medical or health plan (other than
as an incidental benefit under a Company Qualified Plan) which provides benefits
to retirees or other terminated employees other than benefit continuation rights
under the Consolidated Omnibus Budget Reconciliation of 1985, as amended.
(c) Except as set forth in Section 3.13(c) of the Company Disclosure
Letter, each Company Benefit Plan covers only employees who are employed by the
Company or any of its Subsidiaries (or former employees or beneficiaries with
respect to service with the Company or any of its Subsidiaries), so that the
transactions contemplated by this Agreement will require no spin-off of assets
and liabilities or other division or transfer of rights with respect to any such
plan.
(d) Except as disclosed in Section 3.13(d) of the Company Disclosure
Letter, neither the Company nor any of its Subsidiaries, any Company ERISA
Affiliate nor any other corporation or organization controlled by or under
common control with any of the foregoing within the meaning of Section 4001 of
ERISA has at any time contributed to any "multiemployer plan", as that term is
defined in Section 4001 of ERISA.
(e) Each of the Company Benefit Plans is, and its administration is and
has been since inception, in all material respects in compliance with, and
neither the Company nor any of its Subsidiaries has received any claim or notice
that any such Company Benefit Plan is not in compliance with, all applicable
laws and orders and prohibited transactions exemptions, including the
requirements of ERISA, the Code, the Age Discrimination in Employment Act, the
Equal Pay Act and Title VII of the Civil Rights Act of 1964. Each Company
Qualified Plan has received a favorable determination of qualification from the
Internal Revenue Service and there have been no plan amendments, events or
circumstances subsequent to the issuance of such determination of qualification
that would cause the Company Qualified Plan to lose its determination of
qualification. Each Company Benefit Plan which is intended to provide for the
deferral of income, the reduction of salary or other compensation or to afford
other tax benefits complies with the requirements of the applicable provisions
of the Code or other laws required in order to provide such tax benefits. In
respect of any Company Benefit Plan, neither the Company nor any of its
Subsidiaries has requested a closing agreement under the Employee Plans Closing
Agreement Program (set forth in Rev. Proc. 94-16, 1994-5 I.R.B. 22), a
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compliance statement under the Voluntary Compliance Resolution program (set
forth in Revenue Procedure 94-62, 1994-2 C.B. 778) or any other determination
under any remedial program of the Internal Revenue Service applicable to
employee benefit plans, and neither the Company nor any of its Subsidiaries has
consulted with counsel, accountants, employee benefits consultants or actuaries
in regard to making a request under any such remedial program.
(f) Neither the Company nor any of its Subsidiaries is in default in
performing any of its contractual obligations under any Company Benefit Plan or
any related trust agreement or insurance contract, except for such defaults
which, individually or in the aggregate, could not be reasonably expected to
have a material adverse effect on the Company and its Subsidiaries taken as a
whole. All contributions and other payments required to be made by the Company
or any of its Subsidiaries to any Company Benefit Plan with respect to any
period ending before or at or including the Closing Date have been made or
reserves adequate for such contributions or other payments have been or will be
set aside therefor and have been or will be reflected in financial statements in
accordance with GAAP. There are no material outstanding liabilities of any
Company Benefit Plan other than liabilities for benefits to be paid to
participants in such Company Benefit Plan and their beneficiaries in accordance
with the terms of such Company Benefit Plan. Neither the Company nor any of its
Subsidiaries has any express or implied commitment, whether legally enforceable
or not, to create, incur liability with respect to, or cause to exist any
employee benefit plan or to modify any Plan, other than as required by law.
(g) No event has occurred, and there exists no condition or set of
circumstances in connection with any Company Benefit Plan, under which the
Company or any of its Subsidiaries, directly or indirectly (through any
indemnification agreement or otherwise), could reasonably be expected to be
subject to any risk of material liability under Section 409 of ERISA, Section
502(i) of ERISA, Title IV of ERISA or Section 4975 of the Code.
(h) Except as provided in Section 6.06 of this Agreement, no transaction
contemplated by this Agreement will result in liability to the PBGC under
Section 302(c)(11), 4062, 4063, 4064 or 4069 of ERISA, or otherwise, with
respect to the Company or any of its Subsidiaries, Parent, Sub or any
corporation or organization controlled by or under common control with any of
the foregoing within the meaning of Section 4001 of ERISA, and no event or
condition exists or has existed which could reasonably be expected to result in
any such liability with respect to Parent, Sub, the Company, any of its
Subsidiaries or
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any such corporation or organization. Except as disclosed in Section 3.13(h) of
the Company Disclosure Letter:
(i) no "reportable event" within the meaning of Section 4043 of
ERISA has occurred with respect to any Company Defined Benefit Plan;
(ii) no termination re-establishment or spin-off re-establishment
transaction has occurred with respect to any Company Subject Defined
Benefit Plan;
(iii) no Company Subject Defined Benefit Plan has incurred any
accumulated funding deficiency whether or not waived; and
(iv) no filing has been made and no proceeding has been commenced
for the complete or partial termination of, or withdrawal from, any
Company Benefit Plan which is a Company Pension Benefit Plan.
(i) Except as disclosed under Section 3.13(i) of the Company Disclosure
Letter, no benefit under any Company Benefit Plan, including, without
limitation, any severance or parachute payment plan or agreement, will be
established or become accelerated, vested, funded or payable by reason of any
transaction contemplated under this Agreement.
(j) To the knowledge of the Company, there are no pending or threatened
claims by or on behalf of any Company Benefit Plan, by any person covered
thereby, or otherwise, which allege violations of law which could reasonably be
expected to result in material liability on the part of Parent, Sub, the
Company, any of its Subsidiaries or any fiduciary of any such Company Benefit
Plan, nor is there any basis for such a claim.
(k) No employer securities, employer real property or other employer
property is included in the assets of any Company Benefit Plan. Except as
disclosed in Section 3.13(k) of the Company Disclosure Letter, each Company
Subject Defined Benefit Plan is a "frozen" Company Defined Benefit Plan and no
benefits under any such Company Subject Defined Benefit Plan have accrued after
December 31, 1992 in respect of any participants thereunder, active or
otherwise.
(l) Except as disclosed in Section 3.13(l) of the Company Disclosure
Letter, the fair market value of the assets of each Company Subject Defined
Benefit Plan, as determined as of the last day of the plan year of such plan
which coincides with or first precedes the date of this Agreement, was not less
than the present value of the projected benefit obligations under such plan at
such date as established on the basis of the actuarial assumptions applicable
under such Company Subject Defined Benefit Plan at said date and, to the
knowledge of the Company, there have been no material changes in such values
since said date.
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(m) PBGC Liens. The Company is required to pay to the PBGC approximately
$494,000 on September 15, 1996, approximately $230,000 on October 15, 1996 and
approximately $230,000 on January 15, 1997 under the conditional waivers of
minimum funding standards granted by the Internal Revenue Service to the
Retirement Plan for Employees of the Company in letters dated
September 1, 1992 and December 10, 1992 and/or any other Benefit Plan (the "PBGC
Waiver").
(n) Complete and correct copies of the following documents have been
furnished to Parent prior to the execution of this Agreement:
(i) each Company Benefit Plan and any predecessor plans referred to
therein, any related trust agreements, and service provider agreements,
insurance contracts or agreements with investment managers, including
without limitation, all amendments thereto;
(ii) current summary Plan descriptions of each Company Benefit Plan
subject to ERISA, and any similar descriptions of all other Company
Benefit Plans;
(iii) the most recent Form 5500 series filings and schedules thereto
for each Company Benefit Plan subject to ERISA reporting requirements;
(iv) the most recent determination of the Internal Revenue Service
with respect to the qualified status of each Company Qualified Plan;
(v) the most recent accountings with respect to any Company Benefit
Plan funded through a trust; and
(vi) the most recent actuarial report of the qualified actuary of
any Company Subject Defined Benefit Plan or any other Company Benefit Plan
with respect to which actuarial valuations are conducted.
(o) For purposes of this Agreement, the following terms have the following
meanings:
(i) "Company Benefit Plan" means any Plan established by the
Company, any Company Subsidiary, or any predecessor or affiliate of any of
the foregoing, existing at the Closing Date or prior thereto, to which the
Company or any Company Subsidiary contributes or has contributed, or under
which any employee, former employee or director of the Company or any
Company Subsidiary or any beneficiary thereof is covered, is eligible for
coverage or has benefit rights.
(ii) "Company Defined Benefit Plan" means each Company Benefit Plan
which is subject to Part 3 of Title I of ERISA, Section 412 of the Code or
Title IV of ERISA.
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(iii) "Company ERISA Affiliate" means any person who is in the same
controlled group of corporations or who is under common control (within
the meaning of Section 414 of the Code) with the Company or, before the
Closing, the Company or any Subsidiary.
(iv) "Company Pension Benefit Plan" means each Company Benefit Plan
which is a pension benefit plan within the meaning of Section 3(2) of
ERISA.
(v) "Company Qualified Plan" means each Company Benefit Plan which
is intended to qualify under Section 401 of the Code.
(vi) "Company Subject Defined Benefit Plan" means each Company
Defined Benefit Plan listed and described in Section 3.13(a) of the
Company Disclosure Letter.
(vii) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
(viii) "GAAP" means generally accepted accounting principles,
consistently applied throughout the specified period and in the
immediately prior comparable period.
(ix) "PBGC" means the Pension Benefit Guaranty Corporation
established under ERISA.
(x) "Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock
option, stock ownership, stock appreciation rights, phantom stock, leave
of absence, layoff, vacation, day or dependent care, legal services,
cafeteria, life, health, accident, disability, workmen's compensation or
other insurance, severance, separation or other employee benefit plan,
practice, policy or arrangement of any kind, whether written or oral,
including, but not limited to, any "employee benefit plan" within the
meaning of Section 3(3) of ERISA.
3.14 Labor Matters. Except as disclosed in the Company SEC Reports filed
prior to the date of this Agreement or in Section 3.14 of the Company Disclosure
Letter, (i) there are no material controversies pending or, to the knowledge of
the Company, threatened between the Company or any of its Subsidiaries and any
representatives of its employees, except such as would not, individually or in
the aggregate, have a material adverse effect on the Company and its
Subsidiaries taken as a whole, (ii) to the knowledge of the Company, there are
no material organizational efforts presently being made involving any of the now
unorganized employees of the Company or any of its Subsidiaries and (iii) since
December 31, 1992, there has been no work stoppage, strike or other concerted
action by employees of
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the Company or any of its Subsidiaries except such as did not, individually or
in the aggregate, have a material adverse effect on the Company and its
Subsidiaries taken as a whole.
3.15 Environmental Matters. (a) Each of the Company and its Subsidiaries
has obtained all licenses, permits, authorizations, approvals and consents from
Governmental or Regulatory Authorities which are required under any applicable
Environmental Law (as defined below) in respect of its business or operations
("Environmental Permits"), except for such failures to have Environmental
Permits which, individually or in the aggregate, could not reasonably be
expected to have a material adverse effect on the Company and its Subsidiaries
taken as a whole. Each of such Environmental Permits is in full force and effect
and each of the Company and its Subsidiaries is in compliance with the terms and
conditions of all such Environmental Permits and with any applicable
Environmental Law, except for such failures to be in compliance which,
individually or in the aggregate, could not reasonably be expected to have a
material adverse effect on the Company and its Subsidiaries taken as a whole.
(b) Except as disclosed in Section 3.15(b) of the Company Disclosure
Letter, no notice, notification, demand, request for information, citation,
summons or order has been issued, no complaint has been filed, no penalty has
been assessed and no investigation or review is pending or threatened by any
Governmental or Regulatory Authority relating to any alleged failure by the
Company or any of its Subsidiaries to have any Environmental Permit or with
respect to any generation, treatment, storage, recycling, transportation,
discharge or disposal, or any release, of any Hazardous Materials generated by
the Company or any of its Subsidiaries which alleged failure, generation,
treatment, storage, recycling, transportation, discharge or disposal or release
could reasonably be expected to have a material adverse effect on the Company
and its Subsidiaries taken as a whole.
(c) Except as disclosed in Section 3.15(c) of the Company Disclosure
Letter, to the knowledge of the Company, (i) no site or facility now or
previously owned, operated or leased by the Company or any of its Subsidiaries
is listed or proposed for listing on the National Priorities List ("NPL")
promulgated pursuant to the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, and the rules and regulations thereunder
("CERCLA"), or on any similar foreign, provincial, state or local list of sites
requiring investigation or clean-up and (ii) neither the Company nor any of its
Subsidiaries has released a material amount of Hazardous Materials to any site
or facility now or previously owned, operated or leased by the Company or any of
its Subsidiaries (or to any neighboring site or facility).
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(d) Except as described in Section 3.15(d) of the Company Disclosure
Letter, (i) no Liens have arisen under or pursuant to any Environmental Law on
any site or facility owned, operated or leased by the Company or any of its
Subsidiaries, other than any such site or facility not individually or in the
aggregate material to the Company and its Subsidiaries taken as a whole, (ii) no
action of any Governmental or Regulatory Authority has been taken or, to the
knowledge of the Company, is in process that could subject any such site or
facility to such Liens, (iii) neither the Company nor any of its Subsidiaries
has been required to place any notice or restriction relating to the presence of
Hazardous Materials at any such site or facility owned by it in any deed to the
real property on which such site or facility is located and (iv) the Company is
not aware of any facts that would require the Company or any of its Subsidiaries
to place such a notice or restriction in any such deed in the future.
(e) Except as disclosed in Section 3.15(e) of the Company Disclosure
Letter, neither the Company nor any of its Subsidiaries has transported or
arranged for the transportation of any Hazardous Material to any location that
is listed on the NPL, listed for possible inclusion on the NPL by the
Environmental Protection Agency in the Comprehensive Environmental Response and
Liability Information System, as provided for by 40 C.F.R. ss. 300.5
("CERCLIS"), or on any similar state, local or foreign list or that is the
subject of Federal, state, local or foreign enforcement actions or other
investigations that could reasonably be expected to have a material adverse
effect on the Company and its Subsidiaries taken as a whole.
(f) Except as disclosed in Section 3.15(f) of the Company Disclosure
Letter, there have been no environmental investigations, studies, audits, tests,
reviews or other analyses conducted by, or which are in the possession of, the
Company or any of its Subsidiaries in relation to any site or facility now or
previously owned, operated or leased by the Company or any of its Subsidiaries.
(g) As used herein:
(i) "Environmental Law" means any law or order of any Governmental
or Regulatory Authority relating to the regulation or protection of human
health, safety or the environment or to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or wastes into the environment (including,
without limitation, ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances or wastes; and
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(ii) "Hazardous Material" means (A) any petroleum or petroleum
products, flammable explosives, radioactive materials, asbestos in any
form that is or could become friable, urea formaldehyde foam insulation
and transformers or other equipment that contain dielectric fluid
containing levels of polychlorinated biphenyls (PCBs); (B) any chemicals
or other materials or substances which are now or hereafter become defined
as or included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials," "extremely hazardous wastes," "restricted
hazardous wastes," "toxic substances," "toxic pollutants" or words of
similar import under any Environmental Law; and (C) any other chemical or
other material or substance, exposure to which is now or hereafter
prohibited, limited or regulated by any Governmental or Regulatory
Authority under any Environmental Law.
3.16 Intellectual Property Rights. The Company and its Subsidiaries have
all right, title and interest in, or a valid and binding license or right to
use, all Intellectual Property (as defined below) individually or in the
aggregate material to the conduct of the businesses of the Company and its
Subsidiaries taken as a whole (the "Company Intellectual Property"). All
Industrial Property included in the Company Intellectual Property has been and
currently remains duly registered with, filed in or issued by the appropriate
Governmental or Regulatory Authority. Except as disclosed in Section 3.16 of the
Company Disclosure Letter, (i) the Company or a Subsidiary of the Company has
the sole and exclusive right to use all of the Company Intellectual Property,
except for pending applications for any Industrial Property included within the
Company Intellectual Property; (ii) all Company Intellectual Property is valid
and subsisting and free and clear of any Liens, and none of the Company
Intellectual Property is subject to any outstanding order or Contract
restricting the scope of the use thereof; and (iii) there are no claims or
demands of any other person pertaining to the Company Intellectual Property or
any license with respect thereto, and no actions or proceedings, judicial or
administrative or otherwise, have been instituted, are pending or to the
knowledge of the Company are threatened which challenge or affect the rights of
the Company or any of its Subsidiaries in respect thereof. Neither the Company
nor any Subsidiary of the Company is in default (or with the giving of notice or
lapse of time or both, would be in default) under any license to use such
Company Intellectual Property, such Company Intellectual Property is not being
infringed by any third party, and neither the Company nor any Subsidiary of the
Company is infringing any Intellectual Property of any third party, except for
such defaults and infringements which, individually or in the aggregate, are not
having and could not be reasonably expected to have a material adverse effect on
the Company and its Subsidiaries taken as a whole. For purposes of this
Agreement, "Intellectual Property" means Industrial Property (as defined below)
and inventions, invention studies (whether patentable or
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unpatentable), designs, copyrights, mask works, trademarks, service marks, trade
dress, trade names, secret formulae, trade secrets, secret processes, computer
programs, proprietary databases, confidential information, whether technical or
otherwise, and know-how; and "Industrial Property" means patents, copyright
registrations, mask work registrations, trademark and service mark
registrations, and pending applications for any of the foregoing.
3.17 Affiliate Transactions. Except as disclosed in Section 3.17 of the
Company Disclosure Letter, (i) there is no indebtedness outstanding between the
Company or any of its Subsidiaries, on the one hand, and BIL or any of its other
affiliates, on the other hand, (ii) neither BIL nor any of its other affiliates
provides or causes to be provided any assets, services or facilities to the
Company or any of its Subsidiaries, (iii) neither the Company nor any of its
Subsidiaries provides or causes to be provided any assets, services or
facilities to BIL or any of its other affiliates and (iv) neither the Company
nor any of its Subsidiaries beneficially owns, directly or indirectly, any
Investment Assets (as defined below) issued by BIL or any of its other
affiliates. Except as disclosed in Section 3.17 of the Company Disclosure
Letter, each of the transactions disclosed thereon was incurred or engaged in,
as the case may be, on an arm's-length basis and, since December 31, 1995, all
settlements of liabilities between the Company or any of its Subsidiaries, on
the one hand, and BIL or any of its other affiliates, on the other hand, have
been made in the ordinary course of business consistent with past practice. For
purposes hereof, the term "Investment Assets" shall mean debentures, notes and
other evidences of indebtedness, stocks, securities (including rights to
purchase and securities convertible into or exchangeable for other securities),
interests in joint ventures and general and limited partnerships, mortgage loans
and other investment or portfolio assets.
3.18 Vote Required. Assuming the accuracy of the representation and
warranty contained in Section 4.20, the affirmative vote of the holders of
record of a majority of the outstanding shares of Company Common Stock and
Company Preferred Stock, voting together as a single class and separately as
classes, with respect to the adoption of this Agreement is the only vote of the
holders of any class or series of the capital stock of the Company required to
adopt this Agreement and approve the Merger and the other transactions
contemplated hereby.
3.19 Opinion of Financial Advisor. The Company has received the opinion of
Vector Securities International, Inc., dated the date hereof, to the effect
that, as of the date hereof, the consideration to be received in the Merger by
the holders of Company Common Stock is fair, from a financial point of view, to
such holders, and a true and complete copy of such opinion has been delivered to
Parent prior to the execution of this Agreement.
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3.20 Ownership of Parent Common Stock. Except as disclosed in Section 3.20
of the Company Disclosure Letter, neither BIL, the Company nor any of their
respective Subsidiaries and other affiliates beneficially owns any shares of
Parent Common Stock.
3.21 Section 203 of the DGCL Not Applicable. The Company's Board of
Directors has taken all necessary actions so that the provisions of Section
203(a) of the DGCL will not apply to this Agreement, the Merger, the Stockholder
Agreement and the other transactions contemplated hereby or thereby, and has
approved Parent becoming an "interested stockholder" within the meaning of such
section.
ARTICLE III-A
REPRESENTATIONS AND WARRANTIES OF BIL
BIL represents and warrants to Parent and Sub as follows:
3A.01 Organization and Qualification. BIL is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation.
3A.02 Authority Relative to this Agreement. BIL has the requisite
corporate power and authority to enter into this Agreement and to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement by BIL and the
consummation by BIL of the transactions contemplated hereby have been duly and
validly approved by the Board of Directors of BIL, and no other corporate
proceedings on the part of BIL or its stockholders are necessary to authorize
the execution, delivery and performance of this Agreement by BIL and the
consummation by BIL of the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by BIL and constitutes a legal,
valid and binding obligation of BIL enforceable against BIL in accordance with
its terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
3A.03 Non-Contravention; Approvals and Consents. (a) The execution and
delivery of this Agreement by BIL does not, and the performance by BIL of its
obligations hereunder and the consummation of the transactions contemplated
hereby will not, conflict with, result in a violation or breach of, constitute
(with or without notice or lapse of time or both) a default under, result in or
give to any person any right of payment or reimbursement, termination,
cancellation, modification or acceleration of, or result in the creation or
imposition of any Lien upon any of the assets or properties of BIL under, any of
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the terms, conditions or provisions of (i) the certificate or articles of
incorporation or bylaws (or other comparable charter documents) of BIL, or (ii)
(x) any law or order of any Governmental or Regulatory Authority applicable to
BIL or any of its assets or properties, or (y) any Contracts to which BIL is a
party or by which BIL or any of its respective assets or properties is bound,
excluding from the foregoing clauses (x) and (y) conflicts, violations,
breaches, defaults, terminations, modifications, accelerations and creations and
impositions of Liens which, individually or in the aggregate, could not be
reasonably expected to have a material adverse effect on the ability of BIL to
consummate the transactions contemplated by this Agreement.
3A.04 Legal Proceedings. There are no actions, suits, arbitrations or
proceedings pending or, to the knowledge of BIL, threatened against, relating to
or affecting, nor to the knowledge of BIL are there any Governmental or
Regulatory Authority investigations or audits pending or threatened against,
relating to or affecting, BIL or any of its assets and properties which,
individually or in the aggregate, could be reasonably expected to have a
material adverse effect on the ability of BIL to consummate the transactions
contemplated by this Agreement, and (ii) BIL is not subject to any continuing
order of any Governmental or Regulatory Authority which, individually or in the
aggregate, could be reasonably expected to have a material adverse effect on the
ability of BIL to consummate the transactions contemplated by this Agreement.
3A.05 Purchase for Investment. The shares of Parent Common Stock and
Parent Preferred Stock to be issued to BIL pursuant to this Agreement, together
with any shares of Parent Common Stock issued upon conversion of or as a
dividend on such shares of Parent Preferred Stock, will be acquired by BIL for
its own account for the purpose of investment, it being understood that the
right to dispose of such shares shall be entirely within the discretion of BIL.
BIL will refrain from transferring or otherwise disposing of any of such shares
of Parent Common Stock or Parent Preferred Stock, or any interest therein, in
such manner as to cause Parent to be in violation of the registration
requirements of the Securities Act, or applicable state securities or blue sky
laws. BIL acknowledges that each certificate representing such shares of Parent
Common Stock or Parent Preferred Stock shall bear a legend to the effect that
the shares represented by such certificate have not been registered under the
provisions of the Securities Act and may not be sold, transferred or otherwise
disposed of except pursuant to (i) an effective registration statement under the
Securities Act or (ii) a valid exemption from the registration requirements of
the Securities Act and such other legends as may be required by the Stockholder
Agreement.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as follows:
4.01 Organization and Qualification. Each of Parent and its Subsidiaries
(including Sub) is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and has all
requisite corporate power and authority to conduct its business as and to the
extent now conducted and to own, use and lease its assets and properties, except
for such failures to be so incorporated, existing and in good standing or to
have such power and authority which, individually or in the aggregate, are not
having and could not be reasonably expected to have a material adverse effect on
Parent and its Subsidiaries taken as a whole. Sub was formed solely for the
purpose of engaging in the transactions contemplated by this Agreement, has
engaged in no other business activities and has conducted its operations only as
contemplated hereby. Each of Parent and its Subsidiaries is duly qualified,
licensed or admitted to do business and is in good standing in each jurisdiction
in which the ownership, use or leasing of its assets and properties, or the
conduct or nature of its business, makes such qualification, licensing or
admission necessary, except for such failures to be so qualified, licensed or
admitted and in good standing which, individually or in the aggregate, are not
having and could not be reasonably expected to have a material adverse effect on
Parent and its Subsidiaries taken as a whole. Section 4.01 of the letter dated
the date hereof and delivered by Parent and Sub to the Company concurrently with
the execution and delivery of this Agreement (the "Parent Disclosure Letter")
sets forth (i) the name and jurisdiction of incorporation of each Subsidiary of
Parent, (ii) its authorized capital stock, (iii) the number of issued and
outstanding shares of capital stock and (iv) the record owners of such shares.
Except for interests in the Subsidiaries of Parent and as disclosed in Section
4.01 of the Parent Disclosure Letter, Parent does not directly or indirectly own
any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for, any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity.
Parent has previously delivered to the Company correct and complete copies of
the certificate or articles of incorporation and bylaws (or other comparable
charter documents) of Parent and each of its Subsidiaries.
4.02 Capital Stock. (a) The authorized capital stock of Parent consists
solely of 40,000,000 shares of Parent Common Stock and 1,000,000 shares of
preferred stock, par value $.01 per share ("Parent Preferred Stock"). As of
August 7, 1996, 14,175,608 shares of Parent Common Stock were issued and
outstanding, no shares were held in the treasury of Parent,
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1,313,325 shares were reserved for issuance in connection with Parent's
Incentive Program, as amended (the "Parent Incentive Program"), and 345,336 were
shares reserved for issuance in connection with the warrants held by John
Hancock Mutual Life Insurance Company. Since such date, except as set forth in
Section 4.02 of the Parent Disclosure Letter, there has been no change in the
number of issued and outstanding shares of Parent Common Stock or shares of
Parent Common Stock held in treasury or reserved for issuance since such date
other than the exercise of options outstanding under the Parent Incentive
Program as of such date. As of the date hereof, no shares of Parent Preferred
Stock are issued and outstanding and 300,000 shares are designated Series A
Participating Preferred Shares ("Parent Series A Preferred Stock") and are
reserved for issuance in accordance with the Rights Agreement dated as of
September 3, 1996 by and between Parent and American Stock Transfer & Trust
Company, as Rights Agent (the "Parent Rights Agreement"), pursuant to which
Parent has issued rights (the "Parent Rights") to purchase shares of Parent
Series A Preferred Stock. All of the issued and outstanding shares of Parent
Common Stock are, and all shares reserved for issuance will be, upon issuance
in accordance with the terms specified in the instruments or agreements pursuant
to which they are issuable, duly authorized, validly issued, fully paid and
nonassessable. All shares of Parent Common Stock, Parent Series B Preferred
Stock and Parent Series C Preferred Stock to be issued pursuant to the Agreement
and upon conversion of or as a dividend on the Parent Series B Preferred Stock
and the Parent Series C Preferred Stock will be, when so issued in accordance
with this Agreement or the terms of the Parent Series B Preferred Stock or the
Parent Series C Preferred Stock, as the case may be, duly authorized, validly
issued, fully paid and nonassessable. Except pursuant to this Agreement and the
Parent Rights Agreement and except as set forth in Section 4.02 of the Parent
Disclosure Letter, there are no outstanding Options obligating Parent or any of
its Subsidiaries to issue or sell any shares of capital stock of Parent or to
grant, extend or enter into any Option with respect thereto.
(b) Except as disclosed in Section 4.02 of the Parent Disclosure Letter,
all of the outstanding shares of capital stock of each Subsidiary of Parent are
duly authorized, validly issued, fully paid and nonassessable and are owned,
beneficially and of record, by Parent or a Subsidiary wholly owned, directly or
indirectly, by Parent, free and clear of any Liens. Except as disclosed in
Section 4.02 of the Parent Disclosure Letter, there are no (i) outstanding
Options obligating Parent or any of its Subsidiaries to issue or sell any shares
of capital stock of any Subsidiary of Parent or to grant, extend or enter into
any such Option or (ii) voting trusts, proxies or other commitments,
understandings, restrictions or arrangements in favor of any person other than
Parent or a Subsidiary wholly owned, directly or indirectly, by Parent with
respect to the voting of or the right to participate in dividends or other
earnings on any capital stock of any Subsidiary of Parent.
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(c) Except as disclosed in Section 4.02 of the Parent Disclosure Letter,
there are no outstanding contractual obligations of Parent or any Subsidiary of
Parent to repurchase, redeem or otherwise acquire any shares of Parent Common
Stock or any capital stock of any Subsidiary of Parent or to provide funds to,
or make any investment (in the form of a loan, capital contribution or
otherwise) in, any Subsidiary of Parent or any other person.
4.03 Authority Relative to this Agreement. Each of Parent and Sub has the
requisite corporate power and authority to enter into this Agreement and,
subject to obtaining the Parent Stockholders' Approval (as defined in Section
6.03(a)), to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by each of Parent and Sub and the consummation by each of Parent
and Sub of the transactions contemplated hereby have been duly and validly
approved by its Board of Directors and by Parent in its capacity as the sole
stockholder of Sub, the Board of Directors of Parent has adopted a resolution
declaring the advisability of the Parent Amendment and the Plan Amendment (each
as defined in Section 6.03(a)) and directed that the Parent Amendment and the
Plan Amendment and the issuance of Parent securities to be issued pursuant to
this Agreement, upon conversion of or as a dividend on the Parent Series B
Preferred Stock and the Parent Series C Preferred Stock and under the Company
Option Plans after the Merger as contemplated by Section 6.08 be submitted for
consideration by the stockholders of Parent, and no other corporate proceedings
on the part of either of Parent or Sub or their stockholders are necessary to
authorize the execution, delivery and performance of this Agreement by Parent
and Sub and the consummation by Parent and Sub of the transactions contemplated
hereby, other than obtaining the Parent Stockholders' Approval. This Agreement
has been duly and validly executed and delivered by each of Parent and Sub and,
subject to the obtaining of the Parent Stockholders' Approval, constitutes a
legal, valid and binding obligation of each of Parent and Sub enforceable
against each of Parent and Sub in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
4.04 Non-Contravention; Approvals and Consents. (a) The execution and
delivery of this Agreement by each of Parent and Sub do not, and the performance
by each of Parent and Sub of its obligations hereunder and the consummation of
the transactions contemplated hereby will not, conflict with, result in a
violation or breach of, constitute (with or without notice or lapse of time or
both) a default under, result in or give to any person any right of payment or
reimbursement, termination, cancellation, modification or acceleration of, or
result in the
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creation or imposition of any Lien upon any of the assets or properties of
Parent or any of its Subsidiaries under, any of the terms, conditions or
provisions of (i) the certificates or articles of incorporation or bylaws (or
other comparable charter documents) of Parent or any of its Subsidiaries, or
(ii) except as described in Section 4.04 of the Parent Disclosure Letter and
subject to obtaining the Parent Stockholders' Approval in accordance with the
DGCL, Parent's Certificate of Incorporation and Bylaws and the taking of the
actions described in paragraph (b) of this Section, (x) any laws or orders of
any Governmental or Regulatory Authority applicable to Parent or any of its
Subsidiaries or any of their respective assets or properties, or (y) except as
described in Section 4.04 of the Parent Disclosure Letter, any Contracts to
which Parent or any of its Subsidiaries is a party or by which Parent or any of
its Subsidiaries or any of their respective assets or properties is bound,
excluding from the foregoing clauses (x) and (y) conflicts, violations,
breaches, defaults, terminations, modifications, accelerations and creations and
impositions of Liens which, individually or in the aggregate, could not be
reasonably expected to have a material adverse effect on Parent and its
Subsidiaries taken as a whole or on the ability of Parent and Sub to consummate
the transactions contemplated by this Agreement.
(b) Except (i) for the filing of a premerger notification report by Parent
under the HSR Act, (ii) for the filing of the Proxy Statement and Registration
Statement with the SEC pursuant to the Exchange Act and the Securities Act, the
declaration of the effectiveness of the Registration Statement by the SEC and
filings with various state securities authorities that are required in
connection with the transactions contemplated by this Agreement, (iii) for the
filing of the Certificate of Merger and other appropriate merger documents
required by the DGCL with the Secretary of State and appropriate documents with
the relevant authorities of other states in which the Constituent Corporations
are qualified to do business, (iv) for any filings with the SEC required under
Section 13(d) of the Exchange Act and (v) as disclosed in Section 4.04 of the
Parent Disclosure Letter, no consent, approval or action of, filing with or
notice to any Governmental or Regulatory Authority or other public or private
third party is necessary or required under any of the terms, conditions or
provisions of any law or order of any Governmental or Regulatory Authority or
any Contract to which Parent or any of its Subsidiaries is a party or by which
Parent or any of its Subsidiaries or any of their respective assets or
properties is bound for the execution and delivery of this Agreement by each of
Parent and Sub, the performance by each of Parent and Sub of its obligations
hereunder or the consummation of the transactions contemplated hereby, other
than such consents, approvals, actions, filings and notices which the failure to
make or obtain, as the case may be, individually or in the aggregate, could not
be reasonably expected to have a material adverse effect on Parent and its
Subsidiaries taken as a
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whole or on the ability of Parent and Sub to consummate the transactions
contemplated by this Agreement.
4.05 SEC Reports and Financial Statements. Parent delivered to the Company
prior to the execution of this Agreement a true and complete copy of each form,
report, schedule, registration statement, definitive proxy statement and other
document (together with all amendments thereof and supplements thereto) filed by
Parent or any of its Subsidiaries with the SEC since December 31, 1992 (as such
documents have since the time of their filing been amended or supplemented, the
"Parent SEC Reports"), which are all the documents (other than preliminary
material) that Parent and its Subsidiaries were required to file with the SEC
since such date. As of their respective dates, the Parent SEC Reports (i)
complied as to form in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and (ii) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The audited consolidated financial statements and unaudited interim
consolidated financial statements (including, in each case, the notes, if any,
thereto) included in the Parent SEC Reports (the "Parent Financial Statements")
complied as to form in all material respects with the published rules and
regulations of the SEC with respect thereto, were prepared in accordance with
GAAP, except as may be indicated therein or in the notes thereto and except with
respect to unaudited statements as permitted by Form 10-Q of the SEC, and, as of
the respective dates thereof, fairly presented (subject, in the case of the
unaudited interim financial statements, to normal, recurring year-end audit
adjustments (which, in the case of the unaudited financial statements included
in Parent's Report on Form 10-Q for the period ended June 30, 1996, are not
expected to be, individually or in the aggregate, materially adverse to Parent
and its Subsidiaries taken as a whole)) the consolidated financial position of
Parent and its consolidated subsidiaries as at the respective dates thereof and
the consolidated results of their operations and cash flows for the respective
periods then ended. Except as set forth in Section 4.05 of the Parent Disclosure
Letter, each Subsidiary of Parent is treated as a consolidated subsidiary of
Parent in the Parent Financial Statements for all periods covered thereby.
4.06 Absence of Certain Changes or Events. Except as disclosed in the
Parent SEC Reports filed prior to the date of this Agreement or in Section 4.06
of the Parent Disclosure Letter, (a) since December 31, 1995 there has not been
any change, event or development having, or that could be reasonably expected to
have, individually or in the aggregate, a material adverse effect on Parent and
its Subsidiaries taken as a whole, and (b) except as disclosed in Section 4.06
of the Parent Disclosure Letter, between June 30, 1996 and the date hereof (i)
Parent and its Subsidiaries have conducted their respective
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businesses only in the ordinary course consistent with past practice and (ii)
neither Parent nor any of its Subsidiaries has taken any action which, if taken
after the date hereof, would constitute a breach of any provision of clause (ii)
of Section 5.01(b).
4.07 Absence of Undisclosed Liabilities. Except for matters reflected or
reserved against in the balance sheet as of June 30, 1996 included in the Parent
Financial Statements or as disclosed in Section 4.07 of the Parent Disclosure
Letter, neither Parent nor any of its Subsidiaries had at such date, or has
incurred since that date, any liabilities or obligations (whether absolute,
accrued, contingent, fixed or otherwise, or whether due or to become due) of any
nature that would be required by GAAP to be reflected on a consolidated balance
sheet of Parent and its consolidated subsidiaries (including the notes thereto),
except liabilities or obligations (i) which were incurred in the ordinary course
of business consistent with past practice or (ii) which have not been, and could
not be reasonably expected to be, individually or in the aggregate, materially
adverse to Parent and its Subsidiaries taken as a whole.
4.08 Legal Proceedings. Except as disclosed in the Parent SEC Reports
filed prior to the date of this Agreement or in Section 4.08 of the Parent
Disclosure Letter, (i) there are no actions, suits, arbitrations or proceedings
pending or, to the knowledge of Parent, threatened against, relating to or
affecting, nor to the knowledge of Parent are there any Governmental or
Regulatory Authority investigations or audits pending or threatened against,
relating to or affecting, Parent or any of its Subsidiaries or any of their
respective assets and properties which, individually or in the aggregate, could
be reasonably expected to have a material adverse effect on Parent and its
Subsidiaries taken as a whole or on the ability of Parent and Sub to consummate
the transactions contemplated by this Agreement, and (ii) neither Parent nor any
of its Subsidiaries is subject to any continuing order of any Governmental or
Regulatory Authority which, individually or in the aggregate, is having or could
be reasonably expected to have a material adverse effect on Parent and its
Subsidiaries taken as a whole or on the ability of Parent and Sub to consummate
the transactions contemplated by this Agreement.
4.09 Information Supplied. The registration statement on Form S-4 to be
filed with the SEC by Parent in connection with the issuance of shares of Parent
Common Stock, Parent Series B Preferred Stock and Parent Series C Preferred
Stock in the Merger, as amended or supplemented from time to time (as so amended
and supplemented, the "Registration Statement"), and any other documents to be
filed by Parent with the SEC or any other Governmental or Regulatory Authority
in connection with the Merger and the other transactions contemplated hereby
will (in the case of the Registration Statement and any such other documents
filed with the SEC under the Securities Act or the Exchange Act) comply as to
form in all
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material respects with the requirements of the Exchange Act and the Securities
Act, respectively, and will not, on the date of its filing or, in the case of
the Registration Statement, at the time it becomes effective under the
Securities Act, at the date the Proxy Statement is mailed to stockholders of the
Company and of Parent and at the time of the Stockholders' Meetings, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading, except
that no representation is made by Parent or Sub with respect to information
included therein with respect to the Company and its Subsidiaries, including
information incorporated by reference therein from documents filed by the
Company or any of its Subsidiaries with the SEC.
4.10 Compliance with Laws and Orders. Parent and its Subsidiaries hold all
permits, licenses, variances, exemptions, orders and approvals of all
Governmental and Regulatory Authorities necessary for the lawful conduct of
their respective businesses (the "Parent Permits"), except for failures to hold
such permits, licenses, variances, exemptions, orders and approvals which,
individually or in the aggregate, are not having and could not be reasonably
expected to have a material adverse effect on Parent and its Subsidiaries taken
as a whole. Parent and its Subsidiaries are in compliance with the terms of the
Parent Permits, except failures so to comply which, individually or in the
aggregate, are not having and could not be reasonably expected to have a
material adverse effect on Parent and its Subsidiaries taken as a whole. Except
as disclosed in the Parent SEC Reports filed prior to the date of this
Agreement, Parent and its Subsidiaries are not in violation of or default under
any law or order of any Governmental or Regulatory Authority, except for such
violations or defaults which, individually or in the aggregate, are not having
and could not be reasonably expected to have a material adverse effect on Parent
and its Subsidiaries taken as a whole.
4.11 Compliance with Agreements; Certain Agreements. (a) Except as
disclosed in the Parent SEC Reports filed prior to the date of this Agreement,
neither Parent nor any of its Subsidiaries nor, to the knowledge of Parent, any
other party thereto is in breach or violation of, or in default in the
performance or observance of any term or provision of, and no event has occurred
which, with notice or lapse of time or both, could be reasonably expected to
result in a default under, (i) the certificate of incorporation or bylaws (or
other comparable charter documents) of Parent or any of its Subsidiaries or (ii)
any Contract to which Parent or any of its Subsidiaries is a party or by which
Parent or any of its Subsidiaries or any of their respective assets or
properties is bound, except in the case of clause (ii) for breaches, violations
and defaults which, individually or in the aggregate, are not having and could
not be
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reasonably expected to have a material adverse effect on Parent and its
Subsidiaries taken as a whole.
(b) Except as disclosed in Section 4.11 of the Parent Disclosure Letter or
in the Parent SEC Reports filed prior to the date of this Agreement or as
provided for in this Agreement, as of the date hereof, neither Parent nor any of
its Subsidiaries is a party to any oral or written (i) consulting agreement not
terminable on thirty (30) days' or less notice, (ii) union or collective
bargaining agreement, (iii) agreement with any executive officer or other key
employee of Parent or any of its Subsidiaries the benefits of which are
contingent or vest, or the terms of which are materially altered, upon the
occurrence of a transaction involving Parent or any of its Subsidiaries of the
nature contemplated by this Agreement, (iv) agreement with respect to any
executive officer or other key employee of Parent or any of its Subsidiaries
providing any term of employment or compensation guarantee or (v) agreement or
plan, including any stock option, stock appreciation right, restricted stock or
stock purchase plan, any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
4.12 Taxes. (a) Each of Parent and its Subsidiaries has filed all material
tax returns and reports required to be filed by it, or requests for extensions
to file such returns or reports have been timely filed or granted and have not
expired, and all such tax returns and reports are complete and accurate in all
respects, except to the extent that such failures to file, have extensions
granted that remain in effect or be complete and accurate in all respects, as
applicable, individually or in the aggregate, would not have a material adverse
effect on Parent and its Subsidiaries taken as a whole. Parent and each of its
Subsidiaries has paid (or Parent has paid on its behalf) all taxes shown as due
on such tax returns and reports. The most recent financial statements contained
in the Parent SEC Reports reflect an adequate reserve for all taxes payable by
Parent and its Subsidiaries for all taxable periods and portions thereof accrued
through the date of such financial statements, and no deficiencies for any taxes
have been proposed, asserted or assessed against Parent or any of its
Subsidiaries that are not adequately reserved for thereon, except for
inadequately reserved taxes and inadequately reserved deficiencies that would
not, individually or in the aggregate, have a material adverse effect on Parent
and its Subsidiaries taken as a whole. No requests for waivers of the time to
assess any taxes against Parent or any of its Subsidiaries have been granted or
are pending, except for requests with respect to such taxes that have been
adequately reserved for in the most recent financial statements contained in the
Parent SEC Reports, or, to the extent not adequately reserved, the assessment of
which would not, individually or in
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the aggregate, have a material adverse effect on Parent and its Subsidiaries
taken as a whole.
4.13 Employee Benefit Plans; ERISA. (a) Section 4.13(a) of the Parent
Disclosure Letter (i) contains a true and complete list and description of each
Parent Benefit Plan, (ii) identifies each Parent Benefit Plan that is a Parent
Qualified Plan, (iii) identifies each Parent Benefit Plan which at any time
during the five-year period preceding the date of this Agreement was a Parent
Defined Benefit Plan and (iv) lists, describes and identifies each other Plan
maintained, established, sponsored or contributed to by a Parent ERISA
Affiliate, or any predecessor thereof, which, during the five-year period
preceding the date of this Agreement, was at any time a Parent Defined Benefit
Plan. Neither Parent nor any of its Subsidiaries has scheduled or agreed upon
future increases of benefit levels (or creations of new benefits) with respect
to any Parent Benefit Plan, and no such increases or creation of benefits have
been proposed, made the subject of representations to employees or requested or
demanded by employees under circumstances which make it reasonable to expect
that such increases will be granted. Except as disclosed in Section 4.13(a) of
the Parent Disclosure Letter, no loan is outstanding between Parent or any of
its Subsidiaries and any employee.
(b) Neither Parent nor any of its Subsidiaries maintains or is obligated
to provide benefits under any life, medical or health plan (other than as an
incidental benefit under a Parent Qualified Plan) which provides benefits to
retirees or other terminated employees other than benefit continuation rights
under the Consolidated Omnibus Budget Reconciliation of 1985, as amended.
(c) Except as set forth in Section 4.13(c) of the Parent Disclosure
Letter, each Parent Benefit Plan covers only employees who are employed by
Parent or any of its Subsidiaries (or former employees or beneficiaries with
respect to service with Parent or any of its Subsidiaries), so that the
transactions contemplated by this Agreement will require no spin-off of assets
and liabilities or other division or transfer of rights with respect to any such
plan.
(d) Except as disclosed in Section 4.13(d) of the Parent Disclosure
Letter, neither Parent nor any of its Subsidiaries, any Parent ERISA Affiliate
nor any other corporation or organization controlled by or under common control
with any of the foregoing within the meaning of Section 4001 of ERISA has at any
time contributed to any "multiemployer plan", as that term is defined in Section
4001 of ERISA.
(e) Each of the Parent Benefit Plans is, and its administration is and has
been since inception, in all material respects in compliance with, and neither
Parent nor any of its Subsidiaries has received any claim or notice that any
such
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Parent Benefit Plan is not in compliance with, all applicable laws and orders
and prohibited transactions exemptions, including the requirements of ERISA, the
Code, the Age Discrimination in Employment Act, the Equal Pay Act and Title VII
of the Civil Rights Act of 1964. Each Parent Qualified Plan has received a
favorable determination of qualification from the Internal Revenue Service and
there have been no plan amendments, events or circumstances subsequent to the
issuance of such determination of qualification that would cause the Parent
Qualified Plan to lose its determination of qualification. Each Parent Benefit
Plan which is intended to provide for the deferral of income, the reduction of
salary or other compensation or to afford other tax benefits complies with the
requirements of the applicable provisions of the Code or other laws required in
order to provide such tax benefits. In respect of any Parent Benefit Plan,
neither Parent nor any of its Subsidiaries has requested a closing agreement
under the Employee Plans Closing Agreement Program (set forth in Rev. Proc.
94-16, 1994-5 I.R.B. 22), a compliance statement under the Voluntary Compliance
Resolution program (set forth in Revenue Procedure 94-62, 1994-2 C.B. 778) or
any other determination under any remedial program of the Internal Revenue
Service applicable to employee benefit plans, and neither Parent nor any of its
Subsidiaries has consulted with counsel, accountants, employee benefits
consultants or actuaries in regard to making a request under any such remedial
program.
(f) Neither Parent nor any of its Subsidiaries is in default in performing
any of its contractual obligations under any Parent Benefit Plan or any related
trust agreement or insurance contract, except for such defaults which,
individually or in the aggregate, could not be reasonably expected to have a
material adverse effect on Parent and its Subsidiaries taken as a whole. All
contributions and other payments required to be made by Parent or any of its
Subsidiaries to any Parent Benefit Plan with respect to any period ending before
or at or including the Closing Date have been made or reserves adequate for such
contributions or other payments have been or will be set aside therefor and have
been or will be reflected in financial statements in accordance with GAAP. There
are no material outstanding liabilities of any Parent Benefit Plan other than
liabilities for benefits to be paid to participants in such Parent Benefit Plan
and their beneficiaries in accordance with the terms of such Parent Benefit
Plan. Neither Parent nor any of its Subsidiaries has any express or implied
commitment, whether legally enforceable or not, to create, incur liability with
respect to, or cause to exist any employee benefit plan or to modify any Plan,
other than as required by law.
(g) No event has occurred, and there exists no condition or set of
circumstances in connection with any Parent Benefit Plan, under which Parent or
any of its Subsidiaries, directly or indirectly (through any indemnification
agreement or otherwise), could reasonably be expected to be subject to any
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risk of material liability under Section 409 of ERISA, Section 502(i) of ERISA,
Title IV of ERISA or Section 4975 of the Code.
(h) No transaction contemplated by this Agreement will result in liability
to the PBGC under Section 302(c)(11), 4062, 4063, 4064 or 4069 of ERISA, or
otherwise, with respect to Parent or any of its Subsidiaries or any corporation
or organization controlled by or under common control with any of the foregoing
within the meaning of Section 4001 of ERISA, and no event or condition exists or
has existed which could reasonably be expected to result in any such liability
with respect to Parent or any of its Subsidiaries or any such corporation or
organization. Except as disclosed in Section 4.13(h) of the Parent Disclosure
Letter:
(i) no "reportable event" within the meaning of Section 4043 of
ERISA has occurred with respect to any Parent Defined Benefit Plan;
(ii) no termination re-establishment or spin-off re-establishment
transaction has occurred with respect to any Parent Subject Defined
Benefit Plan;
(iii) no Parent Subject Defined Benefit Plan has incurred any
accumulated funding deficiency whether or not waived; and
(iv) no filing has been made and no proceeding has been commenced
for the complete or partial termination of, or withdrawal from, any Parent
Benefit Plan which is a Parent Pension Benefit Plan.
(i) Except as disclosed under Section 4.13(i) of the Parent Disclosure
Letter, no benefit under any Parent Benefit Plan, including, without limitation,
any severance or parachute payment plan or agreement, will be established or
become accelerated, vested, funded or payable by reason of any transaction
contemplated under this Agreement.
(j) To the knowledge of Parent, there are no pending or threatened claims
by or on behalf of any Parent Benefit Plan, by any person covered thereby, or
otherwise, which allege violations of law which could reasonably be expected to
result in material liability on the part of Parent or any of its Subsidiaries or
any fiduciary of any such Parent Benefit Plan, nor is there any basis for such a
claim.
(k) No employer securities, employer real property or other employer
property is included in the assets of any Parent Benefit Plan.
(l) Except as disclosed in Section 4.13(l) of Parent Disclosure Letter,
the fair market value of the assets of each Parent Subject Defined Benefit Plan,
as determined as of the last
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day of the plan year of such plan which coincides with or first precedes the
date of this Agreement, was not less than the present value of the projected
benefit obligations under such plan at such date as established on the basis of
the actuarial assumptions applicable under such Parent Subject Defined Benefit
Plan at said date and, to the knowledge of Parent, there have been no material
changes in such values since said date.
(m) Complete and correct copies of the following documents have been
furnished to the Company prior to the execution of this Agreement:
(i) each Parent Benefit Plan and any predecessor plans referred to
therein, any related trust agreements, and service provider agreements,
insurance contracts or agreements with investment managers, including
without limitation, all amendments thereto;
(ii) current summary Plan descriptions of each Parent Benefit Plan
subject to ERISA, and any similar descriptions of all other Parent Benefit
Plans;
(iii) the most recent Form 5500 series filings and schedules thereto
for each Parent Benefit Plan subject to ERISA reporting requirements;
(iv) the most recent determination of the Internal Revenue Service
with respect to the qualified status of each Parent Qualified Plan;
(v) the most recent accountings with respect to any Parent Benefit
Plan funded through a trust; and
(vi) the most recent actuarial report of the qualified actuary of
any Parent Subject Defined Benefit Plan or any other Parent Benefit Plan
with respect to which actuarial valuations are conducted.
(n) For purposes of this Agreement, the following terms have the following
meanings:
(i) "Parent Benefit Plan" means any Plan established by Parent, any
Parent Subsidiary, or any predecessor or affiliate of any of the
foregoing, existing at the Closing Date or prior thereto, to which Parent
or any Parent Subsidiary contributes or has contributed, or under which
any employee, former employee or director of Parent or any Parent
Subsidiary or any beneficiary thereof is covered, is eligible for coverage
or has benefit rights.
(ii) "Parent Defined Benefit Plan" means each Parent Benefit Plan
which is subject to Part 3 of Title I of ERISA, Section 412 of the Code or
Title IV of ERISA.
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(iii) "Parent ERISA Affiliate" means any person who is in the same
controlled group of corporations or who is under common control (within
the meaning of Section 414 of the Code) with Parent or any Parent
Subsidiary.
(iv) "Parent Pension Benefit Plan" means each Parent Benefit Plan
which is a pension benefit plan within the meaning of Section 3(2) of
ERISA.
(v) "Parent Qualified Plan" means each Parent Benefit Plan which is
intended to qualify under Section 401 of the Code.
(vi) "Parent Subject Defined Benefit Plan" means each Parent Defined
Benefit Plan listed and described in Section 4.13(a) of the Parent
Disclosure Letter.
4.14 Labor Matters. Except as disclosed in the Parent SEC Reports filed
prior to the date of this Agreement or in Section 4.14 of the Parent Disclosure
Letter, (i) there are no material controversies pending or, to the knowledge of
Parent, threatened between Parent or any of its Subsidiaries and any
representatives of its employees, except such as would not, individually or in
the aggregate, have a material adverse effect on Parent and its Subsidiaries
taken as a whole, (ii) to the knowledge of Parent, there are no material
organizational efforts presently being made involving any of the now unorganized
employees of Parent or any of its Subsidiaries and (iii) since December 31,
1992, there has been no work stoppage, strike or other concerted action by
employees of Parent or any of its Subsidiaries except such as did not,
individually or in the aggregate, have a material adverse effect on Parent and
its Subsidiaries taken as a whole.
4.15 Environmental Matters. (a) Each of Parent and its Subsidiaries has
obtained all Environmental Permits from Governmental or Regulatory Authorities
which are required under any applicable Environmental Law in respect of its
business or operations, except for such failures to have Environmental Permits
which, individually or in the aggregate, could not reasonably be expected to
have a material adverse effect on Parent and its Subsidiaries taken as a whole.
Each of such Environmental Permits is in full force and effect and each of
Parent and its Subsidiaries is in compliance with the terms and conditions of
all such Environmental Permits and with any applicable Environmental Law, except
for such failures to be in compliance which, individually or in the aggregate,
could not reasonably be expected to have a material adverse effect on Parent and
its Subsidiaries taken as a whole.
(b) Except as disclosed in Section 4.15(b) of the Parent Disclosure
Letter, no notice, notification, demand, request for information, citation,
summons or order has been issued, no complaint has been filed, no penalty has
been assessed
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and no investigation or review is pending or threatened by any Governmental or
Regulatory Authority relating to any alleged failure by Parent or any of its
Subsidiaries to have any Environmental Permit or with respect to any generation,
treatment, storage, recycling, transportation, discharge or disposal, or any
release, of any Hazardous Materials generated by Parent or any of its
Subsidiaries which alleged failure, generation, treatment, storage, recycling,
transportation, discharge or disposal or release could reasonably be expected to
have a material adverse effect on Parent and its Subsidiaries taken as a whole.
(c) Except as disclosed in Section 4.15(c) of the Parent Disclosure
Letter, to the knowledge of Parent, (i) no site or facility now or previously
owned, operated or leased by Parent or any of its Subsidiaries is listed or
proposed for listing on the NPL, or on any similar foreign, provincial, state or
local list of sites requiring investigation or clean-up and (ii) neither Parent
nor any of its Subsidiaries has released a material amount of Hazardous
Materials to any site or facility now or previously owned, operated or leased by
Parent or any of its Subsidiaries (or to any neighboring site or facility).
(d) Except as described in Section 4.15(d) of the Parent Disclosure
Letter, (i) no Liens have arisen under or pursuant to any Environmental Law on
any site or facility owned, operated or leased by Parent or any of its
Subsidiaries, other than any such site or facility not individually or in the
aggregate material to Parent and its Subsidiaries taken as a whole, (ii) no
action of any Governmental or Regulatory Authority has been taken or, to the
knowledge of Parent, is in process that could subject any such site or facility
to such Liens, (iii) neither Parent nor any of its Subsidiaries would be
required to place any notice or restriction relating to the presence of
Hazardous Materials at any such site or facility owned by it in any deed to the
real property on which such site or facility is located and (iv) Parent is not
aware of any facts that would require Parent or any of its Subsidiaries to place
such a notice or restriction in any such deed in the future.
(e) Except as disclosed in Section 4.15(e) of the Parent Disclosure
Letter, neither Parent nor any of its Subsidiaries has transported or arranged
for the transportation of any Hazardous Material to any location that is listed
on the NPL, listed for possible inclusion on the NPL by the Environmental
Protection Agency in the Comprehensive Environmental Response and Liability
Information System, as provided for by CERCLIS, or on any similar state, local
or foreign list or that is the subject of Federal, state, local or foreign
enforcement actions or other investigations that could reasonably be expected to
have a material adverse effect on Parent and its Subsidiaries taken as a whole.
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(f) Except as disclosed in Section 4.15(f) of the Parent Disclosure
Letter, there have been no environmental investigations, studies, audits, tests,
reviews or other analyses conducted by, or which are in the possession of,
Parent or any of its Subsidiaries in relation to any site or facility now or
previously owned, operated or leased by Parent or any of its Subsidiaries.
4.16 Intellectual Property Rights. Parent and its Subsidiaries have all
right, title and interest in, or a valid and binding license or right to use,
all Intellectual Property individually or in the aggregate material to the
conduct of the businesses of Parent and its Subsidiaries taken as a whole (the
"Parent Intellectual Property"). All Industrial Property included in the Parent
Intellectual Property has been and currently remains duly registered with, filed
in or issued by the appropriate Governmental or Regulatory Authority. Except as
disclosed in Section 4.16 of the Parent Disclosure Letter, (i) Parent or a
Subsidiary of Parent has the sole and exclusive right to use all of the Parent
Intellectual Property, except for pending applications for any Industrial
Property included within the Parent Intellectual Property; (ii) all Parent
Intellectual Property is valid and subsisting and free and clear of any Liens,
and none of Parent Intellectual Property is subject to any outstanding order or
Contract restricting the scope of the use thereof; and (iii) there are no claims
or demands of any other person pertaining to the Parent Intellectual Property or
any license with respect thereto, and no actions or proceedings, judicial or
administrative or otherwise, have been instituted, are pending or to the
knowledge of Parent are threatened which challenge or affect the rights of
Parent or any of its Subsidiaries in respect thereof. Neither Parent nor any
Subsidiary of Parent is in default (or with the giving of notice or lapse of
time or both, would be in default) under any license to use such Parent
Intellectual Property, such Parent Intellectual Property is not being infringed
by any third party, and neither Parent nor any Subsidiary of Parent is
infringing any Intellectual Property of any third party, except for such
defaults and infringements which, individually or in the aggregate, are not
having and could not be reasonably expected to have a material adverse effect on
Parent and its Subsidiaries taken as a whole.
4.17 Vote Required. Assuming the accuracy of the representation and
warranty contained in Section 3.20, the affirmative vote of the holders of
record of a majority of the outstanding shares of Parent Common Stock with
respect to the adoption of the Parent Amendment and the Plan Amendment and the
affirmative vote of a majority of the votes cast by the holders of record of
shares of Parent Common Stock with respect to the approval of the issuance of
Parent Common Stock in connection with the Merger are the only votes of the
holders of any class or series of the capital stock of Parent required to
approve the Merger and the other transactions contemplated hereby.
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4.18 Opinion of Financial Advisor. Parent has received the opinion of
Jefferies & Company, Inc., dated the date hereof, to the effect that, as of the
date hereof, the consideration to be paid pursuant to the Merger Agreement by
Parent is fair, from a financial point of view, to the stockholders of Parent,
and a true and complete copy of such opinion has been delivered to the Company
prior to the execution of this Agreement.
4.19 Parent Rights Agreement. As of the date hereof and after giving
effect to the execution and delivery of this Agreement, each Parent Right is
represented by the certificate representing the associated share of Parent
Common Stock and is not exercisable or transferable apart from the associated
share of Parent Common Stock, and the consummation of the transactions
contemplated by this Agreement and the Stockholder Agreement will not result in
a "Stock Acquisition Date", a "Flip-In Event" or a "Separation Date" (as defined
in the Parent Rights Agreement), and Parent has taken all necessary actions so
that neither BIL nor any affiliate of BIL will be deemed an "Acquiring Person"
(as defined in the Parent Rights Agreement) as a result of its ownership or
acquisition of shares of Parent Common Stock or Parent Preferred Stock pursuant
to transactions contemplated by this Agreement or the Stockholder Agreement.
4.20 Ownership of Company Common Stock. Except as disclosed in Section
4.20 of the Parent Disclosure Letter, neither Parent nor any of its Subsidiaries
or other affiliates beneficially owns any shares of Company Common Stock.
4.21 Section 203 of the DGCL Not Applicable. Parent's Board of Directors
has taken all necessary actions so that the provisions of Section 203(a) of the
DGCL will not apply to this Agreement, the Merger, the Stockholder Agreement and
the other transactions contemplated hereby or thereby, and has approved BIL
becoming an "interested stockholder" within the meaning of such section.
ARTICLE V
COVENANTS
5.01 Covenants of the Company and Parent. At all times from and after the
date hereof until the Effective Time (or earlier termination hereof), the
Company and Parent each covenants and agrees as to itself and its Subsidiaries
that (except as expressly contemplated or permitted by this Agreement or the
Stockholder Agreement, or to the extent that the other party shall otherwise
previously consent in writing):
(a) Ordinary Course. (i) In the case of the Company, the Company and each
of its Subsidiaries shall conduct their respective businesses only in, and
neither the Company nor any of such Subsidiaries shall take any action except
in, the ordinary course consistent with past practice.
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(ii) Without limiting the generality of the immediately preceding
paragraph, (x) the Company and its Subsidiaries shall use all commercially
reasonable efforts to preserve intact in all material respects their
present business organizations and reputation, to keep available the
services of their key officers and employees, to maintain their assets and
properties in good working order and condition, ordinary wear and tear
excepted, to maintain insurance on their tangible assets and businesses in
such amounts and against such risks and losses as are currently in effect,
to preserve their relationships with customers and suppliers and others
having significant business dealings with them, to make all required
payments under the Company Benefit Plans and to comply in all material
respects with all laws and orders of all Governmental or Regulatory
Authorities applicable to them, and (y) the Company shall not, nor shall
it permit any of its Subsidiaries to, except as otherwise expressly
provided for in this Agreement:
(A) amend or propose to amend its certificate or articles of
incorporation or bylaws (or other comparable corporate charter
documents);
(B) (w) declare, set aside or pay any dividends on or make
other distributions in respect of any of its capital stock, except
for the declaration and payment of dividends by a wholly-owned
Subsidiary solely to its parent corporation, (x) split, combine,
reclassify or take similar action with respect to any of its capital
stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares
of its capital stock, (y) adopt a plan of complete or partial
liquidation or resolutions providing for or authorizing such
liquidation or a dissolution, restructuring, recapitalization or
other similar reorganization or (z) directly or indirectly redeem,
repurchase or otherwise acquire any shares of its capital stock or
any Option with respect thereto;
(C) issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock or
any Option with respect thereto (other than (x) the issuance of
Company Common Stock pursuant to Options outstanding on the date of
this Agreement in accordance with their present terms, and (y) the
issuance by a wholly-owned Subsidiary of its capital stock to its
parent corporation), or modify or amend any right of any holder of
outstanding shares of capital stock or Options with respect thereto;
(D) acquire (by merging or consolidating with, or by
purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other manner) any business or any
corporation, partnership,
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association or other business organization or division thereof or
otherwise acquire or agree to acquire any assets other than in the
ordinary course of its business consistent with past practice which
are material, individually or in the aggregate, to the Company and
its Subsidiaries taken as a whole;
(E) other than in the ordinary course of its business
consistent with past practice, sell, lease, grant any security
interest in or otherwise dispose of or encumber any material amount
of its assets or properties;
(F) except to the extent required by applicable law,
regulation or GAAP, (x) permit any material change in (A) any
pricing, marketing, purchasing, investment, accounting, financial
reporting, inventory, credit, allowance or tax practice or policy or
(B) any method of calculating any bad debt, contingency or other
reserve for accounting, financial reporting or tax purposes or (y)
make any material tax election or settle or compromise any material
income tax liability with any Governmental or Regulatory Authority;
(G) (x) incur (which shall not be deemed to include entering
into credit agreements, lines of credit or similar arrangements
until borrowings are made under such arrangements) any indebtedness
for borrowed money or guarantee any such indebtedness other than
HSBC Indebtedness and BIL Debt and such other additional
indebtedness in an aggregate amount not to exceed $1 million;
provided that after giving effect to the incurrence of such
additional indebtedness, the net worth of the Company as of the
Effective Time is equal to or greater than the net worth of the
Company as of June 30, 1996 as set forth in the Company's Form 10-Q
for the period ended June 30, 1996; provided further that such
additional indebtedness is incurred solely in the ordinary course
of the Company's business and used solely for the purchase of
working capital assets; and provided further that for purposes of
calculating the net worth of the Company as of the Effective Time,
the following items shall not be given any effect: (I) any
transactions contemplated or required pursuant to this Agreement,
including but not limited to, contributions to capital,
contributions of debt and the discharge of the HSBC Indebtedness and
BIL Debt, unless such transactions were previously given effect to
as of June 30, 1996, and (II) extraordinary accounting reserves
taken by the Company, provided that any such reserves not required
by GAAP shall be subject to Parent's prior consent, which shall not
be unreasonably withheld; or (y) voluntarily purchase, cancel,
prepay or otherwise provide for a complete or partial discharge
in advance of a scheduled repayment date with respect to, or waive
any right under, any indebtedness for borrowed money other than in
the ordinary course of its business consistent with past practice;
(H) except as may be required by applicable law, enter into,
adopt, amend in any material respect or terminate any Company
Employee Benefit Plan or other agreement, arrangement, plan or
policy between the Company or one of its Subsidiaries and one or
more of its directors, officers or employees, or, except for normal
increases in the ordinary course of business consistent with past
practice that, in the aggregate, do not result in a material
increase in benefits or compensation expense to the Company and its
Subsidiaries taken as a whole, increase in any manner the
compensation or fringe benefits of any director, officer or employee
or pay any benefit not required by any plan or arrangement in effect
as of the date hereof;
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(I) enter into any Contract or amend or modify any existing
Contract, or engage in any new transaction outside the ordinary
course of business consistent with past practice or not on an arm's
length basis, with any affiliate of the Company or any of its
Subsidiaries;
(J) make any capital expenditures or commitments for additions
to plant, property or equipment constituting capital assets;
(K) make any change in the lines of business in which it
participates or is engaged; or
(L) enter into any Contract, commitment or arrangement to do
or engage in any of the foregoing.
(b) Ordinary Course. (i) In the case of Parent, except for the
transactions listed in Section 5.01(b) of the Parent Disclosure Letter and any
additional credit facilities (whether secured or unsecured) entered into by
Parent or any of its Subsidiaries, Parent and each of its Subsidiaries shall
conduct their respective businesses only in, and neither Parent nor any of such
Subsidiaries shall take any action except in, the ordinary course consistent
with past practice.
(ii) Without limiting the generality of the immediately preceding
paragraph, (x) Parent and its Subsidiaries shall use all commercially
reasonable efforts to preserve intact in all material respects their
present business organizations and reputation, to keep available the
services of their key officers and employees, to maintain their assets and
properties in good working order and condition, ordinary wear and tear
excepted, to maintain insurance on their tangible assets and businesses in
such amounts and against such risks and losses as are currently in effect,
to preserve their relationships with customers and suppliers and others
having significant business dealings with them and to comply in all
material respects with all laws and orders of all Governmental or
Regulatory Authorities applicable to them, and (y) Parent shall not, nor
shall it permit any of its Subsidiaries to, except as otherwise expressly
provided for in this Agreement:
(A) except for the Parent Amendment, amend or propose to amend
its certificate or articles of incorporation or bylaws (or other
comparable corporate charter documents);
(B) (w) declare, set aside or pay any dividends on or make
other distributions in respect of any of its capital stock, except
for the declaration and payment of dividends by a wholly-owned
Subsidiary solely to its parent corporation, (x) split, combine,
reclassify or
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take similar action with respect to any of its capital stock or
issue or authorize or propose the issuance of any other securities
in respect of, in lieu of or in substitution for shares of its
capital stock, (y) adopt a plan of complete or partial liquidation
or resolutions providing for or authorizing such liquidation or a
dissolution, restructuring, recapitalization or other similar
reorganization or (z) directly or indirectly redeem, repurchase or
otherwise acquire any shares of its capital stock or any Option with
respect thereto;
(C) issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock or
any Option with respect thereto (other than (v) the issuance of
Parent Common Stock pursuant to options outstanding on the date of
this Agreement under the Parent Option Plans and in accordance with
their present terms, (w) the issuance of options pursuant to the
Parent Option Plans in each case in accordance with their present
terms and the issuance of shares of Parent Common Stock upon
exercise of such options, (x) the issuance by a wholly-owned
Subsidiary of its capital stock to its parent corporation, (y) the
issuance of Parent Rights and reservation of Parent Series A
Preferred Stock pursuant to the Parent Rights Agreement in
accordance with the terms thereof, or modify or amend any right of
any holder of outstanding shares of capital stock or Options with
respect thereto and (z) the issuance of Parent Common Stock or
Parent Preferred Stock or Options with respect thereto in connection
with a transaction involving the acquisition of assets or a business
of any person); or
(D) enter into any Contract, commitment or arrangement to do
or engage in any of the foregoing.
(c) Advice of Changes. Each party shall confer on a regular and frequent
basis with the other with respect to its business and operations and other
matters relevant to the Merger, and shall promptly advise the other, orally and
in writing, of any change or event, including, without limitation, any
complaint, investigation or hearing by any Governmental or Regulatory Authority
(or communication indicating the same may be contemplated) or the institution or
threat of litigation, having, or which, insofar as can be reasonably foreseen,
could have, a material adverse effect on the Company or Parent, as the case may
be, and its Subsidiaries taken as a whole or on the ability of the Company or
Parent, as the case may be, to consummate the transactions contemplated hereby;
provided that no party shall be required to make any disclosure to the extent
such disclosure would constitute a violation of any applicable law.
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(d) Notice and Cure. Each of Parent, BIL and the Company will notify the
other of, and will use all commercially reasonable efforts to cure before the
Closing, any event, transaction or circumstance, as soon as practicable after it
becomes known to such party, that causes or will cause any covenant or agreement
of Parent, BIL or the Company, as the case may be, under this Agreement to be
breached or that renders or will render untrue any representation or warranty of
Parent, BIL or the Company, as the case may be, contained in this Agreement.
Each of Parent, BIL and the Company also will notify the other in writing of,
and will use all commercially reasonable efforts to cure, before the Closing,
any violation or breach, as soon as practicable after it becomes known to such
party, of any representation, warranty, covenant or agreement made by Parent,
BIL or the Company, as the case may be. No notice given pursuant to this
paragraph shall have any effect on the representations, warranties, covenants or
agreements contained in this Agreement for purposes of determining satisfaction
of any condition contained herein, except to the extent any such violation or
breach is cured.
(e) Fulfillment of Conditions. Subject to the terms and conditions of this
Agreement, each of Parent and the Company will take or cause to be taken all
commercially reasonable steps necessary or desirable and proceed diligently and
in good faith to satisfy each condition to the other's obligations contained in
this Agreement and to consummate and make effective the transactions
contemplated by this Agreement, and neither Parent nor the Company will, nor
will it permit any of its Subsidiaries to, take or fail to take any action that
could be reasonably expected to result in the nonfulfillment of any such
condition.
5.02 No Solicitations. Prior to the Effective Time, the Company agrees (a)
that neither it nor any of its Subsidiaries shall, and it shall use its best
efforts to cause their respective Representatives (as defined in Section 9.11)
not to, initiate, solicit or encourage, directly or indirectly, any inquiries or
the making or implementation of any proposal or offer (including, without
limitation, any proposal or offer to its stockholders) with respect to a merger,
consolidation or other business combination including the Company or any of its
Subsidiaries or any acquisition or similar transaction (including, without
limitation, a tender or exchange offer) involving the purchase of all or any
significant portion of the assets of the Company and its Subsidiaries taken as a
whole or any outstanding shares of Company Common Stock or shares of the capital
stock of any Subsidiary of the Company (any such proposal or offer being
hereinafter referred to as an "Alternative Proposal"), or engage in any
negotiations concerning, or provide any confidential information or data to, or
have any discussions or enter into any agreements, arrangements or
understandings, whether written or oral, with, any person or group relating to
an Alternative Proposal (excluding the transactions contemplated by this
Agreement), or otherwise facilitate any effort or attempt to
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make or implement an Alternative Proposal; (b) that it will immediately cease
and cause to be terminated any existing activities, discussions or negotiations
with any parties with respect to any of the foregoing, and it will take the
necessary steps to inform such parties of its obligations under this Section;
and (c) that it will notify Parent immediately if any such inquiries, proposals
or offers are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with, it or
any of such persons.
5.03 Conduct of Business of Sub. Prior to the Effective Time (or earlier
termination hereof), except as may be required by applicable law and subject to
the other provisions of this Agreement, Parent shall cause Sub to (a) perform
its obligations under this Agreement in accordance with its terms, (b) not incur
directly or indirectly any liabilities or obligations other than those incurred
in connection with the Merger, (c) not engage directly or indirectly in any
business or activities of any type or kind and not enter into any agreements or
arrangements with any person, or be subject to or bound by any obligation or
undertaking, which is not contemplated by this Agreement and (d) not create,
grant or suffer to exist any Lien upon its properties or assets which would
attach to any properties or assets of the Surviving Corporation after the
Effective Time.
5.04 Third Party Standstill Agreements. During the period from the date of
this Agreement through the Effective Time (or earlier termination hereof),
neither the Company nor any of its Subsidiaries shall terminate, amend, modify
or waive any provision of any confidentiality or standstill agreement to which
it is a party. During such period, the Company shall enforce, to the fullest
extent permitted under applicable law, the provisions of any such agreement,
including, but not limited to, by obtaining injunctions to prevent any breaches
of such agreements and to enforce specifically the terms and provisions thereof
in any court having jurisdiction.
5.05 Purchases of Common Stock of the Other Party. During the period from
the date hereof through the Effective Time (or earlier termination hereof),
neither Parent nor any of its Subsidiaries or other affiliates will purchase any
shares of Company Common Stock, and neither the Company nor any of its
Subsidiaries or other affiliates will purchase any shares of Parent Common
Stock.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01 Access to Information; Confidentiality. Each of the Company and
Parent shall, and shall cause each of its
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Subsidiaries to, throughout the period from the date hereof to the Effective
Time (or earlier termination hereof), (i) provide the other party and its
Representatives with full access, upon reasonable prior notice and during normal
business hours, to all officers, employees, agents and accountants of the
Company or Parent, as the case may be, and its Subsidiaries and their respective
assets, properties, books and records, but only to the extent that such access
does not unreasonably interfere with the business and operations of the Company
or Parent, as the case may be, and its Subsidiaries, and (ii) furnish promptly
to such persons (x) a copy of each report, statement, schedule and other
document filed or received by the Company or Parent, as the case may be, or any
of its Subsidiaries pursuant to the requirements of federal or state securities
laws and each material report, statement, schedule and other document filed with
any other Governmental or Regulatory Authority, and (y) all other information
and data (including, without limitation, copies of Contracts, Company Employee
Benefit Plans or Parent Employee Benefit Plans, as the case may be, and other
books and records) concerning the business and operations of the Company or
Parent, as the case may be, and its Subsidiaries as the other party or any of
such other persons reasonably may request. No investigation pursuant to this
paragraph or otherwise shall affect any representation or warranty contained in
this Agreement or any condition to the obligations of the parties hereto. Any
such information or material obtained pursuant to this Section 6.01 that
constitutes "Evaluation Material" (as such term is defined in the letter
agreement dated as of June 17, 1996 between the Company, BIL and Parent (the
"Confidentiality Agreement")) shall be governed by the terms of the
Confidentiality Agreement.
6.02 Preparation of Registration Statement and Proxy Statement. The
Company and Parent shall prepare and file with the SEC as soon as reasonably
practicable after the date hereof the Proxy Statement and Parent shall prepare
and file with the SEC as soon as reasonably practicable after the date hereof
the Registration Statement, in which the Proxy Statement will be included as the
prospectus. Parent and the Company shall use their respective best efforts to
have the Registration Statement declared effective by the SEC as promptly as
practicable after such filing. Parent shall also take any action (other than
qualifying as a foreign corporation or taking any action which would subject it
to service of process in any jurisdiction where Parent is not now so qualified
or subject) required to be taken under applicable state blue sky or securities
laws in connection with the issuance of Parent securities pursuant to this
Agreement, upon conversion of or as a dividend on the Parent Series B Preferred
Stock and the Parent Series C Preferred Stock, and under the Company Option
Plans after the Merger as contemplated by Section 6.08. If at any time prior to
the Effective Time any event shall occur that should be set forth in an
amendment of or a supplement to the Registration Statement, Parent shall prepare
and file with the SEC such amendment or supplement as soon thereafter as is
reasonably practicable.
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Parent, Sub and the Company shall cooperate with each other in the preparation
of the Registration Statement and the Proxy Statement and any amendment or
supplement thereto, and each shall notify the other of the receipt of any
comments of the SEC with respect to the Registration Statement or the Proxy
Statement and of any requests by the SEC for any amendment or supplement thereto
or for additional information, and shall provide to the other promptly copies of
all correspondence between Parent or the Company, as the case may be, or any of
its Representatives with respect to the Registration Statement or the Proxy
Statement. Parent shall give the Company and its counsel the opportunity to
review the Registration Statement and all responses to requests for additional
information by and replies to comments of the SEC before their being filed with,
or sent to, the SEC. Each of the Company, Parent and Sub agrees to use its best
efforts, after consultation with the other parties hereto, to respond promptly
to all such comments of and requests by the SEC and to cause (x) the
Registration Statement to be declared effective by the SEC at the earliest
practicable time and to be kept effective as long as is necessary to consummate
the Merger, and (y) the Proxy Statement to be mailed to the stockholders of the
Company and the Parent entitled to vote at the stockholders' meetings described
in Section 6.03 at the earliest practicable time.
6.03 Approval of Stockholders. (a) Parent shall, through its Board of
Directors, duly call, give notice of, convene and hold a meeting of its
stockholders to be held as soon as reasonably practicable after the date hereof
(the "Parent Stockholders' Meeting") for the purpose of voting on (i) the
adoption of the amendments to Parent's Certificate of Incorporation set forth on
Exhibit D hereto (the "Parent Amendment"), (ii) the issuance of Parent
securities pursuant to this Agreement, upon conversion or as a dividend on the
Parent Series B Preferred Stock and the Parent Series C Preferred Stock and
under the Company Option Plans after the Merger as contemplated by Section 6.08
and (iii) the adoption of an amendment (the "Plan Amendment") to increase the
number of shares of Parent Common Stock that may be issued under the Parent
Incentive Program by 900,000 (the "Parent Stockholders' Approval"). Subject to
the exercise of fiduciary obligations under applicable law as advised in writing
by outside counsel (a copy of which will be provided promptly to the Company),
Parent shall, through its Board of Directors, include in the Proxy Statement the
recommendation of the Board of Directors of Parent that the stockholders of
Parent adopt the Parent Amendment and the Plan Amendment and approve such
issuances of Parent securities, and shall use its best efforts to obtain such
adoption and approval.
(b) The Company shall, through its Board of Directors, duly call, give
notice of, convene and hold a meeting of its stockholders to be held
simultaneously with the Parent Stockholders' Meeting (the "Company Stockholders'
Meeting" and, together with the Parent Stockholders' Meeting, the
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"Stockholders' Meetings") for the purpose of voting on the adoption of this
Agreement (the "Company Stockholders' Approval"). Subject to the exercise of
fiduciary obligations under applicable law as advised in writing by outside
counsel (a copy of which will be provided promptly to Parent), the Company
shall, through its Board of Directors, include in the Proxy Statement the
recommendation of the Board of Directors of the Company that the stockholders of
the Company adopt this Agreement, and shall use its best efforts to obtain such
adoption.
6.04 Company Affiliates. At least thirty (30) days prior to the Closing
Date, the Company shall deliver a letter to Parent identifying all persons who,
at the time of the Company Stockholders' Meeting, may, in the Company's
reasonable judgment, be deemed to be "affiliates" (as such term is used in Rule
145 under the Securities Act) of the Company ("Company Affiliates"). The Company
shall use its best efforts to cause each Company Affiliate to deliver to Parent
on or prior to the Closing Date a written agreement substantially in the form
and to the effect of Exhibit E hereto (an "Affiliate Agreement"). Parent shall
be entitled to place legends as specified in such Affiliate Agreements on the
certificates evidencing any Parent Common Stock to be received by such Company
Affiliates pursuant to the terms of this Agreement, and to issue appropriate
stop transfer instructions to the transfer agent for the Parent Common Stock,
consistent with the terms of such Affiliate Agreements.
6.05 Stock Exchange Listing. Parent shall use its best efforts to cause
the shares of Parent Common Stock to be issued pursuant to this Agreement, upon
conversion of or as a dividend on the Parent Series B Preferred Stock and the
Parent Series C Preferred Stock and under the Company Option Plans after the
Merger as contemplated by Section 6.08 to be approved for listing on the NYSE,
subject to official notice of issuance, prior to the Closing Date.
6.06 PBGC Waiver Payments. The Company shall fully pay and satisfy all
payments scheduled to be made to the PBGC prior to the Closing Date arising out
of the PBGC Waiver.
6.07 Regulatory and Other Approvals. (a) Subject to the terms and
conditions of this Agreement and without limiting the provisions of Sections
6.02 and 6.03, each of the Company and Parent will proceed diligently and in
good faith to, as promptly as practicable, (a) obtain all consents, approvals or
actions of, make all filings with and give all notices to Governmental or
Regulatory Authorities or any other public or private third parties required of
Parent, the Company or any of their Subsidiaries to consummate the Merger and
the other matters
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contemplated hereby, and (b) provide such other information and communications
to such Governmental or Regulatory Authorities or other public or private third
parties as the other party or such Governmental or Regulatory Authorities or
other public or private third parties may reasonably request in connection
therewith. In addition to and not in limitation of the foregoing, each of the
parties will (x) take promptly all actions necessary to make the filings
required of Parent and the Company or their affiliates under the HSR Act, (y)
comply at the earliest practicable date with any request for additional
information received by such party or its affiliates from the Federal Trade
Commission (the "FTC") or the Antitrust Division of the Department of Justice
(the "Antitrust Division") pursuant to the HSR Act, and (z) cooperate with the
other party in connection with such party's filings under the HSR Act and in
connection with resolving any investigation or other inquiry concerning the
Merger or the other matters contemplated by this Agreement commenced by either
the FTC or the Antitrust Division or state attorneys general.
6.08 Company Option Plans. The Company will use its best efforts to cause
each holder of an option to purchase shares of Company Common Stock (a "Company
Stock Option") under the Company Option Plans outstanding at the Effective Time,
whether vested or unvested, to enter into an agreement with the Company and
Parent providing that, at the Effective Time, each Company Stock Option held by
such holder will be cancelled and, in exchange therefor, Parent will issue to
such holder a new option under the Parent Incentive Program to purchase a number
of shares of Parent Common Stock equal to the product (rounded down to the
nearest whole share) of (i) the number of shares of Company Common Stock
issuable upon exercise of the Company Stock Option immediately prior to the
Effective Time and (ii) the Conversion Number, and having an option exercise
price per share of Parent Common Stock equal to the Sales Price on the Trading
Day immediately prior to the Effective Time.
6.09 Expenses. Except as set forth in Section 8.02, whether or not the
Merger is consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such cost or expense.
6.10 Brokers or Finders. Each of Parent and BIL represents, as to itself
and its affiliates, that no agent, broker, investment banker, financial advisor
or other firm or person is or will be entitled to any broker's or finder's fee
or any other commission or similar fee in connection with any of the
transactions contemplated by this Agreement, except Vector Securities
International, Inc., whose fees and expenses will be paid by the Company in
accordance with the Company's agreement with such firm (a true and complete copy
of which has been delivered by the Company to Parent prior to the execution of
this Agreement), and Jefferies & Company, Inc., whose fees and expenses will be
paid by Parent in accordance with Parent's
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agreement with such firm (a true and complete copy of which has been delivered
by Parent to the Company prior to the execution of this Agreement), and each of
Parent and BIL shall indemnify and hold the other harmless from and against any
and all claims, liabilities or obligations with respect to any other such fee or
commission or expenses related thereto asserted by any person on the basis of
any act or statement alleged to have been made by such party or its affiliate.
6.11 Takeover Statutes. If any "fair price", "moratorium", "control share
acquisition" or other form of antitakeover statute or regulation shall become
applicable to the transactions contemplated hereby, the Company and the members
of the Board of Directors of the Company shall grant such approvals and take
such actions as are reasonably necessary so that the transactions contemplated
hereby may be consummated as promptly as practicable on the terms contemplated
hereby and thereby and otherwise act to eliminate or minimize the effects of
such statute or regulation on the transactions contemplated hereby and thereby.
6.12 Conveyance Taxes. The Company and Parent shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees, and any similar taxes which become payable in
connection with the transactions contemplated by this Agreement that are
required or permitted to be filed on or before the Effective Time.
6.13 [Intentionally Left Blank].
6.14 Related Party Contracts and Transactions. Except as contemplated by
this Agreement and the transactions contemplated hereby and except as set forth
in Section 6.14 of the Company Disclosure Letter, any and all contracts and
transactions between the Company or any of its Subsidiaries, on the one hand,
and BIL or any of its other affiliates, on the other hand, shall be canceled by
the Closing Date (at no expense to the Company or its Subsidiaries) such that
the Company and its Subsidiaries will have no rights to any assets or properties
of BIL or any of its other affiliates or obligations whatsoever with respect to
such contracts and transactions, and BIL and its other affiliates will have no
rights to any assets or properties of the Company or any of its Subsidiaries or
obligations whatsoever with respect to such contracts or transactions.
6.15 Benefit Arrangements. For a period of one year from and after the
Effective Time or until such employee benefit plans or arrangements are
integrated with the Parent's employee benefit plans and arrangements, whichever
is earlier, Parent shall, or shall cause the Surviving Corporation to, provide
employee benefit plans and arrangements for the benefit of the
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employees of the Surviving Corporation and its Subsidiaries that are reasonably
comparable in the aggregate to the employee benefit plans and arrangements of
the Company and its Subsidiaries currently in effect, except for such changes as
are necessary to comply with, or respond to, changes in applicable laws.
6.16 Indemnification of Directors and Officers. (a) From and after the
Effective Time, the Surviving Corporation shall indemnify, defend and hold
harmless the present and former officers and directors of the Company
(collectively, the "Indemnified Parties") against all losses, expenses, claims,
damages or liabilities arising out of actions or omissions occurring at or prior
to the Effective Time (including, without limitation, the transactions
contemplated by this Agreement) to the full extent permitted or required under
the DGCL (and shall also advance expenses as incurred to the fullest extent
permitted under the DGCL, provided that the person to whom expenses are advanced
provides the undertaking to repay such advances contemplated by Section 145(e)
of the DGCL); Parent hereby guarantees the performance by the Surviving
Corporation of its obligations under this Section 6.16(a) with respect to any
Claim (as hereinafter defined) with respect to the transactions contemplated by
this Agreement, provided such Indemnified Party and its affiliates is not a
party benefited by the Claim indemnified. Parent and Sub agree that all rights
to indemnification, including provisions relating to advances of expenses
incurred in defense of any claim, action, suit, proceeding or investigation (a
"Claim") existing in favor of the Indemnified Parties as provided in the
Company's Certificate of Incorporation or By-Laws, as in effect as of the date
hereof, with respect to matters occurring through the Effective Time, shall
survive the Merger, and shall continue in full force and effect for a period of
not less than six years from the Effective Time; provided, however, that all
rights to indemnification in respect of any Claim asserted or made within such
period shall continue until the disposition of any such Claim.
(b) Without limiting the foregoing, in the event any Claim is brought
against any Indemnified Party (whether arising before or after the Effective
Time) after the Effective Time (i) the Indemnified Parties may retain counsel
satisfactory to them and the Surviving Corporation, (ii) the Surviving
Corporation shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received, and (iii) the
Surviving Corporation will use all reasonable efforts to assist in the vigorous
defense of any such matter, provided that the Surviving Corporation shall not be
liable for any settlement of any Claim effected without its written consent,
which consent shall not be unreasonably withheld or delayed. Any Indemnified
Party wishing to claim indemnification under this Section, upon learning of any
such Claim, shall notify the Surviving Corporation (but the failure to so notify
the Surviving Corporation shall not relieve it from any liability which it may
have under this Section except to the extent the Surviving Corporation is
irreparably harmed thereby), and shall deliver to the Surviving Corporation the
undertaking contemplated by Section 145(e) of the DGCL. The Indemnified Parties
as a group may retain only one firm to represent them
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with respect to such matter unless there is, under applicable standards of
professional conduct, a conflict on any significant issue between the positions
of any two or more Indemnified Parties.
(c) The Surviving Corporation shall use its best efforts to cause to be
maintained in effect for not less than two years after the Effective Time the
current policies of directors' and officers' liability insurance and fiduciary
liability insurance maintained by the Company with respect to matters occurring
prior to the Effective Time; provided, that (i) the Surviving Corporation may
substitute therefor policies of substantially the same coverage containing terms
and conditions which are substantially the same for the Indemnified Parties to
the extent reasonably available and (ii) in no event shall the Surviving
Corporation be obligated to expend in order to maintain or procure insurance
coverage pursuant to this paragraph any amount per annum more than 120% in
excess of the aggregate premiums currently payable by the Company and its
Subsidiaries for such purpose.
(d) This Section is intended to benefit the Indemnified Parties and shall
be binding on all successors and assigns of Parent, Sub, the Company and the
Surviving Corporation.
6.17 Contributed Shares and Debt. At all times from and after the date
hereof until the Effective Time, BIL will not contribute to the capital of the
Company, or otherwise transfer or dispose of, any BIL Debt or shares of Company
Preferred Stock held by BIL on the date hereof, except as contemplated by the
next succeeding sentence. Immediately prior to the Closing, BIL shall contribute
to the capital of the Company, first, any Contributed Shares and, second, any
Contributed Debt to the extent required by Section 2.02(b)(iii).
6.18 Excess HSBC Indebtedness. BIL will make such payments to HSBC as
shall be necessary to cause the HSBC Debt Payment not to exceed $25 million on
and as of the Closing Date.
6.19 Mexican Subsidiary. Prior to the Effective Time, the Company shall
purchase all shares of capital stock of Everest & Jennings de Mexico, S.A. de
C.V. (the "Mexican Subsidiary") owned by any person other than the Company or a
wholly-owned Subsidiary of the Company, on the terms set forth in Section 3.06
of the Company Disclosure Letter.
ARTICLE VII
CONDITIONS
7.01 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect
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the Merger is subject to the fulfillment, at or prior to the Closing, of each of
the following conditions:
(a) Stockholder Approval. This Agreement shall have been adopted by the
requisite vote of the stockholders of the Company under the DGCL. The
stockholders of Parent shall have adopted the Parent Amendment and the Plan
Amendment and approved the issuance of Parent securities pursuant to this
Agreement, upon conversion of or as a dividend on the Parent Series B Preferred
Stock and the Parent Series C Preferred Stock and under the Company Option Plans
after the Merger as contemplated by Section 6.08, in each case by the requisite
vote under applicable law or under the applicable regulations of any national
securities exchange, as the case may be.
(b) Registration Statement; State Securities Laws. The Registration
Statement shall have become effective in accordance with the provisions of the
Securities Act, and no stop order suspending such effectiveness shall have been
issued and remain in effect and no proceeding seeking such an order shall be
pending or threatened. Parent shall have received all state securities or "blue
sky" permits and other authorizations necessary to issue Parent Common Stock in
the Merger, upon conversion of or as a dividend on the Parent Series B Preferred
Stock and the Parent Series C Preferred Stock and under the Company Option Plans
after the Merger as contemplated by Section 6.08.
(c) Canadian Securities Laws. Parent shall have received all consents,
orders or approvals required from applicable Governmental or Regulatory
Authorities under the Securities Act (Ontario) or other applicable Canadian
securities laws, or there shall be a statutory exemption under the Securities
Act (Ontario) or other applicable Canadian securities laws permitting the
issuance to Canadian residents of Parent Common Stock pursuant to this
Agreement, upon conversion of or as a dividend on the Parent Series B Preferred
Stock and the Parent Series C Preferred Stock and under the Company Option Plans
after the Merger as contemplated by Section 6.08.
(d) Exchange Listing. The shares of Parent Common Stock issuable pursuant
to this Agreement, upon conversion of or as a dividend on the Parent Series B
Preferred Stock and the Parent Series C Preferred Stock and under the Company
Option Plans after the Merger as contemplated by Section 6.08 shall have been
authorized for listing on the NYSE, upon official notice of issuance.
(e) HSR Act. Any waiting period (and any extension thereof) applicable to
the consummation of the Merger under the HSR Act shall have expired or been
terminated.
(f) No Injunctions or Restraints. No court of competent jurisdiction or
other competent Governmental or
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Regulatory Authority shall have enacted, issued, promulgated, enforced or
entered any law or order (whether temporary, preliminary or permanent) which is
then in effect and has the effect of making illegal or otherwise restricting,
preventing or prohibiting consummation of the Merger or the other transactions
contemplated by this Agreement.
(g) Governmental and Regulatory and Other Consents and Approvals. Other
than the filing provided for by Section 1.02, all consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
or any other public or private third parties required of Parent, the Company or
any of their Subsidiaries to consummate the Merger and the other matters
contemplated hereby, the failure of which to be obtained or taken could be
reasonably expected to have a material adverse effect on Parent and its
Subsidiaries or the Surviving Corporation and its Subsidiaries, in each case
taken as a whole, or on the ability of Parent or the Company to consummate the
transactions contemplated hereby shall have been obtained, all in form and
substance reasonably satisfactory to Parent and the Company.
(h) Litigation. There shall not be pending on the Closing Date any action,
suit or proceeding challenging the legality of or threatening the consummation
of, or otherwise arising out of this Agreement or any of the transactions
contemplated hereby or seeking an injunction in order to prevent the
consummation of the transactions contemplated hereby, other than litigation
pending on the date hereof.
7.02 Conditions to Obligation of Parent and Sub to Effect the Merger. The
obligation of Parent and Sub to effect the Merger is further subject to the
fulfillment, at or prior to the Closing, of each of the following additional
conditions (all or any of which may be waived in whole or in part by Parent and
Sub in their sole discretion):
(a) Representations and Warranties. The representations and warranties
made by the Company and BIL in this Agreement shall be true and correct as of
the Closing Date as though made on and as of the Closing Date or, in the case of
representations and warranties made as of a specified date earlier than the
Closing Date, on and as of such earlier date, except as affected by the
transactions contemplated by this Agreement, and the Company and BIL shall each
have delivered to Parent a certificate, dated the Closing Date and executed in
the name and on behalf of the Company and BIL by any authorized officer,
respectively, to such effect.
(b) Performance of Obligations. The Company and BIL shall have performed
and complied with, in all material respects, each agreement, covenant and
obligation required by this Agreement to be so performed or complied with by the
Company and BIL at or prior to the Closing, and the Company and BIL shall each
have delivered to Parent a certificate, dated the Closing Date and executed in
the name and on behalf of the Company and BIL by any authorized officer,
respectively, to such effect.
(c) Stockholder Agreement. The Stockholder Agreement shall remain in full
force and effect, and BIL shall have performed and complied with, in all
material respects, each agreement, covenant and obligation of BIL contained in
the
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Stockholder Agreement to be so performed or complied with by BIL prior to the
Closing.
(d) Dissenting Shares. The aggregate number of Dissenting Shares shall not
exceed 5% of the total number of shares of Company Common Stock outstanding on
the Closing Date.
(e) PBGC Consent. The PBGC shall have issued any required consents to the
consummation of the Merger and the other transactions contemplated hereby, all
in form and substance reasonably satisfactory to Parent.
(f) Real Property Title Searches. Parent shall have received reports of
title searches with respect to the real property on which the manufacturing
facilities of the Company and its Subsidiaries in Mexico and Canada are located,
demonstrating to the reasonable satisfaction of Parent that the Company and its
Subsidiaries have good and marketable fee simple title to each parcel of real
property owned by it, free and clear of all Liens other than any Lien identified
in Section 7.02(f) of the Company Disclosure Letter or any minor imperfection of
title or similar Lien which, individually or in the aggregate with other such
Liens, does not materially impair the value of the property subject to such Lien
or the use of such property in the conduct of the business of the Company or any
of its Subsidiaries.
(g) HSBC Debt Payment. The HSBC Debt Payment shall not exceed $25 million
and, upon Parent's application of the proceeds from the issuance of Parent
Common Stock in accordance with Section 2.02(b)(ii), HSBC shall have issued
releases in form and substance reasonably satisfactory to Parent evidencing full
and complete discharge of the HSBC Indebtedness and the release by HSBC of any
and all security interests, guarantees and other Liens granted by the Company or
any of its Subsidiaries in respect of the HSBC Indebtedness.
(h) Mexican and Canadian Subsidiaries. Parent shall have received evidence
satisfactory to Parent that the Company beneficially owns, directly or through
wholly-owned Subsidiaries,
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100% of the capital stock of each of the Mexican Subsidiary and Everest &
Jennings Canadian Limited.
(i) Product Liability Insurance. Parent shall have obtained a product
liability insurance policy in form and substance satisfactory to Parent
providing for reimbursement of all losses, judgments or amounts paid in
settlement, damages, liabilities, deficiencies, costs and expenses incurred by
the Company or any of its Subsidiaries arising out of or incident to any claim
relating to products manufactured or sold by the Company or any of its
Subsidiaries prior to the Effective Time, which policy shall be in full force
and effect, and shall have received reimbursement from BIL for up to $400,000 of
the costs incurred by Parent in obtaining such policy.
(j) Proceedings. All proceedings to be taken on the part of the Company
and BIL in connection with the transactions contemplated by this Agreement and
all documents incident thereto shall be reasonably satisfactory in form and
substance to Parent, and Parent shall have received copies of all such documents
and other evidences as Parent may reasonably request in order to establish the
consummation of such transactions and the taking of all proceedings in
connection therewith.
7.03 Conditions to Obligation of the Company to Effect the Merger. The
obligation of the Company to effect the Merger is further subject to the
fulfillment, at or prior to the Closing, of each of the following additional
conditions (all or any of which may be waived in whole or in part by the Company
in its sole discretion):
(a) Representations and Warranties. The representations and warranties
made by Parent and Sub in this Agreement shall be true and correct as of the
Closing Date as though made on and as of the Closing Date or, in the case of
representations and warranties made as of a specified date earlier than the
Closing Date, on and as of such earlier date, except as affected by the
transactions contemplated by this Agreement, and Parent and Sub shall each have
delivered to the Company a certificate, dated the Closing Date and executed in
the name and on behalf of Parent by any authorized officer and in the name and
on behalf of Sub by any authorized officer, to such effect.
(b) Performance of Obligations. Parent and Sub shall have performed and
complied with, in all material respects, each agreement, covenant and obligation
required by this Agreement to be so performed or complied with by Parent or Sub
at or prior to the Closing, and Parent and Sub shall each have delivered to the
Company a certificate, dated the Closing Date and executed in the name and on
behalf of Parent by any authorized officer and in the name and on behalf of Sub
by any authorized officer, to such effect.
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(c) Indebtedness and Guarantees. BIL shall have received an instrument in
form and substance reasonably satisfactory to BIL evidencing HSBC's release of
BIL from all guarantees of the HSBC Indebtedness, the HSBC letter of credit
facility described in the Company SEC Reports and all letters of credit issued
to secure obligations of the Company and its Subsidiaries.
(d) Proceedings. All proceedings to be taken on the part of Parent and Sub
in connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Company, and the Company shall have received copies of all such
documents and other evidences as the Company may reasonably request in order to
establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.01 Termination. This Agreement may be terminated, and the transactions
contemplated hereby may be abandoned, at any time prior to the Effective Time,
whether prior to or after the Company Stockholders' Approval or the Parent
Stockholders' Approval:
(a) By mutual written agreement of the parties hereto duly authorized by
action taken by or on behalf of their respective Boards of Directors;
(b) By either the Company or Parent upon notification to the
non-terminating party by the terminating party:
(i) at any time after December 31, 1996 if the Merger shall not have
been consummated on or prior to such date and such failure to consummate
the Merger is not caused by a breach of this Agreement by the terminating
party;
(ii) if the Company Stockholders' Approval or the Parent
Stockholders' Approval shall not be obtained by reason of the failure to
obtain the requisite vote upon a vote held at a meeting of such
stockholders, or any adjournment thereof, called therefor; or
(iii) if any court of competent jurisdiction or other competent
Governmental or Regulatory Authority shall have issued an order making
illegal or otherwise restricting, preventing or prohibiting the Merger and
such order shall have become final and nonappealable;
(c) By Parent, if there has been a material breach of any representation,
warranty, covenant or agreement on the part of the Company or BIL set forth in
this Agreement or (in the case of BIL) the Stockholder Agreement, which breach
is not curable
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or, if curable, has not been cured within thirty (30) days following the receipt
by the Company or BIL, as the case may be, of notice of such breach from Parent;
or
(d) By the Company or BIL, if there has been a material breach of any
representation, warranty, covenant or agreement on the part of Parent set forth
in this Agreement, which breach is not curable or, if curable, has not been
cured within thirty (30) days following the receipt by Parent of notice of such
breach from the Company or BIL.
8.02 Effect of Termination. (a) If this Agreement is validly terminated by
either the Company, BIL or Parent pursuant to Section 8.01, this Agreement,
including, without limitation, the provisions of Section 5.02, will forthwith
become null and void and there will be no liability or obligation on the part of
either the Company, Parent or BIL (or any of their respective Representatives or
affiliates), except that (i) the provisions of Sections 6.09 and 6.10 and this
Section 8.02 and of the Confidentiality Agreement will continue to apply
following any such termination and (ii) nothing contained herein shall relieve
any party hereto from liability for wilful breach of any of its representations,
warranties, covenants or agreements contained in this Agreement or the
Stockholder Agreement.
8.03 Amendment. This Agreement may be amended, supplemented or modified by
action taken by or on behalf of the respective Boards of Directors of the
parties hereto at any time prior to the Effective Time, whether prior to or
after the Company Stockholders' Approval or the Parent Stockholders' Approval
shall have been obtained, but after such adoption and approval only to the
extent permitted by applicable law. No such amendment, supplement or
modification shall be effective unless set forth in a written instrument duly
executed by or on behalf of each party hereto.
8.04 Waiver. At any time prior to the Effective Time any party hereto, by
action taken by or on behalf of its Board of Directors, may to the extent
permitted by applicable law (i) extend the time for the performance of any of
the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties of the other parties hereto
contained herein or in any document delivered pursuant hereto or (iii) waive
compliance with any of the covenants, agreements or conditions of the other
parties hereto contained herein. No such extension or waiver shall be effective
unless set forth in a written instrument duly executed by or on behalf of the
party extending the time of performance or waiving any such inaccuracy or
non-compliance. No waiver by any party of any term or condition of this
Agreement, in any one or more instances, shall be deemed to be or construed as a
waiver of the same or any other term or condition of this Agreement on any
future occasion.
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ARTICLE IX
GENERAL PROVISIONS
9.01 Non-Survival of Representations, Warranties, Covenants and
Agreements. The representations, warranties, covenants and agreements contained
in this Agreement or in any instrument delivered pursuant to this Agreement
shall not survive the Merger but shall terminate at the Effective Time, except
for the agreements contained in Article I and Article II, in Sections 6.08,
6.09, 6.10, 6.11, 6.12, 6.15 and 6.16, in this Article IX and in the
agreements of the "affiliates" of the Company delivered pursuant to Section
6.04, which shall survive the Effective Time.
9.02 Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or mailed (first class postage prepaid)
to the parties at the following addresses or facsimile numbers:
If to Parent or Sub, to:
Graham-Field Health Products, Inc.
400 Rabro Drive East
Hauppauge, New York 11788
Facsimile No.: (516) 582-5608
Attn: Richard S. Kolodny, Esq.
with a copy to:
Milbank, Tweed, Hadley & McCloy
One Chase Manhattan Plaza
New York, New York 10005
Facsimile No.: (212) 530-5219
Attn: Robert S. Reder, Esq.
If to the Company, to:
Everest & Jennings International, Ltd.
4203 Earth City Expressway
Earth City, Missouri 63045
Facsimile No.: (314) 512-7225
Attn: Bevil J. Hogg
with a copy to:
Bryan Cave LLP
One Metropolitan Square
211 North Broadway
Suite 3600
St. Louis, Missouri 63102
Facsimile No.: (314) 259-2020
Attn: John P. Denneen, Esq.
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If to BIL, to:
BIL (Far East Holdings) Limited
c/o Brierley Investments Limited
10 Eastcheap, 3rd Floor
London EC 3M 1AJ
United Kingdom
Facsimile No.: 011-44-171-369-9112
Attn: Rodney F. Price, Chairman
with a copy to:
Brierley Investments Limited
22-24 Victoria Street
Level 6, Colonial Building
Wellington, New Zealand
Facsimile No.: 011-644-473-1631
Attn: Mark Horton, Corporate Secretary
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, and (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other person to whom a
copy of such notice, request or other communication is to be delivered pursuant
to this Section). Any party from time to time may change its address, facsimile
number or other information for the purpose of notices to that party by giving
notice specifying such change to the other parties hereto.
9.03 Entire Agreement; Incorporation of Exhibits. (a) This Agreement
supersedes the Memorandum of Agreement dated June 17, 1996 and the Term Sheet
dated as of August 13, 1996 by and among BIL, the Company and Parent, and all
prior discussions and other written or oral agreements among the parties hereto
with respect to the subject matter hereof, other than the Confidentiality
Agreement, which shall survive the execution and delivery of this Agreement in
accordance with its terms, and contains, together with the Confidentiality
Agreement, the Stockholder Agreement, the Registration Rights Agreement and the
other instruments contemplated hereby, the sole and entire agreement among the
parties hereto with respect to the subject matter hereof.
(b) The Company Disclosure Letter, the Parent Disclosure Letter and any
Exhibit attached to this Agreement and referred to herein are hereby
incorporated herein and made a part hereof for all purposes as if fully set
forth herein.
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9.04 Public Announcements. Except as otherwise required by law or the
rules of any applicable securities exchange or national market system, so long
as this Agreement is in effect, Parent and the Company will not, and will not
permit any of their respective Representatives to, issue or cause the
publication of any press release or make any other public announcement with
respect to the transactions contemplated by this Agreement without the consent
of the other party, which consent shall not be unreasonably withheld. Parent and
the Company will cooperate with each other in the development and distribution
of all press releases and other public announcements with respect to this
Agreement and the transactions contemplated hereby, and will furnish the other
with drafts of any such releases and announcements as far in advance as
practicable.
9.05 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other person.
9.06 No Assignment; Binding Effect. Neither this Agreement nor any right,
interest or obligation hereunder may be assigned by any party hereto without the
prior written consent of the other parties hereto and any attempt to do so will
be void, except that Sub may assign any or all of its rights, interests and
obligations hereunder to another direct or indirect wholly-owned Subsidiary of
Parent, provided that any such Subsidiary agrees in writing to be bound by all
of the terms, conditions and provisions contained herein. Subject to the
preceding sentence, this Agreement is binding upon, inures to the benefit of and
is enforceable by the parties hereto and their respective successors and
permitted assigns.
9.07 Headings. The headings used in this Agreement have been inserted for
convenience of reference only and do not define, modify or limit the provisions
hereof.
9.08 Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future law or order, and
if the rights or obligations of any party hereto under this Agreement will not
be materially and adversely affected thereby, (i) such provision will be fully
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof
and (iii) the remaining provisions of this Agreement will remain in full force
and effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom.
9.09 Governing Law. Except to the extent that the DGCL is mandatorily
applicable to the Merger and the rights of the stockholders of the Constituent
Corporations, this Agreement shall be governed by and construed in accordance
with the laws of
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the State of New York applicable to a contract executed and performed in such
State, without giving effect to the conflicts of laws principles thereof.
9.10 Enforcement of Agreement. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specified terms or was otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of competent jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
9.11 Certain Definitions. As used in this Agreement:
(a) except as provided in Section 6.04, the term "affiliate", as applied
to any person, shall mean any other person directly or indirectly controlling,
controlled by, or under common control with, that person; for purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlling", "controlled by" and "under common control with"), as applied to
any person, means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of that person, whether
through the ownership of voting securities, by contract or otherwise;
(b) a person will be deemed to "beneficially" own securities if such
person would be the beneficial owner of such securities under Rule 13d-3 under
the Exchange Act, including securities which such person has the right to
acquire (whether such right is exercisable immediately or only after the passage
of time);
(c) the term "business day" means a day other than Saturday, Sunday or any
day on which banks located in the States of New York or Missouri are authorized
or obligated to close;
(d) any reference to any event, change or effect being "material" or
"materially adverse" or having a "material adverse effect" on or with respect to
an entity (or group of entities taken as a whole) means such event, change or
effect is material or materially adverse, as the case may be, to the business,
financial condition or results of operations of such entity (or of such group of
entities taken as a whole);
(e) the term "person" shall include individuals, corporations,
partnerships, trusts, other entities and groups (which term shall include a
"group" as such term is defined in Section 13(d)(3) of the Exchange Act);
(f) the "Representatives" of any entity means such entity's directors,
officers, employees, legal, investment
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banking and financial advisors, accountants and any other agents and
representatives; and
(g) the term "Subsidiary" means, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated, of
which more than fifty percent (50%) of either the equity interests in, or the
voting control of, such corporation or other organization is, directly or
indirectly through Subsidiaries or otherwise, beneficially owned by such party.
9.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
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IN WITNESS WHEREOF, each party hereto has caused this Agreement to be
signed by its officer thereunto duly authorized as of the date first above
written.
Attest: GRAHAM-FIELD HEALTH PRODUCTS, INC.
/s/ Richard Kolodny By: /s/ Irwin Selinger
- ------------------------- ------------------------------
Secretary Name: Irwin Selinger
Title: Chairman and Chief
Executive Officer
Attest: E&J ACQUISITION CORP.
/s/ Richard Kolodny
_________________________ By: /s/ Irwin Selinger
Secretary -----------------------------
Name: Irwin Selinger
Title: Chairman and Chief
Executive Officer
Attest: EVEREST & JENNINGS INTERNATIONAL
LTD.
TWC By: /s/ Bevil Hogg
- ------------------------- ------------------------------
Secretary Name: Bevil Hogg
Title: Chief Executive Officer
Attest: BIL (FAR EAST HOLDINGS) LIMITED
By: /s/ Rodney Price
_____________________ ____________________________
Secretary Name: Rodney Price
Title: Director
71
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<PAGE>
EXHIBIT A
CERTIFICATE OF DESIGNATIONS
of
SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK
of
GRAHAM-FIELD HEALTH PRODUCTS, INC.
------------------------------------------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
------------------------------------------------------------
GRAHAM-FIELD HEALTH PRODUCTS, INC., a corporation organized and
existing under the laws of the State of Delaware (the "Corporation"), HEREBY
CERTIFIES that pursuant to the authority conferred upon the Board of Directors
of the Corporation by the provisions of the Certificate of Incorporation of the
Corporation (the "Certificate of Incorporation"), and in accordance with the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, the following resolution creating a series of its Preferred Stock, par
value $.01 per share, designated as Series B Cumulative Convertible Preferred
Stock has been duly adopted by the Board of Directors of the Corporation:
RESOLVED, that a series of the class of authorized Preferred Stock,
par value $.01 per share, of the Corporation (the "Preferred Stock") be hereby
created, and that the designation and amount thereof and the voting powers,
preferences and relative, participating, optional and other special rights of
the shares of such series, and the qualifications, limitations or restrictions
of such series, are as follows:
Section 1. Designation and Amount.
The shares of such series shall be designated as the "Series B
Cumulative Convertible Preferred Stock" (the "Series B Preferred Stock") and the
number of shares initially constituting such series shall be ______, which
number may be decreased (but not increased) by the Board of Directors of the
Corporation (the "Board of Directors") without a vote of stockholders; provided,
however, that such number may not be decreased below the number of then
currently outstanding shares of Series B Preferred Stock.
<PAGE>
The stated value per share (the "Stated Value") of the Series B Preferred Stock
shall be $10,000.
Section 2. Definitions.
Capitalized terms used herein shall have the meanings set forth in
this Section 2:
"Average Market Price per share of Common Stock", with respect to
any Measuring Period, shall be the average of the Closing Prices per share of
Common Stock for such Measuring Period; provided, that the Average Market Price
per share of Common Stock shall in no event exceed the Maximum Conversion Price.
"Board of Directors" has the meaning ascribed to such term in
Section 1.
"Business Day" means any day other than Saturday, Sunday or a day on
which banking institutions in the State of New York are authorized or obligated
by law or executive order to close.
"Certificate of Incorporation" means the Certificate of
Incorporation of the Corporation, as it may be amended or restated from time to
time.
"Closing Price per share of Common Stock" on any date shall be the
last sale price, regular way, or, in case no such sale takes place on such date,
the average of the closing bid and asked prices, regular way, of the Common
Stock, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on the
New York Stock Exchange, Inc. (the "NYSE") or, if the Common Stock is not listed
or admitted to trading on the NYSE, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the Common Stock is listed or admitted to
trading or, if the Common Stock is not listed or admitted to trading on any
national securities exchange, the last quoted sale price on such date or, if not
so quoted, the average of the high bid and low asked prices in the
over-the-counter market on such date, as reported by the National Association of
Securities Dealers, Inc. Automated Quotations System or such other system then
in use, or, if on any such date the Common Stock is not quoted by any such
organization, the average of the closing bid and asked prices on such date as
furnished by a professional market maker making a market in the Common Stock
selected by the Board of Directors. If the Common Stock is not publicly held or
so listed or publicly traded, "Closing Price per share of Common Stock" shall
mean the Fair Market Value per share as determined in good faith by the Board of
Directors.
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<PAGE>
"Common Stock" means the common stock, par value $.025 per share, of
the Corporation.
"Conversion Price" shall be either (i) the Average Market Price per
share of Common Stock in the event of a Corporation Optional Conversion, (ii)
the Optional Conversion Price in the event of a Stockholder Optional Conversion,
or (iii) the Minimum Conversion Price in the event of a Mandatory Conversion, as
the case may be.
"Corporation Optional Conversion" has the meaning ascribed to such
term in Section 7.
"Current Market Price per share of Common Stock" on any date shall
be the average of the Closing Prices per share of Common Stock for the twenty
(20) consecutive Trading Days commencing thirty (30) Trading Days immediately
prior to such date.
"DGCL" means the General Corporation Law of the State of Delaware.
"Dividend Rate" means an annual rate of $150.00 per share of Series
B Preferred Stock.
"Employee Benefit Plans" means any employee benefit plan or
arrangement of the Corporation or any of its Subsidiaries approved by the Board
of Directors or its Executive Committee.
"Fair Market Value" means an amount determined in good faith by the
Board of Directors and certified in a resolution sent to all holders of shares
of Series B Preferred Stock.
"Issue Date" means the date on which the merger of Sub with and into
E&J becomes effective pursuant to the Merger Agreement.
"Junior Stock" means the Common Stock, the Series A Preferred Stock
and any other stock of the Corporation ranking junior to the Series B Preferred
Stock with respect to the payment of dividends and the distribution of assets,
whether upon liquidation or otherwise.
"Liquidation Preference" has the meaning ascribed to such term in
Section 6(a).
"Mandatory Conversion" has the meaning ascribed to such term in
Section 7.
"Maximum Conversion Price" shall be $20.00 on the Issue Date, as
adjusted from time to time pursuant to Section 7.
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<PAGE>
"Measuring Period" means any period of ten (10) consecutive Trading
Days ending on any day on or prior to the fifth anniversary of the Issue Date.
"Minimum Conversion Price" shall be $15.50 on the Issue Date, as
adjusted from time to time pursuant to Section 7.
"Merger Agreement" means the Agreement and Plan of Merger dated as
of September 3, 1996 by and among the Corporation, E&J Acquisition Corp., a
Delaware corporation wholly-owned by the Corporation ("Sub"), BIL (Far East
Holdings) Limited, a Hong Kong corporation, and Everest & Jennings International
Ltd., a Delaware corporation ("E&J").
"Optional Conversion Price" means either (i) the Maximum Conversion
Price or (ii) at any time at which dividends payable on shares of Series B
Preferred Stock pursuant to paragraph (a) of Section 3 shall have been in
arrears and not paid in full (in cash or by delivery of shares of Common Stock
as permitted by such paragraph) on two (2) previous Quarterly Dividend Payment
Dates, until all accrued and unpaid dividends payable pursuant to paragraph (a)
of Section 3 shall have been paid in full, the Minimum Conversion Price.
"Parity Stock" means any stock of the Corporation ranking on a
parity with the Series B Preferred Stock either with respect to the payment of
dividends or the distribution of assets, whether upon liquidation or otherwise,
including, without limitation, the Series C Preferred Stock.
"Person" means any person or entity of any nature whatsoever,
specifically including an individual, a firm, a company, a corporation, a
partnership, a trust or other entity.
"Preferred Stock" means the preferred stock, par value $.01 per
share, of the Corporation.
"Quarterly Dividend Payment Date" has the meaning ascribed to such
term in paragraph (a) of Section 3.
"Quarterly Dividend Period" has the meaning ascribed to such term in
paragraph (a) of Section 3.
"Rights" means any rights to purchase Junior Stock issued pursuant
to any Rights Agreement.
"Rights Agreement" means the Rights Agreement dated as of
September 3, 1996 between the Corporation and American Stock Transfer & Trust
Company, as Rights Agent, as it may be amended from time to time (the "Current
Rights Agreement"), and any similar rights agreement that may hereafter be
adopted by the Corporation.
- 4 -
<PAGE>
"Series A Preferred Stock" means the Preferred Stock designated as
the Series A Participating Preferred Stock.
"Series B Preferred Stock" has the meaning ascribed to such term in
Section 1.
"Series C Preferred Stock" means the Preferred Stock designated as
the Series C Cumulative Convertible Preferred Stock.
"Stated Value" has the meaning ascribed to such term in Section 1.
"Stockholder Optional Conversion" has the meaning ascribed to such
term in Section 7.
"Subsidiary" of any Person means any corporation or other entity of
which a majority of the voting power of the voting equity securities or equity
interest is owned, directly or indirectly, by such Person.
"Trading Day" means a day on which the NYSE or any other national
securities exchange on which the Common Stock is then listed is open for the
transaction of business or, if the Common Stock is not listed or admitted to
trading on any national securities exchange, any Business Day.
"Trigger Price" has the meaning ascribed to such term in
subparagraph (ii) of paragraph (b) of Section 7.
Section 3. Dividends and Distributions.
(a) The holders of shares of Series B Preferred Stock, in preference
to the holders of shares of Common Stock, Series A Preferred Stock and any other
capital stock of the Corporation ranking junior to the Series B Preferred Stock
as to payment of dividends, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds of the Corporation legally
available for the payment of dividends, cumulative dividends payable in cash at
the annual Dividend Rate per share, except that the Corporation may at its
option pay any such dividend in whole or in part in fully paid and nonassessable
full shares of Common Stock, valued at the average Closing Price per share of
Common Stock for the thirty (30) consecutive Trading Days ending on the Trading
Day immediately preceding the relevant Quarterly Dividend Payment Date.
Dividends shall be payable on the last day of March, June, September and
December (or if any of such days is not a Business Day, the Business Day next
preceding such day) in each year (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), in respect of the quarterly period ending on
such day (each such calendar quarter being referred to herein as a "Quarterly
Dividend Period") to the holders of record of the shares of Series B Preferred
Stock outstanding on such Quarterly Dividend Payment Date, so long as
- 5 -
<PAGE>
shares of Series B Preferred Stock are outstanding; provided that the first
Quarterly Dividend Payment Date shall be the last day of the first full
Quarterly Dividend Period following the Issue Date in respect of the period from
the Issue Date through such day.
(b) Dividends payable pursuant to paragraph (a) of this Section 3
shall begin to accrue and be cumulative from the Issue Date. The amount of
dividends payable per share of Series B Preferred Stock on any Quarterly
Dividend Payment Date shall be computed by dividing the Dividend Rate by four
(4); provided that with respect to the first Quarterly Dividend Payment Date,
the amount of dividends payable per share of Series B Preferred Stock shall be
computed by dividing the Dividend Rate by two (2) and multiplying the result by
a fraction, the numerator of which is the number of days from the Issue Date to
the last day of the applicable Quarterly Dividend Period and the denominator of
which is one hundred eighty (180). The amount of dividends payable for any
period shorter or longer than a full Quarterly Dividend Period, including the
first Quarterly Dividend Period, shall be determined on the basis of twelve
30-day months and a 360-day year. Dividends paid on the shares of Series B
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all shares of Series B Preferred Stock at the time
outstanding.
(c) In case the Corporation shall at any time or from time to time
declare, order, pay or make a dividend or other distribution (including, without
limitation, any distribution of stock or other securities or property or rights
or warrants to subscribe for securities of the Corporation or any of its
Subsidiaries by way of dividend or spinoff) on the Junior Stock, other than (i)
dividends payable on the Common Stock in cash in an aggregate amount in any
fiscal year of the Corporation which, when declared, do not, together with all
other cash dividends previously paid on the Common Stock in such fiscal year,
exceed 100% of the total dividends payable in cash on the Series B Preferred
Stock and any outstanding shares of Parity Stock during such fiscal year at the
applicable dividend rate; or (ii) any dividend or distribution of shares of
Junior Stock, then, and in each such case, the holders of shares of Series B
Preferred Stock shall be entitled to receive from the Corporation, with respect
to each share of Series B Preferred Stock held, the same dividend or
distribution received by a holder of the number of shares of Common Stock into
which such share of Series B Preferred Stock is convertible on the record date
for such dividend or distribution. Any such dividend or distribution shall be
declared, ordered, paid or made on the Series B Preferred Stock at the same time
such dividend or distribution is declared, ordered, paid or made on the Common
Stock.
- 6 -
<PAGE>
(d) The holders of shares of Series B Preferred Stock shall not be
entitled to receive any dividends or other distributions except as provided in
this Section 3.
(e) Unless all dividends on the outstanding shares of Series B
Preferred Stock that shall have accrued and be payable as of any date shall have
been paid in full, or declared and additional shares of Common Stock or funds,
as appropriate, set apart for payment thereof, no dividend or other distribution
shall be paid to holders of Junior Stock (other than dividends or distributions
payable in shares of Junior Stock) and no shares of Junior Stock shall be
purchased or redeemed by the Corporation.
Section 4. Voting Rights.
In addition to any voting rights provided elsewhere herein and in
the Certificate of Incorporation, and any voting rights provided by law, the
holders of shares of Series B Preferred Stock shall have the following voting
rights:
(a) Each share of Series B Preferred Stock shall be entitled to a
number of votes equal to the result obtained (calculated to the nearest
1/10,000th of a vote) by dividing the Stated Value by the greater of (i) the
average Closing Price per share of Common Stock for the thirty (30) consecutive
Trading Days ending on the Trading Day immediately preceding the applicable
record date for the taking of stockholder action or (ii) the Minimum Conversion
Price. Except as otherwise provided by the Certificate of Incorporation, or by
law, the shares of Series B Preferred Stock, the shares of Series C Preferred
Stock and the shares of Common Stock (and any other shares of capital stock of
the Corporation at the time entitled thereto) shall vote together as one class
on all matters submitted to a vote of stockholders of the Corporation.
(b) Except as provided in this Section 4 or in the Certificate of
Incorporation, or as required by law, the holders of shares of Series B
Preferred Stock shall have no special voting rights and their consent shall not
be required for the taking of any corporate action.
Section 5. Reacquired Shares.
Any shares of Series B Preferred Stock converted, purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be retired
and canceled promptly after the acquisition thereof, and, if necessary to
provide for the lawful purchase of such shares, the capital represented by such
shares shall be reduced in accordance with the DGCL. All such shares shall upon
their cancellation become authorized but unissued shares of Preferred Stock and
may be reissued as part of another series of Preferred Stock.
- 7 -
<PAGE>
Section 6. Liquidation, Dissolution or Winding Up.
(a) In the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the holders of shares of
Series B Preferred Stock shall be entitled to receive out of the assets of the
Corporation available for distribution to its stockholders, an amount equal to
the Stated Value plus all accrued and unpaid dividends thereon to the date of
such payment ("Liquidation Preference"), and no distribution shall be made (i)
to the holders of shares of Common Stock, Series A Preferred Stock or any other
capital stock of the Corporation ranking junior to the Series B Preferred Stock
upon liquidation, dissolution or winding up, unless, prior thereto, the holders
of shares of Series B Preferred Stock shall have received an amount equal to the
Liquidation Preference per share, or (ii) to the holders of shares of any
capital stock of the Corporation (including the Series C Preferred Stock)
ranking on a parity with the Series B Preferred Stock upon liquidation,
dissolution or winding up, except distributions made ratably on the Series B
Preferred Stock and all such other capital stock in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up of the Corporation.
(b) In the event that the assets of the Corporation available for
distribution to the holders of the Series B Preferred Stock upon any voluntary
or involuntary liquidation, dissolution or winding up of the Corporation shall
be insufficient to pay in full all amounts to which such holders are entitled
pursuant to paragraph (a) of this Section 6, such assets of the Corporation
which are so available shall be allocated pro rata on a share-by-share basis
among all shares of Series B Preferred Stock at the time outstanding.
(c) Neither the consolidation, merger or other business combination
of the Corporation with or into any other Person or Persons nor the sale, lease,
exchange or conveyance of all or any part of the property, assets or business of
the Corporation, shall be deemed to be a liquidation, dissolution or winding up
of the Corporation for purposes of this Section 6.
Section 7. Conversion.
Any outstanding share of Series B Preferred Stock may, at the option
of the holder thereof by delivery of the notice referred to in paragraph (e) of
this Section 7 not later than the close of business on the fifth anniversary of
the Issue Date, be converted at the Optional Conversion Price into shares of
Common Stock, on the terms and conditions set forth in this Section 7 (a
"Stockholder Optional Conversion"). In the event the Average Market Price per
share of Common Stock for any Measuring Period equals or exceeds the Minimum
Conversion Price, without any further action on the part of the holder thereof
(a "Corporation Optional Conversion"), all, but not less than all, outstanding
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<PAGE>
shares of Series B Preferred Stock may, at the option of the Corporation by
delivery of the notice referred to in paragraph (d) of this Section 7 not later
than the close of business on the fifth anniversary of the Issue Date, be
converted at the Average Market Price per share of Common Stock for the
applicable Measuring Period into shares of Common Stock, on the terms and
conditions set forth in this Section 7. All outstanding shares of Series B
Preferred Stock (other than shares as to which a notice of conversion pursuant
to a Stockholder Optional Conversion or a Corporation Optional Conversion has
been previously delivered) shall automatically be deemed to have been converted
at the Minimum Conversion Price into shares of Common Stock, on the terms and
conditions set forth in this Section 7, without any further action on the part
of the holder thereof or the Corporation, on the day immediately following the
fifth anniversary of the Issue Date (a "Mandatory Conversion").
(a) Each share of Series B Preferred Stock converted in accordance
with this Section 7 shall be converted in the manner hereinafter set forth into
a number of fully-paid and nonassessable shares of Common Stock equal to the
result obtained (calculated to the nearest 1/10,000th of a share) by dividing
the Stated Value by the Conversion Price.
(b) Each of the Minimum Conversion Price and the Maximum Conversion
Price shall be adjusted from time to time as follows:
(i) In case the Corporation shall at any time after the Issue Date
declare a dividend, or make a distribution, on the outstanding shares of
Common Stock in shares of Common Stock or subdivide or reclassify the
outstanding shares of Common Stock into a greater number of shares of
Common Stock or combine or reclassify the outstanding shares of Common
Stock into a smaller number of shares of Common Stock, then, and in each
such case,
(A) each of the Minimum Conversion Price and the Maximum
Conversion Price as in effect immediately prior to such event shall
be adjusted by multiplying each such Conversion Price by a fraction,
the numerator of which is the number of shares of Common Stock
outstanding immediately prior to such event and the denominator of
which is the number of shares of Common Stock outstanding
immediately after such event; and
(B) an adjustment made pursuant to this subparagraph (i) shall
become effective (I) in the case of any such dividend or
distribution, immediately after the close of business on the record
date for the determination of holders of shares of Common Stock
entitled to receive such dividend or distribution, or (II) in the
case of any such subdivision, reclassification or combination, at
the close of
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<PAGE>
business on the day upon which such corporate action becomes
effective.
(ii) In case the Corporation shall issue shares of Common Stock (or
rights, options or warrants to purchase or other securities convertible
into or exchangeable for shares of Common Stock) at any time after the
Issue Date without consideration or at a price per share less than the
Current Market Price per share of Common Stock on the date of issuance of
such shares (or the date of issuance of such rights, options, warrants or
other convertible or exchangeable securities) (such Current Market Price
shall hereinafter be referred to as the "Trigger Price"), other than (w)
in a transaction to which subparagraph (ii) of paragraph (c) of Section 3
or subparagraph (i) of this paragraph (b) is applicable, (x) issuances of
shares of Common Stock pursuant to rights or options granted under any
Employee Benefit Plan, (y) upon conversion of or as a dividend on shares
of Series B Preferred Stock or Series C Preferred Stock or (z) pursuant
to the Rights, then, and in each such case
(A) each of the Minimum Conversion Price and the Maximum
Conversion Price as in effect immediately prior to such issuance
shall be adjusted by multiplying each such Conversion Price by a
fraction, (I) the numerator of which is the sum of (1) the number of
shares of Common Stock outstanding immediately prior to such event
and (2) the number of shares of Common Stock which the aggregate
consideration, if any, receivable by the Corporation for the total
number of shares of Common Stock so issued (or issuable upon the
exercise or conversion of any such rights, options, warrants or
other convertible or exchangeable securities) would purchase at the
Trigger Price, and (II) the denominator of which is the sum of
(1) the number of shares of Common Stock outstanding immediately
prior to such event and (2) the number of additional shares of
Common Stock issued (or issuable upon the exercise or conversion of
any such rights, options, warrants or other convertible or
exchangeable securities); and
(B) such adjustment shall become effective immediately after
the date of such issuance.
For purposes of this subparagraph (ii), the aggregate consideration
receivable by the Corporation in connection with the issuance of shares of
Common Stock or of rights, options or warrants to purchase or other
securities convertible into or exchangeable for shares of Common Stock
shall be deemed to be equal to the sum of the net offering price (without
giving effect to deductions for underwriting discounts or commissions and
expenses payable to third parties, if any) of all such securities plus the
aggregate amount, if any, payable upon exercise of any such rights,
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<PAGE>
options or warrants or conversion or exchange of any such convertible or
exchangeable securities into or for shares of Common Stock.
(iii) In case the Corporation shall be a party to any transaction
(including, without limitation, a merger, consolidation, sale of all or
substantially all of the Corporation's assets or recapitalization of the
Common Stock and excluding any transaction to which subparagraph (i) or
(ii) of this paragraph (b) or subparagraph (ii) of paragraph (c) of
Section 3 applies) in which the previously outstanding Common Stock shall
be changed into or, pursuant to the operation of law or the terms of the
transaction to which the Corporation is a party, exchanged for different
securities of the Corporation or common stock or other securities of
another corporation or interests in a noncorporate entity or other
property (including cash) or any combination of any of the foregoing,
then, as a condition of the consummation of such transaction, lawful and
adequate provision shall be made so that each holder of shares of
Series B Preferred Stock shall be entitled, upon conversion, to an amount
per share equal to (A) the aggregate amount of stock, securities, cash
and/or any other property (payable in kind), as the case may be, into
which or for which each share of Common Stock is changed or exchanged
times (B) the number of shares of Common Stock into which a share of
Series B Preferred Stock is convertible immediately prior to the
consummation of such transaction.
(c) In case the Corporation shall be a party to a transaction
described in subparagraph (iii) of paragraph (b) above, effective provision
shall be made (in form and substance reasonably satisfactory to the holders of a
majority of the then outstanding shares of Series B Preferred Stock), in the
articles or certificate of incorporation of the resulting or surviving
corporation or other corporation issuing or delivering such shares, other
securities or property or otherwise, so that the provisions set forth herein for
the protection of the conversion rights of the Series B Preferred Stock shall
thereafter be applicable, as nearly as reasonably may be, to any such other
shares of stock and other securities and property deliverable upon conversion of
the Series B Preferred Stock remaining outstanding or other convertible stock or
securities received by the holders in place thereof; and any such resulting or
surviving corporation or other corporation issuing or delivering such shares,
other securities or property shall expressly assume the obligation to deliver,
upon the exercise of the conversion privilege, such shares, securities or
property as the holders of the Series B Preferred Stock remaining outstanding,
or other convertible stock or securities received by the holders in place
thereof, shall be entitled to receive, pursuant to the provisions hereof, and to
make provision for the protection of the conversion right as above provided. In
case shares, securities or property other than Common Stock shall be issuable or
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<PAGE>
deliverable upon conversion as aforesaid, then all references to Common Stock in
paragraph (b) of this Section 7 shall be deemed to apply, so far as provided and
as nearly as is reasonable, to any such shares, other securities or property.
(d) In order for the Corporation to convert shares of Series B
Preferred Stock into shares of Common Stock pursuant to a Corporation Optional
Conversion, the Corporation shall give written notice thereof not later than the
tenth Business Day following the last day of the Measuring Period to each holder
of shares of Series B Preferred Stock, at such holder's address as it appears on
the transfer books of the Corporation. Not later than the third Business Day
following the day on which the Series B Preferred Stock shall have automatically
been converted into shares of Common Stock pursuant to a Mandatory Conversion,
the Corporation shall give written notice thereof to each holder of shares of
Series B Preferred Stock so converted, at such holder's address as it appears on
the transfer books of the Corporation. Failure to give such notice shall in no
way effect the automatic conversion of each outstanding share of Series B
Preferred Stock pursuant to a Mandatory Conversion.
(e) Any holder of any shares of Series B Preferred Stock may (x)
exercise such holder's right to convert such shares into shares of Common Stock
pursuant to a Stockholder Optional Conversion or (y) exchange such holder's
certificates representing Series B Preferred Stock for certificates representing
the shares of Common Stock into which such shares of Series B Preferred Stock
have been converted pursuant to either a Mandatory Conversion or a Corporation
Optional Conversion, by surrendering for such purpose to the Corporation, at its
principal office or at such other office or agency maintained by the Corporation
for that purpose, the certificate or certificates representing the shares of
Series B Preferred Stock to be converted or automatically converted, as the case
may be, accompanied by a written notice stating, in the case of a Stockholder
Optional Conversion, that such holder elects to convert all or a specified whole
number of such shares in accordance with the provisions of this Section 7 and,
in either case, specifying the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued. In case
such notice shall specify a name or names other than that of such holder, such
notice shall be accompanied by payment of all transfer taxes payable upon the
issuance of shares of Common Stock in such name or names. Other than such taxes,
the Corporation will pay any and all issue and other taxes (other than taxes
based on income) that may be payable in respect of any issue or delivery of
shares of Common Stock on conversion of Series B Preferred Stock pursuant
hereto. As promptly as practicable after the surrender of such certificate or
certificates and the receipt of such notice relating thereto and, if applicable,
payment of all transfer taxes (or the demonstration to the satisfaction of the
Corporation that such taxes have been paid), the Corporation shall deliver or
cause to
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<PAGE>
be delivered (i) certificates representing the number of validly issued, fully
paid and nonassessable full shares of Common Stock to which the holder of shares
of Series B Preferred Stock so converted shall be entitled and (ii) in the case
of a Stockholder Optional Conversion, if less than the full number of shares of
Series B Preferred Stock evidenced by the surrendered certificate or
certificates are being converted, a new certificate or certificates, of like
tenor, for the number of shares evidenced by such surrendered certificate or
certificates less the number of shares converted.
(f) Any Stockholder Optional Conversion shall be deemed to have been
effected at the close of business on the date of giving of the notice by the
holder of shares of Series B Preferred Stock of the exercise of such holder's
conversion right and the surrender of the certificate or certificates
representing the shares of Series B Preferred Stock to be converted. Any notice
of a Stockholder Optional Conversion shall, with respect to the shares covered
thereby, supersede any earlier notice given by the Corporation of a Corporation
Optional Conversion. A Corporation Optional Conversion shall be deemed to have
been effected at the close of business on the date of giving of the notice by
the Corporation referred to in the first sentence of paragraph (d) of this
Section 7. A Mandatory Conversion shall be deemed to have been effected at the
close of business on the day immediately following the fifth anniversary of the
Issue Date. Upon the effectiveness of the conversion of any shares of Series B
Preferred Stock pursuant to this Section 7, the rights of the holder thereof as
to the shares being converted shall cease except for the right to receive shares
of Common Stock, and the person entitled to receive the shares of Common Stock
shall be treated for all purposes as having become the record holder of such
shares of Common Stock at such time.
(g) In any case in which paragraph (b) of this Section 7 shall
require that an adjustment as a result of any event becomes effective after a
record date for such event, the Corporation may elect to defer until after the
occurrence of such event (i) issuing to the holder of any shares of Series B
Preferred Stock converted after such record date and before the occurrence of
such event the additional shares of Common Stock issuable upon such conversion
over and above the shares of Common Stock issuable upon such conversion on the
basis of the conversion rate prior to adjustment and (ii) paying to such holder
any amount in cash in lieu of a fractional share of Common Stock pursuant to
paragraph (i) below; and, in lieu of the shares the issuance of which is so
deferred, the Corporation shall issue due bills or other appropriate evidence of
the right to receive such shares.
(h) The Corporation will pay to each holder of shares of Series B
Preferred Stock whose shares are converted the full amount of accrued and unpaid
dividends on such shares through but not including the effective date of such
conversion, which
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<PAGE>
dividends shall be payable in cash out of funds of the Corporation legally
available for the payment of dividends or, at the option of the Corporation, in
whole or in part in fully paid and nonassessable full shares of Common Stock,
valued at the average Closing Price per share of Common Stock for the thirty
(30) consecutive Trading Days ending on the Trading Day immediately preceding
the effective date of such conversion.
(i) In connection with the conversion of any shares of Series B
Preferred Stock, no fractions of shares of Common Stock shall be issued, but in
lieu thereof the Corporation shall pay a cash adjustment in respect of such
fractional interest in an amount equal to such fractional interest multiplied by
the Current Market Price per share of Common Stock on the day on which such
shares of Series B Preferred Stock are deemed to have been converted.
(j) The Corporation shall at all times reserve and keep available
out of its authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of the Series B Preferred Stock, such number of shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all shares of Series B Preferred Stock then outstanding. The
Corporation shall from time to time, subject to and in accordance with the DGCL,
increase the authorized amount of Common Stock if at any time the number of
authorized shares of Common Stock remaining unissued shall not be sufficient to
permit the conversion at such time of all shares of Series B Preferred Stock
then outstanding. The Corporation shall cause any shares of Common Stock issued
upon conversion of Series B Preferred Stock to be listed for trading on any
national securities exchange on which the Common Stock is at the time listed,
and shall deliver such notices as may be required by such exchange in connection
with any such issuance.
(k) Notwithstanding anything to the contrary contained herein, if
adjustments of the Maximum Conversion Price or the Minimum Conversion Price have
caused the Conversion Price to be lower than the par value, if any, of the
Common Stock, upon any conversion of shares of Series B Preferred Stock the
Corporation shall, to the maximum extent it is legally able to do so, issue to
the converting holder the shares of Common Stock into which the shares of Series
B Preferred Stock being converted are convertible, and, in addition, the
Corporation shall pay the converting holder an amount in cash equal to the
Current Market Price per share of Common Stock multiplied by the number of
shares and fractions thereof of Common Stock which the converting holder would
have been entitled to receive except for the limitation on lawful issuance
described in this paragraph.
(l) Notwithstanding anything to the contrary contained herein, any
adjustment in either the Maximum Conversion Price or Minimum Conversion Price
pursuant to this Section 7 shall be made to the nearest $.01.
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<PAGE>
(m) Upon the expiration of any rights, options or warrants to
purchase shares of Common Stock or the termination of any right to convert or
exchange any convertible or exchangeable securities for shares of Common Stock
without such conversion or exchange having occurred, or upon any change in the
amount payable upon exercise of any such rights, options or warrants or
conversion or exchange of any such convertible or exchangeable securities, each
of the Minimum Conversion Price and the Maximum Conversion Price shall thereupon
be readjusted and shall thereafter be such as it would have been had it been
originally adjusted (or had the original adjustment not been required, as the
case may be) on the basis of (i) the only shares of Common Stock so issued were
the shares of Common Stock, if any, actually issued or sold upon the exercise of
such rights, options or warrants to purchase or securities convertible into or
exchangeable for shares of Common Stock, (ii) such shares of Common Stock, if
any, were issued or sold for the consideration actually received by the
Corporation upon such exercise plus the consideration, if any, actually received
by the Corporation for the issuance, sale or grant of all such rights, options
or warrants to purchase or securities convertible into or exchangeable for
shares of Common Stock, whether or not exercised and (iii) the changed amount so
payable; provided, however, that no such readjustment shall have the effect of
increasing either the Minimum Conversion Price or the Maximum Conversion Price
by an amount in excess of the amount of the adjustment initially made in respect
of the issuance, sale or grant of such rights, options or warrants to purchase,
or securities convertible into or exchangeable for, shares of Common Stock.
Section 8. Reports as to Adjustments.
Whenever the Minimum Conversion Price or the Maximum Conversion
Price is adjusted as provided in Section 7, the Corporation shall promptly mail
to the holders of record of the outstanding shares of Series B Preferred Stock
at their respective addresses as the same shall appear in the Corporation's
stock records a notice stating that each of the Minimum Conversion Price and the
Maximum Conversion Price has been adjusted and setting forth the new Minimum
Conversion Price and Maximum Conversion Price and the new number of shares of
Common Stock (or describing the new stock, securities, cash or other property)
into which each share of Series B Preferred Stock is convertible as a result of
such adjustment, a brief statement of the facts requiring such adjustment and
the computation thereof, and when such adjustment became effective.
Section 9. Registration of Transfer.
The Corporation shall keep at its principal office a register for
the registration of Series B Preferred Stock. Upon the surrender of any
certificate representing Series B Preferred Stock at such place, the Corporation
shall, at the request of the record holder of such certificate, execute and
deliver (at the
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<PAGE>
Corporation's expense) a new certificate or certificates in exchange therefor
representing in the aggregate the number of shares of Series B Preferred Stock
represented by the surrendered certificate. Each such new certificate shall be
registered in such name and shall represent such number of shares of Series B
Preferred Stock as is requested by the holder of the surrendered certificate and
shall be substantially identical in form to the surrendered certificate, and
dividends shall accrue on the Series B Preferred Stock represented by such new
certificate from the date to which dividends have been fully paid on such Series
B Preferred Stock represented by the surrendered certificate.
Section 10. Replacement.
Upon receipt of evidence reasonably satisfactory to the Corporation
(an affidavit of the registered holder shall be satisfactory) of the ownership
and the loss, theft, destruction or mutilation of any certificate evidencing
shares of Series B Preferred Stock, and in the case of any such loss, theft or
destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation or, in the case of any such mutilation upon surrender of such
certificate, the Corporation shall (at its expense) execute and deliver in lieu
of such certificate a new certificate of like kind representing the number of
shares of Series B Preferred Stock represented by such lost, stolen, destroyed
or mutilated certificate dated the date of such lost, stolen, destroyed or
mutilated certificate, and dividends shall accrue on the Series B Preferred
Stock represented by such new certificate from the date to which dividends have
been fully paid on such lost, stolen, destroyed or mutilated certificate.
Section 11. Legal Expenses.
The Corporation agrees that, in the event that a holder or holders
of Series B Preferred Stock shall bring any legal action or proceeding to
enforce or to seek damages or other relief arising from an alleged breach of any
term or provision of the Series B Preferred Stock by the Corporation and such
holder or holders prevail in any such action or proceeding, such prevailing
holder or holders shall be entitled to an award of, and the Corporation shall
pay, the reasonable fees and expenses of legal counsel to such prevailing holder
or holders.
Section 12. Notices.
Except as otherwise expressly provided hereunder, all notices
referred to herein shall be in writing and shall be delivered by registered or
certified mail, return receipt requested and postage prepaid, or by reputable
overnight courier service, charges prepaid, and shall be deemed to have been
given when so mailed or sent (i) to the Corporation, at its principal executive
offices, and (ii) to any stockholder, at such holder's address as it appears in
the stock records of the Corporation (unless otherwise indicated in writing by
any such holder).
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<PAGE>
IN WITNESS WHEREOF, Graham-Field Health Products, Inc. has caused
this Certificate of Designations of Series B Cumulative Convertible Preferred
Stock to be duly executed by its President and attested to by its Secretary and
has caused its corporate seal to be affixed hereto, this ____ day of __________,
1996.
GRAHAM-FIELD HEALTH PRODUCTS, INC.
By:___________________________
Chairman of the Board and
Chief Executive Officer
[SEAL]
Attest:
By: ____________________________
Secretary
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<PAGE>
EXHIBIT B
CERTIFICATE OF DESIGNATIONS
of
SERIES C CUMULATIVE CONVERTIBLE PREFERRED STOCK
of
GRAHAM-FIELD HEALTH PRODUCTS, INC.
------------------------------------------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
------------------------------------------------------------
GRAHAM-FIELD HEALTH PRODUCTS, INC., a corporation organized and
existing under the laws of the State of Delaware (the "Corporation"), HEREBY
CERTIFIES that pursuant to the authority conferred upon the Board of Directors
of the Corporation by the provisions of the Certificate of Incorporation of the
Corporation (the "Certificate of Incorporation"), and in accordance with the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, the following resolution creating a series of its Preferred Stock, par
value $.01 per share, designated as Series C Cumulative Convertible Preferred
Stock has been duly adopted by the Board of Directors of the Corporation:
RESOLVED, that a series of the class of authorized Preferred Stock,
par value $.01 per share, of the Corporation (the "Preferred Stock") be hereby
created, and that the designation and amount thereof and the voting powers,
preferences and relative, participating, optional and other special rights of
the shares of such series, and the qualifications, limitations or restrictions
of such series, are as follows:
Section 1. Designation and Amount.
The shares of such series shall be designated as the "Series C
Cumulative Convertible Preferred Stock" (the "Series C Preferred Stock") and the
number of shares initially constituting such series shall be ______, which
number may be decreased (but not increased) by the Board of Directors of the
Corporation (the "Board of Directors") without a vote of stockholders; provided,
however, that such number may not be decreased below the number of then
currently outstanding shares of Series C Preferred Stock.
<PAGE>
The stated value per share (the "Stated Value") of the Series C Preferred Stock
shall be $10,000.
Section 2. Definitions.
Capitalized terms used herein shall have the meanings set forth in
this Section 2:
"Board of Directors" has the meaning ascribed to such term in
Section 1.
"Business Day" means any day other than Saturday, Sunday or a day on
which banking institutions in the State of New York are authorized or obligated
by law or executive order to close.
"Certificate of Incorporation" means the Certificate of
Incorporation of the Corporation, as it may be amended or restated from time to
time.
"Closing Price per share of Common Stock" on any date shall be the
last sale price, regular way, or, in case no such sale takes place on such date,
the average of the closing bid and asked prices, regular way, of the Common
Stock, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on the
New York Stock Exchange, Inc. (the "NYSE") or, if the Common Stock is not listed
or admitted to trading on the NYSE, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the Common Stock is listed or admitted to
trading or, if the Common Stock is not listed or admitted to trading on any
national securities exchange, the last quoted sale price on such date or, if not
so quoted, the average of the high bid and low asked prices in the
over-the-counter market on such date, as reported by the National Association of
Securities Dealers, Inc. Automated Quotations System or such other system then
in use, or, if on any such date the Common Stock is not quoted by any such
organization, the average of the closing bid and asked prices on such date as
furnished by a professional market maker making a market in the Common Stock
selected by the Board of Directors. If the Common Stock is not publicly held or
so listed or publicly traded, "Closing Price per share of Common Stock" shall
mean the Fair Market Value per share as determined in good faith by the Board of
Directors.
"Common Stock" means the common stock, par value $.025 per share, of
the Corporation.
"Conversion Price" shall be $20.00, as adjusted from time to time
pursuant to Section 8.
"Current Market Price per share of Common Stock" on any date shall
be the average of the Closing Prices per share of
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<PAGE>
Common Stock for the twenty (20) consecutive Trading Days commencing thirty (30)
Trading Days immediately prior to such date.
"DGCL" means the General Corporation Law of the State of Delaware.
"Dividend Rate" means an annual rate of $150.00 per share of Series
C Preferred Stock.
"Employee Benefit Plans" means any employee benefit plan or
arrangement of the Corporation or any of its Subsidiaries approved by the Board
of Directors or its Executive Committee.
"Fair Market Value" means an amount determined in good faith by the
Board of Directors and certified in a resolution sent to all holders of shares
of Series C Preferred Stock.
"Issue Date" means the date on which the merger of Sub with and into
E&J becomes effective pursuant to the Merger Agreement.
"Junior Stock" means the Common Stock, the Series A Preferred Stock
and any other stock of the Corporation ranking junior to the Series C Preferred
Stock with respect to the payment of dividends and the distribution of assets,
whether upon liquidation or otherwise.
"Liquidation Preference" has the meaning ascribed to such term in
Section 7(a).
"Mandatory Conversion" has the meaning ascribed to such term in
Section 8.
"Merger Agreement" means the Agreement and Plan of Merger dated as
of September 3, 1996 by and among the Corporation, E&J Acquisition Corp., a
Delaware corporation wholly-owned by the Corporation ("Sub"), BIL (Far East
Holdings) Limited, a Hong Kong corporation, and Everest & Jennings Ltd., a
Delaware corporation ("E&J").
"Parity Stock" means any stock of the Corporation ranking on a
parity with the Series C Preferred Stock either with respect to the payment of
dividends or the distribution of assets, whether upon liquidation or otherwise,
including, without limitation, the Series B Preferred Stock.
"Person" means any person or entity of any nature whatsoever,
specifically including an individual, a firm, a company, a corporation, a
partnership, a trust or other entity.
"Preferred Stock" means the preferred stock, par value $.01 per
share, of the Corporation.
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<PAGE>
"Quarterly Dividend Payment Date" has the meaning ascribed to such
term in paragraph (a) of Section 3.
"Quarterly Dividend Period" has the meaning ascribed to such term in
paragraph (a) of Section 3.
"Rights" means any rights to purchase Junior Stock issued pursuant
to any Rights Agreement.
"Rights Agreement" means the Rights Agreement dated as of
September 3, 1996 between the Corporation and American Stock Transfer & Trust
Company, as Rights Agent, as it may be amended from time to time (the "Current
Rights Agreement"), and any similar rights agreement that may hereafter be
adopted by the Corporation.
"Series A Preferred Stock" means the Preferred Stock designated as
the Series A Participating Preferred Stock of the Corporation.
"Series B Preferred Stock" means the Preferred Stock designated as
the Series B Cumulative Convertible Preferred Stock.
"Series C Preferred Stock" has the meaning ascribed to such term in
Section 1.
"Stated Value" has the meaning ascribed to such term in Section 1.
"Subsidiary" of any Person means any corporation or other entity of
which a majority of the voting power of the voting equity securities or equity
interest is owned, directly or indirectly, by such Person.
"Trading Day" means a day on which the NYSE or any other national
securities exchange on which the Common Stock is then listed is open for the
transaction of business or, if the Common Stock is not listed or admitted to
trading on any national securities exchange, any Business Day.
"Trigger Price" has the meaning ascribed to such term in
subparagraph (ii) of paragraph (b) of Section 8.
Section 3. Dividends and Distributions.
(a) The holders of shares of Series C Preferred Stock, in preference
to the holders of shares of Common Stock, Series A Preferred Stock and any other
capital stock of the Corporation ranking junior to the Series C Preferred Stock
as to payment of dividends, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds of the Corporation legally
available for the payment of dividends, cumulative dividends payable in cash at
the annual Dividend Rate per share, except
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<PAGE>
that the Corporation may at its option pay any such dividend in whole or in part
in fully paid and nonassessable full shares of Common Stock, valued at the
average Closing Price per share of Common Stock for the thirty (30) consecutive
Trading Days ending on the Trading Day immediately preceding the relevant
Quarterly Dividend Payment Date. Dividends shall be payable on the last day of
March, June, September and December (or if any of such days is not a Business
Day, the Business Day next preceding such day) in each year (each such date
being referred to herein as a "Quarterly Dividend Payment Date"), in respect of
the quarterly period ending on such day (each such calendar quarter being
referred to herein as a "Quarterly Dividend Period") to the holders of record of
the shares of Series C Preferred Stock outstanding on such Quarterly Dividend
Payment Date, so long as shares of Series C Preferred Stock are outstanding;
provided that the first Quarterly Dividend Payment Date shall be the last day of
the first full Quarterly Dividend Period following the Issue Date in respect of
the period from the Issue Date through such day.
(b) Dividends payable pursuant to paragraph (a) of this Section 3
shall begin to accrue and be cumulative from the Issue Date. The amount of
dividends payable per share of Series C Preferred Stock on any Quarterly
Dividend Payment Date shall be computed by dividing the Dividend Rate by four
(4); provided that with respect to the first Quarterly Dividend Payment Date,
the amount of dividends payable per share of Series C Preferred Stock shall be
computed by dividing the Dividend Rate by two (2) and multiplying the result by
a fraction, the numerator of which is the number of days from the Issue Date to
the last day of the applicable Quarterly Dividend Period and the denominator of
which is one hundred eighty (180). The amount of dividends payable for any
period shorter or longer than a full Quarterly Dividend Period, including the
first Quarterly Dividend Period, shall be determined on the basis of twelve
30-day months and a 360-day year. Dividends paid on the shares of Series C
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all shares of Series C Preferred Stock at the time
outstanding.
(c) In case the Corporation shall at any time or from time to time
declare, order, pay or make a dividend or other distribution (including, without
limitation, any distribution of stock or other securities or property or rights
or warrants to subscribe for securities of the Corporation or any of its
Subsidiaries by way of dividend or spinoff) on the Junior Stock, other than (i)
dividends payable on the Common Stock in cash in an aggregate amount in any
fiscal year of the Corporation which, when declared, do not, together with all
other cash dividends previously paid on the Common Stock in such fiscal year,
exceed 100% of the total dividends payable in cash on the Series C Preferred
Stock and any outstanding shares of Parity Stock during such fiscal year at the
applicable dividend rate, or (ii) any
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<PAGE>
dividend or distribution of shares of Junior Stock, then, and in each such case,
the holders of shares of Series C Preferred Stock shall be entitled to receive
from the Corporation, with respect to each share of Series C Preferred Stock
held, the same dividend or distribution received by a holder of the number of
shares of Common Stock into which such share of Series C Preferred Stock is
convertible on the record date for such dividend or distribution. Any such
dividend or distribution shall be declared, ordered, paid or made on the Series
C Preferred Stock at the same time such dividend or distribution is declared,
ordered, paid or made on the Common Stock.
(d) The holders of shares of Series C Preferred Stock shall not be
entitled to receive any dividends or other distributions except as provided in
this Section 3.
(e) Unless all dividends on the outstanding shares of Series C
Preferred Stock that shall have accrued and be payable as of any date shall have
been paid in full, or declared and additional shares of Common Stock or funds,
as appropriate, set apart for payment thereof, no dividend or other distribution
shall be paid to holders of Junior Stock (other than dividends or distributions
payable in shares of Junior Stock) and no shares of Junior Stock shall be
purchased or redeemed by the Corporation.
Section 4. Voting Rights.
In addition to any voting rights provided elsewhere herein and in
the Certificate of Incorporation, and any voting rights provided by law, the
holders of shares of Series C Preferred Stock shall have the following voting
rights:
(a) Each share of Series C Preferred Stock shall be entitled to a
number of votes equal to the result obtained (calculated to the nearest
1/10,000th of a vote) by dividing the Stated Value by the Conversion Price.
Except as otherwise provided by the Certificate of Incorporation, or by law, the
shares of Series B Preferred Stock, the shares of Series C Preferred Stock and
the shares of Common Stock (and any other shares of capital stock of the
Corporation at the time entitled thereto) shall vote together as one class on
all matters submitted to a vote of stockholders of the Corporation.
(b) Except as provided in this Section 4 or in the Certificate of
Incorporation, or as required by law, the holders of shares of Series C
Preferred Stock shall have no special voting rights and their consent shall not
be required for the taking of any corporate action.
Section 5. Redemption.
(a) Upon written notice pursuant to paragraph (b) of this Section 5,
the Corporation may at its option redeem all, but not less than all, of the
outstanding shares of Series C
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<PAGE>
Preferred Stock. Any redemption of shares of Series C Preferred Stock shall be
effected at a price per share in cash equal to the Stated Value plus an amount
equal to all accrued and unpaid dividends and distributions thereon to the date
of redemption. Except as provided in this paragraph (a) or elsewhere in the
Certificate of Incorporation, the Corporation shall have no right or obligation
to redeem any shares of Series C Preferred Stock.
(b) (i) Notice of any redemption of shares of Series C Preferred
Stock shall be mailed not less than thirty (30) nor more than sixty (60) days
prior to the fifth anniversary of the Issue Date to each holder of shares of
Series C Preferred Stock, at such holder's address as it appears on the transfer
books of the Corporation. Each such notice shall state: (w) the date fixed for
redemption, which shall be the fifth anniversary of the Issue Date, (x) the
place or places where the redemption price will be paid (if other than the
principal office of the Corporation), (y) the current Conversion Price and (z)
that dividends on the shares of Series C Preferred Stock will cease to accrue on
the date fixed for redemption.
(ii) Notice having been given pursuant to subparagraph (i) of
paragraph (b) of this Section 5, from and after the date specified therein as
the date of redemption, unless default shall be made by the Corporation in
providing for the payment of the applicable redemption price, all dividends on
the Series C Preferred Stock thereby called for redemption shall cease to
accrue, and all rights of the holders thereof as stockholders of the
Corporation, except the right to receive the applicable redemption price (but
without interest) and except the right to exercise any right of conversion,
shall cease and terminate.
Section 6. Reacquired Shares.
Any shares of Series C Preferred Stock converted, redeemed,
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof, and, if
necessary to provide for the lawful redemption or purchase of such shares, the
capital represented by such shares shall be reduced in accordance with the DGCL.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of another series of
Preferred Stock.
Section 7. Liquidation, Dissolution or Winding Up.
(a) In the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the holders of shares of
Series C Preferred Stock shall be entitled to receive out of the assets of the
Corporation available for distribution to its stockholders, an amount equal to
the Stated Value plus all accrued and unpaid dividends thereon to the date of
such payment ("Liquidation Preference"), and no distribution shall be made (i)
to the holders of shares of Common
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<PAGE>
Stock, Series A Preferred Stock or any other capital stock of the Corporation
ranking junior to the Series C Preferred Stock upon liquidation, dissolution or
winding up, unless, prior thereto, the holders of shares of Series C Preferred
Stock shall have received an amount equal to the Liquidation Preference per
share, or (ii) to the holders of shares of any capital stock of the Corporation
(including the Series B Preferred Stock) ranking on a parity with the Series C
Preferred Stock upon liquidation, dissolution or winding up, except
distributions made ratably on the Series C Preferred Stock and all such other
capital stock in proportion to the total amounts to which the holders of all
such shares are entitled upon such liquidation, dissolution or winding up of the
Corporation.
(b) In the event that the assets of the Corporation available for
distribution to the holders of the Series C Preferred Stock upon any voluntary
or involuntary liquidation, dissolution or winding up of the Corporation shall
be insufficient to pay in full all amounts to which such holders are entitled
pursuant to paragraph (a) of this Section 7, such assets of the Corporation
which are so available shall be allocated pro rata on a share-by-share basis
among all shares of Series C Preferred Stock at the time outstanding.
(c) Neither the consolidation, merger or other business combination
of the Corporation with or into any other Person or Persons nor the sale, lease,
exchange or conveyance of all or any part of the property, assets or business of
the Corporation, shall be deemed to be a liquidation, dissolution or winding up
of the Corporation for purposes of this Section 7.
Section 8. Conversion.
Each outstanding share of Series C Preferred Stock which has not
been redeemed pursuant to Section 5 shall automatically be deemed to have been
converted at the Conversion Price into shares of Common Stock, on the terms and
conditions set forth in this Section 8, without any further action on the part
of the holder thereof, on the day immediately following the fifth anniversary of
the Issue Date (a "Mandatory Conversion").
(a) Each share of Series C Preferred Stock converted in accordance
with this Section 8 shall be converted in the manner hereinafter set forth into
a number of fully-paid and nonassessable shares of Common Stock equal to the
result obtained (calculated to the nearest 1/10,000th of a share) by dividing
the Stated Value by the Conversion Price.
(b) The Conversion Price shall be adjusted from time to time as
follows:
(i) In case the Corporation shall at any time after the Issue Date
declare a dividend, or make a distribution, on the outstanding shares of
Common Stock in shares of
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<PAGE>
Common Stock or subdivide or reclassify the outstanding shares of Common
Stock into a greater number of shares of Common Stock or combine or
reclassify the outstanding shares of Common Stock into a smaller number of
shares of Common Stock, then, and in each such case,
(A) the Conversion Price as in effect immediately prior to
such event shall be adjusted by multiplying such Conversion Price by
a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately prior to such event and the
denominator of which is the number of shares of Common Stock
outstanding immediately after such event; and
(B) an adjustment made pursuant to this subparagraph (i) shall
become effective (I) in the case of any such dividend or
distribution, immediately after the close of business on the record
date for the determination of holders of shares of Common Stock
entitled to receive such dividend or distribution, or (II) in the
case of any such subdivision, reclassification or combination, at
the close of business on the day upon which such corporate action
becomes effective.
(ii) In case the Corporation shall issue shares of Common Stock (or
rights, options or warrants to purchase or other securities convertible
into or exchangeable for shares of Common Stock) at any time after the
Issue Date without consideration or at a price per share less than the
Current Market Price per share of Common Stock on the date of issuance of
such shares (or the date of issuance of such rights, options, warrants or
other convertible or exchangeable securities) (such Current Market Price
shall hereinafter be referred to as the "Trigger Price"), other than (w)
in a transaction to which subparagraph (ii) of paragraph (c) of Section 3
or subparagraph (i) of this paragraph (b) is applicable, (x) issuances of
shares of Common Stock pursuant to rights or options granted under any
Employee Benefit Plan, (y) upon conversion of or as a dividend on shares
of Series B Preferred Stock or Series C Preferred Stock or (z) pursuant
to the Rights, then, and in each such case
(A) the Conversion Price as in effect immediately prior to
such issuance shall be adjusted by multiplying such Conversion Price
by a fraction, (I) the numerator of which is the sum of (1) the
number of shares of Common Stock outstanding immediately prior to
such event and (2) the number of shares of Common Stock which the
aggregate consideration, if any, receivable by the Corporation for
the total number of shares of Common Stock so issued (or issuable
upon the exercise or conversion of any such rights, options,
warrants or other convertible or exchangeable securities) would
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<PAGE>
purchase at the Trigger Price, and (II) the denominator of which is
the sum of (1) the number of shares of Common Stock outstanding
immediately prior to such event and (2) the number of additional
shares of Common Stock issued (or issuable upon the exercise or
conversion of any such rights, options, warrants or other
convertible or exchangeable securities); and
(B) such adjustment shall become effective immediately after
the date of such issuance.
For purposes of this subparagraph (ii), the aggregate consideration
receivable by the Corporation in connection with the issuance of shares of
Common Stock or of rights, options or warrants to purchase or other
securities convertible into or exchangeable for shares of Common Stock
shall be deemed to be equal to the sum of the net offering price (without
giving effect to deductions for underwriting discounts or commissions and
expenses payable to third parties, if any) of all such securities plus the
aggregate amount, if any, payable upon exercise of any such rights,
options or warrants or conversion or exchange of any such convertible or
exchangeable securities into or for shares of Common Stock.
(iii) In case the Corporation shall be a party to any transaction
(including, without limitation, a merger, consolidation, sale of all or
substantially all of the Corporation's assets or recapitalization of the
Common Stock and excluding any transaction to which subparagraph (i) or
(ii) of this paragraph (b) or subparagraph (ii) of paragraph (c) of
Section 3 applies) in which the previously outstanding Common Stock
shall be changed into or, pursuant to the operation of law or the terms
of the transaction to which the Corporation is a party, exchanged for
different securities of the Corporation or common stock or other
securities of another corporation or interests in a noncorporate entity
or other property (including cash) or any combination of any of the
foregoing, then, as a condition of the consummation of such transaction,
lawful and adequate provision shall be made so that each holder of shares
of Series C Preferred Stock shall be entitled, upon conversion, to an
amount per share equal to (A) the aggregate amount of stock, securities,
cash and/or any other property (payable in kind), as the case may be,
into which or for which each share of Common Stock is changed or
exchanged times (B) the number of shares of Common Stock into which a
share of Series C Preferred Stock is convertible immediately prior to the
consummation of such transaction.
(c) In case the Corporation shall be a party to a transaction
described in subparagraph (iii) of paragraph (b) above, effective provision
shall be made (in form and substance reasonably satisfactory to the holders of a
majority of the then
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<PAGE>
outstanding shares of Series C Preferred Stock), in the articles or certificate
of incorporation of the resulting or surviving corporation or other corporation
issuing or delivering such shares, other securities or property or otherwise, so
that the provisions set forth herein for the protection of the conversion rights
of the Series C Preferred Stock shall thereafter be applicable, as nearly as
reasonably may be, to any such other shares of stock and other securities and
property deliverable upon conversion of the Series C Preferred Stock remaining
outstanding or other convertible stock or securities received by the holders in
place thereof; and any such resulting or surviving corporation or other
corporation issuing or delivering such shares, other securities or property
shall expressly assume the obligation to deliver, upon the exercise of the
conversion privilege, such shares, securities or property as the holders of the
Series C Preferred Stock remaining outstanding, or other convertible stock or
securities received by the holders in place thereof, shall be entitled to
receive, pursuant to the provisions hereof, and to make provision for the
protection of the conversion right as above provided. In case shares, securities
or property other than Common Stock shall be issuable or deliverable upon
conversion as aforesaid, then all references to Common Stock in paragraph (b) of
this Section 8 shall be deemed to apply, so far as provided and as nearly as is
reasonable, to any such shares, other securities or property.
(d) Any holder of any shares of Series C Preferred Stock may
exchange such holder's certificates representing Series C Preferred Stock for
certificates representing the shares of Common Stock into which such shares of
Series C Preferred Stock have been converted pursuant to a Mandatory Conversion,
by surrendering for such purpose to the Corporation, at its principal office or
at such other office or agency maintained by the Corporation for that purpose,
the certificate or certificates representing the shares of Series C Preferred
Stock to be automatically converted, accompanied by a written notice specifying
the name or names in which such holder wishes the certificate or certificates
for shares of Common Stock to be issued. In case such notice shall specify a
name or names other than that of such holder, such notice shall be accompanied
by payment of all transfer taxes payable upon the issuance of shares of Common
Stock in such name or names. Other than such taxes, the Corporation will pay any
and all issue and other taxes (other than taxes based on income) that may be
payable in respect of any issue or delivery of shares of Common Stock on
conversion of Series C Preferred Stock pursuant hereto. As promptly as
practicable after the surrender of such certificate or certificates and, if
applicable, payment of all transfer taxes (or the demonstration to the
satisfaction of the Corporation that such taxes have been paid), the Corporation
shall deliver or cause to be delivered certificates representing the number of
validly issued, fully paid and nonassessable full shares of Common Stock to
which the holder of shares of Series C Preferred Stock so converted shall be
entitled. A Mandatory Conversion
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<PAGE>
shall be deemed to have been effected at the close of business on the day
immediately following the fifth anniversary of the Issue Date. Upon the
effectiveness of a Mandatory Conversion, the rights of the holder thereof as to
the shares being converted shall cease except for the right to receive shares of
Common Stock, and the person entitled to receive the shares of Common Stock
shall be treated for all purposes as having become the record holder of such
shares of Common Stock at such time.
(e) In any case in which paragraph (b) of this Section 8 shall
require that an adjustment as a result of any event becomes effective after a
record date for such event, the Corporation may elect to defer until after the
occurrence of such event (i) issuing to the holder of any shares of Series C
Preferred Stock converted after such record date and before the occurrence of
such event the additional shares of Common Stock issuable upon such conversion
over and above the shares of Common Stock issuable upon such conversion on the
basis of the conversion rate prior to adjustment and (ii) paying to such holder
any amount in cash in lieu of a fractional share of Common Stock pursuant to
paragraph (g) below; and, in lieu of the shares the issuance of which is so
deferred, the Corporation shall issue due bills or other appropriate evidence of
the right to receive such shares.
(f) The Corporation will pay each holder of shares of Series C
Preferred Stock whose shares are converted the full amount of accrued and unpaid
dividends on such shares through but not including the effective date of such
conversion, which dividends shall be payable in cash out of funds of the
Corporation legally available for the payment of dividends or, at the option of
the Corporation, in whole or in part in fully paid and nonassessable full shares
of Common Stock, valued at the average Closing Price per share of Common Stock
for the thirty (30) consecutive Trading Days ending on the Trading Day
immediately preceding the effective date of such conversion.
(g) In connection with the conversion of any shares of Series C
Preferred Stock, no fractions of shares of Common Stock shall be issued, but in
lieu thereof the Corporation shall pay a cash adjustment in respect of such
fractional interest in an amount equal to such fractional interest multiplied by
the Current Market Price per share of Common Stock on the day on which such
shares of Series C Preferred Stock are deemed to have been converted.
(h) The Corporation shall at all times reserve and keep available
out of its authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of the Series C Preferred Stock, such number of shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all shares of Series C Preferred Stock then outstanding. The
Corporation shall from time to time, subject to and in accordance with the DGCL,
increase the authorized amount of Common Stock if
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<PAGE>
at any time the number of authorized shares of Common Stock remaining unissued
shall not be sufficient to permit the conversion at such time of all shares of
Series C Preferred Stock then outstanding. The Corporation shall cause any
shares of Common Stock issued upon conversion of Series C Preferred Stock to be
listed for trading on any national securities exchange on which the Common Stock
is at the time listed, and shall deliver such notices as may be required by such
exchange in connection with any such issuance.
(i) Notwithstanding anything to the contrary contained herein, if
adjustments of the Conversion Price have caused the Conversion Price to be lower
than the par value, if any, of the Common Stock, upon any conversion of shares
of Series C Preferred Stock the Corporation shall, to the maximum extent it is
legally able to do so, issue to the converting holder the shares of Common Stock
into which the shares of Series C Preferred Stock being converted are
convertible, and, in addition, the Corporation shall pay the converting holder
an amount in cash equal to the Current Market Price per share of Common Stock
multiplied by the number of shares and fractions thereof of Common Stock which
the converting holder would have been entitled to receive except for the
limitation on lawful issuance described in this paragraph.
(j) Notwithstanding anything to the contrary contained herein, any
adjustment in the Conversion Price pursuant to this Section 8 shall be made to
the nearest $.01.
(k) Upon the expiration of any rights, options or warrants to
purchase shares of Common Stock or the termination of any right to convert or
exchange any convertible or exchangeable securities for shares of Common Stock
without such conversion or exchange having occurred, or upon any change in the
amount payable upon exercise of any such rights, options or warrants or
conversion or exchange of any such convertible or exchangeable securities, the
Conversion Price shall thereupon be readjusted and shall thereafter be such as
it would have been had it been originally adjusted (or had the original
adjustment not been required, as the case may be) on the basis of (i) the only
shares of Common Stock so issued were the shares of Common Stock, if any,
actually issued or sold upon the exercise of such rights, options or warrants to
purchase or securities convertible into or exchangeable for shares of Common
Stock, (ii) such shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Corporation upon such exercise plus the
consideration, if any, actually received by the Corporation for the issuance,
sale or grant of all such rights, options or warrants to purchase or securities
convertible into or exchangeable for shares of Common Stock, whether or not
exercised and (iii) the changed amount so payable; provided, however, that no
such readjustment shall have the effect of increasing the Conversion Price by an
amount in excess of the amount of the adjustment initially made in respect of
the issuance, sale or
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<PAGE>
grant of such rights, options or warrants to purchase, or securities convertible
into or exchangeable for, shares of Common Stock.
Section 9. Reports as to Adjustments.
Whenever the Conversion Price is adjusted as provided in Section 8,
the Corporation shall promptly mail to the holders of record of the outstanding
shares of Series C Preferred Stock at their respective addresses as the same
shall appear in the Corporation's stock records a notice stating that the
Conversion Price has been adjusted and setting forth the new Conversion Price
and the new number of shares of Common Stock (or describing the new stock,
securities, cash or other property) into which each share of Series C Preferred
Stock is convertible as a result of such adjustment, a brief statement of the
facts requiring such adjustment and the computation thereof, and when such
adjustment became effective.
Section 10. Registration of Transfer.
The Corporation shall keep at its principal office a register for
the registration of Series C Preferred Stock. Upon the surrender of any
certificate representing Series C Preferred Stock at such place, the Corporation
shall, at the request of the record holder of such certificate, execute and
deliver (at the Corporation's expense) a new certificate or certificates in
exchange therefor representing in the aggregate the number of shares of Series C
Preferred Stock represented by the surrendered certificate. Each such new
certificate shall be registered in such name and shall represent such number of
shares of Series C Preferred Stock as is requested by the holder of the
surrendered certificate and shall be substantially identical in form to the
surrendered certificate, and dividends shall accrue on the Series C Preferred
Stock represented by such new certificate from the date to which dividends have
been fully paid on such Series C Preferred Stock represented by the surrendered
certificate.
Section 11. Replacement.
Upon receipt of evidence reasonably satisfactory to the Corporation
(an affidavit of the registered holder shall be satisfactory) of the ownership
and the loss, theft, destruction or mutilation of any certificate evidencing
shares of Series C Preferred Stock, and in the case of any such loss, theft or
destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation or, in the case of any such mutilation upon surrender of such
certificate, the Corporation shall (at its expense) execute and deliver in lieu
of such certificate a new certificate of like kind representing the number of
shares of Series C Preferred Stock represented by such lost, stolen, destroyed
or mutilated certificate dated the date of such lost, stolen, destroyed or
mutilated certificate, and dividends shall accrue on the Series C Preferred
Stock represented by such new
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<PAGE>
certificate from the date to which dividends have been fully paid on such lost,
stolen, destroyed or mutilated certificate.
Section 12. Legal Expenses.
The Corporation agrees that, in the event that a holder or holders
of Series C Preferred Stock shall bring any legal action or proceeding to
enforce or to seek damages or other relief arising from an alleged breach of any
term or provision of the Series C Preferred Stock by the Corporation and such
holder or holders prevail in any such action or proceeding, such prevailing
holder or holder shall be entitled to an award of, and the Corporation shall
pay, the reasonable fees and expense of legal counsel to such prevailing holder
or holders.
Section 13. Notices.
Except as otherwise expressly provided hereunder, all notices
referred to herein shall be in writing and shall be delivered by registered or
certified mail, return receipt requested and postage prepaid, or by reputable
overnight courier service, charges prepaid, and shall be deemed to have been
given when so mailed or sent (i) to the Corporation, at its principal executive
offices, and (ii) to any stockholder, at such holder's address as it appears in
the stock records of the Corporation (unless otherwise indicated in writing by
any such holder).
* * *
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<PAGE>
IN WITNESS WHEREOF, Graham-Field Health Products, Inc. has caused
this Certificate of Designations of Series C Cumulative Convertible Preferred
Stock to be duly executed by its President and attested to by its Secretary and
has caused its corporate seal to be affixed hereto, this ____ day of __________,
1996.
GRAHAM-FIELD HEALTH PRODUCTS, INC.
By:___________________________
Chairman of the Board and
Chief Executive Officer
[SEAL]
Attest:
By: ____________________________
Secretary
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<PAGE>
EXHIBIT C
Term Sheet for Unsecured
Subordinated Promissory Note
Principal Amount: $4,000,000
Interest Rate: 7.7% per annum
Maturity Date: April 1, 2001
Reduction of
Principal Amount: To the extent that punitive damage
awards in any product liability actions
involving a death prior to the Effective
Time of the Merger are not reimbursed
pursuant to any insurance policies
Subordination: Principal interest payments subordinated
to Senior Indebtedness of Parent on
terms satisfactory to the holders of
Senior Indebtedness.
Covenants and
Events of Default: To be mutually agreed upon
C-1
<PAGE>
EXHIBIT D
PARENT AMENDMENT
1. The first paragraph of Article FOURTH shall be amended in its entirety to
read as follows:
"FOURTH: the total number of shares of all classes of stock which
the Company is authorized to issue is 61,000,000 shares. All such shares
are to have a par value and are classified as 1,000,000 shares of
Preferred Stock, each share of such class having a par value of $.01, and
60,000,000 shares of Common Stock, each share of such class having a par
value of $.025."
2. Articles NINTH, ELEVENTH AND TWELFTH shall be amended and restated in
their entirety to read as follows:
"NINTH: Subject to the rights of the holders of shares of any series
of Preferred Stock or any other series or class of stock as set forth in
this Certificate of Incorporation to elect additional directors under
specified circumstances or to consent to actions taken by the Company
which specifically require the approval of such holders, any action
required or permitted to be taken by the stockholders of the Company must
be affected at an annual or special meeting of stockholders of the Company
and may not be effected by any consent in writing in lieu of a meeting of
such stockholders. Special meetings of stockholders, unless otherwise
prescribed by statute, may be called at any time by the Chief Executive
Officer or the Secretary at the written request of a majority of the Board
of Directors.
Notwithstanding anything in this Certificate of Incorporation to the
contrary, the affirmative vote of at least 80 percent of the voting power
of the then outstanding Voting Stock (as defined below), voting together
as a single class, shall be required to alter, amend or repeal, or adopt
any provision inconsistent with, this Article NINTH. For purposes of this
Certificate of Incorporation, "Voting Stock" shall mean the outstanding
shares of capital stock of the Company entitled to vote generally in the
election of directors."
"ELEVENTH: (A) Subject to the rights of the holders of shares of any
series of Preferred Stock or any other series or class of stock as set
forth in the Certificate of Incorporation to elect additional directors
under specified circumstances, the number of directors of the Company
shall be fixed by the by-laws of the Company and may be increased or
decreased from time to time in such manner as may be prescribed in the
by-laws.
D-1
<PAGE>
(B) Unless and except to the extent that the by-laws of the Company
shall so require, the election of directors of the Company need not be by
written ballot.
(C) The directors, other than those who may be elected by the
holders of shares of any series of Preferred Stock or any other series or
class of stock as set forth in this Certificate of Incorporation, shall be
divided into three classes, and designated as Class I, Class II and Class
III. The term of office of the first class shall expire at the next annual
meeting of the Company after their election, the term of office of the
second class shall expire at the second succeeding annual meeting and the
term of office of the third class at the third succeeding annual meeting.
At each succeeding annual meeting of stockholders of the Company, the
successors of the class of directors whose term expires at that meeting
shall be elected for a term expiring at the annual meeting of stockholders
held in the third year following the year of their election, and until
their successors are elected and qualified.
(D) Advance notice of stockholder proposals and stockholder
nominations for the election of directors shall be given in the manner
provided in the by-laws of the Company.
(E) Subject to the rights of the holders of shares of any series of
Preferred Stock or any other series or class of stock as set forth in this
Certificate of Incorporation to elect additional directors under specified
circumstances, any director may be removed from office at any time, but
only for cause and only by the affirmative vote of the holders of more
than 50 percent of the voting power of the then outstanding Voting Stock,
voting together as a single class.
(F) Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, the affirmative vote of the holders of at
least 80 percent of the voting power of the then outstanding Voting Stock,
voting together as a single class, shall be required to alter, amend or
repeal, or adopt any provision inconsistent with, this Article ELEVENTH."
"TWELFTH: (A) Notwithstanding anything contained in this Certificate
of Incorporation to the contrary, Sections 2 and 12 of Article I, Sections
2 and 11 of Article II and Article XI of the by-laws of the Company shall
not be altered, amended or repealed, and no provision inconsistent
therewith shall be adopted, by the stockholders without the affirmative
vote of the holders of at least 80 percent of the voting power of the then
outstanding Voting Stock, voting together as a single class.
D-2
<PAGE>
(B) Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, the affirmative vote of at least 80 percent
of the voting power of the then outstanding Voting Stock, voting together
as a single class, shall be required to alter, amend or repeal, or adopt
any provision inconsistent with, this Article TWELFTH."
D-3
<PAGE>
EXHIBIT E
[Form of Affiliate's Agreement]
____________, 1996
Graham-Field Health Products, Inc.
400 Rabro Drive East
Hauppauge, New York 11788
Ladies and Gentlemen:
I have been advised that as of the date hereof I may be deemed to be an
"affiliate" of Everest & Jennings International Ltd., a Delaware corporation
(the "Company"), as that term is defined for purposes of paragraphs (c) and (d)
of Rule 145 of the rules and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Act"). Neither my entering into this agreement, nor
anything contained herein, shall be deemed an admission on my part that I am
such an "affiliate".
Pursuant to the terms of the Agreement and Plan of Merger dated as of
September 3, 1996 (the "Merger Agreement"), among Graham-Field Health Products,
Inc., a Delaware corporation ("Parent"), E&J Acquisition Corp., a Delaware
corporation ("Sub"), the Company and BIL (Far East Holdings) Limited providing
for the merger of Sub with and into the Company (the "Merger"), and as a result
of the Merger, I will receive shares of Parent's common stock, par value $.025
per share (the "Parent Securities"), in exchange for the shares of common stock,
par value $.01 per share, of the Company owned by me at the Effective Time (as
defined in the Merger Agreement) of the Merger.
I represent and warrant to Parent that in such event:
A. I shall not make any sale, transfer or other disposition of the Parent
Securities in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed its requirements and other applicable limitations upon my ability to
sell, transfer or otherwise dispose of Parent Securities, with my counsel or
counsel for the Company.
E-1
<PAGE>
C. I have been advised that the issuance of Parent Securities to me
pursuant to the Merger has been registered with the Commission under the Act on
a Registration Statement on Form S-4. However, I have also been advised that,
since at the time the Merger was submitted for a vote of the stockholders of the
Company I may have been deemed to have been an affiliate of the Company and a
distribution by me of Parent Securities has not been registered under the Act,
the Parent Securities must be held by me indefinitely unless (i) a distribution
of Parent Securities by me has been registered under the Act, (ii) a sale of
Parent Securities by me is made in conformity with the volume and other
limitations of Rule 145 promulgated by the Commission under the Act or (iii) in
the opinion of counsel reasonably acceptable to Parent, some other exemption
from registration is available with respect to a proposed sale, transfer or
other disposition of the Parent Securities by me.
D. [Except for the Registration Rights Agreement (as defined in the Merger
Agreement),]* I understand that Parent is under no obligation to register the
sale, transfer or other disposition of Parent Securities by me or on my behalf
or to take any other action necessary in order to make compliance with an
exemption from registration available.
E. I also understand that stop transfer instructions will be given to
Parent's transfer agents with respect to the Parent Securities and that there
will be placed on the certificates for the Parent Securities, or any
substitutions therefor, a legend stating in substance:
"The shares represented by this certificate were issued in a
transaction to which Rule 145 promulgated under the Securities Act of
1933, as amended, applies. The shares represented by this certificate may
only be transferred in accordance with the terms of an agreement dated
____________, 1996, between the registered holder hereof and Graham-Field
Health Products, Inc. (the "Corporation"), a copy of which agreement is on
file at the principal offices of the Corporation."
F. I also understand that unless the transfer by me of my Parent
Securities has been registered under the Act or is a sale made in conformity
with the provisions of Rule 145, Parent reserves the right to put the following
legend on the certificates issued to my transferee:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and were acquired from a
person who received such shares in a transaction to which Rule 145
- ----------
* This provision will only apply to BIL's Affiliate Agreement.
E-2
<PAGE>
promulgated under such Act applies. The shares have been acquired by the
holder not with a view to, or for resale in connection with, any
distribution thereof within the meaning of such Act and may not be sold,
pledged or otherwise transferred except in accordance with an exemption
from the registration requirements of such Act."
It is understood and agreed that the legends set forth in paragraph E and
F above shall be removed by delivery of substitute certificates without such
legend as permitted by Rule 145 or if the undersigned shall have delivered to
Parent a copy of a letter from the staff of the Commission, or an opinion of
counsel reasonably acceptable to Parent to the effect that such legend is not
required for purposes of the Act.
Very truly yours,
_________________________________
Name:
Accepted this ____ day of
_____________, 1996, by:
GRAHAM-FIELD HEALTH PRODUCTS, INC.
By____________________________
Name:
Title:
E-3
EXHIBIT 4(a)
FIRST AMENDMENT TO RIGHTS AGREEMENT
This Amendment, dated as of September 3, 1996 (the "Amendment"),
between Graham-Field Health Products, Inc., a Delaware corporation (the
"Company"), and American Stock Transfer & Trust Company (the "Rights Agent").
WHEREAS, the Company and the Rights Agent are parties to a Rights
Agreement dated as of July 21, 1989 (the "Agreement"); and
WHEREAS, pursuant to Section 6.3 of the Agreement, the Company and the
Rights Agent desire to amend the Agreement as set forth below.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Amendments to Section 1.
(a) The definitions of "Beneficial Owner", and to have "Beneficial
Ownership" of, and to "Beneficially Own" any security, are amended by adding the
following at the end of paragraph (d) of Section 1.1 thereof:
"Notwithstanding anything contained in this Agreement to the contrary, BIL
shall not be deemed to be the Beneficial Owner of, or to Beneficially Own,
any of the Voting Shares of the Company solely by virtue of the approval,
execution or delivery of the Merger Agreement or the Stockholder
Agreement."
(b) The following definitions are added to Section 1.1 of the
Agreement:
""Acquisition Corp." shall mean E&J Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of the Company."
""BIL" shall mean BIL (Far East Holdings) Limited, a Hong Kong corporation,
and its Associates and Affiliates; provided, that if BIL transfers to any
Person Beneficial Ownership of all Voting Shares of the Company then owned
by BIL, then "BIL" shall mean such Person and such Person's Affiliates and
Associates."
""BIL Voting Shares" shall mean (i) any Voting Shares of the Company owned
by BIL which were acquired by BIL in accordance with the Merger Agreement
or the Stockholder Agreement, and (ii) any Common Shares issued by the
Company to BIL upon conversion of or as a dividend on the shares referred
to in clause (i) above."
<PAGE>
""E&J" shall mean Everest & Jennings International Ltd., a Delaware
corporation."
""Effective Time" shall mean the date that the Merger becomes effective, as
described in the Merger Agreement."
""Merger" shall mean the merger of E&J with and into Acquisition Corp. in
accordance with the General Corporation Law of the State of Delaware upon
the terms and subject to the conditions set forth in the Merger Agreement."
""Merger Agreement" shall mean the Agreement and Plan of Merger, dated as
of September 3, 1996, by and among E&J, BIL, Acquisition Corp. and the
Company, as the same may be amended from time to time.
""Stockholder Agreement" shall mean the Stockholder Agreement, dated as of
September 3, 1996, by and between the Company and BIL, as the same may be
amended from time to time.
(c) The following definitions are amended in their entirety to read as
follows:
""Redemption Price" means a price of $.0001 per Right, subject to
adjustment as set forth in Article 5 hereof."
""Acquiring Person" shall mean any Person who or which, together with all
Affiliates and Associates of such Person, shall be the Beneficial Owner of
twenty percent (20%) or more of the Voting Shares of the Company then
outstanding, but shall not include the Company, any Subsidiary of the
Company or any employee benefit plan of the Company or any Subsidiary of
the Company, or any Person or entity organized, appointed or established by
the Company or such Subsidiary of the Company for or pursuant to the terms
of any such employee benefit plan. Notwithstanding the foregoing: (i) (x)
BIL shall not be deemed an Acquiring Person by virtue of its being the
Beneficial Owner of any BIL Voting Shares and (y) following the Effective
Time, BIL shall be deemed an Acquiring Person if it becomes the Beneficial
Owner of any Voting Shares of the Company (other than BIL Voting Shares and
any Voting Shares of the Company issued by the Company to all holders of
any class or series of capital stock of the Company by way of a dividend,
stock split, rights offering, reclassification or similar transaction); and
(ii) no Person shall become an Acquiring Person as the result of an
acquisition of Voting Shares of the Company by the Company which, by
reducing the number of such Voting Shares outstanding, increases the
proportionate number of such Voting Shares Beneficially Owned by such
Person to twenty percent (20%) or more of the Voting Shares of the Company
then outstanding; provided, however, that if a Person shall become the
Beneficial Owner of twenty percent
2
<PAGE>
(20%) or more of the Voting Shares of the Company then outstanding by
reason of share acquisitions or redemptions by the Company and shall after
such share acquisitions or redemptions by the Company, become the
Beneficial Owner of any additional Voting Shares of the Company, then such
Persons shall be deemed to be an Acquiring Person."
Section 2. Amendment to Section 5.2.
The following sentence is added to the end of Section 5.2:
"The redemption of the Rights pursuant to this Section may be made
effective at such time, on such basis and with such conditions as the Board of
Directors in its sole discretion may establish."
Section 3. New Section 6.19.
The following is added as a new Section 6.19 to the Agreement:
"Section 6.19. E&J Merger, etc.
Notwithstanding anything in this Agreement to the contrary, none of
the approval, execution or delivery of the Merger Agreement or the Stockholder
Agreement shall cause (i) BIL to be an Acquiring Person, (ii) a Stock
Acquisition Date to occur or (iii) a Separation Date to occur in accordance with
the terms hereof."
Section 4. Severability. If any term, provision, covenant or
restriction of this Amendment is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Amendment shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
Section 5. Governing Law. This Amendment shall be deemed to be a
contract made under the laws of the State of Delaware and for all purposes shall
be governed by and construed in accordance with the laws of such State
applicable to contracts made and to be performed entirely within such State.
Section 6. Counterparts. This Amendment may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
Section 7. Effect of Amendment. Except as expressly modified herein
the Agreement shall remain in full force and effect.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed all as of the day and year first above written.
GRAHAM-FIELD HEALTH PRODUCTS, INC.
/s/ Richard Kolodny
---------------------------------
Name: Richard S. Kolodny
Title: Vice President,
General Counsel and
Secretary
AMERICAN STOCK TRANSFER & TRUST
COMPANY
/s/ Herbert L. Lemmer
---------------------------------
Name: Herbert L. Lemmer
Title: Vice President
4
EXHIBIT 4(b)
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GRAHAM-FIELD HEALTH PRODUCTS, INC.
and
AMERICAN STOCK TRANSFER & TRUST COMPANY, as Rights Agent
RIGHTS AGREEMENT
Dated as of September 3, 1996
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<PAGE>
TABLE OF CONTENTS
Page
----
Section 1. Certain Definitions...................................... 1
Section 2. Appointment of Rights Agent.............................. 9
Section 3. Issue of Right Certificates.............................. 9
Section 4. Form of Right Certificates............................... 12
Section 5. Countersignature and Registration........................ 13
Section 6. Transfer, Split Up, Combination and Exchange of
Right Certificates; Mutilated, Destroyed, Lost or
Stolen Right Certificates................................ 14
Section 7. Exercise of Rights; Purchase Price; Expiration
Date of Rights........................................... 16
Section 8. Cancellation and Destruction of Right
Certificates............................................. 18
Section 9. Availability of Preferred Shares......................... 19
Section 10. Preferred Shares Record Date............................. 20
Section 11. Adjustment of Purchase Price, Number of Shares
or Number of Rights...................................... 20
Section 12. Certificate of Adjusted Purchase Price or
Number of Shares......................................... 34
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power.................................. 35
Section 14. Fractional Rights and Fractional Shares.................. 37
Section 15. Rights of Action......................................... 39
Section 16. Agreement of Right Holders............................... 40
Section 17. Right Certificate Holder Not Deemed a
Stockholder.............................................. 41
Section 18. Concerning the Rights Agent.............................. 41
<PAGE>
Section 19. Merger or Consolidation or Change of Name of
Rights Agent............................................. 42
Section 20. Duties of Rights Agent................................... 44
Section 21. Change of Rights Agent................................... 48
Section 22. Issuance of New Right Certificates....................... 49
Section 23. Redemption............................................... 50
Section 24. Exchange................................................. 51
Section 25. Notice of Certain Events................................. 54
Section 26. Notices.................................................. 56
Section 27. Supplements and Amendments............................... 56
Section 28. Successors............................................... 58
Section 29. Benefits of this Agreement............................... 58
Section 30. Severability............................................. 58
Section 31. Governing Law............................................ 58
Section 32. Counterparts............................................. 59
Section 33. Descriptive Headings..................................... 59
Section 34. Administration........................................... 59
Exhibit A - Form of Certificate of Designations
Exhibit B - Form of Right Certificate
Exhibit C - Summary of Rights to Purchase Preferred
Shares
ii
<PAGE>
Agreement, dated as of September 3, 1996, between Graham- Field
Health Products, Inc., a Delaware corporation (the "Company"), and American
Stock Transfer & Trust Company, as Rights Agent (the "Rights Agent").
WHEREAS, the Board of Directors of the Company has authorized and
declared a dividend of one preferred share purchase right (a "Right") for each
Common Share (as hereinafter defined) of the Company outstanding at the Close of
Business on September 17, 1996 (the "Record Date"), each Right representing the
right to purchase one one-hundredth of a Preferred Share (as hereinafter
defined), upon the terms and subject to the conditions herein set forth, and has
further authorized and directed the issuance of one Right with respect to each
Common Share that shall become outstanding between the Record Date and the
earliest of the Distribution Date, the Redemption Date and the Final Expiration
Date (as such terms are hereinafter defined);
NOW THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates and Associates
(as such terms are hereinafter defined)
<PAGE>
of such Person, shall be the Beneficial Owner (as such term is hereinafter
defined) of 15% or more of the Voting Shares then outstanding, but shall not
include the Company, any Subsidiary (as such term is hereinafter defined) of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company, or any entity holding Voting Shares for or pursuant to the terms of any
such plan. Notwithstanding the foregoing: (i) (x) BIL shall not be deemed an
Acquiring Person by virtue of its being the Beneficial Owner of any BIL Voting
Shares and (y) following the Effective Time, BIL shall be deemed an Acquiring
Person if it becomes the Beneficial Owner of any Voting Shares (other than BIL
Voting Shares and any Voting Shares issued by the Company to all holders of any
class or series of capital stock of the Company by way of a dividend, stock
split, rights offering, reclassification or similar transaction); and (ii) no
Person shall become an "Acquiring Person" as the result of an acquisition of
Voting Shares which, by reducing the number of shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to 15% or more
of the Voting Shares then outstanding; provided, however, that if a Person shall
become the Beneficial Owner of 15% or more of the Voting Shares then outstanding
by reason of share purchases by the Company and shall, after such share
purchases by the Company, become the Beneficial Owner of any additional Voting
Shares (other than any Voting Shares issued by the Company to all holders of any
class or series of capital stock of the Company by way of a dividend, stock
split, rights offering, reclassification
2
<PAGE>
or similar transaction), then such Person shall be deemed to be an "Acquiring
Person". Notwithstanding the foregoing, if the Board of Directors of the Company
determines in good faith that a Person who would otherwise be an "Acquiring
Person", as defined pursuant to the foregoing provisions of this paragraph (a),
has become such inadvertently, and such Person divests as promptly as
practicable a sufficient number of Voting Shares so that such Person would no
longer be an "Acquiring Person," as defined pursuant to the foregoing provisions
of this paragraph (a), then such Person shall not be deemed to be an "Acquiring
Person" for any purposes of this Agreement.
(b) "Acquisition Corp." shall mean E&J Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of the Company.
(c) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as in effect on the date of this Agreement.
(d) A Person shall be deemed the "Beneficial Owner" of and shall be
deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly;
3
<PAGE>
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (other than customary agreements with and
between underwriters and selling group members with respect to a bona fide
public offering of securities), or upon the exercise of conversion rights,
exchange rights, rights (other than these Rights), warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, securities tendered pursuant
to a tender or exchange offer made by or on behalf of such Person or any
of such Person's Affiliates or Associates until such tendered securities
are accepted for purchase or exchange; or (B) the right to vote pursuant
to any agreement, arrangement or understanding; provided further, however,
that a Person shall not be deemed the Beneficial Owner of, or to
beneficially own, any security if the agreement, arrangement or
understanding to vote such security (1) arises solely from a revocable
proxy or consent given to such Person in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the
applicable rules and regulations promulgated under the Exchange Act and
(2) is not also then reportable on Schedule 13D under the Exchange Act (or
any comparable or successor report); or
4
<PAGE>
(iii) which are beneficially owned, directly or indirectly, by any
other Person with which such Person or any of such Person's Affiliates or
Associates has any agreement, arrangement or understanding (other than
customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities) for the
purpose of acquiring, holding, voting (except to the extent contemplated
by the proviso to Section 1(d)(ii)(B)) or disposing of any securities of
the Company.
Notwithstanding anything in this definition of Beneficial Owner to
the contrary, the phrase "then outstanding", when used with reference to a
Person's beneficial ownership of securities of the Company, shall mean the
number of such securities then issued and outstanding together with the number
of such securities not then actually issued and outstanding which such Person
would be deemed to own beneficially hereunder.
Notwithstanding the foregoing, (i) BIL shall not be deemed the
Beneficial Owner of, or to beneficially own, any of the Voting Shares solely by
virtue of the approval, execution or delivery of the Merger Agreement or the
Stockholder Agreement; and (ii) none of the Company's directors or officers
shall be deemed the Beneficial Owner of, or to beneficially own, any Voting
Shares owned by any other director or officer of the Company solely by virtue of
such persons acting in their capacities as such, including, without limitation,
in connection
5
<PAGE>
with any formulation and publication of the Board of Directors' recommendation
of a position, and any actions taken in furtherance thereof, with respect to any
acquisition proposal relating to the Company, a tender or exchange offer for any
Voting Shares or any solicitation of proxies with respect to any Voting Shares.
(e) "BIL" shall mean BIL (Far East Holdings) Limited, a Hong Kong
corporation, and its Associates and Affiliates; provided, that if BIL transfers
to any Person beneficial ownership of all Voting Shares then owned by BIL, then
"BIL" shall mean such Person and such Person's Affiliates and Associates.
(f) "BIL Voting Shares" shall mean (i) any Voting Shares owned by
BIL which were acquired by BIL in accordance with the Merger Agreement or the
Stockholder Agreement and (ii) any Common Shares of the Company issued by the
Company to BIL upon conversion of or as a dividend on the shares referred to in
clause (i) above.
(g) "Business Day" shall mean any day other than a Saturday, a
Sunday or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
(h) "Close of Business" on any given date shall mean 5:00 P.M.,
Eastern time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., Eastern time, on the next succeeding
Business Day.
6
<PAGE>
(i) "Common Shares" when used with reference to the Company shall
mean the shares of common stock, par value $.025 per share, of the Company.
"Common Shares" when used with reference to any Person other than the Company
shall mean the capital stock (or equity interest) with the greatest voting power
of such other Person or, if such other Person is a Subsidiary of another Person,
the Person or Persons which ultimately control such first-mentioned Person.
(j) "Distribution Date" shall have the meaning set forth in Section
3(a) hereof.
(k) "E&J" shall mean Everest & Jennings International Ltd., a
Delaware corporation.
(l) "Effective Time" shall mean the date that the Merger becomes
effective, as described in the Merger Agreement.
(m) "Final Expiration Date" shall have the meaning set forth in
Section 7(a) hereof.
(n) "Merger" shall mean the merger of E&J with and into Acquisition
Corp. in accordance with the General Corporation Law of the State of Delaware
upon the terms and subject to the conditions set forth in the Merger Agreement.
(o) "Merger Agreement" shall mean the Agreement and Plan of Merger,
dated as of September 3, 1996, by and among E&J, Acquisition Corp., BIL and the
Company, as the same shall be amended from time to time.
7
<PAGE>
(p) "Person" shall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of such entity.
(q) "Preferred Shares" shall mean shares of Series A Junior
Participating Preferred Stock, par value $.01 per share, of the Company having
the rights and preferences set forth in the Form of Certificate of Designations
attached to this Agreement as Exhibit A.
(r) "Purchase Price" shall have the meaning set forth in Section
7(b) hereof.
(s) "Redemption Date" shall have the meaning set forth in Section
7(a) hereof.
(t) "Redemption Price" shall have the meaning set forth in Section
23(a) hereof.
(u) "Shares Acquisition Date" shall mean the first date of public
announcement by the Company or an Acquiring Person that an Acquiring Person has
become such.
(v) "Stockholder Agreement" shall mean the Stockholder Agreement,
dated as of September 3, 1996, by and between the Company, BIL and
Irwin Selinger, as the same shall be amended from time to time.
(w) "Subsidiary" of any Person shall mean any corporation or other
entity of which a majority of the voting
8
<PAGE>
power of the voting equity securities or equity interest is owned, directly or
indirectly, by such Person.
(x) "Voting Shares" shall mean shares of any class or series of
capital stock of the Company entitled to vote generally in the election of
directors, including, without limitation, the Common Shares of the Company and,
following the Effective Time, the Parent Series B Preferred Stock and the Parent
Series C Preferred Stock (as such terms are defined in the Merger Agreement).
Section 2. Appointment of Rights Agent. The Company hereby appoints
the Rights Agent to act as agent for the Company and the holders of the Rights
(who, in accordance with Section 3 hereof, shall prior to the Distribution Date
also be the holders of the Common Shares of the Company) in accordance with the
terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such co-Rights Agents as
it may deem necessary or desirable.
Section 3. Issue of Right Certificates. (a) Until the earlier of (i)
the tenth day after the Shares Acquisition Date or (ii) the tenth Business Day
(or such later date as may be determined by action of the Board of Directors
prior to such time as any Person becomes an Acquiring Person) after the date of
the commencement by any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company or any entity holding Voting Shares for or pursuant to the terms of any
such plan) of,
9
<PAGE>
or of the first public announcement of the intention of any Person (other than
the Company, any Subsidiary of the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company or any entity holding Voting Shares
for or pursuant to the terms of any such plan) to commence, a tender or exchange
offer the consummation of which would result in any Person becoming an Acquiring
Person (including any such date which is after the date of this Agreement and
prior to the issuance of the Rights; the earlier of such dates being herein
referred to as the "Distribution Date"), (x) the Rights will be evidenced
(subject to the provisions of Section 3(b) hereof) by the certificates for
Common Shares of the Company registered in the names of the holders thereof
(which certificates shall also be deemed to be Right Certificates) and not by
separate Right Certificates, and (y) the right to receive Right Certificates
will be transferable only in connection with the transfer of Common Shares of
the Company. As soon as practicable after the Distribution Date, the Company
will prepare and execute, the Rights Agent will countersign, and the Company
will send or cause to be sent (and the Rights Agent will, if requested, send) by
first-class, insured, postage-prepaid mail, to each record holder of Common
Shares of the Company as of the Close of Business on the Distribution Date, at
the address of such holder shown on the records of the Company, a Right
Certificate, in substantially the form of Exhibit B hereto (a "Right
Certificate"), evidencing one Right for each Common Share of the Company so
held. As of the
10
<PAGE>
Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
(b) On the Record Date, or as soon as practicable thereafter, the
Company will send a copy of a Summary of Rights to Purchase Preferred Shares, in
substantially the form of Exhibit C hereto (the "Summary of Rights"), by
first-class, postage-prepaid mail, to each record holder of Common Shares of the
Company as of the Close of Business on the Record Date, at the address of such
holder shown on the records of the Company. With respect to certificates for
Common Shares of the Company outstanding as of the Record Date, until the
Distribution Date, the Rights will be evidenced by such certificates registered
in the names of the holders thereof together with a copy of the Summary of
Rights attached thereto. Until the Distribution Date (or the earlier of the
Redemption Date or the Final Expiration Date), the surrender for transfer of any
certificate for Common Shares of the Company outstanding on the Record Date,
with or without a copy of the Summary of Rights attached thereto, shall also
constitute the transfer of the Rights associated with the Common Shares of the
Company represented thereby.
(c) Certificates for Common Shares of the Company which become
outstanding (including, without limitation, reacquired Common Shares of the
Company referred to in the last sentence of this paragraph (c)) after the Record
Date but prior to the earliest of the Distribution Date, the Redemption Date or
11
<PAGE>
the Final Expiration Date shall have impressed on, printed on, written on or
otherwise affixed to them the following legend:
This certificate also evidences and entitles the holder hereof to certain
rights as set forth in a Rights Agreement between Graham-Field Health
Products, Inc. and American Stock Transfer & Trust Company, dated as of
September 3, 1996 (the "Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is on file at the
principal executive offices of Graham-Field Health Products, Inc. Under
certain circumstances, as set forth in the Rights Agreement, such Rights
will be evidenced by separate certificates and will no longer be evidenced
by this certificate. Graham-Field Health Products, Inc. will mail to the
holder of this certificate a copy of the Rights Agreement without charge
after receipt of a written request therefor. Under certain circumstances,
as set forth in the Rights Agreement, Rights issued to any Person who
becomes an Acquiring Person (as defined in the Rights Agreement) may
become null and void.
With respect to certificates for Common Shares of the Company containing the
foregoing legend, until the Distribution Date, the Rights associated with the
Common Shares of the Company represented by such certificates shall be evidenced
by such certificates alone, and the surrender for transfer of any such
certificate shall also constitute the transfer of the Rights associated with the
Common Shares represented thereby. In the event that the Company purchases or
acquires any Common Shares of the Company after the Record Date but prior to the
Distribution Date, any Rights associated with such Common Shares of the Company
shall be deemed cancelled and retired so that the Company shall not be entitled
to exercise any Rights associated with the Common Shares of the Company which
are no longer outstanding.
Section 4. Form of Right Certificates. The Right Certificates (and
the forms of election to purchase Preferred
12
<PAGE>
Shares and of assignment to be printed on the reverse thereof) shall be
substantially the same as Exhibit B hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions of Section 22
hereof, the Right Certificates shall entitle the holders thereof to purchase
such number of one one-hundredths of a Preferred Share as shall be set forth
therein at the Purchase Price, but the number of such one one-hundredths of a
Preferred Share and the Purchase Price shall be subject to adjustment as
provided herein.
Section 5. Countersignature and Registration. The Right Certificates
shall be executed on behalf of the Company by its Chairman of the Board, its
Chief Executive Officer, its President, any of its Vice Presidents, or its
Treasurer, either manually or by facsimile signature, shall have affixed thereto
the Company's seal or a facsimile thereof, and shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Right Certificates shall be manually countersigned by
the Rights Agent and shall not be valid for any purpose unless countersigned. In
case any officer of the Company who shall have signed any of the Right
Certificates shall cease to be such officer of the Company before
13
<PAGE>
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the person who signed such Right Certificates had not ceased to be such officer
of the Company; and any Right Certificate may be signed on behalf of the Company
by any person who, at the actual date of the execution of such Right
Certificate, shall be a proper officer of the Company to sign such Right
Certificate, although at the date of the execution of this Rights Agreement any
such person was not such an officer.
Following the Distribution Date, the Rights Agent will keep or cause
to be kept, at its principal office, books for registration and transfer of the
Right Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Right Certificates, the number of
Rights evidenced on its face by each of the Right Certificates and the date of
each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject
to the provisions of Section 14 hereof, at any time after the Close of Business
on the Distribution Date, and at or prior to the Close of Business on the
earlier of the Redemption Date or the Final Expiration Date, any Right
Certificate or Right Certificates (other than Right Certificates representing
Rights that have become void pursuant
14
<PAGE>
to Section 11(a)(ii) hereof or that have been exchanged pursuant to Section 24
hereof) may be transferred, split up, combined or exchanged for another Right
Certificate or Right Certificates, entitling the registered holder to purchase a
like number of one one-hundredths of a Preferred Share as the Right Certificate
or Right Certificates surrendered then entitled such holder to purchase. Any
registered holder desiring to transfer, split up, combine or exchange any Right
Certificate or Right Certificates shall make such request in writing delivered
to the Rights Agent, and shall surrender the Right Certificate or Right
Certificates to be transferred, split up, combined or exchanged at the principal
office of the Rights Agent. Thereupon the Rights Agent shall countersign and
deliver to the Person entitled thereto a Right Certificate or Right
Certificates, as the case may be, as so requested. The Company may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split up, combination or exchange of
Right Certificates.
Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will make and deliver a new
Right
15
<PAGE>
Certificate of like tenor to the Rights Agent for delivery to the registered
holder in lieu of the Right Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights. (a) The registered holder of any Right Certificate may, subject to the
second paragraph of Section 11(a)(ii), exercise the Rights evidenced thereby
(except as otherwise provided herein) in whole or in part at any time after the
Distribution Date upon surrender of the Right Certificate, with the form of
election to purchase on the reverse side thereof duly executed, to the Rights
Agent at the principal office of the Rights Agent, together with payment of the
Purchase Price for each one one-hundredth of a Preferred Share as to which the
Rights are exercised, at or prior to the earliest of (i) the Close of Business
on September 3, 2006 (the "Final Expiration Date"), (ii) the time at which the
Rights are redeemed as provided in Section 23 hereof (the "Redemption Date"), or
(iii) the time at which such Rights are exchanged as provided in Section 24
hereof.
(b) The Purchase Price for each one one-hundredth of a Preferred
Share purchasable pursuant to the exercise of a Right shall initially be $35.00,
and shall be subject to adjustment from time to time as provided in Sections 11
and 13 hereof and shall be payable in lawful money of the United States of
America in accordance with paragraph (c) below (the "Purchase Price").
16
<PAGE>
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the shares to be purchased and an amount equal
to any applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof by wire, transfer, certified
check, cashier's check, official bank check or money order payable to the order
of the Company, the Rights Agent shall thereupon promptly (i) (A) requisition
from any transfer agent of the Preferred Shares certificates for the number of
Preferred Shares to be purchased and the Company hereby irrevocably authorizes
its transfer agent to comply with all such requests, or (B) requisition from the
depositary agent depositary receipts representing such number of one
one-hundredths of a Preferred Share as are to be purchased (in which case
certificates for the Preferred Shares represented by such receipts shall be
deposited by the transfer agent with the depositary agent) and the Company
hereby directs the depositary agent to comply with such request, (ii) when
appropriate, requisition from the Company the amount of cash to be paid in lieu
of issuance of fractional shares in accordance with Section 14 hereof, (iii)
after receipt of such certificates or depositary receipts, cause the same to be
delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder and (iv) when appropriate, after receipt, deliver such
17
<PAGE>
cash to or upon the order of the registered holder of such Right Certificate.
(d) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent to the registered holder of such Right Certificate or to
such holder's duly authorized assigns, subject to the provisions of Section 14
hereof.
Section 8. Cancellation and Destruction of Right Certificates. All
Right Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Rights Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all cancelled Right Certificates to the Company, or shall, at the written
request of the Company, destroy such cancelled Right Certificates, and in such
case shall deliver a certificate of destruction thereof to the Company.
18
<PAGE>
Section 9. Availability of Preferred Shares. The Company covenants
and agrees that it will cause to be reserved and kept available out of its
authorized and unissued Preferred Shares or any Preferred Shares held in its
treasury, the number of Preferred Shares that will be sufficient to permit the
exercise in full of all outstanding Rights in accordance with Section 7. The
Company covenants and agrees that it will take all such action as may be
necessary to ensure that all Preferred Shares delivered upon exercise of Rights
shall, at the time of delivery of the certificates for such Preferred Shares
(subject to payment of the Purchase Price), be duly and validly authorized and
issued and fully paid and nonassessable shares.
The Company further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges which may
be payable in respect of the issuance or delivery of the Right Certificates or
of any Preferred Shares upon the exercise of Rights. The Company shall not,
however, be required to pay any transfer tax which may be payable in respect of
any transfer or delivery of Right Certificates to a Person other than, or the
issuance or delivery of certificates or depositary receipts for the Preferred
Shares in a name other than that of, the registered holder of the Right
Certificate evidencing Rights surrendered for exercise or to issue or to deliver
any certificates or depositary receipts for Preferred Shares upon the exercise
of any Rights until any such tax shall have been paid (any such tax being
payable by the holder of such Right Certificate at the time of surrender) or
until it has been
19
<PAGE>
established to the Company's reasonable satisfaction that no such tax is due.
Section 10. Preferred Shares Record Date. Each Person in whose name
any certificate for Preferred Shares is issued upon the exercise of Rights shall
for all purposes be deemed to have become the holder of record of the Preferred
Shares represented thereby on, and such certificate shall be dated, the date
upon which the Right Certificate evidencing such Rights was duly surrendered and
payment of the Purchase Price (and any applicable transfer taxes) was made;
provided, however, that if the date of such surrender and payment is a date upon
which the Preferred Shares transfer books of the Company are closed, such Person
shall be deemed to have become the record holder of such shares on, and such
certificate shall be dated, the next succeeding Business Day on which the
Preferred Shares transfer books of the Company are open. Prior to the exercise
of the Rights evidenced thereby, the holder of a Right Certificate shall not be
entitled to any rights of a holder of Preferred Shares for which the Rights
shall be exercisable, including, without limitation, the right to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares or Number
of Rights. The Purchase Price, the number of Preferred Shares or other
securities covered by each Right and
20
<PAGE>
the number of Rights outstanding are subject to adjustment from time to time as
provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Shares payable in
Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine
the outstanding Preferred Shares into a smaller number of Preferred Shares or
(D) issue any shares of its capital stock in a reclassification of the Preferred
Shares (including any such reclassification in connection with a consolidation
or merger in which the Company is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a), the Purchase Price in effect
at the time of the record date for such dividend or of the effective date of
such subdivision, combination or reclassification, and the number and kind of
shares of capital stock issuable on such date, shall be proportionately adjusted
so that the holder of any Right exercised after such time shall be entitled to
receive the aggregate number and kind of shares of capital stock which, if such
Right had been exercised immediately prior to such date and at a time when the
Preferred Shares transfer books of the Company were open, such holder would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification; provided, however, that
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of one Right.
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(ii) Subject to Section 24 of this Agreement, in the event any
Person becomes an Acquiring Person, each holder of a Right shall thereafter have
a right to receive, upon exercise thereof at a price equal to the then current
Purchase Price multiplied by the number of one one-hundredths of a Preferred
Share for which a Right is then exercisable, in accordance with the terms of
this Agreement and in lieu of Preferred Shares, such number of Common Shares of
the Company as shall equal the result obtained by (x) multiplying the then
current Purchase Price by the number of one one-hundredths of a Preferred Share
for which a Right is then exercisable and dividing that product by (y) 50% of
the then current per share market price of the Company's Common Shares
(determined pursuant to Section 11(d) hereof) on the date of the occurrence of
such event; provided, however, that if the transaction that would otherwise give
rise to the foregoing adjustment is also subject to the provisions of Section 13
hereof, then only the provisions of Section 13 hereof shall apply and no
adjustment shall be made pursuant to this Section 11(a)(ii). In the event that
any Person shall become an Acquiring Person and the Rights shall then be
outstanding, the Company shall not take any action which would eliminate or
diminish the benefits intended to be afforded by the Rights.
From and after the occurrence of such event, any Rights that are or
were acquired or beneficially owned by any Acquiring Person (or any Associate or
Affiliate of such Acquiring Person) shall be void and any holder of such Rights
shall thereafter have no right to exercise such Rights under any provision of
this
22
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Agreement. No Right Certificate shall be issued pursuant to Section 3 that
represents Rights beneficially owned by an Acquiring Person whose Rights would
be void pursuant to the preceding sentence or any Associate or Affiliate
thereof; no Right Certificate shall be issued at any time upon the transfer of
any Rights to an Acquiring Person whose Rights would be void pursuant to the
preceding sentence or any Associate or Affiliate thereof or to any nominee of
such Acquiring Person, Associate or Affiliate; and any Right Certificate
delivered to the Rights Agent for transfer to an Acquiring Person whose Rights
would be void pursuant to the preceding sentence shall be cancelled.
(iii) In the event that there shall not be sufficient Common Shares
of the Company issued but not outstanding or authorized but unissued to permit
the exercise in full of the Rights in accordance with the foregoing subparagraph
(ii), the Company shall take all such action as may be necessary to authorize
additional Common Shares of the Company for issuance upon exercise of the
Rights. In the event the Company shall, after good faith effort, be unable to
take all such action as may be necessary to authorize such additional Common
Shares of the Company, the Company shall substitute, for each Common Share of
the Company that would otherwise be issuable upon exercise of a Right, a number
of Preferred Shares or fraction thereof such that the current per share market
price of one Preferred Share multiplied by such number or fraction is equal to
the current per share market price of one Common Share of the Company as of the
date of issuance of such Preferred Shares or fraction thereof.
23
<PAGE>
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Shares entitling them
(for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Preferred Shares (or shares having the same rights,
privileges and preferences as the Preferred Shares ("equivalent preferred
shares")) or securities convertible into Preferred Shares or equivalent
preferred shares at a price per Preferred Share or equivalent preferred share
(or having a conversion price per share, if a security convertible into
Preferred Shares or equivalent preferred shares) less than the then current per
share market price of the Preferred Shares (as defined in Section 11(d) hereof)
on such record date, the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
number of Preferred Shares outstanding on such record date plus the number of
Preferred Shares which the aggregate offering price of the total number of
Preferred Shares and/or equivalent preferred shares so to be offered (and/or the
aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such current market price and the denominator of
which shall be the number of Preferred Shares outstanding on such record date
plus the number of additional Preferred Shares and/or equivalent preferred
shares to be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible); provided, however, that
in no
24
<PAGE>
event shall the consideration to be paid upon the exercise of one Right be less
than the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of one Right. In case such subscription price may be paid
in a consideration part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent. Preferred Shares owned by or held for the account
of the Company shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever such a record
date is fixed; and in the event that such rights, options or warrants are not so
issued, the Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular quarterly cash dividend or a dividend payable in
Preferred Shares) or subscription rights or warrants (excluding those referred
to in Section 11(b) hereof), the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the then current per share market
25
<PAGE>
price of the Preferred Shares on such record date, less the fair market value
(as determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent) of
the portion of the assets or evidences of indebtedness so to be distributed or
of such subscription rights or warrants applicable to one Preferred Share and
the denominator of which shall be such current per share market price of the
Preferred Shares; provided, however, that in no event shall the consideration to
be paid upon the exercise of one Right be less than the aggregate par value of
the shares of capital stock of the Company to be issued upon exercise of one
Right. Such adjustments shall be made successively whenever such a record date
is fixed; and in the event that such distribution is not so made, the Purchase
Price shall again be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the "current
per share market price" of any security (a "Security" for the purpose of this
Section 11(d)(i)) on any date shall be deemed to be the average of the daily
closing prices per share of such Security for the thirty (30) consecutive
Trading Days (as such term is hereinafter defined) which fall within the
one-year period ending on such date and have the lowest such average; provided,
however, that in the event that the current per share market price of the
Security is determined during a period following the announcement by the issuer
of such Security of (A) a dividend or distribution on such Security payable in
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<PAGE>
shares of such Security or securities convertible into such shares, or (B) any
subdivision, combination or reclassification of such Security and prior to the
expiration of thirty (30) Trading Days after the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination
or reclassification, then, and in each such case, the current per share market
price shall be appropriately adjusted to reflect the current market price per
share equivalent of such Security. The closing price for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Security is not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Security is listed or admitted to trading or, if the Security is
not listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other
system then in use, or, if on any such date the Security is not quoted by any
such organization, the average of the closing bid and asked prices as furnished
by a professional market maker
27
<PAGE>
making a market in the Security selected by the Board of Directors of the
Company. The term "Trading Day" shall mean a day on which the principal national
securities exchange on which the Security is listed or admitted to trading is
open for the transaction of business or, if the Security is not listed or
admitted to trading on any national securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder, the "current per
share market price" of the Preferred Shares shall be determined in accordance
with the method set forth in Section 11(d)(i). If the Preferred Shares are not
publicly traded, the "current per share market price" of the Preferred Shares
shall be conclusively deemed to be the current per share market price of the
Common Shares of the Company as determined pursuant to Section 11(d)(i)
(appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof), multiplied by one hundred. If
neither the Common Shares of the Company nor the Preferred Shares are publicly
held or so listed or traded, "current per share market price" shall mean the
fair value per share as determined in good faith by the Board of Directors of
the Company, whose determination shall be described in a statement filed with
the Rights Agent.
(e) No adjustment in the Purchase Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in the
Purchase Price; provided, however,
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<PAGE>
that any adjustments which by reason of this Section 11(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest one one-millionth of a Preferred Share or one
ten-thousandth of any other share or security as the case may be.
Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
years from the date of the transaction which requires such adjustment or (ii)
the date of the expiration of the right to exercise any Rights.
(f) If as a result of an adjustment made pursuant to Section 11(a)
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock of the Company other than Preferred Shares,
thereafter the number of such other shares so receivable upon exercise of any
Right shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the
Preferred Shares contained in Section 11(a) through (c), inclusive, and the
provisions of Sections 7, 9, 10 and 13 with respect to the Preferred Shares
shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
Preferred Share
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<PAGE>
purchasable from time to time hereunder upon exercise of the Rights, all subject
to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-hundredths of a
Preferred Share (calculated to the nearest one one-millionth of a Preferred
Share) obtained by (i) multiplying (x) the number of one one-hundredths of a
share covered by a Right immediately prior to this adjustment by (y) the
Purchase Price in effect immediately prior to such adjustment of the Purchase
Price and (ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of one one-hundredths of a Preferred Share purchasable
upon the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of one
one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one
30
<PAGE>
ten-thousandth) obtained by dividing the Purchase Price in effect immediately
prior to adjustment of the Purchase Price by the Purchase Price in effect
immediately after adjustment of the Purchase Price. The Company shall make a
public announcement of its election to adjust the number of Rights, indicating
the record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Right Certificates have
been issued, shall be at least 10 days later than the date of the public
announcement. If Right Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Right
Certificates on such record date Right Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled
as a result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and replacement for the
Right Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Right Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Right Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein and shall be registered in
the names of the holders of record of Right
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Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price
or the number of one one-hundredths of a Preferred Share issuable upon the
exercise of the Rights, the Right Certificates theretofore and thereafter issued
may continue to express the Purchase Price and the number of one one-hundredths
of a Preferred Share which were expressed in the initial Right Certificates
issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below one one-hundredth of the then par value, if any, of the
Preferred Shares issuable upon exercise of the Rights, the Company shall take
any corporate action which may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue fully paid and
nonassessable Preferred Shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date of
the Preferred Shares and other capital stock or securities of the Company, if
any, issuable upon such exercise over and above the Preferred Shares and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the
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<PAGE>
Purchase Price in effect prior to such adjustment; provided, however, that the
Company shall deliver to such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any consolidation or subdivision of the Preferred Shares, issuance
wholly for cash of any Preferred Shares at less than the current market price,
issuance wholly for cash of Preferred Shares or securities which by their terms
are convertible into or exchangeable for Preferred Shares, dividends on
Preferred Shares payable in Preferred Shares or issuance of rights, options or
warrants referred to hereinabove in Section 11(b), hereafter made by the Company
to holders of its Preferred Shares shall not be taxable to such stockholders.
(n) In the event that at any time after the date of this Agreement
and prior to the Distribution Date, the Company shall (i) declare or pay any
dividend on the Common Shares of the Company payable in Common Shares of the
Company or (ii) effect a subdivision, combination or consolidation of the Common
Shares of the Company (by reclassification or otherwise than by payment of
dividends in Common Shares of the Company) into a greater or
33
<PAGE>
lesser number of Common Shares of the Company, then in any such case (A) the
number of one one-hundredths of a Preferred Share purchasable after such event
upon proper exercise of each Right shall be determined by multiplying the number
of one one-hundredths of a Preferred Share so purchasable immediately prior to
such event by a fraction, the numerator of which is the number of Common Shares
of the Company outstanding immediately before such event and the denominator of
which is the number of Common Shares of the Company outstanding immediately
after such event, and (B) each Common Share of the Company outstanding
immediately after such event shall have issued with respect to it that number of
Rights which each Common Share of the Company outstanding immediately prior to
such event had issued with respect to it. The adjustments provided for in this
Section 11(n) shall be made successively whenever such a dividend is declared or
paid or such a subdivision, combination or consolidation is effected.
Section 12. Certificate of Adjusted Purchase Price or Number of
Shares. Whenever an adjustment is made as provided in Section 11 or 13 hereof,
the Company shall promptly (a) prepare a certificate setting forth such
adjustment, and a brief statement of the facts accounting for such adjustment,
(b) file with the Rights Agent and with each transfer agent for the Common
Shares of the Company or the Preferred Shares a copy of such certificate and (c)
mail a brief summary thereof to each holder of a Right Certificate in accordance
with Section 25 hereof.
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<PAGE>
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power. In the event, directly or indirectly, at any time after a Person
has become an Acquiring Person, (a) the Company shall consolidate with, or merge
with and into, any other Person, (b) any Person shall consolidate with the
Company, or merge with and into the Company and the Company shall be the
continuing or surviving corporation of such merger and, in connection with such
merger, all or part of the Common Shares of the Company shall be changed into or
exchanged for stock or other securities of any other Person (or the Company) or
cash or any other property, or (c) the Company shall sell or otherwise transfer
(or one or more of its Subsidiaries shall sell or otherwise transfer), in one or
more transactions, assets or earning power aggregating 50% or more of the assets
or earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person other than the Company or one or more of its wholly-owned
Subsidiaries, then, and in each such case, proper provision shall be made so
that (i) each holder of a Right (other than Rights which have become void
pursuant to Section 11(a)(ii) hereof) shall thereafter have the right to
receive, upon the exercise thereof at a price equal to the then current Purchase
Price multiplied by the number of one one-hundredths of a Preferred Share for
which a Right is then exercisable, in accordance with the terms of this
Agreement and in lieu of Preferred Shares, such number of Common Shares of such
other Person (including the Company as successor thereto or as the surviving
corporation) as shall equal the result obtained by (A)
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<PAGE>
multiplying the then current Purchase Price by the number of one one-hundredths
of a Preferred Share for which a Right is then exercisable and dividing that
product by (B) 50% of the then current per share market price of the Common
Shares of such other Person (determined pursuant to Section 11(d) hereof) on the
date of consummation of such consolidation, merger, sale or transfer; (ii) the
issuer of such Common Shares shall thereafter be liable for, and shall assume,
by virtue of such consolidation, merger, sale or transfer, all the obligations
and duties of the Company pursuant to this Agreement; (iii) the term "Company"
shall thereafter be deemed to refer to such issuer; and (iv) such issuer shall
take such steps (including, but not limited to, the reservation of a sufficient
number of its Common Shares to permit the exercise in full of all outstanding
Rights in accordance with this Agreement) in connection with such consummation
as may be necessary to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to the Common Shares
thereafter deliverable upon the exercise of the Rights. The Company shall not
consummate any such consolidation, merger, sale or transfer unless prior thereto
the Company and such issuer shall have executed and delivered to the Rights
Agent a supplemental agreement so providing. The Company shall not enter into
any transaction of the kind referred to in this Section 13 if at the time of
such transaction there are any rights, warrants, instruments or securities
outstanding or any agreements or arrangements which, as a result of the
consummation of such transaction, would eliminate or substantially diminish
36
<PAGE>
the benefits intended to be afforded by the Rights. The provisions of this
Section 13 shall similarly apply to successive mergers or consolidations or
sales or other transfers.
Section 14. Fractional Rights and Fractional Shares. (a) The Company
shall not be required to issue fractions of Rights or to distribute Right
Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Right Certificates
with regard to which such fractional Rights would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a whole
Right. For the purposes of this Section 14(a), the current market value of a
whole Right shall be the closing price of the Rights for the Trading Day
immediately prior to the date on which such fractional Rights would have been
otherwise issuable. The closing price for any day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the average of
the closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the Rights
are not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
Rights are listed or admitted to trading or, if the Rights are not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted,
37
<PAGE>
the average of the high bid and low asked prices in the over-the-counter market,
as reported by NASDAQ or such other system then in use or, if on any such date
the Rights are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Rights selected by the Board of Directors of the Company. If on any such
date no such market maker is making a market in the Rights, the fair value of
the Rights on such date as determined in good faith by the Board of Directors of
the Company shall be used.
(b) The Company shall not be required to issue fractions of
Preferred Shares (other than fractions which are integral multiples of one
one-hundredth of a Preferred Share) upon exercise of the Rights or to distribute
certificates which evidence fractional Preferred Shares (other than fractions
which are integral multiples of one one-hundredth of a Preferred Share).
Fractions of Preferred Shares in integral multiples of one one-hundredth of a
Preferred Share may, at the election of the Company, be evidenced by depositary
receipts, pursuant to an appropriate agreement between the Company and a
depositary selected by it; provided, that such agreement shall provide that the
holders of such depositary receipts shall have all the rights, privileges and
preferences to which they are entitled as beneficial owners of the Preferred
Shares represented by such depositary receipts. In lieu of fractional Preferred
Shares that are not integral multiples of one one-hundredth of a Preferred
Share, the Company shall pay to the registered holders of Right
38
<PAGE>
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current market value of one Preferred
Share. For the purposes of this Section 14(b), the current market value of a
Preferred Share shall be the closing price of a Preferred Share (as determined
pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day
immediately prior to the date of such exercise.
(c) The holder of a Right by the acceptance of the Right expressly
waives such holder's right to receive any fractional Rights or any fractional
shares upon exercise of a Right (except as provided above).
Section 15. Rights of Action. All rights of action in respect of
this Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares of the Company); and any registered holder of any Right
Certificate (or, prior to the Distribution Date, of the Common Shares of the
Company), without the consent of the Rights Agent or of the holder of any other
Right Certificate (or, prior to the Distribution Date, of the Common Shares of
the Company), may, in such holder's own behalf and for such holder's own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, such holder's
right to exercise the Rights evidenced by such Right Certificate in the manner
provided in such Right
39
<PAGE>
Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and will be entitled to specific performance of the
obligations under, and injunctive relief against actual or threatened violations
of the obligations of any Person subject to, this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the Common Shares of the Company;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer; and
(c) the Company and the Rights Agent may deem and treat the Person
in whose name the Right Certificate (or, prior to the Distribution Date, the
associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
40
<PAGE>
ownership or writing on the Right Certificates or the associated Common Shares
certificate made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary.
Section 17. Right Certificate Holder Not Deemed a Stockholder. No
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Preferred Shares or any
other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Right Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. Concerning the Rights Agent. The Company agrees to pay
to the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel
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fees and other disbursements incurred by the Rights Agent in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, obligation, damage or expense
(including reasonable attorneys' fees and other professional services)
(collectively, "Losses"), incurred without negligence, bad faith or willful
misconduct on the part of the Rights Agent in connection with this Agreement,
including, without limitation, the costs and expenses of defending against any
claim of liability in the premises.
The Rights Agent shall be protected and shall incur no liability and
shall be indemnified for and held harmless against any and all Losses for, or in
respect of, any action taken, suffered or omitted by it in connection with, its
administration of this Agreement (i) in reliance upon any Right Certificate or
certificate for the Preferred Shares or Common Shares or for other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
person or persons, or (ii) otherwise upon the advice of counsel as set forth in
Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of Rights
Agent. Any corporation or other Person into which the
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Rights Agent or any successor Rights Agent may be merged or with which it may be
consolidated, or any corporation or other Person resulting from any merger or
consolidation to which the Rights Agent or any successor Rights Agent shall be a
party, or any corporation or other Person succeeding to the stock transfer or
corporate trust business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto; provided, that such corporation or other Person would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall succeed
to the agency created by this Agreement, any of the Right Certificates shall
have been countersigned but not delivered, any such successor Rights Agent may
adopt the countersignature of the predecessor Rights Agent and deliver such
Right Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates shall have the full force provided in the Right Certificates
and in this Agreement.
In case at any time the name of the Rights Agent shall be changed
and at such time any of the Right Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Right
43
<PAGE>
Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, the Rights Agent may countersign
such Right Certificates either in its prior name or in its changed name; and in
all such cases such Right Certificates shall have the full force provided in the
Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may, but
shall not be required to, be legal counsel for the Company), and the opinion of
such counsel shall be full and complete authorization and protection to the
Rights Agent as to any action taken or omitted by it in good faith and in
accordance with or in reliance on such opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking, suffering or omitting any
action hereunder, such fact or matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate in form reasonably satisfactory to the Rights Agent
signed by any one of the Chairman of the Board, the Chief Executive Officer, the
44
<PAGE>
President, any Vice President, the Treasurer or the Secretary of the Company and
delivered to the Rights Agent; and such certificate shall be full authorization
to the Rights Agent for any action taken, suffered or omitted to be taken in
good faith by it under the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder to the Company and
any other Person only for its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Right Certificate;
nor shall it be responsible for any change in the exercisability of the Rights
(including the Rights becoming void pursuant to Section 11(a)(ii) hereof) or any
adjustment in the terms of the Rights (including the manner,
45
<PAGE>
method or amount thereof) provided for in Section 3, 11, 13, 23 or 24 hereof, or
the ascertaining of the existence of facts that would require any such change or
adjustment (except with respect to the exercise of Rights evidenced by Right
Certificates after actual notice that such change or adjustment is required);
nor shall it be responsible for any determination of the market value of the
Rights or any Common Shares pursuant to the provisions hereof; nor shall it by
any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Preferred Shares to be issued pursuant to
this Agreement or any Right Certificate or as to whether any Preferred Shares
will, when issued, be validly authorized and issued, fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President,
any Vice President, the Secretary or the Treasurer of the Company, and to apply
to such officers for advice or instructions in connection with its duties, and
it shall not be liable for any action taken, suffered
46
<PAGE>
or omitted by it in good faith in accordance with instructions of any such
officer or for any delay in acting while waiting for those instructions.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
47
<PAGE>
adequate indemnification against such risk or liability is not reasonably
assured to it.
Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon thirty (30) days' notice in writing mailed to the Company and to
each transfer agent of the Common Shares of the Company or Preferred Shares by
registered or certified mail, and to the holders of the Right Certificates by
first-class mail. The Company may remove the Rights Agent or any successor
Rights Agent upon thirty (30) days' notice in writing, mailed to the Rights
Agent or successor Rights Agent, as the case may be, and to each transfer agent
of the Common Shares of the Company or Preferred Shares by registered or
certified mail, and to the holders of the Right Certificates by first-class
mail. If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights Agent.
If the Company shall fail to make such appointment within a period of 30 days
after giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Rights Agent or
by the holder of a Right Certificate (who shall, with such notice, submit such
holder's Right Certificate for inspection by the Company), then the registered
holder of any Right Certificate may apply to any court of competent jurisdiction
for the appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be a corporation organized
and doing business
48
<PAGE>
under the laws of the United States or of any state of the United States (so
long as such corporation is authorized to do business as a banking institution
under such laws), in good standing, which is authorized under such laws to
exercise corporate trust or stock transfer powers and is subject to supervision
or examination by federal or state authorities and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least $50
million. After appointment, the successor Rights Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the predecessor Rights
Agent shall deliver and transfer to the successor Rights Agent any property at
the time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appointment the Company shall file notice thereof in writing
with the predecessor Rights Agent and each transfer agent of the Common Shares
of the Company or Preferred Shares, and mail a notice thereof in writing to the
registered holders of the Right Certificates. Failure to appoint a successor
Rights Agent or to give any notice provided for in this Section 21, however, or
any defect therein, shall not affect the legality or validity of the resignation
or removal of the Rights Agent or the appointment of the successor Rights Agent,
as the case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any
of the provisions of this Agreement or of the
49
<PAGE>
Rights to the contrary, the Company may, at its option, issue new Right
Certificates evidencing Rights in such form as may be approved by its Board of
Directors to reflect any adjustment or change in the Purchase Price and the
number or kind or class of shares or other securities or property purchasable
under the Right Certificates made in accordance with the provisions of this
Agreement.
Section 23. Redemption. (a) The Board of Directors of the Company
may, at its option, at any time prior to such time as any Person becomes an
Acquiring Person, redeem all but not less than all the then outstanding Rights
at a redemption price of $.01 per Right, appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date
hereof (such redemption price being hereinafter referred to as the "Redemption
Price"). The redemption of the Rights by the Board of Directors may be made
effective at such time, on such basis and with such conditions as the Board of
Directors in its sole discretion may establish.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights pursuant to paragraph (a) of this
Section 23, and without any further action and without any notice, the right to
exercise the Rights will terminate and the only right thereafter of the holders
of Rights shall be to receive the Redemption Price. The Company shall promptly
give public notice of any such redemption; provided, however, that the failure
to give, or any defect in,
50
<PAGE>
any such notice shall not affect the validity of such redemption. Within ten
(10) days after such action of the Board of Directors ordering the redemption of
the Rights, the Company shall mail a notice of redemption to all the holders of
the then outstanding Rights at their last addresses as they appear upon the
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the transfer agent for the Common Shares of the Company. Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of redemption
will state the method by which the payment of the Redemption Price will be made.
Neither the Company nor any of its Affiliates or Associates may redeem, acquire
or purchase for value any Rights at any time in any manner other than that
specifically set forth in this Section 23 or in Section 24 hereof, and other
than in connection with the purchase of Common Shares of the Company prior to
the Distribution Date.
Section 24. Exchange. (a) The Board of Directors of the Company may,
at its option, at any time after any Person becomes an Acquiring Person,
exchange all or part of the then outstanding and exercisable Rights (which shall
not include Rights that have become void pursuant to the provisions of Section
11(a)(ii) hereof) for Common Shares of the Company at an exchange ratio of one
Common Share per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such exchange
ratio being hereinafter referred to as the "Exchange Ratio").
51
<PAGE>
Notwithstanding the foregoing, the Board of Directors shall not be empowered to
effect such exchange at any time after any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or any such
Subsidiary, or any entity holding Voting Shares for or pursuant to the terms of
any such plan), together with all Affiliates and Associates of such Person,
becomes the Beneficial Owner of 50% or more of the Voting Shares then
outstanding.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to paragraph (a) of this
Section 24 and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of Common Shares of the Company
equal to the number of such Rights held by such holder multiplied by the
Exchange Ratio. The Company shall promptly give public notice of any such
exchange; provided, however, that the failure to give, or any defect in, such
notice shall not affect the validity of such exchange. The Company promptly
shall mail a notice of any such exchange to all of the holders of such Rights at
their last addresses as they appear upon the registry books of the Rights Agent.
Any notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of exchange will
state the method by which the exchange of the Common Shares of the Company for
Rights will be effected and, in the event of any partial exchange, the number of
Rights which
52
<PAGE>
will be exchanged. Any partial exchange shall be effected pro rata based on the
number of Rights (other than Rights which have become void pursuant to the
provisions of Section 11(a)(ii) hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient Common Shares of
the Company issued but not outstanding or authorized but unissued to permit any
exchange of Rights as contemplated in accordance with this Section 24, the
Company shall take all such action as may be necessary to authorize additional
Common Shares of the Company for issuance upon exchange of the Rights. In the
event the Company shall, after good faith effort, be unable to take all such
action as may be necessary to authorize such additional Common Shares of the
Company, the Company shall substitute, for each Common Share of the Company that
would otherwise be issuable upon exchange of a Right, a number of Preferred
Shares or fraction thereof such that the current per share market price of one
Preferred Share multiplied by such number or fraction is equal to the current
per share market price of one Common Share of the Company as of the date of
issuance of such Preferred Shares or fraction thereof.
(d) The Company shall not be required to issue fractions of Common
Shares of the Company or to distribute certificates which evidence fractional
Common Shares of the Company. In lieu of such fractional Common Shares, the
Company shall pay to the registered holders of the Right Certificates with
regard to which such fractional Common Shares would
53
<PAGE>
otherwise be issuable an amount in cash equal to the same fraction of the
current market value of a whole Common Share of the Company. For the purposes of
this paragraph (d), the current market value of a whole Common Share of the
Company shall be the closing price of a Common Share of the Company (as
determined pursuant to the second sentence of Section 11(d)(i) hereof) for the
Trading Day immediately prior to the date of exchange pursuant to this Section
24.
Section 25. Notice of Certain Events. (a) In case the Company shall
propose (i) to pay any dividend payable in stock of any class to the holders of
its Preferred Shares or to make any other distribution to the holders of its
Preferred Shares (other than a regular quarterly cash dividend), (ii) to offer
to the holders of its Preferred Shares rights or warrants to subscribe for or to
purchase any additional Preferred Shares or shares of stock of any class or any
other securities, rights or options, (iii) to effect any reclassification of its
Preferred Shares (other than a reclassification involving only the subdivision
of outstanding Preferred Shares), (iv) to effect any consolidation or merger
into or with, or to effect any sale or other transfer (or to permit one or more
of its Subsidiaries to effect any sale or other transfer), in one or more
transactions, of 50% or more of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to, any other Person, (v) to effect the
liquidation, dissolution or winding up of the Company, or (vi) to declare or pay
any dividend on the Common Shares of the Company payable in Common Shares of the
Company or to effect
54
<PAGE>
a subdivision, combination or consolidation of the Common Shares of the Company
(by reclassification or otherwise than by payment of dividends in Common Shares
of the Company), then, in each such case, the Company shall give to each holder
of a Right Certificate and to the Rights Agent, in accordance with Section 26
hereof, a notice of such proposed action, which shall specify the record date
for the purposes of such stock dividend, or distribution of rights or warrants,
or the date on which such reclassification, consolidation, merger, sale,
transfer, liquidation, dissolution, or winding up is to take place and the date
of participation therein by the holders of the Common Shares of the Company
and/or Preferred Shares, if any such date is to be fixed, and such notice shall
be so given in the case of any action covered by clause (i) or (ii) above at
least ten (10) days prior to the record date for determining holders of the
Preferred Shares for purposes of such action, and in the case of any such other
action, at least ten (10) days prior to the date of the taking of such proposed
action or the date of participation therein by the holders of the Common Shares
of the Company and/or Preferred Shares, whichever shall be the earlier.
(b) In case the event set forth in Section 11(a)(ii) hereof shall
occur, then the Company shall as soon as practicable thereafter give to each
holder of a Right Certificate, in accordance with Section 26 hereof, a notice of
the occurrence of such event, which notice shall describe such event and the
consequences of such event to holders of Rights under Section 11(a)(ii) hereof.
55
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Section 26. Notices. Notices or demands authorized by this Agreement
to be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
Graham-Field Health Products, Inc.
400 Rabro Drive East
Hauppauge, New York 11788
Attention: Secretary
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Attention: Executive Vice President
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. Supplements and Amendments. The Company may from time to
time and the Rights Agent shall, if the Company so directs, supplement or amend
this Agreement without the
56
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approval of any holders of Right Certificates in order to cure any ambiguity, to
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, or to make any other provisions
with respect to the Rights which the Company may deem necessary or desirable,
any such supplement or amendment to be evidenced by a writing signed by the
Company and the Rights Agent; provided, however, that from and after such time
as any Person becomes an Acquiring Person, this Agreement shall not be amended
in any manner which would adversely affect the interests of the holders of
Rights (other than any Acquiring Person and its Affiliates and Associates).
Without limiting the foregoing, the Company may at any time prior to such time
as any Person becomes an Acquiring Person amend this Agreement to (a) lower the
thresholds set forth in Sections 1(a) and 3(a) hereof to not less than the
greater of (i) the largest percentage of the outstanding Voting Shares then
known by the Company to be beneficially owned by any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan of the Company
or of any Subsidiary of the Company, any entity holding Voting Shares for or
pursuant to the terms of any such plan) and (ii) 10%, (b) fix a Final Expiration
Date later than the date set forth in Section 7 hereof, (c) reduce the
Redemption Price, (d) increase the Purchase Price or (e) in the event the Merger
Agreement is terminated in accordance with its terms without the Merger having
been consummated, delete reference to BIL and the Merger, as the Board of
Directors of the Company shall deem appropriate.
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<PAGE>
Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Right Certificates (and, prior to the
Distribution Date, the Voting Shares) any legal or equitable right, remedy or
claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Right Certificates (and, prior to the Distribution Date, the Voting Shares).
Section 30. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
Section 31. Governing Law. This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Delaware and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State.
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<PAGE>
Section 32. Counterparts. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 33. Descriptive Headings. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
Section 34. Administration. The Board of Directors of the Company
shall have the exclusive power and authority to administer and interpret the
provisions of this Agreement and to exercise all rights and powers specifically
granted to the Board of Directors of the Company or to the Company or as may be
necessary or advisable in the administration of this Agreement. All such
actions, calculations, determinations and interpretations which are done or made
by the Board of Directors of the Company in good faith shall be final,
conclusive and binding on the Company, the Rights Agent, the holders of the
Rights and all other parties and shall not subject the Board of Directors of the
Company to any liability to the holders of the Rights.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and attested, all as of the day and year first above written.
GRAHAM-FIELD HEALTH PRODUCTS, INC.
Attest:
By /s/ Gary Jacobs By /s/ Richard Kolodny
-------------------------------- -----------------------------------
Title: Vice President Finance Title: Vice President,
General Counsel and Secretary
AMERICAN STOCK TRANSFER & TRUST
COMPANY
Attest:
By /s/ George Garfunkel By /s/ Herbert L. Lemmer
-------------------------------- ------------------------------------
Title: Executive Vice President Title: Vice President
60
EXHIBIT 4(c)
Exhibit A
FORM
of
CERTIFICATE OF DESIGNATIONS
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
GRAHAM-FIELD HEALTH PRODUCTS, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
------------------------------------
Graham-Field Health Products, Inc., a corporation organized and
existing under the General Corporation Law of the State of Delaware (hereinafter
called the "Corporation"), hereby certifies that the following resolution was
adopted by the Board of Directors of the Corporation as required by Section 151
of the General Corporation Law at a meeting duly called and held on August 12,
1996:
RESOLVED, that pursuant to the authority granted to and vested in
the Board of Directors of this Corporation (hereinafter called the "Board of
Directors" or the "Board") in accordance with the provisions of the Certificate
of Incorporation of the Corporation, as heretofore amended, the Board of
Directors hereby creates a series of Preferred Stock, par value $.01 per share
(the "Preferred Stock"), of the Corporation and hereby states the designation
and number of shares, and fixes the relative rights, preferences, and
limitations thereof as follows:
Series A Junior Participating Preferred Stock:
Section 1. Designation and Amount. The shares of this series shall
be designated as "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting the Series A Preferred
Stock shall be Three Hundred Thousand (300,000). Such number of shares may be
increased or decreased by resolution of the Board of Directors; provided, that
no decrease shall reduce the number of shares of Series A Preferred Stock to a
number less than the number of shares then outstanding plus the number of shares
reserved for
<PAGE>
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Corporation
convertible into Series A Preferred Stock.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of any series
of Preferred Stock (or any other stock) ranking prior and superior to the
Series A Preferred Stock with respect to dividends, the holders of shares
of Series A Preferred Stock, in preference to the holders of Common Stock,
par value $.025 per share (the "Common Stock"), of the Corporation, and of
any other junior stock, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the first day of March,
June, September and December in each year (each such date being referred
to herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series A Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (a) $1 or (b)
subject to the provision for adjustment hereinafter set forth, 100 times
the aggregate per share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in kind) of all non-cash dividends or
other distributions, other than a dividend payable in shares of Common
Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect to
the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series A Preferred Stock. In the event the
Corporation shall at any time declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of
Common Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under clause
(b) of the preceding sentence shall be adjusted by multiplying such amount
by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common
Stock (other than a
A-2
<PAGE>
dividend payable in shares of Common Stock); provided that, in the event
no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $1 per share on
the Series A Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment
Date next preceding the date of issue of such shares, unless the date of
issue of such shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares shall begin
to accrue from the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Payment Date or is a date after the record
date for the determination of holders of shares of Series A Preferred
Stock entitled to receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment
Date. Accrued but unpaid dividends shall not bear interest. Dividends paid
on the shares of Series A Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares
shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a record
date for the determination of holders of shares of Series A Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the
date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof to
100 votes on all matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time declare or pay
any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by payment
of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the number of votes per
share to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator
of which is
A-3
<PAGE>
the number of shares of Common Stock that were outstanding immediately
prior to such event.
(B) Except as otherwise provided herein, in any other Certificate of
Designations creating a series of Preferred Stock or any similar stock, in
the Restated Certificate of Incorporation of the Corporation or by law,
the holders of shares of Series A Preferred Stock and the holders of
shares of Common Stock and any other capital stock of the Corporation
having general voting rights shall vote together as one class on all
matters submitted to a vote of stockholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided by law,
holders of Series A Preferred Stock shall have no special voting rights
and their consent shall not be required (except to the extent they are
entitled to vote with holders of Common Stock as set forth herein) for
taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Preferred
Stock outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions,
on any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A
Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with
the Series A Preferred Stock, except dividends paid ratably on the
Series A Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total
amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock, provided that the Corporation may at any
time redeem, purchase or otherwise acquire shares of any such junior
stock in exchange for shares of any stock of the Corporation ranking
junior (as to dividends and
A-4
<PAGE>
upon dissolution, liquidation or winding up) to the
Series A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series A Preferred Stock, or any shares of stock
ranking on a parity with the Series A Preferred Stock, except in
accordance with a purchase offer made in writing or by publication
(as determined by the Board of Directors) to all holders of such
shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares
of stock of the Corporation unless the Corporation could, under paragraph
(A) of this Section 4, purchase or otherwise acquire such shares at such
time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Restated Certificate of Incorporation, or in any other Certificate of
Designations creating a series of Preferred Stock or any similar stock or as
otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution shall
be made (1) to the holders of shares of stock ranking junior (upon liquidation,
dissolution or winding up) to the Series A Preferred Stock unless, prior
thereto, the holders of shares of Series A Preferred Stock shall have received
$100 per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment,
provided that the holders of shares of Series A Preferred Stock shall be
entitled to receive an aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 100 times the aggregate amount to be
distributed per share to holders of shares of Common Stock, or (2) to the
holders of shares of stock ranking on a parity (upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, except distributions made ratably
on the Series A Preferred Stock and all such parity stock in proportion to the
total amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding
A-5
<PAGE>
up. In the event the Corporation shall at any time declare or pay any dividend
on the Common Stock payable in shares of Common Stock, or effect a subdivision
or combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the aggregate amount to which holders of shares of Series A Preferred
Stock were entitled immediately prior to such event under the proviso in clause
(1) of the preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Preferred Stock
shall not be redeemable.
Section 9. Rank. The Series A Preferred Stock shall rank, with
respect to the payment of dividends and the distribution of assets, junior to
all series of any other class of Preferred Stock.
Section 10. Amendment. The Restated Certificate of Incorporation of
the Corporation shall not be amended in any manner which would materially alter
or change the powers, preferences or special rights of the Series A Preferred
Stock so as to affect them adversely without the affirmative vote of the
A-6
<PAGE>
holders of at least two-thirds of the outstanding shares of Series A Preferred
Stock, voting together as a single class.
IN WITNESS WHEREOF, Graham-Field Health Products, Inc. has caused
this Certificate of Designations of Series A Junior Participating Preferred
Stock to be duly executed by its Chairman of the Board and Chief Executive
Officer and attested to by its Secretary and has caused its corporate seal to be
affixed hereto, this ____ day of September, 1996.
GRAHAM-FIELD HEALTH PRODUCTS, INC.
By:_______________________________
Chairman of the Board and
Chief Executive Officer
[SEAL]
Attest:
By:________________________
Secretary
A-7
EXHIBIT 4(d)
Exhibit B
Form of Right Certificate
Certificate No. R- _________________ Rights
NOT EXERCISABLE AFTER SEPTEMBER 3, 2006 OR EARLIER IF REDEMPTION OR
EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER
RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS
AGREEMENT, RIGHTS OWNED BY ANY PERSON WHO IS OR BECOMES AN ACQUIRING
PERSON (AS DEFINED IN THE RIGHTS AGREEMENT) SHALL BECOME NULL AND
VOID.
Right Certificate
GRAHAM-FIELD HEALTH PRODUCTS, INC.
This certifies that _________________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of September 3, 1996 (the "Rights Agreement"), between
Graham-Field Health Products, Inc., a Delaware corporation (the "Company"), and
American Stock Transfer & Trust Company, as Rights Agent (the "Rights Agent"),
to purchase from the Company at any time after the Distribution Date (as such
term is defined in the Rights Agreement) and prior to 5:00 P.M., Eastern time,
on September 3, 2006 at the principal office of the Rights Agent, or at the
office of its successor as Rights Agent, one one-hundredth of a fully paid
non-assessable share of Series A Junior Participating Preferred Stock, par value
$.01 per share (the "Preferred Shares"), of the Company, at a purchase price of
$35.00 per one one-hundredth of a Preferred Share (the "Purchase Price"), upon
presentation and surrender of this Right Certificate with the Form of Election
to Purchase duly executed. The number of Rights evidenced by this Right
Certificate (and the number of one one-hundredths of a Preferred Share which may
be purchased upon exercise hereof) set forth above, and the Purchase Price set
forth above, are the number and Purchase Price as of September 3, 1996, based on
the Preferred Shares as constituted at such date. As provided in the Rights
Agreement, the Purchase Price and the number of one one-hundredths of a
Preferred Share which may be purchased upon the exercise of the Rights evidenced
by this Right Certificate are subject to modification and adjustment upon the
happening of certain events.
<PAGE>
This Right Certificate is subject to all of the terms, provisions
and conditions of the Rights Agreement, which terms, provisions and conditions
are hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates. Copies of
the Rights Agreement are on file at the principal executive offices of the
Company and the above-mentioned offices of the Rights Agent.
This Right Certificate, with or without other Right Certificates,
upon surrender at the principal office of the Rights Agent, may be exchanged for
another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
Preferred Shares as the Rights evidenced by the Right Certificate or Right
Certificates surrendered shall have entitled such holder to purchase. If this
Right Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Right Certificate or Right Certificates
for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate (i) may be redeemed by the Company at a redemption
price of $.01 per Right or (ii) may be exchanged in whole or in part for
Preferred Shares or shares of the Company's Common Stock, par value $.025 per
share.
No fractional Preferred Shares will be issued upon the exercise of
any Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-hundredth of a Preferred Share, which may, at the election
of the Company, be evidenced by depositary receipts), but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.
B-2
<PAGE>
This Right Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal. Dated as of _________________, ____.
ATTEST: GRAHAM-FIELD HEALTH PRODUCTS, INC.
_____________________________ By________________________________
Title: Title:
Countersigned:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By__________________________________
Authorized Signature
B-3
<PAGE>
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED __________________________________ hereby sells,
assigns and transfers unto ____________________
_______________________________________________________________________________
(Please print name and address of transferee)
_______________________________________________________________________________
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint _________________ Attorney, to
transfer the within Right Certificate on the books of the within-named Company,
with full power of substitution.
Dated: _________________, ____
__________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by an eligible guarantor institution
(a bank, stockbroker, savings and loan association or credit union with
membership in an approved signature guarantee medallion program) pursuant to
Rule 17Ad-15 of the Securities Exchange Act of 1934.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).
__________________________________
Signature
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
B-4
<PAGE>
Form of Reverse Side of Right Certificate -- continued
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Right Certificate.)
To: GRAHAM-FIELD HEALTH PRODUCTS, INC.
The undersigned hereby irrevocably elects to exercise
_________________ Rights represented by this Right Certificate to purchase the
Preferred Shares issuable upon the exercise of such Rights and requests that
certificates for such Preferred Shares be issued in the name of:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Dated: _________________, ____
__________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
B-5
<PAGE>
Form of Reverse Side of Right Certificate -- continued
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).
__________________________________
Signature
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
NOTICE
The signature in the Form of Assignment or Form of Election to
Purchase, as the case may be, must conform to the name as written upon the face
of this Right Certificate in every particular, without alteration or enlargement
or any change whatsoever.
In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, the Company and the Rights Agent will deem the beneficial owner of
the Rights evidenced by this Right Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and such
Assignment or Election to Purchase will not be honored.
B-6
EXHIBIT 4(e)
Exhibit C
UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE
RIGHTS AGREEMENT, RIGHTS OWNED BY ANY PERSON WHO IS
OR BECOMES AN ACQUIRING PERSON (AS DEFINED IN THE RIGHTS
AGREEMENT) SHALL BECOME NULL AND VOID
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
GRAHAM-FIELD HEALTH PRODUCTS, INC.
On August 12, 1996, the Board of Directors of Graham-Field Health
Products, Inc. (the "Company") (i) adopted a resolution providing for the
redemption of the preferred stock purchase rights issued by the Company in 1989
(the "1989 Rights") at a redemption price of $.0001 per 1989 Right and (ii)
declared a dividend of one preferred share purchase right (a "1996 Right") for
each outstanding share of common stock, par value $.025 per share, of the
Company (the "Common Shares"). The redemption of the 1989 Rights will be
effective as of, and the dividend of the 1996 Rights is payable on, September
17, 1996 (the "Record Date"). Accordingly, the redemption price in respect of
the 1989 Rights and the dividend of the 1996 Rights will be payable to the
stockholders of record on that date. Any holder of 1989 Rights who is entitled
to receive less than $.01 in respect of such holder's 1989 Rights will not
receive any payment in connection with the redemption.
Each 1996 Right entitles the registered holder to purchase from the
Company one one-hundredth of a share of Series A Junior Participating Preferred
Stock, par value $.01 per share (the "Preferred Shares"), of the Company at a
price of $35.00 per one one-hundredth of a Preferred Share (the "Purchase
Price"), subject to adjustment. The description and terms of the 1996 Rights are
set forth in a Rights Agreement dated as of September 3, 1996 (the "Rights
Agreement") between the Company and American Stock Transfer & Trust Company, as
Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") have acquired beneficial ownership of 15% (which percentage
may be reduced pursuant to the Rights Agreement) or more of the outstanding
shares of capital stock of the Company entitled to vote generally in the
election of directors of the Company (the "Voting Shares") (or, under certain
circumstances, in the case of BIL (Far East Holdings), Limited ("BIL"), if BIL
acquires any such shares) or (ii) 10 business days (or such later date as may be
determined by action of the Board of Directors prior to such time as any person
or group of affiliated persons becomes an Acquiring Person) following the
commencement of, or announcement of an intention to
<PAGE>
make, a tender offer or exchange offer the consummation of which would result in
the beneficial ownership by a person or group of 15% (which percentage may be
reduced pursuant to the Rights Agreement) or more (or, under certain
circumstances in the case of BIL, any such shares) of the outstanding Voting
Shares (the earlier of such dates being called the "Distribution Date"), the
1996 Rights will be evidenced, with respect to any of the Common Share
certificates outstanding as of the Record Date, by such Common Share certificate
with a copy of this Summary of Rights attached thereto.
The Rights Agreement provides that, until the Distribution Date (or
earlier redemption or expiration of the 1996 Rights), the 1996 Rights will be
transferred with and only with the Common Shares. Until the Distribution Date
(or earlier redemption or expiration of the 1996 Rights), new Common Share
certificates issued after the Record Date upon transfer or new issuance of
Common Shares will contain a notation incorporating the Rights Agreement by
reference. Until the Distribution Date (or earlier redemption or expiration of
the 1996 Rights), the surrender for transfer of any certificates for Common
Shares outstanding as of the Record Date, even without such notation or a copy
of this Summary of Rights being attached thereto, will also constitute the
transfer of the 1996 Rights associated with the Common Shares represented by
such certificate. As soon as practicable following the Distribution Date,
separate certificates evidencing the 1996 Rights ("Right Certificates") will be
mailed to holders of record of the Common Shares as of the close of business on
the Distribution Date and such separate 1996 Right Certificates alone will
evidence the 1996 Rights.
The 1996 Rights are not exercisable until the Distribution Date. The
1996 Rights will expire on September 3, 2006 (the "Final Expiration Date"),
unless the Final Expiration Date is extended or unless the 1996 Rights are
earlier redeemed or exchanged by the Company, in each case, as described below.
The Purchase Price payable, and the number of Preferred Shares or
other securities issuable, upon exercise of the 1996 Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Shares, (ii) upon the grant to holders of the Preferred Shares of certain rights
or warrants to subscribe for or purchase Preferred Shares at a price, or
securities convertible into Preferred Shares with a conversion price, less than
the then-current market price of the Preferred Shares or (iii) upon the
distribution to holders of the Preferred Shares of evidences of indebtedness or
assets (excluding regular periodic cash dividends paid out of earnings or
retained earnings or dividends payable in Preferred Shares) or of subscription
rights or warrants (other than those referred to above).
C-2
<PAGE>
The number of outstanding 1996 Rights and the number of one
one-hundredths of a Preferred Share issuable upon exercise of each 1996 Right
are also subject to adjustment in the event of a stock split of the Common
Shares or a stock dividend on the Common Shares payable in Common Shares or
subdivisions, consolidations or combinations of the Common Shares occurring, in
any such case, prior to the Distribution Date.
Preferred Shares purchasable upon exercise of the 1996 Rights will
not be redeemable. Each Preferred Share will be entitled to a minimum
preferential quarterly dividend payment of $1 per share but will be entitled to
an aggregate dividend of 100 times the dividend declared per Common Share. In
the event of liquidation, the holders of the Preferred Shares will be entitled
to a minimum preferential liquidation payment of $100 per share but will be
entitled to an aggregate payment of 100 times the payment made per Common Share.
Each Preferred Share will have 100 votes, voting together with the Common
Shares. Finally, in the event of any merger, consolidation or other transaction
in which Common Shares are exchanged, each Preferred Share will be entitled to
receive 100 times the amount received per Common Share. These rights are
protected by customary antidilution provisions.
Because of the nature of the Preferred Shares' dividend, liquidation
and voting rights, the value of the one one-hundredth interest in a Preferred
Share purchasable upon exercise of each 1996 Right should approximate the value
of one Common Share.
In the event that any person or group of affiliated or associated
persons becomes an Acquiring Person, the Rights Agreement provides that proper
provision shall be made so that each holder of a 1996 Right, other than 1996
Rights beneficially owned by the Acquiring Person (which will thereafter be
void), will thereafter have the right to receive (subject to adjustment) upon
exercise that number of Common Shares having a market value of two times the
exercise price of the 1996 Right. At any time after any person or group becomes
an Acquiring Person and prior to the acquisition by such person or group of 50%
or more of the outstanding Voting Shares, the Board of Directors of the Company
may exchange the 1996 Rights (other than 1996 Rights owned by such person or
group, which will have become void), in whole or in part, at an exchange ratio
of one Common Share, or one one-hundredth of a Preferred Share (or of a share of
a class or series of the Company's preferred stock having equivalent rights,
preferences and privileges), per 1996 Right (subject to adjustment).
The Rights Agreement provides that none of the Company's directors
or officers shall be deemed to beneficially own any Voting Shares owned by any
other director or officer solely by virtue of such persons acting in their
capacities as such, including in connection with the formulation and
C-3
<PAGE>
publication of the Board of Directors recommendation of its position, and
actions taken in furtherance thereof, with respect to an acquisition proposal
relating to the Company or a tender or exchange offer for the Voting Shares.
In the event that the Company is acquired in a merger or other
business combination transaction or 50% or more of its consolidated assets or
earning power are sold after a person or group has become an Acquiring Person,
proper provision will be made so that each holder of a 1996 Right will
thereafter have the right to receive, upon the exercise thereof at the then
current exercise price of the 1996 Right, that number of shares of common stock
of the acquiring company which at the time of such transaction will have a
market value of two times the exercise price of the 1996 Right.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional Preferred Shares will be issued (other than
fractions which are integral multiples of one one-hundredth of a Preferred
Share, which may, at the election of the Company, be evidenced by depositary
receipts) and in lieu thereof, an adjustment in cash will be made based on the
market price of the Preferred Shares on the last trading day prior to the date
of exercise.
At any time prior to the acquisition by a person or group of
affiliated or associated persons of beneficial ownership of 15% (which
percentage may be reduced pursuant to the Rights Agreement) or more of the
outstanding Voting Shares (or, under certain circumstances in the case of BIL,
any such shares), the Board of Directors of the Company may redeem the 1996
Rights in whole, but not in part, at a price of $.01 per 1996 Right (the
"Redemption Price"). The redemption of the 1996 Rights may be made effective at
such time on such basis with such conditions as the Board of Directors in its
sole discretion may establish. Immediately upon any redemption of the 1996
Rights, the right to exercise the 1996 Rights will terminate and the only right
of the holders of 1996 Rights will be to receive the Redemption Price.
The terms of the 1996 Rights may be amended by the Board of
Directors of the Company without the consent of the holders of the 1996 Rights,
including an amendment to (a) lower certain thresholds described above to not
less than the greater of (i) the largest percentage of the outstanding Voting
Shares then known to the Company to be beneficially owned by any person or group
of affiliated or associated persons and (ii) 10%, (b) fix a Final Expiration
Date later than September 3, 2006, (c) reduce the Redemption Price, (d) increase
the Purchase Price or (e) delete the special provisions relating to BIL, as the
Board of Directors shall deem appropriate, in the event that the Company's
proposed acquisition of Everest & Jennings International Ltd., of which BIL is
the majority stockholder, is not consummated; provided that from and after such
time as any
C-4
<PAGE>
person or group of affiliated or associated persons becomes an Acquiring Person,
no such amendment may adversely affect the interests of the holders of the 1996
Rights (other than the Acquiring Person and its affiliates and associates).
Until a 1996 Right is exercised, the holder thereof, as such, will
have no rights as a stockholder of the Company, including, without limitation,
the right to vote or to receive dividends.
A copy of the Rights Agreement has been filed with the Securities
and Exchange Commission as an Exhibit to a Registration Statement on Form 8-A
dated September 3, 1996. A copy of the Rights Agreement is available free of
charge from the Company. This summary description of the 1996 Rights does not
purport to be complete and is qualified in its entirety by reference to the
Rights Agreement, which is hereby incorporated herein by reference.
C-5
Exhibit 4(f)
STOCKHOLDER AGREEMENT
dated as of September 3, 1996
by and among
BIL (FAR EAST HOLDINGS) LIMITED,
.
GRAHAM-FIELD HEALTH PRODUCTS, INC.
and
IRWIN SELINGER
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Stockholder Agreement to which
it is attached but is inserted for convenience only.
Page
No.
----
ARTICLE I
DEFINITIONS
1.01 Definitions................................................... 2
ARTICLE II
BOARD OF DIRECTORS
2.01 Composition of Board of Directors............................. 5
2.02 Resignations and Designations................................. 6
ARTICLE III
FIRST REFUSAL RIGHTS; TRANSFER OF SHARES
3.01 Restriction on Certain Transfers.............................. 7
3.02 Legend ...................................................... 9
ARTICLE IV
BIL'S RIGHTS TO PURCHASE ADDITIONAL
EQUITY SECURITIES; STANDSTILL
4.01 Limitation on Acquisition of Equity Securities................ 10
4.02 Right to Purchase Equity Securities........................... 10
4.03 Standstill.................................................... 11
ARTICLE V
COVENANTS OF BIL IN CONNECTION WITH THE MERGER
5.01 Ownership of E&J Shares; Approval of Merger
Agreement.................................................. 12
5.02 No Solicitation............................................... 13
ARTICLE VI
INDEMNIFICATION
6.01 Indemnification of the Company................................ 14
6.02 Waiver of Environmental Indemnity............................. 14
- i -
<PAGE>
Page
No.
----
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF BIL
7.01 Incorporation of BIL.......................................... 15
7.02 Authority..................................................... 15
7.03 No Conflicts.................................................. 15
7.04 Governmental Approvals and Filings............................ 16
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
8.01 Incorporation................................................. 16
8.02 Authority..................................................... 16
8.03 No Conflicts.................................................. 16
8.04 Governmental Approvals and Filings............................ 17
ARTICLE IX
GENERAL PROVISIONS
9.01 Survival of Representations, Warranties,
Covenants and Agreements................................... 17
9.02 Termination................................................... 17
9.03 Amendment and Waiver.......................................... 17
9.04 Notices ...................................................... 18
9.05 Entire Agreement.............................................. 19
9.06 No Third Party Beneficiary.................................... 20
9.07 No Assignment; Binding Effect................................. 20
9.08 Specific Performance; Legal Fees.............................. 20
9.09 Headings...................................................... 20
9.10 Invalid Provisions............................................ 20
9.11 Governing Law................................................. 21
9.12 Consent to Jurisdiction and Service of Process................ 21
9.13 Counterparts.................................................. 21
SCHEDULES AND EXHIBITS
Schedule I E&J Shares Owned by BIL
Schedule II Indemnified Proceedings
Exhibit A Irrevocable Proxy
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This STOCKHOLDER AGREEMENT dated as of September 3, 1996 is made and
entered into by and among BIL (Far East Holdings) Limited, a Hong Kong
corporation ("BIL"), Graham-Field Health Products, Inc., a Delaware
corporation (the "Company"), and Irwin Selinger, an individual residing
at 73 Bacon Road, Old Westbury, New York ("Mr. Selinger").
WHEREAS, the Company, E&J Acquisition Corp., a Delaware corporation
wholly-owned by the Company ("Sub"), BIL and Everest & Jennings International
Ltd., a Delaware corporation ("E&J"), have entered into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), which provides for the
merger of Sub with and into E&J and for E&J to become a wholly-owned subsidiary
of the Company (the "Merger");
WHEREAS, BIL is the majority stockholder of E&J and Mr. Selinger is the
Chairman and Chief Executive Officer and a 6.7% stockholder of the Company;
WHEREAS, at the Effective Time (as defined below) and in accordance with
the terms of the Merger Agreement, each share of common stock, par value $.10
per share, of E&J (the "E&J Common Stock") will be converted into .35 of a share
of common stock, par value $.025 per share, of the Company (the "Company Common
Stock"), subject to reduction under certain circumstances, all as more fully
described in the Merger Agreement;
WHEREAS, at the Effective Time and in accordance with the terms of the
Merger Agreement, BIL also, among other things, will (i) purchase shares of
Company Common Stock from the Company, the proceeds of which will be used to
repay certain indebtedness owing by E&J to Hong Kong and Shanghai Banking
Corporation Limited, (such shares, together with the shares BIL receives in
exchange for its shares of E&J Common Stock in the Merger, being referred to
herein as the "BIL Common Shares"), (ii) purchase shares of a new series of
Series B Cumulative Convertible Preferred Stock of the Company (the "BIL Series
B Preferred Shares") in exchange for indebtedness of E&J owing to BIL and shares
of convertible preferred stock of E&J owned by BIL and (iii) purchase shares of
a new series of Series C Cumulative Convertible Preferred Stock of the Company
(the "BIL Series C Preferred Shares", and together with the BIL Series B
Preferred Shares and BIL Common Shares, the "BIL Shares") for an aggregate
purchase price of $10 million, all as more fully described in the Merger
Agreement;
WHEREAS, simultaneously with the execution and delivery of this
Stockholder Agreement, BIL and the Company are entering into a registration
rights agreement providing for the registration for sale, under certain
circumstances of its shares of Company Common Stock (the "Registration Rights
Agreement"); and
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WHEREAS, as a condition to the Company's willingness to consummate the
Merger and to BIL's willingness to vote its shares of capital stock of E&J in
favor of the Merger, BIL, the Company and Mr. Selinger desire to establish in
this Stockholder Agreement certain terms and conditions concerning the
acquisition and disposition of securities of the Company by BIL and the
corporate governance of the Company after the Effective Time;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Stockholder Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.01 Definitions. (a) Except as otherwise specifically indicated, the
following terms have the following meanings for all purposes of this Stockholder
Agreement:
"Affiliate" shall have the meaning assigned thereto in Rule 405, as
presently promulgated under the Securities Act.
"beneficially owns" (or comparable variations thereof) has the meaning set
forth in Rule 13d-3 promulgated under the Exchange Act.
"BIL's Pro Rata Share" means, as of the relevant Date of Issuance, the
percentage of the Voting Power of all of Outstanding Voting Securities
represented by the Outstanding Voting Securities then beneficially owned by the
Restricted Group, rounded to the nearest whole number of shares.
"Board of Directors" means the Board of Directors of the Company.
"Change of Control" means and shall be deemed to have occurred if after
the Effective Time individuals who qualify as Continuing Directors shall have
ceased for any reason to constitute at least a majority of the Board of
Directors.
"Continuing Director" means (i) any individual serving as a member of the
Board of Directors at the Effective Time (including the two designees of BIL
pursuant to Section 2.01), for so long as such individual is a member of the
Board of Directors, and (ii) any individual who is recommended or elected to
serve as a member of the Board of Directors by at least a
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majority of the Continuing Directors then in office, for so long as such
individual is a member of the Board of Directors.
"DGCL" means the General Corporation Law of the State of Delaware.
"Effective Time" means the time at which the Merger becomes effective
under the DGCL.
"Equity Securities" means Voting Securities, Convertible Securities and
Rights to Purchase Voting Securities.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any foreign country or any domestic or foreign state, county,
city or other political subdivision.
"Liens" means any lien, claim, mortgage, encumbrance, pledge, security
interest, equity or charge of any kind.
"Person" means any individual, corporation, partnership, trust, other
entity or group (with the meaning of Section 13(d)(3) of the Exchange Act).
"Representatives" of any entity means such entity's directors, officers,
employees, legal, investment banking and financial advisors, accountants and any
other agents and representatives of such entity.
"Restricted Group" means (i) BIL, (ii) any and all Persons directly or
indirectly controlled by or under common control with BIL and (iii) any and all
groups (within the meaning of Section 13(d)(3) of the Exchange Act) of which BIL
or any Person directly or indirectly controlling, controlled by or under common
control with BIL is a member, other than any such group not acting for the
purpose of acquiring, holding or beneficially owning Equity Securities.
"Rule 144" means Rule 144 as presently promulgated under the Securities
Act.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Subsidiary" means any Person in which the Company or E&J, as the case may
be, directly or indirectly through Subsidiaries or otherwise, beneficially owns
more than fifty percent (50%) of either the equity interest in, or the Voting
Power of, such Person.
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"Voting Power" means, with respect to any Outstanding Voting Securities,
the highest number of votes that the holders of all such Outstanding Voting
Securities would be entitled to cast for the election of directors or on any
other matter (except to the extent such voting rights are dependent upon events
of default or bankruptcy), assuming, for purposes of this computation, the
conversion or exchange into Voting Securities of Convertible Securities (whether
presently convertible or exchangeable or not) and the exercise of Rights to
Purchase Voting Securities (whether presently exercisable or not), in either
case to the extent that any such action would increase the number of such votes.
"Voting Securities" means the Company Common Stock and any other
securities of the Company of any kind or class having power generally to vote
for the election of directors; "Convertible Securities" means securities of the
Company which are convertible or exchangeable (whether presently convertible or
exchangeable or not) into Voting Securities; "Rights to Purchase Voting
Securities" means options and rights issued by the Company (whether presently
exercisable or not) to purchase Voting Securities or Convertible Voting
Securities; and "Outstanding Voting Securities" means at any time the then
issued and outstanding Voting Securities, Convertible Securities (which shall be
counted at the maximum number of Voting Securities for which they can be
converted or exchanged) and Rights to Purchase Voting Securities (which shall be
counted at the maximum number of Voting Securities for which they can be
exercised).
(b) In addition, the following terms are defined in the Sections set forth
below:
"Acceptance Notice" -- Section 3.01(b)
"Alternative Proposal" -- Section 5.02
"BIL" -- Preamble
"BIL Common Shares" -- Preamble
"BIL Series B Preferred Shares" -- Preamble
"BIL Series C Preferred Shares" -- Preamble
"BIL Shares" -- Preamble
"Business Combination" -- Section 4.03
"Company" -- Preamble
"Company Common Stock" -- Preamble
"Confidentiality Agreement" -- Section 9.05
"Date of Issuance" -- Section 4.02(a)
"Dispose" or "Disposition" -- Section 3.01(a)
"E&J" -- Preamble
"E&J Common Stock" -- Preamble
"E&J Shares" -- Section 5.01(a)
"E&J Stockholders' Meeting" -- Section 5.01(c)
"Election Notice" -- Section 4.02(b)
"Election Period" -- Section 4.02(b)
"Indemnified Proceedings" -- Section 6.01(a)
"Issue Price" -- Section 4.02(a)
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"Losses" -- Section 6.01(a)
"Merger" -- Preamble
"Merger Agreement" -- Preamble
"Mr. Selinger" -- Preamble
"Notice of Issuance" -- Section 4.02(a)
"Offer Notice" -- Section 3.01(b)
"Offer Period" -- Section 3.01(b)
"Offered Securities" -- Section 3.01(b)
"Offering Terms" -- Section 3.01(b)
"Offeror" -- Section 3.01(b)
"Registration Rights Agreement" -- Preamble
"Selling Period" -- Section 3.01(b)
"Sub" -- Preamble
(c) Unless the context of this Stockholder Agreement otherwise requires,
(i) words of any gender include each other gender; (ii) words using the singular
or plural number also include the plural or singular number, respectively; (iii)
the terms "hereof," "herein," "hereby" and derivative or similar words refer to
this entire Stockholder Agreement; and (iv) the terms "Article" or "Section"
refer to the specified Article or Section of this Stockholder Agreement.
Whenever this Stockholder Agreement refers to a number of days, such number
shall refer to calendar days unless business days are specified.
ARTICLE II
BOARD OF DIRECTORS
2.01 Composition of Board of Directors. (a) Effective at the Effective
Time, there shall be two vacancies on the Board of Directors either by (i) an
increase in the Board of Directors in accordance with the terms of the Company's
Certificate of Incorporation and Bylaws, (ii) director resignations or (iii) a
combination thereof. Effective at the Effective Time, the Board of Directors
shall elect two designees of BIL to fill the two vacancies on the Board of
Directors created in accordance with the preceding sentence, to serve from the
Effective Time until the end of their respective terms. The two designees of BIL
shall be elected to different classes of the Board of Directors. For so long
as one or more nominees of BIL is a director of the Company, one of such
nominees shall be designated as a member of the Executive Committee of the
Board of Directors.
(b) Thereafter, and subject to the next succeeding sentence, the Board of
Directors shall, at each meeting of stockholders of the Company at which the
term of any BIL director expires, nominate for election as a director of the
Company, in accordance with the Company's procedures for nomination of directors
as provided for in its Bylaws, a designee of BIL to stand for election for a
succeeding term, and shall vote all management proxies in favor of such nominee,
except for such proxies that specifically indicate to the contrary.
Notwithstanding the foregoing, BIL shall cease to have the right
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to designate, or cause the nomination or election of, (i) more than one member
of the Board of Directors from and after such date as the Restricted Group
beneficially owns Outstanding Voting Securities representing less than 15% of
the Voting Power of all Outstanding Voting Securities or (ii) any member of the
Board of Directors from and after such date as the Restricted Group beneficially
owns Outstanding Voting Securities representing less than 5% of the Voting
Power of all Outstanding Voting Securities. The obligation of the Board of
Directors hereunder to nominate for election as directors individuals designated
by BIL shall be subject to the foregoing limitation.
(c) Until such time as the Restricted Group beneficially owns Outstanding
Voting Securities representing less than 5% of the Voting Power of all
Outstanding Voting Securities, if any director designated by BIL in accordance
with this Section 2.01 shall decline or be unable to serve for any other reason,
the Board of Directors shall promptly upon the request of BIL nominate or elect,
as the case may be, a qualified person recommended by BIL to replace such
designee; provided that BIL shall have such right only if and to the extent
consistent with the foregoing provisions of this Section 2.01.
(d) Until such time as the Restricted Group beneficially owns Outstanding
Voting Securities representing less than 5% of the Voting Power of all
Outstanding Voting Securities, at each meeting of stockholders of the Company,
(i) the Restricted Group shall vote the Voting Securities held by the Restricted
Group (x) for the nominees recommended by the Board of Directors (provided such
nominees include the nominees referred to in paragraphs (a) and (b) above), (y)
on all other proposals of the Board of Directors, as the Restricted Group
determines in its sole discretion, and (z) on all proposals of any other
stockholder of the Company, in accordance with the recommendation of the Board
of Directors; and (ii) Mr. Selinger shall vote all of his Voting Securities in
favor of the nominees referred to in clause (x) above.
(e) BIL shall promptly provide to the Company, as the Company may from
time to time reasonably request, information regarding BIL's designees for the
Board of Directors, for inclusion in any form, report, schedule, registration
statement, definitive proxy statement or other documents required to be filed by
the Company with the Securities and Exchange Commission.
2.02 Resignations and Designations. As necessary to establish or maintain
the composition of the Board of Directors contemplated by Section 2.01, the
Restricted Group will cause one or both of the directors designated by BIL, as
the case may be, to resign from the Board of Directors.
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ARTICLE III
FIRST REFUSAL RIGHTS; TRANSFER OF SHARES
3.01 Restriction on Certain Transfers.
(a) Until such time as the Restricted Group beneficially owns Outstanding
Voting Securities representing less than 5% of the Voting Power of all
Outstanding Voting Securities, no member of the Restricted Group shall, directly
or indirectly, assign, sell, pledge, hypothecate or other transfer or dispose of
("Dispose" or a "Disposition") any Equity Securities beneficially owned by such
member of the Restricted Group, except (A) a Disposition to a member of the
Restricted Group who simultaneously with such Disposition agrees in a written
instrument in form and substance satisfactory to the Company to be bound by the
provisions of this Stockholder Agreement as though an original signatory hereto,
(B) a Disposition through a bona fide underwritten public offering registered
under the Securities Act effected in accordance with the provisions of the
Registration Rights Agreement, (C) a Disposition in a "brokers' transaction"
pursuant to Rule 144(f), provided that, until such time as the Restricted
Group beneficially owns Outstanding Voting Securities representing less than 5%
of the Voting Power of all Outstanding Voting Securities, any sales pursuant
to this clause (C) shall be subject to the volume limitations set forth in Rule
144(e) (regardless of whether such volume limitations are applicable to such
sale), (D) pursuant to a merger or consolidation of the Company or a
recapitalization of any Equity Securities, (E) pursuant to a self-tender or
exchange offer by the Company or a third party tender offer recommended by the
Board of Directors or (F) a cash sale effected in accordance with the Company's
right of first refusal contained in paragraph (b) below; provided that in the
case of and as a condition to any cash sale pursuant to this clause (F) to a
Person who, after giving effect to such purchase, would own 5% or more of the
Voting Power of all Outstanding Voting Securities, such Person shall
simultaneously with such purchase and sale agree in a written instrument in
form and substance satisfactory to the Company to be bound by the provisions of
Section 3.01, Section 4.01 and Section 4.03 (with references in such sections
to the Restricted Group being changed to references to such Person).
(b) (i) Until such time as the Restricted Group beneficailly owns
Outstanding Voting Securities representing less than 5% of the Voting Power of
all Outstanding Voting Securities, in the event that any member of the
Restricted Group (an "Offeror") wishes to sell for cash any or all Equity
Securities owned by it in a transaction to which none of clauses (A) through
(E) of Section 3.01(a) is applicable, it shall first deliver a written notice
(the "Offer Notice") to the Company specifying the amount and type of Equity
Securities proposed to be sold (the "Offered Securities"), the identity of the
proposed transferee and the price and the other bona fide terms for such sale
(the "Offering Terms") and attaching a copy of the contract entered into with
such transferee, which contract shall be expressly subject to the Company's
right of first refusal hereunder. Such Offer Notice shall constitute an
irrevocable offer (subject to the satisfaction of all regulatory
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requirements) to the Company, for the period of time set forth below, to
purchase all or any portion of the Offered Securities on the Offering Terms. The
Company may elect to purchase all, but not less than all, of the Offered
Securities on the Offering Terms by delivering an irrevocable written notice
specifying the number of Offered Securities it wishes to purchase (the
"Acceptance Notice") to the Offeree (subject to the satisfaction of all
regulatory requirements) within fifteen (15) days following receipt of the Offer
Notice (the "Offer Period").
(ii) If an Offeror's offer is not accepted by the Company within the Offer
Period, the Offeror shall have a period of sixty (60) days (the "Selling
Period") in which it shall be free to sell all, but not less than all, of the
Offered Securities to the proposed transferee described in the Offer Notice at
the Offering Terms or at prices or terms more favorable to the Offeror than the
Offering Terms; provided that if such sale shall not have been consummated
within the Selling Period, none of such Equity Securities may be sold and all
such Equity Securities shall again be subject to the provisions of this Section
3.01 and may be Disposed of only in the manner provided in, and subject to the
provisions of, this Section 3.01.
(iii) Any purchase and sale pursuant to the provisions of Section
3.01(b)(i) shall occur on the date designated by the Company, which date shall
be within sixty (60) days following the date of delivery of the Acceptance
Notice, at the principal offices of the Company unless otherwise agreed, subject
to the satisfaction of all applicable regulatory requirements. At any closing of
a purchase and sale in accordance with this Section 3.01(b)(i), the Offeror will
deliver certificates evidencing the Offered Securities to be so purchased
against delivery by the Company of the price included in the Offering Terms.
Such amount will be payable in immediately available United States funds. The
Company and the Offeror will use their best efforts to accomplish the
satisfaction of all applicable regulatory requirements with respect to such
purchase, and the date on which such purchase and sale must be completed in
accordance with this Section 3.01(b)(i) will be extended automatically until
such time as each applicable Governmental or Regulatory Authority has given a
final determination permitting or prohibiting or otherwise denying necessary
authorization for such purchase and sale and, in the case of a favorable
determination, for an additional five (5) business days.
(c) The Company may not assign its right under Section 3.01(b) to
purchase Offered Securities without the consent of the Offeror, which consent
shall not be unreasonably withheld or delayed; provided that any such
assignees agree in writing (for the benefit of the Offeror) to purchase any of
the Offered Securities not being purchased by the Company in accordance with
the provisions of Section 3.01(b).
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(d) The failure of the Company to exercise its right to purchase Offered
Securities under Section 3.01(b) in connection with any one Offer Notice
delivered by a member of the Restricted Group will not, in any manner, waive or
otherwise impair the rights of the Company to exercise its right to purchase
Offered Securities in connection with any other Offer Notice.
3.02 Legend. Any Disposition of Equity Securities by any member of the
Restricted Group also shall be subject to the terms and conditions of this
Section 3.02. Each certificate representing Equity Securities beneficially owned
by any member of the Restricted Group shall be imprinted with a legend in the
following form until such time (subject to the provisions of the final sentence
of this Section 3.02) as all restrictions on the Disposition of such Equity
Securities hereunder are terminated:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD,
TRANSFERRED, OR OTHERWISE DISPOSED OF UNLESS THEY ARE REGISTERED OR UNLESS
AN EXEMPTION FROM REGISTRATION IS AVAILABLE. SUCH SHARES MAY ONLY BE
TRANSFERRED PURSUANT TO THE PROVISIONS OF ARTICLE III OF A CERTAIN
STOCKHOLDER AGREEMENT DATED AS OF SEPTEMBER 3, 1996, BY AND AMONG
GRAHAM-FIELD HEALTH PRODUCTS, INC., A DELAWARE CORPORATION, IRWIN SELINGER
AND BIL (FAR EAST HOLDINGS) LIMITED, A HONG KONG CORPORATION, COPIES OF
WHICH AGREEMENT ARE ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY."
The Company shall not (i) give effect on its books to an attempted Disposition
of any Equity Securities which shall have been Disposed of in violation of any
provision of this Stockholder Agreement, or (ii) treat any transferee who
obtains any Equity Securities in violation of any provision of this Stockholder
Agreement as the owner of such Equity Securities or accord any transferee
thereof the right to vote or to receive dividends in respect of such Equity
Securities. The Company will issue new certificates not imprinted with the
foregoing legend to any holder of Equity Securities not subject to the
restrictions on Disposition contained in this Stockholder Agreement; provided
that the Company may require an opinion of counsel reasonably satisfactory to it
to the effect that no legend is required under the Securities Act or applicable
state securities or blue sky laws.
ARTICLE IV
BIL'S RIGHTS TO PURCHASE ADDITIONAL
EQUITY SECURITIES; STANDSTILL
4.01 Limitation on Acquisition of Equity Securities. Following the
Effective Time and until the Restricted Group beneficially owns Outstanding
Voting Securities representing less
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than 5% of the Voting Power of all Outstanding Voting Securities, no member of
the Restricted Group shall acquire beneficial ownership of any Equity Securities
without the prior consent of the Board of Directors, which consent shall not be
unreasonably withheld, except (i) the acquisition of Equity Securities pursuant
to the Merger Agreement or upon the conversion of or as a dividend on the BIL
Series B Preferred Shares or the BIL Series C Preferred Shares in accordance
with their terms, (ii) by way of stock dividends, stock splits or other
distributions or offerings made available to holders of Equity Securities
generally, (iii) pursuant to plans established by the Company for members of the
Board of Directors or (iv) pursuant to the exercise of BIL's right to acquire
Equity Securities directly from BIL as provided for in Section 4.02.
4.02 Right to Purchase Equity Securities. (a) Following the Effective Time
and until such time as the Restricted Group beneficially owns Outstanding Voting
Securities representing less than 15% of the Voting Power of all Outstanding
Voting Securities, the Company shall not issue any Equity Securities (except by
way of stock dividends or other distributions or offerings made available to
holders of shares of Company Common Stock generally) after the Effective Time
unless, prior to such issuance, the Company offers BIL the right to participate
proportionately according to BIL's Pro Rata Share as of the date of issuance of
any such Equity Securities (the "Date of Issuance") and on the same terms and
conditions and at the same per unit price (the "Issue Price"). The Company shall
give written notice to BIL of any such issuance as far in advance of the Date of
Issuance as possible, but in no event less than 10 days in advance of the Date
of Issuance (a "Notice of Issuance"). The Notice of Issuance will describe in
reasonable detail the terms and conditions of the proposed issuance, including
the Issue Price, the maximum number of Equity Securities that BIL will be
entitled to purchase (assuming for this purpose only that BIL's Pro Rata Share
does not change between the date of the giving of such notice and the Date of
Issuance) on the Date of Issuance. Notwithstanding the foregoing, BIL's
preemptive right set forth above shall not apply to any Equity Securities issued
(i) pursuant to that certain Warrant, dated as of March 12, 1992, as amended, by
and between the Company and John Hancock Mutual Life Insurance Company, (ii) in
connection with a merger, acquisition or other business combination transaction
approved by the Board of Directors, (iii) in connection with any stock option
or other employee benefit plans and programs of the Company approved by the
Board of Directors, or (iv) in connection with any private debt financing in
which the Equity Securities to be issued represent less than 2% of the Voting
Power of all Outstanding Voting Securities.
(b) BIL shall have the option to elect to purchase all or part of BIL's
Pro Rata Share of the Equity Securities described in a Notice of Issuance at the
Issue Price and on the other terms contained in the Notice of Issuance by
notifying the Company in writing (an "Election Notice") at least two business
days prior to the Date of Issuance (the "Election Period"), at
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which time BIL (or such designee) shall become irrevocably bound (subject to the
satisfaction of all regulatory requirements) to purchase such Equity Securities.
Each Election Notice will indicate the number of units that BIL elects to
purchase.
(c) Any purchase and sale pursuant to the provisions of this Section 4.02
shall occur on the Date of Issuance at the principal offices of the Company
unless otherwise agreed, subject to the satisfaction of all regulatory
requirements. At any closing of a purchase and sale in accordance with this
Section 4.02, the Company will deliver certificates evidencing the Equity
Securities to be so purchased against delivery by BIL of an amount equal to the
number of units that BIL has elected to purchase multiplied by the Issue Price.
Such amount will be payable in immediately available United States funds. The
Company and BIL will use their best efforts to accomplish the satisfaction of
all regulatory requirements with respect to such purchase, and the date on which
such purchase and sale must be completed in accordance with this Section 4.02
will be extended automatically until such time as each applicable Governmental
or Regulatory Authority has given a final determination permitting or
prohibiting or otherwise denying necessary authorization for such purchase and,
in the case of a favorable determination, for an additional five (5) business
days.
(d) The failure of BIL to exercise its right to purchase Equity Securities
under this Section 4.02 in connection with any one issuance of Equity Securities
by the Company will not, in any manner, waive or otherwise impair the rights of
BIL to purchase BIL's Pro Rata Share in connection with any other proposed
issuance of Equity Securities to which this Section 4.02 is applicable.
(e) Notwithstanding anything contained in this Section 4.02 to the
contrary, the Company may at any time, regardless of whether an Election Notice
has been given, prior to the Date of Issuance abandon an offering as to which it
has given a Notice of Issuance, in which case BIL shall have no further right to
purchase the Equity Securities described in such Notice of Issuance.
4.03 Standstill. Following the Effective Time and thereafter until such
time as the Restricted Group beneficially owns Outstanding Voting Securities
representing less than 5% of the Voting Power of all Outstanding Voting
Securities, no member of the Restricted Group will, and they will not assist or
encourage others (including by providing financing) to, directly or indirectly
(i) acquire or agree, offer, seek or propose (whether publicly or otherwise) to
acquire ownership (including but not limited to beneficial ownership) of any
substantial portion of the assets or Equity Securities of the Company (other
than in a transaction permitted under Section 4.01 or 4.02), whether by means of
a negotiated purchase of assets, tender or exchange offer, merger or other
business combination,
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recapitalization, restructuring or other extraordinary transaction ("Business
Combination"), (ii) engage in any "solicitation" of "proxies" (as such terms are
used in the proxy rules promulgated under the Exchange Act, but disregarding
clause (iv) of Rule 14a-1(1)(2) and including any exempt solicitation pursuant
to Rule 14a-2(b)(1) or (2)), or form, join or in any way participate in a
"group" (as defined under the Exchange Act) with respect to any Equity
Securities, (iii) subject to the obligation of BIL's designees on the Board of
Directors to exercise their fiduciary duties as directors, otherwise seek or
propose to acquire control of the Board of Directors, (iv) take any action that
could reasonably be expected to force the Company to make a public announcement
regarding any of the types of matters referred to in clause (i), (ii) or (iii)
above, or (v) enter into any discussions, negotiations, agreements, arrangements
or understandings with any third party with respect to any of the foregoing. No
member of the Restricted Group will request the Company or any of its
Representatives to amend or waive any provision of this paragraph (including
this sentence) during such period. If at any time during such period a member of
the Restricted Group is approached by any third party concerning its
participation in any of the types of matters referred to in clause (i), (ii) or
(iii) above, such member will promptly inform the Company of the nature of such
contact and the parties thereto.
ARTICLE V
COVENANTS OF BIL IN CONNECTION WITH THE MERGER
5.01 Ownership of E&J Shares; Approval of Merger Agreement. (a) BIL
represents and warrants to the Company that it owns, beneficially and of record,
as of the date hereof, the number of shares of each class of capital stock of
E&J listed on Schedule I hereto (the "E&J Shares"), subject to no rights of
others and free and clear of all Liens. BIL's right to vote or Dispose of the
E&J Shares is not subject to any voting trust, voting agreement, voting
arrangement or proxy and BIL has not entered into any contract, option or other
arrangement or undertaking with respect thereto.
(b) Until the Effective Time, BIL will not Dispose of any of the E&J
Shares or any interest therein, exercise any right of conversion with respect
to any E&J Shares, deposit any of the E&J Shares into a voting trust or enter
into a voting agreement or arrangement or grant any proxy with respect thereto
or enter into any contract, option or other arrangement or undertaking with
respect to the direct or indirect Disposition of any of the E&J Shares.
(c) BIL will, with respect to those E&J Shares that it owns of record on
the record date for voting at any annual or special meeting of E&J stockholders
to be held for the purpose of voting on the adoption of the Merger Agreement or
for granting
12
<PAGE>
any written consent in connection with the solicitation of written consents in
lieu of such a meeting (collectively, the "E&J Stockholders' Meeting"), vote
such shares (or execute written consents with respect to such shares) (i) in
favor of the adoption of the Merger Agreement and the approval of the Merger and
the other transactions contemplated by the Merger Agreement, (ii) against any
Alternative Proposal (as defined in Section 5.02) and (iii) in favor of any
other matter necessary for the consummation of the transactions contemplated by
the Merger Agreement, as any of the foregoing is considered and voted upon at
the E&J Stockholders' Meeting.
(d) BIL acknowledges that concurrently with the execution of this
Agreement, it has executed and delivered to the Company an Irrevocable Proxy,
the form of which is attached hereto as Exhibit A.
5.02 No Solicitation. Prior to the Effective Time, BIL shall not, and it
shall use its best efforts to cause its Affiliates and Representatives not to,
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer (including, without
limitation, any proposal or offer to the stockholders of E&J) with respect to a
merger, consolidation or other business combination including E&J or any of its
Subsidiaries or any acquisition or similar transaction (including, without
limitation, a tender or exchange offer) involving the purchase of all or any
significant portion of the assets of E&J and its Subsidiaries taken as a whole
or any outstanding shares of the capital stock of E&J or any Subsidiary of E&J
(any such proposal or offer being hereinafter referred to as an "Alternative
Proposal"), or engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions or enter into any
agreements, arrangements or understandings, whether written or oral, with, any
person or group relating to an Alternative Proposal (excluding the transactions
contemplated by the Merger Agreement), or otherwise facilitate any effort or
attempt to make or implement an Alternative Proposal. BIL will promptly notify
the Company if any such inquiries, proposals or offers are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, it or any of such persons.
ARTICLE VI
INDEMNIFICATION
6.01 Indemnification of the Company. (a) Following the Effective Time, BIL
shall indemnify and hold harmless the Company and its Subsidiaries and their
respective successors and assigns, from and against any and all losses, claims,
demands, liabilities, damages or deficiencies, and all
13
<PAGE>
related costs and expenses, including, without limitation, interest, penalties
and attorneys' fees and disbursements (together "Losses"), suffered, sustained
or incurred by any of them or to which any of them becomes subject, resulting
from, relating to or arising out of any of the litigations, arbitrations and
other proceedings set forth on Schedule II hereto (the "Indemnified
Proceedings"); provided that BIL shall not have any obligation to provide
indemnity with respect to any Indemnified Proceeding unless and until, and only
to the extent that, the amount of the Losses in respect of all Indemnified
Proceedings exceeds, in the aggregate, the applicable amounts reserved with
respect to such Indemnified Proceedings set forth on Schedule II hereto.
(b) The Company will, through its ownership of E&J, control all aspects of
the defense and disposition of the Indemnified Proceedings; provided that the
Company will not consent to any settlement of an Indemnified Proceeding with
respect to which it intends to seek indemnity hereunder without the consent of
BIL, which consent shall not be unreasonably withheld or delayed. BIL shall
have the right to participate in and have the right to be consulted in
connection with the defense or settlement of any of the Indemnified
Proceedings. BIL may retain separate counsel to represent it in, but not to
control, any defense or settlement of any of the Indemnified Proceedings, and
BIL shall bear its owns costs and expenses with respect to such
representation.
(c) BIL will make the indemnity payments provided for in this Section 6.01
promptly following demand therefor by the Company. If BIL disputes its
obligation to make any such payments, the parties will proceed in good faith to
negotiate a resolution of such dispute, and if not so resolved, such dispute
shall be resolved by litigation in a court of competent jurisdiction.
6.02 Waiver of Environmental Indemnity. BIL hereby irrevocably waives any
and all rights to indemnity that BIL and its affiliates may have against E&J or
any of its Subsidiaries under that certain Environmental Indemnity dated as of
August 30, 1991 by E&J and certain of its Subsidiaries in favor of the
Indemnitees referred to therein.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF BIL
BIL hereby represents and warrants to the Company as follows:
7.01 Incorporation of BIL. BIL is a corporation duly incorporated, validly
existing and in good standing under the laws of Hong Kong. BIL has the requisite
corporate power and authority to execute and deliver this Stockholder Agreement
and to perform its obligations hereunder and to consummate the transactions
contemplated hereby.
14
<PAGE>
7.02 Authority. The execution and delivery by BIL of this Stockholder
Agreement, and the performance by BIL of its obligations hereunder, have been
duly and validly authorized by all necessary corporate actions on the part of
BIL, no other corporate action on the part of BIL or its stockholders being
necessary. This Stockholder Agreement has been duly and validly executed and
delivered by BIL and constitutes a legal, valid and binding obligation of BIL
enforceable against BIL in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
7.03 No Conflicts. The execution and delivery by BIL of this Stockholder
Agreement do not, and the performance by BIL of its obligations under this
Stockholder Agreement and the consummation of the transactions contemplated
hereby will not:
(a) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the corporate charter documents of BIL;
(b) conflict with or result in a violation or breach of any term or
provision of any law, statute, rule or regulation or any order, judgment or
decree of any Governmental or Regulatory Authority applicable to BIL or any of
its properties or assets; or
(c) (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default under,
(iii) require BIL to obtain any consent, approval or action of, make any filing
with or give any notice to any Person as a result or under the terms of or (iv)
result in the creation or imposition of any Lien upon BIL or any of its
properties or assets under any contract, agreement, plan, permit or license to
which BIL is a party.
7.04 Governmental Approvals and Filings. No consent, approval or action
of, filing with or notice to any Governmental or Regulatory Authority on the
part of BIL is required in connection with the execution, delivery and
performance of this Stockholder Agreement or the consummation of the
transactions contemplated hereby, other than filings under the Exchange Act in
connection with BIL's acquisition of Equity Securities.
15
<PAGE>
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to BIL as follows:
8.01 Incorporation. The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware.
The Company has the requisite corporate power and authority to execute and
deliver this Stockholder Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby.
8.02 Authority. The execution and delivery by the Company of this
Stockholder Agreement, and the performance by the Company of its obligations
hereunder, have been duly and validly authorized by the Board of Directors of
the Company, no other corporate action on the part of the Company or its
stockholders being necessary. This Stockholder Agreement has been duly and
validly executed and delivered by the Company and constitutes a legal, valid and
binding obligation of the Company in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
8.03 No Conflicts. The execution and delivery by the Company of this
Stockholder Agreement do not, and the performance by the Company of its
obligations under this Stockholder Agreement and the consummation of the
transactions contemplated hereby will not:
(a) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the certificate of incorporation or bylaws of the
Company;
(b) conflict with or result in a violation or breach of any term or
provision of any law, statute, rule or regulation or any order, judgment or
decree of any Governmental or Regulatory Authority applicable to the Company or
any of its properties or asset; or
(c) (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default under,
(iii) require the Company to obtain any consent, approval or action of, make any
filing with or give any notice to any Person as a result or under the terms of
or (iv) result in the creation or imposition of any Lien upon the Company or any
of its properties or assets under, any contract, agreement, plan, permit or
license to which the Company is a party.
16
<PAGE>
8.04 Governmental Approvals and Filings. No consent, approval or action
of, filing with or notice to any Governmental or Regulatory Authority on the
part of the Company is required in connection with the execution, delivery and
performance of this Stockholder Agreement or the consummation of the
transactions contemplated hereby, other than filings under the Exchange Act in
connection with BIL's voting agreement contained in this Stockholder Agreement.
ARTICLE IX
GENERAL PROVISIONS
9.01 Survival of Representations, Warranties, Covenants and Agreements.
Notwithstanding any right of any party (whether or not exercised) to investigate
the accuracy of the representations and warranties of the other party contained
in this Stockholder Agreement, BIL and the Company have the right to rely fully
upon the representations and warranties of the other contained in this
Stockholder Agreement. Except as provided in Section 9.02, the representations,
warranties, covenants and agreements of BIL and the Company contained in this
Stockholder Agreement will survive until the termination of this Stockholder
Agreement.
9.02 Termination. This Stockholder Agreement and all rights and
obligations of the parties hereunder, including, without limitation, the
provisions of Section 5.02, shall automatically terminate, and shall cease to be
of any further force and effect, upon (i) the termination of the Merger
Agreement in accordance with its terms, (ii) the mutual written agreement of BIL
and the Company and (iii) a Change of Control; provided that BIL's obligations
under Section 6.01 shall survive any termination of the Stockholder Agreement
pursuant to clause (iii) of this Section. Notwithstanding the termination
of this Stockholder Agreement, nothing contained herein shall relieve any
party hereto from liability for breach of any of its representations,
warranties, covenants or agreements contained in this Stockholder Agreement.
9.03 Amendment and Waiver. (a) This Stockholder Agreement may be amended,
supplemented or modified only by a written instrument duly executed by or on
behalf of each party hereto. In the event that (i) any Person (other than any
Person included in the Restricted Group) becomes the beneficial owner of
Outstanding Voting Securities representing more than 15% but less than 100%
of the Voting Power of all Outstanding Voting Securities with the approval
of the Board of Directors and (ii) the restrictions imposed by the Company on
the activities of such Person are less onerous in any respect than the
comparable restrictions imposed on the Restricted Group by the
applicable provisions of this Stockholder Agreement, such comparable
provisions of this Stockholder Agreement will be revised so that they
provide for comparable restrictions which are identical to the restrictions
imposed on such Person, if any.
(b) Any term or condition of this Stockholder Agreement may be waived at
any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Stockholder Agreement, in any one or more
instances, shall be deemed to be or construed as a waiver of the same or any
other term or condition of this Stockholder Agreement on any future occasion.
All remedies, either under this Stockholder Agreement or by law or otherwise
afforded, will be cumulative and not alternative.
17
<PAGE>
9.04 Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or mailed (first class postage prepaid)
to the parties at the following addresses or facsimile numbers:
If to BIL, to:
BIL (Far East Holdings) Limited
c/o Brierley Investments Limited
10 Eastcheap, 3rd Floor
London EC 3M 1AJ
United Kingdom
Facsimile No.: 011-44-171-369-9112
Attn: Rodney F. Price, Chairman
with a copy to:
Bryan Cave LLP
One Metropolitan Square
211 North Broadway
Suite 3600
St. Louis, Missouri 63102
Facsimile No.: (314) 259-2020
Attn: John P. Denneen, Esq.
and to:
Brierley Investments Limited
22-24 Victoria Street
Level 6, Colonial Building
Wellington, New Zealand
Facsimile: 011-644-473-1631
Attn: Mark Horton, Corporate Secretary
If to the Company or to Irwin Selinger, to:
Graham-Field Health Products, Inc.
400 Rabro Drive East
Hauppauge, New York 11788
Facsimile No.: (516) 582-5608
Attn: Richard S. Kolodny, Esq.
18
<PAGE>
with a copy to:
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, NY 10005
Facsimile No.: (212) 530-5219
Attn: Robert S. Reder, Esq.
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, and (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other person to whom a
copy of such notice, request or other communication is to be delivered pursuant
to this Section). Any party from time to time may change its address, facsimile
number or other information for the purpose of notices to that party by giving
notice specifying such change to the other parties hereto.
9.05 Entire Agreement. This Stockholder Agreement supersedes all prior
discussions and agreements (including the Term Sheet dated as of August 13,
1996) among the parties hereto with respect to the subject matter hereof (other
than the letter agreement dated as of June 17, 1996 between the Company, BIL and
E&J (the "Confidentiality Agreement"), which, except as provided below, shall
survive the execution and delivery of this Stockholder Agreement in accordance
with its terms), and contains, together with the Merger Agreement, the
Confidentiality Agreement and the Registration Rights Agreement, the sole and
entire agreement among the parties hereto with respect to the subject matter
hereof. Notwithstanding the foregoing, Section 9 of the Confidentiality
Agreement shall terminate and cease to have any further force or effect at the
Effective Time.
9.06 No Third Party Beneficiary. The terms and provisions of this
Stockholder Agreement are intended solely for the benefit of each party hereto,
and it is not the intention of the parties to confer third-party beneficiary
rights upon any other Person.
9.07 No Assignment; Binding Effect. Neither this Stockholder Agreement nor
any right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other party hereto and any attempt to
do so will be void. Subject to the preceding sentence, this Stockholder
Agreement is binding upon, inures to the benefit of and is enforceable by the
parties hereto and their respective successors and assigns.
19
<PAGE>
9.08 Specific Performance; Legal Fees. The parties acknowledge that money
damages are not an adequate remedy for violations of any provision of this
Stockholder Agreement and that any party may, in its sole discretion, apply to a
court of competent jurisdiction for specific performance for injunctive or such
other relief as such court may deem just and proper in order to enforce any such
provision or prevent any violation hereof and, to the extent permitted by
applicable law, each party waives any objection to the imposition of such
relief. The parties hereto agree that, in the event that any party to this
Stockholder Agreement shall bring any legal action or proceeding to enforce or
to seek damages or other relief arising from an alleged breach of any term or
provision of this Stockholder Agreement by the other party, the prevailing party
in any such action or proceeding shall be entitled to an award of, and the other
party to such action or proceeding shall pay, the reasonable fees and expenses
of legal counsel to the prevailing party.
9.09 Headings. The headings used in this Stockholder Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
9.10 Invalid Provisions. If any provision of this Stockholder Agreement is
held to be illegal, invalid or unenforceable under any present or future law,
and if the rights or obligations of any party hereto under this Stockholder
Agreement will not be materially and adversely affected thereby, (i) such
provision will be fully severable, (ii) this Stockholder Agreement will be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part hereof and (iii) the remaining provisions of this
Stockholder Agreement will remain in full force and effect and will not be
affected by the illegal, invalid or unenforceable provision or by its severance
herefrom.
9.11 Governing Law. Except to the extent that the DGCL is mandatorily
applicable to the rights and obligations of the parties, this Stockholder
Agreement shall be governed by and construed in accordance with the laws of the
State of New York applicable to a contract executed and performed in such State,
without giving effect to the conflicts of laws principles thereof.
9.12 Consent to juristiction and Service of Process. Each Party hereby
irrevocably
20
<PAGE>
submits to the exclusive jurisdiction of the United States District
Court for the Southern District of New York or any court of the State of New
York located in the Borough of Manhattan in the City of New York in any action,
suit or proceeding arising in connection with this Stockholder Agreement,
agrees that any such action, suit or proceeding shall be brought only in such
court (and waives any objection based on forum non conveniens or any other
objection to venue therein to the extent permitted by law), and agrees to
delivery of service of process by any of the methods by which notices may be
given pursuant to Section 9.04, with such service being deemed given as
provided in such Section; provided, however, that such consent to jurisdiction
is solely for the purpose referred to in this Section 9.12 and shall not be
deemed to be a general submission to the jurisdiction of said courts or in
the State of New York other than for such purpose. Nothing herein shall
affect the right of any party to serve process in any other manner permitted
by law or to commence legal proceedings or otherwise proceed against the
other in any other jurisdiction.
9.13 Counterparts. This Stockholder Agreement may be executed in any
number of counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
21
<PAGE>
IN WITNESS WHEREOF, each party hereto has caused this Stockholder
Agreement to be signed by its officer thereunto duly authorized as of the date
first above written.
BIL (FAR EAST HOLDINGS) LIMITED
By: /s/ Rodney Price
______________________________
Name: Rodney Price
Title: Director
GRAHAM-FIELD HEALTH PRODUCTS, INC.
By: /s/ Irwin Selinger
______________________________
Name: Irwin Selinger
Title: Chairman and Chief
Executive Officer
/s/ Irwin Selinger
_________________________________
Irwin Selinger
22
<PAGE>
SCHEDULE I
E&J Shares Owned by BIL
-----------------------
Class Number
----- ------
Common Stock 5,779,935
Series A Preferred Stock 7,867,842
Series B Preferred Stock 786,357
Series C Preferred Stock 20,000,000
<PAGE>
SCHEDULE II
Indemnified Proceedings
-----------------------
Nature of Proceeding Amount Reserved
- -------------------- ---------------
I. July 1990, Class Action Law Suit $100,000
filed in the U.S. District Court
for the State of California
relating to certain non-disclosures
and misrepresentations in violation
of the Federal securities laws (as
more fully-described in E&J's
Form 10-Q for the quarter ended
March 31, 1996).
II. Die Cast Products Litigation, relating $500,000
to Law Suit filed by the State of
California, pursuant to The Comprehensive
Environmental Response Compensation and
Liability Act (as more fully-described in
E&J's Form 10-Q for the quarter ended
March 31, 1996).
III. March 1993, Casmalia Site, involving $350,000
inactive hazardous waste treatment and
storage of commercial and industrial
wastes (as more fully-described in E&J's
Form 10-Q for the quarter ended
March 31, 1996).
IV. 1989 Patent Infringement Case initiated $200,000
against E&J in the U.S. District Court,
Central District of California (as more
fully-described in E&J's Form 10-Q for
the quarter ended March 31, 1996).
V. Comdisco Litigation. $250,000
VI. Chris Trew v. Smith & Davis $170,000*
Manufacturing Company.
- --------------------
* The establishment of this reserve shall not affect the reduction in
the principal amount of the unsecured subordinated promissory note
provided for in Exhibit C-1 of the Merger Agreement.
<PAGE>
EXHIBIT A
IRREVOCABLE PROXY
The undersigned stockholder of Everest & Jennings International Ltd., a
Delaware corporation (the "Company"), hereby irrevocably (to the fullest extent
provided by law, but subject to automatic termination and revocation as
provided below) appoints Graham-Field Health Products, Inc., a Delaware
corporation ("Graham-Field"), or any designee of Graham-Field, the attorney and
proxy of the undersigned, with full power of substitution and resubstitution,
to the full extent of the undersigned's rights with respect to the shares of
capital stock of the Company owned beneficially or of record by the
undersigned, which shares are listed in Schedule I to the Stockholder Agreement
referred to below, and any and all other shares or securities of the Company
issued or issuable with respect thereof or otherwise acquired by stockholder on
or after the date hereof, until the termination date specified in the
Stockholder Agreement (the "Shares"). Upon the execution hereof, all prior
proxies given by the undersigned with respect to the Shares are hereby revoked
and no subsequent proxies will be given as to the matters covered hereby prior
to the earlier of the date of termination of the Stockholder Agreement
pursuant to Section 9.02 thereof (the "Termination Date") and the Effective
Time of the Merger (such earlier date being hereinafter referred to as the
"Proxy Termination Date"). This proxy is irrevocable (to the fullest extent
provided by law, but subject to automatic termination and revocation as
provided below), coupled with an interest, and is granted in connection with
the Stockholder Agreement, dated as of September 3, 1996, among Graham-Field,
Irwin Selinger and the undersigned stockholder, as the same may be amended
from time to time (the "Stockholder Agreement", capitalized terms not
otherwise defined herein being used herein as therein defined), and is granted
in consideration of the Company entering into the Merger Agreement referred to
therein.
The attorney and proxy named above will be empowered at any time prior
to the Proxy Termination Date to exercise all voting and other rights with
respect to the Shares (including, without limitation, the power to execute and
deliver written consents with respect to the Shares) of the undersigned at
every annual, special or adjourned meeting of stockholders of the Company held
prior to the Proxy Termination Date and in connection with every solicitation
of written consents in lieu of such a meeting prior to the Proxy Termination
Date, or otherwise, to the extent that any of the following matters is
considered and voted on at any such meeting or in connection with any such
consent solicitation: (i) in favor of the Merger, the execution and delivery
by the Company of the Merger Agreement and the approval of the terms thereof
and the Stockholder Agreement and each of the other actions contemplated by
the Merger Agreement and the Stockholder Agreement and any actions required in
furtherance thereof; (ii)
<PAGE>
against any action, any failure to act, or agreement that would result in a
breach in any respect of any covenant, representation or warranty or any other
obligation or agreement of the Company or the undersigned stockholder under the
Merger Agreement or the Stockholder Agreement (before giving effect to any
materiality or similar qualifications contained therein); and (iii) against any
Alternative Proposal.
The attorney and proxy named above may only exercise this proxy to vote
the Shares subject hereto in accordance with the preceding paragraph, and may
not exercise this proxy in respect of any other matter. The undersigned
shareholder may vote the Shares (or grant one or more proxies to vote the
Shares) on all other matters.
Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned.
This proxy is irrevocable, but shall automatically terminate and be
revoked and be of no further force and effect on and after the Proxy
Termination Date.
Dated: September 3, 1996 BIL (Far East Holdings)
Limited
By: /s/ Rodney Price
--------------------------
Name: Rodney Price
Title: Director
A-2
Exhibit 4(g)
REGISTRATION RIGHTS AGREEMENT
dated as of September 3, 1996
between
GRAHAM-FIELD HEALTH PRODUCTS, INC.
and
BIL (FAR EAST HOLDINGS) LIMITED
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Registration Rights
Agreement to which it is attached but is inserted for convenience only.
Page
No.
----
1. Requested Registrations.................................................. 2
(a) Registration Request.............................................. 2
(b) Registration Statement Form....................................... 2
(c) Registration Expenses............................................. 2
(d) Priority in Cutback Registrations................................. 2
(e) Preemption of Requested Registration.............................. 3
2. Piggyback Registrations.................................................. 3
(a) Right to Include Registrable Securities........................... 3
(b) Registration Expenses............................................. 4
(c) Priority in Cutback Registrations................................. 4
3. Registration Procedures.................................................. 5
4. Underwritten Offerings................................................... 9
(a) Underwritten Requested Offerings.................................. 9
(b) Underwritten Piggyback Offerings.................................. 9
5. Holdback Agreements...................................................... 10
(a) By BIL............................................................ 10
(b) By the Company.................................................... 10
6. Indemnification.......................................................... 10
(a) Indemnification by the Company.................................... 10
(b) Indemnification by BIL............................................ 11
(c) Notices of Claims, etc............................................ 12
(d) Contribution...................................................... 13
(e) Other Indemnification............................................. 13
(f) Indemnification Payments.......................................... 14
7. Covenants Relating to Rule 144........................................... 14
8. Other Registration Rights................................................ 14
(a) No Existing Agreements............................................ 14
(b) Future Agreements................................................. 14
9. Definitions.............................................................. 14
10. Termination............................................................ 18
11. Miscellaneous.......................................................... 18
(a) Notices........................................................... 18
(b) Entire Agreement.................................................. 20
(c) Amendment......................................................... 20
<PAGE>
Page
No.
----
(d) Waiver........................................................... 20
(e) No Third Party Beneficiary....................................... 20
(f) No Assignment; Binding Effect.................................... 20
(g) Headings......................................................... 21
(h) Invalid Provisions............................................... 21
(i) Remedies; Legal Expenses......................................... 21
(j) Governing Law.................................................... 22
(k) Counterparts..................................................... 22
- ii -
<PAGE>
This REGISTRATION RIGHTS AGREEMENT dated as of September 3, 1996 is
made and entered into by and between Graham- Field Health Products, Inc., a
Delaware corporation (the "Company"), and BIL (Far East Holdings) Limited, a
Hong Kong corporation ("BIL"). Capitalized terms not otherwise defined herein
have the meanings set forth in Section 9.
WHEREAS, the Company, E&J Acquisition Corp., a Delaware corporation
wholly-owned by the Company ("Sub"), BIL and Everest & Jennings International
Ltd., a Delaware corporation ("E&J"), have entered into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), pursuant to which Sub
will be merged with and into E&J and E&J will become a wholly-owned subsidiary
of the Company;
WHEREAS, at the Effective Time and in accordance with the terms of
the Merger Agreement, each share of common stock, par value $.10 per share, of
E&J (including shares owned by BIL, the majority stockholder of E&J) will be
converted into .35 of a share of Common Stock, subject to reduction under
certain circumstances, all as more fully described in the Merger Agreement;
WHEREAS, at the Effective Time and in accordance with the terms of
the Merger Agreement, BIL and BIL Securities (Offshore) Limited also, among
other things, will (i) purchase shares of Common Stock from the Company, the
proceeds of which will be used to repay certain indebtedness owing by E&J to
Hong Kong and Shanghai Banking Corporation Limited, (ii) purchase shares of a
new series of Series B Cumulative Convertible Preferred Stock of the Company
in exchange for indebtedness of E&J owing to BIL and shares of convertible
preferred stock of E&J owed by BIL and (iii) purchase shares of a new series
of Series C Cumulative Convertible Preferred Stock of the Company (such shares,
together with the shares of Series C Cumulative Convertible Preferred Stock, the
"Preferred Stock") for an aggregate purchase price of $10 million, all as more
fully described in the Merger Agreement;
WHEREAS, concurrently with the execution and delivery of the Merger
Agreement, the Company, BIL and Irwin Selinger have entered into a Stockholder
Agreement (the "Stockholder Agreement") of even date herewith; and
WHEREAS, as a condition to BIL's willingness to vote its shares of
E&J capital stock in favor of the Merger, the Company has agreed to enter into
this Registration Rights Agreement providing for the Company's registration for
sale, under certain circumstances, of Registrable Securities owned by BIL;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Registration Rights Agreement, and for other good
and valuable consideration, the receipt and
<PAGE>
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Requested Registrations. (a) Registration Requests. At any time
after the Effective Time, upon the written request of BIL requesting that the
Company effect the registration under the Securities Act of all or part of BIL's
Registrable Securities and specifying the number of Registrable Securities to be
registered and the intended method of disposition thereof, the Company thereupon
will use its best efforts to effect the registration under the Securities Act of
such Registrable Securities, all to the extent requisite to permit the
disposition (in accordance with the intended methods thereof) of the Registrable
Securities so to be registered. Notwithstanding the foregoing, the Company may
postpone taking action with respect to a Requested Registration for a reasonable
period of time after receipt of the original request (not exceeding ninety (90)
days) if, in the good faith opinion of the Company's Board of Directors,
effecting the registration would adversely affect a material financing,
acquisition, disposition of assets or stock, merger or other comparable
transaction or would require the Company to make public disclosure of
information the public disclosure of which would have a material adverse effect
upon the Company. Subject to paragraph (d), the Company may include in such
registration other securities of the same class as the Registrable Securities
for sale for its own account or for the account of any other Person.
Notwithstanding anything herein to the contrary, the Company shall not be
required to honor a request for a Requested Registration if the Company shall
have previously effected three (3) Effective Registrations pursuant to Requested
Registrations.
(b) Registration Statement Form. Requested Registrations shall be on
such appropriate registration form promulgated by the Commission as shall be
selected by the Company and shall permit the disposition of such Registrable
Securities in accordance with the intended method or methods specified in the
request for such registration.
(c) Registration Expenses. The Company will pay all
Registration Expenses incurred in connection with any Requested
Registration.
(d) Priority in Cutback Registrations. If a Requested Registration
becomes a Cutback Registration, the Company will include in any such
registration to the extent of the number which the Managing Underwriter advises
the Company can be sold in such offering (i) first, Registrable Securities
requested to be included in such registration by BIL and (ii) second, other
securities of the Company proposed to be included in such registration,
allocated among the Company and any holders thereof in accordance with the
priorities then existing among the Company and the holders of such other
securities; and any securities so
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<PAGE>
excluded shall be withdrawn from and shall not be included in such Requested
Registration.
(e) Preemption of Requested Registration. Notwithstanding anything
to the contrary contained herein, at any time within thirty (30) days after
receiving a written request for a Requested Registration, the Company may elect
to effect an underwritten primary registration in lieu of the Requested
Registration if the Company's Board of Directors believes that such primary
registration would be in the best interests of the Company. If the Company so
elects to effect a primary registration, the Company shall give prompt written
notice to BIL of its intention to effect such a registration and shall afford
BIL rights contained in Section 2 with respect to Piggyback Registrations. In
the event that the Company so elects to effect a primary registration after
receiving a request for a Requested Registration, the request for a Requested
Registration shall be deemed to have been withdrawn and such primary
registration shall not be deemed to be an Effective Registration.
2. Piggyback Registrations. (a) Right to Include Registrable
Securities. Notwithstanding any limitation contained in Section 1, if the
Company at any time proposes after the Effective Time to effect a Piggyback
Registration, including in accordance with Section 1(e), it will each such time
give written notice (a "Notice of Piggyback Registration"), at least twenty (20)
days prior to the anticipated filing date, to BIL of its intention to do so and
of BIL's right under this Section 2, which Notice of Piggyback Registration
shall include a description of the intended method of disposition of such
securities. Upon the written request of BIL made within twenty (20) days after
receipt of a Notice of Piggyback Registration (which request shall specify the
Registrable Securities intended to be disposed of and the intended method of
disposition thereof), the Company will use its best efforts to include in the
registration statement relating to such Piggyback Registration all Registrable
Securities which the Company has been so requested to register. Notwithstanding
the foregoing, if, at any time after giving a Notice of Piggyback Registration
and prior to the effective date of the registration statement filed in
connection with such registration, the Company shall determine for any reason
not to register or to delay registration of such securities, the Company may, at
its election, give written notice of such determination to BIL and, thereupon,
(i) in the case of a determination not to register, shall be relieved of its
obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses in
connection therewith) without prejudice, however, to the right of BIL to request
that such registration be effected as a Requested Registration under Section 1,
and (ii) in the case of a determination to delay registering, shall be permitted
to delay registering any Registrable Securities for the same period as the delay
in registering such other securities. No registration effected under this
Section 2 shall
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<PAGE>
relieve the Company of its obligations to effect a Requested Registration under
Section 1. Notwithstanding anything herein to the contrary, the Company shall
not be required to honor a request to include Registrable Securities in a
Piggyback Registration if the Company shall have previously effected three (3)
Effective Registrations constituting Piggyback Registrations in which
Registrable Securities were included.
(b) Registration Expenses. The Company will pay all Registration
Expenses incurred in connection with each Piggyback Registration.
(c) Priority in Cutback Registrations. If a Piggyback Registration
becomes a Cutback Registration, the Company will include in such registration to
the extent of the amount of the securities which the Managing Underwriter
advises the Company can be sold in such offering:
(i) if such registration as initially proposed by the Company was
solely a primary registration of its securities, (x) first, the securities
proposed by the Company to be sold for its own account, (y) second, any
Registrable Securities requested to be included in such registration by
BIL and any Warrants and Warrant Shares requested to be included in such
registration by the Warrant Holders, to be allocated pro-rata among BIL
and the Warrant Holders based on their Piggyback Percentage, and (z)
third, any other securities of the Company proposed to be included in such
registration, allocated among the holders thereof in accordance with the
priorities then existing among the Company and such holders; and
(ii) if such registration as initially proposed by the Company was
in whole or in part requested by holders of securities of the Company
other than BIL pursuant to demand registration rights, (x) first, such
securities held by the holders initiating such registration and, if
applicable, any securities proposed by the Company to be sold for its own
account, allocated in accordance with the priorities then existing among
the Company and such holders, (y) second, any Registrable Securities
requested to be included in such registration by BIL and any Warrants and
Warrant Shares requested to be included in such registration by the
Warrant Holders, to be allocated pro-rata among BIL and the Warrant
Holders based on their Piggyback Percentage, and (z) third, any other
securities of the Company proposed to be included in such registration,
allocated among the holders thereof in accordance with the priorities then
existing among the Company and the holders of such other securities;
and any securities so excluded shall be withdrawn from and shall not be included
in such Piggyback Registration.
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<PAGE>
3. Registration Procedures. If and whenever the Company is required
to use its best efforts to effect the registration of any Registrable Securities
owned by BIL under the Securities Act pursuant to Section 1 or Section 2, the
Company will use its best efforts to effect the registration and sale of such
Registrable Securities in accordance with the intended methods of disposition
thereof. Without limiting the foregoing, the Company in each such case will, as
expeditiously as possible:
(a) prepare and file with the Commission the requisite registration
statement to effect such registration and use its best efforts to cause
such registration statement to become effective;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and any prospectus used in
connection therewith as may be necessary to maintain the effectiveness of
such registration statement and to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable
Securities covered by such registration statement, in accordance with the
intended methods of disposition thereof, until the earlier of (i) such
time as all of such securities have been disposed of in accordance with
the intended methods of disposition by the seller or sellers thereof set
forth in such registration statement and (ii) ninety (90) days after such
registration statement becomes effective;
(c) promptly notify BIL and the underwriter or underwriters, if any:
(i) when such registration statement or any prospectus used in
connection therewith, or any amendment or supplement thereto, has
been filed and, with respect to such registration statement or any
post-effective amendment thereto, when the same has become
effective;
(ii) of any written request by the Commission for amendments
or supplements to such registration statement or prospectus;
(iii) of the notification to the Company by the Commission of
its initiation of any proceeding with respect to the issuance by the
Commission of, or of the issuance by the Commission of, any stop
order suspending the effectiveness of such registration statement;
and
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any Registrable
Securities for sale under the applicable securities or blue sky laws
of any jurisdiction.
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<PAGE>
(d) furnish to BIL such number of conformed copies of such
registration statement and of each amendment and supplement thereto (in
each case including all exhibits and documents incorporated by reference),
such number of copies of the prospectus contained in such registration
statement (including each preliminary prospectus and any summary
prospectus) and any other prospectus filed under Rule 424 promulgated
under the Securities Act, and such other documents, as BIL may reasonably
request to facilitate the disposition of its Registrable Securities;
(e) use its best efforts to register or qualify all Registrable
Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as BIL shall reasonably
request, to keep such registration or qualification in effect for so long
as such registration statement remains in effect, and take any other
action which may be reasonably necessary or advisable to enable BIL to
consummate the disposition in such jurisdictions of its Registrable
Securities, except that the Company shall not for any such purpose be
required (i) to qualify generally to do business as a foreign corporation
in any jurisdiction wherein it would not but for the requirements of this
paragraph (e) be obligated to be so qualified, (ii) to subject itself to
taxation in any such jurisdiction or (iii) to consent to general service
of process in any jurisdiction;
(f) use its best efforts to cause all Registrable Securities covered
by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable
BIL thereof to consummate the disposition of such Registrable Securities;
(g) furnish to BIL a signed counterpart, addressed to BIL (and the
underwriters, if any), of
(i) an opinion of counsel for the Company, dated the effective
date of such registration statement (or, if such registration
includes an underwritten Public Offering, dated the date of any
closing under the underwriting agreement), reasonably satisfactory
in form and substance to BIL, and
(ii) a "comfort" letter, dated the effective date of such
registration statement (and, if such registration includes an
underwritten Public Offering, dated the date of any closing under
the underwriting agreement), signed by the independent public
accountants who have certified the Company's financial statements
included in such registration statement,
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<PAGE>
in each case covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the
case of the accountants' letter, with respect to events subsequent to the
date of such financial statements, as are customarily covered in opinions
of issuer's counsel and in accountants' letters delivered to the
underwriters in underwritten Public Offerings of securities and, in the
case of the accountants' letter, such other financial matters, as BIL (or
the underwriters, if any) may reasonably request;
(h) notify BIL, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any
event as a result of which any prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and at the
request of BIL promptly prepare and furnish to BIL a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
securities, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(i) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its
securityholders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve (12) months, but not more than
eighteen (18) months, beginning with the first full calendar month after
the effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities
Act and Rule 158 promulgated thereunder;
(j) make available for inspection by BIL, any underwriter
participating in any disposition pursuant to such registration statement
and any attorney, accountant or other agent retained by BIL or any such
underwriter (collectively, the "Inspectors"), all financial and other
records, pertinent corporate documents and properties of the Company
(collectively, the "Records") as shall be reasonably necessary to enable
them to exercise their due diligence responsibility, and cause the
Company's officers, directors and employees to supply all information
reasonably requested by any such Inspector in connection with such
registration statement; provided that records which the Company
determines, in good faith, to be confidential and which it
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<PAGE>
notifies the Inspectors are confidential shall not be disclosed by the
Inspectors unless (i) the disclosure of such Records is necessary to avoid
or correct a misstatement or omission in the registration statement, (ii)
the release of such Records is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction or (iii) the information in
such Records has been made generally available to the public;
(k) provide a transfer agent and registrar for all Registrable
Securities covered by such registration statement not later than the
effective date of such registration statement; and
(l) use its best efforts to cause all Registrable Securities covered
by such registration statement to be listed, upon official notice of
issuance, on any securities exchange on which any of the securities of the
same class as the Registrable Securities are then listed.
In the event of the issuance of any stop order suspending the
effectiveness of a registration statement which includes Registrable Securities,
or any order suspending or preventing the use of any related prospectus or
suspending the qualification of any Registrable Securities included in such
registration statement for sale in any jurisdiction, the Company will use its
reasonable best efforts to promptly obtain the withdrawal of such order.
The Company may require BIL to, and BIL, as a condition to including
Registrable Securities in such registration, shall, furnish the Company with
such information and affidavits regarding BIL and the distribution of such
securities as the Company may from time to time reasonably request in writing in
connection with such registration.
BIL agrees by acquisition of such Registrable Securities that upon
receipt of any notice from the Company of the happening of any event of the kind
described in paragraph (h), BIL will forthwith discontinue its disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until BIL's receipt of the copies of the supplemented or
amended prospectus contemplated by paragraph (h) and, if so directed by the
Company, will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies, then in BIL's possession of the prospectus
relating to such Registrable Securities current at the time of receipt of such
notice. In the event the Company shall give any such notice, the period referred
to in paragraph (b) shall be extended by a number of days equal to the number of
days during the period from and including the giving of notice pursuant to
paragraph (h) and to and including the date when BIL shall receive the copies of
the supplemented or amended prospectus contemplated by paragraph (h).
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<PAGE>
4. Underwritten Offerings. (a) Underwritten Requested Offerings. In
the case of any underwritten Public Offering being effected pursuant to a
Requested Registration, the Managing Underwriter and any other underwriter or
underwriters with respect to such offering shall be selected by the Company,
provided such underwriters are of recognized national standing and are
reasonably acceptable to BIL. Such underwriter or underwriters will be
instructed to effect as broad a distribution of the Registrable Securities to be
sold by them as is reasonably practicable and, in any event, to use their best
efforts to refrain from selling any Registrable Securities to any Person who
beneficially owns, or as a result of such purchase would beneficially own, more
than 5% of the outstanding shares of Common Stock. The Company shall enter into
an underwriting agreement in customary form with such underwriter or
underwriters, which shall include, among other provisions, indemnities to the
effect and to the extent provided in Section 6. BIL shall be a party to such
underwriting agreement and may, at its option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters also be made to and for its
benefit and that any or all of the conditions precedent to the obligations of
such underwriters under such underwriting agreement also be conditions precedent
to its obligations. BIL shall not be required to make any representations or
warranties to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding BIL and its ownership of the
securities being registered on its behalf and its intended method of
distribution and any other representation required by law.
(b) Underwritten Piggyback Offerings. If the Company at any time
proposes to register any of its securities in a Piggyback Registration and such
securities are to be distributed by or through one or more underwriters, the
Company will, subject to the provisions of Section 2(c), arrange for such
underwriters to include the Registrable Securities to be offered and sold by BIL
among the securities to be distributed by such underwriters. If BIL elects to
have any of its Registrable Securities included in such Piggyback Registration,
BIL shall be obligated to sell its Registrable Securities in such Piggyback
Registration through such underwriters on the same terms and conditions as apply
to the other Company securities to be sold by such underwriters in connection
with such Piggyback Registration. BIL shall be a party to the underwriting
agreement between the Company and such underwriter or underwriters and may, at
its option, require that any or all of the representations and warranties by,
and the other agreements on the part of, the Company to and for the benefit of
such underwriters also be made to and for its benefit and that any or all of the
conditions precedent to the obligations of such underwriters under such
underwriting agreement also be conditions precedent to its obligations. BIL
shall not be required to make any representations or warranties to or agreements
with the Company or the underwriters other than representations, warranties
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<PAGE>
or agreements regarding BIL and its ownership of the securities being registered
on its behalf and its intended method of distribution and any other
representation required by law.
5. Holdback Agreements. (a) By BIL. In the case of an underwritten
Public Offering, unless the Managing Underwriter otherwise agrees, BIL, by
acquisition of such Registrable Securities, agrees not to effect any public sale
or distribution (including a sale under Rule 144) of such securities, or any
securities convertible into or exchangeable or exercisable for such securities,
during the seven (7) days prior to and the ninety (90) days after the effective
date of any registration statement filed by the Company in connection with a
Public Offering (or for such shorter period of time as is sufficient and
appropriate, in the opinion of the Managing Underwriter, in order to complete
the sale and distribution of the securities included in such registration),
except as part of such registration statement, whether or not BIL participates
in such registration.
(b) By the Company. Unless the Managing Underwriter otherwise
agrees, the Company agrees not to effect any public sale or distribution of its
equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven (7) days prior to and the
ninety (90) days after the effective date of the registration statement filed in
connection with an underwritten offering made pursuant to a Requested
Registration or Piggyback Registration (or for such shorter period of time as is
sufficient and appropriate, in the opinion of the Managing Underwriter, in order
to complete the sale and distribution of the securities included in such
registration), except as part of such underwritten registration and except
pursuant to registrations on Form S-4 or Form S-8 promulgated by the Commission
or any successor or similar forms thereto. The Company shall cause each holder
of shares of Common Stock, or any securities convertible into or exchangeable or
exercisable for shares of Common Stock, purchased from the Company at any time
after the Effective Time (other than in a registered public offering), who at
the time and after giving effect to such purchase owns shares of Common Stock
and securities convertible into or exchangeable for shares of Common Stock
representing at least 10% of the shares of Common Stock outstanding on a fully
diluted basis, to agree not to effect any public sale or distribution (including
sales pursuant to Rule 144) of any such purchased securities during any period
referred to in the preceding sentence (except as part of an underwritten
registration, if otherwise permitted).
6. Indemnification. (a) Indemnification by the Company. The Company
shall, to the full extent permitted by law, indemnify and hold harmless BIL, its
directors and officers, and each other Person, if any, who controls BIL within
the meaning of the Securities Act, against any Losses, claims, damages, expenses
or liabilities, joint or several (together, "Losses"), to which
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<PAGE>
BIL or any such director or officer or controlling Person may become subject
under the Securities Act or otherwise, insofar as such Losses (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement filed in connection with a
Requested Registration or a Piggyback Registration in which Registrable
Securities of BIL are included, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereto, or
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the case of a
prospectus, in the light of the circumstances under which they were made) not
misleading, and the Company will reimburse BIL and each such director, officer
and controlling Person for all reasonable legal or any other expenses reasonably
incurred by them in connection with investigating or defending any such Loss (or
action or proceeding in respect thereof); provided that the Company shall not be
liable in any such case to the extent that any such Loss (or action or
proceeding in respect thereof) arises out of or is based upon (x) an untrue
statement or alleged untrue statement or omission or alleged omission made in
any such registration statement, preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with information furnished in writing to the Company by or on behalf of BIL
specifically for use in the preparation thereof or (y) BIL's failure to send or
give a copy of the final prospectus to the Persons asserting an untrue statement
or alleged untrue statement or omission or alleged omission at or prior to the
written confirmation of the sale of Registrable Securities to such Person if
such statement or omission was corrected in such final prospectus. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of BIL or any such director, officer or controlling Person,
and shall survive the transfer of such securities by BIL. In connection with an
underwritten Requested Registration or Piggyback Registration, the Company will
indemnify such underwriters, their officers and directors and each other Person,
if any, who controls such underwriters within the meaning of the Securities Act,
to the same extent as provided above with respect to the indemnification of BIL.
(b) Indemnification by BIL. BIL, as a condition to including
Registrable Securities in any registration statement filed in connection with a
Requested Registration or a Piggyback Registration in which Registrable
Securities of BIL are included, shall, to the full extent permitted by law,
indemnify and hold harmless the Company, its directors and officers, and each
other Person, if any, who controls the Company within the meaning of the
Securities Act, against any Losses to which the Company or any such director or
officer or controlling Person may become subject under the Securities Act or
otherwise, insofar as such Losses (or actions or proceedings, whether commenced
or threatened, in
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<PAGE>
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any such registration
statement, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein (in the case of a prospectus, in the
light of the circumstances under which they were made) not misleading, if such
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with information furnished in writing to
the Company by or on behalf of BIL specifically for use in the preparation of
such registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the Company
or any such director, officer or controlling Person and shall survive the
transfer of such securities by BIL.
(c) Notices of Claims, etc. Promptly after receipt by an Indemnified
Party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding paragraph (a) or (b) of this Section 6, such
Indemnified Party will, if a claim in respect thereof is to be made against an
Indemnifying Party pursuant to such paragraphs, give written notice to the
latter of the commencement of such action, provided that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under the preceding paragraphs of this
Section 6, except to the extent that the Indemnifying Party is actually
prejudiced by such failure to give notice. In case any such action is brought
against an Indemnified Party, the Indemnifying Party shall be entitled to
participate in and to assume the defense thereof, with counsel reasonably
satisfactory to such Indemnified Party, and after notice from the Indemnifying
Party to such Indemnified Party of its election so to assume the defense
thereof, the Indemnifying Party shall not be liable to such Indemnified Party
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof; provided that the Indemnified Party may
participate in such defense at the Indemnified Party's expense. If the
Indemnifying Party is not entitled to, or elects not to, assume the defense of a
claim, it will not be obligated to pay the fees and expenses of more than one
counsel for the Indemnified Parties with respect to such claim, unless the
Indemnified Parties shall have been advised by counsel that representation of
any such Indemnified Parties by the same counsel would be inappropriate under
applicable standards of professional conduct due to actual or potential
differing interests between them, in which case such Indemnified Parties shall
have the right to select separate counsel the fees and expenses of which shall
be paid by the Indemnifying Party. No Indemnifying Party shall consent to entry
of any judgment or enter into any settlement without the consent of the
Indemnified Party,
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<PAGE>
which consent will not be unreasonably withheld or delayed. No Indemnifying
Party shall be subject to any liability for any settlement made without its
consent, which consent shall not be unreasonably withheld or delayed. The
indemnification provided for under this Registration Rights Agreement will
remain in full force and effect regardless of any investigation made by or on
behalf of the Indemnified Party or any officer, director or controlling Person
of such Indemnified Party and will survive the transfer of securities.
(d) Contribution. If the indemnity and reimbursement obligation
provided for in any paragraph of this Section 6 is unavailable or insufficient
to hold harmless an Indemnified Party in respect of any Losses (or actions or
proceedings in respect thereof) referred to therein, then the Indemnifying Party
shall contribute to the amount paid or payable by the Indemnified Party as a
result of such Losses (or actions or proceedings in respect thereof) in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and the Indemnified Party on the other hand in connection
with statements or omissions which resulted in such Losses, as well as any other
relevant equitable considerations, including the relative benefits received in
connection with the transaction. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Indemnifying Party or the Indemnified
Party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The parties
hereto agree that it would not be just and equitable if contributions pursuant
to this paragraph were to be determined by pro rata allocation or by any other
method of allocation which does not take account of the equitable considerations
referred to in the first sentence of this paragraph. The amount paid by an
Indemnified Party as a result of the Losses referred to in the first sentence of
this paragraph shall be deemed to include any legal and other expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending any Loss which is the subject of this paragraph.
No Indemnified Party guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from the Indemnifying Party if the Indemnifying Party was not
guilty of such fraudulent misrepresentation.
(e) Other Indemnification. Indemnification similar to that specified
in the preceding paragraphs of this Section 6 (with appropriate modifications)
shall be given by the Company and BIL with respect to any required registration
or other qualification of securities under any federal or state law or
regulation of any governmental authority other than the Securities Act. The
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<PAGE>
provisions of this Section 6 shall be in addition to any other rights to
indemnification or contribution which an Indemnified Party may have pursuant to
law, equity, contract or otherwise.
(f) Indemnification Payments. The indemnification required by this
Section 6 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or Losses
are incurred.
7. Covenants Relating to Rule 144. The Company will file reports in
compliance with the Exchange Act, will comply with all rules and regulations of
the Commission applicable in connection with the use of Rule 144 and will take
such other actions and furnish BIL with such other information as BIL may
request in order to avail itself of such rule or any other rule or regulation of
the Commission allowing BIL to sell any Registrable Securities without
registration.
8. Other Registration Rights. (a) No Existing Agreements. The
Company represents and warrants to BIL that there is not in effect on the date
hereof any agreement by the Company (other than this Registration Rights
Agreement) pursuant to which any holders of securities of the Company have a
right to cause the Company to register or qualify such securities under the
Securities Act or any securities or blue sky laws of any jurisdiction that would
conflict or be inconsistent with any provision of this Registration Rights
Agreement.
(b) Future Agreements. The Company shall not hereafter agree with
the holders of any securities issued or to be issued by the Company to register
or qualify such securities under the Securities Act or any securities or blue
sky laws of any jurisdiction that would conflict or be inconsistent with any
provision of this Registration Rights Agreement.
9. Definitions. (a) Except as otherwise specifically indicated, the
following terms will have the following meanings for all purposes of this
Registration Rights Agreement:
"Business Day" means a day other than Saturday, Sunday or any other
day on which banks located in the State of New York are authorized or obligated
to close.
"Commission" means the United States Securities and Exchange
Commission, or any successor governmental agency or authority.
"Common Stock" means shares of Common Stock, par value $.025 per
share, of the Company, as constituted on the date hereof, and any stock into
which such Common Stock shall have been changed or any stock resulting from any
reclassification of such Common Stock.
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<PAGE>
"Company" has the meaning ascribed to it in the preamble.
"Cutback Registration" means any Requested Registration or Piggyback
Registration to be effected as an underwritten Public Offering in which the
Managing Underwriter with respect thereto advises the Company in writing that,
in its opinion, the number of securities requested to be included in such
registration (including securities of the Company which are not Registrable
Securities) exceed the number which can be sold in such offering without a
material reduction in the selling price anticipated to be received for the
securities to be sold in such Public Offering.
"DGCL" means the General Corporation Law of the State of Delaware.
"Effective Registration" means, subject to the last sentence of
Section 1(e), a Requested Registration or a Piggyback Registration which
includes Registrable Securities, as the case may be, which (a) has been declared
or ordered effective in accordance with the rules of the Commission and (b) has
been kept effective for the period of time contemplated by Section 3(b).
Notwithstanding the foregoing, a Requested Registration that does not become
effective after it has been filed with the Commission solely by reason of BIL's
refusal to proceed shall be deemed to be an Effective Registration for purposes
of this Registration Rights Agreement.
"Effective Time" means the time at which the Merger becomes
effective under the DGCL.
"E&J" has the meaning ascribed to it in the preamble.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Indemnified Party" means a party entitled to indemnity in
accordance with Section 6.
"Indemnifying Party" means a party obligated to provide indemnity in
accordance with Section 6.
"Inspectors" has the meaning ascribed to it in Section 3(i).
"Losses" has the meaning ascribed to it in Section 6(a).
"Managing Underwriter" means, with respect to any Public Offering,
the underwriter or underwriters managing such Public Offering.
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<PAGE>
"Merger Agreement" has the meaning ascribed to it in the preamble.
"NASD" means the National Association of Securities Dealers.
"Notice of Piggyback Registration" has the meaning ascribed to it in
Section 2(a).
"Person" means any natural person, corporation, general partnership,
limited partnership, proprietorship, other business organization, trust, union
or association.
"Piggyback Percentage" means (a) in the case of BIL, the quotient
obtained by dividing (i) the number of Registrable Securities requested to be
included in a Piggyback Registration by BIL by (ii) the sum of (x) the number of
Registrable Securities requested to be included in a Piggyback Registration by
BIL, (y) the number of Warrant Shares requested to be included in a Piggyback
Registration by the Warrant Holders and (z) the number of shares of Common Stock
for which the Warrants requested to be included in a Piggyback Registration by
the Warrant Holders are exercisable; and (b) in the case of a Warrant Holder,
the quotient obtained by dividing (i) the sum of (x) the number of Warrant
Shares requested to be included in a Piggyback Registration by such Warrant
Holder and (y) the number of shares of Common Stock for which the Warrants
requested to be included in a Piggyback Registration by such Warrant Holder are
exercisable by (ii) the sum of (x) the number of Registrable Securities
requested to be included in a Piggyback Registration by BIL, (y) the number of
Warrant Shares requested to be included in a Piggyback Registration by the
Warrant Holders and (z) the number of shares of Common Stock for which the
Warrants requested to be included in a Piggyback Registration by the Warrant
Holders are exercisable.
"Piggyback Registration" means any registration of securities of the
Company of the same class as the Registrable Securities under the Securities Act
(other than a registration in respect of a dividend reinvestment or similar plan
for stockholders of the Company or on Form S-4 or Form S-8 promulgated by the
Commission, or any successor or similar forms thereto), whether for sale for the
account of the Company or for the account of any holder of securities of the
Company (other than Registrable Securities), including a registration by the
Company under the circumstances described in Section 1(e).
"Preferred Stock" has the meaning ascribed to it in the preamble.
"Public Offering" means any offering of Common Stock to the public,
either on behalf of the Company or any of its securityholders, pursuant to an
effective registration statement under the Securities Act.
- 16 -
<PAGE>
"Records" has the meaning ascribed to it in Section 3(i).
"Registrable Securities" means (i) the Shares and (ii) any
additional shares of Common Stock issued or distributed by way of a dividend,
stock split or other distribution in respect of the Shares, or acquired by way
of any rights offering or similar offering made in respect of the Shares. As to
any particular Registrable Securities, once issued such securities shall cease
to be Registrable Securities when (i) a registration statement with respect to
the sale of such securities shall have become effective under the Securities Act
and such securities shall have been disposed of in accordance with such
registration statement, (ii) they shall have been distributed to the public
pursuant to Rule 144 or all Registrable Securities then owned by the Restricted
Group can be sold in any three-month period pursuant to Rule 144, (iii) they are
transferred to or become owned by a Person who is not a member of the Restricted
Group or (iv) they shall have ceased to be outstanding. Shares of Common Stock
available upon conversion of securities of the Company convertible into or
exchangeable for shares of Common Stock or upon the exercise of rights or
options of the Company to purchase shares of Common Stock shall not constitute
"Registrable Securities" for purposes of this Registration Rights Agreement, and
shall not be eligible for inclusion in a Requested Registration or a Piggyback
Registration, until such shares are actually obtained following the conversion
or exchange of such securities or the exercise of such rights or options.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with its obligations under this Registration Rights
Agreement to effect the registration of Registrable Securities in a Requested
Registration or a Piggyback Registration, including, without limitation, all
registration, filing, securities exchange listing and NASD fees, all
registration, filing, qualification and other fees and expenses of complying
with securities or blue sky laws, all word processing, duplicating and printing
expenses, messenger and delivery expenses, the fees and disbursements of counsel
for the Company and for BIL and of the Company's independent public accountants,
including the expenses of any special audits or "cold comfort" letters required
by or incident to such performance and compliance, any fees and disbursements of
underwriters customarily paid by issuers of securities; but excluding
underwriting discounts and commissions and transfer taxes, if any, in respect of
Registrable Securities and the fees and disbursements of any legal counsel
retained by BIL, which shall be payable by BIL.
"Registration Rights Agreement" means this Registration Rights
Agreement, as the same shall be amended from time to time.
- 17 -
<PAGE>
"Requested Registration" means any registration of Registrable
Securities under the Securities Act effected in accordance with Section 1.
"Restricted Group" has the meaning ascribed to it in the Stockholder
Agreement.
"Rule 144" means Rule 144 promulgated by the Commission under the
Securities Act, and any successor provision thereto.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Shares" means, collectively, (i) the shares of Common Stock
received by BIL or any other member of the Restricted Group pursuant to the
Merger Agreement, (ii) any shares of Common Stock obtained by BIL or any other
member of the Restricted Group upon conversion of the shares of Preferred Stock
received by BIL or any other member of the Restricted Group pursuant to the
Merger Agreement or as a dividend in respect of such shares of Preferred Stock
and (iii) any shares of Common Stock purchased by BIL or any other member of the
Restricted Group in accordance with Section 4.01 or 4.02 of the Stockholder
Agreement.
"Stockholder Agreement" has the meaning ascribed to it in the
preamble.
"Sub" has the meaning ascribed to it in the preamble.
"Warrant Holders" means the holders of the Warrants (the "Warrants")
issued pursuant to the Warrant Agreement, dated as of March 12, 1992, as
amended, by and between the Company and John Hancock Mutual Life Insurance
Company.
"Warrant Shares" means the shares of Common Stock issuable to the
Warrant Holders pursuant to the Warrants.
(b) Unless the context of this Registration Rights Agreement
otherwise requires, (i) words of any gender include each other gender; (ii)
words using the singular or plural number also include the plural or singular
number, respectively; (iii) the terms "hereof," "herein," "hereby" and
derivative or similar words refer to this entire Registration Rights Agreement;
and (iv) the term "Section" refers to the specified Section of this Registration
Rights Agreement. Whenever this Registration Rights Agreement refers to a number
of days, such number shall refer to calendar days unless Business Days are
specified.
10. Termination. This Registration Rights Agreement shall
automatically terminate, and shall cease to be of any further force or effect,
upon the termination of the Merger Agreement in accordance with its terms.
11. Miscellaneous. (a) Notices. All notices, requests and other
communications hereunder must be in writing and will be deemed to have been duly
given only if delivered
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<PAGE>
personally or by facsimile transmission or mailed (first class postage prepaid)
to the parties at the following addresses or facsimile numbers:
If to BIL, to:
BIL (Far East Holdings) Limited
c/o Brierley Investments Limited
10 Eastcheap, 3rd Floor
London EC 3M 1AJ
United Kingdom
Facsimile No.: 011-44-171-369-9112
Attn: Rodney F. Price, Chairman
with a copy to:
Bryan Cave LLP
One Metropolitan Square
211 North Broadway
Suite 3600
St. Louis, Missouri 63102
Facsimile No.: (314) 259-2265
Attn: John P. Denneen, Esq.
and to:
Brierley Investments Limited
22-24 Victoria Street
Level 6, Colonial Building
Wellington, New Zealand
Facsimile No.: 011-644-473-1631
Attn: Mark Horton, Corporate Secretary
If to the Company, to:
Graham-Field Health Products, Inc.
400 Rabro Drive East
Hauppauge, New York 11788
Facsimile No.: (516) 582-5608
Attn: Richard S. Kolodny, Esq.
with a copy to:
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Facsimile No.: (212) 530-5219
Attn: Robert S. Reder, Esq.
- 19 -
<PAGE>
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, and (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom a
copy of such notice is to be delivered pursuant to this Section). Any party from
time to time may change its address, facsimile number or other information for
the purpose of notices to that party by giving notice specifying such change to
the other parties hereto.
(b) Entire Agreement. This Registration Rights Agreement supersedes
all prior discussions and agreements between the parties with respect to the
subject matter hereof, and contains the sole and entire agreement between the
parties hereto with respect to the subject matter hereof.
(c) Amendment. This Registration Rights Agreement may be amended,
supplemented or modified only by a written instrument (which may be executed in
any number of counterparts) duly executed by or on behalf of each of the Company
and BIL.
(d) Waiver. Any term or condition of this Registration Rights
Agreement may be waived at any time by the party that is entitled to the benefit
thereof, but no such waiver shall be effective unless set forth in a written
instrument duly executed by or on behalf of the party waiving such term or
condition. No waiver by any party of any term or condition of this Registration
Rights Agreement, in any one or more instances, shall be deemed to be or
construed as a waiver of the same term or condition of this Registration Rights
Agreement on any future occasion.
(e) No Third Party Beneficiary. The terms and provisions of this
Registration Rights Agreement are intended solely for the benefit of each party
hereto and it is not the intention of the parties to confer third-party
beneficiary rights upon any other Person other than any Person entitled to
indemnity under Section 6.
(f) No Assignment; Binding Effect. Neither this Registration Rights
Agreement nor any right, interest or obligation hereunder may be assigned by any
party hereto without the prior written consent of the other party hereto and any
attempt to do so will be void; provided that BIL may assign its rights hereunder
with respect to any Registrable Securities transferred (i) to another member of
the Restricted Group. In the event of any such assignment, references herein to
"BIL" shall mean BIL and any such assignees and (ii) to any Person who purchases
Registrable Securities from any member of the Restricted Group who, pursuant to
the requirements of Section 3.01(a) of the
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<PAGE>
Stockholder Agreement, concurrently with such purchase delivers an instrument to
the Company agreeing to be bound by the provisions of Sections 3.01, 4.01 and
4.03 of the Stockholder Agreement. Notwithstanding any such assignment and the
preceding sentence, all rights of BIL under this Registration Rights Agreement
shall be exercised only by BIL and the Company shall not be required to send
notices to or take directions from any other member of the Restricted Group or
any such other assignee. Subject to the foregoing, this Registration Rights
Agreement is binding upon, inures to the benefit of and is enforceable by the
parties hereto and their respective successors and assigns.
(g) Headings. The headings used in this Registration Rights
Agreement have been inserted for convenience of reference only and do not define
or limit the provisions hereof.
(h) Invalid Provisions. If any provision of this Registration Rights
Agreement is held to be illegal, invalid or unenforceable under any present or
future law, and if the rights or obligations of any party hereto under this
Registration Rights Agreement will not be materially and adversely affected
thereby, (i) such provision will be fully severable, (ii) this Registration
Rights Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof and (iii) the
remaining provisions of this Registration Rights Agreement will remain in full
force and effect and will not be affected by the illegal, invalid or
unenforceable provision or by its severance herefrom.
(i) Remedies; Legal Expenses. Except as otherwise expressly provided
for herein, no remedy conferred by any of the specific provisions of this
Registration Rights Agreement is intended to be exclusive of any other remedy,
and each and every remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity or
by statute or otherwise. The election of any one or more remedies by any party
hereto shall not constitute a waiver by any such party of the right to pursue
any other available remedies.
Damages in the event of breach of this Registration Rights Agreement
by a party hereto would be difficult, if not impossible, to ascertain, and it is
therefore agreed that each such party, in addition to and without limiting any
other remedy or right it may have, will have the right to an injunction or other
equitable relief in any court of competent jurisdiction, enjoining any such
breach, and enforcing specifically the terms and provisions hereof and the
Company and BIL each hereby waives any and all defenses it may have on the
ground of lack of jurisdiction or competence of the court to grant such an
injunction or other equitable relief. The existence of this right will not
preclude any such party from pursuing any other rights and remedies at law or in
equity which such party may have.
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<PAGE>
The parties hereto agree that, in the event that any party to this
Registration Rights Agreement shall bring any legal action or proceeding to
enforce or to seek damages or other relief arising from an alleged breach of any
term or provision of this Registration Rights Agreement by the other party, the
prevailing party in any such action or proceeding shall be entitled to an award
of, and the other party to such action or proceeding shall pay, the reasonable
fees and expenses of legal counsel to the prevailing party.
(j) Governing Law. This Registration Rights Agreement shall be
governed by and construed in accordance with the laws of the State of New York
applicable to a contract executed and performed in such State, without giving
effect to the conflicts of laws principles thereof.
(k) Counterparts. This Registration Rights Agreement may be executed
in any number of counterparts, each of which will be deemed an original, but all
of which together will constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, this Registration Rights Agreement has been duly
executed and delivered by the duly authorized officer of each party hereto as of
the date first above written.
BIL (FAR EAST HOLDINGS) LIMITED
By: /s/ Rodney Price
__________________________
Name: Rodney Price
Title: Director
GRAHAM-FIELD HEALTH PRODUCTS, INC.
By: /s/ Irwin Selinger
__________________________
Name: Irwin Selinger
Title: Chairman and
Chief Executive Officer
- 23 -
Exhibit 99(a)
GRAHAM-FIELD HEALTH PRODUCTS, INC.
400 Rabro Drive East
Hauppauge, New York 11788
(516) 582-5900
FOR IMMEDIATE RELEASE Contacts: Richard S. Kolodny
Vice President,
GRAHAM-FIELD HEALTH PRODUCTS, INC. General Counsel
400 RABRO DRIVE EAST Gary M. Jacobs
Vice President, Finance
HAUPPAUGE, NEW YORK 11788 Chief Financial Officer
(516) 582-5900
GRAHAM-FIELD HEALTH PRODUCTS, INC.
SIGNS MERGER AGREEMENT TO ACQUIRE
EVEREST & JENNINGS INTERNATIONAL LTD.
AND ADOPTS NEW STOCKHOLDER RIGHTS PLAN
HAUPPAUGE, NEW YORK, September 3, 1996 -- Graham-Field Health Products, Inc.
(NYSE-GFI), a manufacturer and supplier of healthcare products, announced today
that it has entered into an Agreement and Plan of Merger with Everest & Jennings
International Ltd. and its majority stockholder, BIL (Far East Holdings)
Limited, providing for the acquisition of Everest & Jennings by Graham-Field.
Graham-Field has received a fairness opinion from Jefferies & Company to the
effect that the consideration to be paid by Graham-Field pursuant to the
Merger Agreement is fair to its stockholders from a financial point
of view. The terms of the acquisition are the same as those reflected in the
announcement dated August 14, 1996.
As a result of the merger, Everest & Jennings will become a wholly-owned
subsidiary of Graham-Field. In the merger, the stockholders of Everest &
Jennings will receive one share of Graham-Field common stock for each 2.857
shares of the common stock of Everest & Jennings, which is subject to reduction
to the extent necessary so that the value of Graham-Field common stock into
which each share of Everest & Jennings common stock is converted will not
exceed $5.50. There are currently 7,196,565 shares of Everest & Jennings common
stock outstanding.
In connection with the merger, BIL will purchase for cash up to 1.9 million
additional shares of Graham-Field common stock, valued at the greater of $13 per
share or the average market price of the common stock of Graham-Field for the 10
consecutive trading days prior to the closing date, the proceeds of which will
be used by Graham-Field to repay all debt of Everest & Jennings in the
approximate amount of $25 million to Hong Kong and Shanghai Banking Corporation
Limited. In addition, Graham-Field will issue to BIL up to $61 million of a new
Series B Cumulative Convertible Preferred Stock in exchange for
<PAGE>
indebtedness of Everest & Jennings owing to BIL and shares of Everest & Jennings
preferred stock owned by BIL. As part of the transaction, BIL will also purchase
for cash $10 million of a new Series C Cumulative Convertible Preferred Stock,
the proceeds of which will be available to Graham-Field for general corporate
purposes. Finally, certain indebtedness in the amount of $4 million owing by
Graham-Field to BIL will be exchanged for a $4 million unsecured subordinated
promissory note of Graham-Field which will mature on April 1, 2001 and will bear
interest at the effective rate of 7.7% per annum.
The Series B Preferred Stock and the Series C Preferred Stock to be issued by
Graham-Field to BIL will be entitled to a dividend at the rate of 1.5% per year,
payable at the option of Graham-Field either in cash or in shares of its common
stock. In addition, the shares of Series B and Series C Preferred Stock will
vote on an as-converted basis, as a single class together with the common stock,
on all matters submitted to a vote of the stockholders of Graham-Field. The
Series B Preferred Stock will not be redeemable and will be convertible into
shares of Graham-Field common stock (x) at the option of the holder, at a
conversion price of $20 per share, (y) at the option of Graham-Field, at a
conversion price equal to the then current trading price (but not less than
$15.50 or more than $20 per share), and (z) automatically on the fifth
anniversary of the date of issuance at a conversion price of $15.50 per
share, in each case subject to customary antidilution adjustments. The Series C
Preferred Stock will be subject to redemption as a whole at Graham-Field's
option on the fifth anniversary of the date of issuance at stated value and, to
the extent not so redeemed, will automatically convert on the fifth anniversary
of the date of issuance at a conversion price of $20 per share, subject to
customary antidilution adjustments.
As a result of the merger, BIL will own shares of common and preferred stock of
Graham-Field representing approximately 34% of the voting power of all
outstanding shares of Graham-Field stock. Simultaneous with the signing of the
Merger Agreement, Graham-Field and BIL entered into a Stockholder Agreement
pursuant to which BIL has agreed to vote all of its Everest & Jennings shares
in favor of the merger. In the Stockholder Agreement, BIL also has agreed to
grant Graham-Field a right of refusal with respect to certain sales of
Graham-Field stock, to indemnify Graham-Field against certain existing actions
and proceedings to which Everest & Jennings is a party and, so long as BIL owns
Graham-Field stock representing at least 5% of the voting power of the
outstanding shares, not to acquire additional shares without the consent of
Graham-Field's Board of Directors (which consent will not be unreasonably
withheld), seek to acquire ownership of Graham-Field, engage in any
solicitation of proxies with respect to Graham-Field or otherwise seek to
propose or
<PAGE>
acquire control of the Board of Directors. Pursuant to the Stockholder
Agreement, BIL will have the right to designate two members of Graham-Field's
Board of Directors, subject to reduction if BIL reduces its ownership of
Graham-Field stock. BIL also will have the right to participate on a pro rata
basis in certain future stock issuances by Graham-Field. The Stockholder
Agreement will automatically terminate upon a change of control of Graham-Field
or its Board of Directors. In addition, Graham-Field has granted certain
registration rights to BIL with respect to its Graham-Field shares.
The closing of the transaction is subject to customary conditions, including
approval by the stockholders of both Graham-Field and Everest & Jennings and the
receipt of all necessary governmental and regulatory approvals. Both companies
expect to mail a joint proxy statement/prospectus to their stockholders
following Securities and Exchange Commission clearance and hold special
stockholders meetings to approve the transaction later this year.
The strategic combination of Graham-Field and Everest & Jennings will position
the company as a significant force in the healthcare industry, and provide
Graham-Field with a world-class manufacturing operation for the wheelchair
product line. The merger will unite Everest & Jennings' manufacturing operations
and rehabilitation product lines with Graham-Field's distribution network and
advanced technology systems, to provide penetration in both the homecare and
rehabilitation markets with a greater level of service and efficiency, as well
as a broader portfolio of products. The revenues of the combined entity will be
approximately $200 million, of which approximately 50% will represent
self-manufactured products, positioning Graham-Field as one of the leading
manufacturers of durable medical products in the United States. The Everest &
Jennings name, a symbol of quality for more than 50 years, will permit
Graham-Field to introduce its Temco home healthcare product line, as well as its
other self-manufactured product lines, into the rehabilitation marketplace, a
virtually untapped marketplace for Graham-Field in the past.
Separately, Graham-Field announced that it has called for redemption of the
preferred stock purchase rights currently outstanding under its Stockholder
Rights Plan and that it has established a successor Stockholder Rights Plan. The
redemption of the existing rights will be effected, and new rights will be
distributed as a dividend of one right for each share of Graham-Field common
stock outstanding, with a record date of September 17, 1996. Information
concerning the new Stockholder Rights Plan and checks for the redemption price
($.0001 per right) of the old rights will be sent to stockholders on or about
September 17, 1996. The new Stockholder Rights Plan is intended to enhance the
protections provided by the existing Stockholder Rights Plan in deterring
coercive takeover tactics and
<PAGE>
strengthening Graham-Field's ability to deal with an unsolicited takeover
proposal.
The new rights will expire in September 2006. Each new right will entitle the
holder to buy one one-hundredth of a newly-issued share of preferred stock at an
exercise price of $35. The rights will become exercisable at such time as any
person or group acquires more than 15% of the outstanding shares of voting stock
of Graham-Field or within 10 days following the commencement of a tender offer
that will result in any person or group owning such percentage of the
outstanding voting shares. Upon any person or group acquiring 15% of the
outstanding shares of voting stock, each right will entitle its holder to buy
shares of Graham-Field common stock (or of the stock of the acquiring company if
it is the surviving entity in a business combination) having a market value
equal to twice the exercise price of each right. The rights will be redeemable
at any time prior to their becoming exercisable. The new Stockholder Rights Plan
exempts the merger and the other transactions contemplated by the Merger
Agreement and the Stockholder Agreement, and provides that BIL's acquisition of
Graham-Field shares will not cause the rights to become exercisable unless BIL
acquires shares other than in accordance with the Merger Agreement and the
Stockholder Agreement.
Graham-Field also announced that its Board has proposed several amendments to
Graham-Field's charter which will be voted on at the upcoming special meeting of
stockholders. The proposed amendments include an increase in the authorized
common stock to 60 million shares and the elimination of stockholders' ability
to take action by written consent in lieu of an actual stockholders meeting. At
the special meeting, the stockholders also will be asked to approve an increase
in the number of shares available for the granting of options under
Graham-Field's Incentive Program by 900,000. This will accommodate the
conversion of options currently held by Everest & Jennings employees into
options to purchase Graham-Field common stock.
* * *
Graham-Field manufacturers, markets and distributes more than 23,000 healthcare
products for hospital, physician and home use to approximately 15,000 home
healthcare, physician, hospital supply and pharmaceutical distributors,
retailers and wholesalers.
