APPENDIX A
DEBT CONVERSION AGREEMENT
THIS DEBT CONVERSION AGREEMENT (this "Agreement"), is made and entered into as of
this 30th day of September, 1993, by and among EVEREST & JENNINGS INTERNATIONAL
LTD., a Delaware corporation ("E&J Ltd."), EVEREST & JENNINGS, INC., a California
corporation ("E&J Inc.," and together with E&J Ltd., the "Borrowers"), THE JENNINGS
INVESTMENT CO., a California corporation ("Jennings Investment," and together with the
Borrowers, the "E&J Parties"), BIL (FAR EAST HOLDINGS) LIMITED, a Hong Kong
corporation ("BIL").
RECITALS
A. BIL and the E&J Parties are parties to that certain Debt Restructure Agreement dated as of
August 30, 199 1, as amended, and certain related documents (collectively, the "Debt Restructure
Agreement"), pursuant to which certain indebtedness of the Borrowers to BIL existing prior to
such date was modified and restructured into new indebtedness of the Borrowers to BIL (the
"BIL Restructure Debt").
B. The outstanding BIL Restructure Debt currently is evidenced by an Amended and Restated
Promissory Note dated as of. August 30, 1991 (the "BIL Restructure Note"), payable by the
Borrowers to BIL in the original principal amount of $6,931,069, and is guaranteed by Jennings
Investment.
C. The Borrowers and Security Pacific National Bank ("SPNB) are parties to that certain First
Amended and Restated Credit Agreement dated as of August 30, 1991, as amended, and
(together with Jennings Investment) certain related documents (collectively, the "Amended Loan
Agreement," and together with the Debt Restructure Agreement, the "Restructuring
Agreements"), pursuant to which certain indebtedness of the Borrowers to SPNB existing prior
to such date was modified and restructured into new indebtedness of the Borrowers to SPNB (the
"SPNB Debt").
D. The outstanding SPNB Debt currently is evidenced by an Amended and Restated Note dated
as of August 30, 1992 (the “SPNB Note"), payable by the Borrowers to SPNB in the original
principal amount of $31,000,000, and is guaranteed by Jennings Investment.
E. On February 21, 1992, SPNB assigned to BIL, and BIL acquired and succeeded to, all of
SPNB's right, title and interest in and to the SPNB Debt under the terms of the Amended Loan
Agreement and the SPNB Note.
F. BIL has assigned to one or more of its "Affiliates" (as defined in Section 11.2 Below) and
such Affiliates have acquired and succeeded to, all of BIL's right, title and interest W in and to
the BIL Restructure Debt and the SPNB Debt, (ii) under the BIL Restructure Note and under the
SPNB Note, and (iii) under the Debt Restructure Agreement and under the Amended Loan
Agreement.G. During the period extending from August 31, 1992, through September 30, 1993, BIL loaned
various sums to E&J Ltd. and certain of its subsidiaries for working capital purposes (the " BIL
Working Capital Debt," and together with the BIL Restructure Debt, the SPNB Debt and the
"Interest Obligations" (as defined in Recital H Below, the "Existing BIL Indebtedness"),
$43,300,000 of which BIL Working Capital Debt is evidenced by the various Promissory Notes
(collectively, the "BIL Working Capital Notes," and together with the BIL Restructure Note and
the SPNB Note, the "Existing BIL Notes") identified on Exhibit attached hereto and by this
reference incorporated herein.
H. As of the date of this Agreement, (i) the balance of the BIL Restructure Debt due under the
BIL Restructure Note, excluding accrued, unpaid interest, is $931,069, (ii) the balance of the
SPNB Debt due under the SPNB Note, excluding accrued, unpaid interest, is $14,573,515, (iii)
the balance of the BIL Working Capital Debt (including the BIL Working Capital Debt due
under the BIL Working Capital Notes), excluding accrued, unpaid interest, is $51,795,780, and
(iv) the balance of accrued unpaid interest due with respect to the foregoing is $4,452,988 (the
"Interest Obligation").
I. E&J Inc. is indebted to The Hong Kong & Shanghai Banking Corporation Limited (the
"Bank") pursuant to a line of credit facility (the "Line of Credit Facility") and a letter of credit
facility (the "Letter of Credit Facility," and together with the Line of Credit Facility, the "B ank
Facility") maintained by E&J Inc. with the Bank, under the terms of that certain Revolving
Credit Agreement dated as of September 30, 1992, as amended, between E&J Inc. and the Bank,
that certain Revolving Credit Promissory Note dated as of September 30, 1992, as amended,
issued by E&J Inc. in favor of the Bank, together with certain related documents (collectively,
the "Bank Agreement").
J. As of the date of this Agreement, the balance due under the Line of Credit Facility,
including accrued, unpaid interest, is $10,000,000.
K. The parties desire to restructure (i) the Existing BIL Indebtedness, (ii) the obligations of the
E&J Parties under the Restructuring Agreements, and (iii) the obligations of the Borrowers under
the Bank Facility.
NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual covenants and
agreements contained in this Agreement, the parties agree as follows:
ARTICLE I - DEFINITIONS
As used in this Agreement, the following terms shall have the meanings indicated:
"Additional BIL Loan Facility" has the meaning set forth for such term in Section 4.1 Below.
"Affiliate" has the meaning set forth for such term in Section 11.2 BELOW.
"Amended Loan Agreement" has the meaning set forth for such term in Recital C above.
"Bank" has the meaning set forth for such term in Recital I above.
"Bank Agreement" has the meaning set forth for such term in Recital above.
“Bank Facility" has the meaning set forth for such term in Recital I above.
"BIL Group" has the meaning set forth for such term in Section 12.2 BELOW.
“BIL Line of Credit Facility Debt" has the meaning set forth for such term in Section 2.1
BELOW.
"BIL Line of Credit Facility Loan" has the meaning set forth for such term in Section 2.1
BELOW.
"BIL Restructure Debt" has the meaning set forth for such term in Recital A above.
"BIL Restructure Note" has the meaning set forth for such term in Recital B above.
"BIL Voting Shares" has the meaning set forth for such term in Section 11.2 BELOW.
"BIL Working Capital Debt" has the meaning set forth for such term in Recital G above.
"BIL Working Capital Notes" has the meaning set forth for such term in Recital G above.
"Blocked Payment" has the meaning set forth for such term in Section 5.3 BELOW.
“Claims" has the meaning set forth for such term in Section 12.1 BELOW.
"Closing" means the closing of the transactions contemplated hereby as provided in Section 7.1
BELOW.
"Closing Date" means the date on which the conditions specified in Sections 8.1 and &2 are
satisfied or waived by BIL and the E&J Parties, as applicable.
"Common Stock" means, as of the applicable time, (i) the Class A Common Stock of E&J Ltd. if
the Class A Common Stock and the Class B Common Stock of E&J Ltd. have not been
reclassified into a new single class of Common Stock of E&J Ltd., and (ii) the new single class
of Common Stock of E&J Ltd. if the Class A Common Stock and the Class B Common Stock of
E&J Ltd. have been reclassified into such new single class of Common Stock.
"Convertible Promissory Note-Common Stock" has the meaning set forth for such term in
Section 3.1 BELOW.
"Convertible Promissory Note-Preferred Stock" has the meaning set forth for such term in
Section 3.1 BELOW.
"Convertible Promissory Notes" has the meaning set forth for such term in Section 3.1 BELOW.
"Debt Conversion Transactions" has the meaning set forth for such term in Section 2.1 BELOW.
"Debt Restructure Agreement" has the meaning set forth for such term in Recital A above.
"E&J Group" has the meaning set forth for such term in Section 12.1 BELOW.
"Existing BIL Indebtedness" has the meaning set forth for such term in Recital G above.
"Existing BIL Notes" has the meaning set forth for such term in Recital G above.
“Governmental Person" means, whether domestic or foreign, any national, federal, state or local
government, any political subdivision thereof, or any governmental, quasi-governmental,
judicial, public or statutory instrumentality, authority, body or entity, including any central bank
and any comparable authority.
"Governmental Rule" means any treaty, law, rule, regulation, ordinance, order, code,
interpretation, judgment, write, injunction, decree, determination, directive, guideline, policy or
similar form of decision of any Governmental Person.
“Indemnification Obligation" has the meaning set forth for such term in Section 2.3 BELOW.
"Interest Obligation" has the meaning set forth for such term in Recital H above.
"Letter of Credit Facility" has the meaning set forth for such term in Recital I above.
"Line of Credit Facility" has the meaning set forth for such term in Recital I above.
"New BIL Notes" has the meaning set forth for such term in Section 4.1 BELOW.
“Person" means an individual, a corporation, a partnership, an association, a business trust or any
other entity or organization.
"Registration Rights Agreement" has the meaning set forth for such term in Article 6 BELOW.
"Restructuring Agreements" has the meaning set forth for such term in Recital C above.
"Revolving Promissory Note" has the meaning set forth for such term in Section 4.1 BELOW.
"Security Agreement" has the meaning set forth for such term in Section 2.3 BELOW.
"Senior Debt" has the meaning set forth for such term in Section 5.1 BELOW.
“Series C Convertible Preferred Stock" has the meaning set forth for such term in Section 3.1
BELOW.
"SPNB" has the meaning set forth for such term in Recital C above.
"SPNB Debt" has the meaning set forth for such term in Recital C above.
"SPNB Note" has the meaning set forth for such term in Recital D above.
"Suspended Payment" has the meaning set forth for such term in Section 5.3 BELOW.
ARTICLE 2 - RESTRUCTURING OF BANK FACILITY
2.1 Repayment of Line of Credit Facility. Within five (5) business days following approval by
the stockholders of E&J Ltd. of the Debt Conversion Transactions, BIL will loan (the "BIL Line
of Credit Facility Loan") the Borrowers the entire outstanding balance due under the Line of
Credit Facility, up to $10,000,000 (the "BIL Line of Credit Facility Debt"), and immediately
thereafter the Borrowers will use the proceeds of such BIL Line of Credit Facility Loan to repay
such outstanding balance to the Bank. The BIL Line of Credit Facility Debt shall be added to the
principal balance of the Convertible Promissory Note Common Stock described in Section 3.1
Below, and shall be converted into Common Stock of E&J Ltd. in accordance with the
provisions of Article 3 Below.2.2 Continuance of Letter of Credit Faculty. The Bank Facility will continue to be maintained by
the Borrowers under the Bank Agreement, and will continue to be guaranteed by BIL, to the
extent necessary (i) to cause the Line of Credit Facility to continue to be available to the
Borrowers in an amount not exceeding $15,000,000 in principal amount through and including
the date on which BIL makes the BIL Line of Credit Facility Loan to the Borrowers in
accordance with Section 2.1 above, and (H) to cause the Letter of Credit Facility to continue to
be available to the Borrowers in an amount not exceeding $6,000,000, through and including
September 30, 1994, and thereafter BIL and the Borrowers will use their reasonable best efforts
to cause the Bank Facility to be renewed and to continue to be guaranteed by BIL to the extent
necessary to cause the Letter of Credit Facility to continue to be available to the Borrowers up to
such amount, through and including June 30, 1995; provided, however, that the Borrowers may
maintain a letter of credit facility not exceeding such amount through an alternative commercia l
lending institution, and BIL will guarantee such alternative letter of credit facility as necessary,
through and including June 30, 1995, if the Bank is not willing to provide the Bank Facility
necessary to maintain the Letter of Credit Facility on terms acceptable to the Borrowers, or if the
Borrowers and BIL mutually agree to do so.
2.3 Security for Guarantee of Letter of Credit Facility. The Borrowers will indemnify and hold
BIL harmless from and against any and all losses, liabilities, damages, demands, claims, actions,
judgements, causes of action, penalties, costs and expenses (including, without limitation, the
reasonable fees and disbursements of legal counsel and accountants), arising out of, resulting
from or in any manner relating to BIL's guarantee of the Line of Credit Facility and of the Letter
of Credit Facility or an alternative letter of credit facility in accordance with Section 2.2 above.
Such indemnification obligation (the "Indemnification Obligation") will be secured by a lien on
and security interest in all the assets of the Borrowers on a pari passu basis with the repayment
obligations of the Borrowers under the "Convertible Promissory Notes" (as defined in Section
3.1 Below) and under the "Revolving Promissory Note" (as defined in Section 4.1 Below)
pursuant to a Security Agreement (the "Security Agreement") in substantially the form set forth
as Exhibit attached hereto and by this reference incorporated herein. Upon cessation of the
Indemnification Obligation, BIL immediately will execute and deliver to the Borrowers such
documents as may be necessary to release the lien on and security interest in such assets
evidenced by the Security Agreement to the extent attributable to the Indemnification Obligation.
ARTICLE 3 - RESTRUCTURING OF THE EXISTING BIL INDEBTEDNESS
3.1 Convertible Promissory Notes. At the Closing, BIL and the Borrowers will restructure the
Existing BIL Indebtedness by executing a Convertible Promissory Note Common Stock (the
"Convertible Promissory Note-Common Stock") in the principal amount of $55,000,000 or the
aggregate unpaid principal balance of all amounts from time to time outstanding thereunder,
whichever is less, in substantially the form attached hereto as Exhibit C and by this reference
incorporated herein, and by executing a Convertible Promissory Note-Preferred Stock (the
"Convertible Promissory Note-Preferred Stock," and together with the Convertible Promissory
Note-Common Stock, the "Convertible Promissory Notes") in the principal amount of
$20,000,000 in substantially the form attached hereto as ' Exhibit D and by this reference
incorporated herein. The parties acknowledge and agree that (i) the initial principal balance of
the Convertible Promissory Note-Common Stock shall aggregate $45,000,000, consisting of the
SPNB Debt, the BIL Restructure Debt, the Interest Obligations and $25,042,428 of the BIEL
Working Capital Debt, and (ii) the initial principal balance of the Convertible Promissory Note-
Preferred Stock shall aggregate $20,000,000, consisting of $20,000,000 of the BIL Working
Capital Debt. The parties further acknowledge and agree that the BIL Line of Credit Facility
Debt shall be added to the principal balance of the Convertible Promissory Note-Common Stock
in accordance with the provisions of Section 2.1 above. The Convertible Promissory Note-
Common Stock (including the BIL Line of Credit Facility Debt added to the principal balance
thereof) will be converted into Common Stock and the Convertible Promissory Note-Preferred
Stock will be converted into a new Series C Convertible Preferred Stock (the "Series C
Convertible Preferred Stock") of E&J Ltd. in accordance with the respective provisions thereof.
The Series C Convertible Preferred Stock will be established pursuant to a Certificate of
Designations, Preferences and Rights of Series C Convertible Preferred Stock in substantially the
form of Exhibit E attached hereto and by this reference incorporated herein. Concurrently with
the execution and delivery of each Convertible Promissory Note, BIL will mark each applicable
Existing BIL Note "Amended and Superseded" and will return each such Existing BIL Note as
so marked to the Borrowers.3.2 Security for the Convertible Notes. The Borrowers' obligations under the Convertible
Notes will be secured by a lien on and security interest in all the assets of the
Borrowers on a pari passu basis with the Borrowers’ Indemnification Obligation and with the
Borrowers' repayment obligations under the Revolving Promissory Note (as defined in Section
4.1 Below). Upon conversion or repayment of all amounts due under each Convertible
Promissory Note, BIL, immediately will execute and deliver to the Borrowers such documents as
may be necessary to release the lien on and security interest in such assets evidenced by the
Restructuring Agreements and to release the Hen on and security interest in such assets
evidenced by the Security Agreement to the extent attributable to such Convertible Promissory
Note.ARTICLE 4 - ADDITIONAL BIL LOAN FACILITY
4.1 Loan by BIL. From and after the Closing, BIL will loan the Borrowers up to an additional
$12,465,687 (the "Additional BIL Loan Facility"), as requested by the Borrowers from time to
time, bearing interest at the rate of 8 % per annum, with all principal and accrued, unpaid interest
payable in full on June 30, 1995. The Borrowers' obligation to repay the Additional BIL Loan
Facility will be evidenced by a Revolving Promissory Note (the "Revolving Promissory Note,"
and together with the Convertible Promissory Notes, the "New BIL Notes") in substantially the
form of Exhibit attached hereto and by this reference incorporated herein. The Borrowers will
execute and deliver the Revolving Promissory Note to BIL at the Closing. T*he parties
acknowledge and agree that the $6,753,352 of BIL Working Capital Debt not included in the
principal balance of the Convertible Promissory Note-Common Stock or in the principal balance
of the Convertible Promissory Note-Preferred Stock shall be treated as a borrowing made by the
Borrowers under the Revolving Promissory Note as of September 30, 1993.4.2 Security for the Revolving Promissory Note. The Borrowers' obligations under the Revolving
Promissory Note will be secured by a Hen on and security interest in all assets of the Borrowers
on a pari passu basis with the Borrowers' Indemnification Obligation and with the Borrowers'
repayment obligations under the Convertible Promissory Notes. Upon payment of all amounts
due under the Revolving Promissory Note, BIL immediately will execute and deliver to the
Borrowers such documents as may be necessary to release the Hen on and security interest in
such assets evidenced by the Security Agreement to the extent attributable to the Revolving
Promissory Note.
ARTICLE 5 - SUBORDINATION
5.1 Agreement to Subordinate. BIL, by acceptance of the New BIL Notes, irrevocably agrees
that the obligations of the Borrowers thereunder with respect to the payment of principal and
interest are and shall be subordinate in right of payment and subject to the prior payment or
provision for payment in full of all "Senior Debt" (as defined Below). BIL further agrees to
execute such documents as the Borrowers reasonably may request from time to time
acknowledging such subordination. As used herein, the term "Senior Debt" means indebtedness
for money borrowed from, or the payment of which has been guaranteed by the Borrowers, or
either of them, to the Pension Benefit Guaranty Corporation, to Congress Financial Corporation
(if and to the extent applicable) and to the Bank on a current basis, and to any other financial
institution constituting a principal lender of the Borrowers, or either of them, on a future basis,
(or to any syndicate of financial institutions which includes the foregoing), which indebtedness is
evidenced by notes or other obligations.
5.2 Liquidation: Dissolution: Bankruptcy. Upon any distribution of assets of a Borrower to its
creditors in connection with any winding-up, liquidation or dissolution of such Borrower or in
the event of a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating
to a Borrower or its property, and subject to the applicability of any intercreditor agreement
between BIL and the holder or holders of Senior Debt:(a) the principal of, premium (if any), interest on and all other amounts payable
with respect to all Senior Debt shall first be paid in full, or adequate provision shall be
made for such payment, before any payment shall be made on account of the principal of
or interest on any New BIL Note; and
(b) any distribution of any assets of such Borrower or payment by or on behalf of
such Borrower of any kind or character to which BIL would be entitled except for the
subordination provisions hereof shall be applied to the payment of all Senior Debt
remaining unpaid to the extent necessary to pay in full the principal of, premium (if any),
interest on and all other amounts payable with respect to all such Senior Debt.
5.3 Default on Senior Debt. If an event of default with respect to the payment of principal of,
premium (if any), interest on or any other amount payable with respect to any Senior Debt shall
have occurred and be continuing then, unless or until the event of default shall have been cured
or waived or shall have ceased to exist, no payment ("Blocked Payment") shall be required to be
made by the Borrowers on account of principal of or interest on any New BIL Note. If any
payment (a "Suspended Payment") on account of principal or interest on any New BIL Note
would result in an event of default with respect to any Senior Debt, then the date on which such
payment is due thereunder will be extended without further action by the Borrowers or BIL for a
period of 30 days or until the Borrowers may make such payment without resulting in an event
of default with respect to such Senior Debt, whichever occurs first.
5.4 Payment Over of Distribution. If a distribution is made to BIL that, according to the
provisions of this Section 5, should not have been made, BIL, in the case of a Blocked Payment,
shall hold such distribution in trust for the holders of Senior Debt and shall repay it to the
Borrowers for the benefit of the holders of such Senior Debt, and, in the case of a Suspended
Payment, shall hold such distribution in trust for, and shall repay it to, the Borrowers.5.5 Subrogation. After payment in full of all Senior Debt, BIL shall be subrogated to the rights of
the holders of Senior Debt to receive distributions of assets of the Borrowers or payments by or
on behalf of the Borrowers applicable to Senior Debt, to the extent that distributions otherwise
payable to BIL under any New BIL Note have been applied to the payment of Senior Debt, until
the principal of and interest on such New BIL Note is paid in full.5.6 Relative Rights. This Section 5 defines the relative rights between BIL under the New BIL
Notes and holders of Senior Debt. No provision contained herein shall in any way affect or
modify the obligations of the Borrowers, which are absolute and unconditional, to pay the
principal of and interest on the New BIL Notes in accordance with their respective terms.
Nothing herein shall prevent BIL from exercising all remedies otherwise permitted by applicable
law upon default under any New BIL Note, subject only to the rights (if any) under this Section 5
of holders of Senior Debt to receive cash, property or securities otherwise payable or deliverable
to BIL. The failure to make a payment on account of principal or interest by reason of any
provision of this Section 5 shall not be construed as preventing the occurrence of an "Event of
Default" as defined under any New BIL Note.5.7 Subordination May Not Be Impaired by the Borrowers. No right of any holder of any Senior
Debt to enforce the subordination of the indebtedness evidenced by the New BIL Notes as herein
provided shall be impaired by any act or failure to act on the part of the Borrowers or by any
noncompliance by the Borrowers with the terms of this Agreement or of the New BIL Notes. ARTICLE 6 - REGISTRATION RIGHTS
At the Closing, E&J Ltd. will grant BIL registration rights with respect to (i) the Common Stock
held by BIL as of the date of this Agreement, (ii) the Common Stock obtained by BIL as a result
of the conversion of the Convertible Promissory Note-Common Stock in accordance with
Section 3.1 above, and (iii) the Common Stock obtained by BIL upon conversion of the
Convertible Promissory Note-Preferred Stock in accordance with Section 3.1 above, by E&J Ltd.
and BIL executing and delivering a Registration Rights Agreement (the "Registration Rights
Agreement") in substantially the form of Exhibit attached hereto and by this reference
incorporated herein.
ARTICLE 7 - CLOSING
7.1 Closing.. The transactions contemplated by this Agreement shall be consummated at a
closing (the "Closing") held at the offices of Heller, Ehrman, White & McAuliffe, 601 South
Figueroa Street, 40th Floor, Los Angeles, California at 10:00 a.m. on the Closing Date.
7.2 Deliverables by B . At the Closing, BIL shall deliver the following documents to the E&J
Parties:
(a) this Agreement duly executed by BIL;
(b) the Security Agreement duly executed by BIL;
(c) the Registration Rights Agreement duly executed by BIL;
(d) the original SPNB Note marked "Amended and Superseded;"(e) the original BIL Restructure Note marked "Amended and Superseded;"
and
(f) the originals of the BIL Working Capital Notes marked "Amended and
Superseded."
7.3 Deliverables by the E&J Parties. At the Closing, the E&J Parties shall deliver the
following documents to BIL
(a) this Agreement duly executed by the E&J Parties;
(b) the Security Agreement and applicable Financing Statements duly
executed by the Borrowers;
(c) the Registration Rights Agreement duly executed by E&J Ltd.;
(d) the Convertible Promissory Note-Common Stock duly executed by the
Borrowers;
(e) the Convertible Promissory Note-Preferred Stock duly executed by the
Borrowers;
(f) the Revolving Promissory Note duly executed by the Borrowers;
and
(g) such additional documents and instruments as BIL reasonably may deem
necessary to perfect the security interests granted to it by the Borrowers.
ARTICLE 8 - CONDITIONS
8.1 Conditions Precedent to BIL's Obligations. The obligation of BIL to consummate the
transactions contemplated by this Agreement is conditioned on satisfaction on or prior to the
Closing Date of the following conditions precedent:
(a) the E&J Parties shall have delivered the documents required to be
delivered by them pursuant to Section 7.3 above;
(b) the Board of Directors of E&J Ltd. shall have received an opinion from
Wedbush Morgan Securities that the transactions contemplated by this Agreement are
fair from a financial point of view to the stockholders of E&J Ltd. other than BIL; and
(c) the representations and warranties of the E&J Parties set forth in Article 9
hereof shall be true and correct as of the Closing Date.
Any of the foregoing conditions not satisfied prior to the Closing shall be deemed waived
if BIL elects to close notwithstanding such non-satisfaction.
8.2 Conditions Precedent to the E&J Parties' Obligations. The obligation of the E&J Parties to
consummate the transactions contemplated by this Agreement is conditioned on satisfaction on
or prior to the Closing Date of the Wowing conditions: (a) BIL shall have delivered the documents required to be delivered by it
pursuant to Section 7. hereof;
(b) the Board of Directors of E&J Ltd. shall have received an opinion from
Wedbush Morgan Securities that the transactions contemplated by this Agreement are
fair from a financial point of view to the stockholders of E&J Ltd. other than BIL;
(c) the representations and warranties of BIL set forth in Article 10 hereof
shall be true and correct as of the Closing Date.
Any of the foregoing conditions not satisfied prior to the Closing, shall be deemed
waived if the E&J Parties elect to close notwithstanding such non-satisfaction.
ARTICLE 9 - REPRESENTATIONS AND WARRANTEES OF THE E&J PARTIES
The E&J Parties jointly and several represent and warrant to BIL as follows:
9.1 Corporate Existence and Power. Each of E&J Inc. and Jennings Investment is a corporation
duly organized, validly existing and in good standing under the laws of the State of California,
and E&J, Inc. is qualified to do business and in good standing under the laws of the State of
Missouri. E&J Ltd. is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and is qualified to do business and in good standing under the
laws of the State of Missouri. Each of the E&J Parties has a corporate power and authority
required to carry on its business as now being conducted and to own its properties.9.2 Capitalization. The authorized capital stock of E&J Ltd. consists of 25,000,000 shares of
Class A Common Stock, $0.01 par value, of which 6,846,185 shares are issued and outstanding,
10,000,000 shares of Class B Common Stock, $0.01 par value, of which 2,353,427 shares are
issued and outstanding, 11,000,000 shares of Preferred Stock, $0.01 par value, of which
6,215,381 shares of Series A Convertible Preferred Stock and 786,357 shares of Series B
Convertible Preferred Stock are issued and outstanding. No shares of any other class of stock are
authorized. AU such issued and outstanding shares of Class A Common Stock, Class B Common
Stock, Series A Convertible Preferred Stock and Series B Convertible Preferred Stock of E&J
Ltd., and all shares of Common Stock and Preferred Stock of E&J Ltd. to be issued to BIL upon
conversion of the Convertible Promissory Notes described in Section 3.1 above, when issued, are
and will be duly authorized, validly issued and outstanding, fully paid and nonassessable. As of
the date of this Agreement, the Class A Common Stock and the Class B Common Stock of E&J
Ltd. are listed and traded upon the American Stock Exchange.9.3 Corporate Authorization. Subject to the approval by the stockholders of E&J Ltd. of this
Agreement and the transactions contemplated hereby at a special meeting of stockholders of E&J
Ltd.'called for such purpose as provided in Article II Below, the execution, delivery and
performance of this Agreement by the EW Parties are within the EW Parties' corporate power,
have been duly authorized by all necessary corporate action of each of the E&J Parties, and to
the E&J Parties' knowledge will not contravene or constitute a default under any applicable law
or regulation, the charter documents or Bylaws of such E&J Party or any judgment, order,
decree, agreement or instrument binding on such E&J Party, or result in the creation of any lien
upon any of its property or assets, other than in favor of BIL and as contemplated by this
Agreement, the New BIL Notes and the Security Agreement.9.4 Binding Effect. This Agreement constitutes the valid and binding agreement of each E&J
Party, enforceable against it in accordance with its terms, subject to and limited by the effect of
bankruptcy, insolvency, reorganization, receivership, conservatorship, arrangement, moratorium
or other laws affecting or relating to the rights of creditors generally.9.5 Conditions Precedent. Each of the conditions precedent to the effectiveness of this
Agreement specified in Section 8.1 above has been satisfied or waived in writing by BIL.
ARTICLE 10 - REPRESENTATIONS AND WARRANTEES OF BIL
BIL represents and warrants to the E&J Parties, and each of them, as follows:
10.1 Corporate Existence and Power. BIL is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Hong Kong, and has all corporate power
and authority required to carry on its business as now being conducted and to own its properties.10.2 Corporate Authorization. The execution, delivery and performance of this Agreement by
BIL are within the BIL's corporate power, have been duly authorized by all necessary corporate
action of BIL and to BIL's knowledge will not contravene or constitute a default under any
applicable law or regulation, the charter documents or Bylaws of BIL or any judgment, order,
decree, agreement or instrument binding on BIL, or result in the creation of any lien upon any of
its property or assets.10.3 Binding Effect. This Agreement constitutes the valid and binding agreement of BIL,
enforceable against it in accordance with its terms, subject to and limited by the effect of
bankruptcy, insolvency, reorganization, receivership, conservatorship, arrangement, moratorium
or other laws affecting or relating to the rights of creditors generally.10.4 Conditions Precedent. Each of the conditions precedent to the effectiveness of this
Agreement specified in Section 8.2 above has been satisfied or waived in writing by the E&J
Parties. ARTICLE 11 - COVENANTS
11. 1 Covenants by the E&J Parties. The E&J Parties will (i) obtain approval of the stockholders
of E&J Ltd. of the transactions (the "Debt Conversion Transactions") contemplated by this
Agreement, the New BIL Notes, the Security Agreement and the Registration Rights Agreement
on or before March 31, 1994, (H) undertake all necessary corporate proceedings to authorize and
effect issuance of the Common Stock and the Series C Convertible Preferred Stock contemplated
to be issued on conversion of the Convertible Promissory Notes, and (iii) will issue sufficient
shares of such Common Stock and Preferred Stock as soon as reasonably practicable following
such authorization and the approval for listing on the American Stock Exchange of the Common
Stock necessary for compliance by the Borrowers with their obligations under the Convertible
Promissory Notes.11.2 Covenants by BIL. BIL will vote all shares of Common Stock, Series A Convertible
Preferred Stock and Series B Convertible Preferred Stock of E&J Ltd. owned by BIL or by any
"Affiliate" (as that term is defined in Rule 405 promulgated under the Securities Act of 1933) of
BIL, and all such shares which any such party has the right to vote at the time of such vote, by
proxy or otherwise (collectively, the "BIL Voting Shares"), and will cause any transferee of the
BIL Voting Shares to vote, for (i) approval of the terms of this Agreement, the New BIL Notes,
the Security Agreement and the Registration Rights Agreement, and of the transactions
contemplated hereby and thereby, and (ii) authorization and issuance of the Common Stock and
Series C Convertible Preferred Stock contemplated to be issued on conversion of the Convertible
Promissory Notes, at any meeting of the stockholders of E&J Ltd. at which any such matter is
presented for. a vote on or before March 31, 1994. BIL will cause each of its Affiliates who has
succeeded to any of BIL's right, title and interest (i) in and to the BIL Restructure Debt or the
SPNB Debt, (ii) under the BIL Restructure Note or under the SPNB Note, or (iii) under the Debt
Restructure Agreement or under the Amended Loan Agreement, to take all actions and to
execute all documents reasonably necessary or desirable in the opinion of the E&J Parties to
effect compliance by BIL with and to give effect to the terms and provisions of this Agreement;
and BIL will indemnify and hold harmless the E&J Parties, and each of them, from and against
any and all losses, abilities, damages, demands, claims, actions, judgements, causes of action,
penalties, costs and expenses (including, without limitation, the reasonable fees and
disbursements of legal counsel and accountants), arising out of, resulting from or in any manner
relating to the failure of BIL to comply with its obligations as set forth in this sentence. ARTICLE 12 - RELEASES AND WAIVER
12.1 Release of the "BIL Group". Except with respect to the obligations contemplated by this
Agreement, the New BIL Notes, the Security Agreement and the Registration Rights Agreement,
the E&J Parties, each on behalf of itself and its parents, subsidiaries, successors and assigns
(collectively, the "E&J Group"), do hereby release and forever discharge the "BIL Group" (as
defined in Section 12.2 Below) from and on account of any and all causes of action, claims,
demands, damages, costs, attorneys' fees and expenses or charges of whatever kind or nature
(collectively, "Claims"), whether known or unknown, suspected or unsuspected, by the E&J
Group against the BIL Group, whether such Claims now exist or with the passage of time may
exist in the future.12.2 Release of the "E&I Group". Except with respect to the obligations contemplated by this
Agreement, BIL on behalf of itself and its Affiliates, together with any other of its parents,
subsidiaries, successors and assigns and on behalf of BIL (USA), Inc. (collectively, the "BIL
Group"), does hereby release and forever discharge the E&J Group from and on account of any
and all Claims, whether known or unknown, suspected or unsuspected, by the BIL Group against
the E&J Group, whether such Claims now exist or with the passage of time may exist in the
future.
12.3 Waiver of Statutory Rights. To the extent applicable, BIL and the E&J Parties, and each of
them, acknowledge that they are aware of and are familiar with the provisions of Section 1542 of
the California Civil Code, which provides as follows:"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING A RELEASE, WHICH IF KNOWN BY MM
MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR."
BIL and the E&J Parties, and each of them, do hereby waive and relinquish all rights and
benefits which they may have under Section 1542 of the California Civil Code or the law of any
other state or jurisdiction to the same of similar effect. ARTICLE 13 - MISCELLANEOUS
13.1 Notices. Any and all notices, requests, demands, designations, consents, offers, acceptances
or any other communications to be given by one party to another party under the terms and
conditions of this Agreement shall be in writing and personally delivered, or sent by first class
mail, registered or certified, postage pre-paid, or sent by reputable overnight courier service,
facsimile, telecopy or telex, addressed as follows, or to such other address as may be designated
in writing by the party to which notice is to be sent:
To the E&J Parties:
Everest & Jennings International Ltd.
1100 Corporate Square Drive
St. Louis, MO 63132
Attention: Chief Financial Officer
With copies to:
Heller, Ehrman, White & McAuliffe
601 S. Figueroa Street, 39th Floor
Los Angeles, CA 90017-5758
Attention: V. Joseph Stubbs, Esq.
To BIL:
BIL (Far East Holdings) Limited
2801 Three Exchange Square
Central, Hong Kong
Attention: Secretary
Each such notice or other communication shall be deemed to be given (a) when received if
personally delivered or sent by facsimile, telecopy or telex; (b) three days after deposit in the
United States mail, first class, registered or certified, postage pre-paid and addressed as set forth
herein, or (c) 48 hours after deposit with a reputable overnight courier service, charges pre-paid
and addressed as set forth herein. Notwithstanding the foregoing, the failure of BIL to provide
Heller, Ehrman, White & McAuliffe with a copy of any notice or other communication given to
the E&J Parties hereunder shall not affect the validity or enforceability thereof.13.2 Expenses: Documentary Taxes. Each party hereto shall. pay its own expenses, including
legal fees and disbursements, incurred in connection with the negotiation, preparation and
execution of this Agreement. BIL shall, in addition, pay the costs of (i) all recording fees,
notarial fees, title and lien search fees, title insurance and other expenses in connection with t he
perfection of its security interests under the Security Agreement.
13.3 Successors and Assigns. This Agreement may not be assigned by the E&J Parties. This
Agreement may be assigned by any of BIL, to any other Person, provided such Person assumes,
in a writing delivered to the E&J Parties, all of BIL's obligations hereunder and under the
documents executed by BIL in connection herewith. Notwithstanding anything to the contrary
herein, this Agreement shall be binding upon and shall inure to the benefit of the parties and their
respective successors and assigns.13.4 Headings. The Section headings contained in this Agreement are for reference purposes
only, and shall not affect in any way the meaning or interpretation of this Agreement.13.5 Governing Law. This Agreement is delivered in the State of Missouri and shall be construed
and enforced in accordance with, and governed by, the laws of the State of Missouri, without
application of the conflict of laws provisions or principles thereof. All persons and entities in any
manner obligated under this Agreement hereby consent to the jurisdiction of any federal or state
court within the State of Missouri having proper venue, and also consent to service of process by
any means authorized by federal or Missouri law.13.6 Entire Agreement. This Agreement constitutes and contains the entire agreement of the
parties with respect to the subject matter hereof and supersedes any and all prior or
contemporaneous negotiations, correspondence, agreements and understandings among the
parties respecting such subject matter.
13.7 Counterparts. This Agreement may be executed in two or more counterparts, or by the
parties hereto in separate counterparts, each of which when executed shall be deemed to be an
original, but all of which when taken together shall constitute one and the same instrument.13.8 Attorneys' Fees. If any action at law or in equity is necessary to enforce or interpret the
terms of this Agreement, or the rights and duties of the parties in relation hereto, the prevailing
party will be entitled, in addition to any other relief granted, to all costs and expenses incurred by
such prevailing party, including, without limitation, all reasonable attorneys' fees.13.9 Survival. This Agreement shall survive the Closing.
13.10 Amendments and Waivers: Cumulative Remedies.
(a) None of the terms of this Agreement may be waived, altered or amended
except by an instrument in writing duly executed by the E&J Parties and BIL.
(b) No failure or delay on the part of BIL in exercising any right, power or
privilege under this Agreement shall operate as a waiver thereof, and no single or partial
exercise of any right, power or privilege under this Agreement shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege. The rights
and remedies provided in and contemplated by this Agreement are cumulative and not
exclusive of any rights or remedies provided by law.
13.11 Illegality. If, after the date hereof, the adoption of any applicable Governmental Rule or
any change therein, any change in the interpretation or administration thereof by any
Governmental Person charged with the interpretation or on thereof, or compliance by BIL with
any Governmental Rule (whether or not having the force of law) of any such Governmental
Person shall make it unlawful or impossible for BIL to maintain the loans evidenced by any of
the New BIL Notes, BIL forthwith shall so notify the E&J Parties. Before giving the notice to the
E&J Parties pursuant to this. Section 13.11, BIL will designate a different lending office if such
designation will avoid the need for giving such notice and will not, in the sole judgment of BIL,
otherwise be disadvantageous to BIL. Upon the Borrowers' receipt of such notice or such later
date as may be required by any such applicable Governmental Rule, BIL's obligation to maintain
any loan evidenced by any New BIL Note to which such Governmental Rule is applicable shall
be suspended, and the outstanding principal balance thereof and all accrued unpaid interest
thereon shall be due and payable.
IN WITNESS WHEREOF,. the parties have executed this Agreement as of the date first above
written.
BIL (FAR EAST HOLDINGS) LIMITED, a Hong Kong corporation
By:
Its:
"BIL"
EVEREST & JENNINGS INTERNATIONAL LTD., a Delaware corporation
By:
Its:
"E&J Ltd."
EVEREST & JENNINGS, INC., a California corporation
By:
Its:
"E&J Inc."
THE JENNINGS INVESTMENT CO., a California corporation
By:
Its:
"Jennings Investment"
ACKNOWLEDGED AND ACCEPTED,
FOR GOOD AND VALUABLE CONSIDERATION,
WITH RESPECT TO THE WITHIN RELEASES:
BIL(USA)INC.
By:
Its:
EXHIBIT A
LIST OF BIL WORKING CAPITAL NOTES
Date Loan Amount
July 16, 1992 $1.0 million
July 30, 1992 $1.0 million
August 31, 1992 $1.0 million
September 4, 1992 $1.0 million
September 11, 1992 $2.0 million
October 1, 1992 $1.0 million
November 4, 1992 $1.0 million
November 12, 1992 $1.0 million
December 7, 1992 $1.5 million
December 22, 1992 $1.0 million
December 30, 1992 $1.5 million
January 8, 1993 $1.0 million
January 13, 1993 $2.0 million
January 21, 1993 $2.0 million
January 28, 1993 $2.0 million
January 29, 1993 $1.0 million
February 11, 1993 $1.0 million
February 23, 1993 $1.0 million
March 2, 1993 $ 1. 0 million
March 11, 1993 $1.0 million
March 22, 1993 $1.0 million
March 31, 1993 $2.0 million
April 13, 1993 $1.3 million
April 22, 1993 $1.0 million
April 30, 1993 $3.5 million
May 28, 1993 $1.0 million
June 14, 1993 $1.0 million
June 22, 1993 $0.5 million
July 1, 1993 $1.5 million
July 14, 1993 $2.5 million
August 18, 1993 $1.0 million
August 30, 1993 $2.0 million TOTAL $43.3 million
