<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) January 27, 1998.
GRAHAM-FIELD HEALTH PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-8801 NY 11-2578230
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
400 Rabro Drive East, Hauppauge, New York 11788
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 582-5900
Not Applicable
(Former name or former address, if changed since last report.)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On January 27, 1998, Lumex/Basic American Holdings, Inc.,
formerly known as Fuqua Enterprises, Inc. ("Fuqua"), a wholly-owned subsidiary
of Graham-Field Health Products, Inc. ("Graham-Field") which was acquired
by Graham-Field in December 1997, sold (the "Leather Sale Transaction") all of
the capital stock of Irving Tanning Company ("ITC"), Hancock Ellsworth Tanners,
Inc., Kroy Tanning Company, Incorporated and Seagrave Leather Corporation
(collectively, the "Leather Companies"), to the management of ITC ("ITC
Management") pursuant to a (i) Stock Purchase Agreement dated as of January 27,
1998, by and among IT Acquisition Corporation ("ITAC"), Graham-Field and Fuqua,
and (ii) Stock Purchase Agreement dated as of January 27, 1998, by and among
HEKS Corporation ("HEKS"), Graham-Field and Fuqua (collectively, the
"Agreements"). As more fully described in the Agreements, the aggregate
consideration received by Fuqua for the sale of the capital stock of the
Leather Companies consisted of (i) $60,167,400 in cash, (ii) an aggregate of
5,000 shares of Series A Preferred Stock of ITAC with a stated value of
$4,250,000 (the "ITAC Preferred Stock"), and (iii) the assumption of debt of
$2,341,250. In connection with the Leather Sale Transaction, the ITC Management
forfeited stock options to acquire 216,090 shares of common stock of
Graham-Field, which were converted immediately prior to the transaction into
an equivalent dollar amount of built-in-gain of stock options to purchase
shares of common stock of ITC. In addition, as the holder of the ITAC
Preferred Stock, Fuqua will be entitled to appoint one (1) director to the
Board of Directors of ITAC.
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<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS PRO-FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a) PRO-FORMA FINANCIAL INFORMATION AND INTERIM
FINANCIAL STATEMENTS.
(a)(1) PRO-FORMA FINANCIAL INFORMATION
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<PAGE> 4
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION OF
GRAHAM-FIELD HEALTH PRODUCTS, INC.
The following unaudited pro forma combined condensed financial information
reflects financial information with respect to (1) the sale of the capital stock
of Irving Tanning Company, Hancock Ellsworth Tanners, Inc., Kroy Tanning
Company, Incorporated and Seagrave Leather Corporation (collectively, the
"Leather Companies"), (2) the merger (the "Merger") of a wholly-owned subsidiary
of Graham-Field with and into Lumex/Basic American Holdings, Inc., formerly
known as Fuqua Enterprises, Inc. ("Fuqua") on December 30, 1997, (3)
Graham-Field's acquisitions of (i) Everest & Jennings International Ltd.
("Everest & Jennings") on November 27, 1996 (the "Everest & Jennings
Acquisition"), (ii) V.C. Medical Distributors, Inc. ("V.C. Medical") on
September 4, 1996 (the "V.C. Medical Acquisition"), (iii) Motion 2000 Inc.
("Motion 2000") and Motion 2000 Quebec Inc. ("Motion Quebec" and, together with
Motion 2000, the "Motion 2000 Companies") on February 28, 1997, (iv) Kuschall of
America, Inc. ("Kuschall") on March 7, 1997, (v) LaBac Systems, Inc. ("LaBac")
on June 25, 1997, and (vi) Medi-Source, Inc. ("Medi-Source") on August 21, 1997
(the acquisitions, other than the Everest & Jennings Acquisition and the V.C.
Medical Acquisition, in this clause (3) are collectively referred to as the
"Other Recent 1997 Acquisitions"; the Other Recent 1997 Acquisitions and the
V.C. Medical Acquisition are collectively referred to as the "Other Recent
Acquisitions"; and the Other Recent Acquisitions, the Merger and the Everest &
Jennings Acquisition are collectively referred to as the "Acquisitions"), and
(4) the sale by Graham-Field of its Senior Subordinated Note's due 2007 (the
"Old Notes") completed on August 4, 1997 and application of the net proceeds
therefrom. See "-- Unaudited Pro Forma Combined Condensed Financial Information
of Fuqua Enterprises, Inc." for financial information with respect to recent
acquisitions completed by Fuqua.
The unaudited pro forma combined condensed financial information gives
effect to the adjustments described in the notes attached thereto. The
accompanying unaudited pro forma combined condensed balance sheet combines the
historical consolidated balance sheet of Graham-Field as of September 30, 1997
and the historical consolidated balance sheet of Fuqua, as if the Merger had
occurred on September 30, 1997 and reflects the sale of the Leather Companies
which was accounted for as "assets held for sale". The accompanying unaudited
pro forma combined condensed statement of operations for the nine months ended
September 30, 1997 combines the historical consolidated statements of operations
of Graham-Field on a pro forma basis with those of the Motion 2000 Companies,
Kuschall, LaBac, Medi-Source and Fuqua as if the Other Recent 1997 Acquisitions
and the Merger had occurred at January 1, 1997. The accompanying unaudited pro
forma combined condensed statement of operations for the year ended December 31,
1996 combines the historical consolidated statements of operations of
Graham-Field on a pro forma basis with those of V.C. Medical, Everest &
Jennings, the Motion 2000 Companies, Kuschall, LaBac, Medi-Source and Fuqua as
if the Acquisitions had occurred at January 1, 1996. The historical consolidated
statements of operations of Graham-Field have been restated to reflect the
acquisition of Medical Supplies of America, Inc. ("Medapex") on August 28, 1997,
which was accounted for as a pooling of interests. The unaudited pro forma
combined condensed financial information, as adjusted, also gives effect to the
completion of the sale of the Old Notes and the use of proceeds therefrom.
As a result of the Merger, the management of Graham-Field anticipates that
the combined entity will achieve significant cost savings and economies of
scale. Graham-Field has plans to eliminate certain duplicate distribution and
manufacturing centers and make reductions in general and administrative expenses
where duplicate functions are being performed. In addition, Graham-Field
anticipates that certain enhancements will be achieved as a result of the
Merger, including an improvement in the gross profit margin associated with the
combined entities' sale of patient aids and bathroom accessories, and
cross-selling opportunities between the companies which may present growth
opportunities for Graham-Field. Furthermore, the management of Graham-Field
believes that it will be able to eliminate a significant amount of the
indebtedness of Fuqua through cash available to Graham-Field and the proceeds
derived from the disposition of the Leather Companies.
The unaudited pro forma combined condensed statements of operations do not
reflect potential (i) cost savings associated with Fuqua's on-going
rationalization of its production and distribution facilities, (ii) synergistic
benefits and enhancements relating to the elimination of duplicate distribution
and manufacturing centers, (iii) reduction of general and administrative
expenses of the combined entity anticipated by
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Graham-Field's management, (iv) enhancements including an improvement in the
gross profit margin associated with the combined entities' sale of patient aids
and bathroom accessories, (iv) cross-selling opportunities between the companies
which may present growth opportunities for Graham-Field, and (v) additional
interest savings from the elimination of Fuqua indebtedness, not related to the
Leather Companies through cash available to Graham-Field and proceeds derived
from the disposition of the Leather Companies. In addition, the unaudited pro
forma combined condensed statement of operations for the year ended December 31,
1996 does not reflect any cost savings, synergistic benefits and enhancements
realized by (i) Graham-Field in connection with the Everest & Jennings
Acquisition for the period prior to November 27, 1996 and (ii) Fuqua in
connection with its acquisition of the Lumex Division for the period prior to
its acquisition on April 3, 1996.
The unaudited pro forma combined condensed financial information is not
necessarily indicative of Graham-Field's financial position or the results of
operations that actually would have occurred if the transactions described above
had occurred on the dates indicated or for any future period or date. The
unaudited pro forma adjustments give effect to available information and
assumptions that Graham-Field believes are reasonable. The unaudited pro forma
combined condensed financial information should be read in conjunction with
Graham-Field's and Fuqua's historical consolidated financial statements and the
notes thereto.
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<PAGE> 6
GRAHAM-FIELD HEALTH PRODUCTS, INC.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1997
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
------------------------- PRO FORMA PRO FORMA PRO FORMA
GRAHAM-FIELD FUQUA ADJUSTMENTS ADJUSTMENTS COMBINED
------------ -------- ----------- ------------ ---------
(NOTE 1) (NOTE 2) (NOTE 3)
<S> <C> <C> <C> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents.............. $ 5,682 $ 2,072 $ (104)[a] $ 9,110(a) $ 16,760
Marketable securities.................. 12,832 -- -- -- 12,832
Accounts receivable -- net............. 74,770 42,419 (24,766)[a] -- 92,423
Inventories............................ 60,314 46,433 (29,558)[a] -- 77,189
Other current assets................... 8,146 3,594 (689)[a] -- 11,051
Recoverable and prepaid income taxes... 256 -- -- -- 256
Deferred tax asset..................... -- 4,802 460[a] -- 5,262
-------- -------- -------- ------- --------
Total Current Assets................ 162,000 99,320 (54,657) 9,110 215,773
Property, plant and equipment -- net... 14,801 34,164 (12,831)[a] -- 36,134
Excess of cost over net assets
acquired -- net..................... 103,232 37,655 79,107[b] -- 219,994
Other Assets........................... 13,015 1,746 (1,547)[a] 2,000(b) 15,214
Discontinued operations................ -- 3,637 (3,637)[a] -- --
Assets held for sale................... -- -- 63,076[a] (63,076)(c) --
-------- -------- -------- -------- --------
Total Assets................... $293,048 $176,522 $ 69,511 $(51,966) $ 487,115
======== ======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt... $ 2,054 $ 589 $ (209)[a] $ -- $ 2,434
Accounts payable....................... 22,945 26,905 (7,913)[a] -- 41,937
Accrued expenses....................... 21,829 -- 10,000[c] -- 31,829
-------- -------- -------- -------- --------
Total Current Liabilities........... 46,828 27,494 1,878 -- 76,200
Long-term debt......................... 8,440 54,444 (978)[a] (51,966)(d) 9,940
Senior subordinated notes.............. 100,000 -- -- -- 100,000
Other long-term liabilities............ 1,522 -- -- -- 1,522
-------- -------- -------- -------- --------
Total Liabilities.............. 156,790 81,938 900 (51,966) 187,662
STOCKHOLDERS' EQUITY
Series A preferred stock............... -- -- -- -- --
Series B preferred stock............... 28,200 -- -- -- 28,200
Series C preferred stock............... 3,400 -- -- -- 3,400
Common stock........................... 530 11,322 (11,077)[d] -- 775
Additional paid-in capital............. 115,702 24,902 138,048[d] -- 278,652
(Deficit) retained earnings............ (11,548) 59,233 (59,233)[d] -- (11,548)
Unrealized gain on marketable
securities.......................... 72 -- -- -- 72
Cumulative translation adjustment...... 61 -- -- -- 61
-------- -------- -------- -------- --------
Subtotal............................... 136,417 95,457 67,738 -- 299,612
Treasury stock......................... -- (873) 873[d] -- --
Notes receivable from sale of shares... (159) -- -- -- (159)
-------- -------- -------- -------- --------
Total Stockholders' Equity..... 136,258 94,584 68,611 -- 299,453
-------- -------- -------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY................................. $293,048 $176,522 $ 69,511 $(51,966) $ 487,115
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these pro forma combined
condensed financial statements.
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<PAGE> 7
NOTE 1: PURCHASE PRICE SUMMARY AND RELATED ALLOCATION OF MERGER
A summary of the estimated purchase price and related allocation, which
reflects the proceeds from the disposal of the Leather Companies is set forth
below (amounts in thousands):
<TABLE>
<S> <C>
Purchase Price:
Issuance of 2.1 shares of Common Stock for each share of Fuqua Common
Stock(a)................................................................ $163,195
Estimated fees and expenses related to the Merger......................... 10,000
--------
Total Estimated Purchase Price............................................ $173,195
========
</TABLE>
<TABLE>
<CAPTION>
SALE OF LEATHER COMPANIES
TOTAL ------------------------- NET
FUQUA (b) (c) ALLOCATION(d)
----- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Allocation (based on estimated fair values):
Cash................................................. $ 2,072 $ (104) $ 9,110 $ 11,078
Accounts and notes receivable, net................... 42,419 (24,766) -- 17,653
Inventory............................................ 46,433 (29,558) -- 16,875
Property, Plant & Equipment, net..................... 34,164 (12,831) -- 21,333
Previous excess of cost over net assets acquired..... 37,655 -- -- 37,655
Discontinued operations.............................. 3,637 (3,637) -- --
Other assets......................................... 10,142 (1,776) 2,000 10,366
Debt and capital leases.............................. 55,033 (1,187) (51,966) 1,880
Accounts payable and accrued expenses................ 26,905 (7,913) -- 18,992
Excess of Purchase Price over net assets acquired.... 78,611 496 -- 79,107
-------- -------- -------- --------
$173,195 $ 63,076 $(63,076) $173,195
======== ======== ======== ========
</TABLE>
- ---------------
a. As of September 30, 1997, there were 4,482,709 shares of Fuqua Common Stock
outstanding (not including shares underlying vested stock options), which
are to be exchanged into shares of Common Stock at the Exchange Ratio or a
total of approximately 9,413,689 shares of Common Stock. In addition, as of
September 30, 1997, there were 418,500 vested stock options (the "Fuqua
Stock Options") outstanding to purchase shares of Fuqua Common Stock. In
accordance with the terms of the Fuqua Merger Agreement, shares of Common
Stock will be issued in substitution for shares of Fuqua Common Stock upon
the exercise of the Fuqua Stock Options. The equivalent number of shares of
Common Stock to be issued, after giving effect to the option price of the
Fuqua Stock Options as adjusted for the Exchange Ratio in accordance with
the Fuqua Merger Agreement, is approximately 364,000 shares of Common Stock.
For purposes of calculating the purchase price, the Common Stock is valued
at $16.69 per share, which represents the average closing sales price of the
Common Stock for the period three business days immediately prior to and
three business days immediately after the announcement on September 8, 1997
of the execution of the Fuqua Merger Agreement.
b. It was Graham-Field's intention to dispose of the Leather Companies as soon
as reasonably practicable following the consummation of the Merger.
Accordingly, the net assets of the Leather Companies had been reflected as
"Assets Held for Sale" in the unaudited pro forma balance sheet. The net
asset value of the Leather Companies included a portion of the excess of the
purchase price over the net assets acquired in connection with the Merger,
based upon the net proceeds of $62,167,000 expected to be realized from the
sale of the Leather Companies and the estimated net after tax income of
$1,399,000 expected to be earned by the Leather Companies for the period
between October 1, 1997 and the disposal date of the Leather Operations.
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<PAGE> 8
c. On January 27, 1998, the Company sold the Leather Companies for (i)
$60,167,400 in cash, (ii) an aggregate of 5,000 shares of Series A Preferred
Stock of IT Acquisition Corporation with a stated value of $4,250,000, and
(iii) the assumption of certain unaffiliated debt of the Leather Companies.
The Series A Preferred Stock was valued at $2.0 million representing its
estimated fair value. The Cash proceeds were assumed to be used to retire
the Fuqua debt assumed as part of the Merger, with the balance assumed to be
available for working capital uses.
d. The net allocation is preliminary and does not reflect the fair value
adjustments to the Fuqua assets and liabilities, the potential charges for
the write-off of purchased in-process research and development costs and
merger-related costs, since such amounts are not able to be estimated at
this time. Graham-Field will determine the fair value of Fuqua's assets and
liabilities following the Effective Time of the Merger through independent
appraisals, which will include appraisals of real estate, patents and
trademarks and research and development projects of Fuqua. Graham-Field
intends to complete the valuation process prior to the filing of its Annual
Report on Form 10-K for the year ended December 31, 1997. These adjustments
could result in a material variation from the preliminary net allocation
presented in these pro forma financial statements.
NOTE 2: PRO FORMA ADJUSTMENTS
a. Adjustment to eliminate the assets of the Leather Companies and reflect the
operations as "Assets Held for Sale." See Note 1 to the pro forma combined
condensed balance sheet.
b. Adjustment to record the excess of the estimated purchase price over the net
assets acquired in connection with the Merger of $79,107,000, after the
elimination of the net assets of the Leather Operations.
c. Adjustment for accrued costs, including, but not limited to, investment
banking fees, legal fees, accounting and tax fees, due diligence expenses
and severance arrangements of approximately $10,000,000 related to the
Merger.
d. Adjustment to record the elimination of the equity of Fuqua of $94,584,000.
Adjustment to record the issuance of shares of Common Stock in connection
with the Merger valued at $163,195,000.
NOTE 3: PRO FORMA ADJUSTMENTS FROM SALE
a. Adjustment to reflect the excess cash received from the sale of the Leather
Companies.
b. Adjustment to record the estimated fair value of the Series A Preferred
Stock in IT Acquisition Corporation independently valued at $2.0 million.
c. Adjustment to record the sale of the Leather Companies originally recorded
as "asset held for sale."
d. Adjustment to reflect the elimination of debt assumed as part of the Merger
through the use of a portion of the cash proceeds received from the sale of
the Leather Companies.
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<PAGE> 9
GRAHAM-FIELD HEALTH PRODUCTS, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA (NOTE 3)
-------------------------- --------------------------------------------------------------------------
OTHER RECENT FUQUA
GRAHAM- 1997 PRO FORMA GRAHAM-FIELD FUQUA PRO FORMA PRO FORMA
FIELD ACQUISITIONS ADJUSTMENTS PRO FORMA PRO FORMA ADJUSTMENTS COMBINED
-------- -------------- ----------- ------------ --------- ----------- ---------
(NOTE 4) (NOTE 1) (NOTE 5)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Medical equipment and
supplies and product
revenue............. $189,515 $ 11,258 $ -- $200,773 $180,575 $(101,438)(a) $279,910
Interest and other
income.............. 759 -- -- 759 187 -- 946
-------- ------- ------- -------- -------- --------- --------
190,274 11,258 -- 201,532 180,762 (101,438) 280,856
-------- ------- ------- -------- -------- --------- --------
Costs and expenses:
Cost of revenues...... 128,100 6,124 -- 134,224 142,433 (89,766)(a) 186,891
Selling, general and
administrative...... 43,976 5,124 (264)(b,c,f) 48,836 27,702 (4,145)(a,b) 72,393
Interest expense...... 4,557 119 3,067(d,f) 7,743 2,627 1,250(a) 9,120
-------- ------- ------- -------- -------- --------- --------
176,633 11,367 2,803 190,803 172,762 (95,161) 268,404
-------- ------- ------- -------- -------- --------- --------
Income (loss) from
continuing
operations before
income taxes........ 13,641 (109) (2,803) 10,729 8,000 (6,277) 12,452
Income taxes
(benefit)........... 5,395 -- (1,121)(e) 4,274 2,722 (1,672)(c) 5,324
-------- ------- ------- -------- -------- --------- --------
Income (loss) from
continuing
operations.......... 8,246 (109) (1,682) 6,455 5,278 (4,605) 7,128
Preferred stock
dividends........... 799 -- -- 799 -- -- 799
-------- ------- ------- -------- -------- --------- --------
Income (loss) from
continuing
operations available
to common
stockholders........ $ 7,447 $ (109) $(1,682) $ 5,656 $ 5,278 $ (4,605) $ 6,329
======== ======= ======= ======== ======== ========= ========
Per share data:
Income from continuing
operations per
common share
outstanding (Note
4g)................. $ .32 $ .24 $ 1.17 $ .20
======== ======== ======== ========
Weighted average
number of common and
common equivalent
shares
outstanding......... 25,888 566 26,454 4,530 5,248 36,232
======== ======= ======== ======== ========= ========
</TABLE>
The accompanying notes are an integral part of these pro forma combined
condensed financial statements.
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<PAGE> 10
GRAHAM-FIELD HEALTH PRODUCTS, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA (NOTE 3)
---------------------------------- --------------------------------------------------------------
OTHER FUQUA
GRAHAM- EVEREST & RECENT PRO FORMA GRAHAM-FIELD FUQUA PRO FORMA PRO FORMA
FIELD JENNINGS ACQUISITIONS ADJUSTMENTS PRO FORMA PRO FORMA ADJUSTMENTS COMBINED
-------- --------- ------------ ----------- ------------ --------- ----------- ---------
(NOTE 2) (NOTE 4) (NOTE 1) (NOTE 5)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Medical equipment and
supplies and product
revenue..................... $143,083 $ 61,403 $ 29,063 $(5,579)(a) $227,970 $208,252 $(107,832)(a) $328,390
Interest and other income.... 559 -- -- -- 559 1,815 (5)(a) 2,369
-------- ------- ------- ------- -------- -------- --------- --------
143,642 61,403 29,063 (5,579) 228,529 210,067 (107,837) 330,759
-------- ------- ------- ------- -------- -------- --------- --------
Costs and expenses:
Cost of revenues............. 99,641 51,992 17,837 (5,379)(a) 164,091 157,575 (89,092)(a) 232,574
Selling, general and
administrative.............. 34,578 19,879 10,463 1,621(b c,f) 66,541 43,066 (5,194) a,b) 104,413
Interest expense............. 2,578 4,250 281 3,848(d,f) 10,957 4,966 (913) (a) 15,010
Purchased in-process research
and development costs....... 12,800 -- -- -- 12,800 -- -- 12,800
Merger related charges....... 3,000 -- -- -- 3,000 -- -- 3,000
-------- ------- ------- ------- -------- -------- --------- --------
152,597 76,121 28,581 90 257,389 205,607 (95,199) 367,797
-------- ------- ------- ------- -------- -------- --------- --------
Income (loss) from continuing
operations before income
taxes (benefit)............. (8,955) (14,718) 482 (5,669) (28,860) 4,460 (12,638) (37,038)
Income taxes (benefit)....... 2,918 26 410 (6,221)(e) (2,867) 1,484 (4,837)(c) (6,228)
-------- ------- ------- ------- -------- -------- --------- --------
Income (loss) from continuing
operations.................. (11,873) (14,744) 72 552 (25,993) 2,976 (7,801) (30,818)
Preferred stock dividends.... -- -- -- 1,065 1,065 -- -- 1,065
-------- ------- ------- ------- -------- -------- --------- --------
Income (loss) from continuing
operations available to
common stockholders......... $(11,873) $(14,744) $ 72 $ (513) (27,058) $ 2,976 $ (7,801) $(31,883)
======== ======= ======= ======= ======== ======== ========= ========
Per share data:
Income (loss) from continuing
operations per common share
outstanding (Note 4g)....... $ (.76) $ (1.31) $ .65 $ (1.05)
======== ======== ======== ========
Weighted average number of
common and common equivalent
shares outstanding.......... 15,557 5,134 20,691 4,554 5,224 30,469
======== ======= ======== ======== ========= ========
</TABLE>
The accompanying notes are an integral part of these pro forma combined
condensed financial statements.
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<PAGE> 11
NOTE 1: PRIOR ACQUISITIONS OF FUQUA
See the unaudited pro forma combined condensed statements of operations of
Fuqua reflecting the acquisitions of the Lumex Division and Prism under
"-- Unaudited Pro Forma Combined Condensed Financial Information of Fuqua
Enterprises, Inc."
On February 26, 1997, Fuqua acquired 100% of the common stock and warrants
of Prism Enterprises, Inc. ("Prism") for approximately $19,500,000. The
acquisition was accounted for as a purchase and accordingly, the results of
operations are included subsequent to that date. The unaudited pro forma
combined condensed statement of operations reflect the results of Prism prior to
the date of acquisition as if the acquisition occurred on January 1, 1996.
On April 3, 1996, Fuqua acquired the medical products operations of Lumex,
Inc. (the "Lumex Division") for approximately $40,750,000. The purchase price
relating to the acquisition of the Lumex Division is subject to a final
adjustment, the amount of which is in dispute and is being resolved by
arbitration. The acquisition was accounted for as a purchase and accordingly,
the results of operations are included subsequent to that date. The 1996
unaudited pro forma combined condensed statement of operations reflects the
results of the Lumex Division prior to the date of acquisition as if the
acquisition occurred on January 1, 1996 and includes $6,300,000 of non-recurring
charges, primarily related to the adoption of FAS 121 and the recoverability of
lease receivables. The 1996 unaudited pro forma combined condensed statement of
operations for the year ended December 31, 1996 has not been adjusted to
eliminate the effect of these charges.
NOTE 2: ACQUISITION OF EVEREST & JENNINGS
On November 27, 1996, Graham-Field acquired Everest & Jennings in a merger
transaction pursuant to which Graham-Field issued 2,522,691 shares of Common
Stock in exchange for the common stock of Everest & Jennings. Simultaneously
with the Everest & Jennings Acquisition, (i) BIL was issued 1,922,242 shares of
Common Stock in consideration of the repayment of indebtedness owing by Everest
& Jennings in the amount of $24,989,151, (ii) Graham-Field issued $61 million
stated value of Graham-Field Series B Cumulative Convertible Preferred Stock
(the "Series B Preferred Stock") to BIL in exchange for certain indebtedness of
Everest & Jennings owing to BIL and shares of Everest & Jennings preferred stock
owned by BIL, (iii) BIL was issued $10 million stated value of Graham-Field
Series C Cumulative Convertible Preferred Stock (the "Series C Preferred Stock")
and (iv) certain indebtedness in the amount of $4,000,000 owing by Graham-Field
to BIL was exchanged for an equal amount of unsecured subordinated indebtedness
of Graham-Field.
Prior to the Everest & Jennings Acquisition, Everest & Jennings's 1996
revenues and operating results were negatively impacted by ongoing price
competition. Long lead times and shipping delays due to start-up inefficiencies
in manufacturing operations adversely impacted customer confidence. The
unaudited pro forma combined condensed statement of operations for the year
ended December 31, 1996 does not reflect any cost savings, synergistic benefits
and enhancements realized by Graham-Field in connection with the Everest &
Jennings Acquisition for the period prior to November 27, 1996. The historical
financial statements of Everest & Jennings for the year ended December 31, 1996
include approximately $5.7 million of additional reserves relating to the
accounts receivable and inventory of Everest & Jennings. The reserves were
increased primarily due to the impairment of such assets during the later part
of 1996 following the execution of the Everest & Jennings merger agreement.
NOTE 3: SYNERGIES AND ENHANCEMENTS RELATED TO THE MERGER
As a result of the Merger, the management of Graham-Field anticipates that
the combined entity will achieve significant cost savings and economies of
scale. Graham-Field has plans to eliminate certain duplicate distribution and
manufacturing centers and make reductions in general and administrative expenses
where duplicate functions are being performed. In addition, Graham-Field
anticipates that certain enhancements will be achieved as a result of the
Merger, including an improvement in the gross profit margin associated with the
sale of patient aids and bathroom accessories, and cross-selling opportunities
between the companies which may present growth opportunities for Graham-Field.
Furthermore, the management of Graham-Field
- 11 -
<PAGE> 12
will be able to eliminate a significant amount of the indebtedness of Fuqua
through cash available to Graham-Field and proceeds derived from the disposition
of the Leather Companies. The unaudited pro forma combined condensed statements
of operations does not give effect to any potential synergistic benefits and
enhancements relating to the elimination of duplicate distribution and
manufacturing centers and the reduction of general and administrative expenses
of the combined entity anticipated by Graham-Field management. There is no
assurance that such cost savings and enhancements will be achieved and,
accordingly, such costs savings and enhancements are not included in the pro
forma statements of operations for the nine months ended September 30, 1997 and
year ended December 31, 1996.
NOTE 4: PRO FORMA ADJUSTMENTS
(a) Adjustment to reflect the elimination of intercompany sales by Everest &
Jennings and Kuschall of $5,579,000, and cost of revenue of $5,379,000 in
1996.
(b) Adjustment to record additional amortization (assuming a 30 year life) of
the excess of the cost over net assets acquired in connection with the
following acquisitions:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
----------------- ------------
<S> <C> <C>
Everest & Jennings(i)................................. $ -- $1,613,000
LaBac................................................. 84,000 167,000
Motion 2000........................................... 8,000 49,000
V.C. Medical.......................................... -- 16,000
Medi-Source........................................... 62,000 107,000
-------- ----------
$ 154,000 $1,952,000
======== ==========
</TABLE>
Amortization of the excess of cost over net assets acquired included in the
historical consolidated statements of operations of Graham-Field, without
giving effect to the above adjustments, is $2,440,000 and $1,029,000 for the
nine months ended September 30, 1997 and the twelve months ended December
31, 1996, respectively.
--------------------
(i) Net of a reduction in goodwill previously recorded by Everest &
Jennings, which was eliminated.
(c) Adjustment to reflect the elimination of certain expenses, partially offset
by additional consulting and non-competition fees related to the following
acquisitions. These adjustments are expected to have a continuing impact on
the statements of operations.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
----------------- ------------
<S> <C> <C>
LaBac:
Elimination of expenses associated with an operation
of LaBac that was disposed of immediately preceding
the acquisition..................................... $(654,000) $ (995,000)
Additional fees related to a three (3) year consulting
agreement entered into as part of the acquisition... 138,000 275,000
Medi-Source:
Elimination of executive salaries directly related to
the acquisition..................................... (71,000) (121,000)
Additional fees related to a five (5) year
non-competition agreement entered into as part of
the acquisition..................................... 35,000 60,000
Motion 2000:
Elimination of expenses directly related to the
acquisition......................................... (171,000) --
--------- ---------
$(723,000) $ (781,000)
========= =========
</TABLE>
- 12 -
<PAGE> 13
(d) Adjustment to (i) reduce interest expense relating to the indebtedness
eliminated in connection with the Everest & Jennings Acquisition and
acquisition of Medi-Source, and (ii) reflect the incurrence of interest
expense to fund the cash purchase price of $1,704,000 with an assumed
interest rate of 8% for the acquisition of V.C. Medical, as set forth below:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
----------------- ------------
<S> <C> <C>
Everest & Jennings.................................... -- $ (3,452,000)
Medi-Source........................................... $ (62,000) (96,000)
V.C. Medical.......................................... -- 34,000
-------- -----------
$ (62,000) $ (3,514,000)
======== ===========
</TABLE>
In connection with the acquisition of Everest & Jennings, BIL purchased
1,922,242 shares of Common Stock for $24,989,151, representing an amount
equal to the outstanding principal and interest on Everest & Jennings'
indebtedness to Hong Kong and Shanghai Banking Corporation Limited, which
indebtedness (the "HSBC Indebtedness") was guaranteed by BIL. The proceeds
of such stock purchase were contributed by Graham-Field to Everest &
Jennings immediately following the acquisition and was used to retire the
HSBC Indebtedness. In addition, Graham-Field issued $61 million stated
value of Series B Preferred Stock to BIL in exchange for indebtedness of
Everest & Jennings owing to BIL in the amount of $21,100,000, bearing
interest at the rate of 8%.
With respect to the acquisition of Medi-Source, Graham-Field did not assume
the indebtedness of $1,393,000 (bearing interest at the rate of 6%) owing
to the former principal stockholder. All interest expense associated with
this debt was eliminated.
(e) Adjustment to reflect the income tax provision that would be more
appropriate and required based upon the pro forma results of the combined
entity. This takes into consideration Graham-Field's significant permanent
differences which would have an effect on the effective tax rate based on
the amount of pre-tax income.
(f) Adjusted to give effect to the sale on August 4, 1997 of the Old Notes
(bearing interest at the rate of 9.75% per annum) and the application of the
estimated net proceeds to eliminate certain Graham-Field indebtedness to its
bank (bearing interest at the bank's prime rate or LIBOR plus 2.25% or 1.5%
above the bank's bankers' acceptance rate, at the option of Graham-Field)
and long-term debt to BIL (bearing interest at the rate of 8.5% per annum),
as if the sale of the Old Notes was completed on January 1, 1996. The
aggregate average outstanding indebtedness eliminated was $42,271,000 and
$30,161,000 for the nine months ended September 30, 1997 and the twelve
months ended December 31, 1996, respectively. The aggregate average
outstanding indebtedness eliminated was calculated on a month-by-month basis
during each of the applicable periods. The following summarizes the
adjustments to reflect the amortization of the issuance costs and the
additional net interest expense of the Old Notes:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
----------------- ------------
<S> <C> <C>
Amortization of Notes issuance cost................... $ 305,000 $ 450,000
========== ==========
Additional interest on the Notes...................... 5,768,000 9,750,000
Elimination of interest on indebtedness replaced...... (2,639,000) (2,388,000)
---------- ----------
$ 3,129,000 $ 7,362,000
========== ==========
</TABLE>
(g) The pro forma net income (loss) per share of Common Stock for the nine
months ended September 30, 1997 and the year ended December 31, 1996 has
been calculated using the Exchange Ratio of 2.1 shares of Common Stock for
each share of Fuqua Common Stock.
The pro forma net income per share of Common Stock for the nine months
ended September 30, 1997 was calculated assuming the conversion of the
Series B and Series C Preferred Stock into an aggregate of
- 13 -
<PAGE> 14
4,435,484 shares of Common Stock and the elimination of a dividend of 1.5%
on the Series B and Series C Preferred Stock in the aggregate amount of
$799,000 for the nine month period ended September 30, 1997.
The pro forma net loss per share in 1996 has been calculated assuming the
payment of a cash dividend of 1.5% on the Series B and Series C Preferred
Stock in the aggregate amount of $1,065,000 for the twelve month period
ended December 31, 1996. Conversion of the preferred stock was not assumed
since the result would have been antidilutive.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Weighted average number of Graham-Field common and common
equivalent shares, excluding preferred stock............... 22,019 20,691
Series B and Series C Preferred Stock assumed to be
dilutive................................................... 4,435 --
------ ------
26,454 20,691
Fuqua shares to be issued.................................... 9,778 9,778
------ ------
36,232 30,469
====== ======
</TABLE>
NOTE 5. FUQUA PRO FORMA ADJUSTMENTS
(a) Graham-Field disposed of the Leather Companies on January 27, 1998,
following the consummation of the Merger. Accordingly, the results of
operations of the Leather Companies have been eliminated from the historical
results of operations as set forth below:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Revenues:
Product revenue........................................... $ 101,438,000 $107,832,000
Interest and other income................................. -- 5,000
---------- ----------
101,438,000 107,837,000
Cost and expenses:
Cost of Revenue........................................... 89,766,000 89,092,000
Selling, general & administrative......................... 6,123,000 7,831,000
Interest Expense.......................................... 1,250,000 913,000
---------- ----------
97,139,000 97,836,000
---------- ----------
Income before income taxes................................ 4,299,000 10,001,000
Income taxes.............................................. 1,672,000 3,980,000
---------- ----------
Net income................................................ $ 2,627,000 $ 6,021,000
========== ==========
</TABLE>
Interest expense for the Leather Companies arises from borrowings related to
the industrial development bonds of the Leather Companies with principal
amounts ranging from $1,186,000 to $1,335,000 and from borrowings from
Fuqua, with principal amounts ranging from $16,424,000 to $26,955,000. The
rates of interest on the industrial development bonds ranged from 4.5% to
6.9% and the rate of interest charged by Fuqua on intercompany borrowings
ranged from LIBOR plus .50% to LIBOR plus .70% and was the same as the rate
charged under Fuqua's Revolving Credit Facility.
Income tax expense for the Leather Companies is based on Fuqua's corporate
tax policy whereby the Leather Companies calculates its federal and state
tax provision at the statutory rates as if the Leather Companies were on a
stand-alone basis and remits such amounts to Fuqua for Fuqua to use in
paying its consolidated Federal and state income taxes.
(b) Adjustment to record additional amortization (assuming a 30 year life) of
the excess of the cost over net assets acquired in connection with the
Merger of $1,978,000 and $2,637,000 for the nine months ended September 30,
1997 and the twelve months ended December 31, 1996, respectively.
(c) Adjustment to reflect the income tax provision that would be more
appropriate and required based upon the pro forma results of the combined
entity. This takes into consideration Graham-Field's significant permanent
differences which would have an effect on the effective tax rate based on
the amount of pre-tax income.
- 14 -
<PAGE> 15
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION OF
FUQUA ENTERPRISES, INC.
The following unaudited pro forma combined condensed financial statements
of operations of Fuqua reflect (1) the historical financial information of Fuqua
and (2) Fuqua's acquisition of (i) the Lumex Division on April 3, 1996 and (ii)
Prism on February 26, 1997.
The unaudited pro forma combined condensed financial statements of
operations give effect to the adjustments described in the notes attached
thereto.
The accompanying unaudited pro forma combined condensed statement of
operations for the nine months ended September 30, 1997 combine the historical
consolidated statement of operations of Fuqua on a pro forma basis as if the
Prism acquisition had occurred at January 1, 1997. The accompanying unaudited
pro forma combined condensed financial statement of operations for the year
ended December 31, 1996 combines the historical consolidated financial statement
of operations of Fuqua on a pro forma basis as if the Lumex Division and Prism
acquisitions had occurred at January 1, 1996.
The unaudited pro forma combined condensed statement of operations for the
year ended December 31, 1996 does not reflect any cost savings, synergistic
benefits and enhancements realized by Fuqua in connection with its acquisition
of the Lumex Division for the period prior to the consummation of the
acquisition on April 3, 1996. In addition, the unaudited pro forma combined
condensed financial statement of operations for the year ended December 31, 1996
has not been adjusted to eliminate $6,300,000 of non-recurring charges primarily
related to the adoption of FAS 121 and the recoverability of lease receivables.
The unaudited pro forma combined condensed statements of operations are not
necessarily indicative of Fuqua's results of operations that actually would have
occurred if the transactions described above had occurred on the dates indicated
or for any future period or date. The unaudited pro forma adjustments give
effect to available information and assumptions that Fuqua believes are
reasonable. The unaudited pro forma combined condensed statements of operations
should be read in conjunction with Fuqua's historical consolidated financial
statements and the notes thereto.
- 15 -
<PAGE> 16
FUQUA ENTERPRISES, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
------------------- PRO FORMA PRO FORM
FUQUA(1) PRISM(1) ADJUSTMENTS COMBINED
-------- ------ ----------- --------
<S> <C> <C> <C> <C>
Revenues:
Net sales........................................ $178,701 $1,874 $ -- $180,575
Investment income................................ 187 -- -- 187
-------- ------ ----- --------
178,888 1,874 -- 180,762
-------- ------ ----- --------
Costs and expenses:
Cost of revenues................................. 141,655 778 -- 142,433
Selling, general and administrative.............. 26,982 760 (40)(2) 27,702
Interest expense................................. 2,307 116 204(3) 2,627
-------- ------ ----- --------
170,944 1,654 164 172,762
-------- ------ ----- --------
Income (loss) before income taxes................ 7,944 220 (164) 8,000
Income taxes (benefit)........................... 2,682 115 (75)(4) 2,722
-------- ------ ----- --------
Net income (loss)................................ $ 5,262 $ 105 $ (89) $ 5,278
======== ====== ===== ========
Net income per share............................. $ 1.16 $ 1.17
======== ========
Weighted average number of common and common
equivalent shares.............................. 4,530 4,530
======== ========
</TABLE>
- ---------------
1. The historical amounts for Prism include the results for the period January
1, 1997 to February 24, 1997 (the date Prism was acquired by Fuqua) and the
historical amounts for Fuqua include the operations of Prism for the period
from February 24, 1997 through September 30, 1997.
2. Adjustment represents the reduction in amortization of intangibles arising
principally from Fuqua assigning no value to certain intangibles that were
amortized over shorter periods of less than five years in the historical
financial statements of Prism. The adjustment reflects a substitution of
Prism's historical intangibles amortization of $191,000 with revised pro
forma goodwill amortization over a period of 30 years of $151,000.
3. Adjustment represents interest on $19,500,000 of debt used to purchase Prism.
The interest rate used to calculate this interest expense is the rate that
would have been in effect had the transaction occurred at the beginning of
the periods presented.
4. Adjustment represents income taxes related to the pro forma adjustments. The
pro forma income tax expense adjustment is based on applying the applicable
statutory income tax rates to the taxable or deductible pro forma
adjustments.
- 16 -
<PAGE> 17
FUQUA ENTERPRISES, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL PRO
--------------------------------------- PRO FORMA FORMA
FUQUA(1) LUMEX DIVISION(1) PRISM(1) ADJUSTMENTS COMBINED
-------- ------------------ ------- ----------- --------
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales......................... $181,543 $ 13,570 $13,139 $ -- $208,252
Investment income................. 1,939 -- -- (124)(2) 1,815
-------- ------- ------- -------- --------
183,482 13,570 13,139 (124) 210,067
-------- ------- ------- -------- --------
Costs and expenses:
Cost of revenues.................. 140,773 11,207 5,595 -- 157,575
Selling, general and
administrative.................. 28,757 9,987 4,697 (375)(3) 43,066
Interest expense.................. 2,470 -- 821 1,675(4) 4,966
-------- ------- ------- -------- --------
172,000 21,194 11,113 1,300 205,607
-------- ------- ------- -------- --------
Income (loss) before income
taxes........................... 11,482 (7,624) 2,026 (1,424) 4,460
Income taxes (benefit)............ 4,209 (3,049) 926 (602)(5) 1,484
-------- ------- ------- -------- --------
Net (loss) income................. $ 7,273 $ (4,575) $ 1,100 $ (822) $ 2,976
======== ======= ======= ======== ========
Net income per share.............. $ 1.60 $ .65
======== ========
Weighted average number of common
and common equivalent shares.... 4,554 4,554
======== ========
</TABLE>
- ---------------
1. The historical results for the Lumex Division are for the period January 1,
1996 to April 3, 1996 (the date the Lumex Division was acquired by Fuqua) and
the historical results for Prism are for the year ended December 31, 1996.
The historical results for Fuqua include the operations for the Lumex
Division for the period April 3, 1996 to December 31, 1996.
2. Adjustment represents the reduction in investment income arising from the use
of $8,750,000 cash related to the purchase price of the Lumex Division.
3. Adjustment represents the reduction in amortization arising from intangibles
which are being amortized over 30 years. Such reduction arises as a result of
(i) ascribing no value to certain intangibles which were amortized over
shorter periods of less than 5 years in the financial statements for the
Lumex Division (resulted in historical amortization of $301,000 being
replaced with pro forma amortization of $128,000) and (ii) substituting
Prism's intangibles amortization previously recorded of $790,000 with revised
pro forma intangibles amortization of $588,000.
4. Adjustment represents interest at Fuqua's borrowing rate with respect to (i)
$33,000,000 of borrowings related to Fuqua's acquisition of the Lumex
Division and (ii) $19,500,000 of borrowings related to Fuqua's acquisition of
Prism, as if both acquisitions occurred on January 1, 1996. The interest rate
used to calculate this interest expense is the rate that would have been in
effect had the transaction occurred at the beginning of the periods
presented.
5. Adjustment represents income taxes related to the pro forma adjustments. The
pro forma income tax adjustment is based on applying the applicable statutory
income tax rates to the taxable or deductible pro forma adjustments.
- 17 -
<PAGE> 18
<TABLE>
<CAPTION>
(c) EXHIBIT NO. DESCRIPTION
<S> <C>
2(a) Stock Purchase Agreement dated as of
January 27, 1998, by and among IT
Acquisition Corporation ("ITAC"),
Graham-Field Health Products, Inc.
(the "Company"), and Lumex/Basic
American Holdings, Inc. ("Fuqua").
2(b) Stock Purchase Agreement dated as of
January 27, 1998, by and among HEKS
Corporation ("HEKS"), the Company, and
Fuqua.
99(a) Press Release, dated January 20,
1998.
99(b) Press Release, dated January 28,
1998.
</TABLE>
- 18 -
<PAGE> 19
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: February 11, 1998 By: /s/Richard S. Kolodny
---------------------
Name: Richard S. Kolodny
Title: Vice President, General
Counsel and Secretary
- 19 -
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
ITEM NO. DESCRIPTION
- -------- -----------
<S> <C>
2(a) Stock Purchase Agreement dated as of January 27, 1998,
by and among IT Acquisition Corporation ("ITAC"),
Graham-Field Health Products, Inc. (the "Company"),
and Lumex/Basic American Holdings, Inc. ("Fuqua").
2(b) Stock Purchase Agreement dated as of January 27, 1998,
by and among HEKS Corporation ("HEKS"), the Company,
and Fuqua.
99(a) Press Release, dated January 20,
1998.
99(b) Press Release, dated January 28,
1998.
</TABLE>
- 20 -
<PAGE> 1
EXHIBIT 2(a)
STOCK PURCHASE AGREEMENT
by and among
IT Acquisition Corporation
and
Graham-Field Health Products, Inc.,
Lumex/Basic American Holdings, Inc.
relating to the capital stock of
Irving Tanning Company
Dated as of
January 27, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I PURCHASE AND SALE OF STOCK..................................... 1
1.1 Purchase and Sale...................................................... 1
ARTICLE II CONSIDERATION.................................................. 1
2.1 Consideration.......................................................... 1
2.2 Conversion of Stock Options............................................ 2
ARTICLE III [INTENTIONALLY OMITTED]........................................ 2
ARTICLE IV CLOSING........................................................ 2
4.1 Closing Time and Place................................................. 2
ARTICLE V REPRESENTATIONS AND WARRANTIES................................. 2
5.1 Representations and Warranties of the Seller........................... 2
5.1.1 Organization and Good Standing of the Company............... 2
5.1.2 Ownership of Shares; Ownership Interests.................... 3
5.1.3 Authorization............................................... 3
5.1.4 Title to Stock.............................................. 3
5.1.5 Non-Violation............................................... 3
5.1.6 Absence of Certain Changes or Events; Business Prospects.... 4
5.1.7 Tax Matters................................................. 4
5.1.8 Litigation.................................................. 5
5.1.9 Brokers..................................................... 5
5.1.10 Environmental Matters....................................... 5
5.1.11 Employee Benefit Plans...................................... 5
5.1.12 Disclosure.................................................. 6
5.1.13 Financial Statements........................................ 6
5.1.14 No Material Adverse Change.................................. 7
5.1.15 No Liabilities.............................................. 7
5.1.16 Books and Records........................................... 8
5.1.17 Insurance................................................... 8
5.2 Representations by the Purchaser....................................... 8
5.2.1 Organization and Good Standing of the Purchaser............. 8
5.2.2 Authorization by the Purchaser.............................. 8
5.2.3 Non-Violation............................................... 8
</TABLE>
ii
<PAGE> 3
<TABLE>
<S> <C>
5.2.4 Litigation.................................................. 9
5.2.5 HSR Act..................................................... 9
5.2.6 Nature of Purchase; Accredited Investor..................... 9
5.2.7 Brokers..................................................... 9
5.2.8 Disclosure.................................................. 9
ARTICLE VI [INTENTIONALLY OMITTED]....................................... 9
ARTICLE VII [INTENTIONALLY OMITTED]....................................... 10
ARTICLE VIII INDEMNIFICATION............................................... 10
8.1 Indemnification by the Seller......................................... 10
8.2 Indemnification by the Purchaser...................................... 10
8.3 Survival of Representations and Warranties; Limitations............... 10
8.4 Notice of Claims and Response......................................... 10
8.5 Opportunity to Cure................................................... 11
8.6 Resolution of Dispute as to Indemnification........................... 11
8.7 Defense of Claims..................................................... 11
8.8 Limitations on Indemnity.............................................. 12
8.9 Exclusive Remedy...................................................... 12
ARTICLE IX CLOSING DATE DELIVERIES AND ACTIONS........................... 12
9.1 Deliveries and Actions of the Purchaser............................... 12
9.1.1 Delivery of Certificates.................................... 12
9.1.2 Contribution of Debt........................................ 13
9.1.3 Delivery of Legal Opinion................................... 13
9.2 Deliveries and Actions of the Purchaser............................... 13
9.2.1 Delivery of Certificates.................................... 13
9.2.2 Delivery of Legal Opinion................................... 13
ARTICLE X GENERAL....................................................... 13
10.1 Confidentiality....................................................... 13
10.2 Further Assurances.................................................... 14
10.3 Entire Agreement...................................................... 14
10.4 Binding Effect; Assignment............................................ 14
10.5 Separate Counterparts................................................. 14
10.6 Transactional Costs................................................... 14
10.7 Notices............................................................... 14
10.8 Severability.......................................................... 15
10.9 Index and Article Headings............................................ 15
10.10 Publicity............................................................. 16
</TABLE>
iii
<PAGE> 4
<TABLE>
<S> <C>
10.11 Governing Law......................................................... 16
10.12 Tax Matters........................................................... 16
10.13 Permitting Matters.................................................... 17
</TABLE>
iv
<PAGE> 5
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of this 27th day of January,
1998, by and among IT ACQUISITION CORPORATION, a Maine corporation (the
"Purchaser"), on the one hand, and GRAHAM-FIELD HEALTH PRODUCTS, INC., a
Delaware corporation ("GFHP"), LUMEX/BASIC AMERICAN HOLDINGS, INC., a Delaware
corporation ("Lumex") (GFHP and Lumex collectively, the "Seller") on the other
hand; and relates to the purchase and sale of all of the issued and outstanding
capital stock of Irving Tanning Company, a Delaware corporation (the "Company").
The Seller owns all of the issued and outstanding shares of stock of
the Company, which in turn owns and operates a business engaged in the
processing of leather and the manufacture of leather products. The Seller is
willing to sell to the Purchaser, and the Purchaser is willing to purchase from
the Seller, upon the terms and conditions herein set forth, the Stock, as
hereafter defined. Therefore, in consideration of the premises and the mutual
benefits to be derived from this Agreement, the parties hereto, intending
legally to be bound, hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK
1.1 Purchase and Sale. The Seller hereby sells, transfers, conveys,
assigns and delivers to the Purchaser, and the Purchaser hereby purchases from
the Seller, all of the issued and outstanding shares of common stock, without
par value, of the Company (the "Stock") by delivery to the Purchaser of a
certificate representing the stock, duly endorsed in blank or accompanied by
duly executed stock powers endorsed in blank.
ARTICLE II
CONSIDERATION
2.1 Consideration. The consideration to be paid by the Purchaser
pursuant to this Agreement shall be SIXTY-FOUR MILLION FOUR HUNDRED SIXTEEN
THOUSAND DOLLARS ($64,416,000.00) (the "Purchase Price"), which is represented
by the following payments and other considerations:
(a) Sixty Million, One Hundred Sixty-Six Thousand Dollars
($60,166,000.00) payable in cash or immediately available funds at the
Closing, as hereafter defined; and
1
<PAGE> 6
(b) Four Million Two Hundred Fifty Thousand Dollars
($4,250,000.00) by the issuance of Five Thousand shares of Series A
Preferred Stock, par value $.01, of the Purchaser (the "Preferred
Stock"), as more fully described on Exhibit 2.1(b).
2.2 Conversion of Stock Options. The Seller hereby causes the stock
options of the Seller that are owned by the principals of the Purchaser, whose
names and option amounts are set forth on Exhibit 2.2, to have been converted
into an equivalent amount, in dollar terms, of options to purchase shares of
common stock of the Company (the "IT Management Options").
ARTICLE III
[INTENTIONALLY OMITTED]
ARTICLE IV
CLOSING
4.1 Closing Time and Place. (a) The closing of the transactions
contemplated by this Agreement (the "Closing") is taking place concurrently with
the execution and delivery of this Agreement at the offices of Verrill & Dana,
One Portland Square, Portland, Maine, at 9:30 a.m. on January 27, 1998 (the
"Closing Date"). At the Closing, the Seller is transferring good and sufficient
instruments of transfer and assignment as are effective to vest in the Purchaser
good and valid title to the Stock. Simultaneously, Purchaser is paying the
Purchase Price in accordance with paragraphs (a) and (b) of Section 2.1.
(b) At the Closing, the parties are also delivering the items
and taking the actions described in Article IX.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of the Seller. As a material
inducement to the Purchaser to enter into and perform its obligations pursuant
to this Agreement, the Seller represents and warrants as of the date hereof as
follows:
5.1.1 Organization and Good Standing of the Company. The
Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and is qualified as a
foreign corporation in the jurisdictions listed on
2
<PAGE> 7
Schedule 5.1.1, being all the jurisdictions where such qualification is
required by the nature of the Company's business, except for those
jurisdictions in which the adverse effects of all such failures by the
Company to be qualified could not in the aggregate reasonably be
expected to have a material adverse effect on the business or condition
of the Company, and the Company has corporate power to carry on its
business as it is now being conducted.
5.1.2 Ownership of Shares; Ownership Interests. The Seller
owns all of the issued and outstanding shares of capital stock of the
Company and all other equity securities of the Company, if any, and
there are no outstanding securities or options, warrants or other
rights to acquire any equity securities of the Company, other than the
IT Management Options. All of the issued and outstanding shares of
capital stock of the Company have been validly issued, fully paid and
are nonassessable, and the Seller has full authority to vote such
shares on all matters, if any, relating to the transactions
contemplated by this Agreement. Set forth on Schedule 5.1.2 is a list
of all capital stock, securities or other ownership interests owned or
held by the Company in any subsidiary or other entity.
5.1.3 Authorization. The execution and delivery by the Seller
of this Agreement, and the consummation by the Seller of the
transactions contemplated hereby and the performance of all of its
obligations hereunder, have been duly authorized by all necessary
action on the part of its Board of Directors and Shareholder, and this
Agreement, when executed and delivered by the Seller, will be the valid
and binding obligation of the Seller, enforceable in accordance with
its terms except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or
affecting the rights of creditors generally and except as the
enforceability of this Agreement is subject to the application of
general principles of equity (regardless of whether considered in a
proceeding in equity or at law), including without limitation (i) the
possible unavailability of specific performance, injunctive relief or
any other equitable remedy and (ii) concepts of materiality,
reasonableness, good faith and fair dealing.
5.1.4 Title to Stock. Lumex has good and valid title to the
Stock, in its own name, free and clear of all claims, liens, charges,
encumbrances, and claimed interests of any kind of any other person or
persons whatsoever, and, except as disclosed on Schedule 5.1.4, has
full right, power and authority to sell, transfer, assign and deliver
the Stock to the Purchaser hereunder, without any required consent or
approval by any other party.
5.1.5 Non-Violation. The execution and delivery of this
Agreement by the Seller, and the consummation by it of the transaction
contemplated hereby (which does not include the subsequent merger of
the Company with the Purchaser), does not and will not violate the
provisions of (i) any applicable laws of the United States, the State
of Delaware, the State of Maine, or of any other state or jurisdiction
in which the Company does business, (ii) the Seller's and the Company's
Certificates of Incorporation or Bylaws, or (iii) any order, judgment
or decree or any other restriction of any kind or character applicable
to the Seller. No default or breach will occur by virtue of the
consummation of
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the transactions contemplated hereunder in any material respect under
any contract, agreement, deed of trust, indenture or other instrument
applicable to the Seller, and no rights of the Seller under any such
existing contract, agreement, indenture, deed of trust, or other
instrument will be limited, impaired or extinguished by virtue of the
consummation of the transactions contemplated hereunder, nor will the
consummation of the transactions contemplated hereunder result in the
creation of any lien, charge or encumbrance upon the Stock.
5.1.6 Absence of Certain Changes or Events; Business
Prospects. Except as set forth in the Schedules attached hereto and
except with respect to the environmental matters relating to the
Company, as to which the Seller makes no representation or warranty
other than the representation contained in Section 5.1.10, to the
Seller's knowledge, the Company has not conducted its business during
the Seller's period of ownership other than in the ordinary course and
consistent with the manner in which the business has been conducted
before such period. As used in this Agreement, the phrase "to the
Seller's knowledge" shall mean knowledge of matters about which Irwin
Selinger or Richard S. Kolodny know or had reason to know and shall not
include the knowledge of Richard Larochelle and the other executive
officers of the Company.
5.1.7 Tax Matters. Except as set forth on Schedule 5.1.7, all
returns, reports and other forms related to Taxes (as hereinafter
defined) with respect to the business, activities or assets of the
Company (collectively, "Tax Returns"), required to be filed on or
before the Closing Date including without limitation Consolidated
Returns (as hereinafter defined), have been timely filed or will be
timely filed on or before the Closing Date, in accordance with all
applicable laws (after taking into account extensions duly obtained)
and all Taxes shown to be due on such Tax Returns have been paid,
provided for in reserves, or properly protested. Except as set forth on
Schedule 5.1.7, no audit of any such Tax Return is pending or, to the
knowledge of the Seller or the Company, threatened, and no waiver or
agreement is in force for the extension of time for the assessment or
payment of any Tax. Schedule 5.1.7 sets forth the status of any audit
that is pending with respect to the Company, including the amounts of
any deficiencies and additions to Tax indicated on any notices of
proposed deficiency or statutory notices of deficiency that may have
been issued in connection therewith and, except as set forth on
Schedule 5.1.7, all of such deficiencies or additions to Tax have been
paid. The term "Tax" or "Taxes" shall mean all requisite federal,
state, local or foreign taxes, including taxes on or measured by
income, withholding taxes, excise taxes, franchise taxes, real and
personal property taxes, inventory and merchandise, capital stock
taxes, sales and use taxes, value added taxes, taxes on services, and
transfer taxes, and interest, penalties and additions to tax thereon,
including any obligations under any tax sharing, tax allocation or
similar agreements to which the Company is a party. For purposes of
this Agreement, "Consolidated Return" means any consolidated federal
income tax return or similar return with respect to any other Tax that
has been or will be filed by the Seller or any affiliate or predecessor
of the Seller on behalf of an affiliated group of corporations of which
the
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Company was or is, as of the Closing Date, a member. For the purposes
of this Agreement the term "Code" means the Internal Revenue Code of
1986, as amended.
5.1.8 Litigation. Except as disclosed on Schedule 5.1.8 and
except with respect to environmental matters relating to the Company,
as to which the Seller makes no representation or warranty other than
the representation contained in Section 5.1.10, (i) no litigation,
proceeding, investigation or claim is pending or, to the Seller's
knowledge, threatened against or relating to the Stock nor does the
Seller know of any basis for any such litigation, proceeding,
investigation or claim; (ii) the Seller is not involved in and has not
been served or put on notice of any litigation, claim, proceeding or
governmental investigation pending or threatened against or relating to
the Company that will adversely affect the Seller's ability to
consummate the transactions contemplated by this Agreement; and (iii)
to the Seller's knowledge, no investigation of the Seller has been
conducted or is intended, nor remedial action taken or intended against
the Seller, by any governmental authority, which would affect its
ability to consummate the transactions contemplated by this Agreement.
5.1.9 Brokers. Except as set forth or Schedule 5.1.9, neither
the Seller nor the Company has incurred any obligation to pay
compensation or commissions to any broker or other intermediary in
connection with the transactions contemplated hereby. The Seller will,
independent of the provisions of Article VIII, indemnify the Purchaser
and hold the Purchaser harmless without deduction or offset against
payment of any such compensation or commissions.
5.1.10 Environmental Matters. Set forth on Schedule 5.1.10
hereto is a list of certain written reports delivered to GFHP relating
to environmental matters of the Company. To the knowledge of Seller,
except as disclosed in such written reports, the Company is not in
violation, of, and has no obligations under, any current environmental
laws, rules or regulations (as currently interpreted) which could
reasonably be expected to result in liabilities which in the aggregate
exceed $3,000,000.
5.1.11 Employee Benefit Plans. Set forth on Schedule 5.1.11
hereto is a true and complete list of every employee benefit and
related plan which the Seller administers on behalf of the Company
("Employee Benefit Plans").
(a) The Seller represents and warrants that each Employee
Benefit Plan is and has at all times during its ownership of the
Company been in material compliance with all Plan terms, laws,
regulations, reporting and other requirements applicable to such Plan,
or any participant in such Plans, including but not limited to material
compliance with all pertinent federal and state requirements and that
any Employee Benefit Plan intended to be qualified under section 401(a)
of the Code is so qualified and has been qualified since its adoption
and each trust thereunder is exempt from tax under section 501(a) of
the Code and has been so exempt since its creation. Neither the Seller
nor the Company has received notification from any federal or state
agency that any Employee Benefit Plan is
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<PAGE> 10
not in compliance with any statute, regulation, ruling or any other
authority having effect of law that is applicable to any of the
Employee Benefit Plans.
(b) The Seller and/or the Company have made all required
contributions under each of the Employee Benefit Plans for all periods
through and including the Closing Date or accruals therefore have been
provided for as shown on the financial statement of Company. No
accumulated funding deficiency has occurred with respect to any of the
Employee Benefit Plans and there are no unfunded liabilities in
connection with any of the Plans. In addition, the Seller and/or the
Company have made all payments due under any individual or group
insurance arrangement, plan, or policy for all periods through and
including the Closing Date.
(c) The Seller shall be responsible for the payment of all
benefit liabilities incurred under any Employee Benefit Plan of the
Company prior to or as of the Closing Date, whether or not claims for
such liabilities have been filed prior to or on such Closing Date,
except that the Seller shall not be liable for continuation benefits
under Section 4980 of the Code for employees of the Company if the
liability for such benefits is incurred after the Closing Date. In
addition, with respect to any of the Company's health, medical, or
dental insurance policies, the Seller agrees that the Purchaser shall
have no liability for any penalties of any kind resulting from early or
off-anniversary cancellation of any such policy, or for claims for
benefits liability incurred under such policy, prior to and on the
Closing Date, whether or not any such claim has been filed prior to or
on such date, including, but not limited to, any runout claims paid
from reserves, or any terminal premium arrangements such as a deficit
recoupment, retrospective premium, or delayed premium payment.
(d) No assets, liabilities, or obligations with respect to any
Employee Benefit Plan shall be accepted by Purchaser, except as
specifically set forth in this Agreement or otherwise required by law.
Neither the Company nor any entity which is under common control with
the Company has incurred, or reasonably expects to incur any liability
under the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or the Code with respect to any Employee Benefit Plan,
including without limitation, any liability subject to Title IV of
ERISA that could become a liability to the Company.
5.1.12 Disclosure. No representation or warranty by the Seller
made herein, or in any Exhibit or Schedule hereto, contains any untrue
statement of material fact, or omits to state a material fact necessary
to make the statements contained herein and therein, in light of the
circumstances under which they were made, not misleading.
5.1.13 Financial Statements. Except as otherwise disclosed in
the footnotes thereto and except with respect to environmental matters
relating to the Company, as to which the Seller makes no representation
or warranty other than the representation contained in Section 5.1.10,
the balance sheets of the Company as of December 31, 1995 and December
31, 1996 and the related statements of income, shareholders' equity and
cash
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flows for the years then ended, including the footnotes thereto,
audited by Ernst & Young, independent certified public accountants,
which have been delivered to the Purchaser, fairly present in all
material respects the financial position of the Company for such
respective periods, in each case in accordance with generally accepted
accounting principles consistently applied for the periods covered
thereby (the "Audited Financials"). Except with respect to
environmental matters relating to the Company, as to which the Seller
makes no representation or warranty other than the representation in
Section 5.1.10, the unaudited balance sheet of the Company as of
November 30, 1997, and the related statement of income which have been
delivered to the Purchaser, fairly present in all material respects the
financial position of the Company as at such date and the results of
operations of the Company for the eleven months then ended, in each
case in conformity with generally accepted accounting principles
applied on a basis consistent with that of the Audited Financials
(subject to the normal year-end adjustments described in Schedule
5.1.13 and except as otherwise disclosed on such Schedule or in the
footnotes to such unaudited balance sheet). (The balance sheet included
in the "Audited Financials" is sometimes referred to herein as the
"Balance Sheet" and December 31, 1996 is sometimes referred to herein
as the "Balance Sheet Date").
5.1.14 No Material Adverse Change. Except with respect to
environmental matters relating to the Company, as to which Seller makes
no representation or warranty other than the representation contained
in Section 5.1.10, and except as set forth on Schedule 5.1.14, since
the Balance Sheet Date, there has been no material adverse change in
the business, properties, results of operations or financial condition
of the Company (collectively, the "Condition of the Company"), other
than those occurring as a result of general economic or financial
conditions or other developments which are not unique to the Company
but also affect other companies in the manufacture and sale of leather
goods, and the Seller knows of no such change which is threatened, nor
has there been any damage, destruction or loss which could have or has
had a material adverse effect on the Condition of the Company.
5.1.15 No Liabilities. Except with respect to environmental
matters relating to the Company, as to which Seller makes no
representation or warranty other than the representation contained in
Section 5.1.10, and except as otherwise disclosed in this Agreement or
the Schedules hereto, (i) as of the Balance Sheet Date, the Company did
not have any liabilities of a kind required by generally accepted
accounting principles to be set forth on a financial statement or in
the notes thereto ("Liabilities") that were not fully and adequately
reflected or reserved against on the Balance Sheet or described in the
notes to the Audited Financials; and (ii) the Company has not, except
in the ordinary course of business, incurred any Liabilities since the
Balance Sheet Date and has not declared any dividends or made any
distributions upon or relating to the Stock, except as set forth on
Schedule 5.1.15. Except as otherwise disclosed in the Agreement or the
Schedules hereto, and except with respect to environmental matters
relating to the Company, as to which the Seller makes no representation
or warranty other than the representation in Section 5.1.10, the Seller
has no knowledge of any circumstance,
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condition, event or arrangement that may hereafter give rise to any
Liabilities of the Company or any successor to their businesses except
in the ordinary course of business.
5.1.16 Books and Records. The books of account, minute books,
corporate record books and other records of the Company, all of which
have been made available to Purchaser, are complete and correct in all
material respects and have been maintained in accordance with sound
business practices and the requirements of Section 13(b)(2) of the
Securities Exchange Act of 1934, as amended (regardless of whether or
not the Company is subject to that Section), including the maintenance
of an adequate system of internal controls. The minute books of the
Company contain accurate and complete records in all material respects
of all meetings held of, and corporate action taken by, the
stockholders, the Board of Directors, and committees of the Board of
Directors of the Company during Seller's ownership of the Company, and
no meeting of any such stockholders, Board of Directors, or committee
has been held for which minutes have not been prepared and are not
contained in such minute books for such period.
5.1.17 Insurance. The Seller and the Company have maintained
in full force and effect substantially the same insurance coverage upon
the Company that was in effect on December 29, 1997, and the Seller
knows of no existing disputes as to coverage under any such policies.
5.2 Representations by the Purchaser. As a material inducement to the
Seller to enter into and perform its obligations pursuant to this Agreement, the
Purchaser represents and warrants, as of the date hereof and the Closing Date,
as follows:
5.2.1 Organization and Good Standing of the Purchaser. The
Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the State of Maine and has corporate power
to carry on its business as it is now being conducted and to enter into
and perform its obligations pursuant to this Agreement.
5.2.2 Authorization by the Purchaser. The execution and
delivery by the Purchaser of this Agreement, and the consummation by
the Purchaser of the transactions contemplated hereby, have been duly
authorized by all necessary action on the part of the Purchaser, and
this Agreement, when executed and delivered by the Purchaser, will be
the valid and binding obligation of the Purchaser, enforceable in
accordance with its terms except as enforcement may be subject to laws
relating to bankruptcy, insolvency and creditors' rights.
5.2.3 Non-Violation. The execution and delivery of this
Agreement by the Purchaser and the consummation of the transactions
contemplated hereby, including the subsequent merger of the Company
with the Purchaser, does not and will not violate the provisions of (i)
any applicable laws of the United States, the State of Maine, or of any
other state of jurisdiction in which the Purchaser does business, (ii)
the Purchaser's Articles of Incorporation or Bylaws, or (iii) any
order, judgment or decree or any other
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restriction of any kind or character applicable to the Purchaser. No
default or breach will, by virtue of the consummation of the
transactions contemplated hereunder, occur in any material respect
under any material contract, agreement, deed of trust, indenture or
other instrument applicable to the Purchaser.
5.2.4 Litigation. The Purchaser is not involved in and has not
been served or put on notice of any material litigation, proceeding or
governmental investigation pending or threatened against or relating to
the Purchaser that will adversely affect the Purchaser's ability to
consummate the transactions contemplated by this Agreement.
5.2.5 HSR Act. For purposes of section 7A of the Clayton Act,
15 U.S.C. Section 18a, and the rules and regulations thereunder, 16
C.F.R. Section 801.1 et seq., (i) the Purchaser is not "controlled" by
any other entity and (ii) the Purchaser, including all entities which
it "controls," does not have "annual net sales" or "total assets" of
$10 million or more, as determined pursuant to such act and the rules
and regulations promulgated thereunder.
5.2.6 Nature of Purchase; Accredited Investor. (a) The
Purchaser is acquiring the Stock for its own account for investment,
not as a nominee or agent, and not with a view to the resale or
distribution of the Stock or any part thereof, and the Purchaser has no
present intention of selling, granting any participation in, or
otherwise distributing the same. The Purchaser acknowledges that the
sale of the Stock pursuant to this Agreement will not be registered
under the Securities Act or any state securities or blue sky law, on
the grounds that the offering and sale of the Stock contemplated by
this Agreement are exempt from registration pursuant to exceptions
available under such laws, and that the Seller's reliance upon such
exemptions is predicated upon the Purchaser's representations set forth
in this Agreement.
(b) The Purchaser is an "accredited investor" within the
meaning of Regulation D promulgated under the Securities Act.
5.2.7 Brokers. The Purchaser has incurred no obligation to pay
compensation or commissions to any broker or other intermediary in
connection with the consummation of the transactions contemplated
hereby.
5.2.8 Disclosure. No representation or warranty by the
Purchaser herein contains any untrue statement of material fact, or
omits to state a material fact necessary to make the statements
contained herein, in light of the circumstances in which they were
made, not misleading.
ARTICLE VI
[INTENTIONALLY OMITTED]
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ARTICLE VII
[INTENTIONALLY OMITTED]
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by the Seller. The Seller shall indemnify, defend,
and save and hold harmless the Purchaser from and against any damage, liability,
loss, expense or injury (including without limitation reasonable attorneys' fees
and costs and expenses incident to any claim, suit, action or proceeding)
suffered by the Purchaser in respect of any and all breaches of any
representation or warranty, or nonfulfillment of any covenant by the Seller
contained in this Agreement, including the Exhibits and Schedules hereto and any
certificate or other instrument furnished or to be furnished to the Purchaser by
or on behalf of the Seller or the Company.
8.2 Indemnification by the Purchaser. The Purchaser shall indemnify,
defend, and save and hold harmless the Seller from and against any damage,
liability, loss, expense or injury (including without limitation reasonable
attorneys' fees and costs and expenses incident to any claim, suit, action or
proceeding), suffered by the Seller in respect of any and all breaches of any
representation or warranty, or nonfulfillment of any covenant by the Purchaser
made or contained in this Agreement, including the Exhibits and Schedules hereto
and any certificate or other instrument furnished or to be furnished to the
Seller by or on behalf of the Purchaser.
8.3 Survival of Representations and Warranties; Limitations. The
representations, warranties and covenants set forth in this Agreement shall
survive the Closing. Notwithstanding any provision of law which may apply to
limit the right to bring an action for indemnification under this Article VIII,
no party shall assert any claim for indemnification hereunder later than January
26, 2001, except for (i) claims relating to a breach of the representations
contained in Sections 5.13, 5.14, and 5.15, which may not be asserted after June
30, 1999; and (ii) claims relating to noncompliance with the covenants and
undertakings set forth in this Agreement or any document constituting a Schedule
or an Exhibit hereto, which may be asserted at any time subject to applicable
statutes of limitations in respect thereof, and any Tax claim under Section
10.12, which may be asserted until the later of (i) the date upon which the
liability to which any such Tax claim may relate is barred by all applicable
statutes of limitations and (ii) the date upon which any claim for refund or
credit related to such Tax claim is barred by all applicable statutes of
limitations.
8.4 Notice of Claims and Response. If the party seeking indemnification
hereunder (for purposes of this Article VIII, the "Indemnified Party") shall
demand indemnification hereunder against the other party (for purposes of this
Article VIII, the "Indemnifying Party"), such Indemnified Party shall notify the
Indemnifying Party of the facts and circumstances giving rise to such claim for
indemnification. The Indemnified Party shall afford to the
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Indemnifying Party access to all records and information relating to such claim,
facts and circumstances (except those matters privileged under applicable state
or federal law or rules of evidence) reasonably necessary to permit the
Indemnifying Party to evaluate the merits of such claim or the accuracy of such
facts and circumstances. Within thirty (30) days after receipt of any such
demand for indemnification, the Indemnifying Party shall by notice to the
Indemnified Party acknowledge its obligation to indemnify the Indemnified Party
in respect of such claim, fact or circumstance, or reject the demanded
indemnification. A failure to respond to any such demand within said thirty day
period shall be deemed to be a rejection of the demand.
8.5 Opportunity to Cure. Notwithstanding any rejection of a demand for
indemnification pursuant to Article 8.4, the Indemnifying Party shall be
entitled, within thirty (30) days after notice of any demand for
indemnification, at its sole cost and expense, to undertake to cure any
circumstances or pay or settle any claim which is the subject of said notice,
provided, however, that any indemnification hereunder with respect to such
claim, fact or circumstance shall continue to be available notwithstanding such
undertaking to cure.
8.6 Resolution of Dispute as to Indemnification. Any dispute relating
to indemnification may, at the election of any party, be resolved by an
arbitration to be held at Portland, Maine, and to be conducted in accordance
with the rules then in effect of the American Arbitration Association, except
that the arbitrators shall be appointed as follows: (a) within fifteen (15) days
after any rejection of a demand for indemnification, the parties jointly shall
appoint a single arbitrator whose resolution of the dispute shall be conclusive,
or (b) if the parties fail jointly to appoint a single arbitrator within said
fifteen day period, either the Indemnified Party or the Indemnifying Party may
appoint one arbitrator by notice to the other such party, and the other party
shall name a second arbitrator within fifteen (15) days after receipt of such
notice, whereupon the two arbitrators so named shall jointly select a third
arbitrator within fifteen (15) days after the date of appointment of the second
arbitrator, failing which the third arbitrator shall be appointed by the
President of the American Arbitration Association. In the event that any party
entitled to name the second arbitrator as set forth in this Section 8.6 fails to
do so within the time period provided herein, the arbitrator appointed by the
other party shall be the sole arbitrator. Any arbitrator or arbitrators shall
promptly conduct an arbitration and render a decision resolving the dispute, and
the parties agree to abide by the decision of any single arbitrator or by a
decision of a majority of any three arbitrators appointed as aforesaid. The
costs and expenses of any arbitrator shall be borne by the party appointing such
arbitrator, except that the costs and expenses of any arbitrator jointly named
or appointed as a third arbitrator shall be borne fifty percent by the
Indemnified Party and fifty percent by the Indemnifying Party.
8.7 Defense of Claims. Should any claims be made or suits or
proceedings be instituted which, if successfully prosecuted, would give rise to
any obligation to indemnify under this Article VIII, the control of the defense
thereof shall be vested in the Indemnifying Party, and the Indemnified Party
shall be entitled to participate in such defense.
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Notwithstanding the foregoing control of the defense provisions, no settlement
of any claim, suit or proceeding which will result in liability pursuant to this
Article VIII may be made without the consent of the party bearing such
liability, which consent will not unreasonably be withheld.
8.8 Limitations on Indemnity. Notwithstanding the foregoing, no
payments in respect of any indemnification claim shall be required of any
Indemnifying Party unless and until the total amount of all indemnification
claims payable by such Indemnifying Party has exceeded One Million Three Hundred
Thousand Dollars ($1,300,000), in which event the Indemnifying Party shall be
obligated to pay the Indemnified Party the amount of all claims payable in
excess of Six Hundred Seventy-Five Thousand Dollars ($675,000); provided,
however, that the aggregate liability for any Indemnifying Party shall not
exceed Six Million Seven Hundred Fifty Thousand Dollars ($6,750,000) (the "Cap")
and provided further, that the foregoing limitations shall not apply to the
parties' obligations set forth in Section 10.12. The foregoing notwithstanding,
the parties acknowledge and agree that, in the event of a breach of the
representation contained in Section 5.1.10 (an "Environmental
Misrepresentation"), (i) no claim shall be brought hereunder for indemnification
unless, until and only to the extent that the total amount of indemnification
claims for Environmental Misrepresentations payable hereunder exceed Three
Million Dollars ($3,000,000), and (ii) in the event that Seller has made
payments to the Indemnified Parties hereunder in an amount equal to the Cap, the
Cap shall be increased on a dollar-for-dollar basis to an amount not exceeding
Nine Million Seven Hundred and Fifty Thousand Dollars ($9,750,000) to cover
amounts payable for indemnification claims in respect of additional
Environmental Misrepresentations.
8.9 Exclusive Remedy. The parties agree that, except for the
representations contained in Sections 5.1.2, 5.1.3, 5.1.4, 5.1.5, 5.1.9, 5.2.2,
5.2.3, and 5.2.7, their sole and exclusive remedy for breach of Article V shall
be indemnification under this Article VIII. Except as otherwise provided in this
Agreement, no party shall have a separate cause of action under contract, tort
or otherwise except for a claim brought under, and subject to the limitations
of, this Article VIII.
ARTICLE IX
CLOSING DATE DELIVERIES AND ACTIONS
9.1 Deliveries and Actions of the Purchaser. Simultaneously with the
delivery of the Stock and the Purchase Price on the date hereof, Seller is
taking the following actions or delivering to Purchaser the following items:
9.1.1 Delivery of Certificates. (a) a certificate dated the
Closing Date and signed by the Secretary of the Seller and the Company
as to the adoption of resolutions on behalf of the Board of Directors
necessary to authorize the transactions contemplated by this Agreement,
and containing copies of Lumex's and the
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Company's Certificate of Incorporation and Bylaws as then in effect,
(b) a certificate as to the legal existence and good standing of the
Company and a certificate issued by the Secretary of State of each
state in which the Company is qualified to transact business, if any,
as to the qualification and good standing of the Company in each such
state, (c) a certificate of tax clearance or similar certificate issued
by the appropriate taxing authorities of the State of Delaware
certifying that the Seller and the Company have paid all taxes due and
payable in respect of the Stock and or the Company (or reasonably
acceptable certification in lieu thereof if such official certificates
are unavailable at the Closing), and (d) a certificate dated the
Closing Date and signed by the Secretary of the Seller as to (i) the
incumbency of any officers executing on behalf of the Seller, (ii) this
Agreement and (iii) any document contemplated by this Agreement.
9.1.2 Contribution of Debt. Lumex is contributing to the
capital of the Company the indebtedness of the Company owing to Lumex.
9.1.3 Delivery of Legal Opinion. The opinion of Messrs.
Milbank, Tweed, Hadley & McCloy, counsel to the Seller and to the
Company, in form and content reasonably satisfactory to the Purchaser.
9.2 Deliveries and Actions of the Purchaser. Simultaneously with the
delivery of the Stock and the Purchase Price on the date hereof, Purchaser is
taking the following actions or delivering to Seller the following items:
9.2.1 Delivery of Certificates. (a) a certificate dated the
Closing Date and signed by the Clerk of the Purchaser as to the
adoption of resolutions on behalf of the Purchaser necessary to
authorize the transactions contemplated by this Agreement, (b) a
certificate issued by the Secretary of State of Maine as to the legal
existence and good standing of the Purchaser, and (c) a certificate
dated the Closing Date and signed by the Clerk of the Purchaser as to
the incumbency of any officers executing this Agreement or any document
contemplated by this Agreement on behalf of the Purchaser.
9.2.2 Delivery of Legal Opinion. The opinion of Messrs.
Verrill & Dana, counsel to the Purchaser, in form and content
reasonably satisfactory to the Seller.
ARTICLE X
GENERAL
10.1 Confidentiality. Each party to this Agreement acknowledges that it
has received or may have received information from other parties of a
confidential or proprietary nature and, except for such information to be used
by the Purchaser in the conduct of the Business after the Closing, each party
agrees to maintain such information as confidential.
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The foregoing does not apply to the disclosure by the parties of the existence
of this Agreement and the transaction contemplated hereunder.
10.2 Further Assurances. (a) The parties hereto agree to execute and
deliver, at any time after the Closing Date, any and all papers and documents
which may be reasonably necessary to carry out the terms of this Agreement.
(b) Following the Closing, each party shall afford the other party, its
counsel, accountants, and professional advisors during normal business hours,
reasonable access to the property, books, records and other data relating to the
Company in its possession with respect to periods prior to the Closing and the
right to make copies and extracts therefrom, to the extent that such access may
be reasonably required by the requesting party in connection with (i) the
preparation of tax returns, (ii) the determination or enforcement of rights and
obligations under this Agreement, (iii) compliance with the requirements of any
governmental or regulatory authority, (iv) the determination or enforcement of
the rights and obligations of any party to this Agreement, (v) in connection
with any actual or threatened litigation or proceeding; or (vi) other reasonable
business purposes.
10.3 Entire Agreement. The Exhibits and Schedules annexed hereto and
delivered concurrently herewith shall be deemed to be incorporated into and made
part of this Agreement. This Agreement, including said Exhibits and Schedules,
contains the entire agreement between the parties hereto and there are no
agreements, representations, or warranties which are not set forth herein. This
Agreement may not be amended or revised except by a writing signed by all
parties hereto, and no waiver hereunder shall be effective unless in writing.
10.4 Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, except as provided below, this Agreement and all
rights hereunder may not be assigned except by written consent of all parties
hereto. The foregoing notwithstanding, the Purchaser shall be entitled to assign
all or any portion of its rights and/or obligations hereunder to a wholly-owned
subsidiary of the Purchaser upon written notice thereof to the Seller.
10.5 Separate Counterparts. This Agreement may be executed in several
identical counterparts, each of which shall be deemed an original, but all of
which together shall constitute but one and the same instrument.
10.6 Transactional Costs. Each party to this Agreement shall be
responsible for its own costs for any legal, accounting and other consulting
services, if any, attendant to the transactions contemplated by this Agreement.
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10.7 Notices. All notices hereunder, to be effective, shall be in
writing and shall be delivered by hand, or by certified mail, postage and fees
prepaid, or via facsimile transmission to the party to be notified as follows:
(i) If to the Purchaser, to:
Richard C. Larochelle
c/o Irving Tanning Company
3 Main Street
Hartland, ME 04943-0400
Facsimile No., (207)938-5100
with a copy to:
Alan D. MacEwan, Esq.
Verrill & Dana
One Portland Square
Portland, Maine 04112-0586
Facsimile No., (207)774-7499
(ii) If to the Seller, to:
Richard S. Kolodny, Esq., Vice President and General Counsel
Graham-Field Health Products, Inc.
400 Rabro Drive East
Hauppauge, NY 11788
Facsimile No., (516)439-5635
with a copy to:
Robert S. Reder, Esq.
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Facsimile No., (212)530-5219
unless and until notice of another or different address or facsimile number
shall be given as provided herein. Notice shall be deemed to be given and
received when delivered by hand or by courier service or (i) in the case of
notice sent by certified mail, three (3) business days after deposited with the
Canadian or the United States Postal Service, whichever shall apply or (ii) in
the case of notice sent by facsimile transmission, upon receipt.
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10.8 Severability. The provisions of this Agreement are severable, and
the invalidity of any provision shall not affect the validity of any other
provision.
10.9 Index and Article Headings. The descriptive index and Article
headings in this Agreement have been inserted solely for convenience of
reference, and shall not be deemed to be a part of this Agreement.
10.10 Publicity. After the Closing, the parties shall be entitled to
make such public statements as each deems appropriate with regard to the
transactions contemplated by this Agreement.
10.11 Governing Law. The execution, interpretation, and performance of
this Agreement shall be governed by the laws in effect in the State of New York.
10.12 Tax Matters.
10.12.1 The Seller shall prepare and file, or cause to be
prepared and filed, in a manner consistent with prior years and
applicable laws and regulations, all Consolidated Returns (as defined
in Section 5.1.7) required to be filed before or after the Closing Date
and shall pay, or cause to be paid, all Taxes shown as due on such
Consolidated Returns.
10.12.2 The Seller shall be liable for, and shall hold the
Purchaser and the Company harmless from and against, any and all Taxes
due or payable by the Company for any taxable year or tax period ending
on or before the Closing Date. Taxes for which the Seller shall be
liable and hold the Purchaser and the Company harmless under the
preceding sentence shall include, without limitation, any liability for
Taxes that arises because the Company ceases on the Closing Date to be
a member of a group filing Consolidated Returns of which it had been a
member and any and all Taxes due or payable by the Company or by the
Purchaser resulting from or arising out of the transactions
contemplated by this Agreement.
10.12.3 The Purchaser and the Company shall be liable for, and
shall hold the Seller harmless from and against, any and all Taxes due
or payable by the Company or by the Seller with respect to the Company
for any taxable year or tax period beginning after the Closing Date.
10.12.4 Any Taxes for a tax period beginning before the
Closing Date and ending after the Closing Date shall be apportioned
between the Seller and the Purchaser, in the case of real and personal
property taxes, on a per diem basis and, in the case of other Taxes,
shall be determined based on the actual operations of the Company
during the portion of such period ending on the Closing Date and the
portion of such period beginning after the Closing Date, and each such
portion shall be deemed to be a tax period subject to the provisions of
Sections 10.12.2 and 10.12.3, above. The Purchaser shall file, in a
manner consistent with prior years and applicable laws and regulations,
any required federal, state,
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local and foreign Tax Returns (other than Consolidated Returns) for any
such tax period, and the Purchaser shall pay, or cause its subsidiaries
or affiliates to pay (subject to the Seller's obligations to reimburse
the Purchaser therefor as provided in Section 10.12.2) all federal,
state, local or foreign Taxes shown as due on any such return with
respect to the Company.
10.12.5 Notwithstanding the foregoing, the Seller shall be
liable for, and shall hold the Purchaser and the Company harmless from
and against, any Taxes attributable to any other member of any group of
affiliated corporations that file Consolidated Returns for federal
income tax purposes of which the Company was a member before the
Closing Date by reason of Treas. Reg. Section 1.1502-6 or any
comparable provision of state, local or foreign law that provides for
joint and several liability, in whole or in part.
10.12.6 Any refunds or credits of Taxes, to the extent that
such refunds or credits relate to a taxable year or tax period
(including a period deemed to be a tax period under Section 10.12.4)
ending on or before the Closing Date, shall be for the account of the
Seller, and, to the extent that such refunds or credits relate to a
taxable year or tax period (including a period deemed to be a tax
period under Section 10.12.4) beginning after the Closing Date shall be
for the account of the Purchaser.
10.12.7 The Purchaser shall prepare, in a manner consistent
with prior practices and applicable laws and regulations, all
information required for inclusion in any Consolidated Return required
to be filed by the Seller or any affiliate of the Seller which includes
the operations of the Company for any period ending on or prior to the
Closing Date, and shall transmit, or cause the Company to transmit,
such information to the Seller at least 45 days before the due date of
any such Consolidated Return. In filing any Consolidated Return which
includes the operations of the Company for the period ending on the
Closing Date, the Seller shall not, without the consent of the
Purchaser (which shall not be unreasonably withheld), report any item
in a manner different from the manner in which such item is reflected
on the information provided to the Seller in accordance with the
preceding sentence hereof. The Seller and the Purchaser shall each
maintain (or, in the case of the Purchaser, cause the Company to
maintain) all books and records that relate to any Tax Return of the
Company or to any Consolidated Return for a period of not less than 6
years following the filing date of such Tax Return or Consolidated
Return. As soon as practicable after a request by the Seller or the
Purchaser ("Requesting Party"), the Purchaser or the Seller, as the
case may be (the "Delivering Party"), shall deliver to the Requesting
Party such information and data as the Requesting Party may reasonably
request, in order to enable the Requesting Party to complete and file
all Tax Returns which it may deem appropriate or desirable to file with
respect to the activities or assets of the Company or to respond to
audits by any taxing authorities with respect to such activities or
assets. The Delivering Party's obligation under this paragraph to
permit the Requesting Party access to and to review the foregoing
materials is conditioned upon the Requesting Party's execution of a
reasonable confidentiality agreement with respect thereto.
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<PAGE> 22
10.13 Permitting Matters. Purchaser shall be responsible for obtaining,
modifying or giving notice that is required, by any governmental entity with
respect to permits, licenses, or approvals by such entity, as a consequence of
the merger of the Company and the Purchaser.
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<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representative as an instrument under seal as
of the day and year first above written.
WITNESS: SELLER:
GRAHAM-FIELD HEALTH PRODUCTS,
INC.
____________________________ By: _______________________________
Its: _______________________________
LUMEX/BASIC AMERICAN
HOLDINGS, INC.
____________________________ By: ________________________________
Its:________________________________
PURCHASER:
IT ACQUISITION CORPORATION
____________________________ By: _______________________________
Its: _______________________________
19
<PAGE> 1
EXHIBIT 2(b)
STOCK PURCHASE AGREEMENT
by and among
HEKS Corporation
and
Graham-Field Health Products, Inc.,
Lumex/Basic American Holdings, Inc.
relating to the capital stock of
Hancock-Ellsworth Tanners,Inc.
Kroy Tanning Company, Incorporated
and
Seagrave Leather Corporation
Dated as of
January 27, 1998
<PAGE> 2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of this 27th day of January,
1998, by and among HEKS CORPORATION, a Maine corporation (the "Purchaser"), on
the one hand, and GRAHAM-FIELD HEALTH PRODUCTS, INC., a Delaware corporation
("GFHP"), LUMEX/BASIC AMERICAN HOLDINGS, INC., a Delaware corporation ("Lumex")
(GFHP and Lumex collectively, the "Seller"), on the other hand; and relating to
the purchase and sale of all the issued and outstanding capital stock of
HANCOCK-ELLSWORTH TANNERS, INC., a Delaware corporation ("HEC"), KROY TANNING
COMPANY, INCORPORATED, a Delaware corporation ("Kroy") and SEAGRAVE LEATHER
CORPORATION, a Maine corporation ("Seagrave") (HEC, Kroy, and Seagrave
collectively, the "Company").
------------------------
Lumex owns all of the issued and outstanding shares of stock of the
Company, which in turn owns certain assets and real estate formerly used for the
processing and manufacturing of leather and related products. The Seller is
willing to sell to the Purchaser, and the Purchaser is willing to purchase from
the Seller, upon the terms and conditions herein set forth, the Stock, as
hereafter defined. Therefore, in consideration of the premises and the mutual
benefits to be derived from this Agreement, the parties hereto, intending
legally to be bound, hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK
1.1 Purchase and Sale. The Seller hereby sells, transfers, conveys,
assigns and delivers to the Purchaser, and the Purchaser hereby purchases from
the Seller, all of the issued and outstanding shares of common stock of HEC
(par value $1.00), Kroy (par value $1.00), and Seagrave (par value $1.00)
(collectively, the "Stock"), by delivery to the Purchaser of certificates
representing the Stock, duly enclosed in blank or accompanied by duly executed
stock powers in blank.
ARTICLE II
CONSIDERATION
2.1 Consideration. The consideration to be paid by the Purchaser pursuant
to this Agreement shall be ONE DOLLAR ($1.00) per share of Stock, for a total
purchase price of ONE THOUSAND FOUR HUNDRED DOLLARS ($1,400.00) (the "Purchase
Price"), to be payable in cash or equivalent immediately available funds at the
Closing, as hereafter defined. The
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<PAGE> 3
parties hereto acknowledge and agree that the Purchase Price is good and
sufficient consideration for the Stock.
ARTICLE III
CLOSING
3.1 Closing Time and Place. The closing of the transactions contemplated
by this Agreement (the "Closing") is taking place concurrently with the
execution and delivery of this Agreement at the offices of Verrill & Dana, One
Portland Square, Portland, Maine, at 9:30 a.m. on January 27, 1998 (the "Closing
Date"). At the Closing, the Seller is transferring good and sufficient
instruments of transfer and assignment as are effective to vest in the Purchaser
good and valid title to the Stock. Simultaneously, Purchaser is paying the
Purchase Price in accordance with Section 2.1.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Seller. As a material
inducement to the Purchaser to enter into and perform its obligations pursuant
to this Agreement, the Seller represents and warrants as of the date hereof as
follows:
4.1.1 Organization and Good Standing of the Company. The Company is
a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware, in the case of HEC and Kroy, and
Maine, in the case of Seagrave, and the Company is qualified as a foreign
corporation in the State of Maine, in the case of HEC and Kroy, and the
Company has corporate power to carry on its business as it is now being
conducted.
4.1.2 Ownership of Shares; Ownership Interests. Lumex owns all of
the issued and outstanding shares of capital stock of the Company and all
other equity securities of the Company, if any, and there are no
outstanding securities or options, warrants or other rights to acquire
any securities of the Company. All of the issued and outstanding shares
of capital stock of the Company have been validly issued, fully paid and
are nonassessable, and Lumex has full authority to vote such shares on
all matters, if any, relating to the transactions contemplated by this
Agreement. Set forth on Schedule 4.1.2 is a list of all capital stock,
securities or other ownership interests owned or held by the Company in
any subsidiary or other entity.
4.1.3 Authorization. The execution and delivery by the Seller of
this Agreement, and the consummation by the Seller of the transactions
contemplated hereby and the
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<PAGE> 4
performance of all of its obligations hereunder, have been duly
authorized by all necessary action on the part of its Board of Directors,
and this Agreement, when executed and delivered by the Seller, will be
the valid and binding obligation of the Seller, enforceable in accordance
with its terms except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
the rights of creditors generally and except as the enforceability of
this Agreement is subject to the application of general principles of
equity (regardless of whether considered in a proceeding in equity or at
law), including without limitation (i) the possible unavailability of
specific performance, injunctive relief or any other equitable remedy and
(ii) concepts of materiality, reasonableness, good faith and fair
dealing.
4.1.4 Title to Stock. Lumex has valid, marketable title to the
Stock, in its own name, free and clear of all claims, liens, charges,
encumbrances, and claimed interests of any kind of any other person or
persons whatsoever, and has full right, power and authority to sell,
transfer, assign and deliver the Stock to the Purchaser hereunder,
without any required consent or approval by any other party.
4.1.5 Non-Violation. The execution and delivery of this Agreement
by the Seller, and the consummation by it of the transactions
contemplated hereby, does not and will not violate the provisions of (i)
any applicable laws of the United States, the State of Delaware, or the
State of Maine, (ii) the Seller's Certificate of Incorporation, HEC and
Kroy's Certificate of Incorporation, and Seagrave's Articles of
Incorporation or the Seller's or the Company's Bylaws, or (iii) any
order, judgment or decree or any other restriction of any kind or
character applicable to the Seller or the Company. No default or breach
will occur by virtue of the consummation of the transactions contemplated
hereunder in any material respect under any contract, agreement, deed of
trust, indenture or other instrument applicable to the Seller, and no
rights of the Seller under any such existing contract, agreement,
indenture, deed of trust, or other instrument will be limited, impaired
or extinguished by virtue of the consummation of the transactions
contemplated hereunder, nor will the consummation of the transactions
contemplated hereunder result in the creation of any lien, charge or
encumbrance upon the Stock.
4.1.6 Tax Matters. Except as set forth on Schedule 4.1.6, the
Seller has paid all taxes, interest and penalties due or assessed and
owed by it relating to the Stock, and has duly filed all federal, state,
local or other tax returns which are required to be filed. Except as set
forth on Schedule 4.1.6, no proceedings or other actions which are still
pending or open have been taken for the assessment or collection of
additional taxes of any kind from the Seller or, to the Seller's
knowledge, the Company, no statute of limitations in respect of any taxes
has been waived or extended by or on behalf of the Seller or the Company,
and no examination by the federal or any state taxing authorities or any
other taxing authority is currently pending. Present taxes which the
Seller or, to the Seller's knowledge, the Company is required by law to
withhold or collect have been withheld or collected and have been paid
over to the proper governmental authorities or are properly held by the
Company for such payment and will be paid when due.
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<PAGE> 5
4.1.8 Litigation. Except as disclosed on Schedule 4.1.8, no
litigation, proceeding, investigation or claim is pending or, to the
Seller's knowledge, threatened against or relating to the Stock nor does
the Seller know of any basis for any such litigation, proceeding,
investigation or claim. The Seller is not involved in and has not been
served or put on notice of any litigation, claim, proceeding or
governmental investigation pending or, to Seller's knowledge, threatened
against or relating to the Company that will adversely affect the
Seller's ability to consummate the transactions contemplated by this
Agreement. To the Seller's knowledge, no investigation of the Seller has
been conducted or is intended, nor remedial action taken or intended
against the Seller, by any governmental authority, which would affect its
ability to consummate the transactions contemplated by this Agreement. As
used in this Agreement, the phrase "to the Seller's knowledge" shall mean
knowledge of matters about which Irwin Selinger or Richard S. Kolodny
know or had reason to know and shall not include the knowledge of Richard
Larochelle and the other executive officers of the Company.
4.1.9 Brokers. Except as set forth in Schedule 4.1.9, neither the
Seller nor the Company has incurred any obligation to pay compensation or
commissions to any broker or other intermediary in connection with the
transactions contemplated hereby. The Seller will, independent of the
provisions of Article V, indemnify the Purchaser and hold the Purchaser
harmless without deduction or offset against payment of any such
compensation or commissions.
4.1.10 Disclosure. No representation or warranty by the Seller made
herein, or in any Exhibit or Schedule hereto, contains any untrue
statement of material fact, or omits to state a material fact necessary
to make the statements contained herein and therein, in light of the
circumstances under which they were made, not misleading.
4.2 Representations by the Purchaser. As a material inducement to the
Seller to enter into and perform its obligations pursuant to this Agreement, the
Purchaser represents and warrants, as of the date hereof and the Closing Date,
as follows:
4.2.1 Organization and Good Standing of the Purchaser. The
Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the State of Maine and has corporate power to
carry on its business as it is now being conducted and to enter into an
perform its obligations pursuant to this Agreement.
4.2.2 Authorization by the Purchaser. The execution and delivery by
the Purchaser of this Agreement, and the consummation by the Purchaser of
the transactions contemplated hereby, have been duly authorized by all
necessary action on the part of the Purchaser, and this Agreement, when
executed and delivered by the Purchaser, will be the valid and binding
obligation of the Purchaser, enforceable in accordance with its terms
except as enforcement may be subject to laws relating to bankruptcy,
insolvency and creditors' rights.
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<PAGE> 6
4.2.3 Non-Violation. The execution and delivery of this Agreement
by the Purchaser and the consummation of the transactions contemplated
hereby, does not and will not violate the provisions of (i) any
applicable laws of the United States, the State of Maine, or of any other
state of jurisdiction in which the Purchaser does business, (ii) the
Purchaser's Articles of Incorporation or Bylaws, or (iii) any order,
judgment or decree or any other restriction of any kind or character
applicable to the Purchaser. No default or breach will, by virtue of the
consummation of the transactions contemplated hereunder, occur in any
material respect under any material contract, agreement, deed of trust,
indenture or other instrument applicable to the Purchaser.
4.2.4 Litigation. The Purchaser is not involved in and has not been
served or put on notice of any material litigation, proceeding or
governmental investigation pending or threatened against or relating to
the Purchaser that will adversely affect the Purchaser's ability to
consummate the transactions contemplated by this Agreement.
4.2.5 HSR Act. For purposes of section 7A of the Clayton Act, 15
U.S.C. Section 18a, and the rules and regulations thereunder, 16 C.F.R.
Section 801.1 et seq., (i) the Purchaser is not "controlled" by any other
entity and (ii) the Purchaser, including all entities which it
"controls," does not have "annual net sales" or "total assets" of $10
million or more, as determined pursuant to such act and the rules and
regulations promulgated thereunder.
4.2.6 Nature of Purchase; Accredited Investor. (a) The Purchaser is
acquiring the Stock for its own account for investment, not as a nominee
or agent, and not with a view to the resale or distribution of the Stock
or any part thereof, and the Purchaser has no present intention of
selling, granting any participation in, or otherwise distributing the
same. The Purchaser acknowledges that the sale of the Stock pursuant to
this Agreement will not be registered under the Securities Act or any
state securities or blue sky law, on the grounds that the offering and
sale of the Stock contemplated by this Agreement are exempt from
registration pursuant to exceptions available under such laws, and that
the Seller's reliance upon such exemptions is predicated upon the
Purchaser's representations set forth in this Agreement.
(b) The Purchaser is an "accredited investor" within the meaning of
Regulation D promulgated under the Securities Act.
4.2.7 Brokers. The Purchaser has incurred no obligation to pay
compensation or commissions to any broker or other intermediary in
connection with the consummation of the transactions contemplated hereby.
4.2.8 Disclosure. No representation or warranty by the Purchaser
herein contains or will contain any untrue statement of material fact, or
omits or will omit to state a material fact necessary to make the
statements contained herein, in light of the circumstances in which they
were made, not misleading.
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<PAGE> 7
ARTICLE V
INDEMNIFICATION
5.1 Indemnification by the Seller. The Seller shall indemnify, defend,
and save and hold harmless the Purchaser from and against any damage, liability,
loss, expense or injury (including without limitation reasonable attorneys' fees
and costs and expenses incident to any claim, suit, action or proceeding)
suffered by the Purchaser in respect of any and all breaches of any
representation, warranty, or nonfulfillment of any covenant by the Seller
contained in this Agreement, including the Exhibits and Schedules hereto and any
certificate or other instrument furnished or to be furnished to the Purchaser by
or on behalf of the Seller or the Company.
5.2 Indemnification by the Purchaser. The Purchaser shall indemnify,
defend, and save and hold harmless the Seller from and against any damage,
liability, loss, expense or injury (including without limitation reasonable
attorneys' fees and costs and expenses incident to any claim, suit, action or
proceeding), suffered by the Seller in respect of any and all breaches of any
representation, warranty, or nonfulfillment of any covenant by the Purchaser
made or contained in this Agreement, including the Exhibits and Schedules hereto
and any certificate or other instrument furnished or to be furnished to the
Seller by or on behalf of the Purchaser.
5.3 Survival of Representations and Warranties; Limitations. The
representations, warranties and covenants set forth in this Agreement shall
survive the Closing. Notwithstanding any provision of law which may apply to
limit the right to bring an action for indemnification under this Article V, no
party shall assert any claim for indemnification hereunder later than June 30,
1999, except for claims relating to noncompliance with the covenants and
undertakings set forth in this Agreement or any document constituting a Schedule
or an Exhibit hereto, which may be asserted at any time subject to applicable
statutes in respect thereof.
5.4 Notice of Claims and Response. If the party seeking indemnification
hereunder (for purposes of this Article V, the "Indemnified Party") shall demand
indemnification hereunder against the other party (for purposes of this Article
V, the "Indemnifying Party"), such Indemnified Party shall notify the
Indemnifying Party of the facts and circumstances giving rise to such claim for
indemnification. The Indemnified Party shall afford to the Indemnifying Party
access to all records and information relating to such claim, facts and
circumstances (except those matters privileged under applicable state or federal
law or rules of evidence) reasonably necessary to permit the Indemnifying Party
to evaluate the merits of such claim or the accuracy of such facts and
circumstances. Within thirty (30) days after receipt of any such demand for
indemnification, the Indemnifying Party shall by notice to the Indemnified Party
acknowledge its obligation to indemnify the Indemnified Party in respect of such
claim, fact or circumstance, or reject the demanded indemnification. A failure
to respond to any such demand within said thirty day period shall be deemed to
be a rejection of the demand.
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<PAGE> 8
5.5 Opportunity to Cure. Notwithstanding any rejection of a demand for
indemnification pursuant to Section 5.4, the Indemnifying Party shall be
entitled, within thirty (30) days after notice of any demand for
indemnification, at its sole cost and expense, to undertake to cure any
circumstances or pay or settle any claim which is the subject of said notice,
provided, however, that any indemnification hereunder with respect to such
claim, fact or circumstance shall continue to be available notwithstanding such
undertaking to cure.
5.6 Resolution of Dispute as to Indemnification. Any dispute relating to
indemnification may, at the election of any party, be resolved by an arbitration
to be held at Portland, Maine, and to be conducted in accordance with the rules
then in effect of the American Arbitration Association, except that the
arbitrators shall be appointed as follows: (a) within fifteen (15) days after
any rejection of a demand for indemnification, the parties jointly shall appoint
a single arbitrator whose resolution of the dispute shall be conclusive, or (b)
if the parties fail jointly to appoint a single arbitrator within said fifteen
day period, either the Indemnified Party or the Indemnifying Party may appoint
one arbitrator by notice to the other such party, and the other party shall name
a second arbitrator within fifteen (15) days after receipt of such notice,
whereupon the two arbitrators so named shall jointly select a third arbitrator
within fifteen (15) days after the date of appointment of the second arbitrator,
failing which the third arbitrator shall be appointed by the President of the
American Arbitration Association. In the event that any party entitled to name
the second arbitrator as set forth in this Section 5.6 fails to do so within the
time period provided herein, the arbitrator appointed by the other party shall
be the sole arbitrator. Any arbitrator or arbitrators shall promptly conduct an
arbitration and render a decision resolving the dispute, and the parties agree
to abide by the decision of any single arbitrator or by a decision of a majority
of any three arbitrators appointed as aforesaid. The costs and expenses of any
arbitrator shall be borne by the party appointing such arbitrator, except that
the costs and expenses of any arbitrator jointly named or appointed as a third
arbitrator shall be borne fifty percent by the Indemnified Party and fifty
percent by the Indemnifying Party.
5.7 Defense of Claims. Should any claims be made or suits or proceedings
be instituted which, if successfully prosecuted, would give rise to any
obligation to indemnify under this Article V, the control of the defense thereof
shall be vested in the Indemnifying Party, and the Indemnified Party shall be
entitled to participate in such defense. Notwithstanding the foregoing control
of the defense provisions, no settlement of any claim, suit or proceeding which
will result in liability pursuant to this Article V may be made without the
consent of the party bearing such liability, which consent will not unreasonably
be withheld.
5.8 Limitations on Liability. Notwithstanding the foregoing, no payments
in respect of any indemnification claim shall be required of any Indemnifying
Party (i) unless and until and then only to the extent that the total amount of
all indemnification claims payable by such Indemnifying Party has exceeded Two
Hundred Fifty Thousand Dollars ($250,000), and (ii) to the extent that the total
amount of all indemnification claims payable by such Indemnifying
7
<PAGE> 9
Party will exceed Two Million Dollars ($2,000,000.00), provided, however, the
limitations hereunder shall not apply to the parties' obligations set forth in
Sections 7.12, 7.13, 7.14, and 7.15.
5.9 Exclusive Remedy. The parties agree that, except for the
representations contained in Sections 4.1.2, 4.1.3, 4.1.4, 4.1.5, 4.1.9, 4.2.2,
4.2.3, and 4.2.7, their sole and exclusive remedy for breach of Article IV shall
be indemnification under this Article V. Except as otherwise provided in this
Agreement, no party shall have a separate cause of action under contract, tort
or otherwise except for a claim brought under, and subject to the limitations
of, this Article V.
ARTICLE VI
CLOSING DATE DELIVERIES AND ACTIONS
6.1 Deliveries and Actions of the Seller. Simultaneously with the
delivery of the Stock and the Purchase Price on the date hereof, Seller is
taking the following actions or delivering to Purchaser the following items:
6.1.1 Delivery of Certificates. (a) a certificate dated the
Closing Date and signed by the Secretary of the Seller as to the
adoption of resolutions on behalf of the Board of Directors necessary
to authorize the transactions contemplated by this Agreement, (b) a
certificate dated the Closing date and signed by the Secretary or
Clerk of Lumex and the Companies containing copies of Lumex's and the
Company's Certificate of Incorporation and Bylaws as then in effect,
(c) a certificate as to the legal existence and good standing of the
Company and a certificate issued by the Secretary of State of each
state in which the Company is qualified to transact business, if any,
as to the qualification and good standing of the Company in each such
state, (d) a certificate of tax clearance or similar certificate
issued by the appropriate taxing authorities of the States of Maine
and Delaware certifying that the Seller and the Company have paid all
taxes due and payable in respect of the Stock and or the Company (or
reasonably acceptable certification in lieu thereof if such official
certificates are unavailable at the Closing), and (e) a certificate
dated the Closing Date and signed by the Secretary of the Seller as
to (i) the incumbency of any officers executing on behalf of the
Seller, (ii) this Agreement and (iii) any document contemplated by
this Agreement.
6.1.2 Contribution of Debt. Lumex is contributing to the
capital of each of Kroy and Seagrave the indebtedness of Kroy and
owing to Lumex.
6.2 Deliveries and Actions of the Purchaser. Simultaneously
with the delivery of the Stock and the Purchase Price on the date
hereof, Purchaser is taking the following actions or delivering to
Seller the following items:
8
<PAGE> 10
6.2.1 Delivery of Certificates. (a) a certificate dated the Closing
Date and signed by the Clerk of the Purchaser as to the adoption of
resolutions on behalf of the Purchaser necessary to authorize the
transactions contemplated by this Agreement, (b) a certificate issued by
the Secretary of State of Maine as to the legal existence and good
standing of the Purchaser, and (c) a certificate dated the Closing Date
and signed by the Clerk of the Purchaser as to the incumbency of any
officers executing this Agreement or any document contemplated by this
Agreement on behalf of the Purchaser.
ARTICLE VII
GENERAL
7.1 Confidentiality. Each party to this Agreement acknowledges that it
has received or may have received information from other parties of a
confidential or proprietary nature and, except for such information to be used
by the Purchaser in the conduct of the Business after the Closing, each party
agrees to maintain such information as confidential. The foregoing does not
apply to the disclosure by the parties of the existence of this Agreement and
the transaction contemplated hereunder.
7.2 Further Assurances. (a) The parties hereto agree to execute and
deliver, at any time after the Closing Date, any and all papers and documents
which may be reasonably necessary to carry out the terms of this Agreement.
(b) Following the Closing, each party shall afford the other party,
its counsel, accountants, and professional advisors, during normal business
hours, reasonable access to the properties, books, records and other data
relating to the Company in its possession with respect to periods prior to the
Closing and the right to make copies and extracts therefrom, to the extent that
such access may be reasonably required by the requesting party in connection
with (i) the preparation of tax returns, (ii) the determination or enforcement
of rights and obligations under this Agreement, (iii) compliance with the
requirements of any governmental or regulatory authority, (iv) the determination
or enforcement of the rights and obligations of any party to this Agreement, (v)
in connection with any actual or threatened litigation or proceeding, or (vi)
other reasonable business purposes.
7.3 Entire Agreement. The Exhibits and Schedules annexed hereto and
delivered concurrently herewith shall be deemed to be incorporated into and made
part of this Agreement. This Agreement, including said Exhibits and Schedules,
contains the entire agreement between the parties hereto and there are no
agreements, representations, or warranties which are not set forth herein. This
Agreement may not be amended or revised except by a writing signed by all
parties hereto, and no waiver hereunder shall be effective unless in writing.
9
<PAGE> 11
7.4 Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, except as provided below, this Agreement and all
rights hereunder may not be assigned except by written consent of all parties
hereto. The foregoing notwithstanding, the Purchaser shall be entitled to assign
all or any portion of its rights and/or obligations hereunder to a wholly-owned
subsidiary of the Purchaser upon written notice thereof to the Seller.
7.5 Separate Counterparts. This Agreement may be executed in several
identical counterparts, each of which shall be deemed an original, but all of
which together shall constitute but one and the same instrument.
7.6 Transactional Costs. Each party to this Agreement shall be
responsible for its own costs for any legal, accounting and other consulting
services, if any, attendant to the transactions contemplated by this Agreement.
7.7 Notices. All notices hereunder, to be effective, shall be in writing
and shall be delivered by hand or by certified mail, postage and fees prepaid,
or via facsimile transmission to the party to be notified as follows:
(i) If to the Purchaser, to:
Richard C. Larochelle
c/o Irving Tanning Company
3 Main Street
Hartland, ME 04943-0400
Facsimile No., (207)938-5100
with a copy to:
Alan D. MacEwan, Esq.
Verrill & Dana
One Portland Square
Portland, Maine 04112-0586
Facsimile No., (207)774-7499
(ii) If to the Seller, to:
Richard S. Kolodny, Esq., Vice President and General Counsel
Graham-Field Health Products, Inc.
400 Rabro Drive East
Hauppauge, NY 11788
Facsimile No., (516)439-5635
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<PAGE> 12
with a copy to:
Robert S. Reder, Esq.
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Facsimile No., (212)530-5219
unless and until notice of another or different address or facsimile number
shall be given as provided herein. Notice shall be deemed to be given and
received when delivered by hand or by courier service or, in the case of notice
sent by certified mail, three (3) business days after deposited with the
Canadian or the United States Postal Service, whichever shall apply.
7.8 Severability. The provisions of this Agreement are severable,
and the invalidity of any provision shall not affect the validity of any other
provision.
7.9 Index and Article Headings. The descriptive index and Article
headings in this Agreement have been inserted solely for convenience of
reference, and shall not be deemed to be a part of this Agreement.
7.10 Publicity. After the Closing, the parties shall be entitled to
make such public statements as each deems appropriate with regard to the
transactions contemplated by this Agreement.
7.11 Governing Law. The execution, interpretation, and performance
of this Agreement shall be governed by the laws in effect in the State of New
York.
7.12 Seller Taxes. The Seller shall be liable for, and shall hold
the Purchaser and the Company harmless from and against, any and all Taxes due
or payable by the Company for any taxable year or tax period ending on or before
the Closing Date. Taxes for which the Seller shall be liable and hold the
Purchaser and the Company harmless under the preceding sentence shall include,
without limitation, any liability for Taxes that arises because the Company
ceases on the Closing Date to be a member of a group filing consolidated returns
of which it had been a member and any and all Taxes due or payable by the
Company or by the Purchaser resulting from or arising out of the transactions
contemplated by this Agreement.
7.13 Purchaser Taxes. The Purchaser and the Company shall be liable
for, and shall hold the Seller harmless from and against, any and all Taxes due
or payable by the Company or by the Seller with respect to the Company for any
taxable year or tax period beginning after the Closing Date.
7.14 Liquidation of Company Assets. The Purchaser covenants, with
regard to the assets of the Company (all of which are listed on Schedule 7.14
attached hereto) (the
11
<PAGE> 13
"Assets"), that the Purchaser shall liquidate the Assets in an orderly manner as
it determines in its reasonable discretion, and shall expend the proceeds of
such liquidation, net of expenses associated therewith (and other reasonable
expenses), to discharge any and all environmental remediation costs and
expenses. As soon as practicable following the Closing, the Purchaser shall
contract with outside consultants to discharge the Company's environmental
liabilities in a commercially reasonable manner.
7.1.15 Irving Tanning Lease. The Purchaser or the appropriate
subsidiary of the Purchaser (the "Subsidiary") shall enter into a lease with
Irving Tanning Company substantially in the form attached hereto as Exhibit 7.15
(the "Lease"). The Purchaser further covenants and agrees that it will not
terminate, modify any material terms of, nor assign or permit assignment of, the
Lease by either party without the prior written consent of the Seller. The
Purchaser shall expend, or cause the Subsidiary to expend, the rents received
thereunder, net of expenses associated therewith (and other reasonable
expenses), to discharge any and all environmental remediation costs and
expenses.
12
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized representative as an instrument under seal
as of the day and year first above written.
WITNESS: SELLER:
GRAHAM-FIELD HEALTH PRODUCTS,
INC.
____________________________ By: ______________________________
Its: ______________________________
LUMEX/BASIC AMERICAN
HOLDINGS, INC.
____________________________ By:________________________________
Its:_______________________________
PURCHASER:
HEKS CORPORATION
____________________________ By: ______________________________
Its: ______________________________
13
<PAGE> 1
Exhibit 99(a)
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.
TO SELL
FUQUA'S LEATHER OPERATIONS FOR $68 MILLION
HAUPPAUGE, NEW YORK, January 20, 1998--Graham-Field Health Products, Inc.
(NYSE-GFI), a manufacturer and supplier of healthcare products, announced that
it has reached an agreement in principle to sell the leather operations of Fuqua
Enterprises, Inc. for approximately $68 million to the management group of
Fuqua's leather operations, including Richard C. Larochelle, the President and
Chief Executive Officer. The purchase price will consist of $60.2 million in
cash, preferred stock with a stated value of $4.25 million in the acquiring
entity, the assumption of debt of approximately $2.3 million and other
consideration of approximately $1.4 million. As structured, Graham-Field will
not be required to pay any income taxes from the sale of the leather operations.
The transaction will also result in no gain or loss for accounting purposes. The
sale of the leather operations, which is currently expected to be completed
during the later part of January 1998, is subject to, among other things, the
execution of definitive agreements, the receipt of financing by the acquiring
entity, and the satisfaction of certain terms and conditions.
<PAGE> 2
Irwin Selinger, the Chairman of the Board and Chief Executive Officer, stated
that "the sale of the leather operations will enable Graham-Field to continue to
focus its strategies and objectives on its traditional and core businesses in
the medical products industry. We will use the cash proceeds from the sale to
retire debt acquired in connection with the Fuqua acquisition, reducing the
overall cost of the acquisition and improving our balance sheet. We believe that
the sale of the leather operations is in the best interests of our stockholders,
and the employees, management and customers of the leather operations."
On December 30, 1997, Graham-Field acquired Fuqua, which included the leather
operations and the $100 million medical products business of Lumex, Basic
American and Prism, all leading companies in their respective markets. The Fuqua
acquisition has positioned Graham-Field as one of the leading suppliers of
durable medical products in the healthcare industry. Graham-Field's distribution
network and advanced technology systems will provide significant growth
opportunities for Fuqua's proven manufacturing capabilities and well-established
product lines.
According to Irwin Selinger, "we have consolidated the Graham-Field and Lumex
sales forces, and eliminated the cost of the corporate offices of Fuqua. Our
management team has combined accounting departments, and is in the process of
integrating manufacturing and distribution functions. We expect to realize
significant cost reductions associated with the integration process.
Cross-selling opportunities will also present significant growth prospects for
Graham-Field. Graham-Field will be able to use existing Fuqua relationships to
cross-sell products to nursing home customers, a virtually untapped marketplace
for Graham-Field."
2
<PAGE> 3
Graham-Field maintains distribution and manufacturing facilities throughout the
United States, Canada, Mexico and Puerto Rico. Graham-Field manufactures,
markets and distributes over 30,000 healthcare and rehabilitation products for
hospital, physician and home use to home healthcare, physician, hospital supply
and pharmaceutical distributors, retailers and wholesalers.
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. This press release contains forward-looking
statements based on current expectations that could be affected by the risks and
uncertainties involved in Graham-Field's business. These risks and uncertainties
include, but are not limited to, the effect of economic and market conditions,
the impact of the consolidation of health care practitioners, the impact of
health care reform, opportunities for acquisitions and Graham-Field's ability to
effectively integrate acquired companies, the acceptance and quality of software
products, acceptance and ability to manage operations in foreign markets,
possible disruptions in Graham-Field's computer systems or telephone systems,
possible increases in shipping rates or interruptions in shipping service, the
level and volatility of interest rates and currency values, the impact of
current or pending legislation and regulation, as well as the risks described
from time to time in Graham-Field's reports to the Securities and Exchange
Commission, which include Graham-Field's Annual Report on Form 10-K/A3 for the
year ended December 31, 1996 and Graham-Field's Registration Statement on Form
S-4 dated as of December 19, 1997. Subsequent written or oral statements
attributable to Graham-Field or persons acting on its behalf are expressly
qualified in their entirety by the cautionary statements in this press release
and those in Graham-Field's reports previously filed with the Securities and
Exchange Commission.
3
<PAGE> 1
Exhibit 99(b)
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.
SELLS FUQUA'S
LEATHER OPERATIONS FOR $68 MILLION
HAUPPAUGE, NEW YORK, January 28, 1998--Graham-Field Health Products, Inc.
(NYSE-GFI), a manufacturer and supplier of healthcare products, announced that
it has sold the leather operations of Fuqua Enterprises, Inc. for approximately
$68 million to the management group of Fuqua's leather operations, including
Richard C. Larochelle, the President and Chief Executive Officer. The purchase
price consisted of $60.2 million in cash, preferred stock with a stated value of
$4.25 million in the acquiring entity, the assumption of debt of approximately
$2.3 million and other consideration of approximately $1.4 million. Graham-Field
will not be required to pay any income taxes from the sale of the leather
operations, and no gain or loss will be recognized for accounting purposes.
Irwin Selinger, the Chairman of the Board and Chief Executive Officer, stated
that "the sale of the leather operations enables Graham-Field to continue to
focus its strategies and objectives on its traditional and core businesses in
the medical products industry. The cash proceeds from the
<PAGE> 2
sale will be used to retire debt acquired in connection with the Fuqua
acquisition, reducing the overall cost of the acquisition and improving our
balance sheet. We believe that the sale of the leather operations is in the best
interests of our stockholders, and the employees, management and customers of
the leather operations."
On December 30, 1997, Graham-Field acquired Fuqua, which included the leather
operations and the $100 million medical products business of Lumex, Basic
American and Prism, all leading companies in their respective markets. The Fuqua
acquisition has positioned Graham-Field as one of the leading suppliers of
durable medical products in the healthcare industry. Graham-Field's distribution
network and advanced technology systems will provide significant growth
opportunities for Fuqua's proven manufacturing capabilities and well-established
product lines.
According to Irwin Selinger, "we have consolidated the Graham-Field and Lumex
sales forces, and eliminated the cost of the corporate offices of Fuqua. Our
management team has combined accounting departments, and is in the process of
integrating manufacturing and distribution functions. We expect to realize
significant cost reductions associated with the integration process.
Cross-selling opportunities will also present significant growth prospects for
Graham-Field. Graham-Field will be able to use existing Fuqua relationships to
cross-sell products to nursing home customers, a virtually untapped marketplace
for Graham-Field."
Graham-Field maintains distribution and manufacturing facilities throughout the
United States, Canada, Mexico and Puerto Rico. Graham-Field manufactures,
markets and distributes over
2
<PAGE> 3
30,000 healthcare and rehabilitation products for hospital, physician and home
use to home healthcare, physician, hospital supply and pharmaceutical
distributors, retailers and wholesalers.
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. This press release contains forward-looking
statements based on current expectations that could be affected by the risks and
uncertainties involved in Graham-Field's business. These risks and uncertainties
include, but are not limited to, the effect of economic and market conditions,
the impact of the consolidation of health care practitioners, the impact of
health care reform, opportunities for acquisitions and Graham-Field's ability to
effectively integrate acquired companies, the acceptance and quality of software
products, acceptance and ability to manage operations in foreign markets,
possible disruptions in Graham-Field's computer systems or telephone systems,
possible increases in shipping rates or interruptions in shipping service, the
level and volatility of interest rates and currency values, the impact of
current or pending legislation and regulation, as well as the risks described
from time to time in Graham-Field's reports to the Securities and Exchange
Commission, which include Graham-Field's Annual Report on Form 10-K/A3 for the
year ended December 31, 1996 and Graham-Field's Registration Statement on Form
S-4 dated as of December 19, 1997. Subsequent written or oral statements
attributable to Graham-Field or persons acting on its behalf are expressly
qualified in their entirety by the cautionary statements in this press release
and those in Graham-Field's reports previously filed with the Securities and
Exchange Commission.
3
